ADEZA BIOMEDICAL CORP, S-1/A, 1996-06-26

ADEZA BIOMEDICAL CORP
S-1/A, 1996-06-26
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996

REGISTRATION NO. 333-03627
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ADEZA BIOMEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 2835 77-0054952
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
----------------
1240 ELKO DRIVE
SUNNYVALE, CA 94089
(408) 745-0975
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DANIEL O. WILDS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADEZA BIOMEDICAL CORPORATION
1240 ELKO DRIVE
SUNNYVALE, CA 94089
(408) 745-0975
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)

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

COPIES TO:
JOSHUA L. GREEN, ESQ. ROBERT L. JONES, ESQ.
WILLIAM W. ERICSON, ESQ. JULIA L. DAVIDSON, ESQ.
VENTURE LAW GROUP COOLEY GODWARD CASTRO
A PROFESSIONAL CORPORATION HUDDLESON & TATUM
2800 SAND HILL ROAD FIVE PALO ALTO SQUARE
MENLO PARK, CALIFORNIA 94025 PALO ALTO, CALIFORNIA 94306-2155
(415) 854-4488 (415) 843-5000

----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.

----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

----------------
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 SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

ADEZA BIOMEDICAL CORPORATION

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING
IN FORM S-1 REGISTRATION STATEMENT HEADING OR LOCATION IN PROSPECTUS
- ------------------------------------ -------------------------------------------
<S> <C>
1. Forepart of Registration State-
ment and Outside Front Cover
Page of Prospectus.............. Outside Front Cover Page; Front of
Registration Statement

2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front and Outside Back Cover Pages

3. Summary Information, Risk Fac-
tors and Ratio of Earnings to
Fixed Charges................... Prospectus Summary; The Company; Risk
Factors

4. Use of Proceeds................. Use of Proceeds

5. Determination of Offering
Price........................... Underwriters

6. Dilution........................ Dilution

7. Selling Security Holders........ Principal and Selling Stockholders

8. Plan of Distribution............ Outside and Inside Front Cover Pages;
Underwriters

9. Description of Securities to be
Registered...................... Description of Capital Stock

10. Interests of Named Experts and
Counsel......................... Legal Matters; Experts

11. Information with Respect to the
Registrant...................... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Underwriting; Legal Matters; Experts;
Additional Information; Glossary of Terms;
Consolidated Financial Statements

12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities...... Not applicable
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION -- DATED JUNE 26, 1996

PROSPECTUS
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2,500,000 Shares

[LOGO OF ADEZA BIOMEDICAL APPEARS HERE]

Common Stock
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All of the 2,500,000 shares of common stock, par value $0.001 per share (the
"Common Stock"), offered hereby are being sold by Adeza Biomedical Corporation
("Adeza" or the "Company").

Prior to this offering there has been no public market for the Common Stock of
the Company. It is currently anticipated that the initial public offering price
will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.

The Common Stock has been approved for inclusion in The Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol "ADZA."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGES 6 TO 16 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.

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

<TABLE>
<CAPTION>
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Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share........................... $ $ $
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Total(3)............................ $ $ $
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</TABLE>
(1) The Company and certain stockholders of the Company (the "Selling
Stockholders") have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be
$1,000,000.

(3) The Selling Stockholders have granted the several Underwriters 30-day over-
allotment options to purchase up to 375,000 additional shares of Common
Stock (which shares will be issued pursuant to the automatic conversion of
outstanding shares of the Company's Series 1 and/or Series 2 Preferred
Stock upon completion of this offering) on the same terms and conditions as
set forth above. If all such additional shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total Proceeds to
Company will be $ , and the total Proceeds to Selling Stockholders will
be $ . See "Certain Transactions," "Principal and Selling Stockholders"
and "Underwriting."
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The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is
expected to be made at the office of Prudential Securities Incorporated, One
New York Plaza, New York, New York, on or about , 1996.
PRUDENTIAL SECURITIES INCORPORATED
NEEDHAM & COMPANY, INC.
TUCKER ANTHONY INCORPORATED
, 1996
<PAGE>

DIAGNOSING PROBLEMS IN WOMEN'S HEALTH CARE

PREMATURE BIRTH

Premature birth is a life-threatening
problem affecting 10% of all births in
the United States. More than 20,000
infants die each year in the United States
from premature delivery. Surviving infants
often suffer lifelong mental and physical
handicaps,and the high cost of neonatal [DRAWING OF CHEMICAL STRUCTURE]
intensive care imposes a significant
financial burden.

Adeza received an expedited PMA from
the FDA for a fetal fibronection fFN
ELISA (Enzyme-Linked Immunosorbent Assay)
test to aid in the diagnosis of premature
birth in symptomatic women. Adeza is
preparing PMA supplements for the use of
the ELISA in asymptomatic women and for
a point-of-care dipstick test. fFN: A Biochemical Indicator
For Premature Birth

[PHOTOS] [DIAGRAMMED DRAWING]

PREECLAMPSIA ENDOMETRIOSIS/INFERTILITY

Preeclampsia, severe hypertension during Endometriosis is a serious condition
pregnancy, is a leading cause of afflicting 10% of all women of
maternal death and affects 7% of all reproductive age in the United
pregnancies in the United States. States.
If the condition progresses to eclampsia,
the lives of both mother and baby are at Adeza is developing analytical
risk. software and less-invasive
biochemical assays to identify
Adeza has developed an ELISA-based women with endometriosis and
diagnostic test to confirm severe endometriosis-related infertility.
preeclampsia in symptomatic women.
Preclinical evaluations are in
progress in the United States, Europe
and Australia.

Adeza is a registered trademark of the
Company, and the Adeza logo is a trademark
ofthe Company. This Prospectus also [LOGO OF
contains trademarks and trade names of ADEZA BIOMEDICAL
other companies. CORPORATION]

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus, including information under "Risk
Factors." The Common Stock offered hereby involves a high degree of risk.
Unless otherwise indicated, the information in this Prospectus (i) assumes that
the Underwriters' over-allotment options will not be exercised, (ii) reflects
the one-for-2.4 reverse stock split effected in connection with the Company's
reincorporation in Delaware in June 1996 and (iii) gives effect to the
automatic conversion of all outstanding shares of Series 1 Preferred Stock and
Series 2 Preferred Stock into an equal number of shares of Common Stock upon
the completion of this offering. Certain terms are defined in the Glossary of
Terms beginning on page 65 of this Prospectus.

THE COMPANY

The Company has received an expedited premarket approval ("PMA") from the
Food and Drug Administration ("FDA") to market its proprietary enzyme-linked
immunosorbent assay ("ELISA") diagnostic (the "fFN ELISA Test") for use in
women with symptoms of premature birth. The fFN ELISA Test is the only FDA-
approved immunodiagnostic test for this disorder and represents a significant
advance over currently used evaluation techniques. This test measures the
presence of fetal fibronectin ("fFN") in the vaginal fluid of pregnant women in
order to assess the likelihood of premature birth. The Company believes that
its fFN-based products have the potential to become an element of standard
prenatal care. The Company will distribute the fFN ELISA Test in the United
States through an exclusive strategic distribution arrangement with Matria
Healthcare, Inc. ("Matria"), a leading women's health care company. Matria
began shipment of fFN ELISA Tests to a select number of initial customers in
the United States in April 1996 and is expected to commence full-scale
marketing efforts in the second half of 1996. The Company has been selling the
fFN ELISA Test in Japan since 1995 through an exclusive arrangement with
Daiichi Pure Chemicals Co. Ltd. ("Daiichi") and in Europe through a limited
number of distributors.

The women's reproductive health care market represents a large and
increasingly important part of the health care economy, with an estimated $20
billion spent annually in the United States on obstetrical and gynecological
("Ob/Gyn") care. Pregnancy-related disorders being addressed by the Company,
including premature birth and preeclampsia, represent significant opportunities
within the women's reproductive health care market. The American College of
Obstetrics and Gynecology estimates that of the annual four million births in
the United States, approximately 400,000 are premature, and approximately
300,000 births are affected by preeclampsia, which accounts for 10% to 25% of
premature births. CIGNA Corporation estimates that the costs associated with
premature births in the United States are greater than $4.7 billion per year.
The Company also targets the reproductive disorder of endometriosis, which in
the United States is estimated to afflict six million women of reproductive
age. Endometriosis is also closely associated with another of the Company's
other targeted markets, infertility. Annual expenditures in the United States
for the diagnosis and treatment of infertility are estimated to be
approximately $2.0 billion.

3
<PAGE>

Adeza's goal is to become a global leader in the diagnosis and treatment of
pregnancy-related and female reproductive disorders by designing, developing
and marketing proprietary diagnostic tests and services for the women's
reproductive health care market. In addition to the fFN ELISA Test, the Company
is developing several other products for this market. The Company is preparing
supplements to its PMA ("PMA Supplements") for the use of the fFN ELISA Test in
assessing the likelihood of premature birth in asymptomatic
women, and for the use of a point-of-care rapid assay (the "fFN Dipstick Test")
for assessing the likelihood of premature birth in symptomatic women. Clinical
trials have been completed by the National Institutes of Health (the "NIH")
which support the use of the fFN ELISA Test for asymptomatic women. The Company
is currently conducting clinical trials to support the use of the fFN Dipstick
in symptomatic women. Additionally, the Company is in the process of designing
clinical trials for the use of the fFN Dipstick Test in assessing the
likelihood of successful induction of labor at term, which may be useful in
avoiding complications related to late birth. The Company's proprietary fFN
vertical flow membrane test (the "fFN Vertical Flow Test") for the assessment
of premature rupture of amniotic membranes ("ROM") has been introduced for sale
in Japan. Finally, the Company has developed a proprietary test based on
cellular fibronectin (the "cFN Test") for the diagnosis of preeclampsia, a
leading cause of maternal death and fetal complications in the United States.
The cFN Test is currently undergoing preclinical evaluations in the United
States, Europe and Australia. The Company also maintains a significant product
development program with the goal of introducing additional proprietary
diagnostics and therapeutics for the women's reproductive health care market.

The Company intends to increase acceptance and create long-term demand for
its products and services by marketing to physicians, hospitals, other health
care providers and third-party payors. The Company, together with its strategic
partners and distributors, will educate this target market as to the cost-
effectiveness and improved patient care that its products and services provide
through a variety of means, including marketing evaluations, seminars,
workshops, publications and professional and trade meetings. The Company
believes that the trend toward management of health care costs will lead to
increased awareness of and emphasis on disease prevention and early patient
management, which will increase demand for its cost-effective diagnostic tests
and services.

The Company owns or has licenses to 23 United States patents, and the Company
owns, has licenses to or options to license technology covered by another 16
pending United States patent applications, each in the area of pregnancy-
related and reproductive disorder diagnostics. To date, sales of the Company's
products have generated limited revenues which have not been sufficient to
cover the Company's operating expenses. The Company has not been profitable
since inception and had incurred a cumulative net loss of $27.3 million through
March 31, 1996.

The Company's principal executive offices are located at 1240 Elko Drive,
Sunnyvale, California 94089 and its telephone number is (408) 745-0975.

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."

4
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company................. 2,500,000 shares
Common Stock to be Outstanding after this
Offering(1)........................................ 7,863,669 shares
Use of Proceeds..................................... To fund research and development,
expand sales and marketing activities,
fund clinical trials, repay
outstanding indebtedness and for
working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol.............. ADZA
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERA-
TIONS DATA:
REVENUES:
Contract revenues............... $ 967 $ 1,977 $ 3,416 $ 167 $ --
Product sales................... 504 316 541 99 152
------- ------- ------- ------ -------
Total revenues.................... 1,471 2,293 3,957 266 152
OPERATING COSTS AND EXPENSES:
Costs of product sales.......... 907 1,088 1,105 213 251
Research and development ....... 3,413 2,547 2,355 572 579
Selling, general and administra-
tive........................... 3,128 1,928 1,725 371 418
------- ------- ------- ------ -------
Total operating costs and expenses
................................. 7,448 5,563 5,185 1,156 1,248
------- ------- ------- ------ -------
Loss from operations.............. (5,977) (3,270) (1,228) (890) (1,096)
Interest income (expense) and oth-
er, net.......................... (132) (390) 84 16 19
------- ------- ------- ------ -------
Net loss.......................... $(6,109) $(3,660) $(1,144) $ (874) $(1,077)
======= ======= ======= ====== =======
Pro forma net loss per share(2)... $ (0.21) $(0.16) $ (0.20)
======= ====== =======
Shares used in computing pro forma
net loss per share(2)............ 5,446 5,446 5,448
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $1,027 $27,927
Working capital........................................... 235 27,135
Total assets.............................................. 1,860 28,760
Capital lease obligations, net of current portion......... 36 36
Total stockholders' equity................................ 669 27,569
</TABLE>

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(1) Excludes (i) 579,270 shares of Common Stock issuable upon exercise of stock
options outstanding as of May 9, 1996 with a weighted average exercise
price of $1.21 per share, (ii) 404,468 shares of Common Stock issuable upon
exercise of warrants outstanding at May 9, 1996 with a weighted average
exercise price of $2.74 per share, (iii) 662,025 shares reserved for future
issuance as of May 9, 1996 under the Company's 1995 Stock Option and
Restricted Stock Plan, (iv) 250,000 shares reserved for future issuance as
of May 9, 1996 under the Company's 1996 Employee Stock Purchase Plan and
(v) 200,000 shares reserved for future issuance as of May 9, 1996 under the
Company's 1996 Directors' Stock Option Plan. See "Management--Stock Option
and Incentive Plans" and "Description of Capital Stock."

(2) See Note 1 of Notes to Consolidated Financial Statements for information
concerning calculation of the pro forma net loss per share.

(3) As adjusted to reflect the sale of the 2,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $12.00 per
share after deducting underwriting discounts and commissions and estimated
offering expenses and the receipt of the estimated net proceeds therefrom.
Does not reflect application of a portion of the net proceeds for repayment
of indebtedness that may be incurred after March 31, 1996 under the
Company's $2.0 million line of credit from certain existing investors. See
"Use of Proceeds" and Notes 5 and 9 to Notes to Consolidated Financial
Statements.

5
<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this
Prospectus, in connection with an investment in the shares of Common Stock
offered hereby. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in this section below.

UNCERTAINTY OF MARKET ACCEPTANCE. Sales of the Company's products have
generated limited revenues to date. The Company's fFN ELISA Test is the only
Company product that has received FDA approval for sale and marketing in the
United States and has generated only limited sales in international markets.
There can be no assurance that the fFN ELISA Test or any of the Company's
other existing or future products, including the fFN Dipstick Test, will gain
any degree of market acceptance among physicians, hospitals, other health care
providers and third-party payors, even if reimbursement and necessary
regulatory approvals are obtained. The Company believes that the commercial
success of its products will depend on the acceptance of such products by its
strategic partners and distributors and by physicians, hospitals, other health
care providers and third-party payors as clinically useful and cost effective,
and there can be no assurance that any such acceptance will be achieved.
Acceptance will also depend upon the ability of the Company and its strategic
partners and distributors to train physicians, hospitals and other health care
providers to use the fFN ELISA Test and the Company's other products, and the
willingness of such individuals to learn to use these products. Failure of the
Company's products to achieve significant market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--The Adeza Solution for Premature and
Late Birth/Successful Induction of Labor," "Business--Sales & Marketing;
Strategic Corporate Alliances" and "Business--Third-Party Reimbursement."

DEPENDENCE ON FFN ELISA TEST. The fFN ELISA Test is the primary product
being marketed by the Company and will remain so for the near term both in the
United States and internationally. The Company has been granted an expedited
PMA to market the fFN ELISA Test for the assessment of the likelihood of
premature birth in symptomatic women. In order to market the fFN ELISA Test
for additional indications in the potentially larger market, the Company will
be required to obtain additional regulatory approvals. The Company plans to
use the results of a clinical trial performed by the NIH to file a supplement
to the Company's PMA (a "PMA Supplement") for use of the fFN ELISA Test in
asymptomatic women. There can be no assurance that a PMA Supplement will be
submitted for this indication, that further clinical trials will not be
required in addition to the NIH trials or that the PMA Supplement will be
approved on a timely basis, if at all. The Company will also be required to
obtain additional regulatory approvals for the use of the fFN Dipstick Test in
assessing the likelihood of premature birth in symptomatic women, for which
clinical trials are in progress, and for the use of the fFN Dipstick Test in
assessing the likelihood of successful induction of labor in women at term,
for which the Company is in the process of designing clinical trials. To date,
the Company has had only limited commercial sales of the fFN ELISA Test in
international markets and has only recently begun shipping to a limited number
of customers in the United States. There can be no assurance that the fFN
ELISA Test or any other product developed by the Company will be safe or
effective, capable of being manufactured in commercial quantities at
acceptable costs, approved by appropriate regulatory or reimbursement
authorities or successfully marketed. Furthermore, because the fFN ELISA Test
represents the Company's principal near-term focus, the Company could be
required to cease operations if the fFN ELISA Test is not successfully
commercialized, and even limited failure of the fFN ELISA Test to gain market
acceptance would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--The Adeza
Solution for Premature and Late Birth/Successful Induction of Labor."

DEPENDENCE ON STRATEGIC PARTNERS AND DISTRIBUTORS. The Company depends on
strategic partners and distributors for substantially all currently
anticipated sales. Matria has exclusive rights to market and distribute the
fFN ELISA Test and the fFN Dipstick Test, as well as the right to participate
in the development of and distribute immunodiagnostic products for premature
birth that are developed by or acquired for development by the Company in the
United States, Canada and Puerto Rico. The Company currently expects that it
will derive a

6
<PAGE>

substantial portion of its United States revenues for the foreseeable future
from sales of its fFN ELISA Test and fFN Dipstick Test through Matria. The
loss of Matria as a strategic partner or the failure of Matria to effectively
market and distribute the Company's fFN ELISA Test and the fFN Dipstick Test
would have a material adverse effect on the Company's business, financial
condition and results of operations. Because the Company's products are sold
to physicians, hospitals and other health care providers, to be effective,
strategic partners and distributors must possess sufficient technical,
marketing and sales resources and must devote these resources to education of
its target market, physician training and continuing product support. The
amount, timing and effectiveness of the resources that Matria will devote to
promoting the fFN ELISA Test or any other of the Company's products is not
within the control of the Company, and the Company does not have the
contractual right to terminate its marketing agreement with Matria for failure
to sell more than a minimum number of products. In addition, Matria may
terminate this agreement in the event a product competitive with either the
fFN ELISA Test or the fFN Dipstick Test captures a specified percentage of the
market for such product or in the event Matria determines it is unable to
legally market either the fFN ELISA Test or the fFN Dipstick Test due to the
patent position of any third party. Furthermore, Matria was recently formed by
the merger of Tokos Medical Corporation and HealthDyne, Inc., and the failure
of such merged companies to be successfully integrated or a change in
strategic focus of the merged entity could have a material adverse effect on
Matria's ability to market and sell the Company's products, including the fFN
ELISA Test. There can also be no assurance that Matria will continue to market
and support the Company's existing or future products effectively or at all,
or that Matria will not be adversely affected by economic conditions or
industry demand. Matria's failure to successfully market and support the
Company's products in the United States would have a material adverse effect
on the Company's business, financial condition and results of operations.
Additionally, the Company expects it will be dependent on entering into
agreements with additional strategic partners and distributors for sales and
marketing of any future products in the United States, if and when such
products are developed. See "--No Assurance of Successful Product Development"
and "Business--Sales & Marketing; Strategic Corporate Alliances."

The Company anticipates that international sales will continue to represent
a significant portion of its total revenues in the future. Daiichi has
exclusive rights to market and distribute the fFN ELISA Test and the fFN
Vertical Flow Test in Japan. See "Business--Sales & Marketing; Strategic
Corporate Alliances." Additionally, the Company currently has a limited
network of other distributors that market the Company's products in Taiwan,
portions of Europe, Scandinavia, Japan and South Korea. The Company's
international sales are dependent upon the marketing efforts of, and sales by,
these distributors. The Company also relies on certain of these distributors
to assist it in obtaining product registration and reimbursement approvals in
certain international markets. If a distributor fails to invest adequate
capital promoting the Company's products and training physicians, hospitals
and other health care providers in the proper techniques for utilizing the
Company's products, or were to cease operations, the Company would likely be
unable to achieve significant sales in the subject territory. In addition, the
Company has only limited contact with the majority of the end-users of its
products in international markets. Furthermore, Adeza does not currently have
distributors in a number of international markets that it has targeted and
will need to establish additional international distribution relationships to
address these markets. There can be no assurance that the Company will engage
qualified distributors in these markets in a timely manner, if at all.
Additionally, if the Company is successful in engaging distributors, there can
be no assurance that such distributors will perform their obligations as
expected or that any revenues will be derived from such arrangements. The
failure to engage such distributors or the failure of the distributors to
perform their obligations as expected would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Sales & Marketing; Strategic Corporate Alliances."

In addition, certain of the arrangements that the Company may enter into in
the future with strategic partners may place responsibility on the Company's
partners for preclinical testing and human clinical trials and for the
preparation and submission of applications for regulatory approval of
potential diagnostic or therapeutic products. Should any strategic partner
fail to perform its obligations under such arrangements, the Company's
business, financial condition and results of operations could be materially
adversely affected.

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<PAGE>

UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT. In the United States,
physicians, hospitals and other health care providers that perform medical
services generally rely on third-party payors, such as private health
insurance plans, to reimburse all or part of the cost associated with the
treatment of patients. Although reimbursement for diagnosing premature birth
has generally been available in the United States, because of the uncertainty
relating to health care reform, there can be no assurance that this will
continue to be the case. See "--Uncertainty Related to Health Care Reform."
Furthermore, there can be no assurance, even if the Company's fFN ELISA Test
and other future products are cleared by the FDA for new clinical
applications, that reimbursement at acceptable levels, or at all, will be
available for such procedures. The Company could also be adversely affected by
changes in reimbursement policies of government or private third-party payors,
particularly to the extent that any such changes affect reimbursement for
diagnostic procedures in which the Company's products are used. Failure by
physicians, hospitals and other health care providers to obtain sufficient
reimbursement from third-party payors for tests in which the Company's
products are used, or adverse changes in government and private third-party
payors' policies toward reimbursement for such tests, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Third-Party Reimbursement."

Market acceptance of the Company's products in international markets may be
dependent in part upon the availability of reimbursement within prevailing
health care payment systems. Reimbursement and health care payment systems in
international markets vary significantly by country, and can include both
government sponsored and private health care insurance. The Company's fFN
ELISA Test and fFN Vertical Flow Test have been approved for reimbursement in
Japan. Although the Company will seek additional international reimbursement
approvals, obtaining such approvals can require 12 to 18 months or longer, and
there can be no assurance that any such approvals will be obtained in a timely
manner, if at all. Failure to receive additional international reimbursement
approvals could have a material adverse effect on market acceptance of the
Company's products in the international markets in which the Company is
seeking approvals and could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Third-
Party Reimbursement."

OPERATING LOSSES; FLUCTUATIONS IN OPERATING RESULTS. Adeza has generated
limited revenues from product sales which have not been sufficient to cover
its operating expenses. Adeza is substantially dependent upon research and
development contracts, external financing such as that being sought in this
offering and interest income to pursue its intended business activities.
Approximately $15.3 million of the Company's aggregate total revenues to date
have consisted of contract revenues received from its strategic partners,
primarily Matria and Daiichi, for research and product development. The
Company does not expect to generate further material research and development
revenues from these strategic agreements. The Company has not been profitable
since inception and had incurred a cumulative net loss of $23.7 million
through March 31, 1996. Losses have resulted principally from costs incurred
in research and development activities, clinical trials, marketing and product
introduction expenses and from general and administrative costs. The Company
expects to incur additional operating losses at least through 1997. The
Company's ability to achieve profitability is dependent on its ability to
successfully market and sell its products, to develop and obtain patent
protection and regulatory approval for its products, to enter into agreements
for product development and commercialization with corporate sponsors and to
manufacture its products in a cost-effective manner. There can be no assurance
that the Company will successfully develop, commercialize, patent, manufacture
or market its products, obtain required regulatory approvals or achieve
profitability. Future revenues and results of operations may fluctuate
significantly from quarter to quarter and will depend upon, among other
factors, actions relating to regulatory and reimbursement matters, the extent
to which Matria is successful in achieving market acceptance of the Company's
products, the rate at which the Company expands its international distribution
network, the progress of clinical trials and the introduction of competitive
products for diagnosis of the Company's targeted pregnancy-related and female
reproductive disorders. See "--Uncertainty of Market Acceptance," "--
Dependence on fFN ELISA Test" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT. The Company's ability to
successfully develop any additional products is uncertain. The Company's
research and development programs with respect to certain of

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<PAGE>

its potential products are at an early stage. The Company's goal is to
develop, manufacture and market diagnostic tests and, to a lesser extent,
therapeutic products concentrating on its targeted pregnancy-related and
female reproductive disorders. Except for the Company's fFN ELISA Test and the
related specimen collection kit, none of the Company's products have been
approved for commercial sale in the United States. Potential new products will
require significant additional research, development, preclinical and clinical
testing, regulatory approval and additional investment prior to their
commercialization, which may not be successful. There can be no assurance that
the Company's approach will result in the development of commercially
successful products. Additionally, the Company has very limited experience in
the development of therapeutic products. See "Business--The Adeza Solution for
Premature and Late Birth/Successful Induction of Labor" and "Business--The
Adeza Solution for Reproductive Disorders."

LIMITED MANUFACTURING EXPERIENCE; MANAGEMENT OF EXPANDING OPERATIONS. The
Company has only limited experience in manufacturing its products in
commercial quantities. The Company currently manufactures its products for
research, United States clinical trials, international clinical trials and
limited commercial sales. As a result of the receipt of a PMA for the fFN
ELISA Test, the Company intends to expand its operations generally, including
its manufacturing and laboratory capabilities. Companies often encounter
difficulties associated with scaling up production of new products and
expanding operations, including problems involving production yields, quality
control and assurance, component supply and shortages of qualified personnel.
There can be no assurance that the Company will be able to develop the
necessary manufacturing capability, build and train the necessary
manufacturing, sales and marketing teams, enter into the necessary
distribution or collaborative relationships, attract, retain and integrate the
required key personnel, or implement the financial and management systems as
required to meet any increased demand for its products. Failure of the Company
to successfully expand its operations in response to any increased demand for
its current and future products, if any, could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, the Company's manufacturing facilities are subject to applicable FDA
regulations regarding Good Manufacturing Practices ("GMP"), international
quality standards and other regulatory requirements. Failure by the Company to
maintain its facilities in accordance with GMP regulations, international
quality standards or other regulatory requirements may entail a delay or
termination of production, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Laboratory Services; Manufacturing" and "Business--Government
Regulation."

LIMITED LABORATORY OPERATING EXPERIENCE. The Company has limited experience
in providing laboratory services to provide results of its diagnostic tests.
The Company intends to provide laboratory results to physicians and other
users of the Company's diagnostic tests as a means of ensuring that the users
of such products will have ready access to results. The Company believes that
such laboratory services could generate a significant portion of the Company's
revenues in the near term. The Company expects that over time other commercial
laboratories will also provide results of its diagnostic tests. However, no
commercial laboratory is currently providing results with respect to the
Company's tests, and there can be no assurance that any laboratory other than
that of the Company will ultimately provide such results. Failure by the
Company to provide accurate and cost-efficient laboratory services and to
generate expected revenues through such services would have a material adverse
effect on the Company's business, financial condition and results of
operations and could expose the Company to significant liability in the event
of errors in test results. There can be no assurance that there will be demand
for the Company's laboratory services or that such services will generate any
additional revenues for the Company. See "Business--Laboratory Services;
Manufacturing."

LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE. The Company has
limited experience in sales, marketing and distribution of its products and
currently relies on strategic partners and distributors for the sales,
marketing and distribution. The Company currently has agreements to sell its
fFN ELISA Test and fFN Dipstick Test in the United States, Canada and Puerto
Rico through Matria and the fFN ELISA Test and the fFN Vertical Flow Test in
Japan through Daiichi. In connection with the commercialization of the fFN
ELISA Test, the Company, in conjunction with Matria, is substantially
increasing its United States sales and marketing efforts. The Company intends
to sell its future products primarily through distributors or by means of
strategic

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<PAGE>

relationships, although the Company may also establish a direct sales force to
sell certain products. There can be no assurance that the Company's sales and
marketing efforts or direct sales force, if established, will be successful.
Failure to establish effective distribution or strategic partner relationships
or to achieve an effective sales and marketing organization with respect to
the Company's future products could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Laboratory Services; Manufacturing" and "Business--Sales &
Marketing; Strategic Corporate Alliances."

DEPENDENCE ON LICENSES; POTENTIAL NEED FOR ADDITIONAL COLLABORATORS. The
Company's strategy for the research and development of certain of its products
contemplates that it will enter into arrangements with collaborators,
licensors, licensees and others. The Company may, therefore, be dependent upon
the subsequent success of these third parties in performing their
responsibilities, including any research activities contemplated under such
arrangements. The Company has obtained, and intends to obtain in the future,
licensed rights to certain proprietary technologies from individuals,
universities and research institutions to which it is, or will be, obligated
to pay royalties and milestone payments if it develops products based upon the
licensed technology. The Company has a worldwide, sublicensable, exclusive
license from the Fred Hutchinson Cancer Research Center to certain patent
rights related to fFN, which constitutes the Company's core technology for its
fFN ELISA Test and fFN Dipstick Test. There can be no assurance that the
Company will be able to enter into additional collaborative, license or other
arrangements that the Company deems necessary or appropriate to develop,
commercialize and market its products, or that any or all of the contemplated
benefits from such collaborative, license or other arrangements will be
realized. There can be no assurance that partners or collaborators will not
pursue alternative technologies or products either on their own or in
collaboration with others, including the Company's competitors, as a means for
developing diagnostic or therapeutic products for the Company's targeted
pregnancy-related and female reproductive disorders. See "Business--Certain
License Agreements; Patents and Proprietary Technology" and "Business--
Advisors and Collaborators."

RELIANCE ON PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY. The Company's
ability to compete effectively will depend substantially on its ability to
develop and maintain proprietary aspects of its technology. Although the
Company has been granted or has exclusive rights to various patents, the
Company's success will depend in large part on its ability to obtain United
States and foreign patent protection for its products, preserve its trade
secrets and operate without infringing on the proprietary rights of third
parties. There can be no assurance that the Company's issued patents, any
future patents that may be issued as a result of the Company's United States
or international patent applications, or the patents that the Company has
licensed, will offer any degree of protection to the Company's products
against competitive products. There can also be no assurance that any
additional patents will be issued from any of the patent applications owned by
or licensed to the Company, or that any patents that currently are or may be
issued or licensed to the Company or any of the Company's patent applications
will not be challenged, invalidated or circumvented in the future, or that any
patents issued to or licensed by the Company will not be infringed upon or
designed around by others. In addition, there can be no assurance that
competitors, many of whom have substantial resources and have made substantial
investments in competing technologies, will not seek to apply for and obtain
patents that will prevent, limit or interfere with the Company's ability to
make, use or sell its products either in the United States or in international
markets. Moreover, patent law relating to certain of the Company's fields of
interest, particularly as to the scope of claims in issued patents, is still
developing and it is unclear how this uncertainty will affect the Company's
patent rights.

The medical device and biotechnology industries have been characterized by
extensive litigation regarding patents and other intellectual property rights,
and companies in these industries have employed intellectual property
litigation as a strategy to gain a competitive advantage. There can be no
assurance that the Company will not in the future become subject to patent
infringement claims and litigation or interference proceedings declared by the
United States Patent and Trademark Office ("USPTO") to determine the priority
of inventions. The defense and prosecution of intellectual property suits,
USPTO interference proceedings and related legal and administrative
proceedings are both costly and time consuming. Litigation may be necessary to
enforce patents issued to or licensed to the Company, to protect the Company's
trade secrets or know-how or to determine the enforceability, scope and
validity of the proprietary rights of others.

