BIOCONTROL TECHNOLOGY INC, S-1/A, 1998-10-02

BIOCONTROL TECHNOLOGY INC
S-1/A, 1998-10-02
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

Previous: AFL CIO HOUSING INVESTMENT TRUST, N-30B-2, 1998-10-02

Next: BIOCONTROL TECHNOLOGY INC, S-3/A, 1998-10-02

As filed with the Securities and Exchange Commission on October 2,
1998
Registration No. 333-63193

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT ON FORM S-3 ON
FORM S-1
under
THE SECURITIES ACT OF 1933
BIOCONTROL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Pennsylvania 3841 25-1229323
(State or other Primary Standard (I.R.S. Employer
jurisdiction of (Industrial Classification Identification
incorporation or Code Number) Number)
organization)

300 Indian Springs Road
Indiana, Pennsylvania 15701 (412) 349-1811
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices and principal
place of business)
___________________________________________
Fred E. Cooper, Chief Executive Officer
Biocontrol Technology, Inc.
2275 Swallow Hill Road, Building 2500, Pittsburgh, Pennsylvania
15220
(412)429-0673
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________________________________________
Copy to:
M. Kathryn Sweeney, Esq.
Sweeney & Associates P.C.
7300 Penn Avenue, Pittsburgh, Pennsylvania 15208
_____________________________________________________
Approximate date of commencement of proposed sale to the public:
As soon as possible after this registration statement becomes
effective.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securiies Act of 1933 check the following box. [X]
<TABLE>
================================================================================
<CAPTION> | | | |
Title of Each Class | Amount to be | Proposed Maximum| Proposed Maximum | Amount of
of Securities to be | Registered | Offering Price | Aggregate Offering| Registration Fee
Registered | | Per Share | Price |
| | | |
<S> | <C> | <C> | <C> | <C>
Common Stock | 200,000,000(1) | $0.10(2) | $20,000,000 | $3,448.00 (3)
__________________ |________________|_________________|____________________|_________________
Total 200,000,000 | | $20,000,000 | $3,448.00
Total Registration Fee | | | (3) $3,868.46
===============================================================================================
</TABLE>

TOTAL OF SEPARATELY NUMBERED PAGES 79 EXHIBIT INDEX ON SEQUENTIALLY
NUMBERED PAGE 72

<PAGE>

(1) Primary shares to be offered by the Registrant.
(2) Estimated solely for purposes of calculating the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, as
amended, and based on the average of the high and low sales
prices of the common stock of Registrant on the NASDAQ Small-
Cap Market reported on September __, 1998.
(3) The proper calculation and filing fee for 100,000,000 shares
was included in the initial filing of this Registration
Statement on Form S-3 on September __, 1998. Therefore, only
the filing fee for 100,000,000 shares will be submitted with
this filing.
_____________________

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

_____________________

<PAGE> ii

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

SUBJECT TO COMPLETION DATED October 2, 1998

PRELIMINARY PROSPECTUS

BIOCONTROL TECHNOLOGY, INC.
Common Stock

THE SALE OF 200,000,000 SHARES OF AUTHORIZED BUT UNISSUED SHARES
OF COMMON STOCK BY THE COMPANY.
______________________________________

The Prospectus filed with this Registration relates to an
offering of the following: up to 200,000,000 shares of common
stock (the "Common Stock"), of Biocontrol Technology, Inc. (the
"Company" or "BICO"). The Common Stock is authorized but
unissued common stock to be sold directly by the Company.

The Company's common stock is traded on the Nasdaq Small-Cap
Market under the trading symbol "BICO" and is also reported under
the symbol "BIOCNTRL TEC"; however, the trading site of the Common
Stock is subject to change (SEE, Risk Factors - Market for Common
Stock).

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS SPECIFIED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 2 OF THIS PROSPECTUS.

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

THE DATE OF THIS PRELIMINARY PROSPECTUS IS OCTOBER 2, 1998

<PAGE>
[INSIDE FRONT COVER]

AVAILABLE INFORMATION

The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other
information concerning the Company can be inspected and copied at
the Public Reference Room of the Commission, 450 Fifth Street,
N.W., Washington, D.C. and at the Commission's regional offices
including those located at 601 Walnut Street, Curtis Center, Suite
1005E, Philadelphia, PA 19106-34322; and 75 Park Place, New York,
NY. Copies of this material may also be obtained from the Public
Reference section of the Commission, 450 Fifth Street, N.W.
Washington, D.C. 20549, at prescribed rates. The Company's common
stock is traded on the NASDAQ Small Cap Market ("NASDAQ"). In
accordance with 1934 Act requirements, the Company files reports,
proxy statements and other information with NASDAQ. Such reports,
proxy statements and other information concerning the Company can
be inspected at NASDAQ's offices located at 1735 K Street N.W.,
Washington D.C., 20006. This Prospectus omits certain information
contained in the Registration Statement and the exhibits relating
thereto which the Registrant has filed with the Securities and
Exchange Commission, under the Securities Act of 1933 (the "1933
Act"), and to which reference is made for additional information.
Descriptions concerning the provisions of any document are
qualified in their entirety by reference to the full text of such
document as filed with the Commission as an exhibit to the
Registration Statement.

Until the Company files a post-effective amendment to this
Prospectus indicating that all securities hereunder have been
sold, or de-registering all such securities which remain unsold,
all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act shall be
deemed incorporated herein by reference and shall become a part
hereof from the date such documents are filed.

Until 90 days after the effective date of this Prospectus,
all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.

<PAGE> ii

SUMMARY INFORMATION

The following summary information is qualified in its
entirety by the more detailed information, including the Company's
financial statements and notes thereto, which are set forth in
this Prospectus. The Company is primarily engaged in the research
and development of biomedical and bioremediation products.
Although the Company does manufacture products on a contractual
basis, and has manufactured bioremediation products, the Company
currently has no material manufacturing and sales operations. All
prospective investors should carefully review the entire
prospectus when considering an investment in the Company,
especially the information in the section captioned "Risk
Factors".

The Company

Biocontrol Technology, Inc. was incorporated in the
Commonwealth of Pennsylvania in 1972 as Coratomic, Inc. and it is
referred to herein as "BICO" or the "Company". BICO's operations
are located at 300 Indian Springs Road, Indiana, Pennsylvania,
15701, telephone number (412)349-1811 and its administrative
offices are located at 2275 Swallow Hill Road, Pittsburgh,
Pennsylvania, 15220, telephone number (412)429-0673.

The primary business of the Company is the development of new
devices which include models of a noninvasive glucose sensor (the
"Noninvasive Glucose Sensor"), an implantable port for drug
delivery and hemodialysis use, a polyurethane heart valve,
procedures relating to the use of whole-body extracorporeal
hyperthermia in the treatment of cancer and the human
immunodeficiency virus ("HIV"), and bioremediation products.

Forward-Looking Statements

From time to time, the Company may publish forward-looking
statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new
products, research and development activities, the regulatory
approval process, specifically in connection with the FDA
marketing approval process, and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. In order to comply with the terms
of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results to differ materially from
the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties
that may affect the operations, performance, research and
development and results of the Company's business include the
following: additional delays in the research, development and FDA
marketing approval of the Noninvasive Glucose Sensor; delays in
the manufacture or marketing of the Company's other products and
medical devices; the Company's future capital needs and the
uncertainty of additional funding; BICO's uncertainty of
additional funding; competition and the risk that the Noninvasive
Glucose Sensor or its other products may become obsolete; the
Company's continued operating losses, negative net worth and
uncertainty of future profitability; potential conflicts of
interest; the status and risk to the Company's patents, trademarks
and licenses; the uncertainty of third-party payor reimbursement
for the Sensor and other medical devices and the general
uncertainty of the health care industry; the Company's limited
sales, marketing and manufacturing experience; the amount of time
or funds required to complete or continue any of the Company's
various products or projects; the attraction and retention of key
employees; the risk of product liability; the uncertain outcome
and consequences of the lawsuits pending against the Company; the
ability of the Company to maintain a national listing for its
common stock; and the dilution of the Company's common stock.

The Offering

Securities Offered: 200,000,000 of the Company's authorized but
unissued common stock

Use of Proceeds: Proceeds from the Offering are intended
to be applied to the working capital needs of the Company and
its subsidiaries, including general and administrative
expenses; for the marketing of its products, including its
<PAGE>1

noninvasive glucose sensor, which is being marketed outside
the United States, and for the ongoing research and
development of its products. The Common Stock is being
offered on a continuous, best-efforts basis, and the Company
will not establish an escrow, trust or similar account. The
proceeds of this Offering will be held in the Company's
corporate accounts (SEE, "Use of Proceeds").

Risk Factors: This is an Offering of securities which
involves a high degree of risk. Investors must be
accept the risk of the entire loss of their investment
(SEE, "Risk Factors ").

RISK FACTORS

An investment in the Company's securities is highly specula
tive and should not be made by any investor who cannot afford the
loss of the entire investment. In addition to the other
information in the Prospectus, the following risk factors should
be considered carefully in evaluating an investment in the shares
offered hereby.

1. Continuing and Future Losses and Cash Flow. The Company
has experienced and continues to experience operating losses due
to the costs of its research and development activities and the
absence of commercially successful products. Without the
development of commercially viable products, such losses will
continue. If the products currently under development are not
fully developed, or do not generate sufficient revenues once
developed, the Company will continue to suffer losses. The
Company will not be able to continue its operations for an
indefinite period of time if such losses continue. It is
uncertain at this time whether the Company will achieve
profitability in the future. In the event that the Company is
unable to complete the development of, receive the necessary U. S.
Food and Drug Administration ("FDA") approval for, or successfully
market the Noninvasive Glucose Sensor as planned, the Company will
incur significant losses and its ability to continue its
operations will be jeopardized. The Company's net losses were
($29,420,345) in 1995; ($22,395,702) in 1996; and ($24,154,324) in
1997. The Company's net losses for the first two quarters of 1998
were ($10,213,319). The Company's accumulated deficit aggregated
($112,770,383) as of December 31, 1997, and ($122,983,702) as of
June 30, 1998. The Company estimates that it has the capacity,
using available cash resources, including funds it reasonably
expects to be raised by BICO or its affiliates, to fund BICO's
operations through at least December 31, 1998; however, absent
additional funding, the Company will have limited liquidity on a
long-term basis. There can be no assurances whether the amount
and timing of the receipt of net proceeds from any future
securities Offering, or additional financing from third parties,
will be sufficient to fund the Company's operations. (SEE, Form
10-K, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS").

2. "Going Concern" Condition of Independent Auditors'
Report. The Report of the Company's independent auditors includes
an emphasis paragraph relating to the Company's ability to
continue as a going concern based primarily upon its continuing
losses, limited cash flow and lack of revenues.

3. Uncertainty of Additional Funding Required to Meet
Future Capital Needs. There are no assurances that the Company
will receive any proceeds from this Offering, and the maximum
proceeds received will be limited to funds received from the sale
of the 100,000,000 Primary Shares. Such funds will not be
sufficient, however, to complete all proposed research and
development or manufacturing start-up projects; although the
Company does have sufficient capital to meet its short-term needs,
the Company currently does not possess sufficient capital to meet
all of its future capital needs (SEE, Form 10-K, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS").

The Company will require additional capital in order to
complete its Noninvasive Glucose Sensor, heart valve, hyperthermia
<PAGE> 2

treatment and bioremediation projects. The Company anticipates
that its other sources of capital may include additional sales of
stock, (SEE, Form 10-K, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS"), private domestic
and offshore placements of its securities, bank financing or joint
ventures with other biomedical companies or venture capital firms.
There can be no assurances that the Company will be able to raise
capital in a manner which meets its timing requirements, or on
terms which are favorable or acceptable to the Company. Should
the Company meet its future capital needs via additional sales of
stock, further dilution of existing shareholders' equity and
voting power will result. Although the Company and its affiliates
have a history of successful capital-raising efforts, there can be
no assurance that it will be successful in meeting its future
capital needs.

4. Uncertainty of Product Development and Lack of Revenues.
Research and development of new products involves a high degree of
financial risk and experimentation. The Company's development
projects involve the application of novel theories, unproven
technology and new engineering. The Company's products are at
various stages of development. In 1998, the Company received the
CE Mark which has enabled it to begin selling its Noninvasive
Glucose Sensor in Europe. In February 1996, the FDA's Panel
Review recommended that the Company conduct additional clinical
trials prior to the granting of marketing approval for the
Diasensor 1000 . In March 1998, the Company acquired a majority
interest in a company which produces metal-coating products, and
the Company has started marketing these products through joint
ventures and other distribution agreements. The bioremediation
products have been developed for various uses in water and on hard
surfaces; as to which manufacturing and sales have begun. The
functional electrical stimulators are currently being manufactured
pursuant to contracts. The hyperthermia project has received FDA
approval to conduct additional clinical trials, and if such trials
are successful, an FDA application for marketing the technology
will be filed. The Coraflex, Inc. ("Coraflexr") heart valve and
other implantable devices are in various stages of preliminary
development. There can be no assurance that new products
currently under development by the Company ultimately will be
developed, and if developed, there can be no assurance that such
new products will be commercially viable (SEE, Form 10-K,
"BUSINESS").

5. Competition. The Company and its affiliates are
currently focusing their efforts on developing biomedical devices
including Noninvasive Glucose Sensors, heart valves and
hyperthermia treatment procedures. In addition, the Company's
majority-owned affiliate ICTI, Inc. has developed metal-coating
products, and its subsidiary, Petrol Rem, Inc. ("Petrol Rem"), has
developed bioremediation products. Other research groups and
companies are also researching and developing such technologies,
devices and procedures. Those companies may be further along in
their research and development, may be better capitalized, may
have more sophisticated equipment and expertise and may have
various other competitive advantages over the Company. Such other
companies may be able to bring their products to market before the
Company, which could have a substantial negative impact on the
Company's plans with respect to developing technologies and future
business prospects.

Although its features are different, the Company's
Noninvasive Glucose Sensor, if successfully developed, will
compete with existing invasive glucose sensors which have an
established market with diabetics. In addition, the Company is
aware that other companies are developing noninvasive glucose
sensors, although the Company has very limited knowledge of the
status of other development projects, it is not aware of any other
company which has filed for FDA approval of its device. The
Company's metal-coating and bioremediation products will compete
with other groups and companies in their respective fields, many
of which are very large and well-established. The Company's
other products and procedures, which are still in early stages of
development, will also face similar competition if they are
successfully developed and brought to market (SEE, Form 10-K,
"Competition").

6. Noninvasive Glucose Sensor Manufacturing Obligation.
Pursuant to a Manufacturing Agreement with Diasense, Inc.
("Diasense"), the Company is obligated to manufacture the
Noninvasive Glucose Sensors if they are approved for marketing by
the FDA. The Company has leased manufacturing space in Indiana,
Pennsylvania, and has undertaken to complete substantial
renovations to make the space usable as its manufacturing
facility. The Company has the right, pursuant to the
Manufacturing Agreement, to enlist subcontractors, which the
Company believes will be capable, if necessary, of meeting its
manufacturing obligations until the facility is renovated.
Although the Company has previous manufacturing experience, it has
no experience in manufacturing large commercial quantities and its
current manufacturing activities are limited to the FES and
bioremediation projects.

7. Price of Noninvasive Glucose Sensor and Uncertainty of
Third Party Reimbursement. The Company currently estimates that
the price of the Diasensor 1000 model of the Noninvasive Glucose
Sensor will be substantially in excess of currently available
invasive technology. Such price may be set at a level which would
limit its sales absent third-party reimbursement. The Company is
<PAGE> 3

unable to make projections regarding the availability of or
procedures required in order to obtain such third-party
reimbursement. Given the uncertainty of the state of the health
care industry, the risk exists that the sales potential for the
Noninvasive Glucose Sensor would be severely limited in the
absence of such reimbursement (SEE, Form 10-K, "Current Status of
the Noninvasive Glucose Sensor").

8. Dependence on Key Officers. BICO is presently dependent
upon the experience and ability of the following persons: David
L. Purdy, its President, Treasurer and Chairman of the Board; and
Fred E. Cooper, its Chief Executive Officer, Executive Vice
President and a director. BICO has key-man life insurance on both
Mr. Purdy and Mr. Cooper.

9. Dependence on Independent Contractors. In experimenting
with and developing new technologies, devices and engineering, the
Company and its affiliates rely upon independent contractors who
may not devote full-time efforts to the development of the
Company's projects. Moreover, the Company's abilities to develop
new products depend, in part, upon the evaluation, coordination
and supervision of such independent contractors in areas where the
Company may not possess particular expertise.

10. Technological Obsolescence. The medical device industry
is subject to rapid technological innovation. While the Company's
management is not aware of any new or anticipated technology which
would make its new products under development obsolete, it is
always possible that future technological developments could make
the Company's products significantly less competitive or even
obsolete.

11. Dependence on Component Suppliers. The Company's
projects may involve the fabrication of custom, novel or unique
component parts for use in experimentation, testing and
development of new devices. Suppliers of such components may not
be readily available, or available at all, which may require the
Company to create such components in-house. Delays in obtaining
components can cause delays in the development process. An
inability to obtain or fabricate components can cause a total
failure of the development process. Although the Company attempts
to minimize the reliance on custom components in designing the
devices, unforeseeable problems may arise in the Company's
development processes for which no resolution may be available.

12. Government Regulation and Approval. BICO's and its
affiliates' operations, medical devices and certain other projects
are subject to regulation by the FDA, the Federal Nuclear
Regulatory Commission (the "NRC"), the Environmental Protection
Agency (the "EPA") and other federal and state regulatory
agencies. There exists the possibility that FDA and other
regulatory approval may not be obtained for a given product. FDA
approval is required prior to the marketing of the Noninvasive
Glucose Sensor in the United States. The Company has received the
CE Mark, which has enabled it to begin selling its Noninvasive
Glucose Sensor in Europe; other foreign countries have their own
regulatory requirements. The FDA review of the Company's 510(k)
Notification has resulted in delays, and no assurance can be given
that approval will ultimately be received. If the FDA does not
approve the 510(k) Notification, the Company will be required to
comply with the FDA's pre-market approval process, which is
substantially more time-consuming and expensive. In that event,
the Company would require additional capital to meet such
expenses, and to support its operations until the Noninvasive
Glucose Sensor can be marketed (SEE, Form 10-K, "BUSINESS").

The EPA, through the National Environmental Technology
Applications Corporation ("NETAC"), conducted the testing of the
Company's bioremediation PRP product. The EPA monitors the use of
bioremediation products, and there can be no assurances that EPA
procedures will not delay the use of or cause modifications to any
given product (SEE, Form 10-K, "BUSINESS").
<PAGE> 4

13. Patents and Proprietary Rights. The Company holds
patents on some of its products, as well as trademarks on the
names of some of its products and procedures. In addition,
Diasense holds patents, and has patent applications pending on the
Noninvasive Glucose Sensor. Both BICO and Diasense may undertake
to file additional patent applications in the United States and in
foreign countries. Neither BICO nor Diasense can provide
assurances that future patents will be granted, that any patent
held or pending will not be challenged or circumvented by a
competitor or other entity, or that any patent contest will result
in a favorable outcome. If any of the Company's or Diasense's
patents are successfully challenged, or if future patents are not
granted, or if BICO or Diasense is found to have infringed upon
another company's patent, it would result in substantial costs and
delays in the Company's product development, and would otherwise
result in materially adverse consequences.

14. Risk of Product Liability Claims. The Company is
engaged in activities which include the testing and selling of
biomedical devices. These activities expose the Company to
potential product liability claims. The Company and its
subsidiaries carry an aggregate amount of $500,000 in product
liability insurance. In the event that a successful claim in
excess of that amount is brought against the Company, the Company
may be liable for the excess.

15. Liability Arising From Warranties. BICO has warranted
its conventional pacemakers against defects in materials and
workmanship for periods presently ranging from six to ten years
from implantation, and warrants its isotopic pacemaker for twenty
years. The Company is subject to liability in the event that
warranted pacemakers function improperly. The Company
discontinued its pacemaker operations in 1988; therefore only
pacemakers implanted prior to that time are subject to such
warranties.

16. No Common Stock Dividends. The Company has not paid
cash dividends on its common stock since its inception and cash
dividends are not presently contemplated at any time in the
foreseeable future.

17. Conflicts of Interest. David L. Purdy and Fred E.
Cooper are employed by BICO, and are also officers and/or
directors of Diasense, a 52%-owned affiliate of BICO which owns
the patents and marketing rights to the Noninvasive Glucose
Sensor. Messrs. Purdy, Cooper, Anthony J. Feola and Glenn
Keeling are also officers and/or directors of BICO and its other
subsidiaries, Coraflex, Petrol Rem, Barnacle Ban Corporation
("Barnacle Ban"), and IDT, Inc. ("IDT"). Accordingly, management
will not only be subject to competing demands, but may face
conflicts of interest. Therefore, the good faith and integrity of
management in all transactions with respect to all of the
companies and their businesses are of utmost importance (SEE, Form
10-K, "Certain Relationships and Related Transactions").

18. Attraction and Retention of Key Personnel. The
Company's ability to develop commercially viable products and to
maintain a competitive position in a business environment
characterized by intense competition and technological development
depends upon, among other factors, its ability to attract and
retain skilled scientific, engineering, management, sales and
marketing personnel. Competition for the services of such
personnel is intense, and there can be no assurance that the
Company will be able to attract or retain the personnel necessary
for the Company's success. The loss by the Company of the
services of any of its key personnel could have a material adverse
impact on the business and prospects of the Company. The Company
currently does not have key-man life insurance for any of its
employees, other than Mr. Purdy and Mr. Cooper.

19. Prior Public Market; Listing on Nasdaq, Possible
Volatility of Stock Price. The Company's common stock has been
traded publicly since December 1982 and has had a limited number
of market makers. The trading volume on the Nasdaq Small-Cap
Market averaged 6,604,778 shares per week during the twelve
months prior to September 1998. There can be no assurances that a
more active or established trading market for the Company's common
stock will develop, or if developed, that it will be maintained.
The trading price of the Company's common stock could fluctuate
significantly in response to variations in quarterly operating
results and many other factors. In 1998, the Nasdaq Small-Cap
market instituted new requirements for listing, which include a
minimum price of $1.00 per share. The Company's common stock has
been trading at a price substantially lower than $1.00 per share;
if the stock price does not rise above the minimum requirement,
the Company's stock may be no longer be eligible for trading on
the Nasdaq Small-Cap market. The Company has received approval
from its shareholders to conduct a reverse stock split of up to
<PAGE> 5

one for twenty; however, there can be no assurances that even if
the reverse stock split is conducted, that the price per share
will increase, or that it will increase enough to maintain its
listing on the Nasdaq Small-Cap Market. If delisted from Nasdaq,
the Company would seek listing on the Electronic Bulletin Board;
there can be no assurances that the Company would be listed on
another trading market, and the risk exists that, once delisted
from Nasdaq, the Company's trading volume and price would decline.

19. Dilution. The Resale Shares sold pursuant to this
Offering may bear selling prices which are significantly higher
than the common stock's book value per share. Dilution represents
the difference between the amount per share paid by purchasers
pursuant to this Offering and the book value of the common stock,
which may be substantial (SEE, "DILUTION").

USE OF PROCEEDS

The Primary Shares in this Offering are being sold on a
continuous, best-efforts, no minimum basis. There are no
assurances that the Company will receive any proceeds from this
Offering. All proceeds will be immediately retained by the
Company regardless of how few shares are sold. There can be no
assurance that sufficient funds will be received through this
Offering to provide for the satisfaction of any aspect of the
financial requirements of the Company or of the Use of Proceeds
set forth below (SEE "RISK FACTORS").

Any proceeds received by BICO pursuant to this Offering will
be used by BICO both to continue the development of the
Noninvasive Glucose Sensor, including the completion of its
manufacturing facility and for inventory build-up, and to satisfy
general working capital requirements, if sufficient. If less
than all of the Primary Shares are sold, the Company will use the
net proceeds actually received, first for salaries of employees,
general and administrative, and legal expenses. The rate of
progress of the development of the Noninvasive Glucose Sensor, the
timing of the regulatory approval process and the availability of
alternative methods of financing will influence the allocation of
the Company's use of the net proceeds actually received from the
Offering among the uses described herein. The maximum gross
proceeds to be received by BICO from the sale of the 200,000,000
Primary Shares, assuming a price per Primary Share of $0.08, would
be $16,000,000, before deducting expenses payable by BICO
estimated at approximately $32,000, which excludes commissions.

Depending upon the actual price per Share at which BICO sells
the Primary Shares, the number of Primary Shares sold and the
timing of any such sales, BICO may not have sufficient funds
available at any given time to fund both the development of the
Noninvasive Glucose Sensor and to satisfy its general working
capital requirements. If the net proceeds of this Offering are
insufficient at any given time, BICO will be required to seek
additional financing from third parties at such time until
additional proceeds from the Offering are obtained, if at all. No
assurance can be given that such additional financing will be
available when needed or available on terms acceptable to BICO.
If such additional financing is unavailable or continues to be
insufficient, BICO would be required to cease operations and the
development of the Noninvasive Glucose Sensor altogether (SEE,
"RISK FACTORS").

In connection with the sale of the Primary Shares offered
hereby, the Company may utilize brokers, dealers, or market-
makers, who may receive compensation in the form of commissions
from the Company (SEE, "PLAN OF DISTRIBUTION").

