SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    ---------
                                   FORM 10-KSB

(Mark One)

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934: For the fiscal year ended December 31, 2001
                                            -----------------

[]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934: For the transition period from __________ to
         __________

                         Commission file number 0-27848
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                                 BIOFIELD CORP.
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                 (Name of small business issuer in its charter)

           Delaware                                               13-3703450
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(State or other jurisdiction of                               (I.R.S. employer
incorporation or organization)                               identification No.)


Suite M, 1025 North Nine Drive, Alpharetta, Georgia                      30004
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      (Address of principal executive offices)                        (Zip Code)

                    Issuer's telephone number: (770) 740-8180
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       Securities registered under Section 12(b) of the Exchange Act: None
                                                                      ----

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.001 per share
                     ---------------------------------------
                                (Title of class)

         Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year: $ -0-
                                                                  -----

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

                  Approximately $3,835,530 based on the closing sale price
                  ($0.40) on February 28, 2002, as reported by The Nasdaq Stock
                  Market, Inc. InfoQuote service furnished by Financial Insight
                  Systems, Inc.

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

                  As of February 28, 2002 - 25,223,478 shares of Common Stock.

         Documents Incorporated by Reference: None.

         Transitional Small Business Disclosure Format (check one) Yes [ ]
No [X]
<PAGE>

                                     PART I

Item 1.  Description of Business

General

We are a medical technology company that has developed a system for detecting
breast cancer in a non-invasive and objective procedure.

Our technology is based on the principle that epithelial cancers, such as cancer
of the breast, ovaries, skin, prostate and colon, are characterized by small
changes in the electrical charge of the affected tissue. These changes, when
they appear, result in a disruption, or depolarization, of the charge
distribution found in normal epithelial tissue which lines many solid organs,
including the stomach, colon, prostate, endometrium, lung and breast. Moreover,
this depolarization appears to be progressive as cell transformation and
carcinogensis occur. This depolarization is measurable at the skin surface.

Biofield Diagnostic System, our breast cancer diagnostic device, employs
single-use sensors of our own design and a measurement device to detect and
analyze changes associated with the development of epithelial cancers, such as
breast cancer. The Biofield Diagnostic System takes multiple readings from an
array of test points on the skin surface of the symptomatic breast and
asymptomatic breast to measure differentials, which may exist between test
points. We believe that the analysis of these differentials, using a
pre-programmed algorithm, provides useful diagnostic information. The device
generally is intended to be used by physicians or by trained medical technicians
under the supervision of a physician.

The Biofield Diagnostic System is intended to be used as an adjunct to physical
examination or relevant imaging modalities to provide physicians and patients
with immediate and objective information concerning the probability that a
previously identified lesion is malignant or benign in women 55 years of age or
younger and without regard to the size, weight or volume of the lesion. The
device currently is not intended for non-palpable breast lesions, or for use
with women over 55 years of age. We believe that the Biofield Diagnostic System,
together with other available clinical information, could reduce diagnostic
uncertainty and decrease the number of diagnostic procedures, including surgical
biopsies, performed on suspicious breast lesions. In the limited clinical
studies we have had conducted to date, the Biofield Diagnostic System performed
statistically better in the clinically difficult subgroup of women 55 years of
age and younger, for whom certain diagnostic imaging modalities, such as
mammography and ultrasound, are generally considered less effective.

The Biofield Diagnostic System has not been approved by the U.S. Food and Drug
Administration and is not available for commercial distribution in the United
States until such time as the FDA gives pre-market approval. The laws of those
countries, which are members of the European Union, permit us to begin marketing
the Biofield Diagnostic System in these countries if we obtain a CE mark
Certification administered by the European regulatory authorities. After
obtaining the CE mark Certification, we introduced the Biofield Diagnostic
System in Europe at the end of September 2000 in conjunction with the 2nd
European Breast Cancer Conference. We also have commenced marketing efforts in
Southern Africa, Asia and the Middle East.

Company History

We were originally organized as a New York corporation in October 1987 and, in
1992, re-incorporated in Delaware by merging into our wholly owned Delaware
subsidiary. In March 1996, we completed our initial public offering of 1,819,000
shares of our common stock at a purchase price of $11.00 per share, for
aggregate proceeds of approximately $18 million (net of related expenses of
approximately $2 million). In December 1997, we received net proceeds of
approximately $8.4 million from the sale of an additional 2,867,670 shares of
our common stock in a private placement offering. In connection with the private
placement, we also issued an aggregate of 643,639 shares of our common stock in
exchange for previously issued warrants. These proceeds, along with other funds
previously received, during the four years ended December 31, 1999, were
utilized as follows: approximately $21,800,000 was spent for research and
development, which included the cost of engineering, manufacturing approximately
60 units of the Biofield Diagnostic System, clinical trials and related

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activities in connection with required governmental and regulatory approvals for
the Biofield Diagnostic System, including preclinical research related to the
enhancement of the technology; and approximately $12,123,000 was spent for
selling, general and administrative matters, including in connection with
marketing activities, expenses associated with being a public company, public
and investor relations, insurance, legal, accounting and administrative
expenses, relocation expenses and expenses associated with the settlement of
agreements with terminated personnel.

In November 1998, we curtailed most of our operations due to lack of adequate
financial resources, and thereafter, as we failed to raise additional financial
resources, we shut down all of our remaining operations. In December 1998, our
common stock was de-listed from trading on The Nasdaq Stock Market for lack of
compliance with the requirement to maintain at least $4 million of tangible net
worth and to maintain a bid price of our common stock in excess of $1.00 per
share. In March 1999, we terminated our reporting obligations under the
Securities Exchange Act of 1934, since we had less than 300 holders of record of
our common stock.

In December 1999, we sold 14 million shares of our common stock in a private
placement for $700,000 to David M. Long, Jr., M.D., Ph.D., his son, Raymond A.
Long, M.D., and their affiliated entities. The sales price per share of $0.05
was the result of arms-length negotiation between the parties. Although the
prices of our common stock in the over-the-counter market during the period from
January 1, 1999 through the date of the sale ranged from $0.375 per share to
$0.032 per share, no public information concerning our company had been released
since we terminated our SEC reporting obligations in March 1999, and our Board
of Directors did not believe that the public market sales prices accurately
reflected the fair value of our company. The Board of Directors did not retain a
financial advisor to assist it in obtaining financing or in negotiating the sale
in December 1999; however, our Board of Directors had contacted certain previous
investors in our company and other parties who had advised our Board of
Directors of a possible interest in an investment in our company, in each
instance to no avail. Approximately $600,000 of the proceeds from this private
placement were used for operating purposes, including for salaries, for legal
and auditing expenses incurred in connection with the re-commencement of our
operations and for regulatory consultants and the balance of approximately
$100,000 were used for marketing expenses associated with the Biofield
Diagnostic System.

Simultaneously with the December 1999 sale, our Board of Directors appointed Dr.
David Long as a director, whereupon the remaining directors and all of our
executive officers resigned. Dr. David Long became Chairman and Chief Executive
Officer and took action to reconstitute our Board of Directors. Since this time,
we have been in the process of re-commencing certain of our operations.

In May 2000, we were successful in obtaining CE mark Certification and
re-certified to ISO-9001 Quality Systems for the design, production management,
sales and distribution of our Biofield Diagnostic System and accessories. This
will permit us to again commence marketing of our equipment in certain European
and other countries that recognize the CE mark. Commercial distribution within
the United States is still dependent on our obtaining FDA approval.

In June 2000, we began a European Post Market Surveillance Study to support our
anticipated European market launch of the Biofield Diagnostic System. The Study
includes patients with previously identified breast lesions and has been
undertaken to confirm the safety, efficacy and clinical utility of the Biofield
Diagnostic System. The initial preliminary results of this Study were presented
on September 28, 2000 in conjunction with the 2nd European Breast Cancer
Conference, in Brussels, which was sponsored jointly by the European Breast
Cancer Association, the European Senology Group, the European Breast Cancer
Awareness Association and the European Oncology Association. Such initial
preliminary results indicated that if the diagnostic work-ups of the first 41
study participants had been stopped, based on the clinical level of suspicion
combined with a negative Biofield Test result, no cancers would have been
missed. This conclusion still needs further confirmation by the study of
additional cases, which currently is underway.

We commenced marketing of the Biofield Diagnostic System in Europe at the end of
September 2000 in conjunction with the 2nd European Breast Cancer Conference, by
a mailing to conference attendees. Our marketing staff currently consists two
people headquartered in the United States, who are responsible for all worldwide

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marketing efforts. To date, we have focused our marketing efforts in Europe,
several countries in the Middle East and a number of Asian and African
countries. As of February 28, 2002, we had sold only one Biofield Diagnostic
System, which was to an Asian distributor.

On September 6, 2000, our Board of Directors determined that it was necessary
for our company to raise an additional $1,000,000 for operating expenses before
the end of 2000, and determined to raise such funds through a private placement
of unissued shares of our common stock. At such time, Dr. David Long offered his
stand-by commitment to purchase any unsubscribed shares, if such shares were
being sold for not more than $0.50 per share and the closing occurred prior to
November 1, 2000, and he advised our Board that he would purchase such shares
without any registration rights or any equity inducement, such as a further
right to subscribe for additional shares in any further offering at a reduced
price. During the thirty day period prior to September 6, 2000 the average
closing price for our common stock, as reported by The Nasdaq Stock Market,
Inc.'s InfoQuote service furnished by Financial Insight Systems, Inc. was $0.439
per share and such closing price on September 5, 2000 was $0.39 per share.
Thereafter, we attempted to sell our common stock at $0.50 per share and under
the other terms offered by Dr. Long by contacting several larger previous
investors in our company and other parties who had advised our officers and
directors of a possible interest in investing in our company. Due to the small
size of the proposed offering and the fact that our common stock was not trading
on any recognized securities exchange, we did not retain a financial advisor to
assist us in the offering. By November 1, 2000, and despite interest from
several investor groups and Dr. Long's stand-by commitment, we were unable to
place all of the offered shares of common stock; whereupon, Dr. Long agreed to
extend his stand-by commitment until December 1, 2000. On December 1, 2000, only
1,518,000 shares of our common stock had been subscribed for at $0.50 per share
and we advised Dr. Long that we were accepting his stand-by commitment for the
then un-subscribed portion of the $1,000,000 offering or 482,000 shares. On
December 1, 2000, the closing price of our common stock, as reported by
InfoQuote, was $0.40 per share. On December 2, 2000, we were advised by
Hambrecht & Quist Capital Management Inc. that H&Q Life Sciences Investors and
H&Q Healthcare Investors, investment companies for which it had investment
authority, may be interested in participating in the offering if it were not too
late. Our Board of Directors then determined to increase the size of the
offering by $500,000 and to delay the closing thereof until December 18, 2000,
and the other subscribers agreed to such extension and increase. The closing of
the $1,500,000 private offering occurred on December 15, 2000, at which time we
sold 3,000,000 of our authorized, unissued shares of common stock, including
482,000 shares sold to Dr. Long. On such date, the closing price of our common
stock, as reported by InfoQuote, was $0.57 per share.

Breast Cancer

Background
----------

Breast cancer is one of the most common cancers among women and, notwithstanding
the currently available detection modalities, is the leading cause of death
among women aged 35 to 54. According to the American Cancer Society,
approximately one in nine women in the United States will develop breast cancer
during her lifetime. In 1999, the American Cancer Society estimated that during
each year approximately 175,000 new cases of invasive breast cancer among women
would be diagnosed in the United States, and that approximately 43,300 women
would die as a result of the disease. Early detection of breast cancer is
critical. There is widespread agreement that screening for breast cancer, when
combined with appropriate follow-up, will reduce mortality from the disease.

The American Cancer Society recommends that all women over the age of 40 should
undergo breast cancer screening in the form of physical examination or
mammography screening as a routine part of preventative healthcare. For these
women, the American Cancer Society has published guidelines for breast cancer
screening, including: (i) monthly breast self-examinations, and (ii) an annual
mammogram for women age 40 and older. As a result of family medical histories
and other factors, certain women are at high-risk of developing breast cancer
during their lifetimes. For these women, physicians often recommend close
monitoring, particularly if a potentially pre-cancerous condition has been
detected.

Each year approximately eight million women in the United States require
diagnostic testing for breast cancer because of a physical symptom, such as a
palpable lesion, pain or nipple discharge, discovered through self or physician

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examination (approximately seven million) or a non-palpable lesion detected by
screening x-ray mammography (approximately one million). Once a physician has
identified a suspicious lesion in a woman's breast, the physician may recommend
further diagnostic procedures, including diagnostic mammography, ultrasound or
fine needle aspiration. In each case, the potential benefits of additional
diagnostic testing must be balanced against the costs, risks, anxiety and
discomfort to the patient associated with undergoing the additional procedures.
Each of the currently available non-surgical modalities for breast cancer
detection has various clinical limitations.

Screening and Diagnostic Modalities
-----------------------------------

Physical examinations may be conducted by a physician as part of a medical
examination, or by a woman performing breast self-examination; however, a
physical examination of the breast can only detect relatively large lesions,
which may be advanced cancers. Furthermore, physical examination of the breast
does not reliably distinguish between malignant and benign tissue. More than
half the women who menstruate will have a lump in a breast at some time during
their life, but only a small percentage of these lumps will be malignant.

Mammography is an x-ray modality commonly used for both routine breast cancer
screening and as a diagnostic tool. A mammogram produces an image of the
internal structure of the breast, which is intended to display lesions as blurry
white spots against normal tissue. In a screening mammogram, radiologists seek
to detect the presence of suspicious lesions, while in a diagnostic mammogram
radiologists seek to characterize suspicious lesions. Mammograms require
subjective interpretation by a radiologist and are often uncomfortable for the
patient. Because x-ray mammography exposes the patient to radiation, the
American Cancer Society recommends that mammograms be limited to one per year.
In addition, x-ray mammography is considered to be less effective for women
under the age of 50 who generally have dense breast tissue. The average cost of
a diagnostic mammogram is approximately $120 to $160 per procedure, and requires
the use of equipment ranging in cost from approximately $75,000 to $225,000. Due
to the high costs associated with mammography equipment and the specialized
training necessary to operate the equipment and to read the x-ray images,
mammography is usually available only at specialty clinics or hospitals.

Ultrasound uses high frequency sound waves to create an image of soft tissues in
the body. Like a mammogram, this image requires interpretation by a physician.
Ultrasound's principal role in breast cancer diagnosis has been to assist the
physician in determining whether a palpable lesion is likely to be a cyst
(usually benign) or a solid mass (potentially cancerous). The average cost of an
ultrasound of the breast is approximately $75 to $200 per procedure and requires
the use of equipment ranging in cost from approximately $60,000 to $200,000.
Like mammography, ultrasound is generally available only at specialty clinics or
hospitals.

Other currently available surgical diagnostic techniques include fine needle
aspiration, core needle biopsy and stereo tactic needle biopsy. In each of these
procedures, a physician seeks to obtain cell samples from a suspicious lesion
through a needle for analysis by a cytopathologist. These procedures are
invasive, require follow-up and range in cost from approximately $300 to $600
per procedure, and inadequate sampling often renders these procedures invalid.

Due in part to the limitations of the currently available modalities to identify
malignant lesions, a large number of patients with suspicious lesions proceed to
additional diagnostic procedures, including surgical biopsy, an invasive and
expensive procedure. Approximately 750,000 surgical biopsies are performed each
year in the United States, of which approximately 500,000 result in the surgical
removal of benign breast tissue. The average cost of a surgical biopsy ranges
from approximately $1,000 to $5,000 per procedure. In addition, surgical biopsy
can result in pain, scarring and anxiety to the patient. Patients who are
referred to biopsy usually are required to schedule the procedure in advance and
generally must wait several days to receive their biopsy results.

The Biofield Diagnostic System

The Biofield Diagnostic System is intended to provide physicians and patients
with immediate and objective information concerning the probability that the
lesion is proliferative or non-proliferative. Based upon such information, a
physician can recommend whether or not the lesion should be removed by biopsy or
whether other action should be taken. Only a biopsy, followed by microscopic

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examination, can determine whether a lesion is benign or malignant. A breast
examination utilizing the Biofield Diagnostic System, called the `Biofield
Test', is non-invasive and can be performed in a physician's office by a
physician or a medical technician in less than 20 minutes. Single-use sensors of
our design are arranged on the skin surface in and around the quadrant of the
breast where a suspicious lesion has been identified and in corresponding
locations on the asymptomatic breast. A suspicious lesion is generally detected
through physical examination or a mammogram. Sensor readings are measured and
analyzed using a pre-programmed algorithm. The Biofield Diagnostic System
generally is intended only to be used as an adjunct to physical examination or
relevant imaging modalities in women 55 years of age or younger who have
palpable breast lesions. We have determined through our clinical testing that,
in women over 55 years of age, the device did not demonstrate significant enough
variations. In addition, mammogram tests do not perform as well with younger
women. As a result, the principal focus of the Biofield Diagnostic System is
women with palpable lesions under 56 years in age.

