10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

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

                  For the Fiscal Year Ended December 31, 1999

                        Commission file number 0-27750
[LOGO OF IMPATH THE CANCER INFORMATION COMPANY]

                                  IMPATH INC.
            (Exact name of registrant as specified in its charter)

              Delaware                                 13-3459685
   (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                  Identification No.)

        521 West 57th Street
         New York, New York                               10019
   (Address of principal executive                     (Zip Code)
              offices)

       Registrant's telephone number, including area code (212) 698-0300

       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.005 par value
                                Title of class

  Indicate by check mark 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 as the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
                             Yes   X    No

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not 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-K. [_]

  State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days.

                                                           
      Aggregate market value as of February 29, 2000............... $286,345,368

      

  Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

                                                              
      Common Stock, $.005 par value, as of February 29, 2000.......... 8,743,370

      

                      DOCUMENTS INCORPORATED BY REFERENCE

  List hereunder the documents, all or portions of which are incorporated by
reference herein and the Part of the Form 10-K into which the document is
incorporated:

  2000 Proxy Statement--Part III


                                    PART I

Item 1. Business.

Overview

  IMPATH Inc. (the "Company") specializes in providing patient-specific cancer
diagnostic and prognostic information, with a particular expertise in
difficult to diagnose tumors, prognostic profiles in breast and other cancers
and lymphoma/leukemia analysis. The Company currently works with more than
7,400 physicians specializing in the treatment of cancer patients, in over
1,785 hospitals and 409 oncology practices. IMPATH's database currently
contains more than 550,000 patient profiles. In addition, IMPATH can link its
information with that of its tumor registry business to provide data on the
full continuum of care, from diagnosis through treatment and outcomes on many
patients. This information should be increasingly valuable to many
constituents involved in the management of cancer including physicians, payors
and developers of new therapies. More recently, the company has leveraged its
years of experience and extensive database of patient profiles and relevant
key biological data, in providing pharmaceutical, biotechnology and genomics
companies with critical information to assist in accelerating oncology
targeted-drug development. IMPATH is currently working on more than 50
projects with over 20 different pharmaceutical/biotechnology companies
including 21 U.S. based and 4 international clinical trials. The Company is
also providing information to several genomics companies in the area of gene
discovery, development and ultimate commercialization of targeted, gene-based
therapies.

  IMPATH believes that it currently performs more specialized analyses for
difficult to diagnose cancer cases than any other institution in the world.
The Company also believes that it is the leader in providing comprehensive
patient-specific prognostic information for cancer. For example, IMPATH
provided patient-specific prognostic information on more than 28% of all
breast cancer cases in the U.S. in 1998. The Company's fastest growing
business is the analysis of lymphomas and leukemias, with IMPATH analyzing
31,269 of such cases in 1999, representing an increase of 48% over 1998.
Lymphoma/leukemia analysis represents an area in which IMPATH's expertise and
utilization of sophisticated technologies are integrated to provide
information for optimal disease management.

  The Company believes that its integration of patient-specific information
will be essential to a growing list of cancer diagnoses, most notably
prostate, colon, lung and bladder cancer. Furthermore, as an increased
understanding of the molecular basis of cancer leads to the development of new
evaluation methods and therapeutic tools, IMPATH expects that the information
it provides will become increasingly significant in optimizing the management
of all phases of cancer, including cancer predisposition, diagnosis,
prognosis, treatment determination and patient follow-up.

  The Company's revenues were $85.4 million in 1999, representing revenue
growth of 52% over 1998. In fact, the 1999 fiscal year was IMPATH's tenth
consecutive year of annual revenue growth in excess of 40%. Moreover, the
fourth quarter of 1999 represented IMPATH's twenty-first consecutive quarter
of record revenues and case volume. Income from operations and net income for
1999 were $12.1 million and $8.2 million, respectively, an increase of 42% and
19% over 1998.

  Certain terms relating to the Company's business which are used in this
Annual Report on Form 10-K are explained in the Glossary included at the end
of this Item 1.

  This Annual Report on Form 10-K contains forward-looking statements about
IMPATH's plans for expansion. IMPATH's ability to achieve its plans for
expansion is dependent on a variety of factors, many of which are outside of
management's control. Some of the most significant factors, alone or in
combination, would be the failure to manage the Company's growth successfully,
the failure to integrate the businesses acquired by IMPATH successfully, an
unanticipated slowdown in the health care industry (as a result of cost-
containment measures, changes in governmental regulation or other

                                       1


factors), an unanticipated failure in the commercialization of IMPATH's cancer
information database or an unanticipated loss of business. Accordingly, there
can be no assurances that IMPATH will achieve its goals for expansion.

Cancer Information Market

  The market for cancer diagnosis, prognosis and treatment is significant and
growing. After heart disease, cancer is the leading cause of death in the
United States. Approximately eight million Americans alive today have been
diagnosed with cancer (excluding certain skin cancers). According to the
American Cancer Society, the estimated number of cancer cases diagnosed
annually in the United States (excluding certain skin cancers) grew from
approximately 530,000 in 1963 to approximately 1.2 million in 1999, an
increase of 126%. The growth in the number of cancer cases in the United
States is expected to accelerate as the leading edge of the "baby boom"
population approaches 55 years of age, the age at which the incidence of
cancer begins to rise sharply. Earlier diagnosis and better information have
led to more effective treatment and have increased the five-year survival rate
of cancer patients from 39% in 1963 to approximately 58% in 1998.

  The National Cancer Institute estimates that the direct medical costs
associated with cancer will be approximately $37 billion in 1999. The Company
believes that these costs will increase rapidly as a result of the growth in
the number of cancer patients and the high cost of new therapies. Thus, the
Company anticipates that the demand for information regarding cancer and
cancer management will continue to increase.

  The diagnosis, prognosis, treatment determination and follow-up of cancer
are extremely complex processes which require a multidisciplinary approach.
Among the key specialties involved in cancer management are pathology (for
diagnosis), surgery (for diagnosis and treatment), oncology (for treatment and
follow-up), radiology (for diagnosis and follow-up) and radiation oncology
(for treatment), as well as a number of other specialties for which cancer is
important, such as urology and gynecology.

  IMPATH's potential market includes all physicians involved in the diagnosis
and treatment of cancer in the United States. This includes approximately
16,000 pathologists and more than 7,000 oncologists (excluding radiation
oncologists), as well as other specialists who treat cancer, such as surgeons
and gynecologists and transplant centers. Historically, pathologists have been
the focus of the Company's marketing efforts because they are responsible for
providing the information from which most cancer management decisions flow.

  IMPATH's primary customers are the pathology departments of small- to
medium-sized community hospitals (100 to 500 beds), where most cancer is
diagnosed. Based upon statistics compiled by the American Hospital
Association, IMPATH believes that there are approximately 2,550 hospitals
which are potential users of IMPATH's services. These hospitals generally do
not perform their own sophisticated cancer analyses because the low case
volume per hospital does not justify establishing and maintaining the required
technological capabilities, facilities and expert medical staff.

  Furthermore, health care providers increasingly are being organized into
managed care networks which emphasize cost containment. IMPATH believes that
these networks increasingly will outsource sophisticated cancer analysis in
order to optimize patient care and control costs. The care of the cancer
patient increasingly is being performed in outpatient settings, representing a
shift from traditional, hospital-based care. Certain evaluations, surgical
procedures and systemic treatments (e.g., chemotherapy) are now being
performed at outpatient facilities, and most patient follow-up is being
performed in outpatient settings rather than hospitals. These outpatient
facilities generally do not have the expertise and resources to provide the
information necessary for optimal cancer management.

  In order to make optimal cancer management decisions, providers and payors
require information about the specific characteristics of a patient's cancer
(e.g., how aggressive it is and how it can best be

                                       2


treated). In the past, patients have been treated based upon information
gathered on entire classes of disease rather than on the individual's cancer.
With the development of new targeted cancer therapies, patient-specific
information has become critical to cancer treatment decisions.

Competitive Advantages of IMPATH

  IMPATH pioneered the marketing of patient-specific diagnostic and prognostic
information to medical professionals involved in cancer management. The
Company believes that it now performs more analyses of difficult to diagnose
cancer cases than any other institution in the world and that it is the leader
in providing comprehensive patient-specific prognostic information for cancer.
IMPATH has established its leadership and reputation in the cancer information
market through its extensive expertise, its integration of technological
advances, its emphasis on customer service and education and the cost-
effectiveness of its services. IMPATH believes that these factors, which
cannot be duplicated without substantial investments of time and capital,
provide it with significant advantages over existing and potential
competitors. In addition, as the value of the information provided by IMPATH
becomes more widely recognized among the participants in the cancer management
market, IMPATH expects its role in all phases of this market to become even
more important.

  Expertise. IMPATH specializes in cancer tests that require a level of
medical knowledge and technical expertise not found in the average community
hospital and not readily accessible in academic medical centers. IMPATH
believes that its medical staff has more experience in providing comprehensive
tissue-based diagnostic and prognostic analyses of cancer than virtually any
other group of practitioners. IMPATH currently receives an average of 600
cases per day. The experience derived from such a volume of cases leads to
superior professional and technical expertise. This expertise is reflected in
IMPATH's database of more than 550,000 cancer cases analyzed to date, with
more than 148,000 cases added during 1999 alone. The Company is linking these
data to outcomes and cost information in order to demonstrate the value of
IMPATH's services to payors and to provide new cancer information services to
providers, payors, biopharmaceutical and large pharmaceutical companies and
clinical research organizations. See "--Company Strategy."

  Comprehensive Technology Integration. IMPATH provides a comprehensive range
of cancer analyses using sophisticated technologies, including
immunohistochemistry, image analysis and flow cytometry, cytogenetics,
molecular pathology and serum analysis. These analyses are integrated through
in-house technical and medical expertise to provide a single source for
optimal patient-specific diagnostic, prognostic and treatment information,
which is not available from clinical laboratories, hospitals or academic
centers. In the past decade, many new evaluation methods and treatment
regimens have been developed as a result of the increased understanding of the
cellular and molecular biology of cancer. As new therapies targeting cancers
with specific biological characteristics emerge, IMPATH believes that the
demand for cancer information services that identify such characteristics will
increase substantially. IMPATH intends to continue to integrate technological
advances rapidly and effectively to meet this demand. See "--Technologies."

  Customer Service and Education. IMPATH's medical staff and customer service
representatives emphasize quality of service, accuracy of results and speed of
turnaround. The medical staff provides frequent expert consultation and
generally returns results within 48 hours of receipt of a specimen. By
contrast, academic medical centers often require approximately 14 days to
return results and typically provide little consultation. In addition,
IMPATH's sales force focuses on educating clients as to the benefits of the
Company's services in managing cancer. In contrast, the sales forces of most
clinical laboratory companies market hundreds of disparate, cancer and non-
cancer test services, and IMPATH believes that sales personnel at these
companies have limited familiarity with the individual cancer tests offered.
Many academic institutions, which perform some of the same analyses as the
Company, typically do not have substantial marketing or customer service
resources, and the pathology laboratories at large regional

                                       3


hospitals are generally dedicated to servicing only their affiliated
physicians. The success of IMPATH's focus on customer service and education is
demonstrated not only by the Company's rapidly growing case volume, but by the
fact that IMPATH's case volume from its long-term customers continues to grow.
See "--Sales and Marketing."

  Cost-Effectiveness. IMPATH provides physicians with diagnostic and
prognostic information necessary to determine the medically optimal therapy
for each patient's specific cancer. As a result, incorrect or unnecessary
treatments can often be avoided, along with the associated trauma, risk and
cost, and appropriate therapies can be implemented on a timely basis. In
addition, because of its high case volume, IMPATH benefits from significant
economies of scale which enable the Company to provide hospitals with a
valuable, cost-effective and expeditious alternative to establishing and
maintaining in-house pathology laboratories. IMPATH also believes that it
provides managed care networks and other payors with a source of sophisticated
cancer analyses which optimize patient care while controlling costs.

Company Strategy

  IMPATH's objective is to be the leading cancer information company and the
comprehensive resource for integrating all aspects of the management of cancer
information. The Company is pursuing the following strategies to achieve its
objective:

  Increase market penetration of diagnostic and prognostic services. IMPATH
believes that it has a significant opportunity to continue to increase its
revenues and case volume from existing clients as well as through new
relationships with hospitals, physicians and payors. The Company intends to
continue to grow its core business by increasing the number of cases received
from existing clients, continuing to incorporate new technologies and
expanding the services it offers to the oncology outpatient market. Case
volume for 1995 was 43,287; in 1999 that figure increased to 148,302,
representing an average annual growth rate of 37.1%. In part as a result of
the more complex analyses per case required to assess tumor activity, the
Company's average revenue realization per case has increased as well. The
average revenue realization per case (excluding cytogenetic and serum
analyses) has increased from approximately $340 in 1995 to approximately $646
in 1999, representing an average annual increase of 18.3%.

  Managed care networks represent an important business opportunity for the
Company because, in many cases, unnecessary treatment can be avoided and
significant cost savings can be achieved through the relatively inexpensive
services provided by the Company. An IMPATH case analysis typically costs
between $300 and $1,500 and contains information which can be critical for
physicians to avoid ineffective courses of therapy costing many thousands of
dollars. The Company intends to expand its presence in managed care by
aggressively marketing the cost-effectiveness and clinical benefits of its
services and assisting managed care companies in developing cancer treatment
protocols.

  In order to implement this strategy, the Company intends to continue to
identify and incorporate new technologies and scientific developments and to
recruit and train medical, scientific, customer service and sales personnel to
meet the demands of its expanding business.

  Pursue strategic acquisitions and alliances. The Company has successfully
completed the acquisition and integration of several complementary regional
businesses which have added to the breadth and depth of its technological
expertise and services and believes that there are other similar acquisition
candidates, including companies with significant national and international
presences. The Company intends to continue to pursue selective acquisitions of
companies that will enhance its cancer management information database. These
acquisitions also may include companies involved in health care information
services and companies that have expertise in the evaluation of medical data
and cost analysis.

  Expand and enhance database capabilities. In the course of performing
sophisticated analyses on hundreds of thousands of tumor samples, IMPATH
gathers vast amounts of valuable data. By combining

                                       4


the genetic and biochemical markers uncovered through these analyses with its
rapidly growing outcomes-focused database, IMPATH can help identify the
genetic basis for responsiveness to therapy, side effects of treatment and
even disease predisposition. The Company can provide patient-specific
information regarding the aggressiveness of a tumor and, in many cases, the
specific type of therapy from which a patient will most likely benefit.

  Building on the data it gathers daily on more than 600 cases, IMPATH has
added to its database through strategic acquisitions and alliances with value-
added data streams. Through the acquisition of Medical Registry Services and
the joint venture with Affiliated Physicians Network, IMPATH has increased its
capabilities in generating patient-specific treatment and outcomes information
to meet the demands of physicians, payors and drug developers in the more
effective management of cancer. The therapeutic, treatment and outcomes
information provided by these resources, when paired with IMPATH's biological
and molecular data, creates an unparalleled continuum of care profile from
diagnosis to treatment and through follow-up. The database adds value to all
the participants involved in treating cancer, from the providers of health
care to the patients who receive it.


  Provide Information to Biopharmaceutical/Genomics Companies. IMPATH has
leveraged its expertise in diagnostic and molecular technology to develop a
successful commercial business focused on supporting oncology drug
development. The business has been designed to support all phases of oncology
drug development from discovery, to clinical trials, and post launch marketing
support and on to label expansion.

  Utilizing its existing resources, IMPATH can provide the essential
biological resources for gene discovery and gene therapy research. This is
achieved through a worldwide surgical oncology investigator network that
acquires, normal human tissue, tumor tissue and serological specimens with the
patient's informed consent. These specimens are characterized and assessed for
quality at IMPATH and then stored at IMPATH's biorepository, BioStorTM. These
well-characterized, well-documented samples provide pharmacogenomic companies
with a critical component in gene target identification, target validation and
drug development.

  In the steps following gene/drug discovery, IMPATH plays a critical role in
the pre-clinical and clinical phases of oncology drug development. In the pre-
clinical setting, IMPATH's expertise in leading edge technology is used to
assess and develop assays that are used to predict how a drug will work, and
which types of cancer patients are most likely to respond to the drug. The
process involves a detailed assessment of a drug's target, molecules related
to that target and the corresponding presence or absence of these molecules on
patient specimens.

  In the clinical trial setting, IMPATH applies these very same assays to
assess patient eligibility for clinical trials, and to ascertain whether a
patient is responding to the drug in the manner intended (also known as
surrogate end-point analyses).

  As the biopharmaceutical industry increasingly utilizes predictive tests to
design clinical trials and surrogate end-points to assess drug efficacy and
patient response, IMPATH is well positioned to capitalize on opportunities in
this industry.

  Target international expansion. IMPATH believes that foreign markets
represent a significant opportunity for the Company to expand its cancer
information business. A principal focus of the Company's international
strategy will be selective acquisitions of established businesses providing
services similar to those provided by the Company. IMPATH also intends to
pursue this opportunity by partnering with international physician oncology
networks and hospital groups, and involvement in drug development efforts of
international pharmaceutical companies. These efforts initially will focus
primarily on select markets in Europe and South America and, once these
relationships are established, would

                                       5


expand into Southeast Asia, Japan, Canada and Australia. These regions
represent areas where sophisticated treatment technologies are currently in
use and which the Company believes would benefit from IMPATH's services.

IMPATH's Role in the Cancer Management Pathway

  The management of cancer involves a series of distinct steps which must be
integrated in order to define a therapeutic strategy. At each step,
information critical to the decision-making process must be obtained in order
to make the optimal decision. Traditionally, the type of information applied
to the decision-making process has been limited, and related not to an
individual's cancer, but rather to an entire class of disease. IMPATH's core
business is providing, through the use of integrated advanced technology,
information unique to a particular patient with cancer.

  IMPATH concentrates on the use of advanced technologies to address many of
the shortcomings of traditional methods of cancer assessment. The Company
believes that its services will be critical to the efficient coordination and
optimal implementation of all phases of the cancer management pathway.

  Predisposition. In the large majority of cancers, genetic defects occur in
the course of an individual's life that may lead to the development of cancer.
However, in some cases an individual has an inherited predisposition for
developing certain types of cancer. It is possible that the genes responsible
for this inheritance pattern may be identified prior to the overt
manifestation of that cancer. In fact, it is believed that as many as 5% of
certain types of cancers are based at least in part on an inherited
predisposition. IMPATH currently possesses the technological expertise to
detect genetic defects associated with predisposition to certain cancers.
While very few predisposition genes have been identified to date (for example,
genes responsible for the inherited forms of breast cancer, ovarian cancer,
colon cancer and retinoblastoma), this is a very active area of research. As
these genes are identified, IMPATH will be in the position to screen for these
types of inheritable cancers.

  Diagnosis. IMPATH's core diagnostic analyses provide information regarding
tumors that are difficult to diagnose using conventional pathology procedures.
Although most tumors can be diagnosed based on visual examination by the
pathologist, as many as 15-20% (more than 180,000 per year in the U.S. alone)
of all cancers defy specific classification by this method. This may result in
treatment decisions that are approximated, incorrect or ineffective leading to
unnecessary treatment, complications and increased cost. Traditionally, the
therapeutic approach to a patient with cancer has been based on a purely
morphological assessment of the origin of the cancer and the extent of spread,
i.e., the tumor's appearance under the microscope (for example, does it look
like colon cancer?) and the tumor's presence in various metastatic sites (such
as regional lymph nodes and bone marrow). While this type of morphological
assessment is well accepted, it has serious and critical limitations.
Specifically, morphological assessment is able to provide very little
information about the biological aggressiveness of an individual's cancer and
can provide virtually no meaningful information regarding the treatment to
which the patient's specific cancer will respond. IMPATH has shown that in a
majority of cases which defy standard classification, the use of advanced
technologies and the medical expertise provided by IMPATH lead to an accurate
diagnosis, thus ensuring optimization of therapy, greater predictability of
outcome, increased survival and decreased overall costs.

