<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------
                                    FORM 10-K

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED] 
         For the fiscal year ended April 30, 1996

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 
         For the transition period from

                     to             
         ------------  -------------

                         Commission file number 0-17085

                      TECHNICLONE INTERNATIONAL CORPORATION
             (Exact name of Registrant as specified in its charter)

          California                                          95-3698422
 (State or other jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                           Identification No.)

       14282 Franklin Avenue, Tustin, California              92780-7017
       (Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:             (714) 838-0500

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

Securities registered pursuant to Section 12(g) of the Act:       Common Stock
                                                                (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 that 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. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $64,449,225 as of July 1, 1996, based upon average
bid and asked prices of such stock.

                            [Cover page 1 of 2 pages]
                               Page 1 of 52 Pages

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              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicated by check mark whether the Registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES     . NO     .

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

                        20,869,675 shares of Common Stock
                               as of July 1, 1996

                      DOCUMENTS INCORPORATED BY REFERENCE.


         Part III of the Form 10-K is incorporated by reference from the
Registrant's Definitive Proxy Statement for its 1996 Annual Meeting which will
be filed with The Commission on or before August 15, 1996.

         This Annual Report on Form 10-K includes certain forward-looking
statements, the realization of which may be impacted by certain important
factors discussed in "Additional Factors that May Affect Future Results" under

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

                            [Cover page 2 of 2 pages]

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                                     PART I


ITEM 1.  BUSINESS

         The following discussion contains forward-looking statements. These
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially. See "Additional Factors That May Affect
Future Results" under Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

         Techniclone International Corporation ("Techniclone") was incorporated
on June 3, 1981, under the laws of the State of California. Effective as of
December 31, 1981, the Company acquired all of the assets, technology and
proprietary rights of Techniclone International Ltd., a research and development
partnership which commenced business in July 1981. In 1983, the Company
completed an initial public offering of its securities. The "Company" refers to
Techniclone International Corporation, its predecessor partnership and its
former subsidiary, Cancer Biologics Incorporated ("CBI"), which was merged into
the Company on July 26, 1994.

         The Company is engaged in research and development of new technologies
utilized in the production of monoclonal antibodies and the production of
specific monoclonal antibodies with prospective research, diagnostic and
therapeutic applications. To date, the Company has been primarily engaged in the
research, development and production of mouse and human hybridoma cell lines and
in the manufacture and initial marketing of monoclonal antibodies derived from
these cell lines for in vitro diagnostic purposes. Products that appear to have
commercial viability include (i) two anti-lymphoma antibodies, LYM-1 and LYM-2;
(ii) a series of monoclonal antibodies for diagnostic applications; and (iii)
three advanced monoclonal antibody technologies, TNT, Vasopermeation
Enhancement, and Modified Antibody Technology.

         In 1985, Techniclone entered into a research and development agreement
with Northwestern University and its researchers to develop antibodies known as
LYM-1 and LYM-2 (LYM-1 and LYM-2 are collectively referred to herein as the "LYM
Antibodies"). Techniclone holds an exclusive world-wide license to manufacture
and market products using the LYM Antibodies. In clinical studies conducted at
the University of California at Davis, over fifty patients with B-cell lymphoma
have been treated with LYM-1 linked to Iodine-131. A significant number of these
patients had significant clinical responses including patients showing complete
and durable responses. None of the patients experienced the acute toxicities
that normally accompany treatment with these radioisotopes.

         The Company has begun Phase II/III testing in multi-center clinical
trials of the LYM-1 Antibody in late stage non-Hodgkins lymphoma patients. The
clinical trials are being sponsored by Alpha Therapeutic Corporation, a
wholly-owned subsidiary of Green Cross of Japan. The clinical trials are
currently being held at participating medical centers including M.D. Anderson,
The Cleveland Clinic, Cornell University (N.Y.C.), George Washington University
and the University of Cincinnati. After the first twelve patients have been
treated, the trials are expected to be expanded to a total of twenty medical
centers. Following the completion of the clinical trials, the Company expects to
file an application with the FDA to market LYM-1 in the United States.

         In connection with the production and sale of the LYM Antibodies, the
Company is obligated to make certain milestone and royalty payments.

         The Company entered into an agreement dated as of August 7, 1992 with
David Legere and Legere Enterprises, Ltd., a Florida limited partnership
controlled by the Purchaser ("Legere"), pursuant

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to which Legere purchased an aggregate of 2,000,000 shares of the Common Stock
of the Company for $1.20 per share, at an aggregate purchase price of
$2,400,000. In February 1994, the Company entered into a Subscription Agreement
with Legere pursuant to which Legere purchased an additional 1,000,000 shares of
the Company's common stock for an aggregate purchase price of $1,500,000. As of
July 1, 1996, the Partnership and affiliates of the Partnership beneficially
owned 3,490,916 shares of Common Stock representing approximately 16.72 percent
of the issued and outstanding shares of the Company.

         On October 28, 1992, the Company entered into a License Agreement with
Alpha Therapeutic Corporation ("Alpha") pursuant to which the Company granted
Alpha a license for the development and commercialization of the LYM Antibodies
in the United States and certain other countries. Unless the Agreement is
terminated, Alpha is required to make future payments to the Company as follows:
(i) $100,000 upon the first European regulatory submission or six months from
the commencement date of U.S. Phase III clinical trials, whichever comes first,
(ii) $200,000 upon the approval of the first European regulatory submission,
(iii) $500,000 upon the submission of a PLA to FDA, and (iv) after the
completion of the Phase III LYM-1 clinical trial $100,000 per year as a research
and development grant. The agreement also provides that Alpha will conduct all
remaining development work necessary for FDA/PLA submission and pay all costs of
development and patient costs including physician fees, hospital fees, material
costs and follow-up costs. Under the Agreement, the Company is responsible for
manufacturing the LYM-1 Antibody for clinical and commercial use.

         During the year ended April 30, 1996, Alpha and the Company have spent
considerable time, effort and money to prepare an application to approve the
Phase III clinical trials for LYM-1. Alpha and the Company completed the
application and submitted it to the FDA in February 1994. The FDA acted upon the
application in October 1994 and approved a Phase II/Phase III trial. With the
Phase II/Phase III trial, the Company agreed to perform additional work on the
first twelve (12) patients to complete some additional Phase II requirements.
The Company has begun Phase II/III testing in multi-center clinical trials of
the LYM-1 antibody in late stage non-Hodgkins lymphoma patients. The clinical
trials are sponsored by Alpha and are being held at participating medical
centers including M.D. Anderson, The Cleveland Clinic, Cornell University
(N.Y.C.), George Washington University and the University of Cincinnati.

         On December 27, 1995, the Company issued 7,700 shares of newly created
Class B Convertible Preferred Stock, at a price of $1,000 per share, and on
December 29, 1995 issued an additional 500 shares of Class B Convertible
Preferred Stock, at a price of $1,000 per share, for an aggregate issuance
consideration of $8,200,000 to sixteen (16) offshore investors pursuant to
Regulation S promulgated under the Securities Act of 1933. The Class B
Convertible Preferred Stock is non-voting. The Class B Convertible Preferred
Stock is convertible, commencing immediately after the Closing into Common Stock
of the Company. During the first ninety days after the Closing, each share of
the Class B Convertible Preferred Stock was convertible in multiples of $50,000
into that number of shares of Common Stock calculated by dividing $1,000 by 110%
of the Fixed Conversion Price which is the lower of (i) $3.06875 (fair market
value at the date of issuance) per share of Common Stock or (ii) 85% of the fair
market value of the Common Stock on the date of conversion based on the average
bid price during the five trading days prior to the date of conversion.
Beginning 91 days after the Closing Date the number of shares of Common Stock
issued upon conversion of each share of Class B Convertible Preferred Stock
converted is determined by (i) taking ten percent (10%) of One Thousand Dollars
($1,000) pro-rated on the basis of a 365 day year, by the number of days between
the last Closing Date and the date of conversion plus (ii) One Thousand Dollars
($1,000), (iii) divided by the Conversion Price. As of April 30, 1996, the Fixed
Conversion Price was set at $3.06875, which was the average closing bid price
for the Company's Common Stock for the five (5) trading days ending on December
8, 1995. Additionally, the Class B Convertible Preferred Stock has a liquidation
preference over other classes of

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the Company's stock. This liquidation preference is $1,000 per share of Class B
Convertible Preferred Stock plus 10% per annum pro-rated through any liquidation
date. As of April 30, 1996, 1,400 shares of Class B Convertible Preferred Stock
had been converted at the election of the holder to Common Stock. In connection
with these conversions the Company issued 469,144 shares of Common Stock. As of
April 30, 1996, 6,800 shares of Class B Convertible Preferred Stock remain
outstanding which as of April 30, 1996 are convertible into 2,289,951 shares of
Common Stock at a conversion price of $3.06875 per share, with a liquidation
preference of $7,027,288.

         The Company received $7,137,544 in net proceeds from the sale of Class
B Convertible Preferred Stock after payment of offering commissions and expenses
and legal fees. In connection with the placement of the Class B Preferred Stock,
the Company paid Swartz Investments, Inc. commissions of $656,000 and a
non-accountable expense allowance of $246,000. In addition, the Company issued
Swartz Investments, Inc. two five year warrants to purchase an aggregate of
267,210 shares of the Company's Common Stock at an exercise price of $3.06875.
The Common Stock issuable on exercise of the warrant and on conversion of the
Class B Convertible Preferred Stock (if not otherwise freely tradeable) is
subject to registration pursuant to a Registration Rights Agreement.
Additionally, the Company paid other commissions of $75,000 and legal fees of
approximately $85,000 in connection with the preferred stock placement.

         The Company intends to use the proceeds from the offering to support
its LYM-1, Oncolym(TM) manufacturing effort for the Phase III LYM-1, Oncolym(TM)
clinical trials, to fund additional development of its patented Tumor Necrosis
Therapy (TNT) and for working capital.

         After the Closing of the Class B Convertible Preferred Stock the
Company applied for and was granted relisting of its Common Stock on the NASDAQ
trading system effective on April 1, 1996 with the trading symbol TCLN.

         On February 5, 1996,the Company entered into an agreement with
Cambridge Antibody Technology, Ltd. ("CAT") to develop and market a new class of
products for cancer therapy and diagnosis. The Agreement provides that the
Company and CAT will develop a monoclonal antibody based upon CAT's patented
technology for producing fully human monoclonal antibodies and the Company's
Tumor Necrosis Therapy ("TNT"). The Agreement provides that equity in the joint
venture and costs associated with the development of the product would be shared
equally between the Company and CAT. The Company retained exclusive world-wide
manufacturing rights for TNT. It is anticipated that the joint venture will
conduct clinical trials of TNT concurrently in both the United States and
Europe.

         On February 29, 1996 the Company entered into a Distribution Agreement
with Biotechnology Development, Ltd. ("BTD"), a limited partnership controlled
by Edward Legere, a member of the Board of Directors of the Company and a major
shareholder of the Company, which provides for BTD to acquire LYM-1 antibody
technology marketing rights for certain European countries and other geographic
areas not covered by its existing license agreement with Alpha Therapeutic
Corporation in exchange for the payment of $3,000,000 by BTD to the Company.
Under the terms of the Distribution Agreement, the Company retains all
manufacturing rights to LYM-1 and will supply LYM-1 to BTD at preset prices.
Additionally, the Company has the option under an Option Agreement to repurchase
the marketing rights to LYM-1 for a thirty month period. The repurchase price,
if repurchase is elected by the Company at its sole discretion, includes a
combination of cash, stock options and royalty payments to be made to BTD, the
amount of which depends on when the repurchase option is elected by the Company.

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         Techniclone organized CBI in 1983 to engage in the research and
development of monoclonal antibodies that recognize antigens associated with
specific forms of human cancer. CBI applied for, and was granted, some patents
on TNT. Laboratory testing on animals indicates that TNT may have potential
application for in vivo diagnosis and therapeutic treatment of a wider spectrum
of cancers than other currently reported antibodies.

         On January 18, 1994 the Company and CBI entered into an Agreement and
Plan of Merger (the "Agreement and Plan of Merger") which contemplated the
merger of CBI with and into the Company (the "Merger"). On June 10, 1994, a
meeting of the shareholders of the Company was held. At this meeting the
shareholders adopted the proposal to approve the Merger pursuant to the
Agreement and Plan of Merger. The Merger between CBI and the Company was
completed on July 26, 1994. The assets of CBI acquired by the Company consisted
primarily of research and development of the TNT antibody technology, which has
not been approved by the FDA. As a result of the Merger, the Company incurred an
immediate charge to earnings of $4,849,591 which represented the excess of the
fair market value of the Company stock issued over the net assets acquired of
CBI, plus an additional non-recurring charge relating to CBI stock options
assumed by the Company.

         The Company's offices and laboratories are located at 14282 Franklin
Avenue, Tustin, California 92780-7017, and its telephone number is (714)
838-0500.

MONOCLONAL ANTIBODY TECHNOLOGY

         ANTIBODIES. Antibodies are protein molecules produced by certain white
blood cells, known as lymphocytes, in the blood, spleen and lymph nodes, which
are part of the immune system in humans and certain animals, in response to the
presence of foreign substances (antigens) in the body. Each antibody recognizes
and binds to one or a very few specific sites on a specific antigen. This
quality, known as specificity, is the basis for using antibodies to diagnose
diseases or deliver drugs to disease sites, and to detect subtle differences
between malignant and normal cells. Once a lymphocyte comes in contact with an
invading antigen, it begins to generate identical offspring cells (clones)
producing identical antibodies that bind to the antigen. Each of these
antibodies recognizes and binds in exactly the same way to the antigen. This
binding process sets in motion a complex series of events which normally permits
the body to eliminate the antigen.

         In a healthy person or animal, hundreds of millions of antibodies are
produced as a defense mechanism when the body is invaded by antigens. Different
lymphocytes will, however, recognize an invading antigen in slightly different
ways. As a result, the clones produced by each lymphocyte will produce
antibodies which bind to different sites on the antigen. Each antibody carries a
genetically determined sequence of seven to eleven amino acids; this chemical
sequence creates a unique site for recognizing and attaching to a corresponding
antigen. Changing any amino acid in the chemical sequence could produce a
different antibody which would recognize and bond with different antigens.