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<PAGE>

As is typical in its industry, the Company has received notices from third
parties alleging infringement claims. Although there are currently no pending
claims or lawsuits against the Company regarding any possible infringement
claims, there can be no assurance that infringement claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future or that such assertions, if proven to be true, will not
have a material adverse effect on the Company's business, financial condition
and results of operations. Any litigation or interference proceedings
involving the Company will result in substantial expense to the Company and
significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation or interference proceedings
to which the Company may become a party could subject the Company to
significant liabilities to third parties or require the Company to seek
licenses from third parties. Although patent and intellectual property
disputes in the medical device and biotechnology industries have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that necessary licenses would be
available to the Company on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling
its products, which would have a material adverse effect on the Company's
business, financial condition and results of operations.

In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information agreements. These agreements
generally provide that all confidential information developed or made known to
the individual by the Company during the course of the individual's
relationship with the Company is to be kept confidential and not disclosed to
third parties, except in specific circumstances. The agreements also generally
provide that all inventions conceived by the individual in the course of
rendering services to the Company shall be the exclusive property of the
Company. There can be no assurance that proprietary information or
confidentiality agreements with employees, consultants and others will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known to or
independently developed by competitors. See "Business--Certain License
Agreements; Patents and Proprietary Technology."

GOVERNMENT REGULATION. The manufacture and sale of medical devices are
subject to extensive regulation by numerous government authorities, both in
the United States and internationally. In the United States, the principal
regulatory authorities are the FDA and corresponding state agencies, such as
the California Department of Health Services ("CDHS"). The process of
obtaining and maintaining required regulatory clearances is lengthy, expensive
and uncertain. The FDA requires companies that desire to market a new medical
device or an existing medical device for use for a new indication to obtain
either a premarket notification clearance under Section 510(k) of the Federal
Food, Drug, and Cosmetic Act ("510(k)") or a PMA prior to the introduction of
such product into the market. In addition, material changes to medical devices
are also subject to FDA review and clearance or approval prior to marketing
and sale in the United States. Though generally believed to be a shorter, less
costly regulatory path than a PMA, the process of obtaining a 510(k) clearance
generally requires the submission of supporting data, which can be extensive
and extend the regulatory process for a considerable length of time. In
addition, the FDA may require review by an advisory panel as a condition for
510(k) clearances, which can further lengthen the regulatory process. The PMA
process can take several years from initial filing and requires the submission
of extensive supporting data and clinical information. No assurance can be
given that any future products or applications developed by the Company will
not require approval under the more lengthy and expensive PMA process or that
such approval will be received on a timely basis, if at all. If the Company is
required to obtain approval for any products pursuant to the PMA procedure or,
if the 510(k) process with respect to any products is extended for a
considerable length of time, the commencement of commercial sales of the
Company's products will be delayed substantially or indefinitely.

Sales of medical devices outside of the United States are subject to
international regulatory requirements that vary from country to country. The
time required to obtain approval for sale internationally may be longer or
shorter than that required for FDA approval, and the requirements may differ.
In Europe, the Company will be required to obtain the certifications necessary
to enable the CE mark, an international symbol of adherence to quality
assurance standards and compliance with applicable European Union Medical
Device Directives, to be

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<PAGE>

affixed to the Company's products by July 1998 in order to continue sales in
member countries of the European Union. The Company has not obtained such
certifications, and there can be no assurance that it will be able to do so in
a timely manner, if at all. Many countries in which the Company currently
operates or intends to operate either do not currently regulate medical
devices or have minimal registration requirements; however, these countries
may develop more extensive regulations in the future that could adversely
affect the Company's ability to market its products. In addition, significant
costs and requests by regulators for additional information may be encountered
by the Company in its efforts to obtain regulatory approvals. Any such events
could substantially delay or preclude the Company from marketing its products
in the United States or internationally.

Regulatory approvals, if granted, may include significant limitations on the
indicated uses for which the Company's products may be marketed. In addition,
in order for companies to obtain such approvals, the FDA and certain foreign
regulatory authorities impose numerous additional requirements with which
medical device manufacturers must comply. FDA enforcement policy strictly
prohibits the promotion of approved medical devices for uses other than those
specifically cleared for marketing by the FDA. The Company is required to
adhere to GMP regulations and similar regulations in other countries, which
include testing, control and documentation requirements. Ongoing compliance
with GMP and other applicable regulatory requirements will be monitored
through periodic inspections by federal and state agencies, including the FDA
and the CDHS, and by comparable agencies in other countries. Failure to comply
with applicable regulatory requirements could result in, among other things,
warning letters, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, refusal of the government
to grant premarket clearance or premarket approval for devices, withdrawal of
previously granted approvals and criminal prosecution. Changes in existing
regulations or adoption of new government regulations or policies could
prevent or delay regulatory approval of the Company's products.

While the Company has received a PMA after an expedited review for the use
of its fFN ELISA Test in assessing the likelihood of premature birth in
symptomatic women, there can be no assurance that the Company will be able to
obtain additional PMA approvals, that the Company will not be required to seek
510(k) clearances for certain products or indications or that necessary
clearances or approvals will be obtained. The Company is preparing a PMA
Supplement for the use of its fFN ELISA Test in screening asymptomatic women,
but there can be no assurance that this PMA Supplement will be filed or, if
filed, will be granted FDA approval. Moreover, regulatory clearances, if
granted, may include significant limitations on the indicated uses for which a
product may be marketed. Delays in receipt of or failure to receive such
approvals or clearances, the loss of previously obtained approvals or
clearances, or failure to comply with existing or future regulatory
requirements would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--The Adeza
Solution for Premature and Late Birth/Successful Induction of Labor" and
"Business--Government Regulation."

As a provider of health care related services, the Company is subject to
extensive and frequently changing federal, state and local regulations
governing licensure, billing, financial relationships, conduct of operations,
cost-containment and other aspects of the Company's business relationships.
Federal and state certification and licensure programs establish standards for
the day-to-day operation of laboratories such as the Company's. Compliance
with such standards is verified by periodic inspections and requires
participation in proficiency testing programs. There can be no assurance that
the Company's laboratory facilities will pass all future inspections conducted
to ensure compliance with federal or any other applicable licensure or
certification laws. See "Business--Laboratory Services; Manufacturing."

COMPETITION. There is currently significant competition in the women's
reproductive health care market, which the Company expects to increase over
time. Currently, the fFN ELISA Test is the only FDA-approved immunodiagnostic
test for the assessment of the likelihood of premature birth for symptomatic
women. However, there can be no assurance that other, more effective
diagnostic tests for the assessment of the likelihood of premature birth will
not receive FDA approval in the near future. Other companies and institutions
with substantially greater financial, manufacturing, marketing, distribution
and technical resources than the Company are engaged in the research and
development of products similar to those currently being developed or

12
<PAGE>

commercialized by the Company. Some or all of these products may compete
directly with the Company's products, and other companies and institutions may
choose to enter this market at a later date. Although none of these companies
currently concentrates exclusively on products for the women's reproductive
health care market, there can be no assurance that these or other companies or
institutions will not succeed in developing products or procedures that are
more effective than the Company's or that would render the Company's
technology or products obsolete or uncompetitive. The Company believes that
important competitive factors with respect to the development and
commercialization of its products include the relative speed with which it can
develop products, establish clinical utility, complete the clinical testing
and regulatory approval process, obtain reimbursement and supply commercial
quantities of the product to the market. The Company's inability to compete
favorably with respect to any of these factors could have a material adverse
effect on its business, financial condition and results of operations.
Additionally, Matria and the Company's other strategic partners compete with
other companies that distribute products related to the women's reproductive
health care market to physicians, hospitals and other health care providers,
and there can be no assurance that Matria or such other strategic partners
will be able to compete favorably with these companies. The Company also
competes with other companies for clinical sites to conduct trials. There can
be no assurance that the Company will be able to compete successfully or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Competition."

RISK OF LIABILITY; ADEQUACY OF INSURANCE COVERAGE. The medical device and
biotechnology industries have historically been litigious, and the Company
faces an inherent business risk of financial exposure to product liability
claims. Inherent in the manufacturing and distribution of the Company's
products is the risk of financial exposure to product liability claims in the
event that the use of its products results in personal injury. Although the
Company has not experienced any claims to date, there can be no assurance that
the Company will not experience losses due to product liability claims in the
future. The marketing and sale of health care services through the Company's
laboratory could expose the Company to the risk of certain types of
litigation. Damages assessed in connection with, and the costs of defending,
any legal action could be substantial. Although the Company believes that its
present general liability insurance coverage in the amount of $5.0 million per
occurrence and $5.0 million in the aggregate is adequate, there can be no
assurance that insurance coverage will provide sufficient funds to satisfy
judgments which, in the future, may be entered against the Company or that
liability insurance in such amounts will be available or affordable in the
future. In addition, there can be no assurance that all of the activities
encompassed within the Company's business are covered under the Company's
policies. The Company may require increased product liability coverage as its
products are commercialized and as it provides increased laboratory services.
Such insurance is expensive, difficult to obtain and may not be available in
the future on acceptable terms, or at all. Furthermore, there can be no
assurance that the Company will have sufficient resources to satisfy any
liability or litigation expenses that may result from any uninsured or
underinsured claims. Any claims or series of claims against the Company,
regardless of their merit or eventual outcome, could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Laboratory Services; Manufacturing."

UNCERTAINTY RELATED TO HEALTH CARE REFORM. Political, economic and
regulatory influences are subjecting the health care industry in the United
States to fundamental change. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative health care delivery and payment systems. Potential approaches
that have been considered include mandated basic health care benefits,
controls on health care spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, the creation of
large insurance purchasing groups, price controls and other fundamental
changes to the health care delivery system. Legislative debate is expected to
continue in the future, and market forces are expected to demand reduced
costs. The Company cannot predict what impact the adoption of any federal or
state health care reform measures, future private sector reform or market
forces may have on its business, financial condition or results of operations.
See "Business--Third-Party Reimbursement."

RISKS ASSOCIATED WITH INTERNATIONAL SALES. In fiscal 1993, 1994 and 1995 and
for the three months ended March 31, 1996, international sales accounted for
approximately 100%, 45%, 31% and 100%, respectively, of the Company's total
revenues. A number of risks are inherent in international operations and
transactions.

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<PAGE>

International sales and operations may be limited or disrupted by the
imposition of government controls, export license requirements, political
instability, trade restrictions, changes in tariffs and difficulties in
staffing, coordinating and managing international operations. Additionally,
the Company's business, financial condition and results of operations may be
adversely affected by fluctuations in international currency exchange rates as
well as constraints on the Company's ability to maintain or increase prices.
All sales of the Company's products and laboratory services are denominated in
United States dollars. The international nature of the Company's business
subjects it and its representatives, agents and distributors to laws and
regulations of the foreign jurisdictions in which they operate or the
Company's products are sold. The regulation of medical devices in a number of
such jurisdictions, particularly in the European Union, continues to develop
and there can be no assurance that new laws or regulations, or new
interpretations of existing laws and regulations, will not have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as do the laws
of the United States. See "Business--Government Regulation" and "Business--
Certain License Agreements; Patents and Proprietary Technology." There can be
no assurance that the Company will be able to successfully further
commercialize its current products or successfully commercialize any future
products in any international market. See "Business--Sales & Marketing;
Strategic Corporate Alliances."

POSSIBLE FUTURE CAPITAL REQUIREMENTS. The Company's capital requirements
depend upon numerous factors, including market acceptance of the fFN ELISA
Test and other products, the progress of the Company's clinical research and
product development programs, the receipt of and time required to obtain
regulatory clearances and approvals, the resources the Company devotes to
developing, manufacturing and marketing its products and other factors. The
timing and amount of such capital requirements cannot accurately be predicted.
There can be no assurance that the Company will not require additional
funding, or that such additional funding, if needed, will be available on
terms acceptable to the Company, or at all. Insufficient capital may require
the Company to delay, scaleback or eliminate certain of its research and
development programs or to attempt to license to third parties the rights to
commercialize products or technologies that the Company itself would otherwise
undertake. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

DEPENDENCE ON QUALIFIED PERSONNEL. The Company is highly dependent upon the
efforts of its senior management and scientific team. The loss of the services
of one or more of these individuals could impede the achievement of its
development objectives. Because of the specialized scientific nature of the
Company's business, Adeza is also highly dependent upon its ability to
continue to attract and retain qualified scientific and technical personnel.
There is intense competition for qualified personnel in the areas of the
Company's activities, and there can be no assurance that Adeza will be able to
continue to attract and retain the qualified personnel necessary for the
development of its business. Loss of the services of, or failure to recruit,
key scientific and technical personnel would be significantly detrimental to
the Company's product development programs. The Company does not currently
have key person insurance on the life of any employee. See "Management--
Executive Officers and Directors."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to this
offering, there has been no public market for the Common Stock. Accordingly,
there can be no assurance that an active trading market for the Common Stock
will develop or be sustained upon completion of this offering. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the representatives of the Underwriters. The factors
to be considered in making such determination will include the prevailing
market conditions, the Company's financial and operating history and
condition, its prospects and the prospects for its industry in general, the
management of the Company and the market price of securities for companies in
businesses similar to that of the Company. The securities markets have, from
time to time, experienced significant price and volume fluctuations that may
be unrelated to the operating performance of particular companies. These
fluctuations often substantially affect the market price of a company's common
stock. The market prices for securities of medical device companies have in
the past been, and can in the future be expected to be, especially volatile.
The market price of the Common Stock may be subject to volatility from quarter
to quarter depending upon announcements regarding the results of regulatory
approval filings, clinical studies or other testing, technological innovations
or new commercial products by the Company or its competitors,

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<PAGE>

government regulations, developments or disputes concerning proprietary
rights, changes in reimbursement levels, public concern as to the safety of
products developed by the Company or others, changes in health care policy in
the United States and internationally, the issuance of new or changed stock
market analyst reports and recommendations and economic and other external
factors, as well as continued operating losses by the Company and fluctuations
in the Company's financial results. These factors could have a material
adverse effect on the Company's business, financial condition and results of
operations and may not be indicative of the prices that may prevail in the
public market. See "Underwriting" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

CONTROL BY EXISTING STOCKHOLDERS. Following the completion of this offering,
officers and directors of the Company, together with entities affiliated with
them, will beneficially own approximately 38.5% of the Common Stock of the
Company (approximately 35.5% if the Underwriters' over-allotment options are
exercised in full). These stockholders, acting as a group, will continue to be
able to control the election of all members of the Company's Board of
Directors and to determine all corporate actions after the sale of the shares
offered hereby. The voting power of these stockholders could also have the
effect of delaying or preventing a change in control of the Company. See
"Principal and Selling Stockholders" and "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this offering and based
on the shares outstanding as of April 30, 1996, the Company will have a total
of 7,863,669 shares of Common Stock outstanding, assuming no exercise of
outstanding warrants for 404,468 shares of Common Stock immediately prior to
the closing of this offering and no exercise of options after April 30, 1996.
Of these shares, the 2,500,000 shares offered hereby (2,875,000 shares if the
Underwriters' over-allotment options are exercised in full) will be freely
tradable without restriction or registration under the Securities Act by
persons other than "affiliates" of the Company, as defined under the
Securities Act. The remaining 5,363,669 shares of Common Stock outstanding are
"restricted shares" as that term is defined by Rule 144 as promulgated under
the Securities Act ("Restricted Shares"). Sales of Restricted Shares in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the Common Stock.

All directors and executive officers, the Selling Stockholders and certain
other Company stockholders who, upon completion of this offering, will own in
the aggregate 5,279,779 shares of Common Stock assuming that the Underwriters'
over-allotment options will not be exercised (4,904,779 shares if such options
are exercised) and the Company have each agreed that they will not, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital
stock or any securities convertible into, or exercisable or exchangeable for,
any shares of Common Stock or other capital stock of the Company, for a period
of 180 days after the date of this Prospectus, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
except for under certain limited circumstances, including bona fide gifts or
transfers effected by such stockholders other than on any securities exchange
or in the over-the-counter market to donees or transferees that agree to be
bound by similar agreements.

Because of the restrictions noted above, beginning 180 days after the
effective date of this offering, 5,334,300 Restricted Shares will be eligible
for sale in the public market subject to Rule 144 and Rule 701 of the
Securities Act. On December 21, 1996, 16,626 shares held by stockholders will
become eligible for sale in the public market pursuant to Rule 144 upon
expiration of a two-year holding period from the date such shares were fully
paid. An additional 12,743 shares held by stockholders will become eligible
for sale in the public market 90 days after the effective date of this
offering pursuant to Rule 701.

In addition, holders of 5,203,465 shares of Common Stock and the holders of
warrants to purchase 136,274 shares of Common Stock may require the Company to
register their shares of Common Stock under the Securities Act, which would
permit such holders to resell a certain amount of their shares without
complying with Rule 144. Registration and sale of such shares could have an
adverse effect on the trading price of the Common Stock. See "Description of
Capital Stock--Registration Rights of Certain Holders."

As of May 9, 1996, options to purchase a total of 579,270 shares of Common
Stock pursuant to the Option Plan were outstanding with a weighted average
exercise price of $1.21 per share, all of which were exercisable as of April
30, 1996 and 237,855 of which were fully vested as of such date. An additional
662,025 shares of Common Stock were available for future option grants under
the 1995 Stock Option and Restricted Stock Plan. 579,270 shares subject to
options held by officers, directors, certain other employees and former
employees are subject to lock-up agreements. See "Management--Stock Option and
Incentive Plans," "Shares Eligible for Future Sale," "Underwriting" and Notes
5 and 9 to Consolidated Financial Statements.

15
<PAGE>

Rule 701 under the Securities Act provides that, beginning 90 days after the
date of this Prospectus, shares of Common Stock acquired on the exercise of
outstanding options may be resold by persons other than affiliates subject
only to the manner of sale provisions of Rule 144, and by affiliates subject
to all provisions of Rule 144 except its two-year minimum holding period. The
Company intends to file one or more registration statements on Form S-8 under
the Securities Act to register shares of Common Stock subject to stock
options.

Prior to this offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made of the effect, if any, that the
sale or availability for shares of additional Common Stock will have on the
trading price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could adversely affect the trading price of the Common Stock and could
impair the Company's future ability to raise capital through an offering of
its equity securities. See "Shares Eligible for Future Sale" and "Description
of Capital Stock."

EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS. Certain provisions of the
Company's Certificate of Incorporation and Bylaws may have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. Such
provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Common Stock. Certain of these provisions
allow the Company to issue preferred stock without any vote or further action
by the stockholders, provide for a classified board of directors, eliminate
the right of stockholders to act by written consent without a meeting and
eliminate cumulative voting in the election of directors. These provisions may
make it more difficult for stockholders to take certain corporate actions and
could have the effect of delaying or preventing a change in control of the
Company. Certain provisions of Delaware law applicable to the Company could
also delay or make more difficult a merger, tender offer or proxy contest
involving the Company, including Section 203 of the Delaware General
Corporation Law, which prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years unless certain conditions are met. See "Management" and "Description of
Capital Stock."

ABSENCE OF DIVIDENDS. The Company has not declared or paid dividends on its
Common Stock since its inception and does not anticipate declaring or paying
cash dividends to its stockholders in the foreseeable future. See "Dividend
Policy."

DILUTION. Purchasers of the Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the initial offering price set forth on the cover of this
Prospectus. At an assumed initial offering price of $12.00 per share for the
2,500,000 shares of Common Stock offered hereby, purchasers of the Common
Stock will experience immediate dilution of $8.49 per share. See "Dilution." A
substantial dilution will occur upon exercise of outstanding options to
purchase Common Stock.

16
<PAGE>

THE COMPANY

The Company was founded and incorporated in California in 1985 as "Aspen
Diagnostics Corporation." The Company has operated as "Adeza Biomedical
Corporation" since November 1989 and will reincorporate in Delaware prior to
the effective date of this offering. In December 1989, the Company merged with
Yellowstone Diagnostics Corporation, a health care diagnostics company. The
Company's principal executive offices are located at 1240 Elko Drive,
Sunnyvale, California, 94089 and its telephone number is (408) 745-0975. As
used in this Prospectus, and unless the context requires otherwise, the terms
"Adeza" and the "Company" refer to Adeza Biomedical Corporation, a Delaware
corporation, its California predecessor and its subsidiary.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby assuming an initial public offering price of
$12.00 per share, the mid-point of the price range set forth on the cover of
this Prospectus (after deducting underwriting discounts and commissions and
estimated offering expenses), are estimated to be approximately $26,900,000.

The principal purposes of this offering are to create a public market for
the Common Stock, to facilitate future access by the Company to public equity
markets and to increase the Company's equity capital. The Company currently
intends to use approximately $6.0 million of the net proceeds from this
offering to fund research and development, approximately $5.0 million to
expand the Company's marketing and sales activities, approximately $4.0
million to fund clinical trials, approximately $500,000 to repay outstanding
indebtedness to certain of the Company's stockholders that has been incurred
under the Company's $2.0 million line of credit from certain existing
investors and the balance for working capital and other general corporate
purposes. These amounts are estimates, and the amount and timing of the
expenditures of the net proceeds for these purposes will depend on numerous
factors, including market acceptance of the Company's fFN ELISA Test and other
products, the status of the Company's product development efforts, the results
of clinical trials, the regulatory approval process, relationships with
strategic corporate partners and distributors, competition and manufacturing
activities. The Company may also use a portion of the net proceeds to acquire
or invest in businesses, products and technologies that are complementary to
those of the Company, although no such acquisitions or investments are planned
or being negotiated as of the date of this Prospectus, and no portion of the
net proceeds has been allocated for any specific acquisition or investment.
The Company's management will have particularly broad discretion to allocate
that portion of the net proceeds of this offering estimated to be expended for
working capital and general corporate purposes. Pending such uses, the Company
intends to invest the net proceeds from this offering in short-term,
government securities and other investment-grade, interest-bearing securities.

If the Underwriters' over-allotment options are exercised, the Company will
not receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholders. See "Principal and Selling Stockholders."

DIVIDEND POLICY

The Company has never paid cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition,
results of operations, capital requirements and such other factors as the
Board of Directors deems relevant.

17
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on a pro forma basis to reflect the automatic conversion of all
outstanding shares of the Company's Series 1 and Series 2 Preferred Stock into
Common Stock and the filing of the Company's Restated Certificate of
Incorporation to authorize 22,462,220 shares of Common Stock at a par value of
$0.001 per share and 10,000,000 shares of preferred stock at a par value of
$0.001 per share prior to the effectiveness of this offering and (ii) on a pro
forma as adjusted basis to reflect the sale of the 2,500,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $12.00 per
share after deducting underwriting discounts and commissions and estimated
offering expenses and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and related Notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
PRO FORMA AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations, net of current portion..... $ 36 $ 36
Stockholders' equity:
Preferred stock, $0.001 par value; issuable in
series; 10,000,000 shares authorized, no shares
issued and outstanding, pro forma and as adjusted.. -- --
Common Stock, $0.001 par value; 22,462,220 shares
authorized, 5,363,669 and 7,863,669 shares issued
and outstanding pro forma and as adjusted,
respectively....................................... 5 8
Additional paid-in capital.......................... 24,455 51,352
Deferred compensation............................... (64) (64)
Deficit accumulated during development stage........ (23,727) (23,727)
-------- --------
Total stockholders' equity........................ 669 27,569
-------- --------
Total capitalization.............................. $ 705 $ 27,605
======== ========
</TABLE>
- --------
(1) Excludes (i) 579,270 shares of Common Stock issuable upon exercise of
stock options outstanding as of May 9, 1996 with a weighted average
exercise price of $1.21 per share, (ii) 404,468 shares of Common Stock
issuable upon exercise of warrants outstanding at May 9, 1996 with a
weighted average exercise price of $2.74 per share, (iii) 662,025 shares
reserved for future issuance as of May 9, 1996 under the Company's 1995
Stock Option and Restricted Stock Plan, (iv) 250,000 shares reserved for
future issuance as of May 9, 1996 under the Company's 1996 Employee Stock
Purchase Plan and (v) 200,000 shares reserved for future issuance as of
May 9, 1996 under the Company's 1996 Directors' Stock Option Plan. See
"Management--Stock Option and Incentive Plans" and "Description of Capital
Stock."

18
<PAGE>

DILUTION

Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of their Common Stock
from the assumed initial public offering price. The pro forma net tangible
book value of the Company at March 31, 1996 was approximately $669,000, or
$0.12 per share. "Net tangible book value" per share is equal to net tangible
assets (tangible assets of the Company less total liabilities) divided by the
number of shares of Common Stock outstanding. Net tangible book value dilution
per share represents the difference between the amount per share paid by
purchasers of Common Stock in this offering and the pro forma net tangible
book value per share of Common Stock immediately after the completion of this
offering. After giving effect to the sale of the 2,500,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $12.00 per
share, after deducting underwriting discounts and commissions and estimated
offering expenses and the application of net proceeds therefrom, the pro forma
net tangible book value of the Company as of March 31, 1996 would have been
$27,569,000 or $3.51 per share. This represents an immediate increase in pro
forma net tangible book value of $3.39 per share to existing stockholders and
an immediate dilution in net tangible book value of $8.49 per share to new
investors purchasing shares of Common Stock in this offering. The following
table illustrates this per share dilution as of March 31, 1996:

<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $12.00
Pro forma net tangible book value before this offering....... $0.12
Increase per share attributable to new investors............. 3.39
-----
Adjusted pro forma net tangible book value after this offer-
ing........................................................... 3.51
------
Dilution in net tangible book value to new investors........... $ 8.49
======
</TABLE>

The following table sets forth, on a pro forma basis as of March 31, 1996
after giving effect to the conversion of all outstanding shares of Series 1
and Series 2 Preferred Stock into Common Stock, the difference between the
existing stockholders and the purchasers of shares in this offering at an
assumed initial public offering price of $12.00 per share (before deducting
underwriting discounts and commissions and estimated offering expenses) with
respect to the number of shares purchased from the Company, the total cash
consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CASH CONSIDERATION
----------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1).................... 5,363,669 68.2% $ 24,855,000 45.3% $ 4.63
New stockholders (1).... 2,500,000 31.8 30,000,000 54.7 12.00
--------- ----- --------------- ---------
Total................. 7,863,669 100.0% $54,855,000 100.0%
========= ===== =============== =========
</TABLE>
- --------
(1) In the event the Underwriters' over-allotment options are exercised in
full, the number of shares held by existing stockholders will be reduced
to 4,988,669 shares, or 63.4% of the total number of shares outstanding
after this offering, and the number of shares held by new investors will
increase to 2,875,000 shares, or 36.6% of the total number of shares
outstanding after this offering. See "Principal and Selling Stockholders."

The foregoing tables assume no exercise of outstanding options or warrants.
As of May 9, 1996, there were 579,270 shares of Common Stock issuable upon
exercise of stock options outstanding under the Company's 1995 Stock Option
and Restricted Stock Plan with a weighted average exercise price of $1.21 per
share and 404,468 shares of Common Stock issuable upon exercise of warrants
outstanding with a weighted average exercise price of $2.74 per share. In
addition, as of May 9, 1996, 662,025 shares of Common Stock reserved for
future issuance under the Company's 1995 Stock Option and Restricted Stock
Plan, 250,000 shares of Common Stock reserved for future issuance under the
Company's 1996 Employee Stock Purchase Plan and 200,000 shares of Common Stock
reserved for future issuance under the Company's 1996 Directors' Stock Option
Plan. If all of the outstanding options and warrants were exercised for Common
Stock, the dilution per share to new investors would be $8.68 per share. See
"Management--Stock Option and Incentive Plans" and Notes 5 and 9 of Notes to
Consolidated Financial Statements.

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data is qualified by reference
to and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. The consolidated statements of operations data set forth below
with respect to each of the three years in the period ended December 31, 1995
and the consolidated balance sheet data at December 31, 1994 and 1995 are
derived from, and are qualified by reference to, the Consolidated Financial
Statements which have been audited by Ernst & Young LLP, independent auditors,
included elsewhere in this Prospectus. The consolidated statements of
operations data for the years ended December 31, 1991 and 1992 and the
consolidated balance sheet data at December 31, 1991, 1992 and 1993 are
derived from the Company's audited consolidated financial statements not
included in this Prospectus. The consolidated statements of operations data
for the three months ended March 31, 1995 and 1996 and the consolidated
balance sheet data at March 31, 1996 have been derived from the unaudited
consolidated financial statements also appearing elsewhere in this Prospectus
which have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods. The results
of operations for the three months ended March 31, 1996 are not necessarily
indicative of results to be expected for the full year or for any subsequent
period.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 1985) THREE MONTHS
TO ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
------------------------------------------ ------------- -----------------
1991 1992 1993 1994 1995 1995 1995 1996
------- ------- ------- ------- ------- -------------- -------- -------
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Contract revenues...... $ 5,299 $ 3,486 $ 967 $ 1,977 $ 3,416 $ 15,300 $ 167 $ --
Product sales.......... 155 432 504 316 541 1,948 99 152
------- ------- ------- ------- ------- -------- -------- -------
Total revenues.......... 5,454 3,918 1,471 2,293 3,957 17,248 266 152
Operating costs and ex-
penses:
Costs of product
sales................. 455 913 907 1,088 1,105 4,498 213 251
Research and develop-
ment (1) ............. 2,856 4,248 3,413 2,547 2,355 21,052 572 579
Selling, general and
administrative........ 2,011 2,819 3,128 1,928 1,725 14,682 371 418
------- ------- ------- ------- ------- -------- -------- -------
Total operating costs
and expenses.......... 5,322 7,980 7,448 5,563 5,185 40,232 1,156 1,248
------- ------- ------- ------- ------- -------- -------- -------
Income (loss) from oper-
ations................. 132 (4,062) (5,977) (3,270) (1,228) (22,984) (890) (1,096)
Interest income (ex-
pense) and other, net.. 67 57 (132) (390) 84 334 16 19
------- ------- ------- ------- ------- -------- -------- -------
Net income (loss)....... $ 199 $(4,005) $(6,109) $(3,660) $(1,144) $(22,650) $ (874) $(1,077)
======= ======= ======= ======= ======= ======== ======== =======
Pro forma net loss per
share(2)............... $ (0.21) $ (0.16) $ (0.20)
======= ======== =======
Shares used in computing
pro forma net loss per
share (2).............. 5,446 5,446 5,448
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ ---------
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital (defi-
cit)................... $ 4,838 $ 1,387 $ (1,638) $ 2,318 $ 1,273 $ 235
Total assets............ 6,603 3,370 2,666 5,175 2,923 1,860
Convertible notes pay-
able to related par-
ties, including accrued
interest............... -- -- 2,262 -- -- --
Capital lease obliga-
tions, net of current
portion................ 398 372 344 144 49 36
Deferred liability-
noncurrent............. 750 750 750 -- -- --
Deficit accumulated dur-
ing the development
stage.................. (7,732) (11,737) (17,846) (21,506) (22,650) (23,727)
Total stockholders' eq-
uity (deficit)......... 4,575 1,408 (1,755) 2,873 1,740 669
</TABLE>
- --------
(1) Included in research and development expenses for the period from
inception (January 1985) to December 31, 1995 is approximately $553,000
related to the purchase of in-process research and development.
(2) See Note 1 of Notes to Consolidated Financial Statements for information
regarding the computation of pro forma net loss per share.