  Prognostic Assessment. IMPATH's prognostic tests provide information to
pathologists and oncologists regarding the aggressiveness of a tumor. The
increase in knowledge of tumor biology and the development of new technologies
have made it increasingly important to determine the aggressiveness of an
individual cancer in order to treat that cancer more rationally. One breast
cancer may have a low biological aggressiveness, and may therefore have a very
low propensity to recur, while another breast cancer (which appears identical
under the microscope) may be very aggressive. These tumors should be treated
very differently, but may not be if these differences are not identified. For
example, post-surgical systemic treatment, such as chemotherapy, for a cancer
that has a very low rate of recurrence produces

                                       6


limited beneficial effects, and may only expose the patient to the morbidity
and expense of such treatment. On the other hand, an aggressive cancer should
be treated aggressively at the earliest possible time in order to achieve
maximal therapeutic benefit. IMPATH's prognostic expertise differentiates such
difficult cases, providing the oncologist with the critical information
necessary to treat patients effectively and to reduce morbidity and costs.

  Treatment Determination. Traditionally, therapeutic approaches to cancer
have been based solely on the diagnosis and stage (or extent) of disease. For
example, a patient with breast cancer is treated with a particular combination
of chemotherapeutic drugs not because it is known that the cancer in question
is likely to respond, but rather because a certain proportion of other breast
cancers have responded in the past to similar treatment. In an increasing
number of cancer cases, IMPATH provides information that can help to predict
the specific types of therapy to which a particular tumor will, or will not,
respond. For example, in the case of breast cancer, IMPATH provides critical
information for the determination of likely patient responses to specific
therapies (e.g., hormonal treatment and chemotherapy) before such therapies
are administered. This type of information is becoming increasingly available
for other types of tumors as well. Thus, therapies that are most likely to be
beneficial can be instituted at the earliest possible time, when the impact
will be the greatest. In addition, therapies which will have little effect can
be avoided, thus decreasing morbidity and expense and accelerating the
implementation of appropriate treatment. The Company believes that this type
of patient-specific information will become essential for optimal cancer
management.

  Treatment Follow-up. Once a cancer has been diagnosed, assessed and treated,
the patient must often undergo many years of follow-up care involving multiple
patient contacts and repeat analyses. This care not only provides for the
treatment of therapeutic complications (often resulting from inappropriate
therapy due to inaccurate diagnosis and insufficient assessment) but is
designed to determine, at the earliest possible time, if a patient has
suffered a recurrence. IMPATH has the expertise to provide highly sensitive
patient monitoring in an increasing number of cancers. For example, the
Company is able to establish whether or not certain types of lymphomas have
recurred prior to their detection by any standard method, even sensitive
microscopic analysis. The identification of tumor recurrence at the earliest
possible time increases the likelihood of a beneficial therapeutic response.

Technologies

  Recent advances in immunology, biochemistry and molecular biology have
created new tools with tremendous potential in the management of cancer
patients. IMPATH specializes in cancer tests that require a sophisticated
level of medical knowledge and technical expertise that is beyond the
capability of pathology laboratories in the average community hospital. In
fact, the expertise required to develop and maintain a high quality immuno-
and molecular pathology laboratory is found in a relatively small number of
top level academic institutions. Furthermore, even the most sophisticated
medical centers perform only a small fraction of the tests that IMPATH
performs every day. This is extremely important, as increased experience
generally leads to superior professional and technical expertise. The average
community hospital pathologist does not see a substantial volume or range of
cases and, therefore, very rarely has the experience to choose the correct
testing methodology and to evaluate the data, or the technical support to
achieve high quality results. Even when these technologies exist at academic
medical centers, they typically exist in different departments (e.g.,
pathology, genetics and molecular biology). The Company believes that there is
usually no integration of information by these different departments, making
it more difficult for the referring physician to diagnose and provide optimal
treatment for a patient's specific cancer.

  IMPATH addresses these issues by virtue of its extensive experience in
applying and performing analyses and by the background and expertise of its
medical staff. IMPATH currently receives an average of 600 cases a day.
Because of IMPATH's significant case volume, its professionals have been able
to expand their considerable experience, and have been able to develop
individual areas of expertise.

                                       7


IMPATH's consultants and in-house staff include internationally known experts
in immuno- and molecular pathology and highly experienced technologists.

  IMPATH continues to identify and incorporate sophisticated technologies and
analyses, consistent with the Company's goal of remaining at the forefront of
scientific advances in cancer analysis. IMPATH integrates these technologies
in order to provide comprehensive cancer information critical for optimal
cancer management. Importantly, these techniques also allow for the
identification of patients who will not benefit from certain types of therapy,
thus avoiding the cost, pain and side effects of unnecessary treatment.

  The following chart summarizes the Company's use of technologies in its
analyses of cancer:




                                        Flow
                                      Cytometry
                                         And                           Micrometas    Drug
  Category of Analysis   Immunohisto-   Image   Molecular                tases    Resistance  Serum
   and Type of Cancer     chemistry   Analysis  Pathology Cytogenetics Detection    Assay    Analysis
  --------------------   ------------ --------- --------- ------------ ---------- ---------- --------
                                                                        
Predisposition..........                             X
Diagnosis:
 Difficult to
  Diagnose Cancers......       X
 Lymphoma/Leukemia......       X           X         X          X
Prognosis/Treatment
 Determination:
 Breast.................       X           X                                X          X         X
 Lymphoma/Leukemia......       X           X         X          X           X          X
 Prostate...............       X           X                                X          X         X
 Other (e.g., Colon,
  Bladder, Ovarian).....       X           X                                X          X         X
Follow-up:
 Breast.................                             X                      X                    X
 Lymphoma/Leukemia......                             X          X
 Prostate...............                             X                      X                    X
 Other (e.g., Colon,
  Bladder, Ovarian).....                             X                      X                    X



 Immunohistochemistry

  Immunohistochemistry (IHC) is a technique wherein a monoclonal antibody is
used to identify disease-specific cellular antigens. A primary antibody to an
antigen of interest is incubated with test tissue sections followed by a
secondary antibody complex. If the antigen is present in tissue, the primary
antibody binds and the antigen-antibody reaction can be visually detected by a
color product. Because cell antigens are not absolutely tissue- or tumor-
specific, the immunopathologist must use panels of antibodies to construct a
"fingerprint" for identification. Immunohistochemistry is superior to standard
biochemical assays because it provides faster results, can be used on smaller
tissue samples, has less stringent requirements for specimen storage, and,
most importantly, predicts outcomes more accurately.

 Flow Cytometry and Image Analysis

  Various components of tumor cells can be quantified by flow cytometry and/or
image analysis. In flow cytometry, a cell sample is stained with appropriate
fluorochromes and passed through a flow chamber designed to align the stream
of cells so that they are individually struck by a focused laser beam. The
scattered light and fluorescent emissions are separated according to
wavelength by appropriate filters and

                                       8


mirrors and directed to detectors which convert the emissions into electronic
signals that are analyzed and stored for future display by a computer. The
data are displayed on a graph of frequency (number of cells versus fluorescent
energy) for a single parameter analysis or as a scattergraph for a multi-
parameter evaluation. The fluorochromes used to stain cells in flow cytometry
include compounds that bind to DNA and/or RNA, but fluoresce at different
wavelengths for each, or that can attach to antibodies against cell surface
antibodies. In image analysis, a pathologist selects the area of the specimen
to be examined, and a computerized instrument using a microscope and camera
then measures various components of tumor cells based on staining intensity.

 Molecular Pathology

  The next generation of commercial diagnostic and prognostic testing is
generally expected to be based on molecular biology, since a disease or
condition may be associated with the presence of an abnormality in DNA or RNA.
A specimen may be tested for a particular disease or condition by finding and
marking this abnormality. Currently, the use of molecular pathology is
confined predominantly to academic centers. However, IMPATH already performs a
wide range of molecular pathology analyses, including in situ hybridization
(ISH). Similar to IHC except that a DNA probe is used rather than a monoclonal
antibody, in situ hybridization employs recombinant DNA technology with
labeled probes to locate and identify nucleic acid sequences within cells.
IMPATH also uses a DNA-based technology called Southern blotting that detects
genetic rearrangements that confirm abnormalities known to be present in
certain tumors. More recently, fluorescence has been used to label probes,
replacing the historical use of radioactive isotopes, in a technique called
fluorescence in situ hybridization (FISH). Another promising molecular
pathology technique already in use at IMPATH is the amplification of specific
DNA sequences by thermal cycling and subsequent electrophoresis, the most
sensitive method of detecting alteration in DNA.

 Cytogenetics

  Cytogenetic analysis evaluates the genetic changes that occur at the
chromosome level. Humans have 23 pairs of chromosomes, or 46 individual
chromosomes in every cell. Cytogenetic methods provide for the identification
of each individual chromosome using DNA-specific staining techniques to
produce the unique band pattern that is characteristic of each chromosome,
providing for the identification of chromosomal abnormalities like balanced
translocations, deletions and gene amplifications that are consistently
associated with certain cancers. The analysis involves the utilization of
fresh cells obtained from blood, bone marrow or tissue specimens which have
been cultured to enhance cell growth and division. The cells are then
harvested and prepared in such a manner that the chromosomes and the distinct
patterns of each can be seen through a microscope. The identification of
chromosome changes has become extremely useful in the diagnosis and prognostic
assessment of lymphomas, leukemias, soft tissue cancers (sarcomas) and
pediatric cancers. The scope of this technology is expected to expand to
carcinomas (such as colon, lung and prostate cancer) in the near future.

 Micrometastases Detection

  Micrometastases is the minute spread of cancer cells from one part of the
body to another. Because the tumor cells are so few, they generally do not
have enough mass to be observed using conventional methods. The presence of
these occult tumor cells in blood, bone marrow and lymph nodes serves as an
important means of stratifying cancer patients and predicting a poor clinical
outcome. Recent technologies have developed exceptionally sensitive detection
levels for minimal residual cancer or micrometastases.

  IMPATH employs five technologies, across a range of tumor types, to
determine the presence of occult tumor cells down to as few as 1 in 20 million
cells. With the acquisition of certain assets of Biological & Immunological
Science Laboratories, Inc. in 1998 ("BIS"), IMPATH enhanced its scientific
leadership in lymph node and bone marrow micrometastases detection in early
and late stage cancers. BIS

                                       9


added critical expertise in detection and characterization assays used to
determine the growth potential or capacity of small numbers of micrometastatic
tumor cells in blood, bone marrow and stem cell products. Cell colonies have
been shown to grow when there are as few as 1 tumor cell in 2 million. This
analysis serves to evaluate the extent of disease for appropriate staging, to
monitor a patient's response to therapy and to ascertain if post-transplant
therapy may be of benefit. Analyses performed by BIS have been the subject of
numerous publications including extensive documentation of the use of minimal
residual disease detection in bone marrow and stem cell transplants for breast
cancer patients.

 Drug Resistance Assay

  The primary reason cancer patients fail chemotherapy is drug resistance
since each individual's cancer can react differently to chemotherapy agents.
The Drug Resistance Assay ("DRA") can provide valuable information about the
pattern of resistance unique to that particular patient, allowing the
oncologist to better target therapy to the tumor. Many mechanisms have been
identified which contribute to the development of cancer cell resistance to
treatment; some tumors are highly resistant to virtually every anticancer
drug, while others are very sensitive. The DRA performed by IMPATH measures
the net effect of these mechanisms in the cells of the individual patient,
allowing the oncologist to exclude chemotherapy agents unlikely to be
effective, while selecting drugs with the greatest likelihood of clinical
impact. This spares cancer patients the morbidity of ineffective chemotherapy
and while improving response and prolonging survival.

 Serum Analysis

  Blood serum markers are proteins circulating in the blood which are produced
in excess by malignant tumors. These serum proteins serve as an indicator of
tumor regression (decreased presence of markers) or tumor progression
(increased presence of markers). Because these proteins are present in minute
amounts, the technology required for detection relied, until recently, on an
immunochemical procedure involving the use of radioactive isotopes. Now,
however, a new generation of non-radioactive techniques is available to detect
blood serum markers employing, among other methods, chemiluminescence--a novel
system based on emitted light as an indicator of activity. IMPATH uses its
serum technology to assist oncologists in patient follow-up. For example, by
monitoring levels of certain known markers, the Company can help to confirm
remission or the recurrence of ovarian and prostate cancers.

Cancer Management Through Information

  Optimal management of cancer means the best outcome at the lowest possible
cost. At each step along a management pathway, the best choice is not
necessarily the lowest cost alternative, but one which leads to the best
outcome at the lowest overall cost. A patient with cancer has many treatment
options, at widely varying costs, ranging for example from no further
intervention to expensive experimental procedures such as bone marrow/stem
cell transplants; however, the choice of a more expensive option may lead to a
better outcome with fewer recurrences. This not only optimizes patient benefit
(an obvious advantage as health care will be increasingly evaluated on the
basis of outcome) but can actually lead to lower overall cost; the cost of
treating recurrent disease is generally far greater than initial post-surgical
interventions. Thus, outcomes and cost-effectiveness should be synergistic,
and not mutually exclusive. The key to cost-effectiveness is choosing the most
appropriate management pathway for the individual patient. This can only be
done through the use of information derived from a patient's tumor that
defines its biological uniqueness, and allows for identification of the most
appropriate therapeutic options.

  Finally, cancer management is not static; approaches that represent current
best practices may well be added to or modified by new developments, a process
that has tremendous impetus in research institutions and biopharmaceutical
companies.


                                      10


  With more than 550,000 analyzed cases to date, IMPATH is rapidly
incorporating the diagnostic and prognostic information generated from its
analyses of cases into its cancer database. The demographics of these cases
are: 250,134 breast cancer prognostics and treatment profiles; 146,191 complex
cancer diagnoses; 92,640 lymphoma and leukemia classifications; and 62,554
analyses of other cancers (e.g., prostate, bladder, uterine).

  In order to provide high quality and cost-effective cancer care, oncology
practices are consolidating into comprehensive coordinated cancer treatment
groups and managed care organizations are increasing their presence in the
oncology marketplace. IMPATH believes that it can provide these groups with
information that is critical in providing such care. IMPATH also believes that
the information it provides will become increasingly important to these groups
as the Company develops its outcomes-oriented database to provide information
for the optimal, cost-effective utilization of resources.

  IMPATH believes that the use of its services will have two fundamental
impacts on cancer management: (1) optimization of patient-specific care, and
(2) the cost-effective delivery of that care. As a result, IMPATH expects to
become an increasingly significant factor in helping to establish quality
standards for these cancer management groups. IMPATH believes that it is well
positioned to become a vital component in the integrated management of cancer.

Applications of IMPATH's Cancer Information Services

  Presented below are examples of how the information provided by IMPATH can
be critical to optimal cancer management.

 Breast Cancer Management--Risk Assessment and Evaluation of Therapeutic
Options

  Breast cancer is the most common cancer in women in the United States.
Annually, more than 175,000 cases are diagnosed and over 44,000 women die of
this disease. While the incidence of breast cancer has been increasing, the
number of deaths resulting from this disease has been slowly but steadily
decreasing. It is now widely recognized that earlier detection (by mammography
and self examination) has played a significant role in decreased mortality.
However, a significant advancement in the management of breast cancer has been
the development of technologies that provide patient-specific information that
allows oncologists to optimize treatment for each individual woman's cancer.

  Traditional analysis of breast cancer only assesses a patient based on what
a tumor has already done, i.e., its current size and whether it has
metastasized to regional lymph nodes. This approach does not provide
information specific to the individual patient, but can only assess how
populations of patients will fare. This approach to providing therapy in
breast cancer has traditionally been based on how breast cancer generally
responds to a particular regimen, and not the potential of a particular tumor
to respond to such therapy.

  IMPATH's approach to breast cancer analysis is based on providing the most
patient-specific information possible through the use of sophisticated
technology. IMPATH provides information in two fundamental areas, from which
virtually all post-surgical management decisions can be based.

  Risk Assessment. IMPATH provides information necessary to determine the
aggressiveness of a tumor, not based on an assessment of the current state of
the tumor, but rather on the specific cellular and molecular changes that take
place in that individual tumor. This information is critical for optimal
cancer management. For example, a patient with a tumor that has a very high
likelihood of producing overt metastases must be treated rapidly and
aggressively. On the other hand, a patient with a tumor that has very little
chance of developing metastasis is not likely to benefit from aggressive
systemic treatment, and may only suffer the complications and cost of such
treatment.


                                      11


  Assessment of Therapeutic Options. IMPATH uses some of the most significant
advances in the understanding of cancer to assess more accurately the
likelihood of response (or lack of responsiveness) of a tumor to a particular
type of systemic therapy. This allows for better, more cost-effective cancer
management, as patients can now be treated with the type of therapy to which
they are most likely to respond, and can avoid treatments to which they are
unlikely to respond.

  Selected examples of how IMPATH assesses risk and therapeutic options are
set forth below:

  Hormone Receptors. The presence of estrogen and progesterone receptors in
breast cancer identifies women who are more likely to respond to hormonal
manipulation of the tumor, a commonly used therapy. This important test is now
required by the American College of Surgeons. The hormonal receptor status, as
examined by IHC, has been shown to be better correlated with clinical outcome
than standard biochemical assays. Furthermore, smaller tumor specimens,
including fine needle aspirates (FNAs), which are obtained through a less
invasive, less painful and less costly procedure, can only be effectively
examined by IHC.

  Oncogene Analyses. The Her-2/neu oncogene identifies tumors that are more
biologically aggressive and therefore require more intensive treatment. The
Her-2/neu oncogene may also identify breast cancers that are resistant to
certain types of chemotherapy.

  Cell Proliferation/DNA Ploidy Analysis. Proliferative rate and ploidy have
been well documented as important prognostic indicators in many cancers,
including breast cancer and colon cancer. The ploidy compares the DNA content
of a tumor cell with that of a normal cell. The proliferative rate measures
the percentage of cells that are actively dividing. High proliferative rates
and abnormal DNA content have been strongly correlated with faster progression
and earlier recurrences. Using image analysis and flow cytometry, the DNA of
the tumor can be examined by IMPATH using tissue specimens, FNAs and other
cell specimens. IHC can also be used visually to evaluate cell proliferation.

  Detection of Occult Bone Marrow and Lymph Node Micrometastases. The single
most reliable indicator of outcomes in most cancers is whether or not a tumor
has spread (metastasized). However, in many cases the conventional pathologic
examination is unable to detect tumor spread, even in patients who will
eventually suffer tumor metastases. The basis for the development of cancer
metastases is the presence of the undetected spread of tumor. Technology
developed by IMPATH's founders allows for the detection of the microscopic
spread of cancer prior to detection by conventional methods, including
sensitive microscopic examination. The detection of lymph node and bone marrow
micrometastases identifies patients at greatest risk for developing overt
metastatic disease and may identify those who will most benefit from
aggressive adjuvant chemotherapy. Furthermore, identifying those patients who
do not have lymph node (or bone marrow) micrometastases may indicate those who
will not require such therapy, and who thus can be spared the pain, side
effects and substantial costs of chemotherapy. IMPATH believes that it is one
of a limited number of companies currently offering tests for the detection of
micrometastases, and that the detection of occult lymph node and bone marrow
micrometastases will be important in identifying the risk of developing overt
metastases for a wide variety of cancers, including breast, lung, colon and
prostate cancer. Furthermore, in patients undergoing high-dose chemotherapy
followed by stem cell transplants from one location to another within the
patient's body, a correct assessment of tumor cells in the patient's bone
marrow may be important to evaluate accurately the response to therapy and to
avoid reinfusing a patient with cancerous cells.