DIVIDEND POLICY

The Company has not paid cash dividends on its common stock
or its preferred stock since its inception, and cash dividends are
not presently contemplated at any time in the foreseeable future.
In accordance with the Company's Articles of Incorporation, cash
dividends are restricted under certain circumstances.
<PAGE> 6

DILUTION

As of June 30, 1998, the Company's common stock had a
negative net tangible book value of ($737,528) or ($.002) per
share based upon 316,226,240 shares outstanding. Net tangible
book value per share is determined by dividing the number of
shares of common stock outstanding into the Company's total
tangible assets less total liabilities, minority interest and
preferred stock.

The negative net tangible book value of BICO as of June 30,
1998, was ($737,528). Net tangible book value consists of the net
tangible assets of BICO (total assets less total liabilities,
intangible assets, minority interest and preferred stock). As of
June 30, 1998 there were 316,226,240 shares of BICO's common stock
outstanding. Therefore, the negative net tangible book value of
BICO's common stock as of that date was ($.002) per share.

In the event that all 200,000,000 Primary Shares of Common
Stock offered pursuant to this Prospectus are sold at a price of
$0.08 per share, the net tangible book value of the Common Stock
as of June 30, 1998 would be $15,230,472 or approximately $.029
per share. These figures give effect to the deduction of all of
the estimated expenses, including filing, printing, legal,
accounting, transfer agent and other fees, and excluding
commissions. The net tangible book value of each share will have
increased by approximately $.031 per share to the present
stockholders, and decreased by approximately $.051 per share to
the investors, if the maximum offering is sold.

Dilution represents the difference between the Offering Price
and the net tangible book value per share immediately after the
completion of the Offering. Dilution arises mainly from the
arbitrary decision by BICO as to the Offering Price per share.
Dilution of the value of the shares purchased by the investors in
this Offering will also be due, in part, to the far lower book
value of the shares presently outstanding, and in part, to
expenses incurred in connection with the Offering. In the table
set forth below, no attempt was made to determine the dilutive
effect of the exercise of outstanding warrants or options. The
following table illustrates this dilution, rounding off such
dilution to the nearest thousandth of a cent:

ASSUMING: 100%-200,000,000 50% -100,000,000 10% - 50,000,000
SHARES / SOLD SHARES / SOLD SHARES / SOLD

Offering Price Per Share $0.080 $0.080 $0.080

Net Tangible Book Value
Per Share Before Offering ($.002) ($.002) ($.002)

Increase Per Share
Attributable to Payment
by Investors $.031 $.019 $ .010

Net Tangible Book Value
Per Share After Offering $.029 $ .017 $.008

Dilution Per Share to
Investors $ 0.051 $0.063 $ 0.070

<PAGE> 7
CAPITALIZATION

The following table sets forth the capitalization of the
Company as of and December 31, 1997 and June 30, 1998. The
December 31, 1997 figures were taken from the audited financial
statements for the year ended December 31, 1997, which included a
qualification regarding the Company's ability to continue as a
going concern. The June 30, 1998 figures were taken from the
unaudited financial statements for the six months ended June 30,
1998.

(1) (1)
December 31, 1997 June 30,
1998
Shareholders' Equity:

Common Stock, par value $.10 per share;
authorized 600,000,000 shares; shares
issued and outstanding: 138,583,978 at
December 31, 1997 and 316,226,240
at June 30, 1998 $13,858,398 $31,662,624
Additional Paid-in Capital 97,004,067 89,496,568
Note Receivable issued for common stk (25,000) (25,000)
Warrants 6,396,994 6,396,994
Accumulated Deficit (112,770,383) (122,983,702)

Total Capitalization $4,464,076 $4,507,484

December 31, 1997 June 30, 1998
(1) Does not include the effects of the
following:

Outstanding Warrants to purchase
common stock granted by the
Company, at exercise prices ranging
from $.25 to $4.03 per share,
expiring 1998 through 2003. 5,346,662 5,346,662

Note: In June 1998, the Company's authorized common stock was
increased from 300,000,000 to 600,000,000 shares pursuant to a
vote of the shareholders; in addition, the shareholders also
authorized the directors of the Company to conduct a reverse stock
split of up to one for twenty.

MARKET PRICE FOR COMMON STOCK

The Company's common stock is traded on the Nasdaq Small-Cap
Market under the symbol "BICO" and is also reported under the
symbol "BIOCNTRL TEC". On September 30, 1998, the closing price
for the common stock of the Company as reported by Nasdaq was
$0.9375. Pursuant to current disclosure guidelines, the following
table sets forth the high and low sales prices for the common
stock of the Company during the calendar periods indicated,
through June 30, 1998 as reported by Nasdaq:

Calendar Year and Quarter High Low

1995 First Quarter 2.719 1.500
Second Quarter 4.689 2.375
Third Quarter 4.125 3.000
Fourth Quarter 6.438 2.688

1996 First Quarter 3.9375 1.500
Second Quarter 3.0625 1.406
Third Quarter 2.969 1.625
Fourth Quarter 2.4375 .656

1997 First Quarter 1.500 .625
Second Quarter 1.000 .3125
Third Quarter .719 .3125
Fourth Quarter .406 .0937

1998 First Quarter .500 .0937
Second Quarter .125 .0313

As of June 30, 1998, the Company had approximately 32,000
holders, including those who hold in street name, for its common
stock and no holders of record for its preferred stock.

Nasdaq has revised its requirements for companies listed on
its Small-Cap market. Such requirements, which include a minimum
trading price of $1.00, will limit the Company's option to
continue to trade on Nasdaq. The Company has received approval
from its shareholders to conduct a reverse stock split of up to
one for twenty; however, there can be no assurances that even if
the maximum authorized reverse stock split is conducted, that the
trading price will increase enough to remain on Nasdaq. Moreover,
the Company has not conducted any reverse split as of the date of
this Prospectus. In the event that the common stock is delisted
from Nasdaq, the Company will seek to have its common stock listed
on the electronic bulletin board; there can be no assurances that
such listing will occur. In addition, if the Company's common
stock is delisted from Nasdaq, the risk exists that its trading
volume and price will decrease.

SELECTED FINANCIAL DATA

The Selected Financial Data provided below is a summary of
the information set forth in the Company's unaudited financial
statements for the six months ended June 30, 1998 and the
Company's audited financial statements for the years ended
December 31, 1993 through 1998.

SIX MONTHS ENDED JUNE 30,

1998 1997

Total Assets $ 16,746,625 $13,028,582
Long-Term
Obligations $ 3,822,847 $ 2,703,383

Working Capital $ (3,835,755) $ (661,794)

Preferred Stock $ 0 $ 0

Net Sales $ 933,441 $ 515,884

TOTAL REVENUES $ 944,035 $ 590,113

Warrant
Extensions $ 1,870,000 $ 4,014,375

Benefit
(Provision)for
Income Taxes $ 0 $ 0

Net Loss $(10,213,319) $(12,265,376)

Net Loss per $( .05) $( .21)
Common Share

Cash Dividends
per share:
Preferred $ 0 $ 0
Common $ 0 $ 0

YEARS ENDED DECEMBER 31st,

1997 1996 1995 1994 1993

Total Assets $12,981,300 $14,543,991 $9,074,669 $6,375,778 $2,995,334
Long-Term
Obligations $ 2,697,099 $ 2,669,727 $ 175,330 $ 163,201 $ 104,917

Working Capital $ 888,082 $ 1,785,576 $3,188,246 $2,612,884 $1,112,541

Preferred Stock $ 0 $ 0 $ 37,900 $ 54,900 $ 54,900

Net Sales $ 1,155,907 $ 597,592 $ 461,257 $ 184,507 $ 54,000

TOTAL $ 1,426,134 $ 776,727 $ 755,991 $ 481,453 $ 134,329
REVENUES

Warrant $ 4,046,875 $ 9,175,375 $12,523,220 $ 0 $ 0
Extensions

Benefit $ 0 $ 0 $ 0 $ 0 $ 0
(Provision)for
Income Taxes

Net Loss ($24,154,324)($22,395,702)($29,420,345)($11,672,123)($ 7,855,998)

Net Loss per ($ .34)($ .53)($ .84)($ .43)($ .45)
Common Share

Cash Dividends
per share:
Preferred $ 0 $ 0 $ 0 $ 0 $ 0
Common $ 0 $ 0 $ 0 $ 0 $ 0

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is a summary of the more detailed information
set forth in the financial statements attached hereto.

Forward-Looking Statements

In addition to other sections of this report, the Management's
Discussion and Analysis section also contains the type of forward-
looking statements discussed on page one herein. Please refer to
such discussion in connection with the information presented here.

Liquidity and Capital Resources

Six Months Ended June 30, 1998

Cash decreased from $2,759,067 at December 31, 1997 to $294,535 at
June 30, 1998. This decrease was attributable to the Company's
$6,153,369 net operating expenditures which primarily related to
the research and development of the non invasive glucose sensor,
Sensor related general and administrative expenses and costs
associated with the acquisition of ICTI, Inc.. The Company also
had net cash used by investing activities of $2,672,976, which
includes equipment consolidated from ICTI, Inc. and the making of
Notes Receivable to related parties.

Furthermore, the Company had net cash provided by financing
activities of $6,361,813 of which $6,945,000 was provided from
debentures sold pursuant to regulation S. Net cash provided by
financing activities was primarily used to continue to fund the
Company's research and development projects, payments in
connection with the acquisition of ICTI, Inc. and to provide
working capital for the Company.

Year Ended December 31, 1997

Working capital was $888,082 at December 31, 1997, as compared to
$1,785,576 at December 31, 1996, and to $3,188,246 at December
31, 1995. Working Capital fluctuations are due primarily to the
varied capital-raising efforts of the Company and its affiliate
Diasense, which aggregated approximately $22,300,000 in 1997;
$21,600,000 in 1996; and $19,275,000 in 1995, as well as a
decrease in net inventory from $3,340,120 as of December 31, 1996
to $1,834,018 as of December 31, 1997.

Cash decreased from $3,802,874 at December 31, 1996 to $2,759,067
at December 31, 1997, as compared to $3,204,501 at December 31,
1995. These changes were attributable to the following factors.
The Company's sales of its securities raised funds aggregating
$22,600,000 during 1997 ; $21,600,000 during 1996 and $19,275,000
during 1995. During those periods, the Company's cash flows used
by operating activities aggregated $19,121,752; $19,972,000 and
$16,891,000, respectively. During 1997, such activities included
a $2.1 million increase in inventory reserves. In addition, the
Company recorded a $4 million charge against operations due to
warrant extensions by the Company and its subsidiary in 1997, with
similar charges of approximately $9 million in 1996 and $12.5
million charge in 1995. (See, Note J to the Financial Statements).
The Company's cash flows used by investing activities aggregated
$1.4 million in 1997 as compared to $1 million in 1996, and $2.7
million in 1995. The primary difference in such activities was
the absence of over $1 million in notes receivable which was
recorded in 1995, but not 1996 or 1997. The Company's other
assets increased by $816,000 from 1996 to 1997; such increase was
due in large part to an increase in notes receivable from related
parties (See, Note C to the Financial Statements) and a $300,000
deposit on equipment during 1997.

The Company's current liabilities decreased by $1,635,000 from
1996 to 1997; the decrease was due to the Company's decreased
issuance of convertible debentures as part of its capital-raising
efforts, $3.3 million of which were outstanding as of December 31,
1997, as compared to $4.6 million of which were outstanding as of
December 31, 1996.

During 1996, the Company incurred $2.6 million in capital leases
in connection with the lease of two buildings used for the
manufacture of the Diasensorr 1000, the current portion of which
was $110,000 at 1997 year end (See, Note H to the Financial
Statements).

The Company continued to fund operations mostly from sales of its
securities. During 1997, the Company sold 22,000 shares of its
Series B convertible preferred stock; and issued $20.2 million in
subordinated convertible debentures. All convertible securities
contain mandatory conversion provisions which expire at various
dates during 1998 and require minimum holding periods prior to
conversion.

Due to the Company's current limited sources of revenue, the
Company plans to seek additional financing which will be used to
finance development of, and to proceed to manufacture, the
Noninvasive Glucose Sensor and to complete the development of its
other projects. No assurances are made as to the availability of
any such financing (See, "BUSINESS").

The Company's products are at various stages of development and
will require additional funding for completion. This paragraph
summarizes the Company's estimates as to the aggregate amounts
needed to complete each project, assuming continued testing and
development is successful. The Company may choose to discontinue
any of its projects at any time if research and development
efforts indicate that continuation would be inadvisable. The
Diasensorr 1000 has been submitted to the FDA for marketing
approval and the Diasensorr 2000 is in the pre-clinical trial
stage of development.

The Company currently has a commitment for capital leases on
certain of its capital equipment and future commitments for new
capital expenditures will be required to continue the Company's
efforts in research and development, and to manufacture and market
its existing products and any other products it may develop.

As of March, 1998, the Company estimates that its short-term
liquidity needs will be met from currently available funds. The
Company estimates that such funds will be sufficient to complete
the research and development stage of the Noninvasive Glucose
Sensor, to complete the CE mark process, and to begin marketing
the device. The Company anticipates that it will finance those
expenses with existing funds, as well as funds raised through the
sales of its securities and from the other sources of funds
described herein. The Company has a history of successful capital-
raising efforts; since 1989, and through December 1997, BICO and
its affiliate Diasense have raised over $100,000,000 in private
and public offerings alone.

Management also expects to meet a portion of its short-term
working capital needs through development contracts with other
organizations and through manufacturing for other companies on a
contractual basis, as described herein. During 1995, 1996 and
1997, the Company was awarded contracts by the Department of
Veteran's Affairs Medical Center for Case Western Reserve
University, Shriners Hospital - Philadelphia Unit, and Austin
Hospital to manufacture FES products. Such contracts generated
revenues of $168,461, $508,561 and $880,919 1995, 1996 and 1997,
respectively (See, "BUSINESS"). During 1998, the Company
discontinued the manufacture of its FES products.

Pursuant to a Research and Development Agreement (the "R&D
Agreement") Diasense is obligated to pay BICO for its work to
develop the Noninvasive Glucose Sensor. During 1995, both
billings and payments pursuant to the R&D Agreement were
suspended. In May, 1995, BICO agreed to accept 3,000,000 shares
of Diasense common stock at an assigned value of $3.50 per share
in return for a reduction of $10,500,000 in amounts due to BICO.
As of December 31, 1995, all amounts due to BICO by Diasense
pursuant to the R&D Agreement had been paid.

In view of BICO's expenses resulting from its product development
projects, and other factors discussed herein, as compared to
BICO's contract revenues, currently available funds, and
established ability to raise capital in public and private
markets, BICO estimates that it will meet its liquidity needs for
a period of at least twelve months from December 31, 1997 from
currently available funds, including those expected to be raised
via additional sales of the Company's securities. This estimate
is based, in part, upon the current absence of any extraordinary
technological, regulatory or legal problems. Should such
problems, which could include unanticipated delays resulting from
new developmental hurdles in product development, FDA
requirements, or the loss of a key employee, arise, the Company's
estimates would require re-evaluation. There can be no assurances
that despite the Company's good-faith efforts, its estimates will
lead to accurate results.

The Company's long-term liquidity needs are expected to include
working capital to fund manufacturing expenses for its products
and continued research and development expenses for existing and
future projects. Such needs are expected to be met from sales of
its bioremediation products, and, once production begins, the
Noninvasive Glucose Sensor and other products. Delays in the
development of the Company's products will result in increased
needs for capital from other sources. The Company anticipates
that such other sources will include continued sales of common
stock, and investment partners such as venture capital funds and
private investment groups. There can be no assurances given that
adequate funds will be available. If the Company is unable to
raise the funds necessary to fund the long-term expenses necessary
to complete the development or manufacture of its products, the
Company will be unable to continue its operations.

As described hereinabove, management believes the Company has
sufficient liquidity to meet its projected expenditures on a
short-term basis. Absent additional funding, the Company will
have limited liquidity on a long-term basis. Moreover, many
demands on liquidity, such as technological, regulatory or legal
problems, could cause the Company's liquidity to be inadequate.
At present, the Company does not have any additional sources of
liquidity, including bank lines of credit. Long-term working
capital needs are expected to be met through sales of the
Noninvasive Glucose Sensor, the PRPr bioremediation product, and
other new products. There can be no assurances that any such
products will be successfully marketed or commercially viable.

Results of Operations

Six Months Ended June 30, 1998

Sales during the second quarter increased to $475,736 in 1998 from
$366,563 in 1997 and increased for the six month period to
$933,441 in 1998 from $515,884 in 1997. The increase was primarily
due to increased sales of the Functional Electrical Stimulators,
the sales of which have been suspended.

Interest income decreased during the second quarter to $15,116 in
1998 from $30,030 in 1997 and decreased for the six month period
to $60,594 in 1998 from $70,249 in 1997. The decrease was due to
the Company's having less cash to invest during the periods in
1998 than in 1997.

Costs of Products Sold during the second quarter decreased to
$229,880 in 1998 from $238,575 in 1997 and increased for the six
month period to $498,860 in 1998 from $323,050 in 1997. The
fluctuations were primarily due to varying orders for the
Functional Electrical Stimulators.

Research and Development expenses during the second quarter
decreased to $1,360,098 in 1998 from $2,005,829 in 1997 and
increased for the six month period to $4,013,632 in 1998 from
$3,921,661 in 1997 The second quarter decrease was due to a
reduction in research and development expenditures.

Selling, General and Administrative expenses during the second
quarter decreased to $3,860,963 in 1998 from $3,957,896 in 1997
and decreased for the six month period to $5,651,209 in 1998 from
$6,600,650 in 1997. The decrease was due to the Company's
reduction in personnel and expenditures.

Interest expense during the second quarter increased to $112,851
in 1998 from $64,566 in 1997 and increased for the six month
period to $205,658 in 1998 from $143,402 in 1997. The increase
was due to the Company's continued efforts in acquiring capital
through 4% convertible debentures and to Notes Payable in
connection with the acquisition of ICTI.

The Company's cash flow problems resulted in a reduction in
personnel during the quarter ended June 30,1998. In addition,
such problems resulted in the Company's inability to meet its full
payroll during June, 1998.

Year Ended December 31, 1997

In 1997, the Company's net sales increased to $1,155,907 from
$597,592 in 1996 and $461,257 in 1995. The increase was due to an
increase in all product sales, including its Petrol Rem and
Barnacle Ban products (See, Note F to the Financial Statements)
Of the total net sales, the Company had $880,919 in implantable
device revenues in 1997 as compared to $508,561 in 1996 and
$168,461 in 1995.

In 1997, 1996 and 1995, the Company received interest income in
the amount of $165,977; $176,478; and $294,734, respectively. The
fluctuation was due to the investment of the Company's liquid
assets (which are composed primarily of funds raised via sales of
securities), the availability of such assets and applicable
interest rates. The Company's other income increased to $104,250
in 1997 from $2,657 in 1996 and $0 in 1995; the increase was due
primarily to amounts due from directors in connection with the
settlement of certain lawsuits.

In 1997, the Company's costs of products sold was $641,331 as
compared to $325,414 in 1996 and $198,542 in 1995. The increase
is primarily due to the Company's corresponding increases in
product sales, and products produced pursuant to FES and IRS
Device contracts.

The Company's research and development expenses were $6,977,590 in
1997, a decrease from $8,742,922 in 1996, and $7,649,678 in 1995.
The overall decrease was due to the Company's realignment of
personnel and resources in an effort to obtain a CE Mark for sale
of the Noninvasive Glucose Sensor outside the U.S. (See, "Business
of the Company - Current Status of the Noninvasive Glucose
Sensor").

In 1997, General and Administrative expenses were $12,704,146, an
increase from $8,963,693 in 1996 and $11,117,107 in 1995. The
increase was due, in part, to the allocation of funds to outside
consultants and other advisors to assist the Company in its
efforts to obtain a CE Mark.

During 1997, the Company extended 177,800 warrants originally
granted to certain officers, directors, employees and consultants
in 1992, as compared to similar extension of 351,482 warrants in
1996, and 2,069,500 warrants in 1995. Because the exercise price
of some such warrants ($.25 to $3.50) was lower than the market
price of the common stock at the time of the extensions $604,342
was charged to operations during 1996, as compared to $7,228,220
in 1995. During 1997, no expense was charged to operations since
the market price was lower than of the original warrant exercise
price. In addition, a similar charge of $4,046,875 in 1997;
$8,571,033 in 1996 and $5,295,000 in 1995 was made by the
Company's subsidiary, Diasense (See, "EXECUTIVE COMPENSATION" and
Note J to the Financial Statements).

Interest expense on the Company's outstanding indebtedness was
$315,624 in 1997 as compared to $133,460 in 1996 and $17,048 in
1995. The increase was due to an increase in capital leases and
interest payment on the Company's subordinated debentures.

Income Taxes

Due to the Company's net operating loss carried forward from
previous years and its current year losses, no federal or state
income taxes were required to be paid for the years 1987 through
1997. As of December 31, 1997, the Company and its subsidiaries,
except for Diasense and Petrol Rem, had available net operating
loss carryforwards for federal income tax purposes of
approximately $63,260,000, which expire during the years 1998
through 2012 (See, Note K to the Financial Statements).

Supplemental Financial Information

The Company sold $3,125,000 in Subordinated Convertible Debentures
during August, 1998 in a private offering pursuant to Regulation
D.

BUSINESS OF THE COMPANY

General Development of Business

Description of Business

Development of the Noninvasive Glucose Sensor

BICO and Diasense are currently developing a Noninvasive Glucose
Sensor, which management believes will be able to measure the
concentration of glucose in human tissue without requiring the
drawing of blood. Currently available glucose sensors require the
drawing of blood by means of a finger prick.

BICO's initial research and development with insulin pumps led to
a theory by which blood glucose levels could be detected
noninvasively by correlating the spectral description of reflected
electromagnetic energy from the skin with blood glucose levels in
the 50 mg per deciliter to 500 mg per deciliter range in the
infrared region of the electromagnetic spectrum. The method was
studied in 1986 and 1987 by BICO and its consultants at Battelle
Memorial Institute in Columbus, Ohio, using laboratory
instruments. The results of the studies provided information
regarding the use of infrared light in the noninvasive measurement
of glucose. The information from the studies, along with later
affirmative work, led to a patent application by BICO's research
team in 1990. A patent covering the method was granted to the
research team and assigned to BICO in December 1991. The rights
of this patent have been purchased by Diasense from BICO, pursuant
to a Purchase Agreement (See, "Intercompany Agreements"). A
second patent application was filed by BICO in December 1992, and
was granted in January 1995. This filing contained new claims
which extended the coverage of the patent based on additional
discoveries and data obtained since the original patent was filed.
BICO has assigned the rights to such patent to Diasense.
Additional concepts to improve the capability of the instrument to
recognize blood glucose were developed, and, in May 1993,
corresponding patent applications were filed. As of March 1998,
a total of five U.S. and six foreign patents have been issued,
with additional patent applications pending (See, "Current Status
of the Noninvasive Glucose Sensor" and "Patents, Trademarks and
Licenses"). BICO has been granted the right to develop and
manufacture sensors pursuant to agreements with Diasense (See,
"Intercompany Agreements").

In 1991, BICO's research team began development of a research
prototype utilizing different technology than previously studied
or developed. This device, the Beta 1 research prototype, was
initially tested on six human subjects, and was subsequently
tested on 110 human subjects in March 1992, during which
simultaneous spectral, blood and chemical data was recorded for
analysis in order to develop calibration data for the device. The
Beta 1 utilized a separate lap-top computer to perform
computational functions. The results of the March 1992 tests were
used to develop further refinements which led to the development
of the Beta 2A.

Although functionally equivalent in terms of performance with the
Beta 1, the next prototype, the Beta 2A, was smaller and had fully
integrated computational software and a liquid crystal display
which interacted with the operator. This model was tested by BICO
on 40 human subjects in July 1992. The spectral and blood
chemistry data obtained indicated that the Beta 2A did not have a
satisfactory signal-to-noise ratio to allow for the calculation of
algorithms of sufficient accuracy to be acceptable to Diasense.
The signal-to-noise ratio reflects the sensor's ability to
optimize the measurement by accepting the signal desired (the
glucose level) and rejecting the random interference. A higher
signal-to-noise ratio results in a more accurate measurement.

Additional Beta prototypes evolved which addressed this problem.
Testing was performed with each prototype, culminating in clinical
trials at two hospitals with ten diabetic volunteers each in Des
Plaines, Illinois in May 1993 and in Indiana, Pennsylvania in
August 1993. These advanced systems embodying improvements in the
optics, electronics and detection subsystems led to the design of
the Beta 2D, Beta 2E, and Beta 2F prototypes, designed and
constructed to simulate production models.

BICO initially obtained the approval of six Institutional Review
Boards ("IRBs") to conduct testing at their hospitals. Those
hospitals are Children's Hospital in Pittsburgh, Pennsylvania;
Rush North Shore in Skokie, Illinois; Westmoreland Hospital in
Greensburg, Pennsylvania; Lutheran General Hospital in Park Ridge,
Illinois; Holy Family Hospital in Des Plaines, Illinois; and
Indiana Hospital in Indiana, Pennsylvania. The Company conducted
initial testing at the Holy Family Hospital and Indiana Hospital,
and may conduct further studies on present and future models at
some or all of the other hospitals from which IRB approval has
been obtained.

