BIOSPHERICS INC, PRE 14A, 1996-03-19

BIOSPHERICS INC
PRE 14A, 1996-03-19
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

BIOSPHERICS INCORPORATED
- - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>

[BIOSPHERICS LOGO]

12051 INDIAN CREEK COURT
BELTSVILLE, MARYLAND 20705

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1996
AND PROXY STATEMENT

The Annual Meeting of Stockholders of Biospherics-REGISTERED TRADEMARK-
Incorporated (the "Company") will be held at the Company headquarters, 12051
Indian Creek Court, Beltsville, Maryland, on May 15, 1996, at 2:00 p.m., Eastern
Daylight Time.

The items of business are:

(1) To elect eight (8) Directors to serve until the next Annual Meeting or
until their respective successors are duly elected and qualified.
(2) To consider and act upon a proposed certificate of amendment to the
charter of the Company that implements a two-for-one stock split of
the Company's outstanding common stock.
(3) To ratify the appointment of the independent accountants.
(4) To transact other business that may properly come before the Meeting.

These items are more fully described in the following pages, which are
hereby made part of this Notice.

The Company's Proxy Statement, Proxy Card, and Summary Annual Report for
1995 accompany this Notice.

Pursuant to the Bylaws of this Corporation, the Board of Directors has
fixed the close of business on March 15, 1996, as the record date for
determination of stockholders entitled to Notice and to vote at the Meeting and
any adjournment thereof. Only common stockholders of record on the date so
fixed are entitled to vote.

BY ORDER OF THE BOARD OF DIRECTORS
M. Karen Levin, Secretary

PLEASE EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY WHETHER OR NOT YOU EXPECT
TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING AND VOTE PERSONALLY, YOUR
PROXY WILL AUTOMATICALLY BE REVOKED AT THAT TIME.

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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1996

This Proxy Statement is being mailed on or about April 10, 1996, with the
solicitation of proxies in the accompanying form by the Board of Directors of
Biospherics-REGISTERED TRADEMARK- Incorporated, a Delaware corporation. The
Annual Meeting of its stockholders will be held May 15, 1996, at 2:00 p.m., at
the Company's headquarters, 12051 Indian Creek Court, Beltsville, Maryland. The
cost of this solicitation is being borne by Biospherics. The Company will
reimburse brokers, banks, and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of the Common Stock. In addition to solicitations by mail,
directors, officers and employees of the Company may solicit proxies personally
or by telegraph or telephone without additional compensation.

All shares represented by proxy will be voted at the Meeting in accordance
with the choices specified on the proxy, and where no choice is specified, in
accordance with the recommendations of the Board of Directors. Thus, where no
choice is specified, the proxies will be voted for the election of Directors,
for ratification of the proposed two-for-one stock split, and for ratification
of the appointment of independent accountants. A stockholder giving a proxy
will have the power to revoke it at any time before it is exercised. A proxy
will be revoked automatically if the stockholder who executed it is present at
the Meeting and elects to vote in person.

Each stockholder will be entitled to one vote for each share of common
stock $.01 par value per share ("Common Stock") held by the stockholder at the
close of business on March 15, 1996. At that time, there were 4,662,992 shares
of Common Stock outstanding.

In accordance with the laws of the State of Delaware and the Company's
Charter and By-Laws, a majority of the outstanding shares of Common Stock will
constitute a quorum at the Meeting. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business.

In accordance with the laws of the State of Delaware and the Company's
Charter and By-Laws (i) for the election of Directors, which requires a
plurality of the votes cast, only proxies and ballots indicating votes "FOR all
Nominees," "WITHHELD from all Nominees," or specifying that votes be withheld
from one or more designated Nominees are counted to determine the total number
of votes cast, and broker non-votes are not counted, and (ii) for the adoption
of all other proposals, which are decided by a majority of the shares of the
stock of the Company present in person or by proxy and entitled to vote, only
proxies and ballots indicating votes "FOR," "AGAINST," or "ABSTAIN" on the
proposal or providing the designated proxies with the right to vote in their
judgment and discretion on the proposal are counted to determine the number of
shares present and entitled to vote, and broker non-votes are not counted.

IT IS ANTICIPATED THAT THE DIRECTORS AND OFFICERS WILL VOTE THEIR SHARES OF
COMMON STOCK: IN FAVOR OF THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
LISTED HEREIN, FOR THE PROPOSED STOCK SPLIT, AND FOR RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS LISTED HEREIN.

ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)

Directors are to be elected at the Annual Meeting to serve until the next
Annual Meeting of Stockholders or until their respective successors are duly
elected and qualified. The Bylaws of the Company authorize up to eleven (11)
Directors. However, the Nominating Committee believes it is not presently
necessary nor cost effective to fill all Board vacancies. Unless otherwise
instructed, the persons named in the accompanying proxy intend to vote the
shares represented by the proxy FOR the election of the eight (8) Nominees
listed below. Although it is not contemplated that any Nominee will decline or
be unable to serve as a Director, in such event, proxies will be voted by the
proxy holder for such other persons as may be designated by the Board of
Directors, unless the Board of Directors reduces the number of Directors to be
elected. Election of a Board of Directors requires a plurality vote of the
shares of Common Stock.

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The following table sets forth certain information about the Nominees for
Directors as of March 15, 1996.

NOMINEES FOR ELECTION TO BOARD OF DIRECTORS

DIRECTOR
NAME AGE POSITION SINCE
- - - - ------------------------ -------- ---------------------------------------------------------- ---------
<S> <C> <C> <C>
Gilbert V. Levin 71 Chairman of the Board, CEO, President, and Treasurer 1967
Lionel V. Baldwin 63 Director 1976
David A. Blake 54 Director 1995
A. Bruce Cleveland 52 Director 1987
Rita R. Colwell 61 Director -
George S. Jenkins 73 Director 1984
M. Karen Levin 76 Director and Vice President for Communications 1968
Anne S. McLeod 65 Director 1992
</TABLE>

Dr. Levin founded the Company in 1967 and has been Chairman of the Board
and President since incorporation. He previously served in the public health
departments of Maryland, California, and the District of Columbia and as a
research scientist and corporate official. Among his inventions are
Lev-O-Cal-TM-, a noncaloric sweetener; the PhoStrip-REGISTERED TRADEMARK-
process for removing phosphorus from wastewater; and the Labeled Release life
detection experiment, which landed on Mars in 1976 aboard NASA's Viking Mission.
He holds a Ph.D. from The Johns Hopkins University.

Dr. Baldwin is President of the National Technological University, Fort
Collins, Colorado. Formerly, Dr. Baldwin was Dean of the College of Engineering
at Colorado State University, where he coordinated research programs with
emphasis on environmental areas. He holds a Ph.D. from Case Institute of
Technology.

Dr. Blake is a Senior Associate Dean of The Johns Hopkins University School
of Medicine. He has also held the posts of Associate Dean for Research,
Director of Research Administration and Associate Professor of Pharmacology and
Molecular sciences in his 22 years at that institution. Prior to that, he was
Chairman, Department of Pharmacology and Toxicology at the University of
Maryland School of Pharmacy. He holds a Ph.D. from the University of Maryland
School of Medicine.

Mr. Cleveland is President and founder of the GIT Investment Funds group of
mutual funds and Bankers Finance Investment Management Corp. of Arlington,
Virginia. Mr. Cleveland is also President and founder of Presidential Savings
Bank of Bethesda, Maryland. Previously he served as Special Assistant for SBIC
Industry Development with the U.S. Small Business Administration and was an
investment banker with Drexel Burnham Co. in New York. He is a graduate of
Harvard College and received an M.B.A. in finance from Harvard Business School.

Dr. Rita R. Colwell is the President, University of Maryland Biotechnology
Institute, Director, Center of Marine Biology, and Vice President for Academic
Affairs, University of Maryland. She also serves as Professor of Microbiology
at the University and is Associate Professor of Biology, Georgetown University.
Dr. Colwell also served as President of the American Association for the
Advancement of Science, 1995 to 1996. She holds a Ph.D. from the University of
Washington and is a member of Phi Beta Kappa.

Mr. Jenkins is a land developer, the owner of Locust Grove Farm, and
previously was Chairman of Consultation Networks, Inc., a Washington, DC,
environmental expert witness data base firm. Mr. Jenkins was President of
Greiner Engineering and is a Past Chairman of the Building Research Board of the
National Academy of Sciences. He is a member of the Advisory Council of the
Whiting School of Engineering of The Johns Hopkins University. Mr. Jenkins
serves on the boards of directors for several other companies. He holds an M.S.
in civil engineering from The Johns Hopkins University.