  Because of its unique approach to breast cancer, IMPATH believes that it is
the leader in providing the most comprehensive prognostic information
essential to the management of breast cancer. In 1998, the Company provided
patient-specific prognostic information on more than 28% of all such cases in
the U.S., and in and over 35% of cases diagnosed in the New York metropolitan
area, California and Florida, the Company's largest markets. The Company's
specialized expertise in breast cancer has not only allowed it to play a
significant role in optimizing patient-specific breast cancer treatment
nationwide but has also

                                      12


allowed it to be well positioned to develop the most comprehensive outcomes-
focused database in breast cancer.

 Lymphoma/Leukemia Management--Integration of Technology in Overall Cancer
Management

  The value of IMPATH's integrated approach to providing cancer information is
demonstrated in the clinical management of hematopoietic malignancies, such as
lymphomas and leukemias, particularly as scientific advances improve our
understanding of these diseases. The clinical management of hematopoietic
malignancies requires a comprehensive approach that includes analysis by
hematopathologists and the use of advanced diagnostic and prognostic
technology. Most community hospitals do not have hematopathologists or the
technologies required for such analyses. The Company employs four
hematopathologists and uses molecular and cellular technology to diagnose and
classify these hematopoietic malignancies. Using the information from an
IMPATH analysis, a physician can tailor therapy to optimize the outcome for a
patient. These same technologies are applied to evaluate a patient's response
to therapy, and to evaluate the progression or remission of the disease.

  Lymphoma. The clinical significance of IMPATH's diagnostic technology is
illustrated by the fact that during 1999, of all the suspected lymphoma cases
sent to IMPATH for analysis, approximately 10-15% were found to be an
infection or inflammation rather than cancer. Prior to the development of
certain technologies used by IMPATH, such cases may have been misdiagnosed as
cancer. In the cases identified by IMPATH as not being cancer, patients who
were suspected of having a hematopoietic malignancy were spared the trauma,
risk and cost associated with unnecessary treatment. Of the cases sent to
IMPATH in 1998 that were in fact lymphomas, the technology applied by the
Company permitted an assignment of the "grade" of the lymphoma, a process
recommended by the International Lymphoma Study Group (1994). The grading of
lymphomas is an important process that influences the treatment decisions of
physicians and can result in better outcomes for a lymphoma patient.

  Leukemia. Similar to lymphomas, leukemias represent a type of cancer where
the classification and grading of the disease provides critical information
that influences the selection of therapy, predicts the response to therapy and
indicates the likely outcomes for the patient. The characteristics that
distinguish the various types of leukemias can be identified by the technology
employed by IMPATH. For example, in many cases, chromosome abnormalities
identified by this technology permit the unequivocal assignment of the disease
to a particular class of leukemia. As new biological characteristics
associated with leukemia classes continue to be identified, the Company
believes that it is well positioned to incorporate into its analyses
additional tests to detect these characteristics.

 Management of Other Cancers

  Diagnostic, prognostic and therapeutic information is being integrated
increasingly into the management of other cancers. As medical research
progresses and as increasing numbers of treatment options evolve, IMPATH
believes that its expertise will play an increasing role in the decision
making processes for all cancers.

  For example, prostate cancer, like breast cancer, is a disease that is
responsive to hormonal manipulation. As in the case of estrogen receptors in
breast cancer, the presence of androgen receptors in prostate cancer can now
be evaluated. IMPATH believes that this information will become increasingly
important in the treatment and management of prostate cancer. The growth rate
of the tumor is also critical; for instance, a 50-year old man with a rapidly
growing cancer must be treated differently than a 90-year old man with a very
slow-growing prostate cancer. IMPATH provides this information for prostate
and other cancers, including breast, colon and bladder cancers.

  The determination of patient-specific characteristics in optimizing therapy
is becoming essential as more outcomes-related biological determinants are
defined. Important examples of this are mutations in

                                      13


tumor suppressor genes and oncogenes (such as Her-2/neu). The presence of
these mutations in a patient with specific types of tumors (e.g., bladder,
breast or colon) identifies the biological aggressiveness of that individual's
tumor. Other characteristics help to establish the responsiveness to therapy.
For example, if a patient's cancer has the multi-drug resistance (MDR)
receptor, his/her tumor will be unresponsive to many forms of drug therapy
including, for example, taxol therapy for ovarian and other cancers.

  Furthermore, the most significant problem in treating cancer is the
accurate, early assessment of disease dissemination, i.e., metastases. IMPATH
has a special expertise in identifying the presence of lymph node and bone
marrow micrometastases, often earlier than practitioners using conventional
methods. This analysis is now useful in the correct staging of prostate, colon
or lung cancers and increasingly in other types of cancers.

  Information that establishes the biological aggressiveness of an
individual's tumor and predicts response to therapy for that particular
patient is crucial to optimizing outcome for that patient. IMPATH believes
that its expertise in this area, as well as its access to increasing numbers
of cancer specimens, will allow it to continue to expand its comprehensive
database for predicting outcomes in various types of cancer. The Company
believes that this database will be increasingly important to the medically
optimal and cost- effective management of the cancer patient.

Sales and Marketing

  Sales Force. As of December 31, 1999, the Company's sales force consisted of
50 employees, including a Vice President--Sales and Marketing, four regional
Directors, and 45 sales representatives. The IMPATH sales force consists of
highly trained individuals with extensive scientific backgrounds and
successful sales records with health care companies. The sales force focuses
on educating clients about the benefits of the Company's services in managing
cancer. IMPATH believes that the technical and clinical knowledge of its sales
force distinguishes it from other companies.

  Marketing Support. IMPATH supports its sales force with extensive customer
service and marketing programs. Due to the technical and scientific complexity
of IMPATH's business, the Company has established a strong interactive
relationship with its clients. This relationship serves to increase the
reliance of the client on IMPATH and is a significant tool for encouraging
business growth within the current customer base. The marketing process
emphasizes educating physicians regarding the development of new technologies
and the value of the information provided by IMPATH.

  Customer Service. The Company emphasizes customer service, including the
provision of a comprehensive detailed report to the referring physician after
each analysis is completed. These reports serve to educate pathologists and
clinicians, many of whom may not be familiar with the analyses performed by
IMPATH, as well as to provide authoritative support for the accuracy and
validity of such analyses. In general, the Company returns its completed
analysis and report to the referring physician or clinician within 48 hours of
receipt of the tissue specimen, compared with approximately 14 days for
academic institutions. Further, the Company's medical staff provides frequent
expert consultation. The Company also employs several customer service
representatives, who are responsible for inquiries made by referring
physicians and provide support for the Company's sales staff. The success of
IMPATH's focus on customer service and education is demonstrated not only by
the Company's rapidly growing case volume, but by the fact that IMPATH's case
volume from its long-term customers continues to grow.

Competition

  The Company provides services in a segment of the health care industry that
is highly fragmented and extremely competitive. The Company's actual or
potential competitors include large university or teaching hospitals; large
clinical laboratories that have substantially greater financial, marketing and
logistical resources than the Company; special purpose clinical laboratories
that have limited test offerings

                                      14


and a highly focused product and marketing strategy; and the Company's
customers or potential customers who may choose to perform services similar to
those performed by the Company. It is anticipated that competition will
continue to increase due to such factors as the perceived potential for
commercial applications of biotechnology and the continued availability of
investment capital and government funding for cancer-related research. There
are several large clinical laboratory companies which market a broad range of
services nationally, and which have substantially greater financial, selling,
logistical and laboratory resources than the Company. In addition, management
has identified a number of specialized clinical laboratories in the U.S. which
have test offerings which are less comprehensive than those of IMPATH and
highly focused product and marketing strategies.

Reimbursement

  The Company typically bills third-party payors, such as private insurance
plans, managed care plans and Medicare, as well as hospitals, for its
services.

  During 1997, 1998 and 1999, the Company received the following estimated
percentages of its total revenues for diagnostic and prognostic services from
the respective payors identified below:



                                                   Year Ended December 31,
                                                   ---------------------------
   Payor                                            1997      1998      1999
   -----                                           -------   -------   -------
                                                              
   Hospitals......................................      26%       21%       17%
   Private Insurance/Managed Care.................      44        50        55
   Medicare.......................................      25        25        23
   Individual Patients............................       5         4         5
                                                   -------   -------   -------
     Total........................................     100%      100%      100%
                                                   =======   =======   =======


  For a discussion of the changes in these percentages in 1999, see Item 7 of
this Annual Report on Form 10-K.

  Medicare is a federal health insurance program that provides health
insurance coverage for certain disabled persons, for persons aged 65 and older
and for certain persons with end-stage renal disease. Medicaid is the state-
administered and state- and federally-funded program for certain low-income
individuals. To date, the Company has derived no revenues from the Medicaid
program. As a participating provider, the Company bills Medicare for covered
services and accepts Medicare reimbursement as payment in full for its
services, subject to applicable co-payments and deductibles.

  Prior to the passage of the Balanced Budget Act of 1997, Medicare
beneficiaries could (i) receive services on a fee-for-service basis pursuant
to which Medicare generally pays providers based on a national fee schedule
subject to the applicable copayment or (ii) elect to enroll with a managed
care organization which had entered into a direct contract with Medicare
whereby the organization is paid a predetermined amount for each covered
Medicare beneficiary without regard to the frequency, extent or nature of
services delivered. The Balanced Budget Act of 1997 reforms Medicare in a
number of respects, including the phase out of existing Medicare risk
contracts and the creation of the Medicare+Choice program. The Medicare+Choice
program allows Medicare beneficiaries, in addition to traditional fee-for-
service Medicare, to have access to a wide array of private health plan
choices beyond the previously existing managed care arrangements. These
additional plan options include "Coordinated Care Plans" which an HMO with or
without point of service option; a Provider-Sponsored Organization plan; a
Preferred Provider Organization plan; and a demonstration Medical Savings
Account project. Given the infancy of the Medicare+Choice program, the Company
cannot predict what effect, if any, the program will have on the Company's
future Medicare revenues.

  Revenues from analyses performed for other patients are derived principally
from other third-party payors, including commercial insurers, Blue Cross/Blue
Shield plans, health maintenance and preferred

                                      15


provider organizations and from hospitals (who in turn usually bill any third-
party payors or patients). With respect to third-party payors, management has
elected, to date, not to accept reimbursement rates set by such non-
governmental third-party payors as payment in full. With respect to hospitals,
management negotiates the terms applicable to each arrangement.

  The Company currently receives Medicare reimbursement through three Medicare
carriers. Reimbursement rates for some services of the type or similar to the
type performed by the Company have been established by Medicare and some other
third-party payors, but have not been established for all services or by all
carriers with respect to any particular service. Most carriers, including
Medicare, do not cover services they determine to be experimental or
investigational, or otherwise not reasonable and necessary for diagnosis or
treatment. However, a formal coverage determination is made with respect to
relatively few new procedures. When such determinations do occur for Medicare
purposes, they most commonly are made by the local Medicare carrier which
processes claims for reimbursement within the carrier's geographic
jurisdiction. Medicare may retroactively audit and review its payments to the
Company, and may determine that certain payments for services must be
returned. With respect to other third-party payors, a positive coverage
determination, or reimbursement without such determination, by one or more
third-party payors does not assure reimbursement by other third-party payors.
Significant disapprovals of payment for any of the Company's services by
various carriers, reductions or delays in the establishment of reimbursement
rates, and carrier limitations on the coverage of the Company's services or
the use of the Company as a service provider could have a material adverse
effect on the Company's future revenues.

  Most services furnished by the Company are characterized for the purposes of
the Medicare program as physician pathology services. As of January 1, 1992,
all physician services, including pathology services, have been reimbursed by
Medicare based on a new methodology known as the resource-based relative value
scale ("RBRVS"), which was phased in over a four-year period. A Final Notice
updating the RBRVS payment methodology, published November 25, 1992, as well
as updates issued subsequently, have not had any significant effect on the
Company's reimbursement rates. Under the Balanced Budget Act of 1997, Congress
revised the RBRVS system to use a single conversion factor, rather than the
previous three, and to change the manner in which fees are updated. The
Company cannot predict what the potential impact of the change to the RBRVS
system will be on the Company's future Medicare reimbursement. A small portion
of the services furnished by the Company are characterized for purposes of the
Medicare program as clinical laboratory services and reimbursed by Medicare
under its clinical laboratory fee schedule. The Balanced Budget Act of 1997
froze the clinical laboratory fee schedule payments for the years 1998-2002.
Such freeze is not expected to have a material adverse effect on the Company's
revenues.

Quality Assurance

  IMPATH engages in a number of quality control procedures, many of which the
Company believes exceed industry norms. For instance, the Company does not buy
untested commercially available reagent test kits. Instead, each of IMPATH's
reagents is selected from various suppliers based on an exhaustive in-house
test of purity, batch-to-batch variability, potency and performance. IMPATH
believes that its quality review procedures are superior to other centers
performing similar analyses. In addition, the quality assurance program of the
Company's facilities includes close attention to the Company's Standard
Operating Procedures, continuing education and technical training of
technologists, statistical quality control of all analytical processes,
instrument maintenance, and regular inspection by governmental agencies and
the College of American Pathologists (the "CAP"). The CAP is an independent
non-governmental organization of board-certified pathologists which offers an
accreditation program to which facilities can voluntarily subscribe. The CAP
accreditation program involves both periodic inspections of the Company's
facilities and participation in the CAP's proficiency testing program for all
categories in which its facilities seek to attain or maintain accreditation.
The Company's facilities are CAP accredited, certified by Medicare, licensed
by New York State, the City of New York and the States of California and

                                      16


Arizona and holds a certificate of accreditation under the Clinical
Laboratories Improvement Act of 1967 ("CLIA"). The Company believes it has
obtained all licenses and permits required to operate its facilities. IMPATH
follows the quality control and quality assurance procedures established by
CLIA, the CAP and various New York State, California, Arizona and New York
City agencies.

  The Company's New York and California facilities are supervised by medical
directors whose qualifications meet all regulatory requirements. The Company's
Arizona facility is supervised by a laboratory director whose qualifications
meet all regulatory requirements governing the cytogenetics testing which is
performed at the facility. The primary role of the Company's medical directors
and laboratory director is to ensure the accuracy and quality of the Company's
analyses. As a further quality assurance procedure, the Company periodically
undergoes peer review with third-party facilities, including Norris Cancer
Center and Memorial Sloan-Kettering Cancer Center. In peer review,
particularly challenging diagnostic cases are referred by the Company to these
cancer centers for verification of antibody tests and IMPATH's diagnostic
conclusions. The results of these consultations are tabulated and discussed at
monthly quality assurance meetings at the Company's offices.

  The Company also participates in a number of proficiency testing programs
under which, in general, the testing body submits pre-tested samples to a
facility in order to measure the facility's results against the known
proficiency test value. The proficiency programs are conducted by groups such
as the CAP and state and federal government regulatory agencies.

Government Regulation

  As a provider of health care related services, the Company is currently
subject to extensive and frequently changing federal, state and local
regulations governing licensure, billing, financial relationships, referrals,
conduct of operations, purchases of existing businesses, cost containment,
direct employment of licensed professionals by business corporations and other
aspects of the Company's business relationships. The various types of
regulatory activity affect the Company's business either by controlling its
growth, restricting licensure of the business entity or by controlling the
reimbursement for services provided.

  Laboratory Licensure. The Company's facilities are certified or licensed
under the federal Medicare program and CLIA, as amended by the Clinical
Laboratory Improvement Amendments of 1988 ("CLIA '88"). Licensure is
maintained under the clinical laboratory licensure laws of New York,
California and Arizona, where the Company's facilities are located. The
Company believes it has obtained all material laboratory licenses required for
its operations. In addition, the California facility is licensed by the
federal Nuclear Regulatory Commission and all three facilities are accredited
by the CAP.

  The federal and state certification and licensure programs establish
standards for the day-to-day operation of facilities, 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. The Health Care Financing Administration conducts an on-
site survey every two years. In addition, federal regulatory authorities
require participation in a proficiency testing program approved by the
Department of Health and Human Services ("HHS") for each of the specialties
and subspecialties for which a facility seeks approval from Medicare and
accreditation under CLIA '88 requires participation in proficiency testing
programs which involve actual testing of specimens by the facility that have
been prepared by an entity running an approved program for testing.

  The Final Rule implementing CLIA '88, published by HHS on February 28, 1992,
became effective September 1, 1992. This Final Rule covers all laboratories in
the United States, including the Company's facilities. The Company has
reviewed the Final Rule (and subsequent revisions thereto), including, among
other things, the rule's requirements regarding facility administration,
participation in proficiency testing, patient test management (including
patient preparation, proper specimen collection, identification,

                                      17


preservation, transportation, processing and result reporting), quality
control, quality assurance and personnel, for the types of analyses undertaken
by the Company, and believes that it complies with these requirements.
However, no assurances can be given that the Company's facilities will pass
all future inspections conducted to ensure compliance with CLIA '88 or with
any other applicable licensure or certification laws.

  False Claims/Anti-Kickback. The Company is also subject to federal and state
laws prohibiting an individual or entity from knowingly presenting claims for
payment (by Medicare, Medicaid and certain other third-party payors) that
contain false or fraudulent information. These laws provide for both civil and
criminal penalties. Furthermore, providers found to have submitted claims
which they knew were false or fraudulent, or for items or services that were
not provided, may be required to make significant payments to the government
(including damages and penalties in addition to the reimbursements previously
collected) and may be excluded from Medicare and Medicaid participation.
Actions under false claims laws have increased significantly in recent years
and have increased the risk that a business engaged in the healthcare
industry, such as the Company, may become the subject of a federal or state
civil and/or criminal investigation or action, be required to defend such
action, be subjected to possible civil and criminal fines, be sued by private
payors and be excluded from Medicare, Medicaid and/or other federally funded
healthcare programs as a result of such an action.

  The Social Security Act imposes criminal penalties and exclusions from
federal health care programs (including Medicare) upon persons who make or
receive kickbacks, bribes or rebates in connection with a federal health care
program (including Medicare). The anti- kickback rules prohibit providers and
others from soliciting, offering, receiving or paying, directly or indirectly,
any remuneration in return for either making a referral for a service or item
covered by a federal health care program (including Medicare) or ordering any
such covered service or item. In order to provide guidance with respect to the
anti-kickback rules, the Office of the Inspector General ("OIG") issued final
regulations outlining certain "safe harbor" practices, which although
potentially capable of inducing prohibited referrals, would not be prohibited
if all applicable requirements are met. A relationship which fails to satisfy
a safe harbor is not necessarily illegal, but could be scrutinized on a case-
by-case basis. The OIG has issued final rules regarding its recently mandated
proposals for accepting and issuing advisory opinions on the anti-kickback
rules.

  Because the anti-kickback rules have been broadly interpreted, they could
limit the manner in which the Company conducts its business. The Company
believes that it currently complies with the anti-kickback rules in planning
its activities, and believes that its activities, even if not within a safe
harbor, do not violate the anti-kickback statute. However, no assurance can be
given regarding compliance in any particular factual situation. Exclusion of
the Company from the Medicare program could result in a significant loss of
reimbursement and have a significant adverse effect on the Company.

