MOLECULAR CIRCUITRY INC, S-1, 1998-11-25

MOLECULAR CIRCUITRY INC
S-1, 1998-11-25

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM S-1
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MOLECULAR CIRCUITRY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3823 36-3825542
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

321 SPRUCE STREET, SUITE 525
SCRANTON, PENNSYLVANIA 18503
(717) 207-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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GEORGE W. GINADER, CORPORATE SECRETARY
MOLECULAR CIRCUITRY, INC.
321 SPRUCE STREET, SUITE 525
SCRANTON, PENNSYLVANIA 18503
(717) 207-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:

<TABLE>
<S> <C>
RICHARD N. WEINER, ESQUIRE RICHARD J. BUSIS, ESQUIRE
PELINO & LENTZ, P.C. COZEN AND O'CONNOR
ONE LIBERTY PLACE, 32ND FLOOR THE ATRIUM
1650 MARKET STREET 1900 MARKET STREET
PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103
(215) 246-3135 (215) 665-2756
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE
TO BE REGISTERED REGISTERED PER SHARE(2) OFFERING PRICE(2)
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<S> <C> <C> <C>
Common Stock, par value $.01 per
share................... 3,450,000 Shares(1) $13.00 $44,850,000
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<CAPTION>
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AMOUNT
TITLE OF EACH CLASS OF SECURITIES OF
TO BE REGISTERED REGISTRATION FEE
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<S> <C>
Common Stock, par value $.01 per
share................... $12,468.30
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</TABLE>

(1) Includes 450,000 shares which the Underwriters have a right to purchase from
the Registrant to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
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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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.

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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 25, 1998

[MOLEDULAR CIRCUITRY, INC. LOGO]
MOLECULAR CIRCUITRY, INC.

3,000,000 SHARES

COMMON STOCK

Molecular Circuitry, Inc. is offering 3,000,000 shares of its common stock. This
is our initial public offering, and no public market currently exists for our
shares. We intend to apply for the listing of our shares on the Nasdaq Stock
Market under the symbol "BUGS." We anticipate that the initial public offering
price will be between $ and $ per share.

We have developed an instrument, the MC-18, to detect certain harmful bacteria,
or pathogens, in meat, poultry, dairy and other food products. We have also
developed test kits required for use with our instrument. The MC-18 currently
tests for Salmonella, E. coli O157:H7, Listeria and Campylobacter, which account
for the majority of confirmed cases of food contamination in the United States.
Our potential customers include producers and distributors of food products
worldwide.

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PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts......................................
Proceeds to Molecular Circuitry, Inc........................
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

Molecular Circuitry, Inc. has granted the Underwriters a thirty-day option to
purchase up to an additional 450,000 shares of Common Stock to cover
over-allotments.

PENNSYLVANIA MERCHANT GROUP

The date of this Prospectus is , 1999.
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TABLE OF CONTENTS

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PAGE
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Prospectus Summary............. 3
Risk Factors................... 8
Forward-Looking Statements..... 15
Use of Proceeds................ 16
Dividend Policy................ 16
Dilution....................... 17
Capitalization................. 19
Selected Financial Data........ 20
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations................... 21
Business....................... 26
Management..................... 40
Security Ownership of Certain
Beneficial Owners and
Management................... 48
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<TABLE>
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PAGE
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Certain Related Party
Transactions................. 49
Description of Certain
Indebtedness................. 50
Description of Capital Stock
and Debentures............... 51
Shares Eligible for Future
Sale......................... 53
Underwriting................... 55
Legal Matters.................. 56
Experts........................ 57
Available Information.......... 57
Index to Financial
Statements................... F-1
</TABLE>

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Except as otherwise stated herein, all information in this Prospectus assumes
the Underwriters' over-allotment option will not be exercised. See
"Underwriting."

The shares of Common Stock are offered by the Underwriters named above, subject
to prior sale and approval of certain legal matters by the Underwriters'
attorneys. The Underwriters reserve the right to withdraw, cancel or modify this
offer and to reject orders in whole or in part. Shares should be ready for
delivery on or about , 1999, against payment in immediately
available funds.
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PROSPECTUS SUMMARY

This is only a summary and does not contain all the information that may be
important to you. You should read the entire Prospectus, especially the "Risk
Factors" section and the Financial Statements and notes to those statements,
before deciding to invest in shares of our Common Stock. In this Prospectus, the
"Company," "we," "our" and "us" refer to Molecular Circuitry, Inc., unless the
context otherwise requires.

OUR BUSINESS: We have developed an instrument, the MC-18, to detect
certain harmful bacteria, or pathogens, in meat,
poultry, dairy and other food products. We believe that
recent adverse publicity relating to cases of food
contamination and new government regulations directed
at reducing these problems has increased the interest
of food producers in pathogen testing. Our goal is to
offer a testing instrument that can streamline the
testing process and offer significant benefits over
currently available testing methods.

OUR PRODUCT: The MC-18 is a compact, desktop instrument that detects
electronically the chemical reactions that occur
between harmful pathogens in a food sample and pathogen
antibodies placed in the MC-18. Through this method,
known as an electroimmunoassay, users will be able to
determine the presence of certain pathogens in food
samples.

We plan to generate revenue through the sale of
disposable test kits that are required to be used with
the MC-18, as well as through the sale of the
instrument itself. We have developed tests for the four
pathogens which, according to a 1995 study by the
Center for Disease Control and Prevention, account for
a majority of laboratory-confirmed cases of food
contamination in the United States: Salmonella; E. coli
O157:H7; Listeria; and Campylobacter. We plan to add
capability to test for more types of pathogens in the
future.

DEVELOPMENT STAGE: Our Company is still in the development stage. We are
field testing the MC-18 and have not begun to sell it.
We do not yet have any full-time employees. We will
begin hiring upon our leasing of a corporate office and
production facility.

OUR MARKET: Potential customers for the MC-18 and test kits include
producers and distributors of food products worldwide.
A principal concern for meat, poultry and dairy safety
is bacterial contamination. Typically, food producers
use separate tests to detect each type of pathogen. Our
product is designed to provide the ability to simplify
testing by using one platform to test for multiple
pathogens simultaneously. We will be marketing the
MC-18 and the related test kits through an exclusive
agreement with VWR Scientific Products Corporation, a
leading worldwide distributor of laboratory supplies,
chemicals and equipment.

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ADVANTAGES OF OUR
TECHNOLOGY: We believe our potential customers will find the MC-18
competitive and cost effective because of the following
features and abilities:

- High volume capability, meaning the MC-18 can test
multiple samples and detect multiple pathogens
simultaneously.

- High level of sensitivity, meaning the MC-18 is able
to detect relatively small quantities of bacteria.

- High level of specificity, meaning the MC-18 can
differentiate between pathogenic and nonpathogenic
bacteria, thereby reducing the likelihood of false
positive test results.

- High level of automation, reducing customers'
dependence on skilled technicians and the chance of
operator error.

- Capacity to create a permanent computer record.

REGULATIONS: We believe that recent United States government action,
including the adoption of regulations and establishment
of a National Food Safety Council, will create an
increased market demand for more efficient and
cost-effective testing methods.

POTENTIAL FUTURE
APPLICATIONS: We believe our technology may have medical
applications, such as testing for hormones, drugs and
disease-associated organisms, as well as environmental
applications, such as testing of soil, air and water.

OUR OFFICES: Our executive offices are currently located at 321
Spruce Street, Suite 525, Scranton, Pennsylvania 18503
and our telephone number is (717) 207-7200. In early
1999, we plan to move to a new facility located in the
Philadelphia area.

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THE OFFERING

Common Stock Offered............ 3,000,000 shares

Common Stock to be Outstanding
after the Offering............ 12,929,947 shares (1)(2)

Use of Proceeds................. The renovation, equipping and maintenance of
our new corporate office and production
facility, research and development,
repayment of certain debt, and working
capital and general corporate purposes. See
"Use of Proceeds."

Risk Factors.................... You should consider the factors set forth in
the "Risk Factors" section, beginning on
page 8, as well as the other cautionary
statements throughout the Prospectus, before
investing in our Common Stock.

Proposed Nasdaq Stock Market
Symbol........................ BUGS
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(1) Based on shares outstanding as of September 30, 1998 as well as 6,188,394
shares expected to be issued at closing upon conversion of an aggregate of
$2.5 million principal amount of 10% subordinated convertible debentures
(the "Debentures"), 52,545 shares expected to be issued in lieu of interest
on the Debentures from January 1, 1999 through January 31, 1999 and 21,460
shares issuable to certain creditors. The Debentures mature on the date of
closing of the Offering, unless the holder elects to convert the Debentures
and interest thereon into shares of Common Stock. Keystone Foods
Corporation, the holder of 88.8% of the outstanding Debentures, has advised
the Company that it intends to exercise its conversion rights.

(2) Does not include 910,000 shares issuable pursuant to outstanding stock
options and 450,000 shares which are issuable if the Underwriters exercise
their over-allotment option.
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SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The summary financial data set forth below as of and for the years ended
December 31, 1996 and 1997 and as of and for the nine months ended September 30,
1998 has been derived from the financial statements of the Company, which have
been audited by Deloitte & Touche LLP, independent auditors. The summary
financial data set forth below as of and for the years ended December 31, 1994
and 1995 and as of and for the nine months ended September 30, 1997 has been
derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus and, in the opinion of management of the Company,
includes all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation thereof. The results of operations set forth
below are not necessarily indicative of results to be expected for any future
period. The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements of the Company, including the notes thereto, included
elsewhere in this Prospectus.

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<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
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ACTUAL AS ADJUSTED(1)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ (961) 31,214
Total assets.............................................. 793 32,399
Total long-term debt...................................... (2,762) --
Total stockholders' equity (deficit)...................... (3,168) 31,783
</TABLE>

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(1) Gives effect to (i) the Offering at an assumed public offering price of
$12.00 per share and the application of the net proceeds therefrom, (ii) the
expected conversion of the Debentures and interest thereon from January 1,
1999 through January 31, 1999 and (iii) the issuance of 21,460 shares to
certain creditors.
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RISK FACTORS

Investing in this Company entails substantial risk. You should purchase shares
only if you can afford a complete loss. You should carefully consider the
following risk factors and other information in this Prospectus before deciding
to invest in shares of Common Stock.

DEVELOPMENT STAGE COMPANY

EARLY STAGE OF DEVELOPMENT. We are at an early stage of development and subject
to all of the risks inherent in the establishment of a new business enterprise.
We have the need for substantial capital to support the expenses of developing
new technology and to attract and retain qualified management and scientific
staff. Our operations may be affected by problems frequently encountered in
connection with the development and utilization of new technologies and by the
competitive environment in which we operate, as well as the risks detailed
below.

LARGE AMOUNT OF ACCUMULATED LOSSES; PRIOR BANKRUPTCY. Since 1994, we have been
engaged in the research and development of an instrument for the detection of
food-borne pathogens. From inception to September 30, 1998, we have incurred net
losses before extraordinary item of approximately $13.9 million and have an
accumulated deficit of approximately $3.2 million. We expect to incur further
operating losses as we continue our product development efforts, seek to expand
our technology for other uses, build executive, administrative, research and
production staffs and participate in product marketing. We filed for voluntary
protection under Chapter 11 of the Bankruptcy Code in May 1996 and emerged from
bankruptcy in February 1997. See "Business -- Company Background."

NO REVENUES FROM MC-18 OR TEST KITS TO DATE. To date, except for the sale in
1995 of two prototypes, we have not realized any revenues through the sale of
our MC-18 instrument (the "MC-18" or the "Instrument") or the test kits which
are made up of multiple disposable cartridges and reagent packs designed for use
with the MC-18 (the "Test Kits"). We expect to commence sales activities in the
second quarter of 1999. Since the MC-18 is a new product, we do not have prior
experience in developing, producing and servicing this product.

POSSIBLE FLUCTUATION OF OPERATING RESULTS. Our results of operations may
fluctuate significantly in the future as a result of a number of factors, many
of which are outside of our control. These factors include, among others: the
timing of purchases by VWR Scientific Products Corporation ("VWR"), the sole
distributor of our products; acceptance of our products by the food processing
and distribution industry; the success of competitive products; expenses
associated with development and protection of intellectual property;
establishment of commercial scale assembly capabilities; and the timing of
expenses related to commercialization of new products. Our results of operations
may fluctuate significantly from quarter to quarter and may not meet
expectations of securities analysts or investors.

As a result of the issuance of certain stock options, we will recognize
compensation expense of $1.9 million in the fourth quarter of 1998, $2.3 million
for 1999, $1.2 million for 2000 and $0.8 million for 2001. In addition, in
connection with the expected conversion of the Debentures upon closing of the
Offering, we will recognize as additional interest expense the remaining
unamortized beneficial conversion feature of the Debentures of $0.3 million in
the quarter in which the Offering closes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

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NEED FOR ADDITIONAL FINANCING

SUBSTANTIAL FUNDS REQUIRED. We plan to continue to spend substantial funds for
research to improve the MC-18 and to develop our own antibodies for use in the
Test Kits, as well as for development of other commercial products employing our
technology. We also will require substantial funds for staffing, leasing and
equipping of a facility and establishment of commercial scale production
capabilities.

RISKS ASSOCIATED WITH FUTURE FINANCINGS. We believe that the funds obtained
from the Offering, together with cash generated from product sales, will be
sufficient to meet our estimated operating and capital requirements at least
through the end of 2001. However, we cannot be certain that we will not require
additional capital during this period. Our future capital requirements will
depend upon numerous factors, including: market acceptance of our products;
operating defects which may appear in the Instrument; acquisition, protection
and defense of intellectual property rights; and competing technological and
market developments. If our capital resources are not sufficient to meet our
requirements, we will need to obtain additional funds from sources then
available, including equity or debt financings or strategic alliances. Obtaining
such funds may result in substantial dilution to the holders of Common Stock and
in significant financial and operational restrictions. These funds may not be
available on satisfactory terms, or at all. If adequate financing is not
available, we may be required to delay, scale back or eliminate certain
programs.

NEW TECHNOLOGY WITH UNCERTAIN MARKET ACCEPTANCE

NEW TECHNOLOGY. We have developed the MC-18 and Test Kits to be used in its
operation, which we intend to offer for sale. They are based on a new technology
which has not been previously used in food product testing and must compete with
more established methods currently accepted as industry standards. Market
acceptance of the MC-18 largely will depend on our ability to demonstrate its
accuracy, cost-effectiveness and ease of use. The use of our products will also
depend on awareness of quality control managers at food processors and other
entities involved in food distribution and upon the marketing and sales efforts
by VWR. Until general acceptance of the MC-18, customers may elect to conduct
parallel testing, whereby they continue to use their prior method along with the
MC-18 and compare results. This will add an extra element of cost to the
customers and could create resistance to purchasing the Instrument.

LIMITED TESTING OF THE MC-18. The MC-18 has been tested by us during its
development stage and will be subjected to limited field testing by others.
Field testing is scheduled to begin at four commercial food processors and two
U.S. Department of Agriculture ("USDA") sites in December 1998. In addition, the
MC-18 has not been subjected to continuous use over an extended period, and we
have no experience about the types or frequency of malfunctions which might
occur. Further, the Instruments being tested are prototypes assembled by our
principal consulting engineers. Therefore, test results may not be reflective of
performance of Instruments produced on a commercial scale and assembled by
less-skilled persons. If the MC-18 does not prove accurate, cost-effective,
reliable and easy to use in field trials or in commercial operation, we may have
to conduct extensive additional research and development to enable us to market
the MC-18 commercially. See "Business -- Field Testing of the Company's
Instruments."

RELIANCE ON SUBSTANTIAL USE BY CUSTOMERS. We believe that a majority of our
revenues will come from sales of our Test Kits, which can only be used one time,
rather than from the sale of the MC-18 itself. Accordingly, even if we succeed
in selling a substantial number of Instruments, unless our customers use the
MC-18 frequently and continue to buy our Test

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Kits, we will not be able to achieve our revenue and other goals. If the U.S.
Patent and Trademark Office issues patents to us based on our pending
applications, we do not believe other entities will be able to develop and
market substitute Test Kits for use with the MC-18. However, competitors may
challenge our patent rights or develop a non-infringing device which could
compete with sales of our Test Kits.

CHANGES IN TECHNOLOGY; SUBSTANTIAL COMPETITION

TESTING TECHNOLOGY IS SUBJECT TO CHANGE. Diagnostic and pharmaceutical
companies and research and academic institutions are continually engaged in
development of new technology. Any of them may succeed in developing products
that are faster, more accurate, more cost-effective or easier to use than the
MC-18 or any subsequent products developed by us. New products or technology
developed by others could render the MC-18 technology and products obsolete and
non-competitive.

METHODS OF ELIMINATING FOOD-BORNE PATHOGENS. Food-borne pathogens can be
eliminated by cooking at high temperatures for a sufficient period of time or by
irradiation with ionizing energy. While irradiation is not now in widespread use
because of health, safety and cost factors, if irradiation or another method of
eliminating food-borne pathogens becomes widely adopted and cost-effective, the
market for our food testing products would be adversely affected.

COMPETITORS HAVE SUBSTANTIAL RESOURCES. Substantially all of our competitors
have significantly greater financial, technical and human resources than we do.
In addition, these competitors have much greater experience in developing,
producing and marketing new diagnostic products and in obtaining regulatory
approvals, where required. Accordingly, if governmental approvals are required
(which is presently the case in certain foreign countries and could occur in the
U.S.), our competitors may already have such approvals or may succeed in
obtaining such approvals for products before we do. Furthermore, as we commence
commercial sales of products, we will have to become competitive with respect to
production efficiency and marketing capabilities, areas in which we have no
experience. See "Business -- Competition."

GOVERNMENT REGULATION

U.S. GOVERNMENT; AOAC. The U.S. government has adopted new regulations designed
to reduce food safety hazards which will be phased in over the next several
years. There is no current U.S. government regulation or accreditation of food
testing methods or instruments. However, the AOAC International, an independent
association of scientists in the public and private sectors ("AOAC"), is the
most widely recognized organization in the United States for evaluating and
endorsing methods of pathogen detection. Two of these endorsements are
certification as an AOAC Performance Tested method, which generally takes up to
twelve months, and approval of a testing method as an AOAC Official Method,
which generally takes at least two years.

Current government regulations require testing by food processors for generic E.
coli using an AOAC Official Method or a method approved by another scientific
body meeting certain criteria. The MC-18 tests for the pathogenic strain E. coli
O157:H7 but not for generic E. coli. Therefore, the regulations governing
generic E. coli testing methods do not apply to our Instruments, and food
processors and other users of diagnostic tests will not be able to use the MC-18
to perform the generic E. coli testing required by these regulations. See
"Business -- Government Regulation of Food Products."

We intend to seek certification of the MC-18 as an AOAC Performance Tested
method and approval of the MC-18 as an AOAC Official Method. Our failure to
obtain, or delay in obtaining, these AOAC endorsements could have a material
adverse effect on our ability to

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have our testing method accepted in the industry and to market our products. In
the future, governmental agencies could require that science-based testing for
all food-borne pathogens be conducted using an AOAC Official Method.

INTERNATIONAL OPERATIONS. Certain foreign countries in which we expect our
products will be offered for sale have regulations applicable to food testing
instruments and methods. We will have to comply with all such regulations and
obtain all necessary licenses and approvals for our products before we may sell
our products in such countries. Failure to comply or the cost of compliance
could significantly limit our ability to sell our products in certain markets or
could place us at a competitive disadvantage in those markets.

ENVIRONMENTAL REGULATION. Because we expect to manufacture and package our own
antibodies for use in our Test Kits, we will be subject to numerous
environmental and safety laws and regulations, including those governing use of
hazardous materials. The cost of compliance with, or any violation of, these
regulations could adversely impact our operations. See
"Business -- Environmental Matters."

RELIANCE ON PATENTS AND OTHER PROPRIETARY RIGHTS

Our success will depend in part on our ability to obtain and maintain patent
protection for our technology and products, both in the United States and other
countries, and operate without infringing the proprietary rights of others.
Patent protection involves complex legal and factual questions and, therefore,
is highly uncertain. We hold three issued U.S. patents and have two pending U.S.
applications. We also have one pending international patent application. We
cannot be certain that patents will issue on any of our present or future
applications. In addition, our existing patents or any future patents may not
adequately protect our technology if they are not broad enough, are successfully
challenged, or other entities are able to develop competing methods without
violating the patents. Litigation involving intellectual property is often very
time consuming and expensive.

Except for Canada and Japan, we do not have patent protection for our initial
technology in any foreign countries. Competitors or others may seek to employ
the technology in the development of testing instruments and methods which could
be sold and marketed outside of the U.S. We are not aware of any third-party
patents which will require us to alter any of our products or processes, or to
obtain licenses or to cease certain development activities with respect to any
potential product. Our business could be materially adversely affected if we
were required to obtain a license from a third party. See
"Business -- Intellectual Property."

LACK OF PRODUCTION EXPERIENCE

We intend to purchase the components for our Instruments and Test Kits and
assemble them at our future production facility. We have no experience in
purchasing and storing components, assembling, packing and shipping our products
and the testing and quality control of products and components. We currently
lack the capability to carry out any of these functions. As we commence
commercial production, we may encounter quality control issues in the components
we purchase and in the assembly of our own products.

DEPENDENCE ON CONTRACTORS AND SUPPLIERS

DEPENDENCE ON ENGINEERS. In 1997, we contracted with two engineers for the
design and development of an instrument and production of prototypes for
testing, and they produced the MC-18. We are substantially dependent on
continuing our relationship with these engineers and others employed by them in
the project until the prototypes we contracted for have all been completed and
any problems which arise during field testing have been remedied. We plan to
have these engineers continue to produce the MC-18 until we are ready to conduct
the assembly and testing operations at our future production facility, which we
do not expect to be

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operational before April 1999. Neither of the engineers have long-term
commitments to us. If we should lose the services of either of the engineers or
their key personnel before we commence our own production, we could face delays
in providing Instruments and Test Kits to customers and in product development.
See "Business -- Production."

DEPENDENCE ON SUPPLIERS. We are dependent on suppliers of components. A
majority of these components are custom designed for our Instrument but could be
made by a number of different vendors using tooling owned by us. Some of the
components, although standard stock items, are provided by single source
suppliers. If such components become unavailable for any reason, we could be
required to redesign the MC-18. The failure of a supplier to provide us with
components in the quantities and at quality levels acceptable to us could have a
material adverse effect on us. Changing vendors could cause us to incur
additional costs and delays in our product deliveries and could affect the
quality or reliability of the Instrument. See "Business -- Assembly;
Components."

NEED TO DEVELOP QUALITY CONTROL PROCEDURES. When we commence commercial
production of the Instruments and Test Kits, we will need to develop a quality
control department to test and evaluate components before installing them. We
will also have to develop certain quality control and handling procedures for
reagents and antibodies. These activities, while designed to increase
efficiency, will in the short term, increase our production costs.

DEPENDENCE ON VWR

We have entered into a three-year agreement with VWR for the exclusive marketing
of our products on a worldwide basis. VWR will be the sole purchaser and
reseller of the products except in any country where VWR is not represented. The
agreement provides for the semi-annual establishment of sales goals by us and
VWR. Thus, our success and our revenue stream are almost entirely dependent on
the sales and marketing efforts and the financial condition of VWR. See
"Business -- Marketing of the Company's Products."

If VWR fails to perform at the expected levels, we will be required either to
enter into a similar arrangement with one or more other firms knowledgeable and
experienced in the sale and marketing of testing and laboratory diagnostic
equipment or to hire and manage our own sales force and conduct our own
marketing program. To date, we have no back-up arrangement or contingency plans
for dealing with this possibility and do not intend to have a sales or marketing
staff at this time. See "Business -- Marketing of the Company's Products."

RELIANCE ON KEYSTONE FOODS CORPORATION

We have entered into an Administrative Services Agreement with Keystone Foods
Corporation, a principal shareholder of the Company ("Keystone"), whereby
Keystone provides us with space in its facility in Folcroft, Pennsylvania and
executive, administrative, accounting and technical personnel for a monthly fee
until we obtain and occupy our own facility and hire the necessary personnel.
Until our own facilities are operational and we have hired our own full-time
staff, we will be substantially dependent on Keystone to perform many of our
operations. See "Business -- Administrative Services Agreement."

SERVICE AND SUPPORT

Our plan is to have customers return to us any Instrument which malfunctions. To
repair and install units and answer customer inquiries, we need to establish our
own field and customer service organization. Failure to develop a rapid and
responsive service organization or to contract with others for servicing will
interfere with market acceptance of our products and with opportunities to
expand our market among existing customers. We believe customers' technicians
will be able to operate the MC-18 successfully with only a brief training period

12
<PAGE> 14

using our operating manual. However, if more extensive training programs are
required, we will have to develop them. See "Business -- Service and Support."

LACK OF FULL-TIME EMPLOYEES; RECRUITMENT OF PERSONNEL

We currently have no full-time employees. We expect to commence hiring a
management, administrative, production and research and development staff once
we have leased a facility. Recruiting and retaining qualified management,
scientific and engineering personnel will be critical to our success. We will be
in competition with numerous business, research and academic entities in our
efforts to attract and retain managers, scientists, engineers and technicians.
See "Business -- Employees."

PRODUCT LIABILITY RISKS

Sale of our products entails the risk of product liability claims, particularly
from a "false negative" reading (a reading incorrectly indicating no pathogens
are present in a sample). Although we intend to maintain product liability
insurance, the coverage limits of our policies may not be adequate and insurance
may not continue to be available on commercially reasonable terms. Whether or
not successful, litigation against us could divert management's time and
attention, result in significant expenditures and cause harm to our business
reputation. See "Business -- Service and Support."

SHARES ELIGIBLE FOR FUTURE SALE

The 3,000,000 shares of Common Stock offered hereby will be freely tradeable
immediately following the Offering, except for any shares that might be held by
our "affiliates," as that term is defined in the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 9,929,947 outstanding
shares, and 160,000 shares issuable upon exercise of certain options (the
"Restricted Shares"), have or will become available for sale in the public
market during 1999, subject, in certain instances, to the applicable resale
limitations of Rule 144 under the Securities Act. In addition, we intend to file
a registration statement covering up to 1,500,000 shares issuable upon exercise
of stock options under our Stock Option Plan. Such option shares, upon issuance,
will be immediately available for resale, subject to the applicable resale
limitations under Rule 144 for holders that are affiliates of the Company. In
addition, holders of approximately 9,550,936 of the Restricted Shares have
certain demand and piggyback registration rights with respect to those shares.
Our officers, directors and certain stockholders have agreed not to sell an
aggregate of 9,150,936 shares of Common Stock for a period of 180 days following
the consummation of the Offering. Thereafter, the holders of these shares may
resell them, either freely or pursuant to the applicable resale limitations of
Rule 144 or after exercise of their registration rights. Sales of substantial
amounts of Common Stock in the public market or the availability of substantial
amounts of such stock for sale subsequent to the Offering could adversely affect
the prevailing market price of the Common Stock and could impair our future
ability to raise capital through the sale of our equity securities. See "Shares
Eligible for Future Sale."

CONTROL BY PRINCIPAL STOCKHOLDERS

Following the Offering and assuming the expected conversion of the Debentures
and interest earned thereon during January 1999 into shares of Common Stock and
the expected issuance of 21,460 shares to certain creditors, our directors,
officers and their affiliates would be beneficial owners of approximately 50% of
the outstanding shares of Common Stock, of which approximately 47% would be held
by our Chief Executive Officer or his affiliate, Keystone. Acting in concert,
they will have the ability to influence significantly and, as a practical

13
<PAGE> 15

matter, control the election of our directors and most other stockholder
actions. See "Security Ownership of Certain Beneficial Owners and Management."

ANTI-TAKEOVER PROVISIONS

Our charter documents have provisions which limit the ability to call special
stockholder meetings and also provide for election of directors for three-year
terms on a staggered basis, with approximately one-third of the Board of
Directors elected each year. These provisions may discourage certain types of
transactions involving an actual or potential change in control of the Company,
including transactions in which the stockholders might otherwise receive a
premium for their shares over then current prices. In addition, the Board of
Directors has the authority, without action by the stockholders, to issue shares
of preferred stock and to fix the rights and preferences of such shares.
Issuance, or the threat of issuance, of shares of preferred stock on terms which
could dilute the Common Stock may also have the effect of delaying or preventing
a change in control of the Company. See "Description of Capital Stock and
Debentures."

NO PRIOR PUBLIC MARKET

Prior to the Offering, there has been no public market for the Common Stock. The
initial public offering price of the Common Stock (the "Offering Price") will be
determined through negotiations between us and the Underwriters and may not be
indicative of the market price for the Common Stock after the Offering. See
"Underwriting" for information relating to the method of determining the
Offering Price. We have made an application to have the Common Stock listed for
trading on the Nasdaq Stock Market. Once our stock is listed for trading, an
active public market may not develop or continue. Further, the price at which
the Common Stock will trade in the public market subsequent to the Offering may
not correspond to the Offering Price.

MARKET VOLATILITY

Equity markets, including the Nasdaq Stock Market, from time to time have
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies or existing economic conditions.
These broad market fluctuations, as well as issues more specifically related to
our business activities or prospects, our financial performance, intellectual
property or the food testing industry, may adversely affect the market price of
the Common Stock.

SUBSTANTIAL DILUTION

Assuming an initial Offering Price of $12.00 per share, investors in the
Offering will experience immediate and substantial dilution in the net tangible
book value of their shares of Common Stock in the amount of $9.54 per share,
after giving effect to the expected conversion of all outstanding Debentures and
interest thereon into shares of Common Stock, underwriting discounts and
commissions, estimated offering expenses and the expected issuance of 21,460
shares to certain creditors. If we offer additional Common Stock in the future,
including shares that may be issued upon exercise of stock options, purchasers
of Common Stock in the Offering may experience further dilution. See "Dilution."

14
<PAGE> 16

NO PAYMENT OF DIVIDENDS

We have never paid dividends on our capital stock. We intend to retain any
future earnings for funding growth and, therefore, do not intend to pay any cash
dividends in the foreseeable future. See "Dividend Policy."

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements which, among other
things, relate to: (i) strategy; (ii) capital expenditures; (iii) the Company's
ability to hire management, administrative, production and research and
development staff and establish a research and production facility; (iv) the
performance of the Company's Instrument at the various sites where it is being
or will be tested; (v) the performance of VWR, which has the exclusive right to
purchase, market and resell the Instruments and Test Kits; (vi) the development
of improvements to the Instrument and refinements to the testing process which
uses the Instrument and the development of additional products and services
employing the Instrument and Test Kits or other Company technology; (vii) demand
for the Instrument and Test Kits; (viii) regulatory matters affecting food
products and testing; (ix) competitive factors; and (x) general economic
conditions and other statements which are not historical facts. When used in
this Prospectus, the words "anticipate," "believe," "estimate" and similar
expressions are generally intended to identify forward-looking statements.
Because such forward-looking statements involve risks and uncertainties, the
Company's actual results could differ materially from those expressed or implied
by such forward-looking statements due to a number of factors, including those
discussed under "Risk Factors."

15
<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of Common
Stock offered are estimated to be $33 million ($38 million if the Underwriters'
over-allotment option is exercised in full), assuming an Offering Price of
$12.00 per share and after deducting the estimated underwriting discounts and
offering expenses payable by the Company of approximately $3 million.

The principal uses of net proceeds of the Offering are as follows:

<TABLE>
<CAPTION>
ESTIMATED ALLOCATION
--------------------
<S> <C>
- - Renovate and equip our headquarters $ 6,300,000
- - Research and development activities 10,500,000
- - Repay loans from Kingco and advances from Keystone 894,000
- - Repay the debenture held by the creditors'
committee 500,000
- - Working capital and general corporate purposes 14,806,000
-----------
Total $33,000,000
===========
</TABLE>

Holders of Debentures in the outstanding principal amount of $2.5 million have
the right to convert their Debentures and accrued interest into shares of Common
Stock as of the close of the Offering. A portion of the net proceeds from the
Offering will be used to redeem any Debentures which are not converted.
Keystone, the holder of 88.8% of the Debentures, has advised the Company that it
intends to convert the principal and accrued interest of its Debentures into
Common Stock.

The loans obtained from Kingco were used to pay research and development costs
and operating costs. These loans bear interest at 10% per annum and mature on
the earlier of the Company's completion of a public offering in excess of $5
million or February 28, 2000. The debenture held by the creditors' committee
accrues interest at 5% per annum, is payable quarterly and matures on February
19, 2001. See "Description of Certain Indebtedness."

Proceeds allocated for working capital and general corporate purposes will be
invested in short-term, interest-bearing investment grade securities, pending
use.

DIVIDEND POLICY

The Company has not paid any dividends to date and does not expect to do so for
the foreseeable future. The Board of Directors will have the authority to
determine when and in what amount any dividend should be paid. In making this
decision, the Board will consider the earnings, capital needs and financial
condition of the Company. The Board will also take into account any restrictions
on the Company's ability to pay dividends contained in any loan agreement,
indenture, mortgage or other financing document binding on the Company.
Presently, the Company intends to retain any future earnings for the Company's
operating and capital needs.

16
<PAGE> 18

DILUTION

The deficit in net tangible book value of the Company at September 30, 1998 was
($3,168,496) or ($0.86) per share of Common Stock. Deficit in net tangible book
value per share represents the amount by which the Company's liabilities exceed
its tangible assets, divided by the number of shares of Common Stock then
outstanding.

Net tangible book value dilution per share represents the difference between the
amount per share paid by the purchasers of shares in the Offering and the
deficit in net tangible book value per share of Common Stock immediately after
completion of the Offering. After giving effect to (i) the sale of 3,000,000
shares of Common Stock in the Offering at an assumed public offering price of
$12.00 per share and deduction of the underwriting discounts and commissions and
estimated expenses associated with the Offering, (ii) the assumed conversion
into shares of Common Stock of $2.5 million principal amount of Debentures and
accrued interest thereon from January 1, 1999 through January 31, 1999 and (iii)
21,460 shares issuable to certain creditors, the net tangible book value of the
Company at September 30, 1998 would have been approximately $31.8 million or
$2.46 per share. This represents an immediate increase in net tangible book
value of $2.58 per share to existing stockholders and an immediate dilution of
$9.54 per share to purchasers of Common Stock in the Offering. The following
table illustrates this pro forma dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Deficit in net tangible book value per share at
September 30, 1998................................... $(0.86)
Decrease in deficit in net tangible book value per
share attributable to conversion of the Debentures... 0.74
------
Subtotal............................................... (0.12)
Increase in net tangible book value per share
attributable to new investors........................ 2.58
Net tangible book value per share after the Offering........ 2.46
------
Dilution per share to new investors......................... $ 9.54
======
</TABLE>

17
<PAGE> 19

The following table sets forth, as of September 30, 1998, the number of shares
of Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders or the holders of
securities convertible into Common Stock (including persons who are expected to
convert their Debentures into shares of Common Stock and persons who have
converted, or will convert, their bankruptcy claims into shares of Common Stock)
and the new investors purchasing shares of Common Stock from the Company in the
Offering, at an assumed public offering price of $12.00 per share before
deducting underwriting discounts and commissions and estimated expenses
associated with the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing common
stockholders............... 3,667,548 28.3% $ 2,193,109 5.4% $ 0.60
Holders of common stock
issued upon conversion of
$2.5 million principal
amount of Debentures and
accrued interest from
January 1, 1999 through
January 31, 1999(1)........ 6,240,939 48.3 2,521,232 6.2 0.40
Acquisition of stock in
exchange for bankruptcy
claims..................... 21,460 0.2 14,807 -- 0.69
---------- -----------
Existing stockholders after
conversion................. 9,929,947 76.8 4,729,148 11.6 0.48
New investors(2)............. 3,000,000 23.2 36,000,000 88.4 12.00
---------- ---- ----------- ----
Total................... 12,929,947 100% $40,729,148 100%
========== ==== =========== ====
</TABLE>

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

(1) From January 1, 1999 through the close of the Offering, 1,695 shares of
Common Stock per day are issuable to holders of the Debentures, representing
accrued but unpaid interest on the Debentures, assuming the holders of the
Debentures choose to convert such interest into shares of Common Stock.

(2) Does not include outstanding stock options, as of September 30, 1998, to
purchase a total of 910,000 shares of Common Stock. To the extent such
options are exercised, there will be further dilution to new investors.

18
<PAGE> 20

CAPITALIZATION

The following table shows the Company's capitalization before and after the
Offering. The first column reflects the Company's capitalization as of September
30, 1998. The second column shows what the Company's capitalization would have
been as of September 30, 1998, as adjusted to give effect to (i) the Offering at
an assumed offering price of $12.00 per share and the application of its net
proceeds, (ii) the assumed conversion into shares of Common Stock of $2.5
million principal amount of Debentures and accrued interest thereon from January
1, 1999 through January 31, 1999 and (iii) 21,460 shares issuable to certain
creditors.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long-Term Debt
Class A and Class B Debentures(1)................. $ 1,936,852 $ --
Debenture arising from reorganization............. 500,000 --
Notes payable to affiliate........................ 325,431 --
----------- -----------
Total debt..................................... 2,762,283 --
Stockholders' equity
Preferred stock, $.01 par value 2,000,000 shares
authorized; none issued........................ -- --
Common stock, $.01 par value
50,000,000 shares authorized; 3,667,548 and
12,929,947 shares outstanding,
respectively(2)................................ 36,675 129,299
Additional paid-in capital........................ 12,154,244 47,597,659
Unearned compensation related to stock options.... (6,726,063) (6,726,063)
Retained earnings (deficit)(3).................... (8,633,352) (9,217,732)
----------- -----------
Total stockholders' equity (deficit)........... (3,168,496) 31,783,163
----------- -----------
Total capitalization......................... $ (406,213) $31,783,163
=========== ===========
</TABLE>

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

(1) The Class A and Class B Debentures have been shown net of the $563,148
unamortized portion of the beneficial conversion feature as described in
Note 6 to the financial statements.

(2) Keystone, the holder of 88.8% of the Debentures, has advised the Company
that it intends to convert all of its Debentures and accrued interest
thereon into shares of Common Stock at the close of the Offering. From
January 1, 1999 through the close of the Offering, 1,695 shares of Common
Stock per day are issuable to holders of the Debentures, representing
accrued but unpaid interest on the Debentures, assuming the holders of all
Debentures choose to convert such interest into shares of Common Stock.

(3) Reflects the remaining amortization of the beneficial conversion feature of
the Debentures in the amount of $563,148 and the interest expense associated
with such conversion ($21,232 assuming the Offering closes on January 31,
1999).

19
<PAGE> 21

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial data set forth below as of and for the fiscal years ended
December 31, 1996 and 1997 and as of and for the nine months ended September 30,
1998 has been derived from the financial statements of the Company, which have
been audited by Deloitte & Touche LLP, independent auditors. The selected
financial data set forth below as of and for the fiscal years ended December 31,
1994 and 1995 and as of and for the nine months ended September 30, 1997 has
been derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus and, in the opinion of management of the Company,
includes all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation thereof. The results of operations set forth
below are not necessarily indicative of results to be expected for any future
period. The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements of the Company, including the notes thereto, included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ------------------------
1994 1995 1996 1997 1997 1998
----------- ----------- ---------- ---------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales..................................... $ 33 $ 364
Cost of sales............................. 32 350
---------- ----------
Gross profit.......................... 1 14
Engineering, research and development..... 1,193 2,258 $ 551 $ 1,627 $ 1,066 $ 1,002
Compensation related to stock options..... -- -- -- -- -- 2,192
General and administration................ 519 533 310 392 262 691
Interest expense.......................... 12 18 60 564 531 696
Depreciation and amortization............. 3 3 5 39 27 29
Write-off of impaired assets.............. -- -- 279 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total expenses........................ 1,727 2,812 1,205 2,622 1,886 4,610
---------- ---------- ---------- ---------- ---------- ----------
Loss before extraordinary item............ (1,726) (2,798) (1,205) (2,622) (1,886) (4,610)
Extraordinary item -- gain on forgiveness
of debt................................. -- -- -- 1,833 1,833 --
---------- ---------- ---------- ---------- ---------- ----------
Net loss.................................. $ (1,726) $ (2,798) $ (1,205) $ (789) $ (53) $ (4,610)
========== ========== ========== ========== ========== ==========
Basic and diluted net loss per common
share before extraordinary item......... $ (0.30) $ (0.27) $ (0.11) $ (0.61) $ (0.41) $ (1.26)
Extraordinary item........................ -- -- -- 0.43 0.40 --
---------- ---------- ---------- ---------- ---------- ----------
Basic and diluted net loss per common
share after extraordinary item.......... $ (0.30) $ (0.27) $ (0.11)$ (0.18) $ (0.01) $ (1.26)
Weighted average number of common shares
outstanding............................. 5,780,590 10,261,569 10,578,875 4,306,061 4,535,441 3,665,740
BALANCE SHEET DATA:
Working capital (deficit)................. $ (493) $ (2,558) $ 60 $ (383) $ (101) $ (961)
Total assets.............................. 589 654 478 372 433 793
Total long-term debt...................... 193 50 955 1,835 1,325 2,762
Total stockholders' equity (deficit)...... (163) (2,029) (3,234) (1,859) (1,038) (3,168)
</TABLE>

20
<PAGE> 22

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

OVERVIEW

The Company is a development stage company which owns patents and technology
providing a single platform for identifying pathogens in food products. The
Company has incorporated this technology into the MC-18, an automated instrument
which, with related Test Kits, can test food products for the following
pathogens: Salmonella; E. coli O157:H7; Listeria; and Campylobacter.

The Company was incorporated in Illinois on March 11, 1992 as Crystal Medical
Products, Inc. It changed its name to Molecular Circuitry, Inc., and the state
of its incorporation to Delaware by merging into its wholly-owned Delaware
subsidiary in October 1998. Since May 1996, when the Company voluntarily filed
for bankruptcy, all resources of the Company available for operations have been
used in research and development associated with the MC-18 and patenting its
technology.

To date, the Company has not commenced commercial production or sold any
Instruments or Test Kits. Since filing for bankruptcy, the Company has financed
its operations by the sale of stock, borrowings from affiliates and a private
placement of its debt securities to its existing stockholders. The gross amount
raised through these financings since emerging from bankruptcy on February 5,
1997 was approximately $4.2 million. On November 5, 1998, Keystone committed to
a $5 million credit facility for the Company, payable interest only until
maturity at the rate of 10% per annum. The credit facility will continue until
the earlier of May 15, 2000 or such time as the Company closes an equity
financing of at least $5 million. Accordingly, this facility will terminate upon
the closing of the Offering and any outstanding borrowings at such time will be
required to be repaid. In November 1998, the Company borrowed $150,000 under
this credit facility. See "Management -- Compensation Committee Interlocks and
Insider Participation" and "Description of Certain Indebtedness."

The Company has entered into a Marketing Agreement for the exclusive sale and
marketing of the Company's products with VWR, a large distributor of laboratory
diagnostic equipment. During the term of the Marketing Agreement, VWR will be
the Company's sole customer. Although there is no minimum purchase requirement,
the Company and VWR will agree upon six and twelve month sales targets allowing
termination by the Company if such targets are not met. The Company will be
dependent upon the efforts, abilities and financial condition of VWR to maintain
and expand its sales organization and to pay for products purchased from the
Company. VWR will assume the credit risk of its customers.

The Company's future results of operations may fluctuate significantly as a
result of a number of factors, many of which are beyond the Company's control.
In addition to market acceptance of the Company's products, one very significant
factor will be the purchasing patterns of VWR. Wide variations in purchasing
from quarter to quarter or any decision by VWR to increase or reduce its
carrying inventory significantly, could cause large fluctuations in Company
revenues and earnings. See "Risk Factors -- Dependence on VWR."

The Company is seeking a facility near Philadelphia for its headquarters, and to
house its research and development, production and warehousing functions. Once
the facility is obtained, the Company will retain the services of an industrial
engineer or other designer to assist its engineers and scientists in the
configuration of the laboratory and production areas and the selection of the
equipment needed. The Company estimates that it will require up to six months
after it takes possession of a facility before it will be able to commence the

21
<PAGE> 23

production and shipping of Instruments and Test Kits. The Company expects to
spend approximately $6.3 million to renovate, equip and maintain this facility.
See "Use of Proceeds."

The Company is relying on Keystone personnel to perform a variety of
administrative and technical functions on its behalf under an Administrative
Services Agreement between Keystone and the Company until it retains the
necessary staff. See "Business -- Employees" and "-- Administrative Services
Agreement" and "Management -- Compensation Committee Interlocks and Insider
Participation."

As of September 30, 1998, the Company had an accumulated deficit of $3,168,496
and net losses before extraordinary item of $13,890,060. At December 31, 1997,
the Company had a cumulative U.S. tax net operating loss carryforwards of
$5,364,000, which expire at various dates through 2018. The availability of the
loss carryforwards will be dependent upon the ability of the Company to generate
operating profits during years when the carryforwards are still available to it.
The use of such loss carryforwards may also be affected by ownership changes in
the Company.

