SABRATEK CORP, S-1/A, 1997-03-31

SABRATEK CORP
S-1/A, 1997-03-31
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1997.

REGISTRATION NO. 333-23437

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

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

AMENDMENT NO. 1

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

SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3845 36-3700639
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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

SABRATEK CORPORATION
5601 WEST HOWARD STREET, NILES, ILLINOIS 60714
(847) 647-2760
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------

K. SHAN PADDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SABRATEK CORPORATION
5601 WEST HOWARD STREET
NILES, ILLINOIS 60714
(847) 647-2760
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies To:

<TABLE>
<C> <C>
SCOTT HODES, ESQ. ROBERT SEBER, ESQ.
DAVID S. GUIN, ESQ. O'SULLIVAN GRAEV & KARABELL, LLP
ROSS & HARDIES 30 ROCKEFELLER PLAZA
150 N. MICHIGAN AVENUE NEW YORK, NEW YORK 10112
CHICAGO, ILLINOIS 60601-7567 (212) 408-2400
(312) 558-1000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

SABRATEK CORPORATION

CROSS-REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY FORM S-1
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NUMBER ITEM IN FORM S-1 AND TITLE OF ITEM LOCATION IN PROSPECTUS
- ------ ---------------------------------- ----------------------
<C> <S> <C>
1 Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page
2 Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page, Back Cover Pages
3 Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary, Risk Factors
4 Use of Proceeds........................... Use of Proceeds
5 Determination of Offering Price........... Underwriting
6 Dilution.................................. Risk Factors, Dilution
7 Selling Security Holders.................. Selling Stockholders
8 Plan of Distribution...................... Underwriting
9 Description of Securities to be
Registered.............................. Prospectus Summary, Description of Capital
Stock -- Common Stock
10 Interests of Named Experts and Counsel.... Legal Matters
11 Information with Respect to the
Registrant.............................. Prospectus Summary, Risk Factors, The
Company, Use of Proceeds,
Capitalization, Selected Financial Data,
Management's Discussion and Analysis of
Financial Condition and Results of
Operations, Business, Management,
Principal Stockholders, Certain
Transactions, Description of Capital
Stock, Shares Eligible for Future Sale
12 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION

DATED MARCH 31, 1997

PROSPECTUS

2,178,493 SHARES

SABRATEK LOGO

COMMON STOCK
------------------------------

Of the 2,178,493 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby, 1,700,000 shares are being sold by Sabratek
Corporation ("Sabratek" or the "Company") and 478,493 shares are being sold by
certain selling stockholders (the "Selling Stockholders"). The Company will not
receive any proceeds from the sale of the shares by the Selling Stockholders. To
the extent that the shares of Common Stock sold by Selling Stockholders are
received by them upon the exercise of outstanding options and warrants, the
Company will receive the proceeds of such exercise. See "Selling Stockholders."

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SBTK." On March 27, 1997, the last reported sale price of the Common
Stock on the Nasdaq National Market was $20.25 per share. See "Price Range of
Common Stock."

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
------------------------------
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.

<TABLE>
<CAPTION>
========================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO THE
PUBLIC COMMISSIONS(1) THE COMPANY(2) SELLING STOCKHOLDERS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Per Share............... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------
Total(3)................ $ $ $ $
========================================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company, estimated at $500,000.
Does not include proceeds to the Company from the exercise of outstanding
options and warrants, estimated at $935,522.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 326,774 additional shares at the Price to Public, less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ , and $ , respectively.

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

The shares of Common Stock are being offered severally by the Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters and subject
to conditions including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, on or about
, 1997.

------------------------------
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
SMITH BARNEY INC.
JEFFERIES & COMPANY, INC.

THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 4

The Company has registered or applied to register the following trademarks:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), Seamless Delivery System(TM),
PumpMaster(TM), MediVIEW(R) and TCS Total Compliance System(TM). The Company has
also filed a foreign trademark application for the name SABRATEK(TM) and its
logo in Japan.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."

2
<PAGE> 5

SUB-ACUTE FACILITY LONG-TERM CARE FACILITY SKILLED NURSING FACILITY HOSPICE

SEAMLESS DELIVERY SYSTEM(TM) FEATURES

FACILITATE THERAPIES FOR HIGHER ACUITY PATIENTS:

- - MULTIPLE THERAPY PROTOCOLS

- - REMOTE INTERACTIVE PROGRAMMING AND MONITORING

- - DATA CAPTURE AND OUTCOMES REPORTING

- - CUSTOMIZABLE DELIVERY FORMATS

- - USER-FRIENDLY DESIGN AND FEATURES

- - ADVANCED SAFETY ALARMS AND FEATURES

ANTIBIOTIC THERAPY PREGNANCY/OBSTETRICAL CHEMOTHERAPY PAIN MANAGEMENT
<PAGE> 6

INFUSION SUITE CLINIC PHYSICIAN'S HOME HEALTH PATIENT'S HOME
OFFICE AGENCY

HEALTH CARE PROVIDER AND PAYOR BENEFITS

ACHIEVE LOWER COSTS

- MINIMIZES ON-SITE CAREGIVER INTERVENTION

- MAXIMIZES THERAPY COMPLIANCE

- REDUCES TRAINING/TRAVEL TIME

- ENABLES OPTIMAL CLINICAL PROTOCOL
DEVELOPMENT

- MINIMIZES PUMP INVENTORIES AND
MAINTENANCE COSTS

- OPTIMIZES ADMINISTRATIVE EFFICIENCIES

ENTERAL NUTRITION PARENTERAL NUTRITION HUMAN GROWTH HORMONES HEMOPHILIA
<PAGE> 7

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the Financial Statements and Notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) assumes the exercise of outstanding options and warrants to
purchase 191,799 shares of Common Stock by the Selling Stockholders and receipt
by the Company of $935,522 in proceeds in connection therewith and (iii) has
been adjusted to give effect to a 1-for-3.173 reverse stock split which was
effected by the Company in connection with its initial public offering of
2,875,000 shares of Common Stock in June, 1996. See "Underwriting" and "Selling
Stockholders." This Prospectus contains certain forward-looking statements
within the meaning of the Federal securities laws. Actual results and the timing
of certain events could differ materially from those projected in the
forward-looking statements due to a number of factors, including those set forth
under "Risk Factors" and elsewhere in this Prospectus.

THE COMPANY

Sabratek Corporation (the "Company" or "Sabratek") develops, produces and
markets technologically-advanced, user-friendly and cost-effective therapeutic
and diagnostic medical systems designed specifically to meet the unique needs of
the alternate-site health care market. The Company's multi-therapy infusion and
other systems incorporate advanced communications technology which is designed
to reduce provider operating costs while maintaining the integrity and quality
of care. Sabratek's proprietary health care information system provides remote
programming as well as real-time diagnostic and therapeutic data capture
capabilities, allowing caregivers to monitor patient compliance more effectively
and allowing providers to develop outcome analyses and optimal clinical
protocols. The Company has designed its integrated hardware and software system
to permit providers of infusion therapy to achieve cost-effective movement of
patients along the continuum of alternate-site health care settings. The Company
intends to expand its product line beyond infusion therapy to become a leading
developer and marketer of a variety of interactive therapeutic and diagnostic
medical systems for the delivery of high-quality, cost-effective health care in
alternate sites. The Company believes that its current and future products and
related software will facilitate the ability of alternate-site providers to
create a "virtual" hospital room, thereby affording the delivery of a wide range
of care previously provided primarily in an acute-care setting. Substantially
all of the Company's revenues have historically been derived from the sale of
its multi-therapy infusion pumps and related disposable supplies. Since August,
1996, the Company has commercially introduced several additional products which
it believes will contribute to future revenues.

Sabratek's strategy focuses primarily on the alternate-site health care
market, which it believes will continue to experience significant growth as
managed care payors continue to move patients to the lowest-cost care setting.
Such growth may be attributed to increasing cost-containment pressures, along
with advances in medical technology, that have transitioned the delivery of
health care away from the traditional acute-care setting to more cost-effective
sites. The alternate-site market includes, among other things, the provision of
infusion services rendered in various settings, including the patient's
residence, sub-acute care facilities, nursing homes, outpatient clinics,
dialysis centers and hospice facilities. According to POV, Incorporated, an
industry tracking and consulting firm, the infusion therapy segment of this
market is expected to grow in revenue from $3.2 billion in 1992 to $7.9 billion
in 1997, representing an average annual compounded growth rate of approximately
20%.

The Company believes that for alternate-site health care providers, the
management of costly resources such as nursing staff and infusion equipment
inventories is critical to their operating viability. The Company's strategic
response to the need to achieve cost-effective movement of patients along the
continuum of alternate-site care has been to develop the SEAMLESS DELIVERY
SYSTEM which integrates stationary and ambulatory multi-therapy infusion pumps,
disposable supplies, a proprietary interactive software system and a proprietary
infusion pump testing device. Sabratek's SEAMLESS DELIVERY SYSTEM maximizes the
similarities in operating features and range of therapeutic applications of the
Company's stationary and ambulatory infusion
3
<PAGE> 8

devices, thereby reducing the costly time requirements of training and infusion
administration as well as minimizing equipment inventories. The Company's
interactive software system augments the utilization of Sabratek's infusion
pumps and allows providers to program therapies and monitor compliance on a
real-time basis from a remote location. The Company's portable, automatic
infusion pump testing device enables providers to perform on-site diagnostic
tests on Sabratek's infusion pumps and thereby reduces costs by eliminating the
traditional reliance on third-party testing services and in-house biomedical
engineering capabilities. The Company believes that competing infusion therapy
products do not meet the diverse needs of payors, alternate-site health care
providers and their patients within the managed care environment to the same
extent as the Company's SEAMLESS DELIVERY SYSTEM.

In 1992, the Company commercially launched its multi-therapy stationary
infusion device (the "3030 Stationary Pump"), and in 1995 introduced its
multi-therapy ambulatory infusion device (the "6060 Ambulatory Pump"). In
addition, the Company markets a comprehensive line of related disposable tubing
sets. Both the 3030 Stationary Pump and the 6060 Ambulatory Pump have received
510(k) clearance from the Food and Drug Administration (the "FDA"). In 1996, the
Company began marketing its proprietary medical software system ("MediVIEW") and
its proprietary infusion pump testing device (the "PumpMaster"). The Company
currently markets its products domestically to national, regional and local
alternate-site and acute-care providers through a sales force composed of 17
direct sales professionals, six clinical support staff and two full-time sales
consultants combined with a network of specialized alternate-site medical
products distributors. The Company also markets its products internationally
through distributors in Europe, Asia, Africa, South America and the Middle East.

The Company's goal is to continue to develop and market interactive
therapeutic and diagnostic medical systems designed to improve the delivery of
high-quality, cost-effective health care at alternate sites. The Company intends
to achieve its goal by continuing to: (i) develop advanced medical products and
related software systems that maximize the cost-effective provision of
alternate-site health care, (ii) develop an integrated system of therapeutic and
diagnostic information-based medical products supported by the Company's
proprietary health care information system platform, and (iii) create a
proprietary outcomes database through the Company's products and software system
platform.

RECENT DEVELOPMENTS

On February 25, 1997, Sabratek acquired substantially all the assets of
Rocap, Inc. ("Rocap") for $100,000 in cash, 131,593 shares of Sabratek Common
Stock (valued at approximately $2.9 million), plus the assumption of net
liabilities of approximately $661,000 and the forgiveness of a bridge loan. In
connection with the acquisition, the former President of Rocap entered into a
three-year employment agreement with Sabratek.

Rocap produces and markets prepackaged injectable prescription
pharmaceuticals (intravenous or "I.V." Admixture products) and pre-filled I.V.
tubing flush syringes for the alternate-site and acute-care markets. The Company
believes the addition of the Rocap product line expands the scope of the
Company's I.V. delivery systems, products, and services, thereby enhancing the
Company's competitive position.

4
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......................... 1,700,000 shares
Common Stock offered by Selling Stockholders................ 478,493 shares
Common Stock to be outstanding after the Offering(1)........ 10,266,028 shares
Use of proceeds............................................. For expanding manufacturing capacity;
for funding further product
development efforts; and for expanding
sales and marketing activities, with
the remainder to be used for working
capital and general corporate
purposes. In addition, proceeds may be
used for future joint ventures or
acquisitions. See "Use of Proceeds."
Nasdaq National Market Symbol............................... SBTK
</TABLE>

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

(1) Based on the number of shares outstanding on February 28, 1997. Excludes
1,467,123 shares of Common Stock issuable upon exercise of outstanding stock
options under the Company's Stock Option Plan at a weighted average exercise
price of $8.31 per share, 233,997 shares of Common Stock reserved for future
option grants under such plan and 544,430 shares of Common Stock issuable
upon exercise of warrants at a weighted average exercise price of $5.36 per
share. Includes 191,799 shares of the above outstanding options and warrants
issuable upon exercise by the Selling Stockholders. See "Management -- Stock
Option Plan" and "Description of Capital Stock -- Warrants."

5
<PAGE> 10

SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------- PRO
1992 1993 1994 1995 1996 FORMA(1)
---- ---- ---- ---- ---- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $ 842 $ 1,229 $ 3,315 $ 4,040 $17,696 $19,632
Gross margin (loss)...................... (28) (405) 834 1,138 8,948 9,340
Selling, general and administrative
expenses............................... 765 2,411 4,108 6,874 8,474 10,092
Operating income (loss).................. (793) (2,816) (3,274) (5,736) 474 (752)
Stock appreciation rights(2)............. -- -- -- -- (1,628) (1,628)
Net loss................................. (791) (2,821) (3,555) (6,036) (858) (2,122)
Weighted average common shares
outstanding(3)......................... 6,610 7,263 7,395
Net loss per share (1995 pro forma)(3)... $ (0.90) $ (0.12) $ (0.29)
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------ ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 24,587 $ 23,427 $ 63,623
Total assets.......................................... 32,951 37,235 77,431
Total debt and capital lease obligations.............. 327 818 818
Accumulated deficit................................... (14,310) (14,310) (14,310)
Total stockholders' equity............................ 28,650 31,550 71,746
</TABLE>

- ---------------
(1) Gives effect to the acquisition of Rocap as if it occurred on January 1,
1996. See "Pro Forma Supplemental Consolidated Financial Statements."

(2) For the period ended December 31, 1996, a non-recurring charge in the amount
of approximately $1.6 million was recorded to recognize obligations under
certain stock appreciation rights in connection with the Company's June 1996
initial public offering.

(3) See Note (2) to the Financial Statements for an explanation of the
calculation of weighted average shares outstanding.

(4) Gives effect to the acquisition of Rocap as if it occurred on December 31,
1996. See "Pro Forma Supplemental Consolidated Financial Statements."

(5) Gives effect to the sale of the 1,700,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $24.75 per share
and receipt by the Company of $935,522 upon exercise of outstanding options
and warrants to purchase 191,799 shares of Common Stock by the Selling
Stockholders.

6
<PAGE> 11

RISK FACTORS

This Prospectus contains certain forward-looking statements within the
meaning of the Federal securities laws. Actual results and the timing of certain
events could differ materially from those projected in the forward-looking
statements due to a number of factors, including those set forth below and
elsewhere in this Prospectus. In addition to the other information contained in
this Prospectus, prospective investors should carefully consider the risk
factors set forth below in evaluating an investment in the shares of Common
Stock offered hereby.

HISTORY OF LOSSES

The Company was formed in 1989, introduced its first product in 1992, and
has incurred operating and net losses since its inception through September 30,
1996. The Company incurred net losses of approximately $3.6 million, $6.0
million, and $858,000 for the years 1994, 1995 and 1996, respectively, and as of
December 31, 1996, had an accumulated deficit of $14.3 million. The Company's
losses resulted primarily from expenditures relating to research and
development, product engineering, obtaining FDA clearance for its products,
development of its initial sales and marketing organization, and establishment
of manufacturing capability. Although the Company has experienced revenue growth
in recent periods and has operated at a profit for the last two calendar
quarters, such recent growth and profitability may not be sustainable and may
not be indicative of future results. The Company's ability to increase sales and
generate profits will depend on numerous factors, and there can be no assurance
that the Company's revenues will continue to grow or that the Company will
remain profitable. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

DEPENDENCE ON PRINCIPAL PRODUCT LINE AND NEW PRODUCT DEVELOPMENT

The Company currently derives substantially all of its revenues from the
sale of its multi-therapy infusion pumps and related disposable supplies and
expects that revenues from these products will continue to account for a
significant portion of the Company's revenues in the future. Although the
commercial introduction of MediVIEW and PumpMaster along with the recent
acquisition of Rocap reduce the Company's reliance on its principal product
line, declines in the demand for the Company's infusion pumps and related
disposable supplies, whether due to increased competition, technological
changes, or other factors, could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's execution
of its business strategy and its future financial performance will depend in
large part on the Company's ability to meet the increasingly sophisticated needs
of its customers through the timely development and successful introduction or
acquisition of new infusion therapy products, enhanced versions of existing
products, and new complementary products. The success of new or enhanced
products is subject to certain risks inherent in the development of products and
materials based upon new technologies. These risks include the possibilities
that (i) certain of the products developed may require and fail to receive
regulatory clearance or approval, (ii) the products may be difficult to
manufacture on a commercial scale or may be uneconomical to manufacture or
market, (iii) the proprietary rights of third parties may preclude the Company
from marketing such products, (iv) the Company's competitors may market
superior, more cost-effective or equivalent products and may do so on a more
timely basis, (v) errors and malfunctions may be found in products after their
commercial introduction and may not be corrected in a timely manner, and (vi)
customers may not accept or use the products. The Company has historically
expended a significant amount on product development and believes that
significant continuing product development efforts will be required to sustain
the Company's growth. There can be no assurance that the market will continue to
accept the Company's existing products, or that product enhancements or new
products will be developed in a timely and cost-effective manner, meet the needs
and requirements of alternate-site health care providers or achieve market
acceptance. In addition, the Company may be unable to acquire additional
products and technologies. See "Business -- Products," "-- Sales and Marketing"
and "-- Competition."

7
<PAGE> 12

HIGHLY COMPETITIVE MARKETS; TECHNOLOGICAL RISK

The medical products industry in general and the infusion therapy products
industry in particular are characterized by intense competition. Large
competitors, such as Abbott Laboratories, Advanced Medical, Inc., Baxter
International Inc. and SIMS Deltec, Inc., a subsidiary of Smiths Industries, PLC
("SIMS Deltec"), among others, have significant market shares and installed
bases of products in the infusion pump and related disposable supplies industry.
Many of the Company's competitors have substantially greater capital resources,
research and development staffs, regulatory experience, sales and marketing
capabilities, manufacturing facilities and broader product offerings than the
Company. The Company expects that these competitors will continue to compete
aggressively with tactics such as offering volume discounts based on "bundled"
purchases of a broader range of medical equipment and supplies, a tactic that
the Company can currently only pursue on a more limited basis. There can be no
assurance that such competition will not adversely affect the Company's results
of operations or its ability to maintain or increase sales and market share. As
a consequence of the foregoing, the Company may not be able to successfully
execute its business strategies.

The market for infusion therapy products is affected by continuing
improvements and enhancements in technology. There can be no assurance that the
Company's competitors or potential competitors will not succeed in developing or
marketing products that provide more desirable characteristics, or are more
effective or less expensive than those developed or marketed by the Company. In
addition, technological advances in drug delivery systems, the development of
therapies that can be administered by methods other than infusion therapy, and
the development of new medical treatments that cure certain complex diseases or
reduce the need for infusion therapy could adversely impact the Company's
business. See "Business -- Research and Development" and "-- Competition."

UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY

There can be no assurance that the common law, statutory and contractual
rights on which the Company relies to protect its intellectual property and
confidential and proprietary information will provide it with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, techniques and
information which the Company considers proprietary. In addition, proprietary
information regarding the Company could be disclosed in a manner against which
the Company has no meaningful remedy.

Disputes regarding the Company's intellectual property could force the
Company into expensive and protracted litigation or costly agreements with third
parties. An adverse determination in a judicial or administrative proceeding or
failure to reach an agreement with a third party regarding intellectual property
rights could prevent the Company from manufacturing and selling certain of its
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

PENDING LITIGATION

On February 5, 1997, SIMS Deltec filed a complaint (the "Complaint") in the
United States District Court for the District of Minnesota alleging that
Sabratek's manufacture, use and/or sale of the MediVIEW software in conjunction
with its infusion pumps infringes on a patent entitled "Systems and Methods for
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. The Complaint seeks injunctive relief,
unspecified monetary damages and costs. The Company has not yet formally
responded to the Complaint but intends to vigorously defend against the
allegations contained in the Complaint. Protracted litigation or an adverse
outcome in this matter could have a material adverse impact on the Company's
business, financial condition and results of operations.

LIMITED SALES AND MARKETING EXPERIENCE

The Company has only begun to significantly expand its sales, marketing and
distribution force within the past year. The Company's sales and marketing staff
will require additional personnel in the future. There can be no assurance that
the Company will be able to continue to successfully expand its sales and
marketing staff,

8
<PAGE> 13

that such an expanded sales and marketing staff will be cost-effective, or that
the Company's increased direct sales and marketing efforts will be successful.
The Company also sells its products through domestic and international
distributors of medical products. There can be no assurance that the Company or
its distributors will be successful in marketing or selling the Company's
products. See "Business -- Sales and Marketing."

BROAD DISCRETION WITH RESPECT TO ALLOCATION OF NET PROCEEDS

The Company intends to use the net proceeds of the Offering for working
capital and general corporate purposes, including: expanding manufacturing
capacity; funding further product development efforts; and expanding sales and
marketing activities. In addition, proceeds may be used for future joint
ventures or acquisitions of technologies, products or companies complementary to
the Company's business. The Company has not yet identified the specific uses for
such net proceeds and will, therefore, retain broad discretion as to their
allocation. Pending such uses, the Company intends to invest the net proceeds in
short-term interest-bearing, investment-grade securities. See "Use of Proceeds."

RISKS ASSOCIATED WITH PAST AND FUTURE ACQUISITIONS

In February, 1997, the Company acquired Rocap. Although the Company has no
pending agreements or commitments, the Company may make additional acquisitions
of complementary businesses, products or technologies in the future.
Acquisitions of companies, divisions of companies, or products entail numerous
risks, including (i) the potential inability to successfully integrate acquired
operations and products or to realize anticipated synergies, economies of scale
or other value, (ii) diversion of management's attention, and (iii) loss of key
employees of acquired operations. No assurance can be given that the Company
will not incur problems in integrating the Rocap operations or any future
acquisition and there can be no assurance that the acquisition of Rocap or any
future acquisition will increase the Company's profitability. Furthermore, there
can be no assurance that the Company will realize value from any such
acquisition which equals or exceeds the consideration paid. Any such problems
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, future acquisitions by the
Company may result in dilutive issuances of equity securities, the incurrence of
additional debt, large one-time write-offs and the creation of goodwill or other
intangible assets that could result in amortization expense. These factors could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Certain Transactions."

LIMITED ASSEMBLY/MANUFACTURING EXPERIENCE

Most of the Company's products are currently assembled/manufactured by the
Company at its facilities. To be successful, the Company must
assemble/manufacture its products in compliance with regulatory requirements, in
sufficient quantities and on a timely basis, while maintaining product quality
and acceptable assembly/manufacturing costs. There can be no assurance that the
Company will be able to continue to assemble/manufacture products in large
commercial quantities on a timely basis and at an acceptable cost. If the
Company becomes unable to assemble/manufacture its products at its facility in a
timely and efficient manner, the Company's ability to supply product to its
distributors and direct customers may be adversely affected until such time as
the Company is able to establish alternative assembly/manufacture arrangements.
See "Business -- Assembly and Manufacturing."

INTERRUPTION IN SOURCES OF SUPPLY

The Company could face problems in supplying its equipment and disposable
products to distributors and customers if its primary sources of supply were
interrupted and it faced delays in activating its secondary sources of supply.
Any such interruption or delays could have an adverse effect on the Company.
There can be no assurance that the Company will be able to maintain a sufficient
and adequate supply of products in its own inventory or that the Company will be
able to cause its distributors to maintain a sufficient and adequate supply of
products to avoid such a disruption. See "Business -- Assembly and
Manufacturing."

9
<PAGE> 14

DEPENDENCE ON THIRD-PARTY REIMBURSEMENT

The Company's products are generally purchased by health care providers,
which then seek reimbursement from various public and private third-party
payors, such as Medicare, Medicaid and indemnity insurers, for health care
services provided to patients. Government and private third-party payors are
increasingly attempting to contain health care costs by limiting both the extent
of coverage and the reimbursement rate for new diagnostic and therapeutic
products and services. The Health Care Financing Administration of the United
States Department of Health and Human Services ("HCFA"), which administers
Medicare, and most private insurance companies do not provide reimbursement for
services that they determine to be experimental in nature or that are not
considered "reasonable and necessary" for diagnosis or treatment. Many private
insurers are influenced by HCFA actions in making their own coverage decisions
on new products or services. There can be no assurance that third-party
reimbursement for the services provided using the Company's products will
continue to be available to its customers or that any such reimbursement will be
adequate. Disapproval of, or limitations in, coverage by HCFA or other
third-party payors could materially and adversely affect market acceptance of
the Company's products which could, in turn, have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Reimbursement."

NO ASSURANCE OF REGULATORY CLEARANCE; STRICT GOVERNMENTAL REGULATION

The production and marketing of the Company's current products and the
products the Company intends to introduce in the future are subject to
regulations by numerous governmental authorities, including the FDA and
corresponding state and foreign agencies. In the United States, the development,
manufacture and promotion of medical devices are regulated by the FDA under the
Federal Food, Drug, and Cosmetic Act (the "FFDCA"). The Company's 3030
Stationary Pump and 6060 Ambulatory Pump, and the related disposable tubing sets
for use with these systems, have been cleared by the FDA under a premarket
notification procedure known as a "510(k) Submission," which generally takes
less time to complete, and requires less information, than the FDA's lengthy and
expensive premarket approval ("PMA") process.

The Company's Rocap division is registered with the FDA as a drug
manufacturer and repackager and its products are required to be manufactured
according to current good manufacturing practices. Some of the products
manufactured by the Rocap division have been listed with the FDA in accordance
with the Drug Listing Act of 1972. Some of the products manufactured by the
Rocap division contain drugs which are purchased from other manufacturers which
have received FDA approvals. There can be no assurance that the suppliers of
such drugs will be able to maintain such approvals. While Rocap currently
manufactures and distributes its products without any FDA approvals, there can
be no assurance that the FDA will allow the Rocap division to manufacture and
distribute new or altered products without obtaining FDA approvals. If in the
future the FDA concludes that the products manufactured and distributed by the
Company's Rocap division require that the products be relabeled, require Rocap
to obtain 510(k) clearance, require new drug approval, or other regulatory
approval, the FDA could prohibit the Rocap division from manufacturing and/or
distributing these products until the Company made the necessary submissions and
obtained any required approvals. The FDA could also take regulatory action
against the Company for the Rocap division's manufacture and/or distribution of
products. If the FDA were to take any of the foregoing actions with respect to
the Company, it could have a material adverse effect on the Company's
operations.

The Company believes that the original 510(k) clearance for the 6060
Ambulatory Pump permits the Company to market the MediVIEW software with the
6060 Ambulatory Pump in the United States without a new 510(k) Submission.
However, there can be no assurance that the FDA would agree with the Company's
determination. If in the future the FDA concludes that the MediVIEW software
system for use with the 6060 Ambulatory Pump required a new 510(k) Submission,
the FDA could prohibit the Company from marketing the MediVIEW software system
for this use until the Company filed a new 510(k) Submission and obtained
clearance from the FDA. The FDA could also take regulatory action against the
Company for its prior distribution of the MediVIEW software system with the 6060
Ambulatory Pump.

The Company has determined that the PumpMaster does not constitute a device
under the statutory definition and, therefore, did not file a 510(k) Submission
with respect to this product. There can be no assurance that the FDA will agree
with the Company's determination in this regard. If the FDA were to

10
<PAGE> 15

determine that the PumpMaster is a medical device that requires a 510(k)
Submission prior to its commercial distribution, the FDA could suspend further
commercial distribution of the PumpMaster and take regulatory action against the
Company for its prior distribution of the product.

The Company's new products and new applications for existing products may
require FDA clearance or approval prior to marketing. The FDA is currently in
the process of revising the regulatory requirements and review criteria for
software-related medical devices, which could adversely effect the Company's
introduction of new software products, or devices that incorporate software, in
the future. The product clearance process for future products can be lengthy,
expensive and uncertain. There can be no assurance that market clearances will
be forthcoming in a timely manner, if at all, or that the FDA will not require
more extensive clinical evaluations, other information or a PMA Submission.
Moreover, the clearances, if granted, could limit the uses for which the product
could be marketed. Failure to obtain, or delays caused by, regulatory clearances
or approvals could have a material adverse affect on the Company's business,
financial condition and results of operations.

The Company is also subject to strict domestic and foreign regulations and
supervision regarding the development, manufacturing, marketing, labeling,
distribution, and promotion of its products. This includes periodic inspections
of the Company's manufacturing facility by the FDA to determine compliance with
good manufacturing practice ("GMP") requirements, which are set forth in the
FDA's Quality System ("QS") regulations. There can be no assurance that the
Company will be able to attain or maintain compliance with GMP requirements.

Failure to comply with the regulations outlined above may result in severe
governmental sanctions. Noncompliance with applicable requirements can result
in, among other things, rejection or withdrawal of premarket clearance or
approval for devices, recall or seizure of products, total or partial suspension
of production, fines, injunctions, and civil and criminal penalties. The FDA
also has the authority to request repair, replacement or refund of the cost of
any devices manufactured or sold by the Company. Any of these sanctions may have
a material adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Government Regulation."

PRODUCT LIABILITY EXPOSURE

Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products is alleged to
have resulted in adverse effects to a patient. The Company maintains product
liability insurance with coverage limits of $5.0 million per occurrence with an
annual aggregate policy limit of $5.0 million. The Company's product liability
insurance provides coverage only for products currently manufactured and
distributed. There can be no assurance that liability claims will not exceed the
limits of such coverage or that such insurance will continue to be available on
commercially reasonable terms or at all. Furthermore, the Company does not
maintain insurance that would provide coverage for any costs or losses resulting
from any required recall of its products due to alleged defects, whether
instituted by the Company or a regulatory agency. See "Business -- Product
Liability Insurance."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

During the year ended December 31, 1996, the Company derived approximately
9% of its revenues from international sales, resulting in exposure to certain
risks. Fluctuations in exchange rates of the U.S. dollar against foreign
currencies may reduce demand for, or the profitability of, the Company's
products sold overseas. In addition, the Company's international sales may be
affected by economic or political instability and domestic and foreign
governmental regulations, including export license requirements, trade
restrictions, changes in tariffs, regulatory approval for marketing products or
similar factors. Finally, the laws of certain foreign countries may not protect
the Company's intellectual property rights to the same extent as do the laws of
the United States. See "Business -- Sales and Marketing" and "-- Intellectual
Property."

