BIOCONTROL TECHNOLOGY INC, S-1/A, 1998-12-30

BIOCONTROL TECHNOLOGY INC
S-1/A, 1998-12-30
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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As filed with the Securities and Exchange Commission on December 30, 1998
Registration No. 333-63193

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
PRE-EFFECTIVE AMENDMENT NO.4 TO
FORM S-1/A
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 jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)

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:
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]

CALCULATION OF REGISTRATION FEE
Title of Each Amount to Proposed Proposed Amount of
Class of be Maximum Maximum Registration
Securities to be Registered Offering Aggregate Fee
Registered Price Per Offering
Share Price
Common Stock 200,000,000(1) $0.10(2) $20,000,000(3) $3,448.00(3)
(Primary Shares)

Total 200,000,000 $20,000,000 $3,448.00(3)
Total
Registration Fee
TOTAL OF SEPARATELY NUMBERED PAGES 84 EXHIBIT INDEX ON
SEQUENTIALLY NUMBERED PAGE 78

(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 30, 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 30, 1998. Therefore, only
the filing fee for 100,000,000 shares was submitted with the
original filing of this Form S-1.
_____________________

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.

_____________________

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.

[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 or electronically via
the Commission's website at www.sec.gov and EDGAR, the electronic
database for all filings with the Commission. The Company's
common stock is traded on the NASDAQ Electronic Bulletin Board.
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 90 days after the effective date of this Prospectus,
all dealers effecting transactions in these securities, whether
or not participating in this offering, 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.

SUBJECT TO COMPLETION DATED December 30, 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 "Primary Shares" or "Common Stock"), of Biocontrol
Technology, Inc. (the "Company" or "BICO") at a price of $ .06
per share on a best-efforts, no minimum basis. 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 Electronic
Bulletin Board under the trading symbol "BICO" and is also
reported under the symbol "BIOCNTRL TEC". (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 DECEMBER 30, 1998
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
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; ($24,045,702) in 1996; and ($30,433,177) in
1997. The Company's net losses for the first three quarters of
1998 were ($17,996,197). The Company's accumulated deficit
aggregated ($120,699,236) as of December 31, 1997, and
($138,695,433) as of September 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.

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 200,000,000 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.

The Company will require additional capital in order to
complete its Noninvasive Glucose Sensor, heart valve, hyperthermia
treatment and bioremediation projects. The Company anticipates
that its other sources of capital may include additional sales of
stock, 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
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, "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, "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 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
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, "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.

9. Loss of Previous Revenue Source. During 1998, the
Company lost the primary purchaser of its functional electrical
stimulator product when NeuroControl, Inc. suspended its orders.
This loss had a significant negative impact upon the Company's
revenues, liquidity and results of operations, since sales to
NeuroControl accounted for approximately 76% of total revenues
during the year ended December 31, 1997 and 51% of total revenues
for the nine months ended September 30, 1998. The Company cannot
estimate whether or not sales to NeuroControl will resume;
therefore, prospective investors should assume that this material
source of revenue has been lost. (SEE, `MANAGEMENT'S DISCUSSION
AND ANALYSIS' and `BUSINESS').

10. 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.

11. 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.

12. 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.

13. 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, "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, "BUSINESS").

14. 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.

15. 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.

16. 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.

17. 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.

18. 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, 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, "Certain Relationships and Related
Transactions").

19. 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.

20. Prior Public Market; 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. The
Company's common stock now trades on the Nasdaq Electronic
Bulletin Board, since its delisting from the Small-Cap Market, and
no assurances can be made as to whether such volume will continue.
In addition, 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. The risk exists that, once delisted from the Small-
Cap Market, the Company's trading volume and price will decline.

21. Dilution. The Primary 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").

22. Penny Stock Rules and Regulations. The Common Stock
of the Company is by virtue of its price subject to the
requirements of certain rules promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which
require additional disclosures by broker-dealers in connection
with any trades involving a stock defined as a "penny stock"
(generally, any non-NASDAQ equity security that has a market price
of less than $5.00 per share, subject to certain exceptions).
Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith, and impose various
sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited
investors (generally defined as an investor with a net worth in
excess of $1,000,000 or annual income exceeding $200,000, $300,000
together with a spouse). For these types of transactions, the
broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to
the transaction prior to sale. The broker-dealer also must
disclose the commissions payable to the broker-dealer, current bid
and offer quotations for the penny stock and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose the fact
and the broker-dealer's resumed control over the market. Such
information must be provided to the customer orally or in writing
prior to effecting the transaction and in writing before or with
the customer confirmation. Monthly statements must be sent
disclosing recent price information for the penny stock held in
the account and information on the limited market in penny stocks.
The additional burdens imposed upon broker-dealers by such
requirements may discourage them from effecting transactions in
the Common Stock, which could severely limit the liquidity of the
Common Stock and the ability of purchasers in this offering to
sell the Common Stock in the secondary market.

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, 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
$0.06, would be $12,000,000, 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.

DILUTION

As of September 30, 1998, the Company's common stock had a
negative net tangible book value of ($2,382,858) or ($.006) per
share based upon 398,302,428 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 September
30, 1998, was ($2,382,858). Net tangible book value consists of
the net tangible assets of BICO (total assets less total
liabilities, intangible assets, minority interest and preferred
stock). As of September 30, 1998 there were 398,302,428 shares of
BICO's common stock outstanding. Therefore, the negative net
tangible book value of BICO's common stock as of that date was
($.006) 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
$0.06 per share, the net tangible book value of the Common Stock
as of September 30, 1998 would be $9,585,142 or approximately
$.016 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, options, or the
conversion of debentures, which will further dilute the value of
the shares. 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 $0.060 $0.060 $0.060

Net Tangible Book Value
Per Share Before Offering ($0.006) ($0.006) ($0.006)

Increase Per Share
Attributable to Payment
by Investors $0.022 $0.013 $.007

Net Tangible Book Value
Per Share After Offering $0.016 $0.007 $.001

Dilution Per Share
to Investors $0.044 $0.053 $.059

CAPITALIZATION

The following table sets forth the capitalization of the
Company as of and December 31, 1997 and September 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 September 30, 1998 figures were taken from the
unaudited financial statements for the nine months ended September
30, 1998.
(1) (1)
December 31, 1997 September 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 398,302,428
at September 30, 1998 $ 13,858,398 39,830,243
Additional Paid-in Capital 104,932,920 94,802,799
Note Receivable issued for common stock (25,000) (25,000)
Warrants 6,396,994 6,396,994
Accumulated Deficit (120,699,236) (138,695,433)

Total Capitalization $4,464,076 $2,309,603

December 31, 1997 September 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 8,911,662

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 Electronic
Bulletin Board under the symbol "BICO" and is also reported under
the symbol "BIOCNTRL TEC". On December 28, 1998, the closing
price for the common stock of the Company as reported by Nasdaq
was $.07. 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 September 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 .25 .0937
Second Quarter .1875 .0313
Third Quarter .359 .0313

As of September 30, 1998, the Company had approximately
40,000 holders, including those who hold in street name, for its
common stock and no holders of record for its preferred stock.

Because Nasdaq revised its requirements for companies listed
on its Small-Cap market to include a minimum trading price of
$1.00, the Company's common stock was delisted from the Small-Cap
Market and is now listed on the Nasdaq Electronic Bulletin Board.
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 nine months ended September 30, 1997 and 1998
and the Company's audited financial statements for the years ended
December 31, 1993 through 1998.

NINE MONTHS ENDED SEPTEMBER 30

1998 1997

Total Assets $15,666,209 $20,194,606

Long-Term
Obligations $ 3,359,823 $ 2,680,688

Working Capital ($ 5,873,101) $ 2,839,858

Preferred Stock $ 0 $ 0

Net Sales $ 1,019,520 $ 720,074

TOTAL REVENUES $ 1,112,580 $ 818,039

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

Benefit(Provision)
for Income Taxes $ 0 $ 0

Net Loss ($17,996,197) ($22,655,167)

Net Loss per
Common Share ($ .07) ($ .36)

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

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

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

Net Loss ($30,433,177)($24,045,702)($29,420,345)($11,672,123)($7,855,998)

Net Loss per
Common Share ($ .43) ($ .57) ($ .84) ($ .43) ($ .45)

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

Nine Months Ended September 30, 1998

Cash decreased from $2,759,067 at December 31, 1997 to $668,868 at
September 30, 1998. This decrease was attributable to the
Company's $10,468,642 net operating expenditures which primarily
related to the research and development of the Noninvasive Glucose
Sensor (Sensor) (which were approximately $5 million), Sensor
related general and administrative expenses (which were
approximately $7 million) and costs associated with the
acquisition of ICTI, Inc. The Company also had net cash used by
investing activities of $1,334,525, which includes equipment
consolidated from ICTI, Inc. (as set forth below) and the making
of Notes Receivable to related parties.