         THERAPEUTIC APPLICATIONS. Cancer therapy utilizing monoclonal
antibodies, whether used alone or conjugated with other substances that attack
cancerous cells, directly attack the cancerous cells, leaving healthy cells
unharmed. Consequently, cancer therapies based upon monoclonal antibodies have
the potential for more effective treatments without the harmful side effects
associated with most cancer therapies. Research in this area has indicated that
certain monoclonal antibodies are effective in the treatment of certain types of
cancers, including lymphoma. The Company's LYM Antibodies, may be an effective
treatment for lymphoma, a form of cancer of the lymph nodes and blood
lymphocytes.

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         Research has also indicated that many monoclonal antibodies have
greater potential for fighting cancers and other diseases in the body when
conjugated with drugs, biologics, toxins or isotopes. Because of the great
specificity of monoclonal antibodies, they can deliver the conjugated drug,
biological, toxin or isotope directly to the selected target cells without
clinically significant toxicity to other cells in the body. The conjugated
monoclonal antibody binds to its target cell, which internalized the conjugated
drug, biological, toxin or isotope, causing cell death.

         TECHNICLONE'S MONOCLONAL ANTIBODY PRODUCTION. Monoclonal antibodies are
produced by the Company using a technology first developed in England in 1975,
by isolating an antibody-producing hybridoma in a tissue culture medium where it
will produce identical hybridoma cells, called clones. Each hybridoma grown in
this manner will secrete the same type of antibody, which can then be harvested.
Because the antibodies grown in this manner are all derived from the same parent
lymphocyte, they are called monoclonal antibodies. The Company's business
strategy has been directed toward development of monoclonal antibodies from
mouse and human hybridomas, which offer the opportunity for producing large
quantities of an antibody that recognizes and bonds to a specific antigen.
Hybridomas are created through the fusion of an antibody-secreting lymphocyte
cell with a cancerous (myeloma) cell. These hybrid cells exhibit the vigorous
growth and multiplication characteristics of the myeloma cell and the
antibody-secreting characteristic of the lymphocyte cell and are easily grown in
culture media. (See also Manufacturing.)

         CHIMERIC ANTIBODIES. Chimeric antibodies are produced by genetic
engineering. A chimeric antibody consists mostly of human protein, with a small
amount of murine protein carrying the specificity site. Like fully human
antibodies, chimerics are regarded as less foreign than whole murine antibodies
and are suited to multiple treatments in-vivo. Techniclone has prepared
chimerics of LYM-1, LYM-2 and TNT at its research laboratories. Preliminary
clinical studies are encouraging and formal trials of chimeric LYM-2 and TNT are
planned to begin in November 1996. The chimeric TNT study will be carried out
jointly by Cambridge Antibody Technology, Ltd. in England and by Techniclone in
the United States.

LYM-1, ONCOLYM(TM).

         Techniclone's first proprietary monoclonal antibody cancer therapy
product LYM-1, Oncolym(TM) is now in a Phase III multi-center clinical trial
being conducted by development partner Alpha Therapeutic Corporation, a U.S.
subsidiary of Green Cross Corporation of Osaka, Japan. LYM-1, Oncolym(TM) is
designed as a therapy against non-Hodgkins lymphoma cancers. Techniclone's
LYM-1, Oncolym(TM) antibody is linked to a radioactive isotope, and the combined
molecule is injected into the blood stream of the cancer patient. The LYM-1,
Oncolym(TM) antibody then recognizes and bonds to the tumor to deliver the
isotope to the tumor site, with minimal adverse effect on surrounding healthy
tissue.

         In Phase II trails of non-Hodgkin's lymphoma patients treated with
LYM-1, Oncolym(TM) at varying dose levels, fifty-six percent (56%) of the trial
participants had complete or partial (greater than 50% tumor shrinkage)
remissions of their tumors. It should be noted that these Phase II clinical
trial results were achieved with terminal patients whose disease was progressing
despite conventional chemotherapy and who were diagnosed as having two to six
months life expectancy.

         The Phase III clinical trial of the LYM-1, Oncolym(TM) antibody is
being conducted using patients with characteristics similar to those in the
Phase II trials. The Phase III clinical trial is being conducted at several
clinical sites with the expectation that the study will ultimately be expanded
to include a total of twenty sites with an enrollment of up to 130 patients. The
initial clinical sites include New York HospitalCornell University Medical
Center, MD Anderson Cancer Center, University of Cincinnati Medical Center,
Cleveland Clinical Foundation, and The George Washington University Medical
Center.

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         The foregoing contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially. See
"Additional Factors That May Affect Future Results" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

ADVANCED MONOCLONAL ANTIBODY.

         In addition to the LYM-1, Oncolym(TM) product, Techniclone has
developed three advanced monoclonal antibody technologies for cancer therapy and
diagnosis. Working in combination, these technologies are designed to increase
the uptake or dosing of a drug at the tumor site. These three technologies are
known as Tumor Necrosis Therapy ("TNT"), Vasopermeation Enhancement ("VE") and
Modified Antibody Technology ("MAT").

         TUMOR NECROSIS THERAPY. TNT is an antibody which attaches to dead cells
found in tumors. The TNT antibody targets necrotic tissue at the interior of
solid tumors, thereby permitting tumors to be destroyed from the inside out. The
TNT delivery system could be the basis for a class of new products effective
across the entire spectrum of solid tumor types, including lung, colon, breast,
prostate and pancreatic cancers. TNT appears to be a monoclonal antibody
delivery system that is universally effective against the entire spectrum of
solid tumor types.

         TNT is different from the Company's other monoclonal antibody based
technologies in its ability to penetrate to the core of solid tumors and
overcome the obstacles of conventional monoclonal antibody therapy. TNT has been
shown in initial tests to deliver therapeutic agents, like chemical drugs or
radioactive isotopes, to the interior of a solid tumor, thereby permitting the
tumor to be destroyed from the inside-out.

         The foregoing contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially. See
"Additional Factors That May Affect Future Results" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         VASOPERMEATION ENHANCEMENT. Vasopermeation Enhancement is a technology
which uses vasoactive agents linked to monoclonal antibodies, which when bound
to tumors, increase the vasoactive permeability of the tumor site.
Vasopermeation Enhancement is based on the concept that when tumor tissues are
uniquely targeted by monoclonal antibodies linked with vasoactive agents
(molecules that cause tissues to dilate), these tissues will become a "sink" for
other compounds that are given intravenously. In pre-clinical studies,
Techniclone's scientists were able to increase the uptake of drugs or isotopes
within a tumor by 200% to 400% if a vasoactive agent was given several hours
prior to the therapeutic treatment. This enhancement of toxic drug dosing is
achieved by altering the physiology and, in particular, the permeability of the
blood vessels and capillaries that serve the tumor. As the tumor vessels become
more permeable, the amount of therapeutic treatment reaching the tumor cells
increases.

         More specifically, the mechanism by which Vasopermeation Enhancement
technology works in a cancer patient is through pretreatment of the patient with
a vasoconjugate, such as Interleukin-2 (IL-2) linked to a monoclonal antibody, a
few hours prior to delivery of a therapeutic drug. The antibody side of this
vasoconjugate may be targeted either against antigens which are unique to the
tumor vessel walls or antigens inside the tumor itself. The vasoconjugate
affects the walls of the tumor vessel and causes an immediate increase in vessel
permeability. This increased state of permeability creates a window of
opportunity for several hours, allowing any therapeutic drug injected into the
patient during that time to enter the tumor in greatly enhanced concentrations.
The therapeutic drug can be a chemotherapy drug, radiolabeled antibody or other
cancer fighting agent.

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         The foregoing contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially. See
"Additional Factors That May Affect Future Results" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         MODIFIED ANTIBODY TECHNOLOGY. Modified Antibody Technology is a
technology where a small organic molecule, such as the vitamin biotin, is
attached to an antibody and this combined molecule causes a major change to
occur in the physicochemical properties of the antibody itself. This chemical
modification decreases the electric charge of the antibody and thereby
influences the way the antibody travels through the circulatory system, and
decreases the time it takes for the antibody to completely clear the patient's
body (the "clearance time"). Decreasing the clearance time of an antibody is an
important factor in reducing its overall toxicity.

         In pre-clinical studies, Techniclone's Modified Antibodies have shown
improved uptake in solid tumors and improved clearance time. Modified Antibodies
have clearance profiles similar to that of smaller antibody fragments and thus
produce markedly less toxicity.

         The foregoing contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially. See
"Additional Factors That May Affect Future Results" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

PRODUCTS

         The Company's plans for future growth have focused on the development
of two product groups: therapeutic products and advanced monoclonal antibody
technologies. Therapeutic products are products intended for hospital pharmacies
and radiologists. The Company is currently developing LYM-1, LYM-2 and TNT
Antibodies for this market. The advanced monoclonal antibody technologies which
the Company is developing are the Vasopermeation Enhancement and the Modified
Antibody Technology.

         LICENSE AGREEMENTS. On October 28, 1992, the Company entered into a
License Agreement with Alpha Therapeutic Corporation ("Alpha") pursuant to which
the Company granted Alpha a license for the development and commercialization of
the LYM Antibodies in the United States and certain other countries. Under the
License Agreement, Alpha paid the Company $100,000 and, unless the Agreement is
terminated, Alpha is required to make fixed payments to the Company as follows:
(i) $50,000 within 30 days following their meeting with the FDA to discuss the
LYM-1 development program (which amount was paid on July 23, 1993); (ii)
$100,000 upon the first European regulatory submission or six (6) months from
the commencement date of U.S. Phase III clinical trials, whichever comes first,
(iii) $200,000 upon the approval of the first European regulatory submission,
(iv) $500,000 upon the submission of a PLA to the FDA, and (v) after the
completion of the Phase III LYM-1 clinical trial $100,000 per year as a research
and development grant. The agreement also provides that Alpha conduct all
remaining development work necessary for FDA/PLA submission and pay all costs of
development and patient costs including physician fees, hospital fees, material
costs and follow-up costs. Under the Agreement the Company is responsible for
manufacturing the LYM Antibodies for clinical and commercial use.

         On February 5, 1996,the Company entered into an agreement with
Cambridge Antibody Technology, Ltd. ("CAT") to develop and market a new class of
products for cancer therapy and diagnosis. The Agreement provides that the
Company and CAT will develop a monoclonal antibody based upon CAT's patented
technology for producing fully human monoclonal antibodies and the Company's
Tumor Necrosis Therapy ("TNT"). The Agreement provides that equity in the joint
venture and costs associated with the development of the product would be shared
equally between the Company

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<PAGE>   10
and CAT. The Company would retain exclusive world-wide manufacturing rights. It
is anticipated that the joint venture will conduct clinical trials of TNT
concurrently in both the United States and Europe.

COMPETITION

         The Company's competitive position is based on its proprietary
technology and know-how, U.S. patents covering the LYM Antibodies and its
technology for monitoring chemotherapy and diagnosis and therapy of human
cancers. The Company has a number of worldwide patents pending. The Company
plans to compete on the basis of the advantages of its technologies, the quality
of its products, and its commitment to research into innovative technologies.
For some of its products a lower marketing price will also be a significant
advantage.

         Various other companies, many of which have larger financial resources
than the Company, are currently engaged in research and development of
monoclonal antibodies and in cancer prevention and treatment. However, none of
these companies has achieved market dominance. Nevertheless, there can be no
assurance that such companies, other companies or various other academic and
research institutions will not develop and market monoclonal antibody products
or other products to prevent or treat cancer prior to the introduction of, or in
competition with, the Company's present or future products. In addition, there
are many firms with established positions in the diagnostic and pharmaceutical
industries which may be better equipped than the Company to develop monoclonal
antibody technology or other products to prevent or treat cancer and to market
their products. Accordingly, the Company plans, whenever feasible, to enter into
joint venture relationships with these larger firms for the development and
marketing of specific products and technologies so that the Company's
competitive position might be enhanced.

GOVERNMENT REGULATION

         Regulation by governmental authorities in the United States and other
countries is a significant factor in the Company's ongoing research and
development activities and in the production and marketing of its products. The
amount of time and expense involved in obtaining necessary regulatory approval
depends upon the type of product. The procedure for obtaining FDA regulatory
approval for a new human pharmaceutical product, such as the LYM Antibodies and
TNT, involves many steps, including laboratory testing of those products in
animals to determine safety, efficacy and potential toxicity, the filing with
the FDA of a Notice of Claimed Investigational Exemption for Use of a New Drug
prior to the initiation of clinical testing of regulated drug and biologic
experimental products, and clinical testing of those products in humans. The
Company has filed a Notice of Claimed Investigational Exemption for Use of a New
Drug with the FDA for the production of LYM-1 as a material intended for human
use, but has not filed such a Notice with respect to any other in vivo products.
The regulatory approval process is administered by the FDA's Office of Biologics
Research and Review and is similar to the process used for any new drug product
intended for human use.

         The pre-marketing clinical testing program required for approval of a
new drug or biologic typically involves a three-phase process. Phase I consists
of testing for the safety and tolerance of the drug with a small group of
patients, and also yields preliminary information about the effectiveness of the
drug and dosage levels. Phase II involves testing for efficacy, determination of
optimal dosage and identification of possible side effects in a larger patient
group. Phase III clinical trials consists of additional testing for efficacy and
safety with an expanded patient group. After completion of clinical studies, a
Product License Application is submitted to the FDA for product marketing
approval and for licensing of the product manufacturing facilities. In
responding to such an application, the FDA could grant marketing approval,
request clarification of data contained in the application or require additional

                                       10

<PAGE>   11
testing prior to approval. The Company has not, to date, filed a Product License
Application for any therapeutic products.

         If approval is obtained for the sale of such new drug, FDA regulations
will also apply to the manufacturing process and market activities for the
product and may require post-marketing testing and surveillance programs to
monitor the effects of the product. The FDA may withdraw product approvals if
compliance with regulatory standards, including labeling and advertising, is not
maintained or if unforeseen problems occur following initial marketing.

         The National Institutes of Health has issued guidelines applicable to
the research, development and production of biological products, such as the
Company's products. Other federal agencies and congressional committees have
indicated an interest in implementing further regulation of biotechnology
applications. The extent of future regulation cannot be predicted, but could
affect the manufacture and sale of the Company's products.

         In addition, the Company is subject to regulation under state and
federal laws and regulations regarding occupational safety, laboratory
practices, the use and handling of radioisotopes, environmental protection and
hazardous substance control, and other regulations. The Company's products may
also be subject to import laws in other countries and food and drug laws in
various states in which the products are or may be sold.

         The Company believes that it is in compliance with all applicable laws
and regulations including those relating to the handling and disposal of
hazardous and toxic wastes.