The output from a Biofield Test will be part of a written report that will
include an objective reading. The higher the Biofield Diagnostic System's
output, the greater the probability that the patient has proliferative disease
or cancer in the area examined. The physician, when making further treatment
decisions, including whether to proceed to surgical biopsy, then can use this
information, together with other available clinical information. We believe that
the Biofield Diagnostic System will offer patients and physicians several
advantages compared with currently available modalities used in breast cancer
diagnosis, including the following:

    o    It will provide the patient and physician with immediate, objective
         test results that characterize a lesion and indicate the probability
         that a suspicious lesion is highly proliferative, proliferative or
         non-proliferative.

    o    It is non-invasive, since all measurements are taken from sensors
         placed on the skin surface.

    o    Unlike x-ray mammography, there is no exposure to radiation or breast
         compression, which will allow the test to be repeated as often as
         needed, especially important for women at high risk for developing
         breast cancer and patients requiring follow-up examination.

    o    In limited clinical studies to date, it has performed better in the
         clinically difficult subgroup of younger women for whom diagnostic
         imaging modalities are generally considered less effective.

    o    The diagnostic examination can be performed by a physician or medical
         technician in less than 20 minutes in a physician's office.

    o    The estimated cost of the device is expected to be significantly less
         than the cost of purchasing and installing diagnostic x-ray mammography
         or other diagnostic imaging equipment. We believe that the cost per
         test with the device of between $60 and $100 should be competitive with
         current costs of diagnostic mammography and ultrasound.

    o    It should be preferred by third party payers of health care costs,
         since it has the potential of reducing the number of diagnostic tests,
         including surgical biopsies, performed on suspicious lesions.

Clinical Studies

We have used the Biofield Diagnostic System to test over 3,000 participants in
the United States, Europe and Japan, involving women with suspicious breast
lesions. The basic protocol for our clinical trials provided for women with
suspicious lesions, detected either by x-ray mammography screening or a physical
examination (self or by physician), to be tested with the Biofield Diagnostic
System before surgical biopsy. Women who participated in our clinical trials had
undergone diagnostic work-ups, which often included a series of tests, before
proceeding to biopsy. In each of our studies, the results obtained were then
compared to the biopsy results. Based on our clinical studies to date, and
although the Biofield Diagnostic System cannot determine the presence of breast
cancer in all cases, we believe that the Biofield Diagnostic System, together
with other available information, could reduce diagnostic uncertainty and
decrease the number of diagnostic procedures, including surgical biopsies,
performed on suspicious lesions.

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The Biofield Test is intended to be conducted under the supervision of a medical
practitioner licensed by law in the use of the Biofield Diagnostic System, and
both the technician performing the Biofield Test and the supervising physician
must have undergone appropriate training. The Biofield Test does not replace the
usual screening methods for detecting breast lesions by mammography or
palpation, nor evaluation using biopsy when appropriate. Moreover, efficacy in
patients with a history of breast cancer or breast augmentation, as well as
patients who have had recent fine needle aspiration of a suspicious lesion or
who have undergone chemotherapy or radiation therapy within three years, have
not been fully evaluated by our research and it is not known whether the
Biofield Test is applicable for these patients. Furthermore, certain conditions
are believed to confound the results of the Biofield Test, and patients with
these conditions have been excluded from our studies. These conditions include
women who have undergone active tamoxifen or raloxifene therapy within the past
three months, women with clinically diagnosed active mastitis, women with
visible or known dermatological conditions or other physical abnormality
precluding the application of all necessary sensors, women with a known allergy
to adhesives or ECMs used to apply electrocardiogram or electroencephalogram
sensors, women with only a single breast, women with active electrically powered
implanted devices, women with breast tattoos and nipple jewelry and pregnant
woman.

Other Possible Product

Based on our clinical experience with the Biofield Diagnostic System for testing
women that have symptoms of breast cancer (often referred to as symptomatic
women) and our belief that the electrophysiological characteristics of cancer
are similar for both lesions that can be felt in a physical examination
(palpable) and those lesion that cannot be felt in a physical examination
(non-palpable lesions), we believe that our technology should be adaptable for
breast cancer screening in women who have not demonstrated any symptoms of
breast cancer (often referred to as asymptomatic women). Based on this belief,
we are contemplating a prototype design of an enhanced version of the Biofield
Diagnostic System, which may be of use as a screening system. The enhanced
version of the Biofield Diagnostic System will contain additional data channels
to allow for more sensors to surround the breast or other area where a lesion is
present and an algorithm to better analyze the data received. However, we have
not yet completed a final sensor configuration for the proposed device, nor have
we commenced any clinical testing for the proposed device, since we believe that
the protocol for a full-scale clinical trial would involve significant financial
resources. As a result, we cannot assure you when, if ever, any further efforts
will be made to complete the development of the proposed device.

We believe that the need exists for products to provide early and accurate
detection of types of cancers found in the epithelial tissue other than breast
cancer. Our previous preclinical research had been designed to obtain additional
scientific knowledge of the fundamentals underlying our core technology and to
identify new applications based on our technology for the detection of other
cancers, including cancer of the ovaries, skin, prostate and colon. However, due
to the cost of this research and our limited financial resources, we have not
pursued any efforts in this regard since 1996, and we cannot assure you when, if
ever, any further steps will be undertaken.

Government Regulation

The manufacture and sale of medical devices intended for commercial distribution
are subject to extensive governmental regulation both in the United States and
abroad.

United States Regulations
-------------------------

The FDA regulates the research, testing, manufacture, safety, labeling, storage,
record keeping, advertising, distribution and production of medical devices in
the United States under the Food, Drug and Cosmetic Act.

         FDA's Pre-market Clearance and Approval Requirements. Unless an
         ----------------------------------------------------
exemption applies, no medical device can be marketed in the United States
without receiving either a 510(k) clearance, or a PMA approval in advance from
the FDA. The FDA's 510(k) clearance process usually takes from four to twelve
months, but it can take longer. The process of obtaining PMA approval is much
more costly, lengthy and uncertain; it generally takes from one to three years

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and can take even longer. We cannot assure you that 510(k) clearance or PMA
approval will ever be obtained for any product that we may propose to market in
the United States.

The FDA decides whether a device must undergo either the 510(k) clearance or PMA
approval process, based upon statutory criteria. These criteria include the
level of risk that the FDA perceives is associated with the device and a
determination as to whether the device to be cleared is within a type that is
similar to devices that are already legally marketed. Devices deemed to pose
relatively less risk are placed in either class I or II, which classification
requires that the manufacturer submit a pre-market notification requesting
510(k) clearance, unless the device is exempted from obtaining such a clearance.
The pre-market notification must demonstrate that the device to be cleared is
substantially equivalent in intended use and in safety and effectiveness to a
legally marketed "predicate device" that is either in class I or class II, or is
a "preamendment" class III device (i.e., one that was in commercial distribution
before May 28, 1976) for which the FDA has not yet decided to require PMA
approval. After a device receives 510(k) clearance, any modification that could
significantly affect its safety or effectiveness, or that would constitute a
major change in its intended use, requires a new 510(k) clearance or PMA
approval.

Devices deemed by the FDA to pose the greatest risk (e.g., life-sustaining,
life-supporting or implantable devices) or deemed not substantially equivalent
to a legally marketed predicate device are placed in class III. Such devices are
required to undergo the PMA approval process in which the manufacturer must
prove the safety and effectiveness of the device to the FDA's satisfaction. An
application for PMA approval must provide extensive preclinical and clinical
trial data and also information about the device and its components regarding,
among other things, manufacturing, labeling and promotion. After approval of a
PMA, a new PMA or PMA supplement is required in the event of any modification to
the device, its labeling or its manufacturing process. As part of the PMA
review, the FDA will typically inspect the manufacturer's facilities for
compliance with Quality System Regulation, requirements that impose elaborate
testing, control, documentation and other quality assurance procedures.

Upon submission, the FDA determines if the application for PMA approval is
sufficiently complete to permit a substantive review, and, if so, the
application is accepted for filing. The FDA then commences an in-depth review of
the application, which typically takes one to three years, but may take longer.
The review time is often significantly extended as a result of the FDA
requesting more information or clarification of information already provided.
The FDA also may respond with a "not approvable" determination based on
deficiencies in the application and require additional clinical trials that are
often expensive and time consuming and can delay approval for months or even
years. During the review period, an FDA advisory committee, typically a panel of
clinicians, usually will be convened to review the application and recommend to
the FDA whether, or upon what conditions, PMA approval should be considered.
Although the FDA is not bound by the advisory panel decision, the panel's
recommendation is important to the FDA's overall decision-making process.

If the FDA's evaluation of the application is favorable, the FDA typically
issues an "approvable letter," requiring the applicant's agreement to specific
conditions (e.g., changes in labeling) or specific additional information (e.g.,
submission of final labeling) in order to secure final approval of the
application. Once the approvable letter is satisfied, the FDA will issue a PMA
for the approved indications, which can be more limited than those originally
sought by the manufacturer. The PMA can include post-approval conditions that
the FDA believes are necessary to ensure the safety and effectiveness of the
device including, among other things, restrictions on labeling, promotion, sale
and distribution. Failure to comply with the conditions of approval can result
in significant adverse enforcement action, including the loss or withdrawal of
the approval. The PMA process can be expensive and lengthy, and we cannot assure
you that any application for PMA approval made by us will ever be approved for
marketing the covered device. Even after approval of a PMA, a new PMA or PMA
supplement is required in the event of a modification to the device, its
labeling or its manufacturing process.

A clinical trial may be required in support of a 510(k) submission or an
application for PMA approval. Such trials generally require an Investigational
Device Exemption application approved in advance by the FDA for a limited number
of patients, unless the product is deemed a non-significant risk device eligible
for more abbreviated IDE requirements. The IDE application must be supported by
appropriate data, such as animal and laboratory testing results. Clinical trials
may begin if the IDE application is approved by the FDA and by the appropriate
institutional review boards at the clinical trial sites.

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In December 1996, we submitted to the FDA our application for PMA approval of
the Biofield Diagnostic System. Our application was based principally upon the
results of clinical trials on over 1,200 women tested at six U.S. medical
institutions under the direction of physicians involved in breast cancer
diagnosis and treatment. In February 1997, the FDA informed us that our
application had not been accepted for filing and requested us to respond to the
following deficiency:

         "The design of the clinical trial is not valid. You have tested several
         algorithms on the PMA data set and selected the one that gave the most
         desired results. This is not an accepted procedure for definitive data
         sets. You will need to select a final algorithm. Then you must test it
         with an independent data set for sensitivity, specificity, etc. The
         design of the clinical trial must provide data that supports the
         indications for use, which should include the impact on patient
         management."

In September 2001, we have had discussions with the FDA about Biofield current
data analysis, its CE indication, its comprehensive algorithm and clinical
efficacy. We also discussed with the FDA the proposed course of action in
support of the re-submission of our application for the PMA of the Biofield
Diagnostic System, including timing of on-going data analysis and patient
management categories. The analysis phase of the clinical data is expected to
take several months or longer, followed by PMA preparation. In January 2002, we
had further discussions with the FDA about the science related to the Biofield
Diagnostic System measurements and we reviewed clinical study databases to be
used for training and testing, regulatory course of action related to the PMA,
statistical methodology and clinical goals of Biofield. We also advised the FDA
that a Pre-Market Surveillance (PMS) Study was in progress in Europe, which
should provide data from 200 to 300 cases performed under real-life conditions
in the field where the Biofield Diagnostic Device is being used. In March 2002,
the FDA orally informed us that it anticipated that our application, upon
submission, would be reviewed under its Expedited Review policy. Discussions
with the FDA to clarify the PMA analysis and filing are ongoing.

We believe that the information from the clinical databases and the PMS Study,
after evaluation, should provide additional evidence on the efficacy of the
Biofield Diagnostic System for the FDA. After such evaluations, additional
actions would still be needed for submission of our application for the PMA
approval. The principal actions would consist of meeting with the FDA to discuss
our proposed submission, data evaluation and preparation of our application. We
expect that the entire process will take about a year before our application is
reviewed. The process is estimated to cost up to $3 million, which is expected
to be funded through a private placement of newly issued securities and through
the initial sales, outside of the United States, of the Biofield Diagnostic
System. We cannot assure you that we will be able to obtain these funds, or that
the FDA will accept our application for filing, or that the clinical data we
obtain will support FDA approval of the PMA.

         Pervasive and Continuing FDA Regulation. A host of regulatory
         ---------------------------------------
requirements apply to marketed devices, including labeling regulations, the
Quality System Regulation, which requires manufacturers to follow elaborate
design, testing, control, documentation and other quality assurance procedures,
the Medical Device Reporting regulation, which requires that manufacturers
report to the FDA deaths or serious injuries associated with regulated products
and product malfunctions that would likely cause or contribute to death or
serious injury if the malfunction were to recur, and the FDA's general
prohibition against promoting products for unapproved or `off-label' uses. Class
II devices also can have special controls (e.g., performance standards,
post-market surveillance, patient registries and FDA guidelines) that do not
apply to Class I devices. We cannot assure you that unanticipated changes in
existing regulatory requirements or adoption of new requirements would not have
a significant adverse effect on our business and financial condition.

Upon commencing commercial distribution, we will be subject to inspection by the
FDA to determine compliance with regulatory requirements. If the FDA finds that
we have failed to comply with the requirements, it can institute a wide variety
of enforcement actions. The FDA sometimes issues a public warning letter, but
also may pursue more severe remedies such as fines, injunctions, and civil
penalties against us; recall or seize of our products; operating restrictions,
partial suspension or total shutdown of our production; refusing our requests
for 510(k) clearance or PMA approval of new products; withdrawing product
approvals already granted; and criminal prosecution. Any FDA enforcement action
could have a significant adverse effect on our business and financial condition.

                                        9
<PAGE>

         Other U.S. Regulation. We must comply with numerous federal, state and
         ---------------------
local laws relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control and hazardous substance
disposal. We cannot assure you that we will not be required to incur significant
costs to comply with such laws and regulations in the future or that such laws
or regulations will not have a significant adverse effect on our business and
financial condition.

Unapproved products subject to the FDA's pre-market application requirements
must receive prior FDA export approval to be marketed outside of the United
States, unless they are approved for use by a member country of the European
Union or certain other countries including Australia, Canada, Israel, Japan, New
Zealand, Switzerland and South Africa, in which case they can be exported to any
country provided that certain limited FDA notification requirements are met.

Foreign Regulations
-------------------

Sales of medical device products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approvals required by foreign countries may be longer or
shorter than that required for FDA approval, and requirements for licensing may
differ from FDA requirements.

To sell medical devices within the European Union, companies are required to
achieve compliance with the requirements of the Medical Devices Directive issued
by the European Union and be capable of affixing a "CE" marking on their medical
devices to attest to this compliance. To achieve a CE marking, the device is
required to meet the Essential Requirements as defined under the Directive,
relating to safety and performance of the device, and we must successfully
undergo verification of our regulatory compliance (known as a "conformity
assessment") by an appropriate approved standards agency or "notified body". We
also are required to comply with additional national requirements that are
beyond the scope of the Directive.

We have received approval by the notified body KEMA-Registered Quality, Inc. to
market the Biofield Diagnostic System and our sensors under the CE Mark
Certification, and this notified body has granted certified ISO-9001 Quality
System status for design, production management, sales and distribution of the
Biofield Diagnostic System. In order to obtain such approvals, KEMA personnel
conducted a detailed review of our technical files and records and reviewed
certain of our medical research files; however, KEMA did not conduct any
confirming research. KEMA did not comment on our clinical research. At the
conclusion of the review, KEMA provided to us a Certificate of Conformity for
the product category "electropotentials systems for the diagnosis of epithelial
cancers". KEMA did not offer any endorsement of the efficacy of the Biofield
Diagnostic System.

The CE Mark Certification and the ISO-9001 Quality System status, which status
is subject to semi-annual audit by KEMA, permit us to commence sales in Europe
and other countries that recognize CE Mark Certification, without obtaining any
further regulatory approval. Since we anticipate that our initial distribution
will be in Europe, our failure to maintain compliance with appropriate Directive
and other applicable requirements could have a significant adverse effect upon
our business and financial condition.