11
<PAGE> 16

QUARTERLY FLUCTUATIONS

The Company's quarterly revenues and operating results have varied
significantly in the past and may continue to do so in the future. In
particular, the Company's distributors and other customers may purchase several
months of inventory at one time which may cause fluctuations in quarterly
revenues. Future revenues and operating results may also fluctuate significantly
from quarter to quarter and will depend upon, among other factors: (i) demand
for the Company's products and new product introductions by the Company or its
competitors or transitions to new products, (ii) the timing of orders and
shipments, (iii) the mix of sales between products, (iv) competition, including
pricing pressures, (v) the timing of regulatory and third-party reimbursement
approvals, (vi) expansion of the Company's assembly capacity and the Company's
ability to assemble or manufacture its products efficiently, and (vii) the
timing of research and development expenditures. Accordingly, period-to-period
comparisons of the Company's revenues and operating results should not be relied
upon as an indication of future performance, and the results of any quarterly
period may not be indicative of results to be expected for a full year. See
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

DEPENDENCE ON KEY PERSONNEL

The Company's future performance depends in significant part upon the
continued service of its senior management and other key personnel. Because the
Company has a relatively small number of employees when compared to other
companies in the same industry, its dependence on maintaining its employees is
particularly significant. There can be no assurance that the Company's current
employees will continue to work for the Company. Loss of services of key
employees could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company is also dependent on
its ability to attract and retain additional high quality personnel. The Company
may need to grant additional options to key employees and provide other forms of
incentive compensation to attract and retain key personnel. See "Business --
Employees."

NEED FOR ADDITIONAL FINANCING

The Company anticipates that the net proceeds of the Offering will be
adequate to satisfy its operating and capital requirements at least through the
end of 1998. However, changes in the Company's business or business plan could
affect the Company's capital requirements. The Company's future capital
requirements will depend on many factors, including, but not limited to, the
cost of manufacturing and marketing activities, its ability to successfully
market its products, the scope of its research and development programs, the
length of time required to collect accounts receivable, competing technological
and market developments, and potential acquisitions. If additional financing is
needed, beyond the amount available under existing credit facilities, there can
be no assurance that it will be available on terms acceptable to the Company, if
at all, or that such financing would not be dilutive to existing stockholders.
See "Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

INFLUENCE OF LIMITED NUMBER OF STOCKHOLDERS

Following completion of the Offering, the directors and executive officers
of the Company and certain existing stockholders may be able to influence the
Company's affairs and business, including any determination with respect to a
change in control of the Company, future issuances of Common Stock or other
securities by the Company, declaration of dividends on the Company's Common
Stock and the election of directors. Such influence could have the effect of
delaying, deferring or preventing a change in control of the Company which could
deprive the Company's stockholders of the opportunity to sell their shares of
Common Stock at prices higher than prevailing market prices. See "Principal
Stockholders."

POSSIBLE VOLATILITY OF STOCK PRICE

The securities markets have, from time to time, experienced extreme price
and volume fluctuations which often have been unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly-held medical device companies have been in the past, and are
expected to be, volatile. Announcements of technological or medical innovations
or new commercial products by the Company or its competitors, developments or
disputes concerning patents or proprietary rights, changes in

12
<PAGE> 17

regulatory or medical reimbursement policies, and economic and other external
factors, as well as period-to-period fluctuations in the financial results of
the Company, may have a significant impact on the market price and marketability
of the Common Stock. See "Underwriting."

ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of shares of Common Stock (including shares issued upon the exercise
of outstanding options or warrants) in the public market after the Offering or
the perception that such sales could occur could adversely affect the market
price of the Common Stock. Such sales also might make it more difficult for the
Company to sell equity securities or equity-related securities in the future at
a time and price that the Company deems appropriate. Upon completion of the
Offering, the Company will have approximately 10,266,028 shares of Common Stock
outstanding. The 2,178,493 shares offered hereby and the 2,875,000 shares issued
by the Company in its initial public offering in June 1996 will be freely
tradable without restriction, unless purchased by an affiliate of the Company.
Of the remaining 5,212,535 shares outstanding, all except 840,789 are eligible
for sale or have already been sold pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act") upon the effective date of the
Registration Statement of which this Prospectus is a part (the "Effective
Date"). Shares held by the Selling Stockholders (other than those sold in the
Offering), all directors, certain officers, and certain stockholders are subject
to lock-ups of 60 or 90 days and may become available for sale upon the
expiration of such lock-ups. Bear, Stearns & Co. Inc. may waive the foregoing
lock-up without notice to persons purchasing shares in this Offering and without
notice to any market on which the Common Stock is traded. In addition, certain
holders of the Company's Common Stock have registration rights. See "Shares
Eligible for Future Sale", "Dilution." "Description of Capital Stock --
Registration Rights" and "Shares Eligible for Future Sale."

IMPACT OF ANTI-TAKEOVER MEASURES; POSSIBLE ISSUANCE OF PREFERRED STOCK;
CLASSIFIED BOARD

Certain provisions of the Company's Certificate of Incorporation and Bylaws
and the Delaware General Corporation Law may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions, including voting rights, of unissued
shares of the Company's preferred stock and to issue such stock without any
further vote or action by the Company's stockholders. The rights of the holders
of Common Stock will be subject to and may be adversely affected by the rights
of the holders of any preferred stock that may be created and issued in the
future. In addition, stockholders do not have the right to cumulative voting for
the election of directors. The Company's Bylaws include a number of provisions
which may have the effect of discouraging persons from pursuing non-negotiated
takeover attempts. Specifically, the Company's Bylaws provide for a staggered
board whereby only one-third of the total number of directors are replaced or
re-elected each year. The Bylaws also require the affirmative vote of two-thirds
of the Company's issued and outstanding capital stock to remove a director.

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock for a period of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved in a prescribed manner,
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transactions that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock.

SUBSTANTIAL DILUTION AND ABSENCE OF DIVIDENDS

Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the public offering price. In addition, the exercise of
outstanding options and warrants will result in further dilution. See
"Dilution." The Company has never paid any cash dividends and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
See "Dividend Policy."

13
<PAGE> 18

THE COMPANY

The Company was organized under Illinois law in December, 1989, and was
reincorporated under Delaware law in December, 1991. The Company's executive
offices are located at 5601 West Howard Street, Niles, Illinois 60714. The
Company's telephone number is (847) 647-2760.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,700,000 shares of Common Stock offered by it pursuant hereto are estimated to
be approximately $39.3 million ($46.9 million if the Underwriters'
over-allotment option is exercised in full), at an assumed public offering price
of $24.75 per share, after deducting underwriting discounts and commissions and
estimated offering expenses. The Company will not receive any proceeds from the
sale of the 478,493 shares of Common Stock offered by the Selling Stockholders
pursuant hereto. The Company will, however, receive proceeds of approximately
$935,522 upon exercise of outstanding options and warrants to purchase 191,799
shares of Common Stock by Selling Stockholders.

The Company estimates that it will use the net proceeds in the following
manner: 20% for expanding manufacturing capacity; 20% for financing further
product development efforts; and 15% for expanding sales and marketing
activities, with the remainder to be used for working capital and general
corporate purposes. In addition, proceeds may be used for future joint ventures
or acquisitions of technologies, products or companies which are complementary
to the Company's business.

PRICE RANGE OF COMMON STOCK

The Company completed its initial public offering in June, 1996 at a price
per share of $10.00. Since June 21, 1996, the Company's Common Stock has traded
on the Nasdaq National Market under the symbol "SBTK". The following table sets
forth, for the periods indicated, the high and low reported sale prices of
shares of the Common Stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
1996
Second Quarter (from June 21, 1996)......................... $12 $10
Third Quarter............................................... $16 1/2 $ 7 3/4
Fourth Quarter.............................................. $16 3/4 $13
1997
First Quarter (through March 27, 1997)...................... $29 1/8 $15 1/4
</TABLE>

As of March 7, 1997, there were approximately 214 holders of record of the
Common Stock. On March 27, 1997, the last reported sale price on the Nasdaq
National Market for the Common Stock was $20 1/4 per share.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all available funds for use in
its business and therefore does not intend to pay any cash dividends on its
Common Stock in the foreseeable future.

14
<PAGE> 19

DILUTION

The net tangible book value of the Company as of December 31, 1996 was
$28,608,542, or $3.49 per share. Net tangible book value per share is determined
by dividing the tangible net worth of the Company (total tangible assets less
total liabilities) by the number of shares of Common Stock outstanding. Without
taking into account any changes in such net tangible book value after December
31, 1996, other than to give effect to the sale of the 1,700,000 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $24.75 per share and receipt by the Company of $935,522 upon the exercise of
outstanding options and warrants to purchase 191,799 shares of Common Stock by
the Selling Stockholders, net tangible book value of the Company as of December
31, 1996 would have been $68,804,939, or $6.82 per share (after deducting the
estimated underwriting discount and offering expenses payable by the Company).
This represents an immediate increase in net tangible book value of $3.33 per
share to existing stockholders and an immediate dilution of $17.93 per share to
new investors. Dilution to new investors is determined by subtracting the net
tangible book value per share after the Offering from the public offering price
per share. The following table illustrates this per share dilution.

<TABLE>
<S> <C> <C>
Assumed public offering price per share(1)........................... $24.75
Net tangible book value per share before Offering......... $3.49
Increase per share attributable to new investors(2)....... 3.33
-----
Net tangible book value per share after Offering..................... 6.82
------
Dilution per share to new investors(3)............................... $17.93
======
</TABLE>

- ---------------
(1) Assumed public offering price before deduction of underwriting discounts and
commissions and estimated expenses of the Offering to be paid by the
Company.

(2) Assumes receipt by the Company of $935,522 in proceeds upon exercise of
outstanding options and warrants to purchase 191,799 shares of Common Stock
by the Selling Stockholders.

(3) Assumes no exercise of outstanding stock options and warrants except for
those specifically described in note (2) above. See "Selling Stockholders."

The following table summarizes, as of December 31, 1996, the difference
between the existing stockholders and the new investors with respect to the
number of shares of Common Stock purchased (or to be purchased) from the
Company, the total consideration paid (or to be paid) and the average price per
share paid (or to be paid) by the existing stockholders and new investors,
including proceeds from the issuance.

<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
----------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 8,196,981 81% $45,133,919 51% $ 5.51
New investors.................. 1,891,799 19 43,010,522 49 22.74
---------- --- ----------- ---
Total................ 10,088,780 100% $88,144,441 100%
========== === =========== ===
</TABLE>

- ---------------
(1) Assumes no exercise of outstanding stock options and warrants except for
those specifically described in note (2) above. See "Management -- Stock
Option Plan" and "Description of Capital Stock -- Common Stock."

15
<PAGE> 20

CAPITALIZATION

The following table sets forth (i) the total capitalization of the Company
as of December 31, 1996, (ii) the pro forma capitalization of the Company as of
December 31, 1996 giving effect to the acquisition of Rocap, and (iii) such pro
forma capitalization as adjusted to reflect the sale of the 1,700,000 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $24.75 per share and receipt by the Company of $935,522 upon exercise of
outstanding options and warrants to purchase 191,799 shares of Common Stock by
the Selling Stockholders.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
obligations)(1)......................................... $ 303 $ 503 $ 503
Long-term obligations (excluding current portion)(1)...... 24 315 315
-------- -------- --------
Total debt................................................ 327 818 818
-------- -------- --------
Stockholders' equity:
Common Stock, par value $0.01; 25,000,000 shares
authorized; 8,196,981 shares issued and outstanding;
8,328,574 shares issued and outstanding pro forma(2);
10,220,373 shares issued and outstanding pro forma as
adjusted(3).......................................... 82 83 102
Additional paid-in capital.............................. 42,891 45,790 85,967
Deferred compensation................................... (17) (17) (17)
Unrealized gains........................................ 4 4 4
Accumulated deficit..................................... (14,310) (14,310) (14,310)
-------- -------- --------
Total stockholders' equity................................ 28,650 31,550 71,746
-------- -------- --------
Total capitalization...................................... $ 28,977 $ 32,368 $ 72,564
======== ======== ========
</TABLE>

- ---------------
(1) Includes capital lease obligations.

(2) Includes 131,593 shares issued in connection with the acquisition of Rocap.
See "Certain Transactions."

(3) Excludes 1,822,763 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants at December 31, 1996.

16
<PAGE> 21

SELECTED FINANCIAL DATA

The selected financial data with respect to the Company's statements of
operations for each of the years in the five year period ended December 31, 1996
and the balance sheet data as of December 31, 1992, 1993, 1994, 1995 and 1996
are derived from the Company's financial statements, which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The pro forma
selected financial data with respect to statement of operations for the year
ended December 31, 1996 and the balance sheet data as of December 31, 1996 are
derived from the unaudited Pro Forma Supplemental Consolidated Financial
Statements which, in the opinion of the Company's management, fairly present the
information contained therein. The financial data for the Company should be read
in conjunction with the Company's Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------- 1996
1992 1993 1994 1995 1996 PRO FORMA(1)
---- ---- ---- ---- ---- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 842 $ 1,229 $ 3,315 $ 4,040 $17,696 $19,632
Cost of sales...................... 870 1,634 2,481 2,902 8,748 10,292
----- ------- ------- ------- ------- -------
Gross margin (loss)................ (28) (405) 834 1,138 8,948 9,340
Selling, general and administrative
expenses......................... 765 2,411 4,108 6,874 8,474 10,092
----- ------- ------- ------- ------- -------
Operating income (loss)............ (793) (2,816) (3,274) (5,736) 474 (752)
Interest expense................... (11) (20) (260) (222) (319) (357)
Other income (expense), including
interest income.................. 13 15 (21) (78) 615 615
Stock appreciation rights(2)....... -- -- -- -- (1,628) (1,628)
----- ------- ------- ------- ------- -------
Net loss........................... $(791) $(2,821) $(3,555) $(6,036) $ (858) $(2,122)
===== ======= ======= ======= ======= =======
Weighted average common shares
outstanding(3)................... 6,610 7,263 7,395
======= ======= =======
Net loss per share (1995 pro
forma)(3)........................ $ (0.90) $ (0.12) $ (0.29)
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------ 1996
1992 1993 1994 1995 1996 PRO FORMA(4)
---- ---- ---- ---- ---- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $ (1) $(1,296) $ 999 $ (1,101) $ 24,587 $ 23,427
Total assets....................... 1,547 2,215 3,338 4,179 32,951 37,235
Short-term debt (including current
portion of long term
obligations)(5).................. 381 2,013 91 775 303 503
Long-term obligations (excluding
current portion)(5).............. -- 310 464 2,512 24 315
Accumulated deficit................ (1,040) (3,861) (7,416) (13,452) (14,310) (14,310)
Total stockholders' equity
(deficit)........................ 390 (1,211) 1,151 (2,821) 28,650 31,550
</TABLE>

- ---------------
(1) Gives effect to the acquisition of Rocap as if it occurred on January 1,
1996. See "Pro Forma Supplemental Consolidated Financial Statements."
(2) For the year ended December 31, 1996, a non-recurring charge in the amount
of approximately $1.6 million was recorded to recognize obligations under
certain stock appreciation rights in connection with the Company's June 1996
initial public offering.
(3) See Note (2) to the Financial Statements for an explanation of the
calculation of weighted average shares outstanding.
(4) Gives effect to the acquisition of Rocap as if it occurred on December 31,
1996. See "Pro Forma Supplemental Consolidated Financial Statements."
(5) Includes capital lease obligations.

17
<PAGE> 22

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

OVERVIEW

Since its inception in 1989, through 1991, the Company was in its
development stage and engaged primarily in research and development, product
engineering and activities related to obtaining clearance from the FDA for its
first product, the 3030 Stationary Pump. The Company has a limited operating
history and, although profitable for the last two calendar quarters, has
experienced significant operating losses since inception. Upon receiving FDA
clearance for the 3030 Stationary Pump in mid-1992, the Company focused its
efforts on creating a domestic and international sales and marketing network, as
well as a manufacturing capability, to assist in the distribution of its first
product to the alternate-site health care market. Concurrent with these sales
and marketing activities, the Company continued to fund the research,
development and regulatory clearance activities of other device and software
products. See "Risk Factors -- History of Losses."

The Company commercially launched the 6060 Ambulatory Pump and related
disposable supplies in late 1995 and its MediVIEW and PumpMaster in late 1996.
Since then, the Company has continued its sales and marketing activities
domestically and internationally for the distribution of its products and
continued to fund the research and development of additional products. In
addition, the Company derives revenues from the rental of its multi-therapy
infusion devices, servicing of products, and the sale of extended warranties.
See "Risk Factors -- Dependence on Principal Product Line and New Product
Development."

The Company sells its products both directly to alternate-site and
acute-care providers, as well as to third-party distributors. The Company's
distributors and customers may purchase several months of inventory at any one
time which may cause fluctuations in quarterly revenues. Quarterly fluctuations
may also result from other factors. The Company also markets and sells its
products internationally and, as a result, its revenues may be affected by
fluctuations in exchange rates. Failure to obtain regulatory approval for the
distribution of new products domestically or in international markets, or
regulatory problems in general, may affect the revenues of the Company. See
"Risk Factors -- Dependence on Principal Product Line and New Product
Development," "-- Governmental Regulations," "-- International Operations," and
"-- Quarterly Fluctuations."

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1996 AND 1995

NET SALES. Net sales increased to $17.7 million for the year ended December
31, 1996 from $4.0 million for the year ended December 31, 1995, an increase of
$13.7 million or 343%. The increase is primarily attributable to an increase in
sales volume of the 3030 Stationary Pump, the 6060 Ambulatory Pump and the
respective disposables, to the alternate-site health care market. Also
contributing to the increase was the introduction of the MediVIEW and PumpMaster
products.

COST OF SALES. Cost of sales increased to $8.7 million for the year ended
December 31, 1996 from $2.9 million for the year ended December 31, 1995, an
increase of $5.8 million, or 200%. Approximately $5.3 million of the increase
represents the direct manufacturing cost attributable to the increase in sales
volume and the balance of the increase is attributable to the investment in
fixed manufacturing costs and overhead necessary to increase production
capacity.

GROSS MARGIN. Gross margin increased to $8.9 million for the year ended
December 31, 1996 from $1.1 million for the year ended December 31, 1995, an
increase of $7.8 million, or 709%. The increase is due primarily to the increase
in sales volume and the resulting economies of scale associated with the
increase. Gross margin as a percentage of sales increased to 50% for the year
ended December 31, 1996, from 28% for the year ended December 31, 1995. The
increase is due to the absorption of fixed manufacturing costs and overhead over
a greater unit volume, higher average pricing levels for the 3030 Stationary
Pump, and the higher margins inherent to the 6060 Ambulatory Pump introduced in
the fourth quarter of 1995.

18
<PAGE> 23

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $8.5 million for the year ended December
31, 1996 from $6.9 million for the year ended December 31, 1995, an increase of
$1.6 million, or 23%. Expansion of the Company's sales and clinical support
staff increased selling, general and administrative expenses by approximately
$1.8 million while reductions and elimination of financial, marketing and
product development consulting fees represent the offsetting amount. Selling,
general and administrative expenses as a percent of sales decreased to 48% for
the year ended December 31, 1996 from 173% for the year ended December 31, 1995.
The decrease is due to the allocation of overhead expenses over a greater volume
of sales.

OPERATING INCOME (LOSS). The Company reported operating income of $474,000
for the year ended December 31, 1996 as compared to an operating loss of $5.7
million for the year ended December 31, 1995. The primary contributors to
operating profitability, as discussed above, are the incremental sales volume of
the 3030 Stationary Pump and the 6060 Ambulatory Pump and related products.

INTEREST EXPENSE. Interest expense increased to $319,000 for the year ended
December 31, 1996 from $222,000 for the year ended December 31, 1995, an
increase of $97,000, or 44%. The increase is attributable to the incremental
amount of debt issued by the Company and outstanding during the comparative
periods. Approximately $1.8 million, in aggregate, of debt was issued between
July and December, 1995 and was outstanding through the end of June, 1996.

INTEREST INCOME. Interest income increased to $617,000 for the year ended
December 31, 1996 from $13,000 for the year ended December 31, 1995. The
increase of $604,000 is due to the investment interest earned on proceeds from
the Company's initial public offering in June, 1996.

INCOME TAX PROVISION. Due to net losses for the years ended December 31,
1996 and 1995, the Company did not incur any federal or state income tax
liability for such periods. The Company currently has a net operating loss
carryforward in excess of $14.0 million; however, utilization of such
carryforward depends on future earnings and will be subject to annual
limitations as a result of changes that have occurred in the Company's
ownership.

NET LOSS. Net loss decreased to $858,000 for the year ended December 31,
1996 from $6.0 million for the year ended December 31, 1995, a decrease of $5.1
million. The loss was reduced primarily as a result of increased sales volume of
new and existing products, as discussed above, and the allocation of fixed
manufacturing cost and overhead over a greater unit volume. The year ended
December 31, 1996 includes a non-recurring charge for stock appreciation rights
of approximately $1.6 million in connection with the Company's June, 1996
initial public offering, without which the Company would have reported net
income of $770,000.

YEARS ENDED DECEMBER 31, 1995 AND 1994

NET SALES. Net sales increased to $4.0 million for the year ended December
31, 1995 from $3.3 million for the year ended December 31, 1994, an increase of
$725,000 or 22%. The market launch of the 6060 Ambulatory Pump and related
disposable tubing sets in the fourth quarter of 1995 accounted for approximately
$611,000 of the increase. The remaining amount was attributable to further
penetration of the alternate-site health care market through sales of the 3030
Stationary Pump and related disposable tubing sets by regional distributors, the
implementation of a direct sales and marketing program in non-distributor
territories and the signing of additional national accounts.

COST OF SALES. Cost of sales increased to $2.9 million for the year ended
December 31, 1995 from $2.5 million for the year ended December 31, 1994, an
increase of $421,000, or 17%. Approximately $399,000 of the increase was
attributed to increased sales volume. The remainder was related to the expansion
of the Company's manufacturing capacities, including an increase in operations
headcount and facility. Cost of sales as a percentage of sales decreased to 72%
in 1995 from 75% in 1994 as a result of the change in product mix, as well as
efficiencies from volume purchases of supplies. However, the overall decrease in
cost of sales from these factors was partially offset by the costs associated
with increases in manufacturing capacities.

19
<PAGE> 24

GROSS MARGIN. Gross margin increased to $1.1 million for the year ended
December 31, 1995 from $834,000 for the year ended December 31, 1994, an
increase of $304,000, or 36%. This increase in gross margin was attributable to
the higher percentage of sales to national accounts during 1995 at pricing
levels which were typically higher than those of sales to the Company's
distributors.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $6.9 million for the year ended December
31, 1995 from $4.1 million for the year ended December 31, 1994, an increase of
$2.8 million, or 68%. Selling, general and administrative expenses accounted for
170% of net sales in 1995 and 124% of net sales in 1994. The high level of such
expenses in both 1994 and 1995 is attributable to the Company's development of
its sales and marketing organization, expansion of its administrative staff, and
efforts to obtain FDA clearance for its products. The increase in such expenses
in 1995 from 1994 resulted primarily from an increase in the number of direct
sales personnel, increased expenditures relating to development of the 6060
Ambulatory Pump, MediVIEW and PumpMaster, the creation of a clinical support
department, and the further addition of administrative support staff.
Additionally, financial advisory fees of $410,000 were recorded in 1995.

OPERATING LOSS. Operating loss increased to $5.7 million for the year ended
December 31, 1995 from $3.3 million for the year ended December 31, 1994.

INTEREST EXPENSE. Interest expense decreased to $222,000 for the year ended
December 31, 1995 from $260,000 for the year ended December 31, 1994. This
decrease was primarily attributable to a reduction of average debt outstanding
during the year.

INCOME TAX PROVISION. The Company had net operating losses for the years
ended December 31, 1995 and 1994, and therefore did not incur any federal or
state income tax liability.

NET LOSS. As a result of the items discussed above, the Company's net loss
increased to $6.0 million for the year ended December 31, 1995 from $3.6 million
for the year ended December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

In June, 1996, the Company completed an initial public offering with
proceeds of $26.7 million, after underwriters' discounts and commissions. As of
December 31, 1996, cash balances were invested in U.S. Treasury Bills, U.S.
Treasury Notes, a short-term bond mutual fund, and a money market account.

As of December 31, 1996, the Company had approximately $16.8 million in
cash, cash equivalents, short-term and long-term investments in marketable
securities, and had net working capital of approximately $24.6 million.
Subsequent to December 31, 1996, the Company received a commitment for a credit
facility with up to $9.5 million of available borrowing.

The Company used cash in its operations of approximately $8.4 million for
the year ended December 31, 1996. Cash used in operations for the period exceeds
the Company's operating results for the same period due, primarily, to the
growth in trade accounts receivable and inventories as a result of actual and
anticipated growth in sales volume.

The Company believes that its financial assets will be sufficient to fund
its operations for the foreseeable future. Future liquidity and capital
resources could be adversely influenced by certain factors including the
Company's dependence on a relatively new customer base, regulatory or
legislative changes pertaining to health care, product liability exposure
regarding the delivery of medication, dependence on future product development,
and others. There can be no assurance that the Company will not require
additional financing and may, in the future, seek additional funds through bank
facilities, debt or equity offerings and to the extent such additional financing
is not available, the Company could suffer material adverse effects to its
financial condition and the results of its operations.

20
<PAGE> 25

BUSINESS

INTRODUCTION

Sabratek develops, produces and markets technologically-advanced,
user-friendly and cost-effective therapeutic and diagnostic medical systems
designed specifically to meet the unique needs of the alternate-site health care
market. The Company's multi-therapy infusion and other systems incorporate
advanced communications technology which is designed to reduce provider
operating costs while maintaining the integrity and quality of care. Sabratek's
proprietary health care information system provides remote programming as well
as real-time diagnostic and therapeutic data capture capabilities, allowing
caregivers to monitor patient compliance more effectively and allowing providers
to develop outcome analyses and optimal clinical protocols. The Company has
designed its integrated hardware and software system to permit providers of
infusion therapy to achieve cost-effective movement of patients along the
continuum of alternate-site health care settings. The Company intends to expand
its product line beyond infusion therapy to become a leading developer and
marketer of a variety of interactive therapeutic and diagnostic medical systems
for the delivery of high-quality, cost-effective health care in alternate sites.
The Company believes that its current and future products and related software
will facilitate the ability of alternate-site providers to create a "virtual"
hospital room, thereby affording the delivery of a wide range of care previously
provided primarily in an acute-care setting. Substantially all of the Company's
revenues have historically been derived from the sale of its multi-therapy
infusion pumps and related disposable supplies. Since August, 1996, the Company
has commercially introduced several additional products which it believes will
contribute to future revenues.

CHANGING HEALTH CARE ENVIRONMENT

The increase in health care costs at a rate significantly higher than that
of overall inflation has caused managed care companies, indemnity insurers,
employers, governmental agencies and other payors to employ a variety of
strategies designed to contain health care expenditures. These cost-containment
strategies aim to reduce the price paid for health care services, as well as the
amount of health care services utilized. In certain markets, payors are shifting
away from traditional fee-for-service based payment plans and moving towards
managed care plans in an effort to deliver quality health care services more
cost-effectively. In particular, cost-containment measures, including increased
utilization review and case management, have caused many health care providers
to move patients from the higher-cost hospital setting to lower-cost alternate
sites.

The alternate-site health care industry, which includes the delivery of
skilled nursing services, intravenous infusion, respiratory therapy, physical
therapy and pharmaceutical therapies in the home, long-term care facilities,
physicians' offices and outpatient centers, has grown significantly during the
past decade. According to a report entitled "National Health Expenditure
Projections, 1994-2005" published in the summer of 1995 by HCFA, total
expenditures for home health care, which constitutes a significant component of
alternate-site health care, increased from approximately $11.1 billion in 1990
to approximately $24.2 billion in 1994 and is projected to reach $45.9 billion
in 2000. Since the early 1980s, the provision of acute and chronic care for
serious illnesses outside the hospital has been recognized as a critical
component of health care cost containment because the delivery of certain
therapies in an alternate-site setting is more cost effective than the delivery
of these same therapies in an acute-care hospital setting. The Company believes
that the alternate-site health care industry will continue to benefit from
cost-containment measures which governmental and private payors have employed to
reduce hospital admissions and lengths of stays in hospitals. The Company
believes that such measures will continue the increase in the use of
alternate-site health care due to its significantly lower cost when compared to
similar care provided in traditional health care settings. In addition to cost
savings, the alternate-site health care industry should continue to benefit from
advances in medical technology which have facilitated the provision of
sophisticated care outside the hospital. Many disease states, including
pulmonary diseases, neurological conditions, infectious diseases, digestive
disorders, AIDS-related symptoms, various forms of cancer and related medical
conditions such as pain and nausea, are now being treated in alternate-site
settings, including the home. Growth in alternate-site health care has also been
facilitated by the increased acceptance of such care by physicians, caregivers
and patients. The American Medical Association Council on Scientific Affairs and
the American Medical Association Council on Medical

21
<PAGE> 26

Education have recommended that training in the principles and practice of home
health care be incorporated into the undergraduate, graduate and continuing
education of physicians. Also contributing to the growth of the alternate-site
health care industry is the increase in the over-65 population, which has a
higher incidence of illness and disability.

A significant component of alternate-site health care is infusion therapy,
which involves the administration of fluid intravenously at a regulated rate and
volume. Alternate-site infusion therapy has historically been the
fastest-growing segment of the alternate-site health care market. According to
POV, Incorporated, an industry tracking and consulting firm, the infusion
therapy segment of this market is expected to grow in revenues from $3.2 billion
in 1992 to $7.9 billion in 1997, representing an average annual compounded
growth rate of approximately 20%. Infusion therapy is used in a wide range of
applications such as nutrition therapy, pain management, delivery of
antibiotics, pregnancy and obstetrical therapies, chemotherapy, cardiovascular
therapy and immunosuppressive therapy. These therapies generally require the use
of specialized infusion pumps to deliver precise dosages of fluids such as
nutrients, parenteral solutions, anti-infectives, chemotherapeutic agents,
narcotic analgesics and a variety of other drugs.

Due to the shift by managed care payors toward fixed fee or capitated
payment arrangements, providers of infusion therapy are being forced to reduce
costs without compromising the quality of care in order to maintain
profitability. The costs associated with providing infusion therapy are composed
of three general components: capital equipment, supplies and labor.
Traditionally, providers of infusion therapy needed to purchase multiple types
of infusion pumps and related back-up inventory because most pumps delivered
only one type of therapy. This requirement to purchase several single therapy
pumps also results in increased labor training costs because of the need to
learn multiple programming protocols. The delivery of infusion therapy requires
a substantial amount of non-clinical nursing time. The Company believes that
reducing the labor costs of delivering infusion therapy is critical for
alternate-site health care providers to achieve operating efficiencies.
According to a 1992 study of the home infusion therapy industry published by The
National Alliance for Infusion Therapy (the "NAIT Study"), nurses spent an
average of 3.1 hours per home visit, of which approximately 64 minutes, or 35%,
was spent traveling to and from the patient's home, 56 minutes, or 30%, was
spent documenting clinical observations as well as coordinating care and the
balance was spent on tasks performed during personal contact with the patient,
including documentation. The NAIT Study also shows that training is required for
patients not only at the start of therapy but also over time as the therapy of
an individual patient changes. The NAIT Study indicates that during such home
visits, a significant amount of nursing time is required to ensure that patients
are complying with the prescribed therapy. Compliance is important to ensure
that patients are not required to re-enter the costly hospital setting thereby
generating unnecessary incremental expenses and health risks as a result of
failure to adhere to their prescribed therapies, whether intentionally or
unintentionally. The Company believes that products and technology which reduce
the cost of providing infusion therapy, especially the labor component, will be
attractive to health care payors in general and providers of infusion therapy in
particular.