  Self Referral Regulations. Under another provision, known as the "Stark" law
or "self-referral" prohibition, physicians who have an investment or
compensation relationship with an entity furnishing clinical laboratory
services (including pathology services) may not, subject to certain
exceptions, refer clinical laboratory analyses for Medicare patients to that
entity. Similarly, facilities may not bill Medicare or any other party for
services furnished pursuant to a prohibited referral. Violation of these
provisions may result in disallowance of Medicare claims for the affected
analysis services, as well as the imposition of civil monetary penalties and
program exclusion. Under the Stark law and the regulations implementing the
law, a physician may make payments to a clinical laboratory in exchange for
the facility's provision of clinical laboratory services and continue to refer
Medicare patients to that laboratory.

  A number of states, including New York and California, have enacted
prohibitions similar to the Stark law covering referrals of non-Medicare as
well as Medicare business. These rules are very restrictive, prohibit
submission of claims for payment for prohibited referrals and provide for the
imposition of civil monetary and criminal penalties. The Company has no
prohibited relationships with any of its referrers.

                                      18


However, the Company is unable to predict how these laws may be applied in the
future, or whether the federal government or states in which the Company
operates will enact more restrictive legislation or restrictions that could
under certain circumstances impact the Company's operations.

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

  Fee-Splitting; Corporate Practice of Medicine. The laws of many states
prohibit physicians from sharing professional fees with non-physicians and
prohibit non-physician entities, such as the Company, from practicing medicine
(including pathology) and from employing physicians to practice medicine
(including pathology). The laws in most states regarding the corporate practice
of medicine have been subjected to limited judicial and regulatory
interpretation. The Company believes its current and planned activities do not
constitute fee-splitting or violate any prohibition against the corporate
practice of medicine. However, there can be no assurance that future
interpretations of such laws will not require structural or organizational
modifications of the Company's existing business. In addition, statutes in
certain states in which the Company does not currently operate could require
the Company to modify its structure.

  Food and Drug Administration. The Food and Drug Administration ("FDA")
regulates certain monoclonal antibodies purchased by the Company but does not
currently regulate the analytical services which are the Company's principal
business. However, the FDA is currently reviewing issues concerning the use of
monoclonal antibodies for analytical services and the decisions the FDA
ultimately makes could impact the Company.

  Other. 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, facilities 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 facilities such
as the Company's. Failure to comply with these regulations, other applicable
OSHA rules or with the general duty to provide a safe work place could subject
an employer, including a facility employer such as the Company, to substantial
fines and penalties.

  The confidentiality of patient medical records is subject to substantial
regulation by the state and federal governments. State and federal laws and
regulations govern both the disclosure and the use of confidential patient
medical record information. Legislation governing the dissemination and use of
medical record information is continually being proposed at both the state and
federal levels. Additional legislation may require that holders or users of
confidential patient medical information implement measures to maintain the
security of such information and may regulate the dissemination of even
anonymous patient information. Furthermore, physicians and other persons
providing patient information to the Company are also required to comply with
these laws and regulations. If a patient's privacy is violated, or if the
Company is found to have violated any state or federal statute or regulation
with regard to confidentiality, dissemination or use of patient medical
information, the Company could be liable for damages, or for fines or
penalties. The Company believes that it is in material compliance with all
applicable state and federal laws and regulations governing the
confidentiality, dissemination and use of medical record information. However,
there can be no assurance that differing interpretations of existing laws and
regulations or the adoption of new laws and regulations would not have a
material adverse effect on the ability of the Company to obtain or use patient
information which, in turn, could have a material adverse effect on the
Company's plans to develop and market its cancer information database.

                                       19


Insurance

  The Company is presently covered by general liability insurance in the
amount of $6.0 million per occurrence and $7.0 million in the aggregate,
professional liability insurance in the amount of $6.0 million per occurrence
and $8.0 million in the aggregate for the Company's Medical Directors and
other physicians, and Directors and Officers liability insurance in the amount
of $5.0 million per occurrence and in the aggregate. The Company's liability
insurance covers claims relating to the handling and disposal of medical
specimens and infectious and hazardous waste, except in the event of
malfeasance or fraud by the Company. Management believes that these amounts
and types of coverage are adequate to protect the Company and its property
against material loss.

Employees

  As of December 31, 1999, the Company had 570 full-time and 60 permanent
part-time employees, of which 165 were management, administrative and
clerical personnel, 50 were engaged primarily in marketing and sales
activities and 415 were engaged in laboratory and related operations. None of
the Company's employees is covered by collective bargaining agreements. The
Company believes its employee relations are good.

                                      20


                                   GLOSSARY

  Adjuvant Chemotherapy: Therapeutic drugs used to inhibit and destroy cancer
cells in addition to conventional treatment (e.g., surgery).

  Antibody: A protein molecule produced by the immune system that specifically
binds with an antigen.

  Antigen: Any of a variety of materials that induce the body's immune system
to produce antibodies.

  Cancer: A generic term for any kind of malignant tumor.

  Clinical: Pertaining to the sign, symptoms and course of a disease.

  Diagnosis: The process for deciding what disease is present.

  DNA: Deoxyribonucleic acid. The biochemical constituents of genes in
chromosomes.

  Electrophoresis: A method of analysis in which chemicals, usually proteins,
are separated one from another by their respective electrical charges.

  Fine Needle Aspirate or FNA: Specimen acquired through insertion of a thin
needle into a lesion whereby cells are withdrawn using negative pressure.

  Flow Cytometry: Method of analysis used to examine the staining of single
cell suspensions by focusing a laser beam on each cell and measuring the
emitted fluorescence.

  Fluorochrome: Fluorescent light generated by excitation and emission of
light of specific wavelengths using molecules with fluorescent properties.

  Hematopathologist: A pathologist specializing in the study of hematolymphoid
diseases, including hematopoietic malignancies.

  Hematopoietic Malignancies: Cancer of the blood, lymph nodes, bone marrow
and related structures.

  Her-2/neu: Oncoprotein (product of an oncogene); overexpression is a
negative prognostic and predictive indicator in certain cancers (primarily
breast cancer).

  Hormone: A chemical substance produced by an organ which has a specific
regulatory effect on the activity of organs.

  Immunohistochemistry or IHC: Technique that uses antibodies to identify and
mark antigens expressed by cells in tissues using specific enzymes (e.g.,
peroxidase alkaline phosphatase).

  In Situ Hybridization: Use of labeled fragments of DNA (probes) that can
bind (hybridize) to specific, complementary sequences.

  Lymph Nodes: Nodular structures scattered along the path of lymphatics. They
produce and store white blood cells and filter harmful substances out of the
system. They are often the first site of cancer metastases.

  Lymphoma: Any neoplasm of lymphoid tissue origin.

  Marker: A characteristic of any cell or cellular structure (e.g., a gene,
chromosome or enzyme).

                                      21


  Metastases: The spread of cancerous cells from the primary site of the
disease.

  Micrometastases: Presence of a small number of tumor cells, particularly in
the 3 lymph nodes and bone marrow, not readily detected by microscopic
examination.

  Monoclonal Antibody: An antibody produced by a single clone of cells
comprising a single species of antibody molecules. Reacts with only one
antigen (epitope).

  Mutation: An event which changes the structure of DNA in chromosomes;
mutations can often be seen in cancer cells.

  Neoplasm: The uncontrolled growth of cells resulting in a mass (tumor);
often refers to cancer.

  Nucleic Acid Sequences: A family of substances of large molecular weight,
found in chromosomes, nucleoli, mitochondria and cytoplasm of all cells.

  Occult Tumor: Clinically unidentified primary tumor with recognized
metastases.

  Oncogene: Abnormal genes derived from proto-oncogenes (normal counterparts);
are associated with many cancers.

  Oncology: The study of cancer.

  Pathology: That branch of medicine which studies essential nature of
disease, especially the structural and functional changes in tissues and
organs of the body which cause or are caused by disease.

  Ploidy: The number of chromosomal sets.

  Prognostic: Referring to potential outcome of a disease.

  Proliferation: Cell cycle kinetics, reproduction or multiplication of a
cell.

  Reagent: A substance used to detect, measure or react with another
substance.

  Receptor:  protein which specifically binds to another and mediates the
biological activity of the other.

  Recombinant DNA: DNA resulting from the insertion into the chain, by
chemical or biological means, of a sequence of DNA (in whole or partial) not
originally in that chain.

  RNA: Ribonucleic acid. A nucleic acid found in all living cells and one of
the major chemical constituents of nucleoli and ribosomes; involved in the
transmission of genetic information from DNA to proteins.

  Sarcoma: A malignant neoplasm derived from connective tissues.

  Scattergraph: A density graph of flow cytometry data where individual cells
are displayed as positive or negative for two antigens. The graph is divided
by x and y axes to define positive and negative. The density of dots, color
warmth and intensity is proportional to the number of cells per unit area.

  Serum: Fluid component of blood (noncellular).

  Southern Blotting: A technique in which DNA is fragmented, electrophoresed
and reacted with labeled fragments of DNA (probes).

  Specimen: Material sent in for evaluation, either tissue or cell suspensions
(i.e., body fluids).

                                      22


  Staining: To apply reagents to cells in order to impart color to specific
components.

  Stem Cell Transplant: Progenitor (precursor) cells used for the bone marrow
rejuvenation.

  Taxol: A chemotherapeutic agent (derived from the bark of the yew tree)
having broad anti-tumor activity.

  Thermal Cycling: Cyclical heating and cooling in the presence of target DNA
and specific DNA primers.

  Tumor: A swelling or enlargement; a growth or neoplasm, often referring to
cancer.

  Tumor Suppressor Gene: A gene involved in the normal growth regulation of
cells. Abnormalities (mutations) of tumor suppressor genes are associated with
the cause and progression of cancer based on abnormal cell growth.

                                      23


Item 2. Properties.

  The Company's main facility and executive offices are located at 521 and 533
West 57th Street, New York, New York, where the Company leases approximately
51,300 square feet of space under a 12 1/2-year lease expiring in November
2010. In 1999 the Company signed an amended lease agreement providing for
additional rental space of 28,700 square feet at 521 West 57th Street. The
Company anticipates occupying this space in June 2000. The two leases provide
for minimum aggregate annual rental payments of approximately $1,069,519. The
Company is also required to pay for repairs, property taxes and insurance
relating to this facility.

  The Company's California facility and offices are located at 5230 Pacific
Concourse Drive, Los Angeles, California, where the Company has entered into a
lease expiring November 2000 for approximately 22,750 square feet of space.
This facility commenced operations in December 1995. The lease provides for
minimum annual rental payments of approximately $453,900. The Company is also
required to pay for repairs, property taxes and insurance relating to this
facility. On December 28, 1999 the Company entered into a new lease agreement
which expires August 2010 for approximately 68,800 square feet of space. The
Company will commence operations in the new facility in August 2000. The new
lease provides for minimum annual rental payments of approximately $1,768,587.
The Company is also required to pay for repairs, property taxes and insurance
relating to this facility.

  The Company's Arizona facility and offices are located at 810 E. Hammond
Avenue, Phoenix, Arizona, where the Company leases approximately 22,600 square
feet of space under a lease which expires September 2006. The Company
commenced operations at this facility in January 1997, when it completed the
acquisition of certain assets of Oncogenetics, Inc. The lease provides for
minimum annual rental payments of approximately $141,400. The Company is also
responsible for all maintenance, property taxes and insurance relating to the
facility.

  The facility and offices of the Company's BIS division are located at 19231
Victory Boulevard, Reseda, California, where the Company leases approximately
3,046 square feet of space under a month-to-month lease. The lease provides
for minimum aggregate annual rental payments of approximately $43,190. The
Company is also required to pay for repairs, property taxes and insurance
relating to this facility.

  The facility and offices of the Company's Medical Registry Services
subsidiary is located at One University Plaza, Hackensack, New Jersey, where
the Company has entered into a lease expiring July 2000 for approximately
3,792 square feet of space. The lease provides for minimum annual rental
payments of approximately $62,040. The Company is also required to pay for
repairs, property taxes and insurance relating to this facility.

  The office of the Company's Physician Choice subsidiary is located at 8403
Colesville Road, Silver Spring, Maryland, where the Company leases 2,236
square feet of space under a five year lease expiring in April 2004. The lease
provides for minimum annual rental payments of approximately $49,530. The
Company is also responsible for all maintenance, property taxes and insurance
relating to this space.

  The facility and offices of the Company's BioClinical Partners subsidiary is
located at 25 Kenwood Circle, Franklin, Massachusetts, where the Company
leases approximately 9,200 square feet of space under a lease which expires
March 2002. The lease provides for minimum annual rental payments of
approximately $59,800. The Company is also required to pay for repairs,
property taxes and insurance relating to the facility.

  The facility and offices of the company's Pacific Coast Reference
Laboratories subsidiary is located at 11215 Knott Avenue, Cypress, California,
where the Company leases approximately 8,020 square feet of space under a
lease expiring in January 2004. The lease provides for minimum annual rental
payments of approximately $76,050. The Company is also responsible for all
maintenance, property taxes and insurance relating to the facility.

                                      24


  The company's New Jersey office is located at 25 Rockwood Place, Englewood,
New Jersey, where the company leases approximately 1,500 square feet of space
under a lease which expires December 2002. The lease provides for minimum
annual rental payments of approximately $33,800. The company is also required
to pay for repairs, property taxes and insurance related to this space.

Item 3. Legal Proceedings.

  From time to time, the Company is a party to various legal proceedings
incidental to its business. The Company believes that none of these legal
proceedings will have a material adverse effect on the Company's financial
position, results of operations or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders.

  Not applicable.

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

  The Company's Common Stock trades on the Nasdaq National Market under the
symbol "IMPH." The following table sets forth the range of high and low bid
prices per share for the Common Stock for the period from January 1, 1998
through February 28, 2000.



                                                                 High     Low
                                                               -------- --------
                                                                  
   Fiscal 1998
   First Quarter.............................................. $40 3/8  $29 3/4
   Second Quarter.............................................  39 5/8   22 1/2
   Third Quarter..............................................  31 3/4   18 3/8
   Fourth Quarter.............................................  40 1/8   20 7/8
   Fiscal 1999
   First Quarter..............................................  28 5/8   22 7/8
   Second Quarter.............................................  28 3/4   23 1/2
   Third Quarter..............................................  36 7/16  23 1/4
   Fourth Quarter.............................................  30       17 1/16
   Fiscal 2000
   First Quarter (through February 28, 2000)..................  36       21


  On March 10, 2000, the last sale price of the Common Stock as reported on
the Nasdaq National Market was $38.56. As of January 31, 2000, there were
approximately 58 record holders of the Common Stock.

                                      25


Item 6. Selected Financial Data.

  The following table sets forth selected consolidated financial and operating
data of the Company as of December 31 in each of 1995 through 1999 and for
each of the years in the five-year period ended December 31, 1999. The
consolidated statement of operations and consolidated balance sheet data have
been derived from the Company's consolidated financial statements, which have
been audited by KPMG LLP, independent certified public accountants. Such
consolidated balance sheets as of December 31, 1998 and 1999 and consolidated
statements of operations for each of the years in the three-year period ended
December 31, 1999 and the notes thereto are included in Item 14(a) of this
Annual Report on Form 10-K. The historical consolidated financial data should
be read in conjunction with and are qualified in their entirety by reference
to the consolidated financial statements of the Company and the related notes
thereto and to Item 7 of this Annual Report on Form 10-K.



                                               Year Ended December 31,
                                       -----------------------------------------
                                        1995     1996     1997    1998    1999
                                       -------  -------  ------- ------- -------
                                        (in thousands, except per share data)
                                                          
Consolidated Statement of Operations
 Data:
Total revenues.......................  $14,714  $21,965  $37,063 $56,259 $85,366
  Salaries and related costs.........    6,830    9,432   15,056  21,532  32,323
  Selling, general and
   administrative....................    6,467    9,108   14,701  22,714  34,002
  Depreciation and amortization......      396      787    1,521   3,492   6,960
                                       -------  -------  ------- ------- -------
Total operating expenses.............   13,693   19,327   31,278  47,738  73,285
                                       -------  -------  ------- ------- -------
Income from operations...............    1,021    2,638    5,785   8,521  12,081
Other income.........................       22    1,030      716   3,002   1,643
                                       -------  -------  ------- ------- -------
Income before income tax expense.....    1,043    3,668    6,501  11,523  13,724
Income tax expense...................      --     1,621    2,852   4,575   5,489
                                       -------  -------  ------- ------- -------
Net income...........................    1,043    2,047    3,649   6,948   8,235
Accrued dividends on Preferred
 Stock(1)............................     (478)     (82)     --      --      --
                                       -------  -------  ------- ------- -------
Net income available to common
 stockholders........................  $   565  $ 1,965  $ 3,649 $ 6,948 $ 8,235
                                       =======  =======  ======= ======= =======
Per common and common equivalent
 share:
  Basic:
   Net income per common share(1)....  $  0.36  $  0.41  $  0.68 $  0.91 $  1.04
                                       =======  =======  ======= ======= =======
   Weighted average common and common
    equivalent shares
    outstanding(2)...................    2,921    4,961    5,398   7,635   7,948
                                       =======  =======  ======= ======= =======
  Diluted:
   Net income per common share
    assuming dilution(1).............  $  0.31  $  0.38  $  0.63 $  0.87 $  1.01
                                       =======  =======  ======= ======= =======
   Weighted average common and common
    equivalent shares outstanding
    assuming dilution(2).............    3,371    5,404    5,809   8,002   8,153
                                       =======  =======  ======= ======= =======

                                               Year Ended December 31,
                                       -----------------------------------------
                                        1995     1996     1997    1998    1999
                                       -------  -------  ------- ------- -------
                                                          
Consolidated Selected Operating Data:
Number of cases reported.............   43,287   55,539   87,884 129,081 148,302
Number of hospitals served...........    1,118    1,360    1,670   1,740   1,788
Number of oncology practices served..      --       --       141     290     409



                                      26




                                               Year Ended December 31,
                                        --------------------------------------
                                         1995   1996    1997    1998    1999
                                        ------ ------- ------- ------- -------
                                                    (In thousands)
                                                        
Consolidated Balance Sheet Data:
Working capital........................ $3,622 $30,768 $21,951 $80,696 $56,105
Total assets...........................  9,261  37,581  46,342 150,033 149,777
Long-term obligations, net of current
 portion...............................  1,130   1,430   2,726   4,026  11,178
Total stockholders' equity.............  5,655  33,638  38,309 124,587 120,314

- --------
(1) Reflects dividends accrued on the Preferred Stock. Dividends accrued prior
    to February 10, 1995 were forgiven in conjunction with the issuance of
    Series D Preferred Stock. Dividends accrued from February 10, 1995 in the
    amount of $560,000 were paid and ceased to accrue upon conversion of the
    Preferred Stock on February 26, 1996.
(2) Weighted average shares outstanding give effect to the conversion of the
    outstanding shares of Preferred Stock into shares of Common Stock in
    accordance with the terms thereof on February 26, 1996 and reflect the
    1-for-2.8218735 reverse split of the outstanding shares of Common Stock.

                                      27


Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.

  The following discussion of the financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto included in Item 14(a) of this Annual Report on Form 10-K.

Overview

  IMPATH was founded in 1988 and has become a leader in providing critical
information essential for making medically optimal and cost-effective cancer
management decisions for individual cancer patients. The Company is focused
exclusively on the analysis of cancer, combining advanced technologies and
medical expertise to provide patient-specific diagnostic, prognostic and
treatment information to physicians involved in the treatment of cancer. With
expected medical cost increases attributable to the growth in the number of
cancer patients and the high cost of new therapies, the Company anticipates
significant and growing demand for cancer management information. IMPATH has
established its leadership and reputation through its extensive expertise, its
integration of technological advances, its emphasis on customer service and
education and the cost-effectiveness of its services.