COMPENSATION RELATED TO STOCK OPTIONS; CHARGE RELATED TO CONVERSION OF
DEBENTURES IN CONNECTION WITH THE OFFERING

In September 1998, the Company issued options to purchase an aggregate of
910,000 shares of Common Stock at $1.00 per share. The issuance of these options
will result in an aggregate charge to compensation expense of $8,918,000. Of
such amount, $2,191,937 was recognized in the nine months ended September 30,
1998, $1,871,810 will be recognized in the fourth quarter of 1998, $2,285,862
during 1999, $1,214,100 during 2000, $760,407 during 2001, with the remainder
being recognized thereafter.

In addition, in connection with the closing of the Offering, the Debentures will
be either repaid or converted into shares of Common Stock. Accordingly, the
remaining unamortized beneficial conversion feature of the Debentures in the
amount of $294,600 will be recognized as additional interest expense in the
quarter in which the Offering closes.

Both of the foregoing are non-cash charges.

RESULTS OF OPERATIONS

REVENUE. The Company is a "development stage company" and had no sales during
1996, 1997 or the nine months ended September 30, 1998.

ENGINEERING, RESEARCH AND DEVELOPMENT. Since January 1, 1996 (excluding
compensation related to stock options) the Company has cumulatively used 52.2%
of its expenditures for research and development. In July 1997, the Company
entered into a Product Development Agreement with two engineers for the
development of ten prototype Instruments for a fee of $1,130,000. The Company
also paid all material costs and other approved expenses. As of September 30,
1998, $70,000 remained unpaid under the agreement pending final delivery to the
Company of all prototypes. The Company has expensed all research and development
costs. During 1998, the Company has continued the development of the Instrument
and has entered into a consulting agreement with one of the engineers for the
transfer to manufacturing process. The Company anticipates continuing to incur
substantial engineering, research and development expenses.

COMPENSATION RELATED TO STOCK OPTIONS. In September 1998, the Board of
Directors awarded options under the Company's Stock Option Plan to purchase an
aggregate of 750,000 shares of Common Stock, vesting over a period of five to
six years, to the key scientific officers

22
<PAGE> 24

of the Company. In addition, the Company issued an aggregate of 160,000 options,
all currently exercisable, to the Company's other four directors. All of these
options have an exercise price of $1.00 per share. The issuance of these options
resulted in an increase to additional paid in capital of $8,918,000 and a charge
to compensation expense of $2,191,937 in the nine months ended September 30,
1998. The remaining unearned compensation of $6,726,063 has been recorded as an
increase in stockholders' deficit and will be charged to expense over the
service period to which the options relate.

GENERAL AND ADMINISTRATIVE EXPENSES. The Company incurred general and
administrative expenses of $309,848 in 1996; $392,364 in 1997; and $690,511 in
the nine months ended September 30, 1998. The increase was attributable to the
administrative support necessary for the research and development efforts. The
Company expects its general and administrative expenses to continue to increase
as a result of the transition of its business. Keystone has paid for certain
administrative services and other expenses on behalf of the Company. These
expenses were recognized during the periods in which they were performed. These
expenses totalled $16,000 in 1996; $96,028 in 1997; and $293,455 in the nine
months ended September 30, 1998, all but $16,000 of which remains outstanding.
Keystone will be repaid such amount from a portion of the proceeds of the
Offering.

INTEREST EXPENSE. Interest expense was $60,400 for 1996; $563,649 for 1997; and
$696,104 for the nine months ended September 30, 1998. Interest expense for 1996
and 1997 and the nine months ended September 30, 1998 included $60,400, $55,740
and $66,497, respectively, for temporary working capital loans from Kingco and
Keystone and, in 1998, $94,178 for interest on the Debentures sold by the
Company to its existing stockholders (primarily Keystone) in April 1998.
Included in the 1997 interest expense was $486,000 of imputed interest arising
out of the warrants issued to Kingco for working capital loans made to the
Company prior to bankruptcy reorganization. In addition, during 1997 and the
nine months ended September 30, 1998, the Company incurred interest expense of
$21,490 and $18,750, respectively, on a $500,000 debenture issued to the
creditors' committee in the Company's bankruptcy. The Company also recorded
interest expense of $516,662 in 1998 related to the convertibility feature of
the Debentures.

EXTRAORDINARY ITEM. In 1997, the Company recorded a gain of $1,832,708 for
forgiveness of indebtedness in securing its discharge from bankruptcy. There was
no income tax effect because the forgiveness was off-set by the Company's
losses.

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents were $13,558 at December 31, 1997 and $237,804 at September
30, 1998. Cash equivalents consist of highly liquid short-term investments of
three months or less.

The following is a summary of selected cash flow information:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ --------------------------
1996 1997 1997 1998
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net cash used for
operating activities.... $(846,983) $(2,032,532) $(1,493,009) $(1,036,257)
Net cash used for
investing activities.... (92,084) (19,966) (19,075) (229,497)
Net cash provided by
financing activities.... 955,431 2,049,692 1,539,692 1,490,000
</TABLE>

23
<PAGE> 25

NET CASH USED IN OPERATING ACTIVITIES. The Company had no operating revenues in
1996, 1997 or the nine months ended September 30, 1998. The Company expended
funds primarily for research and development and general and administrative
services.

NET CASH USED IN INVESTING ACTIVITIES. The funds were used primarily to
purchase research equipment in 1996 and 1997 and for the purchase of production
equipment in the nine months ended September 30, 1998.

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES. A summary of cash provided
by (used in) financing activities is as follows:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------------------
1996 1997 1997 1998
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from the sale of
Common Stock................ $ -- $1,657,692 $1,657,692 $ --
Exercise of Warrants.......... -- 12,000 12,000 --
Proceeds from the sale of
convertible debentures...... -- -- -- 280,633(1)
Increase (decrease) in notes
payable..................... 955,431 380,000 (130,000) 1,209,367
-------- ---------- ---------- ----------
Net cash provided by financing
activities.................. $955,431 $2,049,692 $1,539,692 $1,490,000
======== ========== ========== ==========
</TABLE>

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

(1) Kingco elected to convert $2,219,367 of borrowings under its credit facility
into Debentures. Since Keystone had provided the funds for the credit
facility, the other three members of Kingco assigned their rights under the
Debentures to Keystone.

The Company believes the net proceeds of the Offering, together with cash
generated from sales, will satisfy its cash requirements for the next three
years. See "Use of Proceeds" for a discussion of the principal uses of the net
proceeds of the Offering. The Company's future capital requirements and the
availability and terms of any future funding, such as equity or debt financings
or collaborative agreements with corporate partners, will depend on many
factors. These could include the progress of the Company's research and
development, scope and results of test studies, rate of technological advances,
status of competitive products, establishment of production capacity, expansion
of sales and marketing capabilities and establishment of collaborative
relationships with other companies. See "Risk Factors -- Need for Additional
Financing."

FINANCING PROVIDED BY KEYSTONE. Keystone has provided the Company with
financial support in the form of capital and advances in the past and, on
November 5, 1998, made a $5 million revolving credit facility available to the
Company through May 15, 2000. The Company will use a portion of the proceeds of
the Offering to pay any outstanding amounts owing under the credit facility and
this borrowing facility will terminate upon closing of the Offering.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, which are both effective for
fiscal years beginning after

24
<PAGE> 26

December 15, 1997. Components of comprehensive income for the Company include
such items as net income and foreign currency translation. Net income and
comprehensive income were the same for the nine months ended September 30, 1998.
SFAS No. 131 requires segments to be determined based on how management measures
performance and makes decisions about allocating resources. The Company adopted
the standards in fiscal 1998. Neither statement had a material effect on the
Company's financial position or results of operations.

In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, Reporting on the Costs of Start-up Activities, which provides guidance on
the financial reporting of start-up costs and organization costs. It requires
costs of start-up activities and organization costs to be expensed as incurred.
The application of SOP 98-5 did not have an impact on the financial condition or
results of operations of the Company.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those statements at fair value. This statement is effective
for fiscal years beginning after June 15, 1999, although early adoption is
encouraged. The Company does not anticipate that the adoption of SFAS No. 133
will have a significant impact on its consolidated financial position or results
of operations.

YEAR 2000

The Year 2000 issue arose because many existing computer programs were written
using only two digits, rather than four, to identify a particular year.
Therefore, many computer programs will not accurately recognize any year after
the twentieth century. If not corrected, many computer applications could fail
or create erroneous results in the year 2000.

The Company believes that its financial and production systems will be Year 2000
compliant when the Company occupies a new facility in early 1999. As the Company
acquires hardware and software for its business operations, it will ensure that
these systems are Year 2000 compliant. The Company's software consulting
engineer has designed the MC-18's software program to include features which are
Year 2000 compliant. Accordingly, the Company does not expect to incur material
costs in addressing Year 2000 issues.

The Company's operations may be affected by Year 2000 problems at other
companies and entities with which the Company will transact business,
particularly VWR, which will be the sole marketer of the Company's products, and
Keystone, which currently provides personnel and laboratory facilities to the
Company. VWR has informed the Company that it has implemented a project to
enhance its computer systems, including its order entry, purchasing and
financial systems and to address the Year 2000 issue. Failure by VWR to correct
any Year 2000 problems could have a material adverse effect on the Company's
financial condition and results of operations. The Company has not yet developed
a contingency plan to address this possibility. The Company does not expect
Keystone's Year 2000 issues to have a material effect on the Company's business
operations since the Company intends to occupy its own facility and hire its own
personnel during 1999. Other third parties, including vendors and suppliers, may
not take the necessary action to remediate Year 2000 problems. The Company is
currently unable to determine the potential impact, if any, that could result
from such third parties' failure to adequately address this issue.

25
<PAGE> 27

BUSINESS

THE COMPANY

The Company has developed an instrument, the MC-18, to detect the presence of
certain harmful bacteria, or pathogens, in food products. The MC-18 utilizes a
technology called electroimmunoassay, which combines chemical and electrical
processes to test for specific pathogens. The Company believes its technology
can detect multiple pathogens with greater accuracy and cost effectiveness than
currently available testing methods. The MC-18 is scheduled to undergo field
testing at six locations. The Company expects VWR, its exclusive distributor, to
commence marketing the MC-18 in the second quarter of 1999.

The Company intends to market the MC-18 to food producers in the meat, poultry
and dairy markets. Initially, the MC-18 will be used to test for Salmonella, E.
coli O157:H7, Listeria and Campylobacter, the pathogens which, according to the
Center for Disease Control and Prevention (the "CDC"), cause the majority of
laboratory-diagnosed cases of illness and death from food contamination in the
United States. Currently, food processors usually use separate tests to detect
each type of bacteria. The MC-18 provides the ability to simplify testing
methods by replacing these various tests with one testing platform.

Features that are expected to make the MC-18 competitive and cost effective are:

- High volume capability, meaning the MC-18 can test multiple samples and
detect multiple pathogens simultaneously.

- High level of sensitivity, meaning the MC-18 is able to detect small
quantities of bacteria.

- High level of specificity, meaning it can differentiate between
pathogenic and nonpathogenic bacteria, thereby reducing the possibility
of false positive test results.

- High level of automation, reducing customers' dependence on skilled
technicians and minimizing the chance of operator error.

- Capacity to create a permanent computer record.

INDUSTRY OVERVIEW

Public concern regarding food safety has increased over the past several years
partially as a result of widespread media reports of food contamination
resulting in deaths and illness or product recalls. To address this growing
concern, the federal government has adopted regulations requiring science-based
food testing for generic E. coli at slaughter houses and processing plants. In
addition, President Clinton recently established the National Food Safety
Council to identify strategies for improving food testing and the prevention of
food contamination.

Pathogens can enter a food product at many different points from farm or sea to
table, including feeding, slaughtering and processing of animals and growing,
harvesting and processing of fruits, vegetables and grains. Food transportation,
storage, handling and temperature control are important links in the food safety
chain. While science-based testing of food products can occur at any one of
these points, testing typically occurs only during the processing stage.

Testing usually starts with taking samples of raw meats, poultry, and fish, as
well as eggs and dairy products before the products are processed. Because
contamination of processed foods can occur during processing, often random
samples are taken from production lines and

26
<PAGE> 28

finished products before distribution to supermarkets, restaurants and other
retail establishments. While the Company's technology could be used at any stage
of the food distribution chain, the Company believes that food processors and
distributors will constitute the primary market for its products.

A 1997 independent market report estimates that annually 420 million tests are
conducted in the food industry worldwide. The report concludes that 15% of the
food industry tests (approximately 60 million) are for specific organisms.

FOOD-BORNE PATHOGENS

The CDC and the Food and Drug Administration (the "FDA") estimate that, each
year, at least six million (and possibly as many as 33 million) people in the
United States become ill from pathogens in their food and that as many as 9,000
of them die each year. The USDA estimates that medical costs and productivity
losses from the major food pathogens range between $6.5 billion and $34.9
billion annually in the United States.

The chart below, published by the USDA Economic Research Service, indicates the
estimated number of cases of food-related illnesses and deaths reported in the
United States during 1995 due to contamination by certain pathogens:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TYPE OF PATHOGEN CASES DEATHS
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Salmonella 696,000-3,840,000 870-1,920
- ----------------------------------------------------------------------------------------------
Campylobacter jejuni or coli 1,100,000-7,000,000 110-511
- ----------------------------------------------------------------------------------------------
E. coli O157:H7 8,000-16,000 176-433
- ----------------------------------------------------------------------------------------------
Clostridium perfringens 10,000 100
- ----------------------------------------------------------------------------------------------
Listeria monocytogenes 928-1,767 230-485
- ----------------------------------------------------------------------------------------------
Staphylococcus aureus 1,513,000 454
- ----------------------------------------------------------------------------------------------
</TABLE>

The Company's Instrument and Test Kits are designed to detect the presence of
Salmonella, E. coli O157:H7, Listeria and Campylobacter in food products. These
four pathogens have been specifically targeted for prevention by the USDA's Food
Safety Inspection Service (the "FSIS"). A 1995 study by the CDC indicates that
these four pathogens account for a majority of laboratory confirmed cases of
food contamination in the United States.

Information regarding the four food pathogens which the MC-18 is currently
designed to detect is set forth below. The Company intends to expand its
technology in the future to include testing for other food-borne pathogens. See
"Business -- Research and Development."

SALMONELLA. Salmonella is found in the intestinal tracts of animals. It is
present on virtually all types of raw meat and poultry products and also can be
found in eggs, dairy products, seafood and fresh produce. Salmonella
contamination can be caused by a variety of factors, including fecal material.
The emergence of antibiotic resistant strains, such as Salmonella typhimurium DT
104, may make this pathogen an even greater health hazard.

ESCHERICHIA COLI O157:H7. Escherichia coli ("E. coli") is a fecal bacterium
found in the intestines of animals and human beings. A strain of E. coli known
as E. coli O157:H7 can cause serious illness, kidney damage and death.

27
<PAGE> 29

CAMPYLOBACTER JEJUNI OR COLI. There are many strains of Campylobacter, but only
Campylobacter jejuni or coli significantly affect humans. These strains are
often found in poultry products, unpasteurized milk and untreated water. Raw or
undercooked chicken is the major source of infection.

LISTERIA MONOCYTOGENES. Of the many strains of Listeria, only Listeria
monocytogenes is pathogenic. This strain can be found in animals, soil, water
and vegetation and has the ability to survive for long periods of time. Grazing
animals may ingest the organism from vegetation and transmit it back to the soil
as droppings. Consequently, listeria microorganisms can be present on fruits and
vegetables, as well as meat, poultry and dairy products. Listeria also can
proliferate in refrigerated foods.

With the proliferation of the use of antibiotics, antibiotic resistant strains
of certain of these pathogens are an increasing health hazard. For example,
since 1995, with the licensing of antibiotics known as fluoroquinolones to treat
the infection in chickens, levels of drug-resistant campylobacter in humans has
increased substantially. As pathogens continue to mutate, the diagnostic testing
industry will have to develop new antibodies or testing methods to identify
them.

Methods of preventing food contamination include cooking food products,
particularly ground meat, at high temperatures, food washing, hand washing,
stricter standards and inspection procedures in the food distribution chain, and
irradiation (use of ionizing energy to kill food-borne pathogens).

The American Council on Science and Health endorses irradiation, but some
opponents believe that it involves environmental, consumer and worker-safety
risks. In addition, the current high cost of irradiation limits this method's
marketability. If irradiation can be made cost-effective and becomes widely
accepted by the food industry and consumers, the market for the Company's
technology could be substantially diminished. See "Risk Factors -- Methods of
Eliminating Food-Borne Pathogens."

PLAN OF OPERATION

The Company's objective is to offer its technology initially to the food
industry, particularly producers and processors of raw and cooked foods such as
meat and poultry processors. The Company's Instrument will be marketed with Test
Kits developed by the Company. Although each Test Kit can simultaneously perform
multiple tests, it cannot be reused. Accordingly, the Company anticipates that
the sale of Test Kits will eventually be the Company's primary source of
revenue.

The Company intends to devote significant resources to research and development
of:

- Its own antibodies and reagents for use in the Test Kits.

- Tests for other pathogens that affect the food supply, and for generic E.
coli, which is expected to increase the utility of the MC-18 within the
food testing industry by offering the ability to test for a wider range
of pathogens on a single instrument.

- Accurate and cost effective tests for environmental (soil, air and water)
and medical (hormones, drugs and disease-associated organisms)
laboratories.

- New testing instruments appropriate for use in different types of
laboratory and testing environments.

28
<PAGE> 30

DESCRIPTION OF THE COMPANY'S TECHNOLOGY AND PRODUCTS

The Company has developed a highly sensitive testing method for identifying
pathogens in food products, called electroimmunoassay. It combines chemical and
electrical processes and uses changes in electrical resistance to detect the
presence of pathogens. The Company has incorporated this technology into an
automated, computerized instrument, the MC-18, and the Test Kits. The MC-18 is a
self-contained desktop unit that weighs 50 pounds and has a footprint of 22
inches by 17 inches. Each Test Kit consists of nine cartridges, each of which
has pre-attached electrical resistors, and reagent packs which contain the
chemical materials needed to perform the tests. Each cartridge is able to test
two food samples. The MC-18 can hold 27 cartridges. Consequently, it can run 54
tests simultaneously with each test being for any one of the four pathogens.

Testing for pathogens in food products can be difficult. Contamination
concentrations may be fewer than ten bacteria per sample, which may be too low
for ordinary detection, and the size of the food sample tested may be as small
as 25 grams (the size sample required by FSIS regulations for ground beef).
Consequently, the food sample being tested must first be cultured to allow the
infectious agent to multiply. This process, referred to as enrichment, is
required for all current food testing methods. Enrichment may take 6 to 48
hours, depending upon the pathogen tested and the type of enrichment procedure
used. The Company's products are intended for use after the enrichment phase.

After enrichment, the food sample is added to the cartridge. The electrical
resistors on each cartridge are pre-coated with antibodies designed to test for
the presence of a specific pathogen. If the pathogen is present, it reacts
chemically to substances in the reagent and binds to the antibody-coated
resistor. The Instrument automatically washes out unbound material and a second
antibody solution from the reagent pack is added to the cartridge. When the
pathogen is present, this second antibody binds to the captured bacteria on the
resistor. Through subsequent chemical reactions, this binding reaction is
converted into deposits of metallic silver on the surface of the resistor. A
positive reaction will be detected as a decrease in resistance across the
resistor. Each of the resistors can be coated with a different pathogen-specific
antibody, enabling multiple tests simultaneously within the same cartridge. It
currently takes approximately 1.5 hours to run a test in one cartridge in the
MC-18 and approximately 3.5 hours to run the MC-18 at full capacity (27
cartridges).

The MC-18 is currently programmed to provide a qualitative analysis, indicating
the presence of pathogens in the food samples tested and not the quantity of
pathogens. The Company may develop a procedure to provide a quantitative
analysis as to the amount of pathogens per sample.

The MC-18 can utilize bar codes to identify and record the source of the food
products being tested. As the Instrument performs tests, its computer system
records the data relating to the testing procedures. At the end of the test, the
Instrument measures the resistance of each resistor and can either print out the
results on-site or store them to permit remote access through a computer system
networked to the Instrument. A technician may also store test results on a
standard size computer disc.

ADVANTAGES OF THE COMPANY'S TECHNOLOGY

The Company believes that potential customers will find the MC-18 competitive
and cost effective because of the following features:

HIGH VOLUME CAPABILITY. The MC-18 can test multiple samples and detect multiple
pathogens simultaneously. Current testing methods generally involve individual
test proce-

29
<PAGE> 31

dures for different types of bacteria. The MC-18 offers food producers a way to
complete their major pathogen testing on one platform, simplifying the process.

HIGH LEVEL OF SENSITIVITY. The MC-18 is able to detect relatively small
quantities of bacteria. This is especially important as more virulent strains of
bacteria are discovered. For example, contamination by E. coli O157:H7 can be
caused by as few as ten microbes compared to thousands of microbes required for
Salmonella contamination.

HIGH LEVEL OF SPECIFICITY. The MC-18 can differentiate between pathogenic and
nonpathogenic bacteria, thereby reducing the likelihood of false positive test
results. A positive test result is typically followed by an extended testing
period of three to four days, during which the presence of the pathogen is
confirmed. Accordingly, a false positive result can cost a producer a
significant amount of time and money because the tested food product must be
stored, and processing delayed, until confirmatory testing has been completed.

HIGH LEVEL OF AUTOMATION. Customers can reduce their dependence on skilled
technicians and minimize the chance of operator error through the use of the
MC-18. Currently used methods of food testing are dependent upon the skill and
training of technicians who must actively participate in the testing process by
continuous monitoring, making subjective interpretations in certain cases and
accurately recording the data. The Company's technology reduces the need for
highly skilled and trained technicians because the chemical testing is performed
by the Instrument.

COMPUTERIZED PERMANENT RECORDS. While certain competing test instruments
require that the operator manually record test results, the MC-18 does this
automatically. The Company believes that the instrument's ability to record the
data without operator intervention will significantly reduce the likelihood of
human error, as well as the possibility that the results will be destroyed or
modified. In addition, the Instrument stores and can readily retrieve test
results for regulators, food inspectors, suppliers and distributors, consumers
and potential litigants. The test cartridge also can be maintained to verify
test results at a later date. See "Business -- Competition" and "-- Government
Regulation of Food Products."

The Company's technology is similar to other food testing methods currently
available in that (i) the food samples must go through a liquefaction and
pathogen enrichment procedure, although the Company is aware that certain
competitors have developed proprietary enrichment processes for E. coli O157:H7
which are substantially faster than the third party enrichment processes
currently available for use with the MC-18, and (ii) a chemical process is used
to detect the presence of pathogens. However, the Company believes that the
combined benefits offered by its technology, including measuring electrical
resistance to determine the presence of pathogens, are not available in any
other food testing methods.

FIELD TESTING OF THE COMPANY'S INSTRUMENTS

The Company has completed its own preliminary testing of the MC-18. Independent
secondary testing of the Instrument will take place at six sites nationwide
using standard industry procedures. These tests are scheduled to begin in
December 1998 and are expected to be completed by early 1999. The field test
participants include Keystone and other private companies which are among the
largest processors of beef and chicken in the United States, and two USDA
government labs.

The Company will provide each field test participant with an Instrument and Test
Kits. To check the accuracy of the MC-18, the participants will conduct parallel
tests of the same food samples using both the MC-18 and other commonly used
testing methods. Participants have agreed to communicate the test results to the
Company on a weekly basis. No compensation

30
<PAGE> 32

will be paid by the Company for the field testing, although each participant
will be permitted to retain the Instrument following completion of the testing.

PRODUCTION

The Company has not commenced commercial production or sold any Instruments or
Test Kits. All Instruments made to date are prototypes, having been assembled
and calibrated by the Company's consulting engineers in Fremont, California,
together with the cartridges. The reagent packs containing the chemicals used in
the Company's testing process are produced in Folcroft, Pennsylvania, in
laboratory space leased from Keystone.

The Company anticipates that it will assemble Instruments and Test Kits from
components purchased from third parties at a facility to be leased in the
Philadelphia area. See "Business -- The Company's Offices." At that location,
the Company expects to produce cartridges, purify pathogen specific antibodies
which it will use to coat the resistors in the cartridges and assemble and
package the complete cartridges. The Company will also fill, seal and package
the reagent packs. The complete cartridges and the reagent packs will be sold
together as Test Kits.

In July 1997, the Company entered into a Product Development Agreement (the
"Development Agreement") with Rick T. Smethers and W. Brian Greger
(collectively, the "Engineers") for the design and development of a testing
instrument. The Engineers have delivered to the Company nine prototype
Instruments contracted for and plastic injection tooling for Test Kit
production. Under the Development Agreement, the Engineers are required to
provide the documentation for assembling the Instrument, the tools or fixtures
for assembly and all computer software source codes. The Company committed to
pay the Engineers a fee of $1,130,000 for their development services, plus
reimbursement of the cost of materials and other expenses approved by the
Company. Of that sum, $70,000 remains outstanding and is payable upon delivery
of the remaining prototype. In order to facilitate the Company's transition to
commercial production, the Company and Mr. Smethers orally agreed to extend Mr.
Smethers' consulting arrangement for an additional seven month period which
commenced on August 1, 1998. See "Management -- Consultants."

The Engineers are required to maintain in confidence the information developed
or acquired by them in providing services to the Company and cannot develop
equipment similar to the MC-18 for themselves or a third party during the term
of the Development Agreement and for a period of one year thereafter.

ASSEMBLY; COMPONENTS

The Company has no experience in purchasing and storing components or
assembling, packing and shipping its products. It currently lacks the facilities
and staff to carry out any of these functions and must rely upon the Engineers
to perform these operations. See "Risk Factors -- Lack of Production
Experience."

The Instrument is currently assembled from components purchased from a variety
of manufacturers. A majority of the components are custom designed but could be
obtained from a number of vendors using tooling owned by the Company. Certain
stock items, most significantly the pump used in the Instrument, are obtained
from a single source. Inability to purchase this component could require
redesign of the Instrument.

The mechanical portion of the Instrument is assembled at a facility in Fremont,
California operated by Mr. Smethers, who has built all of the prototypes to
date. The cartridges for the Test Kits are also assembled in Fremont at a
facility adjacent to that of Mr. Smethers. The

31
<PAGE> 33

antibodies are attached to the resistors in the laboratory leased by the Company
from Keystone in Folcroft, Pennsylvania and then shipped to Fremont for sealing
and packaging. Reagent packs are made and sealed in Folcroft. The electronic
assembly and software installation have been performed by Mr. Greger and the
Company's software consultant, Wendy Whitcomb, at a facility in San Francisco,
California. Final testing and calibration have been performed jointly by Messrs.
Smethers and Greger and Ms. Whitcomb.

The Company estimates that a technician/assembler, using pre-assembled
electronic and molded parts, could build one Instrument in two days following
procedures established by Mr. Smethers. Final testing and calibration could be
performed by a senior level electronic technician.

Upon the acquisition of an office and production facility in the Philadelphia
area, all operations and assembly activities will be relocated to such facility
from the Fremont and Folcroft facilities. The Company believes that persons
having the necessary skills for assembly and testing of the Instrument are
available in the Philadelphia area. The equipment required for commercial
production of the Test Kits is available from a variety of sources. The
Company's new facility will contain a room equipped with controls to monitor air
flow and air quality, for preparation of the Test Kits.

The Company has not field tested the MC-18 in the type of long-term continuous
use expected to occur in commercial operations. Consequently, the Company does
not have sufficient data to confirm that the Instrument will meet the industry
standard of 2,400 hours of operation as the mean time before failure. The
Company expects that specifications for the components incorporated into the
Instrument will meet or exceed that standard.

MARKETING OF THE COMPANY'S PRODUCTS

The Company has entered into an agreement giving VWR exclusive rights to market
the Instruments and Test Kits to end users (the "Marketing Agreement"). VWR is a
worldwide distributor of laboratory supplies, chemicals and equipment. It
operates regional distribution centers, service facilities and conducts business
in approximately 50 countries worldwide.

Under the terms of the Marketing Agreement, VWR will be the exclusive
distributor of the Company's food testing products in each of the countries in
which VWR has operations. VWR has agreed that during the term of the Marketing
Agreement, it will not market or distribute products which compete with the
Company's products. The Instruments and Test Kits will be purchased by VWR as a
reseller, with no right of return. VWR has agreed to commit approximately
$800,000 to launch the Company's products and an additional $275,000 per year to
promote the sale of the Company's products. These funds are expected to be used
for trade shows, demonstration Instruments, presentations to institutional
buyers, marketing materials, and product literature.

The Marketing Agreement has an initial term of three years and provides for
automatic annual renewal unless either the Company or VWR elects not to renew.
The Company has the right to terminate the Marketing Agreement at the end of any
six month period if VWR fails to achieve certain levels of sales for any six or
twelve month period. These goals will be established by the Company and VWR upon
completion of field testing of the MC-18. The Company also can terminate the
Agreement upon 60 days' notice if there is a change in control of VWR.

Although the Company does not expect to employ a sales and marketing staff, its
executive and scientific personnel expect to work closely with VWR in developing
marketing strategies and planning and implementing events to demonstrate the
Company's products. In view of

32
<PAGE> 34

VWR's role as the exclusive distributor and reseller of its products, the
Company does not expect to have a significant budget for these activities.

Success of the Company and its revenue stream are substantially dependent on the
sales and marketing efforts and the financial condition of VWR. See "Risk
Factors -- Dependence on VWR."

SERVICE AND SUPPORT

The Company will provide a one-year warranty on the Instrument, covering parts
and labor, and has obtained product liability insurance. For certain repairs
during the warranty period, the Company will provide a replacement Instrument,
by overnight courier service, for use while the customer's Instrument is being
repaired at the Company's facility. The Company also intends to develop a field
service team to install the Instruments, provide training, and answer customer
inquiries. In the case of high volume users, a Company employee may visit the
customer's location to make repairs or upgrade its Instruments.

RESEARCH AND DEVELOPMENT

The Company has expended approximately $3.2 million for research and development
activities during the past three years to develop the MC-18 and the Test Kits.
The Company intends to use a portion of the proceeds of the Offering to continue
research and development in the following four areas: (i) development of its own
antibodies, reagents and other materials used in its testing procedures; (ii)
refinement of the current tests developed by the Company to increase their
sensitivity and specificity; (iii) design and development of new products for
non-food markets, such as medical or environmental; and (iv) engineering
enhancements to increase the speed and capacity of the MC-18 and the design and
development of additional instruments. A discussion of each of these activities
is set forth below.

DEVELOPMENT OF ANTIBODIES AND REAGENTS. The Company currently purchases
antibodies, reagents and other testing materials from third parties. The Company
expects to devote significant resources to the development of its own
antibodies, reagents and other materials used in its testing to decrease, and
possibly eliminate, the Company's dependence on third party suppliers for these
products and to enable the Company to maintain quality control. The Company also
expects to develop antibodies to detect other food-borne pathogens.

REFINEMENT OF CURRENT TESTS. The Company intends to refine its existing
technology by modifying testing procedures and the materials used in the tests
to increase the sensitivity and specificity of its current pathogen assays.
Areas of development to increase the speed of the overall test will include
selective growth during the enrichment phase and methods of concentrating
pathogens.

EXPANSION IN HEALTH-RELATED FIELDS. The electroimmunoassay technology developed
by the Company has potential applications in other testing fields. The Company
may design and develop new test products for medical and environmental use.
Electrical detection of molecular interactions is also applicable to other types
of molecules such as nucleic acids. In parallel with its development of new
immunoassays, the Company intends to work on the development of alternative
methods of pathogen detection, such as methods which use nucleic acid sequences
instead of antigens.

ENGINEERING RESEARCH AND DEVELOPMENT. The Company intends to continue
engineering enhancements to increase the speed and capacity of the MC-18 and to
develop additional instruments suitable for large scale testing and small scale
on-site testing of pathogens.

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<PAGE> 35

GOVERNMENT REGULATION OF FOOD PRODUCTS

There are substantial governmental regulations regarding procedures for food
handling, transportation, storage, inspection and sanitation to prevent food
contamination. Originally, the federal government's regulatory system for meats
and poultry relied primarily on visual and olfactory methods of food inspection
on a carcass-by-carcass and plant-by-plant basis. These methods were appropriate
when the first major meat inspection law was passed in 1906 and animal diseases
and plant sanitation were the primary concern. This is no longer the case.
Notwithstanding modernization and improvement of government inspection programs
over the years, government regulators have determined that there is a "critical
gap" in its ability to protect public health.

The FSIS has implemented new regulations to address these deficiencies. These
regulations require that all slaughter houses and processing plants adopt a
system of controls known as Hazard Analysis of Critical Control Points ("HACCP")
to prevent food safety hazards. To verify that the processing plants' HACCP
systems are effective in reducing contamination from harmful bacteria, meat and
poultry slaughter plants are now required to conduct science-based testing for
generic E. coli, as an indicator of the presence of pathogenic bacteria such as
Salmonella, E. coli O157:H7 and Campylobacter. The frequency of generic E. coli
testing required by the FSIS is based upon production volume. The FSIS
regulations require that testing for generic E. coli must be performed using an
AOAC Official Method or a method approved by another scientific body meeting
certain criteria. The MC-18 is not designed to test for the presence of generic
E. coli, although the Company intends to add this capability in the future. The
Company believes, however, that food processors will continue to conduct testing
for Salmonella, E. coli O157:H7, Campylobacter and Listeria in parallel with the
mandated testing for generic E. coli.

The FSIS has also established standards for Salmonella pathogen reduction and
conducts tests itself to ensure compliance at individual sites. The frequency
and intensity of Salmonella testing will be determined by past plant performance
and other factors. Implementation of the FSIS regulations is based upon plant
size and will continue to be phased in during the next several years.

In addition to the FSIS regulations, other governmental action has occurred
which is likely to increase the market demand for food testing technology. In
1997, President Clinton outlined a new national food safety program supported by
a $43 million budget. A Presidential order recently established a new National
Food Safety Council under the leadership of the Secretary of Agriculture. An
objective of this Council is to increase collaboration among the federal
agencies involved in food safety, including the FDA, the FSIS, the CDC and the
Environmental Protection Agency, and to identify strategies for improving
testing and prevention of food contamination. The agencies involved have a
responsibility for the safety of other classes of foods, including fruits,
juices and vegetables, and it is possible that a government agency will adopt
regulations affecting the production and importation of these food products
requiring pathogen testing.

In addition to mandatory testing of meat and poultry products, diagnostic tests
are used to detect the presence of food-borne pathogens in grains. Further,
inspection of produce and canned goods which enter a U.S. airport or seaport is
required by the FDA and mandatory inspection programs for the U.S. seafood and
fish industry became effective in 1998.

The Company believes that the recent regulatory changes discussed above will
create a greater market demand for a testing process that can quickly and
accurately detect the

34
<PAGE> 36

presence of harmful levels of pathogens and easily record this data as a means
of verifying that a standard of safety has been met.

ACCREDITATION OF FOOD TESTING METHODS

There is no governmental endorsement or certification of food testing methods in
the United States, and the Company is not required to obtain any governmental or
other approvals. However, under FSIS regulations, testing for generic E. coli
must be performed using an AOAC Official Method or a method approved by another
scientific body meeting certain criteria. The MC-18 performs tests for the
pathogenic strain E. coli O157:H7 but not for generic E. coli and, therefore,
the FSIS regulations governing generic E. coli testing methods do not currently
apply to the MC-18. However, in the future, the FSIS could require that
science-based testing for all food-borne pathogens be conducted using an AOAC
Official Method. See "Risk Factors -- Government Regulation."

Two of AOAC's endorsements are certification as an AOAC Performance Tested
method and approval of a testing method as an AOAC Official Method. Where
proprietary testing methods are being evaluated, the AOAC provides third party
review to confirm the manufacturer's performance claims. Evaluation involves the
submission of data with the application, expert review, and testing by
independent laboratories. Successfully tested methods carry the AOAC Performance
Tested logo. This AOAC review and approval process for proprietary test methods
generally takes up to twelve months to complete.

In order to obtain the status as an AOAC Official Method, a testing method is
subjected to rigorous scientific review of performance results, including
specificity, accuracy and repeatability. The testing method is also evaluated to
determine if it is applicable to a wide range of food types. The review and
approval process to become an AOAC Official Method generally takes at least two
years and can be substantially longer. AOAC Official Methods are written into
government regulations, product specifications, product acceptance criteria and
relied upon in legal proceedings.

The Company will seek certification of its testing process by the AOAC in order
to carry the AOAC Performance Tested certification mark and approval as an AOAC
Official Method. Though not currently required, the inability to obtain either
or both of these could have a material adverse effect on the Company's ability
to market its technology successfully.

Certain foreign countries may have more rigorous regulations governing food
testing products than the United States. The Company intends to seek any
required approvals or certifications from foreign governments or applicable
international agencies in order to sell its products worldwide. It is possible
that the Company may not obtain such approvals. See "Risk Factors -- Government
Regulation."

INTELLECTUAL PROPERTY

The Company currently holds three patents issued by the United States Patent and
Trademark Office (the "USPTO") relating to its technology. These patents were
issued in 1988, 1992 and 1994 and cover the Company's electroimmunoassay
methodology for creating a binding reaction between antibodies and bacteria
which can be measured electrically to detect the presence of pathogens. Rights
under these three patents expire in 2006, 2010, and 2012, respectively. Except
for Canada and Japan, the Company does not have patent protection for its
initial technology in any foreign countries. See "Risk Factors -- Reliance on
Patents and Other Proprietary Rights."

35
<PAGE> 37

The Company has applications pending with the USPTO for two additional patents.
The first application, filed in January 1998, is a further development of the
technology described in the three existing patents. A corresponding application
was filed with the World Intellectual Property Organization under the Patent
Cooperation Treaty in contemplation of obtaining foreign patent protection.

The second U.S. patent application was filed in July 1998 and covers certain
aspects of the design and operation of the MC-18 and the Test Kits. If the
patent is issued as filed, both the MC-18 and the Test Kits would be
substantially protected from duplication by third parties. The Company intends
to pursue international patent protection for the technology described in the
July 1998 application.

During 1998, the Company also filed an "intent to use" application to register
its name as a trademark with the USPTO. This application requires that the
Company demonstrate actual use of the mark in commerce prior to its final
registration by the USPTO.

COMPETITION

In the past, methods of identifying pathogens relied on biochemical measurements
in test tubes and growth measurements in specific culture media. These methods
are time consuming, require highly trained technicians and are not suitable for
rapid screening of large numbers of samples. Today, most methods of pathogen
detection use either immunoassays or polymerase chain reaction (PCR) based
assays. However, the Company is aware that certain competitors have developed
proprietary enrichment processes for E. coli O157:H7 which are substantially
faster than the third party enrichment processes currently available for use
with the MC-18.

There are numerous immunoassays and PCR based assays currently available which
compete with the Company's products. The Company believes that competitors
developing pathogen tests in the future will continue to use either immunoassays
or PCR based assays. Alternative testing methods compete based on accuracy,
efficiency, ease of use and cost effectiveness. The Company believes that its
technology, Instrument and Test Kits offer competitive advantages which, in the
aggregate, are not currently available in other testing methods. See
"Business -- Advantages of the Company's Technology."

Virtually all of the Company's competitors have substantially greater financial
and other resources than the Company. A description of some of the Company's
competitors and their products is set forth below.

IMMUNOASSAYS. The most common form of immunoassay is the lateral flow test
which uses an assay card or dipstick. If a pathogen is present in the test
sample, a colored reaction line is formed. Competitors utilizing this technology
include Neogen Corporation, Bio-Control and Meridian Diagnostics. After
enrichment, these types of tests can be completed in only 20-30 minutes. A
further advantage of this type of test is that it uses disposable cards and
requires no instrument. However, the colored line which shows the test results
must be read within minutes of completion of the test or it disappears. Another
disadvantage is that test results in borderline cases are open to subjective
interpretation by technicians. In addition, the lateral flow test requires
manual recording of test results by a technician, while the MC-18 records the
results automatically.

Other immunoassays utilize an enzyme linked reaction that produces a color that
can be read by eye or by a machine. In this class of tests are products by
Tecra, Organon Technika and Foss Electric. One of these products uses an
automated instrument but is limited to testing for a single pathogen in each
sample.

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<PAGE> 38

PCR BASED ASSAYS. PCR assays test for the presence of the DNA of a specific
pathogen. If the pathogen's DNA is present in a food sample, it is amplified by
the PCR. PCR assays have the desired sensitivity, but tend to be labor intensive
and may give false positives from the presence of dead bacteria in the sample.
At present, such tests require a skilled technician to read or analyze the test
results. One PCR based assay uses a manual test that develops a machine-readable
color reaction. Other manufacturers of PCR based assays include Qualicon, a
subsidiary of DuPont Corporation, Perkin-Elmer and Biomerieux.

ENVIRONMENTAL MATTERS

The chemicals and reagents used in the Company's testing process constitute
materials routinely found in testing labs which the Company believes do not
present a substantial environmental risk. In order to minimize the impact of the
Company's research and production activities on its local environment, the
Company will treat all samples and other material to eliminate the bacteria
prior to disposal. The Company intends to dispose of all hazardous substances in
compliance with federal, state and local environmental laws and regulations. The
Company does not believe that the cost of such compliance will have a material
adverse affect on its business.

ADMINISTRATIVE SERVICES AGREEMENT

The Company entered into an Administrative Services Agreement with Keystone on
October 1, 1998. Under the Agreement, the Company leases laboratory space and
utilities at Keystone's Folcroft, Pennsylvania facility and uses Keystone's
executive, administrative, accounting and technical personnel. The Company has
agreed to pay Keystone approximately $311,000 for use of Keystone's premises and
personnel during 1997 and 1998 prior to the date of the Agreement, $150,000 of
which was attributable to Herbert Lotman's services. The Company is indebted to
Keystone for additional expenses incurred prior to the date of the Agreement
aggregating $78,000. The Company is obligated to pay Keystone fees of $20,000
per month for personnel and $1,200 per month for the space and utilities. These
fees are intended to be based on Keystone's cost of supplying such services. The
term of the Agreement is on a month-to-month basis, subject to the Company's
right to terminate or reduce the monthly charge incrementally as the Company
increases its staff and occupies its own facilities. See
"Management -- Compensation Committee Interlocks and Insider Participation."

EMPLOYEES

Currently, the Company employs only five executive officers and one technician,
all on a part-time basis. The Company uses executive, administrative, accounting
and technical personnel employed by Keystone under the Administrative Services
Agreement described above. The Company also has four consultants who are
scientists or engineers. After leasing its corporate office and production
facility, the Company expects to hire full-time executives and 20 to 30 people
for production of the Instruments and Test Kits. An additional 15 to 20
employees are expected to be hired for the Company's research and development
activities, to be headed by Dr. Colin Barnstable. See "Use of Proceeds" and
"Management."

THE COMPANY'S OFFICES

The Company's corporate offices are temporarily located at 321 Spruce Street,
Suite 525, Scranton, Pennsylvania, 18503 and its telephone number is (717)
207-7200. This office space is provided free of charge by Mr. Ginader, an
executive officer and director of the Company.

37
<PAGE> 39

A portion of the proceeds of the Offering will be used to lease, renovate and
equip commercial space located in the Philadelphia area. This space will be used
for the Company's corporate offices, production facilities and research and
development. It is anticipated that the Company will occupy this space in early
1999.

COMPANY BACKGROUND

The Company was formed in March 1992 as an Illinois corporation under the name
Crystal Medical Products, Inc. and initially engaged in the development and
marketing of arterial bandages. The Company subsequently became involved in
developing technology to test for pathogens in food products and acquired
patents and other intellectual property rights related to the technology.

As discussed below in "Business -- Legal Proceedings," in 1996 the Company
voluntarily filed for bankruptcy protection because it had insufficient capital
and borrowing capacity to continue operations. Under the Company's bankruptcy
Plan of Reorganization, the Company's former management was replaced by new
management, all shares of Common Stock then outstanding were canceled, and
stockholders were given the option to purchase new shares at $0.69 per share.

The Company's arterial bandage business was transferred to a creditors'
committee pursuant to the bankruptcy Plan of Reorganization. The Company
retained its patents and other rights relating to the food testing technology,
subject to a claim by one of the original inventors of the technology, which
claim has been settled.

Currently, the Company's only remaining obligations under the Plan of
Reorganization are payment of a $500,000 debenture to a creditors' committee and
the issuance of 21,460 shares of Common Stock to certain unsecured creditors in
lieu of cash distributions. The $500,000 debenture will be repaid using a
portion of the proceeds of the Offering. See "Use of Proceeds."

In October 1998, the Company's Board of Directors and stockholders approved, and
management has implemented, the merger of the Company into a newly-formed
Delaware subsidiary so that the Company now operates as a Delaware corporation
under the name Molecular Circuitry, Inc.