BUSINESS STRATEGY

The Company's goal is to become a leading developer and marketer of
interactive therapeutic and diagnostic medical systems designed to improve the
delivery of high-quality, cost-effective health care at alternate sites. The
Company intends to achieve its goal by pursuing the following business
strategies:

- OFFER ADVANCED MEDICAL PRODUCTS AND RELATED SOFTWARE SYSTEMS THAT
MAXIMIZE THE COST-EFFECTIVE PROVISION OF ALTERNATE-SITE HEALTH CARE. The
Company has designed its multi-therapy infusion products and related
software system, and intends to develop additional products, to address
the various needs of its major constituencies -- payors, providers and
patients and their families.

Payors -- The Company believes that payors are primarily concerned with
reducing costs while assuring the quality of health care. The Company's
multi-therapy infusion system has the flexibility to effectively treat a
wide range of disease states in the lower cost alternate-site market.
Characteristics of the Company's infusion and software systems help
address quality assurance concerns through such features as real-time
data capture, remote monitoring capability, alarms that immediately
alert

22
<PAGE> 27

providers of non-compliance and the capability to perform customized
outcomes analysis. Such analyses also help provide oversight of the
practice patterns of health care providers.

Providers -- The Company believes that alternate-site providers are
concerned with improving their ability to effectively treat patients
through the use of products that reduce labor costs, allow real-time
patient monitoring, improve patient compliance and provide data to
develop better protocols in order to improve operating efficiencies.
This is particularly true under capitated payment programs. The
Company's infusion products incorporate user-friendly characteristics
that minimize set-up time and nurse/patient training, and have the
flexibility to provide multiple therapies using a single infusion
device. Additionally, the Company believes that its infusion pumps'
capabilities for remote interactive programming and monitoring on a
real-time basis considerably reduce costly on-site nurse intervention.
The ability of the Company's infusion system to administer a variety of
infusion therapies, as well as the Company's infusion pump testing
device, allow providers to minimize their inventories of infusion pumps
and related supplies. The Company's infusion pump testing device can
further reduce costs by eliminating outside recalibration and
preventative maintenance costs. The Company believes that the advanced
features incorporated in its infusion system allow providers to treat
higher acuity patients in the alternate-site setting who could
previously only be treated in an acute-care hospital. In combination
with the Company's interactive software, Sabratek's infusion pumps will
enable health care professionals to collect diagnostic and therapeutic
data useful in the analysis and development of clinical protocols and
provide insight into practice patterns, thereby reducing the need for
frequent on-site visits and evaluations as well as redundant and
burdensome record-keeping.

Patients and their Families -- The Company believes that, while
undergoing infusion therapy, patients and their families want comfort,
peace of mind, ease of use and more control over their lives. The
Company's infusion system meets these needs through such characteristics
as user-friendly programming to aid those patients who are not
technologically literate, multiple language formats, quietness of
operation, bright LED displays, alarm system warnings of non-compliance
and, when used in conjunction with the Company's interactive software,
the ability to provide real-time information over standard telephone
lines to providers in remote locations. Real-time monitoring and
intervention capabilities provide patients with an increased comfort
level to receive therapies in a home setting where they would otherwise
feel uncomfortable because of the lack of immediately available medical
personnel.

- OFFER AN INTEGRATED SYSTEM OF THERAPEUTIC AND DIAGNOSTIC
INFORMATION-BASED MEDICAL PRODUCTS SUPPORTED BY THE COMPANY'S PROPRIETARY
HEALTH CARE INFORMATION SOFTWARE PLATFORM. The Company's software system
allows health care providers to program and monitor the Company's infusion
pumps and capture data for reporting and clinical purposes from a remote
location on a real-time basis. The Company intends to expand the
capabilities of its proprietary medical information software as well as
its line of advanced, user-friendly medical devices to create a complete
interactive system that addresses a variety of therapeutic and diagnostic
applications in the alternate-site health care industry. The Company
intends to expand its line of products through further internal product
design and development, licensing arrangements, joint ventures and
acquisitions of technology, products and companies when available.

- CREATE A PROPRIETARY OUTCOMES DATABASE THROUGH THE COMPANY'S PRODUCTS AND
SOFTWARE SYSTEM PLATFORM. The Company's strategy is to expand the
installed base of its interactive medical system and to become the
preferred vendor of such system to alternate-site health care providers.
The Company believes that its software-based medical systems will serve as
a platform on which to develop interactive communication and information
systems designed to allow payors and providers to capture and analyze
clinical data to design the most cost-effective therapy protocols and
practice patterns. The Company has designed its proprietary information
system to incorporate a wide range of real-time, remote programming,
monitoring and administrative report functions for multiple therapeutic
modalities beyond infusion therapy.

23
<PAGE> 28

PRODUCTS

SABRATEK'S SEAMLESS DELIVERY SYSTEM. Sabratek's software-based infusion
devices and related interactive information system and pump testing device are
designed to provide both health care professionals and patients with ease of use
and a smooth transition throughout the health care delivery spectrum. Sabratek's
SEAMLESS DELIVERY SYSTEM product design is the Company's strategic response to
the need to achieve cost-effective movement of patients from a hospital setting
to an alternate-site setting, and among the various stages in alternate-site
care, from sub-acute to home care, with maximum ease of transition. The SEAMLESS
DELIVERY SYSTEM maximizes the similarities between Sabratek's stationary and
ambulatory infusion devices and is intended to allow both patients and health
care providers to use both types of infusion devices interchangeably, as the
specific setting or therapy dictates, and with greater ease. This ability
reduces the amount of time health care professionals must spend training on
multiple operating systems as well as administering and monitoring therapies. In
addition, Sabratek's infusion devices have the flexibility to provide multiple
therapies which allows providers to minimize their equipment inventories.
Sabratek's infusion devices intravenously deliver therapeutic agents to address
treatments for a wide variety of conditions, including, among others, antibiotic
therapy for viral or bacterial infections, chemotherapy for cancer, pain
management for chronic pain, clotting agents for hemophilia and various
therapies for pregnancy and obstetrics.

The following table summarizes certain information with respect to the
Company's products:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
------- ----------- ------
<S> <C> <C>
INFUSION PUMPS

3030 Stationary Pump...... Stationary, multi-therapy Commercially available since
infusion device 1992(1)(2)(4)

6060 Ambulatory Pump...... Ambulatory, multi-therapy Commercially available since
infusion device 1995(2)(5)

INFUSION SUPPLIES

3030 Infusion Sets........ Non-proprietary, disposable Commercially available since
tubing sets for use with 1992
3030 Stationary Pump

6060 Infusion Sets........ Proprietary, disposable Commercially available since
tubing sets for use with 1995(1)(2)(4)
6060 Ambulatory Pump

I.V. Admixture Products... Prepackaged, injectable, Commercially available since
prescription pharmaceuticals 1995(3)

Pre-filled Syringe Pre-filled I.V. tubing flush Commercially available since
Products.................. syringes 1996(2)(3)

INTERACTIVE PROGRAMMING AND MONITORING SOFTWARE

MediVIEW.................. Proprietary, PC-based Commercially available since
software that allows remote 1996(2)
and real-time programming,
monitoring and data capture

AUTOMATIC DIAGNOSTIC TESTING DEVICE

PumpMaster................ Proprietary, portable, Commercially available since
automatic diagnostic device 1996(2)
for the testing of Sabratek
infusion pumps
</TABLE>

- ---------------
(1) Patent(s) issued in the United States.

(2) United States and/or foreign patents pending.

(3) See "Certain Transactions" for information relating to the Company's
acquisition of Rocap.

(4) Foreign patent issued.

(5) U.S. patents allowed.

24
<PAGE> 29

SABRATEK 3030 -- STATIONARY MULTI-THERAPY INFUSION PUMP. The Company's
3030 Stationary Pump is an electromechanical, volumetric infusion device that is
able to deliver a wide variety of infusion therapies including, among others,
chemotherapy, antibiotics, circadian rhythms and total parenteral nutrition
under three standard and one customizable delivery modes. The 3030 Stationary
Pump incorporates multiple language capabilities, remote communications and
pre-programming capabilities, a state-of-the-art ergonomic design and a
relatively easy-to-learn programming format. The 3030 Stationary Pump operates
with leading brands of disposable tubing as well as Sabratek's own line of
non-proprietary disposable tubing.

SABRATEK 6060/HOMERUN -- AMBULATORY MULTI-THERAPY INFUSION PUMP. The
Company's 6060 Ambulatory Pump weighs approximately 13 ounces and can be worn
discreetly by a patient. The 6060 Ambulatory Pump was designed as a
complementary product to the 3030 Stationary Pump and, when combined with the
use of the 3030 Stationary Pump, provides a seamless transition between the bed
and an ambulatory state, or vice versa, with minimal additional training. The
6060 Ambulatory Pump has delivery capabilities and a programming format that are
similar to the 3030 Stationary Pump, with the addition of a pre-programmed
capability to deliver pain management infusion therapy. The 6060 Ambulatory Pump
also has the ability to work in conjunction with the MediVIEW software and
utilizes a proprietary disposable tubing set.

DISPOSABLE INFUSION SUPPLIES. The Company sells non-proprietary disposable
tubing sets for use with the 3030 Stationary Pump and proprietary disposable
tubing sets for use exclusively with the 6060 Ambulatory Pump. Through the
acquisition of Rocap, the Company has begun offering I.V. Admixture and
pre-filled syringe products.

MEDIVIEW -- REMOTE PROGRAMMING, MONITORING AND DATA CAPTURE SOFTWARE
SYSTEM. MediVIEW is a proprietary software system designed to allow providers
to program and monitor Sabratek's infusion pumps and capture data for reporting
and clinical purposes from remote locations over standard telephone lines. The
Company has designed MediVIEW to enable alternate-site health care providers
using the 3030 Stationary Pump and 6060 Ambulatory Pump combined with MediVIEW
to: (i) remotely monitor and program the Company's pumps on a real-time basis,
(ii) receive instantaneous notification of alarm activation and immediately
respond from the provider's physical location, (iii) automatically record and
"package" data regarding the outcomes of actual therapy courses for specific
case management and clinical as well as administrative/reimbursement purposes,
and (iv) develop a proprietary clinical protocol and outcomes database useful to
providers in managed care cases. In addition, patients who receive therapy on
the Company's infusion products should derive greater comfort because their
providers will be able to monitor their therapies on a real-time basis. The
first release of MediVIEW became commercially available in the third quarter of
1996.

PUMPMASTER -- PORTABLE, AUTOMATIC DIAGNOSTIC DEVICE FOR THE TESTING OF
SABRATEK INFUSION PUMPS. The PumpMaster is a portable device designed to enable
providers to perform on-site diagnostic tests on Sabratek's infusion devices.
Pursuant to suggested standards adopted by the Joint Commission for the
Accreditation of Healthcare Organizations ("JCAHO"), an industry group which
promulgates standards relating to the provision of alternate-site health care,
the performance of every infusion pump is required to be re-certified on the
earlier of the date on which such pump is provided to a new patient for their
use or the date which is 12 months from the date of the last certification. The
Company believes that it is not cost-efficient for providers to maintain
in-house bio-medical engineering resources on a branch level to perform pump re-
certification. Instead, providers typically ship their pumps for remote-site
testing and, as a result, are required to maintain costly back-up pump
inventory. The PumpMaster is intended to obviate such incremental capital
expenditure outlays as well as eliminate the cost of outside infusion pump
testing. The PumpMaster is designed to conduct automatically, in approximately
ten minutes, all tests typically performed as part of JCAHO re-certification.
PumpMaster became commercially available in the fourth quarter of 1996.

SALES AND MARKETING

The Company sells its products to a diverse group of customers in the
alternate-site health care industry such as sub-acute skilled nursing care
facilities, home health care providers, physicians' offices, clinics, surgery

25
<PAGE> 30

centers and long-term care facilities. This group of customers ranges in size
from national and regional chains to local independent operators. The Company's
products are also sold to hospitals. Key decision makers include nursing,
pharmacy, purchasing and bio-medical departments, as well as physicians.

As of December 31, 1996, the Company's domestic sales force consisted of 17
direct sales professionals, six clinical support staff and two full-time sales
consultants as well as a network of domestic distributors each of whom covers an
exclusive geographic territory. In certain limited geographic areas, the
distributors are directly involved in sales and implementation; in others, the
distributors act as support to the new client implementation process. The
Company's distributors have been selected for their experience in and focus on
the infusion therapy market, coverage of specific geographical areas, product
sales support and regional dominance. The Company's sales management team trains
the sales personnel of each of the distributors and provides them with all
product information and other relevant field literature. In addition, Sabratek's
direct sales representatives coordinate and manage national account activity.
The Company's marketing and sales efforts are supported by advertising in trade
journals, new product literature and attendance at trade shows. The Company
believes that its existing sales force and distribution network provide the
necessary infrastructure to market its current products and those under
development. The Company intends to use a portion of the proceeds from the
Offering to augment its sales and marketing staff and increase its marketing
efforts to further facilitate sales of current and future products.

The Company has also entered into distribution agreements with distributors
in South America, Europe, the Middle East, Asia and Africa. For the year ended
December 31, 1996, international sales accounted for approximately 9% of the
Company's total sales. The Company perceives the international marketplace as a
potential area for future growth. The Company has distribution agreements in
Japan and Germany, which it believes are among the largest international markets
for infusion systems, and will commence marketing its products in these
countries upon receipt of regulatory approval. Currently, all of the Company's
international sales are invoiced and paid in U.S. dollars.

The Company has enhanced its domestic sales effort through an affiliation
with Americorp Financial, Inc. ("Americorp") to provide leasing services to the
Company's domestic customers. Americorp has licensed the name "Sabratek Credit
Corporation" from the Company and offers financing for the acquisition of
Sabratek products under both capital and operating leases.

RESEARCH AND DEVELOPMENT

The Company is committed to continued product innovation and has invested
approximately $1.0 million, $2.2 million and $1.1 million in research and
development for the years ended December 31, 1996, 1995 and 1994, respectively.
The Company's research and development effort is supported by a staff of twelve
electrical, mechanical and software engineers who have extensive experience in
the design and development of electromechanical infusion therapy devices, other
medical instrumentation and software. Sabratek's engineering team closely
coordinates its design activities with the Company's sales and marketing team.
This group solicits extensive pre-design focus group input from constituencies
that use or are impacted by the use of Sabratek's products, but who may possess
a host of different strategic, economic and other objectives.

Sabratek's research and development program is focused on both new product
development and enhancements of existing products. The Company's product
development efforts include advancements in infusion therapy, interactive
software systems, vital signs monitoring, blood gas monitoring and whole blood
analysis. The Company's product development strategy is based on developing
product platforms that have the flexibility to be configured to respond to a
variety of customer requirements. The Company's product enhancement efforts are
based on the input received from customers after the initial introduction of its
products and focus on addressing customers' needs in a more cost-effective and
comprehensive way.

ASSEMBLY AND MANUFACTURING

Sabratek currently assembles all of its infusion devices at its facility in
Niles, Illinois in an effort to ensure production quality and control its costs.
The Company outsources the manufacture of certain sub-systems used in its
infusion systems. In addition, disposable tubing sets sold by Sabratek are
manufactured by contract

26
<PAGE> 31

manufacturers. Sabratek believes its use of in-house assembly and contract
manufacturing is the most cost-effective means of producing its products.
Additionally, Sabratek's Rocap division manufactures prepackaged injectible
prescription pharmaceuticals and pre-filled I.V. flush syringes at its facility
in Woburn, Massachusetts.

The Company's production process for its infusion devices consists of
assembling major sub-systems as well as the assembly of both standard and custom
components. The standard components can be obtained from a number of sources.
The custom components are produced by both Sabratek as well as by sub-
contractors and, in all cases, competitive back-up supply sources exist. The
Company believes that, due to volume discounts, the unit cost of both standard
and custom components will decrease as production volumes increase.

Disposable tubing sets are manufactured to Sabratek's specifications by
third parties in a clean room environment under stringent quality control
procedures covering assembly, storage and sterilization. Set production consists
of the assembly of both standard and custom components. The plastic custom
components are manufactured by a sub-contractor using molds supplied by the
Company. The Company uses more than one manufacturer for the production of its
disposable tubing sets.

QUALITY ASSURANCE

The Company maintains a comprehensive quality assurance program. The
quality assurance program begins with the components and other materials the
Company purchases from vendors. Vendors are required to supply materials which
meet stated specifications. The Company monitors vendors' compliance with the
stated specifications through a program of on-site surveys, audits and product
testing. The Company also employs quality assurance procedures during its
on-site manufacturing and assembly process in an effort to ensure that finished
products meet the standards set by the Company. All finished products are tested
by the Company's separate quality assurance department to ensure that the
Company avoids distributing sub-standard products. Finally, the Company
maintains a post-sale performance monitoring program.

Sabratek provides a one-year warranty on the 3030 Stationary Pump, the 6060
Ambulatory Pump and PumpMaster. This warranty is passed on to the end-users by
the distributors. To provide further product support, the Company has
established an in-house capability for repair, maintenance and upgrade of its
products. The repair and maintenance function utilizes full-time technical
personnel as well as on-going support from temporary and production personnel as
required to service infusion devices. The Company believes the service and
maintenance of its infusion devices require minimal manpower due to the
modularity of such devices' sub-systems, sound quality control procedures and
the service capabilities of distributors.

As part of its quality program, Sabratek provides its customers with
extensive in-service and training in the use of its products. This is provided
by both Sabratek's sales force and its distributors.

INTELLECTUAL PROPERTY

One United States patent and one Australian patent have been issued for the
3030 Stationary Pump. In addition, two foreign patents are pending for the 3030
Stationary pump. For the 6060 Ambulatory Pump, four United States patents have
been allowed (are awaiting the issuance of patent numbers by the Patent and
Trademark Office) and four United States patents are pending. One United States
and one German patent have been issued for the 6060 Infusion Set and United
States and foreign patents are pending on this product. The Company also has
United States and Foreign patents pending for certain aspects of MediVIEW and
PumpMaster. There is one United States patent pending with respect to the
pre-filled syringe products. The Company also requires each of its employees,
consultants and advisors to agree in writing to keep its proprietary information
confidential and to assign all inventions relating to the Company's business to
the Company. There can be no assurance that any unprotected information will not
also be developed by others.

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<PAGE> 32

The Company has registered or applied to register the following trademarks:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), SEAMLESS DELIVERY SYSTEM(TM),
PumpMaster(TM), MediVIEW(R) and TCS Total Compliance System(TM). The Company has
also filed a foreign trademark application for the name SABRATEK(TM) and its
logo in Japan. See "Risk Factors--Intellectual Property."

COMPETITION

The Company faces substantial competition. At the present time, the Company
considers its primary competitors to be other marketers of infusion pumps. The
Company believes there are several major competitors in the market for infusion
pump devices, including, but not limited to: Abbott Laboratories; Advanced
Medical, Inc.; Baxter International Inc.; I-Flow Corp.; McGaw, Inc., a
subsidiary of IVAX Corporation, and SIMS Deltec. See "Risk Factors -- Highly
Competitive Markets; Technological Risk."

Despite the greater size and market share of its competitors, Sabratek
believes that its products compete favorably against the products offered by its
competitors. Sabratek has strategically designed its stationary and ambulatory
pump products to offer cost efficient and convenient transferability of
training/operational procedures and functions. Unlike manufacturers that offer
only a stationary or an ambulatory pump, or offer both but whose products lack
operational integration, Sabratek's SEAMLESS DELIVERY SYSTEM product design
provides health care providers with product standardization which the Company
believes to be critical in achieving operating efficiencies. Sabratek believes
that its products also compete favorably with the products of larger, more
established companies on the basis of other advanced product features.

REIMBURSEMENT

The Company's current products are generally purchased by health care
providers who are reimbursed by third-party payors, including indemnity
insurance companies, managed care organizations and government agencies. Such
health care providers recover the cost of purchasing the Company's products
through reimbursement for services provided using the Company's products. A
recent trend is for providers to contract for services on a capitated basis.
Under those contracts, providers receive a fixed fee for providing service to
patients. In those situations, the providers' profit or loss on the contract is
dependent upon managing its costs.

HCFA coordinates a system of reimbursement for outpatient hospital
procedures, physician office procedures and devices used in conjunction
therewith. Under this system, HCFA determines coverage eligibility, issues
coverage instructions and assigns billing codes called the HCFA Common
Procedures Coding System ("HCPCS") for such procedures and devices under
Medicare and Medicaid. HCFA has established HCPCS billing codes for infusion
devices. Moreover, the HCPCS system is referenced by most third-party payors,
including Medicare and Medicaid, insurance companies and health maintenance
organizations, thereby standardizing coverage identification and billing
identification across a broad spectrum of payor plans. When the use of
FDA-approved infusion devices is prescribed by a physician and determined to be
reasonable and necessary in the treatment of illness, such use is generally
reimbursable under Medicare and Medicaid. Reimbursement by other third-party
payors is dependent upon the coverage provided under the applicable plan. See
"Risk Factors -- Dependence on Third-Party Reimbursement."

GOVERNMENT REGULATION

The medical devices and supplies manufactured and marketed by the Company
are subject to regulation by the FDA and, in some instances, by state and
foreign authorities. Pursuant to the FFDCA and the regulations promulgated
thereunder, the FDA regulates the clinical testing, development, manufacture,
packaging, labeling, distribution and promotion of medical devices and supplies.

Pursuant to the FFDCA, medical devices intended for human use are
classified into three categories, Classes I, II and III, on the basis of the
controls deemed necessary by the FDA to reasonably assure their safety and
effectiveness. Class I devices are subject to general controls (for example,
labeling, premarket notification and adherence to good manufacturing practice
("GMP") requirements) and Class II devices are subject to general and special
controls (for example, performance standards, postmarket surveillance, patient
registries, and FDA guidelines). Generally, Class III devices are those which
must receive premarket approval ("PMA") from the FDA to ensure their safety and
effectiveness (for example, life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally

28
<PAGE> 33

marketed devices). Electronic infusion devices and disposable tubing sets are
classified by the FDA as Class II medical devices.

If a new Class II medical device is substantially equivalent in terms of
safety and effectiveness to a medical device already legally marketed in the
United States, the FDA requirements may be satisfied through a procedure known
as a "510(k) Submission," in which the applicant provides product information
supporting its claim of substantial equivalency. "Substantial equivalence" means
that a device has the same intended use and the same technological
characteristics as the legally marketed device, or the same intended use and
different technological characteristics, provided that it can be demonstrated
that the device is as safe and effective as the legally marketed device, and
does not raise different questions regarding safety and effectiveness. A
"legally marketed device" to which a new device may be compared for a
determination regarding substantial equivalence is a device that was legally
marketed prior to May 28, 1976, when the Medical Device Amendments were added to
the FFDCA, or a device which has been reclassified from Class III to Class II or
I, or a device which has been found to be substantially equivalent through the
510(k) premarket notification process.

Commercial distribution of a device for which a 510(k) Submission is
required can begin only after the FDA issues an order finding the device to be
"substantially equivalent" to a legally marketed device. The FDA has recently
been requiring a more rigorous demonstration of substantial equivalence than in
the past. This may include a requirement for clinical testing of the device. It
generally takes from four to twelve months from submission of a 510(k) to obtain
a 510(k) clearance, but it may take longer. The FDA may determine that a
proposed device is not substantially equivalent to a legally marketed device, in
which case a PMA may be required, or that additional information is needed
before a substantial equivalence determination can be made, in which case data
from safety and effectiveness tests, including clinical tests, may be required.
The process for preparing and obtaining FDA approval of a PMA is much more
elaborate, time-consuming, and expensive than the process of preparing and
obtaining FDA clearance of a 510(k) Submission and would require the Company,
among other things, to conduct preclinical and clinical trials to demonstrate
the safety and effectiveness of the proposed device. A "not substantially
equivalent" determination or a request for additional information could
significantly delay the market introduction of new products.

The Company received 510(k) clearance to begin marketing the 3030
Stationary Pump in the United States in May, 1992. The Company received 510(k)
clearance for the disposable tubing sets for use with the 3030 Stationary Pump
in March, 1995. In July, 1994, the FDA cleared the 510(k) Submission for the
6060 Ambulatory Pump and disposable tubing sets for use with the 6060 Ambulatory
Pump. In June 1996, the Company received 510(k) clearance for the MediVIEW
software system for use with the 3030 Stationary Pump.

The Company believes that its 510(k) clearance for the 6060 Ambulatory Pump
adequately described the MediVIEW software system and, accordingly, that the
original 510(k) clearance for the 6060 Ambulatory Pump permits the Company to
market the MediVIEW software with the 6060 Ambulatory Pump in the United States.
However, there can be no assurance that the FDA would agree with the Company's
determination. If in the future the FDA concluded that the MediVIEW software
system for use with the 6060 Ambulatory Pump required a new 510(k) Submission,
the FDA could prohibit the Company from marketing the MediVIEW software system
for this use until the Company files a new 510(k) Submission and obtains
clearance from the FDA. The FDA could also take regulatory action against the
Company for any prior distribution of the MediVIEW software system with the 6060
Ambulatory Pump. Alternatively, the FDA could use its discretion not to take any
regulatory steps with regard to this issue.

The PumpMaster is a hardware and software system designed to perform
diagnostic tests on the Company's infusion pumps. The Company has determined
that the PumpMaster does not qualify as a medical device under the statutory
definition and, therefore, did not file a 510(k) Submission with respect to such
product. There can be no assurance that the FDA will agree with the Company's
determination in this regard. If the FDA were to determine that the PumpMaster
is a medical device, it could suspend its commercial distribution until such
time as a 510(k) Submission covering such product has been filed and cleared.
The FDA could also take regulatory action against the Company based on its prior
distribution of the uncleared

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<PAGE> 34

product. Alternatively, the FDA could use its discretion not to take any
regulatory steps with respect to this issue.

The FFDCA requires the filing of a new 510(k) Submission when, among other
things, there is a major change or modification in the intended use of the
device or a change or modification, including product enhancements, to a legally
marketed device that could significantly affect its safety or effectiveness. A
device manufacturer is responsible for making the initial determination as to
whether a proposed change to a cleared device or to its intended use
necessitates the filing of a new 510(k) Submission. The Company has made some
enhancements to its currently marketed products without filing 510(k)
Submissions. There can be no assurance that the FDA would agree with the
Company's determinations that these enhancements do not require a 510(k)
Submission. Likewise, if the Company determines that any modifications that it
may make to its cleared devices in the future do not require a new 510(k)
Submission, there can be no assurance that the FDA would agree with the
Company's determinations and would not require a new 510(k) Submission for any
modifications made to the devices. If the FDA requires the Company to file a new
510(k) Submission for any past or future modification to a cleared device, the
Company may be prohibited from marketing the device as modified until it obtains
clearance from the FDA. There can be no assurance that the Company will obtain
510(k) clearance on a timely basis, if at all, for any device modification for
which it files a future 510(k) Submission. If 510(k) clearance is granted, there
can be no assurance that it will not contain significant limitations in the form
of warnings, precautions or contraindications with respect to conditions of use.

The Company intends to develop new products for the future, including new
applications for the MediVIEW software system. The Company's new products,
including new applications for existing products, may qualify as devices that
require FDA clearance or approval prior to marketing . The FDA is currently in
the process of revising the regulatory requirements and review criteria for
software-related medical devices, which could adversely affect the Company's
introduction of new software products, or devices that incorporate software, in
the future. There can be no assurance that market clearance of future products
or product applications will be forthcoming in a timely manner, if at all, or
that FDA's clearance or approval of future products or product applications will
not contain significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use.

In October 1996, the Company learned of a defect in a software feature of
certain units of the 6060 Ambulatory Pump. The Company initiated a recall of
these units to correct the problem with an upgrade of the software. Pursuant to
FDA regulations, the Company notified the FDA of the recall and has updated the
FDA of the progress of the recall, which is now approximately 85% complete. The
FDA classified the Company's recall as a Class II recall, which is defined as a
situation in which the use of a violative product may cause temporary or
medically reversible adverse health consequences or where the probability of
serious adverse health consequences is remote. FDA reported this recall in the
January 15, 1997 issue of the FDA Enforcement Report. There can be no assurance
that FDA will not take further enforcement action against the Company with
respect to this matter.

Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA. Device manufacturers are required to register their establishments and
list their devices with the FDA, and are subject to periodic inspections by the
FDA and certain state agencies. The FFDCA requires devices to be manufactured in
accordance with GMP requirements, which impose certain process, procedure and
documentation requirements upon the Company with respect to product development,
manufacturing and quality assurance activities. FDA recently revised its GMP
requirements. The new GMP requirements, which are outlined under the FDA's
Quality Systems regulations, are more extensive than previous requirements.
There can be no assurance that the Company will be able to attain or maintain
compliance with GMP requirements.

In addition, the Medical Device Reporting ("MDR") regulation obligates the
Company to inform the FDA whenever there is reasonable evidence to suggest that
one of its devices may have caused or contributed to death or serious injury, or
where one of its devices malfunctions and, if the malfunction were to recur, the
device would be likely to cause or contribute to a death or serious injury.
There can be no assurance that the

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<PAGE> 35

FDA would agree with the Company's determinations as to whether particular
incidents meet the threshold for MDR reporting.

Labeling and promotion activities are also subject to scrutiny by the FDA
and, in certain instances, by the Federal Trade Commission. The FDA actively
enforces regulations prohibiting marketing of products for unapproved or
uncleared uses.

If, as a result of FDA inspections, MDR reports or information derived from
any other source, the FDA believes the Company is not in compliance with the law
or regulations thereunder, the FDA can refuse to clear pending 510(k)
Submissions; withdraw previously cleared 510(k) Submissions; require
notification to users regarding newly found unreasonable risks; request repair,
refund or replacement of faulty devices; request corrective advertisements,
formal recalls or temporary marketing suspension; impose civil penalties; or
institute legal proceedings to detain or seize products, enjoin future
violations, or seek criminal penalties against the Company, its officers or
employees. Civil penalties for FFDCA violations may be assessed by the FDA in
lieu of or in addition to instituting legal action. Civil penalties may range up
to $15,000 per violation for violations of the FFDCA, and a maximum of
$1,000,000 per proceeding. Civil penalties may not be imposed for GMP
violations, unless the violations involve a significant or knowing departure
from the requirements of the FFDCA or a risk to public health. The FDA provides
manufacturers with an opportunity to be heard prior to the assessment of civil
penalties. If civil penalties are assessed, judicial review is available.

The Company exports, or intends to export, its products to Europe, Japan
and other foreign countries. Exports of products that have market clearance from
the FDA in the United States do not require FDA authorization for export.
However, foreign countries often require, among other things, an FDA Certificate
to Foreign Government verifying that the product complies with FFDCA
requirements. To obtain a Certificate to Foreign Government, the device
manufacturer must certify to the FDA that the product has been granted clearance
or approval in the United States and that the manufacturer and the exported
products are in substantial compliance with the FFDCA and all applicable or
pertinent regulations. The FDA may refuse to issue a Certificate to Foreign
Government if significant outstanding GMP violations exist.

International sales of medical devices are subject to the regulatory
requirements of each country. The regulatory review process varies from country
to country. Many countries also impose product standards, packaging and labeling
requirements, and import restrictions on devices. In addition, each country has
its own tariff regulations, duties and tax requirements. The Company plans to
use its distributors to assist in obtaining any necessary foreign governmental
and regulatory approvals. The Company does not currently have its products
registered or approved in any countries requiring an extensive registration or
approval process and has, therefore, not sold any products in such countries.

The Company has received Underwriters Laboratory, Inc. product recognition
under UL 544, Standard for Medical and Dental Equipment as well as product
recognition under Canadian National Standard C22.2 through cUL for both the 3030
Stationary Pump and the 6060 Ambulatory Pump. To maintain "UL" status, the
Company is subject to quarterly inspections by Underwriters Laboratory, Inc.

