10KSB40:

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-KSB
(MARK ONE)

( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended March 31, 1999

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 0-21846

BISHOP EQUITIES, INC.
(Name of Small Business issuer in its charter)

NEVADA 13-3632859
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)


7825 FAY AVENUE, SUITE 200,
LAJOLLA, CALIFORNIA 92037
(Address of Principal Executive Office) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (619) 456-5777

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- ---------------------
NONE NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK -- $.001 PAR VALUE
(TITLE OF CLASS)


Check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No X
--- ---

Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-KSB. X
---

Revenues of the registrant for the fiscal year ended March 31, 1999 were $-0-.

The aggregate market value of the Common Stock held by
non-affiliates of the registrant on March 31, 1999 was approximately
$15,066,521, based upon the closing bid price of the Common Stock, as
reported by the Nasdaq Over-the-Counter Bulletin Board on July 14, 1999.

The number of shares of the Common Stock of the registrant
outstanding as of March 31, 1999 was 2,595,000.

Transitional Small Business Disclosure Format (check one):

Yes No X
---


PART I

All statements, other than statements of historical fact, included
in this Form 10-KSB are, or may be deemed to be, "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of
1934 (the "Exchange Act"). Such forward-looking statements involve
assumptions, known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of Bishop Equities,
Inc. (the "Company") to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements contained in this Form 10-KSB. Such potential risks and
uncertainties include, without limitation, FDA approval of the Company's
products and other regulations, patent protection on the Company's
proprietary technology, product liability exposure, uncertainty of market
acceptance, competition, technological change, and other risk factors
detailed herein and in other of the Company's filings with the Securities and
Exchange Commission. The forward-looking statements are made as of the date
of this Form 10-KSB and the Company assumes no obligation to update the
forward-looking statements or to update the reasons actual results could
differ from those projected in such forward-looking statements.

ITEM 1. BUSINESS

GENERAL

Bishop Equities, Inc. ("Bishop" or the "Company") was incorporated
in Nevada in April 1991 to provide a public vehicle for participation in a
business transaction through a merger with or acquisition of a private
company. In March 1993, Bishop successfully offered its common stock at $6.00
per share through an initial public offering. In March 1999, Bishop began
doing business as "Aethlon Medical, Inc." The members of the Board of
Directors have adopted a resolution to amend the Company's Articles of
Incorporation to formally change the name of the Company from "Bishop
Equities, Inc." to "Aethlon Medical, Inc.," subject to shareholder approval.

REORGANIZATION; ACQUISITION OF AETHLON AND HEMEX

On March 10, 1999, Bishop executed an Agreement and Plan of
Reorganization for the Acquisition of All of the Outstanding Stock (the
"Aethlon Agreement") of Aethlon, Inc., a California corporation ("Aethlon").
Pursuant to the Aethlon Agreement, Aethlon became a majority-owned subsidiary
of the Company.

Also on March 10, 1999, the Company executed an Agreement and Plan
of Reorganization for the Acquisition of All of the Outstanding Stock (the
"Hemex Agreement") of Hemex, Inc., a Delaware corporation ("Hemex"). Pursuant
to the Hemex Agreement, Hemex became a majority-owned subsidiary of the
Company.

As of March 31, 1999, the Company has issued 2,083,500 (80%) of the
2,595,000 shares of the Company's Common Stock to the former shareholders of
Aethlon and Hemex.

The Company's business is the development and manufacture of medical
device technologies. The Company intends to build its business in three ways:

- Complete the commercialization of the Hemex product line of
extracorporeal blood purifiers now in clinical trials.
- Develop and exploit new applications of the Hemex platform
technology.
- Continue the strategy of acquiring other medical device
technologies which can be developed and commercialized on an
international basis.

The Company also intends to pursue the acquisition of additional
medical technologies.

THE HEMEX HEMOPURIFIER-TM-

The Hemopurifier-TM- (hereinafter referred to as the "Hemopurifier"
or the "DFO Hemopurifier") is a novel, hollow-fiber cartridge containing an
immobilized antidote for removing toxic material from the blood. The device
is used in extracorporeal circulation systems, which can be similar to those
used in hemodialysis, or any one of the simpler aphresis systems used today.
The first Hemopurifier product to be commercialized is a device designed for
the removal of aluminum. To date, the device has been proven safe in dialysis
patients with aluminum intoxication in a Phase I clinical trial approved by
the U.S. Food and Drug Administrate ("FDA"). Other initial product markets to
be commercialized are Hemopurifiers, which remove iron, lead, and Cisplatin.
The Hemopurifier is protected by patents in the United States, Europe, and
Japan, with additional patents pending. The size of the potential market for
the initial products addressed by the Hemopurifier is estimated by the
Company to be approximately $1.2 billion in the U.S. and $3.6 billion
worldwide. Potential product applications include Hemopurifiers designed to
remove (i) various viruses; (ii) plutonium and other heavy metals; and (iii)
drug overdoses.