Mrs. Levin has been a full-time executive and Director of the Company since
1968. She was a science and medical reporter and writer for the Washington
Bureau of NEWSWEEK magazine, then served as writer and public information

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consultant to the National Institute of Mental Health. She holds a B.A. in
English from Vassar College. Mrs. Levin and Dr. Levin are husband and wife.

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Dr. MacLeod is Professor, College of Library and Information Services and
Acting Director of Libraries, University of Maryland, College Park. She is also
a specialist in the design of communications for various audiences and is an
authority on the literature of children and youth. Dr. MacLeod holds a Ph.D. in
American history and an M.L.S., both from the University of Maryland.

In 1994, non-employee Directors as a group were awarded stock options for
8,000 shares of stock, at $5.75 per share, with expiration dates of November 17,
1999. Directors are paid annual retainers of $1,500 each and fees of $600 for
each meeting of the Board and each committee meeting they attended. Employee
Directors are not paid for their services as Directors.

Mr. Cleveland serves as a Director of Government Investors Trust, GIT Tax-
Free Trust, GIT Income Trust, and GIT Equity trust, all publicly held registered
investment companies. No other Director serves as a Director of a publicly held
company. There is not and has not been for the previous two fiscal years any
relationship between the Company and any public company in which any Director
has a 1% or greater interest.

BOARD OF DIRECTORS

The Company's Board of Directors held four Regular Meetings during the
year, which were attended by all members. The Board of Directors has Executive,
Compensation, Retirement Plan Administration, Nominating, and Audit Committees.
The Executive Committee may act on behalf of the Board of Directors on matters
requiring action in the interim between meetings of the full Board. In 1995,
its members were Gilbert V. Levin, Chair, Anne S. MacLeod, Richard C. Levin
(staff), and George S. Jenkins (advisor). All members attended the three
meetings in 1995.

The Compensation Committee recommends various incentives for key employees
to encourage and reward increased financial performance, productivity and
innovation. In 1995, its members were Lionel V. Baldwin, Chair, and Anne S.
MacLeod. Both members attended the three meetings during 1995.

The Audit Committee consists of A. Bruce Cleveland, Chair, M. Karen Levin,
and George S. Jenkins. The Audit Committee has authority to review the
financial records of the Company, deal with its independent auditors, recommend
to the Board policies with respect to financial reporting, and investigate all
aspects of the Company's business. All members attended the two meetings in
1995.

The Biospherics Retirement Plan Administration Committee oversees the
management of the Company's Retirement Plan. In 1994, its members were David A.
Blake, Chair, A. Bruce Cleveland, M. Karen Levin, and Richard C. Levin. All
members attended the two meetings in 1995.

The Nominating Committee nominates the proposed Board for election by the
stockholders. Its members are M. Karen Levin, Chair, and Gilbert V. Levin. All
members attended the one meeting held during 1995. The Nominating Committee
will consider Nominees recommended by stockholders of the Company if such
recommendations are submitted in writing at least ninety (90) days before any
Annual Meeting or Special Meeting at which Directors are to be elected.

The Technical Committee advises the Company on the direction of technology
development. It consists of Richard L. Snowden, Chair, Lionel V. Baldwin, and
Gilbert V. Levin. No meetings of the Technical Committee were held in 1995.

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BIOSPHERICS-Registered Trademark- INCORPORATED

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the shares of Common Stock beneficially
owned by all Officers and Directors as a group as of March 15, 1996. Except for
Gilbert V. Levin, Chairman of the Board, CEO and President, and M. Karen Levin,
Vice President for Communications, no person is known by the Company to own
beneficially more than 5% of the outstanding Common Stock.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER OF OWNERSHIP OF CLASS
-------------- ------------------------------------------ ---------------------- --------------
<S> <C> <C> <C>
Common Gilbert V. Levin 912,787 (1)(2) 22.3%
Common M. Karen Levin 834,466 20.4%
Common Richard C. Levin 15,398 (2) *
Common Lee R. Zehner 27,500 (2) *
Common Lionel V. Baldwin 7,909 (2) *
Common A. Bruce Cleveland 5,700 (2) *
Common George S. Jenkins 6,800 (2) *
Common Anne S. MacLeod 4,450 (2) *
Common Richard L. Snowden 2,000 (2) *
Common David A. Blake 2,000 (2) *
Common All Officers and 1,819,010 (2) 44.4%
Directors as a Group
------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Less than 1%.

(1) Includes 100 shares held jointly with M. Karen Levin.

(2) Included in the number of shares beneficially owned by G. V. Levin, R. C.
Levin, L. R. Zehner, L. V. Baldwin, A. B. Cleveland, G. S. Jenkins, A. S.
MacLeod, R.L. Snowden, D.A. Blake, and all Officers and Directors as a group are
105,000, 15,000, 19,648, 2,000, 5,200, 5,800, 4,200, 2,000, 2,000 and 160,848
shares, respectively, which such persons have a right to acquire within 60 days
pursuant to stock options.

As of March 15, 1996, Gilbert V. Levin, President and M. Karen Levin, Vice
President for Communications, 3180 Harness Creek Rd., Annapolis, Maryland,
beneficially owned in the aggregate 1,747,253(1) shares of Common Stock (37.5%
of the outstanding shares). Dr. Gilbert V. Levin and Mrs. M. Karen Levin are
husband and wife. As principal stockholders of the Company, they are considered
control persons with respect to the Company.

All Directors and Officers as a group, as beneficial owners of 1,819,910(2)
shares of Common Stock, owned 39% of the outstanding shares. With the exception
of Cede & Co., the holder of record for certain brokerage firms and banks, no
other person is known by the Company to own beneficially more than 5% of the
outstanding Common Stock.

In 1978, the Company, with stockholder approval, entered into agreement
with Gilbert V. Levin and M. Karen Levin whereby, upon their death, the Company
would redeem from their estates the number of Common Shares necessary to pay
estate taxes and administrative expenses of the estate. This agreement is
funded (at present values) by life
____________

(1) Includes 105,000 shares which could be acquired pursuant to stock options
within 60 days.
(2) Includes 160,848 shares which could be acquired pursuant to stock options
within 60 days.

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insurance on the Levins for which the Company is the beneficiary. Although the
number of shares that would be redeemed is indeterminable, such redemption may
affect ownership and control of the Company.

EXECUTIVE OFFICERS

Officers are elected annually by the Board of Directors. The
Executive Officers of the Company as of December 31, 1995, were as follows:

NAME AGE POSITION
- - - - --------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gilbert V. Levin 71 Chairman of the Board, CEO, President, and Treasurer
M. Karen Levin 76 Director, Vice President for Communications, and Corporate Secretary
Richard C. Levin 43 Vice President, Chief Operating Officer
Arthur S. Locke, III 32 Vice President for Finance
Sylvia W. Williams 49 Vice President and Director, Information Services Division
Lee R. Zehner 49 Vice President for Science Services

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

Dr. and Mrs. Levin's experience is discussed above.

Richard Levin joined the Company in 1991 as Business Manager, was
subsequently elected Corporate Secretary, and then was promoted to Vice
President and Chief Operating Officer. Prior to that, he was the General
Manager of the Catalyst Research Division of the Mine Safety Appliances Company.
Mr. Levin holds a B.S. in business administration from the University of
Baltimore and is a C.P.A. in the State of Maryland. Mr. Levin is the nephew of
Dr. and Mrs. Levin.

Arthur S. Locke, III, joined Biospherics in 1994 as Director of Finance and
became Vice President for Finance in 1995. Previously, he served as Manager of
Accounting and Financial Reporting with NVR Incorporated, McLean, Virginia.
Earlier, he served as a manager with Coopers and Lybrand, in Washington, DC.

Sylvia W. Williams joined the Company in 1990 as Pharmaceutical Marketing
Manager and helped develop the commercial business sector of the Information
Services Division. She was promoted to Vice President, Deputy Director,
Information Services Division in 1994 and promoted to be Director of that
Division in February 1995. Prior to joining Biospherics, Ms. Williams was a
marketing manager with Syntex Laboratories, Inc. Ms. Williams holds a B.S. in
business from George Mason University.

Dr. Lee Zehner joined the Company in 1985 and has helped in the invention
and development of the Company's proprietary low calorie sugars and other
products. He was promoted to the position of Vice President for Science
Services and is also Director of the BioTech Programs Unit. Among his
approximately 100 worldwide patents is the patent for the use of D-tagatose as a
low-calorie sweetener. Prior to joining Biospherics, Dr. Zehner held several
research and development positions at Fortune 100 companies. He holds a Ph.D.
in chemistry from the University of Minnesota.

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EXECUTIVE COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

The following summary compensation table sets forth the compensation paid
by the Company during the year ended December 31, 1995, to Executive Officers
earning in excess of $100,000 during the year.

- - - - ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- -------------------------- --------------------------
Securities
Other Restricted Underlying All Other
Name and Annual Com- Stock Options/ LTIP Compen-
Principal Position Year Salary ($) Bonus($)(1) pensation ($) Awards ($) SARs (#)(2) Payouts ($) sation ($)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gilbert V. Levin 1995 $181,767 $ - $ 7,800 $ - 145,000 $ - $ 3,750
President 1994 177,246 - 14,432 - 525,000 - 4,497
1993 176,002 - 8,115 - - - 2,659

M. Karen Levin 1995 152,474 9,900 7,800 - 15,000 - 1,150
Vice President for
Communications 1994 145,554 9,900 7,800 - 515,000 - 3,632
1993 144,578 19,800 8,176 - - - 2,489

Richard C. Levin 1995 96,054 - 7,800 - 15,000 - 2,575
Vice President 1994 92,754 - 7,909 - 10,000 - 2,332

1993 93,193 - 7,823 - - - 1,481

Sylvia W. Williams 1995 92,057 - 7,800 - 20,000 - 2,495
Vice President (3) 1994 84,067 - 20,684 - 10,000 - 2,630
- - - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Bonuses are based on the financial performance of the Company and are
awarded by the Board of Directors.
(2) Represents the number of options/SARs.
(3) Information for 1993 is not presented since Ms. Williams was not an
executive officer during that year.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following option/SAR grant table sets forth the total options/SARs
granted by the Company during the year ended December 31, 1995, to the Executive
Officers earning in excess of $100,000 during the year.
<TABLE>
<CAPTION>

- - - - ---------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARS
Underlying Granted to Exercise or
Options/SARS Employees in Base Price Expiration
Name Granted (#) Fiscal Year per Share ($) Date
- - - - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gilbert V. Levin 145,000 50.4% $9.20(1) 11/17/99
M. Karen Levin 15,000 5.2% 10.50 11/17/99
Richard C. Levin 15,000 5.2% 10.50 11/17/99
Sylvia W. Williams 20,000 7.0% 8.63(1) 11/17/99
- - - - ---------------------------------------------------------------------------------------------
</TABLE>

(1) If multiple options are offered, the price per share is based on weighted
average price of the various options.

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The Biospherics Incorporated Nonqualified Stock Option Plan (the "Plan")
was established in 1987 to provide certain selected key employees having
substantial responsibilities for the direction and management of the Corporation
with an additional incentive to promote its success and encourage them to remain
in the employ of the Corporation. The plan provides for the issuance of
2,200,000 shares. As of December 31, 1995, there were 1,463,723 outstanding
options granted to individuals including the above-named Officers, including
219,773 that were exercisable as of such date.

AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES

The following aggregated options/SAR table sets forth the total
options/SARs exercised during the year ended December 31, 1995, and year-end
1995 option/SAR values for those Executive Officers earning in excess of
$100,000 during the year.
<TABLE>
<CAPTION>

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
- - - - --------------------------------------------------------------------------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable (#) Unexercisable ($)
- - - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gilbert V. Levin - - 165,000 / 525,000 (1) 0 / 3,062,500
M. Karen Levin - - 30,000 / 500,000 (1) 0 / 3,062,500
Richard C. Levin - - 15,000 / 30,000 0 / 0
Sylvia W. Williams - - 6,250 / 18,750 0 / 0

</TABLE>

(1) On November 18, 1994, Dr. and Mrs. Levin were granted options for 500,000
shares each to purchase common stock under the Plan subject to two additional
conditions. The options are exercisable only in the event that (i) a third
party acquires 5% or more of the issued and outstanding common stock of the
Company and (ii) the options may not be exercised without further approval of
the Board of Directors of the Company. The options were granted not for
compensatory purposes but as a means of protecting shareholder value against
unsolicited offers deemed inadequate by the Board of Directors and to help
ensure fair and equal treatment of all shareholders.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

There were no long-term incentive plan awards during 1995.

To ensure the availability of their services to the Company after their
retirement, Dr. and Mrs. Levin each have entered into a consulting agreement
with the Company, under which they will provide the Company post-retirement
consulting services of not less than twenty-four (24) days per year for ten (10)
years at a daily rate equal to 125% of their respective final average daily rate
of salary adjusted in subsequent years for changes in the cost of living. In
addition, Dr. and Mrs. Levin and the Company have entered into supplementary
retirement plan agreements pursuant to which they will receive retirement
compensation based on the difference between seventy percent of their average
annual total compensation, and their social security payments plus assumed
returns from investment of their funded pension plans. The supplementary
retirement plan is unfunded.

Effective January 1, 1990, the Biospherics Incorporated 401(k) Retirement
Plan was placed into effect. The Plan is a discretionary defined contribution
plan with the Company matching a portion of the employee contributions.

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EMPLOYMENT CONTRACT

The employment agreement for Dr. Gilbert V. Levin, President and Founder of
Biospherics, was extended to December 31, 1997, by the Board of Directors on
January 15, 1996. The Company will pay Dr. Levin $190,000 per year,
representing an increase of 5 percent over last year. The contract incorporates
various other agreements between the Company and Dr. Levin, as reported
elsewhere in this document.

THE PROPOSED STOCK SPLIT
(ITEM 2 ON THE PROXY CARD)

The Board of Directors of the Company has declared it advisable and in the
best interest of the Company and its stockholders to effect a two-for-one split
of the outstanding shares of Common Stock. In the opinion of the Board of
Directors of the Company, a two-for-one stock split would result in a wider
distribution of the Common Stock, increase the number of stockholders of the
Company and enhance the marketability of the Common Stock. If approved by the
stockholders of the Company, the stock split will be effected by the filing of a
Certificate of Amendment with the Secretary of State of Delaware in the form
attached hereto as Attachment A.

Currently, there are 3,934,947 shares of Common Stock issued and
outstanding and 1,442,523 shares of Common Stock reserved for issuance upon
exercise of stock options. If the proposed stock split is implemented, there
will be approximately 7,869,894 shares of Common Stock issued and outstanding
and 2,885,046 shares reserved for issuance upon stock option exercises, leaving
7,245,060 shares of Common Stock authorized, but unissued and not reserved for
any particular purpose. Although the Company has no present plan for the
issuance of any such authorized but unissued shares of Common Stock, all of the
7,245,060 shares of Common Stock authorized but unissued and not reserved for
future issuance would be subject to issuance, from time to time, in the
discretion of the Board of Directors for any proper corporate purpose without
further action by the stockholders, unless otherwise required by law or other
applicable rules and regulations. The proposed stock split would not affect the
provisions in the certificate of incorporation permitting the issuance of up to
2,000,000 shares of the Company's preferred stock.

The Company has been advised by counsel that the implementation of the two-
for-one split of its shares of Common Stock will not result in any gain or loss
to the stockholders of the Company for Federal income tax purposes. For tax
purposes, the cost basis of each outstanding share of Common Stock will be
divided equally between such share and the additional share to be issued
pursuant to the split. For purposes of determining the nature of any gain or
loss upon disposition thereof, the holding period for each additional share
issued will be deemed to have commenced on the date when the previously
outstanding share was acquired.

The two-for-one stock split will not affect the relative rights of any
stockholder or result in a dilution or diminution of any stockholder's
proportionate interest in the Company.

All fees incurred in connection with the implementation of the proposed
two-for-one stock split will be borne by the Company.

If approved by the requisite stockholder vote, the stock split will be
effective on or about May 15, 1996, the date upon which the amendment to the
Company's certificate of incorporation will be filed with the Secretary of State
of the State of Delaware. Stockholders of record at the close of business on
such date will be entitled to receive one newly issued share for each share held
on such date. The Company expects to mail the certificates for additional
shares on or about May 24, 1996, or as soon thereafter as possible.
Stockholders should retain their present certificates, which will continue to
represent the number of shares evidenced thereby. STOCKHOLDERS SHOULD NOT
RETURN THEIR EXISTING CERTIFICATES TO THE COMPANY OR ITS TRANSFER AGENT.

The approval of the proposed stock split will require the affirmative
consent of the holders of a majority of the outstanding shares of Common Stock
of the Company. Abstentions and broker non-votes will not be counted as
affirmative votes.

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The Board of Directors recommends a vote FOR the Proposal to split the
issued and outstanding shares of Common Stock on a two-for-one basis. Proxies
received by the Company will be voted in favor of the stock split unless a
contrary vote is specified.