On January 6, 1994, BICO submitted its initial 510(k) Notification
to the U.S. Food and Drug Administration (the "FDA") for approval
to market the production model, the Diasensor(R)1000. The
submission was based on data obtained from the advanced Beta 2
prototypes, since functionally, the production model will be
identical to these prototype models. BICO's 510(k) Notification
claims that the product has substantial equivalence to home market
glucose monitoring devices presently in the marketplace since its
function is similar, although the device operates on a different
technological principle. BICO provided information in this 510(k)
submission which it believes substantiates that the device does
not raise different questions of safety and efficacy and is as
safe and effective as the legally marketed predicated devices.
Such information is required by the FDA before market approval can
be granted. In February 1996, the FDA convened a panel of
advisors to make a recommendation regarding BICO's 510(k)
Notification. The majority of the panel members recommended that
BICO conduct additional testing and clinical trials prior to
marketing the Diasensor(R)1000. BICO and Diasense announced that
they remained committed to bringing the Diasensorr 1000 to
diabetics, and that additional research, development and testing
would continue (See, "Current Status of the Noninvasive Glucose
Sensor").

The Diasensor(R)1000 is a spectrophotometer capable of illuminating
a small area of skin on a patient's arm with infrared light, and
then making measurements from the infrared light diffusely
reflected back into the device, which it then displays on a liquid
crystal display on the face of the instrument for the user to
read. The Diasensor(R)1000 uses internal algorithms to calculate a
glucose measurement.

Since the Diasensor(R) 1000 will be calibrated individually, each
instrument will be sold by prescription only in the U.S. and will
be calibrated in the patient's home. This feature may limit the
marketability of the Diasensorr 1000, and, if the device is unable
to qualify for third-party reimbursement, the Company's ability to
market the device could be adversely effected.

Current Status of the Noninvasive Glucose Sensor

Due to continued delays of the FDA approval process, which are
summarized below, and while continuing to work with the FDA and
conduct its mandated testing, the Companies have also focused
their efforts on obtaining approval to market the Diasensorr 1000
overseas. The Companies have obtained a "CE" mark, which will
facilitate sales in Europe. As discussed below, in connection
with obtaining a CE mark, BICO has been awarded ISO 9001
certification, and continues to work with its European consultants
to expedite the process as much as possible.

BICO, as designer and manufacturer of the device, was recently
audited for ISO certification by TUV Rheinland, a company
authorized to conduct such audits, which was contracted to perform
a "conformity assessment" of BICO's quality system. BICO has
received certification to ISO 9001, a standard defined by the
International Organization for Standardization ("ISO"), evidencing
that BICO has in place a total quality system for the design,
development and manufacture of its products. The certificate
formalizing the ISO 9001 certification was received by BICO on
January 14, 1998. In February and March, 1998, BICO submitted its
technical file on the Diasensorr to TUV in order to satisfy
requirements of the European Medical Device Directive; following
such submissions, CE Mark approval was obtained. Much like an
Underwriters Laboratory "UL" mark, the CE mark is provided by the
regulatory bodies of the European Community, or by authorized
private bodies, such as TUV Rheinland, to indicate that the device
adheres to "quality systems" of the ISO and the European Committee
for Standardization. The CE mark permits the Companies to sell
the Diasensorr and other medical products in Europe.

With regard to marketing the device within the United States, the
Companies continue to work with the FDA to obtain approval. A
revised 510(k) Notification was submitted in October, 1996, and
was followed by continued discussions with the FDA. During 1997
and 1998, the Company continued its discussions with the FDA, and
established a protocol for in-home testing of the Diasensorr 1000,
which commenced in early 1997. As with all other FDA-related
activities, the Companies cannot provide any assurances as to the
date upon which the next 510(k) Notification will be submitted, or
when the FDA will complete its review of such Notification.

Although the Company's research and development team continues to
meet with and work closely with the FDA, due to the complex,
technical nature of the information being evaluated by the FDA, it
is impossible for the Company to estimate how much longer the FDA
approval process will take.

FDA approval is necessary to market the Diasensorr 1000 in the
United States. The Companies are continuing their efforts to
develop software with a more "universal" algorithm, which can be
used by a larger population. After introduction of the Diasensorr
1000, BICO plans to finalize the development of the Diasensorr
2000 which may contain more complex software, allowing glucose
measurements from many individuals to be performed with one
instrument. The Diasensorr 2000 may be subject to the same
regulatory testing and approval process as was required for the
Diasensorr 1000.

Diasense is responsible for the marketing and sales of the
Noninvasive Glucose Sensor. Diasense plans to market the
Noninvasive Glucose Sensor directly to diabetics, through their
doctors' orders, and is currently negotiating with domestic and
international distribution organizations to aid in the marketing
and distribution of the Noninvasive Glucose Sensor. Due to the
current vicissitudes of the health-care insurance industry, the
Companies are unable to make any projections as to the
availability of, or procedures required in connection with, third-
party reimbursement. Although the Companies estimate, based on
1997 American Diabetes Association data, that there are nearly
16,000,000 diabetics in the United States, not all diabetics will
be suitable users of the Noninvasive Glucose Sensor. Those
diabetics who require and benefit from frequent glucose monitoring
comprise the potential market for the Noninvasive Glucose Sensor.
The Companies are unable to estimate the size of that market at
this time.

Bioremediation

BICO is also involved in the field of biological remedial
("bioremediation") development. Bioremediation technology utilizes
naturally occurring micro-organisms or bacteria to convert various
types of contamination to carbon dioxide and water. This occurs
through the dual processes of chemical and microbiological
reactions. The product, PRP(R), which stands for Petroleum
Remediation Product, is designed as an environmental microbial
microcapsule which is utilized for the collection, containment and
separation of oil-type products in or from water. The product's
purpose is to convert the contaminant, with no residual mass
(separated or absorbed) in need of disposal. When the PRP(R)comes
in contact with the petroleum substances, the contaminants are
bound to the PRP(R), and they stay afloat. Because the product
contains the necessary nutrients and micro-organisms, the
bioremediation process begins immediately, which limits secondary
contamination of the air or surrounding wildlife. Eventually, the
product will biodegrade both the petroleum and itself.

In connection with this project, BICO created a subsidiary, Petrol
Rem, Inc. ("Petrol Rem"). Petrol Rem's officers and directors
include Anthony J. Feola and Fred E. Cooper, who are also
directors and/or officers of BICO and its other affiliates.

Part of Petrol Rem's initial research and development involved
field testing supervised by the National Environmental Technology
Applications Corporation ("NETAC"), a group endorsed by the
Environmental Protection Agency (the "EPA"), to determine whether
the product is effective. As a result of such testing, NETAC
reported positive results regarding the effectiveness of the
product.

PRP(R) is now being manufactured and marketed for use in water and
on solid surfaces in the form of Petrol Rem's OIL BUSTER r
product, which is used for small oil cleanups on hard surfaces
such as the floors of manufacturing facilities, garages and
machine shops.

The product system is listed on the EPA's National Contingency
Plan ("NCP") Product Schedule, and is available in free-flowing
powder or absorbent socks. In 1995, the EPA required that all
products previously listed on the NCP be submitted to additional
testing. Because PRPr successfully passed the Tier II efficacy
test conducted by NETAC, the product was requalified for listing
on the NCP. Management believes that this requalification process
will limit the number of products available for use in clean-up
projects. As illustrative evidence, management notes that only
thirteen of the original fifty-three products in the
bioremediation agents category remain listed.

In April 1993, Petrol Rem entered into a lease for a facility in
the Pittsburgh, Pennsylvania area which is used to manufacture
PRPr. The current lease has a renewable three-year term, with
monthly rental payments of $2,888 plus utilities and applicable
business privilege taxes. Petrol Rem has also purchased equipment
which has the capability to produce PRPr in quantities of 2,500
pounds per day, and Petrol Rem has built an adequate inventory.

During 1995, Petrol Rem completed a BioResponse Action Plan, which
has been submitted to applicable regulatory agencies, including
the EPA, the Coast Guard, and various state agencies. The Plan,
which sets forth the available options and proper responses to
clean-up projects, was created in response to a growing trend by
the agencies to set up pre-approved plans to be used in the event
of an oil-spill emergency. These pre-approved plans would direct
the individuals on site as to which products to use, and should
help accelerate approval and response time.

Because two of Petrol Rem's largest target marketing regions are
Texas/Louisiana and Florida, Petrol Rem has been warehousing PRPr
in those areas.

Petrol Rem has also completed development of a new spray
applicator for its PRPr product. The new applicator is a light-
weight, portable unit which provides a more continuous flow of
product. The lighter weight and smaller size will allow easier
access to remote sites which were impossible to reach with the
previous applicator.

In addition to PRP(R) Petrol Rem has also developed other products.
In order to address water pollution issues at marinas, Petrol Rem
has introduced BIO-SOK(R), which is PRP(R) contained in a 10" fabric
tube, is designed and used to aid in the cleaning of boat bilges.
Bilges are commonly cleaned out with detergents and emulsifiers,
which cause the oil pumped out of the bilge to sink to the bottom
of the water, where it is harmful to marine life, and becomes
difficult to collect. In addition, it is illegal to dump oil or
fuel into the water. The BIO-SOK(R), when placed in the bilge,
absorbs and biodegrades the oil or fuel on contact, which
significantly reduces or eliminates the pollution; then the
product biodegrades itself. As a result, BIO-SOKr helps to keep
waters clear. In addition, BIO-SOK(R) helps to eliminate the chore
of bilge cleanup, and helps users such as boaters and marinas to
avoid fines for pumping oil and fuel into the waterways, which is
prohibited.

In July 1996, the Company's PRPr and BIO-SOK(R) products were
selected by the National Aeronautics and Space Administration
("NASA") to be featured as spinoff technology under its technology
transfer program, which seeks to recognize unique civilian
adaptations of NASA technology. The products were part of NASA
displays at major trade shows.

In October 1996, the Company announced that its BIO-SOKr Bilge
Maintenance System had won a 1996 Innovation Award at the
International Marine Trades Exhibit and Convention ("IMTEC"),
which is held by the National Marine Manufacturers Association
(the "NMMA"). The award was conferred by a panel of experts which
evaluated a field of approximately fifty seven entrants in the
"Accessories and Trailers" category. The NMMA cited the BIO-
SOKr's simplicity of use and commended the product as on the
"frontier of technology".

In December 1996, Petrol Rem announced that the BIO-SOK(R)had been
chosen by Boating, one of the largest pleasure boating magazines
in the world, for use in all of the boats tested for its magazine.
Boating, which tests over 100 boats each year, called the BIO-SOK(R)
"one impressive new product". In February 1997, BIO-SOK(R) was
given a 1997 Innovation Award by the well-known trade magazine
Motorboating and Sailing.

BIO-SOK(R) is guaranteed, lasts for an entire boating season, and is
available from quality marine supply stores in the coastal areas
of the United States, Canada, Europe and South East Asia, and is
recommended by the Canadian Coast Guard.

Petrol Rem has also developed OIL BUSTER(R), which is a mixture of
PRPr and an absorbent material. OIL BUSTER(R) is used to clean up
and remediate oil spills on hard surfaces.

Petrol Rem's BIO-BOOM(R) product is used in water clean-up
projects. The product is a 3" x 10' fabric tube which is filled
with PRP(R), and is used to both contain and biodegrade contaminants
in water. BIO-BOOM (R)is a superior product to most containment
products because, in addition to containing the oil or fuel spill,
or restricting the spread of an anticipated spill, it also
biodegrades the contaminant, then biodegrades itself. These
features act to virtually eliminate secondary contaminants,
thereby reducing disposal and clean-up costs. Initial sales have
occurred, and marketing efforts are accelerating.

Petrol Rem is marketing PRP(R)through trade shows, magazines,
direct mail advertising, and direct contacts with companies and
consultants specializing in petroleum clean-up, as well as
marketing directly to municipalities and corporations with needs
for the product. Although there can be no assurances that PRPr
will be successfully marketed, the Company believes, based on
their scientific determinations, the results of recent NETAC
testing, and the favorable response at the retail level, that PRPr
will be a viable product in the bioremediation marketplace.

The Company believes that it has expended the necessary funds to
complete the development of its bioremediation products, and to
build up sufficient inventory pending additional orders. The
Company has spent approximately $8,499,000 on this project through
December 31, 1997.

Whole-Body Extracorporeal Hyperthermia

BICO is currently funding a project with HemoCleanse, Inc.
("HemoCleanse"), an unaffiliated company located in Lafayette,
Indiana. In connection with this project, BICO formed a wholly-
owned subsidiary, IDT, Inc. IDT's executive officers and
directors include Glenn Keeling, who is also an officer and
director of BICO.

IDT and HemoCleanse are currently engaged in a project which
involves the experimental use of a delivery system, the ThermoChem
System , for perfusion-induced systemic hyperthermia ("PISH") to
treat persons with certain types of cancer and HIV/AIDS.
HemoCleanse is an Indiana corporation with offices located at 2700
Kent Avenue, West Lafayette, Indiana 47906. HemoCleanse designs,
manufactures and markets products that treat blood outside the
body to remove toxins and simultaneously balance blood
chemistries. HemoCleanse believes that its systems are unique in
being able to selectively remove both small, intermediate and
protein-bound toxins, and to provide extracorporeal hyperthermia
to selectively kill infected or rapidly dividing cells without the
risk of electrolyte imbalances.

HemoCleanse has developed two models of the device. The BioLogic-
DT is designed for use as a detoxifier for the treatment of drug
overdose and was approved for marketing in the United States by
the FDA in September 1994. The ThermoChem System , which
incorporates this technology, is designed for use in the
hyperthermia procedure. The ThermoChem System is used in IDT's
clinical trials.

Perfusion-induced systemic hyperthermia, a form of whole-body
hyperthermia, achieved through extracorporeal blood heating
("PISH") involves heating the patient's blood outside the body to
approximately 48 degrees centigrade and returning it back to the
body, thus raising the body's core temperature to the desired
treatment temperature up to a maximum of 42.5 degrees centigrade.
Blood passes a roller pump which sends it onward to the heat
exchanger where indirect heating of the blood occurs, raising the
outside blood temperature to approximately 48 degrees centigrade.
A portion of the blood passes through a T-connection to the
ThermoChem-SB, located between the roller pump and the heat
exchanger, where it is chemically balanced on a real-time basis
and then returned to the blood flow path before it reaches the
heat exchanger. Continually circulating blood is returned to the
patient at 46 degrees centigrade, gradually raising the patient's
core body temperature to the desired treatment temperature, which
is measured by various temperature probes throughout the body.
Experimentation outside the United States to date, to the best
knowledge of the Company, has been somewhat limited and not well-
documented. IDT, and IDT's Scientific and Medical Advisory Board
believe that once a safe delivery system is established, serious,
extensive and well-documented testing will determine whether PISH
can be used as an effective treatment for persons with clinical
cancer or HIV.

Although other entities have experimented with the use of PISH,
one significant problem has been the safe delivery of the
procedure. IDT believes that the improvements inherent to their
ThermoChem System increase the safety of the procedure. The
ThermoChem System incorporates a single access device, utilizing
a parallel plate, cellulosic membrane dialyzer and a unique
sorbent suspension which can effectively remove a wide range of
chemicals and toxins from the blood, while maintaining a balance
of electrolytes and important nutrients. The system is also
comprised of several specially integrated devices that perform
blood propulsion, water heating and cooling to control
extracorporeal blood temperature, air embolism detection,
auxiliary unit roller pump occlusion detection, catheter access
occlusion, and monitoring and recording of cardiac output and
patient temperatures.

As a result, IDT believes that they have taken a significant step
towards the creation of a safe delivery system. Although there
can be no assurances that the ThermoChem System is safe for all
humans, clinical trials to date have confirmed that the humans
tested were able to safely tolerate PISH at a core temperature of
42 degrees centigrade for two hours. Based in part upon the
results of its initial clinical trials, the FDA has approved
additional clinical trials.

The ThermoChem System is a combination of three system
components: 1) the ThermoChem-HT, which circulates and heats blood
extracorporeally up to approximately 48 C and monitors the
patient's core temperature, which provides constant up to the
minute access information on the status of the patient; 2) the
ThermoChem-SB, which can effectively remove a wide range of
chemicals and toxins from the blood, while maintaining a balance
of electrolytes and important nutrients; and 3) the Disposable
Kit, which contains the patented sorbent suspension, as well as
temperature probes, catheters, and tubing set, etc. .

The ThermoChem System's specifications include an extracorporeal
continuous blood circuit, a blood flow rate of 2000 ml/minute
maximum, an integrated device which heats blood outside the body
to approximately 48 degrees centigrade and core temperature to a
maximum of 42.5 degrees centigrade, and a sorbent suspension
system where optimum chemical transfer between the blood and
sorbent is attained, which balances critical blood chemistries.
Pre-clinical trials were conducted on six swine to assure safety
at an increased flow rate and maintenance of a higher core
temperature of 43 degrees centigrade for a period of two hours.
This study concluded that blood chemistries were normalized with
the use of the ThermoChem System . In November 1996, the
Companies submitted an IDE application to the FDA for a study
utilizing the ThermoChem System for PISH for metastatic non-small
cell lung cancer. This protocol was developed by the University
of Texas in Galveston. The FDA responded in December 1996 with an
approval to conduct a Phase I trial. The University of Texas'
Institutional Review Board (IRB) granted approval of this study in
May 1997.

On September 11, 1997, IDT entered into an agreement with the
University of Texas Medical Branch at Galveston (UTMB) to begin a
human clinical trial in October 1997. The trial will utilize the
ThermoChem System and disposables to deliver perfusion-induced
systemic hyperthermia to treat patients with metastatic non-small
cell lung cancer.

One of the objectives of this Phase I trial is to evaluate the
ThermoChem System for the use in the treatment of metastatic non-
small cell lung cancer with regard to patient selection, tumor
response, patient performance status, and patient survival. The
follow-up of the patients is patterned after the Southwest
Oncology Group protocols, which are considered state-of-the-art
studies to follow response of cancer to the therapy.

The study is being conducted at the General Clinical Research
Center (GCRC) at UTMB, which is supported by the National
Institute of Health (NIH). This is the only PISH study for
metastatic non-small cell lung cancer approved by the FDA.

The ThermoChem-HT , a component of the ThermoChem System , which
circulates and heats blood extracorporeally up to approximately 48
C and monitors the patient's core temperature, through various
temperature probes, and also provides constant up to the minute
access information on the patient can be used independently from
the ThermoChem System for regional hyperthermia. Regional
hyperthermia is utilized where a systemic treatment is not
necessary, and isolated limb perfusion, a form of regional
hyperthermia, which was developed 40 years ago to treat patients
with melanoma and sarcoma of the limb. Preclinical trials are
also being conducted for a Phase I trial to involve isolated limb
perfusion for melanomas and sarcomas of the limbs.

Pre-clinical trials are being conducted at M.D. Anderson Cancer
Center in preparation for a Phase I/II trials to involve
thermochemotherapy hemi-perfusion of patients with pelvic or lower
extremity recurrences of different types of cancer. These pre-
clinical studies are being used to develop the surgical techniques
necessary for a clinical trial on humans and to train and
familiarize the center's staff in the use of the system.

The Cancer Center Protocol Committee of Bowman Gray School of
Medicine has approved a protocol concept to conduct a pilot study
investigating the safety of the ThermoChem-HT for intraperitoneal
hyperthermic chemotherapy (IPHC) in the treatment of advanced
gastrointestinal and ovarian cancers.

The technique of IPHC has been done at Bowman Gray since 1992
utilizing a non-standardized perfusion setup. The ThermoChem-HT
can possibly make the technique more efficient with better
temperature monitoring and control. An IDE is being submitted to
the FDA to conduct this human trial.

IDT's Medical and Scientific Advisory Board consists of the three
following professionals. Currently, none of the board members
receive a fee for serving on the board, but are reimbursed for
expenses incurred.

Corklin R. Steinhart, M.D., Ph.D., is the medical director of
special immunology services at Mercy Hospital in Miami, Florida.
Milton B. Yatvin, Ph.D., is a professor in the Radiation & Thermal
Biology Division, Department of Radiation Oncology at Oregon
Health Sciences University in Portland, Oregon.

Stephen R. Ash, M.D., F.A.C.P., is the Chairman of the Board and
Director of Research and Development of HemoCleanse, a corporation
located in West Lafayette, Indiana.

The Company has expensed approximately $8,402,000 on this project
through December 31, 1997, which includes the Company's
acquisition of HemoCleanse common stock, via a purchase of common
stock and the conversion of a loan into common stock.

Other Projects

Implantable Technology

In April 1996, BICO was granted FDA approval to market its
theraPORT(R) Vascular Access System ("VAS"). The approval was in
connection with the Company's 510(k) Notification filed in January
1996. The device is comprised of a reservoir which is implanted
beneath the skin in the chest region with a catheter inserted in a
vein and provides a delivery system for patients who require
continual injections. Because such repeated injections can cause
veins to shut down and collapse, the theraPORTr offers an improved
delivery system by eliminating that vascular trauma. If necessary
to accommodate multiple drug therapy with incompatible drugs, dual
ports can be implanted. Such devices are frequently used in
cancer drug therapy. BICO began selling the standard ports during
the second quarter of 1997. A second device with a low profile
has been developed for pediatric use, and a 510(k) was submitted
to the FDA in November 1997 for marketing approval. In early
February, 1998, BICO submitted a supplement to the FDA in response
to a request for additional information. The Company is currently
developing a dual port device and plans to submit another 510(k)
for that device in the near future.

Through its subsidiary, Coraflex Inc. ("Coraflex"), BICO is
engaged in the development of a polyurethane heart valve which
management believes may not have the disadvantages of the
mechanical and bioprosthetic valves currently being marketed. The
Coraflex(R) valve, which resembles the human heart's aortic valve,
is made by means of a proprietary manufacturing process. The
polyurethane used in the construction of the heart valve is
believed by BICO to exhibit strength and fatigue resistance which
compare favorably with that of other materials used for prosthetic
valves. In vitro testing, some of which has been performed
through the Children's Hospital of Pittsburgh, of the Coraflexr
valve to date has demonstrated superior fatigue resistance and
flow characteristics relative to the currently available
bioprosthetic and mechanical devices, respectively. Additional
development and testing must be conducted by BICO prior to its
making an application to the FDA for approval to begin clinical
testing in humans. BICO will need additional financing to
complete clinical testing of the valve and to begin production.
No assurances can be made that BICO will receive the necessary
funding to complete testing, will receive FDA-marketing approval,
will be able to produce and sell the valve, or that the valve will
be commercially viable.

BICO also has developed technology for other implantable devices,
such as hemodialysis ports, implantable insulin dispensers and
rate-adaptive pacemakers. Because BICO's management decided to
focus most of the Company's resources on the research and
development of the Noninvasive Glucose Sensor, little progress was
made on these projects. Consequently, some of these devices are
in a very preliminary stage of development, and it is unclear at
this time whether their development will be pursued or completed.
The information set forth herein regarding BICO's projects is of a
summary nature, and the status of each project is subject to
constant change. There can be no assurances as to the completion
or success of any project.

RESEARCH AND DEVELOPMENT

The Company continues to be actively engaged in the research and
development of new products. Its major emphasis has been the
development of a Noninvasive Glucose Sensor. In order to raise
funds for the research and development of new products, the
Company and Diasense have conducted sales of stock. (See,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS").

MARKETING AND DISTRIBUTION

Petrol Rem began marketing of its bioremediation product, PRPr, in
mid-1993, and is now sold in quality marine supply stores in the
coastal areas of the United States, Canada, Europe and South East
Asia. These projections are based on management's belief, as to
which there can be no assurances, that the development and
manufacture of those products will continue to proceed
successfully and on schedule.

PATENTS, TRADEMARKS AND LICENSES

The Company owns patents on certain of its products and files
applications to obtain patents on new inventions when practical.
Additionally, the Company endeavors to obtain licenses from others
as it deems necessary to conduct its business.

The Company also relies upon trade secret protection for its
confidential and proprietary information. Although BICO, Diasense
and their affiliates take all reasonable steps to protect such
information, including the use of Confidentiality Agreements and
similar provisions, there can be no assurance that others will not
independently develop substantially equivalent proprietary
information or techniques, otherwise gain access to the Company's
trade secrets, disclose such technology, or that the Company can
meaningfully protect its trade secrets.
Noninvasive Glucose Sensor

Diasense owns a patent entitled "Non-Invasive Determination of
Glucose Concentration in Body of Patients" (the "Patent") which
covers certain aspects of a process for measuring blood glucose
levels noninvasively. Such Patent was awarded to BICO's research
team in December 1991 and was sold to Diasense pursuant to a
Purchase Agreement dated November 18, 1991 (See, "Intercompany
Agreements"). The Patent will expire, if all maintenance fees are
paid, no earlier than the year 2008. If marketing of a product
made under the Patent is delayed by clinical testing or regulatory
review, an extension of the term of the Patent may be obtained.
Diasense's Patent relates only to noninvasive sensing of glucose
but not to other blood constituents. Diasense has filed
corresponding patent applications in a number of foreign
countries.

A second patent application was filed by BICO in December 1992,
which was assigned to Diasense. This second patent contained new
claims which extend the coverage based upon additional discoveries
and data obtained since the original patent was filed. The patent
application was amended in October 1993, and was granted in
January 1995.