ADVANTAGES OF THE HEMOPURIFIER DEVICE. The clinical advantages offered
by the Hemopurifier device over present treatments are:

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1) Toxic material can be selectively removed WITHOUT SIDE EFFECTS,
since no substance enters the body. Toxicity of the antidote is
eliminated, because it is immobilized in the device rather than
injected into the patient.

2) Antidotes of GREATER STRENGTH AND EFFECTIVENESS, compared with
antidotes which were sparingly used previously because of their
toxicity, can be used in this device without regard for the side
effects which would occur if the same substance were in the
bloodstream.

3) The device is HIGHLY EFFICIENT. The structure of the Hemopurifier
device provides a large surface area for immobilization of a
relatively large quantity of antidote, allowing exposure to a
large volume of blood in a short period of time.

4) The device is SAFE. In a closed system, the amount of blood
retained by the Hemopurifier device is small. No replacement fluid
is needed, and no blood transfusions are required. As a result,
the risks of volume expansion, blood pressure changes, infections,
and blood incompatibility (inherent in blood transfusions) are
eliminated. Only the targeted toxic materials are removed. All
other blood components remain in the circulation.

5) The device uses well-established extracorporeal applications,
similar to hemodialysis, plasmapheresis, or other types of
transfusion procedures. These methods are widely used in hospitals
and clinics.

APPLICATIONS OF THE HEMOPURIFIER DEVICE. Development work to date
has focused principally on Hemopurifier devices for the removal of aluminum,
iron, lead, and cisplatin.

Poisoning with aluminum, iron, lead, and platinum are serious
problems for which current treatment methods are unsatisfactory. The need for
new therapeutic approaches in each case is widely recognized. The number of
patients who would benefit from these treatments is estimated to be over one
million per year in the U.S. alone. In many of the targeted conditions,
patient populations are well identified and currently under some form of
treatment, with both patient and physician awaiting the development of more
effective treatment without serious side effects. As a result, the market
penetration of the metal Hemopurifier devices should be relatively quick.

The long-range goal of Hemex is to continue to develop new medical
applications for this novel treatment method. Some of the future applications
include:

1) treatment of poisoning with heavy metals not included above,
including development of specific chelators for the binding of
mercury, cadmium, copper plutonium, and other radioactive
elements;

2) treatment of poisoning with small molecular weight drugs or
chemicals, using specific antibodies against cardioactive drugs
like dioxin and quinine, depressants and sedatives like
barbiturates, addictive analgesics like Darvon, and abused drugs
like cocaine; and

3) improvement of patient management in conditions with circulating
harmful antibodies or antigen-antibody complexes where treatment
may be feasible by specific removal of these proteins.

The priority of pursuing the future applications will be determined
by (i) relative market potential; (ii) technical advances in protein
separation; and (iii) up-to-date reports of therapeutic success with
plasmapheresis in specific diseases. Some of the conditions which may merit
study include various cancers, insulin-dependent diabetes, certain rheumatic
diseases, and hemophilia.

MARKETING STRATEGY

The marketing objective adopted by Hemex management is to establish
the Hemopurifier device as the preferred treatment in the U.S. for each of
the conditions for which the device is designed, and to then expand use of
the device into international markets. The Company intends to use
multi-faceted sales and marketing strategies for penetrating the U.S. market.
Sales and promotional efforts are planned to target distributors, the
prescribing physicians and medical facilities, and patients.

DISTRIBUTORS. The Company plans to hire area-marketing managers to
work with distributor sales forces. In areas of lower population density, the
Company plans to use independent, commissioned sales representatives who work
with a small number of closely aligned products. Their duties will include:

1) Developing product-marketing programs.
2) Training distributor sales forces.
3) Providing sales materials and product updates.
4) Assisting in sales calls to physicians and medical facilities.

