THERMO ECOTEK CORP
8-K, 1997-08-26
COGENERATION SERVICES & SMALL POWER PRODUCERS
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                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

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

                                    FORM 8-K

                                 CURRENT REPORT



                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934



                                 Date of Report
                       (Date of earliest event reported):

                                 August 26, 1997

                    ________________________________________


                            THERMO ECOTEK CORPORATION
             (Exact name of Registrant as specified in its charter)


    Delaware                        1-13572                        04-3072335
    (State or other               (Commission                (I.R.S. Employer
    jurisdiction of               File Number)         Identification Number)
    incorporation or
    organization)

    245 Winter Street, Suite 300
    Waltham, Massachusetts                                              02154
    (Address of principal executive offices)                       (Zip Code)

                                 (617) 622-1000
                         (Registrant's telephone number
                              including area code)
PAGE
<PAGE>
                                                                     FORM 8-K


    Item 5. Other Events

        On January 17, 1997, Thermo Ecotek Corporation (the Company) through
    its wholly owned subsidiary, Thermo Trilogy Corp., acquired substantially
    all of the assets (the Assets) of biosys, inc. (biosys), including the
    stock of a wholly-owned subsidiary, AgriSense-BCS, Ltd., a U.K. company,
    for approximately $11,200,000 in cash (the Purchase Price). The Assets
    consist of the business of biosys, a producer of pheromone,
    neem/azadiractin, nematodes, and virus-based biopesticide products, as
    well as disease resistant sugar cane, based in Columbia, Maryland (the
    biosys Business).

        In September 1996, biosys filed for reorganization under Chapter 11
    of the U.S. Bankruptcy Code. The Company, through Thermo Trilogy Corp.,
    acquired the Assets from biosys as part of an auction conducted by
    biosys. The Purchase Price represents the Company's bid in the auction
    for the Assets. The Company based its bid in part on the Company's
    estimate of projected sales and profits to be generated by the biosys
    Business. The sale of the Assets was subject to, and received, approval
    by the bankruptcy court on January 7, 1997.

        The acquisition was made pursuant to an Asset Purchase Agreement
    dated as of December 24, 1996, among Thermo Trilogy Corp., biosys, inc.,
    Crop Genetics International Corporation and AgriDyne Technologies, Inc.,
    both of which are wholly owned subsidiaries of biosys. The Purchase Price
    was funded entirely from cash on hand.

        The Company has no present intention to use the Assets for purposes
    materially different from the purposes for which such assets were used
    prior to the acquisition. However, simultaneously upon closing, the
    Company abandoned certain equipment which was immaterial and unnecessary
    to the operation of the biosys Business. Further, the Company will review
    the biosys Business and its assets, corporate structure, capitalization,
    operations, properties, and policies, and, upon completion of this
    review, may develop alternative plans or proposals, including mergers,
    transfers of a material amount of assets, or other transactions or
    changes relating to such business.

        On January 31, 1997, the Company filed a Current Report on Form 8-K
    regarding the Company's purchase of biosys. Subsequently, on March 25,
    1997, the Company filed Amendment No. 1 on Form 8-K/A including biosys'
    consolidated financial statements for the three years ended December 31,
    1995. Included as exhibits to this Current Report on Form 8-K are biosys'
    consolidated financial statements for the two years ended December 31,
    1996, together with the unaudited pro forma combined condensed statement
    of income for the fiscal year ended September 28, 1996.

                                        2PAGE
<PAGE>
                                                                     FORM 8-K



    Item 5.  Exhibits

      23.1     Consent of Price Waterhouse LLP

      99.1     Financial Statements of Business Acquired

      99.2     Pro Forma Combined Condensed Financial Information

                                        3PAGE
<PAGE>
                                                                     FORM 8-K
                                   SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934,
    the Registrant has duly caused this report to be signed on its behalf by
    the undersigned thereunto duly authorized, on this 26th of August 1997.


                                                THERMO ECOTEK CORPORATION




                                                Paul F. Kelleher
                                                --------------------------
                                                Paul F. Kelleher
                                                Chief Accounting Officer

                                        4<PAGE>

                                                                 Exhibit 23.1


                       CONSENT OF INDEPENDENT ACCOUNTANTS


        We hereby consent to the incorporation by reference in the
    Registration Statement on Form S-8 (No. 33-91538), Registration Statement
    on Form S-8 (No. 33-91542), Registration Statement on Form S-8 (No.
    33-91546), Registration Statement on Form S-8 (No. 33-91544),
    Registration Statement on Form S-8 (No. 33-91548), and Registration
    Statement on Form S-8 (No. 33-80753) of Thermo Ecotek Corporation of our
    report dated August 7, 1997, appearing in this Current Report on Form
    8-K.




    PRICE WATERHOUSE LLP

    Falls Church, Virginia
    August 20, 1997


                                                                Exhibit 99.1








                                  biosys, inc.


                             Report and Consolidated
                              Financial Statements


                           December 31, 1996 and 1995
PAGE
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS


    To the Board of Directors and Shareholders of biosys, inc.:

         In our opinion, the accompanying consolidated balance sheets of
    discontinued operations and the related consolidated statements of
    discontinued operations, of cash flows of discontinued operations and of
    shareholders' equity (deficit) of discontinued operations present fairly,
    in all material respects, the financial position of biosys, inc. and its
    subsidiaries (the "Company") at December 31, 1995 and 1996, and the
    results of their discontinued operations and their cash flows for each of
    the two years in the period ended December 31, 1996, in conformity with
    generally accepted accounting principles. These financial statements are
    the responsibility of the Company's management; our responsibility is to
    express an opinion on these financial statements based on our audits. We
    conducted our audits of these statements in accordance with generally
    accepted auditing standards which 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, assessing the accounting
    principles used and significant estimates made by management, and
    evaluating the overall financial statement presentation. We believe that
    our audits provide a reasonable basis for the opinion expressed above. 

         As discussed in Notes 1 and 2 to the consolidated financial
    statements, biosys, inc. and certain of its wholly-owned subsidiaries
    filed voluntary petitions for relief under Chapter 11 of the United
    States Bankruptcy Code during 1996. Subsequent to December 31, 1996, the
    Company sold substantially all of its productive assets, ceased
    operations and filed a plan of liquidation with the United States
    Bankruptcy Court for the District of Maryland  which plan is currently
    awaiting confirmation. The accompanying consolidated financial statements
    have been prepared assuming that the Company will continue as a going
    concern. As more fully described in Note 3 to the consolidated financial
    statements, the results of operations are presented as discontinued
    operations, and accrued expenses include the estimated costs of the
    liquidation of the Company. As a consequence,  substantial doubt exists
    about the Company's ability to continue as a going concern. As more fully
    described in Notes 7 and 8 to the consolidated financial statements, a
    significantly larger amount of claims have been cumulatively asserted
    against the Company than are reflected as liabilities in  the
    consolidated financial statements.

         As discussed in Note 8 to the financial statements, in July 1997 a
    former customer of the Company filed a claim contending that biosys, inc.
    has failed to perform under an exclusive marketing agreement between the
    former customer and biosys, inc. Based upon this alleged breach of the
    marketing agreement and biosys, inc.'s inability to perform under such
    agreement, the former customer has asserted a claim of approximately $9
    million, representing their alleged lost margin for the remaining term of
    the marketing agreement. It is the Company's intention to object to the
    allowance of such claim. The ultimate outcome of the matter cannot
    presently be determined, and no provision for any liability that may
    result has been made in the financial statements.
PAGE
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS


         The consolidated financial statements do not include any adjustments
    relating to the amounts that ultimately will be paid to settle the
    Company's liabilities; as a result of the liquidation process, such
    amounts may be substantially different from their carrying values.