20
<PAGE>

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

This discussion and analysis contains certain forward-looking statements
relating to future events or the future financial performance of the Company.
Such statements are only predictions and the actual events or results may
differ materially from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors" as well as
those discussed elsewhere in this Prospectus. The historical results set forth
in this discussion and analysis are not necessarily indicative of trends with
respect to any actual or projected future financial performance of the
Company. This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.

OVERVIEW

Adeza was founded in January 1985 and, since its inception, has been a
development stage company primarily involved in research and development
activities for the women's reproductive health care market. From inception
through 1992, the Company focused its efforts on developing an alternative to
amniocentesis and diagnostic devices for pregnancy-related and female
reproductive disorders. Since current senior management joined the Company in
the second half of 1992, Adeza has primarily focused on the development and
marketing of proprietary tests for the diagnosis of its targeted pregnancy-
related and female reproductive disorders, including premature and late birth,
preeclampsia, endometriosis and infertility. Adeza currently relies on its
strategic partners and distributors for the sale, marketing and distribution
of its products to physicians, hospitals, other health care providers and
third-party payors. The Company, together with its strategic partners and
distributors, intends to educate its target market as to the clinical
usefulness and cost-effectiveness of its products through a variety of means,
including marketing evaluations, seminars, workshops, publications and
professional and trade meetings.

In September 1995, the Company received an expedited PMA from the FDA to
market its fFN ELISA Test in the United States as an aid in assessing the
likelihood of premature birth in symptomatic women. Prior to receiving its
PMA, the Company's sales and marketing efforts were focused on selected
international markets for the purpose of gathering relevant market data and
increasing product awareness. The fFN ELISA Test will be marketed in the
United States, Canada and Puerto Rico through Matria, the Company's strategic
partner. The Company anticipates that Matria will introduce the fFN ELISA Test
in the United States through full-scale marketing efforts commencing in the
second half of 1996. The Company currently expects that it will derive a
substantial amount of its United States revenues for the forseeable future
from sales of its fFN ELISA Test and fFN Dipstick Test through Matria. The
Company anticipates that international sales will continue to represent a
significant portion of its total revenues in the future and intends to expand
its network of international distributors. In general, the Company intends to
recognize revenues upon the shipment of products to Matria or upon the
completion of the laboratory services conducted by the Company. Adeza may
receive additional revenues upon collection of revenues by Matria from its
paying customers. The Company recognizes revenues from international sales
upon shipment of the product to a strategic partner or distributor.

Approximately $15.3 million of the Company's aggregate total revenues to
date have consisted of contract revenues received from its strategic partners,
primarily Matria and Daiichi, for research and product development. In the
future, the Company does not expect to generate further material research and
development revenues from these agreements with its strategic partners. The
Company has also generated approximately $2.1 million since inception through
March 31, 1996 from international product sales. Future revenues and results
of operations may fluctuate significantly from quarter to quarter and will
depend upon, among other factors, actions relating to regulatory and
reimbursement matters, the extent to which Matria is successful in achieving
market acceptance of the Company's products, the rate at which the Company
expands its international distribution network, the progress of clinical
trials and the introduction of competitive products for diagnosis of the
Company's targeted pregnancy-related and female reproductive disorders.

21
<PAGE>

The Company had incurred cumulative net losses of $23.7 million through
March 31, 1996 in the course of its development activities. Losses have
resulted principally from research and development activities, clinical
trials, marketing and product introduction expenses and from general and
administrative costs. The Company expects to incur additional operating losses
at least through 1997. The Company's ability to achieve profitability is
dependent on a number of factors, including acceptance of the Company's
products by physicians, hospitals, other health care providers and third-party
payors, its ability to successfully commercialize the fFN ELISA Test, the
ability of the Company's strategic partners to successfully market and
distribute its products, its ability to obtain reimbursement from third-party
payors for the use of its products and its ability to develop and obtain
patent protection and regulatory approval for its products.

RESULTS OF OPERATIONS

REVENUES

Contract Revenues. Contract revenues increased from $967,000 in 1993 to $2.0
million in 1994 and $3.4 million in 1995, and were $167,000 for the three
months ended March 31, 1995. The Company received no contract revenues in the
three months ended March 31, 1996. Contract revenues were primarily earned as
research and development milestone payments under the Company's strategic
agreements with Matria and Daiichi. The Company does not expect additional
material contract revenues under these strategic agreements, as the research
and development phase of these agreements has been completed.

Product Sales. Product sales decreased from $504,000 in 1993 to $316,000 in
1994 and increased to $541,000 in 1995, and also increased from $99,000 in the
three months ended March 31, 1995 to $152,000 in the comparable 1996 period.
The year-to-year fluctuations were primarily the result of the timing of
inventory orders from international distributors. The increase from three-
month period to three-month period was primarily the result of increased
product sales through Daiichi. The Company expects that Matria will launch
full-scale marketing efforts for the fFN ELISA Test in the United States in
the second half of 1996 and also expects to expand its international
distribution network. There can be no assurance, however, that the Company and
Matria will be successful in their efforts to introduce the fFN ELISA Test in
the United States or that the Company's efforts to expand its international
distribution network will be successful. Additionally, there can be no
assurance that the fFN ELISA Test will be accepted as clinically useful or
cost effective by physicians, hospitals, other health care providers and
third-party payors.

COSTS AND EXPENSES

Cost of Product Sales. Costs of product sales consists of materials, labor,
overhead, and manufacturing start-up costs. Cost of product sales increased
from $907,000 in 1993 to $1.1 million in 1994 and 1995, and also increased
from $213,000 in the three months ended March 31, 1995 to $251,000 in the
comparable 1996 period. The Company experienced negative gross margins for its
product sales due to the early stage of commercialization of the Company's
products and related product start-up costs. The Company anticipates that if
revenues from product sales increase, gross margins will improve as the fixed
portion of cost of product sales is allocated against higher sales.
Improvements in gross margins due to increased product sales, if any, may be
offset in the future if the Company increases the fixed portion of cost of
product sales. Due to the early stage of commercialization, however, the
Company is unable to predict with any certainty future gross margins.

Research and Development. Research and development expenses consist of costs
related to product development, clinical trials and additional product
research. The Company's research and development expenses decreased from $3.4
million in 1993 to $2.5 million in 1994 and $2.4 million in 1995 and increased
from $572,000 in the three months ended March 31, 1995 to $579,000 in the
comparable 1996 three-month period. The decreases from year-to-year were
primarily the result of the Company's cost containment efforts, which were
achieved through reduced personnel costs, partially offset by increased
outside clinical trial costs and support of third-party research efforts. The
increase from three-month period to three-month period was primarily
attributable to an increase in clinical and regulatory expenses, partially
offset by a decrease in research and

22
<PAGE>

development expenses. However, the Company expects that research and
development expenses will increase in future periods, as the sponsorship by
the Company of third-party research and development efforts increase and the
Company pursues its research and development of complementary diagnostic
products. In addition, the Company expects to report a non-cash charge of
approximately $250,000 in the second quarter of 1996 in connection with the
issuance of a warrant to the Hutchinson Center. See Note 9 to Notes to
Consolidated Financial Statements.

Selling, General and Administrative. Selling, general and administrative
expenses decreased from $3.1 million in 1993 to $1.9 million in 1994 and $1.7
million in 1995, and increased from $371,000 for the three months ended March
31, 1995 to $418,000 for the comparable 1996 period. The decreases from year-
to-year were primarily the result of the Company's efforts to reduce overall
operating expenses by reducing management and staff personnel. The increase
from three-month period to three-month period was primarily attributable to an
increase in patent and general corporate legal expenses. The Company expects
that selling, general and administrative expenses will increase in future
periods as the Company increases its sales and marketing efforts in connection
with the commercial introduction of the fFN ELISA Test in the United States,
expansion of its international distribution network and increased
responsibilities as a public company.

Interest Income (Expense) and Other, Net. Interest income (expense) and
other, net changed from $(132,000) in 1993 to $(390,000) in 1994, primarily
reflecting higher outstanding debt balances, and was $84,000 in 1995,
primarily reflecting lower outstanding debt balances. Interest income
(expense) and other, net increased from $16,000 for the three months ended
March 31, 1995 to $19,000 for the comparable 1996 three-month period,
primarily reflecting lower outstanding debt balances.

Income Taxes. At December 31, 1995, the Company had available net operating
loss carryforwards for federal and state tax purposes of approximately $18.8
million and $5.1 million, respectively. The federal net operating loss
carryforwards will expire at various dates beginning in 2000 through 2010, if
not utilized, and the state net operating loss carryforwards will expire in
1996 through 2000, if not utilized. Utilization of the net operating losses
and credits will be subject to a substantial annual limitation due to the
ownership change provisions of the Internal Revenue Code of 1986, as amended,
and similar state provisions. Under its current operating plan, the Company
expects that such limitations may result in the expiration of combined federal
and state net operating loss carryforwards and credits of approximately $18.7
million prior to their utilization.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date primarily through issuances
of equity securities, from payments under agreements with strategic partners
and, to a lesser extent, cash receipts from product sales. Since inception,
the Company raised $23.9 million in aggregate net proceeds from issuances of
equity securities and received an additional $15.3 million in payments from
strategic partners. Further, in April 1996 the Company entered into a $2.0
million line of credit with certain of its existing investors, specifically
Aeneas Venture Corporation, Aspen Venture Partners, L.P., Asset Management
Associates, BG Services Limited, Charter Ventures II, L.P., Enterprise
Partners and STF II, L.P. Such investors have advanced an aggregate of
$500,000 to the Company under this line of credit. All amounts borrowed by the
Company under this line of credit bear simple interest at an annual rate equal
to the applicable Internal Revenue Service imputed rate in effect at the time
such amount is borrowed and will become due and payable upon the earlier of 30
days following the completion of this offering or June 1997.

The Company's net loss from inception through March 31, 1996 of $23.7
million exceeds the net cash used in operations of $21.1 million for the same
period primarily due to non-cash charges of $553,000 for the purchase of in-
process research and development and $1.5 million for depreciation and
amortization, as well as, to a lesser extent, increases in accounts payable
and accrued liabilities. The Company has also invested approximately $1.2
million in capital equipment, facilities improvements and other long-term
assets. The level of future capital expenditures will be dependent upon
available capital, and the Company currently has no commitments for material
capital expenditures.

23
<PAGE>

At March 31, 1996, the Company's cash and cash equivalents were
approximately $1.0 million. The Company anticipates that its existing capital
resources, including the $2.0 million credit line obtained from certain
existing investors in April 1996 and the anticipated net proceeds from this
offering, will be adequate to fund its planned operations through 1997.
However, the Company expects to incur substantial additional operating costs
related to research and clinical trials, manufacturing start-up, development
of reference laboratory facilities and the expansion of its sales and
marketing activities. The Company's capital requirements will also depend upon
numerous factors, including market acceptance of the fFN ELISA Test and other
products, the progress of the Company's clinical research and product
development programs, the receipt of and time required to obtain regulatory
clearances and approvals, the resources the Company devotes to developing,
manufacturing and marketing its products and other factors. The timing and
amount of such capital requirements cannot be accurately predicted. There can
be no assurance that the Company will not require additional funding, or that
such additional funding, if needed, will be available on terms attractive to
the Company, or at all. Insufficient capital may require the Company to delay,
scaleback or eliminate certain of its research and product development
programs or to attempt to license to third parties the rights to commercialize
products or technologies that the Company itself would otherwise undertake.

24
<PAGE>

BUSINESS

THE COMPANY

Adeza Biomedical Corporation ("Adeza" or the "Company") develops and markets
diagnostic products and services for women's reproductive health care. The
Company's primary focus is the development and marketing of proprietary tests
for the diagnosis of pregnancy-related and female reproductive disorders,
including premature and late birth, preeclampsia, endometriosis and
infertility. The Company believes that its products and services will result
in improved patient management, with a consequent reduction in both patient
risk and overall cost of care. The Company, in conjunction with its strategic
partners and distributors, intends to market its products to obstetrical and
gynecological ("Ob/Gyn") physicians and third-party payors, who represent a
large and increasingly important part of the health care economy.

The Company has received an expedited premarket approval ("PMA") from the
Food and Drug Administration ("FDA") to begin marketing its enzyme-linked
immunosorbent assay ("ELISA") diagnostic (the "fFN ELISA Test") for use in
women with symptoms of premature birth. The fFN ELISA Test is the only FDA-
approved immunodiagnostic test for this disorder and represents a significant
advance over currently used evaluation techniques. This test measures the
presence of fetal fibronectin ("fFN") in the vaginal fluid of pregnant women
in order to assess the likelihood of premature birth. The Company believes
that its fFN-based products have the potential to become an element of
standard prenatal care. The Company will distribute the fFN ELISA Test in the
United States through an exclusive strategic distribution arrangement with
Matria Healthcare, Inc. ("Matria"), a leading women's health care company.
Matria began shipment of fFN ELISA Tests to a select number of initial
customers in the United States in April 1996 and is expected to commence full-
scale marketing efforts in the second half of 1996. The Company has been
selling the fFN ELISA Test in Japan since 1995 through an exclusive
arrangement with Daiichi Pure Chemicals Co. Ltd. ("Daiichi") and in Europe
through a limited number of distributors.

In addition to the fFN ELISA Test, the Company is developing several other
products for the women's reproductive health care market. The Company is
preparing supplements to its PMA ("PMA Supplements") for the use of the fFN
ELISA Test in assessing the likelihood of premature birth in asymptomatic
women, and for the use of a point-of-care rapid assay (the "fFN Dipstick
Test") for assessing the likelihood of premature birth in symptomatic women.
Clinical trials have been completed by the National Institutes of Health (the
"NIH") which support the use of the fFN ELISA Test for asymptomatic women, and
the Company is conducting clinical trials for the use of the fFN Dipstick Test
in symptomatic women. Additionally, the Company is in the process of designing
clinical trials for the use of the fFN Dipstick Test in assessing the
likelihood of successful induction of labor at term. The Company has also
developed a proprietary fFN vertical flow membrane test (the "fFN Vertical
Flow Test") for the assessment of premature rupture of amniotic membranes
("ROM"), which has been introduced for sale in Japan. Accurate diagnosis of
suspected premature ROM is related to the diagnosis of premature birth and is
important for the prevention of potentially serious neonatal infection. In
addition, the Company has developed a proprietary diagnostic test based on
cellular fibronectin (the "cFN Test") for the pregnancy-related disorder of
preeclampsia, a leading causes of maternal death and serious fetal
complications in the United States. The cFN Test is currently undergoing
preclinical evaluation in the United States, Europe and Australia. The Company
also maintains a product development program with the goal of introducing
additional proprietary diagnostics and therapeutics for the women's
reproductive health care market.

25
<PAGE>

THE ADEZA STRATEGY

. Penetrate the Market for Premature Birth Diagnostics. The Company's
strategy is to have its fFN-based products become an element of standard
prenatal care. The Company is focusing its initial marketing efforts on
sales of the fFN ELISA Test for symptomatic women through Matria to
physicians, hospitals, other health care providers and third-party
payors. The Company believes this target market will recognize the
significant benefits in patient health and reduced costs arising from
use of the fFN ELISA Test as a diagnostic for premature birth. In order
to further facilitate market penetration, the Company will also provide
a laboratory service to supply fFN ELISA Test results. The Company
believes that other commercial laboratories will provide the same
service as market penetration of the fFN ELISA Test increases.

. Leverage Expertise in fFN-based Diagnostics. The Company intends to
expand the market for its fFN-based diagnostics to include testing of
asymptomatic women for the likelihood of premature birth and testing for
the likelihood of successful induction at term. In addition, the Company
plans to introduce faster and more convenient formats for its fFN-based
products, as represented by the fFN Dipstick Test.

. Market to Health Care Providers and Third-Party Payors. The Company
intends to increase acceptance and create long-term demand for its
products and services by marketing to physicians, hospitals, other
health care providers and third-party payors. The Company, together with
its strategic partners and distributors, will educate this target market
as to the cost-effectiveness and improved patient care that its products
and services provide through a variety of means, including marketing
evaluations, seminars, workshops, publications and professional and
trade meetings.

. Penetrate International Market. The Company may introduce new products
into selected international markets for the purpose of gathering
relevant market data and increasing market awareness. The Company
intends to expand its international distribution network through
agreements with strategic partners and distributors that have
significant presence and experience in the international women's health
care market.

. Continue Product Innovation. Through a focused research and development
program, including joint efforts with various collaborators, the Company
is developing additional products for the diagnosis of premature and
late birth, preeclampsia, endometriosis and infertility. With the goal
of becoming a comprehensive provider, the Company and its collaborators
are also researching a variety of complementary therapeutic approaches
to these targeted disorders. See "--Research and Development."

PREGNANCY-RELATED DISORDERS

The women's reproductive health care market represents a large and
increasingly important part of the health care economy, with an estimated $20
billion being spent annually in the United States on Ob/Gyn care. Obstetrical
care accounts for one in every eight hospital admissions in the United States
at an annual cost of over $10 billion. Obstetrical and neonatal tests result
in annual expenditures on laboratory services in the United States of
approximately $480 million. More than half of all women in the United States
of reproductive age visit their Ob/Gyn for primary health care. The Company
believes that the social and economic cost of inadequate prenatal care and
problem pregnancies has created a significant market opportunity for the
Company's products, and accordingly has targeted the pregnancy-related
disorders of premature and late birth and preeclampsia.

26
<PAGE>

PREMATURE BIRTH AND LATE BIRTH/SUCCESSFUL INDUCTION AT TERM

Premature Birth

Premature birth, defined as delivery between 20 and 37 weeks of gestation,
is a major public health problem in the United States and the leading cause of
death among newly born babies. Of the estimated four million births in the
United States annually, approximately 10% occur prematurely. However, babies
born prematurely often have potentially fatal complications affecting the
cardiovascular, respiratory, digestive and central nervous systems that are
directly related to the premature birth. Even if not fatal, these problems are
often associated with long-term physical and developmental disabilities and
mental retardation.

Approximately $4.7 billion is spent annually in the United States for the
initial medical care of premature babies and their mothers. Compared to the
$10,000 average cost of a term birth, initial medical care for a premature
baby averages $20,000 and frequently exceeds $30,000. Over 20,000 premature
babies die annually during the neonatal period, and another 300,000 babies,
most of which are premature, require intensive care in one of the
approximately 600 neonatal intensive care units in the United States. For
babies born prior to 28 weeks of gestation or weighing less than two pounds
(1,000 grams), initial medical care averages $77,000. In addition, continuing
medical costs for significantly premature babies can be substantial as a
result of the physical and mental developmental complications that often arise
from premature birth.

With respect to the likelihood of premature birth, pregnant women can
generally be divided into two groups: symptomatic, defined as the presence of
symptoms indicating the possibility of premature birth and asymptomatic,
defined as the absence of symptoms indicating the possibility of premature
birth. The challenge for physicians and other health care providers is to be
able to accurately and reliably distinguish women who are actually undergoing
preterm labor from those with "false" labor symptoms. The Company estimates
that approximately 47% of symptomatic women who receive treatment for
premature birth may not need such treatment and that 50% of all asymptomatic
women who deliver prematurely do not otherwise fall into definable risk
categories. Objective assessment of the risk of premature birth in women with
symptoms would allow timely and effective patient management. In addition,
accurate diagnosis of suspected premature ROM is related to the diagnosis of
premature birth, and is important for the prevention of potentially serious
infections of the fetus. At least 20% of all women who experience premature
birth have also had premature ROM.

Symptomatic Women. In the United States, approximately 25% of all pregnant
women seek unscheduled medical care for symptoms of premature birth, resulting
in an estimated one million patient visits each year. Such symptoms may
include uterine contractions, backache, pelvic pain, abdominal fullness or
discomfort, change in vaginal discharge and/or vaginal bleeding. However,
these symptoms are not reliable predictors of premature birth because they
commonly occur in both premature and term births, and the Company believes
that other evaluation techniques that physicians currently use are not
sufficiently reliable to make an accurate diagnosis. Lacking an accurate
diagnostic test, physicians currently evaluate the amniotic membranes for
rupture, the level of uterine activity and the state of the cervix. However,
once the amniotic membranes have ruptured, premature birth is virtually
assured. Similarly, once detectable cervical change occurs, the onset of labor
and imminent delivery of the baby are virtually unavoidable, regardless of the
therapeutic intervention employed. Uterine contractions may be early
indicators of premature birth, but are often actually harmless contractions
that commonly occur in the last half of term pregnancies.

Asymptomatic Women. Diagnosis of the likelihood of premature delivery among
asymptomatic pregnant women currently depends on the evaluation of known risk
factors, such as multiple fetus pregnancies (e.g., twins), poor prenatal care
or previous premature birth. However, these risk factors have limited
usefulness because approximately 50% of women who deliver prematurely are
pregnant for the first time or have no identifiable risk factors. Even when
accurately identified, these risk factors (with the exception of multiple
fetus pregnancies) are not reliable predictors of premature birth.

27
<PAGE>

Late Birth/Successful Induction at Term

Late births are those delivered after 42 weeks of gestation. Approximately
5% of the four million babies born in the United States annually are delivered
late. Late birth significantly increases the medical risk for both the mother
and baby and, if intervention is required, the overall cost of pregnancy and
delivery. The primary risk for late babies is asphyxiation. As a fetus grows
in the relatively confined space of the uterus, there is increased likelihood
of blood flow disruption resulting from umbilical cord compression. When blood
flow through the umbilical cord is compromised, the fetus may lose its source
of oxygen and face death or significant disability if not immediately
delivered, usually by emergency cesarean section. In addition, women with
post-term pregnancies are more likely to develop preeclampsia and therefore be
required to deliver their babies via cesarean section, which increases risk to
the mother and results in costs of approximately $3,000 more than a term
vaginal delivery. In order to limit the risks and costs associated with late
birth, physicians typically seek to induce labor at term. The significant
risks and costs associated with late birth and reasons of social convenience
have led to an increasing reliance on induced labor, which may account for as
many as 25% of all term deliveries.

Physicians induce labor through the application of preparations containing
prostaglandin E2 to the vagina to prepare the cervix for delivery and use
intravenous administration of pitocin to increase the number and force of
uterine contractions. Induction is often accompanied by protracted labor
resulting from the uterus and cervix not being prepared to deliver the baby.
There currently exists no reliable diagnostic to test whether the
physiological preparatory changes necessary for a successful induction have
occurred. Physicians currently assess subjective characteristics of the cervix
to determine preparedness. The Company believes that this subjective
evaluation does not allow practitioners to determine reliably whether or not
induction of labor will be successful and may contribute to the high annual
cesarean rate (24% of all births) in the United States.

28
<PAGE>

THE ADEZA SOLUTION FOR PREMATURE BIRTH AND LATE BIRTH/SUCCESSFUL INDUCTION OF
LABOR

The Company believes that its current products and its near- and long-term
product candidates will address the need for objective diagnostic tests for
premature birth and late birth. The following table sets forth the Company's
current and near-term products for these disorders.

CURRENT AND NEAR-TERM FFN-BASED PRODUCTS FOR PREMATURE AND LATE BIRTH(/1/)

<TABLE>
<CAPTION>
DISORDER/PRODUCT INDICATION STATUS CURRENT APPROACH
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREMATURE BIRTH
fFN ELISA Test Laboratory assay to Received expedited Symptomatic women are
assess likelihood of PMA for use of test typically held for
premature birth to be in symptomatic women observation and are
used in symptomatic in 1995. Commercial often medicated and
or asymptomatic wom- introduction in Eu- monitored for
en. rope in 1992, Japan cervical change and
in 1995 and for symp- contractions. No
tomatic women antici- immunodiagnostic test
pated in the United to assess likelihood
States in the second of premature birth
half of 1996. PMA has received FDA
Supplement for use of approval.
test in asymptomatic
woman being prepared
for planned submis-
sion in late 1996.

fFN Dipstick Test Rapid point-of-care FDA concordance trial Symptomatic women are
dipstick analyzed by in progress and PMA typically held for
practitioner on-site Supplement being observa-
to assess likelihood prepared for use of tion and are often
of premature birth. test in symptomatic medicated and moni-
women. tored for cervical
change and contrac-
tions. No
immunodiagnostic test
to assess likelihood of
premature birth has
received FDA approval.

Premature Rupture of
Amniotic Membranes
fFN Vertical Flow Multi-step membrane Commercial Pregnant women with
Test(/2/) test analyzed by introduction in Japan suspected ruptured
practitioner on-site in 1995. No current membranes are
to assess premature plans to introduce in assessed for excess
rupture of amniotic the United States. fluid in the vagina,
membranes. a vaginal secretion
slide test is
performed and vaginal
fluid acidity is
tested.

LATE BIRTH
fFN Dipstick Test Rapid point-of-care Clinical trials Pregnant women beyond
dipstick analyzed by currently being expected delivery
practitioner on-site designed to support a date have labor
to assess likelihood PMA Supplement. induced and/or
of successful cesarean sections. No
induction at or after immunodiagnostic test
term. to assess likelihood
of successful
induction at term has
received FDA
approval.
</TABLE>

(1) The preceding table and other portions of this Business section, including
without limitation "The Adeza Solution for Premature and Late
Birth/Successful Induction of Labor," "The Adeza Solution for
Preeclampsia" and "The Adeza Solution for Reproductive Disorders," contain
forward-looking statements which involve risks and uncertainties with
respect to the products the Company currently intends to develop. Actual
results may differ significantly from those discussed in the forward-
looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
(2) The fFN Vertical Flow Test for the premature rupture of amniotic membranes
has been specifically developed for sale and marketing in Japan. The
Company is in the early stages of developing a product for detection of
suspected ROM in a more cost-effective, rapid point-of-care format which
it intends to introduce in the United States.

29
<PAGE>

The Company believes that its fFN-based products provide the first objective
and convenient immunodiagnostic tests for assessing the likelihood of
premature birth and late birth/successful induction of labor at term. As
indicated in the diagram below, fFN is a placental protein that is a component
of the placental membranes at the maternal/fetal interface.

NORMAL PREGNANCY

[DRAWING OF FETUS IN UTERUS]

The level of fFN in vaginal secretions is closely correlated to the onset of
labor and subsequent delivery. Although fFN is not the cause of labor and
delivery, its presence in vaginal secretions signals the weakening or
compromise of placental membranes and the probable onset of labor. Results of
the Company's clinical trials indicate that fFN testing will enable physicians
to objectively identify women at risk for preterm labor within the next seven
to 14 days. The Company believes that this will allow appropriate patient
care, resulting in reduced risk to the mother and baby and significantly lower
overall costs to the health care system.

The following chart demonstrates the levels of fFN normally present in
vaginal secretions of pregnant women at different gestational ages. High
levels of fFN between gestational ages of 24 weeks and 34 weeks are associated
with an increased risk of premature birth. By measuring the levels of fFN in
vaginal secretions during such period, physicians are able to better assess
the likelihood of premature birth.

VAGINAL fFN LEVEL AT EACH GESTATIONAL AGE

[CHART OF FFN LEVELS]

30
<PAGE>

The Company has developed, or is developing, a number of tests based on the
detection of fFN as an indicator for premature birth and late birth/successful
induction of labor at term.

fFN ELISA Test

The Company's initial fFN diagnostic product is the fFN ELISA Test that
measures the presence of fFN in vaginal fluid. The fFN ELISA Test consists of
a specimen collection kit and a two-hour microtitre plate kit that will be
used by laboratories and hospitals to provide results on the specimens
collected. The Company believes that the fFN ELISA Test is the first
immunodiagnostic test that will allow accurate predictive assessment of the
risk of premature birth among both symptomatic and asymptomatic pregnant
women. The Company believes that the fFN ELISA Test's predictive ability will
enable physicians to more accurately select the appropriate course of
treatment. If the test is negative, the physician may decide to treat less
aggressively and, for example, not admit a symptomatic woman into a health
care facility for observation. If the test is positive, the physician may
choose to take steps to delay the onset of labor and perhaps initiate
treatment to aid the baby's lung development. The Company believes that early
recognition of women at increased risk leads to improved patient management
via more intense surveillance and selection of appropriate treatments, thereby
improving patient outcome and reducing costs. The fFN ELISA Test has received
an expedited PMA for marketing in the United States as an aid in assessing the
risk of premature birth in symptomatic women. This test is currently being
sold in portions of Europe through a limited number of distributors and in the
Pacific Rim and Japan through Daiichi, and has been approved and assigned
reimbursement points by the Japanese Ministry of Health and Welfare for
assessing the likelihood of premature birth. The Company's strategic partner,
Matria, will market the fFN ELISA Test for use by hospitals, other health care
providers, and eventually commercial reference laboratories, in the United
States, Canada and Puerto Rico. Each fFN ELISA Test will yield up to 44
results. Matria will also market the Company's laboratory service to hospitals
and physicians not equipped to use the fFN ELISA Test to provide results on
the specimen samples they have taken. See "Business--Laboratory Services;
Manufacturing."

Symptomatic Women. The fFN ELISA Test has received a PMA from the FDA for
use in assessing the likelihood of premature birth in symptomatic women
between 24 and 34 weeks of gestation. In clinical trials, symptomatic women
with a negative fFN ELISA Test result had less than a 1% (1-in-150) chance of
delivering within the 14-day period following sample collection. The Company
believes that this high negative correlation in symptomatic women will
significantly reduce costs by allowing physicians to treat some symptomatic
women more appropriately, such as on an outpatient basis, rather than through
observation and hospitalization, as is now often the case. In addition,
symptomatic women who test positive for the presence of fFN between 24 and 34
weeks of gestation have a one in six chance of giving birth within a 14-day
period following administration of the test. The Company believes that this
will result in the proper diagnosis of women who will benefit from proper
patient management. For example, an NIH consensus panel indicates that proper
treatment, such as administration of corticosteroids will result in reduced
risk of respiratory complications for the baby as well as initial cost savings
estimated at more than $3,000 per treated baby born prematurely.

Asymptomatic Women. Based on results from the recently concluded Prematurity
Prediction Study, a multi-center clinical trial conducted by the Maternal
Fetal Medicine Unit of the NIH involving approximately 3,000 patients at 10
sites, the Company is in the process of preparing a PMA Supplement for use of
the fFN ELISA Test in the assessment of the likelihood of premature birth in
asymptomatic women. The results of this trial are expected to be submitted to
the FDA in late 1996, although there can be no assurance that a PMA Supplement
will be submitted at that time or at all. Results of this study indicate that
fFN is a meaningful predictor of premature birth of those asymptomatic women
evaluated between 24 and 30 weeks gestation. The study found that asymptomatic
women at 24 weeks gestation with a negative fFN ELISA Test result had less
than a 1% (1-in-200) chance of delivering within the 28-day period following
sample collection. The study concluded that women who tested positive for the
presence of fFN at 24 weeks gestation were 59 times more likely to give birth
before 28 weeks of gestation, when infant morbidity and mortality is most
significant, than women with negative test results at such gestational age.

31
<PAGE>

fFN Dipstick Test

Premature Birth. The fFN Dipstick Test uses the same core technology as the
fFN ELISA Test, but is a convenient, rapid assay designed to allow a physician
or other health care practitioner to test the pregnant woman on-site and have
a result in approximately 10 minutes, without the need for further processing.
The fFN Dipstick Test is currently being evaluated in an FDA concordance trial
that compares the fFN Dipstick Test to the fFN ELISA Test in symptomatic women
in the United States. The Company believes that use of its fFN Dipstick Test,
if approved for marketing, will allow physicians to make more timely treatment
decisions for symptomatic women, particularly those women with an increased
risk of premature birth. In addition, the Company believes that the ease of
use of the dipstick format and the immediate availability of results will
broaden the use of the fFN Dipstick Test to include the physicians who do not
have access to laboratories that are equipped to analyze the fFN ELISA Test.