PHYSICIANS AND MEDICAL FACILITIES. The Company plans to have area
marketing managers visit physicians and hospital/medical practice
administrators, if possible with distributor salesmen who have strong
pre-established relationships with these buyers. In addition, the Company
plans to introduce physicians to the Hemopurifier device at medical society
meetings and through medical journals. The Company plans to have its
representatives attend medical meetings and host information booths.

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PATIENTS. As consumers take a greater interest in managing their own
health care, the Company believes it will be important to build awareness of
the potential of the Hemopurifier among the patient population. The Company
plans to work with professional public relations firms to promote the
Hemopurifier in newspapers and general interest magazines, as well as in
targeted patient-oriented publications. A strong presence at consumer
association meetings, where interested individuals share information, will
also be pursued. Some of these meetings where the Company will attempt to
make presentations include:

Lead Poisoning Prevention Coalition
Alliance to End Childhood Lead Poisoning --
National and International Conferences
Cooley's Anemia Foundation -- National and
International Conferences

DISTRIBUTION. The Company plans to form strategic alliances with a
small number of significant distributors of those medical products that are
sold to the target buyers. Although distribution rights may be granted on a
geographical or a product line basis, the company intends to avoid
exclusivity which creates dependence on another firm. The Company intends to
look for strategic partners that (i) offer a knowledgeable sales force with
strong relations with the dialysis clinics and other medical facilities Hemex
seeks to penetrate, and (ii) have the financial and physical capacity to
manage inventory and order processing well. For the DFO Hemopurifier device
for aluminum, potential partners include suppliers to the dialysis industry
and large hospital supply companies.

THE MARKETS

GENERAL USE. Treatment with the Hemopurifier device can be in a
hospital or outpatient facility, under the supervision of a physician
experienced in hemodialysis or other extracorporeal procedures. The
prescribing physician would typically be:

HEMOPURIFIER APPLICATION PRESCRIBING PHYSICIAN

Aluminum Removal Nephrologist, Surgeon, Internist,
Orthopedist, Emergency Physician

Iron Removal Hematologist, Pediatrician,
Internist, Emergency Physician,
Nephrologist, Surgeon

Lead Removal Pediatrician, Obstetrician,
Industrial Physician, Family
Physician, Emergency Physician,
Nephrologist

Platinum Removal Oncologist, Internist, Surgeon,
Emergency Physician, Nephrologist

Medical facilities, in the United States targeted for the initial
four Hemopurifier products include:

6,000 Hospitals
2,000 Freestanding Dialysis centers
100 Regional Poison Control Centers

THE MEDICAL NEED FOR THE DFO HEMOPURIFIER. The DFO Hemopurifier,
which removes both aluminum and iron from the blood, is manufactured by
immobilizing the chelator desferrioxamine (DFO) in the cartridge. DFO has
been well established in clinical use as an attractor that binds aluminum and
iron. There are three basic conditions in which DFO therapy is indicated:

1) ALUMINUM INTOXICATION. A segment of patients with End Stage Renal
Disease (ESRD), who are on chronic hemodialysis, have aluminum
toxicity caused by medication which contains aluminum. In 1996,
over 200,000 patients were on hemodialysis in the United States,
of which an estimated 5% have serious levels of aluminum
intoxication. This condition can lead to crippling bone disease,
anemia, and in severe cases brain damage and reduced life
expectancy.

2) IRON OVERLOAD. There are three patient populations in which excess
iron is introduced into the body or absorbed by the body,
resulting in organ damage and early death. In each case, life long
treatment is required.

a) HEREDITARY HEMOCHROMATOSIS: A genetic disorder that
results in excess iron being absorbed by the gut.
Considered the most common of genetic diseases,
hemochromatosis afflicts more than one million people in
the United States alone, and is thought to be the most
under-diagnosed disease in the world.

b) ACQUIRED IRON OVERLOAD: Iron overload is an unavoidable
complication of life-sustaining chronic blood
transfusions. These patients include those with Cooley's
Anemia, about 10% of those with Sickle Cell Disease, and
others with transfusion-dependent anemia like
sideroblastic anemia.

c) ACUTE IRON POISONing: Of approximately 20,000 cases of
iron poisoning from iron-containing vitamin pills reported
annually to Regional Poison Centers, 60% had symptoms
requiring treatment.