During the first quarter of 1998, with a view to diversification
and enhancing shareholder value, the Company acquired a majority
interest in ICTI, Inc. from its existing majority shareholders,
Farrell B. and Brenda K. Jones. In connection with such purchase,
the Company made payments totaling $1,528,000 and issued 2 million
shares of the Company's common stock to the sellers, which the
Company agreed to register on the Jones' behalf. In connection
with its purchase of ICTI, the Company made certain undertakings
to make capital contributions of $3.0 million to ICTI during 1998.
Due to its cash flow problems, the Company has been negotiating
with the seller to restructure and redefine its obligations to
make capital contributions to ICTI.

Furthermore, the Company had net cash provided by financing
activities of $9,712,968 of which $10,070,000 was provided from
debentures sold pursuant to Regulation S, section 4 (2) or
Regulation D during the nine-month period ended September 30,
1998. 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.

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.

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

Results of Operations

Nine Months Ended September 30, 1998

Sales during the third quarter decreased to $86,079 in 1998 from
$204,190 in 1997 and increased for the nine month period to
$1,019,520 in 1998 from $720,074 in 1997. The decrease and
increase were primarily due to that periods fluctuation in sales
of its Functional Electrical Stimulators, which accounted for 51%
of sales during the nine-month period ended September 30, 1998.

The sales of functional electrical stimulators have been
suspended, and no orders are currently pending. Sales were
suspended when NeuroControl, the company placing the orders,
discontinued its orders following the Company's cash flow problems
and reduction of personnel in June 1998. The Company is unable to
determine at this time whether the suspension is permanent, or
when future orders will be received, if any. Due to the
significance of the sales of functional electrical stimulators
when considered as a percentage of total revenues, in the event
that no future orders are received, it will have a negative impact
upon the Company's liquidity and results of operations.

Interest income increased during the third quarter to $32,466 in
1998 from $23,597 in 1997 and decreased from the nine month period
to $93,060 in 1998 from $93,846 in 1997. The increase and decrease
were due to the Company's fluctuation in cash available to invest
in those periods.

Costs of Products Sold during the third quarter decreased to
$37,820 in 1998 from $120,270 in 1997 and increased for nine month
period to $536,680 in 1998 from $443,320 in 1997. The
fluctuations were primarily due to various orders for the
Functional Electrical Stimulators which have been suspended.

Research and Development expenses during the third quarter
decreased to $1,153,474 in 1998 from $1,541,640 in 1997 and
decreased for the nine month period to $5,167,106 in 1998 from
$5,463,301 in 1997. The decrease was due to a reduction in
research and development expenditures, driven by the Company's
cash flow problems and reduction in personnel.

Selling, General and Administrative expenses during the third
quarter decreased to $2,843,709 in 1998 from $3,408,696 in 1997
and decreased for the nine month period to $8,780,862 in 1998 from
$10,009,346 in 1997. The decrease was due to the Company's
reduction in personnel and expenditures.

In connection with the Company's $8.4 million investment in
HemoCleanse, Inc. (the company which, along with IDT, is engaged
in the hyperthermia project) the Company recorded approximately
38% of such investment as General and Administrative expenses; and
approximately 62% as Research and Development expenses. The
determination of allocation was based upon the use of the funds by
HemoCleanse, direct expenses paid, and the overall use of the
funds for the hyperthermia project. The amounts were recorded as
expenses, rather than capitalized, due to the research and
development nature of the use of funds, as well as the financial
condition of HemoCleanse.

Interest expense decreased during the third quarter to $39,947 in
1998 from $87,645 in 1997 and increased to $245,605 for the nine
month period ended September 30, 1998 from $231,047 for the nine
month period ended September 30, 1997. The fluctuations was
primarily due to the Company's varied use of convertible
debentures as a means to generate capital. 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 September 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

The following seven paragraphs discuss the Results of Operations
of the entire Company based on its consolidated financial
statements. A discussion of the business segments follows.

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.

Segment Discussion

For purposes of accounting disclosure, the Company provides the
following discussion regarding three business segments: Biomedical
devices, which includes the operations of Biocontrol Technology,
Inc. and Diasense, Inc.; Bioremediation, which includes the
operations of Petrol Rem, Inc.; and Marine Paint Products, which
includes the operations of Barnacle Ban Corporation. More
complete financial information on these segments is set forth in
Note F to the accompanying financial statements.

Biomedical Device Segment. During the year ended December 31,
1997, sales to external customers increased to $880,919 from
$508,561 in 1996 and $168,461 in 1995. These increases were
primarily due to increased sales of the functional electrical
stimulators. Corresponding increases in costs of products goods
sold occurred for the same reason, from $91,859 in 1995 to
$288,537 in 1996 and to $445,843 in 1997.

Bioremediation Segment. During the year ended December 31, 1997,
sales to external customers increased to $138,362 from $47,625 in
1996. Both years' sales to external customers decreased from
$215,211 in 1995. The decrease from 1995 to 1996 was due to
different marketing targets and a decrease in the orders for
products. The increase from 1996 to 1997 was due to increased
sales of the Bio-Sok to boating suppliers and users through trade
shows and marketing exposure. Costs of products sold fluctuated
due to the same factors, from $53,813 in 1995 to $16,092 in 1996
and $88,178 in 1997. The relatively higher costs of products sold
in 1997 was due to the higher cost of producing the Bio-Sok as
opposed to other bioremediation products.

Marine Paint Products Segment. Sales to external customers
increased to $136,624 in 1997 from $41,406 in 1996, which was a
decrease from $77,585 in 1995. The higher sales in 1995 and 1997
were due to a focus on marine craft, rather than municipal, users,
which was the focus in 1996. Costs of products sold reflect the
same impact, a decrease from 1995's $52,870 to 1996's $20,785 and
an increase to 1997's $107,310.

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

Subsequent to the issuance of its consolidated financial
statements for the quarter ended September 30, 1998, the Company
determined thta beneficial conversion terms included in its
convertible debentures issued in 1996, 1997 and 1998 should be
reflected inits financial sttements as expense and as additional
paid-in capital. The amount of expense charged to operations as a
result of this adjustment was $1,650,000 in 1996; $6,278,853 in
1997; $3,617,914 for the nine months ended September 30, 1998; and
$5,638,030 for the nine months ended September 30, 1997.
Corresponding amounts were recognized as additional paid-in
capital and there was no effect to the total Stockholders Equity
as a result of these adjustments.

In November, 1998, the Company announced that it had received a
$10 million equity line of credit subject to certain terms. The
general terms of the line of credit will be monthly draw downs of
common stock based upon minimum trading volume requirments during
the prior month. The common stock will be issued based on the
price of the stock at the time of the draw. Specific terms are
still subject to negotiation.

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 Diasensorr 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 Diasensorr 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 Diasensorr 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 Diasensorr 1000 uses internal algorithms to calculate a
glucose measurement.

Since the Diasensorr 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, PRPr, 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 PRPr comes
in contact with the petroleum substances, the contaminants are
bound to the PRPr, 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.

PRPr 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 PRPr, Petrol Rem has also developed other products.
In order to address water pollution issues at marinas, Petrol Rem
has introduced BIO-SOKr, which is PRPr 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-SOKr, 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-SOKr 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-SOKr 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-SOKr 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-SOKr
"one impressive new product". In February 1997, BIO-SOKr was
given a 1997 Innovation Award by the well-known trade magazine
Motorboating and Sailing.