The Company and its products are also subject to a variety of state and
local laws and regulations in those states or localities where its products are
or will be marketed. Manufacturers are also subject to numerous federal, state
and local laws relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard control and
disposal of hazardous or potentially hazardous substances. There can be no
assurance that the Company will not be required to incur significant costs to
comply with such laws and regulations.

The Company's Rocap division is currently registered with the FDA as a drug
manufacturer and repackager. Rocap intends to develop new products and to make
modifications to existing products. Such new or modified products may require
obtaining 510(k) clearance, new drug application approval, or other FDA
clearance. If it were determined that any such new or modified products required
prior FDA approval, the Company would be prohibited from marketing such products
until the necessary approvals were obtained. Such approvals could prove costly
and time consuming to obtain. In addition there can be no assurance that the
Company will obtain such clearances on a timely basis, if at all, for any new
product and/or modification

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<PAGE> 36

to an existing product. If any such clearance is granted, there can be no
assurance that it will not contain significant limitations in the form of
warnings, precautions, or contraindications with respect to conditions of the
use.

PRODUCT LIABILITY INSURANCE

The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of its products is alleged to have
resulted in adverse effects. The Company maintains product liability insurance
with coverage of $5.0 million per claim, with an annual aggregate policy limit
of $5.0 million. There can be no assurance that liability claims will not exceed
the coverage limits of such policies or that such insurance will continue to be
available on commercially acceptable terms, if at all. See "Risk Factors --
Product Liability Exposure."

LITIGATION

On February 5, 1997, SIMS Deltec filed the Complaint in the United States
District Court for the District of Minnesota alleging that Sabratek's
manufacture, use and/or sale of the MediVIEW software in conjunction with its
infusion pumps infringes on a patent entitled "Systems and Methods for
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. The Complaint seeks injunctive relief,
unspecified monetary damages and costs. The Company has not yet formally
responded to the Complaint but intends to vigorously defend against the
allegations contained in the Complaint. Protracted litigation or an adverse
outcome in this matter could have a material adverse impact on the Company's
business, financial condition or results of operations.

The Company is also a party to routine litigation in the ordinary course of
business, none of which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the Company.

EMPLOYEES

As of December 31, 1996, the Company employed 100 persons full-time,
including 48 in manufacturing and operations, 26 in sales and marketing, eight
in research and development, twelve in administration, and six in regulatory
affairs/quality assurance. The Company anticipates hiring additional personnel
following the completion of the Offering, primarily in the areas of sales and
marketing and operations. The Company's employees are not represented by a
union, and the Company considers its relationship with its employees to be
satisfactory.

The Company has entered into employee non-disclosure and non-competition
agreements with each of its full-time employees that (i) prohibit disclosure of
confidential information to anyone outside of the Company both during and
subsequent to employment, (ii) require disclosure to the Company of ideas,
discoveries or inventions relating to or resulting from the employee's work for
the Company and assignment to the Company of all proprietary rights to such
ideas, discoveries or inventions, and (iii) limit competition with the Company's
business by the employee for a maximum period of one year following termination
of their employment.

FACILITIES

The Company occupies approximately 38,000 square feet of development,
production, warehouse and administrative space in Niles, Illinois. The facility
lease runs through October 31, 1999. The current annual lease rate for this
space is approximately $217,000 and is subject to annual increases. Sabratek
believes that the leased space is adequate for its anticipated needs into the
foreseeable future.

The Company's Rocap division occupies approximately 7,900 square feet of
production, warehouse and administrative space at two facilities in Woburn,
Massachusetts. The lease terms end July 31, 2000 and August 1, 2000. The current
annual lease rate in aggregate is approximately $64,000. Sabratek intends to
continue to operate the Rocap division's current business from its existing
facilities but may need to lease additional space based upon the planned
expansion of the Rocap division business.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
K. Shan Padda........................ 34 Chairman of the Board, Chief Executive Officer
and Treasurer
Anil K. Rastogi, Ph.D................ 53 President and Chief Operating Officer
Doron C. Levitas..................... 39 Vice Chairman of the Board, Vice President of
International Operations and Secretary
Alan E. Jordan....................... 53 Senior Vice President of Sales and Marketing
Stephen L. Holden.................... 43 Senior Vice President and Chief Financial
Officer
Scott Skooglund...................... 38 Vice President of Finance
Joseph Moser......................... 43 Vice President of Research and Development
Vincent J. Capponi................... 38 Vice President of Manufacturing
Elliot R. Mandell.................... 41 Vice President
Scott Hodes.......................... 59 Director
Mark Lampert......................... 36 Director
William D. Lautman(1)................ 34 Director
William H. Lomicka(1)................ 60 Director
Marvin Samson(2)..................... 55 Director
L. Peter Smith(2).................... 48 Director
Edson W. Spencer, Jr.(2)............. 42 Director
</TABLE>

- ---------------
(1) Member of Audit Committee

(2) Member of Compensation Committee

OFFICERS

The executive officers of the Company are elected annually by the Board of
Directors of the Company (the "Board") and serve at the discretion of the Board.

K. SHAN PADDA co-founded the Company in 1989 and has served as Chairman,
Chief Executive Officer and Treasurer since 1991 and Co-Chairman of the Board
and Vice President of Finance from 1989 to 1991. From 1984 to 1988, Mr. Padda
served as Chief Executive Officer of Andens of Illinois, Inc., a medical
supplies company headquartered in Chicago, Illinois, which assembled and
marketed hospital operating room supply kits. From 1982 to 1984, Mr. Padda
directed marketing and sales efforts for a division of Crowd Caps, Inc., an
apparel company, in Minneapolis, Minnesota. Mr. Padda graduated from Harvard
University with a B.A. in Biology. In 1995, Mr. Padda was inducted into the
Chicagoland Entrepreneur Hall of Fame.

ANIL K. RASTOGI, PH.D. joined the Company in August, 1995 as President and
Chief Operating Officer. Prior to joining Sabratek, from 1991 to 1995, Dr.
Rastogi held various positions with SIMS Deltec, Inc. (formerly Pharmacia
Deltec, Inc.), a manufacturer and marketer of ambulatory drug delivery and
vascular access devices. From 1994 to 1995, Dr. Rastogi served as Chief
Operating Officer; from 1992 to 1994, as Executive Vice President; and from 1991
to 1992, as Vice President and General Manager of the Infusion Division of SIMS
Deltec, Inc. Prior thereto, Dr. Rastogi was President of the Cycolor Division of
Mead Corporation and held various positions with Owens-Corning Fiberglas
Corporation. Dr. Rastogi graduated from McGill University with a Ph.D. degree in
Polymer Science.

DORON C. LEVITAS co-founded the Company in 1989 and has served as Vice
Chairman of the Board and Secretary since 1994 and Vice President of
International Operations since 1993. Prior thereto, Mr. Levitas

33
<PAGE> 38

served in various capacities including Co-Chairman of the Board and Chief
Operating Officer. Before joining Sabratek, from 1986 to 1988, Mr. Levitas
served as President of a division of Chicago-based Andens of Illinois. From 1984
to 1986, Mr. Levitas served as President of Headings, Inc., an international
apparel marketing firm based in New York, New York, which was later sold to
Andens of Illinois. Mr. Levitas graduated from Baruch College in New York, New
York with a B.A. in International Business and Finance. In 1996, under Mr.
Levitas' guidance, Sabratek received the State of Illinois's 1996 Governor's
Export Award.

ALAN E. JORDAN has served as Senior Vice President of Sales and Marketing
of the Company since 1994 and in various other capacities since joining the
Company in 1991. Prior thereto, in 1986, he founded Ivonyx Corp., a national
home health care company, where he served until 1989 in various positions,
including Chairman and Chief Executive Officer. Mr. Jordan has many years
experience in the infusion pump industry, including tenures at IMED Corporation,
an electronic infusion pump manufacturer, where he, among other positions,
served as Vice President of Sales and Marketing. In 1968, Mr. Jordan joined IVAC
Corporation, an electronic infusion equipment manufacturer. He graduated from
Drake University with a B.S. in Business Management.

STEPHEN L. HOLDEN has served as Senior Vice President and Chief Financial
Officer of the Company since August, 1996. Prior thereto, from 1993 to 1996, Mr.
Holden was Chief Operating Officer of a subsidiary of Value Health, Inc., a
provider of specialty managed care. From 1976 to 1993, Mr. Holden was with
American Hospital Supply, Baxter Healthcare and Caremark, Inc., where he served
in a number of financial and operating roles. Mr. Holden holds a B.A. in
Economics and a M.S.B.A. in finance from the University of Denver and is a
certified public accountant.

SCOTT SKOOGLUND has been Vice President of Finance of the Company since
joining Sabratek in 1992. Prior thereto, from 1989 to 1992, Mr. Skooglund served
in various capacities at XCEL Laboratories, Inc., a pharmaceutical manufacturer,
including Vice President of Finance. From 1984 to 1989, Mr. Skooglund was
Regional Accounting Manager at Leaseway Transportation Corp. Mr. Skooglund
graduated with a B.S. in Accounting from Eastern Illinois University and is a
certified public accountant.

JOSEPH MOSER has been Vice President of Research and Development of the
Company since joining Sabratek in 1994. Prior thereto, Mr. Moser served as Vice
President, Research and Development for VideOcart, a Chicago-based technology
firm from 1990 to 1993. Mr. Moser has served as Director of Engineering and Vice
President of Engineering for Information Resources, Inc., a communications
technology company. Mr. Moser graduated from the University of Michigan with a
B.S. in Electrical Engineering.

VINCENT J. CAPPONI joined the Company in April, 1996, as Vice President of
Manufacturing. Prior to joining Sabratek, from 1992 to 1996, Mr. Capponi was
employed by SIMS Deltec, a manufacturer and marketer of ambulatory drug delivery
and vascular access devices, most recently as Director of Operations. From 1984
to 1992, Mr. Capponi served in a variety of positions with Mead Imaging, a
division of Mead Corporation, which commercialized a new color-imaging
technology. Mr. Capponi graduated from Bowling Green State University and also
holds a Masters of Science degree in Chemistry from Bowling Green State
University.

ELLIOT R. MANDELL was elected a Vice President of Sabratek upon the
Company's acquisition of Rocap in February, 1997. Mr. Mandell founded Rocap in
1995 and served as its President until its acquisition by Sabratek. Prior
thereto, Mr. Mandell served as corporate director of clinical services for the
Yankee Alliance of Hospitals, an affiliation of hospitals located in Andover,
Massachusetts. Previously, Mr. Mandell spent 14 years in various clinical
capacities with the New England General Hospital. Mr. Mandell holds a B.S. in
Pharmacy from the Massachusetts College of Pharmacy and also an M.B.A. from the
New Hampshire College Graduate School of Business.

BOARD OF DIRECTORS

In addition to K. Shan Padda and Doron C. Levitas, the Board includes:

SCOTT HODES, a director of the Company since 1992, has been a Senior
Partner in the Business and Finance Group of the Chicago law firm of Ross &
Hardies since 1992. Prior to joining Ross & Hardies,

34
<PAGE> 39

Mr. Hodes was a Partner at the Chicago law firm of Arvey, Hodes, Costello &
Burman. Mr. Hodes is a director of the following companies: Richardson
Electronics, Ltd. and First Investors Life Insurance Co. Mr. Hodes graduated
from the University of Chicago and has a J.D. degree from the University of
Michigan Law School and an LL.M. from Northwestern University Law School.

MARK LAMPERT, a director of the Company since May, 1996, founded and has
been the managing partner of Biotechnology Value Fund, L.P., a private
investment partnership which specializes in biotechnology, since 1993. Prior to
forming the Biotechnology Value Fund in August, 1993, Mr. Lampert was a Vice
President at the investment banking firm Oppenheimer & Co. in New York, New York
from March, 1991 through August, 1992. Prior to joining Oppenheimer & Co., Mr.
Lampert worked at Biotechnology Royalty Corp., which he founded in March, 1990.
Prior to founding Biotechnology Royalty Corp., Mr. Lampert headed business
development for Cambridge NeuroScience, Inc., a public biotechnology company,
and served as Assistant to the President of the NutraSweet Company, then a
subsidiary of G.D. Searle & Co. Mr. Lampert has also worked for the Boston
Consulting Group. Mr. Lampert received a B.A. in Chemistry from Harvard College
and a M.B.A. from Harvard Business School.

WILLIAM D. LAUTMAN, a director of the Company since 1994, has been a
Managing Director of EGS Securities Corp. since 1995. Prior to joining EGS
Securities Corp., Mr. Lautman served as a Managing Director of Advisory Capital
Partners, Inc., which he joined in 1994. Prior thereto, Mr. Lautman served as a
Managing Director of Cowen & Company, which he joined in 1992. From 1989 until
joining Cowen & Company, Mr. Lautman was employed by Kidder, Peabody & Co.,
Incorporated, most recently as a Senior Vice President. Mr. Lautman is a
director of One Call Medical, Inc. Mr. Lautman graduated from The Wharton
School, University of Pennsylvania with an M.B.A., and from Georgetown
University with a B.S. in Business Administration. Mr. Lautman also completed
the Comparative Business Policy Program, Centre for Management Studies, Oxford
University, England.

WILLIAM H. LOMICKA, a director of the Company since 1994, has been
President of Mayfair Capital, Inc., a private investment firm, since 1989 and
President of The Regent Group, an asset management firm since 1990. Prior
thereto, Mr. Lomicka was Senior Vice President of CW Group, a New York venture
capital firm specializing in health care enterprises. From 1975 to 1985, Mr.
Lomicka served in various capacities at Humana Inc., including Treasurer and
Senior Vice President -- Finance. Mr. Lomicka is a director of the following
companies: Regal Cinemas, Inc. and Vencor, Inc.

MARVIN SAMSON, a director of the Company since 1994, has been President and
Chief Executive Officer of Marsam Pharmaceuticals Inc. ("Marsam"), a developer,
manufacturer and marketer of generic injectable drug products, since its
formation. Marsam was acquired by Schein Pharmaceutical, Inc. in 1995. Prior to
founding Marsam, Mr. Samson was a founder of Elkins-Sinn, Inc., a manufacturer
of generic injectable products. Mr. Samson is a director of Community National
Bank. Mr. Samson graduated from Temple University with a B.S. in Chemistry.

L. PETER SMITH, a director of the Company since 1992, has been Chairman and
Chief Executive Officer of Ralin, Inc., a medical service company specializing
in outpatient cardiac care, since 1990. Mr. Smith has also served as a Managing
Partner of AllCare Health Services, Inc., a health care services provider which
was acquired by Medisys, Inc. in 1992. Prior to joining Ralin, Inc. in 1990, Mr.
Smith served in various capacities with Baxter Healthcare, Inc., most recently
as President of Caremark Inc. and Travacare, a division of Baxter. He also
served as Chief Operating Officer of Baxter Japan, Ltd. He is a director of
Coram Healthcare Corporation. Mr. Smith graduated from Princeton University and
from the University of Chicago, Graduate School of Business with an M.B.A.

EDSON W. SPENCER, JR., a director of the Company since 1993, has been the
Managing Partner of PSF Health Care Fund, L.P., a Minnesota-based venture
capital partnership that invests in the health care sector, since 1993. Mr.
Spencer has also been principal and Chief Financial Officer of
Peterson-Spencer-Fansler Company since 1991. Mr. Spencer serves on the Board of
Directors of Pendose Corporation, a privately held physician practice management
company, and is Chairman of the Board of Directors of Children's Health Care,
the Minneapolis/St. Paul Children's Hospitals. Mr. Spencer graduated from
Columbia University with an M.B.A. and from Williams College.

35
<PAGE> 40

BOARD COMMITTEES

The Board has established a Compensation Committee and an Audit Committee.
The Compensation Committee establishes salaries, incentives and other forms of
compensation for directors, executive officers and key employees of the Company
and administers the Company's Amended and Restated 1993 Stock Option Plan (the
"Stock Option Plan") and other incentive compensation and benefit plans. The
Audit Committee oversees the work performed by the Company's independent
auditors, and reviews internal audit controls.

COMPENSATION OF DIRECTORS

Outside directors do not currently receive cash fees for serving as
directors or for attending meetings, participating on committees of the Board of
Directors or attending meetings of such committees. The Company does, however,
reimburse directors for out-of-pocket expenses incurred in connection with
attendance at such meetings. Pursuant to a formula contained in the Stock Option
Plan, each director receives an option to purchase 7,879 shares of the Company's
Common Stock annually. In addition, each member of a committee of the Board of
Directors receives an option to purchase 945 shares of the Company's Common
Stock annually and each chairman of each such committee receives an additional
option to purchase 473 shares of the Company's Common Stock annually. Such
options vest on the earlier of (i) one year from the date of grant or (ii) the
next annual election of directors and have an exercise price equal to the market
price of the Common Stock on the date of grant.

Directors who are not also executive officers of the Company have been
granted options to purchase a total of 165,298 shares of Common Stock at prices
ranging from $3.17 to $11.11 per share pursuant to the Company's Stock Option
Plan.

CLASSIFIED BOARD OF DIRECTORS

The Company's By-Laws divide the Board of Directors into three classes,
with three-year staggered terms and initial terms of one, two and three years
for Class I, Class II and Class III Directors, respectively. The terms of
Messrs. Hodes, Lampert and Spencer expire at the 1997 annual meeting of
stockholders; the terms of Messrs. Lautman, Samson and Smith expire at the 1998
annual meeting of stockholders and the terms of Messrs. Padda, Levitas and
Lomicka expire at the 1999 annual meeting of stockholders.

36
<PAGE> 41

EXECUTIVE COMPENSATION

The Summary Compensation Table below sets forth certain information
concerning compensation paid or accrued for services rendered to the Company in
all capacities for the years ended December 31, 1995 and 1996 to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- AWARDS
OTHER ------------
ANNUAL SECURITIES
COMPEN- UNDERLYING ALL OTHER
NAME AND SALARY BONUS SATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($) (#)(2) ($)
------------------ ---- ------ ------ ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
K. Shan Padda................................ 1995 90,000 -- -- 157,580 --
Chairman, Chief Executive Officer and
Treasurer 1996 150,000 90,000 10,800(3) 157,580 --
Anil K. Rastogi, Ph.D........................ 1995 52,500(4) -- -- 70,911 --
President and Chief Operating Officer 1996 143,000 107,200 -- 31,516 --
Doron C. Levitas............................. 1995 90,000 -- -- 94,548 --
Vice Chairman and Vice President of 1996 120,000 24,000 -- 47,274 --
International Operations
Alan E. Jordan............................... 1995 124,980 -- 22,939(5) 107,154 --
Senior Vice President of Sales and
Marketing 1996 132,000 26,400 426,533(6) 47,274 --
Stephen L. Holden............................ 1995 -- -- -- -- --
Senior Vice President and 1996 50,053(7) 21,000 -- 55,000 --
Chief Financial Officer
</TABLE>

- ---------------
(1) The Board adopted a bonus plan for 1996 and subsequent years, with bonuses
to be paid at the discretion of the Compensation Committee.

(2) Represents shares of Common Stock underlying stock options granted during
1995 and 1996 pursuant to the Stock Option Plan.

(3) Represents Mr. Padda's housing allowance as provided for in his employment
agreement.

(4) Mr. Rastogi joined the Company in August 1995.

(5) Represents commissions paid by the Company.

(6) Represents $89,594 in commissions plus $336,939 in forgiveness of
indebtedness to the Company.

(7) Mr. Holden joined the Company in August 1996.

37
<PAGE> 42

The following table sets forth certain information with respect to options
granted to the Named Executive Officers during 1996.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT
GRANTED EMPLOYEES IN PRICE EXPIRATION DATE
NAME (#) 1996 ($/SH)(1) DATE(2) VALUE(3)
---- ---------- ---------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
K. Shan Padda................ 157,580 35.9% $4.76/$9.80 1/05/06, 3/15/06 $606,999
Anil K. Rastogi, Ph.D. ...... 31,516 7.2% $4.76 01/05/06 100,221
Alan E. Jordan............... 47,274 10.8% $4.76 01/05/06 150,331
Stephen L. Holden............ 55,000 12.5% $8.38 8/09/06 307,450
Doron C. Levitas............. 47,274 10.8% $4.76 01/05/06 150,331
</TABLE>

- ---------------
(1) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board.

(2) Some of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated.

(3) Calculation based on the Black-Scholes model. For assumptions used see Note
18 to the Financial Statements.

The following table sets forth certain information with respect to the
unexercised options held by the Named Executive Officers as of December 31,
1996. No options were exercised by the Named Executive Officers during 1996.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT YEAR-END
SHARES ACQUIRED VALUE OPTIONS AT YEAR-END 1996($)
ON EXERCISE REALIZED 1996(#) EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
K. Shan Padda............... -- -- 39,395/275,765 $438,072/3,090,065
Anil K. Rastogi, Ph.D. ..... -- -- 70,911/ 31,516 788,530/ 350,458
Alan E. Jordan.............. -- -- 50,425/104,003 560,726/1,156,513
Stephen L. Holden........... -- -- 13,750/ 41,250 103,125/ 309,375
Doron C. Levitas............ -- -- 23,637/118,185 262,843/1,314,217
</TABLE>

- ---------------
(1) Calculated based on stock price at December 31, 1996 of $15.88.

STOCK OPTION PLAN

The Company's Stock Option Plan was adopted in 1992, amended in 1993 and
amended and restated in 1996. The Stock Option Plan, as amended, provides for
the grant of options to purchase up to an aggregate of 1,773,668 shares of
Common Stock. The Plan is administered by the Compensation Committee which makes
discretionary grants ("discretionary grants") of options to employees (including
employees who are officers and directors of the Company) and consultants. The
Stock Option Plan also provides for formula grants ("formula grants") of options
to directors who are not employees of the Company.

Options granted pursuant to discretionary grants may be nonqualified
options or incentive options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

38
<PAGE> 43

The selection of participants, allotment of shares, determination of price
and other conditions of purchase of such options are determined by the
Compensation Committee, in its sole discretion. Options granted pursuant to
discretionary grants are exercisable for a period of up to ten years, except
that incentive options granted to optionees who, at the time the option is
granted, own stock representing greater than 10% of the voting power of all
classes of stock of the Company or any parent or subsidiary, are exercisable for
a period of up to five years. The per share exercise price of incentive options
granted pursuant to discretionary grants must be no less than 100% of the fair
market value of the Common Stock on the date of grant, except that the per share
exercise price of incentive options granted to optionees who, at the time the
options are granted, own stock representing greater than 10% of the voting power
of all classes of stock of the Company or any parent or subsidiary, must be no
less than 110% of the fair market value of the Common Stock. The per share
exercise price of non-qualified stock options granted pursuant to discretionary
grants must be no less than 85% of the fair market value of the Common Stock on
the date of grant.

Under the formula grants, each director who is not an employee of the
Company receives automatically upon such director's election to the Board an
option to purchase 7,879 shares of Common Stock. In addition, each director who
serves on a Committee of the Board of Directors receives an option to purchase
945 shares of the Company's Common Stock annually and each Chairman of each such
Committee will receive an additional option to purchase 473 shares of the
Company's Common Stock annually. Such options vest on the earlier of (i) one
year from the date of grant or (ii) the next annual election of directors. Each
such option shall have a term of not more than ten years from the date of
vesting and the exercise price per share of Common Stock for such options shall
be 100% of the fair market value of the Common Stock as determined under the
terms of the Stock Option Plan.

Options granted under the Stock Option Plan are nontransferable, other than
by will or by the laws of descent and distribution, and may be exercised during
the optionee's lifetime, only by the optionee, or in the event of optionee's
legal incapacity to do so, by the optionee's guardian or legal representative.

EMPLOYMENT AGREEMENTS

The Company entered into a two-year Employment Agreement with Mr. Padda as
of January 1, 1996. The Employment Agreement provides that Mr. Padda shall
receive a base salary of $150,000, bonuses based upon the Company's performance
as compared to its budget and options to purchase shares of the Company's Common
Stock under its Stock Option Plan. Mr. Padda is entitled to severance payments
if he is terminated other than for cause. In addition, the Employment Agreement
provides that Mr. Padda will be paid his base salary through the term of the
Employment Agreement if he is terminated following a change in control of the
Company. In addition to provisions relating to Mr. Padda's duties and
compensation, the Employment Agreement requires Mr. Padda to assign all
inventions he develops in the course of his employment with the Company to the
Company, maintain the confidentiality of the Company's proprietary information
and refrain from competing with the Company during his employment with the
Company and for a period of twelve months thereafter.

The Company has entered into an Employment Agreement with Mr. Rastogi. The
Employment Agreement provides that Mr. Rastogi will receive a base salary of
$130,000, bonuses based upon the Company's performance as compared to its
business plan and options to purchase shares of the Company's Common Stock under
its Stock Option Plan. Mr. Rastogi is entitled to severance payments if he is
terminated other than for cause. Mr. Rastogi's Employment Agreement contains a
non-competition provision.

The Company entered into a seventeen-month Employment Agreement with Mr.
Holden, dated as of August 15, 1996, with provision for automatic extensions for
consecutive one-year terms, unless proper notice of termination is given. The
Employment Agreement provides that Mr. Holden will receive an annual base salary
of $140,000, with an unspecified guaranteed increase on January 1, 1997, bonuses
based upon the Company's performance, and options to purchase shares of the
Company's Common Stock under its Stock Option Plan. Mr. Holden is entitled to
severance payments if he is terminated other than for cause. In addition to
provisions relating to Mr. Holden's duties and compensation, the Employment
Agreement requires Mr. Holden to assign all inventions he develops in the course
of his employment with the Company to the

39
<PAGE> 44

Company, maintain the confidentiality of the Company's proprietary information
and refrain from competing with the Company during his employment with the
Company and for a period of the longer of the term of the contract or six months
after his employment with the Company ends.

The Company entered into a three-year Employment Agreement with Mr.
Mandell, dated as of February 25, 1997. The Employment Agreement provides that
Mr. Mandell will receive an annual base salary of $150,000, based upon Mr.
Mandell's and the Company's performance, and options to purchase shares of the
Company's Common Stock under its Stock Option Plan. As of the date of the
Employment Agreement, Mr. Mandell was granted options to acquire 200,000 shares
of the Company's Common Stock. Under the Employment Agreement, the Company could
be obligated to purchase 100,000 option shares at $18.00 each. Mr. Mandell is
entitled to severance payments if he is terminated other than for cause. In
addition to provisions relating to Mr. Mandell's duties and compensation, the
Employment Agreement requires Mr. Mandell to assign all inventions he develops
in the course of his employment with the Company to the Company, maintain the
confidentiality of the Company's proprietary information and refrain from
competing with the Company during his employment with the Company and for a
period of the longer of the term of the contract or 12 months after his
employment with the Company ends.

40
<PAGE> 45

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of the Company's Common Stock as of February 28, 1997, for (i) each officer of
the Company, (ii) each director of the Company, (iii) each stockholder known by
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock of the Company and (iv) all officers and directors of the Company as a
group. Unless otherwise indicated, the address for each officer, director and 5%
stockholder is c/o the Company, 5601 West Howard Street, Niles, Illinois 60714.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER COMPLETION
OFFERING(1) SHARES OF OFFERING(1)
OFFICERS, DIRECTORS OR ------------------- BEING ----------------------
5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT(2)
---------------------- ------ ------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
OFFICERS:
K. Shan Padda(3).................... 509,611 5.311% 75,000 434,611 3.784%
Doron C. Levitas(4)................. 450,282 4.693% 59,020 391,262 3.406%
Stephen L. Holden(5)................ 27,500 0.287% 0 27,500 0.239%
Anil K. Rastogi, Ph.D(6)............ 78,790 0.821% 20,000 58,790 0.512%
Alan E. Jordan(7)................... 153,954 1.605% 72,801 81,153 0.707%
Scott Skooglund(8).................. 12,606 0.131% 0 12,606 0.110%
Joseph Moser(9)..................... 18,910 0.197% 0 18,910 0.165%
Vincent J. Capponi(10).............. 5,916 0.062% 0 5,916 0.052%
Elliot R. Mandell(11)............... 40,000 0.417% 0 40,000 0.348%
DIRECTORS:
Scott Hodes(12)..................... 64,079 0.668% 0 64,079 0.558%
Mark Lampert(13).................... 7,879 0.082% 0 7,879 0.069%
William D. Lautman(14).............. 175,703 1.831% 0 175,703 1.530%
William H. Lomicka(15).............. 84,434 0.880% 0 84,434 0.735%
Marvin Samson(16)................... 24,115 0.251% 0 24,115 0.210%
L. Peter Smith(17).................. 42,028 0.438% 0 42,028 0.366%
Edson W. Spencer, Jr.(18)........... 114,173 1.190% 37,031 77,142 0.672%
5% STOCKHOLDERS:
MSI, Inc.(19)....................... 758,631 7.907% 50,000 708,631 6.169%
Charles K. Stewart(20).............. 507,688 5.291% 0 507,688 4.420%
The Kaufman Fund, Inc.(21).......... 802,500 8.364% 0 802,500 6.987%
All Officers and Directors as a
group (15 persons):............... 1,809,980 18.865% 1,546,128 13.461%
</TABLE>

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

(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Percentage of beneficial ownership is based on 9,594,508 shares of Common
Stock outstanding as of February 28, 1997, including shares of Common Stock
subject to options that are currently exercisable or exercisable within 60
days are deemed to be outstanding and to be beneficially owned by the
person holding such options.

(2) Assumes that the Underwriters' over-allotment option to purchase up to
326,774 shares from the Company is not exercised.

(3) Includes 118,184 shares subject to options exercisable within 60 days. Mr.
Padda will be selling 75,000 shares which are issuable upon exercise of
options at $4.76 per share.

(4) Includes 59,091 shares subject to options exercisable within 60 days. Mr.
Levitas will be selling 59,091 shares which are issuable upon exercise of
options at $4.76 per share.

(5) Includes 27,500 shares subject to options exercisable within 60 days.

(6) Includes 78,790 shares subject to options exercisable within 60 days. Mr.
Rastogi will be selling 20,000 shares which are issuable upon exercise of
options at $4.76 per share.

(7) Includes 81,153 shares subject to options exercisable within 60 days.

(8) Includes 12,606 shares subject to options exercisable within 60 days.

(9) Includes 18,910 shares subject to options exercisable within 60 days.

41
<PAGE> 46

(10) Includes 5,916 shares subject to options exercisable within 60 days.

(11) Includes 40,000 shares subject to options exercisable within 60 days.

(12) Includes 24,080 shares subject to options exercisable within 60 days and 46
shares issuable upon exercise of warrants.

(13) Includes 7,879 shares subject to options exercisable within 60 days.

(14) Includes 21,115 shares subject to options exercisable within 60 days and
77,199 shares issuable upon exercise of warrants. Excludes 21,977 shares
held of record by The Pharmaceutical/Medical Technology Fund, L.P., an
investment partnership whose general partners are the owners of EGS
Partners, L.L.C. EGS Partners, L.L.C. is an affiliate of EGS Securities
Corp. of which Mr. Lautman is a managing director. Mr. Lautman disclaims
beneficial ownership of shares owned by The Pharmaceutical/Medical
Technology Fund, L.P.

(15) Includes 21,824 shares subject to options exercisable within 60 days and
3,152 shares issuable upon exercise of warrants.

(16) Includes 21,115 shares subject to options exercisable within 60 days. Mr.
Samson disclaims beneficial ownership of shares owned by MSI, Inc., a
subsidiary of Marsam.

(17) Includes 34,115 shares subject to options exercisable within 60 days.