    PRICE WATERHOUSE LLP

    Falls Church, Virginia
    August 7, 1997
PAGE
<PAGE>
                                  biosys, inc.
                              (Debtor-in-Posession)
             CONSOLIDATED BALANCE SHEETS OF DISCONTINUED OPERATIONS
                      (in thousands, except per share data)

                                                       December 31,
                                           ----------------------------------
                                                                       1996
                                              1995        1996      Pro Forma
                                                                   (Unaudited)
                                           Historical  Historical    (Note 2)
                                           ----------  ----------   ---------
 ASSETS
 Cash and cash equivalents                 $   1,755   $     961    $   8,021
 Accounts receivable, net                      3,009       2,363        1,040
 Inventories, net                              4,086       3,262            -
 Property and equipment, net                   6,421       6,117            -
 Goodwill                                        380       3,606            -
 Other assets, net                               706         623            -
                                           ---------   ---------    ---------
                                           $  16,357   $  16,932    $   9,061
                                           =========   =========    =========

 LIABILITIES AND SHAREHOLDERS' DEFICIT
 Liabilities not subject to compromise:
   Accounts payable                            4,767       2,512          116
   Debt - prepetition                          9,674       3,562            -
   Accrued expenses                            3,309         966          966
   Deferred credits                              931         214           21
   Estimated costs through completion of
     liquidation                                   -       2,512        2,765
                                           ---------   ---------    ---------
       Total liabilities not subject to
         compromise                           18,681       9,766        3,868
                                           ---------   ---------    ---------
 Liabilities subject to
   compromise - prepetition                        -      11,660        9,686
                                           ---------   ---------    ---------
       Total liabilities                      18,681      21,426       13,554
                                           ---------   ---------    ---------
 Commitment and contingencies (Note 8)

 Shareholders' deficit:
   Series A convertible preferred stock,
     $.001 par value; 5,000,000 shares
     authorized, 520 shares issued and
     outstanding on December 31, 1996              -           1            1
   Common stock, $.001 par value;
     30,000,000 shares authorized;
     5,598,828 and 9,548,610 issued and
     outstanding at December 31, 1995 and
     1996, respectively                            6           9            9
   Additional paid-in capital                126,315     146,651      146,651
   Accumulated deficit                      (128,592)   (151,154)    (151,154)
   Cumulative translation adjustment             (53)         (1)           -
                                           ---------   ---------    ---------
     Total shareholders' deficit              (2,324)     (4,494)      (4,493)
                                           ---------   ---------    ---------
                                           $  16,357   $  16,932    $   9,061
                                           =========   =========    =========

          See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
                                  biosys, inc.
                              (Debtor-in-Posession)
               CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
                 (in thousands, except share and per share data)

                                                       Years ended December 31,
                                                       ------------------------
                                                          1995         1996
                                                          ----         ----

 Revenues:
   Product sales                                       $ 22,679     $ 22,846
   Contract research and development                        320          903
                                                       --------     --------
     Total revenues                                      22,999       23,749
                                                       --------     --------
 Operating costs and expenses:
   Cost of product sales                                 21,241       21,245
   Research and development                               7,006        5,685
   Marketing and selling                                  4,301        3,108
   General and administrative                             3,520        5,607
   Purchased research and development                         -        6,000
   Costs of mergers                                       4,175            -
                                                       --------     --------
     Total operating costs and expenses                  40,243       41,645
                                                       --------     --------
 Loss from operations                                   (17,244)     (17,896)
                                                       --------      -------
 Non-operating income and expenses:
   Interest and other expense                            (1,415)      (1,313)
   Interest and other income                                119           48
                                                       --------     --------
     Total non-operating income and expenses             (1,296)      (1,265)
                                                       --------     --------
 Reorganization and estimated expenses through
   liquidation, net                                           -       (3,401)
                                                       --------     --------
 Net loss                                               (18,540)     (22,562)

 Preferred stock dividends and accretion                      -       (1,844)
                                                       --------     --------
 Net loss applicable to common shares                  $(18,540)    $(24,406)
                                                       ========     ========

 Net loss per share                                    $  (4.04)    $  (3.17)
 Weighted average common shares and equivalents           4,587        7,688

           See accompanying notes to consolidated financial statements
PAGE
<PAGE>
                                  biosys, inc.
                              (Debtor-in-Posession)
        CONSOLIDATED STATEMENTS OF CASH FLOWS OF DISCONTINUED OPERATIONS
                                 (in thousands)


                                                       Years ended December 31,
                                                       ------------------------
                                                          1995         1996
                                                          ----         ----
 Cash flows from operating activities:
   Net loss                                            $(18,540)    $(22,562)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
         Purchased research and development                   -        6,000
         Depreciation and amortization                    1,589        2,567
         Common stock and warrants issued for loan
           origination and modification                      85          153
         Loss on disposal of assets                          49            -
         Changes in assets and liabilities:
            Accounts receivable                          (1,130)         942
            Inventories                                    (543)       1,528
            Other assets                                    336         (146)
            Accounts payable and accrued expenses         4,188        3,044
            Estimated costs through completion of
              liquidation                                     -        2,512
            Deferred credits                                399         (717)
                                                       --------      -------
 Net cash used in operating activities                  (13,567)      (6,679)
                                                       --------      -------
 Cash flows from investing activities:
   Acquisition of property and equipment                   (845)        (888)
   Proceeds from sale of property and equipment             547            -
   Proceeds from sale of short-term investments              76            -
   Net cash acquired in AgriDyne acquisition                  -        1,742
                                                       --------     --------
 Net cash provided by (used in) investing activities       (222)         854
                                                       --------     --------
 Cash flows from financing activities:
   Issuance of common stock, net of issuance costs        3,012            -
   Exercise of stock options and warrants                    24            8
   Issuance of convertible preferred stock, net of
     issuance costs                                           -        7,254
   Payments on debt                                      (1,186)      (2,450)
   Proceeds from issuance of debt                         5,325          182
   Restricted cash                                            -            -
                                                       --------     --------
 Net cash provided by financing activities                7,175        4,994
                                                       --------     --------
 Effect of exchange rate changes on cash                     (8)          37
                                                       --------     --------
 Net decrease in cash and cash equivalents               (6,622)        (794)
 Cash and cash equivalents at beginning of year           8,377        1,755
                                                       --------     --------
 Cash and cash equivalents at end of year              $  1,755     $    961
                                                       ========     ========

          See accompanying notes to consolidated financial statements.
PAGE
<PAGE>
                                  biosys, inc.
                              (Debtor-in-Posession)
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) OF
                             DISCONTINUED OPERATIONS
                        (in thousands, except share data)

                                             Add-            
             Preferred Stock   Common Stock  itional  Accumu-  Cumulative
             ----------------  ------------- Paid-in  lated   Translation
             Shares    Amount  Shares Amount Capital  Deficit  Adjustment  Total
             ------    ------  ------ ------ -------  ------- -----------  -----
 Balance at
   December
   31, 1994  2,133,605  $ 213  4,106,838  $4 $122,983 $(110,052)  $(58)  $13,090
 Issuance of
   common stock
   to retire
   preferred
   stock    (2,133,605)  (213)   573,878   1      212
 Issuance of 
   common stock
   upon exercise
   of options
   and warrants                   51,398          109                        109
 Issuance of
   common stock                  866,714   1    3,011                      3,012
 Net loss                                               (18,540)        (18,540)
 Translation
   adjustment                                                        5         5
               -------  ----- ---------- ---  ------- ---------  ----- ---------
 Balance at 
   December
   31, 1995                    5,598,828   6  126,315  (128,592)   (53)  (2,324)
 Issuance of 
   common stock
   in connection
   with acquisition
   of AgriDyne                 1,888,121   1   12,924                     12,925
 Issuance of
   preferred
   stock           780      1                   7,253                      7,254
 Issuance of
   common stock
   upon exercise
   of options
   and warrants                    8,718          161                        161
 Conversion of
   preferred
   stock into
   common
   stock         (260)         2,052,943   2       (2)
 Net loss                                               (22,562)        (22,562)
 Translation
   adjustment                                                       52        52
               -------  ----- ---------- ---  ------- ---------  ----- ---------
 Balance at
 December
 31, 1996         520  $   1   9,548,610  $9 $146,651 $(151,154)  $ (1) $(4,494)
               =======  ===== ========== ===  ======= =========  ====== ========