LEGAL PROCEEDINGS

The Company filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Northern
District of Illinois, Eastern Division (the "Court") on May 24, 1996. The Court
approved and confirmed the Company's Plan of Reorganization (the "Plan of
Reorganization") under an order entered February 5, 1997 (the "Bankruptcy
Order").

Under the Plan of Reorganization, the Company was discharged of liability on all
pre-petition claims filed by creditors (except for certain specified claims
which were subsequently settled by the Company) in exchange for the Company's
transfer to a creditors' committee (the "Committee") of certain assets to be
administered for the benefit of unsecured creditors. These assets consisted of
(i) a $350,000 cash payment which was applied to administrative expenses and to
an initial distribution to unsecured creditors, (ii) the Company's $500,000
debenture due February 19, 2001 bearing interest at 5% per year payable
quarterly (the "Creditors' Debenture"), (iii) certain patents which are no
longer owned by the Company, and (iv) the assignment of the Company's
pre-petition claims and causes of action against third parties.

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<PAGE> 40

So long as the Creditors' Debenture remains outstanding, the Committee is
entitled to appoint a nonvoting member to the Company's Board of Directors, but
has not exercised its right to do so. The Creditors' Debenture will be repaid
using a portion of the proceeds from the Offering.

Pursuant to the Plan of Reorganization, two unsecured creditors elected to
convert future cash distributions into shares of Common Stock at the rate of
$0.69 per share. To date, these creditors have converted an aggregate of
$2,897.22 of distributions into 4,198 shares of Common Stock. The Committee has
advised the Company that it expects to pay additional distributions to these
creditors approximating $14,807, which will be converted into 21,460 shares of
Common Stock.

After the Committee has resolved all Company claims against third parties, the
Company will seek a final decree from the Court closing the bankruptcy
proceedings. While the Court continues to have jurisdiction over the Company
until such time as the final decree is entered, the Company's only remaining
obligations under the Plan of Reorganization are the payment in full of the
Creditors' Debenture and the issuance of additional shares of Common Stock to
certain creditors in lieu of cash distributions as described above.

39
<PAGE> 41

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth certain information with respect to the Company's
executive officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Herbert Lotman.................... 65 Chairman of the Board, President, Chief
Executive Officer and Director
Marvin L. Sears................... 70 Executive Vice President, Chief
Scientific Officer and Director
Colin J. Barnstable............... 46 Vice President for Research and
Development and Director
Michael J. Mardy.................. 48 Acting Chief Financial Officer
George W. Ginader................. 62 Secretary, Treasurer and Director
John W. Pelino.................... 66 Director
Dale L. Huffman................... 67 Director
</TABLE>

The Board of Directors is divided into three classes serving staggered three
year terms. The terms of Drs. Barnstable and Huffman expire in 1999, those of
Messrs. Ginader and Pelino, in 2000, and the terms of Dr. Sears and Mr. Lotman
will expire in 2001.

Herbert Lotman. Mr. Lotman has served as a director of the Company since
February 1997 and as Chairman of its Board of Directors since July 1998. Mr.
Lotman was elected Chief Executive Officer of the Company in September 1998. He
previously served as President from February 1997 until July 1998 and was again
elected President in October 1998. Mr. Lotman is the founder, and has been for
more than five years, Chairman, Chief Executive Officer and a director of
Keystone Foods Corporation, a privately-held multi-national company engaged in
meat and poultry processing and distribution, with which Mr. Lotman has been
associated since 1973. Keystone is a principal stockholder of the Company and a
member of Kingco LLC, a Delaware limited liability company. See "Security
Ownership of Certain Beneficial Owners and Management"; "Description of Certain
Indebtedness"; and "Management -- Compensation Committee Interlocks and Insider
Participation." Mr. Lotman also serves on the Board of First Union Corporation,
a publicly-held bank holding company, as Chairman of the Board of the
Philadelphia College of Osteopathic Medicine, and on the boards of several
charitable organizations.

Dr. Marvin L. Sears. Dr. Sears has served as a director of the Company since
July 1998 and as Executive Vice President and Chief Scientific Officer since
October 1998. Dr. Sears previously served as President of the Company from July
1998 to October 1998. Dr. Sears is a professor and former Chairman of the
Department of Ophthalmology and Visual Science at Yale University School of
Medicine, a department which he created. Dr. Sears received his B.A. from
Princeton and his M.D. from the College of Physicians and Surgeons at Columbia
University. From 1983 to 1988, Dr. Sears served as a consultant for American
Hoechst Corporation. Prior thereto, from 1973 to 1978, Dr. Sears served as a
consultant to Merck, Sharp & Dohme where his work in adrenergic pharmacology of
the eye resulted in 1978 in the development and approval of timolol, a beta
adrenergic blocker, for the treatment of glaucoma. Dr. Sears received the
Friedenwald Lectureship in 1977, and has received eight other awards for his
research. An endowed chair was established in his name at Yale in 1990.

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<PAGE> 42

He is the author of more than 200 scientific articles. Dr. Sears was a
structural organizer and first consultant for the National Eye Institute of the
National Institutes of Health.

Dr. Colin J. Barnstable. Dr. Barnstable has served as a director of the Company
since July 1998 and as Vice President for Research and Development since October
1998. Dr. Barnstable previously served as Executive Vice President and Chief
Scientific Officer of the Company from July 1998 to October 1998. Dr. Barnstable
is the Director of the Yale Vision Research Center of the Yale University School
of Medicine, a position he has held since 1995. From 1992 through 1995, Dr.
Barnstable was a professor at the Yale University School of Medicine, in the
Department of Ophthalmology and Visual Science and Section of Neurobiology. Dr.
Barnstable received his B.A., M.A. and D.Phil. from Oxford University and earned
an M.A. at Yale University. He has received a number of awards and honors and is
the author of more than 125 scientific articles. He has been engaged in research
and development of monoclonal antibodies for the past twenty years and has
developed a number of antibodies that are marketed commercially.

Michael J. Mardy. Mr. Mardy has served as the Acting Chief Financial Officer of
the Company since October 1998. Mr. Mardy has been the Executive Vice President
and Chief Financial Officer of Keystone since August 1996. From 1993 to 1996, he
served as Senior Vice President and Chief Financial Officer of Nabisco Biscuit
Company. Mr. Mardy held various senior level financial positions at Nabisco,
Inc. and its successor corporations between 1980 and 1996. Mr. Mardy received
his B.A. from Princeton University and his M.B.A. from Rutgers University.

George W. Ginader. Mr. Ginader has served as a director of the Company since
February 1997 and as its Secretary and Treasurer since July 1998. Mr. Ginader
previously served as Chairman of the Board, Secretary and Treasurer from
February 1997 until July 1998. Mr. Ginader is a founder and principal of Ginader
Jones & Co., LLP, certified public accountants, located in Scranton,
Pennsylvania, and has been associated with that firm (or its predecessor) for
the past 25 years. Mr. Ginader also serves as a director of Keystone. Mr.
Ginader is a graduate of Wilkes University and is a certified public accountant.

John W. Pelino. Mr. Pelino has served as a director of the Company since
October 1998. Mr. Pelino has been engaged in the private practice of law in
Philadelphia, Pennsylvania for the past 39 years and, since 1978, with the firm
of Pelino & Lentz, P.C. Mr. Pelino also serves as a director of Keystone. Mr.
Pelino is a graduate of Duquesne University and the Dickinson School of Law.

Dr. Dale L. Huffman. Dr. Huffman has served as a director of the Company since
March 1998. Dr. Huffman is Professor Emeritus of Meat and Animal Sciences at
Auburn University and Director Emeritus of its Food Technology Institute, and
has been associated with Auburn University since 1963. Dr. Huffman has served as
a consultant to the Company since September 1996. See
"Management -- Consultants." He received a B.S. from Cornell University and an
M.S. and Ph.D. in Food Science from the University of Florida.

Under the terms of the Bankruptcy Order, a creditors' committee has the right to
appoint a non-voting director to the Board of Directors of the Company to serve
until the repayment of the Creditors' Debenture held by the committee. To date,
the committee has not designated a person to serve on the Company's Board.
Following the closing of the Offering, a portion of the proceeds will be used to
pay all amounts owing under the terms of that debenture, and the committee's
right to name a director will terminate.

After completion of the Offering, the Company intends to expand its Board of
Directors to include at least two additional non-employee directors.

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<PAGE> 43

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors currently has an Audit Committee and a Compensation
Committee. The Audit Committee is responsible for reviewing the Company's
accounting controls and recommending to the Board of Directors the engagement of
the Company's outside auditors. The members of the Audit Committee are Messrs.
Lotman, Pelino and Ginader.

The Compensation Committee is responsible for reviewing and approving the amount
and type of consideration to be paid to senior management and also serves as a
committee for the granting of stock options under the Company's Stock Option
Plan. The members of the Compensation Committee are Messrs. Lotman, Pelino and
Ginader.

All directors receive reimbursement for reasonable out-of-pocket expenses
incurred in connection with attending meetings of the Board of Directors. No
directors currently receive separate cash compensation for services rendered as
a director. Each of the directors received options to purchase shares of Common
Stock. See "Management -- Stock Options." It is anticipated that, in the future,
nonemployee directors may be compensated either with cash payments, grants of
options or a combination of both.

EXECUTIVE COMPENSATION

Currently, Drs. Sears and Barnstable are the only executive officers of the
Company who receive compensation for their services in that capacity. Drs. Sears
and Barnstable, formerly consultants to the Company, commenced their employment
with the Company on September 1, 1998 and each has entered into an employment
agreement with the Company. See "Management -- Employment Agreements." Dr.
Huffman serves as a paid consultant to the Company. See "Management --
Consultants."

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<PAGE> 44

The following table summarizes the compensation earned by each of the persons
who served as the Chief Executive Officer of the Company during 1997 or the nine
months ended September 30, 1998 (the "Named Executives"). No other executive
officer's compensation exceeded $100,000 during either 1997 or the nine months
ended September 30, 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS COMPENSATION
- --------------------------- ---- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Herbert Lotman(1)............... 1998 $ -- 40,000 $ --
Chairman of the Board, 1997 $ -- -- $ --
President, Chief Executive
Officer and Director
Marvin L. Sears(2).............. 1998 $ -- 500,000 $ --
Executive Vice President
and Chief Scientific Officer
James G. Timmins(3)............. 1998 $10,417 -- $76,616(4)
Prior Chief Executive 1997 $63,233 -- $ --
Officer
</TABLE>

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

(1) Mr. Lotman will not be paid compensation until after the close of the
Offering. Thereafter, the Company expects to pay Mr. Lotman annual
compensation of not less than $200,000. Included in the amount owing by the
Company to Keystone as of September 30, 1998 under the Administrative
Services Agreement was $60,000 attributable to charges for Mr. Lotman's
services during 1997 and $90,000 for his services during 1998, through
September 30.

(2) Dr. Sears has received an aggregate of $75,000 in consulting fees through
September 30, 1998 and will receive a $100,000 bonus on December 1, 1998.

(3) Mr. Timmins served as the Chief Executive Officer of the Company from August
1, 1997 until January 31, 1998.

(4) Consists of amounts paid to Mr. Timmins between February and August 1998 in
connection with a severance package from the Company and health insurance
benefits.

CONSULTANTS

Drs. Sears and Barnstable have provided consulting services with respect to the
Company's research and development activities since the beginning of 1998. For
these consulting services, Dr. Sears received an aggregate of $75,000 through
September 30, 1998, paid at the rate of $25,000 per quarter, and Dr. Barnstable
received an aggregate of $37,500 through September 30, 1998, paid at the rate of
$12,500 per quarter.

Dr. Huffman has served as a consultant to the Company since September 1996 in
connection with its research into food testing. Under an oral arrangement with
the Company, he receives $5,000 per month plus a per diem of $1,000 for each day
of service in excess of five days per month and reimbursement of expenses.
During 1997, Dr. Huffman was paid an aggregate of

43
<PAGE> 45

$128,000 and was also entitled to receive 40,000 shares of Common Stock, which
were issued to him on September 10, 1998. In 1998, the Company has paid $65,000
in consulting fees to Dr. Huffman through September 30.

Rick T. Smethers and W. Brian Greger were hired by the Company in July 1997 as
engineers to design and develop the MC-18 and build ten prototypes. Under such
arrangement, the Company paid Mr. Smethers $366,000 during 1997 and $191,000 in
1998 through September 30. Mr. Greger and another engineer, Wendy Whitcomb,
together were paid $447,000 during 1997 and $174,000 for 1998 through September
30. Approximately $70,000 is still owed to Mr. Greger and Ms. Whitcomb. The
Company and Mr. Smethers orally agreed to extend Mr. Smethers' consulting
arrangement for an additional seven month period which commenced on August 1,
1998 in order to facilitate the Company's transition to commercial production.
See "Business -- Production."

EMPLOYMENT AGREEMENTS

Drs. Sears and Barnstable are employed under Employment Agreements dated
September 1, 1998, for a term of five years at annual salaries of $200,000 for
Dr. Sears and $100,000 for Dr. Barnstable, which commenced November 1, 1998.
Pursuant to the Employment Agreements, they receive signing bonuses of $100,000
and $50,000, respectively, which the Company expects to pay on December 1, 1998,
and certain other executive benefits. Drs. Sears and Barnstable also have been
granted stock options. See "Management -- Stock Options."

The Employment Agreements provide for automatic renewal for successive one year
terms, unless terminated by a party on at least 60 days' prior written notice.
Each of the Employment Agreements also provides for termination upon the
employee's death, the discharge of the employee for cause, or if the Offering is
not consummated by January 30, 1999. If a change in control of the Company
results in the employee's resignation, the employee is entitled to be paid the
salary due under his Employment Agreement for the remainder of the term. The
term "change in control" is defined in the Employment Agreements as a sale of
the Company or an election contest resulting in a change of more than a majority
of the directors.

CONFIDENTIALITY AGREEMENTS

The Company has entered into confidentiality agreements with Drs. Sears and
Barnstable and each of its consultants, as well as with the persons producing
and assembling its Instruments and Test Kits.

STOCK OPTIONS

The Company has adopted a Stock Option Plan (the "Plan") pursuant to which
employees are eligible to receive awards of stock options. Options to purchase
an aggregate of 1,500,000 shares of Common Stock may be granted under the Plan.
The Company's Board of Directors administers the Plan. Subject to the terms of
the Plan, the Board of Directors selects the employees to receive awards under
the Plan and determines the size and other terms of the awards granted
thereunder. The Company intends that any options granted under the Plan after
the Offering will be exercisable at a price per share equal to the fair market
value of the Common Stock at the date of the grant.

In September 1998, the Board of Directors granted Drs. Sears and Barnstable ten
year options to purchase 500,000 and 250,000 shares of Common Stock,
respectively, at a price of $1.00 per share under the Plan. These options vest
in equal annual installments beginning on

44
<PAGE> 46

January 31, 1999, over a period of six years for Dr. Sears, and over a period of
five years for Dr. Barnstable, with the vesting schedules accelerated under
certain circumstances.

Also in September 1998, the Company issued to each of Messrs. Lotman, Ginader
and Pelino and Dr. Huffman options to purchase 40,000 shares of Common Stock. In
each case, the option exercise price is $1.00 per share, the options are
immediately exercisable and the options expire on September 10, 2003. These
options were granted outside the Plan.

The following table summarizes information regarding options granted to each of
the Named Executives during the nine months ended September 30, 1998. No options
were granted to any Named Executive during 1997.

OPTION GRANTS FOR NINE MONTHS
ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- --------------------------------------------------------------------------- ------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTION EMPLOYEES IN EXERCISE EXPIRATION
GRANTED(2) FISCAL YEAR PRICE DATE 5% 10%
----------- ------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Herbert Lotman........ 40,000 5.1% $1.00 10/10/03 $ 616,012.17 $ 789,748.29
Marvin L. Sears....... 500,000 63.3% $1.00 8/31/08 $9,882,056.99 $16,242,248.95
James G. Timmins...... -- -- -- -- -- --
</TABLE>

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

(1) Illustrates the value that might be received upon exercise of the options
immediately prior to their expiration at the specified compound rate of
interest based on the market price on the date of grant. At the time of
grant there was no established public trading market for the Common Stock
and, accordingly, the market price is based on the assumed Offering Price.

(2) The options granted to Mr. Lotman were immediately exercisable, and the
options granted to Dr. Sears vest in six equal annual installments
commencing on January 31, 1999.

45
<PAGE> 47

STOCK OPTION EXERCISES AND HOLDINGS

The following table sets forth the value of options held by each of the
Named Executives at September 30, 1998. None of the Named Executives exercised
any options during 1998.

AGGREGATED OPTION EXERCISES IN 1998 AND
OPTION VALUES AT SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Herbert Lotman.................. -- -- 40,000/-- $440,000/--
Marvin L. Sears................. -- -- --/500,000 --/$5,500,000
James G. Timmins................ -- -- --/-- --/--
</TABLE>

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

(1) There was no established public trading market for the Common Stock as of
September 30, 1998, and accordingly, the values are based on the difference
between the assumed Offering Price and the option exercise price.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Lotman, Ginader and Pelino, all members of the Compensation Committee of
the Board of Directors, are also directors of Keystone, which is a principal
stockholder of the Company and a member of Kingco, which has made loans to the
Company. See "Security Ownership of Certain Beneficial Owners and Management"
and "Description of Certain Indebtedness." In addition, Mr. Lotman serves as the
Company's President and Chief Executive Officer and Mr. Ginader serves as the
Company's Secretary and Treasurer.

CAPITALIZATION OF THE COMPANY. All of the issued and outstanding capital stock
of the Company was canceled under the terms of the Plan of Reorganization for
the Company which was approved by the Court on February 5, 1997. Pursuant to the
Plan of Reorganization, Kingco, which had made a secured loan of $1,200,000 to
the Company prior to the bankruptcy filing, agreed to convert its old shares and
the principal amount of the loan into 1,750,000 shares of Common Stock and
received warrants to purchase an additional 1,200,000 shares of Common Stock at
a price of $0.01 per share. The Common Stock and warrants were distributed to
the members of Kingco, who subsequently exercised the warrants. Following the
exercise of the warrants, each of the Kingco members owned 737,500 shares of the
Company's Common Stock. Kingco is owned in equal shares by Keystone, Golden
State Foods, Inc. ("Golden"), Glenmark Industries, Inc. ("Glenmark") and Michael
R. Quinlan ("Quinlan").

In April 1998, the Company sold an aggregate of $2,500,000 in principal amount
of Debentures, consisting of $2,200,000 in principal amount of Class A
Debentures and $300,000 in principal amount of Class B Debentures. The
Debentures, including accrued interest, are convertible into shares of Common
Stock: the Class A Debentures at $0.69 per share; and the Class B Debentures at
$0.10 per share. Keystone holds an aggregate of $2,219,367 principal amount of
Class A and Class B Debentures which are convertible into an aggregate of
5,493,736 shares of Common Stock, excluding shares issuable upon conversion of
interest on the Debentures.

46
<PAGE> 48

LOANS TO THE COMPANY. In July 1997, Kingco made a $2,500,000 line of credit
available to the Company. Kingco converted the entire principal amount of
borrowings under the credit facility, $2,219,367, into Debentures. Since
Keystone provided the funds advanced under the credit facility, the other three
members of Kingco assigned to Keystone all of their rights with respect to the
Debentures, including the right to accrued interest under the credit facility
and the Debentures, which aggregated $27,167 in 1997 and $123,916 for the nine
months ended September 30, 1998. In addition to the line of credit, Kingco made
loans to the Company bearing interest at 10% per annum following its bankruptcy.
As of September 30, 1998, $325,431 in principal amount and accrued interest of
$60,533 remained outstanding under these loans. The Company incurred interest
expense related to loans from Kingco of $60,400 in 1996, $28,573 in 1997 and
$24,407 for the nine months ended September 30, 1998. See "Description of
Certain Indebtedness."

On November 5, 1998, Keystone committed to provide the Company a $5,000,000
credit facility. Borrowings under the credit facility are payable interest only
until maturity at the rate of 10% per annum. The facility will continue until
the earlier of May 15, 2000 or the close of an equity financing of at least
$5,000,000. Accordingly, this facility will terminate upon the closing of the
Offering and any outstanding borrowings at such time will be required to be
repaid. To date, the Company has not made any borrowings under this credit
facility. See "Description of Certain Indebtedness."

ADMINISTRATIVE SERVICES ARRANGEMENT WITH KEYSTONE. Commencing in 1997, Keystone
has made space available to the Company at its facility in Folcroft,
Pennsylvania and Keystone personnel have performed various executive,
administrative and research and development services for the Company. The
Company and Keystone have entered into an Administrative Services Agreement,
dated October 1, 1998, whereby the parties acknowledged the Company's
indebtedness to Keystone as of September 30, 1998 for facilities and services
provided by Keystone personnel to the Company in the aggregate amount of
approximately $311,000. Included in such amount is $150,000 representing
reimbursement to Keystone for time spent by Mr. Lotman on the conduct of the
Company's business, consisting of $60,000 for 1997 and $90,000 through the nine
months ended September 30, 1998. The Company is indebted to Keystone for
additional expenses incurred prior to the date of the Agreement aggregating
$78,000. The Company expects to pay such past due amount and all other sums
which are accrued and unpaid under the Administrative Services Agreement to
Keystone from the proceeds of the Offering. See "Use of Proceeds."

The Administrative Services Agreement also provides for the Company's sublease
of an approximately 1,200 square foot area at Keystone's facilities for use as a
laboratory and testing facility at a rental of $1,200 per month and for services
of Keystone personnel (all of whom remain as Keystone employees) required by the
Company to perform administrative, accounting and finance, insurance, human
resource, employee benefits, scientific and laboratory functions for the sum of
$20,000 per month. The agreement is terminable by either party on 30 days'
notice. The Company may reduce its personnel requirements under the agreement
incrementally as it increases its own staff, and the monthly personnel fee will
be adjusted accordingly. Under the terms of the agreement, Keystone will be
responsible for the acts or omissions of its employees, except to the extent
that they are supervised directly by Company personnel. Keystone will be
responsible for maintaining the facilities subleased by the Company, but the
Company will be obligated to pay the cost of any renovations required by it and
of restoring the premises after cessation of its occupancy.

Keystone has advised the Company that its payments under the Administrative
Services Agreement are approximately equal to Keystone's costs in supplying such
facility and

47
<PAGE> 49

personnel. The Company believes the fees payable to Keystone under the
Administrative Services Agreement are comparable to the fees which the Company
would have to pay to non-affiliated parties in a similar commercial transaction.

PROVISION OF INSTRUMENT. Keystone, along with three other private companies and
two USDA sites, will participate in field testing of the MC-18. As with all of
the participants, the Company is providing Keystone with an MC-18 for testing,
with the understanding that Keystone will receive free Test Kits during the
testing period and will be able to retain the Instrument following completion of
the testing.

PROFESSIONAL SERVICES. Mr. Ginader's accounting firm, Ginader, Jones & Company,
LLP, has been providing accounting and bookkeeping services to the Company since
1996. The firm served as the accountant for the trustee in bankruptcy during the
pendency of the Company's bankruptcy proceedings. All charges were billed at the
firm's normal hourly rates. Fees and expense reimbursement to Ginader Jones
totaled $42,754 in 1997 and $38,955 in 1998. Ginader Jones also provides
accounting and tax services to Kingco and Keystone.

Mr. Pelino, a director of the Company, is the principal stockholder of Pelino &
Lentz, P.C., a law firm which has provided legal services to the Company since
1997. All billing was based on the firm's regular hourly rates. Pelino & Lentz
also provided legal services to Kingco and provides legal representation to
Keystone and its affiliates.

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of
the Common Stock as of October 31, 1998, and as of such date giving effect to
the Offering, the assumed conversion of $2.5 million in principal amount of
Debentures and accrued interest thereon from January 1, 1999 through January 31,
1999 and the issuance of 21,460 shares to certain creditors, by (i) each person
known to the Company to be the beneficial owner of 5% or more of the Common
Stock, (ii) each director and Named Executive of the Company, and (iii) all
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING(1) OFFERING(1)
-------------------- --------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- ---------------- -------- -------- --------- -------
<S> <C> <C> <C> <C>
Herbert Lotman(2)(3)................... 567,500 15.3% 6,107,895 47.1%
401 City Ave, Suite 800
Bala Cynwyd, PA 19004
Marvin L. Sears(4)..................... -- -- -- --
Colin J. Barnstable(4)................. -- -- -- --
James G. Timmins....................... 10,000 * 10,000 *
George W. Ginader(3)(5)................ 190,000 5.1% 190,000 1.5%
321 Spruce Street, Suite 525
Scranton, PA 18503
John W. Pelino(3)(5)................... 100,000 2.7% 100,000 *
Dale L. Huffman(3)..................... 80,000 2.2% 80,000 *
</TABLE>

48
<PAGE> 50

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING(1) OFFERING(1)
-------------------- --------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- ---------------- -------- -------- --------- -------
<S> <C> <C> <C> <C>
Keystone Foods Corporation(2).......... 527,500 14.4% 6,067,895 46.9%
401 City Avenue, Suite 800
Bala Cynwyd, PA 19004
Golden State Foods, Inc................ 737,500 20.1% 737,500 5.7%
18301 Von Karman Avenue
Irvine, California 92715
Glenmark Industries, Inc............... 737,500 20.1% 737,500 5.7%
4545 South Racine Avenue
Chicago, Illinois 60609
Michael R. Quinlan..................... 737,500 20.1% 737,500 5.7%
Kroc Drive
Oakbrook, Illinois 60521
K-FIVE Construction Corporation........ 250,000 6.8% 680,362 5.3%
13769 Main Street
Lemont, Illinois 60439
All directors and executive officers as
a group(2)(6) (7 persons)............ 937,500 24.5% 6,477,895 49.5%
</TABLE>

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

* Less than 1.0%.

(1) As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting of a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose, or direct the
disposition of, a security). A person is deemed as of any date to have
beneficial ownership of any security that such person has the right to
acquire within 60 days after such date.

(2) Includes 527,500 shares owned by Keystone prior to the Offering and
6,067,895 shares to be owned by Keystone after the Offering. Mr. Lotman is
the Chairman, Chief Executive Officer, a director and a principal
stockholder of Keystone.

(3) Includes 40,000 shares of Common Stock subject to options that are currently
exercisable.

(4) Drs. Sears and Barnstable hold options to purchase 500,000 and 250,000
shares of Common Stock, respectively, which vest over a period of six years
and five years, respectively, commencing January 31, 1999.

(5) Mr. Ginader and Mr. Pelino, while directors of Keystone and trustees of
trusts that hold Keystone stock, disclaim any beneficial ownership in the
Company's shares held by Keystone.

(6) Includes options to purchase an aggregate of 160,000 shares of Common Stock.

CERTAIN RELATED PARTY TRANSACTIONS

For information regarding certain transactions involving officers, directors and
principal stockholders of the Company, see "Management -- Compensation Committee
Interlocks and Insider Participation."
49
<PAGE> 51

Drs. Sears and Barnstable served as consultants to the Company during 1998 in
connection with the Company's research and development activities. Dr. Huffman
has served as a consultant to the Company with respect to its food testing
research since September 1996. For information regarding the fees paid by the
Company for these consulting services, see "Management -- Consultants."

On September 10, 1998, the Company issued to Dr. Huffman 40,000 shares of Common
Stock in lieu of consulting fees for services rendered in 1997. Mr. Timmins, the
former Chief Executive Officer of the Company, received 10,000 shares of Common
Stock on August 1, 1997.

DESCRIPTION OF CERTAIN INDEBTEDNESS

CREDITORS' DEBENTURE

The Company issued the Creditors' Debenture, in the principal amount of
$500,000, on February 19, 1997 to the disbursing agent appointed under the
Company's bankruptcy Plan of Reorganization for the pro rata benefit of the
holders of certain claims under the Plan. This obligation constitutes the
remaining amount owing by the Company under the Plan. The Creditors' Debenture
accrues interest at 5% per annum and is payable quarterly. The entire principal
amount and all accrued interest is due and payable on February 19, 2001.

The Creditors' Debenture contains a number of default provisions, including
provisions which could reactivate the bankruptcy proceedings as a Chapter 7 case
under the United States Bankruptcy Code. These default provisions are not
expected to apply since the Company intends to pay the entire indebtedness due
under the Creditors' Debenture from the proceeds of the Offering.

THE KINGCO LOANS

Following the Company's bankruptcy reorganization, Kingco provided a line of
credit facility to the Company on July 1, 1997 in an aggregate amount of
$2,500,000. The purpose of the facility was to provide interim financing for
development of the Company's technology and the Company's food testing machine
until additional capital was raised. Under the terms of the line of credit,
Kingco's obligation to make additional advances under the facility terminated in
September 1998, upon the Company's receipt of $2,500,000 of proceeds from a
private offering of the Debentures. An aggregate of $2,219,367 of borrowings
under the credit facility was converted, on a dollar for dollar basis, into
Debentures. Since Keystone provided the funds advanced under the credit
facility, the other three members of Kingco assigned all of their rights under
the Debentures, including the right to accrued interest under the credit
facility and the Debentures, which aggregated $27,167 in 1997 and $123,916 for
the nine months ended September 30, 1998. In addition to the line of credit,
Kingco made loans to the Company following its bankruptcy. As of September 30,
1998, $325,431 in principal amount under these loans, bearing interest at 10%
per annum, remained outstanding plus accrued interest of $60,533. The Company
incurred interest expense related to loans from Kingco of $60,400 in 1996,
$28,573 in 1997 and $24,407 for the nine months ended September 30, 1998. The
Company expects to pay the principal of and interest on the Kingco loans out of
the proceeds of the Offering. See "Management -- Compensation Committee
Interlocks and Insider Participation."

50
<PAGE> 52

THE KEYSTONE CREDIT FACILITY

In November 1998, Keystone made a $5,000,000 credit facility available to the
Company to cover the Company's funding requirements until the closing of the
Offering or in the event the Offering is not consummated. Amounts borrowed under
the facility will bear interest at the rate of 10% per annum. Interest is
payable on a monthly basis, commencing January 1, 1999 until May 15, 2000, at
which time all principal and accrued interest thereon will be payable in full.
The Company has the right to prepay all or a portion of the outstanding
principal balance of the credit facility, together with accrued interest on the
prepaid principal amount to the date of prepayment, at any time without premium
or penalty. The Company is obligated to pay all outstanding principal and
interest from any proceeds derived by the Company from an equity financing in
excess of $5,000,000 and will use a portion of the proceeds of the Offering to
pay any outstanding amount under this credit facility.

CLASS A AND CLASS B DEBENTURES

As of September 30, 1998, there was outstanding $56,292 of accrued but unpaid
interest on the Debentures. The Company expects to make an interest payment to
holders of the Debentures on January 1, 1999, the semi-annual interest payment
date under the Debentures. For a description of the terms of the Debentures, see
"Description of Capital Stock and Debentures."

DESCRIPTION OF CAPITAL STOCK AND DEBENTURES

COMMON STOCK

The Company is authorized to issue 50,000,000 shares of Common Stock, par value
$.01 per share. As of October 31, 1998, there were 3,667,548 shares of Common
Stock outstanding and held of record by 23 persons. After giving effect to the
conversion of an aggregate of $2,500,000 principal amount of Debentures plus
accrued interest on the Debentures from January 1, 1999 through January 31, 1999
(which Debentures, if not converted, are subject to mandatory redemption by the
Company upon closing of the Offering) and 21,460 shares issuable to certain
creditors, there would be 9,929,947 shares of Common Stock outstanding. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be, validly issued, fully paid and non-assessable.

Each share of the Common Stock has the same rights, privileges and preferences
as every other share of Common Stock. Holders of the Common Stock are entitled
to dividends when, as and if declared by the Board of Directors. In the event of
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the Common Stock are entitled, after payment or
provision for payment of the debts or other liabilities of the Company,
including any outstanding Debentures or other indebtedness of the Company, and
subject to the prior rights of holders of any preferred stock which may then be
outstanding, to share ratably in the remaining net assets of the Company. Shares
of Common Stock do not possess any preemptive rights.

Holders of the Common Stock are not entitled to cumulate their votes in the
election of directors and are entitled to one vote for each share held of record
on each matter submitted to a vote at a meeting of stockholders. In general, a
majority vote of the stockholders present and voting at any meeting at which a
quorum exists is required to approve any corporate action presented to the
stockholders of the Company for a vote. Any corporate action involving the
merger or consolidation of the Company, or the exchange of stock of the

51
<PAGE> 53

Company, requires the affirmative vote of at least a majority of all shares
entitled to vote on the matter.

____________ will serve as the transfer agent and registrar for the Common
Stock.

PREFERRED STOCK

The Company is authorized to issue 2,000,000 shares of preferred stock. The
Board of Directors has the authority to issue shares of preferred stock in one
or more series and to fix the rights, preferences, privileges and restrictions
granted to or imposed upon such preferred stock, including dividend rights,
conversion rights, terms of redemption, liquidation preferences, sinking fund
terms and the number of shares constituting any series or the designation of
such series, without any further vote or action by the stockholders unless
otherwise required by law.

The Board of Directors can issue preferred stock with voting, dividend,
conversion, redemption and liquidation rights which could adversely affect the
rights of the holders of Common Stock. The issuance of preferred stock could
have the effect of delaying, deferring or preventing a change in control of the
Company. There are no shares of preferred stock outstanding, and the Company has
no present plan to issue any shares of preferred stock.

CLASS A AND CLASS B DEBENTURES

GENERAL. The Debentures are unsecured obligations of the Company in the
aggregate principal amount of $2,200,000 of Class A Debentures and $300,000 of
Class B Debentures. The Debentures were issued from April through September 1998
and bear interest from their respective dates of original issuance at the rate
of 10% per annum. Interest is payable semi-annually in arrears on July 1 and
January 1, commencing July 1, 1998. The Debentures mature on May 1, 2003 or
earlier upon the closing of a public or private equity offering resulting in at
least $2,500,000 of proceeds to the Company (an "Equity Offering"). Accordingly,
the entire principal amount of the then outstanding Debentures, together with
all accrued and unpaid interest thereon, will become due and payable on the
closing date of the Offering unless a holder elects to convert his Debentures
into shares of Common Stock. The Debentures may be repaid prior to maturity, at
any time in whole or in part, at the Company's election, without premium or
penalty; provided that the holders must be given 60 days' notice of repayment
within which to exercise their conversion rights described below.

CONVERSION. The Debentures may be converted into shares of the Common Stock, in
whole or in part, at the option of the holder. The Class A Debentures may be
converted at any time after May 1, 1999, and prior to April 1, 2003, at the rate
of $0.69 per share of Common Stock. The Class B Debentures may be converted at
any time after April 1, 1999, and prior to April 1, 2003, at the rate of $0.10
per share. The Debentures can be converted into shares of Common Stock prior to
their respective stated conversion dates following written notice by the Company
to holders of the Debentures that the Company intends to consummate an Equity
Offering. No fractional shares will be issued and no payment by the Company in
lieu of fractional shares will be paid upon conversion of the Debentures.

Holders of the Debentures will be notified of the Offering and will be entitled
to receive at the closing of the Offering, at the election of the holder, either
(i) a cash payment equal to the full principal amount of Debentures owned by the
holder, together with all accrued interest thereon, (ii) shares of Common Stock
determined on the basis of the applicable conversion rate for the principal
amount of all Debentures owned by the holder plus accrued interest thereon, or
(iii) a combination of cash and shares.

52
<PAGE> 54

INDEMNIFICATION OF OFFICERS AND DIRECTORS

As permitted by the Delaware General Corporation Law (the "DGCL"), the Company's
Certificate of Incorporation provides that no director of the Company will be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
directors' duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) with respect to certain unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of the
DGCL or (iv) for any transaction from which the director derives any improper
personal benefit. In addition, the Company's Bylaws provide that the Company
must indemnify any director or officer, and may indemnify any employee and other
agent, to the fullest extent permitted by the DGCL, who was or is a party to any
action or proceeding by reason of his or her service to the Company or to
another entity at the request of the Company. The Company is required to advance
expenses incurred by indemnified individuals as a result of any proceeding
against them as to which they are entitled to be indemnified. The Company
maintains directors' and officers' insurance against certain liabilities.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers, or persons
controlling the Company as described above, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable.

At present, there is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted.

DELAWARE LAW

The Company is subject to the provisions of Section 203 of the DGCL. In general,
Section 203 prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
Generally, a "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with his affiliates and associates, owns
(or within three years, did own) 15% or more of a corporation's voting stock.
The statute could have the effect of delaying, deferring or preventing a change
in control of the Company.

SHARES ELIGIBLE FOR FUTURE SALE

The market price of the Common Stock could be adversely affected by the sale of
substantial amounts of Common Stock in the public market following the Offering.

Upon completion of the Offering, and assuming conversion of the Debentures and
accrued interest thereon and the issuance of 21,460 shares of Common Stock to
certain creditors, the Company will have 12,929,947 shares of Common Stock
outstanding (or 13,379,947 if the Underwriters' over-allotment is exercised in
full). Of such shares, the 3,000,000 shares (or up to 3,450,000 shares if the
Underwriters' over-allotment option is exercised in full) sold in the Offering
will be freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined

53
<PAGE> 55

under the Securities Act ("Affiliates"), may generally only be sold in
compliance with the limitations of Rule 144 described below.

The remaining 9,929,947 shares of Common Stock are "restricted securities" under
Rule 144. The number of shares of Common Stock available for sale in the public
market is limited by restrictions under the Securities Act and lock-up
agreements under which the holders of 9,150,936 shares issued prior to
completion of the Offering have agreed not to sell or otherwise dispose of any
of their shares publicly for a period of 180 days after the effective date of
the Offering without the prior written consent of the representative of the
underwriters.

In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after the Offering, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities for at least one
year, including a person who may be deemed an Affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then-outstanding shares of
Common Stock (approximately 129,300 shares) or the average weekly trading volume
of the Common Stock as reported through the Nasdaq Stock Market during the four
calendar weeks preceding such sale. Sales under Rule 144 are subject to certain
restrictions relating to manner of sale, notice and the availability of current
public information about the Company. In addition, under Rule 144(k) of the
Securities Act, a person who is not an Affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned shares
for at least two years, would be entitled to sell such shares immediately
following the Offering without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144 of the Securities Act.

The Company has granted to Messrs. Lotman, Ginader and Pelino and Dr. Huffman,
and to each of its principal stockholders who agreed to subject their shares to
a lock-up agreement, the collective right, during the two year period commencing
after the end of the 180-day lock-up period, to demand that the Company prepare
and file, at its expense, two registration statements covering some or all of
their shares, provided the aggregate offering price for the shares proposed to
be sold is at least $4,000,000. In addition, such stockholders have been granted
"piggyback" registration rights, permitting them to include their shares in
certain future registration statements filed by the Company, subject to certain
limitations.

Accordingly, 90 days after the Offering 665,402 restricted shares will be
eligible for sale under Rule 144 and upon expiration of the lock-up 180 days
after the Offering, 9,150,936 additional shares will be eligible for sale under
Rule 144.

After consummation of the Offering, the Company intends to file a registration
statement on Form S-8 covering the 1,500,000 shares of Common Stock reserved for
issuance under its Stock Option Plan.

54
<PAGE> 56

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement among the
Company and the underwriters named below (the "Underwriters"), for whom
Pennsylvania Merchant Group is acting as representative (the "Representative"),
the underwriters have severally agreed to purchase from the Company the number
of shares of Common Stock set forth opposite their names in the table below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Pennsylvania Merchant Group............................

---------
Total: ........................................... 3,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent. The nature of the Underwriters'
obligation is such that they are committed to purchase all shares of Common
Stock offered hereby, if they purchase any of such shares.

The Company has been advised by the Representative that the Underwriters propose
initially to offer the shares of Common Stock directly to the public at the
Offering Price set forth on the cover page of this Prospectus and to certain
dealers (which may include underwriters) at such public Offering Price less a
concession not to exceed $ per share. The Underwriters may allow, and
such dealers may reallow, a discount not to exceed $ per share in sales
to certain other dealers. After the initial public offering, the public offering
price and concessions and discounts may be changed by the Representative.

The Company has granted to the Underwriters an option, exercisable not later
than 30 business days after the date of this Prospectus, to purchase up to an
additional 450,000 shares of Common Stock to cover over-allotments, at the
Offering Price less the underwriting discounts and commissions set forth in the
table below. To the extent that the Underwriters exercise such option, each of
the Underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above, and the Company will be obligated
pursuant to the option to sell such shares to the Underwriters. The Underwriters
may exercise the option only for the purposes of covering over-allotments, if
any, made in connection with the distribution of the shares of Common Stock made
to the public.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the Underwriters by the Company. Such amounts are
shown assuming both no exercise and full exercise of the Underwriters'
over-allotment option:

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share..................................... $ $
Total.................................... $ $
</TABLE>

The Company estimates that its expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $ .

55
<PAGE> 57

The Representative has informed the Company that the Underwriters do not intend
to confirm sales of shares of the Common Stock offered hereby to any accounts
over which they exercise discretionary authority.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

The Company will apply to have its Common Stock listed on the Nasdaq Stock
Market under the symbol "BUGS." Upon the completion of the Offering, the
Company, its directors and executive officers and certain of its stockholders
have agreed not to sell, offer to sell, contract to sell, pledge or otherwise
dispose of any shares of Common Stock or any other security convertible into or
exchangeable for, shares of Common Stock without the prior written consent of
the Representative for a period of 180 days after the date of this Prospectus,
except that the Company may issue options under its stock option plan and shares
of Common Stock upon the exercise of options. See "Shares Eligible for Future
Sale" for a discussion of certain transfer restrictions.

Prior to the Offering there has been no public market for the Common Stock. The
market prices to the public will be determined by negotiations between the
Company and the Representative. Among the factors to be considered in
determining such public Offering Price, in addition to prevailing market
conditions, will be the Company's operations and performance, estimates of the
business potential and earning prospects of the Company, an assessment of the
Company's assets and management and the consideration of the above factors in
relation to market valuation of companies and related businesses.

The Representative has advised the Company that pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), certain
persons participating in the Offering may over-allot or effect transactions
which stabilize, maintain or otherwise affect the market price of the Common
Stock at levels above those which might otherwise prevail in the open market,
including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. Over-allotment involves syndicate sales
in excess of the offering size, which creates a syndicate short position.
Stabilizing bids consist of bids made for the purpose of preventing or retarding
a decline in the market price of the Common Stock while the Offering is in
progress. A syndicate covering transaction involves purchases of the Common
Stock in the open market after the distribution has been completed in order to
cover syndicate short positions. A penalty bid means an arrangement which
permits the Underwriters to reclaim a selling concession otherwise accruing to
an Underwriter or a syndicate member in connection with the Offering when shares
of Common Stock sold by such Underwriter or syndicate member are purchased in
syndicate covering transactions. Such transactions may be effected on the Nasdaq
Stock Market, in the over-the-counter market or otherwise. Such stabilizing, if
commenced, may be discontinued at any time.

One or more of the Underwriters have informed the Company that they currently
plan to make a market in the Common Stock subsequent to the date of this
Prospectus, but there can be no assurance that an active trading market will
develop or continue after the Offering. See "Risk Factors -- No Prior Public
Market."

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Pelino & Lentz, P.C., Philadelphia, Pennsylvania. John W. Pelino, a
stockholder of Pelino & Lentz, is a director of the Company. Certain legal
matters in connection with the Offering are

56
<PAGE> 58

being passed upon for the Underwriters by Cozen and O'Connor, a professional
corporation, Philadelphia, Pennsylvania.

EXPERTS

The financial statements as of December 31, 1997 and September 30, 1998 and for
each of the two years ended December 31, 1997 and the nine month period ended
September 30, 1998 included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein and
described elsewhere in the Registration Statement, which report expresses an
unqualified opinion, except for the cumulative statements of operations, cash
flows and changes in stockholders' deficit for the period from March 11, 1992
(date of inception) to September 30, 1998 on which no opinion was expressed.
Such report includes an explanatory paragraph referring to the Company's
development stage and dependence on Keystone to continue to fund its operations,
and has been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the United States Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1(together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement"), under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, for the registration of the Common Stock offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which have been omitted as permitted by Commission rules and
regulations. For further information with respect to the Company and the Common
Stock offered hereby, you should refer to the Registration Statement. Statements
contained in this Prospectus as to the contents of any agreement or other
document are not necessarily complete, and in each instance, reference is made
to the copy of such agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

You may inspect a copy of the Registration Statement without charge at the
principal office of the Commission in Washington, D.C. at 450 Fifth Street, NW,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain a
copy of the Registration Statement at the Commission's prescribed rates from its
Public Reference Section at 450 Fifth Street, NW, Washington, D.C. 20549. You
may obtain information on the operation of the Commission's Public Reference
Room by calling the Commission at 1-800-SEC-0330. In addition, you may review
the Registration Statement and certain other filings made with the Commission
through its Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system
through the Commission's Web site located at http://www.sec.gov.