Late Birth/Successful Induction of Labor. The Company believes that the fFN
Dipstick Test may provide the first objective and convenient test to identify
women who are candidates for successful induction of labor at term. Based on
the results of clinical trials in three countries involving over 250 patients,
the Company believes that vaginal expression of fFN is associated with
successful induction of labor at term among women with cervices that are not
prepared for the process of labor as assessed using the current subjective
evaluation techniques. These studies indicated that women with a positive fFN
test have a shorter duration of induced labor, require less drug
administration and have a significantly lower cesarean section rate than
similar women with a negative fFN test result. The Company believes that more
accurate selection of patients for induction will decrease maternal and fetal
complications associated with failed induction and decrease the cesarean
section rate which, as a result, will decrease costs. The Company is in the
process of designing a multi-center clinical trial to support an application
for regulatory approval which will expand the use of the fFN Dipstick to
include the assessment of the likelihood of successful induction of labor at
term.

fFN Vertical Flow Test

Premature Rupture of Amniotic Membranes. In addition to the fFN ELISA Test
and the fFN Dipstick Test, the Company has introduced in Japan its fFN
Vertical Flow Test for assessing premature ROM. Accurate diagnosis of
suspected premature ROM is essential to facilitate prevention of potentially
serious neonatal infection. In addition, premature ROM can be indicative of
the likelihood of premature birth. Prior to delivery of a baby, the mother's
amniotic membranes rupture, releasing amniotic fluid into the vagina. Current
procedures to diagnose premature ROM include pooling (visual evidence of
pooling of amniotic fluid in the vagina), ferning (microscopic evidence of a
fern-like pattern produced by dried vaginal secretions) and nitrazine paper (a
form of pH paper). These procedures are commonly used, but because each has
significant weaknesses, two of the three procedures must be positive to
establish the diagnosis of premature ROM under current standards of care.
Detection of fFN in vaginal secretions indicates the presence of amniotic
fluid verifying that the amniotic membranes have ruptured. The fFN Vertical
Flow Test has been approved and assigned reimbursement points by the Japanese
Ministry of Health and Welfare for identification of premature ROM. The fFN
Vertical Flow Test is currently being sold in Japan by Daiichi.

PREECLAMPSIA

The Company also focuses on the pregnancy-related disorder of preeclampsia.
Preeclampsia is a syndrome characterized by the presence of at least one of
the following symptoms: elevated blood pressure (hypertension), protein in the
urine (proteinuria) and swelling of the face and extremities (edema).
Preeclampsia typically occurs in the later stages of pregnancy, and although
its origin is not currently well understood, it is believed to start at the
time of implantation of the fertilized egg and may have an immunological
basis. In the United States, preeclampsia occurs in approximately 7% of all
pregnancies per year and is one of the leading causes of maternal mortality.
Most women develop symptoms of preeclampsia late in pregnancy, although some
women become symptomatic as early as 24 weeks of gestation. The current
standard of care for identifying this disorder includes frequent blood
pressure checks of the mother between 24 and 36 weeks of gestation.

About 5% of all women with preeclampsia develop severe life-threatening
forms of this disorder that may lead to stroke, eclamptic seizures, liver or
kidney failure, severe blood clotting disorders and even death.

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Preeclampsia can also have significant harmful effects on fetal well-being.
The only cure for preeclampsia is delivery of the fetus. Thus, many
preeclamptic women have a cesarean section before the onset of significant
complications. Consequently, preeclampsia accounts for approximately 10% to
25% of preterm deliveries, and, as a result, many of these babies suffer from
prematurity-related disorders.

Current diagnostic techniques for preeclampsia are not reliable. Although
diagnosed on the basis of the presence of hypertension, proteinuria and edema,
preeclampsia occasionally occurs in the complete absence of these symptoms. To
further complicate diagnosis of this disorder, many women experience
relatively harmless, transient blood pressure elevation during pregnancy which
may be incorrectly diagnosed as preeclampsia. At the present time, there are
no widely used immunodiagnostic markers for preeclampsia, and those tests that
do exist do not typically provide sufficient warning to prevent potentially
serious complications. Thus physicians must determine whether to perform a
cesarean section on patients that are believed to be preeclamptic regardless
of the gestational age of the fetus. This leads in some cases to unnecessary
cesarean sections, as well as the complications associated with premature
births.

THE ADEZA SOLUTION FOR PREECLAMPSIA

cFN ELISA Test

The Company has determined that cellular fibronectin ("cFN"), a protein
produced by the endothelial cells that line the vascular system that is
related to but distinct from fFN, is elevated in the plasma of women with
preeclampsia but not in the plasma of women with hypertension unrelated to
preeclampsia. Preclinical studies involving approximately 270 patients in
three sites indicate that cFN may be useful as a confirmatory marker for
preeclampsia and that its concentration seems to be proportional to the
severity of disease. Adeza has developed an ELISA test for the detection of
preeclampsia (the "cFN ELISA Test"), which is currently undergoing preclinical
evaluation in the United States, Europe and Australia.

HLA-G

Research conducted with Adeza's university collaborators has indicated that
preeclampsia may be a disease of abnormal trophoblast invasion. Trophoblasts
allow the placenta to implant on the uterus; adverse effects to trophoblasts
may prevent the placenta from gaining proper access to the maternal blood
supply. The Company's collaborations have identified new proteins which may
play roles in controlling trophoblast invasion and influencing the development
of preeclampsia. The first of these proteins, called Human Lymphocyte Antigen
G, or HLA-G, is present on the trophoblasts of normally invading, non-
preeclamptic placenta but markedly lower in concentration on the same types of
cells in preeclamptic placenta. The Company is conducting research on these
proteins with the goal of developing diagnostics for preeclampsia.

REPRODUCTIVE DISORDERS

In addition to the pregnancy-related disorders of premature birth and late
birth/successful induction of labor and preeclampsia, the Company has also
targeted the reproductive disorders of endometriosis and infertility.

ENDOMETRIOSIS

Endometriosis is a disorder manifested by the misplaced growth of the
endometrial tissue that normally lines the uterus and/or the development of
related lesions in the pelvic cavity. In the United States, the disease is
estimated to afflict 10% of women of reproductive age and is a leading cause
of infertility. Symptoms of endometriosis include pelvic pain, abnormal
vaginal bleeding and infertility. The symptoms of pain can range from minor
distress to excruciating pain that leads to possible bed rest and an inability
to function normally. The extent and location of the disease do not directly
correlate with the severity of the symptoms. In the United States, it is
estimated that approximately six million women of reproductive age have some
form of endometriosis. Approximately 30% to 45% of women who have
endometriosis are infertile. Endometriosis is responsible for 20% to 30% of
all gynecological operations and is the leading non-obstetric cause of
hospitalizations for women of reproductive age.

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Physicians currently diagnose endometriosis by performing laparoscopic
surgery to view endometriosis lesions in the pelvic cavity. Laparoscopy is an
invasive surgical procedure usually performed under general anesthesia,
involving inflation of the abdomen and two punctures in order to inspect the
pelvic cavity and diagnose the disease. Laparoscopy is not consistently
accurate in detecting early stage, microscopic disease. Current treatments
include invasive laparoscopic procedures to remove tissue and hormonal therapy
to temporarily suppress the growth of the lesions. These laparoscopic
procedures cost $2,000 to $4,000 per patient. The Company believes that the
development of an accurate diagnostic test would significantly reduce the
costs of treating endometriosis by providing an effective alternative to
laparoscopic surgery in certain cases. Enhanced ability to diagnose
endometriosis would reduce the risk to the patient and allow the physician to
not only detect the disease, but also to determine and monitor the
effectiveness of treatments.

INFERTILITY

It is estimated that about 800,000 new female infertility patients are
diagnosed in the United States each year and that diagnosis and treatment of
such patients costs approximately $2.0 billion per year. While at least 50% of
female infertility cases involve diagnoses which are well understood, much of
the management of female infertility centers around the treatment of poorly
understood factors. At least 25% of infertile women fall into the category of
"unexplained infertility" where extensive tests for known factors have failed
to reveal the cause of their infertility. These women may face open-ended and
undefined therapy that elevates costs and frustrates patients and physicians.
Women with "unexplained infertility" are candidates for assisted reproductive
technologies ("ART"), which are not always successful. Each attempted ART
treatment costs between $8,000 and $10,000. The Company believes that the
ability to predict successful candidates for ART treatments would help prevent
unnecessary lengthy and costly procedures in failed treatments.

THE ADEZA SOLUTION FOR REPRODUCTIVE DISORDERS

ENDOMETRIOSIS

Neural Networks. A neural network is a computer-based form of artificial
intelligence that is capable of identifying and "learning" direct and indirect
relationships between complex sets of data and a given outcome. The strength
of neural network analysis lies in its ability to examine complex and
nonlinear systems, such as human physiologic processes. The Company is
developing a proprietary neural network software, using its endometriosis
database, that the Company believes may be useful in assessing the likelihood
of the existence of endometriosis in a particular patient. The Company may
also apply this technology to its other targeted pregnancy-related and female
reproductive disorders.

Endometriosis-Specific Chemotactic Factor Test. A chemotactic factor has the
property of attracting macrophages and neutrophils in a process called
chemotaxis. The endometriosis-specific chemotactic factor that has been
isolated by Adeza and its collaborators shows the highest level of activity in
peritoneal fluid of patients with minimal to mild endometriosis, as compared
to patients with no endometriosis or moderate to severe endometriosis. A
diagnostic test based on this endometriosis-specific chemotactic factor would,
as a result, allow physicians to detect endometriosis at an early stage. The
Company is developing a proprietary diagnostic test based on this
endometriosis-specific chemotactic factor.

Anti-Endometrial Antibody Assay. The Company has detected an elevated
antibody response against endometrial proteins in the blood of patients with
endometriosis. Adeza's scientists have identified certain antigens that they
believe elicit this antibody response. Adeza is developing an assay test based
on these antigens that would allow physicians to diagnose endometriosis
through the detection of endometriosis-specific antibodies in the blood of
patients with the disease.

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INFERTILITY

Uterine Receptivity Test. The Company believes that the lack of expression
of the Beta-3 integrin correlates with defects in uterine receptivity to
embryo implantation. The Company has an exclusive worldwide option to a
proprietary test for defects in uterine receptivity based on the Beta-3
integrin. Such a test would be of significant value by allowing the triage of
women for therapy to correct uterine receptivity defects prior to attempting
ART. Because patients with defined defects in uterine receptivity often fail
to conceive either normally or in response to in vitro fertilization, the
Company believes that such a test could also allow significant cost savings by
potentially reducing the number of unnecessary failed in vitro fertilization
("IVF") cycles. The Company intends to conduct a multi-center trial with major
IVF centers to further evaluate the potential of this test.

Anti-Ovarian Antibody Assay. In order for in vitro fertilization
technologies to be successful, patients must produce mature ova, which is the
purpose of fertility drug treatment prior to the use of in vitro
fertilization. The Company believes that high levels of a certain anti-ovarian
antibody correlate to poor response to fertility drug treatments. The Company
is developing an assay to detect anti-ovarian antibodies in the blood of women
who are candidates to receive drug treatment for ovarian stimulation. The
Company believes this test has the potential to be a useful screen for poor
response to drug-induced ovarian stimulation. If the Company is able to
successfully develop such a test, it believes that the anti-ovarian antibody
assay could lead to significant savings by reducing the number of ovulation
induction treatment cycles that fail due to lack of response.

SALES & MARKETING; STRATEGIC CORPORATE ALLIANCES

DOMESTIC OPERATIONS

The Company's strategy is to sell and market its products primarily through
strategic partners and distributors. The Company, together with its strategic
partners and distributors, markets primarily to physicians, hospitals, other
health care providers and third-party payors. The Company believes that the
trend toward management of health care costs in the United States will lead to
increased awareness of and emphasis on disease prevention and early patient
management, which will increase demand from physicians and third-party payors
for cost-effective diagnostic tests.

The Company, together with its strategic partner, Matria, is currently
preparing for market launch of the fFN ELISA Test, which has exclusive rights
to market the Company's fFN ELISA Test and its fFN Dipstick Test in the United
States, Canada and Puerto Rico. Matria is the surviving entity of the merger
of Tokos Medical Corporation ("Tokos") and HealthDyne, Inc., two leaders in
providing health care services for pregnant women. As of April 30, 1996,
Matria had a field organization of approximately 114 sales and sales support
personnel and 400 nurses. It has over 30 specialists focused on third-party
payors and 100 reimbursement customer service claims management personnel.
Adeza and Matria are currently working to structure reimbursement rates with
major third-party payors in anticipation of the full-scale commercial launch
of the fFN ELISA Test in the United States in the second half of 1996. The
current end-user list price in the United States for the fFN ELISA Test is
$212 for a processed laboratory result from the Company and $2,400 for a
diagnostic kit that is analyzed by the end-user's laboratory, which may be
utilized for eight to 44 tests.

The Company's relationship with Matria is governed by an exclusive marketing
agreement (the "Matria Marketing Agreement") for the Company's fFN ELISA Test
and the fFN Dipstick Test. In addition, Matria has the right to participate in
the development of and obtain rights to distribute immunodiagnostic products
for premature birth that are developed by or acquired for development by the
Company, in the United States, Canada and Puerto Rico. Under the Matria
Marketing Agreement, initially executed in December 1991 with Tokos and
amended in May 1996, the Company received an initial $3.0 million in research
and development funding in 1991. In addition, the Company received another
$1.0 million in milestone payments in 1992 and $4.0 million in 1995 in
connection with the completion of other milestones. Additionally, in
connection with the Matria Marketing Agreement, Matria invested in $2.0
million of the Company's capital stock.

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INTERNATIONAL OPERATIONS

Until the Company's receipt of FDA approval of its fFN ELISA Test in the
United States, Adeza's marketing and sales efforts were focused on selected
international markets for the purpose of gathering relevant market data and
increasing market awareness. These markets include Taiwan, portions of Europe,
Scandinavia, Japan and South Korea. Currently, the Company's international
sales and marketing efforts address the particular health care systems of
individual countries through a network of 11 international distributors with
expertise in their markets. These distributors are supported by the Company's
internal sales and marketing professionals. The Company intends to expand its
international distribution network through agreements with strategic partners
and distributors that have significant presence and experience in the
international women's health care market.

The fFN ELISA Test and fFN Vertical Flow Test are marketed in Japan and
South Korea by the Company's marketing partner, Daiichi. In December 1990, the
Company and Daiichi entered into agreements to co-develop and market Adeza's
in vitro diagnostic products in Japan. Under these agreements, the Company
recognized contract revenue for research and development of $2.0 million in
1991, $2.0 million in 1992, $667,000 in 1993, $667,000 in 1994 and $667,000 in
1995. Additionally, in connection with these agreements, Daiichi purchased
362,318 shares of the Company's Series D Preferred Stock for an aggregate of
$1.0 million.

The Company expects in the future to enter into additional strategic
partnerships to develop, commercialize and sell its current and future
products. However, there can be no assurance that the Company will be able to
negotiate acceptable agreements in the future, or that such new agreements or
existing agreements will be successful. The Company may also establish a
direct sales force to sell certain products.

Adeza's internal sales and marketing efforts provide technical and clinical
support for the Company's products to the Company's strategic partners and
distributors, including their journal advertising, seminars, congresses and
trade show participation. A primary goal of the Company's direct marketing is
to increase public awareness of the problems and high costs associated with
pregnancy-related and female reproductive disorders it targets. Adeza
collaborates with Ob/Gyn physicians, practitioners and academics to support
the use of the Company's technology. The Company and its strategic partners
have produced an in-service video to facilitate consistent and regular use of
its products by physicians and laboratory technicians, cost/benefit
information and informative product literature in five languages.

RESEARCH AND DEVELOPMENT

The Company's research and development efforts are conducted internally and
through collaborations with academic investigators and clinicians, with a
primary focus on the research and development of additional diagnostics and on
therapeutic products that will complement the Company's diagnostics in
addressing the needs of women with pregnancy-related and reproductive
disorders. Adeza's therapeutic research strategy emphasizes the selection of
naturally occurring compounds which have clear roles in the biochemical
processes frequently associated with premature birth. Total research and
development expenses for the years ended December 31, 1994 and December 31,
1995 and the three month period ended March 31, 1996 were $2.5million, $2.4
million and $579,000, respectively.

LABORATORY SERVICES; MANUFACTURING

Laboratory Services. The Company offers laboratory services that will
provide results from the fFN ELISA Test. The Company expects that over time
other laboratory service providers will also provide results from this test.
The Company's strategy is to use its laboratory services to help it penetrate
the market by facilitating adoption of the Company's products by physicians,
clinicians and health care providers and to generate additional revenue
through fees for such laboratory services. The Company has limited experience
in providing laboratory services to provide results of its diagnostic tests.
The Company intends to provide laboratory results to physicians and other
users of the Company's diagnostic test as a means of ensuring that the users
of such products will have ready access to results. No commercial laboratory
service provider other than

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the Company is currently providing results with respect to the Company's
tests, and there can be no assurance that any laboratory other than that of
the Company will ultimately provide such results. Failure by the Company to
provide accurate and cost-efficient laboratory services and to generate
expected revenues through such services could have a material adverse effect
on the Company's business, financial condition and results of operations and
could expose the Company to significant liability in the event of errors in
test results. There can be no assurance that there will be demand for the
Company's laboratory services or that such services will generate any
additional revenues for the Company. See "Risk Factors--Limited Laboratory
Operating Experience."

The ability to provide quality laboratory information for the physician
begins with obtaining a high-quality specimen. To maintain the specimen's
integrity during shipment, all specimens are sent following prescribed
shipping instructions. In the case of the fFN samples, a container with a
frozen ice pack is being used to help protect the samples from excess heat. An
overnight courier is used to ensure that the samples are transported from the
point of collection to the laboratory within 24 hours. Validation studies to
ensure the specimens have been transported properly have been performed and
will be an ongoing part of Adeza's laboratory quality assurance program.

As of April 30, 1996, Adeza employed five California Licensed Clinical
Laboratory Scientists and retained the services of a Laboratory Director and a
Clinical Consultant. The laboratory is staffed and equipped to process 240 to
480 fFN samples in the course of each eight hour shift, six days a week. The
Company believes that this laboratory capacity will be sufficient through
1997. In addition to the fFN testing, the Company intends to use its
laboratory to offer clinical testing services for additional products if and
as such products are introduced. Expansion of the Company's existing
laboratory facilities may be required to perform such additional testing.

Adeza's laboratory is certified under the Clinical Laboratory Improvement
Amendments of 1988 ("CLIA") for its laboratory services. It is also certified
by the State of California Department of Health Services. CLIA is intended to
ensure the quality and reliability of all medical testing in laboratories in
the United States by requiring that any facility in which testing is performed
meets specified standards in areas such as personnel qualification,
administration, participation in proficiency testing, patient test management,
quality control, quality assurance and inspections. The regulations
promulgated under CLIA have established three levels of regulatory control
based on test complexity--"waived," "moderately" and "highly" complex. The fFN
ELISA Test is currently catagorized as highly complex, and Adeza's laboratory
has been certified to perform tests at the highly complex level.

The federal and state certification and licensure programs establish
standards for the day-to-day operation of a medical laboratory, including, but
not limited to, personnel and quality control. Compliance with such standards
is verified by periodic inspections by inspectors employed by federal or state
regulatory agencies. In addition, federal regulatory authorities require
participation in a proficiency testing program approved by the Department of
Health and Human Services ("DHHS") for each of the specialties and
subspecialties for which a laboratory seeks approval from Medicare or Medicaid
and licensure under CLIA. Proficiency testing programs involve actual testing
of specimens that have been prepared by an entity running an approved program
for testing by the laboratory. On March 14, 1990, the DHHS published final
regulations setting forth the standards for the day-to-day operation of all
laboratories that participate in Medicare and Medicaid, as well as those
laboratories which engage in interstate commerce and, therefore, are regulated
under CLIA. These regulations generally became effective on September 1, 1992
and apply to the Company's laboratory. The Company believes it is in
compliance with these regulations. However, there can be no assurance that the
Company currently is, or in the future will be, in compliance with such
regulations.

Existing federal laws governing Medicare and Medicaid, as well as some state
laws, also regulate certain aspects of the relationship between health care
providers, including laboratories, and their referral sources, including
physicians, hospitals and other laboratories. One provision of these laws,
known as the "anti-kickback law," contains extremely broad proscriptions, and
relatively little regulatory guidance or judicial precedent exists

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concerning its application. Violation of this provision may result in
exclusion from Medicare and Medicaid or criminal penalties. The Company seeks
to structure its arrangements with physicians and other providers to be in
compliance with this law. However, the Company is unable to predict how the
law will be applied in the future, and no assurances can be given that its
arrangements will not be subject to scrutiny under this law.

Any exclusion or suspension from participation in the Medicare and Medicaid
programs, any loss of licensure or accreditation, or any inability to obtain
any required license or permit, whether arising from any action by DHHS, any
state, or any other regulatory authority, would have a material adverse effect
on the Company's business. Any significant civil or criminal penalty resulting
from such proceedings could have a material adverse effect on the Company.

The FDA does not currently regulate laboratory testing services. Certain
federal and state laws govern the handling and disposal of medical specimens,
infectious and hazardous wastes and radioactive materials. Failure to comply
could subject an entity covered by these laws to fines, criminal penalties
and/or other enforcement actions.

Pursuant to the Occupational Safety and Health Act, laboratories have a
general duty to provide a workplace to their employees that is safe from
hazard. Over the past few years, the Occupational Safety and Health
Administration ("OSHA") has issued rules relevant to certain hazards that are
found in the laboratory. Failure to comply with any applicable OSHA rules or
with the general duty to provide a safe workplace could subject an employer,
including a laboratory employer, to substantial fines and penalties.

Manufacturing. As of April 30, 1996, Adeza employed six full-time employees
in manufacturing and four full-time employees in its quality assurance
department. The manufacturing facility is located at the Company's
headquarters in Sunnyvale, California and consists of approximately 4,400
square feet of dedicated manufacturing and quality assurance space.

The Company currently manufactures the fFN ELISA Test, the fFN Dipstick Test
and the fFN Vertical Flow Test at its facilities in Sunnyvale. The Company
believes that it has the capacity to meet its estimated production
requirements for 1997. Adeza's manufacturing facility has a current license
from the State of California, Department of Health Services Food and Drug
Branch Manufacturing and is also registered with the FDA as a device
manufacturer.

The Company has no therapeutic manufacturing facilities at the present time
and plans to rely upon outside manufacturers to produce any therapeutic
products. The Company believes that there is substantial worldwide production
capacity for therapeutics and that it will be able to establish manufacturing
arrangements on acceptable terms. However, there can be no assurance that
appropriate production capacity for therapeutics will be available if and when
needed by the Company or that the Company will be able to establish
manufacturing arrangements on acceptable terms, if at all.

CERTAIN LICENSE AGREEMENTS; PATENTS AND PROPRIETARY TECHNOLOGY

Certain License Agreements. The Company seeks to obtain technologies that
complement and expand its existing technology base. Where consistent with its
business strategy, the Company intends to license product and marketing rights
from selected research and educational institutions to capitalize on the
research and development capabilities and technology bases of these entities.
The Company's material license agreement covering the technology related to
the Company's fFN-based products is with the Fred Hutchinson Cancer Research
Center (the "Hutchinson Center"). In August 1992, Adeza entered into an
amended license agreement (the "Hutchinson Agreement") which superseded
certain previous license agreements between the two entities. Under the
Hutchinson Agreement, the Company was granted a worldwide, sublicensable,
exclusive license (subject to the rights of certain United States governmental
agencies and a grant-back to the Hutchinson Center for non-commercial research
purposes) to certain patent rights related to fFN and antibodies made against
fFN,

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which constitutes Adeza's core technology for its fFN-based products,
including the fFN ELISA Test and the fFN Dipstick Test. The Company paid up-
front license fees upon execution of the Hutchinson Agreement, in January 1993
and upon receipt of a PMA for the fFN ELISA Test. The Company is also
obligated to pay royalties to the Hutchinson Center on actual product sales in
the United States by the Company during the remainder of the term of a
licensed patent, subject to an annual minimum royalty. In addition, in
connection with Matria's market launch of the fFN ELISA Test, the Company
granted the Hutchinson Center a warrant to purchase 25,000 shares of Common
Stock at an exercise price of $0.01 per share. The Company expects to report a
non-cash charge of approximately $250,000 in the second quarter of 1996 in
connection with the issuance of this warrant.

In addition to the Hutchinson Agreement, the Company is a party to numerous
option and license agreements with research and educational institutions for
the in-licensing of a variety of key technologies, including the University of
California at San Francisco for the use of HLA-G for diagnosis and treatment
of preeclampsia, the University of Pennsylvania for the potential diagnostic
and therapeutic applications of a chemotactic factor associated with
endometriosis and for certain antibodies made against fetal fibronectin and
the University of Alabama at Birmingham for a therapeutic agent for treatment
of women at risk for preterm delivery. Certain of these agreements require the
Company or the other parties to meet certain performance obligations in order
to retain their rights under such agreements or require the Company to make
certain payments in order to obtain or maintain rights to the subject
technology.

Patents and Proprietary Technology. The Company's success will depend in
part on its ability to obtain patent protection for its products and
processes, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. The Company's policy is to protect its
technology base by filing patent applications on internal proprietary
technology as well as on in-licensed technology. The Company owns or has
licenses to 23 United States patents and the Company owns, has licenses to or
options to license technology covered by another 16 pending United States
patent applications, each in the area of pregnancy-related and reproductive
disorder diagnostics.

The Company's ability to protect its proprietary position is in part
dependent on the issuance of patents on current and future applications. The
Company currently has applications pending in the United States, Japan, Canada
and certain countries in Europe. The validity and breadth of claims in medical
technology patents involve complex legal and factual questions and therefore
are highly uncertain. No assurance can be given that any pending patent
applications or any future patent applications will be issued, that the scope
of any patent protection will exclude competitors or provide competitive
advantages to the Company, that any of the Company's patents will be held
valid if subsequently challenged or that others will not claim rights in or
ownership to the patents and other proprietary rights held by the Company.
Furthermore, there can be no assurance that others have not developed or will
not develop similar products, duplicate any of the Company's products or
design around the Company's patents. In addition, others may hold or receive
patents or file patent applications that contain claims having a scope that
covers products developed by the Company. In the event that any relevant
claims of third-party patents are upheld as valid and enforceable, the Company
could be prevented from practicing the subject matter claimed in such patents
or could be required to obtain licenses from the patent owners of each of such
patents or to redesign its products or processes to avoid infringement. There
can be no assurance that such licenses would be available or, if available,
would be on terms acceptable to the Company or that the Company would be
successful in any attempt to redesign its products or processes to avoid
infringement. The Company also relies upon unpatented trade secrets to protect
its proprietary technology, and no assurance can be given that others will not
independently develop or otherwise acquire substantially equivalent techniques
or otherwise gain access to the Company's proprietary technology or that the
Company can ultimately protect meaningful rights to such unpatented
proprietary technology.

Litigation regarding patent and other intellectual property rights which
would result in substantial cost to and diversion of effort by the Company may
be necessary to enforce patents issued to the Company, to protect trade
secrets or know-how owned by the Company, to defend the Company against
claimed infringement of the rights of others or to determine the ownership,
scope or validity of the proprietary rights of the Company and others. An
adverse determination in any such litigation could subject the Company to
significant liability to third parties, could require the Company to seek
licenses from third parties, which licenses may not be available or, if

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available, may not be on terms acceptable to the Company, and ultimately could
prevent the Company from manufacturing, selling or using its products, any of
which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Adeza also relies on trade secrets and proprietary know-how. The Company's
policy is to require each of its employees, consultants and advisors to
execute a confidentiality agreement upon the commencement of any employment,
consulting or advisory relationship with the Company. Each agreement provides
that all confidential information developed or made known to the individual
during the course of the relationship will be kept confidential and not
disclosed to third parties except in specified circumstances. In the case of
employees, the agreements provide that all inventions conceived of by an
individual shall be the exclusive property of the Company, other than
inventions unrelated to the Company and developed entirely on the employee's
own time. There can be no assurance, however, that these agreements will
provide meaningful protection or adequate remedies for misappropriation of the
Company's trade secrets in the event of unauthorized use or disclosure of such
information.

THIRD-PARTY REIMBURSEMENT

The Company's strategy is to increase acceptance of its products and create
long-term demand by marketing the cost-effectiveness and improved patient care
that its products provide to third-party payors. The Company, together with
its strategic partners and distributors, intends to educate such third-party
payors through a variety of means, including marketing evaluations, seminars,
workshops, publications and professional and trade meetings. Adeza and Matria
are currently working to structure reimbursement rates with major third-party
payors in anticipation of the full-scale commercial launch of the fFN ELISA
Test in the United States in the second half of 1996.

The Company's ability to successfully commercialize its products depends in
part on the availability of, and the Company's ability to obtain, adequate
levels of third-party reimbursement for use of its diagnostic tests. In the
United States, hospitals, physicians and other health care providers that
purchase diagnostic tests such as the fFN ELISA Test generally rely on third-
party payors, principally federal Medicare, state Medicaid and private and
corporate health insurance plans, to reimburse all or part of the cost
associated with the use of such tests. Although reimbursement for diagnosing
premature birth has generally been available in the United States, there can
be no assurance that this will continue to be the case. Third-party payors may
deny reimbursement if they determine that a prescribed diagnostic test has not
received appropriate FDA or other governmental regulatory clearances, is not
used in accordance with cost-effective treatment methods as determined by the
payor, or is experimental, unnecessary or inappropriate. The Company's ability
to commercialize its products successfully will depend in part on the extent
to which appropriate reimbursement levels for the cost of such products and
related treatment are obtained from government authorities, private health
insurers and other organizations, such as health maintenance organizations
("HMOs"). Third-party payors are increasingly challenging the prices charged
for medical products and services. The Company is unable to predict what
changes will be made in the reimbursement methods used by third-party health
care payors. Also, the trend towards managed health care in the United States
and the concurrent growth of organizations such as HMOs, which could control
or significantly influence the purchase of health care services and products,
as well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for the Company's products.
The Company is unable to forecast what additional legislation or regulation,
if any, relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect such legislation or
regulation would have on the Company's business. The cost containment measures
that health care providers are instituting and the impact of any health care
reform could have an adverse effect on the Company's ability to sell its
products and may have a material adverse effect on the Company's business,
financial condition and results of operations.

Reimbursement systems in international markets vary significantly by
country, and by region within some countries, and reimbursement approvals must
be obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
diagnostic tests and procedures. In most markets, there are private insurance
systems as well as government managed systems.

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Market acceptance of the Company's products will depend on the availability
and level of reimbursement in international markets targeted by the Company.
Currently, the Company's fFN ELISA Test and fFN Vertical Flow Test have been
approved for reimbursement in Japan. However, there can be no assurance that
the Company will obtain reimbursement in any other countries for these
products or in any country for its future products within a particular time,
for a particular amount, or at all.

Regardless of the type of reimbursement system, the Company believes that
physician and clinician acceptance and advocacy of the use of the Company's
products will be required to obtain reimbursement. Availability of
reimbursement will depend on the clinical efficacy and cost of the Company's
products. There can be no assurance that reimbursement for any of the
Company's products in the United States or foreign countries under either
government or private reimbursement systems will be available, or if
available, will not be decreased in the future, or that physicians and
clinicians will support and advocate reimbursement for the use of the
Company's products. Failure by physicians, clinicians and other users of the
Company's products to obtain sufficient reimbursement from third-party health
care payors for the use of the Company's products could have a material
adverse effect on the Company's business, financial condition and results of
operations.