In May 1993, four additional patent applications were filed by
BICO's research teams related to the methods, measurement and
noninvasive determination of analyte concentrations in blood.

As of March, 1998, a total of five U.S. and six foreign patents
have been issued, all of which have been assigned to Diasense, and
additional patents are pending. Corresponding patent
applications have been filed in foreign countries where the
Company anticipates marketing the Noninvasive Glucose Sensor.

BICO's research team continues to file patent applications,
provisional patent applications, some of which are being converted
into "PCTs" (Patent Cooperative Treaty) which reflect the
continued research and development and additional refinements to
the Noninvasive Glucose Sensor.

Diasense or BICO may file applications in the United States and
other countries, as appropriate, for additional patents directed
to other features of the Noninvasive Glucose Sensor and related
processes.

Those competitors known by BICO to be currently developing non-
invasive glucose sensors own patents directed to various devices
and processes related to the non-invasive monitoring of
concentrations of glucose and other blood constituents. It is
possible that such patents may require the Companies to alter any
model of the Noninvasive Glucose Sensor or the underlying
processes relating to the Noninvasive Glucose Sensor, to obtain
licenses, or to cease certain activities.

The Company also relies upon trade secret protection for its
confidential and proprietary information. Although BICO and
Diasense take all reasonable steps to protect such information,
including the use of Confidentiality Agreements and similar
provisions, there can be no assurance that others will not
independently develop substantially equivalent proprietary
information or techniques, otherwise gain access to the Company's
trade secrets, disclose such technology, or that the Company can
meaningfully protect its trade secrets.

The Company has filed for trademark protection for the term
"Diasensorr 1000", which is intended for use in connection with
the Diasensorr models; such filing will remain pending until the
first production unit is shipped. The Company intends to apply,
at the appropriate time, for registrations of other trademarks as
to any future products of the Company.

Whole-Body Hyperthermia

In September 1992, a research team funded by the Company applied
for a domestic patent in connection with the use of PISH and the
treatment of HIV-positive patients; the patent has been assigned
to IDT. In October 1994, IDT received notification that the
patent application for its specialized method for whole-body
extracorporeal hyperthermia had been issued. A Continuation in
Part, which included the ThermoChem System was filed by IDT, was
allowed in July 1995 and issued in December 1995.

The patent, entitled "Specialized Perfusion Protocol for Whole-
Body Hyperthermia", contains seventeen claims for the hyperthermia
procedure, including the method of heating all of the blood in the
extracorporeal blood circuit to raise the patient's core
temperature to approximately 42 degrees centigrade. A
Continuation in Part, which was filed by IDT and included the
ThermoChem System , was allowed in July 1995 and was issued in
December 1995.

Implantable Technology

During 1995, the Company renewed its U.S. trademark registration
for the name Coraflexr, which was originally granted in 1988. The
Company has also obtained trademark registration for the name
theraPORTr (See, "BUSINESS - Implantable Technology).

In October, 1996, a patent was issued for the Company's heart
valve product.

Bioremediation

In 1992 and 1993, Petrol Rem applied for patents in connection
with its bioremediation product, all of which are still pending.
The Company has received trademark authorization for the use of
the product names PRP, BIO-SOK, BIO-BOOM, and Oil Busterr
(See, "BUSINESS - Bioremediation").
<PAGE> 24

SOURCE OF SUPPLY

In connection with the manufacture the Noninvasive Glucose Sensor,
the Company will be dependent upon suppliers for some of the
components required for the devices fabrication. The Company
plans to assemble the devices, but will need to purchase
components, including some components which will be custom made
for the Company from certain suppliers. These components will not
be generally available, and the Company may become dependent upon
those suppliers which do provide such specialized products.
If the Company successfully develops other new products, and
receives the regulatory approvals to manufacture such products, it
may become dependent on certain suppliers for custom parts.

COMPETITION

Noninvasive Glucose Sensor

With the rapid progress of medical technology, and in spite of
continuing research and development programs, the Company's
developmental products are always subject to the risk of
obsolescence through the introduction by others of new products or
techniques. Management is aware that other research groups are
developing noninvasive glucose sensors, but has limited knowledge
as to the technology used or stage of development of these
devices. There is a risk that those other groups will complete
the development of their devices before the Company does. To the
best knowledge of the Companies, there is no other company
currently producing or marketing noninvasive sensors for the
measurement of blood glucose similar to those being developed by
the Company.

The Noninvasive Glucose Sensor will compete with existing invasive
glucose sensors. Although the Company believes that the features
of the Noninvasive Glucose Sensor, particularly its convenience
and the fact that no blood samples are required, will compete
favorably with existing invasive glucose sensors, there can be no
assurance that the Noninvasive Glucose Sensor will compete
successfully. Most currently available invasive glucose sensors
yield accuracy levels of plus or minus 25% to 30%, range in price
from $80 to $200, not including monthly costs for disposable
supplies and accessories, and are produced and marketed by eight
to ten sizable companies. Those companies include Miles
Laboratories, Inc., Boehringer Mannheim Diagnostics, and Lifescan
(an affiliate of Johnson & Johnson).

Such companies have established marketing and sales forces, and
represent established entities in the industry. Certain of the
Company's competitors (including their corporate or joint venture
partners or affiliates) currently marketing invasive glucose
sensors have substantially greater financial, technical, marketing
and other resources and expertise than Diasense, and may have
other competitive advantages over Diasense (based on any one or
more competitive factors such as accuracy, convenience, features,
price or brand loyalty). Additionally, competitors marketing
existing invasive glucose sensors may from time to time improve or
refine their products (or otherwise make them more price
competitive) so as to enhance their marketing competitiveness
relative to the Company's Noninvasive Glucose Sensor.
Accordingly, there can be no assurance that the product, or
Diasense as marketer for the Noninvasive Glucose Sensor, will be
able to compete favorably with such competition.
In addition to the invasive glucose sensors discussed above, there
exist invasive sensors, such as the Yellow Springs Sensor (the
"Clinical Sensors") which the Company believes achieve accuracy
levels within 30 minutes which are within plus or minus 3% of
actual glucose levels. The Company will also compete with this
technology, which is relatively non-portable and bears a price of
approximately $8,000. The Clinical Sensors are presently used
almost exclusively by hospitals and other institutions, and, like
all invasive sensors, still require repeated blood samples. It is
anticipated that the Company will also face competition from the
Clinical Sensors, at least in some markets. For example, certain
institutions that might otherwise purchase Diasense's products may
decide to continue to use the Clinical Sensors, whether due to the
superior accuracy levels of that sensor or institutional or
historical bias, despite what Diasense believes will be the
superior convenience and cost factors of the Noninvasive Glucose
Sensor.

The Company faces more direct competition from other companies who
are currently researching and developing noninvasive glucose
sensors. The Company has very limited knowledge as to the stage
of development of these sensors; however, should another company
successfully develop a noninvasive glucose sensor, achieve FDA
approval, and reach the market prior to the Company, it would have
an adverse effect upon the Company's ability to market its sensor.
The companies which are currently engaged in the research and/or
development of noninvasive glucose sensors include the following:
Rio Grande Medical Technology ("Rio Grande"), which is working
with the University of New Mexico, CME Telemetrix, Inc. ("CME"),
Cygnus, Inc. ("Cygnus"), Technical Chemicals and Products, Inc.
("TCPI"); Samsung Fine Chemicals ("SFC") and SpectRX. Although
the Company is not aware, there may be other companies engaged in
similar research and development. The named companies, and
others, may be further along in their development than the Company
is aware, and may have access to capital and other resources which
would give them a competitive advantage over the Company. The
following is a summary of the Company's current knowledge
regarding the companies listed.

Rio Grande, formerly associated with Sandia, is affiliated with
the University of New Mexico, continues to develop its noninvasive
glucose sensor based on infrared spectroscopy and using near-
infrared light. To the best knowledge of the Company, no
submission have been made to the FDA in connection with this
device. CME, a Canadian company is developing a device which
claims to measure glucose noninvasively via a finger receptacle.
Testing has been conducted in Canada and the U.S.; however, no
approval has been received to sell the device in Canada, and no
FDA submission has been made to date. Cygnus has disclosed that it
is developing a "GlucoWatch", which it claims periodically directs
an electrical current into the diabetic in order to monitor
glucose levels. Cygnus, has not yet submitted its device for FDA
scrutiny and, to the best of the Companies' knowledge, must
complete additional clinical trials prior to applying for FDA
approval to market the device. Cygnus' latest reports indicate
that its plans make a submission for FDA approval have been
further delayed until late 1998. TCPI recently announced that it
began clinical studies of its system to correlate interstitial
glucose fluid data with various blood glucose; although TCPI
claims that its technology is noninvasive, it utilizes electronic
charges to penetrate the skin and draw fluid from the body. SFC,
a Korean company, announced in February that it had developed a
hand-held device which the company claims measures glucose using
an electromagnetic radiant ray (which management believes is a
laser similar to the TCPI technology) to measure glucose. SFC's
announcement stated that marketing would be limited to Korea and
other parts of Asia, and would begin in mid-1988 pending
government approvals. SpectRX, which is funded by Abbott
Laboratories, also uses lasers to penetrate the skin and measure
interstitial fluids; like the TCPI and SFC devices, it claims to
be noninvasive; however, body fluids are drawn from the body via
lasers.

Certain organizations are also actively engaged in researching and
developing technologies that may regulate the use or production of
insulin or otherwise affect or cure the underlying causes of
diabetes. Diasense is not aware of any new or anticipated
technology that would effectively render the Noninvasive Glucose
Sensor obsolete or otherwise not marketable as currently
contemplated. However, there can be no assurance that future
technological developments or products will not make the
Noninvasive Glucose Sensor significantly less competitive or, in
the case of the discovery of a cure for diabetes, even effectively
obsolete.

GOVERNMENT REGULATIONS

Since most of the Company's products are "medical devices" as
defined by the Federal Food, Drug and Cosmetic Act, as amended
(the "Act"), they are subject to the regulatory authority of the
FDA. The FDA regulates the testing, marketing and registration of
new medical devices, in addition to regulating manufacturing
practices, labeling and record keeping procedures. The FDA can
subject the Company to inspections of its facilities and
operations and may also audit its record keeping procedures at any
time. The FDA's Good Manufacturing Practices for Medical Devices
specifies various requirements for BICO's manufacturing processes
and maintenance of certain records.
In March 1993, the FDA announced that it intends to take steps to
enhance its review and approval procedures and guidelines relating
to the testing of medical devices, including imposing a higher
standard of proof on medical devices that might pose potential
health risks. BICO is unable to determine at this time whether
such action may have a material adverse effect on the approval by
the FDA of the Noninvasive Glucose Sensor, the WBH delivery
system, any other product, or on BICO's business generally. The
extent of federal, state, local or foreign governmental
regulations that might result from any future legislation or
administrative action, and the impact of any such action on BICO's
products or business, cannot be accurately determined.

Noninvasive Glucose Sensor

Because the Noninvasive Glucose Sensor is subject to regulation by
the FDA, the Company will be required to meet applicable FDA
requirements prior to marketing the device in the United States.
These requirements include clinical testing, which must be
supervised by the IRBs of chosen hospitals. Clinical testing
began on the Noninvasive Glucose Sensor in May 1993 (See, "Current
Status of the Noninvasive Glucose Sensor"). The clinical trials
have been conducted based on a determination by the Company and
the IRBs that the device is a "non-significant risk" device, thus
obviating the need for an Investigational Device Exemption ("IDE")
filing with the FDA. Should any of the IRBs determine, and are
successful in convincing the FDA, that the device is a
"significant risk" device, the Company would be required to submit
an IDE filing to the FDA. Such filing would result in material
delays and expenses for the Company, and a resulting significant
delay in the completion, marketing and sale of the Noninvasive
Glucose Sensor. To date, neither the IRBs nor the FDA have
informed the Company that they are of the opinion that the device
is a "significant risk" device.

BICO may conclude clinical testing on any device at any point at
which it believes additional data is not necessary for inclusion
in the 510(k) Notification. Such notification will include a
detailed description of the prototype and data produced during
clinical trials. The 510(k) Notification review by the FDA
involves a substantial period of time, and requests for additional
information and clinical data will require additional time. There
can be no assurance that the 510(k) Notification will ultimately
be approved, or when it will be approved.

The 510(k) Notification filed by the Company for the Diasensorr
1000 indicated that the device is "substantially equivalent" to
similar existing devices, namely invasive glucose sensors. In
connection with its review of the Company's 510(k) Notification,
the FDA will determine whether the device is "substantially
equivalent" to a similar existing device based upon the following
factors: (i) whether the device has the same "intended use" as an
existing device; and (ii) whether the device has the same
technological characteristics as the existing device, unless the
different technological characteristics do not adversely affect
its safety and effectiveness. Although the Company and the IRBs
believe that the Noninvasive Glucose Sensor satisfies those
requirements, thus qualifying for a 510(k) Notification, there can
be no assurance that the FDA will agree. Although its
correspondence with the Company appears to indicate that the FDA
believes that the 510(k) Notification is the appropriate filing
for the Diasensorr 1000, should the FDA determine that the device
is not "substantially equivalent" to an existing device, or refuse
to approve the 510(k) Notification for any reason, the Company
would be required to submit to the FDA's full pre-market approval
process, which would require additional testing, and result in
significant delays and increased expenses. The FDA's pre-market
approval process is more extensive, time-consuming and will result
in increased research and development expenses, while delaying the
time period in which BICO and Diasense could begin manufacturing
and marketing the product.

The time elapsed between the completion of clinical testing at
IRBs and the grant of marketing approval by the FDA is uncertain,
and no assurance can be given that approval to market the
Noninvasive Glucose Sensor will ultimately be obtained. In
addition, delays or rejections may be encountered based upon
changes in the FDA's regulatory policies during the period of
research and development and the FDA's review.

The Company may also be required to comply with the same
regulatory requirements prior to introducing the Diasensor 2000,
or other models of the Noninvasive Glucose Sensor, to the market.
Any changes in FDA procedures or requirements will require
corresponding changes in the Company's obligations in order to
maintain compliance with FDA standards. Such changes may result
in additional delays or increased expenses.

BICO's products may also be subject to foreign regulatory approval
prior to any sales.

The FDA's Good Manufacturing Practices for Medical Devices
specifies various requirements for BICO's manufacturing processes
and maintenance of certain records.

Whole-Body Extracorporeal Hyperthermia

HemoCleanse has received FDA approval of its Form 510(k)
Notification in connection with the use of the BioLogic-DT model,
which is used in drug detoxification procedures. However, the
510(k) Notification process, which is intended to be a shorter,
less complex FDA procedure as compared to a full Pre-Market
Approval process, may not be available for the ThermoChem System
model which is used in the hyperthermia project. IDT and
HemoCleanse continuing to hold discussions with the FDA regarding
the number of patients which must be treated with the ThermoChem
System before the FDA will accept an application to market the
delivery system in the U.S., and the such companies have retained
a biostatistician to assist them in making that determination.
The Company believes, based on the federal government's statements
regarding the priority treatment to be afforded to drugs and
procedures in connection with the treatment of HIV and AIDS, that
its FDA application, in whatever form, may receive expedited
review. If either a Pre-Market Approval application or a 510(k)
Notification is approved by the FDA, it would allow IDT to market
the device.

Although the federal government has publicly stated that
experimental drugs and procedures in connection with the treatment
of HIV will receive priority treatment, there can be no assurances
that any future 510(k) Notifications, Pre-Market Approval
applications, or IDEs will obtain FDA approval. Without FDA
approval, the delivery system cannot be used or marketed in the
United States.

Bioremediation

The Company's bioremediation project will be supervised by NETAC,
a private group endorsed and supervised by the EPA and the
Pennsylvania Department of Environmental Resources. In addition,
each state in which the bioremediation products are used will
apply its own environmental regulations to the use and sale of the
products.

HUMAN RESOURCES

As of September 30, 1998, the Company and its subsidiaries had __
full-time employees who were located primarily in either the
Indiana or Pittsburgh locations. Due to its cash flow problems
during 1998, the Company was compelled to lay off certain
employees; other employees resigned.
The Company has employment contracts with some of its non-officer
employees, most of whom are scientists and engineers employed in
the Company's research and development operations. Such contracts
are typically for terms of five years and contain confidentiality
provisions. The Company also employs consultants as needed; some
of the consultants are employed pursuant to consulting contracts
which contain confidentiality provisions.

Properties

The Company's research and development operations are located in a
20,000 square foot one-story building at 300 Indian Springs Road,
Indiana, Pennsylvania. This facility contains sufficient
additional space to accommodate the Company's projected operations
through 1998, except for its manufacturing space which is
described below. The building is leased by the Company from the
300 Indian Springs Road Real Estate Partnership (the
"Partnership"). The lease period is 20 years and runs
concurrently for ten years with a mortgage arranged by the
Partnership at a stated amount of rent. At the end of ten years,
the amount of rent paid by the Company is subject to
renegotiation, based on refinancing of a balloon payment due on
the mortgage, unless the mortgage has been satisfied by the
Partnership. In addition to rent, the Company pays all taxes,
utilities, insurance, and other expenses related to its operations
at that location (See, "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS").

In September 1992, BICO entered into a ten-year lease agreement
with the Indiana County Board of Commissioners for 22,500 square
feet of space which BICO plans to use for the manufacture of the
Noninvasive Glucose Sensor, once developed. The facility,
comprised of 22,500 square feet, has been reconfigured to BICO's
specifications, and the machinery and equipment necessary to
manufacture have been ordered. In addition, the Company has made
arrangements with Indiana County Commerce Park, the location of
the manufacturing facility, for an additional 32,250 square feet
of manufacturing space. Due to the Company's cash flow problems
during 1998, Indiana County filed a judgment against the Company
in connection with past due payments on this facility.

DIRECTORS AND EXECUTIVE OFFICERS

Name Age Since Position

David L. Purdy 69 1972 President, Chaairman of the Board,
Treasurer, Director
Fred. E. Cooper 52 1989 Chief Executive Officer, Executive Vice
President, Director
Anthony J. Feola 50 1990 Senior Vice President, Director

Glenn Keeling 47 1991 Vice President, Director

Richard H. Bourret 58 1998 Director

Stan Cottrell 55 1998 Director
_________________________________

DAVID L. PURDY, 69 is President, Chairman of the Board, Treasurer
and a director of the Company. Mr. Purdy has been a director and
Chairman of the Board since its organization in 1972 and is
considered the organizer and founder of the Company; he devotes
60% of his time to the business of the Company, and 40% of his
time to Diasense. He has also served as President of the Company
from 1972 through December 1990, with the exception of five months
in 1980, when he served as Chairman and full-time Program Director
of the Company's implantable medicine dispensing device program
with St. Jude Medical, Inc., and from October 1, 1987 through July
15, 1988, when he served as Chairman and Director of Research and
Development for the Company. Prior to founding the Company, he
was employed by various companies in the medical technology field,
including Arco Medical, Inc. Mr. Purdy is also an officer and
director of Diasense and Coraflex.

FRED E. COOPER, 52, is the Chief Executive Officer, Executive Vice
President and a director of the Company; he devotes approximately
60% of his time to the business of the Company, and 40% to
Diasense. Prior to joining the Company, Mr. Cooper co-founded
Equitable Financial Management, Inc. of Pittsburgh, PA, a company
in which he served as Executive Vice President until his
resignation and divestiture of ownership in August 1990. In 1972,
Mr. Cooper founded Cooper Leasing Corp., Pittsburgh, Pennsylvania,
a company specializing in equipment and venture financing. Mr.
Cooper was appointed Chief Executive Officer in January 1990. He
is also an officer and director of Diasense and Barnacle Ban, and
a director of Petrol Rem and Coraflex.

ANTHONY J. FEOLA, 50, rejoined the Company as its Senior Vice
President in April, 1994, after serving as Diasense's Vice
President of Marketing and Sales from January, 1992 until April,
1994. Prior to January, 1992, he was the Company's Vice President
of Marketing and Sales. Prior to joining the Company in November
1989, Mr. Feola was Vice President and Chief Operating Officer
with Gateway Broadcasting in Pittsburgh in 1989, and National
Sales Manager for Westinghouse Corporation, also in Pittsburgh,
from 1980 until 1989. He was elected a director of the Company in
February 1990, and also serves as a director of Diasense,
Coraflex, Petrol Rem and Barnacle Ban.

GLENN KEELING, 47, joined the Board of Directors in April 1991.
Mr. Keeling currently is a full-time employee of BICO in the
position of Vice President of Marketing; his primary
responsibilities during 1994 through 1997 have been the management
and operation of IDT's Whole-Body Extracorporeal Hyperthermia
project. From 1976 through 1991, he was a Vice President in
charge of new business development at Equitable Financial
Management, Inc., a regional equipment lessor. His
responsibilities included initial contacts with banks and
investment firms to open new lines of business referrals in
connection with financing large equipment transactions. He is
also President and a director of IDT.

RICHARD H. BOURRET, 58, was appointed to the Board of Directors in
1998. Mr. Bourret has over twenty-five years of senior management
experience in retail, wholesale and manufacturing with specialty
stores, department stores, mass merchandisers and manufacturers.
He is a former president of Montgomery Wards Apparel Division in
New York, former president and CEO of G.H. Bass Company and a
former Executive Vice President and COO of Woolf Brothers in
Kansas City. Mr. Bourret is currently a business consultant.

STAN COTTRELL, 55, was appointed to the Board of Directors in
1998. Mr. Cottrell is the Chairman and Founder of Cottrell
Associates International, Inc., which provides international
business development, brokerage, specialty marketing and
promotional services. He is a former director of marketing for
Inhalation Therapy Services and was employed by Boehringer
Ingelheim, Ltd. as a national product manager. Mr. Cottrell is a
world ultra-distance runner and the author of several books.
Pursuant to the disclosure requirements of Item 405 of Regulation
S-K regarding timely filings required by Section 16(a) of the
Securities and Exchange Act, the Company represents the following.
Based solely on its review of copies of forms received and written
representations from certain reporting persons, the Company
believes that all of its officers, directors and greater than ten
percent beneficial owners complied with applicable filing
requirements.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Employment Relationships

The Board of Directors of the Company approved employment
agreements on November 1, 1994 for its officers, David L. Purdy,
Fred E. Cooper, Anthony J. Feola and Glenn Keeling (See
"Employment Agreements").

David L. Purdy, President, Treasurer and a director of the
Company, is a director of Diasense and Coraflex. He is also the
chairman and Chief Scientist of Diasense, and the President and
Treasurer of Coraflex. Mr. Purdy devotes 60% of his time to BICO,
and 40% to Diasense. In addition to his salary paid by BICO, Mr.
Purdy was paid $87,500 and $100,000 by Diasense in 1997 and 1996,
respectively. Fred E. Cooper, Chief Executive Officer, Executive
Vice President and a director of the Company, is a director of
Diasense, Coraflex, Petrol Rem, and Barnacle Ban. He is also the
President of Diasense, and Barnacle Ban. Mr. Cooper devotes
approximately 60% of his time to BICO and 40% to Diasense. In
addition to his salary and bonus paid by BICO, he was paid
$150,000 by Diasense in 1996 and 1997. Anthony J. Feola, Senior
Vice President and a director of the Company, is also a director
of Diasense, Coraflex, Petrol Rem, and Barnacle Ban. Glenn
Keeling, Vice President and a director of the Company, was
employed on January 1, 1992 as BICO's manager of product
development. Mr. Keeling is also the President and a director of
IDT. Gary Keeling, the brother of Glenn Keeling, resigned as an
officer and director of Diasense in August, 1997.

Property

Three of the Company's current executive officers and/or directors
and two former directors of the Company are members of the
nine-member 300 Indian Springs Road Real Estate Partnership (the
"Partnership") which in July 1990, purchased the Company's real
estate in Indiana, Pennsylvania, and each has personally
guaranteed the payment of lease obligations to the bank providing
the funding. The five members of the Partnership who are also
current or former officers and/or directors of the Company, David
L. Purdy, Fred E. Cooper, Glenn Keeling, Jack H. Onorato and C.
Terry Adkins, each received warrants on June 29, 1990 to purchase
100,000 shares of the Company's common stock at an exercise price
of $.33 per share until June 29, 1995 (those warrants still
outstanding as of the original expiration date were extended until
June 29, 1998). Mr. Adkins, who was a director at the time of the
transaction, resigned from the Board of Directors on March 30,
1992, and is currently an officer and director of Diasense. Mr.
Keeling, who was not a director at the time of the transaction,
joined the Board of Directors on May 3, 1991. Mr. Onorato, who
was not a director at the time of the transaction, was a BICO
director from September 1992 until April 1994.
In all instances where warrants were issued in connection with the
transactions set forth above, the exercise price of the warrants
was equal to or above the current quoted market price of the
Company's common stock on the date of issuance.
In April 1992, Diasense purchased an office condominium located at
the Bourse Office Park, Virginia Manor, Building 2500, Second
Floor, Pittsburgh, Pennsylvania 15220 for $190,000. The Company
has entered into a lease with Diasense and pays rent in the amount
of $3,544 per month, plus one-half of the utilities.