3) REPERFUSION INJURY AFTER HEART SURGERY. During open-heart surgery,
external blood circulation is established with a heart-lung
machine to allow the heart to be stopped safely. When blood flow
to the heart is reestablished, reperfusion injury can result from
sudden release of iron

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accumulated in the heart that may generate oxygen-derived "free
radicals." The use of DFO in controlling this condition has been
the subject of many recent articles.

PRESENT TREATMENT

Although DFO is an effective chelator of both iron and aluminum, its
use is limited because of its serious side-effects. DFO can presently be
administered only by injection. These injections may cause acute allergic
reactions and blood pressure changes and, after chronic administration, may
lead to impairment of hearing and sight. The most dangerous side-effect is
increased susceptibility to lethal fungal infections.

At present, less than 10% of patients requiring iron chelation
therapy worldwide received the widely used chelating drug desferrioxamine
because of its high cost, oral inactivity, and high toxicity. This medical
opinion expresses increasing concern about DFO side-effects, and increasing
reluctance to prescribe this effective drug.

Two devices containing activated charcoal, the Alu-Kart and the
Clark Hemoperfusion System, have been introduced for the removal of aluminum
after the injection of DFO. However, they are rarely prescribed because (a)
they do not eliminate the need for DFO injection, and (b) other detrimental
side-effects were shown when blood cells came into contact with activated
charcoal.

In addition to anticipated cost advantages, the DFO Hemopurifier
device offers significant medical benefits to the patient:

QUALITY OF LIFE. Treatment is highly efficient, allowing
for a single outpatient treatment to substitute for daily therapy. For
example, for Cooley's Anemia patients, treatment may be two to three days per
month in an outpatient setting rather than 12 hours every night on an
infusion pump.

SAFETY. The debilitating and life-threatening
side-effects of DFO are eliminated because desferrioxamine does not enter
the bloodstream of the patient.

EASE OF TREATMENT. Application is convenient for the
patient because treatment is within the existing dialysis process for the
aluminum patient, and within existing transfusion or phlebotomy regimens for
the iron patient.

The Hemopurifier device clearly adds improved treatment
characteristics to lower cost of treatment, relieving medical and financial
burdens for the patient and the third party payer.

THE MEDICAL NEED FOR THE HEMOPURIFIER DEVICE FOR LEAD

Public health officials say lead poisoning is the number one
environmental threat to children whether they live in public housing or neat,
suburban homes. In addition to widely recognized environmental sources, many
occupations (e.g. battery manufacturing, smelting) result in exposure to high
levels of lead. Workers in these industries may also bring lead into their
homes, exposing their families to lead poisoning.

Lead poisoning can affect virtually all systems of the body,
causing anemia, gastrointestinal symptoms (constipation, vomiting, abdominal
pain), hypertension, damage to the reproductive system (decreased fertility,
increased rate of miscarriage and stillbirth), and central nervous system
damage resulting in loss of coordination, general weakness, and hand and foot
paralysis. In children, lead poisoning interferes with normal growth,
impeding physical and neurological development.

The three segments of the population at greatest risk for lead
poisoning are shown below:

YOUNG CHILDREN. The NHANES III study by the National Center
for Health Statistics found that 1.7 million children under age five have
blood levels high enough to affect cognitive development. Approximately
95,500 were found to have levels at which medical intervention is recommended
by the Center for Disease Control.

PREGNANT WOMEN. According to a recent statement by the
Public Health Service, it is estimated that 22,822 pregnant women have high
blood lead levels, which will result in dangerous exposure to their fetuses.

INDUSTRIAL WORKERS. In 1993, over 587,000 workers were
exposed directly to lead in the workplace. Based on OSHA compliance
inspection data, it is estimated that 195,745 industrial workers have
elevated blood lead levels.

PRESENT TREATMENT

Lead intoxication is presently treated with chelation therapy, in
which a chemical that binds lead is administered to the patient, who
subsequently eliminates the chelator/lead complex through the kidney in the
urine. Lead chelators available for clinical use are: Calcium Disodium
Versenate (EDTA) given intravenously, Dimercaprol (BAL) given
intramuscularly, D-penicillamine and Succimer (DMSA), both given orally. Each
of these drugs has its own side-effects (e.g. hypertension, gastrointestinal
irritation, kidney injury), and must be given under close medical supervision
in a hospital.