  The Company's revenues, which have increased an average of approximately 55%
annually since 1995, have been derived from performing specialized cancer
analyses for which IMPATH typically bills various third-party payors, such as
private insurance plans, managed care plans and governmental programs (e.g.,
Medicare), as well as hospitals and individual patients. Over the last few
years, the Company has experienced increased pressures on reimbursement and
expects such pressures to cause reduced unit pricing for diagnostic and
prognostic analyses in future periods. The revenue generated from private
insurance and managed care has increased significantly as a percentage of
total revenue in the last two years as a result of increased focus by the
Company's sales force on oncology officers as well as a desire by the
Company's hospital clients to have the Company bill third parties directly.
Despite those pressures, the Company has experienced increasing average
reimbursement trends due to changes in its product mix and application of new
technologies. The Company also derives revenues by licensing its tumor
registry software to community hospitals and state agencies as well as
providing contract laboratory services and cancer database and
pharmacoeconomic information to pharmaceutical companies.

  The following table sets forth the percentages of total revenues represented
by certain items reflected in the Company's consolidated statements of
operations. The Company's business generally has been unaffected by
seasonality, except for slower growth in revenues during the third quarter of
its fiscal year due to reduced summertime activity.



                                                    Years Ended December 31,
                                                   ----------------------------
                                                     1997      1998      1999
                                                   --------  --------  --------
                                                              
   Total revenues................................     100.0%    100.0%    100.0%
   Operating expenses:
    Salaries and related costs...................      40.6      38.3      37.9
    Selling, general and administrative..........      39.8      40.4      39.8
    Depreciation and amortization................       4.0       6.2       8.2
                                                   --------  --------  --------
   Total operating expenses......................      84.4      84.9      85.9
                                                   --------  --------  --------
   Operating income..............................      15.6      15.1      14.1
                                                   --------  --------  --------
   Net income....................................       9.8      12.4       9.6
                                                   ========  ========  ========



                                      28


Recent Acquisitions

  On July 29, 1998 the Company purchased certain assets of Biologic &
Immunologic Science Laboratories, Inc. ("BIS"), a privately held cancer
diagnostics company based in Reseda, California for $3.6 million. The terms
provided for an initial payment of $2.0 million, and $800,000 payable in three
equal semi-annual installments beginning December 1998, after which another
$800,000 is payable in three equal semi-annual installments contingent on
achievement of previously established revenue targets, with interest accruing
at 8% per annum. This transaction will allow IMPATH to expand its core
diagnostic and prognostic business and build on IMPATH's scientific leadership
in lymph node and bone marrow micrometastases detection in early and late
stage cancer. Additionally, BIS will further enhance the Company's ability to
provide unique cancer information to physicians for evaluating and treating
cancer patients and to the biopharmaceutical industry in assessing
biologically relevant characteristics for targeted drug development and in
selecting patients for clinical trials and in evaluating the efficacy of
various therapies.

  On August 31, 1998 the Company acquired certain assets of Medical Registry
Services, Inc. ("MRS") for the issuance of 550,000 shares of IMPATH common
stock valued at $13.75 million. After the consideration of certain other
expenses related to the acquisition and after recording net tangible assets of
MRS, the Company recorded approximately $17.3 million in intangibles. MRS is a
leading developer and marketer of cancer registry software products that are
currently utilized in over 400 hospitals throughout the United States. The
products are used to collect and manage critical diagnostic, treatment,
follow-up and outcomes data on cancer patients. The Company and MRS, which at
the time of the acquisition had approximately 200 common clients, began a
relationship through a strategic joint venture in January, 1997. The
acquisition of MRS significantly enhances IMPATH's oncology information
capabilities by matching its diagnostic and prognostic data with treatment and
outcomes information from MRS. Additionally, it provides IMPATH with an
ongoing link to its clients as its ability to supply hospitals and oncologists
with critical information for optimal disease management will continue to
expand. MRS's revenues are derived from licensing fees paid by hospitals
utilizing its proprietary tumor registry software.

  On September 2, 1998 the Company acquired Physician Choice, Inc. ("PCI") for
the sum of $1.0 million, with $400,000 payable immediately, an additional
$400,000 payable in four equal semi-annual installments beginning March, 1999
with interest accruing at 8% per annum and $200,000 payable in IMPATH common
stock. An initial 1,980 shares of common stock, having a fair market value of
$50,000, were issued on September 2, 1998 and 1,786 shares of common stock,
having a fair market value of $50,000, were issued on September 2, 1999, with
the remaining shares to be issued in two equal annual installments beginning
September 2, 2000. PCI is a leading provider of post-clinical, pre-marketing,
cost-benefit analyses to pharmaceutical and biotechnology companies in
connection with new oncology drugs entering the marketplace. By focusing on
cancer, and utilizing health care outcomes and other efficacy measures, PCI
has achieved a better understanding of the way healthcare is delivered in that
specialty. PCI's revenues are generated on a per project basis from
pharmaceutical and biotechnology companies.

  On August 30, 1999 the Company acquired certain assets of BioClinical
Partners, Inc. ("BCP"), for $6.9 million cash, and the issuance of 60,000
shares of IMPATH common stock valued at $1,635,000. The terms provide for an
initial payment of $4.8 million, and $2.1 million payable in three equal
annual installments beginning August 30, 2000, contingent on achievement of
previously established revenue targets, with interest accruing at 6% per
annum. The shares are to be issued in two installments, 40,000 shares on
January 3, 2000 and 20,000 shares on January 2, 2001. BCP is a global medical
research network that obtains and provides access to benign and malignant
tissue and clinically relevant peripheral blood specimens to support oncology
research and product development. This strategic acquisition provides IMPATH
with another critical component in the oncology drug discovery process and
extends the range of services provided through IMPATH's BioPharmaceutical
services.

                                      29


  On November 22, 1999 the Company purchased certain assets of Pacific Coast
Reference Laboratories, Inc. ("PCRL"), for up to $5.4 million cash, with $4.6
million payable immediately and an additional $800,000 payable in four equal
semi-annual installments beginning May 2000, contingent on achievement of
previously established revenue targets, with interest accruing at 6% per
annum. PCRL is a California based, oncology-focused testing facility
specializing in anatomic pathology utilizing immunohistochemistry and flow
cytometry technologies.

  The aforementioned acquisitions have been accounted for using the purchase
method with results of operations of the respective entities being included
with the results of the Company since the respective acquisition dates. The
excess of the purchase price over the net assets acquired on BIS, PCI, BCP and
PCRL acquisitions principally relate to customer lists, which are included in
intangible assets on the Company's consolidated balance sheet and are being
amortized over periods of up to fifteen years. The excess of the purchase
price over the net assets acquired for the MRS purchase primarily relates to
the customer list, trade name, software and goodwill which are included in
intangible assets on the accompanying balance sheets and are being amortized
over periods of 5 to 20 years.

Recent Investment

  On September 27, 1999 the Company completed a $5 million investment in a
private placement of preferred stock in ILEX Oncology Service, Inc. (ILEX).
ILEX is a drug development company focused exclusively on accelerated
development of drugs for the treatment and management of cancer. This
investment accrues dividends per share at the rate per annum of $1.031 and is
convertible into common shares of ILEX's parent Company. This investment will
enable IMPATH to become a preferred provider of anatomic and molecular
pathology services for ILEX and enhance the participation in oncology research
for both companies. The collaboration of combining the international oncology
drug development experience of ILEX and IMPATH's expertise in cancer analysis
and database capabilities will enable the Company to play a greater role in
the international market.

Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

  The Company's total revenues in 1999 and 1998 were $85.4 million and $56.3
million, respectively, representing an increase of $29.1 million, or 51.7%, in
1999. This growth was primarily due to a 15% increase in case volume resulting
from increased sales and marketing activities and a 27% increase in revenue
realization per case due to the continuing product mix shift toward cases
which carry higher reimbursement rates. In addition, revenues increased as a
result of the successful integration of the Company's recent acquisitions.

  Salaries and related costs in 1999 and 1998 were $32.3 million and $21.5
million, respectively, representing an increase of $10.8 million, or 50.2%, in
1999. This increase was primarily due to personnel costs associated with the
Company's case volume growth as well as increases in personnel resulting from
the Company's recent acquisitions. As a percentage of total revenues, salaries
and related costs decreased to 37.9% in 1999 from 38.3% in 1998. This decrease
was facilitated by the Company's successful expansion strategy resulting in
streamlining of operational and administrative duties combined with a higher
revenue realization per case.

  Selling, general and administrative expenses in 1999 and 1998 were $34.0
million and $22.7 million, respectively, representing an increase of $11.3
million, or 49.8%, in 1999. The largest component of this increase was $4.6
million in incremental supply costs associated with rapid case volume growth,
recent acquisitions and the continuing product mix shift towards
lymphomia/leukemia testing which requires more analyses per case. The Company
also recorded $4.3 million of increased bad debt expense associated with
higher revenues, and the billing and collection delays associated with the new
billing system. Additionally, $2.4 million of the increase in selling, general
and administrative expenses was a result of increased operating expenses
incurred in connection with the Company's recent acquisitions. As a percentage
of total revenues, selling, general and administrative expenses decreased to
39.8% in 1999 from 40.4% in 1998 due to the implementation of certain
operating efficiencies combined with a higher revenue realization per case.

                                      30


  Depreciation and amortization in 1999 and 1998 was $7.0 million and $3.5
million, respectively, representing an increase of $3.5 million, or 100.0%, in
1999. This increase was due to approximately $993,000 in intangible
amortization associated with the purchase of certain assets of MRS, an
additional $488,000 in amortization associated with New York facility
leasehold improvements and $1,069,000 in amortization expenses associated with
the Company's new clinical and billing systems which were implemented in 1999.
As a result of these factors, depreciation and amortization expenses as a
percentage of revenues increased to 8.2% in 1999 compared to 6.2% in 1998.

  Income from operations in 1999 and 1998 was $12.1 million and $8.5 million,
respectively, representing an increase of $3.6 million, or 41.8%, in 1999. The
1999 figure reflects an increase in bad debt expense associated with billing
and collection delays related to the Company's billing system's conversion, as
well as increased amortization expense in connection with the Company's new
information system and intangible amortization associated with Company
acquisitions. As a result, as a percentage of total revenues, income from
operations decreased to 14.1% in 1999 from 15.1% in 1998.

  Other income, net for 1999 and 1998 was $1.6 million and $3.0 million,
respectively, representing a decrease of approximately $1.4 million in 1999.
The decrease was the result of increased interest expense primarily due to
additional capital lease obligations and acquisition-related debt, as well as
the sale of interest bearing securities, the proceeds of which were used to
finance the Company's stock buyback program, the acquisition of BCP and the
Company's preferred stock investment in ILEX.

  The tax provision for 1999 of approximately $5.5 million reflects federal,
state and local income tax expense. The effective tax rate for 1999 was 40.0%
compared to 39.7% in 1998. This increase resulted from an increase in the
Company's state and local tax provision associated with a reduction in tax
exempt interest income.

  Net income in 1999 and 1998 was $8.2 million and $6.9 million, respectively,
representing an increase of $1.3 million, or 18.5%, in 1999. As a percentage
of total revenues, net income decreased to 9.6% in 1999 from 12.4% in 1998
primarily due to the higher depreciation and amortization costs and lower
interest income.

Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

  The Company's total revenues in 1998 and 1997 were $56.3 million and $37.1
million, respectively, representing an increase of $19.2 million, or 51.8%, in
1998. This growth was primarily due to a 47% increase in case volume resulting
from increased sales and marketing activities and increases in contract
laboratory and information services provided to biopharmaceutical companies.
In addition, the Company recorded revenues of approximately $1.4 million from
licensing fees for its tumor registry products since the acquisition of MRS in
August 1998.

  Salaries and related costs in 1998 and 1997 were $21.5 million and $15.1
million, respectively, representing an increase of $6.4 million, or 42.4%, in
1998. This increase was primarily due to personnel costs associated with the
Company's case volume growth as well as increases in personnel headcount
resulting from the Company's acquisitions during 1998. As a percentage of
total revenues, salaries and related costs decreased to 38.3% in 1998 from
40.6% in 1997. This decrease was facilitated by the Company's successful
expansion strategy of incorporating complementary and synergistic
technologies, as well as streamlining operational and administrative duties.

  Selling, general and administrative expenses in 1998 and 1997 were $22.7
million and $14.7 million, respectively, representing an increase of $8.0
million, or 54.4%, in 1998. This increase was due to an increase in bad debt
expense of approximately $1.7 million associated with higher revenues, as well
as the continuing payor mix shift from direct hospital billings to private
insurance resulting in higher revenues and patient co-payments that generate
higher bad debt. In addition, the Company incurred over

                                      31


$2.7 million in incremental supply and courier costs due to increased volume
and the logistics required to service the Company's rapidly growing oncology
office-based business. The Company also incurred additional travel-related
expenses and professional fees associated with expanded sales, marketing and
investor relations activities of $620,000. Additionally, as a direct result of
growth, the Company incurred an additional $670,000 in telecommunications
expense and repair and maintenance of equipment. As a percentage of total
revenues, selling, general and administrative expenses increased to 40.4% in
1998 compared to 39.8% in 1997.

  Depreciation and amortization in 1998 and 1997 was $3.5 million and $1.5
million, respectively, representing an increase of $2.0 million, or 133.3%, in
1998. This increase was primarily the result of an additional $1.2 million
amortization associated with leasehold improvements made at the Company's new
facility in New York during the first quarter of 1998. Additionally, the
Company also incurred an increase in intangible amortization of $775,000
associated with the Company's recent acquisitions. As a percentage of total
revenues, depreciation and amortization expenses increased to 6.2% in 1998
compared to 4.0% in 1997.

  Income from operations in 1998 and 1997 was $8.5 million and $5.8 million,
respectively, representing an increase of $2.7 million, or 46.6%, in 1998. The
1998 figure reflects a slight decrease in operating margin due to increased
depreciation and amortization expense associated with capital expenditures and
goodwill associated with the Company's acquisitions. As a percentage of total
revenues, income from operations decreased to 15.1% in 1998 from 15.6% in
1997.

  Other income, net for 1998 and 1997 was $3.0 million and $716,000,
respectively, representing an increase of approximately $2.2 million in 1998.
This increase was the result of interest income generated from the proceeds of
the Company's follow-on offering of common stock in March 1998, partially
offset by increased interest expense due to additional capital lease
obligations.

  The tax provision for 1998 of approximately $4.6 million reflects federal,
state and local income tax expense. The effective tax rate for 1998 was 39.7%
compared to 43.9% in 1997. This decrease resulted from a reduction in the
Company's state and local tax provision associated with tax exempt interest
income, as well as expansion of the Company's operations outside of New York,
which has a lower effective state tax rate.

  Net income in 1998 and 1997 was $6.9 million and $3.6 million, respectively,
representing an increase of $3.3 million, or 91.7%, in 1998 due to the factors
described above. As a percentage of total revenues, net income increased to
12.4% in 1998 from 9.8% in 1997.

Liquidity and Capital Resources

  Since its inception, the Company has raised approximately $103.9 million of
capital through the public offerings of its common stock and $6.6 million from
private placements of preferred stock, all of which was converted into common
stock at the closing of the Company's initial public offering in February
1996. The Company's working capital and capital expenditure needs have
increased and are expected to continue to increase as the Company expands its
existing facilities and pursues its growth strategy. See "Business--Company
Strategy."

  The Company's cash and cash equivalent balances at December 31, 1999 and
1998 were approximately $5.3 million and $45.6 million, respectively,
representing a decrease of $40.3 million in 1999. The Company also had
approximately $23.7 million invested in a portfolio of investment-grade fixed-
income securities at December 31, 1999, representing a $6.3 million decrease
from the $30.0 million which was invested in this portfolio at December 31,
1998. The decrease was primarily due to the repayment of the short-term line
of credit bank borrowings of $10 million and the repurchase by the Company of
642,050 shares of common stock for approximately $15.4 million under the stock
buyback

                                      32


program that was initiated in December 1998. In addition, other uses of cash
included the acquisition of certain assets of BCP for $4.8 million and PCRL
for $4.5 million, as well as a $5.0 million preferred stock investment in
ILEX. The Company also used approximately $3.1 million to satisfy its capital
lease obligations and approximately $1.9 million to meet its note obligations.

  For 1999, cash provided by operating activities was approximately $1.6
million. This was the result of cash inflows from the Company's net income,
partially offset by increases in accounts receivable, net of allowance for bad
debt of $15.9 million due to rapid sales growth as well as billing and
collection delays associated with the Company's new billing system. The
Company also experienced increases in income taxes payable of approximately
$3.7 million and in accounts payable and accrued expenses of approximately
$1.9 million. In addition, as a result of increased case volume growth, the
introduction of several new products and changes in corporate purchasing
methods, laboratory supply inventory increased approximately $2.3 million.

  During 1999, the Company used approximately $3.8 million to fund the
continuing development of the Company's clinical and billing systems, as well
as its outcomes database and network infrastructure. In addition, the Company
received approximately $1.1 million during 1999 through the issuance of common
stock upon the exercise of Company stock options and warrants.

  The Company has a line of credit for an aggregate amount of $15,000,000 with
Fleet Bank. Borrowing under the line will bear interest at LIBOR plus 2.25%.
In February 2000, the Company initiated a draw- down of $13 million against
this line. The Company has lines of credit for financing equipment, leasehold
improvements and computer hardware and software. In July 1999, the Company
established a $6 million credit line with Newcourt Financial with lease terms
based on 48 monthly payments at a rate equal to .35% above the four-year
treasury notes. As of December 31, 1999 approximately $5 million was drawn
against the line. In September 1999, the Company established a $6 million
credit line with Fleet Bank with lease terms based on 48 monthly payments at a
rate equal to .20% above the four-year treasury notes. As of December 31, 1999
approximately $1 million was drawn against the line. Also, in December 1999,
the Company established a $6.2 million credit line with First American
Bankcorp, Inc. with lease terms based on 48 monthly payments at a rate equal
to the four-year treasury notes. As of December 31, 1999 approximately $1.2
million was drawn against the line.

  The Company's growth strategy is anticipated to be financed through its
current cash resources and existing third-party credit facilities. The Company
believes the combination of these sources will be sufficient to fund its
operations and to satisfy the Company's cash requirements for the next 12
months and the foreseeable future. There may be circumstances, however, that
would accelerate the Company's use of proceeds from the follow on offering. If
this occurs, the Company may, from time to time, incur additional indebtedness
or issue, in public or private transactions, equity or debt securities.
However, there can be no assurance that suitable debt or equity financing will
be available to the Company.

Impact of Inflation and Changing Prices

  The impact of inflation and changing prices on the Company has been
primarily limited to salary, laboratory and operating supplies and rent
increases and have not been material to date to the Company's operations. In
the future, the Company may not be able to increase the prices for its cases
by an amount sufficient to cover the cost of inflation, although the Company
is responding to these concerns by attempting to increase the volume and
adjust the product mix of its business.


Recently Issued Accounting Standards

  In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which as amended, becomes effective for
our financial statements beginning January 1, 2001. SFAS No. 133 requires a
company to recognize all derivative instruments as assets or liabilities in
its balance sheet and measure them at fair value. The Company does not expect
the adoption of this Statement to have a material impact on the financial
statements.

                                      33


  In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB 101 requires a company to follow its guidance no later than
the second quarter of its fiscal year beginning after December 15, 1999
through a cumulative effect of a change in accounting principles. The Company
does not expect adoption of this SAB to have a material impact on our
financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

  The following discussion about our exposure to market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.