PATENTS AND TRADE SECRETS

         The Company has relied on the internal achievements of the Company, as
well as the direct sponsorship of university researchers, for its basic
technologies. The Company believes it will continue to learn, on a timely basis,
of advances in the biological sciences which might complement or enhance its
existing expertise. It intends to pursue opportunities to license such advances
as well as pursue similar developments internally.

         The Company has applied for several patents either directly or as a
cosponsor/licensee. The Company treats particular variations in the production
of monoclonal antibodies and related technologies as trade secrets. Patent
protection may, however, be significant in the case of newly-developed human
hybridoma technologies. The Company intends to pursue patent protection for
inventions related to human hybridoma procedures and other unique antibodies
that it cannot protect as trade secrets. Techniclone, as licensee, cosponsored
the patent applications for the LYM Antibodies through its licensing agreements
with Northwestern University. United States Letters patents for LYM-1 and LYM-2
were issued in February 1988.

         The Company's TNT technologies are covered by a United States patent
issued in August 1989 for diagnostic and therapeutic monitoring, and by a United
States patent issued in May 1991 for all therapeutic applications. The foreign
counterparts of these patents have been issued by the European Patent Office and
are still pending in several Asian countries. A third patent application for TNT
imaging and therapeutic applications is pending in the United States.

         For its Vasopermeation Enhancement technology, Techniclone holds an
exclusive world-wide license from the University of Southern California (USC)
that covers all uses of the Vasopermeation Enhancement technology and all
related patents that may issue. USC has filed patent applications

                                       11

<PAGE>   12
covering the Vasopermeation Enhancement technology in the United States, Europe,
Japan, Canada and Australia. The United States patent application was filed in
October 1988 and is currently pending. This patent covers all aspects of
attaching vasoactive compounds to immunoreactive fragments for the purpose of
enhancing the uptake of therapeutic drugs or diagnostic agents. The European
patent application for Vasopermeation Enhancement was allowed in June 1995.

         Techniclone's Modified Antibody Technology is covered by a U.S. patent
issued in March 1993. The European patent application for Modified Antibody
Technology was allowed in June 1996. Asian patent applications for Modified
Antibody Technology are pending as is a second United States patent application
covering further uses of the technology.

         In general, the patent position of a biotechnology firm is highly
uncertain and no consistent policy regarding the breadth of allowed claims has
emerged from the actions of the U.S. Patent Office with respect to biotechnology
patents. Accordingly, there can be no assurance that the Company's patents, if
issued, will provide protection against competitors with similar technology, nor
can there be any assurance that such patents will not be infringed upon or
designed around by others.

         The Company knows of no third party patents which are infringed by its
present activities or which would, without infringement or license, prevent the
pursuit of its business objectives. However, there can be no assurances that
such patents have not been or will not be issued and, if so, whether the Company
will be able to obtain licensing arrangements on reasonable terms.

         The Company also intends to continue to rely upon trade secrets and
improvements, unpatented proprietary know-how, and continuing technological
innovation to develop and maintain its competitive position in research and
diagnostic products. To this end, the Company places restrictions in its
agreements with third parties which restrict their right to use and disclose any
of the Company's proprietary technology which they are licensed to use. In
addition, the Company has internal non-disclosure safeguards, including
confidentiality agreements with all of its employees. There can be no assurance
that others may not independently develop similar technology or that the
Company's secrecy will not be breached.

MANUFACTURING

         RAW MATERIALS. The Company uses various common raw materials in the
manufacture of its products and in the development of its technologies. These
raw materials are generally available from several alternate distributors of
laboratory chemicals and supplies. The Company has not experienced any
difficulty in obtaining these raw materials and does not consider raw material
availability to be a significant factor in its business. The Company uses highly
purified materials with strict requirements for sterility and pyrogenicity.

PRODUCTION.

         The Company's LYM-1 (Oncolym(TM)) antibody is produced for use in the
Phase III clinical trials at Techniclone's GMP pilot facility in Tustin,
California. The Company has commenced design efforts to expand this facility to
handle commercial production requirements. The Company will install additional
bioreactors adequate to meet commercial demand. Centralized product testing and
process controls in this facility permit the Company to maintain a high degree
of uniformity and quality control of its antibodies while utilizing economies of
scale in its manufacturing processes.

                                       12

<PAGE>   13
         Once the LYM-1 antibody has passed stringent quality control and
outside testing, it is shipped to Oklahoma City, Oklahoma for radiolabeling,
(the process of attaching the radioactive agent, Iodine- 131, to the antibody).
From the Oklahoma facility, the labelled LYM-1 is shipped overnight to medical
centers for use in treating patients the next day.

         The Company has also constructed a pilot production laboratory for the
manufacturing of TNT antibody at its Tustin, California, facility. This
laboratory is currently being validated for FDA licensing and will be able to
produce sufficient quantities of the TNT antibody to supply to the European and
United States clinical trial sites in connection with the proposed Phase I
clinical trials expected to commence in late 1996 or early 1997.

         The foregoing contains forward looking statements that involve risks
and uncertainties that could cause actual results to differ materially. See
"Additional Factors That May Affect Future Results" under Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

MARKETING

         On October 28, 1992, the Company entered into a License Agreement with
Alpha Therapeutic Corporation ("Alpha") pursuant to which the Company granted
Alpha a license for the development and commercialization of the LYM Antibodies
in the United States and certain other countries. Under the License Agreement
Alpha paid the Company $100,000 and unless the Agreement is terminated Alpha is
required to make fixed payments to the Company as follows: (i) $50,000 within 30
days following their meeting with the FDA to discuss the LYM-1 development
program (which amount was paid on July 23, 1993); (ii) $100,000 upon the first
European regulatory submission or six months from the commencement date of U.S.
Phase III clinical trials, whichever comes first, (iii) $200,000 upon the
approval of the first European regulatory submission, (iv) $500,000 upon the
submission of a PLA to FDA, and (v) after the completion of the Phase III LYM-1
clinical trial $100,000 per year as a research and development grant. The
agreement also provides that Alpha conduct all remaining development work
necessary for FDA/PLA submission and pay all costs of development and patient
costs including physician fees, hospital fees, material costs and follow-up
costs. Under the Agreement the Company is responsible for manufacturing the
LYM-1 antibody for clinical and commercial use.

         The Company has begun Phase II/III testing in multi-center clinical
trials of the LYM-1 antibody in late stage non-Hodgkins lymphoma patients. The
clinical trials are being sponsored by Alpha Therapeutic Corporation, a
wholly-owned subsidiary of Green Cross of Japan. The clinical trials are
currently being held at participating medical centers including M.D. Anderson,
The Cleveland Clinic, Cornell University (N.Y.C.), George Washington University
and the University of Cincinnati. After the first twelve patients have been
treated, the trials are expected to be expanded to a total of twenty medical
centers. Following the completion of the clinical trials the Company expects to
file an application with the FDA to market LYM-1 in the United States.

EMPLOYEES

         As of July 1, 1996, Techniclone employed 22 full-time employees, which
included 3 Ph.D. level persons, 16 technical and support employees, and 3
administrative employees.

                                       13

<PAGE>   14

I
TEM 2.  PROPERTIES

         The Company's research and manufacturing operations are located in
office and laboratory space at 14282 Franklin Avenue, Tustin, California
92780-7017. On March 25, 1996, the Company entered into a Purchase Agreement for
Real Property and Escrow Instructions by and between the Company and TR Koll
Tustin Tech Corp., an Illinois corporation ("Koll"), pursuant to which the
Company agreed to purchase from Koll its facility for the purchase price of
$1,555,620. The Company obtained financing and escrow closed on the transaction
on April 30, 1996. The terms of the financing provide that the Company financed
$1,020,000 of the purchase price and makes monthly payments of $10,737. In
addition, the Company pays common area maintenance of $2,154 per month.
Techniclone manufactures its LYM and TNT Antibodies at this facility.


ITEM 3.  LEGAL PROCEEDINGS

         There are no pending legal proceedings in which the Company is a party.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                                       14

<PAGE>   15

                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Prior to April 1, 1996, Techniclone's Common Stock was traded
intermittently in the over-the-counter market. Since April 1, 1996,
Techniclone's Common Stock has been traded on the NASDAQ Exchange. The following
table shows the high and low bid and asked prices for Techniclone's Common Stock
for each quarter in the last two fiscal years. Prices shown represent quotations
by dealers, without retail markup, markdown or commissions and may not reflect
actual transactions.


<TABLE>
<CAPTION>
                                   Bid                    Asked
Quarter ended:               High       Low          High        Low
- --------------               -----------------------------------------
<S>                          <C>        <C>          <C>        <C>
April 30, 1994               3.875      1.50         5.00       2.125
July 31, 1994                3.00       2.00         4.375      2.50
October 31, 1994             3.125      1.50         4.00       2.125
January 31, 1995             2.50       0.03         4.00       1.375
April 30, 1995               2.00       0.50         4.00       1.25
July 31, 1995                1.25        .688        1.375       .813
October 31, 1995             3.063       .688        3.125       .875
January 31, 1996             5.375      2.625        5.50       2.813
April 30, 1996               7.813      5.125        7.938      5.313
</TABLE>


         As of July 1, 1996, the number of holders of record of the Company's
Common Stock was 5,986.

         The Company has a limited operating history and only nominal revenues
to date. No dividends have been declared or paid by the Company. The Company
intends to employ all available funds for the development of its business and,
accordingly, does not intend to pay any cash dividends in the foreseeable
future.


ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data has been extracted from the
financial statements of the Company for each of the five years in the period
ended April 30, 1996. The financial statements for each of the five years in the
period ended April 30, 1996 have been audited by the Company's independent
public accountants. These financial summaries should be read in conjunction with
the information contained for each of the three years in the period ended April
30, 1996, included in the financial statements and notes thereto, Management's
Discussion and Analysis of Results of Operations and Financial Condition, and
other information provided elsewhere herein.

                                       15

<PAGE>   16

<TABLE>
<CAPTION>
                                                         SELECTED FINANCIAL DATA
                                                        STATEMENTS OF OPERATIONS
                                                          YEAR ENDED APRIL 30,
                           ---------------------------------------------------------------------------------
                                1992               1993           1994             1995            1996
                           -------------     --------------   ------------     ------------    -------------
<S>                        <C>               <C>              <C>              <C>             <C>
REVENUES
Net Product Sales.......   $      78,734     $       34,990   $      4,400     $        --     $       2,580
Licensing Agreements....         203,000            120,000         56,375            7,265        3,002,244
Interest income.........           2,506             13,773          8,591              126          138,499
Other...................          64,708              --             --               --                  --
                           -------------     --------------   ------------     ------------    -------------
Total Revenues..........         348,948            168,763         69,366            7,391        3,143,323
                           -------------     --------------   ------------     ------------    -------------

COSTS AND EXPENSES:
Cost of sales...........          44,947              9,670          1,680            --               2,580
Research and
Development.............         230,333            579,447      1,315,898        1,225,072        1,679,558
General and
 administrative:........

    Unrelated entities..         320,171            453,200        914,142          547,133          947,816
    Affiliates..........          92,671            136,641        212,594          137,326          170,659
Interest (primarily to
    related parties)....          32,145             31,724         30,467           27,833           17,412
Charges related to
    merger of subsidiary.             --                 --             --        4,849,591               --
Contract losses.........              --                 --             --          132,071               --
Other...................        (156,140)                --             --               --               --
                           -------------     --------------   ------------     ------------    -------------
Total costs
 and expenses...........         564,127          1,210,682      2,474,781        6,919,026        2,818,025
                           -------------     --------------   ------------     ------------    -------------

NET INCOME
(LOSS)..................   $    (215,179)    $   (1,041,919)  $ (2,405,415)    $ (6,911,635)   $     325,298
                           ==============    ==============   ============     ============    =============

NET INCOME (LOSS)
PER SHARE...............   $        (.02)    $         (.09)  $       (.18)    $       (.44)   $         .02
                           =============     ==============   ============     ============    =============

Weighted average
    number of
    common shares
    and common
    equivalent shares
    outstanding.........      11,548,484         12,211,176     13,653,829       15,794,811       21,382,524
                           =============     =============   =============    =============    =============
</TABLE>


                                       16

<PAGE>   17

<TABLE>
<CAPTION>
                                                        BALANCE SHEET DATA
                                                              APRIL 30,
                             ----------------------------------------------------------------------------------------
                                  1992               1993             1994             1995           1996
                             ------------     ------------     ------------     ------------     ------------- 
<S>                          <C>              <C>              <C>              <C>              <C>          
Working Capital (deficit)    $    334,142     $   (156,289)    $   (499,059)    $   (934,121)    $   7,460,514

Total Assets............          807,137          951,660          848,036          856,657        10,775,757

Long-term Debt..........          310,100          302,131          258,500          258,500           987,032

Accumulated deficit.....       (7,727,009)      (8,768,928)     (11,174,343)     (18,085,978)      (17,760,680)

Stockholders' equity
  (deficit).............          246,181          314,381          (60,905)        (600,441)        8,964,677
</TABLE>




ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995

         The Company's net income of approximately $325,000 for the year ended
April 30, 1996 represents an increase of approximately $7,237,000 compared to
the net loss of approximately $6,912,000 for the prior year ended April 30,
1995. This increase in the net income in the 1996 year is primarily attributable
to a $4,101,000 decrease in total costs and expenses and an increase of
$3,136,000 in total revenues. The decrease in total costs and expenses is
primarily attributable to a decease in an aggregate charge to earnings of
$4,849,591 which occurred during the year ended April 30, 1995 (which
represented the excess of the fair market value of the Company stock issued over
the net assets acquired of CBI, plus an additional non-recurring charge relating
to CBI stock options assumed by the Company) in connection with the merger of
Cancer Biologics Incorporated ("CBI") with and into the Company effective July
26, 1994, and which did not recur during the year ended April 30, 1996.

         Total revenues for the year ended April 30, 1996 increased
approximately $3,136,000 compared to the total revenues of $7,000 for prior year
ended April 30, 1995. This increase resulted from increases in sales of
antibodies and other products of approximately $3,000, licensing revenue of
$2,995,000 and interest income of approximately $138,000, in comparison to the
prior year ended April 30, 1995. Licensing fee revenues increased during the
year ended April 30, 1996 primarily from the result of an increase in licensing
fees from Biotechnology Development Ltd. relating to the Company's LYM-1
antibody. On February 29, 1996 the Company entered into a Distribution Agreement
with Biotechnology Development, Ltd. ("BTD"), a limited partnership controlled
by a member of the Board of Directors of the Company and a major shareholder of
the Company, which provides for BTD to acquire LYM-1 antibody technology
marketing rights for certain European countries and other geographic areas not
covered by its existing license agreement with Alpha Therapeutic Corporation in
exchange for the payment of $3,000,000 by BTD to the Company. Under the terms of
the Distribution Agreement, the Company retains all manufacturing rights to
LYM-1 and will supply LYM-1 to BTD at preset prices. Additionally, the Company
has the option under an Option Agreement to repurchase the marketing rights to
LYM-1 for a thirty month period. The repurchase price, if repurchase is elected
by the Company at its sole discretion, includes a combination of cash, stock
options and royalty payments to be made to BTD, the amount of which depends on
when the repurchase option is elected by the Company.