Warrants

The following paragraphs, along with the notes to the financial
statements, include disclosure of the warrants which were granted
to executive officers and directors of the Company from 1995
through 1997. These warrants were accounted for in accordance
with Accounting Principles Board Opinion 25 (based on the spread,
if any, between the exercise price and the quoted market price of
the stock on the date that the warrants were granted). No value
was recorded for these warrants since they were all granted at
exercise prices which were equal to or above the current quoted
market price of the stock on the date issued (See, Note J to the
Financial Statements). In 1995 and 1996, the Company extended
warrants granted in 1990 and 1991, which were scheduled to expire
in 1995 and 1996, until 1998-2000. Because the exercise price of
the warrants, which remained unchanged, was less than the market
price of the common stock on the dates of the extensions, charges
were made against operations (See, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", and
Note J to the Financial Statements).

On August 26, 1996, the Board of Directors approved the granting
of warrants to purchase 100,000 shares of common stock at $1.48
per share to Glenn Keeling, an officer and director of the
Company.

Loans

On October 1, 1990, the Board of Directors approved a $75,000 loan
from the Company to Fred E. Cooper. Mr. Cooper signed a
promissory note promising to pay the principal amount plus twelve
percent (12%) simple interest. Mr. Cooper repaid $66,500 of the
$75,000 principal balance during 1991. During 1991, the Company
granted loans to Fred E. Cooper in the aggregate amount of
$57,400. Mr. Cooper signed promissory notes promising to pay the
principal amounts upon demand plus ten percent (10%) simple
interest. In January 1992, the Company granted a loan to Fred E.
Cooper in the amount of $25,000. Mr. Cooper signed a promissory
note promising to pay the principal amount upon demand plus ten
percent (10%) simple interest. In 1997, the Companies granted
loans to Fred E. Cooper aggregating $158,000; Mr. Cooper signed
promissory notes promising to pay the principal amounts upon
demand plus 8.25% simple interest. In 1998, the Company granted
loans to Fred E. Cooper aggregating $275,000; Mr. Cooper signed a
promissory note promising to pay the principal amount upon demand
plus 8.25% simple interest. Except for the joint liability set
forth below, the aggregate balance of the loans as of September
30, 1998, including accrued interest, was $92,662.

In November 1997, the Companies granted a loan to Anthony J. Feola
in the amount of $50,000. Mr. Feola signed a promissory note
promising to pay the principal amount upon demand plus 8.25%
simple interest. In February 1998, the Company granted a loan to
Anthony J. Feola in the amount of $185,000. Mr. Feola signed a
promissory note promising to pay the principal upon demand plus
8.25% simple interest. Except for the joint liability set forth
below, the aggregate balance of the loans as of September 30,
1998, including accrued interest, was $9,659.

In December 1991, the Company granted a loan to Glenn Keeling in
the amount of $5,000. Mr. Keeling signed a Promissory Note
promising to pay the principal amount upon demand plus ten percent
(10%) simple interest. In December 1996, the Company granted a
loan to Glenn Keeling in the amount of $50,000. Mr. Keeling
signed a promissory note promising to pay the principal amounts
upon demand plus 8.25% simple interest. In November, 1997, the
Company granted a loan to Glenn Keeling in the amount of $20,000.
Mr. Keeling signed a promissory note promising to pay the
principal upon demand plus 8.25% simple interest. In February
1998, the Company granted a loan to Glenn Keeling in the amount of
$190,000. Mr. Keeling signed a promissory note promising to pay
the principal upon demand plus 8.25% simple interest. Except for
the joint liability set forth below, the aggregate balance of the
loans as of September 30, 1998, including accrued interest, was
$22,277.

In September 1995, the Company granted a loan in the amount of
$250,000 to Allegheny Food Services in the form of a one-year
renewable note bearing interest at prime rate as reported by the
Wall Street Journal plus one percent (1%). Interest payments have
been made on the note, and as of September 30, 1998, the balance
was $250,000. Joseph Kondisko, a former director of Diasense, is
a principal owner of Allegheny Food Services.

In 1997, the Company paid $35,000 in connection with the
settlement of a lawsuit. The payment was secured with a loan
executed jointly by all of the directors: Fred E. Cooper, David L.
Purdy, Anthony J. Feola and Glenn Keeling. The balance of the
loan as of September 30, 1998 was $35,000.
Each of the loans made to officers or directors and their
affiliates was made for a bona fide business purpose. All future
loans to officers, directors and their affiliates will be made for
bona fide business purposes only.
Intercompany Agreements

Management of the Company believes that the agreements between
BICO and Diasense, which are summarized below, were based upon
terms which were as favorable as those which may have been
available in comparable transactions with third parties. However
no unaffiliated third party was retained to determine
independently the fairness of such transactions.

License and Marketing Agreement. Diasense acquired the exclusive
marketing rights for the Noninvasive Glucose Sensor and related
products and services from BICO in August 1989 in exchange for
8,000,000 shares of its common stock. That agreement was canceled
pursuant to a Cancellation Agreement dated November 18, 1991, and
superseded by a Purchase Agreement dated November 18, 1991. The
Cancellation Agreement provides that BICO will retain the
8,000,000 shares of Diasense common stock which BICO received
pursuant to the License and Marketing Agreement.

Purchase Agreement. BICO and Diasense entered into a Purchase
Agreement dated November 18, 1991 whereby BICO conveyed to
Diasense its entire right, title and interest in the Noninvasive
Glucose Sensor and its development, including its extensive
knowledge, technology and proprietary information. Such
conveyance includes BICO's patent received in December 1991.

In consideration of the conveyance of its entire right in the
Noninvasive Glucose Sensor and its development, BICO received
$2,000,000. In addition, Diasense may endeavor, at its own
expense, to obtain patents on other inventions relating to the
Noninvasive Glucose Sensor. Diasense also guaranteed BICO the
right to use such patented technology in the development of BICO's
proposed implantable closed-loop system, a related system in the
early stages of development.

In December 1992, BICO and Diasense executed an amendment to the
Purchase Agreement which clarified terms of the Purchase
Agreement. The amendment defines "Sensors" to include all devices
for the noninvasive detection of analytes in mammals or in other
biological materials. In addition, the amendment provides for a
royalty to be paid to Diasense in connection with any sales by
BICO of its proposed closed-loop system.

Research and Development ("R&D") Agreement. Diasense and BICO
entered into an agreement dated January 20, 1992 in connection
with the research and development of the Noninvasive Glucose
Sensor. Pursuant to the agreement, BICO will continue the
development of the Noninvasive Glucose Sensor, including the
fabrication of prototypes, the performance of clinical trials, and
the submission to the FDA of all necessary applications in order
to obtain market approval for the Noninvasive Glucose Sensor.
BICO will also manufacture the models of the Noninvasive Glucose
Sensor to be delivered to Diasense for sale (See, "Manufacturing
Agreement"). Upon the delivery of the completed models, the
research and development phase of the Noninvasive Glucose Sensor
will be deemed complete.

Diasense has agreed to pay BICO $100,000 per month for indirect
costs beginning April 1, 1992, during the 15 year term of the
agreement, plus all direct costs, including labor. BICO also
received a first right of refusal for any program undertaken to
develop, refine or improve the Noninvasive Glucose Sensor, and for
the development of other related products. In July 1995, BICO and
Diasense agreed to suspend billings, accruals of amounts due and
payments pursuant to the R&D Agreement pending the FDA's review of
the Sensor.

Manufacturing Agreement. BICO and Diasense entered into an
agreement dated January 20, 1992, whereby BICO will act as the
exclusive manufacturer of the Noninvasive Glucose Sensor and other
related products. Diasense will provide BICO with purchase orders
for the products and will endeavor to provide projections of
future quantities needed. The original Manufacturing Agreement
called for the products to be manufactured and sold at a price to
be determined in accordance with the following formula: Cost of
Goods (including actual or 275% of overhead, whichever is lower)
plus a fee of 30% of Cost of Goods. In July 1994, the formula was
amended to be as follows: Costs of Goods Sold (defined as BICO's
aggregate cost of materials, labor and associated manufacturing
overhead) + a fee equal to one third (1/3) of the difference
between the Cost of Goods Sold and Diasense's sales price of each
Sensor. Diasense's sales price of each Sensor is defined as the
price paid by any purchaser, whether retail or wholesale, directly
to Diasense for each Sensor. Subject to certain restrictions,
BICO may assign its manufacturing rights to a subcontractor with
Diasense's written approval. The term of the agreement is fifteen
years.
<PAGE> 32

EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
and long-term compensation for services in all capacities to the
Company for the fiscal years ended December 31, 1997, 1996 and
1995, of those persons who were, at December 31, 1997 (i) the
Chief Executive Officer, and (ii) the other most highly
compensated executive officers of the Company whose remuneration
exceeded $100,000 (the "Named Executives").

SUMMARY COMPENSATION TABLE
==============================================================================
Annual Compensation | (1)Long Term Compensation
- ------------------------------------------------------------------------------
| Awards
Name and | Securities
Principal (2) | Underlying (2) All other
Position Year Salary($) Bonus($) Other($) | Warrants(#) Compensation
==============================================================================
David L. |
Purdy , 1997 $154,167 $0 $0 | 0 $0
President, 1996 $300,000 $0 $0 | 0 $0
Treasurer (4) 1995 $300,000 $0 $0 | 820,000 (3) $0
- ------------------------------------------------------------------------------
Fred E. 1997 $442,000 $0 $0 | 0 $0
Cooper, 1996 $442,000 $0 $0 | 0 $0
CEO (5) 1995 $330,000 $0 $0 | 575,000 (3) $0
- ------------------------------------------------------------------------------
Anthony J. 1997 $300,000 $0 $0 | 0 $0
Feola , Sr. 1996 $300,000 $0 $0 | 350,000 (3) $0
Vice Pres.(6) 1995 $250,000 $93,125 $0 | 200,000 (3) $0
- ------------------------------------------------------------------------------
Glenn 1997 $200,000 $0 $0 | 0 $0
Keeling, VP 1996 $200,000 $0 $0 | 100,000 (8) $0
(7) 1995 $175,000 $0 $0 | 0 $0
==============================================================================

1) The Company does not currently have a Long-Term Incentive Plan ("LTIP"),
and no payouts were made pursuant to any LTIP during the years 1997, 1996,
or 1995. The Company did not award any restricted stock to the Named
Executives during any year, including the years 1997, 1996 or 1995. The
Company did not award any warrants, options or Stock Appreciation Rights
("SARs") to the Named Executives during the years ended December 31, 1997,
1996 or 1995; however, the Company did extend warrants owned by the Named
Executives, which would have expired during 1995 and 1996 (See Note 3,
below). The Company has no retirement, pension or profit-sharing programs
for the benefit of its directors, officers or other employees. The
Company currently has key-man life insurance for David L. Purdy and Fred
E. Cooper in the amount of $1,000,000 each.

(2) During the year ended December 31, 1997, the Named Executives received
medical benefits under the Company's group insurance policy, including
disability and life insurance benefits. The aggregate amount of all
perquisite compensation was less than 10% of the total annual salary and
bonus reported for each Named Executive.

(3) During 1995 and 1996, the Company extended warrants previously issued to
the Named Executives which would have otherwise expired. Although the
extensions were in connection with warrants already held by the Named
Executives, they are shown in the table set forth above as "awards" for
executive compensation disclosure purposes because at the time of the
extension, the exercise price of the warrants (which remained unchanged)
was less than the "market price" of the common stock.

(4) In November, 1994, Mr. Purdy's employment agreement was renegotiated to
provide for an annual salary of $250,000 effective November 1, 1994
through October 31, 1999. All other terms of the contract remained
substantially the same (See, "Employment Agreements"). During 1995, Mr.
Purdy's salary was increased by $50,000. In 1997, 1996 and 1995, Mr.
Purdy was paid $87,500; $100,000 and $100,000 by Diasense.

(5) In November, 1994, Mr. Cooper's employment agreement was renegotiated to
provide for an annual salary of $250,000 effective November 1, 1994
through October 31, 1999. All other terms of the contract remained
substantially the same (See, "Employment Agreements"). In addition, in
1997, 1996 and 1995, Mr. Cooper was paid $96,000; $96,000; and $40,000
respectively by both Petrol Rem and IDT, both of which are subsidiaries of
BICO. In 1997, 1996, and 1995, Mr. Cooper was paid $150,000 in salary by
Diasense.

(6) In April, 1994, Mr. Feola's employment agreement with Diasense was
assigned to BICO when he left Diasense to rejoin BICO as its Senior Vice
President. In November, 1994, Mr. Feola's employment agreement was
renegotiated, provides for an annual salary of $200,000 and is effective
November 1, 1994 through October 31, 1999. All other terms of the
contract remained substantially the same (See, "Employment Agreements").
During 1996 and 1995, Mr. Feola's salary was increased by $50,000 per
year.

(7) In November, 1994, Mr. Keeling entered into an employment agreement with
the Company which provides for an annual salary of $150,000 effective
November 1, 1994 through October 31, 1999 (See, "Employment Agreements").
During 1996 and 1995, Mr. Keeling's salary was increased by $25,000 per
year.

(8) On August 26, 1996, Mr. Keeling was granted warrants to purchase 100,000
shares of the Company s common stock at a price of $1.48 per share (the
market price as of that date) until August 26, 2001.

Option/Warrant/SAR Grants in Last Fiscal Year
No options, warrants or SARs were granted or extended to the Named
Executives during 1997.

AGGREGATED OPTION/WARRANT/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/WARRANT/SAR VALUE TABLE
=========================================================================
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs 12/31/97 ($)
at 12/31/97 (#)
Shares Value
Acquired on Realized ($) Exercisable Exercisable/
Exercise (2) Unexercisable(3) Unexercisable (4)
Name (#)(1)
- -------------------------------------------------------------------------------
David L. 52,800 $ 8,239 767,200 $ 0
Purdy (5) (6) (7) (13)
- -------------------------------------------------------------------------------
Fred E. 100,000 $33,440 300,000 $ 0
Cooper (8) (9) (10) (13)
- -------------------------------------------------------------------------------
Anthony J. 0 $ 0 550,000 $ 0
Feola (11) (13)
- -------------------------------------------------------------------------------
Glenn 0 $ 0 100,000 $ 0
Keeling (12) (13)
===============================================================================

__________________
(1) This figure represents the number of shares of common stock
acquired by each named executive officer upon the exercise of
warrants.
(2) The value realized of the warrants exercised was computed by
determining the spread between the market value of the
underlying securities at the time of exercise minus the
exercise price of the warrant.
(3) All warrants held by the Named Executives are currently
exercisable.
(4) The value of unexercised warrants was computed by subtracting
the exercise price of the outstanding warrants from the
closing sales price of the Company's common stock on December
31, 1997 as reported by Nasdaq ($.1875).
(5) During the year ended December 31, 1997, Mr. Purdy exercised
warrants to purchase 52,800 shares of common stock at $.25
per share.
(6) The closing sales price as reported by Nasdaq on May 1, 1997,
the date of the warrant exercise set forth in note (5) was
$.406 per share.
(7) Includes warrants to purchase: 187,200 shares of common stock
at $.25 per share until April 24, 1995 (extended until April
24, 1998); 500,000 shares of common stock at $.25 per share
until May 1, 1995 (extended until May 1, 1998); and 80,000
shares of common stock at $.33 per share until June 29, 1995
(extended until June 29, 1998) (See, "Warrants").
(8) During year ended December 31, 1997, Mr. Cooper exercised
warrants to purchase 100,000 shares of common stock at $.25
per share.
(9) The closing sales price as reported by Nasdaq on April 21,
1997, the date of the warrant exercise set forth in note (8),
was $.594.
(10) Includes warrants to purchase: 300,000 shares of common stock
at $.25 per share until May 1, 1995 (extended until May 1,
1998) (See, "Warrants").
(11) Includes warrants to purchase: 100,000 shares of common
stock at $.25 per share until May 1, 1995 (extended until May
1, 1998); 100,000 shares of common stock at $.25 per share
until November 26, 1995 (extended until November 26, 1998);
and 350,000 shares of common stock at $.50 per share until
October 11, 1996 (extended until October 11, 1999) (See,
"Warrants").
(12) Includes warrants to purchase: 100,000 shares of common stock
at $1.48 per share until August 26, 2001.
(13) Because the market price as of December 31, 1997 was less
than the exercise price of the warrants, such warrants were
not "in-the-money".

Employment Agreements

BICO has entered into employment agreements (the "Agreements")
with its Named Executives Fred E. Cooper, David L. Purdy, Anthony
J. Feola and Glenn Keeling effective November 1, 1994, pursuant to
which they are currently entitled to receive annual salaries of
$250,000, $300,000, $300,000 and $200,000 respectively, which are
subject to review and adjustment. The initial term of the
Agreements with Messrs. Cooper and Purdy expires on October 31,
1999, and continues thereafter for additional three-year terms
unless any of the parties give proper notice of non-renewal. The
initial term of the Agreements with Messrs. Feola and Keeling
expires on October 31, 1999, and continues thereafter for
additional two-year terms unless either of the parties give proper
notice of non-renewal. The Agreements also provide that in the
event of a "change of control" of BICO, BICO is required to issue
the following shares of common stock, represented by a percentage
of the outstanding shares of common stock of the Company
immediately after the change in control: five percent (5%) to Mr.
Cooper and Mr. Purdy; four percent (4%) to Mr. Feola; and three
percent (3%) to Mr. Keeling. In general, a "change of control" is
deemed to occur for purposes of the Agreements (i) when 20% or
more of BICO's outstanding voting stock is acquired by any person,
(ii) when one-third (1/3) or more of BICO's directors are not
Continuing Directors (as defined in the Agreement), or (iii) when
a controlling influence over the management or policies of BICO is
exercised by any person or by persons acting as a group within the
meaning of Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").

In addition, in the event of a change in control within the term
of the Agreements or within one year thereafter, Messrs. Cooper,
Purdy, Feola and Keeling are entitled to receive severance
payments in amounts equal to: 100% of their most recent annual
salary for the first three years following termination; 50% of
their most recent annual salary for the next two years; and 25% of
their most recent salary for the next five years. BICO is also
required to continue medical insurance coverage for Messrs.
Cooper, Purdy, Feola and Keeling and their families during such
periods. Such severance payments will terminate in the event of
the employee's death.

In the event that either Mr. Purdy or Mr. Cooper becomes disabled,
as defined in their Agreements, he will be entitled to the
following payments, in lieu of salary, such payments to be reduced
by any amount paid directly to him pursuant to a disability
insurance policy provided by the Company or its affiliates: 100%
of his most recent annual salary for the first three years; and
70% of his most recent salary for the next two years. In the
event that either Mr. Feola or Mr. Keeling becomes disabled, as
defined in their Agreements, he will be entitled to the following
payments, in lieu of salary, such payments to be reduced by any
amount paid directly to him pursuant to a disability insurance
policy provided by the Company or its affiliates: 100% of his most
recent annual salary for the first year; and 70% of his most
recent salary for the second year.

The Agreements also generally restrict the disclosure of certain
confidential information obtained by Messrs. Cooper, Purdy, Feola
and Keeling during the term of the Agreements and restricts them
from competing with BICO for a eriod of one year in specified
states following the expiration or termination of the Agreements.
In addition to the Employment Agreements described above, BICO
also entered into employment agreements with two of its non-
executive officer employees effective November 1, 1994. The terms
of such agreements are similar to those described for Messrs.
Feola and Keeling above, with the following amendments: the term
of one agreement is from November 1, 1994 through October 31,
2002, and is renewable for successive two-year terms; the term of
the other agreement is from November 1, 1994 through October 31,
1999, and is renewable for successive two-year terms; in the
event of a "change in control", BICO is required to issue both
employees shares of common stock equal to two percent (2%) of the
outstanding shares of the common stock of the Company immediately
after the change in control.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the indicated information as of
September 30, 1998 with respect to each person who is known by the
Company to be the beneficial owner of more than five percent (5%)
of the outstanding common stock, each director of the Company, and
all directors and executive officers of the Company as a group.
The table excludes disclosure of entities such as Cede & Co. and
other companies which would reflect the ownership of entities who
hold stock on behalf of shareholders.

As of September 30, 1998, there were 398,402,428 shares of the
Company's common stock outstanding. The first column sets forth
the common stock currently owned by each person or group,
excluding currently exercisable warrants for the purchase of
common stock. The second column sets forth the percentage of the
total number of shares of common stock outstanding as of September
30, 1998 owned by each person or group, excluding exercisable
warrants. The third column sets forth the total number of shares
of common stock which each named person or group has the right to
acquire, through the exercise of warrants, within sixty (60) days,
plus common stock currently owned. The fourth column sets forth
the percentage of the total number of shares of common stock
outstanding as of September 30, 1998 which would be owned by each
named person or group upon the exercise of all of the warrants
held by such person or group together with common stock currently
owned, as set forth in the third column. Except as otherwise
indicated, each person has the sole power to vote and dispose of
each of the shares listed in the columns opposite his name.

Amount and Nature Percent of
Name and Address of of Beneficial Percent of Ownership with Class with
Beneficial Owner Ownership(1) Class (2) Warrants (3) Warrants(4)

David L. Purdy (5) 240,140 * 1,007,340(6) *
300 Indian Springs Road
Indiana, PA 15701

Fred E. Cooper 776,200 * 1,076,200(7) *
Building 2500, 2nd Floor
2275 Swallow Hill Rd.
Pittsburgh, PA 15220

Anthony J. Feola 354,000 * 904,000(8) *
Building 2500, 2nd Floor
2275 Swallow Hill Rd.
Pittsburgh, PA 15220

Glenn Keeling 138,500 * 238,500(9) *
200 Julrich Drive
McMurray, PA 15317

All directors and 1,508,840 * 3,226,040(10) *
executive officers
as a group (4 persons)

* Less than one percent
_______________________

(1) Excludes currently exercisable warrants set forth in the
third column and detailed in the footnotes below.
(2) Represents current common stock owned by each person, as set
forth in the first column, excluding currently exercisable
warrants, as a percentage of the total number of shares of
common stock outstanding as of September 30, 1998.
(3) Includes ownership of all shares of common stock which each
named person or group has the right to acquire, through the
exercise of warrants, within sixty (60) days, together with
the common stock currently owned.
(4) Represents total number of shares of common stock owned by
each person, as set forth in the third column, which each
named person or group has the right to acquire, through the
exercise of warrants within sixty (60) days, together with
common stock currently owned, as a percentage of the total
number of shares of common stock outstanding as of September
30, 1998. For computation purposes, the total number of
shares of common stock outstanding as of September 30, 1998
has been increased by the number of additional shares which
would be outstanding if the person or group owned the number
of shares set forth in the third column.
(5) Does not include shares held by Mr. Purdy's spouse or adult
children. Mr. Purdy disclaims any beneficial interest to
shares held by members of his family.
(6) Includes currently exercisable warrants to purchase the
following: 187,200 shares of common stock at $.25 per share
until April 24, 1995 (extended until April 24, 1998); 80,000
shares of common stock at $.33 per share until June 29, 1995
(extended until June 29, 1998); and 500,000 shares of common
stock at $.25 per share until May 1, 1995 (extended until May
1, 1998) pursuant to Mr. Purdy's previous employment
agreement. In addition, Mr. Purdy is entitled to certain
shares of Common Stock upon a change of control of BICO as
defined in his employment agreement (See, "Employment
Agreements").
(7) Includes currently exercisable warrants to purchase the
following: 300,000 shares of common stock at $.25 per share
until May 1, 1995 (extended until May 1, 1998) pursuant to
Mr. Cooper's previous employment agreement. In addition, Mr.
Cooper is entitled to certain shares of Common Stock upon a
change of control of BICO as defined in his employment
agreement (See, "Employment Agreements").
(8) Includes currently exercisable warrants to purchase the
following: 100,000 shares of common stock at $.25 per share
until November 26, 1995 (extended until November 26, 1998);
100,000 shares of common stock at $.25 per share until May 1,
1995 (extended until May 1, 1998) pursuant to Mr. Feola's
previous employment agreement; and 350,000 shares of common
stock at $.50 per share until October 11, 1996 (extended
until October 11, 1999). In addition, Mr. Feola is entitled
to certain shares of Common Stock upon a change of control of
BICO as defined in his employment agreement (See, "Employment
Agreements").
(9) Includes currently exercisable warrants to purchase 100,000
shares of common stock at $1.48 per share until August 26,
2001. In addition, Mr. Keeling is entitled to certain shares
of Common Stock upon a change of control of BICO as defined
in his employment agreement (See, "Employment Agreements").
(10) Includes shares of common stock, including stock currently
owned, available under currently exercisable warrants as set
forth above.

DESCRIPTION OF SECURITIES
BICO's authorized capital currently consists of 600,000,000
shares of common stock, par value $.10 per share and 500,000
shares of cumulative preferred stock, par value $10.00 per share.
As of August 31, 1998, there were 398,402,428 shares of common
stock and zero shares of preferred stock outstanding. In addition,
there were $3,125,000 of the Company's 4% Convertible Debentures
outstanding as of August 31, 1998. In June 1998, the Company's
shareholders approved the authorization of an additional
300,000,000 shares of common stock, along with a reverse stock
split, if necessary.
Preferred Stock

The Articles of Incorporation of BICO authorize the issuance
of a maximum of 500,000 shares of non-voting cumulative
convertible preferred stock, and authorize the Board of Directors
of BICO to divide such class of preferred stock into series and
to fix and determine the relative rights and preferences of the
shares.