  Our holdings of financial instruments are comprised primarily of U.S.
corporate debt, U.S. government debt and commercial paper. All such
instruments are classified as securities available for sale. We do not invest
in portfolio equity securities or commodities or use financial derivatives for
trading purposes. Our debt security portfolio represents funds held
temporarily pending use in our business and operations. We manage these funds
accordingly. We seek reasonable assuredness of the safety of principal and
market liquidity by investing in rated fixed income securities while at the
same time seeking to achieve a favorable rate or return. Our market risk
exposure consists principally of exposure to changes in interest rates. Our
holdings are also exposed to the risks of changes in the credit quality of
issuers. We typically invest in the shorter-end of the maturity spectrum, and
at December 31, 1999, more than 50% of our holdings were in instruments
maturing in two years or less and more than 52% of such holdings matured in
one year or less.

Item 8. Financial Statements and Supplementary Data.

  For information concerning this item, see Item 14(a) below.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

  Not applicable.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant.

  For information concerning this item, see text under the captions "Election
of Directors" and "Executive Officers" in the 2000 Proxy Statement of the
Company (the "Proxy Statement") to be filed subsequent to the filing of this
Annual Report on Form 10-K, which information is incorporated herein by
reference.

Item 11. Executive Compensation.

  For information concerning this item, see text under the captions "Executive
Compensation," "Employment-Related Agreements with Executive Officers,"
"Compensation of Directors," "Compensation Committee Interlocks and Insider
Participation," "Section 16(a) Beneficial Ownership Reporting Compliance,"
"Performance Graph" and "Report of the Compensation Committee" in the Proxy
Statement, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

  For information concerning this item, see text under the captions "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of Directors
and Executive Officers" in the Proxy Statement, which information is
incorporated herein by reference.

                                      34


Item 13. Certain Relationships and Related Transactions.

  For information concerning this item, see text under the caption "Certain
Relationships and Related Transactions" in the Proxy Statement, which
information is incorporated herein by reference.

                                    PART IV

Item 14. Exhibits and Financial Statement Schedules

  (a) (1) Financial Statements:

    The financial statements of the Company contained in this Annual Report
  on Form 10-K are listed in the attached Index to Financial Statements.

    (2) Financial Statement Schedules:

    All schedules have been omitted because they are inapplicable or the
  information is provided in the consolidated financial statements, including
  the notes thereto.

    (3) Exhibits:

    The exhibits required to be filed as part of this Annual Report on Form
  10- K are listed in the attached Index to Exhibits. Exhibits 10.2, 10.3,
  10.13, 10.14, 10.15, 10.16 and 10.17 are the management contracts and
  compensatory plans or arrangements required to be filed as part of this
  Annual Report on Form 10-K.

                                      35


                               POWER OF ATTORNEY

  The Registrant and each person whose signature appears below hereby appoint
each of Anu D. Saad, Ph.D. and David J. Cammarata as attorneys-in-fact with
full power of substitution, severally, to execute in the name and on behalf of
the Registrant and each such person, individually and in each capacity stated
below, one or more amendments to this Annual Report on Form 10-K, which
amendments may make such changes in this Report as the attorney-in-fact acting
in the premises deems appropriate and to file any such amendment to this Report
with the Securities and Exchange Commission.

                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          IMPATH Inc.


Dated: March 30, 2000                                 /s/ Anu D. Saad
                                          By __________________________________
                                                    Anu D. Saad, Ph.D.
                                               President and Chief Executive
                                                          Officer

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


Dated: March 30, 2000                                 /s/ Anu D. Saad
                                          By __________________________________
                                                    Anu D. Saad, Ph.D.
                                            President, Chief Executive Officer
                                                       and Director


Dated: March 30, 2000                             /s/ Richard P. Adelson
                                          By __________________________________
                                                    Richard P. Adelson
                                            Executive Vice President and Chief
                                                     Operating Officer


Dated: March 30, 2000                             /s/ David J. Cammarata
                                          By __________________________________
                                                    David J. Cammarata
                                              Executive Vice President, Chief
                                              Financial Officer and Principal
                                                    Accounting Officer


                                                    /s/ John L. Cassis
Dated: March 30, 2000                     By __________________________________
                                                      John L. Cassis
                                            Chairman of the Board and Director


Dated: March 30, 2000                               /s/ Richard J. Cote
                                          By __________________________________
                                                   Richard J. Cote, M.D
                                                         Director


Dated: March 30, 2000                                /s/ George Frazza
                                          By __________________________________
                                                       George Frazza
                                                         Director


Dated: March 30, 2000                                 /s/ David Galas
                                          By __________________________________
                                                    David Galas, Ph.D.
                                                         Director

                                       36



                                                   /s/ Joseph A. Mollica
Dated: March 30, 2000                     By __________________________________
                                                 Joseph A. Mollica, Ph.D.
                                                         Director


Dated: March 30, 2000                              /s/ Marcel Rozencweig
                                          By __________________________________
                                             Marcel Rozencweig, M.D. Director

                                       37


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                 
Independent Auditors' Report......................................          F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999......          F-3
Consolidated Statements of Operations for the years ended December
 31, 1997, 1998 and 1999..........................................          F-4
Consolidated Statements of Stockholders' Equity for the years
 ended December 31, 1997, 1998 and 1999...........................   F-5 to F-6
Consolidated Statements of Cash Flows for the years ended December
 31, 1997, 1998 and 1999..........................................          F-7
Notes to Consolidated Financial Statements........................  F-8 to F-20



                                      F-1


                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
IMPATH Inc.:

  We have audited the accompanying consolidated balance sheets of IMPATH Inc.
and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of IMPATH
Inc. and subsidiaries as of December 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted
accounting principles.

                                          KPMG LLP

Short Hills, New Jersey
February 24, 2000

                                      F-2


                          IMPATH INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 1998 and 1999



                                                         1998          1999
                                                     ------------  ------------
                                                             
                      Assets
Current assets:
 Cash and cash equivalents.........................  $ 45,556,005  $  5,321,916
 Marketable securities, at market value............    29,971,456    23,716,022
 Accounts receivable, net of allowance for
  doubtful accounts of $3,958,235 in 1998 and
  $7,783,663 in 1999...............................    19,619,451    35,515,029
 Prepaid expenses..................................       442,480       535,543
 Prepaid taxes.....................................     1,758,407           --
 Deferred tax assets...............................     1,334,591     1,784,074
 Other current assets..............................     1,306,653     4,851,273
                                                     ------------  ------------
     Total current assets..........................    99,989,043    71,723,857
Fixed assets, less accumulated depreciation and
 amortization......................................    21,239,884    33,704,112
Deposits and other non-current assets..............       203,491       338,373
Investment in preferred stock......................           --      5,000,000
Intangible assets, net of accumulated amortization
  of $1,462,204 in 1998 and
  $4,012,146 in 1999...............................    28,600,749    39,011,001
                                                     ------------  ------------
     Total assets..................................  $150,033,167  $149,777,343
                                                     ============  ============
       Liabilities and Stockholders' Equity
Current liabilities:
 Current portion of capital lease obligations......  $  1,622,366  $  4,655,309
 Current portion of notes payable..................     1,271,915     1,064,587
 Short term borrowings.............................    10,000,000           --
 Accounts payable..................................     2,713,228     3,031,898
 Deferred revenues.................................     1,866,241     1,988,146
 Income taxes payable..............................           --      1,434,947
 Accrued expenses..................................     1,819,752     3,443,578
                                                     ------------  ------------
     Total current liabilities.....................    19,293,502    15,618,465
                                                     ------------  ------------
Capital lease obligations, net of current portion..     3,792,833    10,378,142
Notes payable, net of current portion..............       233,333       800,000
Deferred tax liabilities ..........................     2,126,531     2,666,649
Commitments and contingencies
Stockholders' equity:
 Preferred stock, $.005 par value, authorized
  2,000,000 shares; 0 and 0 shares issued in 1998
  and 1999, respectively
 Common stock, $.005 par value, authorized
  20,000,000 shares; 8,538,345 and 8,695,181
  shares issued in 1998 and 1999, respectively;
  8,224,657 and 7,799,443 shares outstanding in
  1998 and 1999, respectively......................        42,690        43,475
 Common stock to be issued, $.005 par value; 0
  shares in 1998 and 60,000 shares in 1999.........           --      1,735,000
 Additional paid-in capital........................   120,904,861   122,553,938
 Retained earnings.................................    12,095,622    20,330,152
 Accumulated other comprehensive (loss)............       (48,602)     (705,029)
                                                     ------------  ------------
                                                      132,994,571   143,957,536
 Less:
   Cost of 313,688 and 955,738 shares of common
    stock held in treasury in 1998 and 1999,
    respectively...................................    (7,908,841)  (23,350,467)
   Deferred compensation...........................      (498,762)     (292,982)
                                                     ------------  ------------
     Total stockholders' equity....................   124,586,968   120,314,087
                                                     ------------  ------------
     Total liabilities and stockholders' equity....  $150,033,167  $149,777,343
                                                     ============  ============


          See accompanying notes to consolidated financial statements.

                                      F-3


                          IMPATH INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  Years ended December 31, 1997, 1998 and 1999



                                            1997         1998         1999
                                         -----------  -----------  -----------
                                                          
Revenues:
  Net diagnostic and prognostic
   services............................. $36,821,738  $53,183,356  $77,433,164
  Biopharmaceutical services............     241,743    1,685,984    3,838,181
  Tumor registry services...............         --     1,390,106    4,095,050
                                         -----------  -----------  -----------
      Total revenues....................  37,063,481   56,259,446   85,366,395
                                         -----------  -----------  -----------
Operating expenses:
  Salaries and related costs............  15,056,221   21,532,443   32,322,729
  Selling, general and administrative...  14,701,081   22,713,156   34,001,973
  Depreciation and amortization.........   1,521,251    3,492,482    6,960,442
                                         -----------  -----------  -----------
      Total operating expenses..........  31,278,553   47,738,081   73,285,144
                                         -----------  -----------  -----------
      Income from operations............   5,784,928    8,521,365   12,081,251
Interest income.........................     677,109    3,661,063    2,602,959
Interest expense........................    (339,903)    (659,078)    (959,992)
Gains on marketable securities, net.....     379,001          --           --
                                         -----------  -----------  -----------
      Income before income tax expense..   6,501,135   11,523,350   13,724,218
Income tax expense......................   2,851,936    4,575,805    5,489,688
                                         -----------  -----------  -----------
Net income.............................. $ 3,649,199  $ 6,947,545  $ 8,234,530
                                         ===========  ===========  ===========
Per common and common equivalent share:
Basic:
  Net income per common share........... $      0.68  $      0.91  $      1.04
                                         ===========  ===========  ===========
  Weighted average common shares
   outstanding..........................   5,398,000    7,635,000    7,948,000
                                         ===========  ===========  ===========
Diluted:
  Net income per common share--assuming
   dilution............................. $      0.63  $      0.87  $      1.01
                                         ===========  ===========  ===========
  Weighted average common and common
   equivalent
   shares outstanding--assuming
   dilution.............................   5,809,000    8,002,000    8,153,000
                                         ===========  ===========  ===========


          See accompanying notes to consolidated financial statements.

                                      F-4


                          IMPATH INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  Years ended December 31, 1997, 1998 and 1999



                    Common stock
                  -----------------
                                                                           Accumulated
                                                  Additional                  other                 Notes
                                                   paid-in                comprehensive           receivable  Deferred
                                    Common stock   capital      Retained     income     Treasury     from      compen-
                   Shares   Amount  to be issued (deficiency)   earnings     (loss)      stock   stockholders  sation
                  --------- ------- ------------ ------------  ---------- ------------- -------- ------------ ---------
                                                                                   
Balance at
December 31,
1996............  5,322,286 $26,611     --       $32,357,260   $1,498,878                $(100)    $(28,421)  $(216,323)
Common shares
issued upon
exercise of
stock options...    125,357     627     --           474,862          --         --        --           --          --
Common shares
issued upon
exercise of
warrants........     11,184      56     --            39,086          --         --        --           --          --
Compensation
associated with
issuance of
options to non-
employees.......        --      --      --           679,752          --         --        --           --     (679,752)
Issuance of
options related
to Immunopath
acquisition.....        --      --      --           191,218          --         --        --           --          --
Tax benefit
related to stock
option
exercises.......        --      --      --           171,531          --         --        --           --          --
Repayment of
officer loans...        --      --      --               --           --         --        --        28,421         --
Amortization of
deferred
compensation....        --      --      --           (19,935)         --         --        --           --      220,042
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......        --      --      --               --           --     (83,881)      --           --          --
Net income for
the year ended
December 31,
1997............        --      --      --               --     3,649,199        --        --           --          --
                  --------- -------     ---      -----------   ----------    -------     -----     --------   ---------
Total
comprehensive
income..........        --      --      --               --           --         --        --           --          --
Balance at
December 31,
1997............  5,458,827  27,294     --        33,893,774    5,148,077    (83,881)     (100)         --     (676,033)
Common shares
issued upon
exercise
of stock
options.........    198,207     990     --           814,120          --         --        --           --          --
Common shares
issued upon
exercise of
warrant.........     29,331     146     --           102,660          --         --        --           --          --
Common shares
issued upon
follow-on
offering, net
 ................  2,300,000  11,500     --        71,437,994          --         --        --           --          --
Common shares
issued upon
acquisition of
Physicians
Choice, Inc.
(PCI) ..........      1,980      10     --            49,990          --         --        --           --          --
Compensation
associated with
issuance of
options to non-
employees.......        --      --      --            80,462          --         --        --           --      (80,462)
Common shares
issued upon
acquisition of
Medical Registry
Service, Inc.
(MRS)...........    550,000   2,750     --        13,747,250          --         --        --           --          --

                     Total
                  ------------
               
Balance at
December 31,
1996............  $33,637,905
Common shares
issued upon
exercise of
stock options...      475,489
Common shares
issued upon
exercise of
warrants........       39,142
Compensation
associated with
issuance of
options to non-
employees.......          --
Issuance of
options related
to Immunopath
acquisition.....      191,218
Tax benefit
related to stock
option
exercises.......      171,531
Repayment of
officer loans...       28,421
Amortization of
deferred
compensation....      200,107
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......      (83,881)
Net income for
the year ended
December 31,
1997............    3,649,199
                  ------------
Total
comprehensive
income..........    3,565,318
Balance at
December 31,
1997............   38,309,131
Common shares
issued upon
exercise
of stock
options.........      815,110
Common shares
issued upon
exercise of
warrant.........      102,806
Common shares
issued upon
follow-on
offering, net
 ................   71,449,494
Common shares
issued upon
acquisition of
Physicians
Choice, Inc.
(PCI) ..........       50,000
Compensation
associated with
issuance of
options to non-
employees.......          --
Common shares
issued upon
acquisition of
Medical Registry
Service, Inc.
(MRS)...........   13,750,000


                                                                     (continued)

                                      F-5


                          IMPATH INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(Continued)

                  Years ended December 31, 1997, 1998 and 1999



                    Common stock
                  -----------------
                                                                           Accumulated
                                                  Additional                  other                        Notes
                                                   paid-in                comprehensive                  receivable  Deferred
                                    Common stock   capital     Retained      income        Treasury         from      compen-
                   Shares   Amount  to be issued (deficiency)  earnings      (loss)         stock       stockholders  sation
                  --------- ------- ------------ ------------ ----------- ------------- --------------  ------------ ---------
                                                                                          
Repurchase of
common shares...        --      --          --            --          --          --        (7,908,741)     --             --
Amortization of
deferred
compensation....        --      --          --            --          --          --               --       --         257,733
Tax benefit
related to stock
option
exercises.......        --      --          --        778,611         --          --               --       --             --
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......        --      --          --            --          --       35,279              --       --             --
Net income for
the year ended
December 31,
1998............        --      --          --            --    6,947,545         --               --       --             --
                  --------- -------  ----------  ------------ -----------   ---------   --------------      ---      ---------
Total
comprehensive
income..........        --      --          --            --          --          --               --       --             --
Balance at
December 31,
1998............  8,538,345  42,690         --    120,904,861  12,095,622     (48,602)      (7,908,841)     --        (498,762)
Common shares
issued upon
exercise of
stock options...    154,837     775         --      1,111,994         --          --               --       --             --
Common shares
issued upon
exercise of
warrant.........        213       1         --            745         --          --               --       --             --
Common shares
issued as a
result of
business
acquisitions....      1,786       9         --         49,991         --          --               --       --             --
Common shares to
be issued.......        --      --    1,735,000           --          --          --               --       --             --
Repurchase of
common shares...        --      --          --            --          --          --       (15,441,626)     --             --
Amortization of
deferred
compensation....        --      --          --            --          --          --               --       --         205,780
Tax benefit
related to stock
option
exercises.......        --      --          --        486,347         --          --               --       --             --
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......        --      --          --            --          --     (656,427)             --       --             --
Net income for
the year ended
December 31,
1999............        --      --          --            --    8,234,530         --               --       --             --
                  --------- -------  ----------  ------------ -----------   ---------   --------------      ---      ---------
Total
comprehensive
income..........
Balance at
December 31,
1999............  8,695,181 $43,475  $1,735,000  $122,553,938 $20,330,152   $(705,029)   $(23,350,467)      --       $(292,982)
                  ========= =======  ==========  ============ ===========   =========   ==============      ===      =========

                     Total
                  -------------
               
Repurchase of
common shares...    (7,908,741)
Amortization of
deferred
compensation....       257,733
Tax benefit
related to stock
option
exercises.......       778,611
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......        35,279
Net income for
the year ended
December 31,
1998............     6,947,545
                  -------------
Total
comprehensive
income..........     6,982,824
Balance at
December 31,
1998............   124,586,968
Common shares
issued upon
exercise of
stock options...     1,112,769
Common shares
issued upon
exercise of
warrant.........           746
Common shares
issued as a
result of
business
acquisitions....        50,000
Common shares to
be issued.......     1,735,000
Repurchase of
common shares...   (15,441,626)
Amortization of
deferred
compensation....       205,780
Tax benefit
related to stock
option
exercises.......       486,347
Comprehensive
income:
Change in
unrealized net
depreciation of
securities......      (656,427)
Net income for
the year ended
December 31,
1999............     8,234,530
                  -------------
Total
comprehensive
income..........     7,578,103
Balance at
December 31,
1999............  $120,314,087
                  =============


          See accompanying notes to consolidated financial statements.