Manufacturing

We are a development and marketing company and do not manufacture any of our
products or prototypes. We have used contract manufacturers who meet current
quality system regulations and good manufacturing practices requirements imposed
by the FDA to produce the initial quantities of the Biofield Diagnostic Device
and disposable sensors used in our clinical trials, and intend to continue to
use contract manufacturers to satisfy our additional needs for future clinical
studies and for the production of commercial quantities, when and if we engage
in commercial sales. Electronic components and raw materials used in the
Biofield Diagnostic Device and our sensors are available from numerous
suppliers. Some components are stock items, while others have been designed and
manufactured to our specifications. The specifications for the Biofield
Diagnostic Device and our sensors are treated as a trade secret. We own certain
molds and other equipment used to manufacture our components.

                                       10
<PAGE>

SeaMED Corporation had been the contract manufacturer for our Biofield
Diagnostic Device, pursuant to an agreement, which expired May 15, 2001. We have
selected TriVirix International Limited to redesign the Biofield Diagnostic
System to reduce manufacturing costs and make product platform improvements.
SeaMED currently performs repair and service on the equipment it has
manufactured under a year-to-year agreement. We have arranged with Ludlow
Technical Products Inc. to contract manufacture the sensors, which we have
designed for use with the Biofield Diagnostic Device who, in turn, has
contracted with Dow Pharmaceutical Sciences to supply the gel, which is used
with our sensors.

We have considered seeking qualification of a second manufacturer for the
Biofield Diagnostic System, but have determined not to seek an additional source
of supply for our sensors at this time. For additional information, see "Risk
Factors - If Our Single Source Suppliers Are Unable to Deliver, Our Business
Would Suffer."

Marketing and Sales

General
-------

As a result of the large number of diagnostic procedures that are performed on
suspicious breast tissue in the United States, we intend to focus our marketing
efforts on the clinical ability of the Biofield Diagnostic System to reduce
diagnostic uncertainty and decrease the number of diagnostic tests performed on
these suspicious lesions. We believe that the market for the Biofield Diagnostic
System will include physicians involved in the detection and management of
breast cancer, including radiologists, gynecologists, general surgeons, breast
surgeons and general practitioners, as well as hospitals and clinics. We
anticipate that, if the FDA approves the Biofield Diagnostic System, we will
market this product in the United States through one or more distribution
partners. We have not commenced discussions with any potential distribution
partners for the United States, and we cannot assure you that any discussions,
which we may have, will result in any strategic or other relationship. In
December 2001, we announced the execution of a three-year distribution agreement
with Trilogy Critical Care (Pty) Ltd. of Johannesburg, South Africa, a health
care distributor in southern Africa. The agreement grants Trilogy the exclusive
right to market and sell the Biofield Diagnostic System in South Africa and
certain other southern African countries during the term of the agreement,
conditioned on achieving annual minimum sales.

We believe that physicians who use the Biofield Diagnostic System will probably
set a procedure cost for use of our device that will be competitive with the
current procedure costs of diagnostic mammography and ultrasound. Although we
have not sold the Biofield Diagnostic System in the U.S., at such time, if at
all, as we receive pre-market approval from the FDA, we currently expect to
price the device at under $20,000, which will be substantially less than the
cost of diagnostic mammography equipment or ultrasound systems, which range in
price from approximately $60,000 to $225,000. We also currently expect to price
our single-use sensors at approximately $60. As of February 28, 2002, we had
sold only one Biofield Diagnostic System, which was to an Asian distributor.

The laws of certain European countries permit us to begin marketing the Biofield
Diagnostic System in Europe before the FDA permits marketing in the United
States. We introduced the device in Europe at the end of September 2000, in
conjunction with the 2nd European Breast Cancer Conference, by a mailing to
conference attendees.

Our current marketing staff consists of two senior executives, headquartered in
the United States, who are responsible for all worldwide marketing efforts,
which, to date, have focused on several Middle-Eastern countries, certain Asian
countries, Europe and South Africa. To market the Biofield Diagnostic System or
any other products we may develop, we will have to continue to develop a
marketing and sales force with technical expertise and distribution
capabilities.

Effect of Third Party Reimbursement
-----------------------------------

Suppliers of health care products and services are greatly affected by Medicare,
Medicaid and other government insurance programs, as well as by private
insurance reimbursement programs. Third party payers (i.e., Medicare, Medicaid,
private health insurance, health administration authorities in foreign countries
and other organizations) may affect the pricing or relative attractiveness of

                                       11
<PAGE>

our products by regulating the maximum amount of reimbursement provided for by
these payers to the physicians and clinics utilizing our products, or by taking
the position that reimbursement is not available for the procedures.

We believe that the availability and level of third party reimbursement will
impact the decisions of physicians, clinics and hospitals to purchase and use
our products and, thereby, affect the pricing of our products. In the United
States, many patients are reimbursed for mammograms, in amounts that vary
considerably by the location in which the procedure is performed. Our intended
marketing strategy is to obtain approval of payers for payments to physicians
using our products, to work with professional organizations to foster awareness
and support for our products and to enlist the assistance of opinion leaders in
making presentations to health care administrators to inform them of the
benefits of the additional data provided by the Biofield Diagnostic System and
of the potential economic benefits resulting from its use.

Several states and the federal government are investigating a variety of
alternatives to reform the health care delivery system and to reduce and control
health care spending. These reform efforts include proposals to limit spending
on health care items and services, limiting coverage for new technology and
limiting or controlling the price health care providers and drug and device
manufacturers may charge for their services and products. The scope and timing
of these reforms cannot be predicted, but if adopted and implemented, these
reforms could have a significant adverse effect on our business and financial
condition.

Reimbursement for use of the Biofield Diagnostic System in international markets
will vary and will be determined on a country-by-country basis. Although we
intend to pursue efforts to obtain reimbursement status in major European
markets, we do not yet have a schedule for commencing these efforts and cannot
assure you of the level of success, if any, of our efforts once commenced. In
the countries comprising the Europe Union, as well as other countries that
recognize CE Mark certification, our ability to achieve any market penetration
may depend upon the availability of third party governmental reimbursement.
Initially, we expect that the Biofield Diagnostic System will be used in
situations where the patient is responsible for the cost of the procedure.

Patents and Proprietary Information

We have a number of issued U.S. and foreign patents, the earliest of which
expires in 2007, relating to our products and technology, and have applications
for a number of patents pending. Since the technology applicable to our products
is rapidly developing, any patent rights, which we have or may obtain, may not
provide us with any competitive advantage. A number of companies may have filed
applications for, or have been issued, patents relating to technology that is
similar to some of the technology developed or used by us.

We also seek to protect our intellectual property rights through a combination
of trade secret, non-disclosure and other contractual arrangements. We generally
enter into confidentiality agreements with our employees, consultants, vendors
and clinical investigators, and attempt to limit access to and distribution of
our proprietary information.

We may be required to obtain licenses to patents or other proprietary rights
from third parties. We cannot assure you that any licenses required under any
patents or proprietary rights would be made available to us on acceptable terms,
if at all. If we are unable to obtain required licenses, we could encounter
delays in product development or find that the development, manufacture or sale
of products requiring these licenses could be foreclosed.

From time to time, we may support and collaborate in research conducted by
universities and governmental research organizations to obtain rights to use the
resulting technical information and any inventions, which may arise from these
efforts. In these circumstances, it is not unusual for the university or
research organization to retain certain rights, which then could be licensed to
others.

Licenses and Other Agreements

We are a party to several licensing and royalty arrangements relating to the
Biofield Diagnostic System, as well as to prior versions of this product.

                                       12
<PAGE>

We have a royalty agreement with Teiresias, Inc. and its founder who provided
consulting services to us in connection with the original design and fabrication
of an early prototype of the Biofield Diagnostic System, for the use of
depolarized, pre-gelled electrodes with the Biofield Diagnostic System. The
Biofield Diagnostic System no longer uses these electrodes, and we do not
currently anticipate that it will do so.

We have a royalty arrangement under a terminated employment agreement with Mark
L. Faupel, Ph.D., our former Vice President, Research and Development, pursuant
to which we were obligated to pay royalties based on two percent of gross sales
of a prior version of the Biofield Diagnostic Device and its sensors, which are
no longer being marketed, and one percent of gross sales of any pre-gelled
electrodes used in connection with the Biofield Diagnostic Device, through 2005
or until these royalties reach $8 million, whichever comes first.

We have a 1992 royalty agreement with Abel Laboratories, Inc., an affiliate of
our Chairman and Chief Executive Officer, Dr. David Long. Under this agreement,
Abel assigned to us all of its rights and interests in all inventions and/or
technology conceived and/or developed by it in connection with laboratory
services performed by it for us which relate to the use of bioelectronics in the
diagnosis, screening or management of disease, infection, ovulation or other
bioelectric events. This agreement also provides that Abel is entitled to
royalties of 5% of net sales of products incorporating any of these inventions
or technology which are embodied in any patent issued to us, during the life of
the patent, up to a maximum of $2 million per patent, as well as a portion of
the proceeds we may receive from the license of these patents to others. As of
February 28, 2002, one patent has been issued to us, which is covered by this
agreement.

On October 16, 2000, we entered into a license agreement with Cardio Dynamics
International Corporation, a manufacturer of disposable electrical
bio-impendence devices, for use of our interconnect design patent on cables to
be manufactured by them. The initial term of the agreement expires on December
31, 2003 and is renewable by Cardio Dynamics for an additional two years
provided that we are able to agree on a minimum royalty for such additional
term. The fee to be paid to us for the non-exclusive license is based upon the
number of licensed products manufactured under the agreement. We have the right
to terminate the agreement if we do not receive minimum royalties of $19,770
with respect to the year 2001, $46,890 with respect to the year 2002 and $98,465
with respect to the year 2003.

On December 7, 2001, we entered into a three-year distribution agreement with
Trilogy Critical Care (Pty) Ltd. of Johannesburg, South Africa. The agreement
grants Trilogy Critical Care the exclusive right to market and sell the Biofield
Diagnostic System in South Africa and certain other southern African countries
during the three-year period commencing December 1, 2001, conditioned on Trilogy
achieving certain minimum sales on an annual basis.

Research and Development

All of our research and development activities have been related to our core
technology and our attempt to commercialize this technology. Since we are still
in the development stage, our research and development activities have been
substantial. During 1998, our research and development expenses aggregated
approximately $6.7 million. During 1999 and 2000, due to a severe reduction in
our available financial resources and our decision to curtail operations, we
reduced these expenses to approximately $293,000 and $60,000, respectively. We
spent $220,000 in 2001 and anticipate that our research and development
expenditures, which will be limited by our available financial resources, will
continue to be substantial for at least the next several years. During 2002, we
expect to spend over $300,000 towards redesigning the Biofield Diagnostic
System, which effort will be made under an agreement with TriVirix, our contract
manufacturer. We expect to fund these expenditures from the issuance of our
equity securities, assuming that a market for our equity securities exists and
revenues from operations.

Competition

The medical device industry generally, and the cancer diagnostic and screening
segments in particular, are characterized by rapidly evolving technology and
intense competition. Existing breast cancer diagnostic tools will compete with
our Biofield Diagnostic Device, including imaging equipment such as MRI systems
manufactured by Hitachi Medical Corporation of America, Royal Philips

                                       13
<PAGE>

Electronics, Siemens AG, Toshiba America Medical Systems and others; x-ray
mammography equipment manufactured by General Electric Company, Royal Philips
Electronics, Siemens AG, Picker International division of Marconi plc and
others; ultrasound or high frequency ultrasound systems manufactured by Aligent
Technologies Inc., Siemens AG, Toshiba America Medical Systems, Royal Philips
Electronics and others; stereotactic needle biopsy devices manufactured by Royal
Philips Electronics, Johnson and Johnson Company, Siemens AG and others;
thermograph devices manufactured by Scanted Medical Inc. and Lifeline
BioTechnologies Inc.; devices for blood and/or genetic tests manufactured by
Bayer Corporation, Hoffman-La Roche Ltd., Eli Lilly and Company and others; and
electrical impedance and transilluminational devices manufactured by TranScan
Research & Development Co. Ltd. Other emerging cancer diagnostic devices and
technologies which might compete with the Biofield Diagnostic System, include
OmniCorder, manufactured by BioScan Screening Systems, Inc., which looks at
changes in blood flow surrounding cancer, using thermographs for viewing and
recording heat patterns and R2 Technology, Inc.'s ImageChecker ", a
computer-aided detection device for mammography. In addition, other companies
which produce devices utilizing these tools, as well as other companies which
may be developing, or could in the future attempt to develop, additional
products which assist in diagnosing cancers, including non-invasive products,
could compete with the Biofield Diagnostic System.

Substantially all of these companies have significantly greater resources and
name recognition than we do, and substantially greater expertise than us in
research and development. Since all of these companies have existing products,
they each possess substantially greater experience in manufacturing, marketing
and obtaining regulatory approvals.

Our competitors may succeed in developing or marketing technologies and products
that are more effective than those developed or marketed by us or that would
render our technology and products obsolete or noncompetitive. Additionally, we
cannot assure you that we will be able to successfully compete against these
competitors and potential competitors. Although we believe that our products may
offer certain advantages over our competitors' products, earlier entrants in the
market for a diagnostic application often obtain and maintain significant market
share relative to later entrants, such as us.

Physicians using currently existing imaging equipment, or other diagnostic
techniques, may determine not to use the Biofield Diagnostic System or any other
products that we may develop. Currently, mammography is employed widely and
sales, if any, of the Biofield Diagnostic System will, in part, be dependent on
our ability to demonstrate its additional clinical utility as an adjunct to
mammography and/or physical examination, and its advantages over other available
diagnostic tests and products.

Employees

As of February 28, 2002, we had six full-time employees. One employee is
involved in worldwide sales of our products, one is involved primarily in data
management and supervises our research and development activities and the other
four employees are involved primarily in management, manufacturing, product
development and financial and administrative functions. In addition, we had
three independent consultants, two of who assist us with regulatory work,
including seeking FDA approval, and one of them guides us in our marketing and
sales efforts. We believe that our employee relations are good. None of our
employees is covered by a collective bargaining agreement.

Due to the specialized scientific nature of our business, we are highly
dependent upon our ability to timely attract and retain qualified scientific,
technical and managerial personnel. The loss of the services of existing
personnel, as well as our failure to recruit key scientific, technical and
managerial personnel in a timely manner would be detrimental to our research and
development programs and to our business. Our anticipated growth and expansion
into areas and activities requiring additional expertise, such as marketing,
will require the addition of new management personnel. Competition for qualified
personnel is intense and we cannot assure you that we will be able to timely
attract and retain qualified personnel necessary for the development of our
business.

                                       14
<PAGE>

Risk Factors

We Have a Limited Operating History
-----------------------------------

We have had a limited history of operations. Since our inception in October
1987, we have engaged principally in the development of the Biofield Diagnostic
System, which has not been approved for sale in the United States. Consequently,
we have little experience in manufacturing, marketing and selling our products.

We Expect to Continue to Incur Significant Operating Losses
-----------------------------------------------------------

We currently have no significant source of operating revenue and have incurred
net operating losses since our inception. At December 31, 2000, we had an
accumulated deficit of $58,950,445, which had increased to $61,189,132 at
December 31, 2001. These losses have resulted principally from costs incurred in
research and development and clinical trials and from general and administrative
costs associated with our operations. We expect operating losses to continue for
at least the next several years due principally to the anticipated expenses
associated with the pre-market approval process for the Biofield Diagnostic
System, the proposed commercialization of the Biofield Diagnostic System,
research and development activities and general and administration costs.

Our Business May Never Become Profitable
----------------------------------------

Our ability to achieve profitability will depend, in part, on our ability to
obtain regulatory approvals for the Biofield Diagnostic System and any other
proposed products, and to develop the capacity to manufacture and market any
approved products either independently or in collaboration with others. We
cannot assure you when, or if, we will receive required regulatory approvals for
the development and commercial manufacturing and marketing of the Biofield
Diagnostic System or any other proposed products, or achieve profitability.
Accordingly, the extent of future losses and the time required to achieve
profitability are highly uncertain.

We Will Require Significant Additional Capital to Continue
to Develop our Products, Which May Not Be Available
---------------------------------------------------

We expect that we will need significant funding to complete all the steps
necessary to receive approval from the FDA, including clinical trials and
regulatory matters, and substantial additional funds for operating expenses,
other research and development programs and marketing programs. If we are able
to gain any level of market acceptance for our products, additional funding will
be needed for commercialization of our products. Moreover, our fixed
commitments, including salaries and fees for current employees and consultants,
rent, payments under license agreements and other contractual commitments,
including commitments to previous service providers and others which are
contingent upon improvement in our cash position and have been extended until
some indefinite future time, are substantial and are likely to increase as we
expand our operations. We do not expect to generate positive cash flow for at
least several years, if at all, as revenues, initially, are unlikely to cover
funds required for increases in capital expenditures, working capital needs and
operating expenses, including the expected cost of commercializing the Biofield
Diagnostic System. However, our cash requirements may vary significantly from
those now planned due to uncertainty about the future progress of research and
development programs, results of clinical testing, relationships with strategic
partners, changes, if any, in the focus and direction of our research and
development programs, competitive and technological advances, the FDA and
foreign regulatory processes and other factors. We cannot assure you that
additional financing will be available when needed or, if available, will be
available on acceptable terms. Insufficient funds will prevent us from
implementing our business strategy and will require us to delay, scale back or
eliminate certain, or all, of our research and product development programs or
to license to third parties rights to commercialize products or technologies
that we otherwise would seek to develop ourselves.