          See accompanying notes to consolidated financial statements.
                                        .
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   Notes To Consolidated Financial Statements

    NOTE 1 - THE COMPANY

         During the year ended December 31, 1996, biosys, inc. and its
    domestic subsidiaries, Crop Genetics International Corporation ("CGI")
    and AgriDyne Technologies, Inc. ("AgriDyne") and its U.K. subsidiary,
    Agrisense-BCS, Limited ("BCS"), herein collectively referred to as
    "biosys" or the "Company," engaged in the development, production and
    sale of bioinsecticides used to detect, monitor and control harmful
    insects. The Company also had a division which produced high yielding
    seedcane for the sugarcane industry.

         On September 27, 1996, biosys, inc. and CGI, filed voluntary
    petitions for relief under Chapter 11 of the United States Bankruptcy
    Code ("Chapter 11") in the United States Bankruptcy Court for the
    District of Maryland (the "Bankruptcy Court"). On November 15, 1996,
    AgriDyne also filed a voluntary petition for relief under Chapter 11.
    biosys, inc., CGI and AgriDyne are herein collectively referred to as the
    "Debtors" and the filing of voluntary petitions under Chapter 11 are
    referred to as the "Filings."  BCS did not file for bankruptcy
    protection.

         As discussed in Note 2 on January 17, 1997, substantially all of the
    assets of the Debtors, including the stock of BCS, were sold to Thermo
    Trilogy Corporation in accordance with the Asset Purchase Agreement. In
    conjunction with the sale, Thermo Trilogy Corporation also assumed
    certain contractual obligations of biosys. The Company ceased the
    manufacture and sale of commercial products concurrent with the sale of
    assets. 

         The proceeds from the sale of assets are expected to be distributed
    to the Debtor's creditors in accordance with a Joint Plan of Liquidation
    which has been filed with Bankruptcy Court. The Company does not expect
    that there will be any funds remaining for the Company's common or
    preferred shareholders. See Note 2 for further discussion of the
    bankruptcy proceedings.

    NOTE 2 - STATUS OF CHAPTER 11 PROCEEDINGS

         During 1996, the Company continued to experience negative cash flow
    from operations. Despite certain funding and collaborative initiatives
    pursued by the Company during 1996 and prior periods, the Company was,
    for a variety of reasons, not successful in procuring adequate funding to
    satisfy operational and creditor needs. Accordingly, as discussed in Note
    1, during 1996 the Debtors filed voluntary petitions under Chapter 11 in
    order to obtain relief from their creditors. Subsequent to the date of
    the Filings, the Debtors have been operating as debtors-in-possession
    pursuant to federal bankruptcy laws. Schedules were filed by the Debtors
    with the Bankruptcy Court setting forth the assets and liabilities of the
    Debtors as of the date of the Filings as shown by the Debtors' accounting
    records. Creditors, with certain limited exceptions, were required to
    file proof of claims by January 28, 1997 (in the case of biosys, inc. and
    CGI creditors) and March 18, 1997 (in the case of AgriDyne creditors).
    Substantial differences between amounts shown by the Debtors and claims
    filed by creditors are currently being investigated and, where not
    resolved, may be subject to objection in the normal course of bankruptcy
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   Notes To Consolidated Financial Statements

    proceedings. The amount and settlement terms for any such disputed
    liabilities are subject to approval by the Bankruptcy Court. No provision
    has been recorded as of December 31, 1996 for possible settlements, if
    any, as such amount is not determinable. See Note 8.

         From the date of the Filings through the sale of assets to Thermo
    Trilogy Corporation, the operations of the Company were funded by the use
    of existing cash and working capital resources with the oversight of the
    secured creditors, The Official Committee of Unsecured Creditors
    ("Creditors' Committee") and the Bankruptcy Court.

         On December 24, 1996, the Debtors entered into an Asset Purchase
    Agreement with Thermo Trilogy Corporation. Pursuant to the Asset Purchase
    Agreement, Thermo Trilogy Corporation agreed to purchase substantially
    all of the Company's assets, excluding certain cash and trade accounts
    receivable balances and including the common stock of BCS, for $11
    million in cash and the assumption of certain contractual obligations of
    the Company. On January 7, 1997, the Bankruptcy Court approved the Asset
    Purchase Agreement and the sale was consummated on January 17, 1997. At
    the time of sale, the cash paid and contractual obligations assumed by
    Thermo Trilogy Corporation exceeded the carrying value of the assets sold
    by biosys by approximately $253,000. This gain has been offset against
    accrued reorganization and liquidation expenses at December 31, 1996. See
    Note 3. In conjunction with the sale of the Company's assets on January
    17, 1997, the Company paid one of its secured creditors approximately
    $3,562,000, representing outstanding principal balance and accrued
    interest, pursuant to an Order of the Bankruptcy Court.

         The Consolidated Balance Sheets include unaudited pro-forma
    information presenting the Company's balance sheet at December 31, 1996
    as if the transactions with Thermo Trilogy Corporation and the Company's
    secured creditor as described above had been consummated on December 31,
    1996. The pro forma adjustments made to the Consolidated Balance Sheets
    are as follows:
PAGE
<PAGE>
 biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                      Pro Forma Consolidated Balance Sheet
                             (Amounts in thousands)

                                                    December 31, 1996
                                           ----------------------------------
                                                              Unaudited
                                                       ----------------------
                                                        Pro Forma
                                           Historical  Adjustments  Pro Forma
                                           ----------  -----------  ---------
 ASSETS
 Cash and cash equivalents                 $    961    $10,622 (a)  $   8,021
                                                        (3,562)(b)
 Accounts receivable, net                     2,363     (1,323)(a)      1,040
 Inventories, net                             3,262     (3,262)(a)          -
 Property and equipment, net                  6,117     (6,117)(a)          -
 Goodwill                                     3,606     (3,606)(a)          -
 Other assets, net                              623       (623)(a)          -
                                           --------    -------      ---------
                                           $ 16,932    $(7,871)     $   9,061
                                           ========    =======      =========

 LIABILITIES AND SHAREHOLDERS' DEFICIT
 Liabilities not subject to compromise:
   Accounts payable                           2,512     (2,396)(a)        116
   Debt - prepetition                         3,562     (3,562)(b)          -
   Accrued expenses                             966                       966
   Deferred credits                             214       (193)(a)         21
   Estimated costs through completion of
     liquidation                              2,512        253 (a)      2,765
                                           --------    -------      ---------
       Total liabilities not subject to
         compromise                           9,766     (5,898)(a)      3,868
                                           --------    -------      ---------
 Liabilities subject to
   compromise - prepetition                  11,660     (1,974)(a)      9,686
                                           --------    -------      ---------
       Total liabilities                     21,426     (7,872)        13,554
                                           --------    -------      ---------
 Shareholders' deficit:
   Convertible preferred stock, par value         1                        1
   Common stock, par value                        9                        9
   Additional paid-in capital               146,651                  146,651
   Accumulated deficit                     (151,154)                (151,154)
   Cumulative translation adjustment             (1)         1 (a)         -
                                           --------    -------     ---------
     Total shareholders' deficit             (4,494)         1        (4,493)
                                           --------    -------     ---------
                                           $ 16,932    $(7,871)    $   9,061
                                           ========    =======     =========

 (a) To reflect the sale, consummated on January 17, 1997, of substantially all
    of the Company's assets, including the stock of BCS, to Thermo Trilogy
    Corporation in exchange of $11,000,000 in cash and the assumption by Thermo
    Trilogy Corporation of certain contractual obligations of the Company.