                                       17

<PAGE>   18
         On December 27, 1995, the Company issued 7,700 shares of newly created
Class B Convertible Preferred Stock, at a price of $1,000 per share, and on
December 29, 1995 issued an additional 500 shares of Class B Convertible
Preferred Stock, at a price of $1,000 per share, for an aggregate issuance
consideration of $8,200,000 to sixteen (16) offshore investors pursuant to
Regulation S promulgated under the Securities Act of 1933. The Class B
Convertible Preferred Stock is non-voting. The Class B Convertible Preferred
Stock is convertible, commencing immediately after the Closing into Common Stock
of the Company. During the first ninety days after the Closing, each share of
the Class B Convertible Preferred Stock was convertible in multiples of $50,000
into that number of shares of Common Stock calculated by dividing $1,000 by 110%
of the Fixed Conversion Price which is the lower of (i) $3.06875 (fair market
value at the date of issuance) per share of Common Stock or (ii) 85% of the fair
market value of the Common Stock on the date of conversion based on the average
bid price during the five trading days prior to the date of conversion.
Beginning 91 days after the Closing Date the number of shares of Common Stock
issued upon conversion of each share of Class B Convertible Preferred Stock
converted is determined by (i) taking ten percent (10%) of One Thousand Dollars
($1,000) pro-rated on the basis of a 365 day year, by the number of days between
the last Closing Date and the date of conversion plus (ii) One Thousand Dollars
($1,000), (iii) divided by the Conversion Price. As of April 30, 1996, the Fixed
Conversion Price was set at $3.06875, which was the average closing bid price
for the Company's Common Stock for the five (5) trading days ending on December
8, 1995. Additionally, the Class B Convertible Preferred Stock has a liquidation
preference over other classes of the Company's stock. This liquidation
preference is $1,000 per share of Class B Convertible Preferred Stock plus 10%
per annum pro-rated through any liquidation date. As of April 30, 1996 1,400
shares of Class B Convertible Preferred Stock had been converted at the election
of the holder to Common Stock. In connection with these conversions the Company
issued 469,144 shares of Common Stock. As of April 30, 1996, 6,800 shares of
Class B Convertible Preferred Stock remain outstanding which as of April 30,
1996 were convertible into 2,289,951 shares of Common Stock at a conversion
price of $3.06875 per share, with a liquidation preference of $7,027,288.

         The Company received $7,137,544 in net proceeds from the sale of the
Class B Convertible Preferred Stock after payment of offering commissions and
expenses and legal fees. In connection with the placement of the Class B
Preferred Stock, the Company paid to Swartz Investments, Inc. commissions of
$656,000 and a non-accountable expense allowance of $246,000. In addition, the
Company issued to Swartz Investments, Inc. two five year warrants to purchase an
aggregate of 267,210 shares of the Company's Common Stock at an exercise price
of $3.06875. The Common Stock issuable on exercise of the warrant and on
conversion of the Class B Convertible Preferred Stock (if not otherwise freely
tradeable) is subject to registration pursuant to a Registration Rights
Agreement. Additionally, the Company paid other commissions of $75,000 and legal
fees of approximately $85,000 in connection with the preferred stock placement.

         The Company intends to use the proceeds from the offering to support
its LYM-1, Oncolym(TM) manufacturing effort for the Phase III LYM-1, Oncolym(TM)
clinical trials, to fund additional development of its patented Tumor Necrosis
Therapy (TNT) and for working capital. Interest income increased during the year
ended April 30, 1996 as the level of cash funds available for investment has
increased in comparison to the prior year ended April 30, 1995.

         The Company has had no significant research and development contract
revenue during the year ended April 30, 1996 however the Company expects
research and development revenues to increase due to the clinical trials of the
LYM-1 antibody.

         The Company's total costs and expenses decreased approximately
$4,101,000 (or 59%) for the year ended April 30, 1996 in comparison to the year
ended April 30, 1995. Cost of sales increased

                                       18

<PAGE>   19
approximately $3,000 in comparison to the prior year and sales of antibodies and
other products increased approximately $3,000. Research and development expenses
increased approximately $454,000 (or 37%) for the year ended April 30, 1996 in
comparison to the year ended April 30, 1995. This increase in research and
development expenses during the year ended April 30, 1996 resulted from the
Company's activities during the year ended April 30, 1996 in preparing for the
Phase III clinical trials of the LYM-1 antibody. During the year ended April 30,
1996, the Company increased its TNT development costs by approximately $63,000,
in comparison to the prior year ended April 30, 1995. Also, during the year
ended April 30, 1996, research and development costs relating to the LYM-1
antibody increased by approximately $391,000 due to an approximate $286,000
increase in salaries and related costs for clinical trial preparation and an
approximate $105,000 increase in expenses incurred in supporting the efforts of
Mills Biopharmaceuticals, Inc. ("MBI") to complete and obtain Nuclear Regulatory
Commission licensing for its Oklahoma LYM-1 antibody labelling facility.
Management anticipates the Company will have additional capital requirements and
expenses related to development and clinical trials of its antibodies.

         General and administrative expenses incurred by the Company increased
approximately $434,000 (or 63%) during the year ended April 30, 1996 in
comparison to the prior year ended April 30, 1995. The increase in general and
administrative expenses during the year ended April 30, 1996 resulted primarily
from increased administrative, payroll and consultant costs associated with
clinical trial preparation and expanded public relations activities. Interest
expense decreased approximately $10,000 during the year ended April 30, 1996 in
comparison to the year ended April 30, 1995 due to lower levels of interest
bearing debt outstanding during the year. Management believes that general and
administrative costs will increase during the year ending April 30, 1997 as
Phase III clinical trials of the LYM-1 antibody are expanded and due to
increased investor relations activities.

YEAR ENDED APRIL 30, 1995 COMPARED TO YEAR ENDED APRIL 30, 1994

         The Company's net loss of approximately $6,912,000 for the year ended
April 30, 1995 represented an increase of approximately $4,507,000 (or 187%)
compared to the net loss of approximately $2,405,000 for the prior year ended
April 30, 1994. This increase in the net loss in the 1995 year was primarily
attributable to a $4,444,000 increase in total costs and expenses and a $62,000
decrease in total revenues.

         Total revenues for the year ended April 30, 1995 decreased
approximately $62,000 compared to the prior year ended April 30, 1994. This
decrease resulted from decreases in sales of antibodies and other products of
approximately $4,000, licensing revenue of $50,000 and interest income of
approximately $8,000, in comparison to the prior year ended April 30, 1994.
Management attributed the decreases in product and antibody sales to lower sales
of the Company's Histoclone products during the year ended April 30, 1995. The
licensing fee revenues decreased during the year ended April 30, 1995 primarily
from a decrease in LYM-1 licensing fees from Alpha Therapeutic Corporation.
Interest income decreased during the year ended April 30, 1995, as the level of
idle cash funds available for investment had decreased in comparison to the
prior year ended April 30, 1994.

         The Company had no significant research and development contract
revenue during the year ended April 30, 1995.

         The Company's total costs and expenses increased approximately
$4,444,000 (or 180%) for the year ended April 30, 1995 in comparison to the year
ended April 30, 1994. Cost of sales decreased approximately $2,000 during the
year ended April 30, 1995, in comparison to the prior year ended April 30, 1994,
while sales of antibodies and other products decreased approximately $4,000
during the year ended April 30, 1995. Research and development expenses
decreased approximately $91,000 (or 7%)

                                       19

<PAGE>   20
for the year ended April 30, 1995 in comparison to the year ended April 30,
1994. This decrease in research and development expenses resulted primarily from
an approximate $140,000 decrease in expenses due to capitalization of inventory
costs, and a $160,000 decrease in development costs of the TNT antibody
technologies, offset by approximately $209,000 in increased research and
development expenses relating to the Company's preparation for commencement of
clinical trials of LYM-1 during the year ended April 30, 1995. During the year
ended April 30, 1995, the Company produced significant quantities of LYM-1
antibody for sale and use when clinical trials begin. A portion of these
production and testing costs of these LYM-1 inventories were capitalized during
the year, whereas similar costs incurred prior to inventory production were
expensed as research and development costs during the prior year ended April 30,
1994. During the year ended April 30, 1995, the Company decreased its TNT
development costs by $160,000, in comparison to the prior year ended April 30,
1994, as funds were redirected to LYM-1 clinical trial preparation. During the
year ended April 30, 1995, research and development costs relating to the LYM-1
antibody increased by approximately $209,000 due to a $102,000 increase in
salaries and related costs for clinical trial preparation and a $107,000
increase in expenses during the year ended April 30, 1995 incurred in supporting
the efforts of MBI to complete and obtain NRC licensing for its Oklahoma LYM-1
antibody labelling facility.

         General and administrative expenses incurred by the Company decreased
approximately $442,000 (or 39%) during the year ended April 30, 1995 in
comparison to the prior year ended April 30, 1994. The decrease in general and
administrative expenses during the year ended April 30, 1995 resulted primarily
from $300,000 expensed in the prior year ended April 30, 1994 associated with
the vesting of contingent stock options and $142,000 in shareholder meeting
expenses incurred in the year ended April 30, 1994, which did not recur in the
year ended April 30, 1995. Interest expense decreased $3,000 during the year
ended April 30, 1995 in comparison to the year ended April 30, 1994 due to lower
levels of interest bearing debt outstanding during the year.

         The Company incurred a $4,849,591 charge to earnings during the year
ended April 30, 1995 relating to the merger of CBI into the Company on July 26,
1994. The assets of CBI acquired by the Company consisted primarily of research
and development of the TNT antibody technology, which has not been approved by
the FDA. The $4,849,591 charge to earnings consists of the excess of the fair
market value of the Company common stock issued of $2,504,053 over the net
assets of CBI acquired of $231,582 plus an additional $2,577,120, non-recurring
charge relating to the Company's assumption of outstanding stock options of CBI
in the merger.

         The Company recorded a $132,071 reserve during the year ended April 30,
1995 for contract losses relating to current and future LYM-1 inventories which
are committed to be sold at below the Company's expected cost to Alpha
Therapeutics for use in the Phase III clinical trials of LYM-1.

LIQUIDITY AND CAPITAL RESOURCES

         At April 30, 1996, the Company had $8,173,347 in cash, investments and
receivables and a working capital surplus of $7,460,514 compared to $38,020 in
cash and receivables and a working capital deficit of $934,121 at April 30,
1995. The Company raised net proceeds of approximately $1,507,000 from the sale
of Common Stock and net proceeds of $7,138,000 from the sale of the Class B
Preferred Stock during the year ended April 30, 1996.

CAPITAL COMMITMENTS

         At April 30, 1996, the Company had no material commitments to acquire
additional assets, but expects to acquire additional assets, building
improvements and equipment during the year ending April

                                       20

<PAGE>   21
30, 1997 to expand its office and production facilities.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

         FUTURE OPERATING RESULTS. Future operating results may be impacted by a
number of factors that could cause actual results to differ materially from
those stated herein, which reflect management's current expectations. These
factors include worldwide economic and political conditions, industry specific
factors, the Company's ability to maintain access to external financing sources
and its financial liquidity, the Company's ability to timely develop and produce
commercially viable products at competitive prices, the availability and cost of
components of those products, and the Company's ability to manage expense
levels.

         NEED FOR ADDITIONAL CAPITAL. At April 30, 1996, the Company had
approximately $8,078,000 cash and short term investments which approximates 27
months of expenses. The Company has continued to experience negative cash flows
since its inception and expects the negative cash flow to continue for the
foreseeable future. The Company expects that the monthly negative cash flow will
increase as a result of increased activities with the Phase III clinical trials
for LYM-1 and the significantly increased research and development with the
Company's other products, including Tumor Necrosis Therapy ("TNT"). As a result
of the increased expenditure of funds, the Company believes that it will be
necessary for the Company to raise additional capital to sustain the research
and development and provide for future clinical trials. The Company must raise
additional equity funds in order to continue its operations until it is able to
generate sufficient additional revenue from the sale and licensing of its
products. There can be no assurance that the Company will be successful in
raising such funds on terms acceptable to it or at all, or that sufficient
additional capital will be raised to research and develop the Company's
additional products. The Company is discussing the possibility of raising
additional funds with several investment banking firms, but as of April 30,
1996, the Company had not entered into any firm commitments for additional
funds. If the initial results from the Phase II/III clinical trials of LYM-1 are
poor, the results may have a material adverse effect upon the Company's ability
to raise additional capital, which would affect the Company's ability to
continue a full-scale research and development effort for its antibody
technologies. The Company's future success is highly dependent upon its
continued access to sources of financing which it believes are necessary for the
continued growth of the Company. In the event the Company is unable to maintain
access to its existing financing sources, or obtain other sources of financing
there would be a material adverse effect on the Company's business, financial
position and results of operations.

         COMPETITION. The biotechnology industry is intensely competitive and
changing rapidly. Substantially all of the Company's existing competitors have
larger technical staffs, more established and larger research budgets and
significantly greater financial resources than the Company. There can be no
assurance that these competitors will not be able to expend resources to develop
their products prior to the Company's product being granted approval for
marketing by the U.S. Food and Drug Administration. There can be no assurance
that the Company will be able to compete successfully or that competition will
not have a material adverse effect on the Company's results of operation.

         TECHNOLOGY. The Company's future success will depend significantly upon
its ability to develop and test workable products which the Company will seek
FDA approval to market to certain defined groups. A significant risk remains as
to the technological, performance and commercial success of the Company's
technology and products. The products currently under development by the Company
will require significant additional laboratory and clinical testing and
investment over the foreseeable future. The significant research, development,
and testing activities, together with resultant increases in associated
expenses, are expected to result in operating losses for the foreseeable future.
Although the

                                       21

<PAGE>   22
Company is optimistic that it will be able to successfully complete development
of one or more of its products, there can be no assurance that the Company's
research and development activities will be successfully completed; that any
proposed products will prove to be effective in clinical trials; that the
Company will be able to obtain all necessary governmental clearances and
approvals to market its products; that such proposed products will prove to be
commercially viable or successfully marketed; or that the Company will ever
achieve significant revenues or profitable operations. In addition, the Company
may encounter unanticipated problems, including development, manufacturing,
distribution and marketing difficulties. The failure to adequately address such
difficulties could have a material adverse effect on the Company's prospects.