BIO-SOKr 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 PRPr, 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 PRPr 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
theraPORTr 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
Coraflexr 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.
Barnacle Ban

In November 1993, BICO acquired the rights to a specialized paint,
as well as the rights to the name Barnacle Ban pursuant to a
patent and trademark license agreement with its inventor. In 1995,
the Company applied for trademark protection for the name
HotBotton Paint, a barrier coat primer and antifouling paint which
received approval for registration from the EPA in July 1995.
Barnacle Ban's paint is designed to repel zebra mussels and other
related marine life from the surfaces of ships, pipelines and
other objects which function under water. Because the
accumulation of marine life on surfaces such as pipes and ships
have caused significant problems for entities such as water
authorities, utility companies, and naval operations, the Company
believes that there is a potential market for this product;
manufacturing of the product began in 1994.

In connection with the development of this product, the Company
has formed a wholly-owned subsidiary, Barnacle Ban Corporation
("Barnacle Ban's officers and directors include Fred E. Cooper and
Anthony J. Feola, who are officers and directors of BICO and its
other affiliates. Barnacle Ban has leased space in Robinson
Township, Pennsylvania for its operations.

Marketing efforts on the Company's paint products have continued,
and the Company is marketing the products from its Pittsburgh, PA
and Gaithersgurg, MD offices. In July 1996, the Company announced
that it had entered into a fice-year exclusive distribution
agreement with Pleasure Cove Marina, which is located in Maryland,
for Maryland, Virginia, Delaware and the District of Columbia; the
agreement contains an agreed-upon munimum pruchase requirement.

The trademark and license agreement covers the patents, both
granted and pending, to the paint and its application. The
agreement sets forth terms which include the minimum payment, in
the form of royalties and fees, of $32,000 for the first year,
$30,000 for the second year, $42,000 for the third year, $54,000
for the fourth year, and $66,000 for the fifth and each successive
year. These payments will be minimum royalty payments on six
percent (6%) of net sales of the product, plus thiry percent (30%)
of all payments received from any sublicenses. The Company has
spent approximatley $2,525,000 on this project through December
31, 1997.

Metal-Plating Technology

During 1998, the Company acquired a majority interest in
International Chemical Technologies, Inc. ("ICTI") from its
existing majority shareholders. In connection with such purchase,
the Company paid consideration consisting of cash, common stock
and undertook to make certain additional payments (SEE,
"Management's Discussion and Analysis").

ICTI has developed a metal-coating or plating process known
cemkoter. Cemkoter is a hard wear-resistant coating which is
engineered to be environmentally safe and cost effective. ICTI
has obtained a patent on the product, and completed its plating
facility in the fall of 1997. Currently, ICTI plates parts and
products with cemkoter for a fee. ICTI is now marketing cemkoter
in targeted industry segments.

Cemkoter began as the answer to a search for an environmentally
friendly replacement for chrome. However, additional testing
revealed that its other characteristics also make it an attractive
alternative coating material for other reasons. Cemkoter is a
uniform extremely hard nickel boride coating which provides wear
and abrasion resistance at a wide range of temperatures, from -
423F to +1800F. Its patented system formulation provides a low co-
efficient of friction and corrosion resistance which withstands
wear, heat, abrasion and extends the life of the product. The
cemkoter process operates within a closed-loop system that does
not discharge any toxic water and exhausts clean air. Cemkoter is
harder than tungsten carbide or hard chrome with a co-efficient of
friction rating near Teflon.

ICTI has spent 1998 focusing on the research and development,
testing and application of cemkoter on a number of parts and
products for various companies. For example, management believes
that cemkoter meets the specifications of military and commercial
aircraft manufacturers on over 1,000 components including critical
turbine engine parts.

When the Company acquired its interest in ICTI, the Company
disclosed the following in its Form 8-K: estimates of the
potential revenues of both the metal finishing industry (of `$48
billion') and the potential revenue of ICTI (`$50 million with
sizeable profit margins'). The Company also disclosed that it
expected `cemkote to generate immediate revenue and be a major
profit center' for the Company. The Company believes that its
estimate of the potential revenue of the metal finishing industry
is accurate; however, ICTI has not achieved any significant
revenue during 1998. The Company's early estimates were based
upon its assessment of not only the marketability of the product,
but of the Company's ability to penetrate the metal finishing
market using the features of the product. The Company's actual
experience has indicated that it is much more difficult to exploit
the existing market, regardless of whether the Company's product
has superior features. As a result, the Company has had to adjust
its strategy for penetrating the market, and to market cemkote
differently than it originally intended. The Company continues to
negotiate licensing contracts with large coating users; however,
no agreements have been finalized to date. Therefore, although
the Company still believes that the product does have the
potential to generate significant revenue and profit, it can no
longer estimate the amounts or timing of such revenue or profit.

ICTI's current objectives include securing the services of a Chief
Executive Officer with the experience necessary to guide the
Company in its next phase of growth, expanding the production
capability of cemkoter through joint ventures and/or licensing
arrangements for the use of the cemkoter chemistry on a limited
basis. In addition, ICTI plans to continue its research and
development of other "cemkoted" products. ICTI's marketing plans
include an expanded effort to educate the marketplace regarding
the benefits of cemkoter.

ICTI began its current operations in May 1997; it remains in the
development stage. During 1997 and through September 30, 1998,
ICTI's costs of production far outweighed sales due to the
chemical process to initiate the system, discounts and promotional
items, as well as for the reasons set forth above. As of the year
ended December 31, 1997 and the nine months ended September 30,
1998 ICTI's revenues were $8,319 and $31,267 respectively, as
compared to total expenses of $689,154 and $598,418 respectively.
ICTI was, as of both December 31, 1997 and September 30, 1998,
accumulating losses and experiencing cash flow deficits, with
negative working capital of ($602,047) and ($806,564)
respectively. For reasons including those summarized herein, the
financial statements for ICTI include an explanantory paragraph
referring to an uncertainty regarding ICTI's ability to continue
as a going concern.

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").

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 PRPr, BIO-SOKr, BIO-BOOMr, and Oil Busterr
(See, "BUSINESS - Bioremediation").

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 Diasensorr 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 October 31, 1998, the Company and its subsidiaries had 83
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 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 additional space, which had been leased for expansion
purposes. The Comany has vacated such space in return for the
leaseholder's agreement to forebear from taking action on the
judgment at this time.

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.

On April 30, 1996, a class action lawsuit was filed against the
Company, Diasense, Inc., and individual officers and directors.
The suit, captioned Walsingham v. Biocontrol Technology,etal., has
been certified as a class action, and is pending in the U.S.
District Court for the Western District of Pennsylvania. The suit
alleges misleading disclosures in connection with the Noninvasive
Glucose Sensor and other related activities. By mutual agreement
of the parties, the suit remains in the pre-trial pleading stage,
and the Company is unable to determine the outcome or its impact
upon the Company at this time.

The Company had leased space in two locations in Indiana County
for its manufacturing facilities. One space, which has been
upgraded with leasehold improvements, is still being used for
manufacturing of the Noninvasive Glucose Sensor. The other space,
which had been leased as expansion space, was the subject of a
judgment proceeding. The Company has given up possession of its
expansion space in Indiana County in response to the filing of a
judgment for nonpayment of lease fees. In return for possession
of the space, the leaseholder had agreed not to pursue any action
on the judgment at this time.

DIRECTORS AND EXECUTIVE OFFICERS

Name Age Since Position

David L. Purdy 70 1972 President, Chairman 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
Stan Cottrell 55 1998 Director
Paul W. Stagg 51 1998 Director
______________________________

DAVID L. PURDY, 70 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 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
and Petrol Rem.

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.

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.

PAUL W. STAGG, 51, was appointed to the Board of Directors in
1998. Mr. Stagg is the marketing manager for the Wholesale
Division of First Financial Resources, Inc., where he is
responsible for marketing, underwriting, supervising and
coordinating various types of financing for institutional
investors. Prior to his current position, he was District
Distributor of Marketing for Ginger Mae, a division of United
Companies of Baton Rouge, LA.

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. 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", 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 October 31,
1998, including accrued interest, was $ 625,982.

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 October 31, 1998,
including accrued interest, was $ 249,979.

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 October 31, 1998, including accrued interest, was $
289,142.

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 and principal
payments have been made on the note, and as of October 31, 1998,
the balance was $200,000. Joseph Kondisko, a former director of
Diasense, is a principal owner of Allegheny Food Services.

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.