 (b) To reflect the repayment of the outstanding principal balance and accrued
    interest due to one of the Company's secured creditors in conjunction with
    the sale of assets described above.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         On April 28, 1997, the Debtors, together with the Creditors'
    Committee, filed a Joint Plan of Liquidation with the Bankruptcy Court.
    On June 13, 1997, the Debtors, together with the Creditors' Committee,
    filed a Joint Disclosure Statement. A hearing to approve or disapprove
    the Joint Disclosure Statement has been scheduled for August 19, 1997.
    Upon approval of the Joint Disclosure Statement, the Bankruptcy Court
    will schedule a confirmation hearing on the Joint Plan of Liquidation to
    be followed by the appointment of a liquidating agent if the Joint Plan
    of Liquidation is confirmed.

    NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation

         As the Company was in the process of selling substantially all of
    its assets to Thermo Trilogy Corporation at December 31, 1996, the
    financial statements as of and for the year ended December 31, 1996 have
    been prepared as those of a discontinued operation. Therefore, the
    historical cost basis has been used, and the Company has accrued all
    operating results and estimated costs to be incurred through the date of
    its pending liquidation as of December 31, 1996. The gain on sale of the
    Company's assets to Thermo Trilogy Corporation described in Note 2 has
    been offset against this accrual. The valuation of assets and liabilities
    necessarily requires many estimates and assumptions and there are
    substantial uncertainties in carrying out the liquidation.

         The accompanying balance sheets are presented without segregation
    of current assets and current liabilities. This unclassified presentation
    avoids possible misunderstandings as to the relationships between current
    and noncurrent assets and liabilities. With the subsequent sale of
    substantially all of biosys' assets and the planned liquidation, all
    assets and liabilities became current. See Notes 1 and 2.

         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 amount 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. Particularly sensitive estimates
    include liabilities subject to compromise, estimated costs through
    completion of liquidation and the AgriDyne purchase price allocation
    (Note 4). Actual results could differ from those estimates.

         Principles of Consolidation

         The consolidated financial statements include the accounts of
    biosys and its wholly-owned subsidiaries. All significant intercompany
    accounts and transactions have been eliminated.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Revenue Recognition

         Revenue from the sale of the Company's products, as well as from
    products manufactured for others, is recognized upon shipment. Provision
    is made for expected sales returns and allowances when revenue is
    recognized. Contract research and development revenues are recognized as
    related expenses are incurred in accordance with the contract terms.

         Cash Equivalents

         Cash equivalents consist of highly liquid investments with original
    maturities of three months or less. 

         Fair Value of Financial Instruments

         Statement of Financial Accounting Standards No. 107, "Disclosures
    about Fair Value of Financial Instruments," (SFAS 107) requires companies
    to disclose the fair value of financial instruments, both assets and
    liabilities, recognized and not recognized in the balance sheets, for
    which it is practicable to estimate fair value. For purposes of this
    disclosure, the fair value of a financial instrument is the amount at
    which the instrument could be exchanged in a current transaction between
    two willing parties, other than in a forced liquidation or sale. Fair
    value is based on quoted market prices for the same or similar
    instruments. The carrying amount of the Company's financial assets
    approximates fair value due to the short maturity of these financial
    instruments.

         The uncertainty related to the outcome of the Filings and the
    resulting effect upon the ultimate value of the Company's liabilities
    adds significantly to the uncertain nature of any estimate of fair value.
    The disposition of the Company's liabilities in the bankruptcy
    proceedings could occur at significantly different amounts from fair
    value estimates which can be made at this time. The liabilities of the
    Company which are subject to compromise are subject to adjustment at the
    direction of the Bankruptcy Court. Additionally, the timing of the
    ultimate payment of these liabilities, as well as the inclusion of
    interest, late fees and other similar costs, is also subject to
    determination by the Bankruptcy Court. Accordingly, it is not practicable
    to determine the fair value of the liabilities of the Company.

         Inventories

         Inventories are stated at the lower of cost, determined on the
    first-in, first-out basis, or market.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Property and Equipment

         Property and equipment are recorded at cost. Depreciation and
    amortization are computed using the straight line method over the
    estimated useful lives of the assets, which range from three to ten
    years. Depreciation of leasehold improvements is computed using the
    shorter of the remaining lease term or the estimated useful life of the
    improvements. 

         Long-lived Assets

         Effective January 1, 1996, the Company adopted Statement of
    Financial Accounting Standards No. 121 "Accounting for the Impairment of
    Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS
    121). Upon adoption of the SFAS 121, the Company evaluated its long-lived
    assets using projected undiscounted future cash flows and operating
    results for each of the Company's divisions and determined that no
    material impairment existed at January 1, 1996. The Company continued to
    evaluate its long-lived assets for impairment throughout 1996 and
    determined that no material impairment existed.

         Foreign Currency Translation

         Assets and liabilities of the Company's foreign subsidiary are
    translated to U.S. dollars at year-end exchange rates. Revenue and
    expense items are translated at average exchange rates prevailing during
    the year. Translation adjustments are accumulated as a separate component
    of shareholders' deficit. Transaction gains and losses are included in
    results of operations and have not been significant. 

         Interest Expense

         The accrual of interest on prepetition indebtedness ceased
    subsequent to the date of the Filings as a result of the related debt
    being considered liabilities subject to compromise in the bankruptcy
    proceedings. If these costs had continued to accrue subsequent to the
    date of the Filings, total interest expense for the year ended December
    31, 1996 would have been increased by approximately $116,000. Cash paid
    for interest approximated $1,277,000 and $1,228,000 in 1996 and 1995,
    respectively.

         Net Loss Per Share

         Net loss per share has been computed using the weighted average
    number of common shares outstanding during each period presented. Common
    equivalent shares for options and warrants granted but not exercised and
    for convertible preferred stock are not included in the calculation as
    their effect would be antidilutive.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Accounting for Stock Options

         Effective January 1, 1996, the Company adopted Statement of
    Financial Accounting Standards No. 123, "Accounting for Stock-Based
    Compensation" (SFAS 123). In accordance with SFAS 123, the Company has
    elected to continue to measure compensation expense for its stock option
    plans using the intrinsic value method as prescribed by Accounting
    Principles Board Opinion No. 25, "Accounting for Stock Issued to
    Employees."  The Company has not recognized any compensation expense for
    stock options granted under its stock option plans. The Company has
    calculated the pro-forma information required to be disclosed under SFAS
    123 for options granted in 1996 and 1995 using the appropriate pricing
    models prescribed by SFAS 123 and determined that, had compensation
    expense been recorded commensurate to the fair value of options granted
    on the grant date, the pro-forma impact on the Company's net loss and net
    loss per share for such periods was not material. Accordingly, no
    pro-forma amounts are presented.

         Reverse Stock Split

         Effective March 15, 1996, the Company effected a one for two and
    one-half reverse stock split of its common stock (the "Reverse Stock
    Split"). All common stock share information in the accompanying
    consolidated financial statements and related footnotes has been adjusted
    to reflect the Reverse Stock Split.

         Reclassifications

         Certain prior year information has been reclassified to conform
    with current year presentation. 

    NOTE 4 - BUSINESS COMBINATIONS

         AgriDyne Technologies Inc.