Our Products are in the Early Stage of Development and We May Never Be
Able to Bring Them to Market or Sustain Their Sales After Regulatory Approval
-----------------------------------------------------------------------------

Before any of our products that we are currently developing can be marketed and
sold, we must undertake substantial research and development. All new products
face a high degree of uncertainty, including the following:

    o    we may not receive regulatory approval to perform human clinical trials
         for the products we currently have planned or we may be unable to
         successfully complete our ongoing clinical trials.

                                       15
<PAGE>

    o    the results from preclinical studies and clinical trials may not be
         indicative of results that will be obtained in later-stage testing.

    o    we may not be able to timely recruit a sufficient number of patients
         for our clinical trials. (Delays in planned patient enrollment may
         result in increased costs and delays.)

    o    we may not be able to obtain U.S. regulatory approval if we are unable
         to demonstrate that the product is safe and effective for the intended
         use, and obtaining regulatory approval may take significantly more time
         and cost significantly more money than anticipated.

    o    we may determine that the product has undesirable or unintended side
         effects or other characteristics that may make it impossible or
         impracticable for us to continue development or which may limit the
         product's commercial use.

    o    we may not be able to produce the product in commercial quantities at
         reasonable cost.

    o    we may not be able to successfully market the product or to find an
         appropriate corporate partner, if necessary, to assist us in the
         marketing of the product.

    o    the product may not gain satisfactory market acceptance.

    o    the product may be superceded by another product commercialized for the
         same use or may infringe patents issued to others, which would prevent
         us from marketing and selling the product.

    o    after approval, the product may be recalled or withdrawn at any time as
         a result of regulatory issues, including those concerning safety and
         efficacy.

If we are unable to develop products that we can successfully market, our
business, financial condition and results of operations will be significantly
and adversely affected.

We Are Currently Dependent on a Single Product
Which Has Not Yet Been Commercialized
-------------------------------------

Although we are in the process of developing additional applications for our
product based on our core technology, none of these applications is expected to
result in a commercial product for at least several years, if at all.
Consequently, until it is approved for commercial distribution in the United
States, limited distribution of the Biofield Diagnostic System overseas will
account for substantially all of our revenues. Failure to gain U.S. regulatory
approval or market acceptance for the Biofield Diagnostic System would have a
significant adverse effect on our business.

We May Not Be Successful in Marketing Our Products as Planned
-------------------------------------------------------------

While we currently anticipate commencing marketing of our Biofield Diagnostic
System outside of the United States, if were are unable to begin marketing as
planned, our business could be significantly and adversely affected.

Our Contract Manufacturers May Be Unable to
Produce Commercial Quantities of Our Products
---------------------------------------------

Our current contract manufacturer for the Biofield Diagnostic System has not yet
manufactured our product and we cannot assure you that it will be able to
manufacture in volume, when or if the need may arise. If this situation occurs,
our business could be significantly adversely affected.

                                       16
<PAGE>

If Our Single Source Suppliers Are Unable to Deliver, Our Business Would Suffer
-------------------------------------------------------------------------------

The qualification of additional or replacement suppliers for our products and
their components is a lengthy process, and would take up to nine months to be
approved once such suppliers are identified. For certain services and
components, we currently rely on single suppliers. If we encounter delays or
difficulties with our third-party suppliers in producing, packaging or
distributing our products and their components, market introduction and
subsequent sales would be significantly adversely affected. If we are required
to rely on alternative sources of supply, we cannot assure you that we will be
able to enter into alternative supply arrangements at commercially acceptable
rates, if at all. If we are unable to obtain or retain qualified suppliers and
contract manufacturers on commercially acceptable terms, we will not be able to
commercialize our products as planned. Our dependence upon third parties for the
manufacture and supply of our products and components may significantly
adversely affect our ability to attain profitability and our ability to develop
and deliver our products on a timely and competitive basis.

We May Not Be Able to Adapt Our Technology to Other Products
------------------------------------------------------------

We cannot assure you that our technology can be adapted for breast cancer
screening or for the detection of other cancers. Furthermore, we also cannot
assure you even if we can adapt any proposed devices, that these devices would
be submitted for FDA approval, or for approval by any comparable foreign
regulatory bodies, or would be commercially viable.

We Do Not Currently Have the Financial Resources
to Develop Our Technology to Other Products
-------------------------------------------

Due to our limited financial resources, we do not know when, if at all, we will
be able to commence development efforts for any of our other proposed products.
If we are unable to develop any additional products or uses for our current
product, our business could be adversely affected.

We May Not Be Able to Obtain Government Regulatory
Approval to Market and Sell Our Products
----------------------------------------

Regulation by governmental authorities in the United States is a significant
factor in the manufacture and marketing of our products, as well as our research
and development activities. All of our proposed products will require regulatory
approval by governmental agencies before commercialization and our products must
undergo rigorous preclinical and clinical testing and other pre-market approval
procedures prescribed by the FDA. Once we begin to develop a product, the
necessary actions, including pre-clinical and clinical trials, needed to obtain
required regulatory approval to commercialize that product and begin to market
it to the public are expected to take a number of years. Various federal and, in
some cases, state statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of
medical devices. The lengthy process of seeking these approvals, and the
subsequent compliance with applicable statutes and regulations, will require us
to expend substantial resources. If we fail to obtain or are otherwise
substantially delayed in obtaining regulatory approvals, our business and
operations could be significantly and adversely affected. The regulation of
medical devices, particularly in Europe, continues to develop and we cannot
assure that, as new laws and regulations are adopted, these actions will not
have an adverse effect on us.

Our Products Are Subject  to Continuing Review by the FDA
Which Could Impact On Our Ability to Sell Them in the Future
------------------------------------------------------------

Changes to our products or the manner in which they are used after they are
approved will require additional approval by the FDA. Our failure to receive
approval of such a change on a timely basis, or at all, would have a significant
adverse effect on our business.

                                       17
<PAGE>

A Failure of Our Contract Manufacturers to Comply with FDA
Regulations Would Impact On Our Ability To Sell Our Current Product
-------------------------------------------------------------------

We cannot assure that our manufacturers will be in compliance with the FDA's
quality system regulations and good manufacturing practices, when the FDA
inspects them, or that they will continue to maintain this compliance. A failure
to maintain compliance could significantly delay approval of our pre-market
application to the FDA for the Biofield Diagnostic System or prevent us from
marketing the Biofield Diagnostic System if we obtain this approval, and would
have a significant adverse effect on our business.

If Foreign Regulatory Approvals Are Withdrawn, Our Business Will Suffer
-----------------------------------------------------------------------

We cannot assure you that the foreign regulatory approvals that we have
received, which allow us to sell the Biofield Diagnostic System in certain
foreign countries, will not be withdrawn. Our failure to continue to maintain
these approvals or to obtain any additional foreign approvals could have a
significant adverse effect on our business.

Changes to Health Care Reimbursement
Regulations and Practices Could Adversely Affect Us
---------------------------------------------------

Our ability to successfully commercialize our products will depend, in part, on
the extent to which reimbursement for the cost of our products and related
treatment will be available from government health administration authorities,
private health insurers and other organizations. These third-party payers are
increasingly challenging the price of medical products and services. Several
proposals have been made that may lead to a government-directed national health
care system. Adoption of this type of system could further limit reimbursement
for medical products, and we cannot assure you that adequate third-party
coverage will be available to enable us to establish, and then maintain, price
levels sufficient to realize an appropriate return on our investment in product
development. In addition, we also cannot assure you that the U.S. government or
foreign governments will not implement a system of price controls. Any change in
the existing system might significantly affect our ability to market our
products profitably.

Health Care Insurers May Not Reimburse Us For The Use of Our Products
---------------------------------------------------------------------

Governmental health authorities, private health insurers and other organizations
may not approve the cost for the use of our device as an authorized medical
expenditure under their programs, which would severely restrict the
marketability of our device.

We Expect to Encounter Difficulty in Hiring Required Personnel and
The Loss of any Key Personnel Could Adversely Affect our Operations
-------------------------------------------------------------------

As a small medical technology company, we are heavily dependent upon the talents
of key personnel. Since we only recently have started to recommence our
operations, we have not yet hired all of the required personnel we will need.
Competition for qualified personnel in the biotechnology industries is intense
and we do not know if we will be successful in our recruitment efforts. If we
are unable to attract, and then retain, qualified personnel, our operations will
be significantly adversely affected.

Our Limited Marketing and Sales Experience and Capability Could
Impact Our Ability to Successfully Sell Our Current Products
------------------------------------------------------------

We currently do not have a marketing or sales organization to market the
Biofield Diagnostic System. If we are unable to build and then maintain a
marketing organization and a sales force, either directly or through third
parties, our financial condition and operating results could be significantly
adversely affected.

                                       18
<PAGE>

Our Results of Operations May Suffer if Foreign Trade
is Restricted or Foreign Regulations are Modified
-------------------------------------------------

We intend to commence commercial sales of the Biofield Diagnostic System outside
of the United States before we commence this activity in the United States,
where sales cannot occur unless and until we receive pre-market approval from
the FDA. Thus, until the time, if at all, as we receive approval from the FDA to
market the Biofield Diagnostic System in the United States, our revenues, if
any, will be derived from international sales. A significant portion of our
revenues, therefore, may be subject to the risks associated with international
sales, including foreign regulatory requirements, economic or political
instability, shipping delays, fluctuations in foreign currency exchange rates
and various trade restrictions, all of which could have a significant impact on
our ability to deliver products on a competitive and timely basis and our
ability to achieve profitable operations. Future impositions of, or significant
increases in the level of, customs duties, export quotas or other trade
restrictions could have a significant adverse effect on our business.

We Face Substantial Competition in the Medical Technology
Field and May Not Be Able to Successfully Compete
-------------------------------------------------

The medical technology industry is highly competitive, particularly in the area
of cancer screening and diagnostic products. We are likely to encounter
significant competition with respect to our Biofield Diagnostic System, as well
as any other products we may develop. A number of companies are engaged in the
same field as us, and many of these companies have significantly greater
financial, technical and marketing resources than us. In addition, many of these
companies may have more established positions in the industry and may be better
equipped than us to develop, refine and market their products. Our inability to
successfully compete in the industry would have a significant adverse effect on
our business.

Our Products May Be Rendered Obsolete By Rapid Technological Changes
--------------------------------------------------------------------

Methods for the detection of cancer are subject to rapid technological
innovation and we cannot assure you that technological changes will not render
our Biofield Diagnostic System, as well as any other proposed product, obsolete.
Likewise, we cannot assure you that the development of new types of diagnostic
medical equipment or technology will not have a significant adverse effect on
the marketability of the Biofield Diagnostic System or any other products
developed by us. Commercial availability of these products could render our
products obsolete, which would have a significant adverse effect on our
business.

Product Liability Claims in Excess of the Amount of Our
Insurance Could Significantly Affect Our Financial Condition
------------------------------------------------------------

Our business exposes us to potential product liability risks, which are inherent
in the testing, manufacturing and marketing of cancer detection products.
Significant litigation, none of which has involved us, has occurred in the past
based on allegations of false negative diagnoses of cancer. While the Biofield
Diagnostic System does not purport to diagnose any patient, we cannot assure you
that we will not be subjected to future claims and potential liability. We
cannot assure you that claims against us arising with respect to our products
will be successfully defended or that the insurance then carried by us will be
sufficient to cover liabilities arising from these claims. A successful claim
against us in excess of our insurance coverage would, in most instances, deplete
our assets and have a significant adverse effect on our business. Furthermore,
we cannot assure that we will be able to obtain or maintain liability insurance
on acceptable terms at all times.

Our Contract Manufacturers Use Potentially Hazardous
Materials, the Replacement of Which Could Affect Our Costs
----------------------------------------------------------

Although we do not manufacture any of our products, we understand that various
cleaning solvents, used in connection with the contract manufacture of our
products, may contain potentially hazardous materials. As a result, our contract
manufacturers, in the future, could become subject to stringent federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
these materials. We cannot assure you that we will not incur significant future
price increases imposed by our contract manufacturers to comply with
environmental laws, rules, regulations and policies, or that our business will
not be significantly and adversely affected by current or future environmental
laws, rules, regulations and policies or by any releases or discharges of
hazardous materials.

                                       19
<PAGE>

If We Are Unable to Protect Our Intellectual Property
Rights, We Could Lose Our Competitive Advantage
-----------------------------------------------

Our commercial success will be dependent upon proprietary rights that we own or
license. We cannot assure you that any of our pending patents will be issued or
that any of our issued patents will not be validated or that our patents will
provide us protection that has commercial significance. Litigation may be
necessary to protect our patent positions, which could be costly and time
consuming. If any of our key patents that we own or license is invalidated, our
business may be significantly adversely affected. In addition, other companies
may have trade secrets or may independently develop know-how or obtain access to
our trade secrets, know-how or proprietary technology, which could significantly
and adversely affect our business.

We Do Not Have the Financial Resources to Enforce
and Defend All of Our Intellectual Property Rights
--------------------------------------------------

The actions, which we may take to protect our intellectual property, may not be
adequate to deter misappropriation of this property. We currently do not have
adequate financial resources required to enforce, through litigation, all of our
intellectual property rights. In addition, litigation could result in a
substantial diversion of managerial time and resources, which could adversely
affect our business.

Our Products May Infringe Third Party Intellectual Property Rights
------------------------------------------------------------------

Other companies may have filed applications for, or have been issued patents and
obtained other proprietary rights to technology that may be potentially useful
to us. Since we do not have the resources to maintain a staff whose primary
function is to investigate the level of protection afforded to third parties on
devices and components which we use in our products, it is possible that a third
party could successfully claim that our products infringe on their intellectual
property rights. If this were to occur, we may be subject to substantial
damages, and we may not be able to obtain appropriate licenses at a cost we
could afford and we may not have the ability to timely redesign our products. If
we are required to pay material damages or are unable to obtain these rights or
are unable to successfully redesign our products at a reasonable cost, our
business could be significantly adversely affected.

Our Stock Price Has Been Volatile
---------------------------------

The price of our common stock has fluctuated substantially since our initial
public offering in 1996. The market price for our common stock, like that of the
common stock of many other medical device companies, is likely to continue to be
highly volatile.

Our Principal Stockholder Can Control Most
Matters Requiring Approval by Our Stockholders
----------------------------------------------

Dr. David Long, our Chairman and Chief Executive Officer, and his son, Raymond,
and their respective affiliated entities, beneficially own an aggregate of
14,896,826 shares of our common stock, or 59% of our outstanding shares. As a
result, Dr. David Long has the ability to determine the election of our
directors, direct our policies and control the outcome of substantially all
matters that are subject to the vote of our stockholders. This concentration of
ownership, among other things, also may increase our difficulty in raising
necessary financing.

If We Issue Any of Our Available Preferred Stock,
Our Stockholders Could Be Adversely Impacted
--------------------------------------------

In addition to our authorized shares of common stock, we are authorized to issue
12,300,000 shares of preferred stock. Our Board of Directors may, at any time,
determine to issue shares of preferred stock in connection with our future

                                       20
<PAGE>

financing needs. The rights of these shares of preferred stock will be superior
to those of our common stock and may adversely affect the rights of the holders
of our common stock.

Our Stockholders Could Be Adversely Affected
by the Anti-Takeover Effects of Delaware Law
--------------------------------------------

We are subject to the provisions of Section 203 of the General Corporation Law
of the State of Delaware. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner or unless the interested
stockholder acquires at least 85% of the corporation's voting stock (excluding
shares held by certain designated stockholders) in the transaction in which it
becomes an interested stockholder. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the previous three years did own, 15% or more of the corporation's voting
stock. This provision of the Delaware law could delay and make more difficult a
business combination even if the business combination would be beneficial, in
the short term, to the interests of our stockholders and also could limit the
price certain investors might be willing to pay in the future for shares of our
common stock.

We Do Not Expect That We Will Pay Dividends
-------------------------------------------

We have never declared or paid any cash dividends on our capital stock and do
not intend to pay any cash dividends in the foreseeable future.

