GENERAL DEVELOPMENT OF BUSINESS

BIOQUAL, Inc., formerly Diagnon Corporation, (the "Company" or "BIOQUAL"), a Delaware corporation, was founded in 1981 to develop, produce and sell diagnostic test kits incorporating monoclonal antibodies to diagnose certain anemias, infections, and parasitic diseases. In fiscal year 1988, the Company discontinued the diagnostic test kit segment of its business to concentrate on and to expand its contract research base with the National Institutes of Health (NIH).

Beginning with fiscal year 1988, the Company has reported a profit before income tax each year. Beginning in 1994, Company management, recognizing the limited number of new...