GOVERNMENT REGULATION

The manufacturing, testing, labeling, distribution, marketing, promotion and
sale of the Company's products are subject to extensive and rigorous
regulation by the FDA and, to varying degrees of regulation, by other Federal,
state and foreign regulatory agencies. The Company's products are regulated by
the FDA under the Federal Food, Drug and Cosmetic Act (the "FDC Act"), as
amended by the Medical Device Amendments of 1976 and the Safe Medical Devices
Act of 1990, among other laws. Under the FDC Act and the regulations
promulgated thereunder, the FDA regulates, among other things, the clinical
testing, manufacturing, labeling, distribution, sale and promotion of medical
devices in the United States. In addition, various foreign countries in which
the Company's products are or may be sold, including Germany, France, Japan
and Canada, impose local regulatory requirements. The testing for, preparation
of and subsequent FDA and foreign regulatory review of required applications
is expensive, lengthy and uncertain. Failure to comply with FDA and similar
foreign requirements could result in refusal by the government to grant
premarket clearance or approval of the Company's products, withdrawal of
market approval, civil penalties or criminal prosecutions, restrictions on or
injunction against marketing of the Company's products, seizure or recall of
the Company's products, total or partial suspension of products or other
regulatory action. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals or clearances on a timely basis or at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, or
failure to comply with existing or future regulatory requirements would have a
material adverse effect on the Company's business, financial condition and
results of operations.

The FDC Act, among other things, classifies medical devices into three
categories over which the FDA maintains increasing levels of regulation: Class
I (general controls--e.g., labeling, premarket notification and GMPs), II
(general and special controls--e.g., performance standards and postmarket
surveillance) and III (premarket approval). Before a new device can be
introduced into the market, the manufacturer typically must obtain FDA
clearance or approval through either a 510(k) premarket notification or a PMA.
Because the Company believes that the majority of Adeza's products are or will
ultimately be classified as Class III devices, they are or will be subject to
the requirement of premarket approval by the FDA. However, a 510(k) premarket
notification is sufficient for a device that is "substantially equivalent" to
a legally marketed Class I or Class II medical device or a Class III medical
device for which the FDA has not required submission of PMAs. Under either a
510(k) or a PMA, a manufacturer is required to submit a notification or
application to the FDA and await the FDA's determination that the product may
be marketed. In 510(k) premarket notification a company must, among other
things, demonstrate that the product to be marketed is substantially
equivalent to the predicate device. Test data from clinical trials is often
required to demonstrate substantial equivalence and that the products are safe
and effective, which may delay the 510(k) premarket notification review period
or which may result in a finding that the product is not substantially
equivalent and that a full PMA is required.

41
<PAGE>

Following submission of a 510(k) premarket notification, a company may not
market the device for clinical use until the FDA finds that product is
substantially equivalent. It generally takes four to 12 months from the date
of submission of a 510(k) to obtain the FDA's determination, but it may take
longer. The FDA may agree that the product is substantially equivalent to a
predicate device and allow the product to be marketed in the United States.
The FDA, however, may (i) determine that the new device is not substantially
equivalent and require submission and approval of a PMA or (ii) require
further information, such as additional test data, including data from
clinical studies, before it is able to make a determination regarding
substantial equivalence. By requesting additional information, the FDA can
further delay market introduction of a company's products. Further, for any
devices cleared through the 510(k) process, any modification or enhancement
that could significantly affect safety or effectiveness, or constitute a major
change in intended use, requires a new 510(k) submission and a separate FDA
determination of substantial equivalence before the modified or changed device
may be marketed.

In February 1990, Adeza received FDA clearance of its 510(k) premarket
notification for its specimen collection kit and received FDA clearance of
revisions to this 510(k) in September 1995. However there can be no assurance
that the FDA will act favorably or quickly in its review of the Company's
future 510(k) submissions, if any, and significant difficulties and costs may
be encountered by the Company in its efforts to obtain FDA clearance that
could delay or preclude the Company from selling its products in the United
States. Furthermore, there can be no assurance that the FDA will not request
additional data, require that the Company conduct further clinical studies or
reject the 510(k) and require a PMA, causing the Company to incur further cost
and delay.

If a device does not qualify for the premarket notification procedure, a
company must file a PMA. The PMA requires more extensive pre-filing testing
than required for a 510(k) premarket notification and usually involves a
significantly longer review process. The PMA generally must contain results of
laboratory and human clinical studies establishing the safety and
effectiveness of the device for its intended use. The PMA must also give a
detailed description of the proposed labeling as well as the methods,
facilities and controls used for manufacturing the device. After a preliminary
review, the FDA makes an initial determination regarding whether a PMA is
sufficiently complete to permit filing and substantive review. If a PMA is
accepted for filing, the FDA begins a more in-depth review process, which
likely will include review by a scientific advisory panel. During the PMA
review process, the FDA will conduct an inspection of the manufacturer's
facilities to ensure compliance with the applicable Good Manufacturing
Practices ("GMP") requirements. If the FDA's evaluation of the PMA or
manufacturing facilities is not favorable, the FDA will deny the application
or issue a "non-approvable" letter. If the FDA evaluation of both the PMA and
the manufacturing facilities is favorable, the FDA may issue an "approvable"
letter, which usually contains a number of conditions that must be met in
order to secure final approval of the PMA. When those conditions have been
fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval
letter, authorizing commercial distribution of the device for those
indications for which the FDA deems the data to be adequate. The FDA will also
indicate the approved intended uses and labeling claims, and the product may
only be marketed for these uses. The FDA may determine that additional
clinical data is necessary and delay the PMA to allow conduction of clinical
trials and submission of data to the FDA. In addition, the FDA can revoke its
approval after it has initially been given. Once approved, a product is
subject to various other regulatory controls that may be imposed by the FDA.
There can be no assurance that the existing FDA approval for the fFN ELISA
Test will not be revoked or that the fFN ELISA Test will meet other regulatory
controls that may be imposed.

In October 1992, the Company submitted a PMA for the use of its fFN ELISA
Test for use in assessing the likelihood of premature birth in symptomatic
women. In January 1993, the FDA notified the Company of its initial
determination not to accept the PMA for filing pending the submission of
further clinical information by the Company. In response to subsequent
discussions with the FDA, Adeza expanded its clinical studies of the fFN ELISA
Test and submitted these results to the FDA in October 1994. In December 1994,
the FDA notified the Company of its decision to file the PMA with expedited
review, and in April 1995, an FDA advisory panel determined that the fFN ELISA
Test was safe and effective for the symptomatic indication and recommended
approval of the PMA by the FDA. In September 1995, the Company was notified by
the FDA that it approved

42
<PAGE>

the PMA application for the fFN ELISA Test for commercial distribution in the
United States for its intended use.

Once an original PMA is reviewed and approved by the FDA, a company may seek
authorization to market the approved product in a different format or for
additional clinical uses not described in the original PMA. Permission to
market the device for a claim different from that specified in the original
PMA is submitted to the FDA by a company in the form of a PMA Supplement. The
FDA typically requires that a company provide new clinical data to facilitate
its review of the new product format or clinical use. Adeza is currently
planning to submit two PMA Supplements to its original approved PMA covering
the fFN ELISA Test. In the first PMA Supplement, the Company currently intends
to request permission to expand the intended use of the fFN ELISA Test to
include assessment of the likelihood of premature birth for asymptomatic
women. In the second PMA Supplement, the Company currently intends to request
permission to market the fFN Dipstick Test for assessment of the likelihood of
premature birth in symptomatic women.

There can be no assurance that the Company will file either of its proposed
PMA Supplements or be able to meet the FDA's requirements or that the
necessary regulatory approvals will be obtained by the Company in the United
States or any other country. Adeza's failure to obtain any required regulatory
approvals or any delay which may be experienced in obtaining such approvals,
could materially and adversely affect the marketing of the Company's products
and its ability to generate revenues. Adeza's failure to obtain any necessary
regulatory approvals, any delay on receiving such approvals, the restriction,
suspension or revocation of regulatory approvals, if obtained, or the failure
to comply with regulatory requirements would have a material adverse effect on
the Company's business, financial condition and results of operations.

Distribution of the Company's products outside the United States is subject
to FDA export and extensive foreign government regulation. These regulations,
including the requirements for approvals or clearance to market, the time
required for regulatory review and the sanctions imposed for violations, vary
from country to country. Since the fFN ELISA Test has been approved for
marketing in the United States by the FDA, there are currently no significant
restrictions limiting exportation of the device. Exportation of devices which
have not yet been cleared for domestic commercial distribution requires
permission from the country in which the device will be marketed and the
approval of the FDA to export a device in accordance with Section 801(e) of
the FDC Act. Adeza has obtained 801(e) clearances for export of the fFN
Vertical Flow Test to 22 countries, including the United Kingdom, Australia,
Germany, France and Spain. Additionally, Adeza has obtained approval and
reimbursement for the fFN ELISA Test from the Ministry of Health and Welfare
in Japan. On April 26, 1996, the export provisions in the FDC Act were amended
in Chapter 1A of Title II, Supplemental Appropriations For the Fiscal Year
Ending September 30, 1996, in the FDA Export Reform and Enhancement Act of
1996 to revise the terms and conditions under which devices may be exported
under the FDC Act. This new legislation was designed to facilitate the export
of drugs and devices by revising and in some circumstances eliminating the
requirement for FDA approval as a condition of export. Because the legislation
has just been enacted and there are no FDA regulations or existing policies
with respect to its implementation, the Company is unable to reliably predict
the extent of benefit that its export opportunities may enjoy, if any.
However, despite such new legislation, there can be no assurance that the
Company will obtain additional regulatory approvals in other countries or that
it will not be required to incur significant costs in obtaining or maintaining
its foreign regulatory approvals. Failure to obtain necessary regulatory
approvals, the restriction, suspension or revocation of existing approvals or
any other failure to comply with regulatory requirements outside the United
States could have a material adverse effect on the Company's business,
financial condition and results of operations.

The FDC Act and California law require the Company to manufacture its
products in compliance with current GMP regulations. These regulations require
that the Company manufacture its products and maintain related documentation
in a prescribed manner with respect to manufacturing, testing and control
activities. The Company is also required to comply with various FDA
requirements for labeling and the FDA prohibits a device, even if approved
under a PMA, from being marketed for unapproved clinical uses. If the FDA
believes that a company is not in compliance with the GMP or labeling
regulations, it can, among other things, institute proceedings to detain or
seize a product, issue a recall, prohibit marketing and sales of the company's
products

43
<PAGE>

and assess civil and criminal penalties against the company, its officers or
its employees. There can be no assurance that the Company's manufacturing
facility will satisfy FDA or California GMP manufacturing requirements. The
Company's facilities and manufacturing processes have been periodically
inspected by the State of California and other agencies, but remain subject to
federal and state audits from time to time. The Company believes that it is in
substantial compliance with all applicable federal and state regulations.
Nevertheless, there can be no assurance that the FDA or a state agency will
agree with the Company's position, that GMP requirements will not be
increased, or that its GMP compliance will not be challenged at some
subsequent point in time. Enforcement of the GMP regulations has increased
significantly in the last several years and the FDA has publicly stated that
compliance will be more strictly scrutinized. In the event that the Company is
determined to be in noncompliance with FDA regulations, the FDA or state
agency has the power to pursue penalties or remedies, including, among other
things warning letters, fines, injunctions, civil penalties, recall or seizure
of products, total or partial suspension of production, refusal of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of previously granted approvals and criminal prosecution. Such
penalties or remedies could have a materially adverse effect on the Company's
business, financial condition and results of operations.

In addition, the manufacture, sale or use of the Company's products are also
subject to regulation by other federal entities, such as the OSHA and the
Environmental Protection Agency, and by various state agencies, including the
California Environmental Protection Agency. Federal and state regulations
regarding the manufacture, sale or use of the Company's products are subject
to future change, which changes could have a material adverse effect on the
Company's business, financial condition and results of operations.

COMPETITION

Although Adeza believes it is well positioned to take advantage of the
opportunities of the women's reproductive health care market, the Company
expects competition in this market to increase. The fFN ELISA Test is the only
FDA-approved immunodiagnostic test for the assessment of the likelihood of
premature birth for symptomatic women and represents a significant advance
over currently used subjective evaluation techniques. However, there can be no
assurance that other, more effective diagnostic tests for the assessment of
the likelihood of premature birth will not receive FDA approval in the near
future. Other companies and institutions with substantially greater financial,
manufacturing, marketing, distribution and technical resources than the
Company are engaged in the research and development of products similar to
those currently being developed or commercialized by the Company. For example,
companies such as Abbott Laboratories, American Home Products Corp., Bayer AG,
Boehringer Mannheim GmbH, Bristol Myers Squibb Co., Eli Lilly & Co., G.D.
Searle and Co. (a subsidiary of Monsanto Co.), Johnson & Johnson, TAP
Pharmaceuticals Inc. and Zeneca Group PLC. are engaged in the development,
manufacture and marketing of diagnostic and therapeutic products relating to
women's reproductive health care and are therefore potential competitors of
the Company. Although none of these companies currently concentrates
exclusively on products for the women's reproductive health care market, there
can be no assurance that these or other companies or institutions will not
succeed in developing products or procedures that are more effective than the
Company's or that would render the Company's technology or products obsolete
or uncompetitive.

The Company's fFN ELISA Test will be distributed in the United States
through an exclusive strategic distribution arrangement with Matria. The
Company believes Matria competes with other companies that distribute products
related to the women's reproductive health care market to physicians,
clinicians, hospitals and other health care providers. These companies include
Apria Healthcare, Caremark International and Coram Healthcare. The Company
believes that Matria's extensive sales and marketing network competes
favorably with these and other companies, although there can be no assurance
that it will continue to do so.

The medical industry is characterized by rapid and significant technological
change. Consequently, the Company's success will depend in part on its ability
to respond quickly to medical and technological changes through the
development and commercialization of new products. The Company believes that
for all its products, important competitive factors include the relative speed
with which companies can develop products, establish clinical utility,
complete the clinical testing and regulatory approval process, obtain
reimbursement and supply commercial quantities of the product to the market.
The Company's inability to compete favorably with respect

44
<PAGE>

to any of these factors could have a material adverse effect on its business,
financial condition and results of operations. Product development involves a
high degree of risk and there can be no assurance that the Company's current
products will become commercially successful or that the Company's research
and development efforts will result in commercially successful future
products.

EMPLOYEES

As of April 30, 1996, the Company employs 40 full and part time personnel,
including 21 in research, development, clinical and regulatory affairs, six in
manufacturing, four in quality assurance, two in marketing and sales, and
seven in administration. Each of the Company's employees has signed a
confidentiality agreement and none is covered by a collective bargaining
agreement. The Company has never experienced employment-related work stoppages
and considers its employee relations to be good.

PROPERTIES

Adeza maintains its headquarters in Sunnyvale, California in one leased
facility, aggregating approximately 17,600 square feet, which contains
laboratory, research and development, production, manufacturing, marketing and
sales and general administration and finance. The lease for this facility
expires in August 1997. Adeza has a right of first refusal that, if exercised,
would extend the term of the lease for an additional five year period, to
2002. The Company currently pays monthly rent of approximately $20,000. The
Company believes that its existing facilities are adequate to meet its
immediate needs and that suitable additional space will be available in the
future on commercially reasonable terms as needed.

LEGAL PROCEEDINGS

As of the date of this Prospectus, the Company is not a party to any
material legal proceedings.

ADVISORS AND COLLABORATORS

The Company has established a network of medical, clinical and scientific
advisors and collaborators to consult with the Company's scientists and
clinical research staff and to advise the Company on its research and
development program, the design of its products and on other medical and
scientific matters relating to the Company's business. The Company's advisors
and collaborators include the following individuals:

Gary S. David, Ph.D., Independent Consultant, formerly conducted
immunogenetics and immunochemistry research at the City of Hope, cancer
immunobiology at the Salk Institute, and immunochemistry and tumor
immunobiology at the Scripps Clinic and Research Foundation.

Susan Fisher, Ph.D., Chairman and Professor of the Department of Oral
Biology, Professor of Obstetrics, Gynecology & Reproductive Sciences,
Professor of Pharmaceutical Chemistry and Associate Director of UCSF Mass
Spectrometry Facility, University of California at San Francisco, San
Francisco, California.

Thomas Garite, M.D., Chairman and Professor of the Department of Obstetrics
& Gynecology, University of California at Irvine, Irvine California; Diplomat
and Examiner, American Board of Obstetrics and Gynecology; Member, American
Board of Obstetrics and Gynecology Maternal Fetal Medicine Division Committee;
Editor, the American Journal of Obstetrics and Gynecology.

Linda Giudice, M.D., Ph.D., Associate Professor of Obstetrics & Gynecology;
Chief, Division of Reproductive Endocrinology and Infertility, Chief,
Gynecology, Lucille Packard Children's Hospital at Stanford University,
Stanford, California.

Jay Iams, M.D., Professor, Obstetrics & Gynecology, Director of Maternal
Medicine Division of the Department of Obstetrics & Gynecology, Ohio State
University, Columbus, Ohio.

Charles Lockwood, M.D., Chairman and Professor of Obstetrics & Gynecology,
New York University School of Medicine, New York, New York.

45
<PAGE>

Judith Luborsky, Ph.D., Associate Professor of Obstetrics & Gynecology, Rush
Presbyterian St. Luke's Medical Center, Chicago, Illinois.

James Roberts, M.D., Professor of Obstetrics & Gynecology, University of
Pittsburgh, Pittsburgh, Pennsylvania; Chairman, Maternal-Fetal Medicine Unit
of the National Institutes of Health.

Robert Taylor, M.D., Ph.D., Associate Professor of Obstetrics & Gynecology,
University of California at San Francisco, San Francisco, California.

The Company has entered into various consulting agreements with most of the
listed advisors and collaborators. Each of the Company's advisors and
collaborators has entered into a confidentiality and non-disclosure agreement
with the Company. These advisors and collaborators are generally employed by
employers other than the Company and may have commitments to or consulting or
advisory contracts with other entities that may limit their availability to
the Company. Although generally each advisor and collaborator agrees not to
perform services for another person or entity which would create a conflict of
interest with the individual's services for the Company, there can be no
assurance that such conflict will not arise.

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<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company and their ages and positions
as of April 30, 1996:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Daniel O. Wilds......... 47 President, Chief Executive Officer and
Director
Emory V. Anderson....... 42 Vice President and Chief Financial Officer
Robert O. Hussa, 55
Ph.D. ................. Vice President and Chief Technical Officer
David C. Casal, Ph.D. .. 41 Vice President, Clinical and Regulatory
Affairs
Andrew E. Senyei, 46
M.D.(1)................ Chairman of the Board of Directors
Nelson N.H. Teng, M.D., 50
Ph.D. ................. Director
Nancy S. Amer(2)........ 35 Director
Nancy D. Burrus(1)...... 41 Director
Craig C. Taylor(2)...... 45 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee

Daniel O. Wilds has been the President and Chief Executive Officer of Adeza
since July 1992. Prior to joining Adeza, Mr. Wilds was employed by Baxter
Healthcare Corporation ("Baxter"). From 1968 until June 1992, Mr. Wilds was
President of Baxter's Chemotherapy Service division, President and Chief
Operating Officer of its diagnostic joint venture with Genentech and President
and Chief Executive Officer of Medisense, Inc. (a fully integrated diagnostic
company in which Baxter owns a minority interest). Mr. Wilds was also General
Manager of Baxter's Mexico City operations, General Manager of its Container
Development Business Center, Director of Strategy Development and Vice
President of its Corporate Alliances function.

Emory V. Anderson has been the Vice President and Chief Financial Officer of
Adeza since October 1992. Prior to joining Adeza, Mr. Anderson served as
Executive Vice President, Chief Operating Officer and Chief Financial Officer
of Indesys, Inc., which he co-founded in 1984. Previously, Mr. Anderson held
the position of Director of Finance for Atari, Inc.

Robert O. Hussa has been the Vice President of Research and Development and
the Chief Technical Officer of Adeza since May 1993. From January 1990 to May
1993, Dr. Hussa was Vice President of Imaging and Therapeutics Research and
Development at Hybritech, Inc. ("Hybritech"), where he developed in vitro
diagnostic tests in the areas of reproductive endocrinology, cardiovascular
disease and cancer. From June 1986 to December 1989, he was Director of Assay
Development at Hybritech. Prior to joining Hybritech, Dr. Hussa was a
Professor of Gynecology & Obstetrics and of Biochemistry at the Medical
College of Wisconsin, where he worked for 18 years.

David C. Casal has been the Vice President, Clinical and Regulatory Affairs
of Adeza since November 1994, was Adeza's Director of Scientific Affairs from
October 1991 to November 1994 and was Adeza's Director of Clinical and
Regulatory Affairs from January 1990 to October 1991. Dr. Casal was previously
the Manager of Clinical Programs at Ligand Pharmaceutical, Inc., formerly
Progenex Incorporated, and was also a Senior Research Scientist at Hybritech,
where he was responsible for the clinical evaluation and approval of numerous
in vitro diagnostic assays.

47
<PAGE>

Andrew E. Senyei has been a director of Adeza since 1987 and has been
involved in Adeza's development since joining the Company as a consultant in
1986. Dr. Senyei has been a General Partner of Enterprise Partners, a venture
capital firm, since 1987. Dr. Senyei was a founder of Molecular Biosystems
and, prior to joining Enterprise Partners, was a practicing clinician and
Adjunct Associate Professor of Obstetrics, Gynecology and Pediatrics at the
University of California, Irvine. Dr. Senyei currently serves on the Board of
Directors of Ligand Pharmaceutical, Inc.

Nelson N.H. Teng co-founded Adeza and has served on the Company's Board of
Directors since 1985. Dr. Teng was the Medical Director and Vice President of
Research at Adeza from 1988 to 1989. Dr. Teng is currently an Associate
Professor in Obstetrics and Gynecology and Director of Gynecological Oncology
at the Stanford University School of Medicine, where he has been on the
faculty since 1981. Dr. Teng currently serves on the Board of Directors of
Univax Biologics.

Nancy S. Amer has served as a director of Adeza since May 1992. Ms. Amer has
been a Managing Director of Harvard Private Capital Group, Inc., Boston,
Massachusetts since 1990. Prior to joining Harvard Private Capital Group,
Inc., Ms. Amer was a senior consultant with the Boston Consulting Group, Inc.
Ms. Amer currently serves on the Board of Directors of Cambridge NeuroScience,
Inc., Playtex Products, Inc. and Procept, Inc. and several privately held
companies.

Nancy D. Burrus has been a director of Adeza since December 1994. Ms. Burrus
has been a General Partner with Indosuez Ventures since 1991 where she has
been active in early stage health care company investing. Prior to joining
Indosuez Ventures, Ms. Burrus was a Vice President of Morgan Stanley Ventures.

Craig C. Taylor co-founded Adeza and has served on the Company's Board of
Directors since 1986. Mr. Taylor has been a General Partner with Asset
Management Associates, an early stage venture capital firm, since 1977 where
he has participated in the establishment and growth of high technology and
health care companies. Mr. Taylor currently serves on the Board of Directors
of Telor Ophthalmic Pharmaceutical, Metra Biosystems, Pharmacyclics and Lynx
Therapeutics and several privately held companies.

BOARD OF DIRECTORS COMMITTEES, COMPENSATION OF DIRECTORS AND OTHER INFORMATION

All directors hold office until the next annual meeting of stockholders of
the Company and until their successors have been duly elected and qualified.
The officers of the Company are appointed annually and serve at the discretion
of the Board of Directors.

Directors currently receive no cash fees for services provided in their
capacity as directors but may be reimbursed for out-of-pocket expenses
incurred in connection with services performed for the benefit of the Company.
The Company has adopted the 1996 Directors' Stock Option Plan under which
current and future nonemployee directors will be eligible to receive stock
options in consideration for their services. See "Management--Stock Option and
Incentive Plans."

The Board of Directors designated a Compensation Committee (the
"Compensation Committee") in 1995 to review and approve the compensation and
benefits for the Company's executive officers, administer the Company's 1995
Stock Option and Restricted Stock Plan and make recommendations to the Board
of Directors regarding such matters. The Compensation Committee is currently
composed of Andrew E. Senyei and Nancy D. Burrus.

The Board of Directors designated an Audit Committee in 1995 to review the
scope and results of financial audits and other services performed by the
Company's independent accountants and to make recommendations to the Board of
Directors regarding such matters. The committee is currently composed of Nancy
S. Amer and Craig C. Taylor. No interlocking relationship exists between the
Company's Board of Directors, the

48
<PAGE>

Compensation Committee or Audit Committee and the board of directors,
compensation committee or audit committee of any other company, nor has any
such interlocking relationship existed in the past. See "Certain
Transactions."

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages
for breach of such individual's fiduciary duties as a director except for
liability (i) for any breach of such director's duty of loyalty to the
corporation, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which a director derives an improper personal benefit.

The Company's Bylaws provide that the Company will indemnify its directors
and may indemnify its officers, employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of an
indemnified party and permits the Company to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of such party's status or service as a director, officer, employee
or other agent of the Company upon an undertaking by such party to repay such
advances if it is ultimately determined that such party is not entitled to
indemnification.

The Company has entered into separate indemnification agreements with each
of its directors and officers. These agreements require the Company, among
other things, to indemnify such director or officer against expenses
(including attorney's fees), judgments, fines and settlements (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of the Company (other than Liabilities arising from willful misconduct
or conduct that is knowingly fraudulent or deliberately dishonest) and to
advance expenses incurred by such individual in connection with any proceeding
against such individual with respect to which such individual may be entitled
to indemnification by the Company. The Company believes that its Certificate
of Incorporation and Bylaw provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.

At present, the Company is not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of the Company where
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.

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<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain compensation paid by the Company
during the fiscal year ended December 31, 1995 to the Company's Chief
Executive Officer and the Company's other most highly compensated executive
officers whose total cash compensation exceeded $100,000 (collectively, the
"Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- --------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Daniel O. Wilds
President and Chief
Executive Officer...... $191,255 $48,125 $ 0 248,463 $ 0
Emory V. Anderson
Vice President and Chief
Financial Officer...... 126,458 17,250 0 46,885 0
Robert O. Hussa
Vice President and Chief
Technical Officer...... 175,611 24,750 0 58,607 0
David C. Casal
Vice President, Clinical
and Regulatory
Affairs................ 110,052 10,000 0 30,603 0
</TABLE>

The following table shows certain information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1995. No stock appreciation rights were granted to these individuals
during the year.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NUMBER OF SHARES PERCENTAGE OF STOCK PRICE APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE FOR OPTION TERM(2)
OPTIONS GRANTED TO PRICE PER EXPIRATION ---------------------------
NAME GRANTED(#)(1) EMPLOYEES SHARE DATE 5% 10%
---- ---------------- ------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel O. Wilds......... 248,463 53.43% $0.24 5/05 $ 37,502 $ 95,038
Emory V. Anderson....... 46,885 10.08 0.24 5/05 7,077 17,934
Robert O. Hussa......... 58,607 12.60 0.24 5/05 8,846 22,418
David C. Casal.......... 30,603 6.58 0.24 5/05 4,620 11,707
</TABLE>
- --------
(1) These stock options, which were granted under the 1995 Stock Option and
Restricted Stock Plan, represent both vested and unvested options. The
maximum term of each option grant is ten years from the date of grant. The
exercise price is equal to the fair market value of the stock on the grant
date.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the 10-
year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants
made to the executive officers.

50
<PAGE>

The following table sets forth information for the Named Executive Officers
with respect to exercises of options to purchase common stock in the fiscal
year ended December 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
---------------------------- -------------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel O. Wilds.......... 248,463 0 $1,788,934 0
Emory V. Anderson........ 46,885 0 337,572 0
Robert O. Hussa.......... 58,607 0 421,970 0
David C. Casal........... 30,603 0 220,342 0
</TABLE>
- --------
(1) Based on the fair market value of the Common Stock as of December 31,
1995, as determined by the Board of Directors ($7.44 per share), minus the
per share exercise price, multiplied by the number of shares underlying
the option.
(2) As of April 30, 1996, of the 248,463, 46,885, 58,607 and 30,603 option
shares held by Daniel O. Wilds, Emory V. Anderson, Robert O. Hussa and
David C. Casal, respectively, 127,687, 25,542, 33,095 and 16,122 option
shares, respectively, were subject to repurchase by the Company.

STOCK OPTION AND INCENTIVE PLANS

1995 Stock Option and Restricted Stock Plan

The Company's 1995 Stock Option and Restricted Stock Plan (the "Plan") was
adopted by the Board of Directors and approved by the stockholders in July
1995. The Plan was adopted as a successor to the Company's 1988 Employee Stock
Plan and 1992 Key Executive Stock Plan (collectively, the "Predecessor
Plans"). A total of 1,244,083 shares have been authorized for issuance under
the Plan, plus an automatic increase on the first trading day of the 1997,
1998, 1999, 2000 and 2001 calendar years of an additional number of shares
equal to 3.5% of the number of shares of Common Stock outstanding on December
31 of the immediately preceding calendar year, with each such annual increase
not to exceed 500,000 shares. However, in no event may any one participant in
the Plan receive option grants or direct stock issuances in any calendar year
for more than 1,000,000 shares. The Plan provides for the grant to employees
of the Company (including officers and employee directors) of "incentive stock
options" within the meaning of Section 422 of the Code ("ISOs") and for the
grant of nonstatutory stock options ("NSOs") and stock purchase rights to
employees, employee directors and consultants of the Company. The Plan is
administered by the Board of Directors or a committee of the Board of
Directors (the "Administrator") and is divided into two separate components:
the option grant program and the stock issuance program.

Option Grant Program. The Administrator has the authority to grant ISOs to
the employees of the Company and to grant NSOs to the employees, employee
directors and consultants of the Company. The Administrator determines the
individuals to be granted options under the Plan and the terms of such
options, including the exercise price, the number of shares subject to such
options, the maximum term for which such options are to remain outstanding,
the date upon which such options are to become exercisable and the vesting
schedule, if any, applicable to such options. The exercise price of all ISOs
granted under the Plan must be at least equal to the fair market value of the
Common Stock of the Company on the date of grant. The exercise price of all
NSOs granted under the Plan must equal at least 85% of the fair market value
of the Common Stock on the date of grant. The exercise price of any ISO
granted to an optionee who owns stock representing more than 10% of the voting
power of the Company's outstanding capital stock (a "10% Stockholder") must
equal at least 110% of the fair market value of the Common Stock on the date
of grant. Payment of the exercise price may be made in cash, by check or
promissory note, in shares of properly registered Common Stock (valued at the
fair market value as of the exercise date of the option) that meet certain
holding requirements or, to the extent the option is exercised for vested
shares, through a special sale and remittance procedure conducted by a
Company-designated brokerage firm whereby the Company is paid sufficient funds
to cover the aggregate

51
<PAGE>

exercise price of the purchased shares along with all taxes that the Company
would be required to withhold as a result of such exercise.

The term of a stock option granted under the Plan may not exceed 10 years;
provided, however, that the term of an ISO granted to a 10% Stockholder may
not exceed five years. No option may be transferred by the optionee other than
by will or the laws of descent or distribution, except that an NSO may be
assigned in accordance with the terms of a domestic relations judgment, decree
or order (substantially complying with the requirements of Section 414(p) of
the Code) conveying marital property rights to any spouse or former spouse of
the optionee pursuant to applicable state domestic relations laws. Except as
set forth in the foregoing sentence, each option may be exercised during the
lifetime of the optionee only by such optionee. To the extent an optionee
would have the right in any calendar year to exercise for the first time one
or more ISOs for shares having an aggregate fair market value (under all plans
of the Company and determined for each share as of the date the option to
purchase the share was granted) in excess of $100,000, any such excess options
shall be treated as NSOs. In the event of certain changes in control of the
Company, the Plan requires that each outstanding option accelerate so that
each such option will immediately prior to the effective date of the change in
control, become fully exercisable for all the shares of Common Stock subject
to the option, except to the extent assumed by the successor corporation (or
parent thereof), replaced with a comparable option to purchase shares of stock
of the successor corporation (or parent thereof) or replaced with a cash
incentive program of the successor corporation, and subject to other
limitations imposed by the Administration in connection with the change in
control. Upon the termination of an optionee's employment or other
relationship with the Company, such optionee will have a limited time within
which to exercise any outstanding options, which time period will vary
depending on the length of the optionee's relationship with the Company and
the reason for termination. The Administrator has the discretion to grant
options that are exercisable for unvested shares of Common Stock and, to the
extent that an optionee holds options for such unvested shares of Common Stock
upon termination from the Company, the Company will have the right to
repurchase any or all of such unvested shares at the per-share exercise price
paid by the optionee for such unvested shares.