As a result of the Offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended.
The Company will fulfill its obligations with respect to such requirements by
filing periodic reports and other information with the Commission. The Company
intends to furnish its stockholders with annual reports containing financial
statements certified by an independent public accounting firm.

57
<PAGE> 59

INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF MOLECULAR CIRCUITRY, INC. (A DEVELOPMENT STAGE
ENTERPRISE)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1997 and September 30,
1998...................................................... F-3
Statements of Operations for the Years Ended December 31,
1996 and 1997 and Nine Month Periods Ended September 30,
1997 (Unaudited) and 1998 and Cumulative Totals Since Date
of Inception (Unaudited).................................. F-4
Statements of Changes in Stockholders' Equity (Deficit) from
Inception (March 11, 1992) to September 30, 1998.......... F-5
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997 and the Nine Month Periods Ended September
30, 1997 (Unaudited) and 1998 and Cumulative Totals Since
Date of Inception (Unaudited)............................. F-7
Notes to Financial Statements............................... F-9
</TABLE>

F-1
<PAGE> 60

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Molecular Circuitry, Inc.
Scranton, Pennsylvania

We have audited the accompanying balance sheets of Molecular Circuitry, Inc.
(the "Company") (a development stage enterprise) as of December 31, 1997 and
September 30, 1998, and the related statements of operations, changes in
stockholders' deficit and cash flows for the years ended December 31, 1996 and
1997, and the nine months ended September 30, 1998. We were engaged to audit the
cumulative statements of operations, changes in stockholders' deficit and cash
flows for the period from March 11, 1992 (date of inception) to September 30,
1998. 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.

Except as discussed in the following paragraph, 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.

Because of the absence of significant accounting records of the Company for
periods prior to 1996, it was not practicable to extend our auditing procedures
to enable us to form an opinion on the accompanying cumulative statements of
operations, changes in stockholders' deficit and cash flows.

In our opinion, such 1996, 1997 and 1998 financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1997 and September 30, 1998, and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1997, and the nine months ended
September 30, 1998, in conformity with generally accepted accounting principles.
Because of the matter discussed in the preceding paragraph, the scope of our
work was not sufficient to enable us to express, and we do not express, an
opinion on the cumulative results of operations, changes in stockholders'
deficit and cash flows for the period from March 11, 1992 (date of inception) to
September 30, 1998.

The Company emerged from bankruptcy on February 7, 1997 and is in the
development stage at September 30, 1998. As discussed in Note 2 to the financial
statements, successful completion of the Company's development program and,
ultimately, the attainment of profitable operations is dependent upon future
events, including obtaining adequate financing to fulfill its development
activities and achieving a level of sales adequate to support the Company's cost
structure. A principal shareholder of the Company has agreed to provide a
$5,000,000 revolving line of credit to the Company through May 15, 2000 in order
that the Company may continue to fund its operations.

November 20, 1998
Philadelphia, Pennsylvania

F-2
<PAGE> 61

MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 13,558 $ 237,804
----------- ------------
Total current assets..................... 13,558 237,804
----------- ------------
PROPERTY AND EQUIPMENT -- net...................... 63,897 232,539
----------- ------------
OTHER ASSETS:
Patents -- net................................... 293,779 322,326
Security deposit................................. 1,054
----------- ------------
Total other assets....................... 294,833 322,326
----------- ------------
TOTAL ASSETS....................................... $ 372,288 $ 792,669
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable:
Related parties............................... $ 196,028 $ 593,293
Trade......................................... 137,091 216,786
Accrued expenses:
Related parties............................... 63,219 179,350
Other......................................... -- 209,453
----------- ------------
Total current liabilities................ 396,338 1,198,882
----------- ------------
LONG-TERM LIABILITIES:
Notes payable to Affiliates...................... 1,335,431 325,431
Convertible subordinated debentures to
stockholders ($2,500,000 net of $563,148
beneficial conversion feature)................ 1,936,852
Debenture arising from reorganization............ 500,000 500,000
----------- ------------
Total long-term liabilities.............. 1,835,431 2,762,283
----------- ------------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 50,000,000 shares
authorized 3,625,402 and 3,667,548 shares
issued and outstanding, respectively.......... 36,254 36,675
Additional paid-in capital....................... 2,127,775 12,154,244
Unearned compensation related to stock options... (6,726,063)
Deficit accumulated during development stage..... (4,023,510) (8,633,352)
----------- ------------
Total stockholders' deficit.............. (1,859,481) (3,168,496)
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........ $ 372,288 $ 792,669
=========== ============
</TABLE>

See notes to financial statements.

F-3
<PAGE> 62

MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS CUMULATIVE
YEAR ENDED DECEMBER 31, ENDED ENDED TOTALS SINCE
------------------------- SEPTEMBER 30, SEPTEMBER 30, DATE OF
1996 1997 1997 1998 INCEPTION
----------- ----------- ------------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES............................. $ 404,846
COST OF SALES..................... 387,150
------------
GROSS PROFIT...................... 17,696
------------
COSTS AND EXPENSES:
Engineering, research and
development.................. $ 550,624 $ 1,627,251 $ 1,066,321 $ 1,001,958 7,123,555
Compensation related to stock
options...................... 2,191,937 2,191,937
General and administrative...... 309,848 392,364 262,226 690,511 2,661,296
Interest expense................ 60,400 563,649 530,415 696,104 1,566,564
Depreciation and amortization... 5,528 38,846 27,129 29,332 85,734
Write-off of impaired assets.... 278,670 278,670
----------- ----------- ----------- ------------ ------------
Total expenses.......... 1,205,070 2,622,110 1,886,091 4,609,842 13,907,756
----------- ----------- ----------- ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM.... (1,205,070) (2,622,110) (1,886,091) (4,609,842) (13,890,060)
EXTRAORDINARY ITEM:
Gain on forgiveness of debt (see
Note 3)...................... 1,832,708 1,832,708 1,832,708
----------- ----------- ----------- ------------ ------------
NET LOSS.......................... $(1,205,070) $ (789,402) $ (53,383) $ (4,609,842) $(12,057,352)
=========== =========== =========== ============ ============
BASIC AND DILUTED NET LOSS PER
SHARE BEFORE EXTRAORDINARY
ITEM............................ $ (0.11) $ (0.61) $ (0.41) $ (1.26)
EXTRAORDINARY ITEM................ -- 0.43 0.40 --
----------- ----------- ----------- ------------
BASIC AND DILUTED NET LOSS PER
SHARE AFTER EXTRAORDINARY
ITEM............................ $ (0.11) $ (0.18) $ (0.01) $ (1.26)
=========== =========== =========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING.............. 10,578,875 4,306,061 4,535,441 3,665,740
=========== =========== =========== ============
</TABLE>

See notes to financial statements.

F-4
<PAGE> 63

MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FROM INCEPTION (MARCH 11, 1992) TO SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
DEFICIT
UNEARNED ACCUMULATED
COMMON STOCK ADDITIONAL COMPENSATION DURING
--------------------- PAID-IN RELATED TO DEVELOPMENT
SHARES AMOUNT CAPITAL STOCK OPTIONS STAGE TOTAL
----------- ------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 11, 1992
(UNAUDITED)............ -- $ -- $ -- $ -- $ --
Sale of common stock
(Unaudited)......... 4,850,000 500 500
----------- ------- ------------
BALANCE,
DECEMBER 31, 1992
(UNAUDITED)............ 4,850,000 500 500
Net loss (Unaudited)... (929,152) (929,152)
----------- ------- ------------ ------------
BALANCE,
DECEMBER 31, 1993
(UNAUDITED)............ 4,850,000 500 (929,152) (928,652)
Net loss (Unaudited)... (1,726,090) (1,726,090)
Sale of common stock
(Unaudited)......... 5,048,750 520 2,490,980 2,491,500
----------- ------- ----------- ----------- ------------ ------------
BALANCE,
DECEMBER 31, 1994
(UNAUDITED)............ 9,898,750 1,020 2,490,980 (2,655,242) (163,242)
Net loss (Unaudited)... (2,797,796) (2,797,796)
Sale of common stock
(Unaudited)......... 680,125 70 931,930 932,000
----------- ------- ----------- ----------- ------------ ------------
BALANCE,
DECEMBER 31, 1995
(UNAUDITED)............ 10,578,875 1,090 3,422,910 (5,453,038) (2,029,038)
Net loss............... (1,205,070) (1,205,070)
----------- ------- ----------- ----------- ------------ ------------

(CONTINUED)
</TABLE>

F-5
<PAGE> 64

<TABLE>
<CAPTION>
DEFICIT
UNEARNED ACCUMULATED
COMMON STOCK ADDITIONAL COMPENSATION DURING
--------------------- PAID-IN RELATED TO DEVELOPMENT
SHARES AMOUNT CAPITAL STOCK OPTIONS STAGE TOTAL
----------- ------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1996...... 10,578,875 1,090 3,422,910 (6,658,108) (3,234,108)
Net loss............... (789,402) (789,402)
Cancellation of common
stock in
bankruptcy.......... (10,578,875) (1,090) (3,422,910) 3,424,000 --
Sale of common stock... 2,413,350 24,133 1,633,559 1,657,692
Issuance of warrants... 486,000 486,000
Exercise of warrants... 1,200,000 12,000 12,000
Issuance of common
stock to creditors
in lieu of cash
distributions....... 2,052 21 1,416 1,437
Issuance of common
stock for services
rendered............ 10,000 100 6,800 6,900
----------- ------- ----------- ----------- ------------ ------------
BALANCE, DECEMBER 31,
1997................... 3,625,402 36,254 2,127,775 (4,023,510) (1,859,481)
Issuance of common
stock for services
rendered............ 40,000 400 27,178 27,578
Issuance of common
stock to creditors
in lieu of cash
distributions....... 2,146 21 1,481 1,502
Net loss............... (4,609,842) (4,609,842)
Effect of beneficial
conversion feature
of subordinated
debentures.......... 1,079,810 1,079,810
Issuance of options to
directors and
employees........... 8,918,000 (6,726,063) 2,191,937
----------- ------- ----------- ----------- ------------ ------------
BALANCE, SEPTEMBER 30,
1998................... 3,667,548 $36,675 $12,154,244 $(6,726,063) $ (8,633,352) $ (3,168,496)
=========== ======= =========== =========== ============ ============
</TABLE>

See notes to financial statements.

F-6
<PAGE> 65

MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
--------------------------- ----------------------------- CUMULATIVE
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, TOTALS SINCE
1996 1997 1997 1998 INCEPTION
------------ ------------ ------------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................. $(1,205,070) $ (789,402) $ (53,383) $ (4,609,842) $(12,057,352)
Adjustments to reconcile net loss to
net cash (used in) operating
activities:
Depreciation and amortization....... 5,528 38,846 27,129 29,332 85,734
Loss on sale or abandonment of
equipment........................ 2,976 2,976
Write-off of impaired assets........ 278,670 278,670
Gain on forgiveness of debt......... (1,832,708) (1,832,708) (1,832,708)
Fair value of warrants issued in
excess of cash received.......... 486,000 486,000 486,000
Common stock issued to creditors in
lieu of cash distributions....... 1,437 1,437 1,502 2,939
Common stock issued for services
provided......................... 6,900 6,900 27,578 34,478
Issuance of stock options........... 2,191,937 2,191,937
Interest expense relating to the
beneficial conversion feature of
the Series A and B Subordinated
Debentures....................... 516,662 516,662
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............ 75,000 75,000
Other assets................... 8,946 8,946 1,054 (275,538)
Accounts payable -- trade...... 42,112 (255,021) (376,512) 79,695 2,135,156
Accounts payable -- related
parties...................... 196,028 73,528 397,265 593,293
Accrued expenses -- other...... 777 (777) (777) 209,453 257,791
Accrued expenses -- related
parties...................... 31,000 32,219 91,431 116,131 179,350
----------- ----------- ----------- ------------ ------------
Net cash used in operating
activities................... (846,983) (2,032,532) (1,493,009) (1,036,257) (7,400,612)
----------- ----------- ----------- ------------ ------------

(CONTINUED)
</TABLE>

F-7
<PAGE> 66

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
--------------------------- ----------------------------- CUMULATIVE
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, TOTALS SINCE
1996 1997 1997 1998 INCEPTION
------------ ------------ ------------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Patent costs.......................... (30,000) (50,000) (350,000)
Purchase of property and equipment.... (62,084) (19,966) (19,075) (182,747) (299,957)
Proceeds from the sale of assets...... 3,250 3,250
----------- ----------- ----------- ------------ ------------
Net cash used in investing
activities................... (92,084) (19,966) (19,075) (229,497) (646,707)
----------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Issuance of common stock.............. 1,657,692 1,657,692 5,081,692
Exercise of warrants.................. 12,000 12,000 12,000
Increase (decrease) in notes payable
to Affiliates....................... 955,431 380,000 (130,000) 1,209,367 2,910,798
Issuance of subordinated debentures... 280,633 280,633
----------- ----------- ----------- ------------ ------------
Net cash provided by financing
activities................... 955,431 2,049,692 1,539,692 1,490,000 8,285,123
----------- ----------- ----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 16,364 (2,806) 27,608 224,246 237,804
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................ -- 16,364 16,364 13,558 --
----------- ----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................ $ 16,364 $ 13,558 $ 43,972 $ 237,804 $ 237,804
=========== =========== =========== ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Issuance of debenture arising from
reorganization...................... $ 500,000 $ 500,000 $ 500,000
=========== =========== ============
Effect of beneficial conversion
feature............................. $ 1,079,810 $ 1,079,810
============ ============
Conversion of note payable into
subordinated debentures............. $ 2,219,367 $ 2,219,367
============ ============
Cash paid for interest................ $ 29,400 $ 38,627 $ 32,377 $ 62,885 $ 188,480
=========== =========== =========== ============ ============
</TABLE>

See notes to financial statements.

F-8
<PAGE> 67

MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1997
AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND 1998 AND CUMULATIVE TOTALS SINCE DATE OF INCEPTION (UNAUDITED)

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The Company was incorporated on March 11, 1992 as Crystal Medical Products, Inc.
("Crystal"), an Illinois corporation (see Note 3 regarding the reorganization of
Crystal). On October 16, 1998, Crystal was merged into its wholly-owned Delaware
subsidiary, Molecular Circuitry, Inc. (hereinafter referred to as the
"Company"). The Company is a development stage enterprise which was initially
formed to finance research and development in medical science. In 1994, the
Company began to develop an instrument to detect harmful bacteria, or pathogens,
in meat, poultry, dairy and other food products.

FISCAL YEAR -- The Company's fiscal year ends on December 31. The statement of
operations and cash flows for the nine months ended September 30, 1997 are
unaudited. In the opinion of management, all adjustments (which include only
normal recurring adjustments) considered necessary to present fairly the results
of operations and cash flows for the nine months ended September 30, 1997 have
been made.

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.

CASH AND CASH EQUIVALENTS -- For purposes of the statements of cash flows, cash
consists principally of unrestricted cash on deposit, and short-term money
market funds. The Company considers all highly liquid investments with an
original maturity of less than three months to be cash equivalents.

PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost and
depreciated using the straight-line method over estimated useful lives of five
to seven years.

PATENTS -- Payments to obtain and secure patents (see Note 5) are capitalized
and amortized using the straight-line method over the remaining life of the
patent. In the event changes in technology or other circumstances impair the
value or life of the patent, appropriate adjustment in the asset value and
period of amortization will be made.

INCOME TAXES -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Under the liability method prescribed by SFAS No. 109, a deferred
tax asset or liability is determined based on the differences between the
financial statement and tax basis of assets and liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.

RESEARCH AND DEVELOPMENT COSTS -- Research and development expenditures are
expensed as incurred.

F-9
<PAGE> 68
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

LOSS PER COMMON SHARE -- The Company has presented net loss per common share
pursuant to SFAS No. 128, Earnings Per Share. Net loss per common share is
computed by dividing net loss by the weighted average number of common shares
outstanding. The shares issuable upon conversion of subordinated debentures and
the exercise of options have been excluded since the assumed conversion would be
antidilutive due to net losses for all periods presented.

The following table summarizes those securities that could potentially dilute
loss (earnings) for common stockholders per common share in the future that were
not included in determining loss for common stockholders per common share as the
effect was antidilutive.

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------- -------------------------
1996 1997 1997 1998
----------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Potential common shares resulting
from:
Shares issuable to creditors in
bankruptcy................... -- 19,343 18,630 21,460
Stock options................... -- -- -- 910,000
Convertible subordinated debt... -- -- -- 6,188,394
----------- ------- ------- -----------
-- 19,343 18,630 7,119,854
=========== ======= ======= ===========
</TABLE>

STOCK-BASED COMPENSATION -- SFAS No. 123, Accounting for Stock-Based
Compensation encourages, but does not require, companies to record compensation
cost for stock-based compensation plans at fair value. The Company has elected
to continue to account for stock-based compensation in accordance with
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, as permitted by SFAS No. 123.
Compensation expense for stock options is measured as the excess, if any, of the
fair value of the Company's stock at the date of grant over the amount employees
and directors must pay to acquire the stock (see Note 9).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, Reporting Comprehensive
Income, and SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which are both effective for fiscal years beginning after
December 15, 1997. Components of comprehensive income for the Company include
such items as net income and foreign currency translation. Net income and
comprehensive income were the same for the nine months ended September 30, 1998.
SFAS No. 131 requires segments to be determined based on how management measures
performance and makes decisions about allocating resources. The Company adopted
the standards in fiscal 1998. Neither statement had a material effect on the
Company's financial position or results of operations.

F-10
<PAGE> 69
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those statements at fair value. This statement is
effective for fiscal years beginning after June 15, 1999, although early
adoption is encouraged. The Company does not anticipate that the adoption of
SFAS No. 133 will have a significant impact on its financial position or results
of operations.

2. OPERATIONS AND FINANCING

The Company has been in the development stage since its inception in 1992, and
has incurred significant losses from operations. Successful completion of the
Company's development program, and, ultimately, the attainment of profitable
operations is dependent upon future events, including obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company's cost structure. Keystone Foods Corporation
("Keystone") is a principal shareholder of the Company and has provided the
Company with financial and administrative support.

On November 5, 1998 Keystone made a $5,000,000 credit facility (the "Keystone
Credit Facility") available to the Company, payable interest only until maturity
at an annual rate of 10%. This line will continue until the earlier of May 15,
2000 or such time as the Company closes an equity financing of $5,000,000 or
more. The Company will need additional financing to achieve its product
development goals and is in the process of raising equity (see Note 12).
However, management believes that the Keystone Credit Facility will allow the
Company to continue its operations through May 15, 2000.

3. REORGANIZATION

On May 24, 1996, the Company voluntarily filed a petition for reorganization
under Chapter 11 of the United States Bankruptcy Code (Chapter 11).

Liabilities subject to compromise as of December 31, 1996 consisted of the
following:

<TABLE>
<S> <C>
Priority claims.................................... $ 66,261
Unsecured claims................................... 2,616,447
----------
Total claims....................................... $2,682,708
==========
</TABLE>

On February 5, 1997, the bankruptcy court confirmed the plan of reorganization
(the "Reorganization Plan") of the Company and the Reorganization Plan became
effective. The Company was discharged from liability in all prepetition claims
filed by the creditors in exchange for (i) the Company's cash payment of
$350,000 to a Creditors' Committee, (ii) a $500,000 debenture issued to the
Creditors' Committee, and (iii) the assignment of the Company's pre-petition
claims and causes of action against third parties. A final decree will

F-11
<PAGE> 70
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

not be issued until the obligation under the debenture is satisfied and all
Creditors' Committee claims against third parties are resolved.

Under the Reorganization Plan, the Company, under new management, retained its
patents and other rights relating to the food testing technology, subject to a
claim by one of the original investors of the technology, which claim has since
been settled for a $50,000 cash payment in 1998. Pursuant to the Reorganization
Plan, all shares of Crystal common stock were canceled and those shareholders
were given the right to subscribe for new shares at $.69 per share. There were
2,413,350 new shares issued, including 1,750,000 shares issued to the four
members of Kingco, LLC, a limited liability company ("Kingco") formed by certain
original shareholders who loaned the Company $1,200,000 prior to the bankruptcy
filing. The patents and technology secured the loan. The members also received
warrants to purchase 1,200,000 shares of common stock of the Company at $.01 per
share. The warrants were exercised in 1997.

Upon emergence from its Chapter 11 proceedings, the Company adopted the
provisions of SOP No. 90-7, Financial Reporting of Entities in Reorganization
Under the Bankruptcy Code, as promulgated by the American Institute of Certified
Public Accountants. The effect of the Reorganization Plan on the Company's
unaudited balance sheet at February 5, 1997 was as follows:

<TABLE>
<CAPTION>
PREDECESSOR REORGANIZED
FEBRUARY 5, DEBT BALANCE
1997 DISCHARGE SHEET
----------- ----------- -----------
<S> <C> <C> <C>
Cash.................................. $ 322,478 $ (320,000) $ 2,478
Accounts receivable................... 75,000 75,000
Net property and equipment............ 56,556 56,556
Patents............................... 300,000 300,000
Deposit with Creditors' Committee..... 30,000 (30,000)
----------- ----------- -----------
$ 784,034 $ (350,000) $ 434,034
=========== =========== ===========
Accrued expenses...................... $ 1,570 $ 1,570
Notes payable-secured by patents...... 1,325,431 1,325,431
Liabilities subject to compromise..... 2,682,708 $(2,682,708)
Debenture payable..................... 500,000 500,000
Capital stock -- old.................. 3,424,000 (3,424,000)
Retained earnings..................... (6,649,675) 5,256,708 (1,392,967)
----------- ----------- -----------
$ 784,034 $ (350,000) $ 434,034
=========== =========== ===========
</TABLE>

In connection with the emergence, the Company recorded a gain on the forgiveness
of debt in the amount of $1,832,708. The results of operations and cash flows
for 1997 include the Company's emergence from Chapter 11 proceedings.

F-12
<PAGE> 71
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1997 and September 30, 1998, consist of
the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Research equipment.......................... $50,218 $ 67,465
Furniture and fixtures...................... 31,832 31,832
Production equipment........................ 158,280
------- --------
Subtotal............................... 82,050 257,577
Less accumulated depreciation and
amortization.............................. 18,153 25,038
------- --------
Property and equipment -- net............... $63,897 $232,539
======= ========
</TABLE>

5. PATENTS

Patents at December 31, 1997 and September 30, 1998, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Patent costs................................ $300,000 $350,000
Less accumulated amortization............... 6,221 27,674
-------- --------
Patents -- net.............................. $293,779 $322,326
======== ========
</TABLE>

6. NOTES AND DEBENTURES PAYABLE

NOTES PAYABLE TO AFFILIATES -- Following the Company's bankruptcy
reorganization, Keystone, acting through Kingco, provided a credit facility to
the Company in an aggregate amount of $2,500,000 (the "Notes Payable to
Affiliates"). As of December 31, 1997, the amount borrowed under this facility
totalled $1,335,431. Borrowings accrued interest at a rate of 10% annually. Both
Kingco and Keystone advanced other funds to the Company between February and
December 1997. Interest expense related to this facility and these advances for
the year ended December 31, 1997 and the nine month periods ended September 30,
1997 and 1998 totalled $55,740, $29,227 (unaudited) and $66,497, respectively.

Kingco's obligation to extend additional loans to the Company under the
borrowing facility terminated in September 1998, at which time there was an
aggregate balance on the Notes Payable to Affiliates of $325,431.

CONVERTIBLE SUBORDINATED DEBENTURES -- On April 6, 1998, the Company offered
$2,200,000 principal amount of Class A Convertible Subordinated Debentures and
$300,000 principal amount of Class B Convertible Subordinated Debentures
(collectively, the "Subordinated Debentures") to its stockholders. Stockholders
who elected to subscribe to the Subordinated Debentures were required to
purchase a proportionate share of both Class A and B Subordinated Debentures.
Kingco converted the entire principal amount of borrowings under

F-13
<PAGE> 72
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the credit facility, $2,219,367, to Class A and Class B Subordinated Debentures.
Since funds advanced under the credit facility by Kingco to the Company were
provided to Kingco by Keystone, the other three members of Kingco assigned to
Keystone all of their rights with respect to the Subordinated Debentures. As a
result, Keystone holds $1,953,043 of the Class A Subordinated Debentures and
$266,324 of Class B Subordinated Debentures. Interest on the Subordinated
Debentures is paid in cash at an annual rate of 10% semiannually through
maturity. The Subordinated Debentures are unsecured and subordinated in right of
payment to the Company's obligations to secured creditors.

Class A Debentures -- Maturity is the earlier of May 1, 2003 or the closing of
an equity offering resulting in proceeds to the Company of at least $2,500,000.
Class A Debentures are convertible any time after May 1, 1999, but before April
1, 2003 or upon notice that the Company intends to close an equity offering, at
the rate of one share of common stock for each $.69 principal amount of the
Class A Debentures and accrued interest, if any, at the time of conversion. No
fractional shares will be issued and no payment by the Company in lieu of
fractional shares will be made upon conversion.

Class B Debentures -- Maturity is the earlier of May 1, 2003 or the closing of
an equity offering by the Company of at least $2,500,000. Class B Debentures are
convertible from May 1, 1999 to April 1, 2003 or upon notice that the Company
intends to close an equity offering, at the rate of one share of common stock
for each $.10 face amount of the Class B Debentures and accrued interest, if
any, at the time of conversion. No fractional shares will be issued and no
payment by the Company in lieu of fractional shares will be made upon
conversion.

The conversion price of the Subordinated Debentures represented a discount from
the estimated fair price of the Company's common stock at the time of issuance.
As a result, the Company recorded $1,079,810 for the intrinsic value of this
"beneficial conversion feature". The effect of the beneficial conversion feature
is being accreted from the date of issuance to the earliest date which such
shares are convertible. As of September 30, 1998, $516,662 has been charged to
interest expense and the remaining $563,148 has been reflected as a reduction of
the balance of the Subordinated Debentures. Interest expense for the
Subordinated Debentures for the nine months ended September 30, 1998 totalled
$610,840 (including $516,662 of interest related to the beneficial conversion
feature).

DEBENTURE ARISING FROM REORGANIZATION -- In connection with its Reorganization
Plan, the Company issued a $500,000 debenture on February 19, 1997 to the
Creditors' Committee (the "Creditors' Debenture"). The Creditors' Debenture
accrues interest at 5% annually and is payable quarterly. The entire principal
amount and all accrued interest is due and payable on February 19, 2001. The
Creditors' Debenture is subordinated to working capital lines of credit and
ordinary trade creditors' claims. Interest expense related to the Creditors'
Debenture for the year ended December 31, 1997 and the nine month periods ended
September 30, 1997 and 1998 totalled $21,490, $15,240 (unaudited) and $18,750,
respectively.

F-14
<PAGE> 73
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate contractual amount of required payments on long-term debt is as
follows:

7. FINANCIAL INSTRUMENTS

Financial instruments include cash and cash equivalents, other assets, accounts
payable, notes and debentures payable and convertible debentures. With the
exception of the debt instruments, management believes that the amounts reported
for financial instruments are reasonable approximations of their fair values due
to their short-term nature. Because of the related party nature of the debt
instruments and the circumstances under which they arose (see Note 6), it is not
practicable to estimate the fair value of these financial instruments due to a
lack of existing comparable financial instruments.

8. INCOME TAXES

Deferred income taxes reflect the net effects of temporary differences between
the amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The principal temporary difference arises
from the net operating loss carryforwards and results in a deferred tax asset of
approximately $1,178,000 and $1,824,000 at December 31, 1997 and September 30,
1998, respectively.

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
determined, based on its recurring net losses, and its being a development stage
enterprise, that a full valuation allowance is appropriate at December 31, 1997
and September 30, 1998.

As of September 30, 1998, the Company had federal net operating loss
carryforwards of approximately $5,364,000. The net operating loss carryforwards
will expire at various dates through 2018, if not utilized.

9. CAPITAL STOCK

PREFERRED STOCK -- The Company is authorized to issue 2,000,000 shares of
preferred stock, par value $.01 per share, none of which are issued and
outstanding.

COMMON STOCK -- The Company is authorized to issue 50,000,000 shares of common
stock, par value $.01 per share.

As more fully described in Note 3, as part of the Reorganization Plan, the
Company issued 2,413,350 shares of new common stock to old stockholders that
subscribed and paid $.69 per share for the new stock; all previously issued
stock was canceled. In conjunction with the Reorganization Plan, 1,200,000
shares were issued upon the exercise of 1,200,000 warrants at

F-15
<PAGE> 74
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$.01 per share. Additionally, in 1997 the Company issued 2,052 shares to
creditors that elected to receive shares of stock in lieu of certain cash
distributions and 10,000 shares were issued under an employment agreement. In
1998, an additional 2,146 shares were issued to creditors in lieu of cash
distributions and 40,000 shares were issued under a consulting agreement. The
Company will issue 21,460 additional shares to creditors in the reorganization
who have elected to receive shares rather than cash distributions.

The Class A Debentures are convertible into 3,188,403 shares of common stock (at
a rate of $.69 per share). The Class B Debentures are convertible into 2,999,991
shares of common stock (at a rate of $.10 per share). Any accrued interest on
the Subordinated Debentures is also convertible into shares of common stock at
the same conversion rates; interest accrues in an amount equal to 1,695 shares
per day.

STOCK OPTION PLAN -- The Company has a Stock Option Plan (the "Option Plan") for
officers and key employees which is administered by the Company's Board of
Directors. Under the Plan, options have been granted to employees to purchase
750,000 shares of common stock at a price of $1.00 per share. The options vest
over a period of five to six years and expire ten years from the date of grant.
Up to 750,000 additional shares of common stock are reserved for issuance under
the Option Plan. Additional options to purchase an aggregate of 160,000 shares
have been granted to certain of the Company's directors at a price of $1.00 per
share and expire five years from the date of grant. The issuance of the 910,000
options in 1998 resulted in an increase to additional paid-in capital of
$8,918,000 and a charge to compensation expense of $2,191,937 in the nine months
ended September 30, 1998. The remaining unearned compensation of $6,726,063 has
been recorded as an increase in stockholders' deficit and will be charged to
expense over the service period to which the options relate. The following table
summarizes stock option activity:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Outstanding at January 1, 1998.................... -- --
Granted......................................... 910,000 $1.00
Exercised....................................... -- --
------- -----
Outstanding at September 30, 1998................. 910,000 $1.00
======= =====
Options exercisable at September 30, 1998......... 160,000 $1.00
======= =====
</TABLE>

The weighted average fair value of options granted during 1998 was $11.22 per
share on the date of grant. The fair value of each option on the date of grant
was estimated using the Black-Scholes option pricing model with expected lives
of two, five and six years. The risk-free interest rate and expected volatility
used in this calculation was 5.2% and 50%, respectively. No dividend yield is
expected, and therefore, was not included in the computation.

F-16
<PAGE> 75
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Had compensation cost for the options been determined consistent with SFAS No.
123, the Company's net loss would have been increased by $317,000 and the loss
per share would have been antidilutive for the nine months ended September 30,
1998.

10. RELATED PARTY TRANSACTIONS

The Company is obligated to Keystone for administrative services and expenses
incurred (including management, finance, human resources, benefits, scientific,
laboratory and insurance personnel) performed during the year ended December 31,
1997 and the nine months ended September 30, 1998. At September 30, 1998, there
was a balance of $389,483 due to Keystone, as well as interest due on temporary
cash advances. The Company is also obligated to Keystone under a month-to-month
lease for laboratory space. Effective October 1, 1998, the Company has entered
into an administrative services agreement with Keystone at the rate of $20,000
per month for personnel and $1,200 per month for space and utilities. These fees
are intended to be based on Keystone's cost of supplying such services and
space.

Certain officers, directors and shareholders of the Company have provided
services as consultants prior to becoming officers of the Company. The Company
also has a monthly consulting agreement with a current director. Certain
directors of the Company are members of firms that have provided legal and
accounting services to the Company. The following schedule shows amounts
included in operations that the Company has incurred in related party
transactions.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -----------------------
1996 1997 1997 1998
-------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Keystone:
General and administrative
expense........................ $ 16,000 $ 96,028 $ 68,528 $293,455
Interest.......................... 27,167 8,245 123,916
Lease payments.................... 10,000
-------- -------- -------- --------
Subtotal.................. 16,000 123,195 76,773 427,371
-------- -------- -------- --------
Kingco:
Interest.......................... 60,400 28,573 20,982 24,407
-------- -------- -------- --------
Officers and Directors:
Consulting fees................... 54,000 128,400 118,000 177,500
Legal services.................... 175,000 75,000 103,810
Accounting services............... 6,000 42,754 30,750 38,955
-------- -------- -------- --------
Subtotal.................. 60,000 346,154 223,750 320,265
-------- -------- -------- --------
TOTAL............................... $136,400 $497,922 $321,505 $772,043
======== ======== ======== ========
</TABLE>

F-17
<PAGE> 76
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The balances due to related parties at December 31, 1997 and September 30, 1998
were included in the accompanying balance sheets as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Keystone:
General and administrative expenses............... $ 96,028 $389,483
Officers and Directors:
Legal services.................................... 100,000 203,810
-------- --------
Accounts payable -- related parties................. $196,028 $593,293
======== ========
Keystone:
Interest.......................................... $ 27,167 $118,817
Kingco:
Interest.......................................... 36,052 60,533
-------- --------
Accrued expenses -- related parties................. $ 63,219 $179,350
======== ========
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENTS -- The Company has entered into employment agreements with
two key officers and employees effective September 1, 1998, for a term of five
years. Such agreements provide for minimum salary levels as well as incentive
bonuses, as determined by the Board of Directors. Signing bonuses aggregating
$150,000 have been included in general and administrative expenses in the
accompanying statement of operations for the nine month period ended September
30, 1998. The aggregate commitment for future salaries at September 30, 1998,
excluding bonuses, was approximately $1,500,000.

PRODUCT DEVELOPMENT AGREEMENT -- The Company entered into an engineering
agreement for the development of a prototype instrument and test cartridges in
July 1997, in the amount of $1,130,081, plus the cost of material and expenses.
As of September 30, 1998, $1,060,178 of the contract has been paid. At September
30, 1998, the Company had obligations to an engineering consultant in the amount
of $75,600, regarding the transfer to manufacturing process.

CONSULTING AGREEMENT -- The Company is obligated under an oral consulting
agreement with a director (see Note 10) to pay $5,000 a month.

12. SUBSEQUENT EVENTS

MARKETING AND DISTRIBUTION -- On October 12, 1998 the Company entered into a
three year agreement (the "Marketing Agreement") with an unrelated laboratory
equipment distributor to market and distribute the Company's instruments and
test kits on a worldwide basis. The distributor will be the sole purchaser and
reseller of the Company's products. The Marketing Agreement provides for the
semi-annual establishment of sales goals and the Company has

F-18
<PAGE> 77
MOLECULAR CIRCUITRY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the right to terminate the agreement if certain goals are not met. The sales
goals and financial terms have not yet been finalized.

KEYSTONE CREDIT FACILITY -- On November 5, 1998, Keystone made a $5,000,000
credit facility available to the Company, payable interest only commencing
January 1, 1999 until maturity at an annual rate of 10%. This line will continue
until the earlier of May 15, 2000 or such time as the Company closes an equity
financing of $5,000,000 or more. On November 20, 1998, the Company borrowed
$150,000 under the credit facility.

INITIAL PUBLIC OFFERING -- The Company and representatives of underwriters are
preparing to sell shares of the Company's common stock in an initial public
offering. The proceeds of the offering are currently anticipated to be used to
repay existing indebtedness, fund research and development activities, renovate
and equip an administrative and production facility and for working capital and
other general corporate purposes.

* * * * * *

F-19
<PAGE> 78

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

PROSPECTIVE INVESTORS MAY RELY ONLY ON INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER MOLECULAR CIRCUITRY, INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS IT
SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.

UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THE OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

- ------------------------------------------------------
- ------------------------------------------------------
3,000,000 SHARES

MOLECULAR CIRCUITRY, INC.

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

PROSPECTUS
-------------------------
, 1999

PENNSYLVANIA MERCHANT GROUP
------------------------------------------------------
------------------------------------------------------
<PAGE> 79

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses, other than underwriting
discounts and commissions, in connection with the issuance and distribution of
the shares of Common Stock being registered, all of which are being borne by the
Registrant:

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC Registration fee....................................... $12,468.30
NASD Filing Fee............................................ 4,985.00
Transfer agent fees and registrar's fees*..................
Printing and engraving*....................................
Legal fees and expenses*...................................
Blue Sky fees and expenses*................................
Nasdaq listing fee*........................................ $86,000.00
Accounting fees and expenses*..............................
Miscellaneous*.............................................
Total*................................................ $
==========
</TABLE>

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

* Estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Bylaws state that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was a director or officer
of the Registrant or is or was serving at the request of the Registrant as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Registrant, whether the basis of
such proceeding is alleged action in an official capacity as a director, officer
or employee, or in any other capacity while serving as a director, officer or
employee, shall be indemnified and held harmless by the Registrant to the
fullest extent authorized by the Delaware General Corporation Law (the "DGCL")
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Registrant to
provide broader indemnification rights than said law permitted the Registrant to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, Employee Retirement Income
Security Act excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that the Registrant
is not obligated to indemnify any such person: (i) with respect to proceedings,
claims or actions initiated or brought voluntarily without the authorization or
consent of the Registrant by such person and not by way of defense; or (ii) for
any amounts paid in

II-1
<PAGE> 80

settlement of an action effected without the prior written consent of the
Registrant to such settlement.

The right to indemnification is a contract right and includes the right to be
paid by the Registrant the expenses incurred in defending any such proceedings
in advance of their final disposition, such advances to be paid by the
Registrant within 20 days after the receipt by the Registrant of a statement or
statements from the claimant requesting such advance or advances from time to
time; provided, however, that if the DGCL requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Registrant of an undertaking, by or on
behalf of such director of officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified.

The Registrant's Bylaws also state that if a claim is not paid in full by the
Registrant within 30 days after a written claim has been received by the
Registrant, the claimant may, at any time thereafter, bring suit against the
Registrant to recover the unpaid amount of the claim and, if successful in whole
or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Registrant) that the claimant has
not met the standard of conduct which makes it permissible under the DGCL for
the Registrant to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Registrant.

Delaware law permits the Registrant to provide similar indemnification to
employees and agents who are not directors or officers. The determination of
whether an individual meets the applicable standard of conduct may be made by
the disinterested directors, independent legal counsel or the stockholders.
Delaware law also permits indemnification in connection with a proceeding
brought by or in the right of the Registrant to procure a judgment in its favor.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, (the "Securities Act") may be permitted to directors,
officers, or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In the past three years, the Company has sold and issued the following
unregistered securities:

1. Pursuant to an Amended and Restated Chapter 11 Plan of Reorganization for
Crystal Medical Products, Inc., approved February 5, 1997, all of the
Registrant's then issued and outstanding capital stock was canceled and
extinguished. Pursuant to the Plan of Reorganization, the Registrant issued
1,750,000 shares of new Common Stock and warrants to purchase 1,200,000
shares of new Common Stock to Kingco, LLC and 4,198 shares of new Common
Stock to general unsecured creditors of the Registrant, in transactions
exempt from registration under Section 5 of the Securities Act, by operation
of Section 1145(a) of the Bankruptcy Code, in exchange for a general release
of claims against the Registrant by Kingco and these unsecured creditors. In
addition, the Registrant issued 663,350 shares of new Common Stock at a
purchase price of $0.69 per share for an aggregate of $457,712 to existing
shareholders in a transaction not deemed to involve a public offering within
the
II-2
<PAGE> 81

meaning of Section 4(2) of the Securities Act, pursuant to Rule 506 of the
Securities Act. The members of Kingco exercised their respective warrants in
June 1997 for an aggregate exercise price of $12,000.

2. In July 1997, Kingco made a $2,500,000 line of credit available to the
Registrant. Kingco converted the borrowings under the credit facility on a
dollar-for-dollar basis into $2,219,367 principal amount of 10% subordinated
convertible debentures in a private offering conducted by the Registrant in
April 1998 and described below in paragraph 4. Since Keystone provided the
funds advanced under the credit facility, the other three members of Kingco
assigned their rights under these debentures to Keystone.

3. The Registrant issued 10,000 shares of its Common Stock to James G. Timmins,
the former Chief Executive Officer of the Registrant, on August 1, 1997 in
lieu of compensation. The shares of Common Stock were valued at $0.69 per
share.

4. The Registrant issued an aggregate of $2,200,000 in principal amount of Class
A 10% Subordinated Convertible Debentures and $300,000 in principal amount of
Class B 10% Subordinated Convertible Debentures (collectively, the
"Debentures") in the following amounts and dates to the following existing
stockholders:

<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
DATE AMOUNT OF AMOUNT OF
NAME OF STOCKHOLDER ISSUED CLASS A CLASS B
- ------------------- ------- ------------- -----------
<S> <C> <C> <C>
Sherwyn J. Wayne, M.D.,................. 4/23/98 $ 7,585.37 $ 1,034.37
Trustee, Sherwyn J. Wayne, M.D.
Living Trust 1-2-92
Constance K. Hardacre................... 4/23/98 $ 4,400.00 $ 600.00
8/3/98 $ 1,506.00 $ 205.00
William J. Krug......................... 4/23/98 $ 75,853.66 $ 10,343.68
Raymond W. Schlueter.................... 4/23/98 $ 4,399.51 $ 599.93
8/3/98 $ 1,506.00 $ 205.00
K-FIVE Construction Company............. 4/23/98 $ 151,707.31 $ 20,687.36
Keystone Foods Corporation.............. 4/23/98 $1,394,800.00 $190,200.00
9/18/98 $ 558,242.79 $ 76,124.02
------------- -----------
TOTAL:............................. $2,200,000.64 $299,999.36
============= ===========
</TABLE>

Each stockholder of the Registrant was eligible to purchase the stockholder's
pro rata share of the Debentures, based on such stockholder's relative holdings
of the Company's Common Stock prior to the Offering, with any unsubscribed
Debentures reoffered among the purchasing stockholder group.

5. The Registrant issued 40,000 shares of its Common Stock to Dale L. Huffman on
September 10, 1998 in lieu of compensation for consulting services provided
to the Registrant by Mr. Huffman. The shares of Common Stock were valued at
$0.69 per share.

The Registrant believes that each of the transactions described above was exempt
from registration under Section 4(2) of the Securities Act because the subject
securities were sold to a limited group of persons, each of whom was believed to
have been either an accredited investor or a sophisticated investor or had a
preexisting business or personal relationship with the Registrant or its
management and was purchasing for investment without a view to further

II-3
<PAGE> 82

distribution. Restrictive legends were placed on stock certificates and/or
Debentures evidencing the securities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. The following exhibits are filed as part of this Registration
Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
1** Form of Underwriting Agreement
3.1* Certificate of Incorporation of Molecular Circuitry, Inc.
3.2* By-Laws of Molecular Circuitry, Inc.
4.1** Form of Certificate of Common Stock
4.2* Debenture dated February 19, 1997 issued to Benjamin Gordon,
as Disbursing Agent under the Crystal Medical Products, Inc.
Plan of Reorganization
4.3* Form of 10% Subordinated Convertible Class A Debenture
issued to existing shareholders of Crystal Medical Products,
Inc.
4.4* Form of 10% Subordinated Convertible Class B Debenture, as
amended, issued to existing shareholders of Crystal Medical
Products, Inc.
5* Opinion of Pelino & Lentz, P.C.
10.1* Marketing Agreement dated October 12, 1998 between Molecular
Circuitry, Inc. and VWR Scientific Products Corporation
10.1(i)* Agreement amending Marketing Agreement dated November 6,
1998 between Molecular Circuitry, Inc. and VWR Scientific
Products Corporation
10.2* Crystal Medical Products, Inc. Stock Option Plan adopted
September 1, 1998
10.3* Product Development Agreement dated July 28, 1997 by and
between Crystal Medical Products, Inc., SRC, Inc., W. Brian
Greger and Rick T. Smethers
10.4* Administrative Services Agreement dated October 1, 1998
between Crystal Medical Products, Inc. and Keystone Foods
Corporation
10.5* Employment Agreement dated September 1, 1998 between Crystal
Medical Products, Inc. and Marvin L. Sears
10.5(i)* Grant of Stock Options to Marvin L. Sears under Crystal
Medical Products, Inc. Stock Option Plan
10.6* Employment Agreement dated September 1, 1998 between Crystal
Medical Products, Inc. and Colin J. Barnstable
10.6(i)* Grant of Stock Options to Colin J. Barnstable under Crystal
Medical Products, Inc. Stock Option Plan
10.7** Registration Rights Agreement dated November , 1998 by and
among Molecular Circuitry, Inc., Keystone Foods Corporation,
Golden State Foods Corp., Glenmark Industries, Inc., K-FIVE
Construction Corporation, Michael R. Quinlan, William J.
Krug, Herbert Lotman, George W. Ginader, John W. Pelino and
Dale L. Huffman
10.8** Interim Revolving Credit Agreement dated July 1, 1997
between Kingco, L.L.C. and Crystal Medical Products, Inc.
10.8(i)** Interim Revolving Credit Note dated July 1, 1997 in the
principal amount of $2,500,000 from Crystal Medical
Products, Inc. to Kingco, L.L.C.
</TABLE>

II-4
<PAGE> 83

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
<C> <S>
10.9* Revolving Credit Agreement dated November 5, 1998 between
Keystone Foods Corporation and Molecular Circuitry, Inc.
10.9(i)* Revolving Credit Note dated November 5, 1998 in the
principal amount of $5,000,000 from Molecular Circuitry,
Inc. to Keystone Foods Corporation
10.10** Revolving Credit Agreement dated as of February 19, 1997
between Crystal Medical Products, Inc. and Kingco, L.L.C.
10.10(i)** Revolving Credit Note dated as of February 19, 1997 in the
principal amount of $175,431.00 from Crystal Medical
Products, Inc. to Kingco, L.L.C
10.11** Revolving Credit Agreement dated as of July 1, 1997 between
Crystal Medical Products, Inc. and Kingco, L.L.C.
10.11(i)** Revolving Credit Note dated as of July 1, 1997 in the
principal amount of $300,000.00 from Crystal Medical
Products, Inc. to Kingco, L.L.C.
10.12** Letter agreement dated November 12, 1998, extending the
terms of a Revolving Credit Note in the amount of $175,431
and a Revolving Credit Note in the amount of $300,000
between Crystal Medical Products, Inc. and Kingco, L.L.C.
10.13** Termination Agreement dated November , 1998 between
Molecular Circuitry, Inc. and Kingco, L.L.C.
23.1* Consent of Pelino & Lentz, P.C. (Included in Exhibit 5)
23.2* Consent of Deloitte & Touche LLP
24* Power of Attorney (included as part of the signature page
hereto)
27* Financial Data Schedule
</TABLE>

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

* Filed herewith.