Resales of Restricted Shares Held By Our Current Directors and
Executive Officers May Lower the Market Price of Our Common Stock
-----------------------------------------------------------------

At February 28, 2002, 25,223,478 shares of our common stock were outstanding, of
which approximately 7.75 million shares were freely tradable by the holders of
these shares without limitations under the Securities Act of 1933. Substantially
all of the remaining shares of our outstanding common stock were held by our
current executive officers and directors and their affiliated entities, who are
generally subject to the volume and other limitations of Rule 144 promulgated
under the Securities Act of 1933. These persons, after they have held their
shares for a period of one year, are eligible to sell their shares pursuant to
the volume and other limitations of Rule 144. Three months after these persons
are no longer deemed to be our affiliates, and provided that they have held
their shares for more than one year, they will be able to sell their shares
without restriction under Rule 144. Sales of substantial amounts of our
restricted shares of common stock in the public market, or the perception that
these sales could occur, could adversely affect the trading price of our common
stock and could impair our ability to raise funding through an offering of our
equity securities.

Future Issuances of Our Securities May Be Dilutive to Our Stockholders
----------------------------------------------------------------------

We will need additional capital to fund our future operations through public or
private financings or collaborative licensing or other arrangements with
corporate partners. If additional funds are raised by issuing equity securities,
dilution to our existing stockholders will occur. As of February 28, 2002,
options to purchase a total of 1,138,531 shares of our common stock were
outstanding with a weighted average exercise price of $1.86 per share, 783,531
of which were then exercisable. In addition, 1,018,529 shares of our common
stock were available for future option grants under our stock option plans. To
the extent that any of the foregoing options are exercised, the interests of our
stockholders would be diluted.

Special Note Regarding Forward-looking Statements
-------------------------------------------------

We have made statements in this Annual Report on Form 10-KSB that are
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934. Sometimes these statements contain
words like 'may,' 'believe,' 'expect,' 'continue,' 'intend,' 'anticipate' or
other similar words. These statements could involve known and unknown risks,

                                       21
<PAGE>

uncertainties and other factors that might significantly alter the actual
results suggested by the statements. In other words, our performance might be
quite different from what the forward-looking statements imply. The following
factors, as well as those discussed above in Item 1 - "Description of Business",
could cause our performance to differ from the implied results:

    o    inability to obtain capital for continued operations and the
         development and commercialization of our products.

    o    inability to obtain FDA approval for our products in a timely manner,
         if at all.

    o    failure to obtain expected results in our clinical trials.

    o    technological obsolescence of our products.

    o    changes in governmental regulations in our principal markets.

    o    inability to generate significant market acceptance of our products.

    o    failure to obtain customers for our products.

    o    inability to manage our growth.

    o    loss of our key employees.

    o    changes in general economic and business conditions.

    o    inability to obtain third party reimbursement for use of our products.

We have no obligation to release publicly the result of any revisions to any of
our "forward-looking statements" to reflect events or circumstances that occur
after the date of this Report or to reflect the occurrence of other
unanticipated events.

Item 2.  Description of Property

All of our operations currently are conducted from our offices located at Units
M and K, 1025 Nine North Drive, Alpharetta, Georgia. We lease our office space,
which comprises approximately 4,000 square feet, on a month-to-month basis for
an aggregate monthly payment of $2,020.

We intend to move our operations to 2737 Via Orange Way, Spring Valley,
California and to occupy approximately 5,000 square feet of furnished and
laboratory equipped space being subleased under the same terms and conditions as
the original lease from Abel Laboratories, Inc., an affiliate of Dr. David Long,
our Chairman and Chief Executive Officer. The space currently is leased by Abel
at an annual cost of $54,328 with an automatic annual adjustment based upon any
increase that may occur in the Consumer Price Index under a lease expiring April
1, 2004. We believe that the terms and conditions of this sublease are no less
favorable to us than those that would be available from an unaffiliated third
party. We estimate the cost of such move, including moving expenses and
relocation costs of employees, to be approximately $300,000. Although we have
begun to move records relating to research and development used by our Chief
Executive Officer who operates principally from California, the Company's
administrative and Regulatory and Quality Assurance functions are still carried
out in, and our full-time employees are still located at, our Alpharetta office.
The timing of our moving these functions, and our employees, to California will
depend on the achievement of certain operational and regulatory milestones.

Item 3.  Legal Proceedings

We are not a party to any pending legal proceeding which is not routine
litigation incidental to our business or which involves a claim for damages

                                       22
<PAGE>

exceeding 10% of our current assets, nor are we aware of any proceeding that a
governmental authority is contemplating.

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

No matter was submitted to a vote of our securities holders during the fiscal
quarter ended December 31, 2001.


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Our common stock, par value $.001 per share, traded, until February 9, 1999, on
the Nasdaq National Market, at which time it was delisted as a result of our
continued failure to comply with certain listing requirements. Since that date,
and until July 21, 2000, our common stock was quoted on the OTC Bulletin Board.
Commencing July 24, 2000, our common stock has been listed in the "Pink Sheets"
published by The National Quotation Bureau, Inc.

The following table sets forth the high and low per share sales prices for our
common stock as reported by The Nasdaq Stock Market, Inc. InfoQuote service
furnished by Financial Insight Systems, Inc. for the periods indicated.

Year ended December 31, 2000
----------------------------

First Quarter                                          $ 2.2500        $ 0.1250
Second Quarter                                           1.0312          0.3438
Third Quarter                                            1.3500          0.3000
Fourth Quarter                                           1.0200          0.3400

Year ended December 31, 2001
----------------------------

First Quarter                                            0.8400          0.2800
Second Quarter                                           0.4500          0.2600
Third Quarter                                            0.7500          0.3000
Fourth Quarter                                           0.9000          0.3700

Year ending December 31, 2002 (through February 28)
---------------------------------------------------

First Quarter (through February 28)                      0.6900          0.3300

On February 28, 2002, the closing sale price for our common stock was $0.37, as
reported by The Nasdaq Stock Market, Inc. InfoQuote service furnished by
Financial Insight Systems, Inc. As of December 31, 2001, there were
approximately 139 holders of record of our common stock, including Cede & Co.,
who held an aggregate of 5,036,411 shares for an undisclosed number of
beneficial holders.

We have not declared or paid any dividends since our inception, and do not
intend to pay any cash dividends in the foreseeable future. We currently
anticipate that we will retain all earnings, if any, for use in the operation
and expansion of our business.

Since December 31, 2000, we have not sold any of our securities without
registration under the Securities Act of 1933, although we have made option
grants under our 1996 Stock Option Plan, an option grant under our 1992 Employee
Stock Incentive Plan and an option grant to David Long, as described in Item 10.
"Executive Compensation".

Item 6.  Management's Discussion and Analysis or Plan of Operations

The following discussion and analysis should be read in conjunction with our
Financial Statements and Notes thereto appearing elsewhere in this document.

                                       23
<PAGE>

Overview

As a development stage company, we have incurred net losses since inception
through December 31, 2001 of approximately $61 million. We will continue to
incur losses for at least the next several years. In the short term, the
majority of our financial resources, after payment of necessary operating
expenses, will be utilized in an effort to obtain FDA approval for the Biofield
Diagnostic System, to conduct additional clinical trials, for continuing
research and development activities and for marketing and administration
expenses associated with the anticipated commercialization of the Biofield
Diagnostic System. To date, we have not generated material revenues from the
commercialization of any products.

In November 1998, we decided to eliminate most of our operations due to lack of
adequate financial resources. In December 1998, our common stock was delisted
from trading on The Nasdaq Stock Market, primarily due to our inability to
comply with certain financial requirements. In March 1999, we announced that our
efforts would be directed to selling our existing technology and/or raising
additional capital, and that, thereafter, if we were unable to sell our
technology or raise additional capital, we would shut down all of our remaining
operations.

In December 1999, we sold an aggregate of 14 million shares of our common stock
for $700,000 to Dr. David Long, his son, Raymond, and their affiliated entities.
Simultaneously with the sale, our then Board of Directors appointed Dr. Long as
a director, whereupon the other directors and all of our then executive officers
resigned. Thereafter, Dr. Long took action to reconstitute our Board of
Directors and Dr. Long was appointed our Chairman and Chief Executive Officer.
In early 2000, as an initial step in the process of recommencing our operations,
we sold an additional 440,000 shares of our common stock to our then
non-affiliated directors and executive officers for an aggregate of $22,000. In
addition, on December 15, 2000, we sold an aggregate of 3 million shares of our
common stock, in a private placement, for $1,500,000.

In 2001, besides continuing the efforts necessary for us to commence to seek FDA
approval, we commenced activities to market the Biofield Diagnostic System
overseas, based upon our CE mark Certification and certification to ISO - 9001.
In June 2001, we appointed Steven Preiss as our Vice President of Regulatory and
Clinical Affairs and Quality Assurance. In August 2001, we hired Arthur C.
Hilmer as Vice President Sales and, in September 2001, Nancy Patterson was
recruited as Vice President Worldwide Sales & Marketing to strengthen our
marketing efforts. In October 2001, we entered into a $364,000 contract with a
manufacturer of medical devices to redesign the Biofield Diagnostic System,
mainly to replace obsolete parts, incorporate new technology and make other
changes to reduce manufacturing costs.

Results of Operations

Comparison of the Year Ended December 31, 2001
with the Year Ended December 31, 2000
-------------------------------------

Research and development expenses include the costs of engineering,
manufacturing and clinical trials and related activities conducted in connection
with obtaining required governmental and regulatory approvals for the Biofield
Diagnostic System, as well as expenses related to the enhancement of the
Biofield Diagnostic System to enable it to meet the technical and functional
requirements for economic viability. During the later part of 1999, we had
temporarily eliminated our research and development efforts and related
infrastructure due to the then severe reduction in our available financial
resources, which efforts did not recommence until the last quarter of 2000.
Research and development expenses increased by $162,946 or 271%, to $223,172 in
2001 from $60,226 in 2000, primarily because no research and development
expenditure was incurred during the first nine months of 2000. Research and
development expenses in 2001 also include $65,164 spent towards redesign of the
Biofield Diagnostic System.

Selling, general and administrative expenses increased by $586,438 or 40%, to
$2,036,356 in 2001 from $1,449,918 in 2000. The increase was largely
attributable to costs incurred to renew our efforts to build the infrastructure
for anticipated commencement of operations and to fulfill requirements in
connection with the re-registration of our common stock with the SEC and to an
increase in the inventory obsolescence reserve of $179,916. During 2001, four
new officers were hired in anticipation of increased activity.

                                       24
<PAGE>

Net interest income decreased by $5,664 or 84% to net interest income of $1,071
in 2001 from net interest income of $6,735 in 2000, due to the depletion of our
available cash and subsequent borrowing against a line of credit to fund
operations in 2001.

Royalty income increased by $11,202 or 131% to $19,770 in 2001 compared to
$8,568 in 2000. In 2000, we entered into a license agreement, which generated
royalties only in the last quarter of the year, while in 2001 we received
royalties for the entire year.

As a result of the foregoing, we incurred a net loss of $2,238,687, or $0.09 per
share, in 2001, compared to a net loss of $1,522,223, or $0.07 per share, in
2000.

Comparison of the Year Ended December 31, 2000
with the Year Ended December 31, 1999
-------------------------------------

Research and development expenses decreased by $232,674 or 79%, to $60,226 in
2000 from $292,900 in 1999, primarily as a result of the write-off of certain
patents in 1999, which expense did not recur in 2000.

Selling, general and administrative expenses increased by $352,857 or 32%, to
$1,449,918 in 2000 from $1,097,061 in 1999. During 2000, three new officers were
hired in anticipation of increased activity in the near future.

Net interest income decreased by $20,374 or 75% to $6,735 in 2000 from $27,109
in 1999, due to the significant decrease of our cash position as this cash was
utilized in our operations.

In 2000, we also wrote off most of our obsolete fixed assets and incurred a net
loss of $39,812. In 1999 no loss or gain arose from disposal or write-off of
fixed assets.

As a result of the foregoing, we incurred a net loss of $1,522,223, or $0.07 per
share, in 2000, compared to a net loss of $1,253,696, or $0.16 per share, in
1999.

Liquidity and Capital Resources
-------------------------------

We have financed our operations since inception almost entirely by the issuance
of equity securities, interest income on the then unutilized proceeds from these
issuances, and since June 2000 with short-term bank borrowing the repayment of
which has been guaranteed by Dr. David Long, our Chairman and Chief Executive
Officer, and certain of his affiliates.


At December 31, 2001, our total short-term liabilities were more than total
current assets by $695,858, as compared to working capital of $1,384,004 at
December 31, 2000, a decrease of $2,079,862. Our unrestricted cash and cash
equivalents were $25,121 at December 31, 2001, as compared to $1,339,273 at
December 31, 2000. In addition, at December 31, 2001 and December 31, 2000, we
had $86,432 of restricted cash, which was being held by a third party escrow
agent, pursuant to an agreement between us and a former director and chief
executive officer, which funds had been deposited for the payment of continued
director and officer liability insurance covering our former directors and
executive officers. The escrowed funds were released to us in February 2002
after obtaining the prescribed insurance coverage through March 17, 2003. At
December 31, 2001, we had $540,275 of inventory, as compared to $692,752 at
December 31, 2000, of which approximately $496,000 (net of a valuation reserve
of approximately $180,000) was finished goods, as compared to approximately
$655,000 at December 31, 2000, consisting of units of the Biofield Diagnostic
System and sensors. All of these units are believed to be currently saleable at
prices in excess of their carrying cost.

During 2001, our operating activities utilized $1,761,521 of net cash, primarily
to fund operations, our investing activities utilized $17,350 of net cash,
primarily to continue processing our patent applications, and our financing
activities provided $464,000 of net cash representing our net borrowing under a
bank line of credit. During 2000, our operating activities utilized $1,128,946
of net cash, our investing activities utilized $38,054 of net cash to acquire
equipment and for patent applications, and our financing activities provided
$1,525,000 of net cash from the private placement of our securities, before
utilization of $286,000 to pay off bank borrowings.

                                       25
<PAGE>

In November 1998, we discontinued most of our operations due to lack of adequate
financial resources and substantially all of our activities ceased. On December
28, 1999, in connection with the receipt of $700,000 of funding and as a
condition of this funding, all of our previously elected directors and executive
officers resigned and their employment obligations were settled. A new Board of
Directors subsequently took office, elected executive officers and took actions
to recommence our operations.

In June 2000, we obtained a $500,000 line of credit from a bank (the Bank),
repayment of which has been personally guaranteed by Dr. David Long, our
Chairman and Chief Executive Officer and certain of his affiliates and secured
by their collateral (the Line). On December 15, 2000, we sold an aggregate of 3
million shares of our common stock for $1,500,000, the proceeds of which were
used for operating activities and for the repayment of $286,000 of then existing
drawdowns under the Line.

In August 2001, we again began to draw against the Line, mainly to pay for
operating activities. In November 2001, the Line was increased from $500,000 to
$750,000 and, in January 2002 was further increased to $1,000,000. As of
February 28, 2002, we had drawn $970,000 under the Line.

In March 2002, Dr. Long issued his written commitment to us to provide all of
our financing needs to enable us to meet our operating and capital requirements
through the end of 2002. At such time, our 2002 budget reflected that we
projected approximately $3.1 million of expenses and the attainment of
approximately $1.47 million in revenues. Since our inception in 1987 through
December 31, 2001, we had attained revenues aggregating only $22,582 and we
cannot assure that our revenue goal will be met in 2002, if at all. Likewise, we
cannot assure you that our 2002 budget will not be modified if we are not
successful in attaining our projected revenue goal. It is anticipated that the
financial support that Dr. Long will provide may be in the form of loans (which
may or may not be interest bearing), capital contributions or in the nature of
assisting in having the Bank further increase the Line, by extension of Dr.
Long's guarantee to the Bank, secured by assets of Dr. Long and certain of his
affiliates, although no such arrangements have yet been made.

During 2002, we intend to seek additional funding of at least $1,500,000 through
a private placement of our securities. Although we have had preliminary
discussions with the management company associated with an institutional holder
of our shares of common stock to assist us in such placement, we cannot assure
you that any such placement will be successful or whether such additional
funding will be timely received, if at all. Until consummation of such
placement, we anticipate that we will continue to attempt to defer payment of
all of our obligations which are capable of being deferred, which actions may
materially affect some of our vendor relationships.

In the event that we are successful in obtaining third-party funding, we do not
expect to generate a positive cash flow from our operations for at least several
years, if at all, due to anticipated expenditures for research and development
activities, administrative and marketing activities, and working capital
requirements and expect to raise such further capital through one or more
further private placements after 2002.