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YOUNG CHILDREN. Chelation Therapy is used very cautiously
in children, depending on the level of intoxication. The most frequently
prescribed chelator, EDTA, is given by infusion in a dilute intravenous
solution over five consecutive days. This process is often repeated two or
three times, with weeklong rests between treatments. Other chelators are
administered to children in the same way.

PREGNANT WOMEN. Although lead poisoning in a mother may
cause neurological damage to her fetus, she is not given chelation therapy
because it is potentially too toxic, and potentially fatal, to the fetus.

INDUSTRIAL WORKERS. Chelation therapy is rarely
administered to industrial workers because of its side-effects. OSHA requires
that workers be removed from the contaminated area, or sent home, until their
lead levels return to acceptable levels. Under current OSHA regulations, the
average time away from work is approximately 100 days, at an average
estimated cost per day of $74, for a total economic impact of approximately
$7,400 per year. The prospect for a long-term illness adds further to the
potential cost for the worker and his employer.

TREATMENT OF LEAD POISONING WITH THE HEMOPURIFIER DEVICE

Since the chelator is immobilized in the Hemopurifier device, the
binding of lead and chelator takes place outside the body. Lead removal is
achieved without any toxicity; the lead/chelator complex is neither released
into the blood, nor eliminated through the kidney.

Blood lead levels do not reflect the total body burden of lead, as
lead accumulates in the tissues and in bones. During conventional chelation,
lead stored in tissues and bones may be released into the blood, increasing
the potential for damage (eventually a new equilibrium among
blood-tissue-bones will be established). By contrast, the Hemopurifier device
captures the circulating lead as well as the lead released from storage, thus
preventing harm to the kidneys.

The number and frequency of treatments with the Hemopurifier device
will depend upon the amount of total lead in the body, and on potential
re-exposure to the lead source. Re-exposure is a problem for many children
living in homes with lead paint, and for many workers in high lead exposure
industries.

Application of the Hemopurifier device could be in an outpatient
hospital setting, an emergency room, or a dialysis center. A dialysis system,
or a simpler apheresis system used for blood transfusions and plasmapheresis,
is suitable for administration of the Hemopurifier device for the removal of
lead.

In addition to anticipated cost advantages over other treatments,
the Company believes the Hemopurifier offers significant medical benefits to
the patient:

REDUCED TREATMENT TIME. Treatment is efficient, allowing
one outpatient treatment in place of a five-day process. For example,
children with lead poisoning might be treated three times in an outpatient
setting instead of 15 days of traditional chelation therapy.

TREATMENT FOR PREGNANT WOMEN. Because of the safety of the
Hemopurifier, this treatment can be used by pregnant women who heretofore had
no effective means of reducing their blood lead levels.

SAFETY. With no side-effects, the Hemopurifier device
allows safer and more thorough treatment.

THE MEDICAL NEED FOR THE HEMOPURIFIER DEVICE FOR PLATINUM

Cisplatin is a platinum derivative that is one of the most effective
chemotherapeutic agents for certain types of cancer. However, cisplatin
infusion is typically followed by severe nausea and vomiting. Cisplatin may
deposit in the sensory nerves, resulting in incapacitating levels of pain,
which may last for years after treatment has been discontinued. The dosage of
cisplatin, therefore, is often limited by its toxicity.

PRESENT TREATMENT

There is presently no means of removing cisplatin from the body.
Painkillers and medications that reduce vomiting provide limited relief from
side-effects. An injectable preparation for reducing the acute and chronic
side-effects is reported to be in development.

TREATMENT OF PLATINUM INTOXICATION WITH THE HEMOPURIFIER DEVICE

The Hemopurifier device for the removal of cisplatin can be applied
to the vein draining the tumor, either during or immediately after cisplatin
treatment. The toxic agent is removed as it exits the tumor, and before it
can invade normal tissue.

Animal tests have demonstrated the effectiveness of this procedure.
In a simulated regional perfusion of the legs of anesthetized dogs, cisplatin
was infused in the femoral artery, and blood leaving the femoral vein was
passed through the Hemopurifier device. The level of cisplatin in the dogs'
blood was reduced significantly.