(18) Includes 28,915 shares subject to options exercisable within 60 days, 2,749
shares issuable upon exercise of warrants, 3,366 shares held of record by
Peterson-Spencer-Fansler Company ("PSF Co."), of which Mr. Spencer is a
principal, 14,240 shares issuable upon exercise of warrants held by PSF
Co., 33,098 shares held by PSF HealthCare Fund, L.P. ("PSF Health") of
which Mr. Spencer is the managing partner, and 12,153 shares held of record
by Spencer Family Partnership, L.P. Excludes 5,253 shares held of record by
Valerie Spencer, Mr. Spencer's wife, 1,719 shares held of record by Valerie
C. Spencer Trust #3 U/A 8/24/84, Valerie C. Spencer & Edward J. Stewart,
III TTEE, and by WHC #145751 Trust, a trust established for the benefit of
Mrs. Spencer's family. Mr. Spencer disclaims beneficial ownership of shares
owned by Mrs. Spencer, Valerie C. Spencer Trust #3 and the WHC #145751
Trust. Mr. Spencer is selling 6,303 shares and 13,315 shares which are
issuable upon exercise of options at $11.11 and $4.76 per share,
respectively and 1,173 shares issuable upon exercise of warrant at $4.76
per share. PSF Co. is selling 3,152 shares and 11,088 shares which are
issuable upon exercise of warrants at $3.17 and $4.76 per share,
respectively.

(19) Includes 318,667 shares issuable upon exercise of warrants. MSI, Inc.
disclaims beneficial ownership of shares owned by Marvin Samson. MSI,
Inc.'s address is Building 31, Olney Ave., Cherry Hill, New Jersey 08034.

(20) Includes 3,939 shares subject to options exercisable within 60 days,
271,738 shares held of record by Charles K. Stewart Money Purchase Plan.
Mr. Stewart's address is 401 South LaSalle Street, Suite 1502, Chicago,
Illinois 60605.

(21) The Kaufman Fund's address is 140 E. 45th Street, New York, New York 10017.

42
<PAGE> 47

SELLING STOCKHOLDERS

The table below sets forth the number of shares of Common Stock (i) owned
beneficially by each of the Selling Stockholders as of February 28, 1997; (ii)
being offered by each Selling Stockholder pursuant to this Prospectus; (iii) to
be owned by each Selling Stockholder after completion of the Offering, assuming
that all of the shares offered hereby are sold and that none of the other shares
held by the Selling Stockholders, if any, are sold and (iv) the percentage (if
one percent or more) to be owned by each Selling Stockholder after completion of
the Offering, assuming that all of the shares offered hereby are sold and that
none of the other shares held by the Selling Stockholders, if any, are sold.
Except as otherwise noted, none of such persons or entities has had any material
relationship with the Company during the past three years.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
SHARES TO BE SHARES TO BE
TOTAL NUMBER OF OWNED AFTER OWNED AFTER
SHARES SHARES OPTION/ COMPLETION OF COMPLETION OF
SELLING STOCKHOLDERS OWNED(1) OFFERED WARRANT OFFERING(1) OFFERING
-------------------- -------- --------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
K. Shan Padda(2)................. 509,611 75,000(10) 75,000 434,611 3.78%
Doron C. Levitas(3).............. 450,282 59,020(10) 59,020 391,262 3.41%
Anil K. Rastogi, Ph.D.(4)........ 78,790 20,000(10) 20,000 58,790 0.51%
MSI, Inc.(5)..................... 758,631 50,000 708,631 6.17%
Edson W. Spencer, Jr.(6)......... 51,316 20,791(11) 20,791 30,525 0.27%
Peterson-Spencer-Fansler
Company(6)..................... 17,606 14,240(12) 14,240 3,366 0.03%
Spencer Family Partnership,
L.P.(6)........................ 12,153 2,000 10,153 0.09%
Gary Peterson.................... 1,173 1,173(13) 1,173 -- 0.00%
Sam Oracle Fund, Inc.(7)......... 44,797 13,185 -- 31,612 0.28%
Oracle Partners, L.P.(7)......... 188,580 50,000 -- 138,580 1.21%
Oracle Institutional Partners,
L.P.(7)........................ 12,749 3,295 -- 9,454 0.08%
Alan E. Jordan(8)................ 153,954 72,801 -- 81,153 0.71%
James O. Pohlad(9)............... 14,048 14,048 -- 0.00%
Pohlad Companies(9).............. 22,331 22,331 -- -- 0.00%
Carl Pohlad Trust No. 2(9)....... 5,093 5,093 -- -- 0.00%
Gideon Hixon Fund, L.P........... 32,131 1,575(14) 1,575 30,556 0.27%
Paul J. Finnegan................. 21,089 15,000 -- 6,089 0.05%
John E. Rogers................... 118,262 22,749 -- 31,515 0.83%
Oakleaf Associates............... 5,093 5,093 -- -- 0.00%
Gerald E. Jr. & Linda E.
Bisbee......................... 1,099 1,099 -- -- 0.00%
Mirza Mehdi...................... 40,179 10,000 -- 30,179 0.26%
---------- ------- ------- --------- ------
Total....................... 2,538,967 478,493 191,799 2,060,474 17.94%
========== ======= ======= ========= ======
</TABLE>

- ---------------
(1) Includes shares issuable upon exercise of warrants or options exercisable
within 60 days.

(2) Chairman of the Board, Chief Executive Officer, Treasurer and a director
of the Company.

(3) Vice Chairman of the Board, Vice President of International Operations, a
Secretary and a director of the Company.

(4) President and Chief Operating Officer.

(5) MSI, Inc. is a beneficial owner of more than 5% of the shares of Common
Stock of the Company.

(6) Related party to Edson W. Spencer, Jr., a director of the Company. The
total number of shares Mr. Spencer beneficially owns is 107,870.

(7) Related party to Larry Feinberg. The total number of shares which Mr.
Feinberg beneficially owns is 246,126.

43
<PAGE> 48

(8) Senior Vice President of the Company.

(9) Related party to James Pohlad. The total number of shares which Mr. Pohlad
owns is 42,472.

(10) Represents the number of shares of Common Stock issuable upon exercise of
option at $4.76 per share which is to take effect simultaneously with the
Offering.

(11) Includes 6,303 shares and 13,315 shares of Common Stock issuable upon
exercise of options at $11.11 and $4.76 per share respectively, and 1.173
shares of Common Stock issuable upon exercise of warrant at $4.76 per
share which is to take effect simultaneously with the Offering.

(12) Includes 11,088 shares and 3,152 shares of Common Stock issuable upon
exercise of warrants at $4.76 and $3.17 per share respectively, which is
to take effect simultaneously with the Offering.

(13) Includes shares of Common Stock issuable upon exercise of warrant at $4.76
per share which is to take effect simultaneously with the Offering.

(14) Represents the number of shares of Common Stock issuable upon exercise of
warrant which is to take effect simultaneously with the Offering.

CERTAIN TRANSACTIONS

On February 25, 1997, Sabratek acquired substantially all the assets of
Rocap for $100,000 in cash, 131,593 shares of Sabratek Common Stock (valued at
approximately $2.9 million), plus the assumption of net liabilities of
approximately $661,000 and the forgiveness of a bridge loan. In connection with
the acquisition, the former President of Rocap, who is also the majority
shareholder of Rocap, entered into a three-year employment agreement with
Sabratek. See "Management -- Employment Agreements." The number of shares to be
paid to Rocap may be increased based on the value of the Sabratek Common Stock
on July 1, 1997 (the "Valuation Date"). Sabratek retains the right to pay cash
in lieu of delivery of the shares of Common Stock. As part of the transaction,
the former shareholders of Rocap received the right to have a registration
statement relating to the shares issued in the acquisition filed for their
benefit. In the event such registration statement is not declared effective by
the Commission on or before September 1, 1997, such former shareholders have the
right, exercisable from September 2, 1997 to September 15, 1997, to put such
shares to the Company at a price determined in accordance with the acquisition
agreement.

On December 26, 1996, the Company granted EGS Securities Corp. ("EGS"), of
which William D. Lautman, a director of the Company, is Managing Director, an
option under the Stock Option Plan to purchase 50,000 shares of the Company's
Common Stock at a price of $14.00 per share. The option was granted in
consideration of services provided by EGS to the Company in evaluating potential
acquisitions and strategic relationships and fully vests on June 30, 1997.

In May, 1996 the Company entered into an agreement with EGS, of which
William D. Lautman, a director of the Company, is a Managing Director, pursuant
to which EGS agreed to provide financial advisory services in connection with
the initial public offering. In connection with this agreement, the Company paid
EGS $150,000 upon consummation of the Company's initial public offering.

In March, 1996, the Company issued a Convertible Subordinated Debenture to
Charles K. Stewart Investments, in the principal amount of $844,500. The
debenture was converted into 354,869 shares of Common Stock upon the
consummation of the initial public offering at a conversion price of $5.23757
per share. Also in March, 1996, the Company issued 167,245 shares of Common
Stock at $9.80 per share to Charles K. Stewart Investments.

In March, 1996, the Company issued 100,851 shares of Common Stock to Arie
Kalo at $4.76 per share in payment for past engineering consulting services
performed by him personally during 1995 and which the

44
<PAGE> 49

Company valued at $480,000. K. Shan Padda and Doron Levitas, each of whom is an
officer and director of the Company, together with Arie Kalo each own one-third
of the shares of DAK-Tech, Ltd. (an Israeli corporation) which supplies
component assemblies and research and development services to the Company, the
value of which was $538,544 in 1995.

In January, 1996, the Company issued a Convertible Subordinated Debenture
to William D. Lautman, a director of the Company, in the principal amount of
$110,000, of which $60,000 was payment for financial consulting services
rendered. The debenture was converted into 23,112 shares of Common Stock at a
conversion price of $4.76 per share.

In January, 1996, the Company issued a Convertible Subordinated Debenture
to Marvin Samson, a director of the Company, in the principal amount of
$100,000. The debenture bore interest at a rate of 10% per annum. The Company
repaid the Convertible Subordinated Debenture, plus accrued interest thereon, in
June 1996.

In December, 1995, the Company issued a Convertible Subordinated Debenture
to Charles Stewart in the principal amount of $100,000. The debenture was
converted into 42,021 shares of Common Stock upon the consummation of the
initial public offering at a conversion price of $5.23757 per share.

On September 26, 1995, the Company entered into an agreement with EGS (the
"EGS Agreement") for a period of one year pursuant to which the Company engaged
EGS as a financial and business consultant for the Company. Mr. Lautman is a
Managing Director of EGS and a director of the Company. Pursuant to the EGS
Agreement, as amended, the Company paid EGS a fee of approximately $410,000.

In July and September, 1995, the Company issued Convertible Subordinated
Debentures to Charles K. Stewart Money Purchase Plan in the principal amount of
$150,000 and $200,000 respectively. The debentures were converted into 147,075
shares of Common Stock upon the consummation of the initial public offering at a
conversion price of $5.23757 per share.

On May 12, 1995, the Company issued warrants in exchange for advisory
services to Scott C. Newquist and Robert G. Eccles which gives each of them the
right to purchase 87,032 shares of Common Stock at $4.76 per share. The Company
valued the services received in exchange for these warrants at $27,618. Messrs.
Eccles and Newquist transferred such portion of the rights under their warrants
as was necessary to purchase 174,065 shares of Common Stock to Oracle Partners,
L.P. for immediate exercise and, in connection therewith, the Company entered
into stock appreciation rights agreements with Messrs. Newquist and Eccles.
Under the stock appreciation rights agreements, the Company paid each of Messrs.
Newquist and Eccles a stock appreciation payment in the amount of approximately
$414,000. Messrs. Newquist and Eccles are principals of Advisory Capital
Partners, Inc. of which William D. Lautman, a director of the Company, was also
affiliated at the time the parties entered into the stock appreciation rights
agreement.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to William D. Lautman, a Managing Director of
EGS, as compensation for financial services rendered to the Company which
services were valued at $13,809. This warrant vested immediately and expires on
May 12, 2000. On May 31, 1995, Mr. Lautman exercised the warrant to purchase
21,011 shares of Common Stock at $2.38 per share, pursuant to a re-pricing
offered by the Company. Mr. Lautman retains the right to exercise the warrant
for the remaining 66,021 shares of Common Stock at $4.76 per share.

On September 23, 1994, the Company issued a warrant (the "MSI Warrant") to
MSI, Inc. which initially gave MSI, Inc., a subsidiary of Marsam Pharmaceuticals
Inc. of which Marvin Samson, a director of the Company, is President and a
director, the right to purchase up to 472,739 shares of Series A Preferred
Stock. On May 8, 1995, such portion of the rights under the MSI Warrant as was
necessary to acquire 84,043 shares of Series A Preferred Stock was transferred
to each of Charles K. Stewart Money Purchase Plan and John Stafford for
immediate exercise. In connection with the transfer, the Company entered into a
stock appreciation rights agreement with MSI, Inc. pursuant to which the Company
paid MSI, Inc. a stock appreciation payment in the amount of approximately
$800,000. Pursuant to the MSI Warrant, after giving effect to conversion of
Series A Preferred Stock to Common Stock, MSI, Inc. currently has the right to
purchase 318,668 shares of Common Stock at $4.55 per share.

45
<PAGE> 50

On November 14, 1991, the Company lent Alan Jordan, currently its Executive
Vice President of Sales and Marketing, $112,500 to purchase 135,000 shares of
the Company's Common Stock. This note and the related accrued interest were
forgiven during 1996.

Scott Hodes, a director of the Company, is a senior partner at the Chicago
law firm of Ross & Hardies and provides legal services as corporate counsel to
the Company.

46
<PAGE> 51

DESCRIPTION OF CAPITAL STOCK

Immediately prior to the issuance of the shares offered hereby, the
authorized capital of the Company will consist of 25,000,000 shares of Common
Stock, par value $0.01 per share, and 12,500,000 shares of Preferred Stock, par
value $0.01 per share. See "Risk Factors -- Influence of Limited Number of
Stockholders" and "-- Impact of Anti-Takeover Measures; Possible Issuance of
Preferred Stock; Classified Board."

COMMON STOCK

As of February 28, 1997, assuming no exercise of outstanding options or
warrants, there were 8,374,229 shares of Common Stock outstanding, held of
record by approximately 214 stockholders of record. The holders of the Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders. Holders of the Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. In the event of a liquidation, dissolution
or winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of all liabilities. The
outstanding shares of the Common stock are fully paid and nonassessable. No
preemptive rights, conversion rights, redemption rights or sinking fund
provisions are applicable to the Common Stock.

WARRANTS

As of February 28, 1997, there were warrants outstanding to purchase
544,430 shares of Common Stock at a weighted average exercise price of $5.36 per
share. The warrants were issued in exchange for services or in connection with
the issuance of debt securities by the Company. All of the warrants are
currently exercisable. The warrants will expire by their terms at times ranging
from April 18, 1997 to September 6, 2001.

REGISTRATION RIGHTS

The Company has entered into a Registration Rights Agreement (the
"Registration Rights Agreement") which may, in certain circumstances, be
applicable to the holders of the equivalent of approximately 1,442,752 shares of
Common Stock. As part of this Offering, the Company is registering the sale of
478,493 of such shares. As such, following the Offering 964,259 shares of the
Company's outstanding Common Stock will continue to have the benefit of
Registration Rights. Persons who own shares of Common Stock which will have the
benefit of Registration Rights following this Offering are hereinafter referred
to as "Rights Holders." In order for the Rights Holders to effect a demand for
registration, the Registration Rights Agreement requires that the holders of
more than 25% of all of the shares held under the Registration Rights Agreement
request such registration. An unlimited number of demands may be made; however,
the Company has an obligation to complete only two registrations at the demand
of Rights Holders. In addition to demand registration rights, Rights Holders
have unlimited "piggyback" registration rights pursuant to which the Rights
Holders will have the right to request that the Company register shares of
Common Stock under the Act at the expense of the Company, unless in connection
with an underwritten public offering, the managing underwriter is of the opinion
that inclusion of the shares of Common Stock to which the Rights Holders request
registration would have an adverse impact on the marketing of the securities to
be sold in such public offering.

The Company has entered into a Registration Rights Agreement with Rocap,
pursuant to which the Company agreed to register on Form S-3 in a delayed or
continuous offering (a "Shelf Registration"), 131,593 shares of Common Stock of
the Company, which were distributed to Rocap in connection with the Company's
acquisition of Rocap. Such Shelf Registration would permit the registration of
such securities for resale by Rocap or the Rocap shareholders to whom such
shares may be distributed (the "Rights Holders"). In the event a Shelf
Registration is not permitted under the Securities Act, the Company agreed to
provide alternative registration rights to the Rights Holders. Rights Holders
also have "piggyback" registration rights pursuant to which the Rights Holders
will have the right to require the Company to register shares of Common Stock
held by the Rights Holders on any Registration Statement being filed by the
Company, unless in connection with an underwritten public offering, the managing
underwriter is of the opinion that inclusion of

47
<PAGE> 52

such shares of Common Stock would have an adverse impact on the marketing of the
securities to be sold for the benefit of the Company in such public offering.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is LaSalle National
Bank, Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have approximately
10,266,028 shares of Common Stock outstanding. Of these shares, the 2,178,493
shares of Common Stock sold in the Offering and the 2,875,000 shares of Common
Stock sold by the Company in its initial public offering in June, 1996, will be
freely tradable without restriction under the Act, unless held by "affiliates"
of the Company (as that term is defined in the Act and regulations promulgated
thereunder).

The shares of Common Stock issued and outstanding prior to the Company's
initial public offering were acquired by existing stockholders without
registration under the Act in reliance upon exemptions from registration and are
"restricted securities" for purposes of the Act. The "restricted securities" may
not be sold unless they are registered under the Act or unless an exemption from
registration, such as the exemption provided by Rule 144 under the Act, is
available.

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned "restricted
securities" for at least two but less than three years (at least one year but
less than two years beginning April 29, 1997), and any affiliate of the Company
who has owned shares for at least two years (one year beginning April 29, 1997),
is entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the outstanding shares of the Company's Common
Stock or the average weekly trading volume in the Company's Common Stock on the
Nasdaq National Market during the four calendar weeks preceding such sale. Such
sales under Rule 144 are also subject to certain provisions regarding the manner
of sale, notice requirements and the availability of current public information
about the Company. A stockholder who is not an affiliate of the Company at the
time of the sale and for at least 90 days prior to a proposed transaction and
who has beneficially owned "restricted securities" for at least three years (two
years beginning April 29, 1997) is entitled to sell such shares under Rule 144
without regard to the limitations described above.

The Company, all Selling Stockholders, all directors, certain officers, and
certain other stockholders have agreed not to offer, pledge, issue, sell,
contract to sell, grant any option for the sale of, or otherwise dispose or
announce any offer, sale, grant of any option to purchase or other disposition
of, directly or indirectly, any Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, until 90 days, or 60 days in
the case of certain stockholders, following the date of the final prospectus
relating to the Offering without the prior written consent of Bear, Stearns &
Co. Inc. ("Bear, Stearns"), subject to certain exceptions (the "Lock-up
Agreements").

On October 2, 1996, the Company's registration statement on Form S-8 under
the Act to register all of the shares of Common Stock issued or reserved for
future issuance under the Stock Option Plan and certain other options currently
outstanding to employees of the Company became effective. After the effective
date of that registration statement, but subject to the provisions of applicable
Lock-up Agreements, shares purchased upon exercise of options covered by such
registration statement generally would be available for resale in public market.

On the anticipated Effective Date, all except 840,789 shares of Common
Stock not issued in a public offering will be eligible for sale or have already
been sold pursuant to Rule 144 promulgated under the Act. Shares subject to the
Lock-up Agreements may become available for sale upon the expiration of such
lock-ups.

The holders of certain of the Company's outstanding securities also have
the benefit of a Registration Rights Agreements which provide that, subject to
certain conditions, certain holders of the Company's

48
<PAGE> 53

outstanding securities have rights with respect to registration under the Act.
See "Description of Capital Stock -- Registration Rights."

Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could have an adverse impact on the
market price of Common Stock.

UNDERWRITING

Subject to certain terms and conditions contained in the Underwriting
Agreement (the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Bear, Stearns, Salomon Brothers Inc, Smith Barney Inc.
and Jefferies & Company, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase an aggregate of 1,700,000
shares of Common Stock from the Company and 478,493 shares of Common Stock from
the Selling Stockholders. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Bear, Stearns & Co. Inc. ...................................
Salomon Brothers Inc .......................................
Smith Barney Inc. ..........................................
Jefferies & Company, Inc. ..................................

---------
2,178,493
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to approval of
certain legal matters by counsel and to certain other conditions precedent. If
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares of Common Stock (other than shares
of Common Stock covered by the over-allotment option described below) must be so
purchased.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Act,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public initially at the price set forth
on the cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price less a concession not to exceed $ per share. The
Underwriters may allow, and such dealers may allow, discounts not in excess of
$ per share to any Underwriter and certain other dealers.

The Company has granted to the Underwriters an option to purchase up to an
aggregate of 326,774 additional shares of Common Stock at the public offering
price less underwriting discounts and commissions solely to cover
overallotments. Such option may be exercised at any time until 30 days after the
date of the final Prospectus relating to the Offering. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriters' initial commitment as indicated in the
preceding table.

The Company, all Selling Stockholders, all directors, certain officers and
certain other stockholders have agreed not to offer, pledge, issue, sell,
contract to sell, grant any option to purchase or otherwise dispose (or announce
any offer, sale, grant of any option to purchase or other disposition) of any
shares of Common Stock, or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock for a period of

49
<PAGE> 54

60 or 90 days after the date of the final Prospectus relating to the Offering,
without the prior written consent of Bear, Stearns.

The Underwriters do not intend to sell shares of Common Stock to any
account over which they exercise discretionary authority.

Stephen Raphael, an employee and director of Bear, Stearns, beneficially
owns 10,505 shares of Common Stock of the Company.

In order to facilitate this Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
this Offering, creating a short position in the Common Stock for their own
account. The Representatives may elect to reduce any short position by
exercising all or part of the over-allotment option described above. In
addition, to cover over-allotments or to stabilize the price of the Common
Stock, the Representatives may bid for, and purchase, shares of Common Stock in
the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing the Common
Stock in this Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representations that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

LEGAL MATTERS

Certain legal matters in connection with the shares of Common Stock of the
Company offered hereby will be passed upon for the Company by Ross & Hardies,
Chicago, Illinois. A partner of Ross & Hardies beneficially owns 64,079 shares
of the Company's Common Stock. O'Sullivan Graev & Karabell, LLP, New York, New
York, has acted as counsel to the Underwriters in connection with the Offering.

EXPERTS

The financial statements of the Company as of December 31, 1996 and 1995
and for each of the years in the three year period ended December 31, 1996 have
been included herein and elsewhere in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing herein, and upon the authority of said firm as experts in
auditing and accounting.

The financial statements of Rocap as of December 31, 1996 and for the year
ended December 31, 1996 have been included herein and elsewhere in the
Registration Statement in reliance upon the report of Parent, Naffah & Company,
independent certified public accountants, appearing herein, and upon the
authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and in each instance

50
<PAGE> 55

reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the offices of the Commission at 450 Fifth Street,
N.W., Washington, D.C 20549, and copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the Commission
upon the payment of the fees prescribed by the Commission.

Sabratek is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by Sabratek can be inspected and copied at Room 1024
of the Offices of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission's Regional Offices in New York (7 World Trade Center,
13th Floor, New York, New York 10048) and Chicago (Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511), and copies
of such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.

Sabratek Common Stock is traded in the over-the-counter market and quoted
on the Nasdaq National Market under the symbol "SBTK." Documents filed by
Sabratek with the Commission can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.

51
<PAGE> 56

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SABRATEK CORPORATION
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1996 and 1995............. F-3
Statements of Operations for the years ended December 31,
1996, 1995 and 1994....................................... F-4
Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994.......................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994....................................... F-6
Notes to Financial Statements............................... F-7

ROCAP, INC.
Independent Auditors' Report................................ F-17
Balance Sheet as of December 31, 1996....................... F-18
Statement of Loss and Accumulated Deficit for the year ended
December 31, 1996......................................... F-19
Statement of Cash Flows for the year ended December 31,
1996...................................................... F-20
Notes to Financial Statements............................... F-21

SABRATEK CORPORATION PRO FORMA SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS...................................... F-24
Balance Sheet as of December 31, 1996....................... F-25
Statement of Operations for the year ended December 31,
1996...................................................... F-26
Notes to Pro Forma Supplemented Consolidated Financial
Statements................................................ F-27
</TABLE>

F-1
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sabratek Corporation:

We have audited the accompanying balance sheets of Sabratek Corporation as
of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1996. 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 Sabratek Corporation as of
December 31, 1996 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, 1996 in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 4, 1997

F-2
<PAGE> 58

SABRATEK CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $10,446,818 $ 8,027
Short-term investments in marketable securities........... 4,351,726 --
Receivables:
Trade, net of allowance for doubtful accounts of
$146,151 and $75,469 at December 31, 1996 and December
31, 1995, respectively................................ 8,305,045 1,454,919
Other.................................................. 124,690 --
----------- ------------
Total receivables................................. 8,429,735 1,454,919
----------- ------------
Inventories............................................... 5,049,001 1,825,411
Prepaids and other assets................................. 586,338 50,737
----------- ------------
Total current assets........................................ 28,863,618 3,339,094
----------- ------------
Property, plant and equipment, net.......................... 1,774,612 901,728
Intangible asset, net....................................... 41,587 --
Note receivable............................................. 200,000 --
Long-term investments in marketable securities.............. 2,011,560 --
Other....................................................... 59,495 50,828
----------- ------------
$32,950,872 $ 4,291,650
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term debt........................................... $ 167,813 $ 621,021
Current portion of capital lease obligation............... 132,459 150,848
Current portion of long-term debt......................... 3,200 3,200
Accounts payable.......................................... 2,247,312 2,377,159
Accrued expenses:
Payroll & commissions.................................. 1,264,857 191,086
Warranty............................................... 235,740 229,263
Other.................................................. 54,861 399,490
Deferred rent............................................. 30,599 31,322
Deferred revenue.......................................... -- 125,000
Due to affiliated company................................. 139,991 311,811
----------- ------------
Total current liabilities................................... 4,276,832 4,440,200
----------- ------------
Long-term capital lease obligation.......................... 23,111 149,334
Long-term debt.............................................. 800 2,362,293
Accrued interest............................................ -- 160,630
----------- ------------
Total liabilities........................................... 4,300,743 7,112,457
----------- ------------
Stockholders' equity (deficit):
Convertible preferred stock par value $.01, issued and
outstanding -- 0 at December 31, 1996 and 1,768,129 at
December 31, 1995...................................... -- 17,681
Common stock, par value $.01, issued and outstanding --
8,196,981 at December 31, 1996 and 1,718,458 at
December 31, 1995...................................... 81,970 17,185
Additional paid-in capital................................ 42,891,350 10,708,671
Note receivable from stockholder.......................... -- (112,500)
Deferred compensation..................................... (17,371) --
Unrealized gains.......................................... 4,140 --
Accumulated deficit....................................... (14,309,960) (13,451,844)
----------- ------------
Total stockholders' equity (deficit)........................ 28,650,129 (2,820,807)
----------- ------------
Commitments and contingencies...............................
----------- ------------
$32,950,872 $ 4,291,650
=========== ============
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 59

SABRATEK CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales......................................... $17,696,786 $ 4,039,797 $ 3,314,599
Cost of sales..................................... 8,748,364 2,901,818 2,480,369
----------- ----------- -----------
Gross margin...................................... 8,948,422 1,137,979 834,230
Selling, general and administrative expenses...... 8,474,408 6,873,934 4,107,588
----------- ----------- -----------
Operating income (loss)........................... 474,014 (5,735,955) (3,273,358)
Other income (expenses):
Interest income................................. 617,157 12,607 19,340
Interest expense................................ (318,557) (222,491) (260,494)
Stock appreciation rights....................... (1,628,463) -- --
Other........................................... (2,267) (90,496) (40,311)
----------- ----------- -----------
Net loss.......................................... $ (858,116) $(6,036,335) $(3,554,823)
=========== =========== ===========
Weighted average shares outstanding............... 7,263,114 6,609,571
=========== ===========
Net loss per share (1995 pro forma)............... $ (0.12) $ (0.90)
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 60

SABRATEK CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>

PREFERRED COMMON ADDITIONAL
--------------------- ------------------- PAID-IN NOTE DEFERRED
DESCRIPTION SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION
----------- ------ ------ ------ ------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993.... -- $ -- 1,510,395 $15,104 $ 2,746,663 $(112,500) $ --
Conversion of short-term
convertible subordinated
debentures to convertible
preferred stock................ 635,815 6,358 -- -- 3,019,802 -- --
Issuance of convertible
preferred stock, net of
$354,596 of offering costs..... 681,900 6,819 -- -- 2,884,090 -- --
Net loss........................ -- -- -- -- -- -- --
---------- -------- --------- ------- ----------- --------- --------
Balance at December 31, 1994.... 1,317,715 13,177 1,510,395 15,104 8,650,555 (112,500) --
Issuance of convertible
preferred stock and warrants,
net of $76,758 of offering
costs.......................... 202,963 2,030 -- -- 887,207 -- --
Issuance of preferred stock in
exchange for services
rendered....................... 728 7 -- -- 3,458 -- --
Exercise of stock options....... -- -- 9,621 96 33,623 -- --
Exercise of stock warrants...... 246,723 2,467 198,442 1,985 1,054,928 -- --
Issuance of common stock
warrants....................... -- -- -- -- 78,900 -- --
Net loss........................ -- -- -- -- -- -- --
---------- -------- --------- ------- ----------- --------- --------
Balance at December 31, 1995.... 1,768,129 17,681 1,718,458 17,185 10,708,671 (112,500) --
Issuance of common shares, net
of offering costs of
1,562,932...................... -- -- 3,042,245 30,422 26,783,907 -- --
Issuance of common shares for
services....................... -- -- 124,488 1,245 591,255 -- --
Conversion of long-term
debentures..................... -- -- 1,331,162 13,312 3,992,662 -- --
Conversion of preferred stock... (1,768,129) (17,681) 1,838,113 18,381 (700) -- --
Exercise of warrants and
options........................ -- -- 142,515 1,425 668,702 -- --
Settlement of note receivable... -- -- -- -- -- 112,500 --
Issuance of warrant............. -- -- -- -- 127,000 -- --
Deferred compensation, net...... -- -- -- -- 19,853 -- (17,371)
Unrealized gains on
investments.................... -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- -- --
---------- -------- --------- ------- ----------- --------- --------
Balance at December 31, 1996.... -- $ -- 8,196,981 $81,970 $42,891,350 $ -- $(17,371)
========== ======== ========= ======= =========== ========= ========

<CAPTION>
TOTAL
STOCKHOLDERS'
UNREALIZED ACCUMULATED EQUITY
DESCRIPTION GAINS DEFICIT (DEFICIT)
----------- ---------- ----------- -------------
<S> <C> <C> <C>
Balance at December 31, 1993.... $ -- $ (3,860,686) $(1,211,419)
Conversion of short-term
convertible subordinated
debentures to convertible
preferred stock................ -- -- 3,026,160
Issuance of convertible
preferred stock, net of
$354,596 of offering costs..... -- -- 2,890,909
Net loss........................ -- (3,554,823) (3,554,823)
------ ------------ -----------
Balance at December 31, 1994.... -- (7,415,509) 1,150,827
Issuance of convertible
preferred stock and warrants,
net of $76,758 of offering
costs.......................... -- -- 889,237
Issuance of preferred stock in
exchange for services
rendered....................... -- 3,465
Exercise of stock options....... -- -- 33,719
Exercise of stock warrants...... -- -- 1,059,380
Issuance of common stock
warrants....................... -- -- 78,900
Net loss........................ -- (6,036,335) (6,036,336)
------ ------------ -----------
Balance at December 31, 1995.... -- (13,451,844) (2,820,807)
Issuance of common shares, net
of offering costs of
1,562,932...................... -- -- 26,814,329
Issuance of common shares for
services....................... -- -- 592,500
Conversion of long-term
debentures..................... -- -- 4,005,974
Conversion of preferred stock... -- -- --
Exercise of warrants and
options........................ -- -- 670,127
Settlement of note receivable... -- -- 112,500
Issuance of warrant............. -- -- 127,000
Deferred compensation, net...... -- -- 2,482
Unrealized gains on
investments.................... 4,140 -- 4,140
Net loss........................ -- (858,116) (858,116)
------ ------------ -----------
Balance at December 31, 1996.... $4,140 $(14,309,960) $28,650,129
====== ============ ===========
</TABLE>

See accompanying notes to financial statements

F-5
<PAGE> 61

SABRATEK CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (858,116) $(6,036,335) $(3,554,823)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 402,953 185,562 89,483
Loss on sale of property, plant and equipment........... -- -- 63,498
Deferred compensation................................... 2,482 -- --
Expenses paid with issuance of stock.................... 840,051 3,465 --
Expenses paid with issuance of warrants................. 127,000 35,700 --
Stock appreciation rights expense....................... 1,628,463 -- --
Provision for bad debts................................. 70,682 75,469 --
Changes in assets and liabilities:
Receivables........................................... (7,045,498) (350,659) (509,268)
Note receivable....................................... (200,000) -- --
Deferred revenue...................................... (125,000) 125,000 --
Inventories........................................... (3,223,590) (1,190,326) (90,479)
Advances to stockholders.............................. -- 162,306 (11,827)
Accounts payable...................................... (129,847) 1,522,960 147,883
Deferred rent......................................... (723) 19,254 3,535
Accrued expenses...................................... 848,119 621,860 139,010
Due to affiliated company............................. (171,820) (95,863) 238,732
Other................................................. (544,268) 45,751 (124,196)
----------- ----------- -----------
Net cash used in operating activities....................... (8,379,112) (4,875,856) (3,608,452)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (1,275,221) (458,857) (249,824)
Purchase of intangible assets............................. (42,203) -- --
Proceeds from sale of property, plant and equipment....... -- -- 182,611
Purchases of marketable securities, net................... (6,359,146) -- --
----------- ----------- -----------
Net cash used in investing activities....................... (7,676,570) (458,857) (67,213)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of short-term debt................. 167,813 621,021 860,000
Repayment of short-term debt.............................. (621,021) -- (25,000)
Repayment of long-term debt............................... (353,200) (3,200) (3,200)
Proceeds from issuance of long-term debt.................. 1,589,500 2,058,533 --
Payment of stock appreciation rights...................... (1,628,463) -- --
Payments of capital lease, net............................ (144,612) (123,912) (45,880)
Proceeds from issuance of common stock, net............... 27,484,456 505,963 --
Proceeds from issuance of preferred stock, net............ -- 1,519,573 3,072,069
----------- ----------- -----------
Net cash provided by financing activities................... 26,494,473 4,577,978 3,857,989
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents............ 10,438,791 (756,735) 182,324
Cash and cash equivalents at beginning of year.............. 8,027 764,762 582,438
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $10,446,818 $ 8,027 $ 764,762
=========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 62

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Sabratek Corporation (the "Company") designs, manufactures and markets
programmable electronic intravenous infusion pumps, disposable intravenous
administration sets, integrated software, and related accessories. Sales of the
products are made through distributors as well as the Company's own
representatives.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Revenue Recognition

Revenues are recognized when products are shipped with allowances for
discounts and estimated returns recorded at the time of sale. Contract revenue
from research agreements is recorded when earned and as the related costs are
incurred. Payments received which are related to future performance are deferred
and recognized as revenue when earned over future performance periods.