During 2002, we anticipate expending significant amounts on our research and
development activities, primarily in data extraction and interpretation and in
development activities relating to an enhanced version of the Biofield
Diagnostic System. Our payroll cost has recently increased due to our hiring of
several executive personnel.

As of February 28, 2002, we did not have any material commitments for capital
expenditures; although in October 2001 we entered into a $364,000 contract to
redesign the Biofield Diagnostic System over an estimated twelve-month period.
As of December 31, 2001, we had paid $65,164 under this contract.

At December 31, 2001, we estimated that we had available net operating loss
carry forwards of approximately $58 million for Federal and state purposes,
which expire in years 2002 through 2021. However, substantially all of these
carry forwards are not expected to be utilizable to reduce future taxable
income, if any, as a result of limitations imposed by Section 382 of the
Internal Revenue Code under the Tax Reform Act of 1986, due to ownership changes
which occurred in 1992, 1995, 1997 and 1999.

                                       26
<PAGE>

Certain Critical Accounting Policies
------------------------------------

Impairment of long-lived assets
-------------------------------

At December 31, 2001, we had $349,250 of capitalized patent costs. In assessing
the recoverability of our patents, we have made assumptions regarding estimated
future cash flows and other factors relating to the use of our patents to
determine the fair value of the respective assets. If our estimates or their
related assumptions change in the future, we may be required to record
additional charges for theses assets not previously recorded. For the year ended
December 31, 2001, we have written off approximately $30,000 related to patents,
which we do not believe will be recoverable during their estimated economic
life. Subsequent impairment losses, if any, will be reflected in operating
income in our statement of operations.

Valuation of deferred tax assets
--------------------------------

In assessing the realizability of deferred tax assets, we have considered
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. At December 31, 2001 and
2000, we have made full provision for our deferred tax assets due to our
continued operating losses and inability to assess the likelihood of generating
sufficient future taxable income to realize such benefits. Substantially all of
our operating losses are subject to limitation and may expire unutilized.

Inventory valuation reserves
----------------------------

We provide for inventory obsolescence based upon assumptions about future
demand, market conditions and anticipated timing of the release of next
generation products. If actual market conditions or future demand are less
favorable than those projected by management, or if next generation products are
released earlier than anticipated, additional inventory write-downs may be
required.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 establishes accounting and
reporting standards for derivatives and hedging. It requires that all
derivatives be recognized as either assets or liabilities at fair value and it
establishes specific criteria for the use of hedge accounting. We adopted SFAS
133 on January 1, 2001, which had no material effect on our consolidated results
of operations, financial position, cash flows or stockholders" equity.

On June 29, 2001, SFAS No. 141, "Business Combinations" was approved by the
FASB. SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Goodwill and certain
intangible assets will remain on the balance sheet and not be amortized. On an
annual basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs may be necessary. SFAS No. 141 was required to be implemented by
July 1, 2001. There was no material effect on our consolidated financial
position or results of operations upon adoption of SFAS No. 141.

On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. We are required to implement SFAS No. 142 on January
1, 2002 and expect that such implementation will not have a material effect on
our consolidated financial position or results of operations.

On August 1, 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was approved by the FASB. SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 142 is required to be adopted on January 1, 2002 and we do not
expect any material effect on our consolidated financial position or results of
operations as a result thereof.

                                       27
<PAGE>

Item 7.  Financial Statements


Index to Financial Statements
-----------------------------

                                                                            Page
                                                                            ----

Independent Auditors' Report.................................................F-1

Consolidated Balance Sheets..................................................F-2

Consolidated Statements of Operations........................................F-3

Consolidated Statements of Stockholders' Equity (Deficit)....................F-4

Consolidated Statements of Cash Flows........................................F-7

Notes to Consolidated Financial Statements...................................F-9

                                       28
<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Biofield Corp.

We have audited the accompanying consolidated balance sheets of Biofield Corp.
(a development stage company) (the "Company") as of December 31, 2001 and 2000
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 2001 and for the period October 16, 1987 (date of inception)
through December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2001
and 2000 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001 and for the period October 16,
1987 (date of inception) through December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 13 to the Consolidated Financial Statements, the Company is
in the development stage as of December 31, 2001.

/s/ Deloitte & Touche LLP

Atlanta, Georgia
March 22, 2002

                                       F-1
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------

                                                                 December 31,
                                                         ----------------------------
ASSETS                                                        2001            2000
<S>                                                      <C>             <C>

CURRENT ASSETS:
  Cash and cash equivalents                                    25,121       1,339,273
  Restricted cash                                              86,432          84,717
  Short-term investments                                           --             719
  Inventories                                                 540,275         692,752
  Other current assets                                        156,134          34,599
                                                         ------------    ------------
      Total current assets                                    807,962       2,152,060

PROPERTY AND EQUIPMENT - Net                                   20,320          21,577
OTHER ASSETS                                                   22,753          22,753
PATENT AND PATENT APPLICATION - Net                           349,250         406,818
                                                         ------------    ------------
TOTAL                                                    $  1,200,285    $  2,603,208
                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFECIT)

CURRENT LIABILITIES:
  Accounts payable                                            558,790         349,211
  Line of credit borrowings                                   750,000         286,000
  Due to affiliate                                             61,371          56,845
  Accrued expenses                                            133,659          76,000
                                                         ------------    ------------
      Total current liabilities                             1,503,820         768,056

COMMITMENT AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY (DEFECIT):
  Preferred Stock, $.001 par value; authorized
    12,300,000 undesignated shares (Note 10);
    no shares issued or outstanding
  Common Stock, $.001 par value; authorized 40,000,000
    shares; issued 27,529,609 shares                           27,530          27,530
  Treasury stock - 2,306,131 shares                            (3,100)         (3,100)
  Additional paid-in capital                               60,861,167      60,761,167
  Accumulated deficit during development stage            (61,189,132)    (58,950,445)
                                                         ------------    ------------
    Total stockholders' equity (defecit)                     (303,535)      1,835,152
                                                         ------------    ------------
TOTAL                                                    $  1,200,285    $  2,603,208
                                                         ============    ============
</TABLE>

See notes to consolidated financial statements.

                                       F-2
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------
                                                                                                 October 16, 1987
                                                                Year Ended                         (Inception) to
                                                               December 31,                     December 31, 2001
                                            ---------------------------------------------------------------------
                                                2001               2000               1999

<S>                                         <C>                <C>                <C>                <C>
REVENUE                                                              22,582                                22,582
COST OF SALES                                         --             10,162                 --             10,162
                                            ------------       ------------       ------------       ------------
GROSS PROFIT                                          --             12,420                 --             12,420

OPERATING EXPENSES:
  Research and development                       223,172             60,226            292,900         40,056,772
  Selling, general, and administrative         2,036,356          1,449,918          1,097,601         23,172,267
  (Gain) loss on disposal of fixed assets             --             39,812           (109,696)            (8,084)
                                            ------------       ------------       ------------       ------------
     Total operating expenses                  2,259,528          1,549,956          1,280,805         63,220,955


OTHER INCOME (EXPENSE):
  Interest income                                 14,793              9,584             28,882          2,476,723
  Interest expense                               (13,722)            (2,849)            (1,773)          (465,909)
  Royalty income                                  19,770              8,568                 --             28,338
                                            ------------       ------------       ------------       ------------
     Net other income                             20,841             15,303             27,109          2,039,152
                                            ------------       ------------       ------------       ------------
LOSS BEFORE INCOME TAXES                      (2,238,687)        (1,522,233)        (1,253,696)       (61,169,383)
PROVISION FOR INCOME TAXES                            --                 --                 --            (19,749)
                                            ------------       ------------       ------------       ------------
NET LOSS                                    $ (2,238,687)      $ (1,522,233)      $ (1,253,696)      $(61,189,132)
                                            ============       ============       ============       ============

NET LOSS PER SHARE:

     Basic and Diluted                      $      (0.09)      $      (0.07)      $      (0.16)
                                            ============       ============       ============

WEIGHTED-AVERAGE SHARES

     Basic and Diluted                        25,223,478         22,168,589          7,783,478
                                            ============       ============       ============
</TABLE>

See notes to consolidated financial statements.

                                       F-3

<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                Series A          Series B          Series C
                                                            Preferred Stock   Preferred Stock   Preferred Stock     Common Stock
                                                            ----------------  ----------------  ---------------  ------------------
                                                             Shares  Amount   Shares   Amount    Shares  Amount   Shares    Amount
<S>                                                         <C>     <C>       <C>     <C>       <C>     <C>       <C>       <C>
Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)                                                                        549,020  $    55
Issuance of Common Stock in connection with patent
  acquisition ($.001 per share)                                                                                    235,294       24
Net loss, October 16, 1987 to March 31, 1988
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1988                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1989                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1990                                         -        -        -        -        -       -    784,314       79
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1991                                         -        -        -        -        -       -    784,314       79
Retirement of Common Stock held in treasury                                                                       (235,294)     (24)
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)                                                          431,372       43
Sale of Common Stock ($.82 per share, net)                                                                          24,510        2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1992                                         -        -        -        -        -       -  1,004,902      100
Sale of Common Stock  ($7.67 per share, net)                                                                       557,475       55
Exercise of Common Stock options                                                                                     2,451        1
Amortization of deferred compensation
Change in par value of common stock
  from $.0001 to $.001                                                                                                        1,408
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1993                                         -        -        -        -        -       -  1,564,828  $ 1,564
Exercise of Common Stock options                                                                                       735        1
Sale of Series A Preferred Stock
  ($3.97 per share, net)                                  2,119,896  $ 2,120
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                      222,222      222
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1994                                 2,342,118  $ 2,342        -        -        -       -  1,565,563  $ 1,565
  (carried forward)                                       ---------  -------  -------  -------  -------  ------  ---------  -------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                   Deficit
                                                                                 Accumulated    Foreign
                                                           Additional               During      Currency                 Total
                                                            Paid-In    Treasury  Development  Translation            Comprehensive
                                                            Capital     Stock       Stage      Adjustment    Total       Loss
                                                          -----------  -------- ------------- ----------- ----------- -------------
<S>                                                       <C>          <C>      <C>           <C>         <C>          <C>
Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)               $    91,898                                     $   91,953
Issuance of Common Stock in connection with patent
  acquisition ($.001 per share)                                   276                                            300
Net loss, October 16, 1987 to March 31, 1988                                   $   (159,359)                (159,359)
Total comprehensive income (loss)                                                                                      $  (159,359)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1988                                      92,174       -      (159,359)          -      (67,106)
Net loss                                                                           (495,520)                (495,520)
Total comprehensive income (loss)                                                                                      $  (495,520)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1989                                      92,174       -      (654,879)          -     (562,626)
Net loss                                                                           (233,347)                (233,347)
Total comprehensive income (loss)                                                                                      $  (233,347)
                                                          ----------   ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1990                                      92,174       -      (888,226)          -     (795,973)
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)                                                    $ (300)                                  (300)
Net loss                                                                           (285,179)                (285,179)
Total comprehensive income (loss)                                                                                      $  (285,179)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1991                                      92,174    (300)   (1,173,405)          -   (1,081,452)
Retirement of Common Stock held in treasury                      (276)    300
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)   1,248,638                                      1,248,681
Sale of Common Stock ($.82 per share, net)                     19,998                                         20,000
Amortization of deferred compensation                         136,880                                        136,880
Net loss                                                                           (461,061)                (461,061)
Total comprehensive income (loss)                                                                                      $  (461,061)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1992                                   1,497,414       -    (1,634,466)          -     (136,952)
Sale of Common Stock  ($7.67 per share, net)                4,275,223                                      4,275,278
Exercise of Common Stock options                                  624                                            625
Amortization of deferred compensation                         477,453                                        477,453
Change in par value of common stock
  from $.0001 to $.001                                         (1,408)
Net loss                                                                         (3,099,637)              (3,099,637)
Total comprehensive income (loss)                                                                                      $(3,099,637)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1993                                 $ 6,249,306       -    (4,734,103)          -    1,516,767
Exercise of Common Stock options                                  187                                            188
Sale of Series A Preferred Stock
  ($3.97 per share, net)                                    8,411,370                                      8,413,490
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                        999,778                                      1,000,000
Issuance of Common Stock warrants                               2,119                                          2,119
Amortization of deferred compensation                       1,580,320                                      1,580,320
Net loss                                                                         (6,899,515)              (6,899,515)
Total comprehensive income (loss)                                                                                      $(6,899,515)
                                                          -----------  ------  ------------    --------   ----------   ===========
BALANCE AT MARCH 31, 1994                                 $17,243,080       -  $(11,633,618)          -   $5,613,369
  (carried forward)                                       -----------  ------  ------------    --------   ----------

                                                                                                                        (Continued)
</TABLE>

                                      F-4
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                            Series A           Series B          Series C
                                                        Preferred Stock    Preferred Stock    Preferred Stock      Common Stock
                                                       ------------------- ----------------- ----------------- --------------------
                                                        Shares    Amount    Shares  Amount    Shares   Amount    Shares  Amount
<S>                                                    <C>         <C>     <C>       <C>    <C>         <C>     <C>        <C>
BALANCE AT MARCH 31, 1994                               2,342,118   2,342         -      -           -       -   1,565,563   1,565
  (brought forward)
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                                    481,644    482
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1994                            2,342,118   2,342   481,644    482           -       -   1,565,563   1,565
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                                                     2,914,771   2,915
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1995                            2,342,118   2,342   481,644    482   2,914,771   2,915   1,565,563   1,565
Sale of Common Stock  ($9.91 per share, net)                                                                     1,819,000   1,819
Conversion of Series A, Series B, and Series C
  Preferred Stock to Common Stock                      (2,342,118) (2,342) (481,644)  (482) (2,914,771) (2,915)  3,046,474   3,047
Exercise of Common Stock warrants                                                                                    2,058       2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1996                                    -       -         -      -           -       -   6,433,095   6,433
Sale of Common Stock ($2.92 per share, net)                                                                      2,867,670   2,868
Warrants exchanged for Common Stock                                                                                643,639     644
Exercise of Common Stock options                                                                                    50,674      50
Exercise of Common Stock warrants                                                                                    9,531      10
Issuance of Common Stock for consulting                                                                             25,000      25
  services ($4.00 per share, net)
Amortization of deferred compensation
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1997                                    -       -         -      -           -       -  10,029,609  10,030
Repurchase of Common Stock                                                                                      (2,246,131)
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1998                                    -       -         -      -           -       -   7,783,478  10,030
Sale of Common Stock ($.05 per share, net)                                                                      14,000,000  14,000
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1999                                    -       -         -      -           -       -  21,783,478  24,030
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)
Sale of common stock ($0.05 per share)                                                                             500,000     500
Sale of common stock ($0.50 per share)                                                                           3,000,000   3,000
Repurchase of common stock                                                                                         (60,000)
Net loss
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 2000                                    -       -         -      -           -       -  25,223,478 $27,530
                                                       ==========  ======  ========  =====  ==========  ======  ========== =======
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
<S>                                                    <C>          <C>        <C>           <C>        <C>         <C>
BALANCE AT MARCH 31, 1994                                17,243,080         -   (11,633,618)         -    5,613,369
  (brought forward)
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                  1,947,149                                       1,947,631
Issuance of Common Stock warrants                                 6                                               6
Amortization of deferred compensation                        14,859                                          14,859
Net loss                                                                         (4,959,312)             (4,959,312)
Total comprehensive income (loss)                                                                                    $ (4,959,312)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1994                             19,205,094         -   (16,592,930)         -    2,616,553
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                 11,977,856                                      11,980,771
Issuance of Common Stock warrants                               161                                             161
Amortization of deferred compensation                       195,874                                         195,874
Net loss                                                                         (8,739,858)             (8,739,858)
Total comprehensive income (loss)                                                                                    $ (8,739,858)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1995                             31,378,985         -   (25,332,788)         -    6,053,501
Sale of Common Stock  ($9.91 per share, net)             18,026,419                                      18,028,238
Conversion of Series A, Series B, and Series C
  Preferred Stock to Common Stock                             2,692
Exercise of Common Stock warrants                            20,145                                          20,147
Amortization of deferred compensation                        26,093                                          26,093
Net loss                                                                        (10,036,090)            (10,036,090)
Total comprehensive income (loss)                                                                                    $(10,036,090)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1996                             49,454,334         -   (35,368,878)         -   14,091,889
Sale of Common Stock ($2.92 per share, net)               8,377,583                                       8,380,451
Warrants exchanged for Common Stock                            (644)
Exercise of Common Stock options                            168,541                                         168,591
Exercise of Common Stock warrants                            93,299                                          93,309
Issuance of Common Stock for consulting                      99,975                                         100,000
  services ($4.00 per share, net)                            62,579                                          62,579
Amortization of deferred compensation
Net loss                                                                        (10,151,041)            (10,151,041)
Foreign currency translation adjustment                                                       $  1,333        1,333
Total comprehensive income (loss)                                                                                    $(10,149,708)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1997                             58,255,667         -   (45,519,919)     1,333   12,747,111
Repurchase of Common Stock                                               (100)                                 (100)
Net loss                                                                        (10,654,597)            (10,654,597)
Foreign currency translation adjustment                                                         55,891       55,891
Total comprehensive income (loss)                                                                                    $(10,598,706)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1998                             58,255,667      (100)  (56,174,516)    57,224    2,148,305
Sale of Common Stock ($.05 per share, net)                  686,000                                         700,000
Net loss                                                                         (1,253,696)             (1,253,696)
Foreign currency translation adjustment                                                        (43,020)     (43,020)
Total comprehensive income (loss)                                                                                    $ (1,296,716)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1999                             58,941,667      (100)  (57,428,212)    14,204    1,551,589
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)                 198,000                                         198,000
Sale of common stock ($0.05 per share)                       24,500                                          25,000
Sale of common stock ($0.50 per share)                    1,497,000                                       1,500,000
Repurchase of common stock                                             (3,000)                               (3,000)
Net loss                                                                         (1,522,233)             (1,522,233)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Foreign currency translation adjustment                                                        (14,204)     (14,204)
Total comprehensive income (loss)                                                                                    $ (1,522,233)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2000                           $ 60,761,167   $(3,100) $(58,950,445)  $     --  $ 1,835,152
                                                       ============   =======  ============   ========  ===========
                                                                                                                       (Concluded)
</TABLE>

See notes to consolidated financial statements.