As of December 31, 1995, options to purchase a total of 986 shares of Common
Stock had been exercised, options to purchase a total of 516,284 shares at a
weighted average exercise price of $0.24 per share were outstanding, and an
aggregate of 166,063 shares remained available for future option grants under
the Plan. Additionally, options to purchase a total of 32,888 shares of Common
Stock had been exercised under the Predecessor Plans.

Stock Issuance Program. In addition to the Option Grant Program, the
Administrator may grant direct and immediate issuances of shares of Common
Stock, without any intervening option grants, pursuant to the Company's Stock
Issuance Program. The purchase price per share of all Common Stock issued
under the Plan must equal at least 85% of the fair market value of the Common
Stock on the date of issuance. Payment of the exercise price may be made in
cash, by check or promissory note, or in past services rendered to the Company
(or any parent or subsidiary of the Company).

Shares of Common Stock issued under the Plan's stock issuance program may,
in the discretion of the Administrator, be fully and immediately vested upon
issuance, or may vest in one or more installments over the term of the
recipient's service for the Company or upon attainment of specified
performance objectives. An individual who is issued shares of Common Stock
under the Plan's stock issuance program will, upon issuance, have full
stockholder rights with respect to such shares whether or not such shares are
vested as of the date of issuance. To the extent that an individual who was
issued Common Stock pursuant to the Plan's stock issuance program either
terminates his or her employment (or other relationship) with the Company
while holding unvested shares of Common Stock or fails to attain the specified
performance objectives upon which the vesting of such Common Stock was
contingent, the Company may cause such individual to immediately surrender the
unvested shares to the Company for cancellation in exchange for a refund of
any cash or cash-equivalent consideration paid for such unvested shares.

The Administrator has the authority to amend the Plan as long as such action
does not adversely affect the rights and obligations with respect to options
or unvested stock issuances then outstanding under the Plan and provided
further that stockholder approval shall be required for an amendment to
increase the number of shares

52
<PAGE>

subject to the Plan (other than for permissible adjustments in the event of
certain changes in the Company's capitalization), to materially modify the
eligibility requirements for Plan participation, to materially increase the
benefits accruing to participants under the Plan, or to increase the annual
limitation on grants to Plan participants. If not terminated earlier, the Plan
will terminate in 2005.

1996 Employee Stock Purchase Plan

The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in May 1996. The Company is currently
seeking stockholder approval of the Purchase Plan and expects to have such
approval prior to the commencement of this offering. A total of 250,000 shares
of Common Stock has been reserved for issuance under the Purchase Plan. The
Purchase Plan, which is intended to qualify under Section 423 of the Code,
will be implemented by a series of offering periods of 12 months duration,
with new offering periods (other than the first offering period) commencing on
or about January 1 and July 1 of each year. Each offering period will consist
of two consecutive purchase periods of six months duration, with the last day
of such period being designated a purchase date. The initial offering period
will begin on the date of this offering and will continue through June 30,
1997, with the first purchase date occurring on December 31, 1996 and
subsequent purchase dates to occur every six months thereafter. The Purchase
Plan permits eligible employees to purchase Common Stock through payroll
deductions, which may not exceed 15% of an employee's compensation, at a price
equal to the lower of 85% of the fair market value of the Common Stock at the
beginning of the offering period or the purchase date. If the fair market
value of the Common Stock on a purchase date is less than the fair market
value at the beginning of the offering period, a new 12 month offering period
will automatically begin on the first business day following the purchase date
with a new fair market value. The maximum number of shares an employee may
purchase during each offering period shall be determined on the offering date
by dividing $25,000 by the fair market value of a share of the Company's
Common Stock on the offering date (subject to certain limitations imposed by
the Code). Employees may end their participation in an offering at any time
during this offering period prior to the purchase date, and participation ends
automatically on termination of employment with the Company. The Purchase Plan
provides that in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each right
to purchase stock under the Purchase Plan will be assumed or an equivalent
right substituted by the successor corporation unless the Board of Directors
shortens this offering period so that employees' rights to purchase stock
under the plan are exercised prior to the merger or sale of assets. The Board
of Directors has the power to amend or terminate the Purchase Plan as long as
such action does not adversely affect any outstanding rights to purchase stock
thereunder. If not terminated earlier, the Purchase Plan will have a term of
20 years.

1996 Directors' Stock Option Plan

The 1996 Directors' Stock Option Plan (the "Directors' Plan") was adopted by
the Board of Directors in May 1996. The Company is currently seeking
stockholder approval of the Directors' Plan and expects to have such approval
prior to the commencement of this offering. A total of 200,000 shares of
Common Stock has been reserved for issuance under the Directors' Plan. The
Directors' Plan provides for the grant of NSOs to non-employee directors of
the Company. The Directors' Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors. The Directors' Plan provides that each
person who is a non-employee director on the date of this offering and each
person who first becomes a non-employee director of the Company after the date
of this offering shall be granted an NSO to purchase 10,000 shares of Common
Stock (the "First Option"). Thereafter, on the date of each Annual Meeting of
the Company's stockholders, commencing in 1997, each non-employee director
shall be automatically granted an additional NSO to purchase 5,000 shares of
Common Stock (a "Subsequent Option") if, on such date, he or she shall have
served on the Company's Board of Directors for at least six months. The
Directors' Plan provides that the First Option shall become exercisable in
installments as to 25% of the total number of shares subject to the First
Option on each anniversary of the date of grant of the First Option; each
Subsequent Option shall become exercisable in full on the fourth anniversary
of the date of grant of that Subsequent Option. The exercise price of all
stock options granted under the Directors' Plan shall be equal to

53
<PAGE>

the fair market value of a share of the Company's Common Stock on the date of
grant of the option. Options granted under the Directors' Plan have a term of
10 years. In the event of the dissolution or liquidation of the Company, a
sale of all or substantially all of the assets of the Company, the merger of
the Company with or into another corporation in which the Company is not the
surviving corporation or any other capital reorganization in which more than
50% of the shares of the Company entitled to vote are exchanged, each non-
employee director shall have either (i) a reasonable time within which to
exercise the option, including any part of the option that would not otherwise
be exercisable, prior to the effectiveness of such liquidation, dissolution,
sale, merger, consolidation or reorganization, at the end of which time the
option shall terminate or (ii) the right to exercise the option, including any
part of the option that would not otherwise be exercisable, or receive a
substitute option with comparable terms, as to an equivalent number of shares
of stock of the corporation succeeding the Company or acquiring its business
by reason of such liquidation, dissolution, sale, merger, consolidation or
reorganization. The Board of Directors may amend or terminate the Directors'
Plan; provided, however, that no such action may adversely affect any
outstanding option, and the provisions regarding the grant of options under
the plan may be amended only once in any six-month period, other than to
comport with changes in the Employee Retirement Income Security Act of 1974,
as amended or the Code. If not terminated earlier, the Directors' Plan will
have a term of 10 years.

401(k) Plan

The Company has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of the Company's employees. Pursuant to the 401(k)
Plan, employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of
such reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but
does not require, additional matching contributions to the 401(k) Plan by the
Company on behalf of all participants in the 401(k) Plan. To date, the Company
has not made matching contributions under the 401(k) Plan. The 401(k) Plan is
intended to qualify under Section 401 of the Code so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on 401(k)
Plan contributions, are not taxable to employees until withdrawn from the
401(k) Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made. The Trustee under the 401(k) Plan, at the
direction of each participant, invests the assets of the 401(k) Plan in any of
six investment options.

EMPLOYMENT AGREEMENTS

The Company does not presently have any employment contracts in effect with
its Chief Executive Officer or any of the other Named Executive Officers.

54
<PAGE>

CERTAIN TRANSACTIONS

Prior to December 1994, the Company sold (i) an aggregate of 525,692 shares
of its Series A Preferred Stock for an aggregate of approximately $332,000
directly to, or to funds affiliated with, Asset Management Associates, Charter
Venture Capital, Enterprise Partners, Hambrecht & Quist, Pebble Beach
Ventures, Ingemar Lundquist and certain individuals who hold an aggregate of
approximately 1% of such Series A Preferred Stock, (ii) an aggregate of
3,199,436 shares of its Series B Preferred Stock for an aggregate of
approximately $1.9 million directly to, or to funds affiliated with, Aspen
Venture Partners, Asset Management Associates, Charter Venture Capital,
Enterprise Partners, Hambrecht & Quist and certain individuals who hold an
aggregate of less than 1% of such Series B Preferred Stock, (iii) an aggregate
of 4,992,955 shares of its Series C Preferred Stock for an aggregate of
approximately $6.9 million directly to, or to funds affiliated with, Aeneas
Venture Corporation, Aspen Venture Partners, Asset Management Associates,
Charter Venture Capital, Enterprise Partners, Hambrecht & Quist, Pebble Beach
Ventures and certain individuals who hold an aggregate of less than 1% of such
Series C Preferred Stock, (iv) an aggregate of 362,318 shares of its Series D
Preferred Stock for an aggregate of $1.0 million to Daiichi, (v) an aggregate
of 654,761 shares of its Series E Preferred Stock for an aggregate of $2.75
million to Rohto Pharmaceutical Company, Ltd. and Tokos and (vi) an aggregate
of 1,201,922 shares of its Series F Preferred Stock for an aggregate of $3.75
million to funds affiliated with Berkeley International Capital Corporation
and Rohto Pharmaceutical Company, Ltd. In December 1994, 64,635 shares of
Series A Preferred Stock and 517,390 shares of Series B Preferred Stock were
converted to Common Stock. Subsequently in December 1994, the Company effected
a recapitalization, whereby all outstanding shares of its Preferred Stock were
converted into and exchanged for shares of a newly created Series 1 Preferred
Stock based upon the outstanding series' respective liquidation preferences,
and all outstanding shares of Common Stock were subject to a reverse stock
split (the "1994 Recapitalization"). Such conversion ratios were determined by
arms-length negotiations between the Company and investors holding the Series
A through Series F Preferred Stock at the time of issuance of the Series 1
Preferred Stock. Upon the consummation of the 1994 Recapitalization, each
outstanding share of Series A Preferred Stock was converted and reconstituted
as .081305 shares of Series 1 Preferred Stock; each outstanding share of
Series B Preferred Stock was converted and reconstituted as .081305 shares of
Series 1 Preferred Stock; each outstanding share of Series C Preferred Stock
was converted and reconstituted as .155837 shares of Series 1 Preferred Stock;
each outstanding share of Series D Preferred Stock was converted and
reconstituted as .311654 shares of Series 1 Preferred Stock; each outstanding
share of Series E Preferred Stock was converted and reconstituted as .474293
shares of Series 1 Preferred Stock; and each outstanding share of Series F
Preferred Stock was converted and reconstituted as .352341 shares of Series 1
Preferred Stock.

In December 1994, the Company sold shares of its Series 2 Preferred Stock
directly to, or to funds affiliated with, Aeneas Venture Corporation, Aspen
Venture Partners, Asset Management Associates, Charter Venture Capital,
Enterprise Partners, Hambrecht & Quist, Indosuez Ventures, Invesco Trust
Company and Tokos (the "Series 2 Holders") at a price of $2.40 per share. The
Series 2 Holders paid for the Series 2 Preferred Stock in cash and by the
surrendering for cancellation of certain outstanding promissory notes issued
by the Company. In addition, the Company concurrently issued warrants to
purchase shares of Series 2 Preferred Stock to certain of the Series 2 Holders
at an exercise price of $2.40 per share.

All shares of the Series 1 and Series 2 Preferred Stock issued by the
Company will convert into shares of Common Stock at a one-to-one ratio upon
the closing of the sale of the shares of Common Stock offered hereby. Such
one-to-one conversion ratio was determined by arms-length negotiations between
the Company and investors holding the Series 1 and Series 2 Preferred Stock at
the time of issuance of such Series 1 and Series 2 Preferred Stock.

In April 1996, the Company obtained a $2.0 million aggregate committed line
of credit from certain of the Company's existing investors, pursuant to which
Aeneas Venture Corporation agreed to lend the Company up to $250,000, Asset
Management Associates agreed to lend the Company up to $356,118, Enterprise
Partners agreed to lend the Company up to $356,118, STF II, L.P. agreed to
lend the Company up to $265,134, and certain other investors of the Company
agreed to lend the Company an aggregate of up to $772,630 in exchange for
convertible secured promissory notes (the "Notes") that will become due and
payable upon the earlier of 30 days following the completion of this offering
or June 1997 (the "Line of Credit"). Such investors have advanced an aggregate
of $500,000 to the Company under the Line of Credit. The Company intends to
use a portion of the proceeds obtained from this offering to repay
indebtedness incurred pursuant to the Line of Credit. In connection with the
Line of Credit, the Company issued warrants to purchase Common Stock,
exercisable at 85% of the offering price in an amount equal to 10% of their
respective commitments under the Line of Credit

55
<PAGE>

plus an additional 5% of the outstanding principal amount of their respective
Notes issued under the Line of Credit for each full or partial calendar month
that such principal amount remains outstanding. The aggregate warrant coverage
that the Company is entitled to provide to each investor pursuant to the Line
of Credit is capped at 50% of each investor's contribution to the aggregate
amount of the Notes issued under the Line of Credit. The warrants issued in
connection with the Line of Credit are not exercisable for a period of one
year following the closing of this offering and expire on April 30, 2001, or
earlier upon the sale of all or substantially all of the assets of the Company
or upon the acquisition of the Company by another entity pursuant to which the
stockholders of the Company immediately prior to such acquisition possess a
minority of the voting power of the acquiring entity immediately following
such acquisition.

In December 1992, Adeza entered into a promissory note agreement with Daniel
O. Wilds, the Company's President and Chief Executive Officer, which allowed
Mr. Wilds to borrow up to $140,000. Interest on the note accrues at a rate of
6.15% per annum. The note and accrued interest are due upon the earlier of (i)
voluntary termination, (ii) 12 months after involuntary termination, (iii)
closing of an initial underwritten public offering of the Common Stock, (iv)
merger of the Company, (v) sale of all the assets of the Company or (vi) July
19, 1997. As of April 30, 1996, the outstanding principal balance under this
note was $100,000.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested directors, and will continue
to be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

56
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of April 30, 1996 (after giving
effect to the conversion of the Company's Series 1 and Series 2 Preferred
Stock into Common Stock at a one-to-one ratio), and as adjusted to reflect the
sale of shares offered hereby, as to (i) each person (or group of affiliated
persons) known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers, (iv) all current directors and executive
officers of the Company as a group and (v) each of the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED AFTER OWNED AFTER
SHARES OFFERING IF OFFERING IF
BENEFICIALLY OVER-ALLOTMENT NUMBER OVER-ALLOTMENT
OWNED PRIOR TO OPTION OF OPTION
OFFERING(1) NOT EXERCISED SHARES EXERCISED(1)
----------------- ----------------- BEING ---------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT OFFERED(1) NUMBER PERCENT
- ------------------------------------ --------- ------- --------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Aeneas Venture Corporation(2).... 1,115,116 20.47% 1,115,116 14.03% 255,049 860,067 10.82%
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue, 26th Floor
Boston, MA 02210-2203
Entities affiliated with
Charter Venture Capital(3)...... 786,492 14.51 786,492 9.93 0 786,492 9.93
525 University Avenue,
Suite 1500
Palo Alto, CA 94301
Entities affiliated with
Asset Management Associates(4).. 624,199 11.52 624,199 7.88 0 624,199 7.88
2275 East Bayshore Road,
Suite 150
Palo Alto, CA 94303
Enterprise Partners(5)........... 641,682 11.85 641,682 8.11 0 641,682 8.11
7979 Ivanhoe Avenue, Suite 550
La Jolla, CA 92037
Funds affiliated with
Invesco Trust Company........... 416,666 7.77 416,666 5.30 0 416,666 5.30
c/o Health Care Group
7800 E. Union Avenue, Suite 800
Denver, CO 80237
STF II, L.P.(6) ................. 419,265 7.81 419,265 5.33 0 419,265 5.33
c/o Indosuez Ventures
2180 Sand Hill Road, Suite 450
Menlo Park, CA 94025
Aspen Venture Partners L.P.(7)... 401,589 7.45 401,589 5.09 28,500 373,089 4.73
c/o Alliance Technology Venture
3343 Peachtree Road, N.E.
Suite 1140, East Tower
Atlanta, GA 30326
Daniel O. Wilds(8)............... 256,796 4.57 256,796 3.16 0 256,796 3.16
c/o Adeza Biomedical Corporation
1240 Elko Drive
Sunnyvale, CA 94089
Robert O. Hussa, Ph.D.(9)........ 66,940 1.23 66,940 * 0 66,940 *
c/o Adeza Biomedical Corporation
1240 Elko Drive
Sunnyvale, CA 94089
</TABLE>

57
<PAGE>

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED AFTER OWNED AFTER
OFFERING IF OFFERING IF
SHARES BENEFICIALLY OVER-ALLOTMENT NUMBER OVER-ALLOTMENT
OWNED PRIOR TO OPTION OF OPTION
OFFERING(1) NOT EXERCISED SHARES EXERCISED(1)
-------------------------------------- BEING -----------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT OFFERED(1) NUMBER PERCENT
- ------------------------------------ ----------- ------------------ ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Emory V. Anderson(10).................. 67,718 1.25 67,718 * 0 67,718 *
c/o Adeza Biomedical Corporation
1240 Elko Drive
Sunnyvale, CA 94089
David C. Casal, Ph.D.(11).............. 38,936 * 38,936 * 0 38,936 *
c/o Adeza Biomedical Corporation
1240 Elko Drive
Sunnyvale, CA 94089
Andrew E. Senyei, M.D.(5)(12).......... 664,251 12.25 664,251 8.38 0 664,251 8.38
c/o Enterprise Partners
7979 Ivanhoe Avenue, Suite 550
La Jolla, CA 92037
Nelson N. H. Teng, M.D.(13)............ 39,717 * 39,717 * 0 39,717 *
c/o Stanford University School of
Medicine
Department of Obstetrics/Gynecology
3000 Pasteur Drive
Palo Alto, CA 94305-5317
Nancy S. Amer(2)....................... 1,115,116 20.47 1,115,116 10.82 255,049 860,067 10.82
c/o Harvard Management Company, Inc.
600 Atlantic Avenue, 26th Floor
Boston, MA 02210
Craig C. Taylor(4)..................... 624,199 11.52 624,199 8.01 0 624,199 8.01
c/o Asset Management Associates
2275 E. Bayshore Road, Suite 150
Palo Alto, CA 94303
Nancy D. Burrus(6)..................... 419,265 7.81 419,265 5.33 0 419,265 5.33
c/o Indosuez Ventures
2180 Sand Hill Road, Suite 450
Menlo Park, CA 94025
All directors and officers as a group
(9 persons)
(2)(3)(4)(5)(6)(8)(9)(10)(11)(12)(13).. 3,292,938 54.32 3,292,938 38.46 255,049 3,037,889 35.48
OTHER SELLING STOCKHOLDERS
- --------------------------
BG Services Limited (14)............... 190,330 3.55 190,330 2.42 46,462 143,868 1.83
K.B. (C.I.) Nominees Ltd. ............. 150,572 2.81 150,572 1.91 37,114 113,458 1.44
H&Q Life Science Ventures(15).......... 110,506 2.06 110,506 1.40 7,875 102,631 1.30
</TABLE>
- --------
* Less than 1%.
(1) Includes the number of shares and percentage ownership represented by such
shares determined to be beneficially owned by a person in accordance with
the rules of the Securities and Exchange Commission plus all additional
options and warrants to purchase Common Stock exercisable at any time
after 60 days from April 30, 1996. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. Such exercisable options are shown in the footnotes to this
table for each such person. The persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
shown as owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this table.
(2) Includes 1,031,487 shares held by Aeneas Venture Corporation and 83,629
shares issuable upon the exercise of outstanding warrants exercisable
within 60 days of April 30, 1996. Nancy S. Amer, a director of the
Company, is a Managing Director

58
<PAGE>

of Harvard Private Capital Group, Inc., the investment advisor for Aeneas
Venture Corporation, and, as such, may be deemed to share voting and
investment power with respect to such shares. Ms. Amer disclaims
beneficial ownership of such shares.
(3) Includes 573,432 shares held by Charter Ventures and 53,146 shares
issuable upon the exercise of an outstanding warrant held by Charter
Ventures exercisable within 60 days of April 30, 1996. Also includes
155,433 shares held by Charter Ventures II, L.P. and 4,481 shares
issuable upon the exercise of an outstanding warrant held by Charter
Ventures II, L.P. exercisable within 60 days of April 30, 1996.
(4) Includes 455,878 shares held by Asset Management Associates 1984, L.P.,
49,548 shares issuable upon the exercise of an outstanding warrant held
by Asset Management Associates 1984, L.P. exercisable within 60 days of
April 30, 1996, and 2,507 shares issuable upon the exercise of an
outstanding option held by Asset Management Associates 1984, L.P.
exercisable within 60 days of April 30, 1996. Also includes 112,775
shares held by Asset Management Associates 1989, L.P. and 3,491 shares
issuable upon the exercise of an outstanding warrant held by Asset
Management Associates 1989, L.P. exercisable within 60 days of April 30,
1996. Craig C. Taylor, a director of the Company, is a general partner of
AMC Partners 84 and of AMC Partners 89, L.P., the general partners of
Asset Management Associates 1984, L.P. and of Asset Management Associates
1989, L.P., respectively, and, as such, may be deemed to share voting and
investment power with respect to such shares. Mr. Taylor disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(5) Includes 53,039 shares issuable upon the exercise of outstanding warrants
exercisable within 60 days of April 30, 1996. Andrew E. Senyei, a
director of the Company, is a general partner of Enterprise Partners,
and, as such, may be deemed to share voting and investment power with
respect to such shares. Dr. Senyei disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(6) Includes 416,666 shares and 2,599 shares issuable upon exercise of an
outstanding warrant exercisable within 60 days of April 30, 1996 held by
STF II, L.P., a fund affiliated with Indosuez Ventures. Nancy D. Burrus,
a director of the Company, is a General Partner of STF II, L.P. and, as
such, may be deemed to share voting and investment power with respect to
such shares. Ms. Burrus disclaims beneficial ownership of such shares
except to the extent of her pecuniary interest therein.

(7) Includes 378,158 shares held by Aspen Ventures Partners L.P. and 23,431
shares issuable upon the exercise of outstanding warrants exercisable
within 60 days of April 30, 1996.
(8) Represents 256,796 shares issuable upon the exercise of outstanding
options held by Mr. Wilds exercisable within 60 days of April 30, 1996,
at which date, 130,039 shares of such shares are fully vested.
(9) Represents 66,940 shares issuable upon the exercise of outstanding
options held by Dr. Hussa exercisable within 60 days of April 30, 1996,
at which date, 27,919 shares of such shares are fully vested.
(10) Represents 67,718 shares issuable upon the exercise of outstanding
options held by Mr. Anderson exercisable within 60 days of April 30,
1996, at which date, 23,798 shares of such shares are fully vested.
(11) Represents 38,936 shares issuable upon the exercise of outstanding
options held by Dr. Casal exercisable within 60 days of April 30, 1996,
at which date, 15,797 shares of such shares are fully vested.
(12) Includes 11,950 shares held directly by Dr. Senyei and 6,638 shares
issuable upon the exercise of outstanding options held by Dr. Senyei
exercisable within 60 days of April 30, 1996. Also includes 1,327 shares
held by Jack Sills, M.D. and Beverly J. Verano, Co-Trustees of the Alison
Marie Senyei Trust, U/T/D 11/20/90, 1,327 shares held by Jack Sills, M.D.
and Beverly J. Verano, Co-Trustees of the Grant Drew Senyei Trust, U/T/D
11/20/90 and 1,327 shares held by Jack Sills, M.D. and Beverly J. Verano,
Co-Trustees of the Kelly Joanne Senyei Trust, U/T/D 11/20/90. Dr. Senyei
disclaims beneficial ownership of such shares held by the Co-Trustees
except to the extent of his pecuniary interest therein.
(13) Includes 25,891 shares held by Nelson N. H. Teng and 13,826 shares
issuable upon the exercise of outstanding options held by Dr. Teng
exercisable within 60 days of April 30, 1996, at which date, 4,191 shares
of such shares are fully vested.
(14) Includes 188,216 shares held by BG Services Limited and 2,114 shares
issuable upon the exercise of an outstanding warrant exercisable within
60 days of April 30, 1996.
(15) Includes 104,131 shares held by H&Q Life Science Ventures and 6,375
shares issuable upon the exercise of an outstanding warrant exercisable
within 60 days of April 30, 1996. Does not include shares held by H&Q
Investors, H&Q London Ventures, H&Q Ventures IV, H&Q Ventures
International C.V., Hamquist, Hamco Capital Corporation and The Hambrecht
1980 Revocable Trust.

59
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, the authorized capital stock of the
Company will consist of 22,462,220 shares of Common Stock, $0.001 par value,
and 10,000,000 shares of Preferred Stock, $0.001 par value.

COMMON STOCK

As of April 30, 1996, there were 5,363,669 shares of Common Stock
outstanding that were held of record by approximately 99 stockholders after
giving effect to the conversion of the Company's Series 1 and Series 2
Preferred Stock into Common Stock at a one-to-one ratio. There will be
7,863,669 shares of Common Stock outstanding (assuming no exercise of
outstanding options under the 1995 Stock Option and Restricted Stock Plan
after April 30, 1996) after giving effect to the sale of the shares of Common
Stock offered hereby. See "Management--Stock Option and Incentive Plans."

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock, the holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions available to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable.

PREFERRED STOCK

Upon completion of this offering, the Company will be authorized to issue
10,000,000 shares of undesignated Preferred Stock. The Board of Directors will
have the authority to issue the undesignated Preferred Stock in one or more
Series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated Preferred Stock and to fix the number
of shares constituting any Series and the designation of such series, without
any further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of Common Stock.
At present, the Company has no plans to issue any shares of Preferred Stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

The holders of 5,203,465 shares of Common Stock, the holder of a warrant
exercisable for 91,666 additional shares of Common Stock and the holders of
the additional Common Stock issuable upon exercise of the Warrants issued
pursuant to the Line of Credit (the "Registrable Securities") or their
transferees are entitled to certain rights with respect to the registration of
such shares under the Securities Act. These rights are provided under the
terms of an investors' rights agreement (the "Rights Agreement") between the
Company and the holders of Registrable Securities. The holders of at least 40%
of the Registrable Securities may require, on two occasions at any time after
120 days following the effective date of this offering, that the Company use
its best efforts to register the Registrable Securities for public resale;
provided, among other limitations, that the proposed aggregate selling price,
prior to deductions for underwriting discounts and commissions, is at least
$5.0 million. The Company may delay such registration by up to 90 days for
business reasons (but not more than once in any 12-month period). If the
Company registers any of its Common Stock either for its own account or for
the account of other security holders, the holders of Registrable Securities
are entitled to include their shares of Common Stock in the registration. A
holder's right to include shares in an underwritten registration is subject to
the ability of the underwriters to limit the number of shares so included in
the offering. Holders of Registrable Securities may also require the Company,
on no more than one occasion over any twelve-month period, to

60
<PAGE>

register all or a portion of their Registrable Securities on Form S-3 when use
of such form becomes available to the Company, provided, among other
limitations, that the proposed aggregate selling price, prior to deductions
for underwriting discounts and commissions, is at least $500,000 and, provided
further, that the Company will not be required to make such a registration
within 120 days following the effective date of any other registration
effected under the Rights Agreement. The Company may delay such registration
by up to 90 days for business reasons. Subject to certain limitations
contained in the Rights Agreement, all fees, costs and expenses of
registrations effected pursuant to the Rights Agreement, excluding those
incurred with respect to registrations on Form S-3, must be borne by the
Company and all selling expenses (including underwriting discounts and selling
commissions) relating to Registrable Securities must be borne by the holders
of the securities being registered. Subject to certain limitations contained
in the Rights Agreement, all fees, costs, and expenses (excluding selling
expenses) for the first three registrations on Form S-3 shall be borne by the
Company and, thereafter, by the holders of the securities being registered
(including selling expenses).

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

The Company is subject to the provisions of Section 203 of the Delaware Law.
In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder, and an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own)
15% or more of the corporation's outstanding voting stock. This provision may
have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders. In addition, upon
completion of this offering, certain provisions of the Company's charter
documents, including a provision eliminating the ability of stockholders to
take actions by written consent, may have the effect of delaying or preventing
changes in control or management of the Company, which could have an adverse
effect on the market price of the Company's Common Stock. The Company's stock
option and purchase plans generally provide for assumption of such plans or
substitution of an equivalent option of a successor corporation or,
alternatively, at the discretion of the Board of Directors, exercise of some
or all of the options stock, including non-vested shares, or acceleration of
vesting of shares issued pursuant to stock grants, upon a change of control or
similar event. The Board of Directors has authority to issue up to 10,000,000
shares of Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further
vote or action by the stockholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company. Furthermore, such Preferred
Stock may have other rights, including economic rights senior to the Common
Stock, and, as a result, the issuance of such Preferred Stock could have a
material adverse effect on the market value of the Common Stock. The Company
has no present plan to issue shares of Preferred Stock.

WARRANTS AND OTHER RIGHTS

The Company also has outstanding warrants exercisable for 268,194 shares of
Common Stock at an exercise price of $2.40 per share, 91,666 shares of Common
Stock at an exercise price of $2.88 per share and 25,000 shares of Common
Stock at an exercise price of $0.01 per share. Additionally, the Company has
outstanding warrants exercisable for shares of Common Stock at an exercise
price of $2.40 per share, exercisable in connection with an acquisition of the
Company for a number of shares determined at the time of such acquisition. In
connection with the Line of Credit, the Company issued warrants, which expire
in five years, to purchase shares of Common Stock at 85% of this offering
price as more fully described under "Certain Transactions."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is First Chicago Trust
Company of New York.

61
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering and based on the shares outstanding as of
April 30, 1996, the Company will have a total of 7,863,669 shares of Common
Stock outstanding, assuming no exercise of outstanding warrants for 404,468
shares of Common Stock immediately prior to the closing of this offering and
no exercise of options after April 30, 1996. Of these shares, the 2,500,000
shares offered hereby (2,875,000 shares if the Underwriters' over-allotment
options are exercised in full) will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of
the Company, as defined under the Securities Act. The remaining 5,363,669
shares of Common Stock outstanding are "restricted shares" as that term is
defined by Rule 144 as promulgated under the Securities Act (the "Restricted
Shares"). Sales of Restricted Shares in the public market, or the availability
of such shares for sale, could adversely affect the market price of the Common
Stock.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least two years, including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the number of shares of
Common Stock then outstanding (approximately 78,637 shares) immediately after
this offering, assuming no exercise of underwriters' over-allotment options)
or the average weekly trading volume of the Common Stock as reported through
the Nasdaq National Market during the four calendar weeks preceding the filing
of a Form 144 with respect to such sale. Sales under Rule 144 are also subject
to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned for at
least three years the shares proposed to be sold, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.