(b) Cash and Cash Equivalents

Cash and cash equivalents represent funds in demand deposit accounts, money
market accounts and short-term bond mutual funds. Also included are U.S.
Treasury Bills and U.S. Treasury Notes to the extent they mature within 90 days.

Short-term and long-term investments in marketable securities are
classified as available-for-sale and are reported at fair market value.
Unrealized gains on available-for-sale securities are excluded from earnings and
are reported as a separate component of stockholders' equity until realized.

(d) Inventories

Inventories are stated at the lower of cost or net realizable value. Cost
is determined under the first-in, fist-out ("FIFO") method.

(e) Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation and amortization is provided on a
straightline basis over the estimated useful lives. The estimated useful lives
of the machinery and equipment range from 3 to 5 years. The estimated useful
lives of office furniture, fixtures and equipment is 7 years. Leasehold
improvements are amortized over the life of the lease.

(f) Research and Development

Research and development costs are expensed as incurred. Research and
development costs amounted to $969,059, $2,193,508 and $1,098,167 in 1996, 1995
and 1994, respectively.

(g) Patents

Patents costs in progress are amortized over 16 years. The Company has
assessed that no permanent impairment of the value of the asset has occurred.
Such assessment includes consideration of possible obsolescence, demand, new
technology, competition, and other pertinent economic factors and trends that
may have an impact on the value or remaining lives of the asset.

F-7
<PAGE> 63

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(h) Warranty

The provision for estimated warranty costs is recorded at the time of sale
and periodically adjusted to reflect actual experience.

(i) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(j) Use of Estimates

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

(k) Computation of Net Loss Per Share

Net loss per share is based on the weighted average number of shares
outstanding with common equivalent shares from stock options and warrants
excluded because their effect is antidilutive. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, options and warrants, and
convertible debt granted or issued by the Company during the twelve month period
immediately preceding the initial public offering of the Company's common stock
have been included in the calculation of common shares as if they had been
outstanding for all periods presented. The net loss per share for the year ended
December 31, 1995 has been presented on a pro forma basis in lieu of historical
net loss per share as such historical information is not meaningful due to the
conversion of preferred stock and debt in connection with the Company's initial
public offering.

(l) Reclassifications

Certain amounts for the year ended December 31, 1995 were reclassified to
conform to the current year presentation.

(3) INVESTMENTS IN MARKETABLE SECURITIES

The following table summarizes short-term and long-term investments in
marketable securities as of December 31, 1996:

<TABLE>
<CAPTION>
LESS THAN 1-2
1 YEAR YEARS TOTAL
--------- ----- -----
<S> <C> <C> <C>
U.S. Treasury Bills.......................... $1,344,386 $ -- $1,344,386
U.S. Treasury Notes.......................... 3,007,340 2,011,560 5,018,900
---------- ---------- ----------
$4,351,726 $2,011,560 $6,363,286
========== ========== ==========
</TABLE>

The above securities are classified as available-for-sale and are reported
at fair market value. As of the balance sheet date, an unrealized gain of $4,140
was recorded in the stockholders' equity section of the Balance Sheet.

F-8
<PAGE> 64

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) INVENTORIES

Inventories at December 31 is as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials............................................. $3,401,848 $1,228,594
Work-in-process........................................... 1,068,343 195,981
Finished goods............................................ 578,810 400,836
---------- ----------
$5,049,001 $1,825,411
========== ==========
</TABLE>

(5) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 is as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Machinery and equipment..................................... $1,817,063 $ 725,694
Furniture and fixtures...................................... 411,187 278,168
Leasehold improvements...................................... 181,769 130,936
---------- ----------
2,410,019 1,134,798
Less accumulated depreciation............................... 635,407 233,070
---------- ----------
$1,774,612 $ 901,728
========== ==========
</TABLE>

Depreciation expense for years ended December 31, 1996, 1995 and 1994
amounted to $402,337, $184,383 and $86,639 respectively.

(6) NOTE RECEIVABLE

In December, 1996, the Company loaned $200,000 to a non-affiliated
corporation in exchange for a Non-Negotiable Promissory Note due upon demand
after February 18, 1999. The note carries an interest rate of 5.5% per annum,
payable upon maturity or prepayment of the note.

(7) AFFILIATED COMPANY

The Company is affiliated through common ownership with Dak-Tech Ltd., an
Israeli company. Dak-Tech Ltd. provides the Company with manufacturing goods and
previously research and development activities. 67% of the Dak-Tech Ltd. stock
is owned by two stockholders of Sabratek. Amounts included as research and
development expense were $0, $44,585, and $271,166 for the years ended December
31, 1996, 1995 and 1994, respectively. Amounts included as cost of sales were
$384,800, $493,959 and $748,652 for the years ended December 31, 1996, 1995 and
1994, respectively. As of December 31, 1996 and 1995, the Company was indebted
to Dak-Tech Ltd. for receipts of various inventory components in the amount of
$139,991 and $311,811, respectively.

(8) TRANSACTIONS WITH STOCKHOLDERS

During 1996, the Company forgave the repayment of a loan, interest on the
loan and certain advances to a stockholder who is an officer of the Company
totaling $336,939, in aggregate.

(9) CAPITAL STOCK

In March, 1996, the Company issued 167,245 shares of common stock at a per
share price of approximately $9.80, resulting in gross proceeds to the Company
of $1,639,761.

F-9
<PAGE> 65

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In April, 1996, the Company executed a 1-for-3.173 reverse stock split of
its Common Stock and Series A convertible preferred stock. All references in the
financial statements to share and per share data retroactively reflect the
reverse stock split. Also in April, the Company filed a Restated Certificate of
Incorporation authorizing an increase in the number of authorized shares of
common stock to 25,000,000, $0.01 par value, and preferred stock to 12,500,000,
$0.01 par value.

In October, 1996, the Company filed a Certificate of Elimination to rescind
its Preferred Stock Certificate of Designation.

(10) INITIAL PUBLIC OFFERING

In June, 1996, the Company completed an underwritten initial public
offering (the "Offering") of 2,785,000 shares of common stock, par value $0.01,
at a price of $10.00 per share, with proceeds to the Company of $26,737,500
after underwriters' discounts and commissions. The Company's shares are traded
on the Nasdaq National Market under the symbol "SBTK."

(11) SHORT-TERM DEBT

During 1996, the Company executed a bank promissory note due August 5,
1997, in the amount of $167,813. Interest is paid monthly at a floating rate of
0.50% over the bank's prime rate and is secured by a domestically confirmed
letter of credit from a foreign customer of Sabratek.

During 1995, the Company entered into a General Loan and Security Agreement
with Sterling Business Credit (Sterling), pursuant to which, Sterling held a
first security interest in accounts receivable, as well as other assets of the
Company. As of December 31, 1995, the outstanding balance on the loan was
$621,021. During 1996, the Company paid back the loan in full and terminated the
General Loan and Security Agreement.

(12) LONG-TERM DEBT

In January, 1996, the Company issued 6 year convertible subordinated
debentures bearing interest at 13.22% per annum in the amount of $110,000,
convertible into one share of common stock for every $5.24 of principal and
accrued interest. The debentures were converted into 46,222 shares of common
stock, in the aggregate, upon the Offering, giving effect to the conversion
premium provided for in the debentures.

In January, 1996, the Company issued a convertible subordinated debenture
to a director of the Company in the amount of $100,000 at an interest rate of
10%, until due at June 30, 1996. After June 30, 1996, the debenture would have
paid interest at 13.22% and been extended to 6 years, however, the debenture was
repaid in full, including interest, immediately following the Offering, and
prior to June 30, 1996.

In January and February, 1996, the Company issued convertible subordinated
debentures to directors and independent third-parties in the principal amounts
of $110,000 and $425,000, respectively. $60,000 of the debentures were issued to
a director in satisfaction of an obligation for services rendered. In February,
1996, the debenture holders and the Company agreed to convert the debenture into
112,407 shares of common stock, in the aggregate, reflecting a conversion rate
of $4.76.

In March, 1996, the Company issued a convertible subordinated debenture to
a stockholder in the principal amount of $844,500. The debenture contained a 6
year maturity and an interest rate of 13.22% per annum and was convertible into
one share of common stock for every $5.24 of principal and accrued interest. The
debenture was converted into 354,869 shares of common stock upon the Offering,
giving effect to the conversion premium provided for in the debenture.

In June, 1996, two convertible subordinated debentures, issued in 1993, in
the principal amount of $300,000, in the aggregate, plus accrued interest
thereon, were converted into 63,031 shares of common stock,

F-10
<PAGE> 66

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

in the aggregate, upon the Offering. The conversion rate included a conversion
premium not originally provided for in the debentures which resulted in a charge
to operating income of $46,841 in 1996.

In June, 1996, convertible subordinated debentures, issued in 1995, in the
aggregate principal amount of $1,808,292, were converted into 749,348 shares of
common stock, in the aggregate, upon the Offering, giving effect to the
conversion premium provided for in the debentures.

(13) SERIES A CONVERTIBLE PREFERRED STOCK

Upon the closing of the Offering, all 1,768,129 shares of Series A
Preferred Stock were converted into 1,838,113 shares of the Company's Common
Stock, including anti-dilution adjustments.

(14) STOCK APPRECIATION RIGHTS

In July, 1996, the Company paid, in full, stock appreciation rights
totaling $1,628,463 in aggregate, which were issued pursuant to three separate
agreements during 1995. The agreements provided for a maximum appreciation of
$4.76 per share and required payment at the time of certain qualifying events,
or upon demand of the holder. The obligation created with respect to the
agreements resulted in a non-recurring charge to other income (expenses) in the
Statement of Operations for 1996.

(15) BUSINESS AND CREDIT CONCENTRATIONS

As of December 31, 1996 and 1995, individual customers representing at
least 10% of total receivables accounted for $3,458,882 or 41% (three customers)
and $848,588 or 53% (five customers) of accounts receivable, respectively.
Aggregate sales to customers representing at least 10% of total sales
individually amounts to $0, $1,367,227 (three customers) and $1,690,678 (four
customers), for the years ended December 31, 1996, 1995 and 1994, respectively.
Individual customers representing over 10% of aggregate sales each had sales of
$0 for the year ended December 31, 1996; $475,591, $449,020 and $442,616 for the
year ended December 31, 1995 and $517,204, $468,636, $353,364 and $351,474 for
the year ended December 31, 1994.

The Company's customers are based throughout the world with 9%, 15%, 14% of
sales from international markets for the years ended December 31, 1996, 1995 and
1994, respectively. Customers are not concentrated in any specific geographic
location. The customer base is very specific, however, to the health care
industry as the Company's products are used primarily by hospitals and alternate
site healthcare settings such as nursing homes and clinics.

(16) RETIREMENT PLAN

The Company implemented a defined contribution plan during 1995 pursuant to
section 401(k) of the Internal Revenue Code, whereby participants may contribute
a percentage of compensation, but not in excess of the maximum allowed under the
Code. The Plan includes a discretionary employer matching contribution program
as determined by the Board of Directors. In 1996 and 1995, no matching
contributions were made to Plan participants' accounts.

(17) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash paid during the year for interest...................... $133,103 $87,473
</TABLE>

In 1996, 124,488 shares of common stock were issued in satisfaction of
accrued obligations in the amount of $592,500 for services rendered in 1995.

F-11
<PAGE> 67

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In 1996, 1,331,451 shares of common stock were issued in exchange for the
retirement of $3,597,793 in long-term debt principal and $364,210 in accrued
interest on long-term debt. The number of shares issued included the conversion
premium originally provided for in the debt instruments.

Capital lease obligations of $0 and $178,239 were incurred in 1996 and
1995, respectively, when the Company entered into leases primarily for
machinery, equipment, furniture and fixtures.

In 1995, 728 shares of common stock were issued in exchange for services
rendered. The value of the services rendered equaled $3,465.

In 1994, 635,815 shares of Series A convertible preferred stock were issued
upon the conversion of $3,026,160 of short-term convertible subordinated
debentures, including accrued interest of $181,160.

(18) STOCK OPTIONS

The Company adopted the Amended and Restated 1993 Stock Option Plan (the
Stock Option Plan) which provided for the granting of stock options to
employees, nonemployee consultants, and directors of the Company. Options vest
over various periods as defined in the agreements and expire as determined by
the Board on an individual basis, but not to exceed 10 years. Total shares of
common stock reserved at December 31, 1996 for issuance on the exercise of stock
options was 1,773,668.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its Stock Option Plan. Accordingly, no compensation cost has been
recorded. Had compensation cost for the Company's Stock Option Plan been
determined consistent with FASB Statement No. 123, the Company's net loss and
loss per share would have been increased to the pro forma amounts indicated
below.

The compensation cost of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1996 and 1995.

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend yield.............................................. 0% 0%
Volatility.................................................. 67% 67%
Risk-free interest rate..................................... 7% 7%
Expected term in years...................................... 4.2 4.2
</TABLE>

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Net loss As reported................................. $ (858,116) $(6,036,335)
Pro forma................................... $(2,025,953) $(6,522,389)
Net loss per
share As reported (1995 pro forma)................ $ (0.12) $ (0.90)
Pro forma................................... $ (0.28) $ (0.99)
=========== ===========
</TABLE>

Pro forma net loss and loss per share reflect 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 loss amounts
presented above because compensation cost is reflected over the options' vesting
period of up to 4 years and compensation cost for options granted prior to
January 1, 1995 is not considered.

F-12
<PAGE> 68

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of the Company's Stock Option Plan as of December
31, 1994, 1995 and 1996 and changes during the years then ended is presented
below:

<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE PRICE
------ -------------
<S> <C> <C>
Outstanding at December 31, 1993............................ 105,184 $ 4.71
Granted................................................... 53,577 5.43
Expired................................................... (157) 11.11
---------
Outstanding at December 31, 1994............................ 158,604 4.95
Granted................................................... 613,773 4.76
Exercised................................................. (9,621) 3.51
Expired................................................... (30,120) 5.51
---------
Outstanding at December 31, 1995............................ 732,636 4.78
Granted................................................... 581,590 7.10
Exercised................................................. (55,978) 4.90
Expired................................................... (2,994) 5.29
---------
Outstanding at December 31, 1996............................ 1,255,254 $ 5.85
=========
</TABLE>

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

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
WEIGHTED-AVG.
REMAINING WEIGHTED-AVG. WEIGHTED-AVG.
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$3.17 to 4.76............. 1,021,363 7.4 $ 4.73 375,986 $ 4.68
$8.38 to 9.80............. 159,224 9.4 9.31 20,986 8.87
$11.11 to 15.25........... 74,667 9.2 13.75 8,619 11.60
--------- -------
$3.17 to 15.25............ 1,255,254 7.8 5.85 405,591 5.04
========= =======
</TABLE>

(19) WARRANTS

The following table of warrants gives effect to the anti-dilution
adjustment on the conversion of preferred stock warrants to common stock
warrants. The anti-dilution adjustment resulted in 19,849 additional shares of

F-13
<PAGE> 69

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

common stock issuable upon the exercise of certain warrants and changed the
exercise price from $4.76 to $4.55.

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------- -------------------
NUMBER AVERAGE NUMBER AVERAGE
OF SHARES PRICE OF SHARES PRICE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
December 31, 1993................................ 84,462 4.76 33,798 5.17
Issued......................................... 593,760 4.76 945 4.76
-------- --------
December 31, 1994................................ 678,222 4.76 34,743 5.16
Anti-dilution adjustment....................... 19,849 4.76
Issued......................................... 316,397 4.76
Exercised...................................... (246,723) 2.38 (198,442) 2.38
-------- --------
December 31, 1995................................ 451,348 4.55 152,698 4.71
Converted to Common............................ (451,348) 4.55 451,348 4.55
Issued......................................... -- 50,000 13.00
Exercised...................................... -- (86,537) 4.57
-------- --------
December 31, 1996 -- 567,509 5.33
======== ========
</TABLE>

(20) INCOME TAXES

A deferred tax asset stemming from the Company's net operating loss
carryforward, research and development credit carryforward, and other accruals
has been reduced by a valuation account to zero due to uncertainties regarding
the utilization of the deferred assets. The deferred tax asset and the
corresponding valuation allowance were approximately $5,851,000 and $5,201,542
as of December 31, 1996 and 1995, respectively.

The sale of the Company's common stock will result in an ownership change
for the Company, as defined for tax purposes. As a result an annual limitation
will be placed on the utilization of the existing net operating loss
carryforwards and credit carryforwards. This limitation may cause a portion of
the existing net operating loss and credit carryforwards to expire prior to
utilization.

The net operating loss and research and development credit carryforwards
will expire as follows:

<TABLE>
<CAPTION>
NET RESEARCH
OPERATING AND
LOSS DEVELOPMENT
--------- -----------
<S> <C> <C>
2005........................................................ $ 42,000 $ --
2006........................................................ 128,000 --
2007........................................................ 794,000 2,000
2008........................................................ 2,500,000 47,000
2009........................................................ 3,341,000 53,000
2010........................................................ 5,880,000 63,000
2011........................................................ 1,335,000 27,000
----------- --------
Total....................................................... $14,020,000 $192,000
=========== ========
</TABLE>

F-14
<PAGE> 70

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The net deferred tax assets are summarized at December 31 as follows:

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Deferred tax assets
Net operating loss
carryforwards....... $ 374,032 $ 1,344,032 $ 2,640,340 $ 4,839,542 $ 5,443,000
Research and
development credit
carryforwards....... -- -- 102,000 188,000 192,000
Other.................. -- -- -- 174,000 216,000
--------- ----------- ----------- ----------- -----------
374,032 1,344,032 2,742,340 5,201,542 5,851,000
Less: Valuation
allowance.............. (374,032) (1,344,032) (2,742,340) (5,201,542) (5,851,000)
--------- ----------- ----------- ----------- -----------
Net deferred taxes....... $ -- $ -- $ -- $ -- $ --
========= =========== =========== =========== ===========
</TABLE>

(21) LEASES

The following summarizes assets held under capital leases which are
included in property, plant, and equipment as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Machinery and equipment..................................... $239,839 $239,839
Furniture and fixtures...................................... 181,750 181,750
Leasehold improvements...................................... 48,386 48,386
-------- --------
469,975 469,975
Less accumulated depreciation............................... 232,871 94,316
-------- --------
$237,104 $375,659
======== ========
</TABLE>

The Company leases its facility under a noncancelable operating lease
arrangement. Rent expense charged to operations for the years ended December 31,
1996, 1995 and 1994 amounted to $221,035, $221,361 and $121,632, respectively.

At December 31, 1996 minimum lease commitments together with the present
value of obligations under leases that have initial or remaining noncancelable
terms in excess of one year were as follows:

<TABLE>
<CAPTION>
YEARS ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
------------ ------- ---------
<S> <C> <C>
1997...................................................... $141,789 $230,949
1998...................................................... 23,351 236,335
1999...................................................... -- 200,764
2000...................................................... -- --
2001...................................................... -- --
-------- --------
Total minimum lease payments................................ 165,140 $668,048
========
Less amount representing interest........................... 9,570
--------
Present value of minimum lease payments..................... 155,570
Less current installments of obligation..................... 132,459
--------
Obligation excluding current installments................... $ 23,111
========
</TABLE>

F-15
<PAGE> 71

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(22) SUBSEQUENT EVENTS (UNAUDITED)

Acquisition

In February, 1997, the Company purchased substantially all of the assets of
Rocap, Inc., a Massachusetts company which produces various types of
pre-packaged syringes. Consideration paid by the Company is summarized as
follows:

(1) $100,000 cash.

(2) Forgiveness of $300,000 in debt, owed to the Company in the form of
a bridge loan agreement entered into on January 15, 1997.

(3) Assumption of approximately $661,000 in net liabilities.

(4) $2,900,000 in cash or stock of the Company.

The stock value as determined by the Asset Purchase Agreement for payment
in shares was $22.0375 per share and, as such, 131,593 shares are held in
escrow. The final number of Company shares deliverable to Rocap, Inc. will be
determined by the Company's stock price at July 1, 1997. The Company has the
option to pay in cash, rather than shares.

In February, 1997, the Company granted stock options to two former Rocap,
Inc. employees, one of which was elected an officer of the Company. In
aggregate, 220,000 option shares were granted at an exercise price of $22.25,
under the Company's Amended and Restated 1993 Stock Option Plan. The stock
options vest over a period of 3 to 4 years. Pursuant to the officer's employment
agreement, the Company could be obligated to purchase 100,000 option shares at
$18.00 each.

Litigation

On February 5, 1997, SIMS Deltec filed a complaint (the "Complaint") in the
United States District Court for the District of Minnesota alleging that
Sabratek's manufacture, use and/or sale of the MediVIEW software in conjunction
with its infusion pumps infringes on a patent entitled "Systems and Methods for
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. The Complaint seeks injunctive relief,
unspecified monetary damages and costs. The Company has not yet formally
responded to the Complaint but intends to vigorously defend against the
allegations contained in the Complaint. Although the outcome of these
proceedings cannot be determined, management believes that the outcome should
not have a material adverse effect on the Company's financial position.

Credit Facility

The Company received a commitment for a credit facility with up to $9.5
million of available borrowings. Borrowings under this facility bear interest at
the bank's prime rate and the facility matures in April, 1999. No amounts have
been borrowed under this facility.

F-16
<PAGE> 72

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
ROCAP, Inc.
Five Constitution Way
Woburn, MA 01801

We have audited the accompanying balance sheet of ROCAP, Inc. (an S
corporation) as of December 31, 1996, and the related statements of loss and
accumulated deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides 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 ROCAP, Inc. as of December
31, 1996, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

/s/ Parent, Naffah & Company

North Andover, Massachusetts
February 3, 1997

F-17
<PAGE> 73

ROCAP, INC.

BALANCE SHEET, DECEMBER 31, 1996

<TABLE>
<S> <C>
ASSETS
Current assets
Cash $ 22,317
Accounts receivable, net of allowance for bad debts of
$50,000................................................ 425,629
Inventory................................................. 24,500
Prepaid expense........................................... 10,455
-----------
Total Current Assets.............................. 482,901
-----------
Property and equipment
Leasehold improvements.................................... 62,637
Equipment................................................. 217,148
Office equipment.......................................... 17,152
Furniture and fixtures.................................... 32,164
-----------
Total............................................. 329,101
Less: Accumulated depreciation............................ 95,100
-----------
Property and equipment -- net............................. 234,001
-----------
Other assets
Organization costs, net of accumulated amortization of
$792................................................... 1,708
Deposits.................................................. 4,133
-----------
Total Other Assets................................ 5,841
-----------
Total assets...................................... $ 722,743
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Note payable.............................................. $ 200,000
Accounts payable.......................................... 629,224
Accrued payroll and payroll taxes......................... 40,248
Accrued liabilities....................................... 141,023
Due to officer............................................ 82,800
-----------
Total Current Liabilities......................... 1,093,295
Notes payable -- stockholders............................... 290,576
-----------
Total Liabilities................................. 1,383,871
-----------
Stockholders' Deficit
Common Stock, no par value, 100,000 shares authorized,
58,677 issued and outstanding.......................... 515,000
Additional paid-in capital................................ 277,500
Accumulated deficit....................................... (1,453,628)
-----------
Total Stockholders' Deficit....................... (661,128)
-----------
Total liabilities and stockholders' deficit....... $ 722,743
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-18
<PAGE> 74

ROCAP, INC.

STATEMENT OF LOSS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
Revenue
Flush program............................................. $ 1,672,726
IV program................................................ 263,365
-----------
Total Revenue.......................................... 1,936,091
-----------
Cost of Goods Sold
Materials and supplies.................................... 1,109,805
Outside labor............................................. 275,539
Shipping and freight...................................... 138,001
Equipment leases.......................................... 16,264
Waste removal............................................. 4,391
-----------
Total Cost of Goods Sold............................... 1,544,000
-----------
Gross Profit................................................ 392,091
General and Administrative Expenses......................... 1,388,402
-----------
Loss from Operations........................................ (996,311)
-----------
Other Income (Expense)
Interest income........................................... 31
Interest expense.......................................... (37,531)
-----------
Total Other Income (Expense)........................... (37,500)
-----------
Net Loss.................................................... (1,033,811)
Accumulated Deficit, January 1, 1996........................ (419,817)
-----------
Accumulated Deficit, December 31, 1996...................... $(1,453,628)
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-19
<PAGE> 75

ROCAP, INC.

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 13, 1996

<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
Cash Flows From Operating Activities
Cash received from customers.............................. $ 1,476,626
Cash paid to suppliers and employees...................... (2,098,539)
Interest received......................................... 31
Interest paid............................................. (2,600)
-----------
Net Cash Used in Operating Activities.................. (624,482)
-----------
Cash Flows from Investing Activities
Capital expenditures...................................... (13,562)
Collection of notes receivable............................ 22,750
-----------
Net Cash Provided by Investing Activities.............. 9,188
-----------
Cash Flows from Financing Activities
Proceeds from note payable................................ 200,000
Proceeds from issuance of common stock.................... 265,000
Proceeds from issuance of stockholder notes payable....... 40,576
Proceeds from officer loan................................ 82,800
-----------
Net Cash Provided by Financing Activities.............. 588,376
-----------
Net Decrease in Cash........................................ (26,918)
Cash, January 1, 1996....................................... 49,235
-----------
Cash, December 31, 1996..................................... $ 22,317
===========
Reconciliation of Net Loss to Net Cash Used in Operating
Activities
Net Loss.................................................. $(1,033,811)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization.......................... 72,421
Changes in assets and liabilities:
Increase in accounts receivable...................... (409,464)
Increase in inventory................................ (24,500)
Decrease in prepaid expense.......................... 15,545
Increase in accounts payable......................... 596,303
Increase in accrued payroll and payroll taxes........ 40,248
Increase in accrued liabilities...................... 124,356
Decrease in unearned revenue......................... (5,580)
-----------
Total Adjustments................................. 409,329
-----------
Net Cash Used In Operating Activities....................... $ (624,482)
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-20
<PAGE> 76

ROCAP, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

The Company was incorporated in 1994 under the laws of the Commonwealth of
Massachusetts. The Company has developed an alternative for the in-hospital
pharmacy production process for mixing and packaging pharmaceuticals into
dilutent solutions for intravenous administration.

Basis of Accounting

The Company maintains its records on the accrual basis of accounting.

Accounts Receivable

An allowance for uncollectible accounts in the amount of $50,000 has been
provided at December 31, 1996.

Inventory

Inventories are valued at lower of cost or market on the first-in,
first-out (FIFO) basis.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed in
accordance with the Modified Accelerated Cost Recovery System (MACRS) using
various methods and lives as provided in the Internal Revenue Code. Maintenance
and repairs are charged to operations when incurred while significant renewals
and betterments are capitalized.

Income Taxes

The shareholders of the Corporation elected to have the Corporation taxed
as a "S Corporation" for federal and state tax reporting purposes. As such, the
net income of the corporation is taxed at the shareholder level, thereby
eliminating the liability for federal and state corporate income taxes.

Cash Equivalents

For purposes of the statements of cash flows, the Corporation considers all
short-term instruments purchased with a maturity of three months or less to be
cash equivalents. There were no cash equivalents at December 31, 1996.

Use of Estimates

2. PREPAID EXPENSES

Prepaid expense at December 31, 1996 consists of prepaid insurance.

F-21
<PAGE> 77

ROCAP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

3. ORGANIZATION COSTS

Certain legal fees and other expenses associated with the organization of
the Company are being amortized over five years. Amortization expense for the
year ended December 31, 1996 was $792.

4. DEPOSITS

Deposits at December 31, 1996 consist of security deposits paid to a
landlord and certain utility companies.