                                      F-5
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                            Series A           Series B          Series C
                                                        Preferred Stock    Preferred Stock    Preferred Stock      Common Stock
                                                       ------------------- ----------------- ----------------- --------------------
                                                        Shares    Amount    Shares  Amount    Shares   Amount    Shares  Amount
<S>                                                    <C>         <C>     <C>       <C>    <C>         <C>     <C>        <C>
BALANCE AT DECEMBER 31, 2000                                   --      --        --     --          --      --  27,529,609 $27,530
  (brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 2001                                    -       -         -      -           -       -  27,529,609 $27,530
                                                       ==========  ======  ========  =====  ==========  ======  ========== =======
</TABLE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
<S>                                                    <C>          <C>        <C>           <C>        <C>         <C>
BALANCE AT DECEMBER 31, 2000                           $ 60,761,167    (3,100) $(58,950,445)        --  $ 1,835,152
(brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,238,687)             (2,238,687)
Total comprehensive income (loss)                                                                                    $ (2,238,687)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2001                           $ 60,861,167   $(3,100) $(61,189,132)  $     --  $  (303,535
                                                       ============   =======  ============   ========  ===========

                                                                                                                      (Concluded)
</TABLE>

                                       F-6
<PAGE>

<TABLE>
<CAPTION>
BIOFIELD CORP.

(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                                  October 16, 1987
                                                                                                                   (Inception) to
                                                                                    December 31,                  December 31, 2001
                                                                    ---------------------------------------------------------------
                                                                         2001            2000            1999

<S>                                                                 <C>             <C>             <C>                <C>
OPERATING ACTIVITIES
  Net loss                                                          $  (2,238,687)  $ (1,522,233)   $ (1,253,696)      $(61,189,132)
  Adjustments to reconcile net loss to net cash used in operating
  activities:
    Depreciation and amortization                                          46,308         22,887          99,467          2,577,016
    Amortization of premiums (discount) on short-term investments                                                           156,692
    Loss on disposal of property and equipment                                            39,812          49,777            194,102
    Loss on license and settlement agreement                                                                                 49,026
    Loss on abandonment of patent applications                             29,867                        248,006            277,873
    Vendor settlements                                                                                   (77,257)           (77,257)
    Noncash compensation                                                  100,000        298,000                          3,108,451
    Gain from disposal of fixed assets                                                                  (159,473)          (159,473)
    Interest paid by issue of shares in Common Stock                                                                        297,148
    Changes in assets and liabilities:
      Inventories                                                         152,477          5,069                           (540,275)
      Other current assets                                               (121,535)        44,727        (115,495)          (156,134)
      Other assets                                                         (1,715)        87,713        (104,597)          (134,582)
      Due to affiliate                                                      4,526          1,329         (88,404)            61,371
      Accounts payable and accrued expenses                               267,238       (106,250)       (259,122)           648,832
                                                                    -------------   ------------    ------------       ------------
        Net cash used in operating activities                          (1,761,521)    (1,128,946)     (1,660,794)       (54,886,342)
                                                                    -------------   ------------    ------------       ------------

INVESTING ACTIVITIES
  Acquisition of property and equipment                                    (7,458)       (24,439)                        (2,596,726)
  Costs incurred for patents and patent applications                       (9,892)       (13,615)         (5,066)          (782,527)
  Proceeds from sale of property and equipment                                                           291,331            294,748
  Purchases of short-term investments                                                                                   (26,476,638)
  Proceeds from sales and maturities of short-term investments                                                           26,319,946
                                                                    -------------   ------------    ------------       ------------
        Net cash provided by (used in) investing activities               (17,350)       (38,054)        286,265         (3,241,197)
                                                                    -------------   ------------    ------------       ------------

FINANCING ACTIVITIES
  Repayments of capitalized lease obligations                                                                               (82,234)
  Proceeds from issuance of Series A Preferred Stock - net                                                                8,413,490
  Proceeds from issuance of Series B Preferred Stock - net                                                                1,947,631
  Proceeds from issuance of Series C Preferred Stock - net                                                               11,980,771
  Proceeds from issuance of Common Stock and Common Stock
    warrants - net                                                                     1,525,000         700,000         33,023,206
  Proceeds from exercise of Common Stock options and Common
    Stock warrants                                                                                                          282,860
  Proceeds from bank borrowings                                           750,000        286,000                          1,842,000
  Payment on bank borrowings                                             (286,000)                                       (1,092,000)
  Repayment of advances from stockholder                                                                                   (145,000)
  Repurchase of Common Stock held in treasury                                             (3,000)                            (3,100)
  Proceeds from notes payable issued to stockholder and related
    party                                                                                                                 2,096,533
                                                                    -------------   ------------    ------------       ------------
        Net cash provided by financing activities                         464,000      1,808,000         700,000         58,264,157
                                                                    -------------   ------------    ------------       ------------
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS               (1,314,871)       641,000        (674,529)           136,618
    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                         (14,204)        (43,040)          (111,497)

  CASH AND CASH EQUIVALENTS:
    BEGINNING OF PERIOD                                                 1,339,992        713,196       1,430,765
                                                                    -------------   ------------    ------------       ------------
    END OF PERIOD                                                   $      25,121   $  1,339,992    $    713,196       $     25,121
                                                                    =============   ============    ============       ============

See notes to consolidated financial statements                                                                           (continued)
</TABLE>

                                       F-7
<PAGE>

<TABLE>
<CAPTION>
BIOFIELD CORP.

(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                                  October 16, 1987
                                                                                                                   (Inception) to
                                                                                    December 31,                  December 31, 2001
                                                                    ---------------------------------------------------------------
                                                                         2001            2000            1999

<S>                                                                 <C>             <C>             <C>                <C>

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid during the period for interest                          $     10,171    $      2,849    $      1,773       $    462,358
                                                                    ============    ============    ============       ============

SUPPLEMENTAL SCHEDULE FOR NONCASH
  INVESTING AND FINANCING ACTIVITIES:
  Acquisition of property and equipment under
    capitalized lease transactions                                                                                     $     82,234
                                                                                                                       ============

  During the fiscal year ended March 31, 1994, the
    Company issued 222,222 shares of Series A Preferred
    Stock in exchange for an aggregate of $1 million in
    notes payable to a principal stockholder and a former
    Director:

    Notes payable                                                                                                      $  1,000,000
                                                                                                                       ------------
    Issuance of Series A Preferred Stock                                                                               $  1,000,000
                                                                                                                       ============

  At inception, the Company acquired the rights to a
    patent and assumed certain liabilities in exchange
    for 235,294 shares of Common Stock, as follows:

    Fair value of patent acquired                                                                                      $    112,732
    Liabilities assumed                                                                                                     112,432
                                                                                                                       ------------
    Issuance of Common Stock                                                                                           $        300
                                                                                                                       ============

  Pursuant to a license and settlement agreement with
    respect to an acquired patent (see above), the
    Company reacquired during the fiscal year ended
    March 31, 1991 its 235,294 shares of Common Stock
    issued in connection with the acquired patent, which was
    retired during the fiscal year ended March 31, 1992:

    Remaining carrying value of patent on date of
      license and settlement agreement                                                                                 $     49,326
    Common Stock returned to the Company                                                                                        300
                                                                                                                       ------------
    Loss on Settlement                                                                                                 $     49,026
                                                                                                                       ============

  During the fiscal year ended March 31, 1992, the
    Company exchanged 431,372 shares of Common
    Stock for notes, debt and accrued interest
    payable to a principal stockholder:

    Notes payable                                                                                                      $     96,660
    Debt                                                                                                                    854,873
    Accrued interest                                                                                                        297,148
                                                                                                                       ------------
    Issuance of Common Stock                                                                                           $  1,248,681
                                                                                                                       ============


See notes to consolidated financial statements                                                                        (Concluded)
</TABLE>

                                       F-8
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


1.       COMPANY

Biofield Corp. (the "Company") is a development stage company that has developed
a system that assists in detecting breast cancer in a non-invasive and objective
procedure. The Company's breast cancer diagnostic device, the Biofield
Diagnostic System, employs single-use sensors of its own design and a
measurement device to detect and analyze changes in cellular electrical charge
distributions associated with the development of epithelial cancers, such as
breast cancer. Principal activities to date include product development,
conducting clinical trials, recruitment of personnel, and raising capital. The
Company operates in one segment, the biomedical device market.

In March 1996, the Company completed its initial public offering (the "IPO") of
1,819,000 shares of Common Stock, par value $.001 per share ("Common Stock"), at
a purchase price of $11.00 per share, for aggregate proceeds of $18,028,238 (net
of related expenses of $1,980,762).

During the first half of 1997, the Company formed a wholly owned Delaware
corporation, Biofield International, Inc., which established a branch in
Switzerland. The Company closed the Branch in March 1999.

In December 1997, the Company received net proceeds of approximately $8.4
million from the sale of 2,867,670 shares of Common Stock in a private placement
(the "1997 Private Placement"). Concurrent with the closing of the 1997 Private
Placement, the Company issued an aggregate of 643,639 shares of Common Stock in
exchange for previously issued warrants to purchase an aggregate of 1,574,930
shares of Common Stock (see Note 10).

In November 1998, the Company decided to eliminate certain operations due to
lack of adequate financial resources. In December 1998, the Common Stock was
delisted from trading on The NASDAQ Stock Market due primarily to the Company's
lack of compliance with certain financial requirements and, in March 1999, the
Company's reporting obligations under the Securities Exchange Act of 1934 were
terminated. At such time, the Company announced that its efforts would be
directed to selling its existing technology and/or raising additional capital.

In December 1999, the Company sold 14 million shares of Common Stock for
$700,000 to two related investors and their affiliated entities. Simultaneously,
the Company's Board of Directors appointed one of such investors as a director,
whereupon the remaining directors and the Company's then Chief Executive Officer
resigned. Thereafter, such investor became Chairman and Chief Executive Officer
of the Company and took action to reconstitute the Board of Directors.

                                       F-9
<PAGE>

In 2000, the Company completed the process of becoming recertified with ISO
(International Standards Organization) 9001 and obtaining a CE mark compliance
that will allow the Company to introduce and market its product within the
European community.

In 2001, the Company's major efforts were focused on preparations to obtain FDA
approval to market the Company's device in the United States, and to market the
device in certain overseas markets.


2.       SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents and Short-Term Investments - The Company invests its
excess cash in short-term, investment grade corporate obligations, money market
funds, shares of liquid (auction-market) preferred stock and bonds, and
certificates of deposit. For purposes of financial reporting, the Company
considers highly liquid investments with maturity of three months or less to be
cash equivalents. The Company's short-term investments are sold if cash is
needed and, therefore, are considered "available-for-sale."

Restricted Cash - Under an agreement with its previous Chairman of the Board,
the Company, in 1999, placed $109,000 of cash in escrow for payment of premiums
on director and officer insurance for the benefit of its previous directors and
officers. The cash was released from escrow in February 2002 when insurance was
obtained covering the final period ending March 17, 2003 as per the terms of the
agreement.

Inventory - Inventory is valued at the lower of cost (first-in, first-out basis)
or market, including provisions for obsolescence.

Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using straight-line methods over the estimated useful lives of the
assets, principally three to five years, or the term of the lease, if shorter,
for leasehold improvements.

Patents - The costs of patents are amortized on a straight-line basis over their
estimated economic life, not to exceed 17 years.

Revenue recognition - The Company recognizes revenue from the sales of the
Biofield Diagnostic System and sensors when the title and risk of loss has
passed to the customer, if collection is reasonably assured, product pricing is
fixed and determinable, and product returns are reasonably estimatable. Royalty
revenues are recognized in the period earned.

Income Taxes - Deferred tax assets and liabilities are determined for
differences between the financial reporting basis and income tax basis of the
assets and liabilities that will result in taxable or deductible amounts in the
future, based on enacted tax rates applicable to the periods that the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.

Impairment of Long-Lived Assets - Long-lived assets, including patents, are
reviewed for impairment when events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable based on an analysis of
undiscounted future cash flows. Any impairment losses are reported in the period
that the recognition criteria are first applied, based on the fair value of the
asset. Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value, less estimated cost of disposition.

                                      F-10
<PAGE>

Stock-Based Compensation - The Company applies the intrinsic value-based method
of accounting prescribed by Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees", and related interpretations, in accounting for
its stock option plans. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation", established accounting and disclosure
requirements using a fair value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No.123, the Company has elected
to continue to apply the intrinsic value-based method of accounting described
above, and has adopted the disclosure requirements of SFAS No. 123 which are
included in Note 12.

Research and Development - Research and development costs are charged to
operations as incurred.

Basic and Diluted Loss Per Share - The basic loss per share is computed by
dividing loss to common stockholders by the weighted average number of shares of
Common Stock outstanding for the period. Diluted loss per share reflects the
potential dilution that could occur if the Company's dilutive outstanding stock
options were exercised. Common equivalent shares are not included in the per
share calculations of diluted loss per share where the effect of their inclusion
would be antidilutive.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the 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 income and expenses during the reporting
period. Actual results could differ from those estimates.

Comprehensive Income - The Company's comprehensive income information is
included in the consolidated statements of stockholders' equity.

Fair Value of Financial Instruments - The Company's financial instruments
include cash and cash equivalents and short-term debt. The carrying value of
these items approximated their fair values at December 31, 2001.

New Accounting Pronouncements - On June 29, 2001, the Financial Accounting
Standards Board (FASB) approved SFAS No. 141, "Business Combinations". SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Goodwill and certain intangible
assets will remain on the balance sheet and not be amortized. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs may be necessary. SFAS No. 141 was required to be implemented by
July 1, 2001. There was no material effect on the consolidated financial
position or results of operations upon adoption of SFAS No. 141 on July 1, 2001.

On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. The Company is required to implement SFAS No. 142 on
January 1, 2002. Management expects no material effect on the consolidated
financial position or results of operations upon adoption of SFAS No. 142.

                                      F-11
<PAGE>

On August 1, 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was approved by the FASB. SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 is required to be adopted on January 1, 2002. Management
expects no material effect on the consolidated financial position or results of
operations upon adoption of SFAS No. 144.


3.       INVENTORIES

Inventories at December 31, 2001 and 2000 consisted of the following:

                                                2001       2000

         Components and supplies              $ 44,679   $ 37,749
         Finished goods                        675,512    655,003
                                              --------   --------
                                               720,191    692,752
         Less: Reserve for potential losses    179,916         --
                                              --------   --------
                                              $540,275   $692,752
                                              ========   ========


4.       PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2001 and 2000 consisted of the following:


<TABLE>
<CAPTION>
                                                                  2001       2000

<S>                                                             <C>        <C>
Furniture and office equipment                                  $ 40,772   $ 33,314
Production equipment, tooling, and clinical testing equipment    467,441    467,441
                                                                --------   --------
                                                                 508,213    500,755
Less accumulated depreciation                                    487,893    479,178
                                                                --------   --------

                                                                $ 20,320   $ 21,577
                                                                ========   ========
</TABLE>


Depreciation expense for the years ended December 31, 2001, 2000, 1999, and for
the period from inception through December 31, 2001 was $8,715, $5,137, $80,696,
and $2,358,092, respectively.