Because of the restrictions noted above, beginning 180 days after the
effective date of this offering, 5,334,300 Restricted Shares will be eligible
for sale in the public market subject to Rule 144 and Rule 701 of the
Securities Act. On December 21, 1996, 16,626 shares held by stockholders will
become eligible for sale in the public market pursuant to Rule 144 upon
expiration of a two-year holding period from the date such shares were fully
paid. An additional 12,743 shares will become eligible for sale in the public
market 90 days after the effective date of this offering pursuant to Rule 701.

As of May 9, 1996, options to purchase a total of 579,270 shares of Common
Stock pursuant to the Plan were outstanding with a weighted average exercise
price of $1.21 per share, all of which were exercisable as of April 30, 1996,
and 237,855 of which were fully vested as of April 30, 1996. An additional
662,025 shares of Common Stock were available for future option grants under
the Plan. 579,270 shares subject to options held by officers, directors,
certain other employees and former employees and certain investors are subject
to lockup agreements. See "Management--Stock Option and Incentive Plans,"
Notes 5 and 9 of Notes to Financial Statements, and "Underwriting."

62
<PAGE>

Prior to this offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made of the effect, if any, that the
sale or availability for shares of additional Common Stock will have on the
trading price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could adversely affect the trading price of the Common Stock and could
impair the Company's future ability to raise capital through an offering of
its equity securities. See "Risk Factors--Shares Eligible for Future Sale" and
"Description of Capital Stock."

63
<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Needham & Company, Inc. and Tucker Anthony
Incorporated are acting as representatives (the "Representatives"), have
severally agreed, subject to the terms and conditions in the Underwriting
Agreement, to purchase from the Company the numbers of shares of Common Stock
set forth below opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated.................................
Needham & Company, Inc.............................................
Tucker Anthony Incorporated........................................
---------
Total............................................................ 2,500,000
=========
</TABLE>

The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby if any are
purchased.

The Underwriters, through their Representatives, have advised the Company
that they propose to offer the Common Stock initially at the public offering
price set forth on the cover page of this Prospectus; that the Underwriters
may allow to selected dealers a concession of $ per share; and that such
dealers may reallow a concession of $ per share to certain other dealers.
After the initial public offering, the offering price and the concessions may
be changed by the Representatives.

The Selling Stockholders have granted the Underwriters options, exercisable
for 30 days from the date of this Prospectus, to purchase, in the aggregate,
up to 375,000 additional shares of Common Stock at the initial public offering
price, less underwriting discounts and commissions, as set forth on the cover
page of this Prospectus. The Underwriters may exercise such options solely for
the purpose of covering any over-allotments incurred in the sale of the shares
of Common Stock offered hereby. To the extent such options to purchase are
exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriters' name in the
preceding table bears to 2,500,000.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.

The Company, all directors and executive officers, the Selling Stockholders
and certain other Company stockholders who in the aggregate will hold
approximately 5,279,779 restricted shares of Common Stock upon completion of
this offering, have agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer to sale,
contract of sale, pledge, grant any option to purchase or other sale or
disposition) of any shares of Common

64
<PAGE>

Stock or other capital stock of the Company, or any securities convertible
into, or exercisable or exchangeable for, any shares of Common Stock or other
capital stock of the Company without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, for a period of 180
days after the date of this Prospectus, except for under certain limited
circumstances, including bona fide gifts or transfers effected by such
stockholders other than on any securities exchange or in the over-the-counter
market to donees or transferees that agree to be bound by similar agreements.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial offering price will be determined
through negotiations between the Company and the Representatives. Among the
factors to be considered in making such determination were the prevailing
market conditions, the Company's financial and operating history and
condition, its prospects and the prospects for its industry in general, the
management of the Company and the market prices of securities for companies in
businesses similar to that of the Company.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by its counsel, Venture Law Group, A Professional Corporation, 2800
Sand Hill Road, Menlo Park, California 94025. Certain legal matters will be
passed upon for the Underwriters by Cooley Godward Castro Huddleson & Tatum,
3000 El Camino Real, Palo Alto, California 94306.

EXPERTS

The consolidated financial statements and schedule of Adeza Biomedical
Corporation, as of December 31, 1994 and 1995 and for each of the three years
in the period ended December 31, 1995, and for the period from inception
(January 1985) to December 31, 1995, appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, have been included in reliance upon such report
given on the authority of that firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement, of which this Prospectus constitutes a
part, under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement
and the exhibits and schedules thereto for further information with respect to
the Company and the Common Stock offered hereby. Statements contained herein
concerning the provisions of any documents are not necessarily complete, and
in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including exhibits and
schedules filed therewith, may be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Room 1228, 75 Park Place, New York, New
York 10007, and Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and its public reference
facilities in New York, New York and Chicago, Illinois, at prescribed rates.

65
<PAGE>

GLOSSARY OF TERMS

AMNION: A single layer of epithelial cells which, when paired with the
chorion, forms the amniotic sac of pregnancy.

AMNIOTIC FLUID: A fluid contained within the amniotic sac that provides
nutrients and protection to the developing fetus.

ASSISTED REPRODUCTIVE TECHNOLOGIES (ART): Methods involving removing eggs
from the woman's ovaries, combining them with sperm and either placing the
eggs and sperm into the fallopian tube for fertilization or placing fertilized
eggs into the fallopian tube or uterus. See IVF.

CELLULAR FIBRONECTIN (CFN): A protein produced by the endothelial cells that
line the vascular system that is related to but distinct from fFN. The Company
has determined that cFN may be useful as a confirmatory marker for
preeclampsia.

CERVIX: The lower part of the uterus that opens into the vagina.

CESAREAN SECTION: Surgical delivery of an infant through the maternal
abdomen. It is also commonly referred to as an abdominal or operative delivery
or C-section.

CHEMOTAXIS: A response involving movement of cells toward or away from a
chemical stimulus.

CHORION: The outer layer of the amniotic sac consisting of trophoblasts and
extracellular matrix. The chorion is fetal in origin and is in contact with
maternal tissue called the decidua.

CLIA: Abbreviation for Clinical Laboratory Improvement Amendments of 1988
intended to ensure the quality and reliability of United States medical
testing.

DECIDUA: Maternal endometrial tissue lining the uterus during pregnancy. It
covers the amniotic sac and placenta during gestation and is shed at birth. It
is also shed periodically during menstruation.

ENDOMETRIOSIS: The presence of tissue resembling the normal lining of the
uterus in abnormal locations such as the ovaries, fallopian tubes and pelvic
cavity.

ENDOMETRIUM: The mucous membrane lining of the uterus. It changes in
thickness and in structure with the menstrual cycle.

ECLAMPSIA: One or more seizures or convulsions occurring as a consequence of
untreated preeclampsia and not attributable to other conditions, e.g.,
epilepsy or cerebral hemorrhage.

EDEMA: A symptom of preeclampsia characterized by swelling which results
from accumulation of fluid in the tissues of the body.

FDA: Abbreviation for Food and Drug Administration of the United States
Department of Health and Human Services.

FALLOPIAN TUBES: A pair of organs attached to the uterus and the ovaries
through which eggs travel to the uterus.

FETAL FIBRONECTIN (FFN): Extracellular matrix protein of pregnancy which
facilitates the attachment of the placenta and amniotic sac to the uterine
wall. The Company has determined that abnormal levels of fFN in vaginal
secretions during certain gestational ages is closely correlated to the onset
of labor and subsequent delivery.

66
<PAGE>

GESTATION: Having to do with pregnancy and usually refers to the length of
time from conception to birth. A fully developed or term gestation is 37 to 42
weeks.

HLA-G: Human leukocyte antigen type G. Human leukocyte antigens are genetic
markers identified by a specific position (loci) on chromosome 6. The HLA
system is used to assess tissue compatibility. HLA-G is a fetal specific HLA
marker expressed on trophoblast cells as they invade the maternal endometrial
tissue.

IN VITRO FERTILIZATION (IVF): A method of assisted reproduction that
involves removing eggs from the woman's ovaries, combining them with sperm in
the laboratory and, if fertilized, replacing the fertilized egg into the
woman's uterus. See ART.

INDUCTION: Stimulation of labor via the applications of drugs to the cervix
to prepare it for delivery and/or the administration of systemic intravenous
drugs to increase the frequency and strength of uterine contractions.

LAPAROSCOPE: A narrow invasive viewing device with a light and a telescopic
lens used to evaluate the abdominal and pelvic contents.

LAPAROSCOPY: A diagnostic procedure involving the insertion of a laparoscope
through a small incision below the navel to visually inspect the uterus,
uterine ligaments, fallopian tubes, ovaries and abdominal organs.

LATE BIRTH: Delivery of an infant after week 42 of gestation.

MONOCLONAL ANTIBODY: An immune protein made against a foreign antigen and
produced by a genetically homogeneous population of cells.

NEURAL NETWORK: Computer-based form of artificial intelligence capable of
identifying and learning direct and indirect relationships between sets of
data and outcome. The Company is developing a neural network software program
to aid in the diagnosis of endometriosis.

OVARY: One of the paired female reproductive glands that produce eggs,
estrogen and progesterone.

OVULATION: The release of a mature egg from the ovary usually occurring on
day 14 or 15 of a 28 day cycle.

PMA SUPPLEMENT: An amendment process involving the submission of additional
information to the FDA with respect to an existing PMA to allow the marketing
of the approved product for an indication or in a format different from that
specified in the approved PMA application.

PLACENTA: Specialized tissue in the uterus through which the mother delivers
nutrients and oxygen to the baby.

PREECLAMPSIA: Pregnancy-related development of hypertension, proteinuria and
edema.

PRE-MARKET APPROVAL (PMA): Approval by the FDA to market a new device after
submission to the FDA of results of prototype tests, laboratory and animal
studies.

PREMATURE BIRTH: Delivery of an infant between 20 and 37 weeks of gestation.

PROTEINURIA: The presence in the urine of abnormally large quantities of
protein, predominantly albumin.

67
<PAGE>

RUPTURE OF AMNIOTIC MEMBRANES (ROM): Rupture of amniotic membranes in which
the membranes tear and amniotic fluid escapes into the vagina.

TERM BIRTH: Delivery of an infant from week 37 through week 42 of gestation.

TOCOLYSIS: The use of a therapeutic drug such as ritodrine, terbutaline,
magnesium sulfate, indocin, nifedipine, etc., to suppress or stop the
contractions of the uterus.

TROPHOBLAST: The cell type that forms the outer wall of the fertilized
embryo in early fetal development. In later development it is the primary cell
type involved in the establishment of the placenta and chorion.

UTERUS: The hollow muscular organ in which the fetus develops during
pregnancy.

510(K): Clearance to market a product that is substantially equivalent to a
product that was in commercial distribution prior to May 28, 1976.

801(E): Clearance to export a product not yet approved by the FDA.

68
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................... F-2
Consolidated Financial Statements
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statement of Stockholders' Equity (Deficit).................... F-5
Consolidated Statements of Cash Flows....................................... F-7
Notes to Consolidated Financial Statements.................................. F-8
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Adeza Biomedical Corporation

We have audited the accompanying consolidated balance sheets of Adeza
Biomedical Corporation (a development stage company) as of December 31, 1994
and 1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period
ended December 31, 1995 and for the period from inception (January 1985) to
December 31, 1995. 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 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Adeza
Biomedical Corporation at December 31, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995 and for the period from inception (January
1985) to December 31, 1995, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Palo Alto, California
April 30, 1996,
except for Note 9 as to
which the date is
June 25, 1996

F-2
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
UNAUDITED
PRO FORMA
STOCKHOLDERS'
EQUITY AT
MARCH 31, MARCH 31,
1994 1995 1996 1996 (NOTE 9)
-------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 2,895 $ 2,136 $ 1,027
Accounts receivable, net of
allowance for doubtful accounts
of $115, $71 and $35 at
December 31, 1994 and 1995 and
March 31, 1996, respectively... 1,255 61 63
Inventories..................... 207 179 225
Other current assets............ 119 31 75
-------- -------- --------
Total current assets............. 4,476 2,407 1,390
Property and equipment, net...... 556 337 281
Notes receivable from officer.... 60 115 125
Other assets..................... 83 64 64
-------- -------- --------
$ 5,175 $ 2,923 $ 1,860
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................ $ 1,076 $ 664 $ 729
Accrued compensation............ 161 205 155
Accrued warranty................ 32 109 110
Other accrued liabilities....... 23 5 48
Deferred revenue................ 666 -- --
Current portion of capital lease
obligations.................... 200 151 113
-------- -------- --------
Total current liabilities........ 2,158 1,134 1,155
Noncurrent portion of capital
lease obligations............... 144 49 36
Commitments
Stockholders' equity:
Preferred stock, $0.001 par
value, issuable in series;
5,471,659 shares authorized,
5,203,465 shares issued and
outstanding at December 31,
1994 and 1995 and March 31,
1996; aggregate liquidation
preference at December 31, 1995
of $20,463 (10,000,000 shares
authorized, none issued and
outstanding, pro forma)........ 5 5 5 $ --
Common stock, $0.001 par value;
8,333,333 shares authorized,
157,416, 158,402 and 160,204
shares issued and outstanding
at December 31, 1994 and 1995
and March 31, 1996,
respectively (22,462,220 shares
authorized, 5,363,669 shares
issued and outstanding, pro
forma)......................... -- -- -- 5
Additional paid-in capital...... 24,374 24,452 24,455 24,455
Deferred compensation........... -- (67) (64) (64)
Deficit accumulated during the
development stage.............. (21,506) (22,650) (23,727) (23,727)
-------- -------- -------- --------
Total stockholders' equity....... 2,873 1,740 669 $ 669
-------- -------- -------- ========
$ 5,175 $ 2,923 $ 1,860
======== ======== ========
</TABLE>

See accompanying notes.

F-3
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS
(JANUARY 1985) ENDED
YEAR ENDED DECEMBER 31, TO MARCH 31,
------------------------- DECEMBER 31, ----------------
1993 1994 1995 1995 1995 1996
------- ------- ------- -------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Contract revenues..... $ 967 $ 1,977 $ 3,416 $ 15,300 $ 167 $ --
Product sales......... 504 316 541 1,948 99 152
------- ------- ------- -------- ------- -------
Total revenues.......... 1,471 2,293 3,957 17,248 266 152
Operating costs and
expenses:
Costs of product
sales................ 907 1,088 1,105 4,498 213 251
Research and
development.......... 3,413 2,547 2,355 20,499 572 579
Selling, general and
administrative....... 3,128 1,928 1,725 14,682 371 418
Charge for purchase of
in-process research
and development...... -- -- -- 553 -- --
------- ------- ------- -------- ------- -------
Total operating costs
and expenses........... 7,448 5,563 5,185 40,232 1,156 1,248
------- ------- ------- -------- ------- -------
Loss from operations.... (5,977) (3,270) (1,228) (22,984) (890) (1,096)
Interest and other
income................. 50 25 150 1,094 50 24
Interest and other
expense................ (182) (415) (66) (730) (34) (5)
------- ------- ------- -------- ------- -------
Loss before taxes....... (6,109) (3,660) (1,144) (22,620) (874) (1,077)
Provision for income
taxes.................. -- -- -- (82) -- --
------- ------- ------- -------- ------- -------
Loss before
extraordinary credit... (6,109) (3,660) (1,144) (22,702) (874) (1,077)
Extraordinary credit.... -- -- -- 52 -- --
------- ------- ------- -------- ------- -------
Net loss................ $(6,109) $(3,660) $(1,144) $(22,650) $ (874) $(1,077)
======= ======= ======= ======== ======= =======
Pro forma net loss per
share.................. $ (0.21) $ (0.16) $ (0.20)
======= ======= =======
Shares used in computing
pro forma net loss per
share.................. 5,446 5,446 5,448
======= ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE TOTAL
----------------- -------------- PAID-IN FROM DEFERRED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE EQUITY (DEFICIT)
---------- ------ ------- ------ ---------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders,
officers and
employees at $0.74
to $1.51 per share
in the period
February 1985 to
December 31, 1992,
net of repurchases.. -- $ -- 74,988 $ -- $ 104 $(45) $ -- $ -- $ 59
Issuance of Series
A, B, C, D and E
convertible
preferred stock to
investors at prices
ranging from $0.60
to $4.20 per share
for cash and
cancellation of
notes payable in the
period from July
1985 to April 1992,
net of issuance
costs............... 9,112,832 9 -- -- 12,539 -- -- -- 12,548
Issuance of stock
for the purchase of
Yellowstone
Diagnostics
Corporation in
October 1988:
Series B
convertible
preferred stock.... 145,832 -- -- -- 105 -- -- -- 105
Series C
convertible
preferred stock.... 217,389 -- -- -- 300 -- -- -- 300
Common stock....... -- -- 12,420 -- 19 -- -- -- 19
Exercise of stock
options at $1.51 to
$7.54 per share for
cash and notes from
March 1989 through
December 1992....... -- -- 27,361 -- 69 -- -- -- 69
Cancellation of note
from stockholder for
services in August
1992................ -- -- -- -- -- 14 -- -- 14
Repayment of note
from stockholder in
October 1992 ....... -- -- -- -- -- 31 -- -- 31
Net loss from
inception through
December 31, 1992... -- -- -- -- -- -- -- (11,737) (11,737)
---------- ----- ------- ----- ------- ---- ----- -------- --------
Balance at December
31, 1992............ 9,476,053 9 114,769 -- 13,136 -- -- (11,737) 1,408
Exercise of warrants
to purchase Series B
convertible
preferred stock at
$0.72 per share for
cash in March 1993.. 259,112 -- -- -- 186 -- -- -- 186
Exercise of stock
options at $3.20 to
$7.54 per share for
cash in February
through August
1993................ -- -- 5,391 -- 19 -- -- -- 19
Issuance of Series F
convertible
preferred stock to
investors at $3.12
per share for cash
in March 1993 (net
of issuance costs of
$259)............... 961,535 1 -- -- 2,740 -- -- -- 2,741
Net loss............ -- -- -- -- -- -- -- (6,109) (6,109)
---------- ----- ------- ----- ------- ---- ----- -------- --------
Balance at December
31, 1993 (carried
forward)............ 10,696,700 $ 10 120,160 $ -- $16,081 $-- $ -- $(17,846) $ (1,755)
</TABLE>

See accompanying notes.

F-5
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
(In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE TOTAL
------------------ -------------- PAID-IN FROM DEFERRED DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE EQUITY (DEFICIT)
---------- ------ ------- ------ ---------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1993 (brought
forward)........... 10,696,700 $10 120,160 $ -- $16,081 $ -- $ -- $(17,846) $ (1,755)
Exercise of stock
options at
approximately
$7.54 per share
for cash in
January through
December 1994..... -- -- 164 -- 1 -- -- -- 1
Issuance of Series
F convertible
preferred stock to
corporate partner
at $3.12 per share
in exchange for
cash.............. 240,384 -- -- -- 750 -- -- -- 750
Conversion of
shares from
convertible
preferred stock to
common stock in
December 1994..... (582,025) -- 37,092 -- -- -- -- -- --
Recapitalization
and related
transactions:
Net change in
shares of
preferred stock
outstanding and
cancellation of
fractional
shares............ (8,474,487) (8) -- -- 8 -- -- -- --
Issuance of Series
2 convertible
preferred stock to
investors at $2.40
per share for cash
and cancellation
of notes of $4,459
and interest
payable of $325
(net of issuance
costs of $438) in
December 1994..... 3,322,893 3 -- -- 7,534 -- -- -- 7,537
Net loss.......... -- -- -- -- -- -- -- (3,660) (3,660)
---------- --- ------- ----- ------- ----- ----- -------- --------
Balance at December
31, 1994........... 5,203,465 5 157,416 -- 24,374 -- -- (21,506) 2,873
Exercise of stock
options at $0.24
per share for cash
in July through
November 1995..... -- -- 986 -- -- -- -- -- --
Deferred
compensation
related to
issuance of
certain stock
options........... -- -- -- -- 78 -- (78) -- --
Amortization of
deferred
compensation...... -- -- -- -- -- -- 11 -- 11
Net loss.......... -- -- -- -- -- -- -- (1,144) (1,144)
---------- --- ------- ----- ------- ----- ----- -------- --------
Balance at December
31, 1995........... 5,203,465 5 158,402 -- 24,452 -- (67) (22,650) 1,740
Exercise of stock
options at $0.24
per share for cash
(unaudited)....... -- -- 1,802 -- -- -- -- -- --
Deferred
compensation
related to
issuance of
certain stock
options
(unaudited)....... -- -- -- -- 3 -- (3) -- --
Amortization of
deferred
compensation
(unaudited)....... -- -- -- -- -- -- 6 -- 6
Net loss
(unaudited)....... -- -- -- -- -- -- -- (1,077) (1,077)
---------- --- ------- ----- ------- ----- ----- -------- --------
Balance at March
31, 1996
(unaudited)........ 5,203,465 $ 5 160,204 $ -- $24,455 $ -- $ (64) $(23,727) $ 669
========== === ======= ===== ======= ===== ===== ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS
(JANUARY 1985) ENDED
YEAR ENDED DECEMBER 31, TO MARCH 31,
------------------------- DECEMBER 31, ---------------
1993 1994 1995 1995 1995 1996
------- ------- ------- -------------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss................ $(6,109) $(3,660) $(1,144) $(22,650) $ (874) $(1,077)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Charge for purchase of
in-process research
and development....... -- -- -- 553 -- --
Depreciation and
amortization.......... 270 264 248 1,423 66 58
Issuance of common
stock for intellectual
property rights and
consulting services... -- -- -- 5 -- --
(Gain) loss on
disposals and
retirements of
equipment............. -- -- 7 89 19 (2)
Note receivable from
stockholder canceled
in exchange for
services.............. -- -- -- 14 -- --
Changes in assets and
liabilities, net of
acquisition of
Yellowstone
Diagnostics
Corporation:
Accounts receivable,
inventories and other
current assets........ (135) (1,046) 1,310 (271) 1,137 (92)
Accounts payable and
accrued liabilities... (188) 764 (309) 834 (402) 59
Deferred revenue....... 334 332 (666) -- (166) --
------- ------- ------- -------- ------ -------
Net cash used in
operating activities... (5,828) (3,346) (554) (20,003) (220) (1,054)
------- ------- ------- -------- ------ -------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of property and
equipment.............. -- (67) (43) (1,057) -- --
Proceeds from the sale
of property and
equipment.............. -- -- 18 18 2 6
Sale (purchases) of
other assets........... 4 81 (36) (180) (29) (10)
------- ------- ------- -------- ------ -------
Net cash provided by
(used in) investing
activities............. 4 14 (61) (1,219) (27) (4)
------- ------- ------- -------- ------ -------
CASH FLOWS FROM
FINANCING ACTIVITIES
Payments on capital
lease obligations...... (146) (203) (144) (666) (56) (51)
Proceeds from sale and
leaseback of previously
acquired equipment..... 88 -- -- 88 -- --
Issuance of convertible
notes payable to
related parties,
including accrued
interest............... 2,262 2,522 -- 5,609 -- --
Issuance of convertible
preferred stock, net of
issuance costs......... 2,928 2,753 -- 18,153 -- --
Issuance of common
stock, net of
repurchases............ 19 1 -- 143 1 --
Payments of notes
receivable from
stockholders........... -- -- -- 31 -- --
------- ------- ------- -------- ------ -------
Net cash provided by
(used in) financing
activities............. 5,151 5,073 (144) 23,358 (55) (51)
------- ------- ------- -------- ------ -------
Net increase (decrease)
in cash and cash
equivalents............ (673) 1,741 (759) 2,136 (302) (1,109)
Cash and cash
equivalents at
beginning of period.... 1,827 1,154 2,895 -- 2,895 2,136
------- ------- ------- -------- ------ -------
Cash and cash
equivalents at end of
period................. $ 1,154 $ 2,895 $ 2,136 $ 2,136 $2,593 $ 1,027
======= ======= ======= ======== ====== =======
</TABLE>

See accompanying notes.

F-7
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

Adeza Biomedical Corporation ("Adeza" or the "Company") is a California
corporation and the successor to Aspen Diagnostics Corporation ("Aspen"),
which was originally incorporated in the State of California in January 1985.
Since inception, the Company has been engaged in the development of products
for the obstetrics and gynecology market. The Company's principal activities
to date have been recruiting personnel, raising capital, acquiring operating
assets, performing research and development and clinical trials and obtaining
regulatory approval of its first product. The Company has made no significant
product sales to date. Accordingly, it is classified as a development stage
company.

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All significant intercompany balances and
transactions have been eliminated.

CONCENTRATIONS OF CREDIT RISK

Cash and cash equivalents and trade receivables are financial instruments
which potentially subject the Company to concentrations of credit risk. The
estimated fair value of financial instruments approximates the carrying value
based on available market information. The Company primarily invests in notes
and bills issued by the United States government and its agencies, and by
policy, limits the amount of credit exposure to any one issuer and to any one
type of investment, other than securities issued or guaranteed by the United
States government. The Company has not experienced any credit losses and does
not generally require collateral on receivables.

In 1993, two customers accounted for 45% and 20% of total revenues. In 1994,
two customers accounted for 54% and 35% of total revenues. In 1995, two
customers accounted for 69% and 24% of total revenues. In the three months
ended March 31, 1996, three customers accounted for 56%, 19% and 15% of total
revenues. For the period from inception (January 1985) to December 31, 1995,
two customers accounted for 46% and 38% of total revenues. The Company sells
its product primarily to international distributors in Europe and Japan. All
product sales are export sales to the following geographic areas (in
thousands).

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
Europe.......................................... $504 $183 $252 $ 27 $ 67
Asia............................................ -- 133 289 72 85
---- ---- ---- ----- ------
$504 $316 $541 $ 99 $ 152
==== ==== ==== ===== ======
</TABLE>

OPERATIONS AND FINANCING

The Company is substantially dependent upon external financing to pursue its
intended business activities. Except for brief periods, the Company has not
been profitable since inception and has incurred a cumulative net loss of
approximately $23,700,000 through March 31, 1996. Losses have resulted
principally from costs incurred in research and development activities,
clinical trials, marketing and product introduction expenses and from general
and administrative costs. The Company expects to incur additional operating
losses at least through 1997.

F-8
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company's ability to achieve profitability is dependent on its ability to
obtain regulatory approval for its products, to successfully market and sell
its products, to enter into agreements for product development and
commercialization with corporate partners and to cost-effectively manufacture
its products. There can be no assurance that the Company will successfully
develop, commercialize, patent, manufacture and market its products, obtain
required regulatory approvals, or ever achieve profitability. In September
1995, the Company received an expedited PMA from the FDA to market its fFN
ELISA Test in the United States. Management expects its marketing partner to
introduce the fFN ELISA Test in the United States through full-scale marketing
efforts commencing in the second half of 1996.

In April 1996, the Company entered into a $2,000,000 line of credit with
certain of its investors that expires in April 1997 (see Note 9). The Company
expects that available cash resources, together with this line of credit, will
be adequate to fund operations at current levels through the remainder of
1996. The Company also plans to continue to finance its operations with sales
of its equity securities such as the initial public offering currently being
pursued. Should management's plans not be consummated, the Company will have
to seek alternative sources of capital and reevaluate its operating plans.

INTERIM FINANCIAL INFORMATION

The financial information at March 31, 1996 and for the three months ended
March 31, 1995 and 1996, is unaudited but includes all adjustments (consisting
only of normal recurring adjustments) which the Company considers necessary
for a fair presentation of the financial position at such date and of the
operating results and cash flows for those periods. Results of the 1996 period
are not necessarily indicative of results expected for the entire year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities from
date of purchase of three months or less to be cash equivalents. The Company
maintains its cash and cash equivalents in several different money market
accounts with various banks and brokerage houses. This diversification of risk
is consistent with Company policy to maintain liquidity and ensure the safety
of principal.

INVENTORIES

Inventories are recorded at the lower of cost (first-in, first-out basis) or
market and consist of the following, net of reserves:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................... $ 169 $ 100 $101
Work in process......................................... 34 64 72
Finished goods.......................................... 4 15 52
------ ------ ----
$ 207 $ 179 $225
====== ====== ====
</TABLE>

F-9
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Laboratory and other equipment..................... $ 1,498 $ 1,462 $ 1,438
Furniture and fixtures............................. 119 119 119
Leasehold improvements............................. 114 114 114
------- ------- -------
1,731 1,695 1,671
Less accumulated depreciation and amortization..... (1,175) (1,358) (1,390)
------- ------- -------
$ 556 $ 337 $ 281
======= ======= =======
</TABLE>

Laboratory equipment and furniture and fixtures are depreciated using the
straight-line method over the estimated useful lives of the assets (generally
five years). Leasehold improvements are amortized over their useful lives or
the term of the lease, whichever is shorter.

Included in equipment at December 31, 1994 and 1995 and March 31, 1996 are
assets with a cost of $865,000, $781,000 and $781,000 acquired pursuant to
capital lease obligations and related accumulated amortization of
approximately $479,000, $532,000 and $547,000, respectively.

REVENUE RECOGNITION

Collaborative research agreements provide support for the Company's research
activities. Revenue from research support payments is recognized during the
period in which work is performed and related costs are expensed as research
and development. Research support payments received in advance of work
performed are recorded as deferred revenue. Milestone payments are included in
contract revenues in the period in which the applicable milestone is achieved
and collection is deemed probable (see Note 2).

The Company recognizes revenues on product sales to international
distributors when units are shipped. Net revenues include primarily
international product sales of diagnostic tests in the women's reproductive
health care market. The Company's limited product sales to date have all been
made to worldwide distributors in this market. The Company performs ongoing
credit evaluations of these customers and generally does not require
collateral. The Company maintains reserves for potential credit losses. Such
losses have been within management's expectations.

ACCOUNTING FOR STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation" ("SFAS123"), which is effective for the Company's December 31,
1996 financial statements. SFAS123 allows companies to either account for
stock-based compensation under the new provisions of SFAS123 or under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB25"), but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of
SFAS123 had been adopted. The Company intends to continue accounting for its
stock-based compensation in accordance with the provisions of APB25. As such,
the adoption of SFAS123 will not impact the financial position or the results
of operations of the Company.

F-10
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DEFERRED COMPENSATION

The Company recorded deferred compensation expense for the difference
between the exercise price and the deemed fair value for financial statement
presentation purposes of the Company's common stock for certain options
granted from July 1995 through March 1996. Such options were granted at an
exercise price of $0.24 per share with deemed fair values ranging from $1.80
to $7.92 per share. This deferred compensation expense totaled approximately
$81,000, which is being amortized over the vesting period of the options.
Amortization of deferred compensation expense of approximately $11,000 and
$6,000 was recorded in the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively.

NET LOSS PER SHARE

Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from stock options, convertible preferred stock and warrants are excluded from
the computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission ("SEC") Staff Accounting Bulletins, common
and common equivalent shares issued during the period beginning 12 months
prior to the initial filing of the proposed public offering at prices
substantially below the assumed public offering price have been included in
the calculation as if they were outstanding for all periods presented (using
the treasury stock method and the assumed public offering price for stock
options and warrants and the if-converted method for convertible preferred
stock).

Historical net loss per share information is as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss per share............. $(30.17) $(16.36) $(4.72) $(3.61) $(4.41)
======== ======== ======= ======= =======
Shares used in computing
historical net loss per share
(in thousands)................ 202 224 243 243 244
======== ======== ======= ======= =======
</TABLE>

Pro forma net loss per share has been computed as described above and also
gives effect, pursuant to SEC Staff policy, to the conversion of convertible
preferred shares that will automatically convert upon completion of the
Company's initial public offering (using the if-converted method) from the
original date of issuance. The preferred shares have been restated to give
retroactive effect to the recapitalization of the Company in December 1994.