As of August 31, 1998, the Company had no outstanding shares
of preferred stock.
Common Stock

All outstanding shares of the Company's common stock are
fully paid and nonassessable. All shares of common stock to be
received by holders will be fully paid and nonassessable. All the
shares of common stock will be equal to each other with respect to
liquidation rights and dividend rights and there are no preemptive
rights to purchase any additional shares of common stock. Holders
of common stock are entitled to one vote per share on all matters
submitted to a vote of shareholders, but are not entitled to
cumulate their votes in the election of directors. Accordingly,
the holders of more than 50% of the outstanding common stock
voting for the election of directors, could elect the entire slate
of the Board of Directors of BICO, and the holders of the
remaining common stock would not be able to elect any member to
the Board of Directors. As of August 31, 1998, there were
398,402,428 shares of common stock outstanding. In June 1998, the
Company's shareholders approved the authorization of an additional
300,000,000 shares of common stock, along with a reverse stock
split of a maximum of one for 20, if necessary.
In the event of liquidation or dissolution of BICO, holders
of the common stock are entitled to receive on a pro rata basis
all assets of BICO remaining after satisfaction of all liabilities
including liquidation preferences granted to holders of the
preferred stock of BICO.
Convertible Debentures

As of August 31, 1998, the Company had outstanding $3,125,000
in Convertible Debentures, which are due between August 14, 1999
and August 31, 1999.
Dividends

The Company has not paid cash dividends on its common stock
or preferred stock (with the exception of a cash dividend on its
preferred stock in 1983, and a common stock dividend on its
preferred stock in 1988) since its inception, and cash dividends
are not presently contemplated at any time in the foreseeable
future. The Company anticipates that any excess funds generated
from operations in the foreseeable future will be used for working
capital and for investment in research and new product
development, rather than to pay dividends.

In accordance with the Company's Articles of Incorporation,
cash dividends are restricted under certain circumstances.
Holders of common stock are entitled to cash dividends only when
and if declared by the Board of Directors out of funds legally
available for payment thereof. Any such dividends are subject to
the prior right of holders of the Company's preferred stock to
receive any accrued but unpaid dividends. Further, common stock
dividends may be paid only to the extent the net assets of BICO
exceed the liquidation preference of any outstanding preferred
stock.

Employment Agreement Provisions Related to Changes in Control

BICO has entered into agreements (the "Agreements") with Fred
E. Cooper, David L. Purdy, Anthony J. Feola, Glenn Keeling, and
two non-executive officer employees. The Agreements provide that
in the event of a "change of control" of BICO, BICO is required to
issue to Mr. Cooper and Mr. Purdy shares of common stock equal to
five percent (5%), to issue to Mr. Feola four percent (4%), to
issue Mr. Keeling three percent (3%), and to issue the two non-
executive officer employees two percent (2%) each of the
outstanding shares of common stock of the Company immediately
after the change in control. In general, a "change of control" is
deemed to occur for purposes of the Agreement: (i) when 20% or
more of BICO's outstanding voting stock is acquired by any person,
(ii) when one-third (1/3) or more of BICO's directors are not
Continuing Directors (as defined in the Agreements), or (iii) when
a controlling influence over the management or policies of BICO is
exercised by any person or by persons acting as a group within the
meaning of Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Warrants

As of August 31, 1998, there were outstanding warrants to
purchase 8,911,662 shares of the Company's common stock at
exercise prices of between $0.25 and $4.03 per share. These
warrants are held by members of the Company's Scientific Advisory
Board, certain employees, officers, directors, loan guarantors,
lenders and consultants.

The holders of warrants are not entitled to vote, to receive
dividends or to exercise any of the rights of the holders of
shares of common stock for any purpose until such warrants have
been duly exercised and payment of the exercise price has been
made.

Transfer Agent

Chase-Mellon Shareholder Services in New York, New York acts
as the Company's Registrar and Transfer Agent for its common and
preferred stock. The Company acts as its own warrant transfer
agent.

PLAN OF DISTRIBUTION
This Offering is a "best-efforts" offering, and will not be
underwritten nor will any underwriter be engaged for the
marketing, distribution or sale of any shares registered hereby.
The Primary Shares offered hereby by the Company may be sold from
time to time in one or more transactions. The Offering Price will
fluctuate as the market price of the common stock fluctuates, and
the resulting Offering Price may be higher or lower than eight
cents ($.08) per share. Such sales may be made to purchasers
directly by the Company or, alternatively, the Company may offer
the shares through dealers, brokers or agents, who may receive
compensation in the form of concessions or commissions from the
Company and/or the purchasers of the shares for whom they may act
as agents. Any dealers, brokers or agents that participate in the
distribution of shares may be deemed to be underwriters, and any
profits on the sale of the shares by them and any discounts or
commissions received by any such dealers, brokers or agents may be
deemed to be underwriting discounts and commissions under the 1933
Act.

To the extent required at the time a particular offer of the
shares by the Company is made, a supplement to this Prospectus
will be distributed which will set forth the number of shares
being offered and the terms of the offering, including the name or
names of any underwriters, or dealers, the purchase price paid by
any underwriter for the shares purchased from the Company, and any
discounts, commissions, or concessions allowed or reallowed to
dealers, including the proposed selling price to the public.

To comply with the securities laws of certain jurisdictions,
as applicable, the Primary Shares may be offered and sold only
through registered or licensed brokers or dealers. In addition,
the Primary Shares may not be offered or sold in certain
jurisdictions unless they are registered or otherwise comply with
the applicable securities laws of such jurisdictions by exemption,
qualification or otherwise.

SHARES ELIGIBLE FOR FUTURE SALE

So long as the Registration Statement concerning this
offering is effective under the 1933 Act and the Company remains
current in its information filing requirements under Rule 144,
promulgated under the 1933 Act, substantially all of the Resale
Shares will be freely transferable, or freely transferable upon
issuance in the case of shares issuable upon exercise of the
Warrants, without restriction or further registration under the
1933 Act, unless acquired by an affiliate of the Company.
"Affiliates" of the Company generally would include the directors
and executive officers of the Company and any other person or
entity which controls, is controlled by, or is under common
control with, the Company. Affiliates who acquire common stock
pursuant to this Prospectus will continue to be subject to the
volume restrictions of Rule 144, as set forth below.

In general, under Rule 144 as currently in effect, an
affiliate of the Company and any person (or persons whose shares
are aggregated) who has beneficially owned Restricted Shares for
at least two years would be entitled to sell within any three-
month period a number of shares which does not exceed the greater
of (i) one percent (1%) of the then outstanding shares of common
stock of the Company, or (ii) the average weekly trading volume of
the common stock on the open market during the four calendar weeks
preceding such sale. Rule 144 also requires such sales to be
placed through a broker or with a market maker on an unsolicited
basis and requires that there be adequate current public
information available concerning the Company. A person who is
deemed not to have been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially
owned the Restricted Shares for at least two years, would be
entitled to sell such shares under Rule 144(k) without regard to
any of the limitations discussed above immediately following the
commencement of this offering. Restricted Shares properly sold in
reliance upon Rule 144 are thereafter freely tradable without
restriction or registration under the 1933 Act, unless thereafter
held by an affiliate of the Company.
The Company can make no prediction as to the effect, if any,
that sales of shares of common stock or the availability of shares
for sale will have on the market price prevailing from time to
time. Nevertheless, sales of substantial amounts of common stock
in the public market could adversely affect the prevailing market
price of the common stock.

LEGAL PROCEEDINGS
During April, 1998, the Company and its affiliates were
served with subpoenas by the U.S. Attorneys' office for the U.S.
District Court for the Western District of Pennsylvania. The
subpoenas requested certain corporate, financial and scientific
documents and the Company continues to provide documents in
response to such requests. The class action lawsuit which names
the Company and certain officers and directors as defendants is
pending in the U.S. District Court for the Western District of
Pennsylvania. The action has been certified as a class action and
remains in the pre-trial pleading stages pursuant to consent of
all the parties.

INTERESTS OF NAMED EXPERTS AND COUNSEL

The validity for the issuance of the Primary Shares offered
hereby will be passed upon for the Company by Sweeney & Associates
P.C., Pittsburgh, Pennsylvania. Thomas E. Sweeney, Jr., Esq., the
President of Sweeney & Associates P.C., currently holds warrants
to purchase the following shares of the common stock of Diasense,
an affiliate of the Company: 40,000 shares at $.50 per share until
October 23, 2000 and 60,000 shares at $1.00 per share until
January 6, 2000.
EXPERTS
The financial statements of the Company as of December 31,
1997, 1996 and 1995 (which reports included an explanatory
paragraph referring to an uncertainty regarding the Company's
ability to continue as a going concern), incorporated by reference
in this Prospectus, have been audited by Thompson Dugan,
independent certified public accountants, as stated in their
report appearing in the Company's Form 10-K for the year ended
December 31, 1997 and has been so included in reliance upon such
report given upon the authority of that firm as experts in
auditing and accounting.

INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as set forth herein, the Company has no provisions for
the indemnification of its officers, directors or control persons.
David L. Purdy, Fred E. Cooper, Anthony J. Feola and Glenn Keeling
have employment contracts which include indemnification provisions
which indemnify them to the extent permitted by law. The Company
and its affiliates, Diasense, Coraflex, Petrol Rem, Nu-Insulin and
IDT are incorporated under the Business Corporation Law of the
Commonwealth of Pennsylvania. Section 1741, et seq. of said law,
in general, provides that an officer or director shall be
indemnified against reasonable and necessary expenses incurred in
a successful defense to any action by reason of the fact that he
serves as a representative of the corporation, and may be
indemnified in other cases if he acted in good faith and in a
manner he reasonably believed was in, or not opposed to, the best
interests of the corporation, and if he had no reason to believe
that his conduct was unlawful, except that no indemnification is
permitted when such person has been adjudged liable for
recklessness or misconduct in the performance of his duty to the
corporation, unless otherwise permitted by a court of competent
jurisdiction.
Insofar as indemnification for liabilities arising under the
1933 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
Commission such indemnification is against public policy as
expressed in the 1933 Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

<PAGE> 42

No dealer, salesman or other person has been authorized
to give any information or to make any representation
other than those contained in this Prospectus and, if
given or made, such information or representation must
not be relied upon as having been authorized by the
Company, the selling shareholders or any underwriter.
Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs
of the Company since the date of this Prospectus. This
Prospectus does not constitute an offer to sell or
solicitation of an offer to buy any securities offered
hereby in any jurisdiction in which such offer or
solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.
__________________________

<PAGE> 43

INFORMATION NOT REQUIRED IN PROSPECTUS
EXPENSES OF ISSUANCE AND DISTRIBUTION

The following sets forth the Company's estimated
expenses incurred in connection with the issuance and
distribution of the securities described in the
Prospectus other than underwriting discounts and
commissions:

Printing and Copying $ 2,500.00
Legal Fees 15,000.00
SEC Registration Fees 4,100.00
State Filing Fees 2,500.00
Accounting Fees 7,900.00
Total $32,000.00

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Except as set forth herein, the Company has no
provisions for the indemnification of its officers,
directors or control persons. David L. Purdy, Fred E.
Cooper, Anthony J. Feola and Glenn Keeling have
employment contracts which include indemnification
provisions which indemnify them to the extent permitted
by law. The Company and its affiliates Diasense, Inc.,
Coraflex, Inc., Petrol Rem, Inc., and IDT, Inc. are
incorporated under the Business Corporation Law of the
Commonwealth of Pennsylvania. Section 1741, et seq. of
said law, in general, provides that an officer or
director shall be indemnified against reasonable and
necessary expenses incurred in a successful defense to
any action by reason of the fact that he serves as a
representative of the corporation, and may be indemnified
in other cases if he acted in good faith and in a manner
he reasonably believed was in, or not opposed to, the
best interests of the corporation, and if he had no
reason to believe that his conduct was unlawful, except
that no indemnification is permitted when such person has
been adjudged liable for recklessness or misconduct in
the performance of his duty to the corporation, unless
otherwise permitted by a court of competent jurisdiction.

Insofar as indemnification for liabilities arising
under the 1933 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 Commission such
indemnification is against public policy as expressed in
the 1933 Act and is therefore unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Act and will be governed by
the final adjudication of such issue.
<PAGE> II-1

RECENT SALES OF UNREGISTERED SECURITIES

The Company recently completed sales of unregistered
securities as summarized below. Unless otherwise
indicated, all offers and sales were made pursuant to the
"private offering" exemption under Section 4(2) of the
1933 Act. Accordingly, because the shares sold
constitute "restricted securities" within the meaning of
Rule 144 under the 1933 Act, stop-transfer instructions
were given to the transfer agent, and the stock
certificates evidencing the shares bear a restrictive
legend.

During 1996 through March 1998, the Company entered
into agreements with several entities which agreed to use
their best efforts to sell the Company's common stock to
foreign investors subject to the requirements set forth
in Regulation S of the Securities Act of 1933
("Regulation S"). Such entities, which most recently
included J.P. Carey, Inc. undertook to ensure compliance
with Regulation S, which among other things, limits a
foreign investor's ability to trade the Company's stock
in the United States. In addition to sales of common
stock pursuant to Regulation S, the Company has also sold
convertible preferred stock and convertible debentures.
The debentures mandatorily convert to common stock at
prices which are discounted to the market price, but
cannot be converted for periods of 45 to 90 days
following the purchase of the debentures; such holding
periods were enforced via the use of stop transfer
instructions and other notices. The following funds were
raised pursuant to Regulation S offerings during the
years noted: approximately $21.6 million in 1996,
approximately $22 million in 1997, and approximately $6.9
million in 1998. In August 1998, the Company sold
convertible debentures pursuant to Regulation D; each
debenture has mandatory conversion provisions and is
convertible beginning ninety days from purchase. As of
August 31, 1998, $3,125,000 of such debentures were
outstanding. Proceeds of the sales were used to continue
to fund the Company's research and development projects
and to provide working capital for the Company.

UNDERTAKINGS

The undersigned registrant hereby undertakes:

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

(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any
facts or events arising after the
effective date of the registration
statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material
information with respect to the plan of
distribution not previously disclosed in
the registration statement;

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

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

The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference
in the registration statement 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.

The undersigned registrant hereby undertakes to
supplement the prospectus, after the expiration of the
subscription period, to set forth the results of the
subscription offer and the terms of any subsequent
reoffering thereof. If any public offering is to be made
on terms differing from those set forth on the cover page
of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.

EXHIBIT TABLE
Exhibit Sequential Page No.

3.1(4) Articles of Incorp. as filed March 20, 1972..N/A

3.2(4) Amendment to Articles filed May 8,1972......N/A

3.3(4) Restated Articles filed June 19,1975.........N/A

3.4(4) Amendment to Articles filed February 4,1980..N/A

3.5(4) Amendment to Articles filed March 17,1981....N/A

3.6(4) Amendment to Articles filed January 27,1982..N/A

3.7(4) Amendment to Articles filed November 22,1982.N/A

3.8(4) Amendment to Articles filed October 30,1985..N/A

3.9(4) Amendment to Articles filed October 30,1986..N/A

3.10(4) By-Laws......................................N/A

3.11(5) Amendment to Articles filed December 28,1992.N/A

5.1 Legal Opinion of Sweeney & Associates P.C....24

10.1(1) Manufacturing Agreement......................N/A

10.2(1) Research and Development Agreement...........N/A

10.3(1) Termination Agreement........................N/A

10.4(1) Purchase Agreement...........................N/A

10.5(2) Sublicensing Agreement and Amendments........N/A

10.6(3) Lease Agreement with 300 Indian Springs
Partnership................................. N/A

10.7(4) Lease Agreement with Indiana County..........N/A

10.8(5) First Amendment to Purchase Agreement dated
December 8, 1992.............................N/A

10.9(6) Fred E. Cooper Employment Agreement dated
11/1/94......................................N/A

10.10(6) David L. Purdy Employment Agreement dated
11/1/94......................................N/A

10.11(6) Anthony J. Feola Employment Agreement dated
11/1/94......................................N/A

10.12(6) Glenn Keeling Employment Agreement dated
11/1/94......................................N/A

16.1(7) Disclosure and Letter Regarding Change in
Certifying Accountants dated 1/25/95.........N/A

24.1 Consents of Thompson Dugan, Independent
Certified Public Accountants..................26

24.2 Consent of Counsel Included in
Exhibit 5.1 above)............................24

25.1 Power of Attorney of Fred E. Cooper...........23
(included under "Signatures")

(1) Incorporated by reference from Exhibit with this
title filed with the Company's Form 10-K for the
year ended December 31, 1991

(2) Incorporated by reference from Exhibit with this
title to Form 8-K dated May 3, 1991

(3) Incorporated by reference from Exhibit with this
title to Form 10-K for the year ended December 31,
1990

(4) Incorporated by reference from Exhibits with this
title to Registration Statement on Form S-1 filed on
December 1, 1992

(5) Incorporated by reference from Exhibits with this
title to Amendment No. 1 to Registration Statement
on Form S-1 filed on February 8, 1993

(6) Incorporated by reference from Exhibit with this
title to Form 10-K for the year ended December 31,
1994

(7) Incorporated by reference from Exhibit with this
title to Form 8-K dated January 25, 1995

<PAGE>
Exhibit 25.1
SIGNATURES

Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned
on October 2, 1998.

BIOCONTROL TECHNOLOGY, INC.

By:/s/ Fred E. Cooper
Fred E. Cooper,
Director,CEO,principal
executive officer,principal
financial officer, and
principal accounting officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual
whose signature appears below constitutes and appoints
Fred E. Cooper his true and lawful attorney-in-fact and
agent with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective
amendments) to this Registration Statement, and to file
the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and7
confirming all that said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities indicated on the
dates indicated.

Signature Title Date

/s/ David L. Purdy President, October 2, 1998
David L. Purdy Treasurer, Director

/s/ Anthony J. Feola Senior Vice President, October 2, 1998
Anthony J. Feola Director

/s/ Glenn Keeling Director October 2, 1998
Glenn Keeling

/s/ Stan Cottrell Director October 2, 1998
Stan Cottrell

<PAGE>
Exhibit 5.1

SWEENEY & ASSOCIATES P.C.
ATTORNEYS AT LAW

7300 PENN AVENUE TELEPHONE (412) 731-1000
PITTSBURGH, PA 15208 FACSIMILE (412) 731-9190

October 2, 1998

To the Board of Directors
Biocontrol Technology, Inc.
2275 Swallow Hill Road
Building 2500; 2nd Floor
Pittsburgh, PA 15220

Gentlemen:

We have examined the corporate records and proceedings
of Biocontrol Technology, Inc, a Pennsylvania corporation
(the "Company"), with respect to:

1. The organization of the Company;

2. The legal sufficiency of all corporate
proceedings of the Company taken in connection
with the creation, issuance, the form and
validity, and full payment and
non-assessability, of all the present
outstanding and issued common stock of the
Company; and

3. The legal sufficiency of all corporate
proceedings of the Company, taken in connection
with the creation, issuance, the form and
validity, and full payment and
non-assessability, when issued, of shares of
the Company's common stock (the "Shares"), to
be issued by the Company covered by the
registration statement (hereinafter referred to
as the "Registration Statement") filed with the
Securities and Exchange Commission October
2, 1998, file number 333-63193 (in connection
with which Registration Statement this opinion
is rendered.)

We have also examined such other documents and such
questions of law as we have deemed to be necessary and
appropriate, and on the basis of such examinations, we
are of the opinion:

(a) That the Company is duly organized and
validly existing under the laws of the
Commonwealth of Pennsylvania;

(b) That the Company is authorized to have
outstanding 600,000,000 shares of common stock
of which 398,402,428 shares of common stock
were outstanding as of August 31, 1998;

(c) That the Company has taken all necessary and
required corporate proceedings in connection with
the creation and issuance of the said presently
issued and outstanding shares of common stock and
that all of said stock so issued and outstanding has
been validly issued, is fully paid and
non-assessable, and is in proper form and valid;

(d) That when the Registration Statement
shall have been declared effective by order of
the Securities and Exchange Commission, after a
request for acceleration by the Company, and
the Shares shall have been issued and sold upon
the terms and conditions set forth in the
Registration Statement, then the Shares will be
validly authorized and legally issued, fully
paid and non-assessable.

We hereby consent (1) to be named in the Registration
Statement, and in the Prospectus which constitutes a part
thereof, as the attorneys who will pass upon legal
matters in connection with the sale of the Shares, and
(2) to the filing of this opinion as Exhibit 5.1 of the
Registration Statement.

Sincerely,

SWEENEY & ASSOCIATES P.C.

Exhibit 24.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated March 25, 1998
accompanying the consolidated financial statements of
Biocontrol Technology, Inc. and subsidiaries appearing in
the 1997 Annual Report on Form 10-K for the year ended
December 31, 1997 which is incorporated by reference in
this Registration Statement on Form S-1. We consent to
the incorporation by reference in the Registration
Statement of the aforementioned report and to the use of
our name as it appears under the caption "EXPERTS". Our
report on the consolidated financial statements referred
to above includes an explanatory paragraph which
discusses going concern considerations as to Biocontrol
Technology, Inc.

/s/ Thompson Dugan

Pittsburgh, Pennsylvania

October 2, 1998

<PAGE>

THOMPSON DUGAN
CERTIFIED PUBLIC ACCOUNTANTS
________________________

Pinebridge Commons
1580 McLaughlin Run Rd.
Pittsburgh, PA 15241

Report of Independent Certified Public Accountants

Board of Directors
Biocontrol Technology, Inc.

We have audited the accompanying consolidated balance sheets of
Biocontrol Technology, Inc. and its subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial
statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, such consolidated financial statements present
fairly, in all material respects, the consolidated financial position
of Biocontrol Technology, Inc. and its subsidiaries as of December
31, 1997 and 1996, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming
that the Corporation will continue as a going concern. As discussed in
Note B to the financial statements, the Corporation has incurred losses
and negative cash flows from operations in recent years through December
31, 1997 and these conditions are expected to continue through 1998,
raising substantial doubt about the Corporation's ability to continue as a
going concern. Management's plans in regard to these matters are also
discussed in Note B. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Pittsburgh, Pennsylvania
March 25, 1998

/s/Thompson Dugan
- -----------------

<PAGE> F-1
<TABLE>
Biocontrol Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>

Jun.30, 1998 Dec. 31, 1997 Dec. 31, 1996
------------ ------------- -------------
(Unaudited)
------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and equivalents (note A) $ 294,535 $ 2,759,067 $ 3,802,874
Accounts receivable - net of allowance for doubtful accounts
of $14,931 at Dec. 31, 1997 and $195,840 at Dec. 31, 1996 103,108 417,329 98,769
Inventory - net of valuation allowance (notes A and D) 1,864,959 1,834,018 3,340,120
Notes receivable - related parties (note C) 35,000 35,000 300,000
Notes receivable (note C) 826,050 87,000 12,000
Interest receivable (note C) 2,655 2,134 -
Prepaid expenses 180,845 164,012 277,409
----------- ------------- ------------

TOTAL CURRENT ASSETS 3,307,152 5,298,560 7,831,172

PROPERTY, PLANT AND EQUIPMENT (notes A and H)
Building 1,444,273 1,444,273 1,442,423
Land 246,250 246,250 246,250
Construction in progress 1,541,609 1,465,152 1,240,320
Leasehold improvements 1,486,083 1,197,977 1,157,239
Machinery and equipment 5,128,623 5,042,736 4,386,364
Furniture, fixtures & equipment 880,154 812,221 735,962
------------- ------------- -------------

Subtotal 10,726,992 10,208,609 9,208,558

Less accumulated depreciation 3,929,366 3,516,677 2,670,207
------------- ------------- -------------
6,797,626 6,691,932 6,538,351

OTHER ASSETS
Notes receivable - related parties (notes C and L) 1,273,900 598,900 95,900
Interest receivable - related parties (notes C and L) 108,666 75,343 53,958
Deposit on Equipment - 300,000 -
Goodwill, net of amortization 5,240,413 - -
Patents, net of amortization (note A) 4,599 6,765 11,097
Other assets 14,269 9,800 13,513
------------- ------------- ------------
6,641,847 990,808 174,468
------------- ------------- -------------
TOTAL ASSETS $ 16,746,625 $ 12,981,300 $ 14,543,991
============== ============== ==============

The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE> F-2
<TABLE>
Biocontrol Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
(Continued)
<CAPTION>

Jun. 30, 1998 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- -------------
<S> (Unaudited)
<S> -------------
<C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,345,352 $ 646,535 $ 1,035,171
Current portion of long-term debt (note G) 2,976,715 18,765 30,478
Current portion of capital lease obligations (note H) 116,349 109,933 48,944
Debentures payable (note I) 1,949,300 3,301,280 4,600,000
Accrued liabilities (note E) 638,088 215,119 148,303
Escrow payable (note J) 2,700 2,700 2,700
Deferred revenue on contract billings (note A) 114,403 116,146 180,000
------------- ------------- -------------
TOTAL CURRENT LIABILITIES 7,142,907 4,410,478 6,045,596

LONG-TERM LIABILITIES
Capital lease obligations (note H) 2,650,625 2,688,293 2,660,730
Long-term debt (note G) 1,172,222 8,806 38,997
------------- ------------- -------------
3,822,847 2,697,099 2,699,727

COMMITMENTS AND CONTIGENCIES (notes M and O)

UNRELATED INVESTORS'INTEREST
IN SUBSIDIARY (note A) 1,273,387 1,409,647 1,881,437

STOCKHOLDERS' EQUITY (notes J and O)