** To be filed by Amendment.

(b) Financial Statement Schedules.

None.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted 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 Commission such indemnification is against
public policy as expressed in the Securities 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

II-5
<PAGE> 84

the question whether such indemnification by it is against public policy as
expressed in the Securities 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, 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, 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-6
<PAGE> 85

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN BALA CYNWYD,
PENNSYLVANIA ON NOVEMBER 25, 1998.

MOLECULAR CIRCUITRY, INC.

By: /s/ HERBERT LOTMAN
-----------------------------------
Herbert Lotman, President and
Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

POWER OF ATTORNEY

Each person in so signing also makes, constitutes and appoints Herbert Lotman
and George W. Ginader and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, to execute and cause to be
filed with the Securities and Exchange Commission pursuant to the requirements
of the Securities Act of 1933, as amended, any and all amendments and
post-effective amendments to this Registration Statement, and including any
Registration Statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, in each case with exhibits
thereto and other documents in connection therewith, and hereby ratifies and
confirms all that said attorney-in-fact or his substitute or substitutes may do
or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<S> <C> <C>

/s/ HERBERT LOTMAN Principal Executive Officer
- ------------------------------------ and Director November 25, 1998
Herbert Lotman

/s/ MICHAEL J. MARDY Principal Financial and
- ------------------------------------ Accounting Officer November 25, 1998
Michael J. Mardy

/s/ MARVIN L. SEARS Director November 25, 1998
- ------------------------------------
Marvin L. Sears

/s/ COLIN J. BARNSTABLE Director November 25, 1998
- ------------------------------------
Colin J. Barnstable

/s/ GEORGE W. GINADER Director November 25, 1998
- ------------------------------------
George W. Ginader
</TABLE>

II-7
<PAGE> 86

<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<S> <C> <C>
/s/ DALE L. HUFFMAN Director November 25, 1998
- ------------------------------------
Dale L. Huffman

/s/ JOHN W. PELINO Director November 25, 1998
- ------------------------------------
John W. Pelino
</TABLE>

II-8
<PAGE> 87

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
1** Form of Underwriting Agreement
3.1* Certificate of Incorporation of Molecular Circuitry, Inc.
3.2* By-Laws of Molecular Circuitry, Inc.
4.1** Form of Certificate of Common Stock
4.2* Debenture dated February 19, 1997 issued to Benjamin Gordon,
as Disbursing Agent under the Crystal Medical Products, Inc.
Plan of Reorganization
4.3* Form of 10% Subordinated Convertible Class A Debenture
issued to existing shareholders of Crystal Medical Products,
Inc.
4.4* Form of 10% Subordinated Convertible Class B Debenture, as
amended, issued to existing shareholders of Crystal Medical
Products, Inc.
5* Opinion of Pelino & Lentz, P.C.
10.1* Marketing Agreement dated October 12, 1998 between Molecular
Circuitry, Inc. and VWR Scientific Products Corporation
10.1(i)* Agreement amending Marketing Agreement dated November 6,
1998 between Molecular Circuitry, Inc. and VWR Scientific
Products Corporation
10.2* Crystal Medical Products, Inc. Stock Option Plan adopted
September 1, 1998
10.3* Product Development Agreement dated July 28, 1997 by and
between Crystal Medical Products, Inc., SRC, Inc., W. Brian
Greger and Rick T. Smethers
10.4* Administrative Services Agreement dated October 1, 1998
between Crystal Medical Products, Inc. and Keystone Foods
Corporation
10.5* Employment Agreement dated September 1, 1998 between Crystal
Medical Products, Inc. and Marvin L. Sears
10.5(i)* Grant of Stock Options to Marvin L. Sears under Crystal
Medical Products, Inc. Stock Option Plan
10.6* Employment Agreement dated September 1, 1998 between Crystal
Medical Products, Inc. and Colin J. Barnstable
10.6(i)* Grant of Stock Options to Colin J. Barnstable under Crystal
Medical Products, Inc. Stock Option Plan
10.7** Registration Rights Agreement dated November , 1998 by and
among Molecular Circuitry, Inc., Keystone Foods Corporation,
Golden State Foods Corp., Glenmark Industries, Inc., K-FIVE
Construction Corporation, Michael R. Quinlan, William J.
Krug, Herbert Lotman, George W. Ginader, John W. Pelino and
Dale L. Huffman
10.8** Interim Revolving Credit Agreement dated July 1, 1997
between Kingco, L.L.C. and Crystal Medical Products, Inc.
10.8(i)** Interim Revolving Credit Note dated July 1, 1997 in the
principal amount of $2,500,000 from Crystal Medical
Products, Inc. to Kingco, L.L.C.
10.9* Revolving Credit Agreement dated November 5, 1998 between
Keystone Foods Corporation and Molecular Circuitry, Inc.
10.9(i)* Revolving Credit Note dated November 5, 1998 in the
principal amount of $5,000,000 from Molecular Circuitry,
Inc. to Keystone Foods Corporation
</TABLE>
<PAGE> 88

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.10** Revolving Credit Agreement dated as of February 19, 1997
between Crystal Medical Products, Inc. and Kingco, L.L.C.
10.10(i)** Revolving Credit Note dated as of February 19, 1997 in the
principal amount of $175,431.00 from Crystal Medical
Products, Inc. to Kingco, L.L.C
10.11** Revolving Credit Agreement dated as of July 1, 1997 between
Crystal Medical Products, Inc. and Kingco, L.L.C.
10.11(i)** Revolving Credit Note dated as of July 1, 1997 in the
principal amount of $300,000.00 from Crystal Medical
Products, Inc. to Kingco, L.L.C.
10.12** Letter agreement dated November 12, 1998, extending the
terms of a Revolving Credit Note in the amount of $175,431
and a Revolving Credit Note in the amount of $300,000
between Crystal Medical Products, Inc. and Kingco, L.L.C.
10.13** Termination Agreement dated November , 1998 between
Molecular Circuitry, Inc. and Kingco, L.L.C.
23.1* Consent of Pelino & Lentz, P.C. (Included in Exhibit 5)
23.2* Consent of Deloitte & Touche LLP
24* Power of Attorney (included as part of the signature page
hereto)
27* Financial Data Schedule
</TABLE>

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

* Filed herewith.

** To be filed by Amendment.

<PAGE> 1
Exhibit 3.1

CERTIFICATE OF INCORPORATION

MOLECULAR CIRCUITRY, INC.

The undersigned, for the purpose of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, hereby
certifies as follows:

ARTICLE 1

The name of the Corporation is: MOLECULAR CIRCUITRY, INC.

ARTICLE 2

The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at that address is The Corporation Trust Company.

ARTICLE 3

The purpose of the corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of Delaware (the "General Corporation Law").

ARTICLE 4

4.1 The total number of shares of stock which the Corporation
shall have authority to issue is 52,000,000 shares of which 50,000,000 shares
shall be common stock, having a par value of $.01 per share (the "Common
Stock"), and 2,000,000 shares shall be preferred stock, having a par value of
$.01 per share (the "Preferred Stock").

4.2 Each holder of record of shares of the Common Stock shall
be entitled to vote at all meetings of the stockholders and shall have one (1)
vote for each share held of record.

4.3 Subject to all of the rights of the holders of all classes
or series of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive dividends at such
times and in such amounts as may be determined by the Board of Directors of the
Corporation.

4.4 The Board of Directors is expressly authorized to provide
for the issuance of all or any shares of the Preferred Stock in one or more
classes or series, and to fix for each
<PAGE> 2
such class or series such voting powers, full or limited, or no voting powers,
and such distinctive designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors of the Corporation providing for
the issuance of such class or series and as may be permitted by the General
Corporation Law, including without limitation, the authority to provide that any
such class or series may be (i) subject to redemption at such time or times and
at such price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of any
other class or classes of stock, or of any other series of the same or any other
class or classes of stock, of the Corporation at such price or prices or at such
rates of exchange and with such adjustments; all as may be stated in such
resolution or resolutions.

4.5 In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, after payment or provision for payment of the debts and
other liabilities of the Corporation and the amount to which the holders of any
class or series of the Preferred Stock shall be entitled, to share ratably in
the remaining net assets of the Corporation.

ARTICLE 5

The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:

(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.

(b) The number of directors shall be fixed from time to time
as provided in the Corporation's by-laws.

(c) The directors shall be divided into three classes
designated as Class I, Class II, and Class III, respectively. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. At each annual meeting of
the stockholders, successors to the class of directors whose term expires at the
annual meeting shall be elected for a three-year term. The initial term of the
Class I directors shall expire at the 1999 annual meeting of the stockholders;
the initial term of the Class II directors shall expire at the 2000 annual
meeting of the stockholders; and the initial term of the Class III directors
shall expire at the 2001 annual meeting of the stockholders. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly as
equal as possible, but in no case shall

2
<PAGE> 3
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his or her term expires and until his or her successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement or
removal from office. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.

(d) Subject to the rights, if any, of holders of any series of
the Preferred Stock then outstanding, any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a vote of
the majority of the Board of Directors then in office, provided that a quorum is
present, and any other vacancy occurring in the Board of Directors may be filled
by a majority of the directors then in office, even if less than a quorum, or by
the vote of the holders of a majority of the shares then entitled to vote at an
election of directors. Any director elected to fill a vacancy not resulting from
an increase in the number of directors shall have the same remaining term as
that of his or her predecessor.

(e) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended.

(f) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the General
Corporation Law, this Certificate of Incorporation, and any by-laws adopted by
the stockholders; provided, however, that no by-laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such by-laws had not been adopted.

(g) The affirmative vote of a majority of the entire Board of
Directors shall be required to make, alter, amend, change, add to or repeal the
by-laws of the Corporation.

(h) Except as otherwise required by law and subject to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to convene a meeting of the
stockholders, special meetings of stockholders of the Corporation may be called
(i) by the Chairman of the Board; (ii) by the President; or (iii) by the
Secretary pursuant to a resolution approved by a majority of the entire Board of
Directors, or (iv) by such person or persons as may be authorized by the
by-laws.

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(i) Any director, or the entire Board of Directors, may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided that if the director to
be removed was elected by any class or series of Preferred Stock, than such
person may only be removed, and his or her successor elected by the holders of a
majority of the shares of such class or series.

ARTICLE 6

The Corporation shall indemnify, in accordance with and to the
full extent now or hereafter permitted by the General Corporation Law as it may
be amended from time to time, any person who was or is a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (including, without limitation,
an action by or in the name of the Corporation), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer or employee of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans maintained or sponsored by the Corporation,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer or employee, or in any other capacity while serving as a
director, officer or employee against any expense, liability or loss reasonably
incurred by such person in respect thereof; provided, however, that the
Corporation shall not be obligated to indemnify any such person: (i) if such
person has not met the standard of conduct for indemnification under the General
Corporation Law; or (ii) with respect to proceedings, claims or actions
initiated or brought voluntarily without the authorization or consent of the
Corporation by such person and not by way of defense; or (iii) for any amounts
paid in settlement of an action effected without the prior written consent of
the Corporation to such settlement. Such indemnification is not exclusive of any
other right of indemnification provided by law, agreement or otherwise.

ARTICLE 7

No amendment to or repeal of Articles 5(e) or 6 of this
Certificate of Incorporation shall apply to or have any effect on the rights of
any individual referred to in Articles 5(e) or 6 for or with respect to acts or
omissions of such individual occurring prior to such amendment or repeal.

ARTICLE 8

Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the General Corporation Law)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the by-laws of the Corporation.

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ARTICLE 9

No stockholder of the Corporation shall by reason of holding
shares of any class of stock have any pre-emptive or preferential right to
purchase or subscribe to any shares of any class of stock of the Corporation,
now or hereafter to be authorized, or any notes, debentures, bonds or other
securities convertible into, or carrying options or warrants to purchase, shares
of any class of such stock, now or hereafter to be authorized, whether or not
the issuance of any such shares, or such notes, debentures, bonds or other
securities, would adversely affect the dividend or voting rights of such
stockholder, other than such rights, if any, as the Board of Directors, in its
discretion from time to time, may grant and at such price as the Board of
Directors in its discretion may fix; and the Board of Directors may issue shares
of any class of stock of the Corporation, or any notes, debentures, bonds or
other securities convertible into or carrying options or warrants to purchase
shares of any class of such stock, without offering any such shares of any
class, either in whole or in part, to the existing stockholders of any class of
such stock.

ARTICLE 10

The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

ARTICLE 11

The Corporation is hereby exempt from the applicability and
coverage of Section 203 of the General Corporation Law.

ARTICLE 12

The name and mailing address of the incorporator is Laura P.
Wax, 1650 Market Street, 32nd Floor, Philadelphia, PA 19010.

I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this Certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and, accordingly, have
hereunto set my hand this 15th day of September, 1998.

/s/ Laura P. Wax
-----------------
LAURA P. WAX

<PAGE> 1
Exhibit 3.2

BY-LAWS

MOLECULAR CIRCUITRY, INC.

(hereinafter called the "Corporation")

ARTICLE I

OFFICES

Section 1.1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.

Section 1.2. Other Office. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.

Section 2.2 Annual Meetings. The annual meetings of stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
annual meetings the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the annual meeting. Written notice of the annual meeting stating the place, date
and hour of the annual meeting shall be given to each stockholder entitled to
vote at such annual meeting not less than 10 nor more than 60 days before the
date of the annual meeting.

Section 2.3. Nominating Directors. Nominations of persons for
election to the Board of Directors at a meeting of stockholders may be made (i)
by or at the direction of the Board of Directors or (ii) by any stockholder
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.3. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary. To be timely, a
stockholder's notice must be delivered to, or mailed and received by, the
Secretary at the principal executive offices of the Corporation
<PAGE> 2
not less than 60 or more than 90 days prior to the meeting; provided, however,
that if the Corporation has not "publicly disclosed" (in the manner provided in
the last sentence of this Section 2.3) the date of the meeting at least 70 days
prior to the meeting date, notice may be timely made by a stockholder under this
Section 2.3 if received by the Secretary not later than the close of business on
the tenth day following the day on which the Corporation publicly discloses the
meeting date. Such stockholder's notice shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as
director if elected); and (ii) as to the stockholder giving notice (A) the name
and address, as they appear on the Corporation's books, of such stockholder, (B)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by such stockholder and (C) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
nominate the persons named in the stockholder's notice. At the request of the
Board of Directors, any persons nominated by the Board of Directors for election
as a director shall furnish to the Secretary that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee. No
person shall be eligible to serve as a director of the Corporation unless
nominated in accordance with the procedures set forth herein, except for persons
elected to fill vacancies on the Board of Directors. The presiding officer
shall, if the facts so warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
By-Laws, and the defective nomination shall be disregarded. For purposes of
these By-Laws, "publicly disclosed" or "public disclosures shall only be
applicable if the common stock of the Corporation is registered under Section 12
of the Exchange Act and shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or a comparable national news service
or in a document publicly filed by the Corporation with the Securities and
Exchange Commission.

Section 2.4. Notice of Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder who complies with the notice procedures set forth in this
Section 2.4. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must deliver written notice to, or mail such
written notice so that it is received by, the Secretary, at the principal
executive offices of the Corporation, not less than 120 or more than 150 days
prior to the first anniversary of the date of the Corporation's consent
solicitation or proxy statement released to stockholders in connection with the
previous year's election of directors or meeting of stockholders, except that if
no annual meeting of stockholders or election by consent was held in the
previous year or if the date of the annual meeting has been changed from the
previous year's meeting, a proposal shall be received by the Corporation within
10 days after the Corporation has "publicly disclosed" the date of the meeting
in the manner provided in Section 2.3. above. The stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (A) a

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brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (B)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (C) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, (D) a description
of all arrangements or understandings between such stockholder and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder and any other material interest of such
stockholder in such business and (E) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting. At an annual meeting, the presiding officer shall,
if the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 2.4., and such business not properly brought before the meeting shall
not be transacted. Whether or not the foregoing procedures are followed, no
matter which is not a proper matter for stockholder consideration shall be
brought before the meeting.

Section 2.5. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of Incorporation, special meetings of stockholders, for any
purpose or purposes, may be called only by (i) the Chairman, (ii) the President,
or (iii) by the Secretary pursuant to a resolution approved by a majority of the
entire Board of Directors. Such request shall state the purpose or purposes of
the proposed meeting. The business transacted at any special meeting of the
stockholders shall be limited to the purposes stated in the notice for the
meeting transmitted to stockholders. Written notice of a special meeting stating
the place, date and hour of the special meeting and the purpose or purposes for
which the special meeting is called shall be given not less than 10 nor more
than 60 days before the date of the special meeting to each stockholder entitled
to vote at such special meeting.

Section 2.6. Waiver of Notice; Postponement or Cancellation of
Stockholders Meetings. Notice of the time, place and purpose or purposes of any
meeting of stockholders may be waived by a written waiver thereof, signed by the
person entitled to notice. Such waiver, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Any previously scheduled meeting of the
stockholders may be postponed, and any special meeting of the stockholders may
be cancelled, by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such meeting.

Section 2.7. Record Date. In order that the Corporation may
determine the stockholders entitled to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to any proposed
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which shall

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not precede the date upon which the resolution fixing the record date is
adopted, and which shall be (i) not more than 60 nor less than 10 days before
the date of a meeting, and (ii) not more than 60 days prior to the other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for any adjourned
meeting.

Section 2.8. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the presiding
officer of the meeting or the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder entitled to vote at the meeting.

Section 2.9. Voting. When a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the stock represented and
entitled to vote thereat shall decide any question brought before such meeting
unless the question is one upon which, by express provision of applicable law,
the Certificate of Incorporation or these By-Laws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.

Section 2.10. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted after
three years from its date, unless the proxy provides for a longer period. At any
meeting of the stockholders, every stockholder entitled to vote may vote in
person or by proxy authorized by an instrument in writing or by a transmission
permitted by law filed in accordance with the procedure established for the
meeting. Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to this Section may be substituted
or used in lieu of the original writing or transmission for any and all purposes
for which the original meeting or transmission could be used; provided that,
such copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission. All voting, except
where otherwise required by law, the Certificate of Incorporation or the Board
of Directors, may be by a voice vote.

Section 2.11. Chairman of the Meeting. The Chairman of the Board of
Directors, if any, shall preside at all meetings of the stockholders. In the
absence or inability to act of the Chairman, the Vice Chairman, the President or
a Vice President (in that order) shall preside, and

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in their absence or inability to act another person designated by one of them
shall preside. The Secretary shall act as secretary of each meeting of the
stockholders. In the event of his or her absence or inability to act, the
chairman of the meeting shall appoint a person who need not be a stockholder to
act as secretary of the meeting.

Section 2.12. Conduct of Meetings. Meetings of the stockholders need
not be governed by any prescribed rules of order. The presiding officer's
rulings on procedural matters shall be final. The presiding officer is
authorized to impose reasonable time limits on the remarks of individual
stockholders and may take such steps as such officer may deem necessary, or
appropriate to assure that the business of the meeting is conducted in an
orderly manner.

Section 2.13. Inspectors of Elections; Opening and Closing the
Polls. If the common stock of the Corporation is registered under Section 12 of
the Exchange Act, the Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives, to act at the meetings of stockholders and
make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act or is able to act at a meeting of
stockholders, the presiding officer of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law. The presiding
officer of the meeting shall fix and announce at the meeting the date and time
of the opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting.

Section 2.14. Action Without a Meeting. Unless otherwise provided in
the Certificate of Incorporation, any action required or permitted to be taken
at any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.

ARTICLE III
DIRECTORS

Section 3.1. Duties and Number of Directors. The business and
affairs of the Corporation shall be managed by or under the direction of a Board
of Directors which shall be chosen at the annual meeting of stockholders. The
number of directors shall be fixed by

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resolution adopted by a majority of the entire Board of Directors except that
such number shall be not less than five (5) nor more than fifteen (15), the
exact number to be six (6) until otherwise determined by resolution adopted by
the entire Board of Directors.

Section 3.2. Resignation, Removal and Vacancies. Each director shall
hold office until the annual meeting for the year in which his or her term
expires and until his or her successor is elected and qualified, subject,
however, to his or her prior death, resignation, retirement or removal from
office. Any director may resign at any time upon written notice to the
Corporation directed to the Chairman of the Board of Directors or the Secretary.
Such resignation shall take effect at the time specified therein, and, unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. Subject as set forth in the following sentence, any
director or the entire Board of Directors may be removed with or without "Cause"
(as hereafter defined) by the vote of the holders of at least a majority of
shares of capital stock then entitled to vote at an election of directors.
Whenever the holders of shares of any class or series of capital stock are
entitled to elect one or more directors by the provisions of the Certificate of
Incorporation, the provisions of the preceding sentence shall apply, in respect
to the Removal with Cause of a director or directors so elected, to the vote of
the holders of the outstanding shares of that class or series of capital stock
and not to the vote of the holders of the outstanding shares of capital stock as
a whole. Unless otherwise provided by the Certificate of Incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by the vote of a majority of the
directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by the vote of the
holders of a majority of the shares then entitled to vote at an election of
directors, unless otherwise provided in the Certificate of Incorporation. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his or her
predecessor. For the purposes of this Section 3.2, "Cause" is defined as the
willful and continuous failure to perform a substantial portion of one's duties
to the Corporation or willfully engaging in gross misconduct materially and
demonstrably injurious to the Corporation.

Section 3.3. General. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Members of
the Board of Directors may participate in any such meeting by means of
conference telephone or similar communications equipment through which all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting.

Section 3.4. Notice. Notice of each meeting of Board of Directors
shall be given to each director at his or her business or residence in writing
by hand delivery, first-class or overnight mail or courier service, telegram or
facsimile transmission, or orally by telephone. If mailed by first-class mail,
such notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five (5) days
before such meeting. If by telegram, overnight mail or courier service, such
notice shall be deemed

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adequately delivered when the telegram is delivered to the telegraph company or
the notice is delivered to the overnight mail or courier service company at
least one (1) business day before such meeting and designated for next day
delivery. If by facsimile transmission, such notice shall be deemed adequately
delivered when the notice is transmitted at least 12 hours before such meeting.
If by telephone or by hand delivery, the notice shall be given at least 12 hours
prior to the time set for the meeting. Notice of any meeting of the Board of
Directors for which a notice is required may be waived in writing signed by the
person or persons entitled to such notice, whether before or after the time of
such meeting, and such waiver shall be equivalent to the giving of such notice.
Attendance of a director at any such meeting shall constitute a waiver of notice
thereof, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because such meeting is not
lawfully convened. Neither the business to be transacted at nor the purpose of
any meeting of the Board of Directors for which a notice is required need be
specified in the notice, or waiver of notice, of such meeting.

Section 3.5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors or a majority
of the Board of Directors, either personally, or by courier, telephone,
facsimile transmission, mail or telegram.

Section 3.6. Quorum. At all meetings of the Board of Directors, a
majority of the then duly elected directors shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.

Section 3.7. Action Without a Meeting. Unless otherwise provided by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or any committee designated by the
Board of Directors may be taken without a meeting if all members of the Board of
Directors or of such committee consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
such committee.

Section 3.8. Chairman of the Meeting. Meetings of the Board of
Directors shall be presided over by the Chairman, or in his or her absence by
the Vice Chairman, if any, or in their absence by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his or her
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.

Section 3.9. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or

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disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent allowed by law and provided in the resolution of the
Board of Directors establishing such committee, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation.

Section 3.10. Committee Meetings. Each committee shall keep regular
minutes of its meetings and shall file such minutes and all written consents
executed by its members with the Secretary. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings. A
majority of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum. All matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee. Members of any committee of
the Board of Directors may participate in any meeting of such committee by means
of conference telephone or similar communications equipment by means of which
all persons participating may hear each other, and participation in a meeting by
such means shall constitute presence in person at such meeting.

Section 3.11. Compensation. In the discretion of the Board of
Directors, the directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or any committee thereof.
In addition, in the discretion of the Board of Directors, the directors may
receive a stated salary for serving as directors or committee members or any
other form of compensation deemed appropriate. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.

ARTICLE IV

OFFICERS

Section 4.1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall consist of a Chairman of the Board of
Directors (who must be a director), a President, a Vice President, a Secretary
and a Treasurer. The Board of Directors, in its discretion, may also choose one
or more Vice Chairmen (who must be directors), Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices

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may be held by the same person, unless otherwise prohibited by law, the
Certificate of incorporation or these By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors or Vice Chairman, need such officers be
directors of the Corporation.

Section 4.2. Election. The Board of Directors at its first meeting
held after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein unless the Board of
Directors designates an earlier time, and, unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. The
Board of Directors may remove any officer or agent with or without cause at any
time by the affirmative vote of a majority of the Board of Directors. Any such
removal shall be without prejudice to the contractual rights of such officer or
agent, if any, with the Corporation, but the election of an officer or agent
shall not of itself create any contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise may be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or a committee thereof.

Section 4.3. Voting Securities Owned by the Corporation.
Notwithstanding anything to the contrary contained herein, powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board of Directors, the
President or any Vice President. Any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities. At any such meeting
such officer shall possess and may exercise any and all rights and powers
incident to the ownership of such securities which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.

Section 4.4. Chairman of Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board of Directors. In the absence or disability of the President, the Chairman
of the Board of Directors shall be the chief executive officer of the
Corporation, and except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The

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Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him or her by
these By-Laws or by the Board of Directors.

Section 4.5. Vice Chairman. Each Vice Chairman shall perform such
duties and have such powers as the Board of Directors from time to time may
prescribe. In the absence or disability of the Chairman of the Board of
Directors, the Vice Chairman, if any, shall exercise all the powers and
discharge all of the duties of the Chairman of the Board of Directors and shall
preside at all meetings of the stockholders and the Board of Directors.

Section 4.6. President. The President shall, subject to the control
of the Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall also be the Chief
Executive Officer of the Corporation unless the Board of Directors shall
designate the Chairman or any other person to serve in that capacity. He or she
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these By-Laws or by
the Board of Directors.

Section 4.7. Vice Presidents. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors or the
President from time to time may prescribe. The Board of Directors may designate
one or more Vice Presidents as Executive Vice Presidents or Senior Vice
Presidents, or make such other designations of Vice Presidents as it deems
appropriate.

Section 4.8. Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose. The
Secretary shall also perform like duties for the standing and special committees
of the Board of Directors when required. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board of Directors and shall perform such other duties as the Board of Directors
or the President may prescribe. The Secretary shall have custody of the seal of
the Corporation, and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it. When so
affixed, the seal may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his or her signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.

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<PAGE> 11
Section 4.9. Treasurer. The Treasurer shall perform all duties
commonly incident to that office including, but without limitation, the care and
custody of the funds and securities of the Corporation which, from time to time,
may come into his or her hands and the deposit of the funds of the Corporation
in such banks or trust companies as the Board of Directors may authorize or
direct. The Treasurer shall have and perform such other duties as the Board of
Directors or the President from time to time may prescribe.

Section 4.10. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President or the Secretary. In the absence of the
Secretary or in the event of his or her disability or refusal to act, an
Assistant Secretary shall perform the duties of the Secretary and, when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.

Section 4.11. Assistant Treasurers. Assistant Treasurers, if there
be any, shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors, the President or the Treasurer.
In the absence of the Treasurer or in the event of his or her disability or
refusal to act, an Assistant Treasurer shall perform the duties of the Treasurer
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer.

Section 4.12. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.

ARTICLE V

STOCK

Section 5.1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, certifying the number of shares owned by
the stockholder in the Corporation. If the Corporation shall be authorized to
issue more than one class of stock, or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock, or series thereof, and the qualifications,
limitations or restrictions of such preferences and/or rights, shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, except as
otherwise provided in the General Corporation Law. In lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock a
statement

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<PAGE> 12
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.

Section 5.2. Signatures. Where a certificate is countersigned by (i)
a transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.

Section 5.3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.

Section 5.4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by his or her attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued, except that a new certificate may be issued
in the name of an appropriate state officer or office, without the surrender of
the former certificate for shares presumed abandoned under the provisions of
applicable state escheat or abandoned property laws. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person or persons entitled thereto, cancel the old
certificate and record the transaction upon its books.

Section 5.5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.

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ARTICLE VI

NOTICES

Section 6.1. Notices. Whenever written notice is required by law,
the Certificate of Incorporation or these By-Laws to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by overnight mail, courier service, telegram, telex, cable or
facsimile transmission.

Section 6.2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws to be given to any
director, member of a committee or stockholder, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.

ARTICLE VII

GENERAL PROVISIONS

Section 7.1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital stock
or rights to acquire the same.

Section 7.2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors or a duly authorized committee
thereof may from time to time designate.

Section 7.3. Fiscal Year. Until otherwise fixed by resolution of the
Board of Directors, the fiscal year of the Corporation shall end on December 31.

Section 7.4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.

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ARTICLE VIII

INDEMNIFICATION

Section 8.1. Power to Indemnify. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Corporation, whether the basis of
such proceeding is alleged action in an official capacity as a director, officer
or employee, or in any other capacity while serving as a director, officer or
employee, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the General Corporation Law of Delaware (the
"General Corporation Law") as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Section 8.3, the Corporation shall not be obligated to indemnify any such
person: (i) with respect to proceedings, claims or actions initiated or brought
voluntarily without the authorization or consent of the Corporation by such
person and not by way of defense; or (ii) for any amounts paid in settlement of
an action effected without the prior written consent of the Corporation to such
settlement. The right to indemnification conferred in this Article VIII shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceedings in advance of their final
disposition, such advances to be paid by the Corporation within twenty (20) days
after the receipt by the Corporation of a statement or statements from the
claimant requesting such advance or advances from time to time; provided,
however, that if General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director of officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Article VIII or otherwise.

Section 8.2. Procedures for Indemnification. To obtain
indemnification under this Article VIII, a claimant shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to the claimant and is

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<PAGE> 15
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 8.2, a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (i) by the Board of Directors by a
majority vote of a quorum consisting of Disinterested Directors (as hereinafter
defined), or (ii) if a quorum of Disinterested Directors so directs, by the
stockholders of the Corporation. If it is so determined that the claimant is
entitled to indemnification, payment to the claimant shall be made within 10
days after such determination.

Section 8.3. Power to Bring Suit. If a claim under Section 8.1 is
not paid in full by the Corporation within thirty (30) days after a written
claim pursuant to Section 8.2 has been received by the Corporation, the claimant
may, at any time thereafter, bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.

Section 8.4. Binding Determination. If a determination shall have
been made pursuant to Section 8.2 that the claimant is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to Section 8.3. The Corporation shall be
precluded from asserting in any judicial proceeding commenced pursuant to
Section 8.3 that the procedures and presumptions of this Article VIII are not
valid, binding and enforceable and shall stipulate in such proceeding that the
Corporation is bound by all the provisions of this Article VIII.

Section 8.5. Non-Exclusive Remedy. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VIII shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Laws, agreement, vote of
stockholders or Disinterested Directors, or otherwise. No repeal or modification
of this Article VIII shall in any way diminish or adversely affect the rights of
any director, officer, employee or agent of the Corporation hereunder in respect
of any occurrence or matter arising prior to any such repeal or modification.

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Section 8.6. Insurance. The Corporation may, but shall not be
obligated to, purchase and maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation against any
liability, cost or expense.

Section 8.7. Expenses. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to indemnification,
and rights to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any employee or agent or
class of employees or agents of the Corporation including the heirs, executors,
administrators or estate of each such person) to the fullest extent of the
provisions of this Article VIII with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.

Section 8.8. Severability. If any provision or provisions of this
Article VIII shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Article VIII (including, without limitation, each
portion of any section of this Article VIII containing any such provision held
to be invalid, illegal or enforceable, that is not itself held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby;
and (b) to the fullest extent possible, the provisions of this Article VIII
including, without limitation, each such portion of any section of this Article
VIII containing any such provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or enforceable.

Section 8.9. Definitions. For purposes of this Article VIII,
"Disinterested Director" means a director of the Corporation who is not and was
not a party to the matter in respect of which indemnification is sought by the
claimant.

Section 8.10. Notice of Indemnification. Any notice, request or
other communication required or permitted to be given to the Corporation under
this Article VIII shall be in writing and either delivered in person or sent by
telecopy, telex, telegram, overnight mail or courier service, or certified or
registered mail, postage prepaid, return receipt requested, to the Secretary and
shall be effective only upon receipt by the Secretary.

ARTICLE IX

AMENDMENTS

Section 9.1. Amendments. These By-Laws may be amended, repealed or
added to at any regular or special meeting of the Board of Directors or of the
stockholders, by the affirmative vote of a majority of the entire Board of
Directors, or by the affirmative vote of a majority of the stock issued and
outstanding and entitled to vote, as the case may be.

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Section 9.2. Entire Board of Directors. As used in this Article IX
and in these By- Laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.

<PAGE> 1
EXHIBIT 4.2

DEBENTURE
DUE FEBRUARY 19, 2001

$500,000.00 February 19, 1997

FOR VALUE RECEIVED, the undersigned, Crystal Medical Products, Inc.,
an Illinois corporation ("Debtor"), hereby promises to pay to the order of
Benjamin Gordon, as Disbursing Agent under Crystal Medical Products Inc.'s Plan
of Reorganization, not individually, but solely as disbursing agent ("Disbursing
Agent") for the pro rata benefit of the holders of Allowed Class 4 Claims as
provided in Article 4 of the Plan (as defined below), the principal sum of Five
Hundred Thousand Dollars ($500,000), together with interest on such principal
sum accruing at a rate per annum equal to five percent (5%), calculated on the
basis of a 365-day year and the actual number of days elapsed. All principal
interest and all other amounts payable hereunder at any time and from time to
time are referred to herein, collectively, as "Liabilities". Debtor shall pay to
Disbursing Agent the entire principal sum owing under this Note on or before
February 19, 2001. Debtor shall pay to Disbursing Agent all interest accrued
under this paragraph on the last day of each calendar quarter, commencing with
the quarter ending on March 31, 1997, and on the date of any payment of
principal.

Any Liabilities that are not paid to Disbursing Agent when due shall
accrue interest from the date such Liabilities are due until they are paid at a
rate per annum equal to twelve percent (12%), calculated on the basis of a
365-day year and the actual number of days elapsed, and payable on demand of
Disbursing Agent. All payments hereunder shall be made to Disbursing Agent in
lawful U.S. currency c/o D'Ancona & Pflaum, Esquire, 30 North LaSalle Street,
Suite 2900, Chicago, Illinois 60602 (Facsimile: (312) 580-0923). Any payments
received pursuant to this Note shall be applied by Disbursing Agent to the
Liabilities (i) first, to any costs and expenses then payable hereunder, (ii)
second, to any interest accrued at such 12% rate, (iii) third, to any interest
accrued at such 5% rate, and (iv) fourth, to any principal outstanding.

This Note is the "Debenture" referred to in the Amended and Restated
Chapter 11 Plan of Reorganization of Crystal Medical Products, Inc. Proposed by
Kingco, L.L.C., dated October 18,
<PAGE> 2
1996 (as confirmed, and as it may be modified from time to time, pursuant to
court order, the "Plan"), confirmed by Order entered February 5, 1997, of the
United States Bankruptcy Court for the Northern District of Illinois, Eastern
Division (the "Bankruptcy Court"), in Case No. 96 B 25767 (the "Case") pending
in the Bankruptcy Court under Chapter 11 of the United States Bankruptcy Code.
Capitalized terms used in this Note, unless otherwise defined herein, shall have
the meanings provided in the Plan.

Debtor hereby further covenants that it shall execute and deliver
all such documents and instruments, and take all such actions, as are reasonably
requested by Disbursing Agent to preserve and protect Disbursing Agent's rights
hereunder.

Each of the following events, occurrences or circumstances shall
constitute a "default" under this Note: (a) any Liability shall not be paid when
due; (b) any representation, warranty or statement heretofore or hereafter made
to Disbursing Agent by or on behalf of Debtor under this Note or in any document
or instrument in connection with this Note or the Plan, including, without
limitation, the Disclosure Statement or any Plan Document, shall be false or
materially misleading; (c) Debtor shall fail to duly perform any of its
obligations hereunder or under the Plan or any Plan Document; (d) a default
shall occur in (i) the payment when due (subject to applicable grace periods),
whether by acceleration or otherwise, of any indebtedness owing to any holder of
an Allowed Secured Claim, or any other indebtedness (other than indebtedness
described in clause (a) above) of Debtor in a principal amount exceeding $5,000,
or (ii) the performance or observance of any obligation, covenant or condition
with respect to such indebtedness, if the effect of such default is to
accelerate, or to permit the acceleration of the maturity of such indebtedness,
or to permit the holder of such indebtedness otherwise to enforce or seek
enforcement of any remedies against Debtor with respect to such default; (e) any
judgment or order for the payment of money in excess of $5,000 shall be rendered
against Debtor which is not discharged, stayed or indemnified against to the
satisfaction of Disbursing Agent within 10 days; (f) Debtor shall become
insolvent, a receiver, Disbursing Agent or custodian shall be appointed for
Debtor or any part of the property of Debtor or any proceeding is commenced by
or against Debtor under any bankruptcy, reorganization, debt arrangement or
insolvency law,

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<PAGE> 3
in each case, other than any such events or circumstances described in this
clause (f) heretofore arising or occurring under the Case; (g) the holder of any
lien on or security interest in any property of Debtor shall take any action to
enforce such lien or security interest; or (i) a breach, default or violation by
Debtor shall occur under the provisions of the Plan (subject to applicable grace
or cure periods thereunder).

Upon the occurrence of any default, Disbursing Agent at its option
shall have all rights and remedies of a creditor under the Uniform Commercial
Code of the State of Illinois and other applicable laws. In addition to the
foregoing rights and remedies, upon the occurrence of any default, Disbursing
Agent shall have the right to (i) declare any or all Liabilities to be
immediately due and payable, whereupon all such amounts shall become immediately
due and payable, without further notice, demand or presentment of any kind
(provided that in the event of a default described in clause (f) of the
foregoing paragraph, all Liabilities automatically shall become due and payable,
without declaration, notice, demand or presentment of any kind), and (ii) apply
to the Bankruptcy Court for and obtain such modifications of the Plan and any
other Plan Documents, and such other remedies and relief, as Disbursing Agent
deems appropriate. In addition to the foregoing, a default under this Note shall
constitute a default under the Plan and, without limitation to any other rights
or remedies of Disbursing Agent (or the holders of any Allowed Class 4 Claims),
shall constitute sufficient grounds for, and entitle Disbursing Agent to obtain,
conversion of the Case to a Chapter 7 case under the United States Bankruptcy
Code. All rights and remedies of Disbursing Agent after a default shall be
cumulative. No waiver by Disbursing Agent of any default shall constitute a
waiver of any other default or the same default on a different occasion.

Debtor further agrees to pay on demand all reasonable costs and
expenses incurred by Disbursing Agent (including, without limitation, court
costs and reasonable attorneys' fees and disbursements) in endeavoring to
enforce this Note and Disbursing Agent's rights hereunder and the rights of the
holders of Allowed Class 4 Claims under the Plan, including, without limitation,
those incurred in defending any action threatened or brought against Disbursing
Agent by Debtor, its successors or

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<PAGE> 4
assigns or any creditor or shareholder of Debtor relating to the transactions
evidenced or contemplated under this Note.

All notices and other communications in connection with this Note
shall be sent in writing to Disbursing Agent or to Debtor, as the case may be,
at their respective addresses set forth in this Note (or to such other address
as either party shall notify the other party in writing in accordance with this
paragraph), and any such notice or other communication shall be deemed delivered
three (3) business days after being sent by certified U.S. mail, one (1)
business day after being sent by nationally-recognized private courier or by
facsimile (which facsimile shall be confirmed by sending a copy thereof by
either courier or certified mail as aforesaid, within two (2) business days
thereafter), or upon actual receipt when sent by any other means.

IN CONNECTION WITH ANY MATTER OR DISPUTE ARISING OUT OF OR RELATING
TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, DEBTOR HEREBY (A) CONSENTS
TO THE JURISDICTION AND VENUE OF THE BANKRUPTCY COURT, (B) WAIVES ANY OBJECTION
TO IMPROPER VENUE OR FORUM NON CONVENIENS, AND (C) CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, ADDRESSED TO DEBTOR AT ITS ADDRESS
FOR NOTICES AS PROVIDED ABOVE. DEBTOR HEREBY WAIVES TRIAL BY JURY IN CONNECTION
WITH ANY SUCH ACTION.

Debtor hereby irrevocably authorizes and empowers any attorney of
any court of record (which authorization and power, being coupled with an
interest, shall be irrevocable until payment of all Liabilities and payment and
performance in full of all liabilities and obligations of Debtor under this
Note, the Plan and the Plan Documents) to appear for Debtor in the Bankruptcy
Court (or any other court of competent jurisdiction) to confess judgment,
without process, in favor of Disbursing Agent, for such amount as may appear due
and unpaid under this Note, together with the costs of enforcement of this Note,
including, without limitation, reasonable attorneys' fees and disbursements and
court costs, to waive and release all errors that may intervene in any such
proceedings, and to consent to immediate execution on that judgment, hereby
ratifying and confirming all that such attorney may do by virtue of this
paragraph.

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Debtor irrevocably waives diligence in collection or protection,
presentment, protest, notice of protest, demand, dishonor, default, non-payment,
creation and existence of any Liabilities and any security or collateral now or
hereafter given for any Liabilities, and all other matters or things relating to
the Liabilities, this Note or any other agreement or instrument to which Debtor
and Disbursing Agent are parties, including any extension before, at or after
maturity of this Note.

Debtor shall maintain books for the registration and transfer of
this Note. Such registers shall show the names and addresses of the respective
holders of this Note and any other Notes issued in substitution or exchange for
this Note as provided below, the respective principal amounts thereof, and the
provisions applicable thereto. Debtor from time to time shall, subject to the
terms of the Plan, transfer this Note and any outstanding Notes issued in
substitution for this Note upon the books to be maintained by the Company for
that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer. Upon any such transfer, a
new Note shall be issued to the transferee and the surrendered Note shall be
canceled.

This Note may be exchanged, at the option of Disbursing Agent, when
surrendered at the location of Debtor for notices provided above, for another
Note, or other Notes of different denominations, of like tenor and representing
in the aggregate the same principal amount. In case this Note shall be
mutilated, lost, stolen or destroyed, Debtor shall issue and deliver in exchange
and substitution for this Note a new Note of like tenor and in the same
principal amount, but only upon receipt of an affidavit of such mutilation,
loss, theft or destruction executed by Disbursing Agent.

If any provision of this Note is prohibited by or invalid under
applicable law, that provision will be ineffective to the extent of the
prohibition or invalidity, without invalidating the rest of that provision or
the remaining provisions of this Note. This Note shall be governed and construed
in accordance with the laws of the State of Illinois applicable to agreements
made and to be performed entirely within Illinois, without regard to the
conflict of laws principles of Illinois. This Note shall bind Debtor and
Debtor's successors,

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<PAGE> 6
legal representatives and permitted assigns, and shall inure to the benefit of
Disbursing Agent and its successors, legal representatives and assigns. Debtor
shall have no right to assign any right or obligation hereunder without the
prior written consent of Disbursing Agent. No provision of this Note may be
waived, amended, released or otherwise changed, except by a writing signed by
the party against which enforcement is sought.