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 3 ON THE PROXY CARD)

The Board of Directors has reappointed the firm of Coopers & Lybrand to be
Biospherics' independent accountants for the year 1996 and recommends that
stockholders vote FOR ratification of that appointment. The Company is advised
that no member of the firm of Coopers & Lybrand has any interest, financial or
otherwise, direct or indirect, in the Company. A representative from Coopers &
Lybrand will attend the Annual Meeting, will have the opportunity to make a
statement if he or she desires to do so, and will be available to answer
questions. If the Stockholders, by the affirmative vote of a majority of the
shares of Common Stock represented at the Meeting, do not ratify the selection
of Coopers & Lybrand, the selection of independent accountants will be
reconsidered by the Board of Directors.

OTHER BUSINESS

As of the date of this statement, the management of Biospherics
Incorporated has no knowledge of any business that may be presented for
consideration at the Meeting, other than that described above. As to other
business, if any, that may properly come before the Meeting, or any adjournment
thereof, it is intended that the Proxy hereby solicited will be voted in respect
of such business in accordance with the judgment of the proxy holders.

SHAREHOLDER PROPOSALS

Shareholders intending to present a proposal at the 1996 Annual
Shareholders Meeting must submit such proposals to the Company at 12051 Indian
Creek Court, Beltsville, MD 20705, no later than December 15, 1996.

BY ORDER OF THE BOARD OF DIRECTORS,
M. KAREN LEVIN, SECRETARY

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FINANCIAL STATEMENTS, SUPPLEMENTAL DATA, AND

REPORT OF INDEPENDENT ACCOUNTANTS

The following proxy statement addendum is provided to comply with Securities and
Exchange Commission requirements to provide financial statements and
supplemental data to shareholders. Items are numbered to show consistency with
the most recent 10-KSB.

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

Biospherics' common stock is traded on the NASDAQ National Market System.
No cash dividends were paid in 1995 or 1994. The Company's loan agreement with
its bank does not restrict the payment of dividends, though no such payments are
anticipated in the near future.

As of March 15, 1996, the number of stockholders of record of Biospherics'
common stock was approximately 4,800, based on the number of proxy requests of
the Company's transfer agent. The per share market value at the close of each
quarter for 1995 and 1994 is listed below.

<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
1st Quarter 1995 5-3/4 4-1/4
2nd Quarter 1995 8 4-1/2
3rd Quarter 1995 27 6-1/2
4th Quarter 1995 13-3/4 7-7/8

1st Quarter 1994 8 6-1/2
2nd Quarter 1994 8-1/4 5-7/8
3rd Quarter 1994 7-3/4 5-1/4
4th Quarter 1994 7-1/2 4-3/4
</TABLE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS -- 1995 COMPARED WITH 1994

The Company earned income of $424,000 from continuing operations for the
year ended December 31, 1995, compared with a net loss of $183,000 from
continuing operations during 1994. The primary reason for this improvement was
the substantial reduction in losses associated with the Company's Department of
Agriculture Forest Service campsite reservation contract (the "Forest Service
Contract"). Revenues from continuing operations were $13,740,000 for the year
ended December 31, 1995, which represents a 2%, or $229,000, increase from 1994
revenues of $13,511,000 from continuing operations. These fluctuations are
discussed further below. On January 5, 1996, the Board of Directors of the
Company approved a formal plan to sell the net assets of the Environmental and
Laboratory Services Division (ELSD). See "Liquidity and Capital Resources,"
below.

Information Services Division (ISD) revenues were $13,715,000, which
reflects an increase of 2% or $239,000, compared with revenues of $13,476,000 in
1994. This increase was primarily from commercial business growth, which
accounted for 54% of ISD's business as compared to 46% in 1994. Profit before
interest and taxes increased 128%, or $566,000, to $1,006,000 in 1995 from
$440,000 in 1994. This increase was directly attributable to the substantial
reduction in losses on the Company's Forest Service Contract, from $840,000 in
1994 to $260,000 in 1995 as a result of certain cost control measures put into
place in late 1994. The Company anticipates earning a minimal profit on this
contract in 1996.

Research and Development (R&D) generated revenues of $25,000 during 1995,
compared with $35,000 in 1994. During 1995 and 1994, R&D has focused primarily
on developing its bulk sugar substitute, D-tagatose (which was named "Sugaree-
TM-"), and, to a lesser extent, its safe-for-humans pesticides. During 1995,
R&D's loss before interest and taxes was $583,000, compared with a loss of
$624,000 in 1994. The expenditures primarily relate to ongoing efforts to
develop an economical manufacturing process for Sugaree and ongoing negotiations
for its commercial production. Management believes that significant progress
continues on the development of an economical manufacturing process and market
introduction of Sugaree and that there is a substantial market for nonfattening,
bulk sugar substitutes. If the manufacturing process can be implemented, the
commercialization of Sugaree could have a substantial impact on future results
of operations. However, no assurance can be given that the Company will be
successful in its efforts to commercialize this product.

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On August 16, 1995, the Company entered into a Letter of Intent with MD
Foods Ingredients amba ("MD Foods") to negotiate within 1 year an agreement to
establish and operate a joint venture that will produce and distribute
commercial quantities of Sugaree worldwide. No assurance can be given that the
Company will be able to negotiate such an agreement under terms satisfactory to
the Company. The Letter of Intent provides for the construction and operation
of a pilot plant in Denmark to obtain product development quantities of the
sugar and obtain data on which to design a full-scale plant. The pilot plant is
now operating and producing small quantities of Sugaree. Under the agreement,
MD Foods will incur costs up to $550,000 for the construction and operation of
the pilot plant, costs associated with establishing the joint venture, and other
costs. MD Foods will be reimbursed for 100% of such costs by the joint venture,
if organized, or 50% by the Company if the parties do not reach an agreement.
If no agreement is reached, the product of the effort and all the technology
resides with the Company. No amounts have been accrued by the Company to
reimburse MD Foods for these costs. The Company will be reimbursed up to
$170,000 by the joint venture for certain costs to produce limited quantities of
D-tagatose, costs associated with establishing the joint venture, and certain
other costs. MD Foods will reimburse the Company for up to 50% of these costs
if an agreement is not reached. The Company has recognized a receivable of
$32,000 for the recovery of such costs. The Company and MD Foods are in the
process of negotiating an agreement. While the Letter of Intent contemplates a
joint venture, the parties also are discussing the possibility of the grant of a
non-exclusive license by the Company to MD Foods.

General and administrative expenses ("G&A") have been fully allocated to
each segment's operating results discussed above. G&A expenses that will not be
eliminated after the sale of ELSD is completed have been allocated to ISD and
R&D in the discussion above. As reflected in the accompanying Statements of
Operations, G&A increased $297,000, from $2,053,000 in 1994 to $2,350,000 in
1995. This increased cost is primarily a result of the transfer of certain
salary, fringe benefit, and other costs to G&A from ISD in connection with the
formation of a corporate communications group. As a result of the sale of ELSD,
G&A expenses of $355,000 and $17,000 in 1995, which otherwise would have been
absorbed by ELSD, have been allocated to ISD and R&D, respectively; and G&A
expenses of $325,000 and $16,000 in 1994, previously absorbed by ELSD, have been
allocated to ISD and R&D, respectively.

Interest expense increased $89,000, from $123,000 in 1994 to $212,000 in
1995. This increase was primarily caused by interest accrued relating to the
IRS settlement, offset by lower interest expense associated with the line of
credit because of lower borrowings outstanding during 1995. The after-tax
impact of the interest expense associated with the IRS settlement was offset by
the reversal of estimated tax accruals, which reduced the current year's tax
expense.

1995 net income was positively affected by a settlement of a claim against
the U.S. Department of Agriculture. See "Liquidity and Capital Resources."

The Company's backlog as of December 31, 1995, has remained steady at
$31,941,000, compared to $32,164,000 in 1994.

LIQUIDITY AND CAPITAL RESOURCES

On January 5, 1996, the Board of Directors of the Company approved a formal
plan to sell the net assets of ELSD because of a continuing lack of
profitability and diminishing opportunity for profitable new sales. On February
27, 1996, the Company entered into an agreement with ManTech Environmental
Corporation to sell substantially all assets of ELSD except for certain
receivables retained by the Company relating to completed contracts. The sale
is expected to close on February 29, 1996. The purchase price will be equal to
the book value of substantially all ELSD assets, less certain liabilities, plus
approximately $150,000, subject to final adjustments under the agreement. The
aggregate cash received for the sale and liquidation of remaining assets is
expected to be approximately $850,000. The Company will no longer be in the
environmental and laboratory services business upon completion of this
transaction. Management believes that the sale will permit better focus on the
major businesses of the Company, ISD and R&D.

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tangible net worth and cash flow coverage ratios and exclude a specific
limitation on research and development expenditures. The Company was in
compliance with all covenants as of December 31, 1995.