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
YEARS ENDED DECEMBER 31, 1997, 1996, and 1995

(1)Long Term
Annual Compensation Compensation

Name and Year Salary($) Bonus($) (2)Other($) Awards (2)All Other
Principal Securities Compensation
Position Underlying
Warrants(#)

David L. 1997 $241,667 $ 0 $ 0 -0- $ 0
Purdy, 1996 $400,000 $ 0 $ 0 -0- $ 0
President,
Treasurer(4)1995 $400,000 $ 0 $ 0 820,000(3) $ 0

Fred E. 1997 $592,000 $ 0 $ 0 -0- $ 0
Cooper,
CEO (5) 1996 $592,000 $ 0 $ 0 -0- $ 0
1995 $480,000 $ 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. 1995 $250,000 $ 93,125 $ 0 200,000(3) $ 0
(6)

Glenn 1997 $200,000 $ 0 $ 0 -0- $ 0
Keeling, 1996 $200,000 $ 0 $ 0 100,000(8) $ 0
VP (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.

(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. Mr. Purdy is paid a salary by the Company based
upon his employment contract. Amounts paid to Mr. Purdy by
Diasense are determined by the Diasense Board of Directors
based upon services performed on its behalf.

(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. Mr. Cooper is paid a
salary by the Company based upon his employment agreement.
Amounts paid to Mr. Cooper by Diasense, Petrol Rem and IDT
are determined by the Boards of Directors of those companies
based upon services performed on their behalf.

(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 at 12/31/97($)
at 12/31/97(#)
Name Shares Value Exercisable/ Exercisable/
Acquired Realized Unexerciseable(3) Unexercisable(4)
on ($)(2)
Exercise
(#)(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) 160,000 * 927,200(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 1,428,700 * 3,145,900(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 September 30, 1998, there were 398,302,428 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.

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 September 30, 1998, the Company had outstanding
$3,125,000 in Convertible Debentures, which are due between
August 14, 1999 and August 31, 1999. The debentures are
convertible beginning ninety days from issuance into shares of
common stock. As of December 10, the conversion price of the
debentures would be approximately $ .075 per share based on a
formula which applies a discount to the average market price for
the previous week and determined by the holding period. As of
December 10, 1998, the number of shares which would be issued upon
conversion of all $3.125 million debentures would be approximately
41.5 million shares which reflects a discount of approximately
19%. The convertible debentures were sold pursuant to Section
4(2) and/or Regulation D, bear a 4% interest rate, are redeemable
by the Company at 115% of face value, and are subject to mandatory
conversion prior to or upon one year from issuance.

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 September 30, 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 at a price of $ .06 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.

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, as well as the financial statements of
International Chemical Technologies, Inc. (`ICTI') as of December
31, 1997 (which reports included an explanatory paragraph
referring to an uncertainty regarding the Company's ability to
continue as a going concern), incorporated 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 the December
31, 1997 statements of ICTI, and have 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.

INDEX TO FINANCIAL STATEMENTS

BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES

Report of Independent certified Public Accounts F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
Unaudited Proforma Condensed Consolidated Finanical
Statements F-26

INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.

Report of Independent Certified Public Accounts F-30
Balance Sheet F-31
Statement of Operations F-32
Statament of Changes in Stockholders' Equity (Deficit) F-33
Statement of Cash Flows F-34
Notes to Financial Statements F-35

F-1
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.

As discussed in Note Q to the consolidated financial
statements, certain restatements have been made to financial
statements which were previously issued by the Company.

Pittsburgh, Pennsylvania
March 25, 1998, except for Note Q
as to which the date is November 23, 1998

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

Sep.30, 1998 Dec. 31, 1997 Dec. 31, 1996
------------ ------------- -------------
(Unaudited)
------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and equivalents (note A) $ 668,868 $ 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 162,988 417,329 98,769
Inventory - net of valuation allowance (notes A and D) 1,758,378 1,834,018 3,340,120
Notes receivable - related parties (note C) - 35,000 300,000
Notes receivable (note C) 121,050 87,000 12,000
Interest receivable (note C) - 2,134 -
Prepaid expenses 216,396 164,012 277,409
----------- ------------- ------------

TOTAL CURRENT ASSETS 2,927,680 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 1,568,600 1,465,152 1,240,320
Leasehold improvements 1,486,084 1,197,977 1,157,239
Machinery and equipment 5,162,232 5,042,736 4,386,364
Furniture, fixtures & equipment 842,136 812,221 735,962
------------- ------------- -------------

Subtotal 10,749,575 10,208,609 9,208,558

Less accumulated depreciation 4,124,178 3,516,677 2,670,207
------------- ------------- -------------
6,625,397 6,691,932 6,538,351

OTHER ASSETS
Notes receivable - related parties (notes C and L) 1,270,900 598,900 95,900
Interest receivable - related parties (notes C and L) 137,186 75,343 53,958
Deposit on Equipment - 300,000 -
Goodwill, net of amortization 4,688,945 - -
Patents, net of amortization (note A) 3,516 6,765 11,097
Other assets 12,585 9,800 13,513
------------- ------------- ------------
6,113,132 990,808 174,468
------------- ------------- -------------
TOTAL ASSETS $ 15,666,209 $ 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>

Sep. 30, 1998 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- -------------
<S> (Unaudited)
<S> -------------
<C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,115,811 $ 646,535 $ 1,035,171
Current portion of long-term debt (note G) 3,623,217 18,765 30,478
Current portion of capital lease obligations (note H) 135,725 109,933 48,944
Debentures payable (note I) 3,125,000 3,301,280 4,600,000
Accrued liabilities (note E) 683,925 215,119 148,303
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 8,800,781 4,410,478 6,045,596

LONG-TERM LIABILITIES
Capital lease obligations (note H) 2,594,823 2,688,293 2,660,730
Long-term debt (note G) 765,000 8,806 38,997
------------- ------------- -------------
3,359,823 2,697,099 2,699,727

COMMITMENTS AND CONTIGENCIES (notes M and O)

UNRELATED INVESTORS'INTEREST
IN SUBSIDIARY (note A) 1,196,002 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 398,302,428 at Sep. 30, 1998; 138,583,978 at
Dec. 31, 1997 and 49,213,790 at Dec. 31, 1996 39,830,243 13,858,398 4,921,379
Additional paid-in capital (note Q) 94,802,799 104,932,920 82,354,749
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 (note Q) (138,695,433) (120,699,236) (90,266,059)
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 2,309,603 4,464,076 3,917,231

TOTAL LIABILITIES AND
STOCKHOLDER' EQUITY $ 15,666,209 $ 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 nine months ended
September 30, Year Ended December 31,
1998 1997 1997 1996 1995
---------- ---------- ------------- ------------- ------------
<S> (Unaudited) (Unaudited)
---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Net Sales $1,019,520 $ 720,074 $ 1,155,907 $ 597,592 $ 461,257
Interest income 93,060 93,846 165,977 176,478 294,734
Other income - 4,119 104,250 2,657 -
---------- ---------- ------------ ------------- -------------
1,112,580 818,039 1,426,134 776,727 755,991
Costs and expenses
Cost of products sold 536,680 443,320 641,331 325,414 198,542
Research and development (notes A and L) 5,167,106 5,463,301 6,977,590 8,742,922 7,649,678
General and administrative 8,780,862 10,009,346 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 245,605 321,047 315,624 133,460 17,048
Beneficial convertible debt feature(noteQ) 3,617,914 5,638,030 6,278,853 1,650,000 -
---------- ---------- ------------- ------------- -------------
20,218,167 25,799,419 34,271,231 29,492,864 31,505,595
---------- ---------- ------------- ------------- -------------

Loss before unrelated investors' interest (19,105,587) (24,981,380) (32,845,097) (28,716,137) (30,749,604)

Unrelated investors' interest in net loss of
subsidiary 1,109,390 2,326,213 2,411,920 4,670,435 1,329,259
---------- ---------- ------------- ------------- ------------

Net loss (note Q) $(17,996,197) $(22,655,167) $(30,433,177) $(24,045,702) $(29,420,345)
========== ========== ============= ============= =============