Common stock, par value $.10 per share,
authorized 600,000,000 shares, issued and
outstanding 316,226,240 at Jun. 30, 1998; 138,583,978 at
Dec. 31, 1997 and 49,213,790 at Dec. 31, 1996 31,622,624 13,858,398 4,921,379
Additional paid-in capital 89,496,568 97,004,067 80,704,749
Notes receivable issued for common stock-related party (note C) (25,000) (25,000) -
Warrants 6,396,994 6,396,994 6,907,162
Accumulated deficit (122,983,702) (112,770,383) (88,616,059)
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 4,507,484 4,464,076 3,917,231

TOTAL LIABILITIES AND
STOCKHOLDER' EQUITY $ 16,746,625 $ 12,981,300 $ 14,543,991
============= ============= =============

The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE> F-3
<TABLE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
For the six months ended
June 30, Year Ended December 31,
1998 1997 1997 1996 1995
---------- ---------- ------------- ------------- -------------
<S> (Unaudited) (Unaudited)
---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Net Sales $ 933,441 $ 515,884 $ 1,155,907 $ 597,592 $ 461,257
Interest income 60,594 70,249 165,977 176,478 294,734
Other income - 3,980 104,250 2,657 -
---------- ---------- ------------ ------------- -------------
994,035 590,113 1,426,134 776,727 755,991
Costs and expenses
Cost of products sold 498,860 323,050 641,331 325,414 198,542
Research and development (notes A and L) 4,013,632 3,921,661 6,977,590 8,742,922 7,649,678
General and administrative 5,651,209 6,600,650 12,704,146 8,963,693 11,117,107
Debt issue costs (note A) - - 3,306,812 502,000 -
Warrant extensions (note J) - - - 604,342 7,228,220
Warrant extensions - Subsidiary (note J) 1,870,000 4,014,375 4,046,875 8,571,033 5,295,000
Interest expense 205,658 143,402 315,624 133,460 17,048
---------- ---------- ------------- ------------- -------------
12,239,359 15,003,138 27,992,378 27,842,864 31,505,595
---------- ---------- ------------- ------------- -------------

Loss before unrelated investors' interest (11,245,324) (14,413,025) (26,566,244) (27,066,137) (30,749,604)

Unrelated investors' interest in net loss of
subsidiary 1,032,005 2,147,649 2,411,920 4,670,435 1,329,259
---------- ---------- ------------- ------------- -------------

Net loss $(10,213,319) $(12,265,376) $(24,154,324) $(22,395,702) $(29,420,345)
========== ========== ============= ============= ==============

Loss per common share (note A) $ (0.05) $ (0.21) $ (0.34) $ (0.53) $ (0.84)
=========== =========== ============= ============== ==============

The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> F-4
<TABLE>

Biocontrol Technology, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

Note rec.
Preferred Stock Common Stock issued for Additional
--------------- ---------------- Common Stk Paid in Accumulated
Shares Amount Shares Amount Warrants Rel Party Capital Deficit Total
------- -------- --------- ---------- ---------- --------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1993 5,490 $54,900 21,108,847 $2,110,885 - - $25,025,643 ($25,127,889) $2,063,539
------- ------- ---------- ---------- ---------- -------- ---------- ------------- ------------
Proceeds from stock offering - - 7,224,690 722,469 - - 13,206,152 - 13,928,621
Additional paid in capital from
subsidiary stock offering - - - - 507,370 - 507,370
Warrants exercised - - 977,542 97,754 - - 183,129 - 280,883
Net Loss - - - - - - - (11,672,123) (11,672,123)
-------- ------- ---------- ---------- ---------- -------- ----------- ------------ -----------

Balance at Dec. 31, 1994 5,490 54,900 29,311,079 2,931,108 - - 38,922,294 (36,800,012) 5,108,290
-------- ------- ---------- ---------- -------- ------- ---------- ---------- ---------

Proceeds from stock offering - - 6,892,325 689,233 - - 15,580,180 - 16,269,413
Conversion of preferred stk. (1,700) (17,000) 17,000 1,700 - - 15,300 - -
Additional PIC from
subsidiary stock offering - - - - - - 1,648,677 - 1,648,677
Warrant extensions - - - - $7,228,220 - - - 7,228,220
Warrant extensions - sub. - - - - - - 4,984,755 - 4,984,755
Change in ownership int.-sub. - - - - - - (2,012,785) - (2,012,785)
Warrants exercised - - 800,714 80,071 (550,400) - 711,454 - 241,125
Net Loss - - - - - - - (29,420,345) (29,420,345)
-------- ------- ---------- ---------- ---------- --------- ---------- ------------ ------------
Balance at December 31, 1995 3,790 37,900 37,021,118 3,702,112 6,677,820 - 59,849,875 (66,220,357) 4,047,350
-------- ------- ---------- ---------- ---------- --------- ---------- ------------ -----------
Proceeds from stock offering - - 7,839,065 783,907 - - 12,571,822 - 13,355,729
Conversion of preferred stk.(22,730)(227,300) 1,958,602 195,860 - - 31,440 - -
Cash redemp. at par-pref stk.(1,060) (10,600) - - - - - - (10,600)
Proceeds from sale of
preferred stk.- series A 20,000 200,000 - - - - 1,640,000 - 1,840,000
Conversion of debenture - - 2,275,005 227,500 - - 1,799,623 - 2,027,123
Warrant extensions - - - - 604,342 - - - 604,342
Warrant extensions - sub. - - - - - - 4,441,262 - 4,441,262
Change in ownership int.-sub. - - - - - - (22,873) - (22,873)
Warrants exercised - - 120,000 12,000 (375,000) - 393,600 - 30,600
Net loss - - - - - - - (22,395,702) (22,395,702)
-------- -------- ----------- ---------- ---------- -------- ------------ -------------- ----------
Balance at Dec. 31, 1996 - - 49,213,790 4,921,379 6,907,162 - 80,704,749 (88,616,059) 3,917,231
-------- -------- ----------- ---------- ---------- -------- ------------ ------------ ----------
Proceeds from stk offering - - 1,705,000 170,500 - - 765,648 - 936,148
Conversion of preferred stk(22,000)(220,000) 6,913,366 691,337 - - (471,337) - -
Proceeds from sale of
preferred stk.-Series B 22,000 220,000 - - - - 1,807,000 - 2,027,000
Conversion of debenture - - 80,599,022 8,059,902 - - 11,554,077 - 19,613,979
Warrant extensions - sub. - - - - - - 2,108,421 - 2,108,421
Change in ownership int-sub. - - - - - - 2,421 - 2,421
Warrants exercised - - 152,800 15,280 (510,168) ($25,000) 533,088 - 13,200
Net loss - - - - - - - (24,154,324) (24,154,324)
-------- -------- ----------- ---------- ----------- --------- ----------- ------------- ----------
Balance at Dec. 31, 1997 - - 138,583,978 13,858,398 6,396,994 (25,000) 97,004,067 (112,770,383) 4,464,076
-------- -------- ----------- ----------- ---------- --------- ---------- -------------- ----------
Proceeds from stk offering - - 2,125,000 212,500 - - 19,813 - 232,313
Conversion of debenture - - 175,517,260 17,551,726 - - (8,501,582) - 9,050,144
Warrant extensions - sub. - - - - - - 974,270 - 974,270
Net loss - - - - - - - (10,213,319) (10,213,319)
-------- -------- ----------- ----------- ---------- --------- ---------- ---------- ----------
Balance at June 30, 1998 $ - $ - 316,226,238 $31,622,624 $6,396,994 $(25,000) $89,496,568 $(122,983,702) $4,507,484
======== ======== =========== =========== ========== ======== =========== ============== ==========
The accompanying notes are an integral part of these statements.
</TABLE>

Biocontrol Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
For the six months ended
June 30, 1998 Year ended December 31,

1998 1997 1997 1996 1995
----------- ----------- ------------- ------------- ------------
<S> Unaudited Unaudited
----------- -----------
<C> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss (10,213,319) (12,265,376) (24,154,324) (22,395,702) (29,420,345)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 482,940 420,069 850,802 587,507 459,778
Unrelated investors' interest in susidiary (1,032,005) (2,147,649) (2,411,920) (4,670,435) (1,329,259)
Stock issued in exchange for services (17,688) 864,565 936,148 17,200 180,373
Stock issued in exchange for services by subsidiary - 600 600 7,000 -
Debenture interest converted to stock 72,665 - 164,055 - -
Premium for extension on Debenture 680,500 - 527,113 - -
Provision for potential loss on notes receivable - - - - 1,050,000
Warrant extensions - - - 604,342 7,228,220
Acquisition of ICTI 621,517 - - - -
Warrant extensions by subsidiary 1,870,000 4,014,375 4,046,875 8,571,033 5,295,000
Increase in allowance for losses on a/r - - (180,909) 195,840 -
(Increase) in accounts receivable 314,221 (96,906) (137,651) (92,083) (169,805)
(Increase) in inventories (30,941) (454,884) (586,029) (1,679,981) (2,379,694)
(Increase) in inventory valuation allowance - - 2,092,131 - 900,000
(Increase) decrease in prepaid expenses (16,833) 55,299 113,397 (128,883) 38,934
(Increase) decrease in other assets (4,469) 1,487 3,713 (2,445) 79,472
Increase (decrease) in accounts payable 698,817 (117,687) (388,636) (803,237) 1,195,044
Increase (decrease) in other liabilities 422,969 334,627 66,737 (35,960) (18,960)
(Decrease) in deferred revenue (1,743) (75,000) (63,854) (146,000) -
------------ ------------- ------------ ------------- -------------
Net cash flow used by operating activities (6,153,369) (9,466,480) (19,121,752) (19,971,804) (16,891,242)
------------ ------------- ------------- ------------- -------------
Cash flows from investing activities:
Purchase of property, plant and equipment (784,082) (711,369) (845,512) (954,610) (1,441,509)
(Increase) in notes receivable (825,050) (83,000) (313,000) (50,000) (1,312,000)
Deposit on equipment - - (300,000) - -
(Increase) in interest receivable (33,844) (12,768) (23,519) (11,721) (9,792)
Acquisition of ICTI (1,030,000) - - - -
------------- ------------- ------------- ------------- -------------
Net cash used by investing activites $ (2,672,976) $ (807,137) $ (1,482,031) $ (1,016,331) $ (2,763,301)
------------- ------------- ------------- ------------- -------------

Cash flows from financing activities:
Proceeds from stock offering - - - 13,338,531 16,195,788
Proceeds from sale by subsidiary of its common stock - - 3,500 (172,315) 3,079,200
Proceeds from warrants exercised - 38,200 13,200 30,600 273,325
Proceeds from warrants exercised-subsidiary - - - 2,000 -
Proceeds from sale of Preferred stock-Series A - - - 1,840,000 -
Proceeds from sale of Preferred stock-Series B - 2,027,000 2,027,000 - -
Cash redemption at par - Preferred stock - - - (7,900) -
Proceeds from debentures payable 6,945,000 5,800,000 20,230,000 6,600,000 -
Payments on debentures payable - - (2,605,833) - -
Payments on notes payable (528,634) (28,179) (41,904) (19,509) (5,115)
Payments on capital lease obligations (54,553) 39,115 (65,987) (24,899) -
------------- ------------- ------------- ------------- -------------
Net cash provided by financing activities 6,361,813 7,876,136 19,559,976 21,586,508 19,543,198

Net increase (decrease) in cash (2,464,532) (2,397,481) (1,043,807) 598,373 (111,345)
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, beginning of year 2,759,067 3,802,874 3,802,874 3,204,501 3,315,846
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of year $ 294,535 $ 1,405,393 $2,759,067 $ 3,802,874 $ 3,204,501
============= ============= ============= ============= =============

The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>F-6
<TABLE>

Biocontrol Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)

<CAPTION>
Year ended June 30, Year ended December 31,
1998 1997 1997 1996 1995
------- ------- --------- --------- ---------
<S> <C> <C> <C>
Supplemental Information:
Interest paid $ 142,130 $ 73,427 $ 155,647 $ 72,578 $ 17,048
========= ========= ========= ======== ========

Supplemental schedule of non-cash
investing and financing activities:

Acquisition of equipment with note payable $ - $ - $ - $ 145,063 $ 47,282
========== ========= ========= ========= ========
Acquisition of ICTI with note payable $3,350,000 $ - $ - $ - $ -
========== ========= ========= ========= ========
Acquisition of property under a capital lease:
Building - - $ - $1,205,760 $ -
Land - - - 246,250 -
Construction in progress - - - 1,137,500 -
Equipment - - 154,539 - -
---------- ---------- --------- ---------- ----------
$ - $ - $ 154,539 $2,589,510 $ -
========== ========== ========= ========== ==========

Conversion of Series I-preferred stock for common stock:
Common stock $ - $ - $ - $ 2,730 $ 1,700
Additional paid-in capital - - - 24,570 15,300
---------- ---------- --------- ---------- ----------
$ - $ - $ - $ 27,300 $ 17,000
========== ========== ========= ========== ==========

Redemption of preferred stock held in escrow $ - $ - $ - $ 2,700 $ -
========== ========== ========= ========== ==========
Conversion of Series A - preferred stock for common stock:
Common stock $ - $ - $ - $ 193,130 $ -
Additional paid in capital - - - 6,870 -
---------- ---------- ---------- ---------- ----------
$ - $ - $ - $ 200,000 $ -
========== ========== ========== ========== ==========

Conversion of Series B- preferred stock for common stock:
Common stock $ - $ 220,000 $ 220,000 $ - $ -
Additional paid-in capital - 1,807,000 1,807,000 - -
---------- ---------- ---------- ---------- ----------
$ - $2,027,000 $ 2,027,000 $ - $ -
========== ========== ========== ========== ==========

Conversion of debentures for common stock $8,977,480 $6,664,048 $ 19,449,924 $2,000,000 $ -
========== ========== ========== ========== ==========

Converion of debenture interest for common stock $ 72,671 $ 86,493 $ 164,055 $ 27,122 $ -
========== ========== ========== ========== ==========
Stock granted to related party for note receivable $ - $ 25,000 $ 25,000 $ - $ -
========== ========== ========== ========== ==========
Conversion of warrants for common stock $ - $ 13,200 $ 510,168 $ 375,000 $ 550,400
========== ========== ========== ========== ==========

The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> F-7

Biocontrol Technology, Inc. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995 and June 30, 1998 and 1997

(Information for the six months June 30, 1998 and 1997 is unaudited)

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

1. Organization

Biocontrol Technology, Inc. - BICO (the Company) and its
subsidiaries are engaged in the development, manufacturing
and marketing of biomedical products and biological
remediation products.

2. Principles of Consolidation

The consolidated financial statements include the accounts
of: Diasense, Inc. (Diasense) a 52% owned subsidiary as of
December 31, 1997 and 1996; Petrol Rem, Inc., a 67% owned
subsidiary as of December 31, 1997 and 1996; IDT, Inc., a
99.1% owned subsidiary as of December 31, 1997 and 1996; and
Barnacle Ban Corporation, a 100% owned subsidiary as of
December 31, 1997 and 1996. All significant intercompany
accounts and transactions have been eliminated. Subsidiary
losses in excess of the unrelated investors' interest are
charged against the Company's interest.

3. Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company
considers all highly liquid investments with a maturity of
three months or less at acquisition to be cash equivalents.

4. Inventory

Inventory is valued at the lower of cost (first-in, first-out
method) or market. An inventory valuation allowance is
provided against finished goods and raw materials for
products for which a market has not yet been established.

5. Property and Equipment

Property and equipment are accounted for at cost and are
depreciated over their estimated useful lives on a straight-
line basis.

6. Patents

Patents are amortized over their legal or useful lives,
whichever is less. Accumulated amortization on patents was
$90,176 and $85,844 at December 31, 1997 and 1996,
respectively.

7. Deferred Revenue on Contract Billings

Revenue is recognized from sales when products are shipped
and/or services performed. Advance billings are recorded as
deferred revenue until shipment or performance.

8. Loss Per Common Share

Loss per common share is based upon the weighted average
number of common shares outstanding which amounted to
202,083,593 in June 30, 1998 and 57,253,388 in June 30,1997,
71,415,351 shares in 1997, 42,266,597 shares in 1996 and
35,025,237 shares in 1995. Shares issuable under stock
options, stock warrants, convertible debentures and
convertible preferred stock are excluded from computations as
their effect is antidilutive.

9. Research and Development Costs

Research and development costs are charged to operations as
incurred. Machinery, equipment and other capital
expenditures which have alternative future use beyond
specific research and development activities are capitalized
and depreciated over their estimated useful lives.

<PAGE> F-8

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued

10. Income Taxes

The Company previously adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), Accounting for Income
Taxes, which requires the asset and liability method of
accounting for income taxes. Enacted statutory tax rates are
applied to temporary differences arising from the differences
in financial statement carrying amounts and the tax bases of
existing assets and liabilities. Due to the uncertainty of the
realization of income tax benefits, (Note K), the adoption of
FAS 109 had no effect on the financial statements of the
Company.

11. Interest

The Company follows the policy of capitalizing interest as a
component of the cost of property, plant and equipment
constructed for its own use. Total interest incurred for the
periods December 31, 1997, 1996, and 1995 was $528,942,
$236,280 and $17,048, respectively, of which $315,624,
$133,460 and $17,048, respectively, was charged to operations.

12. Estimates and Assumptions

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. The Company has established allowances based upon
management's evaluation of inventories and accounts
receivable.

13. Common Stock Warrants

The Company recognizes cost, if any, on warrants granted based
upon the excess of the market price of the underlying shares
of common stock as of the warrant grant date over the warrant
exercise price. Had the Company adopted the fair value based
accounting method for recognizing stock-based compensation (as
permitted by Financial Accounting Standard No. 123) its
reported net losses (utilizing the Black-Scholes method of
valuation) for the periods ending December 31, 1997, 1996 and
1995 would have been approximately $27,150,101, $24,173,787
and $29,911,000, respectively. Net loss per share under the
fair value based accounting method for the periods ending
December 31, 1997, 1996 and 1995 would have been approximately
$.38, $.88 and $.85, respectively.

14. Debt Issue Costs

The Company follows the policy of expensing debt issue costs
on debentures during the period of debenture issuance. Total
debt issue costs incurred for the periods December 31, 1997,
1996, and 1995 was $3,306,812, $502,000 and $0, respectively.

15. Concentration of Credit Risk

Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist principally
of cash investments at commercial banks and receivables from
officers and directors of the Company. Cash and cash
equivalents are temporarily invested in interest bearing
accounts in financial institutions, and such investments may
be in excess of the FDIC insurance limit. Receivables from
directors and officers of the Company (Note C, L and O) are
unsecured and represent a concentration of credit risk due to
the common employment and financial dependency of these
individuals on the Company.

<PAGE> F-9

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued

16. Interim Financial Information

The unaudited consolidated financial statements of Biocontrol
Technology, Inc. as of June 30 1998 and 1997 and for the six
month periods then ended, have been prepared in accordance with
generally accepted accounting principles for interim financial
information, and with the instructions to Form
10-Q and Rule 10-O Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included.

NOTE B - OPERATIONS AND LIQUIDITY

The Company and its subsidiaries have incurred substantial
losses in the six month periods ended June 30, 1998, 1997 and
in prior years and have funded their operations and product
development primarily through the sale of stock and issuance
of debt instruments. Until such time that products can be
successfully developed and marketed, the Company and its
subsidiaries will continue to need to fulfill working capital
requirements through the sale of stock and issuance of debt.
The inability of the Company to continue its operations as a
going concern would impact the recoverability and
classification of recorded asset amounts.

The ability of the Company to continue in existence is
dependent on its having sufficient financial resources to
complete the research and development necessary to
successfully bring products to market and for marketplace
acceptance. As a result of its significant losses, negative
cash flows from operations, and significant accumulated
deficits for each of the periods ending, June 30, 1998
December 31, 1997, 1996 and 1995, there is substantial doubt
about the Company's ability to continue as a going concern.

Management believes that its currently available working
capital, anticipated contract revenues, subsequent sales of
stock and future debt issuance will be sufficient to meet its
projected expenditures for a period of at least twelve months
from June 30, 1998.

NOTE C - NOTES RECEIVABLE

Notes receivable due from various related and unrelated
parties consisted of:

Notes receivable due from various related and unrelated parties consisted of:

<TABLE>
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
<S> <C> <C>
Related Parties
Note receivable from Fred E. Cooper, Chief Executive $ 8,500 $ 8,500
Officer, payable upon demand with 12% interest.

Note receivable from Fred E. Cooper, Chief Executive
Officer, payable upon demand with 10% simple interest. 82,400 82,400

Note receivable from Fred E. Cooper, Chief Executive
Officer, payable upon demand with 8.25% simple interest. 83,000 -

Note receivable from Fred E. Cooper, Chief Executive
Officer, payable upon demand with 8.25% simple interest. 35,000 -

<PAGE> F-10

NOTE C - NOTES RECEIVABLE Continued

Note receivable from Fred E. Cooper, Chief Executive
Officer, payable upon demand with 8.25% simple interest. 15,000 -

Note receivable from Glenn Keeling, Director,
payable upon demand with 10% simple interest. 5,000 5,000

Note receivable from Glenn Keeling, Director,
payable upon demand with 8.25% interest. 50,000 50,000

Note receivable from Glenn Keeling, Director,
payable upon demand with 8.25% interest. 20,000 -

Note receivable from T.J. Feola, Director,
payable upon demand with 8.25% interest 50,000 -

Note receivable from Dave Purdy, T.J. Feola, Fred Cooper,
Glenn Keeling, all directors who are jointly liable to the 35,000 -
Company.

Note receivable from Allegheny Food Services,Inc. of
which Joseph Kondisko, a former director, is principal owner, 250,000 250,000
payable 9/1/98 with interest at prime plus 1% interest.

Unrelated Parties
Note receivable from an individual, payable upon
demand with 8.75% interest. 12,000 12,000

Note receivable from HemoCleanse Inc, payable without
interest on demand. 75,000 -
------------- -----------
720,900 407,900
Less current notes receivable 122,000 312,000
------------- -----------
Noncurrent $598,900 $95,900
============= ===========
</TABLE>

Accrued interest receivable on the related party notes as of
December 31, 1997 and 1996 was $77,477 and $53,958,
respectively.

<PAGE> F-11

NOTE D - INVENTORY

Inventories consisted of the following as of:

Dec. 31, 1997 Dec. 31, 1996
------------- -------------

Raw materials $4,380,254 $3,928,565
Work-in-process 47,976 191,220
Finished goods 1,005,788 728,204
------------- -------------
5,434,018 4,847,989
Less valuation allowance (3,600,000) (1,507,869)
------------- -------------
$1,834,018 $3,340,120
============= =============

The inventory valuation allowance was increased to $3,600,000 in 1997
based upon management's estimation of market value for materials for
products for which market has not yet been established. There was no
change in the allowance during 1996.

NOTE E - ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Current
Accrued payroll taxes $ 13,606 $ 18,537
Accrued vacation 87,652 68,344
Other accrued liabilities 113,861 61,422
------------- -------------
$215,119 $148,303
============= =============

NOTE F - SALES AND COST OF GOODS SOLD

The following is a schedule that details Sales and Cost of Goods
Sold by segment:

Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995
------------- ------------- -------------

Sales
Implantable Devices $ 880,919 $ 508,561 $ 168,461
Petrol Rem 138,362 47,625 215,211
Barnacle Ban 136,624 41,406 77,585
------------- ------------- -------------
1,155,905 597,592 461,257

CGS
Implantable Devices 445,843 288,537 91,859
Petrol Rem 88,178 16,092 53,813
Barnacle Ban 107,310 20,785 52,870
------------- ------------- -------------
641,331 325,414 198,542
------------- ------------- -------------
Gross Profit $514,574 $272,178 $262,715
============= ============= =============

<PAGE> F-12

NOTE G - LONG TERM DEBT
<TABLE>
<CAPTION>
Long term debt consisted of the following as of:

Dec. 31, Dec. 31,
1997 1996
----------- -----------
<C> <S> <S>
Note Payable to a bank in monthly payments of
$999 including interest at a rate of 7.35%.
Collateralized by cash on deposit. $13,007 $ 23,584

Note Payable in monthly payments of $495 including
interest at a rate of 8.48%. Collateralized by equipment. - 15,095
Cancelled and reissued as a Capital Lease in 1997.

Note Payable in monthly payments of $374 including
interest at a rate of 18.00%. Collateralized by equipment. 5,452 7,810

Note Payable in monthly payments of $851 including
interest at a rate of 10.11%. Collateralized by equipment. - 9,675

Note Payable to a bank in monthly payments of $433 including
interest at a rate of 8.75%. Collateralized by equipment. 9,476 13,311
------------- -------------
27,935 69,475

Current portion of long-term debt 26,343 30,478
------------- -------------
Long-term debt $ 1,592 $ 38,997
============= =============
</TABLE>

NOTE H - LEASES

Operating Leases

The Company is committed under a noncancelable operating
lease for its research and product development facility. The
lease between the Company and a group of investors (lessor)
which includes four of the Company's Executive Officers
and/or Directors is for a period of 240 months beginning
September 1, 1990. Monthly rental under the terms of the
lease is $8,810 for a period of 119 months to August 1, 2000
when the monthly rental payments shall be fixed at an amount
equal to the fair rental value of the property as determined
by mutual agreement of lessor and the Company for the balance
of the lease. Total rent expense was $105,720 in each of the
years 1997, 1996 and 1995. Future minimum lease payments as
of December 31, 1997 are $105,720 for 1998 and 1999 and
$61,670 for 2000 on which date the rental payments shall be
renegotiated.