5. NOTES PAYABLE -- STOCKHOLDERS

On June 1, 1995 the Company borrowed a total sum of $250,000 from the
stockholders of record on that date. The notes are payable in full on May 1,
2000, and bear interest at 10% per annum, payable quarterly. The notes are
secured by substantially all of Company's assets, and requires a premium of 10%
of the amount of any principal paid prior to May 1, 2000. The note also requires
an acceleration of principal payments if and when the Company reaches certain
levels of net income. In January 1996 certain stockholders loaned the Company an
additional $40,576 under the same terms as the original debt.

6. NOTE PAYABLE -- VENDOR

On December 1, 1996, the Company borrowed $200,000 from a vendor. The note,
which is unsecured, is payable in quarterly installments of $50,000 plus
interest at 8%, beginning March 1997.

7. ACCRUED LIABILITIES

Accrued liabilities at December 31, 1996 includes accrued interest of
$51,597 (Refer to notes 5 and 6 above), accrued future compensated absences of
$26,703, accrued Medicaid rebates of $32,509, and uninvoiced services and
purchases of $30,214.

8. OPERATING LEASE

On June 26, 1996 the Company entered into a five year lease agreement for
their 4,700 square foot manufacturing facility located in Woburn, Massachusetts.
The lease requires monthly payments of $4,027 representing a base rent of $3,133
plus the Company's proportional share of real estate taxes and other common area
charges. The lease commenced August 1, 1995 and expires July 31, 2000.

Minimum future rental payments under this non-cancelable operating lease
through the end of the lease term are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
- ------------ ------
<S> <C> <C>
1997.................................................................. $ 48,324
1998.................................................................. 48,324
1999.................................................................. 48,324
2000.................................................................. 28,189
--------
$173,161
========
</TABLE>

9. MAJOR DISTRIBUTOR

In 1996, sales to the Company's two major distributors totalled $1,503,712.
A major distributor is defined as one whose sales exceed 10% of the Company's
total sales.

F-22
<PAGE> 78

ROCAP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

10. SUBSEQUENT EVENTS

On January 15, 1997, the Company borrowed $300,000 from a non-affiliated
corporation. The loan accrues interest at 6%, until September 30, 1997, and at
8%, thereafter. As of the date of this report, the repayment terms of this note
had not been determined.

On January 21, 1997, the Company entered into a 42 month lease for
warehouse space in Woburn, Massachusetts. The minimum future payments under this
lease through the end of its term are:

YEAR ENDED
DECEMBER 31, AMOUNT
- ------------ ------
<S> <C>
1997.................................................................. $23,898
1998.................................................................. 26,794
1999.................................................................. 27,584
2000.................................................................. 2,304
-------
$80,580
=======
</TABLE>

F-23
<PAGE> 79

PRO FORMA SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Pro Forma Supplemental Consolidated Financial Statements
gives effect to the Company's acquisition of substantially all of the assets of
Rocap, Inc. The Pro Forma Supplemental Consolidated Statement of Operations for
the fiscal year ended December 31, 1996 combines the Statement of Operations of
the Company for the year ended December 31, 1996 with the Statement of Loss and
Accumulated Deficit of Rocap, Inc. for the same year then ended as if the
acquisition had occurred at January 1, 1996. The Pro Forma Supplemental
Consolidated Balance Sheet at December 31, 1996 combines the Balance Sheets at
December 31, 1996 of the Company and Rocap, Inc. as if the acquisition had
occurred at December 31, 1996. The transaction has been accounted for as a
purchase and appropriate adjustments have been made to the Pro Forma
Supplemental Consolidated Statement of Operations to reflect the transaction at
the beginning of period presented. The Pro Forma Supplemental Consolidated
Financial Statements presented is not necessarily indicative of the operating
results which would have been achieved had the transaction occurred at the
beginning of the period presented or of results to be achieved in the future.

F-24
<PAGE> 80

SABRATEK CORPORATION

PROFORMA SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
----------------
SABRATEK ROCAP DEBIT CREDIT PRO FORMA
-------- ----- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 10,447 $ 22 $ 550 $ 9,919
Short-term investments in marketable securities....... 4,352 -- 4,352
Receivables:
Trade, net.......................................... 8,305 426 8,731
Other............................................... 125 -- 125
-------- ------ ------ ------ --------
Total receivables 8,430 426 8,856
-------- ------ ------ ------ --------
Inventories........................................... 5,049 25 5,074
Prepaids and other assets............................. 586 10 596
-------- ------ ------ ------ --------
Total current assets.................................... 28,864 483 550 28,797
-------- ------ ------ ------ --------
Property, plant, and equipment, net..................... 1,775 234 2,009
Intangible asset, net................................... 42 -- 42
Note receivable......................................... 200 200
Long-term investments in marketable securities.......... 2,011 -- 2,011
Goodwill................................................ 4,111(1) 4,111
Other................................................... 59 6 65
-------- ------ ------ ------ --------
Total assets............................................ $ 32,951 $ 723 $4,111 $ 550 $ 37,235
======== ====== ====== ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term debt....................................... $ 168 $ 200 $ 368
Current portion of capital lease obligation........... 132 132
Current portion of long-term debt..................... 3 3
Accounts payable...................................... 2,247 629 2,876
Accrued expenses:
Payroll & commissions............................... 1,265 40 1,305
Warranty............................................ 236 236
Other............................................... 55 224 279
Deferred rent......................................... 31 31
Deferred revenue...................................... -- -- --
Due to affiliated company............................. 140 140
-------- ------ ------ ------ --------
Total current liabilities............................... 4,277 1,093 -- -- 5,370
-------- ------ ------ ------ --------
Long-term of capital lease obligation................... 23 23
Long-term debt.......................................... 1 291 292
Accrued interest........................................ -- -- --
-------- ------ ------ ------ --------
Total liabilities....................................... 4,301 1,384 -- -- 5,685
-------- ------ ------ ------ --------
Stockholders' equity (deficit):
Common stock, 8,196,981 shares issued and outstanding
December 31, 1996, 8,328,574 shares pro forma....... 82 515 515(1) 1(1) 83
Additional paid-in capital............................ 42,891 278 278(1) 2,899(1) 45,790
Deferred compensation................................. (17) -- (17)
Unrealized gains...................................... 4 -- 4
Accumulated deficit................................... (14,310) (1,454) 1,454(1) (14,310)
-------- ------ ------ ------ --------
Total stockholders' equity (deficit).................... 28,650 (661) 793 4,354 31,550
-------- ------ ------ ------ --------
$ 32,951 $ 723 $ 793 $4,354 $ 37,235
======== ====== ====== ====== ========
</TABLE>

F-25
<PAGE> 81

SABRATEK CORPORATION

PROFORMA SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
----------------- PRO
SABRATEK ROCAP DEBIT CREDIT FORMA
-------- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net sales...................................... $17,696 $ 1,936 $19,632
Cost of sales.................................. 8,748 1,544 10,292
------- ------- ---- -- -------
Gross margin.............................. 8,948 392 -- -- 9,340
Selling, general & administrative expenses..... 8,474 1,388 9,862
Goodwill amortization.......................... -- -- 230(2) -- 230
------- ------- ---- -- -------
Operating income (loss)........................ 474 (996) 230 -- (752)
------- ------- ---- -- -------
Other income (expense):........................ --
Interest income.............................. 617 -- 617
Interest expense............................. (319) (38) (357)
Stock appreciation rights.................... (1,628) -- (1,628)
Other........................................ (2) -- (2)
------- ------- ---- -- -------
Net income (loss).............................. $ (858) $(1,034) 230 -- $(2,122)
======= ======= ==== == =======
Weighted average shares outstanding............ 7,263 7,395
======= =======
Net income (loss) per share.................... $ (0.12) $ (0.29)
======= =======
</TABLE>

F-26
<PAGE> 82

SABRATEK CORPORATION

NOTES TO PROFORMA SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)

The Proforma adjustments reflect the following:

(1) On February 25, 1997, the company consummated an agreement to acquire the
assets of Rocap. This acquisition was accounted for using the purchase
method of accounting. The total purchase price of $3,450,000 was paid for
in a combination of Sabratek stock (assumed to be 131,593 shares currently
held in escrow) and cash. In addition, Sabratek assumed $661,000 in net
liabilities. An allocation of the purchase price has been made based upon
the estimated fair value of the net assets acquired in excess of the
purchase price over the estimated fair value of the net assets acquired of
$4,111,000 recorded as goodwill.

(2) Represents amortization, on a straight line basis over 15 years, of the
goodwill arising out of Rocap.

F-27
<PAGE> 83

TECHNOLOGICALLY-ADVANCED
USER-FRIENDLY
AND COST-EFFECTIVE
MULTI-THERAPY SYSTEMS
DESIGNED TO MEET THE UNIQUE NEEDS
OF THE ALTERNATE-SITE HEALTH CARE MARKET

[SABRATEK LOGO]
<PAGE> 84

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, 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. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES IN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT LAWFUL,
OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT AUTHORIZED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
The Company........................... 14
Use of Proceeds....................... 14
Price Range of Common Stock........... 14
Dividend Policy....................... 14
Dilution.............................. 15
Capitalization........................ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 21
Management............................ 33
Principal Stockholders................ 41
Selling Stockholders.................. 43
Certain Transactions.................. 44
Description of Capital Stock.......... 47
Shares Eligible for Future Sale....... 48
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Available Information................. 50
Index to Financial Statements......... F-1
</TABLE>

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

2,178,493 SHARES

SABRATEK LOGO
COMMON STOCK
---------------------------

PROSPECTUS
---------------------------
BEAR, STEARNS & CO. INC.

SALOMON BROTHERS INC

SMITH BARNEY INC.

JEFFERIES & COMPANY, INC.
, 1997

======================================================
<PAGE> 85

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses of the issuance and distribution
of the securities being registered. None of the expenses of the issuance and
distribution of the securities being registered will be borne by selling
stockholders.

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission...... $ 20,000
Filing and Listing Fee -- National Association of Securities
Dealers................................................... 60,000
Legal Fees.................................................. 125,000
Accounting Fees............................................. 95,000
Printing and Engraving...................................... 175,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent Fees......................................... 5,000
Miscellaneous Expenses...................................... 10,000
--------
Total.................................................. $500,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Amended and Restated Certificate of Incorporation provides
for indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of the Company or of any
other corporation, partnership, joint venture, trust or other enterprise which
has served in such capacity at the request of the Company if such acts or
omissions occurred or were or are alleged to have occurred, while said party was
a director or officer of the Company; provided, however, the Company shall not
indemnify any director or officer in an action against the Company unless the
Company shall have consented to such action. Generally, under Delaware law,
indemnification will only be available where an officer or director can
establish that he/she acted in good faith and in a manner which was reasonably
believed to be in or not opposed to the best interests of the Company.

Section 145 of the Delaware Law provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of the
fact that such person was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually incurred by such person in connection with such action if such person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of the Company's Amended and Restated
Certificate of Incorporation have no effect on the availability of equitable
remedies such as injunction or rescission, based upon a director's breach of the
duty of care. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions and agreements, the Company has
been informed that in the opinion of the Staff of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Securities
Act and is therefore unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On February 25, 1997, the Company issued 131,593 shares of Common Stock
valued at $3,043,088 to Rocap as partial consideration for the acquisition of
substantially all of the assets of Rocap. This sale was exempt from registration
in reliance on Section 4(2) of the Act.

On September 6, 1996, the Company issued a warrant to purchase 50,000
shares of Common Stock at $13.00 per share to a customer. This warrant vested
immediately and is exercisable for a period of 5 years and

II-1
<PAGE> 86

includes piggyback registration rights with a guarantee of one registration
during the five year term. This sale was exempt from registration in reliance on
Section 4(2) of the Act.

On April 18, 1996, the Company issued 23,637 shares of Common Stock to
Mirza Mehdi for aggregate consideration of $112,500 and 100,851 shares of Common
Stock to Arie Kalo for aggregate consideration of $480,000 in exchange for
consulting services performed by such individuals during 1995. The sales were
exempted from registration in reliance on Section 4(2) of the Act.

On March 14, 1996, the Company issued a Convertible Subordinated Debenture
to Charles K. Stewart Investments, in the amount of $844,500 for a purchase
price equal to the face amount thereof. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act. The Company also issued
167,245 shares of Common Stock for aggregate consideration of $1,639,761 under
the Act pursuant to Regulation D of the Act.

On February 13, 1996, the Company issued a Debenture to Hospital Credit
Corp. in the amount of $200,000 for a purchase price equal to the face amount
thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On February 8, 1996, the Company issued a Debenture to ABDM Partners c/o
Daniel E. Straus in the amount of $50,000 for a purchase price equal to the face
amount thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On February 6, 1996, the Company issued a Debenture to Stephen Raphael, IRA
in the amount of $50,000 for a purchase price equal to the face amount thereof.
The sale was exempt from registration under the Act pursuant to Regulation D of
the Act.

On January 23, 1996, the Company issued a Debenture to Marvin Samson in the
amount of $100,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On January 16, 1996, the Company issued a Debenture to Valerie Spencer in
the amount of $25,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On January 15, 1996, the Company issued Convertible Subordinated Debentures
to Mark Mitchell in the amount of $60,000 and The Hodes Family Foundation in the
amount of $50,000. Each debenture was issued for a purchase price equal to the
face amount thereof, and the sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On January 11, 1996, the Company issued a Debenture to IASD Health Services
Corp. in the amount of $100,000 for a purchase price equal to the face amount
thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On January 8, 1996, the Company issued a Debenture to William Lautman, a
managing director of EGS Securities Corp., in the amount of $110,000 for $50,000
in cash and $60,000 in payment for services rendered by Mr. Lautman to the
Company. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On December 19, 1995, the Company sold 3,152 shares of Common Stock to
Timothy M. McCaffrey for aggregate consideration of $15,000 in a private
transaction in reliance on Section 4(2) of the Act.

On December 14, 1995, the Company issued a Convertible Subordinated
Debenture to John Stafford in the amount of $100,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On December 11, 1995, the Company sold 1,397 shares of Common Stock to Todd
W. Garrison for aggregate consideration of $6,648 in a private transaction in
reliance on Section 4(2) of the Act.

II-2
<PAGE> 87

On December 6, 1995, the Company issued a Debenture to Charles Stewart in
the amount of $100,000 for a purchase price equal to the face amount thereof.
The sale was exempt from registration under the Act pursuant to Regulation D of
the Act.

On December 4, 1995, the Company issued a Debenture to William Lomicka in
the amount of $50,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On November 30, 1995, the Company sold 105,053 shares of Series A Preferred
Stock to MSI, Inc. (Marsam) for aggregate consideration of $499,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On November 7, 1995, the Company issued Convertible Subordinated Debentures
to Ilan Kaufthal in the amount of $3,550 and Steven L. Volla in the amount of
$3,550. Each Convertible Subordinated Debenture was issued for a purchase price
equal to the face amount thereof, and the sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 6, 1995, the Company issued Convertible Subordinated Debentures
to Martin and Patricia Volla in the amount of $372.75 and Lillian Volla Trust in
the amount of $372.75. Each Convertible Subordinated Debenture was issued for a
purchase price equal to the face amount thereof, and the sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 5, 1995, the Company issued Convertible Subordinated Debentures
to Gildea Investment Co. Def. Benefit in the amount of $1,775 and John W. Gildea
in the amount of $3,550. Each Convertible Subordinated Debenture was issued for
a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On October 31, 1995, the Company issued Convertible Subordinated Debentures
to Anne L. Fawcett in the amount of $10,000, Donald N. Fawcett in the amount of
$1,000 and Dwight P. Fawcett in the amount of $1,000. Each Convertible
Subordinated Debenture was issued for a purchase price equal to the face amount
thereof, and the sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On October 28, 1995, the Company issued a Convertible Subordinated
Debenture to Peter M. Gaines in the amount of $2,946 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 26, 1995, the Company issued a Convertible Subordinated
Debenture to Jane F. Dearborn in the amount of $1,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 20, 1995, the Company issued a Convertible Subordinated
Debenture to John E. Traeger Trust No. 1 in the amount of $2,951 for a purchase
price equal to the face amount thereof. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On October 16, 1995, the Company issued a warrant to Oscar E. Hyman to
purchase 18,910 shares of Common Stock at $4.76 per share as compensation for
services rendered to the Company. This warrant vested immediately and expires on
April 15, 1999. The Company valued the services received in exchange for the
warrant at $24,000. The sale was exempt from registration under the Act pursuant
to Regulation D of the Act.

On October 15, 1995, the Company issued a Convertible Subordinated
Debenture to Charles R. Hall in the amount of $1,225 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 5, 1995, the Company issued a warrant to Steven B. Johns to
purchase 9,455 shares of Common Stock at $4.76 per share as compensation for
services rendered to the Company. This warrant vested immediately and expires on
February 15, 1999. The Company valued the services received in exchange for the
warrant at $11,700. The sale was exempt from registration under the Act pursuant
to Regulation D of the Act. On January 14, 1997, Steve Johns exercised a warrant
to purchase 9,454 shares of Common Stock at $4.76 per share. This transaction
was exempt from registration in reliance on Section 4(2) of the Act.

II-3
<PAGE> 88

On September 21, 1995, the Company issued a Convertible Subordinated
Debenture to Robert J. Nowlin in the amount of $25,000 for a purchase price
equal to the face amount thereof. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On September 13, 1995, the Company issued Convertible Subordinated
Debentures to John Stafford in the amount of $200,000 and Cowen & Co., Custodian
FBO William G. Walters IRA in the amount of $100,000. Each Convertible
Subordinated Debenture was issued for a purchase price equal to the face amount
thereof, and the sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On September 12, 1995, the Company issued a Convertible Subordinated
Debenture to R.J. Bertero in the amount of $150,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On September 8, 1995, the Company issued Convertible Subordinated
Debentures to Charles K. Stewart Money Purchase Plan in the amount of $200,000
and Paine Weber Inc. IRA Custodian for Francis Cook in the amount of $200,000.
Each Convertible Subordinated Debenture was issued for a purchase price equal to
the face amount thereof, and the sales were exempt from registration under the
Act pursuant to Regulation D of the Act.

On September 5, 1995, the Company issued a Convertible Subordinated
Debenture to Catherine Dawson in the amount of $50,000 for a purchase price
equal to the face amount thereof. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On August 31, 1995, the Company issued a warrant to purchase 11,177 shares
of Common Stock at $4.76 per share to William D. Lautman as compensation for
financial services rendered to the Company. This warrant vested immediately and
expires on August 31, 2000. The Company valued the services received in exchange
for the warrant at $1,773. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 14, 1995, the Company issued a Convertible Subordinated Debenture
to George Walker in the amount of $100,000 for a purchase price equal to the
face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 12, 1995, the Company issued Convertible Subordinated Debentures to
Charles K. Stewart Money Purchase Plan in the amount of $150,000, John Stafford
in the amount of $150,000 and Paine Webber Inc. IRA Custodian for Francis Cook
in the amount of $200,000. Each Convertible Subordinated Debenture was issued
for a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On June 7, 1995, the Company sold 5,072 shares of Common Stock to Scott
Hodes for aggregate consideration of $12,071.25 in a private transaction in
reliance on Section 4(2) of the Act.

On June 5, 1995, the Company sold 6,303 shares of Common Stock to Charles
F. Manker for aggregate consideration of $15,000 in a private transaction in
reliance on Section 4(2) of the Act.

On May 31, 1995, the Company issued Secured Subordinated Notes to IASD
Health Services Corp. in the amount of $150,000, Edson W. Spencer, Jr. in the
amount of $25,000, Gideon Hixon Fund, L.P. in the amount of $25,000 and William
H. Lomicka in the amount of $50,000. Each Secured Subordinated Note was issued
for a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On May 31, 1995, in connection with certain secured notes issued by the
Company on May 31, 1995 to such parties, the Company issued the following
warrants to purchase shares of Common Stock at $4.76 per share: to Edson W.
Spencer, a warrant to purchase 1,576 shares of Common Stock; to William H.
Lomicka, a warrant to purchase 3,152 shares of Common Stock; to Gideon Hixon
Fund, L.P., a warrant to purchase 1,576 shares of Common Stock; and to IASD
Health Services Corp., a warrant to purchase 9,455 shares of Common Stock. These
warrants vested immediately and expire on May 31, 2000. The sales were exempt
from registration under the Act pursuant to Regulation D of the Act. On June 27,
1996, IASD Health Services

II-4
<PAGE> 89

Corp. exercised a warrant to purchase 9,454 shares of Common Stock at $4.76 per
share. This transaction was exempt from registration in reliance on Section 4(2)
of the Act.

On May 31, 1995, the Company sold 7,202 shares of Series A Preferred Stock
to Charles K. Stewart Money Purchase Plan and Timm R. & Robin S. Reynolds for
aggregate consideration of $17,139.75, each in a private transaction in reliance
on Section 4(2) of the Act.

On May 26, 1995, the Company sold 1,050 shares of Series A Preferred Stock
to Spencer Family Partnership, L.P. for aggregate consideration of $2,499.75 in
a private transaction in reliance on Section 4(2) of the Act.

On May 24, 1995, the Company sold 21,011 shares of Series A Preferred Stock
to PSF Health Care Fund for aggregate consideration of $50,000.25 in a private
transaction in reliance on Section 4(2) of the Act.

On May 22, 1995, the Company sold 1,050 shares of Series A Preferred Stock
to Edson W. & Harriett S. Spencer for aggregate consideration of $24,999.75 in a
private transaction in reliance on Section 4(2) of the Act.

On May 15, 1995, the Company sold 8,404 shares of Series A Preferred Stock
to Upland Associates, L.P., Namakagon Associates, L.P. and Barker, Lee & Company
for aggregate consideration of $20,000.25, each in a private transaction in
reliance on Section 4(2) of the Act.

On May 13, 1995, the Company sold 28,364 shares of Series A Preferred Stock
to Gideon Hixon Fund and Benson K. Whitney for aggregate consideration of
$67,500, each in a private transaction in reliance on Section 4(2) of the Act.

On May 12, 1995, the Company sold 2,101 shares of Series A Preferred Stock
to Robert D. Stuart, Jr. for aggregate consideration of $5,000.25 in a private
transaction in reliance on Section 4(2) of the Act.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to William D. Lautman, a managing director of
EGS Securities Corp., as compensation for financial services rendered to the
Company. The Company valued the services received in exchange for the warrant at
$13,809. This warrant vested immediately and expires on May 12, 2000. On May 31,
1995, Mr. Lautman exercised the warrant to purchase 21,011 shares of Common
Stock at $2.38 per share, pursuant to a discount offered by the Company in
consideration for services rendered by Mr. Lautman and retains the right to
exercise the warrant for the remaining 66,021 shares of Common Stock at $4.76
per share. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to Scott C. Newquist and a warrant to purchase
87,032 shares of Common Stock at $4.76 per share to Robert G. Eccles as
compensation for financial services rendered to the Company. The Company valued
the services received in exchange for the warrants at $27,618. These warrants
vested immediately and expire on May 12, 2000. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act. Messrs. Eccles
and Newquist transferred the rights under their warrants to Oracle Partners,
L.P. for immediate exercise. On May 31, 1995, Larry N. Feinberg c/o Oracle
Partners, L.P., Oracle Institutional Partners, L.P., Sam Oracle Fund, Inc. and
Oracle Partners, L.P. exercised the warrants which were transferred by Messrs.
Eccles and Newquist to purchase an aggregate of 174,064 shares of Common Stock.

On May 9, 1995, the Company sold 168,085 shares of Series A Preferred Stock
to Charles K. Stewart Money Purchase Plan and John Stafford for aggregate
consideration of $400,000.50, each in a private transaction in reliance on
Section 4(2) of the Act.

On April 24, 1995, the Company issued 5,072 shares of Common Stock to Scott
Hodes, in partial exercise of the stock option granted by the Company to Scott
Hodes, at an exercise price of $2.38 per share, in a private transaction in
reliance on Section 4(2) of the Act.

On March 2, 1995, the Company sold 5,252 shares of Series A Preferred Stock
to Joan O. Bent TTEE for aggregate consideration of $24,999 in a private
transaction in reliance on Section 4(2) of the Act.

II-5
<PAGE> 90

On February 28, 1995, the Company sold 11,234 shares of Series A Preferred
Stock to Martin Volla and Patricia Volla as Joint Tenants, Lillian Volla Trust,
Stephen E. Raphael IRA, Lucy H. Gordon and Noam Frankel for aggregate
consideration of $53,466, each in a private transaction in reliance on Section
4(2) of the Act.

On February 27, 1995, the Company sold 10,505 shares of Series A Preferred
Stock to Kenneth Lebow IRA R/O for aggregate consideration of $49,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On February 10, 1995, the Company sold 4,412 shares of Series A Preferred
Stock to Martin Volla and Patricia Volla as Joint Tenants and Lillian Volla
Trust for aggregate consideration of $21,000, each in a private transaction in
reliance on Section 4(2) of the Act.

On January 24, 1995, the Company sold 21,011 shares of Series A Preferred
Stock to Steven Volla for aggregate consideration of $100,000.50 in a private
transaction in reliance on Section 4(2) of the Act.

On January 17, 1995, the Company sold 46,223 shares of Series A Preferred
Stock to Eveswise Limited Retirement Benefit Scheme, Gildea Investment Co.
Defined Benefit Plan, John Gildea and Charles F. Manker for aggregate
consideration of $220,000.50, each in a private transaction in reliance on
Section 4(2) of the Act.

On December 21, 1994, the Company sold 10,505 shares of Series A Preferred
Stock to William D. Lautman IRA for aggregate consideration of $49,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On December 7, 1994, the Company sold 5,253 shares of Series A Preferred
Stock to Joe Gutman for aggregate consideration of $25,000.50 in a private
transaction in reliance on Section 4(2) of the Act.

On December 1, 1994, the Company sold 10,506 shares of Series A Preferred
Stock to Jeffrey B. Goldenberg for aggregate consideration of $50,001 in a
private transaction in reliance on Section 4(2) of the Act.

On November 22, 1994, the Company issued a warrant to Comdisco, Inc. to
purchase 8,089 shares of Series A Preferred Stock at $4.76 per share as
compensation for services rendered to the Company. This warrant vested
immediately and expires on November 22, 2000. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 3, 1994, the Company sold 2,364 shares of Series A Preferred
Stock to Buzz Benson for aggregate consideration of $11,250 in a private
transaction in reliance on Section 4(2) of the Act.

On October 31, 1994, the Company sold 105,053 shares of Series A Preferred
Stock to Oracle Partners, L.P.; Oracle Institutional Partners, L.P.; and Sam
Oracle Fund, Inc. for aggregate consideration of $500,001, each in a private
transaction in reliance on Section 4(2) of the Act.

On October 29, 1994, the Company sold 10,506 shares of Series A Preferred
Stock to William Lomicka for aggregate consideration of $50,001 in a private
transaction in reliance on Section 4(2) of the Act.

On October 5, 1994, the Company sold 21,011 shares of Series A Preferred
Stock to The Pharmaceutical/Medical Technology Fund, L.P. for aggregate
consideration of $100,000.50 in a private transaction in reliance on Section
4(2) of the Act. The Pharmaceutical/Medical Technology Fund, L.P. is an
investment partnership whose general partners are the owners of EGS Partners,
L.L.C., which is a registered investment adviser. EGS Partners, L.L.C. is an
affiliate of EGS Securities Corp. of which William D. Lautman is a managing
director. Mr. Lautman disclaims beneficial ownership of the shares held by
Pharmaceutical/Medical Technology Fund, L.P. On the same date, the Company also
issued a warrant to Steven Johns to purchase 9,455 shares of Common Stock at
$4.76 per share as compensation for services rendered to the Company. This
warrant vested immediately and expires on February 15, 1999. The issuance of
this warrant was exempted from registration under the Act pursuant to Regulation
D of the Act.

II-6
<PAGE> 91

On September 23, 1994, the Company issued a warrant to
Peterson-Spencer-Fansler Co. to purchase 945 shares of Common Stock at $4.76 per
share as compensation for financial services rendered to the Company. The
Company valued the services received in exchange for this warrant at $150. This
warrant vested immediately and expires on September 23, 1999. The sale was
exempt from registration under the Act pursuant to Regulation D of the Act.

In connection with the sale of its Series A Preferred Stock, on September
23, 1994, the Company issued a warrant to MSI Inc. to purchase 472,739 shares of
Series A Preferred Stock at $6.35 per share. This warrant vested immediately and
expires on September 12, 1999. On May 8, 1995, MSI Inc. transferred the right to
exercise the warrant to purchase 168,085 shares of Series A Preferred Stock to
Charles K. Stewart Money Purchase Plan and John Stafford for immediate exercise,
and retains the right to exercise the warrant for the remaining 304,654 shares
of Series A Preferred Stock at an exercise price of $4.76 per share. On May 9,
1995, Charles K. Stewart Money Purchase Plan and John Stafford exercised such
warrant for 168,085 shares. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On September 23, 1994, the Company sold 1,152,682 shares of Series A
Preferred Stock to MSI Inc., a subsidiary of Marsam Pharmaceuticals Inc.;
William D. Lautman, a managing director of EGS Securities Corp.; James E. Flynn;
David H. Betts TIEE DHB Trust; Howard Miller; Mark Lenowitz; Ilan Kaufthal; IASD
Health Services Corp.; Leopold Swergold; William H. Lomicka; ABDM Partners;
Scott Newquist (later transferred to Scott C. Newquist and Aileen M. Newquist as
Joint Tenants); Spencer Family Partnership, L.P.; PSF Health Care Fund, L.P.;
Davis D. Fansler; Benson K. Whitney; Warren H. Corning #145751 Trust; Frank D.
Mayer Jr.; Duncan N. Dayton; Dwight W. Fawcett; Jane F. Dearborn; Donald N. &
Adrienne W. Fawcett; Charles R. Hall; John E. Traeger Trust #1; Gideon Hixon
Fund; Robert D. Stuart, Jr.; Peter M. Gaines; Paul J. Finnegan; Timm R. & Robin
S. Reynolds; Robin S. & Timm R. Reynolds; Gordon H. & Eunice H. Smith; James O.
Pohlad; P-J Investments; Vukasin Pavlovic; D-W Investments, L.P.; Gerald E. Jr.,
& Linda E. Bisbee; Steven M. & Rivanna Hyman; Sabratek Holdings I (later
transferred to Charles K. Stewart Money Purchase Plan, John Stafford, Jim
Stafford and Sabratek Holdings I); Edward G. Edelstein; Gideon Hixon Fund;
Pohlad Companies; Edson W. & Harriet S. Spencer; Jack E. Hill; John E. Rogers;
Upland Associates, L.P.; Barker, Lee & Company; Namakagon Associates, L.P.; D.W.
Fawcett; and Anne L. Fawcett for aggregate consideration of $5,486,190, each in
a private transaction in reliance on Section 4(2) of the Act.

On May 26, 1994, the Company issued a Convertible Debenture to Pohlad
Companies in the amount of $50,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 10,846 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Section 4(2) of the Act.

On May 26, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Pohlad Companies to purchase shares
of its Capital Stock which was subsequently exchanged for a warrant to purchase
10,505 shares of Series A Preferred Stock at $4.76 per share. This warrant
vested immediately and expires on May 26, 1997. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 18, 1994, the Company issued Convertible Debentures to the following
individuals and entities each in the amount set forth after its name and each
for a purchase price equal to the face amount thereof: Edson W. & Harriet S.
Spencer, $50,000; Barker, Lee & Company, $11,400; Upland Associates, L.P.,
$17,200; Namakagon Associates, L.P., $11,400. The Convertible Debentures were
exchanged for 10,869; 2,478; 3,739; and 2,478 shares of Series A Preferred Stock
respectively. The sales were exempt from registration under the Act pursuant to
Section 4(2) of the Act.