         On March 15, 1996, the Company acquired AgriDyne Technologies Inc.
    ("AgriDyne") in a merger whereby AgriDyne became a wholly-owned
    subsidiary of the Company. To effect the merger, the Company issued
    approximately 1.9 million shares of its common stock in exchange for all
    of the outstanding shares of AgriDyne common stock based on a conversion
    ratio of 0.28664 of a share of biosys common stock for each share of
    AgriDyne common stock, after giving effect to a one for two and one-half
    reverse stock split of biosys common stock effected immediately prior to
    the merger.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     
         The Company and AgriDyne initially entered into an Agreement and
    Plan of Merger in April 1995. The final purchase price of AgriDyne was
    determined as the market value of the Company's 1.9 million shares of
    common stock on the date of the final amendment to the Agreement and Plan
    of Merger in December 1995 and certain direct costs to effect the merger.
    The Company allocated this purchase price to the identifiable tangible
    and intangible assets and liabilities of AgriDyne and assigned the excess
    purchase price to goodwill as follows (in thousands):

              Identifiable tangible and intangible 
                assets and liabilities:
                  Cash                                        $   2,041
                  Accounts receivable                               338
                  Inventory                                         673
                  Equipment                                         121
                  In-process research and development             6,000
                  Other assets                                      199
                  Accrued expenses                                 (105)
                                                                  -----
                    Total identifiable tangible and
                       intangible assets and liabilities          9,267
                  Goodwill                                        4,325
                                                                 ------
                                                               $ 13,592
                                                               ========

         In accordance with generally accepted accounting principles, the
    Company's estimate of purchased in-process research and development was
    expensed immediately. Goodwill acquired in this transaction was to be
    amortized over its estimated useful life of three years, of which $1.1
    million of amortization expense was recorded in the fourth quarter of
    1996.

         The results of operations of AgriDyne have been included in the
    Company's financial statements since the date of acquisition. The
    following unaudited pro forma results of the Company for the years ended
    December 31, 1995 and 1996 assume that the transaction had taken place on
    the first day of the respective periods and include the non-recurring $6
    million write-off of in-process research and development (in thousands,
    except per share data):
                                                Year ended December 31,
                                              --------------------------
                                                  1995          1996
                                                --------      --------
              Total revenues, net                $25,129       $23,997
              Net loss                           (28,270)      (23,163)
              Net loss applicable to 
                common shares                    $ (4.37)      $ (2.87)

         Crop Genetics International Corporation

         On March 31, 1995, the Company completed a merger with CGI. In
    exchange for all of CGI's outstanding equity securities, the Company
    issued approximately 1.4 million shares of common stock. The acquisition
    was accounted for using the pooling-of-interests method and the separate
    balance sheets, statements of operations, cash flows and shareholders'
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    equity of the Company and CGI for periods prior to March 31, 1995 were
    restated on a combined basis for all periods presented. During 1995, the
    Company incurred $3,723,000 in merger, severance and relocation costs
    associated with the merger.

         Revenues and net loss of the separate companies included in the
    combined statement of operations through the merger date of March 31,
    1995 are as follows (in thousands):


             Revenues:
               biosys      $5,921
               CGI             99
                           ------
                           $6,020
                           ======

             Net loss:
               biosys     $(2,682)
               CGI         (3,423)
                          -------
                          $(6,105)
                          =======
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   NOTE 5 - DETAILS OF BALANCE SHEET COMPONENTS

                                                       December 31,
                                             ---------------------------
                                                 1995             1996
                                             ----------       ----------
   Accounts receivable:
     Trade receivables                       $2,993,000       $2,850,000
     Other receivables                          304,000           66,000
     Less allowance for doubtful accounts      (288,000)        (553,000)
                                             ----------       ----------
                                             $3,009,000       $2,363,000
                                             ==========       ==========
   Inventories:
     Raw materials                           $3,130,000       $2,329,000
     Work-in-process                            225,000          141,000
     Finished goods                             814,000        1,259,000
     Deferred growing costs                     471,000          450,000
     Less reserve for obsolescence             (554,000)        (917,000)
                                             ----------        ---------
                                             $4,086,000       $3,262,000
                                             ==========       ==========
   Property and equipment:
     Land and improvements                   $  220,000       $  220,000
     Machinery and equipment                  9,721,000       11,243,000
     Furniture and fixtures                     567,000          608,000
     Leasehold improvements                   4,045,000        4,101,000
                                             ----------       ----------
                                             14,553,000       16,172,000
     Less accumulated depreciation           (8,132,000)     (10,055,000)
                                             ----------       ----------
                                             $6,421,000       $6,117,000
                                             ==========       ==========
   Accrued expenses:
     Merger costs (Note 4)                   $1,633,000       $        -
     Accrued compensation and benefits          169,000          126,000
     Other                                    1,507,000          840,000
                                             ----------        ---------
                                             $3,309,000       $  966,000
                                             ==========       ==========

   NOTE 6 - INDEBTEDNESS

        During 1995, the Company entered into a working capital line of
   credit with a bank that allowed for borrowings of up to $5,250,000
   subject to certain limitations based upon the value of substantially all
   of the Company's assets which were used for collateral. In 1995 and 1996,
   $5,250,000 and $3,500,000, respectively, were outstanding under the line
   of credit. During 1995 and 1996, the Company sought and received
   extensions to stated dates of repayment; however, the Company was unable
   to negotiate an extension of the final repayment date of September 30,
   1996. Interest on borrowings is charged at the bank's prime rate plus 3%
   (11.25% as of December 31, 1996). In conjunction with the closing of the
   sale of Company's assets to Thermo Trilogy Corporation in January 1997,
   pursuant to an Order of the Bankruptcy Court, the Company paid the bank
   approximately $3,562,000, representing outstanding principal balance and
   accrued interest.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        During 1995, the Company paid fees of $100,000 and issued to the
   lender warrants to purchase 45,992 shares of common stock at exercise
   prices ranging from $5.00 to $7.00 per share. The warrants were
   exercisable at various dates through January 31, 2001. The warrant shares
   are subject to adjustment for certain changes in capital structure and
   have registration rights. The warrants were valued at $58,000 and
   recorded as interest expense in 1995. During 1996, the Company issued to
   the lender warrants to purchase 173,333 shares of common stock at an
   exercise price of the lesser of $3 per share or the lowest closing price
   per common share during the duration of the line of credit facility. The
   warrants were valued at $97,000 and recorded as interest expense in 1996.
   In addition, the warrants issued in 1995 were re-priced to the same
   exercise price as the warrants issued in 1996.

        CGI had borrowings of $3,400,000 under a credit facility. At
   December 31, 1996, approximately $2,450,000 was outstanding under this
   credit facility. The borrowing bears interest at the bank's prime rate
   plus 0.5% (8.75% at December 31, 1996). Future principal payments on the
   credit facility are subject to bankruptcy proceedings. Borrowings under
   this debt facility are secured by substantially all of the equipment of
   CGI. CGI has instituted an adversary proceeding in order to determine the
   validity, extent and priority of the bank's secured claim against CGI in
   the bankruptcy proceeding. A joint motion by the Debtors, unsecured
   creditors committee, and the lender to approve a settlement agreement
   establishing the bank's secured claim at approximately $548,000 is before
   the Bankruptcy Court for approval, but the Bankruptcy Court has not yet
   ruled on the motion. If the Bankruptcy Court approves the settlement, the
   remainder of the bank's claim will be treated as an unsecured claim. The
   entire principal balance of $2,450,000 outstanding at December 31, 1996
   is included in liabilities subject to compromise in the Consolidated
   Balance Sheets. 

        In December 1994, the Company entered into a borrowing arrangement
   under which the Company borrowed $2,180,000, secured by certain property
   and equipment. At December 31, 1996, approximately $1,395,000 was
   outstanding under this arrangement. Future principal payments on the debt
   are subject to bankruptcy proceedings. biosys, inc. has instituted an
   adversary proceeding in order to determine the validity, extent and
   priority of the lender's secured claim against biosys, inc. in the
   bankruptcy proceeding. This determination will assist in establishing the
   amount to be paid to the lender as a secured claim. The remainder of the
   lender's claim will be treated as an unsecured claim. The entire
   principal balance of $1,395,000 outstanding at December 31, 1996 is
   included in liabilities subject to compromise in the Consolidated Balance
   Sheets.