On October 12, 1995, the Company entered into a $200,000 Promissory Note,
which matures on October 12, 1998. The Promissory Note accrues interest at the
rate of 8.55% per annum and the Company is required to make monthly payments of
interest and principal. The proceeds were used to provide financing for a
portion of the Company's property and equipment purchases during 1995. The
Promissory Note is collateralized by equipment purchased prior to October 12,
1995.

In November 1995, the Company received a notice of potential liability (the
"Notice") from the U.S. Environmental Protection Agency ("EPA") regarding a
small quantity of hazardous materials shipped in 1988 and 1989 to a sight owned
and operated by a company that was in the business of disposing of such
materials. The EPA is conducting an investigation of the source, the extent,
and the nature of release or threatened release of hazardous substances at this
sight. The Notice stated that the EPA has spent over $2.1 million in its
investigation and restoration activities and that the Company has a potential
liability under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, for such costs. Based upon information in the
Notice, the amount of hazardous material that the Company shipped to the sight
is less than 0.2% of all such materials found at the sight. If the EPA
allocates its costs based on the amount of materials that each company shipped
to the sight in proportion to the total materials shipped to the sight, the
Company's share of the costs should be immaterial. The Company is reviewing its
alternatives in response to the Notice and believes that it has defenses against
such claims, but that, should the EPA persist and prevail, the impact on the
financial statements will be immaterial. However, no assurance can be given
about the final outcome.

Cash flow improved significantly as reflected in the accompanying
Statements of Cash Flows. Net cash provided by operating activities was
$1,432,413, which is an improvement of $631,884, compared to 1994. This was
primarily due to a decrease of $1,014,369 in accounts receivable and an
improvement in earnings of $485,986. Net cash used in investing activities
decreased $165,446 because of a decrease in payments for purchases of property
and equipment. Cash flow from financing activities changed substantially as the
Company repaid a net amount of $1,214,000 during 1995 under its line of credit,
compared to net repayments of $108,000 during 1994.

On February 22, 1996, the Company settled a claim against the U.S.
Department of Agriculture, relating to the startup and early operation of the
Forest Service Contract. The claim, which originally was filed in late 1994,
was amended in 1995 to include certain additional costs. This settlement was
recorded as other income in the Statement of Operations included herein; it
increased pre-tax income from continuing operations by $335,000 in 1995. The
full amount due to the Company as a result of the claim is expected to be
received in March 1996.

Consistent with the Company's policy, profits will be retained by the
Company to help bring Sugaree and its other products to market and for
reinvestment in the growth of ISD. Thus, no dividends were paid in 1995 and
none are anticipated in 1996. While management believes that continuing
operations of the business will generate positive cash flow, management is
pursuing additional financing alternatives to accelerate bringing its products
to market and to support growth of its core businesses.

The Company may require additional funds to pursue its commercialization of
Sugaree, depending on the negotiations with MD Foods. Such funds could be
generated by further assets sales, sales of debt and/or equity securities, or
other methods.

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----------

ITEM 7. FINANCIAL STATEMENTS

Financial statements and supplementary data required by this Item 7 follow.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Consolidated Operations for each of the two years ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . 16
Consolidated Balance Sheet as of December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statements of Changes in Stockholders' Equity for each of the two years ended December 31, 1995 . . . 18
Consolidated Statements of Cash Flows for each of the two years ended December 31, 1995. . . . . . . . . . . . . . 19
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

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BIOSPHERICS-Registered Trademark- INCORPORATED

----------

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
REVENUES
Contract revenues $13,739,514 $13,510,716
----------- -----------

OPERATING EXPENSES
Direct costs and operating expenses 10,005,559 10,698,332
General and administrative expenses 2,349,684 2,052,762
Research and development expenses 538,714 579,820
Depreciation and amortization expenses 421,263 363,061
----------- -----------

Total operating expenses 13,315,220 13,693,975
----------- -----------

Income (loss) from operations 424,294 (183,259)

Other income (expense)
Other income 329,631 12,765
Interest expense (211,979) (122,816)
----------- -----------

Income (loss) from continuing operations
before income taxes 541,946 (293,310)
Income tax expense (benefit) 115,103 (112,936)
----------- -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS 426,843 (180,374)

Discontinued operations
Income (loss) from discontinued operations, net of
applicable income tax expense (benefit) of
$(19,949) and $54,354 in 1995 and 1994, respectively (32,549) 88,682
----------- -----------

NET INCOME (LOSS) $ 394,294 $ (91,692)
----------- -----------

NET INCOME (LOSS) PER SHARE DATA:
Income (loss) per share from continuing operations $ 0.09 $ (0.05)
Income (loss) per share from discontinued operations (0.01) 0.03
----------- -----------
Net income (loss) per share $ 0.08 $ (0.02)
----------- -----------
----------- -----------

Weighted average shares and common stock equivalents outstanding 4,662,992 3,904,770
----------- -----------
----------- -----------
</TABLE>

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 29,861
Trade accounts receivable, net 1,602,486
Costs and estimated earnings in excess of billings on contracts 49,030
Other receivables 562,706
Prepaid expenses and other assets 507,487
Current deferred income taxes 36,721
Net assets of discontinued operations 710,958
----------
Total current assets 3,499,249

Restricted cash-security deposit 27,408
Property and equipment, net 1,610,860
Patents, net 96,675
----------
TOTAL ASSETS $5,234,192
----------
----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit $ 321,000
Accounts payable and accrued expenses 1,045,211
Accrued salaries and benefits 382,201
Accrued vacation 133,773
Income taxes payable 66,010
Deferred revenue 191,461
Note payable-current portion 61,893
----------
Total current liabilities 2,201,549

Deferred compensation 110,626
Deferred income taxes 148,028
Deferred rent 114,741
Note payable 127,917
----------
Total liabilities 2,702,861
----------

Commitments and contingencies
Redeemable common stock 169,595
----------

STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 18,000,000 shares
authorized, 3,934,947 issued, of which 1,642,253 shares
are classified in redeemable common stock 22,926
Paid-in capital in excess of par 773,050
Treasury stock, 14,451 shares at cost (156,268)
Retained earnings 1,722,028
----------
Total stockholders' equity 2,361,736
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,234,192
----------
----------
</TABLE>

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

PAID-IN
COMMON CAPITAL IN TREASURY RETAINED STOCKHOLDERS'
STOCK EXCESS OF PAR STOCK EARNINGS EQUITY
------ ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $20,883 $654,416 $ - $1,419,426 $2,094,725
Exercise of employee
stock options 5 2,170 - - 2,175
Net reclassification
for redeemable
common stock 457 2,743 - - 3,200

Net loss - - - (91,692) (91,692)
------- -------- --------- ---------- ----------

Balance, December 31, 1994 21,345 659,329 - 1,327,734 2,008,408
Exercise of employee
stock options 151 105,141 - 105,292
Acquisition of treasury
stock in connection
with option exercise - - (160,258) - (160,258)
Issuance of treasury stock
in payment of expense - - 3,990 - 3,990
Net reclassification
for redeemable
common stock 1,430 8,580 - - 10,010
Net income - - - 394,294 394,294
------- -------- --------- ---------- ----------

Balance, December 31, 1995 $22,926 $773,050 $(156,268) $1,722,028 $2,361,736
------- -------- --------- ---------- ----------
------- -------- --------- ---------- ----------
</TABLE>

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER,
--------------------------
1995 1994
----------- ---------
<S> <C> <C>
Net income (loss) $ 394,294 $ (91,692)
----------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 467,054 436,753
Deferred compensation adjustment (38,000) (55,513)
Loss on sales and retirements of property and equipment 32,414 -
Treasury stock issued in payment of expense 3,990 -
Decrease (increase) in provision for uncollectable accounts (11,216) 36,000
Decrease (increase) in trade accounts receivable 1,036,801 (552,683)
Decrease (increase) in costs and estimated earnings
in excess of billings on contracts 213,194 (143,631)
Decrease (increase) in other receivables (360,314) 74,748
Decrease in income taxes receivable - 421,176
Decrease (increase) in prepaid expenses and other assets (75,558) 120,947
Increase (decrease) in accounts payable and accrued expenses (303,025) 486,103
Increase (decrease) in accrued salaries and benefits (53,506) 24,371
Decrease in accrued vacation (9,504) (6,541)
Decrease (increase) in current deferred income taxes 16,824 (77,118)
Decrease in deferred income taxes (42,397) (20,824)
Increase in income taxes payable 14,289 31,772
Increase in deferred revenue 191,461 -
Decrease in deferred rent (44,388) (51,984)
----------- ---------
Total adjustments 1,038,119 723,576

Net cash provided by operating activities 1,432,413 631,884
----------- ---------

Cash flows from investing activities:
Decrease in short-term investment - 29,457
Payments for purchases of property and equipment (468,657) (669,231)
Additions to patent costs (18,162) (12,511)
----------- ---------

Net cash used in investing activities (486,819) (652,285)
----------- ---------

Cash flows from financing activities:
Net repayments under line of credit (1,214,000) (108,000)
Net change in book overdraft 95,766 125,160
Proceeds from note payable 200,000 -
Repayments of note payable (10,190) -
Proceeds from issuance of common stock 4,712 2,175
----------- ---------

Net cash provided by (used in) financing activities (923,712) 19,335
----------- ---------

Net increase (decrease) in cash 21,882 (1,066)
Cash, beginning of period 7,979 9,045
----------- ---------
Cash, end of period $ 29,861 $ 7,979
----------- ---------
----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (refunded) $ 73,135 $(413,588)
Interest paid 110,473 122,816
Non-cash redemption of common stock in connection with
stock option exercises 160,258 -
</TABLE>

See notes to consolidated financial statements.