         REGULATION. The Company's products are subject to extensive government
regulation in the United States by federal, state and local agencies including
the Food and Drug Administration. The process of obtaining and maintaining FDA
and other required regulatory approvals for the Company's products is lengthy,
expensive and uncertain. There can be no assurance that the Company can obtain
FDA or other regulatory approval for the marketing of its products or that
changes in existing regulations or the adoption of new regulations will not
occur which will adversely affect the Company.

         EARTHQUAKE RISKS. The Company's corporate headquarters facility, at
which the majority of its research and development activities are conducted, is
located near major earthquake faults which have experienced earthquakes in the
past. The Company does not carry earthquake insurance on its facility due to its
unavailability and prohibitive cost. In the event of a major earthquake or other
disaster affecting the Company's facilities, the operations and operating
results of the Company could be adversely affected.

         STOCK PRICE FLUCTUATIONS. The Company's participation in the highly
competitive biotechnology industry often results in significant volatility in
the Company's common stock price. This volatility in the stock price is a
significant risk investors should consider.

         FORWARD LOOKING STATEMENTS. This Annual Report on Form 10-K contains
certain forward-looking statements that are based on current expectations. In
light of the important factors that can materially affect results, including
those set forth above and elsewhere in this Form 10-K, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company may encounter competitive, technological, financial and
business challenges making it more difficult than expected to continue to
develop, market and manufacture its products; competitive conditions within the
industry may change adversely; upon development of the Company's products,
demand for the Company's products may weaken; the market may not accept the
Company's products; the Company may be unable to retain existing key management
personnel; the Company's forecasts may not accurately anticipate market demand;
and there may be other material adverse changes in the Company's operations or
business. Certain important factors affecting the forward looking statements
made herein include, but are not limited to (i) accurately forecasting capital
expenditures, and (ii) obtaining new sources of external financing prior to the
expiration of existing support arrangements or capital. Assumptions relating to
budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its capital expenditure or other budgets,
which may in turn affect the Company's financial position and results of
operations.

                                       22

<PAGE>   23

I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Reference is made to the financial statements included in this Report
         at pages F-1 through F-21.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         Not applicable.

                                       23

<PAGE>   24

                                    PART III


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Except for information concerning the Company's executive officers
which is included in Part I of this Annual Report on Form 10-K, the information
required by Item 10 is incorporated herein by reference from the Company's
definitive proxy statement for the Company's 1996 annual shareholders' meeting
which will be filed with the Commission on or before August 15, 1996.


ITEM 11.          EXECUTIVE COMPENSATION

         The information required by Item 11 is incorporated herein by reference
from the Company's definitive proxy statement for the Company's 1996 annual
shareholders' meeting which will be filed with the Commission on or before
August 15, 1996.


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is incorporated herein by reference
from the Company's definitive proxy statement for the Company's 1996 annual
meeting which will be filed with the Commission on or before August 15, 1996.


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is incorporated herein by reference
from the Company's definitive proxy statement for the Company's 1996 annual
shareholders' meeting which will be filed with the Commission on or before
August 15, 1996.

                                       24

<PAGE>   25

                                     PART IV


ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
                  8-K

(a)      (1)      Financial Statements

         The financial statements and schedules listed below are filed as part
of this Report:

                                                                           Page
         Independent Auditors' Report                                       F-1

         Balance Sheets as of                                         F-2 & F-3
         April 30, 1996 and 1995

         Statements of Operations                                           F-4
         for each of the three years in the period
         ended April 30, 1996.

         Statements of Stockholders' Equity                           F-5 & F-6 
         (Deficit) for each of the three years in the period
         ended April 30, 1996.

         Statements of Cash Flows                                     F-7 & F-8
         for each of the three years
         in the period ended April 30, 1996

         Notes to Financial Statements                               F-9 - F-20

         (2)      Financial Statement Schedules

                     II       Valuation and Qualifying Accounts            F-21

         (3)      Exhibits


<TABLE>
<CAPTION>
Exhibit                                                                             Sequential
Number       Description                                                            Page No.
- -------      -----------                                                            ----------
<S>          <C>                                                                        <C>
 3.1         Articles of Incorporation of the Registrant, as Amended to Date
             (Incorporated by reference to the exhibit contained in
             Registrant's Current Report on Form 8-K dated December 27, 1995,
             as filed with the Commission on or about January 24, 1996)

 3.2         Bylaws of the Registrant, as currently in effect                           **

 4.1         Form of Certificate for Common Stock                                       **

 4.2         Form of Techniclone Research Partners I Warrants                           *
</TABLE>


                                       25

<PAGE>   26

<TABLE>
<S>        <C>                                                                              
 4.3       Form of Series A Convertible Debentures                                      *

 4.4       Form of Subscription Agreement entered into with Series B
           Convertible Preferred Stock Subscribers (Incorporated by
           reference to Exhibit 4.1 contained in Registrant's Report on
           Form 8-K dated December 27, 1995, as filed with the
           Commission on or about January 24, 1996)

 4.5       Registration Rights Agreement dated December __, 1995, by and
           among Swartz Investments, Inc. and the holders of the
           Registrant's Series B Convertible Preferred Stock
           (incorporated by reference to Exhibit 4.2 contained in
           Registrant's Current Report on Form 8-K dated December 27,
           1995 as filed with the Commission on or about January 24,
           1996)

 4.6       Warrant to Purchase Common Stock of Registrant issued to
           Swartz Investments, Inc. (Incorporated by reference to
           Exhibit 4.3 contained in Registrant's Current Report on
           Form 8-K dated December 27, 1995 as filed with the
           Commission on or about January 24, 1996

10.5       Research and Development Contract, dated December 31, 1981 and
           amended March 1, 1982, between Registrant and Celltech Partners I            **

10.6       Option Agreement, dated December 31, 1981 and amended March 1, 1982,
           between Registrant and Celltech Partners I                                   **

10.12      Secrecy Agreement, dated April 24, 1981, and proposed License
           Agreement by and between Registrant and the Regents of the
           University of California                                                     **

10.16      Agreement to purchase Registrant's Stock dated June 16, 1986,
           between Registrant and American Cyanamid Company                             ***

10.17      Agreement to purchase 400,000 shares of Registrant's Common Stock
           dated April 29, 1988 between Registrant and American Cyanamid Company        ****

10.22      1982 Stock Option Plan                                                       *****

10.23      Incentive Stock Option, Nonqualified Stock Option and Restricted
           Stock Purchase Plan - 1986                                                   ******

10.24      Cancer Biologics Incorporated Incentive Stock Option, Nonqualified
           Stock Option and Restricted Stock Purchase Plan - 1987                       *

10.25      Amendment to 1982 Stock Option Plan dated March 1, 1988                      *

10.26      Amendment to 1986 Stock Option Plan dated March 1, 1988                      *

10.27      License Agreement dated May 12, 1986 between Registrant and Cancer
</TABLE>


                                       26

<PAGE>   27

<TABLE>
<S>       <C>                                                                           <C>
          Biologics Incorporated                                                        *

10.28     Lease Agreement dated February 1, 1988 between Registrant and
          McKellar Development of La Jolla                                              *

10.29     Stock Purchase Agreement dated November 1987, between Registrant
          and Cancer Biologics Incorporated                                             *

10.30     Lease Agreement dated September 10, 1991 between Registrant and
          McKellar Development of La Jolla

10.31     Agreement dated February 5, 1996, between Cambridge Antibody
          Technology, Ltd. and Registrant (Incorporated by reference to
          Exhibit 10.1 contained in Registrant's Current Report on Form
          8-K dated February 5, 1996, as filed with the Commission on or
          about February 8, 1996)

10.32     Distribution Agreement dated February 29, 1996, between
          Biotechnology Development, Ltd. and Registrant (Incorporated
          by reference to Exhibit 10.1 contained in Registrant's Current
          Report on Form 8-K dated February 29, 1996, as filed with the
          Commission on or about March 7, 1996)

10.33     Option Agreement dated February 29, 1996, by and between
          Biotechnology Development, Ltd. and Registrant (Incorporated
          by reference to Exhibit 10.2 contained in Registrant's Current
          Report on Form 8-K dated February 29, 1996, as filed with the
          Commission on or about March 7, 1996)

10.34     Purchase Agreement for Real Property and Escrow Instructions
          dated as of March 22, 1996, by and between TR Koll Tustin Tech
          Corp. and Registrant (Incorporated by reference to Exhibit
          10.1 contained in Registrant's Current Report on Form 8-K
          dated March 25, 1996, as filed with the Commission on or about
          April 5, 1996)

11.1      Computation of Net Income (Loss) Per Share                                    51

22        Subsidiaries of the Registrant                                                None

23        Consent of Deloitte & Touche LLP                                              52
</TABLE>


(b)      Reports on Form 8-K:

         (i)      Current Report on Form 8-K as filed with the Commission on
                  January 24, 1996, reporting the issuance and sale of the
                  Series B Convertible Preferred Stock

         (ii)     Current Report on Form 8-K as filed with the Commission on
                  February 8, 1996, reporting the agreement with Cambridge
                  Antibody Technology, Ltd.

                                       27

<PAGE>   28
         (iii)    Current Report on Form 8-K as filed with the Commission on
                  March 7, 1996, reporting the Distribution Agreement with
                  Biotechnology Development, Ltd.

         (iv)     Current Report on Form 8-K as filed with the Commission on
                  April 5, 1996, reporting the agreement to purchase the
                  Company's facility

*                 Incorporated by reference to the exhibit of the same number
                  contained in Registrant's Annual Report on Form 10-K for the
                  year ended April 30, 1988.

**                Incorporated by reference to the exhibit of the same number
                  contained in Registrant's Registration Statement on Form S-18
                  (File No. 2-78552).

***               Incorporated by reference to the exhibit of the same number
                  contained in Registrant's Annual Report on Form 10-K for the
                  year ended April 30, 1986.

****              Incorporated by reference to the exhibit contained in
                  Registrant's Current Report on Form 8-K dated April 29, 1988.

*****             Incorporated by reference to the exhibit contained in
                  Registrant's Registration Statement on Form S-8 filed August
                  4, 1983 (File No. 2-85628).

******            Incorporated by reference to the exhibit contained in
                  Registrant's Registration Statement on Form S-8 dated June 16,
                  1987 (File No. 33-15102).

                                       28

<PAGE>   29

                                   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.

                                        TECHNICLONE INTERNATIONAL CORPORATION

Dated:  July 25, 1996                    By:  /ss/ Lon H. Stone
                                         ----------------------------------
                                              Lon H. Stone, President

         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.


<TABLE>
<CAPTION>
Signature                                   Capacity                             Date
- ---------                                   --------                             ----
<S>                                        <C>                               <C> 
/ss/ Lon H. Stone                          Chairman of the Board,            July 25, 1996
- ------------------------                   President, Chief Executive
Lon H. Stone                               Officer and Director       
                                            

 /ss/William V. Moding                      Vice President-Finance,          July 25, 1996
- ------------------------                    Chief Financial Officer,
William V. Moding                           Secretary and Director  
                                            
 /ss/Rudolph C. Shepard                     Assistant Secretary              July 25, 1996
- ------------------------                    and Director
Rudolph C. Shepard                          

 /ss/ Clive R. Taylor, M.D.                 Director                         July 25, 1996
- ---------------------------
Clive R. Taylor, M.D.,
Ph.D.

 /ss/ Edward Joseph Legere II               Director                         July 25, 1996
- ------------------------------
Edward Joseph Legere II

                                            Director                         July __, 1996
- ------------------------------
Carmelo J. Santoro
</TABLE>


                                       29

<PAGE>   30


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Techniclone International Corporation:


We have audited the accompanying balance sheets of Techniclone International
Corporation (the Company) as of April 30, 1996 and 1995, and the related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended April 30, 1996.  Our audits also included
the financial statement schedule listed in the index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Company's management.  Our responsibility is to express an opinion on the listed
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Techniclone International Corporation as of
April 30, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended April 30, 1996 in conformity
with generally accepted accounting principles.  Also, in our opinion, such
financial statement schedule, when considered in relation to the basis financial
statements taken as a whole presents fairly, in all material respects, the
information set forth therein.


/s/ DELOITTE & TOUCHE LLP

Costa Mesa, California
June 21, 1996

<PAGE>   31

TECHNICLONE INTERNATIONAL CORPORATION

BALANCE SHEETS
AS OF APRIL 30,1996 AND 1995
- -------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                 1996            1995
ASSETS
<S>                                                          <C>               <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 3)                           $ 4,179,313       $   35,642
Short-term investments (Note 3)                                3,898,888
Accounts receivable, net (Note 5)                                 95,146            2,378
Inventories, net (Note 3)                                         93,921          226,457
Prepaid expenses and other current assets                         17,294
                                                             -----------       ----------
  Total current assets                                         8,284,562          264,477

PROPERTY (Notes 3 and 4):
Land                                                             525,255
Building and improvements                                      1,298,416
Laboratory equipment                                           1,139,663          985,026
Furniture and fixtures                                            78,155           30,844
                                                             -----------       ----------

                                                               3,041,489        1,015,870
Less accumulated depreciation and amortization                  (722,436)        (583,328)
                                                             ------------      -----------

  Property, net                                                2,319,053          432,542

OTHER ASSETS (Note 3):
Patents, net                                                     166,585          154,081
Other                                                              5,557            5,557
                                                             -----------       ----------

  Total other assets                                             172,142          159,638
                                                             -----------       ----------
                                                             $10,775,757       $  856,657
                                                             ===========       ==========
</TABLE>


See independent auditors' report and
notes to financial statements.