On May 18, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to Edson W. & Harriet S.
Spencer, a warrant to purchase 10,505 shares of Series A Preferred Stock, which
warrant was exercised on May 22, 1995; to Barker, Lee & Company, a warrant to
purchase 2,395 shares of Series A Preferred Stock, which warrant was exercised
on May 15, 1995; to Upland Associates, L.P., a warrant to purchase 3,614 shares
of

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Series A Preferred Stock, which warrant was exercised on May 15, 1995; and to
Namakagon Associates, L.P., a warrant to purchase 2,395 shares of Series A
Preferred Stock, which warrant was exercised on May 15, 1995. These warrants
vested immediately and expire on May 18, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 16, 1994, the Company issued Convertible Debentures to the following
individuals each in the amount set forth after his name and each for a purchase
price equal to the face amount thereof: John E. Rogers, $100,000; and Jack E.
Hill, $20,000. The Convertible Debentures were exchanged for 21,750 and 4,350
shares of Series A Preferred Stock respectively. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 16, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to John E. Rogers, a warrant to
purchase 21,011 shares of Series A Preferred Stock; and to Jack E. Hill, a
warrant to purchase 4,202 shares of Series A Preferred Stock. These warrants
vested immediately and expire on May 16, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act. In February,
1997, Jack E. Hill exercised a warrant to purchase 4,395 shares of Common Stock
at $4.55 per share. This transaction was exempt from registration in reliance on
Section 4(2) of the Act.

On May 12, 1994, the Company issued Convertible Debentures to the following
individuals and entities each in the amount set forth after its name and each
for a purchase price equal to the face amount thereof: PSF Health Care Fund,
L.P., $100,000; Gideon Hixon Fund, $75,000; and Benson K. Whitney, $25,000. The
Convertible Debentures were exchanged for 21,773; 16,330; and 5,443 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On May 12, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to PSF Health Care Fund, L.P., a
warrant to purchase 21,011 shares of Series A Preferred Stock, which warrant was
exercised on May 24, 1995; to Gideon Hixon Fund, a warrant to purchase 15,758
shares of Series A Preferred Stock, which warrant was exercised on May 13, 1995;
and to Benson K. Whitney, a warrant to purchase 5,253 shares of Series A
Preferred Stock, which warrant was exercised on May 13, 1995. These warrants
vested immediately and expire on May 12, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On April 28, 1994, the Company issued a Convertible Debenture to Peter M.
Gaines in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 5,464 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 28, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Peter M. Gaines to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
5,253 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on April 28, 1997. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On April 20, 1994, the Company issued a Convertible Debenture to Charles R.
Hall in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Subordinated Debenture was converted into 5,678 shares
of Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On April 20, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Charles R. Hall to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
525 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on April 20, 1997. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

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On April 18, 1994, the Company issued a Convertible Debenture to Dwight W.
Fawcett in the amount of $45,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 10,225 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 18, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Dwight W. Fawcett to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
5,253 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on April 18, 1997. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On April 16, 1994, the Company issued a Convertible Debenture to John E.
Traeger Trust #1 in the amount of $25,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 5,681 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On April 16, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to John E. Traeger Trust #1 to purchase
shares of its Capital Stock which were subsequently exchanged for warrants to
purchase 5,253 shares of Series A Preferred Stock at $4.76 per share. This
warrant vested immediately and expires on April 16, 1997. The sale was exempt
from registration under the Act pursuant to Regulation D of the Act. On October
3, 1996, John E. Traeger Trust No. 1 exercised a warrant to purchase 5,495
shares of Common Stock at $4.55 per share. This transaction was exempt from
registration in reliance on Section 4(2) of the Act.

On December 15, 1993, the Company issued a Convertible Debenture to Edward
G. Edelstein in the amount of $5,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 1,118 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On December 15, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Edward G. Edelstein to purchase
shares of its Capital Stock which were subsequently exchanged for warrants to
purchase 210 shares of Series A Preferred Stock at $4.76 per share. This warrant
vested immediately and expires on December 15, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act. On November 12,
1996, Edward G. Edelstein exercised a warrant to purchase 220 shares of Common
Stock at $4.55 per share. This transaction was exempt from registration in
reliance on Section 4(2) of the Act.

On December 2, 1993, the Company issued a warrant to Mirza Mehdi to
purchase 6,303 shares of Common Stock at $4.76 per share as compensation for
financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $1,000. This warrant vested immediately
and expires on December 2, 1998. The sale was exempt from registration under the
Act pursuant to Regulation D of the Act.

On December 2, 1993, the Company issued a Convertible Debenture to Sabratek
Holdings I for a purchase price equal to $600,000. The Convertible Debenture
converted into 134,951 shares of Series A Preferred Stock. The sale was exempt
from registration under the Act pursuant to Regulation D of the Act.

On December 2, 1993, in connection with the Company's sale of a Convertible
Debenture, the Company issued a warrant to purchase shares of its Capital Stock
which was subsequently exchanged for a warrant to purchase shares of Series A
Preferred Stock at $4.76 per share to Sabratek Holdings I, which warrant was
subsequently canceled and replaced with warrants to: Charles K. Stewart Money
Purchase Plan, a warrant to purchase 6,152 shares of Series A Preferred Stock,
which warrant was exercised on May 31, 1995; to John Stafford, a warrant to
purchase 5,118 shares of Series A Preferred Stock; to Sabratek Holdings I, a
warrant to purchase 8,824 shares of Series A Preferred Stock; and to Jim
Stafford, a warrant to purchase 5,118 shares of Series A Preferred Stock. These
warrants vested immediately and expire on December 2, 1996. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act. On
October 28, 1996, Jim Stafford and John Stafford each exercised a warrant to
purchase 5,354 shares of Common Stock at $4.55 per

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<PAGE> 94

share. These transactions were exempt from registration in reliance on Section
4(2) of the Act. On January 31, 1997, Sabratek Holdings I exercised a warrant to
purchase 9,230 shares of Common Stock at $4.55 per share. This transaction was
exempt from registration in reliance on Section 4(2) of the Act.

On November 30, 1993, the Company issued a warrant to purchase 5,725 shares
of Common Stock at $4.76 per share to James W. DeYoung as compensation for
financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $908. This warrant vested immediately
and expires on November 30, 1998. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On November 30, 1993, the Company issued warrants to
Peterson-Spencer-Fansler Co. to purchase 1,576 shares of Common Stock at $4.76
per share and 3,519 shares of Common Stock at $4.76 per share as compensation
for financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $250. These warrants vested immediately
and expire on November 30, 1998. The sales were exempt from registration under
the Act pursuant to Regulation D of the Act.

On November 24, 1993, the Company issued a Convertible Debenture to Steven
M. & Rivanna Hyman in the amount of $50,000 for a purchase price equal to the
face amount thereof. This Convertible Debenture was converted into 11,288 shares
of Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 24, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Steven M. & Rivanna Hyman to
purchase shares of its Capital Stock which were subsequently exchanged for
warrants to purchase 2,101 shares of Series A Preferred Stock at $4.76 per
share. This warrant vested immediately and expires on November 24, 1996. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act. On November 19, 1996, Steven M. & Rivanna Hyman exercised a warrant to
purchase 2,198 shares of Common Stock at $4.55 per share. This transaction was
exempt from registration in reliance on Section 4(2) of the Act.

On November 22, 1993, the Company issued a Convertible Debenture to Gerald
E., Jr. and Linda Bisbee in the amount of $25,000 for a purchase price equal to
the face amount thereof. This Convertible Debenture was converted into 5,649
shares of Series A Preferred Stock. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On November 22, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Gerald E. Jr., & Linda E. Bisbee to
purchase shares of its Capital Stock which were subsequently exchanged for
warrants to purchase 1,050 shares of Series A Preferred Stock at $4.76 per
share. This warrant vested immediately and expires on November 22, 1996. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act. On November 19, 1996, Gerald E. & Linda E. Bisbee exercised a warrant to
purchase 1,099 shares of Common Stock at $4.55 per share. This transaction was
exempt from registration in reliance on Section 4(2) of the Act.

On November 19, 1993, the Company issued a Convertible Debenture to D-W
Investments in the amount of $120,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 27,167 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 19, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to D-W Investments to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
5,043 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 19, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act. On November 14,
1996, D-W Investments, L.P. exercised a warrant to purchase 5,275 shares of
Common Stock at $4.55 per share. This transaction was exempt from registration
in reliance on Section 4(2) of the Act.

On November 18, 1993, the Company issued a Convertible Debenture to Vukasin
Pavlovic in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted

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into 5,649 shares of Series A Preferred Stock. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 18, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Vukasin Pavlovic to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
1,050 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 18, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act. On October 18,
1996, Vukasin Pavlovic exercised a warrant to purchase 1,099 shares of Common
Stock at $4.55 per share. This transaction was exempt from registration in
reliance on Section 4(2) of the Act.

On November 17, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P., $75,000; P-J Investments,
$100,000; James O. Pohlad, $50,000; Davis D. Fansler, $20,000; and Gordon H. &
Eunice H. Smith, $25,000. The Convertible Debentures converted into 16,995;
22,660; 11,330; 4,532; and 5,665 shares of Series A Preferred Stock
respectively. The sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 17, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to PSF Health Care Fund, L.P., a
warrant to purchase 3,152 shares of Series A Preferred Stock; to P-J
Investments, a warrant to purchase 4,202 shares of Series A Preferred Stock; to
James O. Pohlad, a warrant to purchase 2,101 shares of Series A Preferred Stock;
to Davis D. Fansler, a warrant to purchase 841 shares of Series A Preferred
Stock; and to Gordon H. & Eunice H. Smith, a warrant to purchase 1,050 shares of
Series A Preferred Stock. These warrants vested immediately and expire on
November 17, 1996. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act. On October 10, 1996, PSF HealthCare Fund,
L.P. exercised a warrant to purchase 3,297 shares of Common Stock at $4.55 per
share. This transaction was exempt from registration in reliance on Section 4(2)
of the Act. On October 14, 1996, Davis D. Fansler exercised a warrant to
purchase 1,538 879 shares of Common Stock at $4.55 per share. This transaction
was exempt from registration in reliance on Section 4(2) of the Act. On November
8, 1996, Gordon H. and Eunice H. Smith exercised a warrant to purchase 1,099
shares of Common Stock at $4.55 per share. This transaction was exempt from
registration in reliance on Section 4(2) of the Act. On November 14, 1996, P-J
Investments, L.P., James O. Pohlad and Pohlad Companies each exercised a warrant
to purchase 4,395 shares, 2,198 shares and 10,988 shares of Common Stock,
respectively at $4.55 per share. These transactions were exempt from
registration in reliance on Section 4(2) of the Act.

On November 16, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: Robert D. Stuart, $50,000; Timm R. & Robin S.
Reynolds, $25,000; and Timm R. and Robin S. Reynolds, $25,000. The Convertible
Debentures converted into 11,335; 5,706; and 5,706 shares of Series A Preferred
Stock respectively. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 16, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: Robert D. Stuart, Jr., a
warrant to purchase 2,101 shares of Series A Preferred Stock, which warrant was
exercised on May 12, 1995; to Timm R. & Robin S. Reynolds, a warrant to purchase
1,050 shares of Series A Preferred Stock, which warrant was exercised on May 31,
1995; and to Robin S. & Timm R. Reynolds, a warrant to purchase 1,050 shares of
Series A Preferred Stock. These warrants vested immediately and expire on
November 16, 1996. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act. On October 10, 1996, Robin S. and Timm R.
Reynolds exercised a warrant to purchase 1,099 shares of Common Stock at $4.55
per share. This transaction was exempt from registration in reliance on Section
4(2) of the Act.

On November 15, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P.,

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$50,000; Gideon Hixon Fund, $150,000; Paul J. Finnegan, $75,000; and Peter M.
Gaines, $25,000. The Convertible Debentures converted into 11,409; 34,021;
17,010; and 5,670 shares of Series A Preferred Stock respectively. The sales
were exempt from registration under the Act pursuant to Regulation D of the Act.
On November 15, 1996, PSF HealthCare Fund, L.P. exercised a warrant and
purchased 2,198 shares of Common Stock at $4.55 per share in a private
transaction in reliance on Section 4(2) of the Act. On November 3, 1996, Paul J.
Finnegan exercised a warrant and purchased 3,297 shares of Common Stock at $4.55
per share in a private transaction in reliance on Section 4(2) of the Act.

On November 15, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: PSF Health Care Fund, L.P., a
warrant to purchase 2,101 shares of Series A Preferred Stock; to Gideon Hixon
Fund, a warrant to purchase 6,303 shares of Series A Preferred Stock, which
warrant was exercised on May 13, 1995; to Paul J. Finnegan, a warrant to
purchase 3,152 shares of Series A Preferred Stock; and to Peter M. Gaines, a
warrant to purchase 1,050 shares of Series A Preferred Stock. These warrants
vested immediately and expire on November 15, 1996. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act. On October 16,
1996, Peter M. Gains exercised a warrant and purchased 1,099 shares of Common
Stock at $4.55 per share in a private transaction in reliance on Section 4(2) of
the Act.

On November 12, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: Duncan N. Dayton, $50,000; and Frank D. Mayer, Jr.,
$25,000. The Convertible Debentures converted into 11,356; and 5,678 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 12, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: Duncan N. Dayton, a warrant
to purchase 2,101 shares of Series A Preferred Stock; to Frank D. Mayer Jr., a
warrant to purchase 1,050 shares of Series A Preferred Stock; and to Charles R.
Hall, a warrant to purchase 1,050 shares of Series A Preferred Stock. These
warrants vested immediately and expire on November 12, 1996. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act. On
October 23, 1996, Frank D. Mayer, Jr. exercised a warrant tp purchase 1,099
shares of Common Stock at $4.55 per share. This transaction was exempt from
registration in reliance on Section 4(2) of the Act. On November 2, 1996,
Charles R. Hall exercised a warrant to purchase 1,099 shares of Common Stock at
$4.55 per share. This transaction was exempt from registration in reliance on
Section 4(2) of the Act. On December 24, 1996, Duncan N. Dayton exercised a
warrant to purchase 2,198 shares of Common Stock at $4.55 per share. This
transaction was exempt from registration in reliance on Section 4(2) of the Act.

On November 11, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: John E. Traeger Trust #1, $25,000; Dwight P. Fawcett,
$12,500; Dwight W. Fawcett, $45,000; Jane F. Dearborn, $12,500; Donald N. &
Adrienne W. Fawcett, $5,000; and D.W. Fawcett, $25,000. The Convertible
Debentures converted into 5,482; 10,225; 2,840; 2,840; 1,136 and 5,479 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 11, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: John E. Traeger Trust #1, a
warrant to purchase 1,050 shares of Series A Preferred Stock; to Anne L.
Fawcett, a warrant to purchase 1,471 shares of Series A Preferred Stock; to
Dwight W. Fawcett, a warrant to purchase 420 shares of Series A Preferred Stock;
to Jane F. Dearborn, a warrant to purchase 525 shares of Series A Preferred
Stock; to Donald N. & Adrienne W. Fawcett, a warrant to purchase 210 shares of
Series A Preferred Stock; to Dwight P, Fawcett, a warrant to purchase 525 shares
of Series A Preferred Stock. These warrants vested immediately and expire on
November 11, 1996. The sales were exempt from registration under the Act

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<PAGE> 97

pursuant to Regulation D of the Act. On October 3, 1996, John E. Traeger Trust
No. 1 exercised a warrant to purchase 1,099 shares of Common Stock at $4.55 per
share. This transaction was exempt from registration in reliance on Section 4(2)
of the Act. On October 4, 1996, Dwight P. Fawcett exercised a warrant to
purchase 550 shares of Common Stock at $4.55 per share. This transaction was
exempt from registration in reliance on Section 4(2) of the Act. On October 18,
1996, Dwight W. Fawcett and Ann L. Fawcett each exercised a warrant to purchase
439 shares and 1,539 shares of Common Stock, respectively at $4.55 per share.
These transactions were exempt from registration in reliance on Section 4(2) of
the Act. On October 25, 1996, Jane D. Dearborn exercised a warrant to purchase
550 shares of Common Stock at $4.55 per share. This transaction was exempt from
registration in reliance on Section 4(2) of the Act. On October 27, 1996, Donald
N. and Adrienne W. Fawcett exercised a warrant to purchase 220 shares of Common
Stock at $4.55 per share. This transaction was exempt from registration in
reliance on Section 4(2) of the Act.

On November 5, 1993, the Company issued a Convertible Debenture to Davis D.
Fansler in the amount of $15,000 for a purchase price equal to the face amount
thereof. The Convertible Debenture converted into 3,416 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 5, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Davis D. Fansler to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
630 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 5, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act. On October 14,
1996, Davis D. Fansler exercised a warrant to purchase 659 shares of Common
Stock at $4.55 per share. This transaction was exempt from registration in
reliance on Section 4(2) of the Act.

On October 14, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P., $50,000; PSF Health Care
Fund, L.P., $100,000; Warren H. Corning #145751 Trust, $100,000; Benson K.
Whitney, $25,000; and Spencer Family Partnership, L.P., $25,000. The Convertible
Debentures converted into 11,493; 22,986; 22,986; 5,678; and 5,678 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On October 14, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: PSF Health Care Fund, L.P., a
warrant to purchase 2,101 shares of Series A Preferred Stock; to PSF Health Care
Fund, L.P., a warrant to purchase 4,202 shares of Series A Preferred Stock; to
Warren H. Corning #145751 Trust, a warrant to purchase 4,202 shares of Series A
Preferred Stock; to Benson K. Whitney, a warrant to purchase 1,050 shares of
Series A Preferred Stock, which warrant was exercised on May 1, 1995; and to
Spencer Family Partnership, L.P., a warrant to purchase 1,050 shares of Series A
Preferred Stock, which warrant was exercised on May 26, 1995. These warrants
vested immediately and expire on October 14, 1996. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act. On October 8,
1996, Warren H. Corning #145751 Trust exercised a warrant to purchase 4,395
shares of Common Stock at $4.55 per share. This transaction was exempt from
registration in reliance on Section 4(2) of the Act. On October 10, 1996 and
November 15, PSF HealthCare Fund, L.P. exercised two warrants to purchase a
total of 6,594 shares of Common Stock at $4.55 per share. This transaction was
exempt from registration in reliance on Section 4(2) of the Act.

On August 24, 1993, the Company issued a Convertible Subordinated Debenture
to Gideon Hixon Fund, L.P. in the amount of $100,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 15, 1993, the Company issued a warrant to Peterson-Spencer-Fansler
Co. to purchase 3,152 shares of Common Stock at $3.17 per share as compensation
for financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $500. This warrant vested immediately
and expires on July 15, 1998. The sale was exempt from registration under the
Act pursuant to Regulation D of the Act.

II-13
<PAGE> 98

On June 29, 1993, the Company issued a Convertible Subordinated Debenture
to John E. Rogers in the amount of $200,000 for a purchase price equal to the
face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On May 31, 1993, the Company issued warrants to Peterson-Spencer-Fansler
Co. to purchase 735 shares of Common Stock at $4.76 per share, 918 shares of
Common Stock at $11.11 per share and 2,448 shares of Common Stock at $11.11 per
share as compensation for financial services rendered to the Company. The
Company valued the services received in exchange for this warrant at $262. These
warrants vested immediately and expire on May 31, 1998. The warrant for 918
shares of Common Stock and the warrant for 2,448 shares of Common Stock were
exercised on May 31, 1995. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On May 27, 1993, the Company issued a warrant to Mirza Mehdi to purchase
1,009 shares of Common Stock at $11.11 per share as compensation for financial
services rendered to the Company. The Company valued the services received in
exchange for this warrant at $160. This warrant vested immediately and expires
on May 27, 1998. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On May 27, 1993, the Company sold 15,758 shares of Common Stock to Murdoch
& Co. for aggregate consideration of $175,000 in a private transaction in
reliance on Section 4(2) of the Act.

On May 6, 1993, the Company sold 11,031 shares of Common Stock to MLPF&S
CUST FBO Donald India IRA for aggregate consideration of $122,500 in a private
transaction in reliance on Section 4(2) of the Act.

On May 5, 1993, the Company sold 2,206 shares of Common Stock to Noam
Frankel for aggregate consideration of $24,500 in a private transaction in
reliance on Section 4(2) of the Act.

On May 1, 1993, the Company sold 4,502 shares of Common Stock to Koshin
International Corporation for aggregate consideration of $49,997.50 in a private
transaction in reliance on Section 4(2) of the Act.

On April 13, 1993, the Company sold 610 shares of Common Stock to Lewis P.
Smith for aggregate consideration of $6,772.50 in a private transaction in
reliance on Section 4(2) of the Act.

On April 8, 1993, the Company issued the following warrants to purchase
shares of Common Stock at $11.11 per share: to Scott Hodes, in compensation for
services rendered, a warrant to purchase 46 shares of Common Stock; to Upland
Associates, L.P., in compensation for services rendered, a warrant to purchase
229 shares of Common Stock; to Barker, Lee & Co., in compensation for services
rendered, a warrant to purchase 153 shares of Common Stock; and to Namakagon
Associates, L.P., in compensation for services rendered, a warrant to purchase
153 shares of Common Stock. The Company valued the services received in exchange
for this warrant at $92. These warrants vested immediately and expire on April
8, 1998. The sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 8, 1993, the Company sold 10,692 shares of Common Stock to Barker,
Lee & Co., Upland Associates, L.P. and Namakagon Associates, L.P. for aggregate
consideration of $118,744.50 in a private transaction in reliance on Section
4(2) of the Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
(A) EXHIBITS
<S> <C>
++++1.1 Form of Underwriting Agreement
+3.1 Amended and Restated Certificate of Incorporation
+++3.1.1 Certificate of Elimination regarding Series A Preferred
Stock
+3.2 Amended and Restated By-Laws
++++5.1 Opinion of Ross & Hardies regarding legality of shares of
Common Stock
+10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995
+++10.1.1 Amendment, dated September 16, 1996, to Agreement with
Americorp Financial, Inc.
</TABLE>

II-14
<PAGE> 99

<TABLE>
<CAPTION>
(A) EXHIBITS
<S> <C>
+10.2 Agreement with Clintec Nutrition Company re: Development Agreement, dated September 1, 1995
10.3 Intentionally Omitted
10.4 Intentionally Omitted
+10.5 Distributorship Agreement with CO-Medical, Inc., dated February 17, 1992
+10.6 Distributorship Agreement with Clinical Technology Inc., dated August 1, 1992
10.7 Intentionally Omitted
10.8 Intentionally Omitted
+10.9 Distributorship Agreement with Advanced Medical, Inc., dated September 1, 1991
+10.10 Distributorship Agreement with Healthcare Technology, dated October 9, 1991
10.11 Intentionally Omitted
10.12 Intentionally Omitted
+10.13 Pump Contract with Chartwell Home Therapies, dated November 22, 1993
+10.14 Sales Agreement with Pharmacy Corporation of America, dated March 17, 1995
+10.15 Sales & Marketing Agreement with Alpha Group, dated November 6, 1995
+10.16 Foreign Distributorship Agreement with MED-O-GEN INC., dated September 22, 1995
+10.17 Foreign Distributorship Agreement with Yoon Duk Separation Technology, dated April 17, 1995
+10.18 Foreign Distributorship Agreement with Upwards Biosystems Ltd., dated March 8, 1995
+10.19 Foreign Distributorship Agreement with Grupo Grifols, S.A., dated September 17, 1993
+10.20 Foreign Distributorship Agreement with JMS Company, dated March 22, 1996
+10.21 Foreign Distributorship Agreement with Brasimpex
+10.22 Foreign Distributorship Agreements with Medicare (s) PTE LTD., dated February 10, 1995
10.23 Intentionally Omitted
10.24 Intentionally Omitted
+10.25 Master Lease Agreement with Comdisco, Inc., dated August 9, 1994
+10.26 Stock Option Plan
+10.27 Lease for Real Property located at 5601 West Howard, Niles, Illinois, dated as of May 31, 1994
+++10.27.1 Amendment, dated October 30, 1996, to Lease for Real Property located at 5601 West Howard,
Niles, Illinois
+10.28 Employment Agreement for K. Shan Padda
+10.29 Employment Agreement for Anil Rastogi
++10.30 Asset Purchase Agreement, dated February 25, 1997, by and among Sabratek Corporation, Rocap,
Inc. and Elliott Mandell
++++10.31 Employment Agreement for Stephen L. Holden
++10.32 Employment Agreement for Elliott Mandell
++++10.33 Lease Agreement for property located at 11 Sixth Road, Woburn, Massachusetts, dated February 1,
1997
++++10.34 Lease Agreement for property located at 5 Constitution Way, Woburn, Massachusetts, dated June
26, 1995
++++11.1 Computation of Per Share Earnings
</TABLE>

II-15
<PAGE> 100

<TABLE>
<S> <C>
+++21 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Parent, Naffah & Company
23.3 Consent of Ross & Hardies (included as part of its opinion filed as Exhibit 5.1 hereto)
24.1 Powers of Attorney (included on signature page hereof)
</TABLE>

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

+ Incorporated by reference to the Company's Registration Statement on Form
S-1 declared effective by the Commission on June 21, 1996, file No.
333-3866.

++ Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on March 11, 1997.

+++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 filed with the Commission on March
31, 1997.

++++ Originally filed as an Exhibit to the Registration Statement on Form S-1 on
March 17, 1997.

(b) Financial Statement Schedules

The following financial statement schedules, which are not included in the
Prospectus, appear on the following pages of this Registration Statement: N/A

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

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

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

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

II-16
<PAGE> 101

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Niles, State of Illinois,
on March 31, 1997.

SABRATEK CORPORATION

By: /s/ K. SHAN PADDA

------------------------------------
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities indicated on
March 31, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ K. SHAN PADDA Chairman of the Board, Chief Executive
- -------------------------------------------- Officer
K. Shan Padda and Treasurer

/s/ ANIL RASTOGI* President and Chief Operating Officer
- --------------------------------------------
Anil Rastogi

/s/ DORON C. LEVITAS* Vice Chairman of the Board, Vice President--
- -------------------------------------------- International Operations and Secretary
Doron C. Levitas

/s/ STEPHEN L. HOLDEN Senior Vice President and Chief Financial
- -------------------------------------------- Officer, Principal Financial Officer
Stephen L. Holden

/s/ SCOTT SKOOGLUND Vice President--Finance and Assistant
- -------------------------------------------- Secretary, Principal Accounting Officer
Scott Skooglund

/s/ WILLIAM D. LAUTMAN* Director
- --------------------------------------------
William D. Lautman

/s/ L. PETER SMITH* Director
- --------------------------------------------
L. Peter Smith

/s/ SCOTT HODES* Director
- --------------------------------------------
Scott Hodes

/s/ EDSON SPENCER, JR.* Director
- --------------------------------------------
Edson Spencer, Jr.

/s/ MARVIN SAMSON* Director
- --------------------------------------------
Marvin Samson

/s/ WILLIAM H. LOMICKA* Director
- --------------------------------------------
William H. Lomicka

/s/ MARK LAMPERT* Director
- --------------------------------------------
Mark Lampert

*Signed pursuant to power of attorney
</TABLE>

II-17
<PAGE> 102

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<C> <S>
++++1.1 Form of Underwriting Agreement
+3.1 Amended and Restated Certificate of Incorporation
+++3.1.1 Certificate of Elimination regarding Series A Preferred
Stock
+3.2 Amended and Restated By-Laws
++++5.1 Opinion of Ross & Hardies regarding legality of shares of
Common Stock
+10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995
+++10.1.1 Amendment, dated September 16, 1996, to Agreement with
Americorp Financial, Inc.
+10.2 Agreement with Clintec Nutrition Company re: Development
Agreement, dated September 1, 1995
10.3 Intentionally Omitted
10.4 Intentionally Omitted
+10.5 Distributorship Agreement with CO-Medical, Inc., dated
February 17, 1992
+10.6 Distributorship Agreement with Clinical Technology Inc.,
dated August 1, 1992
10.7 Intentionally Omitted
10.8 Intentionally Omitted
+10.9 Distributorship Agreement with Advanced Medical, Inc., dated
September 1, 1991
+10.10 Distributorship Agreement with Healthcare Technology, dated
October 9, 1991
10.11 Intentionally Omitted
10.12 Intentionally Omitted
+10.13 Pump Contract with Chartwell Home Therapies, dated November
22, 1993
+10.14 Sales Agreement with Pharmacy Corporation of America, dated
March 17, 1995
+10.15 Sales & Marketing Agreement with Alpha Group, dated November
6, 1995
+10.16 Foreign Distributorship Agreement with MED-O-GEN INC., dated
September 22, 1995
+10.17 Foreign Distributorship Agreement with Yoon Duk Separation
Technology, dated April 17, 1995
+10.18 Foreign Distributorship Agreement with Upwards Biosystems
Ltd., dated March 8, 1995
+10.19 Foreign Distributorship Agreement with Grupo Grifols, S.A.,
dated September 17, 1993
+10.20 Foreign Distributorship Agreement with JMS Company, dated
March 22, 1996
+10.21 Foreign Distributorship Agreement with Brasimpex
+10.22 Foreign Distributorship Agreements with Medicare (s) PTE
LTD., dated February 10, 1995
10.23 Intentionally Omitted
10.24 Intentionally Omitted
+10.25 Master Lease Agreement with Comdisco, Inc., dated August 9,
1994
+10.26 Stock Option Plan
+10.27 Lease for Real Property located at 5601 West Howard, Niles,
Illinois, dated as of May 31, 1994
+++10.27.1 Amendment, dated October 30, 1996, to Lease for Real
Property located at 5601 West Howard, Niles, Illinois
+10.28 Employment Agreement for K. Shan Padda
+10.29 Employment Agreement for Anil Rastogi
</TABLE>

<PAGE> 103

<TABLE>
<C> <S>
++10.30 Asset Purchase Agreement, dated February 25, 1997, by and among Sabratek Corporation; Rocap, Inc. and
Elliott Mandell
++++10.31 Employment Agreement for Stephen L. Holden
++10.32 Employment Agreement for Elliott Mandell
++++10.33 Lease Agreement for property located at 11 Sixth Road, Woburn, Massachusetts, dated February 1, 1997
++++10.34 Lease Agreement for property located at 5 Constitution Way, Woburn, Massachusetts, dated June 26,
1995
++++11.1 Computation of Per Share Earnings
+++21 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Parent, Naffah & Company
23.3 Consent of Ross & Hardies (included as part of its opinion filed as Exhibit 5.1 hereto)
24.1 Powers of Attorney (included on signature pages hereof)
</TABLE>

- ---------------
+ Incorporated by reference to the Company's Registration Statement on Form
S-1 declared effective by the Commission on June 21, 1996, File No.
333-3866.

++ Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on March 11, 1997.

+++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 filed with the Commission on March
31, 1997.

++++ Originally filed as an Exhibit to the Registration Statement on Form S-1 on
March 17, 1997.

<PAGE> 1
Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Sabratek Corporation:

We consent to the use of our reports included herein and to the
reference to our firm under the headings "SELECTED FINANCIAL DATA" and
"EXPERTS" in the prospectus.

KPMG Peat Marwick LLP

Chicago, Illinois
March 27, 1997

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Sabratek Corporation:

We consent to the use of our reports included herein and to the
reference to our firm under the headings "SELECTED FINANCIAL DATA" and
"EXPERTS" in the prospectus.

/s/ Douglas L. Naffah, CPA

Douglas L. Naffah, CPA
Parent, Naffah & Company

Boston, MA
March 28, 1997