2. RESEARCH AND DEVELOPMENT ARRANGEMENTS

In December 1990, the Company and Daiichi Pure Chemicals Co., Ltd.
("Daiichi"), a subsidiary of Daiichi Pharmaceutical Co., Ltd., entered into
agreements to co-develop and market Adeza's in vitro diagnostic products in
Japan. The agreements call for Daiichi to market Adeza's proprietary
diagnostic products in Japan. Under these agreements, the Company received
nonrefundable payments for research performed. Under these agreements, the
Company recognized contract revenue for research development of approximately
$667,000 during each of the years ended December 31, 1993, 1994 and 1995.
Additionally, in connection with these agreements, Daiichi purchased an
aggregate of $1.0 million of the Company's Preferred Stock.

In July 1991, Rohto Pharmaceutical Company, Ltd. ("Rohto") entered into a
distribution and product development agreement with the Company. The Company
received a cash payment of $750,000 upon execution of the agreement, which was
recorded as a deferred liability. The Company also received periodic
nonrefundable

F-11
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

payments for research performed. In 1994, the agreement was terminated. In
consideration for termination of the agreement, the Company issued Rohto
240,385 shares of Series F convertible preferred stock (converted into 84,697
shares of Series 1 convertible preferred stock) and eliminated the deferred
liability. In April 1992, the Company sold 178,571 shares of Series E
convertible preferred stock (converted into 84,695 shares of Series 1
convertible preferred stock in 1994) to Rohto for $750,000.

In December 1991, Tokos Medical Corporation, now Matria Healthcare, Inc.
("Matria"), entered into a marketing and distribution agreement with the
Company. Under this agreement, the Company received an up front fee in
exchange for marketing and distribution rights in the United States, Canada
and Puerto Rico. This fee of approximately $3,000,000 was recognized as
revenue in 1991. The Company received and recognized $1,000,000 in 1992 for
attaining a certain milestone. In December 1994, the Company attained another
milestone entitling it to receive $4,000,000. The Company recognized as
revenue $1,250,000 and $2,750,000 in 1994 and 1995, respectively, in
accordance with its revenue recognition policy. Matria also purchased 476,191
shares of Series E convertible preferred stock (converted into 225,854 shares
of Series 1 convertible preferred stock in 1994) for gross cash proceeds of
$2,000,000 concurrent with entering into this agreement.

The Company has also entered into license, clinical trial, supply agreements
and sponsored research and development agreements with universities, research
organizations and commercial companies. Certain of these agreements require
payments of royalties on future sales of products resulting from such
agreements and may subject the Company to minimal annual payments to such
contract partners. To date, payments under these agreements have not been
significant and, at December 31, 1995 and at March 31, 1996, related
noncancelable commitments are immaterial.

3. COMMITMENTS

The Company has a $250,000 lease line of credit of which $190,000 was unused
at December 31, 1995.

Future minimum lease obligations under noncancelable capital and operating
leases at December 31, 1995 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31,
1996......................................................... $213 $ 169
1997......................................................... 27 33
1998......................................................... -- 19
---- -----
Total minimum lease payments.................................. $240 221
====
Amount representing interest.................................. (21)
-----
Present value of future lease payments........................ 200
Current portion of capital lease obligations.................. (151)
-----
Noncurrent portion of capital lease obligations............... $ 49
=====
</TABLE>

Rent expense under noncancelable operating leases was approximately
$219,000, $200,000, $257,000, $59,000 and $64,000 for the years ended December
31, 1993, 1994 and 1995 and the three months ended March 31, 1995 and 1996,
respectively ($1,426,000 for the period from inception (January 1985) to
December 31, 1995).

F-12
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. RECAPITALIZATION AND RELATED TRANSACTIONS

PREFERRED STOCK AND WARRANTS

Convertible preferred stock as of December 31, 1995 consists of the
following ($0.001 par value):

<TABLE>
<CAPTION>
SHARES SHARES ISSUED LIQUIDATION
AUTHORIZED AND OUTSTANDING PREFERENCE
---------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Series 1.............................. 1,880,572 1,880,572 $ 4,513
Series 2.............................. 3,322,893 3,322,893 15,950
--------- --------- -------
Total................................. 5,203,465 5,203,465 $20,463
========= =======
Undesignated.......................... 268,194
---------
5,471,659
=========
</TABLE>

In December 1994, stockholders approved an amendment to the Articles of
Incorporation to change the Company's capital structure. This amendment
effected a conversion of the then outstanding Series A through F preferred
stock into a new Series 1 preferred stock and a reverse split of the common
stock. These changes reduced the number of outstanding shares of preferred and
common stock, reduced the aggregate liquidation preference of outstanding
preferred shares, and authorized a new class of preferred shares to be issued
in a private equity financing to new and existing stockholders.

The conversion reduced the number of the previously outstanding preferred
shares by 8,474,493 and reduced the aggregate liquidation preference of the
previously outstanding preferred shares from $16,653,000 to $4,513,000 ($2.40
per share for Series 1 preferred shares).

Concurrent with the conversion of the previously outstanding Series A
through F preferred stock into Series 1 convertible preferred stock, the
Company sold to existing and new investors a total of 3,322,893 shares of
Series 2 convertible preferred stock at $2.40 per share and issued to the
holders of certain promissory notes (now exchanged for Series 2 preferred
shares) warrants to purchase an additional 268,194 shares of Series 2
convertible preferred stock for $2.40 per share, exercisable through December
1999. All of these warrants were unexercised and outstanding at December 31,
1995. In connection with the closing of the Series 2 preferred stock
financing, the Company issued an additional warrant to purchase 91,666 shares
of common stock with an exercise price of $2.88 per share for $100. This
warrant will expire in December 1999.

Each share of Series 1 and 2 preferred stock entitles the holder to receive
noncumulative dividends of $0.24 per share, annually, if declared by the board
of directors. If dividends are declared on either series of preferred stock,
both series of preferred stock must receive dividends. No dividends have been
declared to date. The Series 1 and 2 preferred stock is convertible into an
equal number of common shares (subject to certain antidilution provisions) at
the option of the holder, or automatically upon a public offering with a price
per share of at least $10.80 and aggregate proceeds greater than $10,000,000,
or the affirmative vote or written consent of the holders of at least 66 2/3%
of the preferred stock then outstanding, as a single class on an if-converted
basis. The holders of these shares are entitled to one vote for each share of
common stock into which such shares can be converted.

Upon liquidation of the Company prior to September 30, 1997, the holders of
Series 2 preferred stock shall have a liquidation preference, prior and in
preference to any distribution to the holders of Series 1 preferred stock, of
$4.80 per share plus any declared but unpaid dividends. After such payment,
the holders of Series 1 preferred stock shall have a liquidation preference of
$2.40 per share plus any declared but unpaid dividends. Upon liquidation of
the Company on or after September 30, 1997, the two series of preferred stock
shall have an equal liquidation preference of $2.40 per share plus all
declared but unpaid dividends.

F-13
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

After the payments to holders of preferred stock as described above, the
holders of common shares are entitled to receive $0.24 per share. Any
remaining assets of the Company available for distribution shall be
distributed ratably among the holders of common stock and preferred stock on
an if-converted basis.

COMMON STOCK

The Company has reserved as of December 31, 1995 a total of 6,079,609 shares
of common stock in the event of conversion of the outstanding convertible
preferred stock and the exercise of outstanding common stock options and
warrants.

5. STOCK OPTIONS

In 1995, the board adopted the 1995 Stock Option and Restricted Stock Plan
(the "Plan") to succeed the 1988 Employee Stock Plan and the 1992 Key
Executive Stock Plan (together, the "Plans"), whereby options for 683,333
shares of common stock can be issued to employees, officers, directors,
consultants and promotional representatives of the Company. As of December 31,
1995, 166,063 shares remain available for option grants under the Plan
(166,593 shares as of March 31, 1996).

The Plan provides that the exercise price for incentive stock options will
be no less than 100% of the fair value of the Company's common stock (no less
than 85% of the fair value for nonqualified stock options), as determined by
the board on the date of grant. All options are immediately exercisable,
subject to repurchase at the original grant price. Generally options vest
ratably over four years.

Option activity under the Plans is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------
NUMBER OF PRICE PER
SHARES SHARE
--------- ------------
<S> <C> <C>
Balance at December 31, 1993........................... 96,502 $1.51-$37.66
Options granted....................................... 19,395 $7.54
Options exercised..................................... (164) $1.51-$7.54
Options canceled...................................... (16,564) $1.51-$37.66
-------- ------------
Balance at December 31, 1994........................... 99,169 $1.51-$37.66
Options granted....................................... 521,525 $0.24
Options exercised..................................... (986) $0.24
Options canceled...................................... (103,424) $1.51-$37.66
-------- ------------
Balance at December 31, 1995........................... 516,284 $0.24
Options granted (Unaudited)........................... -- $0.24
Options exercised (Unaudited)......................... (1,802) $0.24
Options canceled (Unaudited).......................... (530) $0.24
-------- ------------
Balance at March 31, 1996 (Unaudited).................. 513,952 $0.24
======== ============
</TABLE>

During May 1995, options to purchase 96,428 shares of common stock were
reissued at $0.24 per share and a further options to purchase 382,945 shares
of common stock were granted at $0.24 per share in connection with the
recapitalization of the Company. The reissuances are included as cancellations
(at the original price) and grants (at the $0.24 per share price). As of March
31, 1996, all options are exercisable and 228,994 options have vested under
the Plan.

6. INCOME TAXES

As of December 31, 1995, the Company had federal and state net operating
loss carryforwards of approximately $18,800,000 and $5,100,000, respectively.
The federal net operating loss carryforwards will

F-14
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

expire at various dates beginning on 2000 through 2010, if not utilized. The
state net operating loss carryforwards will expire beginning on 1996 through
2000, if not utilized.

Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

The accumulated deficit at December 31, 1995 differs from the federal net
operating loss carryforwards due to losses of the Company's foreign subsidiary
and temporary differences consisting primarily of certain expenses not
currently deductible for tax reporting purposes.

Significant components of the Company's deferred tax assets as of December
31, 1994 and December 31, 1995 are as follows :

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards.......................... $ 5,100 $ 6,700
Research credits (expiring 2000-2010)..................... 700 700
Capitalized research and development...................... 300 300
Other, net................................................ 1,100 300
------- -------
Total deferred tax assets................................. 7,200 8,000
Valuation allowance for deferred tax assets............... (7,200) (8,000)
------- -------
Net deferred tax assets................................... $ -- $ --
======= =======
</TABLE>

Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $2,210,000 and $990,000 during the years ended December 31, 1993
and 1994, respectively.

7. PROMISSORY NOTE WITH OFFICER

In December 1992, the Company entered into a promissory note agreement with
an officer which allowed the officer to borrow up to $140,000. Interest on the
note accrues at a rate of 6.15% per annum. The note and accrued interest is
due upon the earlier of (i) voluntary termination, (ii) 12 months after
involuntary termination, (iii) closing of an initial underwritten public
offering of the Company's common stock, (iv) merger of the Company, (v) sale
of all the assets of the Company or (vi) July 19, 1997. The outstanding
principal balance at December 31, 1994 and 1995 and March 31, 1996 was
$60,000, $90,000 and $97,500, respectively.

F-15
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. STATEMENT OF CASH FLOW DATA

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, INCEPTION TO ENDED MARCH 31,
------------------------- DECEMBER 31, ---------------
1993 1994 1995 1995 1995 1996
------- --------- ------- ------------ ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
Acquisition of equipment
under capital leases... $ 108 $ -- $ 60 $ 837 $ -- $ --
======= ========= ======= ====== ======= =======
Purchase of Yellowstone
Diagnostics
Corporation:
Issuance of preferred
and common stock...... $ -- $ -- $ -- $ 424 $ -- $ --
======= ========= ======= ====== ======= =======
Issuance of preferred
stock for cancellation
of notes payable and
accrued interest...... $ -- $ 4,552 $ -- $5,377 $ -- $ --
======= ========= ======= ====== ======= =======
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION
Interest paid........... $ 73 $ 167 $ 35 $ 414 $ 12 $ 3
======= ========= ======= ====== ======= =======
</TABLE>

9. SUBSEQUENT EVENTS

In April 1996, the Company obtained a $2,000,000 aggregate committed line of
credit (the "Line of Credit") from certain of the Company's investors,
specifically Aeneas Venture Corporation, Aspen Venture Partners, L.P., Asset
Management Associates, BG Services Limited, Charter Ventures II, L.P.,
Enterprise Partners and STF II, L.P. (the "Committed Investors"), whereby such
investors agreed to lend the Company up to $2,000,000 in cash in exchange for
convertible secured promissory notes (the "Notes") that must be repaid upon
the earlier of (i) 30 days following the closing of an initial public offering
(the "Offering") or (ii) June 1997. Such investors have advanced an aggregate
of $500,000 to the Company under the Line of Credit. In addition, the Company
issued warrants to purchase common stock, exercisable at 85% of the offering
price, to the Committed Investors in an amount equal to 10% of their
respective commitments under the Line of Credit plus an additional 5% of the
outstanding principal amount of their respective Notes issued under the Line
of Credit for each full or partial calendar month that such principal amount
remains outstanding. The aggregate warrant coverage that the Company is
entitled to provide to each Committed Investor pursuant to the Line of Credit
is capped at 50% of such Committed Investor's contribution to the aggregate
amount of the Notes issued under the Line of Credit. The warrants issued in
connection with the Line of Credit are not exercisable for a period of one
year following the closing of the Offering and expire in April 2001 or earlier
upon the sale of all or substantially all of the assets of the Company or upon
the acquisition of the Company by another entity pursuant to which the
stockholders of the Company immediately prior to such acquisition possess a
minority of the voting power of the acquiring entity immediately following
such acquisition.

In April 1996, the board of directors of the Company granted 65,318 options
to purchase common stock at an exercise price of $8.88 per share.

On May 6, 1996, the board of directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If
the initial public offering is consummated under the terms presently
anticipated, all of the preferred stock outstanding will automatically convert
into 5,203,465 shares of common stock. Unaudited pro

F-16
<PAGE>

ADEZA BIOMEDICAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

forma stockholders' equity, as adjusted for the assumed conversion of the
preferred stock into shares of common stock, is set forth on the accompanying
balance sheet.

On May 6, 1996, the board of directors of the Company authorized the
reincorporation of the Company in the State of Delaware to be effective
immediately prior to the effectiveness of the Offering and a one-for-2.4
reverse stock split in which each 2.4 shares of preferred stock and common
stock are split into one share of preferred stock and common stock,
respectively. In addition the Company increased the number of authorized
common and preferred shares to 22,462,220 shares and 10,00,000 shares,
respectively. All the share and per share data in the accompanying financial
statements has been adjusted retroactively to give effect to the reverse stock
split. On June 25, 1996, the stockholders' approval was obtained for the above
action.

On May 6, 1996, the Company adopted the 1996 Employee Stock Purchase Plan
under which 250,000 shares of common stock are reserved for issuance and the
1996 Directors' Stock Option Plan under which 200,000 shares of common stock
have been reserved for issuance. No shares have been issued under either plan.
The Company also increased the number of shares available under the 1995 Stock
Option and Restricted Stock Plan by 560,750 shares. On June 25, 1996, the
stockholders' approval was obtained for the above action.

On May 9, 1996 and in connection with the Company's market launch of the fFN
ELISA Test, the Company granted a warrant to purchase 25,000 shares of common
stock at an exercise price of $0.01 per share to a research institution from
which Adeza licenses the fetal fibronectin patent. The warrant is not
exercisable for a period of one year from the date of this Offering and
expires in May 2001. The Company expects to report a non-cash charge of
approximately $250,000 in the second quarter of 1996 in connection with the
issuance of this warrant.

F-17
<PAGE>

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY
OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

UNTIL , 1996 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 17
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 25
Management............................................................... 47
Certain Transactions..................................................... 55
Principal and Selling Stockholders....................................... 57
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 62
Underwriting............................................................. 64
Legal Matters............................................................ 65
Experts.................................................................. 65
Additional Information................................................... 65
Glossary of Terms........................................................ 66
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

2,500,000 Shares

[LOGO OF ADEZA APPEARS HERE]

Common Stock

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

PROSPECTUS

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

PRUDENTIAL SECURITIES INCORPORATED

NEEDHAM & COMPANY, INC.

TUCKER ANTHONY INCORPORATED

, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee.................................................... $ 12,888
NASD Filing Fee..................................................... 4,238
Nasdaq National Market Listing Fee.................................. 41,000
Printing and Engraving Expenses..................................... 150,000
Legal Fees and Expenses............................................. 375,000
Accounting Fees and Expenses........................................ 125,000
Blue Sky Qualification Fees and Expenses............................ 15,000
Directors and Officers' Liability Insurance......................... 250,000
Transfer Agent and Registrar Fees................................... 14,000
Miscellaneous Fees and Expenses..................................... 12,874
----------
Total............................................................. $1,000,000
==========
</TABLE>
- --------

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
Article X of the Registrant's Amended and Restated Certificate of
Incorporation (Exhibit 3.3 hereto) provides for indemnification of its
directors and officers to the maximum extent permitted by the Delaware General
Corporation Law and Section 6 of Article VII of the Registrant's Bylaws
(Exhibit 3.2 hereto) provides for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements (Exhibit 10.1 hereto) with its directors and
officers containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify its directors against certain liabilities that may
arise by reason of their status or service as directors (other than
liabilities arising from willful misconduct of culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' insurance if available on
reasonable terms. Reference is also made to Section 9 of the Underwriting
Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors
of the Company against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since April 30, 1993, the Company has sold and issued the following
unregistered securities (without payment of any selling commission to any
person), as adjusted to give effect to the Company's reincorporation in
Delaware pursuant to which one share of Common Stock of the Delaware
corporation will be issued for each 2.4 shares of Common Stock of the
California corporation:

(1) The Company has sold and issued 35,693 shares of its Common Stock to
directors, officers, employees and consultants pursuant to the exercise of
options under the Company's Plan and the Predecessor Plans.

II-1
<PAGE>

(2) On September 30, 1994, the Company sold and issued 240,384 shares of
its Series F Preferred Stock to Rohto Pharmaceutical Company, Ltd. for an
aggregate of $749,999.50 in cash.

(3) On December 20, 1994, the Company effected a recapitalization,
whereby all outstanding shares of its Preferred Stock were converted into
and exchanged for shares of a newly created Series 1 Preferred Stock based
upon the outstanding series' respective liquidation preferences, and all
outstanding shares of Common Stock were subject to a reverse stock split.

(4) On December 20, 1994, the Company also sold and issued 3,322,893
shares of its Series 2 Preferred Stock directly to, or to funds affiliated
with, Aeneas Venture Corporation, Aspen Venture Partners, Asset Management
Associates, Charter Venture Capital, Enterprise Partners, Hambrecht &
Quist, Indosuez Ventures, Invesco Trust Company, Sutro Investment Partners
and Tokos Medical Corporation for an aggregate of $7,974,943.20 in cash.

(5) On April 30, 1996, the Company issued warrants to purchase 19,608
shares of its Common Stock, exercisable at 85% of the offering price, to
certain investors, specifically Aeneas Venture Corporation, Aspen Venture
Partners, L.P., Asset Management Associates, BG Services Limited, Charter
Ventures II, L.P., Enterprise Partners and STF II, L.P., in connection with
a committed line of funding totalling $2,000,000 in cash to the Company
from such investors.

(6) In July 1996, the Company's predecessor California corporation will
be reincorporated in Delaware by means of a merger with and into the
Delaware corporation, pursuant to which one share of the Common Stock of
the Delaware corporation will be issued for each 2.4 shares of Common Stock
of the California corporation.

The sales and issuances of securities in the transaction described in
paragraph 1 were deemed to be exempt from registration under the Securities
Act by virtue of Rule 701 promulgated thereunder in that they were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701.

The sales and issuances of securities in the transactions described in
paragraphs 2, 3, 4 and 5 above were deemed to be exempt from registration
under the Act in reliance on Section 4(2) of such Act as transactions by an
issuer not involving any public offering.

The transaction described in paragraph 6 was exempt under the Act because no
"sale" occurred in connection with such transaction pursuant to Section 2(3)
of the Securities Act and Rule 145 thereunder.

Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with
any subsequent sales of any such securities. In all such transactions, all
recipients of securities represented their intention to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof and all recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

II-2
<PAGE>

The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such Act
as transactions by an issuer not involving any public offering. The recipients
of securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends where affixed
to the securities issued in such transactions. All recipients had adequate
access, through their relationships with the Company, to information about the
Registrant. In addition, certain issuances described in Item 15(a)(1) and (2)
were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated under such Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of Registrant.
3.2* Bylaws of Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation to be
filed with the Delaware Secretary of State upon the Company's
reincorporation in Delaware.
4.1* Form of Common Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1995 Stock Option and Restricted Stock Plan and form of Option
Agreement.
10.3* 1996 Employee Stock Purchase Plan and form of Subscription
Agreement.
10.4* 1996 Directors' Stock Option Plan and form of Option Agreement.
10.5*+ Exclusive Marketing Agreement, dated December 31, 1991, by and
between the Company and Tokos Medical Corporation, together with
Letter Agreements dated December 20, 1994, January 13, 1995 and May
8, 1996.
10.5(a)+ Page 6 of previously filed Exhibit 10.5, reflecting the Company's
revised request for confidential treatment.
10.5(b)+ Schedule 6.2.6 to previously filed Exhibit 10.5.
10.6*+ Exclusive License Agreement, dated August 12, 1992, between the
Company and the Fred Hutchinson Cancer Research Center, together
with the First Amendment to Exclusive License Agreement and Consent
dated May 9, 1996.
10.7* Investors' Rights Agreement, dated December 21, 1994, between the
Company and certain Shareholders of the Company, together with the
First Amendment to the Investors' Rights Agreement dated April 30,
1996.
10.8*+ Distribution Agreement, dated December 17, 1990, between the
Company and Daiichi Pure Chemicals Co., Ltd., as amended.
10.9*+ Master Equipment Lease, dated September 29, 1995, between the
Company and Phoenix Leasing Incorporated.
10.10* Industrial Space Lease, dated July 1, 1988, between the Company and
James R. Bancroft, together with Addenda Nos. 1, 2, 3, 4 and 5.
10.11* Leastec Master Lease Agreement, dated June 1, 1991, between the
Company and Leastec Corporation, together with Rental Schedules
Nos. 1, 2, 3, 4 and 5.
10.12* Security Agreement, dated April 30, 1996, between the Company and
the Secured Parties thereto.
10.13* Note and Warrant Purchase Agreement, dated April 30, 1996, between
the Company and the Purchasers thereto.
10.14* Form of Convertible Secured Promissory Note.
10.15* Form of Stock Purchase Warrant issued April 30, 1996.
11.1* Calculation of earnings per share.
21.1* Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
</TABLE>

II-3
<PAGE>

- --------
* Previously filed.
+ Certain portions of this Exhibit have been omitted (blacked out) for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.

(B) FINANCIAL STATEMENT SCHEDULES

The following Schedule has been filed:

Schedule II--Valuation and Qualifying Accounts.

ITEM 17. UNDERTAKINGS

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

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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
hereunder, 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.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

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

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF SUNNYVALE, STATE OF CALIFORNIA, ON THIS 25TH DAY OF JUNE, 1996.

Adeza Biomedical Corporation

/s/ Daniel O. Wilds
By: _________________________________
DANIEL O. WILDS (PRESIDENT AND
CHIEF EXECUTIVE OFFICER)

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated below:

SIGNATURE TITLE DATE

/s/ Daniel O. Wilds President and Chief
- ------------------------------------- Executive Officer, June 25, 1996
(DANIEL O. WILDS) and Director
(Principal
Executive Officer
and Director)

/s/ Emory V. Anderson* Vice President and
- ------------------------------------- Chief Financial June 25, 1996
(EMORY V. ANDERSON) Officer (Principal
Financial and
Accounting Officer)

/s/ Nancy S. Amer* Director
- ------------------------------------- June 25, 1996
(NANCY S. AMER)

/s/ Nancy D. Burrus* Director
- ------------------------------------- June 25, 1996
(NANCY D. BURRUS)

/s/ Andrew E. Senyei* Director
- ------------------------------------- June 25, 1996
(ANDREW E. SENYEI)

/s/ Craig C. Taylor* Director
- ------------------------------------- June 25, 1996
(CRAIG C. TAYLOR)

/s/ Nelson H. Teng* Director
- ------------------------------------- June 25, 1996
(NELSON H. TENG)

*By: /s/ Daniel O. Wilds
---------------------------------
DANIEL O. WILDS, ATTORNEY-IN-FACT

II-5
<PAGE>

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE CHARGE BALANCE
AT TO COSTS AT END
BEGINNING AND OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1993............ $ 40 $ 25 $-- $ 65
Year ended December 31, 1994............ $ 65 $ 50 $-- $115
Year ended December 31, 1995............ $115 $-- $ 44 $ 71
Three months ended March 31, 1996
(Unaudited)............................ $ 71 $-- $ 36 $ 35
</TABLE>
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
--------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of Registrant.
3.2* Bylaws of Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation to be filed
with the Delaware Secretary of State upon the Company's
reincorporation in Delaware.
4.1* Form of Common Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1995 Stock Option and Restricted Stock Plan and form of Option
Agreement.
10.3* 1996 Employee Stock Purchase Plan and form of Subscription Agreement.
10.4* 1996 Directors' Stock Option Plan and form of Option Agreement.
10.5*+ Exclusive Marketing Agreement, dated December 31, 1991, by and
between the Company and Tokos Medical Corporation, together with
Letter Agreements dated December 20, 1994, January 13, 1995 and May
8, 1996.
10.5(a)+ Page 6 of previously filed Exhibit 10.5, reflecting the Company's
revised request for confidential treatment.
10.5(b)+ Schedule 6.2.6 to previously filed Exhibit 10.5.
10.6*+ Exclusive License Agreement, dated August 12, 1992, between the
Company and the Fred Hutchinson Cancer Research Center, together with
the First Amendment to Exclusive License Agreement and Consent dated
May 9, 1996.
10.7* Investors' Rights Agreement, dated December 21, 1994, between the
Company and certain Shareholders of the Company, together with the
First Amendment to the Investors' Rights Agreement dated April 30,
1996.
10.8*+ Distribution Agreement, dated December 17, 1990, between the Company
and Daiichi Pure Chemicals Co., Ltd., as amended.
10.9*+ Master Equipment Lease, dated September 29, 1995, between the Company
and Phoenix Leasing Incorporated.
10.10* Industrial Space Lease, dated July 1, 1988, between the Company and
James R. Bancroft, together with Addenda Nos. 1, 2, 3, 4 and 5.
10.11* Leastec Master Lease Agreement, dated June 1, 1991, between the
Company and Leastec Corporation, together with Rental Schedules Nos.
1, 2, 3, 4 and 5.
10.12* Security Agreement, dated April 30, 1996, between the Company and the
Secured Parties thereto.
10.13* Note and Warrant Purchase Agreement, dated April 30, 1996, between
the Company and the Purchasers thereto.
10.14* Form of Convertible Secured Promissory Note.
10.15* Form of Stock Purchase Warrant issued April 30, 1996.
11.1* Calculation of earnings per share.
21.1* Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
</TABLE>
- --------
* Previously filed.
+ Certain portions of this Exhibit have been omitted (blacked out) for which
confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.

<PAGE>

Exhibit 10.5(a)

5.1 Technical Information. During the term of this Agreement Adeza shall
---------------------
provide to Tokos all such technical and marketing information
concerning the Tests as Adeza shall possess and Tokos shall reasonably
request or to which it may otherwise be entitled under this Agreement.
Except as utilized for marketing purposes as agreed to by Adeza, all
such disclosures shall be subject to the confidentiality obligations
set forth elsewhere in this Agreement.

5.2 On-Site Technical Assistance. Adeza shall, at its own expense, upon
----------------------------
the reasonable request of Tokos, dispatch a reasonable number of
qualified technical personnel to locations designated by Tokos for a
period of not more than 5 working days per year during the term hereof
for consultation, advice and technical discussion with Tokos'
personnel during the initial set up of a marketing plan for the Tests
as well as subsequent periodic training programs with respect to the
Tests.

5.3 Clinical Studies. All necessary studies with regard to Tests shall be
----------------
agreed to, designed and managed to successful conclusion by Adeza and
Tokos, jointly. Necessary studies shall include uses of Tests for
indications and applications without regard to any FDA requirement
including, but not limited to, symptomatic patients, high risk
asymptomatic patients, low risk asymptomatic patients for screening
purposes and intervention studies with current conventional
treatments. Except for home uterine activity monitoring ("HUAM"),
which may be a part of any study and the cost of which shall be borne
by Tokos and significant other tests or materials other than the
Tests, Adeza shall allocate from Marketing Rights Payments and Product
Purchase Payments all amounts necessary to undertake and successfully
complete all necessary studies. Any sales or use of the Tests prior
to FDA PMA approval shall only be pursuant to such clinical studies or
other programs as the parties shall jointly agree upon.

VI. PAYMENTS

6.1 Marketing Rights Payments. In consideration for the Marketing Rights
-------------------------
granted to Tokos by Adeza pursuant to this Agreement, Tokos shall pay
to Adeza the following amounts:

6.1.1 Upon the execution of this Agreement $3,000,000.

6.1.2 Upon submission to the FDA of a PMA application by Adeza for
the Membrane Test, which application the parties shall jointly
and reasonably agree upon, [*]. If there is disagreement
between the parties as to condition of the application for
filing, the parties agree to abide by the recommendation of a
committee composed of the Chairman of Tokos, the Chairman of
Adeza and one outside party jointly appointed.

* [CONFIDENTIAL TREATMENT REQUESTED]

-6-

<PAGE>
Exhibit 10.5(b)

SCHEDULE 6.2.6

AVERAGE NET SELLING PRICE

Identified Targeted Quantity
Volume Selling Sold In
Level Price/Test A Month
- ----- ---------- -------
<S> <C> <C> <C>
[*] $[*]/ [*] [*]
[*] $[*]/ [*] [*]
[*] $[*]/ [*] [*]
----- --------
[*] [*]

</TABLE>
[*] divided by [*] = [*]

Weighted average selling price is [*] per test.

If Tokos' actual collection experience is [*],
the Average Net Selling Price is:

[*]
======

[*] Confidential Treatment Requested

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
April 30, 1996 (except for Note 9 as to which the date is June 25, 1996) in
Amendment No. 2 to the Registration Statement (Form S-1) and the related
Prospectus of Adeza Biomedical Corporation for the registration of 2,875,000
shares of its Common Stock.

Our audits also included the financial statement schedule of Adeza
Biomedical Corporation listed in Item 16(b). This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

Ernst & Young LLP

Palo Alto, California

June 25, 1996

<PAGE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 2,136 1,027
<SECURITIES> 0 0
<RECEIVABLES> 132 98
<ALLOWANCES> 71 35
<INVENTORY> 179 225
<CURRENT-ASSETS> 2,407 1,390
<PP&E> 1,695 1,671
<DEPRECIATION> 1,358 1,390
<TOTAL-ASSETS> 2,923 1,860
<CURRENT-LIABILITIES> 1,134 1,155
<BONDS> 0 0
0 0
5 5
<COMMON> 0 0
<OTHER-SE> 24,385 24,391
<TOTAL-LIABILITY-AND-EQUITY> 2,923 1,860
<SALES> 541 152
<TOTAL-REVENUES> 3,957 152
<CGS> 1,105 251
<TOTAL-COSTS> 1,105 251
<OTHER-EXPENSES> 4,080 997
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 66 5
<INCOME-PRETAX> (1,144) (1,077)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,144) (1,077)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,144) (1,077)
<EPS-PRIMARY> (0.21) (0.20)
<EPS-DILUTED> (0.21) (0.20)

</TABLE>