                                      F-2

<PAGE>   32

TECHNICLONE INTERNATIONAL CORPORATION

BALANCE SHEETS
AS OF APRIL 30, 1996 AND 1995 (CONTINUED)
- -------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                     1996            1995
<S>                                                                              <C>           <C>
LIABILITIES AND STOCKHOLDERS'DEFICIT


CURRENT LIABILITIES:
Accounts payable                                                                 $    230,144    $    137,878
Accrued legal and accounting fees (Note 10)                                            99,495         334,741
Accrued payroll and related costs                                                      88,791         260,301
Accrued license termination fee (Note 6)                                              100,000         100,000
Accrued royalties (Note 6)                                                             61,667          75,168
Accrued interest (Note 4)                                                                              90,910
Reserve for contract losses (Note 11)                                                 173,563         132,071
Current portion of long-term debt (Note 4)                                             32,968
Other current liabilities (Note 5)                                                     37,420          67,529
                                                                                 ------------    ------------
  Total current liabilities                                                           824,048       1,198,598

LONG-TERM DEBT (Note 4)                                                               987,032

LONG-TERM DEBT TO RELATED PARTY (Note 4)                                                              258,500

COMMITMENTS (Notes 5 and 6)

STOCKHOLDERS'EQUITY (DEFICIT) (Notes 2,4,6,7 and 8):
Preferred stock - $1 par value; authorized 100,000 shares:
  Class A convertible preferred stock, shares outstanding -
    1996, no shares; 1995, 4,225 shares
    (liquidation preference of $253,500 - 1995)                                                         4,225
  Class B convertible preferred stock, shares outstanding -
    1996, 6,800 shares; 1995, no shares
    (liquidation preference of $7,027,288 - 1996)                                       6,800
Common stock - no par value; authorized 30,000,000 shares;
  outstanding - 1996, 20,048,014 shares; 1995, 16,768,909 shares                   21,133,968      17,730,648
Additional paid-in capital                                                          6,061,171         227,246
Accumulated deficit                                                               (17,760,680)    (18,085,978)
                                                                                 ------------    ------------ 
                                                                                    9,441,259        (123,859)
Less notes receivable from sale of common stock                                      (476,582)       (476,582)
                                                                                 ------------    ------------ 
  Net stockholders' equity (deficit)                                                8,964,677        (600,441)
                                                                                 ------------    ------------ 
                                                                                 $ 10,775,757    $    856,657
                                                                                 ============    ============ 
</TABLE>




See independent auditors' report and
notes to financial statements.





                                      F-3

<PAGE>   33

TECHNICLONE INTERNATIONAL CORPORATION

STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1996
- -------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                   1996          1995             1994
<S>                                                             <C>          <C>             <C>
REVENUES (Notes 3 and 6):
Net product sales                                              $    2,580    $      -        $    4,400
Licensing agreements                                            3,002,244         7,265          56,375
Interest income                                                   138,499           126           8,591
                                                               ----------    ----------      ----------
  Total revenues                                                3,143,323         7,391          69,366

COSTS AND EXPENSES (Notes 2, 3, 4, 5, 6,
  8, 10 and 11):
Cost of sales                                                       2,580                         1,680
Research and development                                        1,679,558     1,225,072       1,315,898
General and administrative:
  Unrelated entities                                              947,816       547,133         914,142
  Affiliates                                                      170,659       137,326         212,594
Interest (primarily to related parties)                            17,412        27,833          30,467
Charges related to merger                                                     4,849,591
Contract losses                                                                 132,071
                                                               ----------   -----------     -----------
  Total costs and expenses                                      2,818,025     6,919,026       2,474,781
                                                               ----------   -----------     -----------

NET INCOME (LOSS)                                              $  325,298   $(6,911,635)    $(2,405,415)
                                                               ==========   ===========     ===========
NET INCOME (LOSS) PER SHARE -
  PRIMARY (Note 3)                                                  $0.02        ($0.44)         ($0.18)
                                                                    =====         =====           =====
NET INCOME (LOSS) PER SHARE -
  FULLY DILUTED (Note 3)                                            $0.02        ($0.44)         ($0.18)
                                                                    =====         =====           =====
</TABLE>




See independent auditors' report and
notes to financial statements.





                                      F-4

<PAGE>   34


TECHNICLONE INTERNATIONAL CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996
- -------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                                             NOTES         NET
                                      PREFERRED STOCK       COMMON STOCK          ADDITIONAL               RECEIVABLE  STOCKHOLDERS'
                                     ----------------   ----------------------     PAID-IN   ACCUMULATED  FROM SALE OF    EQUITY
                                     SHARES   AMOUNT      SHARES       AMOUNT      CAPITAL     DEFICIT    COMMON STOCK   (DEFICIT)
<S>                                  <C>      <C>       <C>         <C>            <C>       <C>            <C>           <C>
BALANCES, May 1, 1993                10,000   $10,000   12,759,393  $ 8,785,520    $532,789  $ (8,768,928)  $(245,000)  $   314,381

Common stock issued for cash,            
  net of issuance costs of $38,696                      1,403,232    1,734,129
Issuance of compensatory options                                                  
  (Note 8)                                                             296,000
Net loss                                                                                       (2,405,415)               (2,405,415)
                                    -------   -------   ----------  -----------    --------  ------------   ---------   -----------
BALANCES, April 30,1994              10,000    10,000   14,162,625   10,815,649     532,789   (11,174,343)   (245,000)      (60,905)

Common stock issued for cash,
  net of issuance costs of $15,132                       1,221,978    1,499,118                                           1,499,118
Common stock issued upon
  conversion of preferred stock      (5,775)   (5,775)     288,750      311,318    (305,543)
Common stock issued in exchange
  for services                                              10,000       12,500                                              12,500
Common stock issued upon exercise
  of options                                                 6,223       10,890                                              10,890
Common stock and compensatory
  options issued upon merger of
  subsidiary(Note 2)                                     1,079,333    5,081,173                              (231,582)    4,849,591
Net loss                                                                                       (6,911,635)               (6,911,635)
                                    -------   -------   ----------  -----------    --------  ------------   ---------   -----------
BALANCES,April 30,1995                4,225     4,225   16,768,909   17,730,648     227,246   (18,085,978)   (476,582)     (600,441)
</TABLE>




See independent auditors' report and
notes to financial statements.


                                      F-5

<PAGE>   35
TECHNICLONE INTERNATIONAL CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1996 (CONTINUED)
- -------------------------------------------------------------------------------
               

<TABLE>
<CAPTION>
                                                                                                        NOTES             NET   
                            PREFERRED STOCK        COMMON STOCK         ADDITIONAL                   RECEIVABLE     STOCKHOLDER'S  
                           -----------------     -------------------      PAID-IN      ACCUMULATED   FROM SALE OF       EQUITY
                           SHARES    AMOUNT      SHARES       AMOUNT      CAPITAL        DEFICIT     COMMON STOCK      (DEFICIT)
<S>                        <C>                  <C>                      <C>          <C>            <C>            <C>
Common stock issued for 
 cash                                 $         1,770,396  $ 1,289,352   $    -       $     -        $     -        $1,289,352 
Class B preferred stock 
 issued for cash, net 
 of issuance costs of
 $1,062,456                    8,200   8,200                              7,129,344                                  7,137,544
Common stock issued upon 
 conversion of Class A 
 preferred stock              (4,225) (4,225)     338,000      227,760     (223,535) 
Common stock issued upon
 conversion of Class B 
 preferred stock              (1,400) (1,400)     469,144    1,218,605   (1,217,205) 
Common stock issued upon 
 conversion of note payable
 and accrued interest to 
 related party (Note 4)                           235,000      258,500      104,697                                    363,197
Common stock issued upon                    
 conversion of accrued 
 expenses and other current
 liabilities                                      183,333      134,000                                                 134,000
Common stock issued upon 
 exercise of stock options                        226,132      218,003                                                 218,003
Common stock issued upon 
 exercise of stock options 
 in exchange for services                          57,100       57,100                                                  57,100
Proceeds from sale of stock 
 purchase warrants, net                                                      40,624                                     40,624
Net income                                                                                 325,298                     325,298
                                -----  ------  ----------  -----------   ----------   ------------   ---------      ----------
BALANCES, April 30, 1996        6,800  $6,800  20,048,014  $21,133,968   $6,061,171   $(17,760,680)  $(476,582)     $8,964,677 
                                -----  ------  ----------  -----------   ----------   ------------   ---------      ----------
</TABLE>
   



                      See independent auditors' report and
                         notes to financial statements.


                                        


                                      F-6
           

<PAGE>   36

TECHNICLONE INTERNATIONAL CORPORATION

STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996
- -------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                            1996             1995           1994
<S>                                                                     <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                       $   325,298      $(6,911,635)    $(2,405,415)
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation and amortization                                             169,162          151,368         184,194
  Charges related to merger                                                                4,849,591
  Common stock issued for services                                           57,100           12,500
  Issuance of compensatory options                                                                           296,000
  Conversion of interest expense into shares of
    common stock                                                             13,787
  Increase in reserves                                                                       230,793
  Changes in operating assets and liabilities:
    Accounts receivable                                                     (92,768)          (2,378)          2,400
    Inventories                                                             132,536         (236,499)        (57,854)
    Prepaid expenses and other current assets                               (17,294)
    Deposits                                                                                  33,600         (33,600)
    Accounts payable and accrued legal and
      accounting fees                                                      (142,980)         171,980          84,543
    Accrued license termination fee                                                                          100,000
    Other accrued expenses and current liabilities                          (39,628)         244,106          87,119
                                                                        -----------      -----------     -----------
      Net cash provided by (used in) operating activities                   405,213       (1,456,574)     (1,742,613)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments                                       (3,898,888)
Property acquisitions                                                    (2,025,619)         (39,262)        (55,357)
Increase in other assets                                                    (42,558)          (7,632)        (52,690)
                                                                        -----------      -----------     -----------

      Net cash used in investing activities                              (5,967,065)         (46,894)       (108,047)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock                                 7,137,544
Proceeds from issuance of common stock                                    1,547,979        1,510,008       1,734,129
Proceeds from issuance of long-term debt                                  1,020,000
                                                                        -----------      -----------     -----------

      Net cash provided by financing activities                           9,705,523        1,510,008       1,734,129
                                                                        -----------      -----------     -----------
</TABLE>




See independent auditors' report and
notes to financial statements.





                                      F-7

<PAGE>   37

TECHNICLONE INTERNATIONAL CORPORATION

STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- --------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                    1996               1995              1994
 <S>                                                             <C>               <C>                <C>
NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                              $4,143,671        $    6,540         $ (116,531)

CASH AND CASH EQUIVALENTS,
   beginning of year                                                 35,642            29,102            145,633
                                                                 ----------        ----------         ----------

CASH AND CASH EQUIVALENTS,
   end of year                                                   $4,179,313        $   35,642         $   29,102
                                                                 ==========        ==========         ==========

SUPPLEMENTAL INFORMATION:
Merger of subsidiary (Note 2):
   Common stock issued                                                             $2,504,053
   Compensatory options issued                                                      2,577,120
   Notes receivable assumed                                                          (231,582)
                                                                                   ----------       

   Charges related to merger                                                       $4,849,591
                                                                                   ==========

Interest paid                                                    $    3,625        $    6,998         $    9,787
Income taxes paid                                                $      800        $    1,600         $    1,600
</TABLE>


For supplemental information relating to conversion of preferred stock into
common stock, common stock issued in exchange for services, common stock issued
upon merger and other noncash transactions, see the statements of stockholders'
equity (deficit) and Notes 2, 7, 8 and 11.


<TABLE>
<S>                                                               <C>              <C>                <C>
NONCASH INVESTING AND FINANCING
ACTIVITIES:
  Common stock issued upon conversion of accrued
  expenses and other current liabilities                          $ 134,000        $  -               $  -
  Common stock issued upon conversion of note
  payable and forgiveness of accrued interest to
  related party                                                   $ 363,197        $  -               $  -
</TABLE>



See independent auditors' report and
notes to financial statements.


                                      F-8



<PAGE>   38
TECHNICLONE INTERNATIONAL CORPORATION


NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1996
- -----------------------------------------------------------------------------

1.       GENERAL AND NATURE OF OPERATIONS

         Nature of Operations - Techniclone International Corporation (the
         Company) was incorporated on June 3, 1981 under the laws of the State
         of California.  The Company is engaged in research and development of
         new technologies used in the production of monoclonal antibodies and
         the production of specific antibodies with prospective research,
         diagnostic and therapeutic applications.  The Company's activities are
         primarily focused on innovative drug delivery systems that permit the
         destruction or treatment of cancerous tumors.

         Going Concern - The accompanying financial statements have been
         prepared on a going concern basis, which contemplates the realization
         of assets and the satisfaction of liabilities in the normal course of
         business.  As shown in the financial statements, the Company suffered
         losses in fiscal 1995 and 1994 and has an accumulated deficit at April
         30, 1996.  Management has restructured certain of its license
         agreements to provide it with greater control over the development and
         clinical trials of its antibodies.  If the Company is able to achieve
         certain goals in relation to these antibodies, it will receive certain
         additional financing pursuant to the terms of an existing license
         agreement (Note 6).  Historically, the Company has relied on third
         party and investor funds to fund its operations and clinical trials,
         and management expects to receive additional funds in the future.
         There can be no assurances that this funding will be received.  If the
         Company does not receive additional funding, it will be forced to
         scale back operations and it could have a material adverse effect on
         the Company.  The Company's continuation as a going concern is
         dependent on its ability to generate sufficient cash flow to meet its
         obligations on a timely basis, to obtain additional financing as may
         be required and, ultimately, to attain successful operations.  During
         fiscal 1996, the Company received significant funding through the
         issuance of preferred stock (Note 7) and a foreign distribution
         agreement (Note 6) which has resulted in significant available cash as
         of April 30, 1996.  Management believes that the cash and cash
         equivalents and short-term investments aggregating approximately
         $8,078,000 as of April 30, 1996 are sufficient to support the
         Company's estimated operations and other cash needs through at least
         April 30, 1997.

2.       MERGER

         In June 1994, the Company's stockholders approved a merger of the
         Company's 62%-owned subsidiary, Cancer Biologics Incorporated (CBI),
         into the Company.  Pursuant to the agreement and plan of merger dated
         January 18, 1994, each share of CBI common stock, no par value, was
         converted into the right to receive one share of the Company's common
         stock, and each CBI option was converted into the right to acquire
         shares of the Company's common stock with the same terms and
         conditions as specified in the CBI option agreement.  At the merger
         date, July 26, 1994, 1,079,333 shares of CBI's common stock and
         options to purchase 1,416,000 shares of CBI's common stock were
         outstanding to stockholders other than the Company, of which 676,000
         shares and options to purchase 739,000 shares were held by officers
         and directors of the Company.  As a result of the merger, the


                                      F-9

<PAGE>   39
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- -------------------------------------------------------------------------------

         Company incurred nonrecurring charges to operations of $4,849,591, of
         which $2,272,471 relates to the value of the stock issued in excess of
         notes receivable assumed, and $2,577,120 relates to the excess of the
         fair market value over the exercise price of the CBI options at the
         effective date of the merger (measurement date).  The Company
         recognized this charge to operations due to the research and
         development nature of CBI and as CBI had no tangible assets at the
         date of the merger.