Loss per common share (note A and P) $ (0.07) $ (0.36) $ (0.43) $ (0.57) $ (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
Issuance of conv debt(noteQ) - - - - - - 1,650,000 - 1,650,000
Net loss (note Q) - - - - - - - (24,045,702) (24,045,702)
-------- -------- ----------- ---------- ---------- -------- ------------ -------------- ----------
Balance at Dec. 31, 1996 - - 49,213,790 4,921,379 6,907,162 - 82,354,749 (90,266,059) 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
Issuance of conv debt(noteQ) - - - - - - 6,278,853 - 6,278,853
Net loss (note Q) - - - - - - - (30,433,177) (30,433,177)
-------- -------- ----------- ---------- ----------- --------- ----------- ------------- ----------
Balance at Dec. 31, 1997 - - 138,583,978 13,858,398 6,396,994 (25,000) 104,932,920 (120,699,236) 4,464,076
-------- -------- ----------- ----------- ---------- --------- ---------- -------------- ----------
Proceeds from stk offering - - 2,025,000 202,500 - - 23,563 - 226,063
Conversion of debenture - - 257,693,450 25,769,345 - - (14,745,868) - 11,023,477
Warrant extensions - sub. - - - - - - 974,270 - 974,270
Issuance of conv debt(noteQ) - - - - - - 3,617,914 - 3,617,914
Net loss (note Q) - - - - - - - (17,996,197) (17,996,197)
-------- -------- ----------- ----------- ---------- --------- ---------- ---------- ----------
Balance at Sept. 30, 1998 $ - $ - 398,302,428 $39,830,243 $6,396,994 ($25,000) $94,802,799 ($138,695,433) $2,309,603
======== ======== =========== =========== ========== ======== =========== ============== ==========
The accompanying notes are an integral part of these statements.
Information for the nine months ended September 30, 1998 is unaudited.
</TABLE>

Biocontrol Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
For the nine months ended
Septmeber 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 (17,996,197) (22,655,167) (30,433,177) (24,045,702) (29,420,345)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,190,904 647,131 850,802 587,507 459,778
Unrelated investors' interest in susidiary (213,645) (2,326,213) (2,411,920) (4,670,435) (1,329,259)
Stock issued in exchange for services (23,937) 888,710 936,148 17,200 180,373
Stock issued in exchange for services by subsidiary - 600 600 7,000 -
Debenture interest converted to stock 96,697 - 164,055 - -
Premium for extension on Debenture 680,500 - 527,113 - -
Beneficial convertible debt feature 3,617,914 5,638,030 6,278,853 1,650,000 -
Provision for potential loss on notes receivable - - - - 1,050,000
Warrant extensions - - - 604,342 7,228,220
Warrant extensions by subsidiary 974,270 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 262,923 (168,177) (137,651) (92,083) (169,805)
(Increase) in inventories 83,135 (602,538) (586,029) (1,679,981) (2,379,694)
(Increase) in inventory valuation allowance - - 2,092,131 - 900,000
(Increase) decrease in prepaid expenses (51,197) 76,968 113,397 (128,883) 38,934
(Increase) decrease in other assets 35,269 2,087 3,713 (2,445) 79,472
Increase (decrease) in accounts payable 443,747 (522,667) (388,636) (803,237) 1,195,044
Increase (decrease) in other liabilities 430,975 118,677 66,737 (35,960) (18,960)
(Decrease) in deferred revenue - - (63,854) (146,000) -
------------ ------------- ------------ ------------- ------------
Net cash flow used by operating activities (10,468,642) (14,888,184) (19,121,752) (19,971,804) (16,891,242)
------------ ------------- ------------- ------------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (162,766) (1,050,028) (845,512) (954,610) (1,441,509)
(Increase) in notes receivable (82,050) (158,000) (313,000) (50,000) (1,312,000)
Deposit on equipment - - (300,000) - -
(Increase) in interest receivable (59,709) (16,434) (23,519) (11,721) (9,792)
Acquisition of ICTI (1,030,000 (75,000) - - -
------------- ------------- ------------- ------------- -----------
Net cash used by investing activites $ (1,334,525) $(1,299,462) $ (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 10,070,000 18,440,000 20,230,000 6,600,000 -
Payments on debentures payable - - (2,605,833) - -
Payments on notes payable (539,354) (34,959) (41,904) (19,509) (5,115)
Increase in notes payable 250,000 - - - -
Payments on capital lease obligations (67,678) 24,029 (65,987) (24,899) -
------------- ------------- ------------- ------------- ------------
Net cash provided by financing activities 9,712,968 20,494,270 19,559,976 21,586,508 19,543,198

Net increase (decrease) in cash (2,090,199) 4,306,624 (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 $ 668,868 $ 8,109,498 $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>
Nine months ended Sept 30, Year ended December 31,
1998 1997 1997 1996 1995
------- ------- --------- --------- ---------
Unaudited Unaudited
------- -------
<S> <C> <C> <C>
Supplemental Information:
Interest paid $ 103,691 $ 116,737 $ 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 $ - $ -
Additional paid-in capital - - 1,807,000 - -
---------- ---------- ---------- ---------- ----------
$ - $ - $ 2,027,000 $ - $ -
========== ========== ========== ========== ==========

Conversion of debentures for common stock $10,926,780 $13,862,460 $ 19,449,924 $2,000,000 $ -
========== ========== ========== ========== ==========

Stock granted to related party for note receivable $ - $ - $ 25,000 $ - $ -
========== ========== ========== ========== ==========
Conversion of warrants for common stock $ - $ - $ 510,168 $ 375,000 $ 550,400
========== ========== ========== ========== ==========

The accompanying notes are an integral part of these statements.
</TABLE>

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
241,246,805 in September 30, 1998 and 62,461,671 in
September 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.

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 $33,428,954, $25,823,787 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 $.47,
$.92 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. (Note Q)

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 P) are unsecured and represent a
concentration of credit risk due to the common employment
and financial dependency of these individuals on the
Company.

16. Comprehensive Income
The Company's consolidated net income (loss) is
substantially the same as comprehensive income to be
disclosed by SFA130.

17. Interim Financial Information
The accompanying consolidated financial statements of
Biocontrol Technology, Inc. as of September 30, 1998 and 1997
and for the nine 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 Q).

NOTE B - OPERATIONS AND LIQUIDITY

The Company and its subsidiaries have incurred substantial
losses in the nine month periods ended September 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,
September 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 September 30, 1998.

NOTE C - NOTES RECEIVABLE

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

Dec. 31, 1997 Dec. 31, 1996

Related Parties

Note receivable from Fred E. Cooper,
Chief Executive Officer, payable
upon demand with 12% interest. $ 8,500 $ 8,500

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 -

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, Glen Keeling, all
directors who are jointly liable to the
company. 35,000 -

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

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

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

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 of materials for products for which a 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 - BUSINESS SEGMENTS

The Company operates in three reportable business segments:
Biomedical devices, which includes the operations of Biocontrol
Technology, Inc., and Diasense, Inc.; Bioremediation, which
includes the operations of Petrol Rem, Inc.; and Marine Paint
Products, which includes the operations of Barnacle Ban
Corporation. Following is summarized financial information for
the Company's reportable segments:

<TABLE>
Biomedical Bioremediation Marine All Consolidated
Devices Paint Other
Products
<S> <C> <C> <C> <C> <C>
1997
Sales to external customers $ 880,919 $138,362 $136,624 $ 0 $ 1,155,905
Cost of product sold 445,843 88,178 107,310 0 641,331
Gross profit 435,076 50,184 29,314 0 514,574
Identifiable assets 11,122,314 602,460 56,860 999,666 12,981,300
Capital expenditures 661,095 4,460 8,680 526,933 1,000,051
Depreciation & amortization 720,150 33,976 2,751 93,925 850,802

1996
Sales to external customers 508,561 47,625 41,406 0 597,592
Cost of products sold 288,537 16,092 20,785 0 325,414
Gross profit 220,024 31,533 20,621 0 272,178
Identifiable assets 13,683,657 380,851 96,710 382,773 14,543,991
Capital expenditures 3,362,400 9,188 23,755 293,840 3,689,183
Depreciation & amortization 498,256 35,725 5,406 48,120 587,507

1995
Sales to external customers 168,461 215,211 77,585 0 461,257
Cost of products sold 91,859 53,813 52,870 0 198,542
Gross profit 76,602 161,398 24,715 0 262,715
Identifiable assets 8,467,569 452,601 24,969 129,530 9,074,669
Capital expenditures 1,424,388 31,501 2,463 9,476 1,467,828
Depreciation & amortization 404,392 29,999 858 24,529 459,778

</TABLE>

The Company will adopt Statement of Financial Accounting Standards
No. 131, "Disclosures about segments of an Enterprise and Related
Information" in 1998. The disclosures under this new standard are
not expected to be significantly different from the Company's
current disclosures of segment information.