        In connection with the December 1994 borrowing and subsequent
   amendments, the Company issued to the lender warrants to purchase 55,179
   shares of common stock at prices ranging from $7.525 to $8.125 per share.
   These warrants are exercisable at various dates through November 1, 2000.
   The warrant shares are subject to adjustment for certain changes in
   capital structure and have certain registration rights. The warrants were
   valued at $138,000 and included in other long-term assets as a debt
   issuance cost. The warrants are being amortized over the term of the debt
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   and $32,000 and $58,000 was recognized as related interest expense during
   1996 and 1995, respectively. The effective rate of interest on this
   borrowing, including the amortization of the value of the warrants, is
   approximately 18%.

        No amounts are currently available for additional borrowings under
   any of the Debtors borrowing agreements.

   NOTE 7 - LIABILITIES SUBJECT TO COMPROMISE

        Liabilities subject to compromise under the bankruptcy proceedings
   include substantially all current and long-term unsecured or undersecured
   liabilities as of the date of the Filings. Pursuant to the provisions of
   the Bankruptcy Code, payment of those liabilities may not be made except
   pursuant to a plan of liquidation or Bankruptcy Court order while the
   Debtors continue to operate as debtors-in-possession. The Debtors believe
   that they have performed all required notification procedures under
   bankruptcy law with regards to known or potential claimants for the
   purpose of identifying all prepetition claims against the Debtors. While
   the Company believes that the amounts recorded reflect known bona fide
   unsecured and undersecured liabilities, the amounts ultimately allowed by
   the Bankruptcy Court may be significantly different.

   A significantly larger amount of claims have been cumulatively filed
   against the Debtors than are reflected as prepetition liabilities in the
   financial statements. Furthermore, there are (i) individual creditors
   that have not filed claims, (ii) claims filed for unspecified amounts,
   and (iii) claims for specific items which are not reflected as
   liabilities in the financial statements.

   The amount recorded as liabilities subject to compromise is significantly
   less than filed claims because the cumulative total of filed claims
   includes: (i) claims that have been discharged or waived subsequent to
   their filing, (ii) duplicate filings of single items in all three
   bankruptcy cases, (iii) claims currently or potentially subject to
   negotiated compromise, (iv) claims filed by participants in a certain
   limited partnership (v) claims filed by the common and preferred
   shareholders of the Debtors, and (vi) numerous errors or otherwise
   currently unresolved differences.

   It is currently not possible to precisely determine the ultimate total
   amount of claims which will be allowed by the Bankruptcy Court and the
   final resolution of the disputed or negotiated claims. However, total
   prepetition liabilities reflected in the consolidated financial
   statements represents management's best current estimate of all known
   prepetition liabilities given the facts and circumstances of which
   management is currently aware. 

   NOTE 8 - LITIGATION AND DISPUTED CLAIMS

   The Debtors and the Creditors' Committee have identified certain claims
   filed in the three bankruptcy cases which are either duplicative or the
   amount of which the Debtors dispute. The Debtors intend to file
   objections to duplicative claims in order to have only one claim allowed
   for each creditor. The Debtors also intend to object to claims subject to
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   other than de minimis disputed amounts. Claims which cannot be resolved
   by agreement will have to be determined by the Bankruptcy Court. The
   resolution by the Bankruptcy Court is subject to the Court's schedule,
   however, the Debtors estimate that claims subject to objection may be
   resolved by the Bankruptcy Court within two to six months, or longer,
   after the filing of the objections. Significant disputed creditor claims,
   settlements and other contingencies are discussed below.

        A lender has asserted that the Debtor owes amounts in addition to
   the principal and interest amounts already repaid. The lender had filed
   additional claims totaling approximately $850,000 representing unpaid
   interest calculated at a default rate, late charges, attorney's fees,
   collection costs, and certain alleged put right liabilities arising from
   warrants issued by the Debtor to the lender. The Creditors' Committee has
   filed an objection with the Bankruptcy Court to the allowance of certain
   claims filed by the lender. The Creditors' Committee, the Debtors and the
   lender have reached an agreement in principle resolving these outstanding
   claims for $425,000. A motion seeking approval of this proposed
   settlement will be filed with the Bankruptcy Court. Liabilities subject
   to compromise at December 31, 1996 include $425,000 for the amount to be
   paid under the proposed settlement.

        biosys, inc. and the Creditors' Committee instituted an adversary
   proceeding against two banks to enjoin them from paying or honoring
   certain letters of credit in the approximate total amount of $441,000 for
   which biosys, inc. is the account party and which biosys, inc. and the
   Creditors' Committee contend have expired. With the consent of the banks,
   a preliminary injunction was entered by the Bankruptcy Court enjoining
   payment of the letters of credit. A trial on the merits has been
   scheduled for February, 1998. No liability has been recorded as of
   December 31, 1996 due to the uncertainty of the outcome of these disputed
   claims; however, in connection with the sale of assets to Thermo Trilogy
   Corporation described in Note 2, the Debtors agreed to place an amount in
   excess of the claims in an escrow account pending the resolution of this
   matter.

        The owner of property previously occupied by the Debtors filed
   duplicate claims in the biosys, inc. and CGI bankruptcy cases for damages
   arising from the rejection of a lease in the approximate amount of
   $8,400,000 in each case. Certain postpetition amounts were also
   outstanding for unpaid rent. The Debtors, the property owner and the
   Creditors' Committee have reached an agreement as to the payment of all
   obligations to the property owner on account of the lease. The Debtors
   have agreed to pay $425,000 in full and final satisfaction of all claims
   of the property owner. A motion approving the proposed settlement is
   pending before the Bankruptcy Court. Liabilities subject to compromise at
   December 31, 1996 include $425,000 for the amount to be paid under the
   proposed settlement.

        Certain preferred stockholders of biosys, inc. have filed a motion
   for an order compelling conversion of their preferred stock to common
   stock. The Debtors do not anticipate that there will be any recovery for
   the biosys, inc. preferred stockholders on account of their equity
   interests in biosys, inc. Some of the preferred stockholders have filed
   proof of claims in the biosys, inc. bankruptcy estate totaling
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   approximately $4,450,000 asserting unsecured creditor claims in
   connection with biosys, inc.'s failure to convert their preferred stock
   to common stock. It is the Debtors intention to object to the allowance
   of such claims. No liability has been recorded as of December 31, 1996
   due to the uncertainty of the outcome of these disputed claims.

        Subsequent to the January 1997 sale of the Company's assets to
   Thermo Trilogy Corporation described in Note 2, in July 1997, a former
   customer of the Company filed a claim contending that biosys, inc. has
   failed to perform under an exclusive marketing agreement between the
   former customer and biosys, inc. Based upon this alleged breach of the
   marketing agreement and biosys, inc.'s inability to perform under such
   agreement, the former customer has asserted a claim of approximately $9
   million, representing their alleged lost margin for the remaining term of
   the marketing agreement. It is the Company's intention to object to the
   allowance of such claim. No liability has been recorded as of December
   31, 1996 due to the uncertainty of the outcome of these disputed claims.

        The Debtors believe that certain purchasers of one of the Company's
   bioinsecticide products may file claims alleging that such products
   failed to adequately disrupt pink bollworm mating, thereby damaging their
   cotton crops harvested in Arizona in September and October of 1996. To
   date, no such claim has been asserted and no liability has been recorded
   as of December 31, 1996 due to the uncertainty of these unasserted
   claims.