                                      F-6


                          IMPATH INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 1997, 1998 and 1999




                                           1997          1998          1999
                                        -----------  ------------  ------------
                                                          
Cash flows from operating activities:
 Net income...........................  $ 3,649,199  $  6,947,545  $  8,234,530
 Adjustments to reconcile net income
  to net cash provided by operating
  activities:
  Depreciation and amortization.......    1,521,251     3,492,482     6,960,442
  Provision for uncollectible accounts
   receivable.........................    4,390,581     6,100,789    10,433,546
  Deferred taxes......................    1,305,858      (395,164)       90,636
  Non-cash compensation...............      200,107       257,733       205,780
  Changes in assets and liabilities
   (net of the effects from
   acquisitions of business):
  (Increase) in accounts receivable,
   net................................   (8,803,998)  (13,683,381)  (26,329,124)
  (Increase) in prepaid expenses and
   other current assets...............     (455,227)     (718,396)   (3,637,683)
  (Increase) decrease in deposits and
   other non-current assets...........     (235,289)      130,676      (134,882)
  (Decrease) increase in accounts
   payable/accrued expenses...........     (381,729)    2,073,948     1,942,496
  (Decrease) in construction payments
   payable............................          --     (1,542,199)          --
  (Decrease) increase in income taxes
   payable............................     (362,568)   (1,137,890)    3,679,701
  Increase in deferred revenues.......          --        196,210       121,905
                                        -----------  ------------  ------------
Net cash provided by operating
 activities...........................      828,185     1,722,353     1,567,347
                                        -----------  ------------  ------------
Cash flows from investing activities:
 (Purchases) of marketable
  securities..........................   (1,122,368)  (49,989,700)  (43,205,992)
 Sales/maturities of marketable
  securities..........................   10,481,737    34,005,671    48,804,999
 Acquisitions of businesses, net of
  cash acquired.......................   (6,185,030)   (2,775,393)   (9,250,000)
 Investment in preferred stock........          --            --     (5,000,000)
 Capital expenditures.................   (4,063,195)   (9,491,394)   (3,826,959)
                                        -----------  ------------  ------------
Net cash (used in) investing
 activities...........................     (888,856)  (28,250,816)  (12,477,952)
                                        -----------  ------------  ------------
Cash flows from financing activities:
 Issuance of common stock.............      514,631       917,916     1,113,515
 Repurchase of common stock...........          --     (7,908,741)  (15,441,626)
 Proceeds of follow-on offering, net
  of registration costs...............          --     71,449,494           --
 Proceeds (repayments) from bank
  loans...............................          --     10,000,000   (10,000,000)
 Payments of notes payable............          --       (863,752)   (1,869,816)
 Payments of capital lease
  obligations.........................   (1,098,999)   (1,835,734)   (3,125,557)
 Repayment of loans to stockholders...       28,421           --            --
                                        -----------  ------------  ------------
Net cash (used in) provided by
 financing activities.................     (555,947)   71,759,183   (29,323,484)
                                        -----------  ------------  ------------
Net (decrease) increase in cash and
 cash equivalents.....................     (616,618)   45,230,720   (40,234,089)
Cash and cash equivalents at beginning
 of year..............................      941,903       325,285    45,556,005
                                        -----------  ------------  ------------
Cash and cash equivalents at end of
 year.................................  $   325,285  $ 45,556,005  $  5,321,916
                                        ===========  ============  ============
Supplemental disclosures of cash flow
 information:
 Cash paid during the year for income
  taxes...............................  $ 1,771,044  $  6,108,858  $  2,565,533
                                        ===========  ============  ============
 Cash paid during the year for
  interest............................  $   339,963  $    581,278  $  1,011,640
                                        ===========  ============  ============
 Fixed assets acquired pursuant to
  capital leases......................  $ 2,638,364  $  3,577,065  $ 13,200,039
                                        ===========  ============  ============
 Note payable related to acquisition
  of business.........................  $   974,000  $  1,395,000  $  3,261,255
                                        ===========  ============  ============
 Common stock issued for
  acquisitions........................  $       --   $ 13,800,000  $     50,000
                                        ===========  ============  ============


          See accompanying notes to consolidated financial statements.

                                      F-7


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(1) Organization

  IMPATH Inc. (the "Company") was incorporated on March 1, 1988 under the laws
of the State of Delaware. The Company was organized for the purpose of
establishing a specialized facility dedicated to the use of the most
sophisticated technologies to provide diagnostic and prognostic information to
physicians specializing in cancer. The Company conducts these analyses by
utilizing immunohistochemistry, flow cytometry and image analysis, molecular
pathology, cytogenetics, micrometastases detection, Drug Resistance Assay(TM)
and serum analysis technologies. The consolidated financial statements include
the accounts of all the majority-owned subsidiaries. All intercompany balances
have been eliminated in consolidation. The Company's revenues are derived
through:

    Diagnostic and prognostic analytical services to hospitals, medical
  centers, clinical laboratories and physicians;

    Monoclonal antibody and molecular probe characterization services to
  biotechnology and genomics companies and other researchers;

    Licensing of tumor registry software to community hospitals and state
  agencies; and

    Global medical research network that obtains and provides access to
  benign and malignant tissue and clinically relevant peripheral blood
  specimens to support oncology research and product development.

  The Company submits its invoices for diagnostic and prognostic analytical
services to its clients, primary and secondary insurers, or individual
patients. The Company does not require collateral from its clients as security
for payment of its invoices.

(2) Significant Accounting Policies

 (a) Cash Equivalents

  Cash equivalents consist principally of money market funds at December 31,
1998 and 1999. For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents. Cost approximates fair market
value for these instruments.

 (b) Marketable Securities

  In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115. The Company's portfolio of securities are considered available for sale
as prescribed by SFAS No. 115. As a result, unrealized appreciation
(depreciation) is recorded as an accumulated other comprehensive income (loss)
in stockholders' equity, net of related deferred taxes. At December 31, 1999,
approximately $17.8 million of the securities mature in one to three years (of
which approximately $17.4 million are corporate fixed income securities and
$400,000 are municipal securities) and approximately $5.9 million mature in
more than three years (of which approximately $3.3 million are corporate fixed
income securities and $2.6 million are government securities).

 (c) Fixed Assets

  Fixed assets are stated at cost. Depreciation of furniture, fixtures,
laboratory equipment and personal computers is provided over their estimated
useful lives (which range from three to seven years) using the straight-line
method, and leasehold improvements are being amortized over the shorter of the
related lease term or the lives of the improvements using the straight-line
method. Software development costs primarily represent external costs
capitalized for software developed to meet the specific needs of the

                                      F-8


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company. These costs are being amortized over a five- to seven-year period
using the straight-line method. Effective January 1, 1998, the Company adopted
the provisions of AICPA statement of position 98-1 "Accounting for Software
Costs". The adoption of the statement resulted in approximately $500,000 or
approximately $0.04 per diluted share after taxes, and $1,236,000, or
approximately $0.09 per diluted share after taxes, of internal payroll costs
being capitalized in 1998 and 1999 respectively, as they related directly to
system implementation.

 (d) Revenue Recognition

  Revenues are recognized on an accrual basis as earned at such time as the
Company has completed performance of its diagnostic or prognostic services.
Revenue is reported at the estimated net realizable amounts from patients,
third-party and government payors, and others for services rendered, including
estimated retroactive adjustments under reimbursement agreements with certain
payors. Retroactive adjustments are accrued on an estimated basis in the
period the related services are rendered and adjusted in future periods as
final settlements are determined.

  Revenue from biopharmaceutical services is recognized in accordance with
terms of the respective contracts or upon shipment of tissue and other
specimens to customers.

  Revenue from the license of tumor registry software is deferred and
recognized on a straight-line basis over the term of the agreement. All
license agreements have support and maintenance obligations by the Company.

 (e) Intangible Assets

  Goodwill, which represents the excess of purchase price over fair value of
identifiable net assets acquired, is amortized on a straight-line basis over
the expected periods to be benefited, generally 20 years. The Company assesses
the recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved. Other acquired intangibles, the majority being customer lists, are
being amortized over their estimated useful lives of between five to twenty
years.

 (f) Income Taxes

  Income taxes are provided pursuant to the asset and liability method as
described in SFAS No. 109. SFAS No. 109 requires that the Company recognize
deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the consolidated financial statements or
tax returns. Under SFAS No. 109, deferred tax assets and liabilities are
determined on the basis of the difference between the tax basis of assets and
liabilities and their respective financial reporting amounts ("temporary
differences") at enacted tax rates in effect for the years in which the
differences are expected to reverse.

 (g) Concentration of Credit Risks

  The Company invests its cash, cash equivalents and marketable securities in
deposits with money market funds of major U.S. financial institutions, and
fixed income securities. The Company has established guidelines relative to
diversification and maturities that maintain safety and liquidity. To date,
the Company has not experienced any significant losses on its cash, cash
equivalents and marketable securities.

                                      F-9


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 (h) Stock-Based Compensation

  In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation cost for stock options is measured
as the excess, if any, of the market price of the Company's stock at the date
of grant over the amount an employee or Director must pay to acquire the
stock. Such amounts are amortized over the respective vesting periods of the
option grant. The Company uses the fair value-based method of accounting for
stock-based compensation to non-employees. Under the fair value-based method,
compensation cost is measured at the grant date based on the value of the
award and is recognized over the vesting period.

 (i) Net Income Per Common Share

  "Basic" earnings per common share equals net income divided by weighted
average common shares outstanding during the period. "Diluted" earnings per
common share equals net income divided by the sum of weighted average common
shares outstanding during the period plus common stock equivalents. Common
stock equivalents are shares assumed to be issued if outstanding stock options
and warrants were exercised. Common stock equivalents that are anti-dilutive
are excluded from net income per common share.

  Following is a reconciliation of the shares used in calculating basic and
diluted net income per common share (net income as reported is the numerator
in each calculation):



                                                    1997      1998      1999
                                                  --------- --------- ---------
                                                             
   Weighted average common shares outstanding...  5,398,000 7,635,000 7,948,000
   Effect of diluted securities--options........    411,000   367,000   205,000
                                                  --------- --------- ---------
   Weighted average common and common equivalent
    shares outstanding--assuming dilution.......  5,809,000 8,002,000 8,153,000
                                                  ========= ========= =========


 (j) Use of Estimates

  Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

 (k) Long-Lived Assets

  The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

 (l) Comprehensive Income

  Comprehensive income consists of net income and net unrealized gains
(losses) on securities and is present in the consolidated statements of
stockholders' equity.

                                     F-10


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(3) Fair Value of Financial Instruments

  SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties.

  The carrying amounts of all financial instruments except investments in
marketable securities approximate fair value because of the short maturity of
those instruments or the market rate of interest being charged. Fair values of
investments in marketable securities are based on quoted market prices.

(4) Accounts Receivable

  In accordance with Generally Accepted Accounting Principles ("GAAP") and
consistent with healthcare industry practices, IMPATH presents its accounts
receivable at net realizable value. Net accounts receivable balances are
comprised of the following as of December 31, 1998 and 1999.



                                                          1998         1999
                                                       -----------  -----------
                                                              
   Gross accounts receivable.......................... $35,138,046  $63,510,465
   Allowance for doubtful accounts....................  (3,958,235)  (7,783,663)
   Contractual allowance reserve...................... (11,560,360) (20,211,773)
                                                       -----------  -----------
                                                       $19,619,451  $35,515,029
                                                       ===========  ===========


  Accounts receivable, by payor class, as a percentage of total net
receivables at December 31, 1998 and 1999 are as follows:



                                                                     1998  1999
                                                                     ----  ----
                                                                     
   Medicare.........................................................   12%  15%
   Commercial insurance.............................................   44   48
   Hospitals, clinics and other institutions........................   25   22
   Patients.........................................................   19   15
                                                                     ----  ---
                                                                     100%  100%
                                                                     ====  ===


(5) Fixed Assets

  At December 31, 1998 and 1999, fixed assets consist of the following:



                                                           1998        1999
                                                        ----------- -----------
                                                              
   Personal computers.................................. $ 4,571,227 $ 6,010,846
   Software development costs..........................  10,508,280  15,543,912
   Furniture, fixtures and laboratory equipment........   5,990,837   9,240,975
   Leasehold improvements..............................   5,316,091  12,434,031
                                                        ----------- -----------
                                                         26,386,435  43,229,764
   Less accumulated depreciation and amortization......   5,146,551   9,525,652
                                                        ----------- -----------
                                                        $21,239,884 $33,704,112
                                                        =========== ===========


  Included in the above at December 31, 1998 and 1999 are gross assets under
capital leases of approximately $9,109,906 and $20,469,522, respectively, and
the related accumulated amortization at such dates is approximately $2,427,255
and $4,838,757, respectively.

                                     F-11


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(6) Acquisitions/Investments

  In October 1996, the Company entered into an agreement with Oncogenetics
Inc. to purchase customer lists pertaining to its diagnostic and prognostic
cancer business for a sum of $800,000. In conjunction with this purchase the
Company obtained the option to purchase the cytogenetics business of the
seller for $1, plus assumption of a $750,000 note payable (which was paid just
after the transaction). The option was exercised in January 1997.

  In February 1997, the Company purchased certain assets of Immunodiagnostic
Laboratories, Inc. ("Immunodiagnostic"), which operates an oncology division
specializing in sophisticated cancer analytical assays, in order to provide
diagnostic and prognostic information to pathologists, oncologists and others
specializing in cancer. The purchase price included an initial payment at
closing of $425,000 plus the issuance of options to purchase 20,000 shares of
the Company's common stock at $17.44 per share (estimated value of $191,218).

  In September 1997, the Company acquired certain assets of GenCare for an
initial payment of $4.6 million. GenCare is a New Jersey-based cancer
laboratory specializing in tissue-based testing and tumor marker analyses.

  In October 1997, the Company purchased certain assets of Aeron
Biotechnology, Inc. ("Aeron"), a California-based cancer testing facility
specializing in breast cancer prognostic analysis. The purchase price for
Aeron included an initial payment of $376,000 made at closing. Additionally,
the Company paid $180,000 for certain other assets owned by Aeron.

  The acquisitions of Immunodiagnostic, GenCare and Aeron all have an
individual contingent purchase price arrangement based on the future operating
results of the respective business. Such payments could range up to
approximately $1.0 million and bear interest at 9% per annum.

  The aggregate acquisitions in 1997 were all treated as purchases with the
results of operations of each transaction being included in the consolidated
results from the respective acquisition date. The incremental operating
results were not material to the results of operation of the Company. The
purchase prices represented primarily payments for customer lists, which are
included in intangible assets on the accompanying consolidated balance sheets
and will be amortized over periods of up to fifteen years.

  In July 1998 the Company purchased certain assets of Biologic & Immunologic
Science Laboratories, Inc. (BIS), a privately held cancer diagnostics company
based in Reseda, California for $3.6 million. The terms provided for an
initial payment of $2.0 million, and $800,000 payable in three equal semi-
annual installments beginning December 1998, after which another $800,000 is
payable in three equal semi-annual installments contingent on previously
established revenue targets with interest accruing at 8% annum.

  In August 1998 the Company acquired certain assets of Medical Registry
Services, Inc. (MRS) for the issuance of 550,000 shares of IMPATH Inc. common
stock valued at $13.75 million. After the consideration of certain other
expenses related to the acquisition and after recording net tangible assets of
MRS, the Company recorded approximately $17.3 million in intangibles (includes
approximately $12 million of goodwill). MRS is a leading developer and
marketer of cancer registry software products that are currently utilized in
about 500 hospitals throughout the United States. The products are used to
collect and manage critical diagnostic, treatment, follow-up and outcomes data
on cancer patients.

                                     F-12


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  MRS's revenues are derived from licensing fees paid by hospitals utilizing
its proprietary tumor registry software. Had the MRS acquisition been effected
as of the beginning of 1997 the following unaudited proforma results would
have been reflected for the year ended December 31, 1997 and 1998.



                                                         1997          1998
                                                     ------------- -------------
                                                             
   Revenues........................................  $40.5 million $59.1 million
   Net income......................................  $ 3.0 million $ 6.6 million
   Net income per common share-assuming dilution...          $0.47         $0.79
                                                     ------------- -------------
   Weighted average shares-assuming dilution.......      6,359,000     8,369,000
                                                     ============= =============


  These proforma results are not necessarily indicative of the results that
would have actually occurred had the transaction been completed at that time.

  On September 2, 1998 the Company acquired Physicians Choice, Inc. (PCI) for
the sum of $1.0 million, with $400,000 payable immediately and an additional
$400,000 payable in four equal semi-annual installments beginning March 1999
with interest accruing at 8% per annum. In addition, the terms provided for an
issuance of $200,000 in IMPATH Inc. common stock. An initial 1,980 shares of
common stock, having a fair market value of $50,000, were issued on September
2, 1998 and 1,786 shares of common stock, having a fair market value of
$50,000, were issued on September 2, 1999, with the remaining shares to be
issued in two equal annual installments beginning September 2, 2000.

  On August 30, 1999 the Company acquired certain assets of BioClincial
Partners, Inc., ("BCP"), for $6.9 million including the issuance of 60,000
shares of IMPATH common stock valued at $1,635,000. The terms provided for an
initial payment of $4.8 million, and $2.1 million payable in three equal
annual installments beginning August 30, 2000 contingent on the achievement of
previously established revenue targets, with interest accruing at 6% per
annum. The shares are to be issued in two installments, 40,000 shares on
January 3, 2000 and 20,000 shares on January 2, 2001 and are recorded as
common stock to be issued in the December 31, 1999 consolidated balance sheet.

  On November 22, 1999 the Company acquired certain assets of Pacific Coast
Reference Laboratories, Inc. ("PCRL"), for the sum of $5.4 million cash, with
$4.6 million payable immediately, an additional $800,000 payable in four equal
semi-annual installments beginning May 2000, contingent on achievement of
previously established revenue targets, with interest accruing at 6% per
annum.

  The aggregate acquisitions in 1999 and the 1998 acquisitions other than MRS
were all treated as purchases with the results of operations of each
transaction being included in the consolidated results from the respective
acquisition date. The incremental operating results were not material to the
results of operation of the Company. The purchase prices represented primarily
payments for customer lists, which are included in intangible assets on the
accompanying consolidated balance sheets and will be amortized over periods of
up to fifteen years.

  On September 27, 1999 the Company completed a $5 million investment in a
private placement of preferred stock in ILEX Oncology Service, Inc. (ILEX).
ILEX is a drug development company focused exclusively on accelerated
development of drugs for the treatment and management of cancer. This
investment accrues dividends per share at the rate per annum of $1.031 and is
convertible into common shares of ILEX's parent company. This investment will
enable IMPATH to become a preferred provider of anatomic and molecular
pathology services for ILEX and enhance the participation in oncology research
for both companies. The collaboration of combining the international oncology
drug development experience of ILEX and IMPATH's expertise in cancer analysis
and database capabilities will enable the Company to play a greater role in
the international market.

                                     F-13


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(7) Accrued Expenses

  Accrued expenses are comprised of the following as of December 31, 1998 and
1999:



                                                             1998       1999
                                                          ---------- ----------
                                                               
   Salaries and related costs...........................  $  756,000 $  944,376
   Other accrued expenses...............................   1,063,752  2,499,202
                                                          ---------- ----------
                                                          $1,819,752 $3,443,578
                                                          ========== ==========


(8) Indebtedness

  The Company has a line of credit for an aggregate amount of $15.0 million
with Fleet Bank which expires on June 28, 2000. Borrowing under the line will
bear interest at LIBOR plus 2.25%. In February 2000, the Company initiated a
draw-down of $13 million against this line. The line of credit has certain
financial covenants with which the Company is in compliance at December 31,
1999.

(9) Stockholders' Equity

 (a) Common Stock

  On October 13, 1995, the Board of Directors authorized the Company to file a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with an initial public offering. Such
offering was consummated on February 26, 1996 for a total of 2,242,500 common
shares at an offering price of $13 per share. The net proceeds to the Company
amounted to approximately $25,737,000. In March 1998, the Company raised
approximately $71,000,000 of additional capital through an underwritten
follow-up offering of 2,300,000 common shares of stock.

 (b) Treasury Stock

  In December 1998, the Company initiated a share buyback program to acquire
up to $25.0 million worth of stock. As of December 31, 1999, the Company had
repurchased 948,650 shares of common stock for approximately $23.4 million. In
January 2000, the Company initiated an additional $15 million buyback program.
During January and February 2000 the Company repurchased an additional 149,000
shares of common stock for approximately $3.4 million. This brought the total
cost of shares repurchased since the inception of the plan to approximately
$26.8 million.