The Company and its related subsidiaries also lease other
office facilities, various equipment and automobiles under
operating leases expiring in various years through 2002.
Total lease expense related to these leases was $295,809,
$239,096 and $216,143 in the years ended December 31, 1997,
1996 and 1995, respectively.

<PAGE> F-13

NOTE H - LEASES Continued

Capital Leases

During 1996, the Company leased two manufacturing buildings
under capital leases expiring in various years through 2011.
The assets and liabilities under capital leases are recorded
at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are
depreciated over the lower of their related lease terms or
their estimated productive lives. Depreciation of assets
under capital leases is included in depreciation expense.

The following is a summary of property held under capital leases:

Dec. 31, 1997 Dec. 31, 1996
------------- -------------
Building $ 1,207,610 $ 1,205,760
Construction in Progress 1,465,152 1,240,320
Land 246,250 246,250
Equipment 243,271 166,026
------------- -------------
Sub Total 3,162,283 2,858,356

Less: Accumulated Depreciation 165,951 46,278
------------- -------------
Total Property under Cap. Leases $ 2,996,332 $ 2,812,078
============= =============

Minimum future lease payments to related and unrelated parties are
as follows:

Related Unrelated
Parties Parties Total
------------- ------------- -------------
1998 $ 105,720 $ 635,536 $ 741,256
1999 105,720 466,938 572,658
2000 61,670 394,872 456,542
2001 0 393,617 393,617
2002 0 362,958 362,958
Thereafter 0 3,142,160 3,142,160
------------- ------------- ------------
Future minimum lease payments $ 273,110 $5,396,081 $5,669,191
============= ============= ============

NOTE I - SUBORDINATED CONVERTIBLE DEBENTURE

During the six months ended June 30, 1998, and the years
ended December 31, 1997 and 1996 the Company issued
subordinated 4% convertible debentures totaling $6,945,000,
$20,230,000 and $6,600,000, respectively, with a one year
mandatory maturity. At June 30, 1998, December 31, 1997 and
1996, the subordinated convertible debentures totaled
$1,949,300, $3,301,280 and $4,600,000, respectively.

NOTE J - STOCKHOLDERS' EQUITY

Preferred Stock

The Board of Directors of the Company may issue preferred
stock in series which would have rights as determined by the
Board.

During 1996, 2,730 shares of the Series I preferred stock
were converted to common stock, 790 shares were redeemed for
cash and an escrow payable of $2,700 was established for the
redemption of the remaining 270 shares.

<PAGE> F-14

NOTE J - STOCKHOLDERS' EQUITY - Continued

Preferred Stock - Continued

During 1996, 20,000 shares of the Series A convertible
preferred stock were sold and converted.

During 1997 22,000 shares of the Series B convertible
preferred stock were sold and converted.

Common Stock Warrants

During 1997, warrants ranging from $.22 to $1.25 per share to
purchase 2,594,000 shares of common stock were granted at
exercise prices which were equal to or above the current
quoted market price of the stock on the date issued.
Warrants to purchase 5,346,662 shares of common stock were
exercisable at December 31, 1997. The per share exercise
prices of these warrants are as follows:
Shares Exercise Price
------------- ------------
10,000 $.22
1,226,700 $.25
180,000 $.33
50,000 $.38
1,482 $.45
350,000 $.50
2,334,000 $1.00
200,000 $1.25
994,480 $1.48 - $4.03
-------------
Total 5,346,662
=============
The fiscal year in which common stock warrants were granted
and the various expiration dates by fiscal year are as
follows:
<TABLE>
Fiscal Warrants Warrants Expire During Fiscal Year
Year Granted Granted 1998 1999 2000 2001 2002
- -------------- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1990 506,700 506,700 - - -
1991 1,251,482 900,000 351,482 - -
1992 25,000 - - 25,000 -
1993 209,000 209,000 - - -
1994 130,000 - 130,000
1995 21,000 21,000
1996 609,480 59,480 550,000
1997 2,594,000 - 200,000 1,400,000 994,000
------------ ----------- ----------- ----------- ----------- ---------
5,346,662 1,675,180 681,482 46,000 1,950,000 994,000
============ =========== =========== =========== =========== =========

</TABLE>
The following is a summary of warrant transactions during 1997:

Outstanding beginning of period: 2,905,462

Granted during the twelve month period: 2,594,000

Cancelled during the twelve month period: -0-

Exercised during the twelve month period: (152,800)
-------------

Outstanding, and eligible for exercise: 5,346,662
=============
<PAGE> F-15

NOTE J - STOCKHOLDERS' EQUITY - Continued

Common Stock Reserve

At December 31, 1997 the Company has reserved unissued common stock
as follows:

Warrants 5,346,662
Convertible debentures 23,874,729
-------------
Total 29,221,391
=============

Warrant Extensions

During the six month period ending June 30, 1998, no warrants
were extended.

During 1997, the Company extended the exercise date of
warrants to purchase 177,800 shares of common stock to
certain officers and consultants. The warrant shares were
originally granted at exercise prices ranging from $.25 to
$3.50, and were extended at the original grant price. No
expense was charged to operations since the market price was
less than the original warrant price.

During 1996, the Company extended the exercise date of
warrants to purchase 351,482 shares of common stock to
certain officers and consultants. The warrant shares were
originally granted at exercise prices ranging from $.45 to
$.50, and were extended at the original grant price. The
Company recorded a $604,342 expense for the difference
between the fair market value on the date the warrants were
extended and the warrant exercise prices.

During 1995, the company extended the exercise date of
warrants to purchase 2,069,500 shares of common stock to
certain officers, directors, employees and consultants. The
warrant shares were originally granted at exercise prices
ranging from $.25 to $.33, and were extended at the original
grant price. The company recorded a $7,228,220 expense for
the difference between the fair market values on the date the
warrants were extended and the warrants' exercise prices.

Diasense Common Stock

At December 31, 1997, warrants to purchase 7,476,513 shares
of Diasense common stock were exercisable. The per share
exercise price for 4,055,000 shares is $.50, for 2,286,763
shares is $1.00 and for 1,134,750 shares is $3.50. The
warrants expire at various dates through 2001. To the extent
that all the warrants are exercised, the Company's
proportionate ownership would be diluted from 52% at December
31, 1997 to 39.2%.

Diasense Warrant Extensions

During the period ending June 30, 1998, Diasense Inc.,
extended the exercise date of warrants to purchase 748,000
shares of common stock to certain directors, consultants and
employees. The warrants were originally granted at an
exercise price of $.50 per share and extended at the same
price. The assigned value of the stock when the extensions
were granted was $3.50. Diasense Inc. recorded a $1,870,000
expense for the difference between the assigned value and the
warrant price times the number of shares.

During 1997, Diasense extended the exercise date of warrants
to purchase 2,236,550 shares of common stock to certain
officers, directors, employees and consultants. The warrant
shares were

<PAGE> F-16

NOTE J - STOCKHOLDERS' EQUITY - Continued

Diasense Warrant Extensions -Continued
originally granted at an exercise price of $1.00, and
extended at the same price. Diasense recordeda $4,046,875
expense for the difference between the assumed value on the
date the warrants were extended and the warrants' exercise
prices.

During 1996, Diasense extended the exercise date of warrants
to purchase 2,970,013 shares of common stock to certain
officers, directors, employees and consultants. The warrant
shares were originally granted at exercise prices ranging
from $.50 to $1.00, and extended at the same price. Diasense
recorded a $8,571,033 expense for the difference between the
assumed value on the date the warrants were extended and the
warrants' exercise prices.

During 1995, Diasense extended the exercise date of warrants
to purchase 1,765,000 shares of common stock to certain
officers, directors, employees and consultants. The warrant
shares were originally granted at exercise prices of $.50,
and extended at the same price. Diasense recorded a
$5,295,000 expense for the difference between the assumed
value on the date the warrants were extended and the
warrants' exercise prices.

Petrol Rem Common Stock

At December 31, 1997 warrants to purchase 3,920,000 shares of
Petrol Rem common stock were exercisable at the exercise
price of $.10. The warrants expire at various dates through
2002. To the extent that if all the warrants were exercised,
the Company's proportionate ownership would be diluted from
67% at December 31, 1997 to 53.3%.

IDT Common Stock

At December 31, 1997 warrants to purchase 3,875,000 shares of
IDT common stock were exercisable. The per share exercise
price for 3,780,000 shares is $.10 and for 75,000 shares is
$1.00 and for 20,000 shares is $2.00. The warrants expire at
various dates through 2001. To the extent that if all the
warrants were exercised, the Company's proportionate
ownership would be diluted from 99.1% at December 31, 1997 to
71.6%.

NOTE K - INCOME TAXES

As of December 31, 1997, the company and its subsidiaries,
except Diasense and Petrol Rem, have available approximately
$63,260,000 of net operating loss carryforwards for federal
income tax purposes. These carryforwards are available,
subject to limitations, to offset future taxable income, and
expire in tax years 1998 through 2012. The Company also has
research and development credit carryforwards available to
offset federal income taxes of approximately $580,000 subject
to limitations, expiring in tax years 2005 through 2012.

As of September 30, 1997, the end of its fiscal year,
Diasense had available approximately $21,500,000 of net
operating loss carryforwards for federal income tax purposes.
These carryforwards, which expire during the years 2005
through 2012, are available, subject to limitations, to
offset future taxable income. Diasense also has research and
development credit carryforwards available for federal income
tax purposes of approximately $700,000, subject to
limitations, expiring in the years 2005 through 2012.

<PAGE> F-17

NOTE K - INCOME TAXES - Continued

As of December 31, 1997, Petrol Rem had available
approximately $8,700,000 of net operating loss carryforwards
for federal income tax purposes. These carryforwards, which
expire during the years 2008 through 2012, are available,
subject to limitations, to offset future taxable income.
Petrol Rem also has research and development credit
carryforwards available for federal income tax purposes of
approximately $75,000.

Certain items of income and expense are recognized in
different periods for financial and income tax reporting
purposes. In the years ended December 31, 1996 and 1995, a
warrant exercise adjustment of $211,520 and $1,267,640,
respectively, was reported for tax purposes. The fair market
value of warrant extensions have been recorded and expensed
for financial statement purposes in the years ended December
31, 1996 and 1995 in the amounts of $604,342 and $7,228,220,
respectively.

The Company has not reflected any future income tax benefits
for these temporary differences or for net operating loss and
credit carryforwards because of the uncertainty as to
realization. Accordingly, the adoption of FAS 109 had no
effect on the financial statements of the Company.

The following is a summary of the composition of the
Company's deferred tax asset (all long-term) and associated
valuation allowance at December 31, 1997, December 31, 1996
and December 31, 1995:

Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995
------------- ------------- -------------

Net Operating Loss $ 21,508,400 $ 15,330,642 $ 10,959,420
Warrant Expense 2,741,397 2,741,397 2,529,877
Tax Credit Carryforward 580,000 520,000 400,000
------------ ------------- -------------
24,829,797 18,592,039 13,899,297
Valuation Allowance (24,829,797) (18,592,039) (13,899,297)
------------ ------------- -------------
Net Deferred Tax Asset $ 0 $ 0 $ 0
============= ============= =============

The deferred tax benefit and the associated increase in the valuation
allowance are summarized in the following schedule:

Increase in
Deferred Valuation
Tax Benefit Allowance Net
------------- ------------- ----------

Year-ended December 31, 1997 $ (6,237,758) $ 6,237,758 $ 0
Year-ended December 31, 1996 $ (4,702,742 $ 4,702,742 $ 0
Year-ended December 31, 1995 $ (6,977,857 $ 6,977,857 $ 0
From March 20, 1972 (inception)
through December 31, 1997 $ (24,829,797) $ 24,829,797 $ 0

<PAGE> F-18

NOTE L - RELATED PARTY TRANSACTIONS

Research and Development Activities

The Company is currently performing research and development
activities related to the non-invasive glucose sensor (the
Sensor) under a Research and Development Agreement with
Diasense. If successfully developed, the Sensor will enable
users to measure blood glucose levels without taking blood
samples. Diasense acquired the rights to the Sensor,
including one United States patent from BICO for $2,000,000
on November 18, 1991. Such patent covers the process of
measuring blood glucose levels non-invasively. Approval to
market the Sensor is subject to federal regulations including
the Food and Drug Administration (FDA). The Sensor is
subject to clinical testing and regulatory approvals by the
FDA. BICO is responsible for substantially all activities in
connection with the development, clinical testing, FDA
approval and manufacturing of the Sensor. As discussed in
Note B, BICO finances its operations from the sales of stock
and issuance of debt and was reimbursed for costs incurred
under the terms and conditions of the Research and
Development Agreement for the research and development of the
Sensor by Diasense. If BICO is unable to perform under the
Research and Development or Manufacturing Agreements,
Diasense would need to rely on other arrangements to develop
and manufacture the Sensor or perform these efforts itself.

BICO and Diasense have entered into a series of agreements
related to the development, manufacturing and marketing of
the Sensor. BICO is to develop the Sensor and carry out all
steps necessary to bring the Sensor to market including 1)
developing and fabricating the prototypes necessary for
clinical testing; 2) performing the clinical investigations
leading to FDA approval for marketing; 3) submitting all
applications to the FDA for marketing approval; and 4)
developing a manufacturable and marketable product. Diasense
is to conduct the marketing of the Sensor. The following is
a brief description of the agreements:

Manufacturing Agreement

The manufacturing agreement between BICO and Diasense was
entered into on January 20, 1992. BICO is to act as the
exclusive manufacturer of production units of the Sensor upon
the .
completion of the Research and Development Agreement and sell
the units to Diasense at a price determined by the agreement.
The term of the agreement is fifteen years.

Research and Development Agreement

Under a January 1992 agreement between BICO and Diasense,
beginning in April 1992, BICO received $100,000 per month,
plus all direct costs for the research and development
activities of the Sensor. This agreement replaced a previous
agreement dated May 14, 1991. The term of the new agreement
is fifteen years. Under the terms of this agreement, the
Company billed Diasense $2,955,863 in research and
development and general and administrative expenses for the
year ending December 31, 1995. In July 1995, BICO and
Diasense agreed to suspend
billings, accruals of amounts due and payments pursuant to
the research and development agreement pending the FDA's
review of the Sensor.

Purchase Agreement

In November 1991, BICO entered into a Purchase Agreement with
Diasense under which Diasense acquired BICO's rights to the
Sensor for a cash payment of $2,000,000. This agreement
permits BICO to use Sensor technology for the manufacture and

<PAGE> F-19

NOTE L - RELATED PARTY TRANSACTIONS - Continued

Purchase Agreement - Continued
sale by BICO of a proposed implantable closed loop system. BICO will
pay Diasense a royalty equal to five percent of the net salesof such
implantable closed loop system.

Real Estate Activities

Four of the Company's Executives and/or Directors are members
of an eight-member partnership which in July 1990 purchased
the Company's real estate in Indiana, Pennsylvania, and each
has personally guaranteed the payment of lease obligations to
the bank providing the funding. For their personal
guarantees, the four individuals each received warrants to
purchase 100,000 shares of the Company's common stock at an
exercise price of $.33 per share until June 29, 1998.

Amounts due from Officers

At December 31, 1997 and 1996, Mr. Cooper owed the Company
$8,500 related to a 12 percent simple interest demand loan.
At December 31, 1997 and 1996, Mr. Cooper owed the Company
$82,400, related to 10 percent simple interest demand loans.
At December 31, 1997, Mr. Cooper owed the Company in
aggregate notes of $158,000, related to 8.25 percent simple
interest demand loans The accrued interest owed by Mr.
Cooper on all demand notes at December 31, 1997 and 1996 was
$66,121 and $50,070, respectively.

At December 31, 1997 and 1996, the Company had a demand loan
of $5,000 with 10 percent simple interest with Glenn Keeling,
a Director. At December 31, 1997 and 1996 the Company had a
demand loan of $50,000 with 8.25 percent interest with Mr.
Keeling. At December 31, 1997, the Company had a demand loan
of $50,000 with 8.25 percent interest with Mr. Keeling. The
accrued interest owed by Mr. Keeling on all demand notes at
December 31, 1997 and 1996 was $7,664 and $2,804,
respectively.

At December 31, 1997, the Company had a demand loan of
$50,000 with 8.25 percent simple interest with TJ Feola, a
Director. The accrued interest owed by Mr. Feola on the
demand note at December 31, 1997 was $1,254 .

At December 31, 1997, the Company had a note receivable of
$35,000 with 8.25 percent simple interest with Dave Purdy,
Fred Cooper, TJ Feola and Glen Keeling, all Directors who are
jointly liable. As of December 31, 1997, there was no
accrued interest owed

At December 31, 1997 and 1996, the Company had extended a one
year judgment note payable September 1, 1997, for $250,000,
with an interest rate of prime plus one percent, with Joseph
Kondisko, Allegheny Food Services, Inc. of which Joseph
Kondisko, a former director, is principal owner. As of
December 31, 1997 and 1996 there was no accrued interest
owed.

<PAGE> F-20

NOTE L - RELATED PARTY TRANSACTIONS - Continued

Advances to Officers
During the periods 1997 and 1996, the Company and its
subsidiaries made advances to Mr. Cooper. At December 31,
1997 and 1996, these advances accumulated to $26,150 and
$32,535, respectively.

Employment Contracts

The Company's employment contracts with four officers and two
employees commenced November 1, 1994 and end October 31,
1999. These employment contracts set forth annual basic
salaries aggregating $1,500,000 in 1997 and expiring in
periods beginning October 1999 through 2002, which are
subject to review and adjustment. The contracts may be
extended for two to three - year periods. In the event of
change in control in the Company and termination of
employment, continuation of annual salaries at 100%
decreasing to 25% are payable in addition to the issuing of
shares of common stock as defined in the contracts. The
contracts also provide for severance, disability benefits and
issuances of BICO common stock under certain circumstances.

NOTE M - COMMITMENTS AND CONTINGENCIES

Litigation

Several class action lawsuits have been filed against the
company and its subsidiary Diasense as well as certain of
their directors, all of which have been consolidated into a
single action. The suit alleges various violations of
federal securities laws on behalf of a class of plaintiffs
who purchased common stock of the Company between April 25,
1995 and February 26, 1996, at which time the value of the
Company's stock dropped as a result of an unfavorable
recommendation of a Panel Review convened by the United
States Food and Drug Administration with respect to a certain
medical device owned by Diasense and manufactured by the
Company. To date, a complaint has been filed in the action,
to which the defendants have filed a Motion to Dismiss. The
Company has engaged in voluntary mediation in order to
explore whether settlement is an option. As a result of the
mediation, the plaintiffs agreed to a "standstill" period,
which has now expired; however, no further activity has been
conducted by the plaintiffs to move the case forward.
Management believes that no federal securities violation has
occurred, and they intend to strongly defend the action. At
this time it is not possible to predict the outcome of the
litigation or to estimate the potential damages arising from
the claims, since the number of class members, and the volume
and pricing of shares traded, are unknown.

Pennsylvania Securities Commission

The Pennsylvania Securities Commission is conducting a
private investigation of the Company and its subsidiary,
Diasense, Inc. in connection with the sale of securities.
The Companies have cooperated with and provided information
to the Pennsylvania Securities Commission in connection with
the private investigation. As the Commission's investigation
is not yet complete, there can be no estimate or evaluation
of the likelihood of an unfavorable outcome in this matter or
the range of possible loss, if any.

<PAGE> F-21

NOTE M - COMMITMENTS AND CONTINGENCIES Continued

License Agreement

Under terms of a license agreement with a shareholder of
Petrol Rem for the marketing rights with respect to certain
inventions Petrol Rem is to make minimum royalty payments of
$120,000 per year for each year starting in 1994 through
2001.

Legal Proceedings

During April 1998, the Company and its affiliates were served
with subpoenas by the U.S. Attorneys' office for the U.S.
District Court for the Western District of Pennsylvania. The
subpoenas requested certain corporate, financial and scientific
documents and the Company has provided documents in response to
such requests. 8

NOTE N - EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan with 401k
provisions which covers all employees meeting certain age and
period of service requirements. Employer contributions are
discretionary as determined by the Board of Directors. There
have been no employer contributions to the plan through
December 31, 1997.

NOTE O - Year 2000 Issue

The Company is currently working to resolve the potential
impact of the Year 2000 on the processing of date-sensitive
information. The Year 2000 Issue is the result of computer
programs being written using two digits (rather than four)
to define the applicable year. Programs which are
susceptible to problems after December 31, 1999 are those
which recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or
system failures. Based upon a review of its own internal
programs and software, the Company currently believes that
the Year 2000 will not pose significant operational problems
to its information systems, because such systems are already
compliant or will be made compliant with minor adjustments.
In addition, ChaseMellon Shareholder Services, the Company's
transfer agent, has disclosed that it will be Year 2000
compliant and that no interruptions in service will occur.
The Company is also conducting an investigation of its major
suppliers, vendors and other parties to determine their
respective plans for the Year 2000 compliance. The
Company's common stock currently trades on the Nasdaq Small-
Cap Market, Nasdaq and its parent, the NASD, have analyzed
its products and systems; are addressing their Year 2000
issues; and are implementing a plan to test their systems
and to remediate any Year 2000 problems. As of this date,
Nasdaq has not made a definitive statement regarding when it
will be compliant, but has stated that it is making all
necessary changes to its trading systems. The Company's
current estimates indicate that the costs of addressing
potential problems are not expected to have a material
impact upon the Company's financial position, results of
operations or cash flows in future periods. There can be no
assurance, however, that modifications to information
systems which impact the Company and which are required to

<PAGE> F-22

NOTE O - Year 2000 Issue - Continued

remediate year 2000 issues will be made on a timely basis
and that they will not adversely affect the Company's
systems or operations.

NOTE P - SUBSEQUENT EVENTS

Special Meeting

On February 2, 1998 BICO's shareholders approved an increase
in the number of authorized common shares from 150,000,000 to
300,000,000 at a special shareholders meeting convened for
that purpose.

Debentures

Subsequent to December 31, 1997, and through March 25, 1998.
the Company issued additional 4% subordinated convertible
debentures totaling $5,020,000 with a one year mandatory
maturity and converted $4,271,280 of subordinate debentures
into common stock.

Common Stock

Subsequent to December 31, 1997 and through March 25, 1998,
the Company issued an additional 50,385,098 shares of common
stock bringing total outstanding common stock at March 25,
1998, to 188,969,076.

The Company's common stock is currently traded on the NASDAQ
Small-Cap Market. Revised requirements for this market
include a minimum trading price of $1.00 which will limit the
Company's option to continue to trade on NASDAQ.

Related Party Transactions

Subsequent to December 31, 1997, the company issued Mr.
Cooper demand notes in the amount of $275,000 with 8.25
percent simple interest.

Subsequent to December 31, 1997, the company issued Mr.
Keeling a demand note in the amount of $190,000 with 8.25
percent simple interest.

Subsequent to December 31, 1997, the company issued Mr. Feola
a demand note in the amount of $185,000 with 8.25 percent
simple interest.

Stock Purchase Agreement

Effective March 4, 1998, pursuant to a Stock Purchase
Agreement dated February 20, 1998, the Company acquired 58.4%
of International Chemical Technologies, Inc. (ICTI) a
development stage corporation. ICTI commenced operations in
May 1997 and plans to engage in the business of manufacturing
and marketing, and licensing rights with respect to certain
corrosion/wear-resistant metal alloy coating compositions.
The unaudited financial statements of ITCI as of December 31,
1997 present accumulated losses of $680,335, a working
capital deficiency of $457,164, and a net deficiency in
assets of $678,335.

Consideration for the purchase of the 58.4% interest in ICTI
included a cash payment of $1,030,000; a promissory note for
$3,350,000 at 8%; 2,000,000 shares of Biocontrol common stock

<PAGE> F-23

NOTE P - SUBSEQUENT EVENTS - Continued

(fair market value of $250,000), a warrant to purchase 1,000,000
shares of Biocontrol stock for $2 per share anytime through
March 4, 2003; and the guarantee by Biocontrol of a promissory
note for $1,300,000 payable by ICTI to the seller.

Stock Purchase Agreement continued

The Biocontrol promissory note for $3,350,000 is payable in
monthly installments as follows; (i) on the first day of each
calendar month from April 1, 1998 through and including
September 1, 1998 a principal payment of $150,000 per month plus
accrued interest (ii) on October 1, 1998, a principal payment
of $1,100,000 plus accrued interest (iii) on the first day of
each calendar month from November 1, 1998 through and including
November 1, 1999 a principal payment of $100,000 per month plus
accrued interest and (iv) on December 1, 1999 a final payment
equal to the remaining outstanding principal balance plus all
accrued interest thereon. The note is collateralized by shares
of ICTI purchased by Biocontrol.

The ICTI promissory note, guaranteed by Biocontrol, is for
$1,300,000 at an annual interest rate of 9.5% and is payable
in monthly principal amounts of $36,111 plus interest. This
note is collateralized by all tangible and intangible assets
of ICTI.

In addition, Biocontrol has agreed to make nonscheduled
capital contributions totaling $3,000,000 to ICTI on or
before September 4, 1998.