ADVANTAGE OF THE HEMOPURIFIER DEVICE

Priced at $400 to the patient, it is expected that the Hemopurifier
will be approved by third-party payers for this treatment. The total cost of
treatment are estimated to be:

Cartridge Cost $ 400
Procedure Cost $ 600
Procedures per Year 3
Total Annual Cost $ 3,000


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Although it offers relatively modest cost, the major benefit offered
by the Hemopurifier Device for cisplatin is that it will allow the
administration of substantially higher doses of cisplatin, thereby increasing
its effectiveness as a chemotherapeutic agent. Since most cisplatin will be
removed immediately after it leaves the tumor, normal tissues will not be
damaged. The patient will receive more effective treatment, and enjoy an
improved quality of life during treatment because of the reduction or
elimination of the debilitating side-effects of cisplatin.

MANUFACTURING

The production of a Hemopurifier device involves two steps: (1)
compounding the chelator in a form that can be immobilized in the cartridge,
and (2) filling the cartridge with the chelator preparation. A standard
Fresenius dialysis cartridge, with minor modifications, is used because of
its relatively low cost and wide availability.

Hemex has contracted with two companies to do scale-up development
of the DFO Hemopurifier for aluminum for the final clinical trial.

One company, located in Buffalo, New York, has extensive experience
in taking chemical products from laboratory formulations to industrial scale
production. This contractor will prepare the chelator for delivery to the
filler.

The second contractor, located in Rochester, New York, is an
FDA-approved facility with a strong record with regulatory agencies. The
company is research-oriented with a good understanding of scale-up
development. They will fill the devices with the prepared chelator, and
package, label, and sterilize the Hemopurifier to FDA specifications.

Beyond meeting the product requirements for clinical trials, there
are three options for manufacturing the DFO Hemopurifier device for the
commercial market:

- continue to subcontract both processes in these or other facilities;

- manufacture the chelator in-house, and contract the filling,
packaging, and sterilization; or

- form a strategic alliance with one competent firm to manufacture the
entire product.

Subcontracting without a strategic partnership exposes technological
secrets to potential competitors, but offers minimal capital investment and
maximum flexibility. It also allows Hemex to bring products to market as
rapidly as possible, perhaps sacrificing some potential profit margin to do
so. Contracting with a strategic partner offers less risk, but involves
surrender of some corporate autonomy and likely some ownership as well.

Hemex management favors using subcontractors in the near and
intermediate term. With the anticipated growth in volume, it is possible that
self-manufacture will become an attractive financial alternative at some
point in the commercial life of the Hemopurifier. In any case, it is unlikely
that Hemex will invest in sterilizing capacity in the plan period, so that
that capital-intensive process will remain with a contractor.

HEMEX RESEARCH AND DEVELOPMENT LOCATIONS

UNIVERSITY OF BUFFALO FOUNDATION INCUBATOR

Development and in-vitro testing of the Hemopurifier device takes
place at laboratory facilities rented from the Western New York Technology
Center, maintained by the State University of New York at Buffalo.

The employees at this location work under the direction of Dr. Agnes
Stadler. She has a Ph.D. in biotechnology, and an MS in Pharmaceutical
chemistry, from the University of Budapest, Hungary. Before coming to the
U.S., Dr. Stadler headed the Pharmaceutical Group at the Chinoin Research
Center of Chinoin Pharmaceutical Company. She is responsible for developing
the immobilized chelators and the assembly of the Hemopurifier devices.

BUFFALO GENERAL HOSPITAL LABORATORY

Testing of Hemopurifier in recirculation experiments with biological
materials (chiefly human blood) is conducted at the laboratory at the
University-affiliated Buffalo General Hospital. Blood Samples from patients
with disease conditions amenable to treatment with specific Hemopurifier's
are tested in this facility. This unit is headed by Dr. Clara Ambrus.

LABORATORY ANIMAL FACILITIES - SUNY AT BUFFALO

Preclinical animal testing is conducted under sterile conditions,
using continuous monitoring, at the Laboratory Animal Facilities at the State
University of New York at Buffalo. Hemex employees work at this facility with
the assistance of personnel provided by the University. Veterinary
consultation, technicians for the daily care of the animals, surgical
assistants during experimentation, and post-surgical care are all provided by
the facility. Hemex reimburses the University on an hourly basis for animal
maintenance and experimental assistance.

BUFFALO GENERAL HOSPITAL HEMODIALYSIS CENTER


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A state of the art facility with 20 hemodialysis stations, the
Hemodialysis Center can serve 120 patients per day. Director of the Center is
Dr. Sidney Anthone, a member of the Scientific Advisory Board of Hemex and a
long-time collaborator of Dr. Ambrus. Dr. Anthone has conducted the in vivo
clinical studies of the Hemopurifier completed to date, in collaboration with
Dr. Clara Ambrus.