 (c) Preferred Stock

  Effective February 10, 1995, the Company sold 1,612,904 shares of its 8%
Series D Convertible Participating Preferred Stock and warrants to purchase
42,529 shares of its common stock at $3.50 per share for an aggregate sales
price of $2.0 million (before issuance costs). The warrants are exercisable
for a period of six years. In 1997, 11,184 of such warrants were exercised and
in 1998 another 29,331 were exercised. The holders of this preferred stock had
the right to convert their shares into shares of common stock, subject to
certain adjustments. Concurrent with the issuance of the 8% Series D
Convertible Participating Preferred Stock and common stock warrants, the terms
of the outstanding Series A, B and C Redeemable Preferred Stock were revised,
resulting in the elimination of all previously existing redemption rights,
elimination of all previously accrued dividends in the amount of $1,799,909
and a change in the future dividend rate from 9% to 8%.

  In June 1988 and March 1990, the Company sold 1,776,318 and 100,000 shares,
respectively, of its Series A 9% Convertible Preferred Stock (subsequently
amended to 8%) with a par value of $.01 per share for $1,350,000 (before
issuance costs) and $76,000, respectively.

                                     F-14


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  In March 1990, the Company issued 668,182 shares of its Series B 9%
Convertible Preferred Stock (subsequently amended to 8%; terms are
substantially identical to those of the Series A 8% Convertible Preferred
Stock) for an aggregate consideration of $587,998 (before issuance costs).

  In March 1991, the Company issued 1,638,887 shares of its Series C 9%
Convertible Preferred Stock (subsequently amended to 8%; terms are
substantially identical to those of the Series A 8% Convertible Preferred
Stock) for an aggregate consideration of $1,475,000 (before issuance costs).
In June and July 1993, the Company issued 1,396,433 additional shares of its
Series C 9% Convertible Preferred Stock (subsequently amended to 8%) for an
aggregate consideration of $1,256,789.

  Upon the consummation of the Company's IPO on February 26, 1996, all
preferred shares were converted into 2,548,933 shares of common stock and all
accrued dividends commencing February 10, 1995, totaling approximately
$560,000, were paid.

 (d) Stock Option Plans

  In February 1989, the Company adopted (and subsequently amended) a Stock
Option Plan (the "Plan") which provides for granting to certain key employees
of the Company, Directors and consultants, options to purchase up to 884,688
shares of common stock. Options granted are exercisable over a period not to
exceed ten years and generally vest over five years.

  In August 1995, four Directors were granted options to purchase a total of
42,529 shares of common stock at an exercise price of $3.50 per share under
the Company's Stock Option Plan, which vest ratably over 36 months. Management
of the Company estimated the fair market value of the underlying common stock
to be approximately $8.00 per share and, accordingly, recorded deferred
compensation of $191,000, which amount is being amortized ratably over the
vesting period. In October 1995, three additional Directors were granted
options to purchase a total of 31,896 shares of common stock at an exercise
price of $3.50 per share, which vest ratably over 36 months. Management of the
Company estimated fair market value of the underlying common stock to be
approximately $9.50 per share and, accordingly, recorded deferred compensation
of $191,000, which amount is being amortized ratably over the vesting period.

  In April 1997, the Company adopted the IMPATH Inc. 1997 Long-Term Incentive
Plan (the "Incentive Plan"), which provides for granting to certain key
employees of the Company, Directors and consultants, options to purchase up to
300,000 shares of common stock. Options granted are exercisable over a period
not to exceed ten years and generally vest over four years. Options to
purchase 79,000 shares were granted to consultants under the Incentive Plan in
1997. Options to purchase 69,000 shares were granted to consultants under the
Incentive Plan in 1998. Options to purchase 6,772 shares were granted to
consultants under the Incentive Plan in 1999. Compensation cost will be
amortized per these grants over the vesting period of the options.

  In June 1999, the Company adopted the IMPATH Inc. 1999 Long Term Incentive
Plan (the "Incentive Plan"), which provides for granting to employees of the
Company, Directors and consultants, options to purchase up to 300,000 shares
of common stock. Options granted are exercisable over a period not to exceed
ten years and generally vest over four years. Options to purchase 40,631
shares were granted under this plan in 1999.

  The Company has elected not to implement the fair value-based accounting
method for employee and Director stock options, but has disclosed the pro
forma net income and earnings per share as if such method had been used to
account for stock-based compensation cost as described in SFAS No. 123.

  The per share weighted-average fair value of stock options granted during
1997, 1998 and 1999 was $14.88, $16.68 and $19.15, respectively, on the dates
of grant using the Black Scholes option-pricing

                                     F-15


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

model with the following weighted-average assumptions: 1997--expected dividend
yield 0%, risk-free interest rate of 7.0%, expected volatility 60% and an
expected life of 7 years; 1998--expected dividend yield 0%, risk-free interest
rate of 7.0%, expected volatility of 60% and an expected life of 7 years;
1999--expected dividend yield 0%, risk-free interest rate of 6.5%, expected
volatility of 60% and an expected life of 7 years.

  The Company applies APB Opinion No. 25 in accounting for its options and,
accordingly, no compensation cost has been recognized for its stock options
issued at exercise prices equal to the fair market value of the stock on the
grant date, with the exception of certain stock options issued in 1996 through
1999 to non-employees as previously described. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No 123, the Company's net income would have been reduced to
the pro forma amounts indicated below:



                                                 1997       1998       1999
                                              ---------- ---------- ----------
                                                        
Net income....................... As reported $3,649,199 $6,947,545 $8,234,530
                                  Pro forma   $3,211,328 $5,879,393 $6,936,151
Net income per share--assuming
 dilution........................ As reported $     0.63 $     0.87 $     1.01
                                  Pro forma   $     0.55 $     0.73 $      .85


  Pro forma net income reflects only options granted in 1995 through 1999.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options'
vesting period and compensation cost for options granted prior to January 1,
1995 is not considered.

  The following is a summary of option activity during the years ended
December 31, 1997, 1998 and 1999:



                                                                      Weighted
                                                                      average
                                                 Shares               exercise
                                                 under       Price     price
                                                options    range ($)    ($)
                                                --------  ----------- --------
                                                             
   Options outstanding at December 31, 1996....  689,626   0.28-18.38   6.72
   Granted.....................................  342,612  17.25-31.38  23.12
   Exercised................................... (125,357)  0.28-25.25   3.84
   Canceled....................................  (28,705)  2.54-25.25  16.53
                                                --------
   Options outstanding at December 31, 1997....  878,176   0.28-31.38  13.21
   Granted.....................................  189,698  20.50-37.25  25.47
   Exercised................................... (198,207)  0.28-26.88   4.29
   Canceled....................................  (41,399)  2.54-31.88  22.20
                                                --------
   Options outstanding at December 31, 1998....  828,268   0.28-37.25  17.70
   Granted.....................................   77,913  17.06-29.94  20.58
   Exercised................................... (154,837)  0.28-26.88   7.06
   Canceled....................................  (51,200)  2.54-37.25  22.57
                                                --------
   Options outstanding at December 31, 1999....  700,144   0.56-36.88  20.01
                                                ========  ===========  =====


                                     F-16


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The following table summarizes information about stock options outstanding
and exercisable as of December 31, 1999:



                                   Weighted
                    Number          average       Weighted      Number      Weighted
    Range of         out-          remaining      average      exercis-     average
    exercise      standing at     contractual     exercise     able at      exercise
     Prices        12/31/99          life          price       12/31/99      price
   -----------    -----------     -----------     --------     --------     --------
                                                             
         $0.56        1,773       1.31 years       $ 0.56        1,773       $ 0.56
     2.12-3.50       55,045       4.65 years         3.05       53,908         3.04
    8.00-13.75      106,550       6.13 years        12.15       71,268        12.12
   16.75-18.75      157,184       7.04 years        17.73      109,253        17.69
   19.88-26.38      176,311       8.82 years        23.51       58,751        23.52
   26.88-28.50      183,881       8.11 years        27.11       84,944        27.07
   29.11-36.88       19,400       8.85 years       $32.70        5,235       $33.80
   -----------      -------                                    -------
   $0.56-36.88      700,144                                    385,132
   ===========      =======                                    =======


  At December 31, 1999, the Company had 997,724 shares reserved for options
and warrants outstanding, as well as future option grants.

(10) 401(k) Retirement Savings Plan

  Effective June 1, 1995, the Company adopted the IMPATH Inc. 401(k)
Retirement Savings Plan (the "Plan") benefiting certain employees. Employees
who are over the age of 21 and have completed six months of service are
eligible for voluntary participation in the Plan. Employees may contribute 1%
to 20% of their total salaries on a before tax basis, and the Company will
match up to 50% of the first 4% of employee contributions. Plan participants
who were employees as of June 1, 1996 are 100% vested in all contributions.
Any employees hired subsequent to June 1, 1996 are 100% vested in their own
contributions and will become vested in employer contributions over a three-
year period. Employer contributions for the years ended December 31, 1997,
1998 and 1999 were $70,439, $133,842 and $277,504, respectively.

(11) Income Taxes

  The components of the provision for income taxes for 1997, 1998 and 1999 are
as follows:



                                                 1997       1998        1999
                                              ---------- ----------  ----------
                                                            
   Current:
     Federal................................. $  972,484 $3,345,462  $3,666,612
     State and local.........................    573,594  1,625,507   1,732,440
                                              ---------- ----------  ----------
                                               1,546,078  4,970,969   5,399,052
                                              ---------- ----------  ----------
   Deferred:
     Federal.................................  1,015,667   (255,671)    (58,188)
     State and local.........................    290,191   (139,493)    148,824
                                              ---------- ----------  ----------
                                               1,305,858   (395,164)     90,636
                                              ---------- ----------  ----------
                                              $2,851,936 $4,575,805  $5,489,688
                                              ========== ==========  ==========


                                     F-17


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Deferred tax components at December 31, 1998 and 1999 are as follows:



                                                         1998         1999
                                                     ------------  -----------
                                                             
   Assets:
     Allowance for doubtful accounts................ $    405,035  $ 2,011,289
     Deferred compensation..........................      244,110      306,673
     Deferred revenue...............................      640,000      110,723
                                                     ------------  -----------
                                                        1,289,145    2,428,685
   Liabilities:
     Intangible assets--acquisitions................   (1,880,531)  (1,776,630)
     Depreciation...................................          --    (1,060,053)
     Other..........................................     (200,554)    (474,577)
                                                     ------------  -----------
                                                      (2,081,085)   (3,311,260)
                                                     ------------  -----------
   Deferred tax assets (liabilities), net........... $   (791,940) $  (882,575)
                                                     ============  ===========


  Management of the Company believes that it is more likely than not that
future tax benefits will be realized as a result of the recent operating
performance of the Company.

  A reconciliation of the Federal statutory income tax rate to the effective
tax rate for the years ended December 31, 1997, 1998 and 1999 follows:



                                                             1997  1998  1999
                                                             ----  ----  ----
                                                                
   Federal statutory income tax rate........................ 34.0% 35.0% 35.0%
   State and local taxes, net of Federal income tax
    benefit................................................. 10.2   7.3   8.0
   Tax exempt interest income...............................  --   (2.9) (2.0)
   Other.................................................... (0.3)  0.3  (1.0)
                                                             ----  ----  ----
                                                             43.9% 39.7% 40.0%
                                                             ====  ====  ====


  The Company recognized a tax benefit for stock options exercised as a
reduction in taxes payable and a corresponding increase in additional paid-in
capital totaling $171,531 in 1997, $778,611 in 1998 and $486,347 in 1999,
respectively.

                                     F-18


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(12) Leases

  The Company utilizes laboratory and office facilities and leases equipment
pursuant to the terms of operating and capital leases, which expire through
2010.

  The present value of future minimum lease payments (including those
cancelable at the Company's option and subject to increases in the Consumer
Price Index and real estate taxes) for the capital leases and the future
minimum lease payments for operating leases are as follows:



                                                         Operating    Capital
                 Year ending December 31,                 leases      leases
                 ------------------------               ----------- -----------
                                                              
   2000................................................ $ 3,393,507 $ 5,558,738
   2001................................................   3,752,854   4,796,992
   2002................................................   3,398,143   4,222,565
   2003................................................   3,155,623   2,249,244
   2004................................................   1,315,379         --
   Thereafter..........................................  17,632,497         --
                                                        ----------- -----------
                                                        $32,648,003  16,827,539
                                                        ===========
   Less amount representing interest
    (rates range from 5.75% to 9.75%)..................             (1,794,088)
                                                                    -----------
   Present value of minimum lease payments.............              15,033,451
   Less current portion................................              (4,655,309)
                                                                    -----------
                                                                    $10,378,142
                                                                    ===========


  For the years 1997, 1998 and 1999, rent expense was $1,169,763, $1,272,661
and $1,634,853 respectively.

  The Company has a line of credit for an aggregate amount of $15.0 million
with Fleet Bank. Borrowing under the line will bear interest at LIBOR plus
2.25%. In February 2000, the Company initiated a draw-down of $13 million
against this line. The Company has lines of credit for financing equipment,
leasehold improvements and computer hardware and software. In July 1999, the
Company established a $6 million credit line with Newcourt Financial with
lease terms based on 48 monthly payments at a rate equal to .35% above the
four-year treasury notes. As of December 31, 1999 approximately $5 million was
drawn against the line. In September 1999, the Company established a $6
million credit line with Fleet Bank with lease terms based on 48 monthly
payments at a rate equal to .20% above the four-year treasury notes. As of
December 31, 1999 approximately $1 million was drawn against the line. Also,
in December 1999, the Company established a $6.2 million credit line with
First American Bankcorp, Inc. with lease terms based on 48 monthly payments at
a rate equal to the four-year treasury notes. As of December 31, 1999
approximately $1.2 million was drawn against the line.

(13) Related Party Transactions

  The Company paid $128,329, $104,000 and $111,000 in the years ended December
31, 1997, 1998 and 1999, respectively, to a Director who also performs certain
consulting services to the Company.

(14) Commitments and Contingencies

  The Company is involved in various legal actions in the normal course of
business, some of which seek monetary damages. The Company believes any
ultimate liability associated with these contingencies would not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

                                     F-19


                         IMPATH INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  As a provider of healthcare-related services, the Company is subject to
extensive and frequently changing federal, state and local laws governing
licensure, reimbursement, financial relationships, referrals, conduct of
operations and other aspects of the Company's business. In recent years, the
federal government has expanded its investigative and enforcement activities
relating to the billing of government programs, such as Medicare and Medicaid,
by laboratories and other healthcare providers. In January 2000, the company
was notified that the U.S. Attorney's Office for the Southern District of New
York was investigating certain of the Company's billing practices. The Company
believes that its billing practices are in compliance with applicable laws and
is cooperating in the investigation.

  Certain executive officers of the Company have entered into agreements which
provide severance of up to one year's salary in the event of termination
without cause.

(15) Quarterly Financial Data (unaudited) (dollars in thousands except per
share data)



                                                                   Per Share of
                                                                   Common Stock
                                                                    Net Income
                                                                   -------------
   Quarter                                     Revenues Net Income Basic Diluted
   -------                                     -------- ---------- ----- -------
                                                             
   1999
   Fourth..................................... $26,007    $1,742   $0.22  $0.21
   Third......................................  21,543     2,406    0.30   0.30
   Second.....................................  20,846     2,297    0.29   0.28
   First......................................  16,970     1,790    0.23   0.22
                                               -------    ------   -----  -----
     Total.................................... $85,366    $8,235   $1.04  $1.01
                                               =======    ======   =====  =====
   1998
   Fourth..................................... $16,540    $2,014   $0.24  $0.23
   Third......................................  14,571     2,067    0.26   0.25
   Second.....................................  13,435     1,789    0.23   0.22
   First......................................  11,713     1,078    0.18   0.17
                                               -------    ------   -----  -----
     Total.................................... $56,259    $6,948   $0.91  $0.87
                                               =======    ======   =====  =====


                                     F-20


                               INDEX TO EXHIBITS



 Exhibit
 Number                            Description                             Page
 -------                           -----------                             ----
                                                                     
  3.1    Restated Certificate of Incorporation, as amended                   *
  3.2    Form of Certificate of Amendment regarding authorization of         *
         additional preferred stock
  3.3    By-laws                                                             *
  4.1    Regulation Rights Agreement dated February 10, 1995 among           *
         IMPATH Inc. and certain of its shareholders
 10.1    Master Lease Agreement dated April 11, 1995 between IMPATH Inc.     *
         and Financing For Science International, Inc.
 10.2    Employment letter dated October 26, 1993 between Bruce C.           *
         Horten, M.D., and IMPATH Inc.
 10.3    Employment letter dated March 7, 1994 between John P. Gandolfo      *
         and IMPATH Inc.
 10.4    Space Lease dated August 29, 1988, as amended, between 166 East     *
         61st Street Associates and IMPATH Inc. (formerly known as
         BioPath, Inc.)
 10.5    Sublease dated April 1992, between Zeller 1010 Formals, Inc.        *
         and IMPATH Inc.
 10.6    Space Lease dated September 27, 1991, as amended, between 166       *
         East 61st Street Associates and IMPATH Inc. (formerly known as
         Impath Laboratories Inc.)
 10.7    Assignment and Assumption of Lease Agreement dated August 1,        *
         1990, as amended, between Mitchell Manning Associates, Inc. and
         IMPATH Inc.
 10.8    Space Lease Agreement dated April 20, 1995 between OMA Del Aire     *
         Properties and IMPATH Inc. (formerly known as Impath
         Laboratories Inc.)
 10.9    Floating Rate Promissory Note in the principal amount of            *
         $300,000 made by IMPATH Inc. in favor of Chemical Bank
 10.10   1989 Stock Option Plan                                              *
 10.11   Form of Indemnification Agreement with directors                    *
 10.12   Lease Modification Agreement dated as of April 24, 1995 between     *
         166 East 61st Street Associates and IMPATH Inc. (formerly known
         as Impath Laboratories Inc.)
 10.13   Letter Agreement dated December 12, 1997 between Anu D. Saad,      **
         Ph.D., and IMPATH Inc.
 10.14   Letter Agreement dated December 12, 1997 between John P.           **
         Gandolfo and IMPATH Inc.
 10.15   Letter Agreement dated December 12, 1997 between Bruce C.          **
         Horten, M.D., and IMPATH Inc.
 10.16   Letter Agreement dated December 12, 1997 between Moacyr Da         **
         Silva, M.D., and IMPATH Inc.
 10.17   Letter Agreement dated December 12, 1997 between Richard P.        **
         Adelson and IMPATH Inc.
 10.18   1997 Long Term Incentive Plan                                     ***
 10.19   Agreement of Lease dated as of June 26, 1997 between               **
         International Flavors & Fragrances Inc. and IMPATH Inc.
 23      Consent of KPMG                                                    **
 24      Power of Attorney (see "Power of Attorney" in Form 10-K)
 27      Financial Data Schedule

- --------
  * Incorporated by reference to the exhibit of the same number filed with the
    Registration Statement on Form S-1 of IMPATH Inc. (File No. 33-98916).
 ** Incorporated by reference to the exhibit of the same number filed with the
    Annual Report on Form 10-K for the year ended December 31, 1997.
*** Incorporated by reference to Exhibit A to the Proxy Statement of IMPATH
    Inc. dated April 25, 1997 (File No. 000-27750).
Ex-23

                                CONSENT OF KPMG

EX-23

                                                                     EXHIBIT 23

                         Independent Auditors' Consent

The Board of Directors
IMPATH Inc.:

  We consent to the incorporation by reference in Registration Statements on
Form S-3 (no.'s 33--98916, 333-08553, 333-45921 and 333-62563) and on Form S-8
(no.'s 333-09469 and 333-47689) of IMPATH Inc. of our report dated February
24, 2000, relating to the consolidated balance sheets of IMPATH Inc. and
subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statement of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1999, which report appears
in the December 31, 1999 annual report on Form 10-K of IMPATH Inc.

                                          KPMG LLP
Short Hills, New Jersey
March 30, 2000

EX-27

 


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