IN WITNESS WHEREOF, Debtor has executed this Note as of the day and
year written first above.

CRYSTAL MEDICAL PRODUCTS, INC.

By:/s/Herbert Lotman
-------------------------------
Herbert Lotman
Its: President

Address: c/o Ginader, Jones & Co.
321 Spruce Street
525 Bank Towers
Scranton, PA 18503
717-347-1734

<PAGE> 1
EXHIBIT 4.3

CRYSTAL MEDICAL PRODUCTS, INC.
Class A 10% Subordinated Convertible Debenture

No. ______ ___________, 1998

$_________

CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (hereinafter
called "Company") for value received, promises to pay to the order
of____________ ("Holder") the sum of___________________________ ($_________) in
lawful money of the United States on the Maturity Date (as defined herein).

This debenture ("Debenture") is one of an authorized issue of Class
A 10% Convertible Subordinated Debentures (collectively, the "Debentures" or
individually a "Debenture") limited in the aggregate to $2,200,000 offered
pursuant to a Private Placement Memorandum dated April 6, 1998, all of like
tenor and maturity except the variations necessary to express the principal
amount and registered owner of each Debenture.

THIS DEBENTURE IS NON-NEGOTIABLE, and can only be assigned or
transferred as provided for herein.

The following is a statement of the rights of the holder of this
Debenture and the terms and conditions to which this Debenture is subject, to
which the Holder assents:

1. Payment of Principal and Interest. Company will pay interest
semi-annually in arrears from the date of issue on the unpaid principal balance
at the rate of Ten Percent (10%) per annum on July 1 and January 1, commencing
on July 1, 1998 through the Maturity Date, to holders of record at the close of
business thirty (30) days prior to each interest payment date. Interest will be
calculated on the basis of a 360 day year. Company will pay the entire principal
amount of this Debenture, together with all accrued and unpaid interest thereon,
on the Maturity Date.

2. Place of Payment. The principal and interest of this Debenture
shall be payable without setoff or reduction at the principal office of the
Company, c/o Ginader, Jones & Co., LLP, 321 Spruce Street, Suite 525, Scranton,
PA 18503, or at such other place to which such office may have been moved (the
"Principal Office") unless another place of payment is specified in writing by
the Company.

3. Maturity Date. This Debenture shall mature and all unpaid
principal and interest shall be automatically due and payable, without notice or
demand, upon the earliest to occur (the "Maturity Date") of the following dates:
(i) May 1, 2003; or (ii) closing of any Equity Financing (as defined herein)
resulting in proceeds to Company of at least $2,500,000. As used
<PAGE> 2
herein, the term "Equity Financing" shall mean and include the sale by Company
in any public or private offering, of shares of any class of its New Common
Stock or any security convertible into such shares.

4. Optional Conversion. For purposes of this Section 4, the
"Conversion Termination Date" shall mean the earlier of the following dates: (i)
April 1, 2003; or (ii) sixty (60) days following the mailing postmark date of
written notice by the Company to the Holders that it intends to close under an
Equity Financing. This Debenture may be converted at any time after, but not
before, May 1, 1999 (or at any time following written notice by the Company to
the Holders that it intends to close under an Equity Offering) and prior to the
Conversion Termination Date in whole or in part, at the option of the Holder
(the "Conversion") into that number of whole shares of the Company's fully-paid
and non-assessable New Common Stock as shall be determined by dividing the then
outstanding principal balance of this Debenture plus all interest then accrued
but unpaid hereunder, by $.69 (the "Conversion Price"). No fractional shares of
the Company's New Common Stock shall be issued nor shall cash in lieu of
fractional shares be paid by the Company.

A Debenture may be converted in whole or in part by written notice
from the Holder to the Company bearing a mailing postmark date not later than
the Conversion Termination Date sent to the Principal Office of the Company
specifying the portion, if less than all, of the Debenture to be converted,
accompanied by surrender of the Debenture. In the event of a partial Conversion
of the Debenture by the Holder, another Debenture of like terms equal in
principal amount to the unpaid balance of the Debenture partially converted
shall be issued to the Holder.

The shares of New Common Stock issuable upon the Conversion may not
be publicly offered or sold unless the person offering or selling such security
complies with the registration provisions of the Securities Act of 1933, as
amended or any successor legislation thereto, any state securities law
applicable to the issuance and sale of such shares and all applicable rules and
regulations adopted by any of the foregoing, or unless, in the opinion of
counsel who is satisfactory to Company and its counsel, such offer and sale is
exempt from such registration provisions. Notwithstanding anything herein to the
contrary, unless the shares issuable on Conversion are covered by a current
registration statement under the Securities Act of 1933 as amended, or other
applicable law at the time of any proposed Conversion, it shall be a condition
of the delivery of certificates for shares of the Company's New Common Stock
issuable upon the Conversion, that the Holder deliver to Company, together with
this Debenture for cancellation, the Holder's written representation in form
satisfactory to the Company that the Holder is acquiring the shares without a
view to engage in a distribution thereof in violation of applicable laws, rules
and regulations relating to such registration. Any unregistered shares issued
upon Conversion shall be endorsed with a legend in substantially the following
form, and the Holder shall comply with the terms thereof:

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<PAGE> 3
"These shares have not been registered under the Securities Act of
1933, as amended, or any successor legislation thereto or under any
state securities laws. They may not be transferred by the holder
unless, in the opinion of counsel who is satisfactory to the Company
and its counsel, such transfer does not violate the registration
provisions of such laws."

5. Redemption. Company may redeem this Debenture at any time in
whole or in part, without payment of any premium or penalty. The redemption
price shall be the principal amount of the portion of the Debenture redeemed,
plus accrued and unpaid interest to the date of redemption. A Debenture may be
redeemed by the Company by written notice of redemption specifying the date of
redemption (the "Redemption Date"), mailed to the Holder not less than fifteen
(15) days nor more than ninety (90) days prior to the Redemption Date. The
Holder shall surrender this Debenture to Company at the Principal Office by the
Redemption Date in exchange for the payment due and, in the event of a partial
redemption, in exchange for another Debenture of like terms equal in principal
amount to the unpaid balance of the principal sum of the Debenture partially
redeemed. Upon due tender of the redemption price by Company, no Debenture which
has been subject to a notice of redemption, and no part of a Debenture which has
been the subject of a notice of partial redemption, shall be deemed to be
outstanding for any purpose subsequent to 5:00 p.m. local time at the Principal
Office on the Redemption Date, notwithstanding the failure of the Holder to
surrender such Debenture. Interest shall cease to accrue on the Debenture or on
the portion of a Debenture partially redeemed, as of the Redemption Date.

6. Events of Default. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder:

(a) Failure to pay any amount payable on account of principal
or interest on this Debenture or redemption of this Debenture in whole or in
part, within thirty (30) days after the date when due;

(b) Failure to observe or perform any of the other agreements
or covenants of Company herein contained; or

(c) The adoption by Company of any plan of merger in which it
is not the surviving entity and in which its shareholders prior to the merger do
not own the majority of the outstanding stock of the surviving entity, or any
plan of consolidation, liquidation or dissolution.

(d) The sale or other transfer by Company of all or
substantially all of its property or assets except in the usual and ordinary
course of the operation of its business.

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<PAGE> 4
(e) The commencement of an involuntary case, or the filing of
a petition against Company seeking reorganization, arrangement, adjustment or
composition of or in respect of Company under the Federal bankruptcy laws, as
now or hereafter constituted, or under any other applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or seeking the
appointment of a receiver, liquidator, custodian, trustee (or similar official)
of Company for any substantial part of its property, or seeking the winding up
or liquidation of its affairs (and such involuntary case or petition is not
dismissed within ninety (90) days after the filing thereof), or the commencement
by Company of a voluntary case, or the consent by it to the institution, of
bankruptcy or insolvency proceedings against it under the Federal bankruptcy
laws as now or hereafter constituted, or any other applicable Federal or state
bankruptcy or insolvency or other similar law, or the consent by Company to the
appointment of or taking possession by a receiver, liquidator, trustee,
custodian (or other similar official) of Company for any substantial part of its
property, or the making by it of any assignment for the benefit of creditors or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the failure of Company to generally pay its debts as such
debts become due or the taking of any corporate action by Company by its
stockholders or Board of Directors or any committee thereof in furtherance of
any of the foregoing.

The Company will promptly notify Holders of the Debentures in
writing of the occurrence of any event of default under the Debentures.

If an Event of Default described in (c) or (d) occurs, the entire
principal balance of this Debenture shall accelerate and shall become
automatically due and payable without further notice or demand within thirty
(30) days following the Event of Default.

If an Event of Default described in (a), (b) or (e) occurs, and if
the Holders of Debentures holding forty percent (40%) or more of the then
remaining principal balance of indebtedness under the Debentures give written
notice to the Company of an Event of Default (whether or not the Holder of this
Debenture gives written notice of an Event of Default), then in such event the
entire principal balance of indebtedness under this Debenture shall accelerate
and shall become due and payable thirty (30) days after Company's receipt of
such notices from Holders of Debentures, unless all Events of Default described
in (a), (b) or (e) above have been cured prior to the expiration of such thirty
(30)-day period.

Any payment due on this Debenture which is not paid within thirty
(30) days after the date when due will bear interest at the rate of three
percent (3%) in excess of the rate specified above from the due date until the
date of payment.

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<PAGE> 5
present and future indebtedness which is not expressly on a parity with or
junior to the Debentures will be superior to the Debentures in right of payment.
The Debentures will be on parity with any future subordinated indebtedness of
the Company. In case of any insolvency proceedings, receivership,
conservatorship, reorganization, readjustment of debt, marshaling of assets and
liabilities or similar proceedings or any liquidation or winding-up of the
Company, whether voluntary or involuntary, all such obligations (except
obligations which rank on a parity with or junior to the Debentures) will be
entitled to be paid in full before any payment may be made on account of the
principal of or accrued interest on the Debentures. No payment of principal or
interest shall be made on the Debenture if, but only as long as, there exists
any default, or the existence of any event which, with the giving of notice,
would constitute a default, in the payment of Senior Debt, as determined by the
terms of such Senior Debt. No default shall be deemed to exist on Senior Debt to
the extent that Company is, in good faith, diligently contesting its obligation
to pay or discharge such Senior Debt.

8. Covenants. Until the principal amount of this Debenture and all
accrued interest have been paid in full, Company will not without the prior
written consent of the Holder, pay any dividends or make any distributions
(other than dividends or distributions in the form of capital stock of Company)
to its shareholders.

9. Anti-Dilution Provisions. In the event that Company shall, at any
time prior to the Maturity Date and prior to any Conversion: (i) declare or pay
to the holders of its New Common Stock a dividend payable in any kind of shares
of stock of Company; or (ii) change or divide or otherwise reclassify its New
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially as an entirety
to, any other corporation or other entity; or (iv) make any distribution of its
assets to Holders of its New Common Stock in whole or partial liquidation or by
way of return of capital, then, upon Conversion, the Holder hereof shall receive
for the Conversion Price, in addition to or in substitution for the shares of
New Common Stock to which such Holder would otherwise be entitled upon such
exercise, such additional shares of stock of Company or such reclassified shares
of stock of Company, or such shares of the securities or property of Company if
the surviving entity) or of the corporation or other entity resulting from such
consolidation, merger or transfer, or such assets of Company, which the Holder
would have been entitled to receive had the Conversion occurred immediately
prior to the happening of any of the foregoing events. Any plan or agreement
devised or executed in connection with any of the foregoing events shall
explicitly provide for the aforesaid rights of the Holder of this Debenture.
Within a reasonable time prior to or subsequent to the occurrence of any of the
foregoing events, Company shall notify the registered Holder hereof with respect
to the Holder's rights in connection therewith, and shall include with such
notice a detailed written explanation of the relevant events, transactions and
resulting capital adjustments to the Holder hereof. If the Holder gives Company
no written objection to such adjustments within ten (10) days after the Holder's
receipt of such explanation, the Holder hereof may not thereafter object to such
adjustments.

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<PAGE> 6
Company shall, at all times prior to the Maturity Date, reserve or
hold available a sufficient number of shares of its New Common Stock to cover
the number of shares issuable upon Conversion.

10. Severability. If any provision of this Debenture is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Debenture shall remain in full force and effect and shall be
liberally construed in favor of Holder in order to effectuate the provisions of
this Debenture. In addition, in no event shall the rate of interest payable
under this Debenture exceed the maximum rate of interest permitted to be charged
by the applicable law (including the choice of law rules) and any interest paid
in excess of the permitted rate shall be refunded to Company. Such refund shall
be made by application of the excessive amount of interest paid against any sums
outstanding, and shall be applied to reduce principal. If the excessive amount
on interest paid exceeds the sums outstanding, the portion exceeding the said
sums outstanding shall be refunded in cash by Holder. Any such crediting or
refund shall not cure or waive any default by Company hereunder. Company agrees,
however, that in determining whether or not any interest payable under this
Debenture exceeds the highest rate permitted by law, any non-principal payment,
including, without limitation, fees and late charges, if any, shall be deemed,
to the extent permitted by law, to be an expense, fee, premium or liquidated
damages, rather than interest.

11. Modification of Debenture. The rights and obligations of Company
and of the Holder may be modified, the terms of this Debenture may be amended
and any right of the Holder or other provision hereof may be waived, with the
written consent of Company and the registered owners of not less than
sixty-seven percent (67%) in principal amount outstanding of all of the
Debentures at the time of such modification, amendment or waiver (whether or not
the Holder of this Debenture so consents); provided, however, that, without the
consent of the Holder of this Debenture, no such modification shall affect the
reduction of the principal amount, extend the Maturity Date or reduce the
interest rate of this Debenture. Any such consent by the then current Holder of
this Debenture shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof, irrespective of whether any notation of
such consent or waiver is made upon this Debenture or otherwise. Except as set
forth above, Holders shall not by any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver is in writing
and signed by Holder, and then only to the extent specifically set forth
therein.

12. Maintenance of Registry. Company will maintain at its Principal
Office or at the office of its agent appointed for such purpose, a registry for
the registration and transfer of the Debentures, in which it will register the
name and address (to be supplied by each registered owner) of each person to
whom the Debentures are issued and the name of each successive Holder presenting
a Debenture for registration as herein provided. Company and its agents may deem
and treat the person in whose name a Debenture is registered as the absolute
owner and Holder thereof for purpose of receiving payment of principal and
interest and for all other

6
<PAGE> 7
purposes, whether or not the Debenture is overdue and regardless of any notices
to Company or its agents, unless and until this Debenture is presented for
transfer duly endorsed or assigned by Holder.

13. Choice of Law. This Debenture, and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.

14. Jurisdiction; Service. With respect to any suit, action or
proceeding relating to this Debenture, each party irrevocably (i) submits to the
non-exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and
the United States District Court for the Eastern District, Commonwealth of
Pennsylvania; and (ii) waives any objection which it may have at any time to the
laying of venue of any proceedings brought in any such court, waives any claim
that such proceedings have been brought in any inconvenient forum and further
waives the right to object, with respect to such proceedings, that the court
does not have jurisdiction over such party. Service of process in any such
action may be made, and shall be deemed sufficient, in the manner for the giving
of notice set forth herein.

15. Loss or Destruction. Upon receipt by Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Debenture, and (in case of loss, theft or destruction) of indemnity satisfactory
to it, and upon reimbursement to Company of all reasonable expenses incidental
thereto, including reasonable attorneys' fees, and upon surrender and
cancellation of this Debenture, if mutilated, Company will make and deliver a
new Debenture of like tenor in lieu of this Debenture. The face amount of any
Debenture made and delivered in accordance with the provisions of this paragraph
shall reflect the principal balance then outstanding and shall be dated as of
the date to which interest has been paid on this Debenture.

16. Company Waivers. Except as herein above expressly otherwise
provided, Company waives presentment for payment, demand, notice of non-payment,
notice of protest, and protest of this Debenture, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Debenture, and agrees that its liability shall be
unconditional without regard to the liability of any other party.

17. Binding Nature of Debenture. This Debenture shall be binding
upon Company and its successors and assigns.

18. No Waiver, Indulgences, etc. Neither the failure nor any delay
on the part of the Holder to exercise any right, remedy, power or privilege
under this Debenture shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any

7
<PAGE> 8
other occurrence. No waiver shall be effective unless it is in writing and,
except as expressly provided above, unless it is signed by the Holder asserted
to have granted such waiver.

19. Notices. All notices required or permitted by this Debenture
shall be in writing and shall be deemed to have been duly given when delivered,
or when deposited in the United States mails, certified mail, postage pre-paid,
return receipt requested, addressed to Company at the Principal Office and
addressed to Holder at Holder's address as it appears on the records of Company.
Either party may change the address to which notices are to be sent by giving
notice of such change of address in conformity with the foregoing provisions.

20. No Guarantees or Third Party Liability. No recourse shall be had
for the payment of the principal, interest or redemption price of this
Debenture, or for any premium or other claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, employee, agent, officer
or director, past, present or future of Company, or by the enforcement of any
assessment or penalty, or otherwise, all such liability being expressly waived
and released by Holder's acceptance of this Debenture.

21. Non-Registration; Investment Intent; Transferability. THIS
DEBENTURE AND THE SHARES INTO WHICH IT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAW OF ANY STATE.
THIS DEBENTURE HAS BEEN ACQUIRED, AND SUCH SHARES WILL BE ACQUIRED, BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH DEBENTURE OR
SHARES UNDER THE ACT, UNLESS IN THE OPINION OF COUNSEL (WHICH OPINION SHALL BE
IN FORM AND SUBSTANCE SATISFACTORY TO COMPANY AND SUCH COUNSEL SHALL BE
SATISFACTORY TO COMPANY), SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT. By
acceptance of this Debenture, Holder represents and warrants to Company that the
Holder is acquiring this Debenture, and will acquire the shares into which it is
convertible, for the Holder's own individual investment account, and not with a
view to distribution or resale.

IN WITNESS WHEREOF, Company has caused this Debenture to be duly
executed on ____________, 1998.

CRYSTAL MEDICAL PRODUCTS, INC.

By: /s/ George Ginader, Chairman
------------------------------------
George Ginader, Chairman

<PAGE> 1
EXHIBIT 4.4

CRYSTAL MEDICAL PRODUCTS, INC.
Class B 10% Subordinated Convertible Debenture

No. ____ ___________, 1998

$___________

CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (hereinafter
called "Company") for value received, promises to pay to the order
of_____________("Holder") the sum of _________________________________
($__________) in lawful money of the United States on the Maturity Date (as
defined herein).

This debenture ("Debenture") is one of an authorized issue of Class
B 10% Convertible Subordinated Debentures (collectively, the "Debentures" or
individually a "Debenture") limited in the aggregate to $300,000 offered
pursuant to a Private Placement Memorandum dated April 6, 1998, all of like
tenor and maturity except the variations necessary to express the principal
amount and registered owner of each Debenture.

THIS DEBENTURE IS NON-NEGOTIABLE, and can only be assigned or
transferred as provided for herein.

The following is a statement of the rights of the holder of this
Debenture and the terms and conditions to which this Debenture is subject, to
which the Holder assents:

1. Payment of Principal and Interest. Company will pay interest
semi-annually in arrears from the date of issue on the unpaid principal balance
at the rate of Ten Percent (10%) per annum on July 1 and January 1, commencing
July 1, 1998 through the Maturity Date to holders of record at the close of
business thirty (30) days prior to each interest payment date. Interest will be
calculated on the basis of a 360 day year. Company will pay the entire principal
amount of this Debenture, together with all accrued and unpaid interest thereon,
on the Maturity Date.

4. Optional Conversion. For purposes of this Section 4, the
"Conversion Termination Date" shall mean the earlier of the following dates: (i)
April 1, 2003; or (ii) sixty (60) days following the mailing postmark date of
written notice by the Company to the Holders that it intends to close under an
Equity Financing. This Debenture may be converted at any time after, but not
before, April 1, 1999 (or at any time following written notice by the Company to
the Holders that it intends to close under an Equity Offering) and prior to the
Conversion Termination Date in whole or in part, at the option of the Holder
(the "Conversion") into that number of whole shares of the Company's fully-paid
and non-assessable New Common Stock as shall be determined by dividing the then
outstanding principal balance of this Debenture plus all interest then accrued
but unpaid hereunder, by $.10 (the "Conversion Price"). No fractional shares of
the Company's New Common Stock shall be issued nor shall cash in lieu of
fractional shares be paid by the Company.

6. Events of Default. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder:

(a) Failure to pay any amount payable on account of principal
or interest on this Debenture or redemption of this Debenture in whole or in
part, within thirty (30) days after the date when due;

(b) Failure to observe or perform any of the other agreements
or covenants of Company herein contained; or

(d) The sale or other transfer by Company of all or
substantially all of its property or assets except in the usual and ordinary
course of the operation of its business.

7. Subordination. This Debenture shall be subordinated to Senior
Debt to the extent indicated herein. "Senior Debt" shall mean any indebtedness
or obligation of Company (plus interest, premium and penalties due from or
arising out of such indebtedness, or any refinancing thereof), whether now
outstanding or hereinafter incurred, to its secured creditors and/or its general
or unsecured creditors, including Kingco, L.L.C. and/or its members. The
Debentures will be on parity with any future subordinated indebtedness of the
Company. In case of any insolvency proceedings, receivership, conservatorship,
reorganization, readjustment of debt, marshaling of assets and liabilities or
similar proceedings or any liquidation or winding-up

4
<PAGE> 5
of the Company, whether voluntary or involuntary, all such obligations (except
obligations which rank on a parity with or junior to the Debentures) will be
entitled to be paid in full before any payment may be made on account of the
principal of or accrued interest on the Debentures.. No payment of principal or
interest shall be made on the Debenture if, but only as long as, there exists
any default, or the existence of any event which, with the giving of notice,
would constitute a default, in the payment of Senior Debt, as determined by the
terms of such Senior Debt. No default shall be deemed to exist on Senior Debt to
the extent that Company is, in good faith, diligently contesting its obligation
to pay or discharge such Senior Debt.

Company shall, at all times prior to the Maturity Date, reserve or
hold available a sufficient number of shares of its New Common Stock to cover
the number of shares issuable upon Conversion.

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<PAGE> 6
10. Severability. If any provision of this Debenture is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Debenture shall remain in full force and effect and shall be
liberally construed in favor of Holder in order to effectuate the provisions of
this Debenture. In addition, in no event shall the rate of interest payable
under this Debenture exceed the maximum rate of interest permitted to be charged
by the applicable law (including the choice of law rules) and any interest paid
in excess of the permitted rate shall be refunded to Company. Such refund shall
be made by application of the excessive amount of interest paid against any sums
outstanding, and shall be applied to reduce principal. If the excessive amount
on interest paid exceeds the sums outstanding, the portion exceeding the said
sums outstanding shall be refunded in cash by Holder. Any such crediting or
refund shall not cure or waive any default by Company hereunder. Company agrees,
however, that in determining whether or not any interest payable under this
Debenture exceeds the highest rate permitted by law, any non-principal payment,
including, without limitation, fees and late charges, if any, shall be deemed,
to the extent permitted by law, to be an expense, fee, premium or liquidated
damages, rather than interest.

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<PAGE> 7
13. Choice of Law. This Debenture, and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.

17. Binding Nature of Debenture. This Debenture shall be binding
upon Company and its successors and assigns.

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<PAGE> 8
19. Notices. All notices required or permitted by this Debenture
shall be in writing and shall be deemed to have been duly given when delivered,
or when deposited in the United States mails, certified mail, postage pre-paid,
return receipt requested, addressed to Company at the Principal Office and
addressed to Holder at Holder's address as it appears on the records of Company.
Either party may change the address to which notices are to be sent by giving
notice of such change of address in conformity with the foregoing provisions.

IN WITNESS WHEREOF, Company has caused this Debenture to be duly
executed on _____________, 1998.

CRYSTAL MEDICAL PRODUCTS, INC.

By: /s/ George Ginader
-------------------------------------
George Ginader, Chairman

<PAGE> 1
EXHIBIT 5

November 25, 1998

Molecular Circuitry, Inc.
321 Spruce Street, Suite 525
Scranton, Pennsylvania 18503

Ladies and Gentlemen:

This opinion is being given in connection with the Registration
Statement on Form S-1 (the "Registration Statement") to be filed with the
Securities and Exchange Commission by Molecular Circuitry, Inc. (the "Company")
on or about the date hereof for the purpose of registering under the Securities
Act of 1933, as amended, up to 3,450,000 shares (the "Shares") of Common Stock,
$.01 par value per share (the "Common Stock"). In connection with this opinion,
we have examined such corporate records, certificates and other documents and
such questions of law as we have considered necessary or appropriate for the
purpose of this opinion.

Upon the basis of such examination, we advise you that, in our opinion,
the Shares have been legally authorized for issuance and, when sold and paid
for, will be validly issued, fully paid and nonassessable shares of Common Stock
of the Company.

We hereby consent to the use of our name in the Registration Statement
and to the filing of this opinion as an exhibit to such Registration Statement.

Very truly yours,

/s/ Pelino & Lentz, P.C.

PELINO & LENTZ, P.C.

<PAGE> 1
EXHIBIT 10.1

Date: October 12, 1998

Molecular Circuitry, Inc.

VWR Scientific Products is prepared to move ahead on an agreement with Molecular
Circuitry, Inc. It is our understanding that beta sites are still under
development and upon resolution, we will work together to establish pricing for
the instrument and associated test kits.

After establishment of pricing, we will jointly develop six-month and annual
sales goals.

VWR Scientific Products also agrees to co-develop a program for sales and
marketing in conjunction with MCI.

The sales & marketing effort will consist of the following:

- Pre-introductory Phase
- Training
- Marketing Development
- Product Launch
- Annual Programs
- Dedicated Marketing Manager
- Trade Shows and Field Support

VWR also agrees to the following:

- VWR will invest approximately $800,000 during the first year
for the product launch. VWR will also invest $275,000 annually
for marketing, with a 4% inflation factor built in.
- VWR will not sell competing products
- VWR will purchase product from MCI and not on consignment
- VWR agrees to allow eight (8) beta sites to keep instrument at
end of test period
- VWR worldwide distributions rights (excluding North America)
will be subject to a review of sales volume by geographic area
and industry.

MCI responsibilities to include the following:
<PAGE> 2
- Field support to assist in sales and service-number to be
determined

- Establishment of an agreed-upon warranty policy

- Quarterly business review with VWR

- Dedicated "key contact" for program

MCI agrees to the following conditions:

- VWR to receive world-wide distribution rights for the
instrument and test kits

- There will be no direct sale of the product

- Discounts after establishing price points will be:

1st Year

- 20% on instrument

- 30% on Test Kits

2nd Year-or after sale 3,000,000 Test Kits
(earliest of the two)

- 25% on instrument

- 33% on Test Kits

- Discounts include assumed 4% on freight and 1.5% inventory
shrinkage. Assumptions to be reviewed and adjusted annually.

- Price points to be reviewed at quarterly business reviews.

- Payment terms 45 days net.

- Three-year contract with automatic renewals based on
satisfaction of both parties. Agree to a six-month
cancellation clause in conjunction with this.

- Verification of product liability insurance in the amount of
$2,000,000.00. MCI also agrees to name VWR as additionally
insured on the policy.

- Adhere to VWR's Quality Supplier Requirements.

/s/ Herbert Lotman /s/ Robert R. Rosenfeld
- ----------------------------- -----------------------
MOLECULAR CIRCUITRY, INC. VWR SCIENTIFIC PRODUCTS

<PAGE> 1
EXHIBIT 10.1(i)

AGREEMENT

AGREEMENT made this 6th day of November, 1998 by and between VWR
SCIENTIFIC PRODUCTS, INC., a _______________ corporation, with offices at 1310
Goshen Parkway, West Chester, Pennsylvania 19380 ("VWR"), and MOLECULAR
CIRCUITRY, INC., a Delaware corporation, with offices at 321 Spruce Street,
Suite 525, Scranton, Pennsylvania 18503 ("MCI").

Background

On October 12, 1998, the parties entered into an agreement for the
distribution by VWR of an instrument, called the MC-18, and associated test kits
produced by MCI (hereinafter the "Prior Agreement"). Under the terms of the
Prior Agreement, VWR will engage in a variety of sales and marketing activities
and will invest certain sums specified therein for product launch and annual
marketing expenses. MCI will sell the instruments and test kits to VWR and
provide field support and certain warranties.

In exchange for worldwide distribution rights granted to VWR during the
term of the Prior Agreement, the parties provide for their joint agreement on
pricing for the instrument and test kits, 6 month and annual sales goals and a
program for sales and marketing.

The parties now wish to provide for the right of MCI to terminate the
Prior Agreement upon a change of control of VWR, a change of VWR's business
activities or VWR's failure to meet the sales objectives established by the
parties or certain other circumstances.

NOW, THEREFORE, in consideration of the above premises and of the
mutual covenants contained herein and in the Prior Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:

1. Incorporation of Prior Agreement and Background. The Prior
Agreement and the Background set forth above are hereby incorporated by
reference into this Agreement and made a part hereof.

2. Termination by MCI.

a. In the event of the occurrence of any of the
following, MCI shall have the right, by written notice to VWR, to terminate the
Prior Agreement. Such termination shall be effective on the 60th day after
notice of termination from MCI to VWR, or on such earlier date as MCI shall
specify in such notice: (i) a "change of control" of VWR; (ii) VWR shall cease
to engage in the business of the sale and distribution of laboratory and
diagnostic testing equipment; (iii) VWR shall fail to achieve the sales of
instruments or associated test kits set forth in any 6 month or 12 month sales
goal; (iv) VWR shall breach any provision of the Prior Agreement and fail to
correct the same within 30 days after notice thereof from MCI; or (v) VWR shall
become bankrupt or insolvent.

b. As used in subparagraph (a), the term "change of
control" shall mean and include any act or transaction affecting VWR or any
successor entity whereby either: (i) the shareholders of VWR immediately prior
to the occurrence of such act or transaction shall cease to be able to cast a
majority of the votes able to be cast by all shareholders of VWR at any regular
or special meeting of shareholders or VWR (or its successor entity) on all
matters presented to the shareholders for a vote; or (ii) persons constituting a
majority of the members of the Board of Directors of VWR immediately prior to
such act or transaction shall cease to constitute a majority following, or as a
consequence of, such act or transaction. VWR shall notify MCI promptly of any
"change of control" of VWR.

c. For purposes of this Agreement, achievement of a
sales goal shall be determined based on revenues received by VWR from the sales
of instruments and/or test kits during the 6 month or 12 month period in
question. Within 45 days after the end of each 6 month period, VWR shall certify
to MCI revenues received by it from such sales, indicating the number of
instruments, cartridges and reagent packs sold and the revenues derived from
each. Such determination shall be made on an accrual basis in accordance with
generally accepted accounting principles, consistently applied with past
periods.

d. As used herein, the term "bankruptcy" or
"insolvency" shall mean, with respect to an entity, an entity: (a) that (i)
makes a general assignment for the benefit of creditors; (ii) files a voluntary
bankruptcy petition; (iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency proceedings;
(iv) files a petition or answer seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
law; (v) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed
<PAGE> 2
against it in a proceeding of the type described in subclauses (i) through (iv)
of this clause (a); or (vi) seeks, consents to or acquiesces in the appointment
of a trustee, receiver, or liquidator or of all or any substantial part of its
properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any law has been commenced and 120 days have expired without
dismissal thereof or with respect to which, without the entity's consent or
acquiescence, a trustee, receiver, or liquidator of or for it or all or any
substantial part of its properties has been appointed and 90 days have expired
without the appointment's having been vacated or stayed, or 90 days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated.

3. Notices. All notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed given or delivered
when transmitted personally, one business day after being delivered to a
nationally-recognized courier service guaranteeing overnight delivery or sent by
facsimile machine with confirmation of receipt and with a copy sent by certified
mail as herein provided, or 4 business days after being deposited in the United
States mail, sent by first-class, certified or registered mail, in all events
addressed to the parties at the addresses set forth at the introduction to this
Agreement as follows:

a. If to VWR: c/o Robert R. Rosenfeld, Senior Vice
President; Facsimile No.: (610) _____-____.

b. If to MCI, to: Herbert L. Lotman, President;
Facsimile No.: (610) 667-1460, or to such other person or at such other address
as either party shall, from time-to-time, designate to the other by due notice,
such notice to be effective 10 days after having been given.

4. Miscellaneous.

a. This Agreement shall and the Prior Agreement shall
be governed and construed by, and in accordance with, the laws of the
Commonwealth of Pennsylvania.

b. This Agreement and the Prior Agreement shall be
binding upon, and inure to the benefit of, the parties and their respective
successors and assigns, provided that neither this Agreement, nor the Prior
Agreement, nor any rights, duties or obligations hereunder or thereunder, may be
assigned by either party, including assignments by operation of law, without the
express written consent of the other. This Agreement and the Prior Agreement may
only be amended or modified by an instrument in writing, signed by both parties
hereto.

c. No waiver by any party to this Agreement or the
Prior Agreement of any condition, or the breach of any term or covenant
contained in this Agreement or the Prior Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed or construed as a
further or continuing waiver of any such condition or breach or waiver of any
other condition.

d. This Agreement and the Prior Agreement constitute
the entire agreement and understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior or contemporaneous
agreements, understandings, inducements or conditions, express or implied, oral
or written.

e. Except as specifically herein provided, the Prior
Agreement shall remain in full force and effect and shall not be deemed amended
or modified hereby.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its duly authorized officer on and as of the day and year first
above written.

VWR SCIENTIFIC PRODUCTS, INC.

By: /s/ Robert R. Rosenfeld
-----------------------------
Name: Robert R. Rosenfeld

Title: Senior Vice President, Marketing

MOLECULAR CIRCUITRY, INC.

By: /s/ Herbert Lotman
-----------------------------
Name: Herbert Lotman

Title: Chairman

-2-

<PAGE> 1
EXHIBIT 10.2

CRYSTAL MEDICAL PRODUCTS, INC.
STOCK OPTION PLAN

The purpose of this Stock Option Plan (the "Plan") is to
provide designated employees of Crystal Medical Products, Inc. (the "Company")
with an opportunity to receive grants of stock options, for the purpose of
encouraging them to contribute materially to the growth of the Company by
aligning their economic interests with those of the shareholders.

1. ADMINISTRATION.

a. The Plan shall be administered by the Company's Board of Directors
(the "Board"), acting in the best interests of the Company, rather than as a
fiduciary. If the Company completes a public offering of its stock as described
in Section 11, the Plan shall thereafter be administered by a committee
consisting of "outside directors", as defined under section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code")and related Treasury
Regulations, and the committee may consist of "non-employee directors", as
defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). If such a committee is appointed, references in the Plan
to the "Board" relating to Plan administration, shall be deemed to refer to the
committee.

b. Unless otherwise specifically provided herein, the Board shall have
sole and conclusive authority to determine (i) the employees to whom grants
shall be made, (ii) the type, size and terms of the grants and (iii) the terms
of any release, non-compete or other agreement to be used in connection with the
Plan. In addition, the Board shall have sole and conclusive authority to
interpret the Plan, make factual determinations, adopt, amend or rescind rules,
regulations, agreements and instruments relating to the Plan and take such other
action as it deems necessary or advisable.

2. OPTIONS.

This Plan provides for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Code ("Incentive
Stock Options"), options that are not intended to so qualify ("Nonqualified
Stock Options") or any combination of the two (collectively, the "Options"). All
Options shall be subject to the terms and conditions set forth herein and to
such other terms and conditions as the Board deems appropriate and specifies in
writing to the individual in a grant instrument (the "Grant Instrument").
Options and Grant Instruments need not be uniform among grantees.
<PAGE> 2
3. SHARES SUBJECT TO THE PLAN.

a. AUTHORIZED SHARES. Subject to adjustment as specified below, the
maximum number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under this Plan is 1,500,000. The shares may be
authorized and unissued or reacquired shares of Company Stock. To the extent any
Option terminates, expires or is canceled, forfeited, exchanged or surrendered
without having been exercised, the shares subject to the Option shall again be
available for purposes of the Plan.

b. ADJUSTMENTS. In the event of a reorganization, recapitalization,
change of shares, stock split, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation or any other change in the
corporate structure or shares of capital stock of the Company, the Board shall
make such adjustment as it considers appropriate in the number and kinds of
shares of Company Stock available for, or subject to, Option(s) and in the price
therefor; provided, however, that no such adjustment shall give an individual
any additional benefits under an outstanding Option.

4. ELIGIBILITY FOR PARTICIPATION.

Only officers and key employees of the Company, as selected by the
Board (the "Employees"), shall be eligible to participate in the Plan.

5. GRANT OF OPTIONS.

Options may be granted under the Plan on or after the effective date
hereof. The Board shall select the Employees to receive grants of Options (the
"Grantees") and determine the number of shares of Company Stock subject to each
grant. The Board may grant Incentive Stock Options, Nonqualified Stock Options
or any combination of the two.

6. OPTION TERMS.

a. EXERCISE PRICE. The Exercise Price of each Option shall be
determined by the Board and may be equal to, greater than or less than the "Fair
Market Value" of a share of Company Stock on the date the Option is granted;
provided, however, that the Exercise Price of an Incentive Stock Option shall be
at least equal to the Fair Market Value of Company Stock on the date the Option
is granted (at least 110% of the Fair Market Value in the case of any Incentive
Stock Option granted to a Grantee who, at the time of the grant, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company).

2
<PAGE> 3
i. If the Company Stock is not publicly traded, "Fair Market
Value" shall be determined by the Company's accountant using the same
methodology employed in the attached Howard Lawson & Co. valuation.

ii. If the Company Stock is publicly traded, "Fair Market
Value" shall be determined as follows: (I) if the principal trading market for
the Company Stock is a national securities exchange or the Nasdaq National
Market, the last reported sales price thereof on the relevant date on which at
least 1,000 shares were traded or, if there were no trades on that date (or
trades aggregating less than 1,000 shares), the latest preceding date on which
sales involving at least 1,000 shares were reported, or (II) if the Company
Stock is not principally traded on such an exchange or market, the mean between
the last reported "bid" and "asked" prices of Company Stock on the relevant
date, as reported on Nasdaq or, if not so reported, as reported by the National
Daily Quotation Bureau, Inc. or a customary financial reporting service.

b. TERM. The Board shall determine the term of each Option. Such term
shall not exceed ten (10) years from the date of grant (five (5) years in the
case of any Incentive Stock Option granted to a Grantee who, at the time of
grant, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company).

c. EXERCISABILITY. Options shall become exercisable in accordance with
the terms and conditions set forth herein and in the Grant Instrument. The Board
may accelerate the exercise date of any or all outstanding Options at any time
and for any reason.

d. TERMINATION OF EMPLOYMENT. Subject to the exceptions below or such
other exceptions as the Board deems appropriate and includes in the Grant
Instrument, an Option only may be exercised while the Grantee is employed by the
Company.

i. If the Grantee ceases to be employed by the Company for any
reason other than those specified in Subsections (ii)or (iii) below, any Option
that is otherwise exercisable by the Grantee shall terminate if not exercised
within ninety (90) days after the cessation of the Grantee's employment or by
the expiration of the Option term, if earlier. All of the Grantee's Options that
are not so exercisable shall terminate as of the date the Grantee's employment
terminates.

ii. If the Grantee ceases to be employed by the Company on
account of a termination pursuant to Section 4.2 (termination for cause) or
Section 4.3 (special termination)of the Grantee's Employment Agreement with the
Company, all Options

3
<PAGE> 4
held by the Grantee shall terminate as of the date the Grantee's Employment
Agreement terminates.

iii. If the Grantee ceases to be employed by the Company on
account of death or a "disability" (or dies within 90 days after termination of
his employment other than for cause), any Option that is otherwise exercisable
by the Grantee shall terminate unless exercised within one (1) year of the
cessation of his employment or by the expiration of the Option term, if earlier.
(For this purpose, "disability" shall mean being disabled within the meaning of
Code section 22(e)(3).) Any of the Grantee's Options not otherwise exercisable
shall terminate as of the date the Grantee's employment terminates.

e. EXERCISE. A Grantee may exercise an Option that has become vested
and exercisable by giving the Board written notice of intent to exercise,
specifying: the Option being exercised; the number of shares as to which the
Option is exercised; and the date to complete the exercise. Full payment of the
Exercise Price shall be made by the Grantee on or before the exercise date.
After a Public Offering, subject to Board consent, the Grantee may pay the
Exercise Price for an Option through a broker in accordance with procedures
established by the Board, consistent with Regulation T of the Federal Reserve
Board.

f. LIMIT. Each Incentive Stock Option shall provide that, if the
aggregate Fair Market Value of the stock on the date of the grant with respect
to which Incentive Stock Options are exercisable for the first time by a Grantee
during any calendar year exceeds $100,000, then such Option, as to the excess,
shall be treated as a Non-qualified Stock Option.

7. WITHHOLDING OF TAXES.

All Options under the Plan shall be subject to applicable federal
(including FUTA), state and local tax withholding requirements. The Company may
require the Grantee to pay the amount of any such taxes that the Company is
required to withhold with respect to the Options; alternatively, the Company may
deduct the amount of any withholding taxes from other compensation payable to
the Grantee.

8. NONTRANSFERABILITY OF OPTIONS.

An Option shall be exercisable only by the Grantee, and shall not be
transferable except by will or the laws of descent and distribution. When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee may exercise such rights upon satisfactory proof to
the Company of the right to receive the Option under the Grantee's will or the
applicable laws of descent and

4
<PAGE> 5
distribution. Any other attempt by the Grantee to alienate, assign, pledge,
hypothecate or otherwise dispose of any Option, or the levy of any attachment,
execution or similar process upon the rights conferred thereunder, shall
terminate such Option.

9. PURCHASE BY THE COMPANY.

a. Prior to a Public Offering, if a Grantee ceases to be employed by
the Company for any reason, the Company shall purchase all Company Stock
acquired by the Grantee under this Plan, at its then Fair Market Value. Except
as provided in Section 12, the Grantee shall have no other right to transfer
such Company Stock.

b. On and after a Public Offering, the Company shall have no further
right to purchase shares of Company Stock under this Section 9, and its
limitations shall be null and void.

10. CHANGE OF CONTROL.

As used herein, a "Change of Control" shall be deemed to have occurred
if:

a. Any "person" within the meaning of Sections 13(d) and 14(d) of the
Exchange Act (other than a person who is a shareholder of the Company as of the
effective date of the Plan), directly or indirectly becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), of Company securities
representing more than 50% of the voting power of the then outstanding
securities of the Company (other than as a result of the death of a
shareholder); or

b. There is (i) a merger or consolidation of the Company with another
corporation whereby the shareholders of the Company (immediately prior to the
merger or consolidation) will not beneficially own (immediately after the merger
or consolidation) shares entitling them to cast more than 50% of the votes to
which the shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) a sale or other disposition
of all or substantially all of the assets of the Company or (iii) a liquidation
or dissolution of the Company.

11. PUBLIC OFFERING.

As used herein, a "Public Offering" shall be deemed to have occurred
upon the initial registration of Company stock under Section 5 of the Securities
Act of 1933, as amended. The provisions of the Plan that are applicable after a
Public Offering of the Company's stock shall be effective as of such

5
<PAGE> 6
registration, and shall remain effective so long as the stock is registered.

12. ACCELERATION OR ASSUMPTION UPON CHANGE IN CONTROL OR PUBLIC OFFERING.

a. If a Change of Control or Public Offering occurs, the Board may, but
shall not be obligated to:

i. Accelerate by declaring all outstanding Options
exercisable; or

ii. Provide for assumption of all outstanding Options, or
replacement with comparable options, by the surviving corporation.

b. Notwithstanding the foregoing, (subject to Subsection d. below), in
the event of a Change of Control or Public Offering, the Board may take one or
both of the following actions: (i) require that the Grantee surrender the
Grantee's then exercisable Options in exchange for a payment by the Company, in
cash or Company Stock as determined by the Board, in an amount equal to the
amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's exercisable Options exceeds the Exercise Price of the
Options, or (ii) after giving the Grantee an opportunity to exercise the
Grantee's then exercisable Options, terminate any or all unexercised Options at
such time as it deems appropriate. Such surrender or termination shall take
place as of the date of the Change of Control or Public Offering or such other
date as the Board may specify.

c. Notwithstanding anything in the Plan to the contrary, in the event
of a Change of Control, neither the Grantee nor the Board shall have the right
to take any actions described in the Plan (including, without limitation,
actions described in Subsection c. above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.