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NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are summarized below.

REVENUE RECOGNITION

Revenue is recognized using the following methods, depending on the terms
of the contracts: time & materials, fixed price, and cost-plus-fixed-fee.
Revenue recognized under time & material contracts is based on direct labor
hours and other direct costs incurred. Revenue for fixed-price contracts is
recognized using the percentage-of-completion and unit-of-delivery methods.
Revenue for cost-plus-fixed-fee contracts is recognized based on the allowable
total costs incurred plus a pro rata share of the fee. Losses, if any, on
contracts are recorded during the period when first determined. Included in
prepaid expenses and other assets is $180,403 at December 31, 1995, attributable
to certain start-up costs, which have been deferred and which will be amortized
and recovered over the related period of service provided to the client.

RECEIVABLES

Trade accounts receivable are reflected in the accompanying Balance Sheet
net of an allowance for doubtful accounts of $79,398, including $38,520 included
in net assets of discontinued operations.

Costs and estimated earnings in excess of billings on contracts represent
revenues recognized that are not billable as of December 31, 1995, under the
terms of the contracts. There are no significant contract retainages as of
December 31, 1995.

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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.

DEPRECIATION AND AMORTIZATION

Depreciation is provided on the straight-line basis over the estimated
useful lives of the various assets. Leasehold improvements are amortized over
the shorter of the periods of the leases or the useful lives of the
improvements. Expenditures for maintenance, repairs, and minor renewals are
charged to expense as incurred; expenditures for improvements, replacements, and
major renewals are added to the property-and-equipment accounts. Assets retired
or otherwise disposed of are removed from the asset accounts, along with the
related amounts of accumulated depreciation. Gains or losses from disposals, if
any, are included in earnings.

INCOME TAXES

Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end, based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are

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established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable for the period
and the change during the period in deferred tax assets and liabilities.

PATENT COSTS

Legal and acquisition costs relating to patents are capitalized when
incurred. When patents are granted, costs are amortized over a term
representing the lesser of the life of the patent or the projected sales period
of the product or process.

DEFERRED RENT

The Company entered into a lease for its headquarters and research
facilities in 1987. The excess of the rent expense over the cash payments for
rent is recorded as deferred rent and is being amortized over the life of the
lease.

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is computed using the weighted average number
of common shares outstanding during each period. Outstanding common stock
equivalents, consisting of shares under option, have an anti-dilutive effect on
loss per share in 1994 and therefore are excluded from the calculation.

RECLASSIFICATIONS

The Statement of Changes in Stockholders' Equity has been reclassified to
conform to the 1995 presentation for redeemable common stock.

ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement 123, "Accounting for Stock-Based Compensation" ("Statement 123"),
which establishes fair value-based accounting and reporting standards for all
transactions in which a company acquires goods or services by issuing equity
securities. As such, Statement 123 covers stock-based compensation plans
including all arrangements under which employees receive shares of stock.
Statement 123 encourages, but does not require, employers to adopt its
prescribed fair value-based method of accounting to recognize compensation
expense for employee stock compensation plans. Employers must comply with the
disclosure requirements set forth in the statement. Statement 123 is effective
for fiscal years beginning after December 15, 1995. The Company expects to
adopt only the reporting standards of Statement 123. The Company accounts for
its employee stock compensation plan under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees."

2. DISCONTINUED OPERATIONS

On January 5, 1996, the Board of Directors of the Company approved a formal
plan to sell the net assets of ELSD because of a continuing lack of
profitability and diminishing opportunity for profitable new sales. On February
27, 1996, the Company entered into an agreement with a corporation to sell
substantially all assets of ELSD except for certain receivables retained by the
Company relating to completed contracts. The sale is expected to close on
February 29, 1996. The purchase price will be equal to the book value of
substantially all ELSD assets, less certain liabilities, plus approximately
$150,000, subject to final adjustments under the agreement. The aggregate cash
received for the sale and liquidation of remaining assets is expected to be
approximately $850,000. The Company will no longer be in the

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BIOSPHERICS-Registered Trademark- INCORPORATED

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environmental and laboratory services business upon completion of this
transaction. Management believes that the sale will permit better focus on the
major businesses of the Company, ISD and R&D.

Assets and liabilities of ELSD consisted of the following at December 31,
1995:

<TABLE>
<S> <C>
Trade accounts receivable, net $649,852
Costs and estimated earnings in excess of
billings on contracts 76,586
Prepaid expenses and other assets 60,308
Property and equipment, net 71,483
--------
Total assets 858,229

Accounts payable and accrued expenses 147,271
--------

Net assets of discontinued operations $710,958
--------
--------
</TABLE>

Assets are shown at their expected net realizable values and accounts
payable and accrued expenses at their face amounts.

3. PROPERTY AND EQUIPMENT

The components of property and equipment as of December 31, 1995, are as
follows:

AMOUNT ESTIMATED LIFE
------------ --------------
<S> <C> <C>
Office furniture and equipment $ 4,114,569 3 to 10 years
Leasehold improvements 265,191 3 to 7 years
------------
4,379,760

Accumulated depreciation and amortization (2,768,900)
------------

Property and equipment, net $ 1,610,860
------------
------------
</TABLE>

4. BANK LINE OF CREDIT

On May 31, 1995, the Company entered into a Loan Agreement (the "New Loan
Agreement"), which replaced the Company's previous bank line of credit. The New
Loan Agreement, which expires on May 31, 1996, provides for borrowings of up to
$2 million, subject to an advance rate as defined in the agreement. Amounts
outstanding under the New Loan Agreement accrue interest at the bank's prime
rate plus 0.75% per annum and are collateralized by the Company's accounts
receivable. The New Loan Agreement contains covenants that require the Company
to meet certain tangible net worth and cash flow coverage ratios, and excludes a
specific limitation on research and development expenditures. The Company was
in compliance with all covenants as of December 31, 1995. The Company will seek
to renew the line under similar terms and conditions.

5. NOTE PAYABLE

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12, 1995. The unpaid principal balance of the note was $189,810 as of December
31, 1995, of which $61,893, $67,464, and $60,453 mature in 1996, 1997, and 1998,
respectively.

6. INCOME TAXES

The components of the provision (benefit) for income taxes from continuing
operations are as follows:

YEAR ENDED DECEMBER 31,
----------------------
1995 1994
-------- ---------
<S> <C> <C>
Current
Federal $114,065 $ (12,291)
State 26,611 (2,703)
-------- ---------

Total current provision 140,676 (14,994)
-------- ---------

Deferred
Federal (21,207) (77,703)
State (4,366) (20,239)
-------- ---------

Total deferred benefit (25,573) (97,942)
-------- ---------
Total expense (benefit) for income
taxes from continuing operations $115,103 $(112,936)
-------- ---------
-------- ---------
</TABLE>

The tax effect of significant temporary differences representing deferred
tax assets and liabilities as of December 31, 1995, are as follows:

CURRENT NON-CURRENT
-------- -----------

<S> <C> <C>
Depreciation and amortization $ 36,216 $183,384
Deferred compensation - (45,356)
Accrued vacation (40,384) -
Other (32,553) 10,000
-------- --------

Deferred tax liability (asset) $(36,721) $148,028
-------- --------
-------- --------
</TABLE>

Differences between the effective income tax rates and the federal
statutory rates for 1995 and 1994 are as follows:

1995 1994
-------- ---------
<S> <C> <C>
Federal income tax expense (benefit) at 34% $184,262 $ (99,725)
State income tax expense (benefit), net of federal 12,898 (6,981)
Expenses not deductible for tax purposes 9,096 27,825
Adjustments relating to resolving the IRS audit (73,081) -
Other, primarily changes in prior year estimates (18,072) (34,055)
-------- ---------
Income tax expense (benefit)
from continuing operations $115,103 $(112,936)
-------- ---------
-------- ---------
</TABLE>

As a result of routine audits of the Company's Federal income tax returns
by the Internal Revenue Service ("IRS"), the IRS had disputed the timing of
certain rent expense deductions taken during the 1986 through 1992 tax years.
The aggregate amounts of the IRS's claims and penalties were $348,666 and
$79,808, respectively. The deficiencies in question constituted temporary
differences regarding the period in which certain rent expenses should have been
deducted. The Company had filed a petition in the U.S. Tax Court disputing all
of the claims and penalties. Additionally, the Company had identified certain
errors in the IRS audit findings. As a result, on August 28, 1995, the Company
entered

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into a settlement agreement under which the IRS claims were substantially
reduced and all penalties assessed were waived. During the third quarter of
1995, the Company reduced its current income tax liability relating to excess
income tax accruals, maintained until a settlement with the IRS was reached,
which was offset overall by accrued interest expense relating to the settlement.
The overall impact on the financial statements was immaterial.