        AgriDyne and CGI each received from the United States Environmental
   Protection Agency, Region VIII ("EPA") a Notice of Potential Liability
   and Request for Information for the RAMP Industries Site in Denver,
   Colorado, dated January 24, 1997, notifying AgriDyne and CGI of their
   respective potential liability for response costs incurred or to be
   incurred at the RAMP Industrial Site in Denver. The potential liability
   of AgriDyne and CGI relate to activities which took place prior to 1995.
   These letters also included Requests for Information regarding those
   entities' involvement at the Site and attached historical documentation
   purportedly indicating that both entities generated certain hazardous
   substances that were disposed of at the Site. In May 1997, written
   notification was received from the EPA that Native Plants (the
   predecessor company to AgriDyne) shipped a limited amount of hazardous
   waste to the Site for disposal and also is considered a potentially
   responsible party at the Site. The Company has responded to the EPA's
   requests for information. The Company contends that AgriDyne and CGI are
   de minimis parties and therefore subject to a limited, allocated share of
   the response costs; however, the Company may be jointly and severally
   liable for additional amounts. Moreover, CGI intends to challenge the
   EPA's preliminary determination and assert that the transporter of any
   hazardous waste, as opposed to CGI, made the decision to dispose of the
   waste at the Site. If the EPA accepts CGI's challenge, CGI's liability
   would be further reduced, however, it is uncertain at this time whether
   the EPA will accept this challenge. No liability has been recorded as of
   December 31, 1996 due to the uncertainty of the outcome of this matter.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   NOTE 9 - CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY

        Series A Preferred Stock

        On March 26, 1996, biosys completed the sale of an aggregate of 780
   shares of biosys Series A Preferred Stock (the "Preferred Shares") at
   $10,000 per share or an aggregate purchase price of $7.8 million, net of
   placement fees of approximately $550,000, to a group of institutionally
   accredited investors in a private placement (the "Preferred Share
   Financing"). The Preferred Shares were offered and sold in reliance on
   the exemption from registration under the Securities Act set forth in
   Regulation D under the Securities Act. In connection with the issuance of
   the Preferred Shares, warrants to purchase up to 80,889 shares of biosys
   common stock were issued  to the placement agent and related parties (the
   "Warrants"). The Warrants are exercisable over a five-year term and have
   an exercise price of $6.75.

        The Preferred Shares may be converted into biosys common stock at a
   conversion price which is the lower of (i) $6.75, or (ii) 85% of the
   average closing bid price for the five trading days prior to the date the
   investor gives notice of conversion. At the date of issuance, the
   Preferred Shares were immediately convertible into biosys common stock at
   a conversion price of $6.75 per common share. However, the ability to
   convert such shares at the discount from market value, as described
   above, was based on a schedule set forth in the agreement governing the
   Preferred Shares. Inasmuch as the Preferred Shares provided for
   conversion into biosys common stock at a discount, the accompanying
   Statement of Discontinued Operations reflects a corresponding amount of
   accretion in arriving at net loss available to common shares which was
   recorded in the fourth quarter of 1996. The Preferred Shares principal
   amount accretes at an annual rate of 8%, payable in stock upon conversion
   to biosys common stock. The Preferred Shares may be redeemed at the
   option of the Company at the time of conversion at a price that would
   give the investor the same return as he would have received had he
   converted on the day the redemption occurs and sold the common stock upon
   conversion. The Preferred Shares have certain other conversion and
   redemption rights. Such rights are not expected to be exercised due to
   the Company's pending liquidation.

        During 1996, 260 Preferred Shares were converted into 2,052,943
   shares of common stock at an average conversion price of approximately
   $1.30. The Company has not allowed any shareholders to convert Preferred
   Shares into shares of common stock subsequent to the Company's filing for
   bankruptcy on September 27, 1997. As discussed in Note 8, this matter is
   currently the subject of litigation.

        Options

        The Company has an incentive stock option plan (the "Option Plan")
   which is administered, and terms of option grants are established, by the
   Company's Board of Directors (the "Board"). Under the terms of the Option
   Plan, options covering the purchase of common stock may be granted to
   directors, employees and consultants of the Company at prices not less
   than the fair market value of such common stock at the date of grant.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   Options granted are exercisable over time and generally vest 20% on a
   date specified by the Board and vest thereafter in equal monthly
   increments over four years. To date, all options granted under the Option
   Plan have been for a term of ten years after grant.  The shares subject
   to expired options become available for future grants. Generally, in the
   event of a transfer of control of the Company, the stock option
   agreements used in conjunction with the Option Plan provide that the
   Board shall either cause all outstanding options to become vested and
   immediately exercisable or arrange for the successor or surviving entity
   to assume such options. As of December 31, 1996, a total of 1,015,115
   shares of common stock were reserved under the Option Plan. 

        The Company maintains an outside directors' stock option plan (the
   "Directors' Option Plan") which is administered by the Board. Under the
   terms of the Directors' Option Plan, options to purchase common stock are
   granted to outside directors upon appointment and after each annual
   meeting of the stockholders of the Company at prices equal to the fair
   market value of such common stock at the date of grant. Options granted
   are exercisable over time and vest 50% six months after the date of grant
   and 50% one year after the date of grant. Options granted under the
   Directors' Option Plan are for a term of ten years and any expired or
   canceled options become available for future grants. Generally, in the
   event of a transfer of control of the Company, the stock option
   agreements used in conjunction with the Directors' Option Plan provide
   that the Board shall either cause all outstanding options to become
   vested and immediately exercisable or arrange for the successor or
   surviving entity to assume such options. As of December 31, 1996, a total
   of 40,000 shares of common stock were reserved under the Directors'
   Option Plan.

   The following table summarizes activity under these Option Plans:

                                      Shares
                                      Under
                                      Option               Exercise Price
                                     --------             ------------------
   Balance at December 31, 1994      589,434              $0.45   -  98.425
     Options canceled               (179,140)             $0.45   -  98.425
     Options granted                 220,960              $4.375  -   5.12
     Options exercised               (51,398)             $0.45   -  15.625
                                     -------
   Balance at December 31, 1995      579,856              $0.45   -  29.05
     Options canceled                (32,620)             $0.45   -  29.05
     Options granted                 244,980              $5.625  -  17.01
     Options exercised                (4,493)             $0.45   -   4.5313
                                     -------
   Balance at December 31, 1996      787,723              $0.45   -  20.625
                                     =======
   Options exercisable at 
     December 31, 1996               349,850              $0.45   -  20.625
                                     =======

         The Company expects no further stock option grants or exercises due
   to the Company's pending liquidation and the anticipated lack of funds
   remaining for common stockholders after bankruptcy proceedings.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Reincorporation

         On March 30, 1995, in connection with the CGI merger, the Company's
   Certificate of Incorporation was amended to increase the authorized
   number of shares of common stock from 8,000,000 to 12,000,000 and to
   increase the authorized number of shares of Preferred Stock from
   1,000,000 to 5,000,000.

   NOTE 10 - INCOME TAXES

         As a result of recurring losses, the Company has provided full
   valuation allowances as of December 31, 1996 and 1995 against its
   deferred tax assets. Given the sale of substantially all of the Company's
   assets and the pending liquidation of the Company, disclosure of deferred
   tax amounts is not considered meaningful. At December 31, 1996, the
   Company had net operating loss carryforwards of approximately 
   $96 million for Federal tax purposes which expire between 1998 and 2010
   and other net operating loss carryforwards in several states and the
   United Kingdom. Due to past changes in the Company's ownership, certain
   of these net operating loss carryforwards are significantly restricted in
   their utilization. Further changes in the Company's ownership would cause
   there to be additional annual limitations on the amount of unrestricted
   carryforwards which can be utilized.