NOTE G - LONG TERM DEBT

Long term debt consisted of the following as of:
Dec. 31,1997 Dec. 31, 1996

Note Payable to a bank in monthly payments
of $999 including interest at a rate of 7.35%. $13,007 $ 23,584
Collateralized by cash on deposit.

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

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

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

Note Payable to a bank in monthly payments
of $433 including interest at a rate of 8.75%. 9,112 13,311
Collateralized by equipment. --------- ---------
27,571 69,475

Current portion of long-term debt 18,765 30,478
--------- ---------
Long-term debt $ 8,806 $ 38,997
========= =========

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.

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
Capital 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 nine months ended September 30, 1998, and the
years ended December 31, 1997 and 1996 the Company issued
subordinated 4% convertible debentures totaling
$10,070,000, $20,230,000 and $6,600,000, respectively.
Such convertible debentures were issued pursuant to
Regulation S, Regulation D, and/or Section 4(2) and have a
one year mandatory maturity and are not saleable or
convertible for a minimum of 45 to 90 days from issuance.
At September 30, 1998, December 31, 1997 and 1996, the
subordinated convertible debentures totaled $3,125,000,
$3,301,280 and $4,600,000, respectively. (Note Q).

As of December 31, 1997 and 1996, the conversion price of
the debentures was approximately $.146 and $.686 per share,
respectively, based upon a formula which applies a discount
to the average market price for the previous week and
determined by the length of the holding period. As of
December 31, 1997 and 1996, the number of shares which would
have been issued upon conversion of all outstanding debentures
was approximately 23.9 million and 6.7 million shares,
respectively, which reflects discounts of approximately
18% and 17%, respectively.

As of September 30,1998, there were $3,125,000 in
subordinated convertible debentures outstanding, all of which
are due between August 14, 1999 and August 31,1999. As of
December 10, 1998 the conversion price of the debentures
would be approximately $.075 per share, based on a formula
which applies a discount to the average market price for the
previous week and determined by the length of the holding period.
As of December 10, 1998, the number of shares which would be
issued upon conversion of all $3.125 million debentures would
be approximately 41.5 million shares, which reflects a
discount of approximately 19%.

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 on the Series I 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.

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:

Fiscal Warrants Warrants Expire During Fiscal Year
Year Granted 1998 1999 2000 2001 2002
Granted

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

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

Canceled during the twelve month period: -0-

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

Outstanding, and eligible for exercise: 5,346,662

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 nine month period ending September 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 September 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 originally granted at an exercise
price of $1.00, and extended at the same price. Diasense
recorded $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.

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 13,889,297
Valuation Allowance (24,829,797) (18,592,039) (13,889,297)
----------- ------------ -----------
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 Allowance Net
Benefit

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

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 sale by BICO of a proposed implantable closed
loop system. BICO will pay Diasense a royalty equal to five
percent of the net sales of 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 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.

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.

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.

Additional 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.

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 Electronic Bulletin Board, 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 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.

On June 12, 1998, BICO's shareholders approved an
additional 300,000,000 shares of authorized common stock
at a special meeting called for that purpose.

Debentures

Subsequent to December 31, 1997, and through October 31,
1998. the Company issued additional 4% subordinated
convertible debentures totaling $10,070,000 with a one
year mandatory maturity.

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 Electronic Bulletin Board.

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 financial statements of ITCI as
of December 31, 1997 present accumulated losses of
$680,335, a working capital deficiency of $602,047, 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 (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.

The Company recognized $5,310,501 of goodwill in connection
with the stock purchase agreement. For purposes of
amortizing this goodwill, Management has determined a useful
life of 5 years.

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 during
1998. Due to its cash flow problems, the Company has been
negotiating with the seller to restructure and redefine
its obligations to make capital contributions to ICTI.

Unaudited Pro Forma Condensed Consolidated Financial
Statement

The following unaudited pro forma condensed consolidated
financial statements gives effect to the acquisition of
International Chemical Technologies, Inc. by the Company
pursuant to the Stock Purchase Agreement dated February
20, 1998. The pro forma financial statements have been
prepared utilizing the historical financial statements of
Biocontrol Technology, Inc. and the historical financial
statements of International Chemical Technologies, Inc.

The unaudited pro forma financial information is provided
only for comparative purposes and does not purport to be
indicative of the results of operations that actually
would have been obtained if the purchase had been
consummated on January 1, 1997, or the results of
operations that may be obtained in the future.

The unaudited proforma condensed balance sheet assumes
that the transaction occurred on December 31, 1997 with
respect to Biocontrol Technology, Inc. The transaction
was accounted for under the purchase method of accounting.
Under the purchase accounting method, assets acquired and
liabilities assumed are recorded at their estimated fair
value at the date of the purchase.

The unaudited pro forma condensed consolidated statement
of operations represents the historical net income of the
consolidated companies for the year ended December 31,
1997 adjusted to reflect the transactions as if they had
occurred at the beginning of the year. Included in these
proforma adjustments for BICO is $268,000 of interest
expense on the $3,350,000 note payable and $1,062,096 of
amortization on the ICTI goodwill. The proforma
adjustments for ICTI reflect the elimination of ICTI's
amortization expense in the amount of $39,417.

Unaudited Pro Forma Condensed Consolidated
Balance Sheet
at December 31, 1997

International
Biocontrol Chemical
Technology Technologies, Pro Forma Pro Forma
Inc. Inc. Adjustment Combined

CURRENT ASSETS
Cash and equivalents $ 2,759,067 $ 15,084 $(1,030,000)(1) (1,744,151)
Accounts receivable 417,329 5,697 - 423,026
Inventory 1,834,018 7,495 - 1,841,513
Other assets 288,146 4,087 - 292,233
--------- ---------- ----------- ----------
5,298,560 32,363 (1,030,000) 4,300,923

PROPERTY, PLANT and
EQUIPMENT,net 6,691,923 625,998 - 7,317,930

OTHER ASSETS
Notes receivable 898,900 - - 898,900
Goodwill - - 5,308,335 (2) 5,308,335
Other 91,908 272,715 (262,970)(3) 101,653
--------- ---------- ----------- ---------
$12,981,300 $ 931,076 $ 4,015,365 $17,927,741
========== ========== =========== ==========

CURRENT LIABILITIES
Accounts Payable $ 646,535 $ 26,627 $ - $ 673,162
Debenture Payable 3,301,280 - - 3,301,280
Notes Payable - 246,380 3,350,000 (4) 3,596,380
Current portion of
long-term debt 128,698 324,999 - 453,697
Other liabilities 333,965 36,404 - 370,369
---------- ---------- ----------- ----------
4,410,478 634,410 3,350,000 8,394,888

LONG-TERM DEBT 2,697,099 975,001 - 3,672,100

UNRELATED INVESTORS
INTEREST IN SUBSIDIARY 1,409,647 - - 1,409,647

STOCKHOLDERS'EQUITY
(DEFICIT) 4,464,076 (678,335) 665,365 (5) 4,451,106
---------- ---------- ----------- ---------
$12,981,300 $ 931,076 $ 4,015,365 $17,927,741
========== ========== =========== ==========

(1) Cash payments in connection with acquisition
(2) Goodwill in connection with acquisition
(3) Net balance of ICTI organization costs
(4) Notes payable issued in connection with acquisition
(5) Net deficiency in assets of ICTI and stock issued in
connection with acquisition

<PAGE>

Unaudited Pro Forma Condensed Consolidated
Statement of Operations
For the Year Ended December 31, 1997

International
Biocontrol Chemical Pro Forma
Technology, Technologies, Combined
Inc. Inc.