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BIOSPHERICS-Registered Trademark- INCORPORATED

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7. COMMITMENTS AND CONTINGENT LIABILITIES

CONTRACT REVENUES

The financial statements include revenues under U.S. Government contracts
that are subject to final Government audit adjustments. DCAA has completed its
audits for all years through 1993. The Company believes that no material
adjustments to the financial statements will arise from the unaudited years.

LEASE COMMITMENTS

The Company incurred expenses of $1,471,485 in 1995 and $1,160,703 in 1994
under operating leases. It is obligated for future minimum rental payments
under leases for office space and telecommunications equipment as follows:

YEARS ENDED DECEMBER 31, AMOUNT
----------------------------------------------
<S> <C>
1996 $ 1,464,688
1997 1,462,934
1998 660,898
1999 222,978
2000 186,307
Thereafter 217,604
----------------------------------------------

Total $ 4,215,409
----------------------------------------------
</TABLE>

The Company recorded rental income of $426,166 in 1995 and $401,982 in
1994, under sublease agreements, which is offset against rent expense in the
accompanying financial statements. Future minimum receipts under sublease
agreements are as follows:

YEARS ENDED DECEMBER 31, AMOUNT
----------------------------------------------
<S> <C>
1996 $ 483,860
1997 410,043
1998 45,320
----------------------------------------------

Total $ 939,223
----------------------------------------------
</TABLE>

RELATED PARTY TRANSACTIONS

STOCK REDEMPTION AGREEMENTS

In August 1978, the Company, with stockholders' approval, entered into
agreements, which were restated on January 15, 1996, with two officer-
stockholders who beneficially own 45.5% of the outstanding common stock. Under
the agreement, upon their deaths, the Company may be required to redeem from
their estates the number of shares of the Company's stock necessary to pay
estate taxes and administrative expenses of the estate, if any, up to
$5,000,000. Shares would be redeemed at the then-current market price. The
Company is the beneficiary to an insurance policy on the lives of the two
officer-stockholders, which the Company maintains to provide benefits of
$5,000,000 for this agreement.

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DEFERRED COMPENSATION AND CONSULTING AGREEMENTS

The Company has entered into agreements with two officer-stockholders, who
beneficially own 45.5% of the outstanding common stock, whereby the officer-
stockholders agreed to serve as full-time employees of the Company until their
respective retirements. Under the agreements, upon retirement, the officer-
stockholders will receive deferred compensation equal to 70% of their average
annual total compensation less the assumed returns from investment of their
funded pension plans and their social security payments. The deferred
compensation plan is unfunded. During 1995 and 1994, the deferred compensation
liability was reduced by $38,000 and $55,513, respectively, as determined by
actuarial calculation. Upon completion of their employment, the officer-
stockholders also agreed to serve as consultants to the Company on a minimum
part-time, plus as-needed basis, at a specified daily rate.

OTHER

On August 16, 1995, the Company entered into a Letter of Intent with MD
Foods Ingredients amba ("MD Foods") to negotiate within 1 year an agreement to
establish and operate a joint venture that will produce and distribute
commercial quantities of the Company's patented, non-fattening sugar, Sugaree
worldwide. No assurance can be given that the Company will be able to negotiate
such an agreement under terms satisfactory to the Company. The Letter of Intent
provides for the construction and operation of a pilot plant to obtain product
development quantities of the sugar and obtain data on which to design a full-
scale plant. The pilot plant is now operating and producing small quantities of
Sugaree. Under the agreement, MD Foods will incur costs up to $550,000 for the
construction and operation of the pilot plant, costs associated with
establishing the joint venture, and other costs. MD Foods will be reimbursed
for 100% of such costs by the joint venture, if organized, or 50% by the Company
if the parties do not reach an agreement. If no agreement is reached, the
product of the effort and all the technology resides with the Company. No
amounts have been accrued by the Company to reimburse MD Foods for these costs.
The Company will be reimbursed up to $170,000 by the joint venture for certain
costs to produce limited quantities of Sugaree, costs associated with
establishing the joint venture, and certain other costs. MD Foods will
reimburse the Company for up to 50% of these costs if an agreement is not
reached. The Company has recognized a receivable of $32,000 for the recovery of
such costs. The Company and MD Foods are in the process of negotiating an
agreement. While the Letter of Intent contemplates a joint venture, the parties
also are discussing the possibility of the grant of a non-exclusive license by
the Company to MD Foods.

In November 1995, the Company received a notice of potential liability (the
"Notice") from the U.S. Environmental Protection Agency ("EPA") regarding a
small quantity of hazardous materials shipped in 1988 and 1989 to a sight owned
and operated by a company that was in the business of disposing of such
materials. The EPA is conducting an investigation of the source, the extent,
and the nature of release or threatened release of hazardous substances at this
sight. The Notice stated that the EPA has spent over $2.1 million in its
investigation and restoration activities and that the Company has a potential
liability under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, for such costs. Based on information in the Notice,
the amount of hazardous material that the Company shipped to the sight is less
than 0.2% of all such materials found at the sight. If the EPA allocates its
costs based on the amount of materials that each company shipped to the sight in
proportion to the total materials shipped to the sight, the Company's share of
the costs should be immaterial. The Company is reviewing its alternatives in
response to the Notice and believes that it has defenses against such claims,
but that, should the EPA persist and prevail, the impact on the financial
statements will be immaterial. However, no assurance can be given about the
final outcome.

8. STOCK OPTION PLAN

The Company has an Employees' Nonqualified Stock Option Plan (the "Plan"),
whereby options may be granted to officers and other key employees to purchase
up to 2,200,000 shares of common stock in amounts determined by the Board of
Directors at a price not less than 50% of the publicly quoted closing price of
the stock on the date the options are granted, and for a term not to exceed five
years from the date of grant. The Board of Directors determines the vesting
period of options granted. To date, all options granted, except for those part
of an anti-hostile takeover plan explained below, have been at the then-publicly
quoted price of the stock. Activity for the two years ending December 31, 1995,
is shown below:

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BIOSPHERICS-Registered Trademark- INCORPORATED

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OPTION PRICE
SHARES PER SHARE
------------- ----------------
<S> <C> <C>
Outstanding as of January 1, 1994 148,600 $2.25 - $8.25
Granted 1,152,500 5.75 - 7.00
Exercised (15,500) 2.25 - 4.875
Expired (83,400) 2.25 - 8.25
-------------
Outstanding as of December 31, 1994 1,202,200 2.875 - 8.25
Granted 287,500 6.625 - 10.50
Exercised (13,177) 5.75 - 8.00
Expired (12,800) 4.00 - 8.25
-------------

Outstanding as of December 31, 1995 1,463,723 5.75 - 10.50
-------------

Exerciseable as of December 31, 1995 240,973
-------------

Options available for grant as of
December 31, 1995 736,277
-------------
</TABLE>

On November 18, 1994, two officer-shareholders were each granted options to
purchase 500,000 of common stock of the Company at $2.875 per share subject to
two conditions. The options will be exercised in the event that both (i) a
third party acquires 5% or more of the issued and outstanding common stock of
the Company and (ii) the exercise is approved by the Board of Directors of the
Company. This plan was put in place not for compensatory purposes but as a
means of protecting shareholder value against unsolicited offers deemed
inadequate by the Board of Directors and to help ensure fair and equal treatment
of all shareholders.

9. EMPLOYEE BENEFIT PLANS

Effective January 1, 1990, the Company established the Biospherics
Incorporated 401(k) Retirement Plan. The plan is a discretionary defined
contribution plan and covers substantially all employees who have attained the
age of 21, have completed 1 year of service, and have worked a minimum of 1,000
hours in the past Plan or anniversary year.