   NOTE 11 - SEGMENT INFORMATION

         The Company is engaged in one industry segment. One customer
   accounted for 22% of total revenues for each of the years ended December
   31, 1996 and 1995. One customer accounted for 12% of accounts receivable
   at December 31, 1996. Substantially all of the Company's customers are in
   the bioagricultural and consumer insecticide economic sector.

         Information about the Company's operations in different
   geographical locations for the years ended December 31, 1996 and 1995 is
   shown below. The Company's areas of operation outside the United States
   are primarily in Europe. Revenues from unaffiliated customers represent
   total net revenues from the respective geographical areas after
   elimination of intercompany transactions. Intraenterprise revenues
   represent intercompany sales in 1996 and 1995. Operating loss is net
   revenues less operating costs and expenses pertaining to specific
   geographic areas. Identifiable assets are those assets used in the
   geographic areas and are reflected after elimination of intercompany
   balances.
PAGE
<PAGE>
    biosys, inc. (Debtor-in-Possession)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                              Years Ended December 31,
                                           -----------------------------
                                                 1995            1996
                                           ------------     ------------
   Revenues from unaffiliated customers:
     United States                         $ 13,251,000     $ 13,616,000
     Europe                                   9,748,000       10,133,000
                                           ------------     ------------
                                           $ 22,999,000     $ 23,749,000
                                           ============     ============
   Intraenterprise revenues:
     United States                         $  3,036,000     $  1,942,000
     Europe                                      63,000          538,000
                                           ------------     ------------
                                           $  3,099,000     $  2,480,000
                                           ============     ============
   Operating (loss) income:
     United States                         $(17,661,000)    $(18,436,000)
     Europe                                     417,000          540,000
                                           ------------     ------------
                                           $(17,244,000)    $(17,896,000)
                                           ============     ============

                                                   December 31,
                                           ------------------------------
                                                1995              1996
                                           ------------      ------------
   Identifiable assets:
     United States                         $ 12,337,000      $ 13,224,000
     Europe                                   4,020,000         3,708,000
                                           ------------      ------------
                                           $ 16,357,000      $ 16,932,000
                                           ============      ============


   NOTE 12 - RELATED PARTY TRANSACTIONS

         During 1995, the Company paid approximately $76,000 to a company
   for marketing services. A former member of the Company's Board was an
   officer of this company.


                                                                  Exhibit 99.2



    Pro Forma Combined Condensed Financial Information

        The following unaudited pro forma combined condensed statement of
    income sets forth the results of operations for the fiscal year ended
    September 28, 1996, as if the acquisition of biosys by the Company had
    occurred at the beginning of the year. Biosys has a financial year which
    differs from the Company's fiscal year end, therefore, the pro forma
    combined condensed statement of income for the fiscal year ended
    September 28, 1996, includes the results of operations for biosys for the
    year ended December 31, 1996.

        The acquisition has been accounted for using the purchase method of
    accounting. The pro forma results of operations are not necessarily
    indicative of future operations or the actual results that would have
    occurred had the acquisition of biosys been consummated at the beginning
    of fiscal 1996. The financial statements filed as Exhibit 99.1 to this
    Current Report on Form 8-K should be read in conjunction with this pro
    forma combined condensed statement of income.<PAGE>
                PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
                      Fiscal Year Ended September 28, 1996
                                   (Unaudited)



                                Historical                 Pro Forma
                         -------------------------  -----------------------
                         Thermo Ecotek      biosys  Adjustments    Combined
                         -------------    --------  -----------    --------
                              (In thousands except per share amounts)

 Revenues                     $150,076    $ 23,749     $      -    $173,825
                              --------    --------     --------    --------

 Costs and Operating
   Expenses:
     Cost of revenues          101,883      21,245         (384)    122,744
     General and administra-
       tive expenses            12,218       5,607         (353)     17,472
     Research and development
       expenses                      -       5,685            -       5,685
     Marketing and selling
       expenses                      -       3,108            -       3,108
     Purchased research and
       development costs             -       6,000            -       6,000
                              --------    --------     --------    --------
                               114,101      41,645         (737)    155,009
                              --------    --------     --------    --------

 Operating Income (Loss)        35,975     (17,896)         737      18,816
 Interest Income                 5,104          48         (639)      4,513
 Interest Expense              (14,727)     (1,313)       1,104     (14,936)
 Reorganization and 
   Liquidation Expenses                     (3,401)           -      (3,401)
 Other Expense                     (26)          -            -         (26)
                              --------    --------     --------    --------
 Income (Loss) Before Provision
   for Income Taxes and 
   Minority Interest            26,326     (22,562)       1,202       4,966
 Provision for Income Taxes      7,271           -       (5,376)      1,895
 Minority Interest Expense       1,275           -            -       1,275
                              --------    --------     --------    --------
 Net Income (Loss)            $ 17,780    $(22,562)    $  6,578    $  1,796
                              ========    ========     ========    ========
 Earnings per Share:
   Primary                    $    .70                             $    .07
                              ========                             ========
   Fully diluted              $    .53                             $    .07
                              ========                             ========
 Weighted Average Shares:
   Primary                      25,476                               25,476
                              ========                             ========
   Fully diluted                36,315                               36,315
                              ========                             ========


 See notes to pro forma combined condensed statement of income.
PAGE
<PAGE>
                            THERMO ECOTEK CORPORATION

            NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
                                   (Unaudited)

   Note 1 - Basis of Presentation

        The preliminary allocation of the purchase price is based on an
   estimate of the fair market value of the net assets acquired and is subject
   to adjustment. To date, no information has been gathered that would cause
   the Company to believe that the final allocation of the purchase price will
   be materially different than the preliminary estimate.


   Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed
            Statement of Income (In thousands, except in text)

                                                                   Fiscal
                                                                 Year Ended
                                                                September 28,
                                                                    1996
                                                               --------------
                                                               Debit (Credit)

   Cost of Revenues
   Decrease in the depreciation expense for 
     leasehold improvements and fixed assets  
     of biosys due to abandonment of certain
     facilities                                                   $  (384)

   General and Administrative Expenses
   Service fee of 1.0% of the revenues
     of biosys for services provided
     under a services agreement between
     the Company and Thermo Electron
     Corporation for the year ended December
     31, 1996                                                         237

   Amortization over 14 years of patents,
     trademarks, intellectual property, and 
     product technology acquired through the 
     acquisition of biosys                                            561

   Elimination of biosys' amortization of goodwill                 (1,151)
                                                                  -------
                                                                     (353)
                                                                   -------

                                        6PAGE
<PAGE>
                            THERMO ECOTEK CORPORATION

      NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (continued)
                                   (Unaudited)

   Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed
            Statement of Income (In thousands, except in text)
            (continued)

                                                                   Fiscal
                                                                 Year Ended
                                                                September 28,
                                                                    1996
                                                               --------------
                                                               Debit (Credit)

   Interest Income
   Decrease in interest income earned attributable
     to the lower cash position as a result of the
     total cash payments of $11,381,000, less cash
     acquired of $378,000, to acquire biosys,
     calculated using the average 90-day Commercial
     Paper Composite Rate plus 25 basis points, or 5.81%         $    639

   Interest Expense
   Decrease in interest expense as a result of the
     elimination of biosys' short-term debt and long-term
     obligations (included in liabilities subject to
     compromise) not included as part of the purchase of
     biosys                                                        (1,104)

   Provision for Income Taxes
   Income tax provision associated with the adjustments
     above (excluding elimination of amortization of
     biosys' goodwill), calculated at the Company's
     statutory income tax rate of 35%                                  17

   Income tax benefit related to biosys' pro forma
     pre-tax loss (excluding the $6,000,000 purchased
     research and development costs associated with the
     acquisition of AgriDyne and $1,151,000 of amortization
     related to biosys' goodwill), calculated at the
     Company's statutory income tax rate of 35%                    (5,393)
                                                                  -------
                                                                   (5,376)
                                                                  -------




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