DEVELOPMENTS TO DATE

A summary of progress to date for each of the four metal
intoxication devices follows:

DFO HEMOPURIFIER DEVICE FOR ALUMINUM. The first clinical trial under
an IDE was completed at the end of 1993, with the results accepted by the FDA
in 1994. The trial showed that the device was safe; a complete lack of
side-effects on the first application, and on repeated applications, was
demonstrated. Furthermore, the device was effective in removing substantial
amounts of aluminum from the blood. See Exhibit "D" for detailed results of
this trial.

In preparation for the application for marketing approval, a second
IDE was requested, and approved in February 1997. This trial will test the
efficacy of aluminum removal during dialysis treatment using the same
treatment schedule that will be recommended for commercial use of the DFO
Hemopurifier.

This clinical trial includes treating patients from three dialysis
centers three times per week for 12 weeks, with each treatment lasting four
hours. A total of 24 patients will be treated, with an equal number of
controls monitored. The focus of the trial will be to demonstrate the
superiority of the Hemopurifier device over present treatment, and to gather
data that will support the cost-effectiveness of this treatment. This trial
will begin in the fourth quarter of 1999.

Upon acceptance by the FDA of the results of this clinical trial,
Hemex will immediately file a PMA application, anticipating approval in the
first quarter of 2001. Sales of the aluminum device will begin as soon as
this approval is received.

The Company will continue to explore alternative expedited
regulatory paths, such as the Product Development Protocol, the Humanitarian
Device Exemption, and the 510K process, for this and subsequent devices.

DFO HEMOPURIFIER DEVICE FOR IRON . During the forthcoming clinical
trial for the aluminum device, excess iron will unavoidably be removed from
patients' blood since the chelator for aluminum and for iron is identical.
Data gathered on iron removal will be an essential part of Hemex submission
to the FDA for approval of the iron Hemopurifier, which will be made at the
earliest opportunity. The FDA may require further clinical testing on a
limited scale, but the approval process may be shorter and less costly than
for the PMA for the initial product.

HEMOPURIFIER DEVICE FOR PLATINUM. The initial prototype of the
Hemopurifier device for platinum has been tested successfully in vitro using
blood of patients which was collected during cisplatin treatment. It was also
tested in animals chiefly for safety. Chelators are now being tested, and an
application for a Phase I Clinical trial will be submitted in the third
quarter of 1999.

HEMOPURIFIER DEVICE FOR LEAD. Resin chelators are being investigated
for their suitability for immobilization, as well as their specificity,
efficiency, availability, and cost. Results from tests in vitro, and in dogs
with experimentally produced lead poisoning, are extremely encouraging in
demonstrating the efficacy of the Hemopurifier approach to lead
detoxification. Once the laboratory work is complete, application to the FDA
for a Phase I Clinical Trial will be submitted in the fourth quarter of 1999.

COMPETITION AND TECHNOLOGICAL CHANGE

There are many companies, both public and private, including
well-known pharmaceutical companies, chemical companies and specialized
biotechnology companies, engaged in developing diagnostic products for
certain of the applications being pursued by Hemex. Many of these companies
have substantially greater capital, research and development, manufacturing,
marketing and human resources and experience Company is anticipated to have.
Such companies may develop products more quickly or products that are more
effective and less costly than any that the Company may develop. The industry
in which the Company proposes to compete is characterized by extensive
research efforts and rapid technological changes. New developments are
expected to continue, and there can be no assurance that discoveries by
others will not render the Company's products or potential products
noncompetitive. Competition may increase further as a result of advances that
may be made in the commercial applicability of technologies and greater
availability of capital for investment in these fields.

SUMMARY OF CURRENTLY AVAILABLE TREATMENTS

Management knows of no comparable medical devices either being sold
commercially, or in development, which perform the same function as the
Hemopurifier products. The alternative treatments available to patients today
are described below.

CHELATION. Current treatments for metal intoxications (aluminum,
iron, and lead) involve the administration of specific binding agents, called
chelators, either by injection or orally. The complex formed by the
combination of the chelator and the metal is removed by natural evacuation,
through the kidney or through the intestines. The chelators and
chelator/metal complexes are toxic and can produce such harmful side-effects
as gastrointestinal irritation, hypertension, and kidney injury.

The principal chelators and their manufacturers are identified in
the following table:


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