Under provisions of the plan, the Company, for any plan year, has
contributed an amount equal to 50% of the participant's contribution or 2.5% of
the participant's eligible compensation, whichever is less. The Company may, at
its own discretion, make additional matching contributions to participants.
Company contributions, net of forfeitures, amounted to $58,662 in 1995 and
$66,634 in 1994.

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10. INFORMATION BY BUSINESS SEGMENT

Financial information by business segment for the two years ended December
31, 1995 is summarized below.
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,
(Dollars in thousands)
1995 1994
------------ ------------
<S> <C> <C> <C>
REVENUES Information Services Division $ 13,715 $ 13,476
R&D Unit 25 35
------------ ------------
Total revenues $ 13,740 $ 13,511
------------ ------------

OPERATING PROFIT AND Information Services Division $ 1,006 $ 440
INCOME BEFORE R&D Unit (583) (624)
------------ ------------
INCOME TAXES Total operating profit 423 (184)
Other income 330 13
Interest expense 212 122
------------ ------------
Income (loss) from continuing operations
before income taxes $ 541 $ (293)
------------ ------------

IDENTIFIABLE ASSETS Information Services Division $ 3,168 $ 3,614
R&D Unit 174 131
General corporate assets 1,181 948
Discontinued operations 711 1,479
------------ ------------

Total assets $ 5,234 $ 6,172
------------ ------------

CAPITAL Information Services Division $ 382 $ 401
EXPENDITURES R&D Unit 17 8
General corporate assets 67 172
Discontinued operations 3 88
------------ ------------
Total assets $ 469 $ 669
------------ ------------

DEPRECIATION Information Services Division $ 292 $ 258
AND AMORTIZATION R&D Unit 27 21
General corporate assets 56 85
Discontinued operations 46 -
------------ ------------
Total depreciation and amortization $ 421 $ 364
------------ ------------
</TABLE>

The Information Services Division (ISD) provides computerized medical data
collection and clinical trial management, report and publication writing and
editing, development of programmatic concepts in public health information and
education, database management, and computer-assisted health resource
information. During 1995, commercial and government business accounted for
approximately 54% and 46%, respectively, of ISD's business compared with 46% and
54%, respectively, in 1994. During 1995, the Company recognized revenue from
two of its commercial customers of $3,185,911 and $1,407,626 representing 23%
and 10%, respectively, of total revenues from continuing operations. In 1994,
the Company recognized revenue from one of these customers of $3,938,382 or 29%
of total revenues from continuing operations in 1994.

The R&D Unit has invented and patented for the Company the use of D-tagatose
and L-sugars as low-calorie sweeteners and has invented and patented safe-for-
humans pesticides. The Company also has filed for patents on other inventions.

Operating profit consists of revenue less operating expenses. In computing
operating profit, general corporate and selling expenses, research and
development, interest expense, and income taxes were not deducted. As a result
of the sale of ELSD, G&A expenses of $354,869 and $17,013 in 1995 that would
have been absorbed by ELSD, have been allocated to ISD and R&D, respectively;
and G&A expenses of $325,384 and $16,491 in 1994, previously absorbed by ELSD,
have been allocated to ISD and R&D, respectively.

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Identifiable assets by business segment are those assets used in the
Company's operations in each segment, such as accounts receivable, inventories,
fixed assets, and patent costs. Corporate assets are principally cash and
certain other assets not related to a particular segment's operations.

11. SUBSEQUENT EVENT

On February 22, 1996, the Company settled a claim against the U.S.
Department of Agriculture relating to the startup and early operation of the
Forest Service Contract. The claim, which originally was filed in late 1994,
was amended in 1995 to include certain additional costs. This settlement was
recorded as other income in the Statement of Operations included herein and
increased pre-tax income from continuing operations by $335,000 in 1995. The
full amount due to the Company as a result of the claim is expected to be
received in March 1996.

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REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
BIOSPHERICS INCORPORATED

We have audited the financial statements of Biospherics Incorporated as of
and for the year ended December 31, 1995 listed in Item 7 of this Form 10-KSB.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Biospherics Incorporated as
of December 31, 1995 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.

Rockville, Maryland
February 28, 1996 COOPERS & LYBRAND L.L.P.

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REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS,
BIOSPHERICS INCORPORATED

We have audited the financial statements of Biospherics Incorporated for
the year ended December 31, 1994, listed in Item 7 of this Form 10-KSB. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Biospherics Incorporated for the year ended December 31, 1994, in conformity
with generally accepted accounting principles.

Bethesda, Maryland Rubino & McGeehin, Chartered
March 2, 1995 Certified Public Accountants

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ATTACHMENT A

CERTIFICATE OF AMENDMENT

Biospherics Incorporated, a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), by virtue of a Certificate
of Incorporation filed with the Secretary of State of Delaware on May 1, 1992,
does hereby certify that:

FIRST: The charter of the Corporation is hereby amended by deleting the
first paragraph in Article FOURTH in its entirety and by substituting in lieu
thereof the following:

The total number of shares of stock that the corporation has authority
to issue is twenty million (20,000,000) shares, eighteen million
(18,000,000) of which shall be Common Stocks of the par value of one
half cent ($0.005) per share, and two million of which shall be
Preferred Stock of the par value of one cent ($0.01) per share.

SECOND: At the time this Certificate of Amendment becomes effective:
(i) each share of Common Stock of the Corporation of the par value of $0.01 that
is issued and outstanding shall be automatically changed and converted into two
shares of Common Stock of the par value of $0.005; (ii) each Certificate
representing shares of Common Stock of the par value of $0.01 shall continue,
without the necessity of presenting the same for exchange, to represent
thereafter the same number of shares of Common Stock of the par value of $0.005;
and (iii) each holder of shares of Common Stock of the par value of $0.01 that
is issued and outstanding at the time this Certificate of Amendment becomes
effective shall be entitled, without surrendering the certificate or
certificates representing the shares, to receive a certificate or certificates
representing one additional share of Common Stock of the par value of $0.005.

THIRD: The foregoing amendment of the Corporation's charter was duly
adopted by the Corporation's board of directors and stockholders pursuant to the
requirements of Section 242 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, BIOSPHERICS INCORPORATED has caused these presents to be
signed in its name and on its behalf by its President and its corporate seal to
be hereunder affixed and attested by its Secretary on this 15th day of May,
1996.

ATTEST: BIOSPHERICS INCORPORATED

- - - - ----------------------------------- -----------------------------------
M. Karen Levin, Secretary Gilbert V. Levin, President

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<PAGE>

BIOSPHERICS-Registered Trademark- INCORPORATED - BOARD OF DIRECTORS PROXY -
ANNUAL MEETING OF STOCKHOLDERS

Gilbert V. Levin, M. Karen Levin, and Richard Levin, or any of them,
each with power of substitution, are hereby appointed Proxies of the
undersigned to vote all shares of Common Stock of Biospherics Incorporated
owned by the undersigned at the Annual Meeting of stockholders to be held at
the Company headquarters, 12051 Indian Creek Court, Beltsville, Maryland on
May 15, 1996 at 2:00 p.m. EDT, or any adjournment thereof, upon the proposals
set forth below and, in their discretion, upon all other matters as may
properly be brought before the meeting.

<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) / / TO VOTE FOR ALL NOMINEES LISTED BELOW / /

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.

L.V. BALDWIN, D.A. BLAKE, A.B. CLEVELAND, R.L. COLWELL, G.S. JENKINS, G.V. LEVIN, M.K. LEVIN, A.S. MACLEOD

2. PROPOSAL TO EFFECT A TWO-FOR-ONE STOCK SPLIT.

/ / FOR / / AGAINST / / ABSTAIN

3. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND LLP as the independent accountants of the Corporation for the fiscal
year ending December 31, 1996.

/ / FOR / / AGAINST / / ABSTAIN
</TABLE>

This proxy will be voted as specified hereon. If no indication to the
contrary is made hereon, this proxy will be voted FOR all nominees for
Directors listed in Proposal 1 and FOR Proposals 2 and 3. BIOSPHERICS'
DIRECTORS RECOMMEND A FOR VOTE ON EACH ITEM, AND SHARES WILL BE SO VOTED
UNLESS OTHERWISE INDICATED.

/ / I plan to attend the Annual Meeting in Beltsville, MD, at 2:00 p.m. on
May 15, 1996.

_________________________________________________ _________________________ ________________________
PLEASE SIGN HERE AND RETURN PROMPTLY PLEASE PRINT YOUR NAME NUMBER OF SHARES VOTED
(IF SIGNING AS ATTORNEY, ADMINISTRATOR, EXECUTOR,
GUARDIAN, OR TRUSTEE, PLEASE ADD YOUR TITLE AS SUCH.) DATED _____________, 1996
</TABLE>