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Cash Equivalents - The Company considers all highly-liquid, short-term
         investments with an initial maturity of three months or less to be
         cash equivalents.

         Short-term Investments - Short-term investments represent six-month
         term treasury bills which expire at various dates through July 1996,
         are classified as held-to-maturity, and are stated at cost, which
         approximates fair value.

         Inventories - Inventories are stated at the lower of first-in,
         first-out cost or market and consist of the following at April 30:


<TABLE>
<CAPTION>
                                                         1996          1995
          <S>                                         <C>           <C>
          Raw materials                               $ 20,960      $ 11,300
          Laboratory supplies                           19,598        16,510
          Finished goods                                79,885       297,369
          Reserves                                     (26,522)      (98,722)
                                                      --------      --------
                                                      $ 93,921      $226,457
                                                      ========      ======== 
</TABLE>


          Property - Property is recorded at cost.  Depreciation and
          amortization are computed using the straight-line method over the
          estimated useful lives of the related asset.  Generally, the estimated
          useful lives are 8 to 25 years for buildings and improvements and five
          years for laboratory equipment and furniture and fixtures.

          Other Assets - Other assets primarily consist of patent costs which
          are amortized over the lesser of the estimated useful life of the
          patent or the estimated useful life of the related product.  Patent
          costs totaled $166,585 and $154,081, net of related accumulated
          amortization of $140,318 and $110,264, at April 30, 1996 and 1995,
          respectively.  During fiscal 1994, the Company changed the
          amortization period of the patents from 17 years to ten years, which
          resulted in additional amortization expense of $34,620 during the year
          ended April 30, 1994.

                                      F-10



<PAGE>   40
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- -------------------------------------------------------------------------------

         Revenue Recognition - Product revenues are recognized upon shipment to
         customers.  Revenues related to licensing agreements (Note 6) are
         recognized when cash has been received and all obligations of the
         Company have been met, which is generally upon the transfer of the
         technology and license to the licensee.

         Net Income (Loss) per Share - Net income (loss) per share is
         calculated by dividing net income (loss) by the average number of
         shares of common stock and dilutive common stock equivalents
         outstanding each year, totaling 21,382,524 in fiscal 1996, 15,794,811
         in fiscal 1995 and 13,653,829 in fiscal 1994.  Fully diluted net
         income (loss) per share reflects the maximum dilution and is based on
         21,661,605 shares in fiscal 1996.  Shares issuable upon the exercise
         of common stock warrants and options and conversion of outstanding
         preferred stock have been included in the per share computations for
         fiscal 1996 and are excluded from fiscal 1995 and 1994 per share
         calculation because their effect is antidilutive.

         Income Taxes - The Company accounts for income taxes in accordance
         with the standards specified in Statement of Financial Accounting
         Standards (SFAS) No. 109, Accounting for Income Taxes.

         Use of Estimates - The preparation of financial statements in
         conformity with generally accepted accounting principles necessarily
         requires management to make estimates and assumptions that affect the
         reported amounts of assets and liabilities and disclosure of
         contingent assets and liabilities at the date of the financial
         statements and the reported amounts of revenues and expenses during
         the reported periods.  Actual results could differ from these
         estimates.

         Reclassifications - Certain amounts as previously reported have been
         reclassified to conform to the fiscal 1996 presentation.

4.       LONG-TERM DEBT

         During January 1996, long-term debt to a related party and accrued
         interest of $258,500 and $104,697, respectively, were converted into
         235,000 shares of common stock at the election of the related party
         pursuant to the terms of the convertible note dated December 31, 1991.
         Interest expense related to this convertible debt amounted to $13,787
         for the year ended April 30, 1996 and $20,680 for each of the
         two years ended April 30, 1995.

         On April 30, 1996, the Company entered into a $1,020,000 note
         agreement with a bank and purchased its principal operating facility
         in Tustin, California.  The note payable is collateralized by the
         property, bears interest at LIBOR, plus 4.25% (9.5% at April 30, 1996)
         with a minimum rate of 9.5% and a maximum rate of 14.5%, and matures
         in April 2011. Principal and interest payments are due monthly.


                                      F-11

<PAGE>   41
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- ------------------------------------------------------------------------------

         Minimum principal payments scheduled on the Company's long-term debt as
         of April 30, 1996 are as follows:


<TABLE>
         <S>                                                    <C>
         Year ending April 30:     
           1997                                                 $   32,968
           1998                                                     36,253
           1999                                                     39,866
           2000                                                     43,606
           2001                                                     48,183
           Thereafter                                              819,124
                                                                ----------

                                                                $1,020,000
                                                                ==========      
</TABLE>


         The Company's long-term debt approximates fair value as the debt was
         recently negotiated and represents the borrowing rates currently
         available to the Company.


5.       COMMITMENTS

         On April 30, 1996, the Company terminated the operating lease on its
         principal facility in conjunction with the purchase of the property
         (Note 4).  No future payments or obligations are due under the lease
         agreement.  Rent expense amounted to approximately $167,000, $180,000
         and $174,000 for each of the three years in the period ended April 30,
         1996, respectively.

         During fiscal 1994 and 1996, the Company entered into separate
         agreements to advance funds for an aggregate of $117,000 and $175,000,
         respectively, to cover certain expenses of an unrelated entity
         providing radio-labeling services to the Company.  The Company
         determined that advanced amounts under the 1994 agreement of
         approximately $117,000 would no longer be recoverable and expensed all
         amounts during fiscal 1995.  During fiscal 1996, the Company advanced
         the maximum under the 1996 agreement and recorded a $175,000 note
         receivable, which is to be repaid based on potential future revenues
         of the Company's product or as terms are modified in accordance with
         the agreement.  Due to uncertain future collection, the Company
         recorded a full valuation reserve on the related note as of April 30,
         1996.  Additionally, under a separate agreement, an unrelated entity
         advanced the Company $20,000 for each of the two years ended April 30,
         1995, which will be repaid through inventory purchases from the
         Company.  At April 30, 1996 and 1995, the advanced balance of $37,420
         and $40,000, respectively, have been included in other current
         liabilities in the accompanying balance sheets.


                                      F-12

<PAGE>   42


TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- --------------------------------------------------------------------------------

         During fiscal 1995, the Company entered into agreements with certain
         officers, directors and employees of the Company, which expire at
         various dates through September 1999.  The total future commitment
         under these agreements amounts to $632,000.  One of the agreements
         entitles the employee to receive 2% of net sales of certain products.
         There were no sales of these products during fiscal 1995 or 1996.

         On February 5, 1996, the Company entered into a joint venture
         agreement with an unrelated entity to develop and market a new class
         of products for cancer therapy and diagnosis based upon the unrelated
         party's patented technology for producing fully human monoclonal
         antibodies and the Company's Tumor Necrosis Technologies.  The
         agreement provides that equity in the joint venture and costs
         associated with the development of the product would be shared
         equally.  The activities of the joint venture were not considered
         significant for the year ended April 30, 1996.  The Company would
         retain exclusive world-wide manufacturing rights under the agreement.


6.       LICENSE, RESEARCH AND DEVELOPMENT AGREEMENTS

         During October 1992, the Company entered into an agreement to
         terminate the licensing rights and certain other rights (the
         Termination Agreement) associated with a June 1986 agreement with a
         stockholder.  The Termination Agreement provides for (1) $100,000 on
         the date that is the earlier of the commencement of the first Phase
         Three clinical trials (as defined) or a specified number of days after
         the commencement of the first Phase Two clinical trials (as defined)
         for the licensed product, and (2) $200,000 upon the issuance of a
         license or other approval for the initial marketing in the United
         States of such product.  Such obligations are collateralized by
         certain licensed patents.  Additionally, the Company must pay net
         royalties equal to 4% of the sales revenue related to such licensed
         product, not to exceed $700,000 and 25% of any royalties received
         related to such licensed product.  The maximum payments due under the
         Termination Agreement are $1,100,000 of which $100,000 has been
         paid through April 30, 1996.  The Company accrued $100,000 during
         fiscal 1994 when the Company completed essentially all of the
         requirements for commencement of Phase Three clinical trials.  This
         amount remains outstanding as of April 30, 1996.  Upon achieving each
         of the above criteria, additional liabilities and expenses will be
         incurred.

         Research and development expenses under the June 1986 and a separate
         April 1988 agreement, for which all obligations have been fulfilled,
         with a stockholder were $215,000 for the year ended April 30, 1994.
         There were no expenses related to these agreements for the two-year
         period ended April 30, 1996.

         During October 1992, the Company entered into an agreement with an
         unrelated entity which provides the entity with exclusive licensing
         rights to certain patents and products owned by the Company in
         exchange for: (1) $50,000 at a specified meeting with the United
         States Food and Drug Administration (FDA), (2) $100,000 upon the
         first submission to the European regulatory agency to


                                      F-13

<PAGE>   43
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- -------------------------------------------------------------------------------


     sell the product in certain countries or six months from the effective date
     of the commencement of Phase Three clinical trials, whichever is sooner,
     (3) $200,000 upon approval of the first European submission, (4) $500,000
     on the submission to the FDA of a product license application, and (5)
     $100,000 per year as a research and development grant after completion of
     the Phase Three clinical trials (as defined), of which 50% of such payment
     is specified for certain research programs.  Additionally, the Company is
     to receive 10% royalties from any product sales related to this agreement
     which will be applied to offset any amounts due under stipulation (4)
     above. Under the agreement, the Company received $50,000 during the year
     ended April 30, 1994, which has been recognized in licensing revenues in
     the accompanying financial statements. During fiscal 1995 and 1996, no
     licensing revenue was earned related to this agreement.

     The Company has agreements which provide the licensees with the right to
     use certain technologies and to manufacture and market products derived
     from these technologies in specified geographic areas (as defined), on a
     non-exclusive and semi-exclusive basis.  The Company recognized revenue of
     $6,375, $7,265 and $2,244 related to these agreements during each of the
     three years in the period ended April 30, 1996, respectively.

     In September 1989, the Company entered into an option and license agreement
     with a university under which the Company was granted the exclusive right
     to conduct initial marketing, patent and other studies.  During fiscal
     1993, the Company was granted the exclusive worldwide license to use the
     related technology in exchange for the payment of a license fee and royalty
     terms set forth in the agreement.  During the three years ended April 30,
     1996, the Company incurred royalty expenses of $64,000, $43,000 and
     $80,000, respectively, under the agreement, of which $67,000 and $47,000
     was unpaid and accrued at April 30, 1995 and 1996, respectively.  Future
     minimum royalties under this agreement are the lesser of $80,000 per year
     or 6% of net sales.

     The Company has certain license agreements which require minimum royalties
     of the lesser of $6,500 per year or 6% of net sales.  All amounts have been
     paid or accrued related to these agreements.

     The Company has certain license agreements which require minimum royalties
     of 6% of net sales.  No products related to these agreements have been sold
     during the three years in the period ended April 30, 1996; therefore, no
     amounts have been paid or accrued related to these agreements.

     In February 1996, the Company entered into a foreign distribution agreement
     with a director and an entity with which the director is affiliated.  The
     agreement appoints the affiliated entity as the Company's exclusive
     distributor to sell one of the Company's products, if approved, to certain
     foreign countries if an unrelated entity forfeits or relinquishes its
     outstanding distribution rights, as defined in a separate agreement.  Under
     the agreement, the Company received $3,000,000 for the year ended April 30,
     1996, which has been recognized as licensing revenue in the accompanying
     financial statements.  The agreement has an initial term of fifteen years,
     through February 2011, with automatic annual renewals thereafter unless
     terminated pursuant to the terms of the agreement.


                                      F-14


<PAGE>   44
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- -------------------------------------------------------------------------------


         Additionally, the Company and affiliated entity entered into an
         agreement which provides the Company, at its sole discretion, an
         option to repurchase the distribution rights from the affiliated
         entity through August 1998.  Management has not exercised its option
         as of April 30, 1996 nor does it currently intend to exercise the
         option.  The repurchase price includes a combination of cash, stock
         options and royalty payments, the amount of which depends on the date
         of repurchase, if elected by the Company.

7.       STOCKHOLDERS' EQUITY (DEFICIT)

         During December 1995, the Company issued 8,200 shares of non-voting
         Class B convertible preferred stock at $1,000 per share, for cash
         proceeds of $7,137,544, net of issuance costs of $1,062,456.  The
         Class B preferred stockholders are entitled to a liquidation
         preference of $1,000 per share of Class B preferred stock and an
         amount equal to 10% of the original Class B preferred stock issue
         price per annum since the issuance date.  The preferred stockholders
         are not entitled to any cash dividends.

         Each preferred share may be converted, at the option of the Class B
         preferred stockholder, into that number of common shares calculated
         by: (a) taking ten percent (10%) of one thousand dollars ($ 1,000)
         pro-rated for the number of days between the closing date and the
         conversion date plus (b) one thousand dollars ($1,000), (c) divided by
         the conversion price ($3.06875 at April 30, 1996), as defined in the
         agreement.  During fiscal 1996, 1,400 shares of Class B preferred
         stock were converted into 469,144 common shares.  All outstanding
         Class B preferred stock will automatically be converted into shares of
         the Company's common stock on December 15, 1998.

         The Company has the right to redeem, in whole or in part, the Class B
         preferred stock upon receipt of a notice of conversion from the
         preferred stockholder.  Additionally, the Company has the right to
         redeem, at its discretion, any or all of the Class B preferred stock
         as long as the initial redemption is equal to or exceeds $1,500,000.
         The redemption price at the Company's election ranges from 130% to
         105% of the stated value, depending on the date of redemption notice.

         The Class A preferred stockholders were entitled to a liquidation
         preference of $60 per share of Class preferred stock and any declared
         but unpaid dividends.  Class A preferred stockholders could convert, at
         their option, each Class A preferred stock share into 80 fully-paid and
         nonassessable shares of common stock.  As a result of certain common
         stock transactions, the conversion ratio had increased from 50 shares
         of common stock for each Class A preferred stock at April 30, 1994 to
         80 shares thereafter.  During fiscal 1995, 5,775 shares of Class A
         preferred stock were converted into 288,750 shares of common stock,
         pursuant to the election of the Class A preferred stockholders. In
         connection with the commencement of the Phase Three clinical trials,
         the remaining 4,225 shares of Class A preferred stock were
         automatically converted into 338,000 shares of common stock during
         fiscal 1996.