13. REQUIREMENTS FOR ISSUANCE OF SHARES.

a. BOARD REQUIREMENTS. The Board may (i) require that the Grantees
execute a shareholders' agreement, with such terms as it deems appropriate, with
respect to any Company Stock distributed pursuant to the Plan and (ii) condition
any Option on the Grantee's written consent to comply with such restrictions on
the disposition of Company Stock acquired under an Option as it deems

6
<PAGE> 7
necessary to ensure compliance with applicable securities laws or otherwise
advisable (certificates representing such shares be legended to reflect any such
restrictions.)

b. LEGAL REQUIREMENTS. No Company Stock shall be issued or transferred
in connection with any Option unless and until the Grantee complies with all
legal requirements applicable to the issuance or transfer in a manner
satisfactory to the Board. Certificates representing shares of Company Stock
issued under the Plan shall be subject to such stop-transfer orders and other
restrictions as may be required by applicable law, regulation and
interpretation, including any requirement that a legend be placed thereon.

14. AMENDMENT AND TERMINATION OF THE PLAN.

a. AMENDMENT. The Board may amend or terminate the Plan at any time;
provided, however, that, after a Public Offering, the Board shall not amend the
Plan without shareholder approval if such approval is required by Section 162(m)
of the Code.

b. TERMINATION. The Plan shall terminate on the day immediately
preceding the tenth (10th) anniversary of its effective date, unless terminated
earlier by the Board or extended by the Board with the approval of the Company's
shareholders.

c. TERMINATION AND AMENDMENT OF OUTSTANDING OPTIONS. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the Grantee's rights unless the Grantee consents or the Board
acts under Section 20.a hereof. The termination of the Plan shall not impair the
power and authority of the Board with respect to an outstanding Option. Whether
or not the Plan has terminated, an outstanding Option may be terminated or
amended under Section 20.a. or may be amended by agreement of the Company and
the Grantee consistent with the Plan.

d. GOVERNING DOCUMENT. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.

15. FUNDING OF THE PLAN.

The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of shares with respect to Options.

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<PAGE> 8
16. RIGHTS OF PARTICIPANTS.

Nothing in the Plan shall entitle any Employee to any claim or right to
be granted an Option. Neither the Plan nor any action taken hereunder shall be
construed as giving a Grantee any right to continuing employment with the
Company.

17. FRACTIONAL SHARES.

No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option. The Board shall determine whether cash or
other awards or property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

18. HEADINGS.

Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.

19. EFFECTIVE DATE.

This Plan shall be effective as of September 1, 1998.

20. MISCELLANEOUS.

a. COMPLIANCE WITH LAW. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and any required approvals by
governmental or regulatory agencies. In the event of a Public Offering, with
respect to persons subject to Section 16 of the Exchange Act, it is the intent
of the Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
The Board may revoke any Option if it is contrary to law, or modify an Option to
bring it into compliance with any valid and mandatory government regulation. The
Board may, in its sole discretion, agree to limit its authority under this
Section.

b. GOVERNING LAW. The validity, construction, interpretation and effect
of the Plan shall be exclusively governed by and determined in accordance with
the laws of the Commonwealth of Pennsylvania, except to the extent preempted by
federal law.

<PAGE> 1
EXHIBIT 10.3

PRODUCT DEVELOPMENT AGREEMENT

AGREEMENT made July 28, 1997 between CRYSTAL MEDICAL PRODUCTS, INC., an
Illinois corporation ("Crystal") and SRC, INC., a California corporation ("SRC")
and W. BRIAN GREGER ("Greger"). SRC and Greger are referred to herein as
"Developer."

WHEREAS, Crystal is in the business of developing and marketing
products to detect various pathogens in food products for use by the food
manufacturing industry; and

WHEREAS, Developer has submitted to Crystal a proposal dated March 22,
1997 (the "Proposal"), a copy of which is attached hereto as Exhibit A and
incorporated herein by reference, for the development and pre-production
manufacturing of certain pathogen detection equipment (the "Equipment"); and

WHEREAS, Crystal wishes to engage Developer to develop the Equipment
(the "Project"), and Developer wishes to develop the Equipment for Crystal.

NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises contained herein, agree as follows:

1. The Project and Delivery. Crystal hereby engages Developer
as an independent contractor to develop specifications for the Equipment
described in the Proposal and to deliver to Crystal 10 complete prototypes, a
plastic injection molded tool and 2,000 cartridges, and manufacturing
transferrable documentation, all as more fully described in the Proposal and in
accordance with the Final specifications. Developer shall also deliver all tools
or fixtures for assembly, Source Codes, and Validation of source.

2. Specifications. Developer shall commence work upon
execution of this Agreement and shall within 45 days submit draft specifications
for the Equipment for review and revision by Crystal. Within 30 days after
submission of the draft, Developer shall submit final specifications reflecting
Crystal's comments. Upon approval by Crystal of the final specifications,
Developer shall proceed with the balance of the Project as described in the
Proposal.
<PAGE> 2
3. Term. The first prototype shall be delivered to Crystal
within seven months of the date hereof, and the balance of the Equipment shall
be delivered within eight months of the date hereof. Crystal may terminate the
Agreement at any time on 30 days' prior written notice, and Developer shall be
paid the portion of their fee that has accrued through the date of termination.

4. Reports. Developer shall submit to Crystal a detailed
monthly report of its progress, which report shall be due prior to each monthly
fee payment.

5. Fees. Crystal shall pay Developer an initial deposit of
$282,520.38 upon execution of this Agreement, receipt of which is hereby
acknowledged by Developer, which deposit shall cover fees through August 20,
1997. Thereafter, fees will be due in advance on the first day of each month,
commencing August 21, 1997, in six monthly payments in the amount of
$105,945.14. A seventh and final payment of $211,890.28 shall be due upon
completion of the Project and delivery in accordance with paragraph 1 hereof.

6. Expenses. Developer shall pay all expenses required to
complete the Project, except as follows:

a. Crystal shall reimburse Developer for reasonable
travel expenses incurred in connection with the Project for travel upon prior
written approval of Crystal.

b. Crystal shall reimburse Developer (or make direct
payments at Developer's request) for material expenses approved in advance by
Crystal from time-to-time, which expenses shall not exceed $286,750.00 in the
aggregate.

7. Independent Contractor. Developer is an independent
contractor and is not a partner, agent or employee of Crystal. The parties agree
that Rick T. Smethers ("Smethers") is the principal of SRC, Inc. and shall
perform all services required of SRC, Inc. under this Agreement. Smethers, SRC
and Greger shall be jointly and severally liable under this Agreement. Crystal
shall allocate payments among the principals of Developer pursuant to
Developer's written request.

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<PAGE> 3
8. Patent Indemnity. Developer agrees at its own cost to
defend any claim, suit or proceeding brought against Crystal on the issue of
infringement of any United States copyright or patent by the Equipment as
supplied by Developer to Crystal, provided Crystal notifies Developer promptly
in writing of any such claim, suit or proceedings.

9. Rights in Project. All know-how, ideas, techniques, formula
and concepts developed in connection with the Project shall be the property of
Crystal and Developer shall have no right, title or interest therein. Developer
agrees, at Crystal's request and Crystal's cost, to execute all U.S. and foreign
patent applications and fully to assign to Crystal the whole and entire right,
title and interest in and to such patent applications and patents which Crystal
may decide to file or has obtained on Developer's ideas, designs, discoveries,
inventions or improvements in connection with the Project, and to assist Crystal
in the prosecution of such patent applications and in the enforcement and
maintenance of the patents granted thereon, whether or not after termination of
this Agreement. In all cases, such execution of patent applications and
assignments and assistance shall be provided at no cost to Crystal, except that
Crystal shall reimburse Developer for the Developer's costs or expenses
necessarily incident to Crystal's request, pursuant to this provision, and
provided further that Crystal agrees to pay Developer $100.00 at the time that a
U.S. patent is executed and assigned by Developer.

10. Restriction. Developer agrees that it will not, during the
term of this Agreement and for a period of one year thereafter, develop
Equipment similar to the Project for itself or for any competitor of Crystal. In
the event of any actual or threatened violation of such restriction, Crystal
shall be entitled, in addition to any other remedy, to preliminary and permanent
injunctive relief.

11. Disclosure. Developer has executed confidentiality and
non-disclosure agreements with Crystal with respect to the subject matter
hereof, and Developer reaffirms its obligations thereunder. All books, records,
and materials used by Developer in connection with the Project pursuant to this
Agreement shall at all times remain the property of Crystal and upon termination
of this Agreement, irrespective of the time, manner or cause of said
termination, Developer will surrender to Crystal all such lists,

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<PAGE> 4
books and records, together with all Equipment and other materials purchased for
this Project.

12. Representations and Warranties. Developer represents and
warrants to Crystal that Developer has the expertise necessary to execute the
Proposal and will perform this Agreement in accordance with all governmental
safety and other applicable regulations, and it understands and acknowledges
that the materials involved in the Project are experimental in nature and have
not been subject to governmental or other reviews for safety. Developer
represents and warrants to Crystal that Smethers and Greger will devote
substantially their full time to this Project during the term hereof, and that
they will hire sufficient staff and procure sufficient equipment to diligently
prosecute completion of the Project in accordance with this Agreement.

13. Notice. All notices required to be given under this
Agreement shall be in writing, and shall be delivered to the addressee in person
or mailed by certified mail, return receipt requested:

If to Crystal, addressed to:

George Ginader, C.P.A.
Ginader, Jones & Company
321 Spruce Street, 525 Bank Towers
Scranton, Pennsylvania 18503

If to Developer, addressed to:

or to such other address as a party shall have designed by notice given in
accordance with this paragraph.

14. Binding Agreement. This Agreement shall inure to and shall
be binding upon the parties hereto, and the successors and assigns of Crystal
and the successors, heirs and personal representatives of Developer. This
Agreement may not be assigned

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by Developer. SRC, Greger and Smethers shall be jointly and severally liable
hereunder.

15. Governing Law. This Agreement has been negotiated and
executed within the Commonwealth of Pennsylvania, and the law of that state
shall govern its construction and validity.

16. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof.
No change, addition or amendment shall be made except by written agreement
assigned by the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.

CRYSTAL MEDICAL PRODUCTS, INC.

By:/s/George Ginader 7/28/97
----------------------
SRC, INC.

By:/s/Rick T. Smethers 7/18/97
----------------------

/s/ W. Brian Greger 7/18/97
-------------------------
W. BRIAN GREGER

/s/ Rick T. Smethers 7/18/97
-------------------------
RICK T. SMETHERS

<PAGE> 1
EXHIBIT 10.4

ADMINISTRATIVE SERVICES AGREEMENT

THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made as
of the 1st day of October, 1998 by and between KEYSTONE FOODS CORPORATION, a
Delaware corporation having an address at 401 City Avenue, Suite 800, Bala
Cynwyd, Pennsylvania 19004 ("Keystone"), and CRYSTAL MEDICAL PRODUCTS, INC., an
Illinois corporation having an address at 321 Spruce Street, Suite 525,
Scranton, Pennsylvania 18503 ("Crystal").

RECITALS:

WHEREAS, Keystone operates a food processing facility and laboratory
at 600 A Kaiser Drive, Folcroft, Pennsylvania 19032 (the "Facility") under a
lease dated December 1990 and amended on July 31, 1995 (the "Lease") with
Henderson-Columbia Corp. ("Landlord"); and

WHEREAS, Keystone has provided space at the Facility for use by
Crystal in the testing of an instrument developed by Crystal and has also
permitted Crystal to utilize certain Keystone employees at the Facility for
Crystal's business purposes; and

WHEREAS, Crystal desires to continue to sublease from Keystone
approximately Twelve Hundred (1,200) square feet of laboratory space and
utilities at the Facility (the "Leased Premises") until Crystal occupies its own
facilities and to enjoy the benefit of the utilities servicing the Leased
Premises; and

WHEREAS, Crystal desires to continue to use certain of Keystone's
administrative, accounting, human resources, benefits, scientific, laboratory
and insurance personnel (the "Personnel") to assist Crystal in operating its
business until Crystal increases its own staff; and
<PAGE> 2
WHEREAS, Keystone is willing to sublease the Leased Premises to
Crystal and to provide Personnel to assist Crystal in operating its business
upon the terms and subject to the conditions set forth herein,

NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and intending to be legally bound, the parties hereto agree as follows:

(1) Leased Premises. Subject to the rights of the Landlord under the
Lease, Crystal shall be entitled to the exclusive use, occupancy and quiet
enjoyment of the Leased Premises and shall be entitled to use of the utilities
as reasonably required by Crystal. Keystone, at its sole cost and expense, shall
maintain the Leased Premises in good condition and repair and shall provide all
janitorial services; provided that Crystal shall be responsible for the cost of
any repairs or renovations to the Leased Premises, and to the restoration of the
same following the cessation of its occupancy thereof, necessitated by Crystal's
business requirements or by the negligence or misconduct of Crystal, its
employees, agents or contractors (other than Keystone). Following the cessation
of its occupancy hereunder, Crystal shall return the Leased Premises to Keystone
in broom clean condition, reasonable wear and tear excepted. Keystone shall at
all times, at its sole expense, maintain property and liability insurance
coverage for the Leased Premises; provided, however, that Crystal shall
reimburse Keystone for any portion of an insurance premium incurred solely on
account of, or arising out of, Crystal's occupancy of, or the activities of
Crystal at, the Leased Premises. Crystal shall be obligated to obtain and
maintain both property damage and liability insurance coverage for the contents
of the Leased Premises and acts or events occurring thereon or elsewhere at the
Facility.

(2) Personnel.

(a) During the term of this Agreement, Keystone shall use
reasonable efforts to provide Crystal with the Personnel which Crystal
reasonably requires in order to conduct and operate its business at the Leased
Premises in the ordinary course. Keystone

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<PAGE> 3
shall have no duty or responsibility to hire or retain any individual or any
group of persons solely to fulfill the employment needs of Crystal, nor shall it
be obligated to employ any individual not otherwise required for, or useful in,
the conduct of Keystone's own business to satisfy a request of Crystal. Keystone
shall, however, wherever practicable and upon reasonable notice from Crystal,
make available to Crystal such of its Personnel, on a full or part-time basis,
as Crystal may determine. Crystal may, for any lawful reason, reject any person
referred to it by Keystone hereunder or ask Keystone to replace any person
provided by it with another similarly qualified Keystone employee.

(b) Crystal acknowledges that all of the Personnel assigned by
Keystone to perform services for Crystal shall, unless the parties otherwise
specifically agree in writing, remain employees of Keystone and that Keystone
shall have the sole and exclusive right and authority to control the Personnel
including, but not limited to, training, scheduling, discipline and discharge.
All Personnel policies shall be established and administered solely by Keystone.
At no time shall Crystal claim, state, suggest or permit a perception to persist
that any of the Personnel are employees of Crystal.

(c) Keystone shall be solely responsible for all wages,
salaries, bonuses, benefits and other compensation, taxes and tax withholding,
workers' compensation and other insurance for and with respect to Personnel and
shall obtain and maintain during the term hereof, life, accident, disability and
errors and omissions insurance for its employees. Keystone shall submit to
Crystal, and shall update the same promptly after any change is made therein, a
list of all insurance coverages, including the name of the person or entity
covered, the carrier, policy number and the nature and extent of the coverage.
Crystal may, at its own expense, obtain additional coverage for employees or
property. To the extent that Crystal's coverage is an add-on to the Keystone
policy, the cost shall be shared by the parties on an equitable basis.

(3) Compliance with Laws; Lease. Each of the parties, in connection
with their performance of this Agreement and the occupancy of the Leased
Premises, shall

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<PAGE> 4
comply with all laws, statutes, ordinances, rules, regulations, governmental
orders or other legal requirements affecting such party's business including,
without limitation, environmental laws and regulations, the employment of
Personnel or the use and occupancy of any real or personal property. Neither
party shall take any action in breach or violation of, or that would cause
another to breach or violate, any applicable Federal, state or local law, rule,
regulation or order relating to labor or employment, the ownership, use,
maintenance or handling of equipment or toxic substances or the occupancy of the
Leased Premises. Neither party shall engage in or permit any conduct at the
Leased Premises or the Facility that would constitute unlawful discrimination.
Both parties shall take all actions required to comply with the terms of the
Lease and retain the same in full force and effect. Crystal acknowledges that it
has received and reviewed the Lease and will not take, or omit to take, any
action which, if taken or omitted by Keystone, would constitute a breach or
default under the Lease.

(4) Fee for Leased Premises and Personnel. In consideration for use
of the Leased Premises and the Personnel as contemplated by this Agreement,
Crystal shall pay Keystone initially a fee of Twenty Thousand Dollars
($20,000.00) per month for the Personnel and One Thousand Two Hundred Dollars
($1,200.00) per month for the Leased Premises. All payments shall be made on the
first day of each month, commencing October 1, 1998. Crystal may elect, from
time to time, upon at least thirty (30) days' written notice to Keystone, to
reduce its use of Keystone's Personnel as Crystal increases its own staff. Any
such reduction in Personnel shall reduce the monthly fee payable to Keystone by
an amount to be mutually agreed upon by the parties, depending upon the persons
affected.

(5) Prior Use of Leased Premises and Personnel. The parties
acknowledge that Keystone has, during 1997 and 1998 prior to the date of this
Agreement, permitted Crystal to use the Leased Premises and certain Keystone
Personnel in the conduct of Crystal's business activities. In consideration for
such prior use, Crystal shall pay Keystone Three Hundred Eighty-Nine Thousand
Dollars ($389,000.00), which amount has been reviewed and approved by both
parties. Such payment shall be made immediately following

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<PAGE> 5
the closing of an equity offering by Crystal of its common stock, or, if the
equity offering is not consummated by March 31, 1999, in accordance with a
payment schedule which the parties shall mutually agree upon.

(6) Relationship of the Parties. The parties acknowledge, confirm
and agree that this Agreement is not intended to create a joint venture,
association, partnership, franchise or other form of business or relationship.
The parties acknowledge, however, that Keystone is currently a shareholder of
Crystal. This Agreement shall not affect Keystone's rights or privileges as a
shareholder or create any fiduciary or other duty owing by Keystone to Crystal
or any other person or entity, except as specifically set forth herein.

(7) Term. The term of this Agreement shall begin on October 1, 1998
and shall continue on a month-to-month basis until terminated, in whole or in
part, by either party upon at least thirty (30) days' prior written notice to
the other. In the event of a partial termination (as to the Leased Premises or
to any particular Personnel), this Agreement shall remain in full force and
effect as to all portions not so terminated.

(8) Indemnification. Each party (an "Indemnitor") shall indemnify
the other (an "Indemnitee") from and against any and all claims, liabilities,
expenses, costs, damages and losses, including reasonable attorneys' fees,
arising out of any act or omission by the Indemnitor, its employees, agents or
contractors in connection with, or relating to, the Indemnitor's performance of
this Agreement, provided, however, that an Indemnitor shall not be liable to an
Indemnitee for loss of business, goodwill, profits or other consequential or
special damages.

(9) Default. If either party fails to make any payment or perform
any agreement, covenant or provision hereunder within ten (10) days after
receipt of written notice of such failure from the other party, such party shall
be in default under this Agreement. Upon a default by Crystal, Keystone shall
have the right to withhold Personnel or use of the Leased Premises until the
default is cured or to terminate this Agreement

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forthwith by written notice to Crystal, in which case all amounts due and owing
to Keystone shall be immediately due and payable. Upon a default by Keystone,
Crystal shall have the right to withhold payments required to be made hereunder
until the default is cured or to terminate this Agreement forthwith by written
notice to Keystone, in which case all amounts due and owing to Keystone prior to
such default shall be immediately due and payable.

(10) Miscellaneous Provisions.

(a) Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties and may not be modified or amended except
by written instrument signed by both parties.

(b) Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Pennsylvania without regard to its principles of
conflicts of law.

(c) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. The rights and privileges of Crystal and its duties and
responsibilities under this Agreement may not be assigned by it or assumed by
any third party without the express prior written consent of Keystone.

(d) Notices. Any notice required by this Agreement shall be in
writing and sent to the other party by hand delivery, United States certified
mail or by nationally recognized overnight courier service to the addresses of
the parties set forth on the first page of this Agreement. All notices shall be
deemed given or delivered when actually received.

(e) Third-Party Beneficiaries. Nothing set forth in this
Agreement shall be for the benefit of, and no provision of this Agreement may be
enforced by, any person or entity other than the parties, their successors and
permitted assigns.

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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.

CRYSTAL MEDICAL PRODUCTS, INC.

By: /s/ Herbert Lotman
--------------------------------
HERBERT LOTMAN,
Chief Executive Officer

KEYSTONE FOODS CORPORATION

By: /s/ John Coggins
--------------------------------
JOHN COGGINS, Vice President

<PAGE> 1
EXHIBIT 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement is made as of this 1st day of September, 1998,
between CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (the "Company")
and MARVIN SEARS ("Employee").

BACKGROUND

The Company is in the business of development and marketing of a
commercially feasible device to identify pathogens in foods, bodily fluids or
tissue through an electronic measurement technique. The principal office of the
Company is located at 321 Spruce Street, 525 Bank Towers, Scranton,
Pennsylvania. The Company services, or will service customers on a nationwide
basis.

The Company desires to employ Employee as its Executive Vice President and
Chief Scientific Officer, and Employee desires to accept such position and to be
employed by Company.

Employee, in the course of employment, will have access to confidential
and proprietary information of the Company and will likely build personal
relationships with the employees, customers and suppliers of the Company. It is
important to the Company that Employee not compete or interfere with, divulge
confidential information of, or otherwise harm it. Therefore, as a precondition
to Employee's employment, and in consideration thereof, the Company is requiring
Employee to enter into this Agreement, which includes certain restrictions on
Employee's right to engage in activities competitive with the Company or to
interfere with its business and on Employee's use of confidential information of
the Company, as more fully set forth below.

NOW, THEREFORE, in consideration of the foregoing, the covenants contained
herein and the employment of Employee by the Company, the parties hereto,
intending to be legally bound hereby, agree as follows:

1. Employment. Subject as provided in this Agreement, the Company hereby
employs Employee, and Employee hereby accepts employment by the Company. During
the period of his employment hereunder, Employee shall serve as the Executive
Vice President and Chief Scientific Officer of the Company, or in such other
capacity as may be determined from time to time by its Board of Directors.
Employee shall perform such duties and have such responsibilities as are
consistent with the position of Executive Vice President and Chief Scientific
Officer (or such other office as may be hereafter held by him), including such
duties and responsibilities as shall be assigned him from time to time by the
Board of Directors. Employee shall devote his best efforts to the promotion of
the business and affairs of the
<PAGE> 2
Company and shall perform faithfully and to the fullest extent of his ability
all duties which relate to his position of employment by the Company.

2. Term. Employee's employment hereunder shall commence on September 1,
1998 and continue for a period of five (5) years, ending on August 31, 2003
(Initial Term) unless sooner terminated, as provided in Section 4 hereof.

3. Renewal. At the end of the Initial Term, this Agreement will renew
automatically for successive one (1) year renewal terms, unless either party
gives written notice not to renew sixty (60) days prior to the end of the
Initial Term or any Renewal Term.

4. Termination.

4.1 Death. This Agreement shall terminate immediately upon the death
of Employee.

4.2 Termination for Cause. This Agreement shall terminate
immediately if the Board of Directors of the Company discharges Employee for
cause, in which event the Company shall not be obligated to make any further
payments hereunder other than amounts accrued as of the date of termination.
"Cause" shall mean, and be limited to, the following, to be determined in the
sole judgment of the Board of Directors, reasonably exercised, at a meeting. At
least thirty (30) days' written notice will be given to Employee, who shall have
the opportunity to attend with counsel, and be heard at such meeting:

(i) Employee's fraud, misappropriation, embezzlement or
willful misconduct;

(ii) Employee's material violation of any provision of this
Agreement; or

(iii) Employee's conviction of a felony involving moral
turpitude.

4.3 Special Termination. This Agreement shall terminate if there is
not an initial registration of the Company's stock under Section 5 of the
Securities Act of 1933, as amended (a "Public Offering") by January 30, 1999, in
which event the Company shall not be obligated to make any further payments
hereunder other than amounts accrued as of the date of termination.

5. Compensation.

5.1 Base Salary. The Company shall pay, and Employee shall accept,
as base compensation during the term of his employment hereunder, a salary at
the annual rate of Two Hundred Thousand Dollars ($200,000). Such base salary
shall be paid to Employee in equal

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<PAGE> 3
installments on the first day of each calendar month during the term hereof or
in accordance with established pay periods of the Company, but in no event less
frequently than monthly.

5.2 Bonus. The Company will pay Employee a bonus of One Hundred
Thousand Dollars ($100,000). Employee shall also be eligible for such additional
bonuses as may be approved from time to time by the Board of Directors, whether
for all employees generally or for senior management.

5.3 Stock Options. Subject to shareholder approval of the Company's
Stock Option Plan (the "Plan"), the Company shall grant Employee options to
acquire up to five hundred thousand (500,000) shares of the Company's Common
Stock pursuant to all the terms and conditions of the Plan and the form of grant
attached hereto.

6. Benefits. During the term of his employment, Employee shall be entitled
to receive or participate in such employee benefits of the Company as are made
available generally to the members of its executive management, such as
vacations, holidays, medical, dental and other insurance or qualified retirement
plans which may be established by the Company.

7. Automobile; Expense Reimbursement.

7.1 The Company shall pay Employee a reasonable car allowance of up
to Nine Hundred Dollars ($900) per month.

7.2 The Company shall reimburse Employee for job-related expenses
incurred by him, including expenses for: travel, hotel, meals, cellular phone,
business-related entertainment, postage, telephone and office supplies. Employee
shall promptly submit to the Company, at least monthly, an itemization of his
job-related expenses incurred, with such documentation as the Company may
reasonably require, and the Company shall reimburse him therefor within ten (10)
days from the date of such submission. The quality and types of expenses to be
reimbursed shall be agreed in advance with the Company and shall be consistent
with the Company's budget.

8. Change in Control.

8.1 A "Change in Control" shall be deemed to have occurred if there
is a sale of the Company or if a meeting of the shareholders of the Company
involving a contest for the election of directors results in a new Board of
Directors of which the directors of the Company immediately prior to such
meeting no longer constitute a majority of the Board.

8.2 If, after a Change in Control, Employee resigns as a result of
his reasonable determination that he is unable to exercise the authorities,
powers, functions or duties

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attached to his position as contemplated by this Agreement, Employee shall be
entitled to a lump sum payment equal to the amount of his salary for the
remainder of the term of this Agreement.

9. Definitions.

9.1 "Affiliate" means any Entity owned or controlled by, or under
common control with, the Company.

9.2 "Competitor" means any individual or Entity which is currently
engaged in, or shall conduct or be engaged in, development or marketing of a
device to identify pathogens in foods, bodily fluids or tissue through an
electronic measurement technique or in any other business or activity in which
the Company is engaged during the term of Employee's employment by the Company.

9.3 "Confidential Business Information" means all information
(whether or not in written or tangible form) which is not generally known or
available to the public or a Competitor, the knowledge of which could benefit a
Competitor. Confidential Business Information includes any and all information
of a confidential, proprietary or secret nature which is or may be either
applicable to or related in any way to the business, present or future, of the
Company or any Affiliate, the business of any customer of the Company or any
Affiliate and shall include, but not be limited to, trade secrets, processes,
formulas, data, algorithms, source codes, object codes, documentation,
flow-charts, drawings, correspondence, know-how, improvements, inventions,
techniques, concepts, technologies, programs, designs, personnel records,
marketing plans and strategies, customer lists, projections, financial
information, internal accounting statistics, pricing and bidding policies and
practices, costing information, salaries, proposals to licensors or customers,
any data, confidential information or property entrusted to the Company or any
Affiliate by any licensors or customers and confidential information concerning
customers or employees of the Company or any Affiliate.

9.4 "Confidential Materials" means all documents, materials,
programs, recordings or any other tangible media (including, without limitation,
copies or reproductions of any of the foregoing) in which any Confidential
Business Information may be contained.

9.5 "Entity" means any partnership, corporation, trust, joint
venture, association or other business enterprise in any form.

10. Confidentiality.

10.1 Employee acknowledges that in the course of, or incident to,
his employment with the Company, Employee will likely obtain from the Company
Confidential

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<PAGE> 5
Business Information. Employee acknowledges that all Confidential Business
Information and all Confidential Materials are, and shall remain, the exclusive
property of the Company.

10.2 Employee shall hold and maintain in the strictest confidence
and duly safeguard all Confidential Business Information, and shall not,
directly or indirectly, disclose, communicate or divulge the same to any person
or Entity other than in connection with his business activities on behalf of the
Company or any Affiliate, or use or otherwise exploit the same for the direct or
indirect benefit of any person or Entity other than the Company or its
Affiliate. Notwithstanding the foregoing or any other provision of this
Agreement, Employee may disclose Confidential Business Information or
Confidential Materials (i) if and to the extent required by law, including
pursuant to a judicial or administrative order or ruling (provided that, to the
extent reasonably possible, the Company is given prior notice to enable it to
seek a protective order) and (ii) in order to enforce his rights in any action,
suit or proceeding against or involving the Company.

10.3 In the event of termination of Employee's employment with the
Company for any reason, whether voluntary or involuntary or by either party,
Employee shall return immediately to the Company all Confidential Materials and
Confidential Business Information in Employee's possession or within Employee's
control, in whatever form, written, photographic, computer disk, other media or
otherwise, and all keys, credit cards, business card files, product samples and
other property belonging to the Company.

10.4 The restrictions in this Section 10 shall survive the
termination of Employee's employment and of this Agreement for any reason
whatsoever.

11. Company's Rights to Certain Discoveries.

11.1 Employee shall disclose promptly to the Company any and all
concepts, inventions, improvements, discoveries, developments, techniques,
modifications, procedures, formulas, ideas, trade secrets, innovations, systems,
programs, know-how or designs (collectively, the "Discoveries") related to the
business or activities of the Company that he conceives, develops or reduces to
practice during the time that he is employed by the Company, Employee agrees
that all his right, title and interest in such Discoveries shall belong to the
Company, in confirmation of which he shall execute deeds of assignment of such
right, title and interest to the Company, its nominees, successor or assigns,
whenever requested, without demanding separate or additional compensation
therefor. All of the foregoing shall be subject to the same confidentiality,
nonuse and nondisclosure requirements as are prescribed in Section 10 hereof.
Any of the Discoveries related to the business of the Company that Employee may
reduce to practice, or apply for a copyright or patent on, during the first two
(2) years after termination of his employment hereunder shall be presumed to
have been conceived by him during the time of such employment and, as such,
shall belong to the Company, and the burden

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shall be upon Employee, if he contends it was not, to prove it was not by clear
and convincing evidence.

11.2 Employee shall assist the Company and its nominees, successors
or assigns (at its or their request) in every proper way during and following
the period of his employment (entirely at its or their expense) to obtain and
maintain for its or their own benefit copyrights or patents in any and all
countries for all Discoveries described in Section 11.1 hereof. Such assistance
shall include, but not be limited to, the execution and delivery of all lawful
papers and documents of every nature which relate to the securing and
maintenance of such copyrights and patent rights, and the performance of all
other lawful acts, such as the giving of testimony in any interference
proceedings, infringement suits or other litigation, as may be deemed necessary
or advisable by the Company or its nominees, successors or assigns.

12. Non-Competition and Non-Interference. During the entire term of
Employee's employment with the Company, and for a period of five (5) years
following the cessation of such employment, for any reason, whether voluntary or
involuntary or by either party, within the United States (and in such other
countries in which the Company is actively conducting, or seeking to conduct,
its business), Employee shall not, without prior written authorization of the
Company, directly or indirectly (i) compete with the Company, including, but not
limited to, own, manage, invest or acquire any economic stake or interest in,
assist or advise or otherwise engage or participate in any manner whatsoever in,
any Competitor (whether as a proprietor, partner, shareholder, investor,
manager, director, officer, employee, venturer, representative, agent, broker,
independent contractor, consultant, lender, guarantor, adviser or otherwise) or
(ii) solicit, induce or influence, or attempt to induce or influence, any
employee, customer, supplier, consultant or other business contact of the
Company to terminate, reduce, discourage or otherwise materially harm any
business relationship with, or commitment to, the Company or otherwise divert
from the Company any trade or business conducted by the Company. Nothing herein
set forth shall prohibit Employee from owning securities of any public company
(other than the Company), provided that Employee shall not own more than one
percent (1%) of any class of publicly-traded equity securities. EMPLOYEE
ACKNOWLEDGES THAT THE RESTRICTION SET FORTH HEREIN IS REASONABLE AND NECESSARY
TO PROTECT THE LEGITIMATE BUSINESS INTERESTS OF THE COMPANY AND THAT EMPLOYEE
HAS SUFFICIENT SKILLS, TRAINING, EDUCATION AND EXPERIENCE TO OBTAIN SATISFACTORY
EMPLOYMENT TO PROVIDE FOR HIS FINANCIAL NEEDS DURING THE PERIOD SPECIFIED HEREIN
WHILE COMPLYING WITH THE TERMS AND THE SPIRIT OF THE COVENANT SET FORTH IN THIS
SECTION 12.

13. Remedies.

6
<PAGE> 7
protection of the legitimate interests of the Company. Employee further
acknowledges that the Company's rights protected by the provisions and
restrictions hereof are unique and that in the event of any breach or threatened
breach or violation of any of these rights by Employee, the Company has no
adequate remedy at law and such breaches or violations are likely to result in
irreparable harm and injury to the Company. Therefore, Employee agrees that,
upon a breach or threatened breach or violation of the provisions or
restrictions hereof by Employee, the Company shall be entitled to obtain
specific performance, temporary and permanent injunctive relief, as well as an
equitable accounting of all profits and benefits arising therefrom, in addition
to other rights and remedies, at law or in equity, which may be available to it.

13.2 If Employee violates any restrictive covenant contained herein
and the Company institutes action for equitable relief, the Company, as a result
of the time involved in obtaining such relief, shall not be deprived of the
benefit of the full restriction period as set forth in Section 12. Accordingly,
such period shall be deemed to have the duration specified in Section 12 hereof,
computed from and commencing on the date on which relief is granted by a final
order from which there is no appeal.

13.3 Each provision hereof, including, without limitation, the
periods of time, geographical areas and types and scopes of duties of, and
restrictions on the activities of, Employee specified herein are divisible, and
if any portion thereof (including any sentence, clause or part) shall be held
contrary to law or invalid or unenforceable in any respect in any jurisdiction,
or as to one or more periods of time, areas or business activities, the
remaining provisions shall not be affected, but shall remain in full force, and
any such invalid or unenforceable provision shall be deemed, without further
action on the part of any person, modified, amended and limited to the extent
necessary to render the same valid and enforceable in such jurisdiction.

13.4 In order to enable the Company to enforce Sections 10, 11 and
12, Employee, regardless of his residence, and the Company hereby consent to the
personal jurisdiction of any federal or state court of competent jurisdiction in
the Eastern District of Pennsylvania and to the receipt of service of process in
any action brought hereunder in the manner provided in Section 14 for the giving
of notices.

14. Notices. Any notice required or permitted hereunder shall be delivered
personally or sent by facsimile transmission, national courier service
guaranteeing overnight delivery, or registered or certified mail, with all
postage or other delivery charges prepaid, to the respective parties hereto at
the addresses set forth below, or to such other address, or in care of such
other person, as any party shall from time to time designate by due notice
hereunder. Any notice hereunder shall be deemed given when received by the
person to whom or which addressed.

If to the Company:

7
<PAGE> 8
Crystal Medical Products, Inc.
321 Spruce Street
525 Bank Towers
Scranton, PA 18503
Facsimile Number: (717) 347-1734

copies to:

George Ginader, CPA
Ginader Jones & Co.
321 Spruce Street
525 Bank Towers
Scranton, PA 18503
and

John W. Pelino, Esquire
Pelino & Lentz, P.C.
One Liberty Place, 32nd floor
1650 Market Street
Philadelphia, PA 19103-7393

If to Employee:

Marvin Sears
P.O. Box 551
952 Pond Meadow Road
Westbrook, CT 06498-0551

15. Miscellaneous.

15.1 Employee represents and warrants to the Company that Employee's
commencement of the employment contemplated hereby will not violate or cause a
breach of any covenant, agreement or instrument to which Employee is a party or
by which Employee is bound.

15.2 This Agreement, its interpretation, performance and
enforcement, and the rights and remedies of the parties hereto, shall be
governed and construed according to the laws of the Commonwealth of
Pennsylvania, without regard to the principles of conflict of laws.

15.3 The Company reserves the right to waive the restrictive
covenants contained herein, or any one of them, provided that any waiver shall
be in writing executed by such person as shall be specifically authorized for
such purpose by its Board of Directors (not including Employee). A waiver of any
condition or breach of any term or covenant shall not be deemed or construed as
a further or continuing waiver of such condition or breach of any other term or
covenant set forth in this Agreement.

8
<PAGE> 9
15.4 This Agreement represents the entire agreement and
understanding of the parties and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof.

15.5 This Agreement shall not be modified or amended except by a
writing signed by each of the parties hereto. The Company may assign this
Agreement to any person or Entity which may become a successor in interest to
the Company by acquisition of all or substantially all of the Company's assets
or business, whether by merger, consolidation, reorganization, purchase or
otherwise. This Agreement is a personal service contract and, as such, shall not
be assignable, in whole or part, by Employee.

15.6 Subject as aforesaid, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.

15.7 The Company shall indemnify and defend Employee to the fullest
extent permitted by law from and against all suits, actions, proceedings,
obligations, liabilities, and all costs and expenses incurred in connection
therewith, suffered or incurred by Employee arising out of or in connection with
his employment hereunder and shall advance to Employee all expenses he may incur
in any such action unless prohibited by law. The Company's Bylaws shall contain
the broadest available indemnification provisions for the purpose of
implementing this provision.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.

CRYSTAL MEDICAL PRODUCTS, INC.

BY: /s/ HERBERT LOTMAN
-------------------------------
NAME: HERBERT LOTMAN
TITLE: CHAIRMAN

/s/ MARVIN SEARS
-------------------------------
MARVIN SEARS

<PAGE> 1
EXHIBIT 10.5(i)

GRANT OF STOCK OPTIONS
UNDER THE
CRYSTAL MEDICAL PRODUCTS, INC. STOCK OPTION PLAN

This Grant is delivered by Crystal Medical Products, Inc. (the
"Company") to Marvin Sears ("Sears"), its Executive Vice President and Chief
Scientific Officer, as of September 1, 1998 (the "Grant Date").

WHEREAS, the Company's Board of Directors (the "Board"), has
adopted, subject to shareholder approval, the Crystal Medical Products, Inc.
Stock Option Plan (the "Plan"); and

WHEREAS, the Plan provides that officers and key employees of
the Company may be granted options for the purchase of shares of the Company's
common stock, $.01 par value ("Company Stock"), in accordance with the terms and
provisions of the Plan; and

WHEREAS, the Board considers Sears eligible for a grant of
options under the Plan, and has determined that it would be in the best
interests of the Company to grant options to him;

NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:

1. GRANT OF OPTIONS.

Subject to the terms and conditions set forth herein, the Company, with
the approval and at the direction of the Board, hereby grants to Sears, as of
the Grant Date, options for a total of 500,000 shares, consisting of one (1)
incentive stock option to purchase up to 83,335 shares of Company Stock (Option
No. 1) and five (5) incentive stock options to purchase up to 83,333 shares of
Company Stock per Option (Option Nos. 2 through 6), at a price of $1.00 per
share (the fair market value as of the Grant Date). (Option Nos. 1 through 6
shall be collectively referred to as the "Options". The shares of Company Stock
purchasable upon exercise of each Option shall be collectively referred to as
the "Option Shares".) The Options are intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").

2. EXERCISABILITY OF OPTIONS.

Subject to the limitations provided herein, the Options shall become
exercisable as follows:

Option No. 1: on and after January 31, 1999
Option No. 2: on and after January 31, 2000
Option No. 3: on and after January 31, 2001
Option No. 4: on and after January 31, 2002
Option No. 5: on and after January 31, 2003
Option No. 6: on and after January 31, 2004
<PAGE> 2
The Board may accelerate the exercise date of any Option at any time
and for any reason, including, but not limited to, a "change in control" (as
defined in the Plan). In addition, if Sears ceases to be employed by the Company
(i) after a public offering, and within five (5) years of the Grant Date, due to
death, disability or termination by the Company for any reason other than cause,
or (ii) five (5) or more years after the Grant Date for any reason, the exercise
date of any Option that is not otherwise exercisable shall be accelerated to the
date Sears' employment terminates. If the aggregate fair market value (as of the
Grant Date) of Option Shares as to which Options are exercisable for the first
time in any calendar year is deemed to exceed $100,000, then the Options, as to
the excess, shall be treated as nonqualified stock options, not intended to
qualify under Section 422 of the Code.

3. TERMINATION OF OPTIONS.

All exercisable options shall terminate unless exercised before the
earliest of the following dates:

(a) August 31, 2008;

(b) Ninety (90) days after Sears ceases to be employed by the
Company for any reason other than death or disability (as
defined in the Plan);

(d) One year after Sears' death if he dies within ninety (90) days
of termination of his employment.

4. EXERCISE OF OPTIONS.

Sears may exercise any of the Options with respect to all or any part
of the Option Shares then exercisable by giving the Board written notice of
intent to exercise specifying: the Option being exercised; the number of shares
as to which the Option is exercised; and the date to complete the exercise (the
"Notice").

Provided full payment therefor has been received and all legal
requirements applicable to the issuance or transfer of such shares have been
complied with to its satisfaction, the Board, on the exercise date specified in
the Notice, or as soon thereafter as practicable, shall cause to be delivered to
Sears certificate(s) for the Option Shares then being purchased. Such
certificate(s) may be for authorized and unissued or reacquired shares of
Company Stock.

5. SHAREHOLDERS' AGREEMENT; OTHER INSTRUMENTS.

As a condition to the delivery of any Option Shares to be distributed
to him, Sears agrees to execute any shareholders' agreement and such other
documents and instruments required by applicable federal and state securities
laws or which the Board deems appropriate or desirable.

2
<PAGE> 3
6. FAIR MARKET VALUE.

As used herein, the "fair market value" of an Option Share as of the
Grant Date shall be the value as determined by the valuation of Howard Lawson &
Co. attached hereto.

7. NONTRANSFERABILITY OF OPTIONS.

Options granted hereunder shall not be transferable by Sears except by
will or the laws of descent and distribution. If Sears dies, his personal
representative or any other person entitled to succeed his rights may exercise
such rights upon satisfactory proof to the Company of the right to receive the
Option under Sears' will or the applicable laws of descent and distribution. Any
other attempt by Sears to alienate, assign, pledge, hypothecate or otherwise
dispose of any of the Options, or the levy of any attachment, execution or
similar process upon the rights conferred hereunder, shall terminate such
Options.

8. STOCKHOLDER RIGHTS.

Sears shall have the rights and privileges of a stockholder of the
Company with respect to any Option Share only after exercise of the Option with
respect thereto and delivery of such Option Share pursuant to Section 4 hereof.

9. EMPLOYMENT NOT AFFECTED.

Neither the granting of the Options, nor their exercise, shall be
construed as granting Sears any right to continuing employment with the Company.

10. AMENDMENT OF GRANT.

The Board may amend this Grant at any time if it determines, in its
sole discretion, that such amendment is necessary or advisable in light of any
modification of the Code (or the Treasury Regulations promulgated thereunder),
any federal or state securities law or any other law or regulation which applies
to the Options. Other amendments to the Grant may be made only in a writing
signed by the Company and Sears.

11. NOTICE.

Any notice required hereunder or under the Plan shall be sent to the
appropriate party, at the address indicated below, by hand delivery or certified
mail -

to the Company's Board: Board of Directors
Crystal Medical Products, Inc.
Attention: Herbert Lotman, Chairman
321 Spruce Street
525 Bank Towers
Scranton, PA 18503

copies to: George Ginader, CPA
Ginader Jones & Co.

3
<PAGE> 4
321 Spruce Street
525 Bank Towers
Scranton, PA 18503

and

John W. Pelino, Esq
Pelino & Lentz, P.C.
One Liberty Place - 32nd Floor
1650 Market Street
Philadelphia, PA 19103-7393

to Sears: Marvin Sears
952 Pond Meadow Road
Westbrook, CT 06498-0551

12. INCORPORATION OF PLAN BY REFERENCE.

These Options are granted pursuant to the terms of the Plan (which is
incorporated herein by reference), and the Options shall in all respects be
subject to, and interpreted in accordance with, the Plan, including, but not
limited to, its provisions relating to adjustments of and changes to the stock
of the Company, change in control and public offering. The Board shall interpret
and construe the Plan and this Grant instrument, and its interpretations and
determinations shall be binding and conclusive on Sears.

13. GOVERNING LAW.

The validity, construction, interpretation and effect of this
instrument shall be exclusively governed by and determined in accordance with
the law of the Commonwealth of Pennsylvania, except to the extent preempted by
federal law.