Revenues
Sales $ 1,155,907 $ 8,319 $ 1,164,226
Interest income 165,977 - 165,977
Other income 104,250 500 104,750
----------- ------- -----------
1,426,134 8,819 1,434,953

Costs and expenses
Cost of products sold 641,331 12,964 654,295
Research and develop 6,977,590 - 6,977,590
General and admin 12,704,146 547,069 13,251,215
Debt issue costs 3,306,812 - 3,306,812
Warrant extensions-sub 4,046,875 - 4,046,875
Interest expense 583,624 89,704 673,328
Amortization of goodwill 1,062,096 - 1,062,096
Beneficial convertible
debt feature 6,278,853 - 6,278,853
----------- ------- -----------
35,601,327 649,737 36,251,064
=========== ======= ===========

Loss before unrelated
investors' interest (34,175,193) (640,918) (34,816,111)

Unrelated investors'
interest in net loss of
subsidiary 2,411,920 - 2,411,920
----------- ------- -----------
Net loss $ (31,763,273) $(640,918) $(32,404,191)
=========== ======= ===========

Loss per common share $ (0.44) $ (0.45)
=========== ===========

NOTE Q - RESTATEMENT

The accompanying financial statements include the effect
of adjustments which were made to financial statements
previously issued by the Company.

Subsequent to the issuance of its consolidated financial
statements for the quarter ended September 30, 1998, the
Company determined that beneficial conversion terms
included in its convertible debentures issued in 1996,
1997 and 1998 should be reflected in its financial
statements as expense and as additional paid-in capital.
The amount of expense charged to operations as a result of
this adjustment was $ 1,650,000 in 1996; $ 6,278,853 in
1997; $3,617,914 for the nine months ended September 30,
1998; and $ 5,638,030 for the nine months ended September
30, 1997. Corresponding amounts were recognized as
additional paid-in capital and there was no effect to the
total Stockholders Equity as a result of these
adjustments.

The Company has also revised its previously issued
financial statements to reflect a reduction in the
amortization period for goodwill associated with its
acquisition of ICTI from 20 years to 5 years. The additional
amortization expenses for the nine months ended September 30,
1998 was $483,380.

THOMPSON DUGAN
CERTIFIED PUBLIC ACCOUNTANTS
_______________________

Pinebridge Commons
1580 McLaughlin Run Rd.
Pittsburgh, PA 15241

Report of Independent Certified Public Accountants

Independent Auditor's Report

Board of Directors
International Chemical Technologies, Inc.

We have audited the accompanying balance sheet of
International Chemical Technologies, Inc. (a development
stage company) as of December 31, 1997, and the related
statements of operations, changes in stockholders' equity
(deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, such financial statements present
fairly, in all material respects, the financial position of
International Chemical Technologies, Inc. as of December 31,
1997 and the results of its operations and its cash flows
for the year then ended in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a
going concern. As discussed in Note 2 to the financial
statements, the Company is in the development stage and has
incurred losses from operations and negative cash flows from
operations through December 31, 1997, raising substantial
doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also
described in Note 2. The financial statements do not
include any adjustments that might result from the outcome
of this uncertainty, including adjustments relating to the
recoverability and classification of recorded assets that
might be necessary in the event the Company cannot continue
to meet its financing requirements and achieve productive
operations.

Thompson Dugan, PC

October 14, 1998

INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

DECEMBER 31, 1997

ASSETS

Current Assets:
Cash $ 15,084
Accounts Receivable - trade 5,697
Employee Advances 2,900
Inventory, FIFO (note 3) 7,495
Prepaid expenses 1,187
------------
Total current assets 32,363
------------

Property and equipment (note 1):
Machinery and equipment 353,538
Leasehold improvements 288,107
Computer equipment 15,321
Furniture and fixtures 10,437
------------
667,403
Less - Accumulated depreciation 41,405
------------
625,998
------------
Other Assets:
Intangible assets (net of accumulated
amortization of $39,417) (note 4) 262,970
Deposits 9,745
------------
272,715
------------
TOTAL ASSETS $ 931,076
============

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

<PAGE>

BALANCE SHEET
(Continued)

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Current Liabilities:
Accounts payable $ 26,627
Sales tax payable 200
Accrued interest payable (stockholder) 36,204
Stockholder loan (unsecured and due on demand) 246,380
Current portion of long-term debt-stockholder (note 5) 324,999
------------
Total current liabilities 634,410

Long-term debt-stockholder (note 5) 975,001
------------
Total liabilities 1,609,411
------------

Stockholders' (deficit):
Common stock - par $.001; 2,000,000 shares
authorized, issued and outstanding 2,000
Deficit accumulated during development stage (680,335)
------------
Total stockholders' (deficit) (678,335)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 931,076
============

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

<PAGE>

INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997

Revenue - sales $ 8,319
------------
Manufacturing expense:
Materials 12,964
Wages 108,834
Contract labor 75,849
Overhead applied 174,468
------------
372,115
------------

Selling expenses:
Freight and shipping 7,620
Advertising 1,084
------------
8,704
------------

General expenses:
Professional fees 96,780
Interest and bank charges 89,704
Depreciation and amortization 80,822
Wages - administrative 48,461
Supplies 38,886
Rent (note 6) 31,988
Insurance 26,708
Utilities 19,093
Payroll and other taxes 13,156
Repairs and maintenance 9,042
Telephone 5,722
Travel and entertainment 5,130
Printing and reproduction 4,563
Employee benefits 4,507
Education and seminars 4,201
Miscellaneous 1,903
Equipment rental 1,276
Recruiting 861
------------
Less - amounts allocated to overhead applied 482,803
(174,468)
------------
308,335
------------
Total Expenses 689,154
------------

Net loss from operations (680,835)
Other income - miscellaneous 500
------------
Net loss (680,335)
============
Loss per common share (note 1) $ (0.34)
============

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

<PAGE>

INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

YEAR ENDED DECEMBER 31, 1997

Deficit Accumulated Total
Common stock During Development Stockholders'
Shares Amount Stage Equity(Deficit)
------ ------ ----------- ---------------
Balance at beginning
of year 2,000,000 $ 2,000 $ - $ 2,000

Net loss - - (680,335) (680,335)
---------- ------ ----------- ----------------
Balance at end
of year 2,000,000 $ 2,000 $ (680,335) (678,335)
========== ====== =========== ================

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

<PAGE>
INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1997

Increase (decrease) in cash
Cash flows from operating activities:
Net loss $ (680,335)
------------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 80,822
Changes in assets and liabilities:
Increase in accounts receivable (5,697)
Increase in inventory (7,495)
Increase in prepaid expenses (1,187)
Increase in employee advances (2,900)
Increase in deposits (4,220)
Increase in accrued interest payable 36,204
Increase in accounts payable 12,457
Increase in sales tax payable 200
------------
Total adjustments 108,184
------------
Net cash used by operating activities (572,151)
------------

Cash flow from investing activities:
Acquisition of property and equipment (601,190)
Investment in intangible assets (132,952)
------------
Net cash used by investing activities (734,142)
------------

Cash flow from financing activities:
Principal payments on stockholder loan (150,000)
Loan from stockholder 166,716
Proceeds from issuance of long-term debt 1,300,000
------------
Net cash provided by financing activities 1,316,716
------------

Net increase in cash 10,423
Cash at beginning of year 4,661
------------
Cash at end of year $ 15,084
============
Supplemental disclosures of cash flow information (see note 7).

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

INTERNATIONAL CHEMICAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Accounts Receivable -- The company maintains an allowance
for uncollectible accounts based upon historical experience.
No allowance for bad debts is reflected in these financial
statements as they are considered immaterial. The Company
extends credit to customers located throughout the country.

Inventory -- Inventory is stated at the lower of first-in,
first-out (FIFO) cost or market.

Property and Equipment -- Property and equipment are
stated at cost. Depreciation is computed using straight-
line methods over the following estimated useful lives:

Leasehold improvements 39 years
Machinery and equipment 7 - 10 years
Furniture and fixtures 7 - 10 years
Computer equipment 3 - 5 years

Expenditures for maintenance and repairs are charged against
operations. Renewals and betterments that materially extend
the life of an asset are capitalized.