         As a result of the Company's merger (Note 2), the Company issued
         1,079,333 shares of its common stock to stockholders of CBI.


                                        F-15

<PAGE>   45
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- --------------------------------------------------------------------------------


     During August 1992 and February 1994, the Company entered into stock
     subscription agreements with a director of the Company and an entity with
     which the director is affiliated.  The parties agreed to purchase 2,000,000
     and 1,000,000 shares of the Company's stock at $1.20 and $1.50 per share,
     respectively, through May 1995.  During the years ended April 30, 1994,
     1995 and 1996, 1,342,485, 676,167 and 55,833 shares, respectively,
     aggregating $1,691,381, $1,014,250 and $83,750, respectively, were
     purchased under these agreements, net of issuance costs incurred in fiscal
     1994 of $38,696 which was paid through the issuance of 32,247 shares of the
     Company's common stock. There were no costs incurred related to the fiscal
     1995 and 1996 issuances.

     Notes receivable from sale of common stock are generally
     noninterest-bearing and are due April 30, 1997.

8.   STOCK OPTION PLANS AND STOCK WARRANTS

     In December 1982, January 1986 and June 1994, the Company adopted stock
     option plans providing for the granting of options to officers and key
     employees to purchase up to 1,700,000 shares of the Company's common stock
     at prices not less than the fair market value of the stock at the date of
     grant.  The options generally expire ten years after the date of grant.
     Option activity for each of the three years in the period ended April 30,
     1996 is described as follows:


<TABLE>
<CAPTION>
                                    1996                          1995                         1994
                        ----------------------------  -----------------------------  -----------------------------
                                           PRICE                          PRICE                         PRICE
                          SHARES         PER SHARE       SHARES         PER SHARE      SHARES          PER SHARE
         <S>               <C>          <C>              <C>          <C>              <C>          <C>
         BALANCE,
           beginning
           of year          545,000     ($.27 - $1.75)   563,667      ($.27 - $1.75)   410,000      ($.27 - $1.50)

         Granted            588,982     ($1.00 - $2.50)                                153,667      ($1.75)
         Exercised         (194,432)    ($1.00 - $2.50)   (6,223)     ($1.75)
         Canceled           (29,000)    ($1.75)          (12,444)     ($1.75)
                           --------                      -------                       -------

         BALANCE,
           end of year      910,550     ($.27 - $1.75)   545,000      ($.27 - $1.75)   563,667      ($.27 - $1.75)
                           ========                      =======                       =======
</TABLE>


     At April 30, 1996, options to purchase 512,850 shares of the Company's
     common stock were exercisable and options to purchase 68,795 shares were
     available for grant under these plans.  Included in outstanding options at
     April 30, 1996 are contingent options to purchase 160,000 shares of common
     stock which became exercisable in October 1993 when the Company attained
     equity financing of at least $3,000,000.  As the fair market value exceeded
     the exercise price at the time the contingency was resolved, the Company
     recognized $296,000 in compensation expense during the year ended April 30,


                                      F-16


<PAGE>   46
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- ------------------------------------------------------------------------------

     1994 related to these options.  Also included in outstanding options at
     April 30, 1996 are options to purchase 100,000 shares of common stock which
     become exercisable only if the Company experiences a change in ownership of
     greater than 50%.  These options generally expire ten years after the date
     of grant.

     Subject to stockholder approval, the Company has adopted an additional
     stock option plan providing for the granting of options to purchase up to
     2,500,000 shares of the Company's common stock.  As of April 30, 1996,
     options to purchase 1,795,000 were allocated for grant contingent upon
     stockholder approval.

     Pursuant to the Company's merger agreement (Note 2) on July 26, 1994,
     options to purchase 1,416,000 shares were outstanding at April 30, 1995
     under CBI's stock option plan which converted into the right to acquire
     shares of the Company's common stock with the same terms and conditions as
     specified in the CBI option agreement.  During fiscal 1996, 88,800 options
     were exercised at $.50 per share and 1,327,200 options were outstanding and
     exercisable at April 30, 1996.  These options expire at the earlier of
     termination of employment or January 2003. These agreements expire in
     January 2003 and are collateralized by the Company's common stock.

     During fiscal 1994, the Company granted options to an unrelated party for
     the purchase of 100,000 shares of the Company's common stock at $3.00 per
     share. These options were granted in conjunction with an agreement which
     provides for the unrelated party to seek and attain a certain level of
     equity financing for the Company.  The shares are exercisable upon
     attainment of this financing and expire five years from such date.

     During the year ended April 30, 1996, the Company granted warrants to
     purchase restricted shares of common stock to nonemployees pursuant to
     services provided.  As of April 30, 1996, warrants to purchase an aggregate
     397,310 shares had been granted with 393,310 shares exercisable at a price
     per share ranging from $3.00 to $5.30, exercisable generally through
     December 2000.  The Company estimated that the difference between the grant
     price and the fair value of the warrants on the dates of grant was $348,675
     based on the Black Scholes Model, which must be recognized over the
     exercise period.  Of this amount, $10,625 was recorded as compensation
     expense for the year ended April 30, 1996.  Future annual compensation
     expense ranging from approximately $34,000 to approximately $90,000 will be
     recognized through fiscal 2001. Certain of these warrants have piggyback
     registration rights through the expiration date.

     Recently Issued Accounting Standard - In October 1995, the Financial
     Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based
     Compensation, which requires adoption of the disclosure provisions and
     recognition and measurement provisions for nonemployee transactions for
     fiscal years beginning after December 15, 1995.  The new standard defines a
     fair value method of accounting for stock options and other equity
     instruments.  Under the fair value method, compensation cost is measured at
     the grant date based on the fair value of the award and is recognized over
     the service period, which is usually the vesting period.


                                      F-17

<PAGE>   47
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- --------------------------------------------------------------------------------

         Pursuant to the new standard, companies are encouraged, but not
         required, to adopt the fair value method of accounting for employee
         stock-based transactions.  Companies are also permitted to continue to
         account for such transactions under the Accounting Principles Board
         Opinion No. 25, Accounting for Stock Issued to Employees, but would be
         required to disclose in a note to the financial statements pro forma
         net income, and if presented, net income per share as if the Company
         had applied the new method of accounting.  The accounting requirements
         of the new method are effective for all employee awards granted after
         the beginning of the fiscal year of adoption.  Adoption of the new
         standard will have no effect on the Company's cash flows.

         The Company has determined that it will not change to the fair value
         method and will continue to use Accounting Principles Board Opinion No.
         25 for measurement of employee stock-based transactions.


9.       INCOME TAXES

         The Company accounts for income taxes under SFAS No. 109.  SFAS No. 109
         requires the recognition of deferred tax liabilities and assets for the
         future consequences of events that have been recognized in the
         Company's financial statements or tax returns.  In the event the future
         consequences of differences between financial reporting bases and tax
         bases of the Company's assets and liabilities result in a deferred tax
         asset, SFAS No. 109 requires an evaluation of the probability of being
         able to realize the future benefits indicated by such asset.  A
         valuation allowance is provided when it is more likely than not that
         some portion or all of the deferred tax asset will not be realized.

         As of April 30, 1996 and 1995, the Company had net deferred tax assets
         of approximately $5,211,000 and $5,350,000, respectively, all of which
         has been offset by a valuation allowance.

         The valuation allowance decreased $139,000 in fiscal 1996 and increased
         $815,000 and $4,503,000 in fiscal 1995 and 1994, respectively.


                                        F-18

<PAGE>   48


TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- -------------------------------------------------------------------------------


     Net deferred tax assets are comprised of the following:


<TABLE>
<CAPTION>

                                                                             1996             1995
            <S>                                                          <C>              <C>
            Net operating loss carryforwards                             $ 4,874,000      $ 4,943,000
            Noncash compensation                                             118,000          118,000
            General business and research and development credits             61,000           61,000
            Inventory reserve                                                 11,000           40,000
            Accrued license fee                                               40,000           40,000
            Accrued interest                                                                   36,000
            Accrued royalties                                                 25,000           30,000
            Accrued vacation                                                  13,000            6,000
            Accrued payroll and related costs                                                  24,000
            Contract losses                                                   69,000           53,000
            Depreciation and amortization                                                      (1,000)
                                                                         -----------      -----------

                                                                           5,211,000        5,350,000
            Less valuation allowance                                      (5,211,000)      (5,350,000)
                                                                         -----------      ----------- 

            Net deferred taxes                                           $      -         $      -
                                                                         ===========      ===========
</TABLE>


     Primarily all of the above temporary differences existing at April 30, 1996
     will reverse in 1997, except for the net operating loss carryforwards and
     the tax credits (see below).  The Company's federal net operating loss
     carryforwards and the tax credit carryforwards expire as follows: 


<TABLE>
<CAPTION>
           YEAR OF                              NET OPERATING      INVESTMENT           OTHER
          EXPIRATION                               LOSSES          TAX CREDITS       TAX CREDITS
          <S>                                     <C>                <C>               <C>
            1997                                  $     1,300         $  500           $   -
            1998                                      263,100          1,940            12,700
            1999                                      897,300          1,720            41,500
            2000                                      343,900          1,920
            2001                                      346,800            670
            2002                                      585,600
            2003                                      463,300
            2004                                    1,652,300
            2005                                    1,665,300
            2006                                      986,500
</TABLE>



                                      F-19

<PAGE>   49
TECHNICLONE INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996 (CONTINUED)
- --------------------------------------------------------------------------------


<TABLE>
<CAPTION>
            YEAR OF                                              NET OPERATING       INVESTMENT         OTHER
          EXPIRATION                                                 LOSSES          TAX CREDITS     TAX CREDITS
         <S>                                                    <C>                  <C>             <C>
            2007                                                    $   214,100        $  -           $   -
            2008                                                      1,038,200
            2009                                                      2,036,900
            2010                                                      1,690,400
                                                                    -----------        ------         -------
                                                                    $12,185,000        $6,750         $54,200
                                                                    ===========        ======         =======
</TABLE>


          The items reconciling income taxes applied at the federal statutory
          rate to the income tax provision recorded for each of the three years
          in the period ended April 30, 1996 are primarily net operating loss
          carryforwards, changes in valuation allowance of deferred tax assets
          and state tax (benefit), net of federal effect.


10.       RELATED PARTY TRANSACTIONS

          Certain stockholders, through their separate businesses, have provided
          the Company with various legal, accounting and consulting services.  A
          summary of such professional fees for each of the three years in the
          period ended April 30 are as follows:


<TABLE>
<CAPTION>
                                                                     1996               1995            1994
               <S>                                                 <C>               <C>              <C>
               Professional fees paid                              $377,378           $ 57,500        $150,000
               Professional fees expensed                          $170,659           $137,300        $212,594
               Professional fees payable at April 30               $ 65,495           $272,214        $180,381
</TABLE>



11.       FOURTH QUARTER ADJUSTMENTS

          During the fourth quarter of the year ended April 30, 1995, pursuant
          to a sales contract with a third party in which the estimated costs
          related to this contract exceeded sales prices, the Company increased
          its lower of cost or market inventory reserve by $98,722, which has
          been included in research and development expenses, and recorded a
          reserve for contract losses related to future expected losses from
          inventory costs in excess of the sale price of $132,071.


                                      F-20

<PAGE>   50


TECHNICLONE INTERNATIONAL CORPORATION                               SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30,1996
- -------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                         BALANCE       CHARGED TO                    BALANCE
                      AT BEGINNING     COSTS AND                      AT END
  DESCRIPTION           OF PERIOD      EXPENSES      DEDUCTIONS     OF PERIOD
<S>                   <C>              <C>           <C>            <C>
Lower of cost or         
  market inventory  
  reserve for the
  year ended
  April 30, 1995        $   -          $ 98,722      $     -        $ 98,722


Lower of cost or
  market inventory
  reserve for the
  year ended
  April 30, 1996        $98,722        $237,931      $(310,131)     $ 26,522


Valuation reserve
  for accounts
  receivable for
  the year ended
  April 30, 1996        $   -          $175,000      $     -        $175,000
</TABLE>



                                      F-21





<PAGE>   1
                      TECHNICLONE INTERNATIONAL CORPORATION
                   Computation of Net Income (Loss) Per Share


<TABLE>
<CAPTION>
                                                                              Year Ended April 30
                                                                              ------------------- 
                                                                      1996           1995            1994
                                                                 
<S>                                                              <C>           <C>             <C>             
NET INCOME (LOSS)                                                $     325,298 $   (6,911,635) $    (2,405,415)
                                                                 ============= =============== ================
DATA AS TO NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES:
   Weighted average number of common shares outstanding             18,466,359   15,794,811      13,653,829

   Common equivalent shares assuming issuance of shares
   represented by outstanding stock options and warrants             1,852,300          *             *

   Common equivalent shares assuming issuance of
   shares upon conversion of preferred stock
   and notes payable                                                 1,063,865          *              *
                                                                 ------------- -------------- ---------------

     Weighted average number of common and                          21,382,524     15,794,811       13,653,829
     common equivalent shares outstanding                        ============= ==============  ===============
     
NET INCOME (LOSS) PER SHARE - Primary                            $        0.02 $        (0.44) $         (0.18)
                                                                 ============= =============== ================

DATA AS TO NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES ASSUMING FULL DILUTION:
   Weighted average number of common and common
   equivalent shares outstanding                                    21,382,524     15,794,811       13,653,829

Excess of incremental shares assumed to be issued
under stock options and warrants (using market prices
at the end of each year) over shares used in
computing primary net income (loss) per share (using
average market prices during each year)                                279,081          *              *
                                                                 ------------- --------------- ---------------

     Weighted average number of common and common
     equivalent shares
 outstanding assuming full dilution           21,661,605   15,794,811         13,653,829
                                                                 ============= ============    ===============

NET INCOME (LOSS) PER SHARE - Fully diluted                      $        0.02 $      (0.44)   $        (0.18)
                                                                 ============= =============== ===============
</TABLE>


- -------------------------------------
*        Shares issuable upon the exercise of common stock warrants and options
         and conversion of preferred stock and notes payable have been excluded
         because of their antidilutive effect.

                                  Exhibit 11.1





<PAGE>   1
INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement Numbers
2-85628, 33-15102, 33-87662 and 33-87664 of Techniclone International
Corporation on Form S-8 of our report dated June 21, 1996, appearing in this
Annual Report on Form 10-K of Techniclone International Corporation for the year
ended April 30, 1996.

/s/ Deloitte & Touche

Costa Mesa, California
July 26, 1996





                                   Exhibit 23