IN WITNESS HEREOF, the parties hereto have executed this
instrument as of the day and year first written above.

CRYSTAL MEDICAL PRODUCTS, INC.

By: /s/ Herbert Lotman, Chairman
----------------------------------------

Accepted and Agreed To By:

/s/ Marvin Sears
-------------------------------------------
Marvin Sears

<PAGE> 1
EXHIBIT 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement is made as of this 1st day of September,
1998, between CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (the
"Company") and COLIN BARNSTABLE ("Employee").

BACKGROUND

The Company desires to employ Employee as its Vice President for
Research and Development and Employee desires to accept such positions and to be
employed by Company.

NOW, THEREFORE, in consideration of the foregoing, the covenants
contained herein and the employment of Employee by the Company, the parties
hereto, intending to be legally bound hereby, agree as follows:

1. Employment. Subject as provided in this Agreement, the Company
hereby employs Employee, and Employee hereby accepts employment by the Company.
During the period of his employment hereunder, Employee shall serve as the Vice
President for Research and Development of the Company, or in such other capacity
as may be determined from time to time by its Board of Directors. Employee shall
perform such duties and have such responsibilities as are consistent with the
position of Vice President for Research and Development (or such other office as
may be hereafter held by him), including such duties and responsibilities as
shall be assigned him from time to time by the Board of Directors. Employee
shall devote his best efforts to the promotion of the business and affairs of
the Company and shall perform faithfully and to the fullest extent of his
ability all duties which relate to his position of employment by the Company.
<PAGE> 2
2. Term. Employee's employment hereunder shall commence on September 1,
1998 and continue for a period of five (5) years ending on August 31, 2003
(Initial Term) unless sooner terminated, as provided in Section 4 hereof.

4. Termination.

4.1 Death. This Agreement shall terminate immediately upon the
death of Employee.

(i) Employee's fraud, misappropriation, embezzlement
or willful misconduct;

(ii) Employee's material violation of any provision
of this Agreement; or

(iii) Employee's conviction of a felony involving
moral turpitude.

4.3 Special Termination. This Agreement shall terminate if
there is not an initial registration of the Company's stock under Section 5 of
the Securities Act of 1933, as amended (a "Public Offering") by January 30,
1999, in which event the Company shall not be obligated to make any further
payments hereunder other than amounts accrued as of the date of termination.

5. Compensation.

5.1 Base Salary. The Company shall pay, and Employee shall
accept, as base compensation during the term of his employment hereunder, a
salary at the annual rate of One Hundred Thousand Dollars ($100,000). Such base
salary shall be paid to Employee in equal installments on the first day of each
calendar month during the term hereof or in accordance with established pay
periods of the Company, but in no event less frequently than monthly.

2
<PAGE> 3
5.2 Bonus. The Company will pay Employee a bonus of Fifty
Thousand Dollars ($50,000). Employee shall also be eligible for such additional
bonuses as may be approved from time to time by the Board of Directors, whether
for all employees generally or for senior management.

5.3 Stock Options. Subject to shareholder approval of the
Company's Stock Option Plan (the "Plan"), the Company shall grant Employee
options to acquire up to two hundred fifty thousand (250,000) shares of the
Company's Common Stock, pursuant to all the terms and conditions of the Plan and
the form of grant attached hereto.

6. Benefits. During the term of his employment, Employee shall be
entitled to receive or participate in such employee benefits of the Company as
are made available generally to the members of its executive management, such as
vacations, holidays, medical, dental and other insurance coverage or qualified
retirement plans which may be established by the Company.

7. Automobile; Expense Reimbursement.

7.1 The Company shall pay Employee a reasonable car allowance
of up to Nine Hundred Dollars ($900) per month.

7.2 The Company shall reimburse Employee for job-related
expenses incurred by him, including expenses for: travel, hotel, meals, cellular
phone, business-related entertainment, postage, telephone and office supplies.
Employee shall promptly submit to the Company, at least monthly, an itemization
of his job-related expenses incurred, with such documentation as the Company may
reasonably require, and the Company shall reimburse him therefor within ten (10)
days from the date of such submission. The quality and types of expenses to be
reimbursed shall be agreed in advance with the Company and shall be consistent
with the Company's budget.

8. Change in Control.

8.1 A "Change in Control" shall be deemed to have occurred if
there is a sale of the Company or if a meeting of the shareholders of the
Company involving a contest for the election of directors results in a new Board
of Directors of which the directors of the Company immediately prior to such
meeting no longer constitute a majority of the Board.

8.2 If, after a Change in Control, Employee resigns as a
result of his reasonable determination that he is unable to exercise the
authorities, powers, functions or duties attached to his position as
contemplated by this Agreement, Employee shall be entitled to a lump sum payment
equal to the amount of his salary for the remainder of the term of this
Agreement.

9. Definitions.

3
<PAGE> 4
9.1 "Affiliate" means any Entity owned or controlled by, or
under common control with, the Company.

9.2 "Competitor" means any individual or Entity which is
currently engaged in, or shall conduct or be engaged in, development or
marketing of a device to identify pathogens in foods, bodily fluids or tissue
through an electronic measurement technique or in any other business or activity
in which the Company is engaged during the term of Employee's employment by the
Company.

9.5 "Entity" means any partnership, corporation, trust, joint
venture, association or other business enterprise in any form.

10. Confidentiality.

10.1 Employee acknowledges that in the course of, or incident
to, his employment with the Company, Employee will likely obtain from the
Company Confidential Business Information. Employee acknowledges that all
Confidential Business Information and all Confidential Materials are, and shall
remain, the exclusive property of the Company.

4
<PAGE> 5
same for the direct or indirect benefit of any person or Entity other than the
Company or its Affiliate. Notwithstanding the foregoing or any other provision
of this Agreement, Employee may disclose Confidential Business Information or
Confidential Materials (i) if and to the extent required by law, including
pursuant to a judicial or administrative order or ruling (provided that, to the
extent reasonably possible, the Company is given prior notice to enable it to
seek a protective order) and (ii) in order to enforce his rights in any action,
suit or proceeding against or involving the Company.

10.3 In the event of termination of Employee's employment with
the Company for any reason, whether voluntary or involuntary or by either party,
Employee shall return immediately to the Company all Confidential Materials and
Confidential Business Information in Employee's possession or within Employee's
control, in whatever form, written, photographic, computer disk, other media or
otherwise, and all keys, credit cards, business card files, product samples and
other property belonging to the Company.

10.4 The restrictions in this Section 10 shall survive the
termination of Employee's employment and of this Agreement for any reason
whatsoever.

11. Company's Rights to Certain Discoveries.

11.1 Employee shall disclose promptly to the Company any and
all concepts, inventions, improvements, discoveries, developments, techniques,
modifications, procedures, formulas, ideas, trade secrets, innovations, systems,
programs, know-how or designs (collectively, the "Discoveries") related to the
business or activities of the Company that he conceives, develops or reduces to
practice during the time that he is employed by the Company. Employee agrees
that all his right, title and interest in such Discoveries shall belong to the
Company, in confirmation of which he shall execute deeds of assignment of such
right, title and interest to the Company, its nominees, successor or assigns,
whenever requested, without demanding separate or additional compensation
therefor. All of the foregoing shall be subject to the same confidentiality,
nonuse and nondisclosure requirements as are prescribed in Section 10 hereof.
Any of the Discoveries related to the business of the Company that Employee may
reduce to practice, or apply for a copyright or patent on, during the first two
(2) years after termination of his employment hereunder shall be presumed to
have been conceived by him during the time of such employment and, as such,
shall belong to the Company, and the burden shall be upon Employee, if he
contends it was not, to prove it was not by clear and convincing evidence.

5
<PAGE> 6
copyrights and patent rights, and the performance of all other lawful acts, such
as the giving of testimony in any interference proceedings, infringement suits
or other litigation, as may be deemed necessary or advisable by the Company or
its nominees, successors or assigns.

12. Non-Competition and Non-Interference. During the entire term of
Employee's employment with the Company, and for a period of five (5) years
following the cessation of such employment, for any reason, whether voluntary or
involuntary, or by either party, within the United States (and in such other
countries in which the Company is actively conducting, or seeking to conduct,
its business), Employee shall not, without prior written authorization of the
Company, directly or indirectly (i) compete with the Company, including, but not
limited to, own, manage, invest or acquire any economic stake or interest in,
assist or advise or otherwise engage or participate in any manner whatsoever in,
any Competitor (whether as a proprietor, partner, shareholder, investor,
manager, director, officer, employee, venturer, representative, agent, broker,
independent contractor, consultant, lender, guarantor, adviser or otherwise) or
(ii) solicit, induce or influence, or attempt to induce or influence, any
employee, customer, supplier, consultant or other business contact of the
Company to terminate, reduce, discourage or otherwise materially harm any
business relationship with, or commitment to, the Company or otherwise divert
from the Company any trade or business conducted by the Company. Nothing herein
set forth shall prohibit Employee from owning securities of any public company
(other than the Company), provided that Employee shall not own more than one
percent (1%) of any class of publicly-traded equity securities. EMPLOYEE
ACKNOWLEDGES THAT THE RESTRICTION SET FORTH HEREIN IS REASONABLE AND NECESSARY
TO PROTECT THE LEGITIMATE BUSINESS INTERESTS OF THE COMPANY AND THAT EMPLOYEE
HAS SUFFICIENT SKILLS, TRAINING, EDUCATION AND EXPERIENCE TO OBTAIN SATISFACTORY
EMPLOYMENT TO PROVIDE FOR HIS FINANCIAL NEEDS DURING THE PERIOD SPECIFIED HEREIN
WHILE COMPLYING WITH THE TERMS AND THE SPIRIT OF THE COVENANT SET FORTH IN THIS
SECTION 12.

13. Remedies.

13.1 The parties acknowledge that the Company is engaged in a
competitive business and that the provisions and restrictions set forth herein
regarding confidentiality, Discoveries, non-competition and non-interference are
reasonable and necessary for the protection of the legitimate interests of the
Company. Employee further acknowledges that the Company's rights protected by
the provisions and restrictions hereof are unique and that in the event of any
breach or threatened breach or violation of any of these rights by Employee, the
Company has no adequate remedy at law and such breaches or violations are likely
to result in irreparable harm and injury to the Company. Therefore, Employee
agrees that, upon a breach or threatened breach or violation of the provisions
or restrictions hereof by Employee, the Company shall be entitled to obtain
specific performance, temporary and permanent injunctive relief, as well as an
equitable accounting of all profits and benefits arising therefrom, in addition
to other rights and remedies, at law or in equity, which may be available to it.

6
<PAGE> 7
13.2 If Employee violates any restrictive covenant contained
herein and the Company institutes action for equitable relief, the Company, as a
result of the time involved in obtaining such relief, shall not be deprived of
the benefit of the full restriction period as set forth in Section 12.
Accordingly, such period shall be deemed to have the duration specified in
Section 12 hereof, computed from and commencing on the date on which relief is
granted by a final order from which there is no appeal.

13.4 In order to enable the Company to enforce Sections 10, 11
and 12, Employee, regardless of his residence, and the Company hereby consent to
the personal jurisdiction of any federal or state court of competent
jurisdiction in the Eastern District of Pennsylvania and to the receipt of
service of process in any action brought hereunder in the manner provided in
Section 14 for the giving of notices.

14. Notices. Any notice required or permitted hereunder shall be
delivered personally or sent by facsimile transmission, national courier service
guaranteeing overnight delivery, or registered or certified mail, with all
postage or other delivery charges prepaid, to the respective parties hereto at
the addresses set forth below, or to such other address, or in care of such
other person, as any party shall from time to time designate by due notice
hereunder. Any notice hereunder shall be deemed given when received by the
person to whom or which addressed.

If to the Company:

Crystal Medical Products, Inc.
321 Spruce Street
525 Bank Towers
Scranton, PA 18503
Facsimile Number: (717) 347-1734

With copies to:

George Ginader, CPA
Ginader Jones & Co.
321 Spruce Street

7
<PAGE> 8
525 Bank Towers
Scranton, PA 18503

and

John W. Pelino, Esquire
Pelino & Lentz, P.C.
One Liberty Place, 32nd floor
1650 Market Street
Philadelphia, PA 19103-7393

to Barnstable:

Colin Barnstable
41 Greenway Street
Hamden, CT 06517

15. Miscellaneous.

15.1 Employee represents and warrants to the Company that
Employee's commencement of the employment contemplated hereby will not violate
or cause a breach of any covenant, agreement or instrument to which Employee is
a party or by which Employee is bound.

15.4 This Agreement represents the entire agreement and
understanding of the parties and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof.

15.5 This Agreement shall not be modified or amended except by
a writing signed by each of the parties hereto. The Company may assign this
Agreement to any person or Entity which may become a successor in interest to
the Company by acquisition of all or substantially all of the Company's assets
or business, whether by merger, consolidation, reorganization, purchase or
otherwise. This Agreement is a personal service contract and, as such, shall not
be assignable, in whole or part, by Employee.

8
<PAGE> 9
15.6 Subject as aforesaid, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.

15.7 The Company shall indemnify and defend Employee to the
fullest extent permitted by law from and against all suits, actions,
proceedings, obligations, liabilities, and all costs and expenses incurred in
connection therewith, suffered or incurred by Employee arising out of or in
connection with his employment hereunder and shall advance to Employee all
expenses he may incur in any such action unless prohibited by law. The Company's
Bylaws shall contain the broadest available indemnification provisions for the
purpose of implementing this provision.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.

CRYSTAL MEDICAL PRODUCTS, INC.

BY:/S/ HERBERT LOTMAN
-------------------------------------
NAME:HERBERT LOTMAN
TITLE:CHAIRMAN

/S/ COLIN BARNSTABLE
----------------------------------------
COLIN BARNSTABLE

<PAGE> 1
EXHIBIT 10.6(i)

GRANT OF STOCK OPTIONS
UNDER THE
CRYSTAL MEDICAL PRODUCTS, INC. STOCK OPTION PLAN

This Grant is delivered by Crystal Medical Products, Inc. (the
"Company") to Colin Barnstable ("Barnstable"), its Vice-President for Research
and Development, as of September 1, 1998 (the "Grant Date").

WHEREAS, the Company's Board of Directors (the "Board"), has
adopted, subject to shareholder approval, the Crystal Medical Products, Inc.
Stock Option Plan (the "Plan"); and

WHEREAS, the Plan provides that officers and key employees of the
Company may be granted options for the purchase of shares of the Company's
common stock, $.01 par value ("Company Stock"), in accordance with the terms and
provisions of the Plan; and

WHEREAS, the Board considers Barnstable eligible for a grant of
options under the Plan, and has determined that it would be in the best
interests of the Company to grant options to him;

NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

1. GRANT OF OPTIONS.

Subject to the terms and conditions set forth herein, the Company, with
the approval and at the direction of the Board, hereby grants to Barnstable, as
of the Grant Date, options for a total of 250,000 shares, consisting of five (5)
incentive stock options (the "Options") to purchase up to 50,000 shares of
Company Stock per Option, at a price of $1.00 per share (the fair market value
as of the Grant Date). (The shares of Company Stock purchasable upon exercise of
each Option shall be collectively referred to as the "Option Shares".) The
Options are intended to qualify as incentive stock options under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").

2. EXERCISABILITY OF OPTIONS.
<PAGE> 2
Subject to the limitations provided herein, the Options shall become
exercisable as follows:

The Board may accelerate the exercise date of any Option at any time and
for any reason, including, but not limited to, a "change in control" (as defined
in the Plan). In addition, if, after a public offering, Barnstable ceases to be
employed by the Company due to death, disability or termination by the Company
for any reason other than cause, the exercise date of any Option that is not
otherwise exercisable shall be accelerated to the date Barnstable's employment
terminates. If the aggregate fair market value (as of the Grant Date) of Option
Shares as to which Options are exercisable for the first time in any calendar
year is deemed to exceed $100,000, then the Options, as to the excess, shall be
treated as nonqualified stock options, not intended to qualify under Section 422
of the Code.

3. TERMINATION OF OPTIONS.

All exercisable options shall terminate unless exercised before the
earliest of the following dates:

(a) August 31, 2008;

(b) Ninety (90) days after Barnstable ceases to be employed by the
Company for any reason other than death or disability (as defined in
the Plan);

(d) One year after Barnstable's death if he dies within ninety (90) days
of termination of his employment.

4. EXERCISE OF OPTIONS.
<PAGE> 3
Barnstable may exercise any of the Options with respect to all or any part
of the Option Shares then exercisable by giving the Board written notice of
intent to exercise, specifying: the Option being exercised; the number of shares
as to which the Option is exercised; and the date to complete the exercise (the
"Notice").

Provided full payment therefor has been received and all legal
requirements applicable to the issuance or transfer of such shares have been
complied with to its satisfaction, the Board, on the exercise date specified in
the Notice, or as soon thereafter as practicable, shall cause to be delivered to
Barnstable certificate(s) for the Option Shares then being purchased. Such
certificate(s) may be for authorized and unissued or reacquired shares of
Company Stock.

5. SHAREHOLDERS' AGREEMENT; OTHER INSTRUMENTS.

As a condition to the delivery of any Option Shares to be distributed to
him, Barnstable agrees to execute any shareholders' agreement and such other
documents and instruments required by applicable federal and state securities
laws which the Board deems appropriate or desirable.

6. FAIR MARKET VALUE.

As used herein, the "fair market value" of an Option Share as of the Grant
Date shall be the value as determined by the valuation of Howard Lawson & Co.
attached hereto.

7. NONTRANSFERABILITY OF OPTIONS.

Options granted hereunder shall not be transferable by Barnstable except
by will or the laws of descent and distribution. If Barnstable dies, his
personal representative or any other person entitled to succeed his rights may
exercise such rights upon satisfactory proof to the Company of the right to
receive the Option under Barnstable's will or the applicable laws of descent and
distribution. Any other attempt by Barnstable to alienate, assign, pledge,
hypothecate or otherwise dispose of any of the Options, or the levy of any
attachment, execution or similar process upon the rights conferred hereunder,
shall terminate such Options.
<PAGE> 4
8. STOCKHOLDER RIGHTS.

Barnstable shall have the rights and privileges of a stockholder of the
Company with respect to any Option Share only after exercise of the Option with
respect thereto and delivery of such Option Share pursuant to Section 4 hereof.

9. EMPLOYMENT NOT AFFECTED.

Neither the granting of the Options, nor their exercise, shall be
construed as granting Barnstable any right to continuing employment with the
Company.

10. AMENDMENT OF GRANT.

The Board may amend this Grant at any time if it determines, in its sole
discretion, that such amendment is necessary or advisable in light of any
modification of the Code (or the Treasury Regulations promulgated thereunder),
any federal or state securities law or any other law or regulation which applies
to the Options. Other amendments to the Grant may be made only in a writing
signed by the Company and Barnstable.

11. NOTICE.

Any notice required hereunder or under the Plan shall be sent to the
appropriate party, at the address indicated below, by hand delivery or certified
mail:

to the Company's Board: Board of Directors
Crystal Medical Products, Inc.
Attention: Herbert Lotman, Chairman
321 Spruce Street
525 Bank Towers
Scranton, PA 18503

copies to: George Ginader, CPA
Ginader Jones & Co.
321 Spruce Street
525 Bank Towers
Scranton, PA 18503

and
<PAGE> 5
John W. Pelino, Esq
Pelino & Lentz, P.C.
One Liberty Place - 32nd Floor
1650 Market Street
Philadelphia, PA 19103-7393

to Barnstable: Colin Barnstable
41 Greenway Street
Hamden, CT 06517

12. INCORPORATION OF PLAN BY REFERENCE.

13. GOVERNING LAW.

The validity, construction, interpretation and effect of this instrument
shall be exclusively governed by and determined in accordance with the law of
the Commonwealth of Pennsylvania, except to the extent preempted by federal law.

IN WITNESS HEREOF, the parties hereto have executed this instrument
as of the day and year first written above.

CRYSTAL MEDICAL PRODUCTS, INC.

By: /s/ Herbert Lotman, Chairman
-----------------------------------
Accepted and Agreed To By:

/s/ Colin Barnstable
----------------------------------------
Colin Barnstable

<PAGE> 1
EXHIBIT 10.9

REVOLVING CREDIT AGREEMENT

THIS REVOLVING CREDIT AGREEMENT dated as of November 5, 1998 is by and
between KEYSTONE FOODS CORPORATION, a Delaware corporation ("Lender") and
MOLECULAR CIRCUITRY, INC., a Delaware corporation ("Borrower").

Background

Lender has agreed to provide working capital to Borrower on an as
needed basis, and agreed to extend a credit facility upon terms and conditions
set forth herein.

Agreement

NOW, THEREFORE, in consideration of the mutual promises and
undertakings set forth or provided for herein, the parties hereto agree as
follows:

1. Loan. Subject to the terms and conditions herein set forth, Lender
agrees to lend to Borrower and Borrower may borrow from Lender from time to time
prior to May 15, 2000 on a revolving credit basis such amounts as Borrower may
request from time to time, provided that the aggregate principal amount of such
loans at any time outstanding shall not exceed Five Million Dollars
($5,000,000). Loans hereunder shall be evidenced by, shall bear interest and
shall otherwise be repayable in accordance with the Revolving Credit Note of
Borrower of even date hereof (the "Revolving Credit Note") in the maximum
principal amount of Five Million Dollars ($5,000,000), which has been delivered
by Borrower to Lender herewith.

2. Term. Except as hereinafter provided, this Agreement shall remain in
full force and effect until May 15, 2000 and thereafter until all obligations of
Borrower to Lender hereunder and otherwise are fulfilled and discharged,
provided, however, that Lender's commitment to extend loans to Borrower under
the Revolving Credit Note shall terminate on May 15, 2000.

3. Conditions. As a condition to Lender's obligation to make any loan
hereunder, at the time of each advance hereunder (a) no Event of Default (as
hereinafter defined) shall have occurred and be continuing, (b) Borrower shall
have paid in full when due any installment of interest on the Revolving Credit
Note, (c) each of Borrower' representations and warranties contained or referred
to herein or in the Revolving Credit Note shall have been continuously true and
correct and shall remain true and correct in all material respects since the
date hereof, (d) Borrower shall have requested such action of Lender in writing
at least two (2) business days in advance, unless a shorter period is approved
by Lender, (e) Lender shall have determined that no material adverse change in
the business prospects or financial condition of Borrower has occurred, and (f)
Lender shall have been provided with a schedule and/or budget in satisfactory
form to Lender describing the intended use of proceeds for each advance
requested by Borrower.

4. Representations and Warranties. In order to induce Lender to make
the loans hereunder, Borrower makes the following representations and warranties
to Lender, each and all of
<PAGE> 2
which shall survive the execution and delivery of this Agreement and continue
until all obligations of Borrower to Lender hereunder and under the Revolving
Credit Note are satisfied:

(a) Corporate Existence. Borrower is a corporation duly
organized and validly existing under the laws of the state of Delaware; has the
lawful power to own its properties and to engage in the business it conducts;
and is duly qualified and in good standing as a foreign corporation in the
jurisdictions wherein the nature of the business transacted by it or property
owned by it makes such qualification necessary.

(b) Absence of Conflicts. The creation and performance of
Borrower's rights, duties and obligations under this Agreement and the Revolving
Credit Note will not (immediately, with the passage of time, the giving of
notice, or otherwise):

(i) Violate the charter or by-law provisions of
Borrower or violate any laws or result in a default under any contract,
agreement or instrument to which Borrower is a party or by which Borrower or its
property is bound; or

(ii) Result in the creation or imposition of any
security interest in, or lien upon, any of the assets of Borrower, except liens
in favor of Lender.

(c) Authorization. Borrower has the power and authority to
enter into and perform all of its obligations under this Agreement and the
Revolving Credit Note and to incur the obligations herein and has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the Revolving Credit Note.

(d) Validity. This Agreement and the Revolving Credit Note are
and when delivered will be valid, binding and enforceable in accordance with
their respective terms.

(e) Accuracy of Representations. No representation or warranty
by Borrower contained herein or in any certificate or other document furnished
by Borrower pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.

(f) Consents and Approvals. Each consent, approval or
authorization of, or filing, registration or qualification with, any person
which is required to be obtained or effected by Borrower in connection with the
execution and delivery of this Agreement and the Revolving Credit Note or the
undertaking or performance of any obligation hereunder or thereunder, has been
duly obtained or effected.

5. Borrower's Negative Covenants. Borrower covenants and agrees with
Lender that so long as there is any Borrower's indebtedness to Lender
outstanding, Borrower shall not do, agree to do, or permit to be done any of the
following:

(a) Guaranty the obligations of any person.

2
<PAGE> 3
(b) Create, incur or assume any liability for borrowed money,
except liabilities heretofore or hereinafter incurred by Borrower to Lender and
any liability or indebtedness incurred in the ordinary course of Borrower's
business.

(c) Assume, guaranty, endorse or otherwise become directly or
contingently liable, in connection with the obligations of any person, firm or
corporation.

(d) Consolidate with or merge into any person, firm or
corporation, or permit any person, firm or corporation to consolidate with or
merge into Borrower; or create or acquire, or permit the creation or acquisition
of, any subsidiary unless such entity guarantees all obligations of Borrower to
Lender under this Agreement and the Revolving Credit Note in a form and manner
acceptable to Lender.

(e) Alter its existing capital stock structure whether by
issuance of new shares of an existing class of stock, by creation of new classes
of stock, or otherwise.

6. Borrower's Affirmative Covenants. Borrower covenants and agrees with
Lender that so long as there is any Borrower's indebtedness to Lender
outstanding, Borrower shall:

(a) Preserve and keep in full force and effect its corporate
existence and all franchises, rights and privileges necessary to the proper
conduct of its business.

(b) Promptly deliver to Lender copies of any amendments or
modifications to its Certificate of Incorporation and Bylaws.

(c) Comply with all laws, ordinances, rules and regulations of
any federal, state or local government, or any instrumentality or agency
thereof, when such failure to comply may have a material adverse effect on it,
or on Lender in enforcing its rights under this Agreement or under the Revolving
Credit Note, against Borrower.

(d) Pay and discharge, as they may become due, all taxes,
assessments, debts, claims and other governmental or nongovernmental charges
lawfully imposed upon it or incurred by it or its properties and assets, except
taxes, assessments, debts, claims and charges contested in good faith in
appropriate proceedings and for which Borrower shall set aside adequate reserves
for the payment of such tax, assessment or charge.

(e) Maintain, preserve and keep all of its property, equipment
and assets in good repair, working order and condition.

(f) Notify Lender of any litigation, actions, proceeds, claims
or investigations pending or threatened against Borrower, and of the entry of
any judgment against Borrower, or the entry of any liens, other than liens in
favor of Lender.

3
<PAGE> 4
(g) Notify Lender in writing thirty (30) days in advance of
any (i) change of location of Borrower's principal place of business or other
place of business, and (ii) the addition of any new places of business of
Borrower.

(h) Deliver to Lender in form and substance satisfactory to
Lender, the following:

(i) within forty-five (45) days after the end of each
quarterly fiscal period of Borrower, commencing with the fourth quarter of 1998
and continuing until all the obligations of Borrower to Lender are satisfied, a
balance sheet and statement of income of Borrower prepared in accordance with
generally accepted accounting principles consistently applied and prepared and
compiled by independent certified public accountants acceptable to Lender
together with a certification by the chief financial officer of Borrower;

(ii) within ninety (90) days after the end of each
fiscal year of Borrower, commencing with the year 1998 and continuing until all
the obligations of Borrower to Lender are satisfied, a balance sheet and
statement of income of Borrower prepared in accordance with general accepted
accounting principles consistently applied and prepared and compiled by
independent certified public accountants acceptable to Lender together with a
certification by the chief financial officer of Borrower; and

(iii) such additional financial information of
Borrower as Lender may reasonably from time to time request.

(i) Pay on demand all reasonable and necessary expenses and
expenditures of Lender including without limitation, reasonable attorneys' fees
and expenses incurred or paid by Lender in protecting, enforcing or exercising
its rights, interests or remedies created by or connected with or provided in
this Agreement or the Revolving Credit Note.

7. Further Rights of Lender.

(a) Borrower appoints such person or persons as Lender may
designate as its attorney-in-fact to endorse the name of Borrower on any checks,
notes, drafts or other forms of payment or security that may come into the
possession of Lender or any affiliate or agent of Lender, to sign Borrower's
name on invoices or bills of lading, drafts against customers, notices of
assignment, verifications and schedules and, in general, to do all things
necessary to carry out the terms of this Agreement. If an Event of Default shall
have occurred and be continuing, such attorney-in-fact may notify the post
office authorities to change Borrower's address for delivery of mail to an
address designated by Lender, and may open and deal with mail addressed to
Borrower. The powers granted herein, being coupled with an interest are
irrevocable, and Borrower approves and ratifies all acts of such
attorney-in-fact which are not malicious or grossly negligent. Neither Lender
nor such attorney-in-fact shall be liable for any act or omission, error in
judgment or mistake of law so long as the same is not malicious or grossly
negligent.

(b) At any time and from time to time, during normal business
hours, Lender or any agents or representatives of Lender may examine and make
copies of and abstracts from the

4
<PAGE> 5
records and books of account of, and visit and inspect the properties
(including, but without limitation, the inventory and equipment) of Borrower and
discuss the affairs, finances and accounts of Borrower with any of its officers,
employees, directors and accountants.

8. Default.

(a) Events of Default. The occurrence of any one or more of
the following events shall constitute an event of default ("Event of Default")
hereunder:

(i) Borrower shall fail to pay when due any
installment of principal or interest or any fee payable on the Revolving Credit
Note in accordance with its terms or any fees, charges, expenses and other
amounts payable hereunder;

(ii) Borrower shall fail to observe or perform any
other obligation to be observed or performed by it hereunder or under the
Revolving Credit Note, and such failure shall continue for five (5) days after
notice of such failure from Lender;

(iii) Lender shall have determined that a material
adverse change in the business, prospects or financial condition of Borrower has
occurred;

(iv) Any financial statement, representation,
warranty or certificate made by Borrower to Lender in connection herewith, or as
inducement to Lender to enter into this Agreement or to make an advance, or in
the Revolving Credit Notes, separate statement or document to be delivered
hereunder to Lender, shall be false, incorrect, or incomplete when made in any
material respect;

(v) A receiver or trustee shall be appointed for
Borrower or for any substantial part of its assets, or any proceedings shall be
instituted for the dissolution or the full or partial liquidation of Borrower,
and such receiver or trustee shall not be discharged within thirty (30) days of
his appointment, or such proceedings shall not be discharged within thirty (30)
days of their commencement, or Borrower shall discontinue business or change the
nature of its business;

(b) Effect of Event of Default. Upon an Event of Default
hereunder, all principal amounts outstanding hereunder, and all interest accrued
thereon shall, at the election of Lender become immediately due and payable
without presentment, demand, protest or notice of any kind, all of which
Borrower hereby expressly waives.

9. General Contractual Provisions.

(a) Further Assurances. From time to time, Borrower will
execute and deliver to Lender such additional documents and will provide such
additional information as Lender may reasonably require to carry out the terms
of this Agreement and be informed of Borrower's status and affairs.

5
<PAGE> 6
(b) Enforcement and Waiver by Lender. Lender shall have the
right at all times to enforce the provisions of this Agreement in strict
accordance with the terms hereof and thereof, notwithstanding any conduct or
custom on the part of Lender in refraining from so doing at any time or times.
The failure of Lender at any time or times to enforce its rights under such
provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the same.
All rights and remedies of Lender are cumulative and concurrent and the exercise
of one right or remedy shall not be deemed a waiver or release of any other
right or remedy.

10. Notices. Any notice or consent required or permitted hereunder
shall be delivered personally or sent by facsimile transmission, national
courier service guaranteeing overnight delivery or registered or certified mail,
with all postage or other delivery charges prepaid, to the respective parties
hereto at the addresses set forth below, or to such other address, or in care of
such other person, as any party shall from time to time designate by due notice
hereunder. Any notice hereunder shall be deemed given when received by the
person to whom or which addressed:

If to Borrower: Crystal Medical Products, Inc.
c/o George Ginader, Treasurer
Crystal Medical Products, Inc.
321 Spruce Street
525-536 Bank Towers
Scranton, PA 18503

If to Lender: Keystone Foods Corporation
401 City Avenue, Suite 800
Bala Cynwyd, Pennsylvania 19004

With a copy to: Pelino & Lentz, P.C.
One Liberty Place
1650 Market Street
32nd Floor
Philadelphia, PA 19103
Attn: John W. Pelino, Esquire

11. Waiver and Release by Borrower. Borrower hereby:

(a) Waives presentment, demand or notice of any kind except as
otherwise provided herein.

(b) Releases Lender and its officers, attorneys, agents and
employees from all claims for loss or damage caused by any act or omission on
the part of any of them except willful misconduct.

6
<PAGE> 7
12. Applicable Law. The laws of the Commonwealth of Pennsylvania shall
govern the construction of this Agreement, the Revolving Credit Note and the
rights and remedies of the parties hereto and thereto.

13. Situs of Litigation. Borrower, irrevocably, agrees that, subject to
Lender's sole and absolute election, all actions or proceedings in any way,
manner or respect, arising out of or from or related to this Agreement or the
Revolving Credit Note, shall be litigated only in courts having situs within the
County of Montgomery, Commonwealth of Pennsylvania. Borrower hereby consents and
submits to the jurisdiction of any local, state or federal court located within
the County of Montgomery, Commonwealth of Pennsylvania. Borrower hereby waives
any right it may have to transfer or change the venue of any litigation brought
against Borrower by Lender in accordance with this Paragraph.

14. Binding Effect, Assignment and Entire Agreement. This Agreement
shall inure to the benefit of and shall be binding upon the respective
successors and permitted assigns of the parties hereto. Lender may assign any of
its rights or obligations hereunder without the consent of or any person.
Borrower cannot assign any of its rights or obligations hereunder without the
prior written consent of Lender. This Agreement and the documents executed and
delivered pursuant hereto, constitute the entire agreement between the parties,
and may be amended only by a writing signed on behalf of each party.

15. Indemnity. Borrower will indemnify Lender against, and hold it
harmless on demand from any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against Lender in any way relating to or arising out of this Agreement,
the Revolving Credit Note or any of the documents or transactions contemplated
hereby.

16. Amendments. This Agreement may not be changed, modified, amended or
terminated orally, but only by a writing signed by all of the parties to this
Agreement.

17. Severability. If any provision of this Agreement shall be held
invalid under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision and to this end, the provisions hereof are severable.

18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.

19. Conflict of Interest. Borrower and Lender waive to the fullest
extent possible any actual or potential conflicts of interest between them or
involving the transactions contemplated by this Agreement, it being acknowledged
that the terms of this Agreement are arms length and that all details of such
potential conflicts of interest have been fully disclosed.

7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

LENDER:

KEYSTONE FOODS CORPORATION

BY: /S/ JOHN J. COGGINS
-------------------------------------
JOHN J. COGGINS, VICE PRESIDENT

BORROWER:

CRYSTAL MEDICAL PRODUCTS, INC.,

BY: /S/ HERBERT LOTMAN
-------------------------------------
HERBERT LOTMAN, PRESIDENT

<PAGE> 1
EXHIBIT 10.9(i)

REVOLVING CREDIT NOTE

NOT TO EXCEED $5,000,000 Dated as of November 5, 1998

FOR VALUE RECEIVED, the undersigned, MOLECULAR CIRCUITRY, INC., a
Delaware corporation ("Maker"), promises to pay to the order of KEYSTONE FOODS
CORPORATION, a Delaware corporation ("Keystone"), the principal sum of Five
Million Dollars ($5,000,000) (or such lesser amount as shall be necessary to pay
the principal balance hereof in full), together with interest in accordance with
the following additional terms:

1. Interest Rate. Interest shall accrue on the unpaid principal balance
hereof from time to time outstanding at a rate per annum equal to ten percent
(10%). Interest shall be computed and paid for actual number of days elapsed.

2. Monthly Installments. Interest accrued prior to the Due Date, as
hereafter defined, shall be paid in arrears in monthly installments beginning on
January 1, 1999, and on the first day of every consecutive month thereafter
except that the entire unpaid principal balance hereunder, together with accrued
interest, shall be due and payable on the earlier of any one of the following
events: (i) May 15, 2000; (ii) the closing of an Initial Public Offering in
excess of Five Million Dollars ($5,000,000); or (iii) any other financing
obtained by Maker in excess of Five Million Dollars ($5,000,000) ("Due Date").
The undersigned may prepay part or all of the principal balance hereof prior to
the Due Date (together with interest on the prepaid principal amount to date of
prepayment) at any time and from time to time without premium or penalty.

3. Place of Payment. Payments of both principal and interest hereunder
are to be made in lawful money of the United States at the offices of Keystone
at 401 City Avenue, Suite 800, Bala Cynwyd, Pennsylvania 19004, or at such other
place as the holder hereof may from time to time designate in writing. All
payments hereunder shall be first applied to accrued and unpaid interest and
then to principal.

4. Late Payment Charge. Any amounts due and payable by the Maker to the
holder hereof under this Note, which are not paid in full when and as they
become due and payable, shall thereafter bear interest until paid at the rate of
eighteen percent (18%) per annum, and the Maker agrees to pay such interest
which has accrued to the holder hereof on demand. Notwithstanding any provision
contained herein, the total liability of Maker for payment of interest pursuant
hereto, including late charges, shall not exceed the maximum amount of such
interest permitted by law to be charged, collected, or received from Maker, and
if any payments by Maker include interest in excess of such a maximum amount,
the holder hereof shall apply such excess to the reduction of the unpaid
principal amount due pursuant hereto, or if none is due, such excess shall be
refunded to Maker.

5. Default. The occurrence of any one or more of the following events
shall constitute an event of default ("Event of Default") hereunder:
<PAGE> 2
(a) Any failure by the undersigned to pay in full any
installment of interest under this Note within five (5) days after the date when
due;

(b) The failure to pay any amount of principal or interest due
and payable on the Due Date;

(d) Any default or event of default under the Revolving Credit
Agreement, as the term "default" or "event of default" is defined or used
therein. For purposes of this paragraph such Revolving Credit Agreement shall
include, without limitation, any and all extensions, renewals and modifications
thereof.

Upon an Event of Default hereunder, all principal amounts
outstanding hereunder, and all interest accrued thereon shall, at the election
of the holder hereof, become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which the Maker hereby expressly
waives.

Failure or forbearance by the holder of this Note upon the
occurrence of any Event of Default hereunder to avail itself fully or partially
of any remedy provided for herein or in the Revolving Credit Agreement shall not
constitute a waiver thereof, but such remedy shall be available continuously
thereafter unless waived in writing by the holder of this Note. The Due Date may
be extended from time to time at the option of the holder hereof without in any
way affecting the liability of the Maker or endorsers or guarantors hereof, if
any. The Maker waives any right to the benefit of or to the direct application
of any specific security pledged, hypothecated, transferred or mortgaged to the
holder hereof or to require the holder hereof to pursue any specific remedy in
such holder's power.

Should it become necessary to collect this Note through an
attorney or otherwise, the Maker hereby agrees to pay all costs of collection of
this Note, including reasonable attorneys' fees and any attorneys' fees incurred
in appellate, bankruptcy or post judgment proceedings.

6. Advances. Providing no Event of Default then exists and subject to
the terms of the Revolving Credit Agreement, advances under this Note may be
made by Keystone upon two (2) day advance written request of the President of
the undersigned, unless a shorter period is approved by Keystone. Any such
advance shall be conclusively presumed to have been made by Keystone to or for
the benefit of the undersigned. The Maker does hereby irrevocably confirm,
ratify and approve all such advances by Keystone.

7. Notice. Any notice or consent required or permitted hereunder shall
be delivered personally or sent by facsimile transmission, national courier
service guaranteeing overnight delivery or registered or certified mail, with
all postage or other delivery charges prepaid, to the respective parties hereto
at the addresses set forth below, or to such other address, or in care of such
other

2
<PAGE> 3
person, as any party shall from time to time designate by due notice hereunder.
Any notice hereunder shall be deemed given when received by the person to whom
or which addressed:

If to Maker: Crystal Medical Products, Inc.
c/o George Ginader, Treasurer
Crystal Medical Products, Inc.
321 Spruce Street
525-536 Bank Towers
Scranton, PA 18503

If to Keystone: Keystone Foods Corporation
401 City Avenue, Suite 800
Bala Cynwyd, Pennsylvania 19004

With a copy to: Pelino & Lentz, P.C.
One Liberty Place
1650 Market Street
32nd Floor
Philadelphia, PA 19103
Attn: John W. Pelino, Esquire

8. Jurisdiction. This Note has been negotiated and delivered in the
Commonwealth of Pennsylvania and the validity, construction and enforcement
hereof shall be governed in all respects by the laws of the Commonwealth of
Pennsylvania.

9. CONFESSION OF JUDGMENT. MAKER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS THE HOLDER OF THIS NOTE, BY ANY AUTHORIZED OFFICER, EMPLOYEE OR AGENT,
OR BY ITS ATTORNEY, OR BY THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN
THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE WHERE PERMITTED BY LAW, UPON THE
OCCURRENCE OF A DEFAULT UNDER THIS NOTE, TO APPEAR FOR AND CONFESS JUDGMENT
AGAINST MAKER IN FAVOR OF THE HOLDER OF THIS NOTE IN ANY JURISDICTION IN WHICH
MAKER OR ANY OF ITS PROPERTY IS LOCATED FOR ENTIRE PRINCIPAL BALANCE OF THIS
NOTE, ALL ACCRUED INTEREST AND LATE CHARGES, TOGETHER WITH THE COSTS OF SUIT AND
WITH ACTUAL COLLECTION COSTS, INCLUDING REASONABLE ATTORNEYS' FEES, WITH OR
WITHOUT DECLARATION, WITH RELEASE OF ALL ERRORS, WITHOUT STAY OF EXECUTION AND
THE RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS NOTE OR A COPY
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. MAKER HEREBY WAIVES AND
RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY
STATE NOW IN FORCE OR HEREINAFTER ENACTED.

MAKER ACKNOWLEDGES THAT BY AGREEING THAT THE HOLDER OF THIS
NOTE MAY CONFESS JUDGMENT HEREUNDER, IT WAIVES THE RIGHT TO NOTICE IN A PRIOR
JUDICIAL PROCEEDING TO DETERMINE ITS RIGHTS AND

3
<PAGE> 4
LIABILITIES, AND MAKER FURTHER ACKNOWLEDGES THAT THE HOLDER OF THIS NOTE MAY
OBTAIN A JUDGMENT AGAINST MAKER WITHOUT MAKER'S PRIOR KNOWLEDGE OR CONSENT AND
WITHOUT THE OPPORTUNITY TO RAISE ANY DEFENSE, SET OFF, COUNTERCLAIM OR OTHER
CLAIM MAKER MAY HAVE, AND MAKER EXPRESSLY WAIVES SUCH RIGHTS AS AN EXPLICIT AND
MATERIAL PART OF THE CONSIDERATION. THE FOREGOING POWER TO CONFESS JUDGMENT MAY
BE EXERCISED AGAINST MAKER AT ONE TIME OR AT DIFFERENT TIMES AS THE HOLDER OF
THIS NOTE ELECTS UNTIL THE THIS NOTE IS FULLY DISCHARGED.

IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and
year first above written.

MOLECULAR CIRCUITRY, INC.

BY: /S/ HERBERT LOTMAN
-----------------------
HERBERT LOTMAN, PRESIDENT
ATTEST:

BY: /S/ GEORGE W. GINADER
--------------------------------
GEORGE W. GINADER, SECRETARY

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement on Form S-1 of Molecular
Circuitry, Inc. of our report dated November 20, 1998, which expresses an
unqualified opinion, except for the cumulative statements of operations, cash
flows and changes in stockholders' deficit for the period from March 11, 1992
(date of inception) to September 30, 1998 on which no opinion was expressed and
includes an explanatory paragraph referring to the Company's development stage
and dependence on Keystone to continue to fund its operations, appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Summary Financial
Data," "Selected Financial Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania
November 25, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1998 STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND NINE MONTHS ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1 REGISTRATION
STATEMENT.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS

<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 SEP-30-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 13558 237804
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 13558 237804
<PP&E> 82050 257577
<DEPRECIATION> 18153 25038
<TOTAL-ASSETS> 372288 792669
<CURRENT-LIABILITIES> 396338 1198882
<BONDS> 1835431 2762283
0 0
0 0
<COMMON> 36254 36675
<OTHER-SE> (1895735) (3205171)
<TOTAL-LIABILITY-AND-EQUITY> 372288 792669
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2058461 3913738
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 563649 696104
<INCOME-PRETAX> (2622110) (4609842)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2622110) (4609842)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 1832708 0
<CHANGES> 0 0
<NET-INCOME> (789402) (4609842)
<EPS-PRIMARY> (.18) (1.26)
<EPS-DILUTED> (.18) (1.26)

</TABLE>