Intangible Assets -- Intangible assets are stated at cost
less accumulated amortization. Amortization is computed
using straight-line methods over the following estimated
useful lives:

Patents 15 years
Start up costs 5 years
Organizational costs 5 years

Income Taxes -- The Company was treated as an `S'
Corporation for federal income tax purposes and, therefore,
the stockholders were taxed on the Company's taxable income
through December 31, 1997. Therefore, no provision or
liability for federal income taxes is reflected in these
financial statements.

During 1998, majority control of the Company was acquired by
another corporation and the Company's `S' Corporation status
was terminated.

Advertising Costs -- The Company defers the cost of direct
solicitation advertising and amortizes it over the future
periods which the revenue is expected to be earned. All
other advertising costs are expensed in the period it is
incurred.

Cash Flows -- The Company presents changes in cash flow
using the indirect method. For purposes of
reporting cash flow, the Company considers all highly liquid
investments with original maturities of three months or less
to be cash equivalents.

Loss Per Common Share -- Loss per common share is based upon
the weighted average number of common shares outstanding
(2,000,000 shares for 1997).

NOTE 2 - ORGANIZATION AND BUSINESS

International Chemical Technologies, Inc. was incorporated
in Florida in 1995. The Company is engaged in the business
of manufacturing Cemkoter, an extremely hard, uniform,
nickel boride coating that provides wear and abrasion
resistance. The Company is currently licensing Cemkote's
patented technology to the metal finishing industry.

International Chemical Technologies, Inc. started operations
May 1, 1997. The process of Cemkote is a new process and
the market place is currently being established. The year
of 1997 was a development stage year with plans to be fully
operational in 1998. In the initial year of production,
costs to manufacture far out weighed sales due to the
chemical process to initiate the system, and discounts and
promotional items to create an interest in the product.
Current year revenues and expenses reflect total development
stage activity.

Effective March 4, 1998, pursuant to a Stock Purchase
Agreement dated February 20, 1998, Biocontrol Technology,
Inc. acquired 58.4% of the Company's outstanding common
stock. The ability of the Company to continue in existence
is dependent on its having sufficient financial resources to
maintain operations and to successfully develop a market for
its product. Until the Company can become financially self
sufficient it will be dependent on funding provided by its
parent company, Biocontrol Technology, Inc. (BICO) and
capital raised through a private placement of its common
stock. In the past BICO has financed its own operations
from proceeds generated from private and public sales of its
securities, the issuance of debt in the form of convertible
debentures and funds from other subsidiaries. The failure
of BICO to continue to exist as a going concern would have a
material adverse effect on the business of International
Chemical Technologies, Inc. and its ability to continue
operations.

The Company is currently raising additional capital through
a private placement memorandum and anticipates that sales of
its product will begin to provide funding to its operations
by late 1998.

NOTE 3 - INVENTORY

Inventory consists of the following:

Raw material $ 7,495

NOTE 4 - INTANGIBLE ASSETS

Intangible assets consist of the following:

Patents $ 10,140
Start up costs 197,731
Organizational costs 94,516
------------
302,387
Less - accumulated amortization (39,417)
------------
$ 262,970
------------

NOTE 5 - LONG-TERM DEBT

Long-term debt consists of the following:

Brenda and Farrell Jones (stockholders) - due in
36 monthly installments of $36,111 plus
interest at 9.5% beginning April 1, 1998 $1,300,000

Less - current portion (324,999)
----------
$ 975,001
----------

Long-term debt maturing subsequent to December 31, 1998 is
as follows: 1999 - $433,334; 2000 - $433,334; 2001 - $108,333

NOTE 6 - LEASE OBLIGATIONS

The Company entered a lease of a building effective January
1997 for a term of seven years. during 1997, the Company's
rent expense was $31,988. The following is a schedule by
years of future minimum rental payments required under
operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of
December 31, 1997.

Year ending December 31:
1998 $34,125
1999 $35,100
2000 $36,075
2001 $37,050
2002 $38,025

NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW

Supplemental disclosures of cash flow information:
Cash paid during the year for:

Interest $53,373

The Company did not engage in any non-cash investing or
financing activities during 1997.

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.
__________________________
TABLE OF CONTENTS Page
Prospectus Delivery
Requirements ii
Incorporation by Reference ii
The Company 1
Risk Factors 2
Use of Proceeds 6
Dilution 6
Capitalization 8
Market Price for Common Stock 9
Description of Securities 43
Plan of Distribution 44
Shares Eligible for Future
Sale 44
Legal Proceedings 31
Interests of Named
Experts and Counsel 45
Experts 45
Indemnification of Directors
and Officers 45

200,000,000 Shares

BIOCONTROL TECHNOLOGY
INC.

Common Stock

____________________

P R O S P E C T U S

____________________

December 30, 1998

PART II

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.

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.

In January through March of 1997, the Company sold an aggregate of
22,000 shares of Series B Convertible Preferred Stock pursuant to
Regulation S. All of such preferred stock was converted pursuant
to its terms, on various dates no earlier than ninety days from
the sale of the preferred stock, into common stock during 1997,
with total proceeds tot he Company of $2,027,000. Proceeds were
used primarily to continue to fund the Company's research and
development projects and to provide working capital for the
Company.

During 1997, the Company sold an aggregate of $20.2 million in
Subordinated Convertible Debentures pursuant to Regulation S. All
such debentures were converted pursuant to their terms, on various
dates no earlier than ninety days, and no later than one year from
the sale of the debenture, into common stock. The debentures had
a mandatory conversion feature, which required conversion prior to
their expiration. The debentures resulted in total net proceeds
to the Company of approximately $18 million. Proceeds were used
primarily to fund the Company's research and development projects
and to provide working capital for the Company.

During the first two quarters of 1998, the Company sold an
aggregate of approximately $7 million in Subordinated Convertible
Debentures pursuant to Regulation S. All such debentures were
converted pursuant to their terms, on various dates no earlier
than forty-five to ninety days from issuance, into shares of
common stock; all such debentures had been converted as of the
date of this filing. The net proceeds to the Company of
approximately $6.3 million. Proceeds were used to fund the
Company's research and development projects, the acquisition of
ICTI, and to provide working capital for the Company.

In August 1998, the Company sold an aggregate of $3,125,000 in
convertible subordinated debentures which are due between August
14, 1999 and August 31, 1999. The debentures are convertible
beginning ninety days from issuance into shares of common stock.
The convertible debentures were sold pursuant to Section 4(2) and
/or Regulation D, bear a 4% interest rate, are redeemable by the
Company at 115% of face value, and are subject to mandatory
conversion prior to or upon one year from issuance. Proceeds from
the sale of the securities were used for general working capital
expenses and to contunue the Company's research and development
projects.

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 Incorporation 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 82

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 thereto 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 84

24.2 Consent of Counsel (Included in Exhibit 5.1 above) 82

25.1 Power of Attorney of Fred E. Cooper 81
(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

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 December 30, 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 and 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, December 30, 1998
David L. Purdy Treasurer, Director

/s/ Anthony J. Feola Senior Vice President, December 30, 1998
Anthony J. Feola Director

/s/ Glenn Keeling Director December 30, 1998
Glenn Keeling

/s/ Stan Cottrell Director December 30, 1998
Stann Cottrell

/s/ Paul W. Stagg Director December 30, 1998
Paul W. Stagg

SWEENEY & ASSOCIATES P.C. Exhibit 5.1
ATTORNEYS AT LAW
7300 PENN AVENUE
PITTSBURGH, PA 15208

TELEPHONE (412) 731-1000
FACSIMILE (412) 731-9190

December 30, 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 December 30, 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 398,302,428
shares of common stock were outstanding as of September
30, 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 ACCOUNTS

We have issued our report dated March 25, 1998, except for Note
Q as to which the date is November 23, 1998, accompanying the
consolidated financial statements of Biocontrol Technology,
Inc. and subsidiaries appearing in the 1997 Annual Report on
Form 10-K fo the year ended December 31, 1997. We have also
issued our report dated October 14, 1998, accompanying the
financial statements of International Chemical Technologies,
Inc. We consent to the inclusion in the Registration Statement
of the aforementioned reports and to the use of our name as it
appears under the caption "EXPERTS". Our reports on the
financial statements referred to above include explanatory
paragraphs which discuss going concern considerations as to
Biocontrol Technology, Inc. and International Chemical
Technologies, Inc.

/s/ Thompson Dugan
Pittsburgh, Pennsylvania

December 30, 1998
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