5.       PATENT AND PATENT APPLICATION COSTS

The Company entered into a 15-year agreement dated December 22, 1992 with a
consultant and inventor for the assignment of certain rights relating to
performance under a laboratory service agreement. The Company paid $100,000 for
such assignment and agreed to pay royalties of five percent of the Net Sales
Price of Covered Inventions (as defined), if any, subject to a limit of
$2,500,000. No royalties have been paid or accrued as of December 31, 2001.

                                      F-12
<PAGE>

The Company has a patent royalty agreement with a related party and his
corporation which would assign all rights to the Company for patented
inventions, if any, resulting from performance under a laboratory service
agreement (see Note 11). The Company has been issued a United States patent in
which the related party is a named co-inventor. No royalties have been paid or
accrued as of December 31, 2001.

Accumulated amortization for patents was $142,218 and $117,917 at December 31,
2001 and 2000, respectively. Patent amortization expense for the years ended
December 31, 2001, 2000, 1999, and for the period from inception through
December 31, 2001 was $37,593, $17,750, $19,041, and $218,926, respectively.

In 2001 and 1999, the Company evaluated its patent application program and
related costs and, as a result, has written off previously capitalized costs of
approximately $30,000 and $248,000, respectively. The fair value of the impaired
patents was determined to be zero as the Company concluded that there was no
alternative market for the patents or expected future cash flows related to the
impaired patents. The Company believes that the remaining net patent and patent
application costs are not impaired.


6.       ACCRUED EXPENSES

Accrued expenses at December 31, 2001 and 2000 consisted of the following:

                                                       2001               2000

Professional fees                                    $105,973           $ 70,000
Other                                                  27,686              6,000
                                                     --------           --------

                                                     $133,659           $ 76,000
                                                     ========           ========


7.       INCOME TAXES

Due to the Company's operating losses, there was no provision for U.S. income
taxes for the years ended December 31, 2001, 2000 and 1999.

At December 31, 2001, the Company had Federal net operating loss carryforwards
of approximately $57.6 million, which expire in years 2002 through 2021. These
losses may be offset against future U.S. taxable income, if any, during the
carryforward period. However, substantially all of the net operating loss
carryforwards may not be utilizable as a result of the limitations imposed by
Section 382 of the Internal Revenue Code due to ownership changes in 1992, 1995,
1997 and 1999.

The tax effects of temporary differences that give rise to deferred tax assets
at December 31, 2001 and 2000 are as follows:

                                      F-13
<PAGE>

                                                     2001              2000

Deferred tax assets:
  Net operating loss carryforwards               $ 22,341,451      $ 22,244,900
  Research and development credits                    467,114           442,252
  Other                                                 1,087            67,498
                                                 ------------      ------------

Total gross deferred tax assets                    22,809,652        22,754,650

Less valuation allowance                          (22,809,652)      (22,754,650)
                                                 ------------      ------------

Net deferred tax assets                          $         --      $         --
                                                 ============      ============


The valuation allowances are equal to the deferred tax assets because of the
uncertainty of the future realization of the assets.


8.       COMMITMENTS AND CONTINGENCIES

Lease Commitments - Total rental expense relating to operating expenses for the
years ended December 31, 2001, 2000, 1999 and for the period from inception to
December 31, 2001 was $79,859, $28,623, $55,273, and $1,245,800, respectively.

In 1999, the Company canceled or terminated various office leases for office
facilities that were being rented for an aggregate of approximately $17,000 per
month. Beginning in 1999, the then Chief Executive Officer rented an office
under a month-to-month lease for $1,000 per month, totaling $8,750 for the year
ended December 31, 1999; the lease terminated in early 2000. Currently, the
Company occupies an aggregate of approximately 4,000 square feet near Atlanta,
Georgia under month-to-month leases, at an aggregate minimal rental of $24,240
per annum. The Company intends to move its operations to California, and is
subleasing approximately 5,000 square feet of furnished and laboratory equipped
space in San Diego from Abel Laboratories, Inc., an affiliate of Dr. David Long,
the Company's Chairman and principal stockholder under an arrangement pursuant
to which the Company is paying Abel for its lease costs without any adjustment.
The annual rental of $54,328 paid in 2001 by Abel is annually adjusted for any
future increase in the Consumer Price Index. The Abel lease expires on April 1,
2004.

Employee Agreements - The Company has no employment agreements with any of its
current employees. Pursuant to an employment agreement with a former officer,
the Company is obligated to pay royalties of two percent and one percent,
respectively, on two inventions for which such former officer was the inventor
or co-inventor through December 31, 2005 or until such royalties reach $8
million, whichever occurs first. As of December 31, 2001, no royalties had been
paid or accrued to such former officer.

Vendor Commitments - As part of its ongoing efforts to conserve cash and
maintain its business existence, the Company has negotiated agreements and
settlements with certain vendors. During the period ended December 31, 1999,
certain vendor-payable amounts were settled for an amount approximately $77,000
less than the invoiced amounts and 1999 operating expenses were reduced
accordingly. In addition, approximately $101,000 of the current accounts payable

                                      F-14
<PAGE>

balances at December 31, 2001 ($180,000 at December 31, 2000) has been deferred
by agreement with vendors until such time, if any, as the Company obtains
adequate financial resources.

Line Of Credit - In June 2000, the Company entered into a line of credit
arrangement with a commercial bank that allowed the Company to borrow up to
$500,000 with interest at the bank's prime rate plus one percent. In November
2001, the borrowing limit was increased to $750,000, and subsequently in January
2002 to $1,000,000. The terms of the arrangement were renewed after a one-year
duration with a new maturity date of August 15, 2002. The Company's chairman and
principal stockholder has guaranteed the repayment of all borrowings under this
credit facility. As of December 31, 2001, the Company has drawn $750,000 under
this credit facility.

Redesign Agreement - In October 2001, the Company entered into a $364,000
contract to redesign the Biofield Diagnostic System over an estimated
twelve-month period. As of December 31, 2001, the Company had paid $65,164 under
this contract.

Distribution Agreement - In December 2001, the Company signed an exclusive
three-year distribution agreement to market and sell the Biofield Diagnostic
System in southern Africa, exclusivity of distributorship subject to the
distributor achieving specified annual sales targets.


9.       ROYALTY AGREEMENT

On October 16, 2000, the Company entered into a non-exclusive license agreement
with Cardio Dynamics International Corporation, a manufacturer of disposable
electrical bio-impendence devices, to use the Company's interconnect design
patent on cables. The initial agreement, which is for three years, expires on
December 31, 2003 and is renewable by Cardio Dynamics for an additional two
years based on a mutual agreement of minimum royalties. The royalty payment is
based upon the number of devices manufactured with minimum annual amounts for
the three years. The license agreement can be terminated if minimum royalties of
$46,890, and $98,465 are not received in 2002, and 2003, respectively. The
Company earned $19,770 in 2001, the minimum royalty payable for that year.


10.      STOCKHOLDERS' EQUITY

In December 1993, the Company completed a private placement of 2,342,118 shares
of its Series A Preferred Stock for an aggregate of $9,413,490 (net of related
expenses of $1,126,041). $1 million of the net proceeds were exchanged for
related party loans (see Note 11).

In September 1994, the Company completed a private placement of 481,644 shares
of its Series B Preferred Stock for an aggregate of $1,947,631 (net of related
expenses of $219,761). In connection with such placement, the Company issued,
for no additional consideration, 2,843 warrants to purchase shares of Common
Stock, which warrants expired unexercised in September 1999.

During 1995, the Company completed a private placement of 2,914,771 units of its
securities for an aggregate of $11,980,771 (net of related expenses of
$1,135,699). Each unit consisted of: (i) one share of Series C Preferred Stock;
(ii) one-half of a warrant to purchase a share of Series D Preferred Stock at

                                      F-15
<PAGE>

$6.00 per share, or upon the occurrence of certain events (which subsequently
occurred) a share of Series C Preferred Stock at $4.50 per share; and (iii)
one-half of a warrant to purchase a share of Series D Preferred Stock at $6.00
per share. In addition, the purchasers of the units (the "Unit Purchasers") were
granted the right, upon the occurrence of certain events, to receive an
aggregate of 357,192 warrants to purchase an aggregate of 357,192 shares of
Common Stock at an exercise price of $9.18 per share. In connection with the
sale of units to certain of the Unit Purchasers, the Company: (i) paid a
selected broker-dealer a commission equal to seven percent of the aggregate
proceeds from the sales of such units; and (ii) sold to the broker-dealer for
$161 warrants to purchase an aggregate of 78,986 shares of Common Stock at a
price of $9.18 per share. None of the warrants to purchase shares of Common
Stock at $9.18 per share were exercised prior to their expiration on March 3,
2000.

In March 1996, the Company completed its IPO of 1,819,000 shares of Common Stock
at a purchase price of $11.00 per share for aggregate proceeds of $18,028,238
(net of related expenses of $1,980,762). Upon completion of the IPO: (i) each
outstanding share of Series A Preferred Stock automatically was converted into
approximately .5729 shares of Common Stock, (ii) each outstanding share of
Series B Preferred Stock automatically was converted into approximately .5729
shares of Common Stock, (iii) each outstanding share of Series C Preferred Stock
automatically was converted into .4902 shares of Common Stock, (iv) each
outstanding warrant to purchase a share of Series C Preferred Stock
automatically became exercisable for .4902 shares of Common Stock, and (v) each
outstanding warrant to purchase a share of Series D Preferred Stock
automatically became exercisable for .4902 shares of Common Stock. The Series C
warrants entitled the holder to purchase 78,976 shares, 84,425 shares, and
84,425 shares of Common Stock at an exercise price of $9.18, $12.24, and $9.18
per share, respectively. None of the Series C warrants were exercised prior to
their expiration on June 30, 2000.

In June 1996, the Company issued to the Unit Purchasers warrants to purchase an
aggregate 357,192 shares of Common Stock at an exercise price of $9.18 per
share. None of these warrants were exercised prior to their expiration on March
3, 2000.

In December 1997, the Company completed a private placement of 2,867,670 shares
of Common Stock for aggregate proceeds of $8,380,451 (net of related expenses of
$652,710). Concurrent with such placement, the Company issued to the Unit
Purchasers participating in the placement an aggregate of 643,639 shares of
Common Stock in exchange for their previously issued warrants to purchase an
aggregate of 1,574,930 shares of Common Stock.

In December 1999, the Company completed a private placement of 14 million shares
of Common Stock for aggregate proceeds of $700,000 (see Note 11).

In January 2000, the Board of Directors authorized the sale of 100,000 shares of
its Common Stock to each of its two nonaffiliated directors and three of its
then principal executive officers, at a price of $0.05 per share, the same price
at which shares of Common Stock were sold by the Company in December 1999. The
sale to the directors was based on their foregoing any compensation for their
services to the Company during the year 2000. The sale to the executive officers
was based on their agreement to accept compensation for the year 2000 at the
rate of $100,000. The Company has recognized $198,000 of compensation expense
related to the issuance of these stock purchase rights. On June 30, 2000, one of
the executives resigned and the Company repurchased 60,000 of the shares sold
for an amount equal to the purchase price ($0.05 per share).

                                      F-16
<PAGE>

On October 6, 2000, the Company amended its articles of incorporation to
increase the number of authorized shares of Common Stock from 25,000,000 shares
to 40,000,000 shares, and to reclassify all of the authorized shares of
Preferred Stock to "undesignated preferred".

In December 2000, the Company completed a private placement of 3 million shares
of Common Stock for aggregate proceeds of $1,500,000 (net of related expenses of
$20,000).

Treasury Stock - In December 1998, the Company purchased 2,246,131 shares of
Common Stock for $100. In June 2000, the Company repurchased 60,000 shares from
an executive who resigned. All of these shares are held by the Company in its
treasury.


11.      RELATED PARTY TRANSACTIONS

In June 1992, the Company entered into a series of agreements with David M.
Long, M.D., Ph.D. ("Dr. Long"), then a director of the Company, and Dr. Long's
wholly owned corporation, Abel Laboratories, Inc. ("Abel"). One of the
agreements (the "Laboratory Agreement") engaged Abel to provide specified
preclinical research. Although the Laboratory Agreement expired in December
1993, the parties agreed that any research conducted thereafter by Abel for the
Company would be pursuant to substantially the same terms as the Laboratory
Agreement and would be approved and invoiced on a case-by-case basis. Abel has
conducted preclinical research for the Company since such time, but none during
the three years ended December 31, 2001. Amounts owed to Abel at December 31,
2001 and 2000 are recorded as due to affiliate in the accompanying balance
sheets.

In connection with the Laboratory Agreement, the Company granted Abel an option
to purchase 61,275 shares of Common Stock at $8.16 per share. Following
completion of the Company's Series A Preferred Stock private placement in
December 1993, the exercise price of the option was reduced to $2.04 per share
based on the market capitalization of the Company at such time. These options
expire June 1, 2002. During 1995, the Company granted Dr. Long options to
acquire 24,510 shares of Common Stock at $10.20 per share exercisable for
services to be rendered, as such services are rendered. These options expired
unexercised on March 16, 2000.

The Company, in January 1994, entered into a patent royalty agreement with Dr.
Long and Abel, which assigns all rights to the Company for any patented
inventions resulting from performance under the Laboratory Agreement which
inventions are used by the Company. In return, the Company will pay royalties
calculated by multiplying specified percentages (ranging from 5% to 20 %) of
either future net sales or net license fees, if any, collected from such
patented inventions up to a maximum of $2,000,000 per invention. As of December
31, 2001, the Company has been issued a United States patent in which Dr. Long
is a named co-inventor. As of such date, the Company had not paid or accrued any
royalties to Dr. Long under such agreement.

Dr. Long resigned as a director of the Company in April 1993. In December 1999,
Dr. Long and his son, Raymond Long, M.D., and their affiliated entities,
purchased 14 million shares of Common Stock from the Company (the "Long
Transaction") for an aggregate of $700,000 (see Note 10). Simultaneously, Dr.
Long was appointed a director of the Company and the remaining directors of the
Company (C. Leonard Gordon, Harvey Horowitz, and D. Carl Long), and the
Company's then executive officers resigned. Dr. Long reconstituted the Board of

                                      F-17
<PAGE>

Directors of the Company; Raymond Long was appointed a director of the Company
and Dr. Long was elected Chairman and Chief Executive Officer of the Company by
the Board.

In connection with the Long Transaction, D. Carl Long ("Mr. Long") received a
payment of $60,000 from the Company in consideration for a release of all
obligations owed to him by the Company under his then employment agreement and
consulting arrangement, and the Company paid Mr. Long's counsel $7,200 for
services rendered to Mr. Long in connection with the negotiation of such
release. Mr. Long is a son of Dr. Long. Mr. Long's employment agreement, dated
July 7, 1997, was for a term through July 7, 2000 and provided for his
employment as President and Chief Executive Officer of the Company, at an
initial base compensation of $250,000 annually plus bonus of $70,000, subject to
realization of certain milestones, and with an automatic 5 percent annual
cost-of-living increase. The employment agreement also acknowledged that Mr.
Long had been granted: (i) in March 1997, nonqualified options to purchase
100,000 shares of Common Stock at $4.75 per share, which options vested
immediately and were not subject to forfeiture, including upon his termination
of employment; (ii) in July 1997, nonqualified options to purchase 200,000
shares of Common Stock at $2.938 per share, half of which options vested
immediately and half of which vested ratably over the employment term and were
not subject to forfeiture upon vesting, including upon his termination of
employment; and (iii) during the period from 1992 through 1995, nonqualified and
incentive options to purchase an aggregate of 338,238 shares of Common Stock at
prices between $1.02 to $9.18 per share. All of these options were relinquished
by Mr. Long by delivery of his release. Mr. Long entered into his consulting
arrangement as of April 1999, when Mr. Long relinquished his role as Chief
Executive Officer of the Company, at which time the Company recognized that Mr.
Long was owed $60,000 by the Company for previous services rendered (to be paid
when the Company so determines), and agreed to pay Mr. Long $15,000 monthly as a
consulting fee, commencing as of April 15, 1999, until the arrangement was ended
by either party on 30 days' notice. Total compensation paid to Mr. Long was $0,
$0, $177,446, and $702,467 for the years ended December 31, 2001, 2000, and 1999
and for the period from inception to December 31, 2001, respectively. In
addition, Mr. Long received reimbursements for various expenses of $0, $0,
$34,503, and $313,425 for the years ended December 31, 2001, 2000, and 1999 and
for the period from inception to December 31, 2001, respectively.

An entity controlled by C. Leonard Gordon, who had been Chairman, President, and
Chief Executive Officer of the Company until his resignation at the time of the
Long Transaction, had been receiving a fee of $80,000 annually for Mr. Gordon's
services to the Company. During the years ended December 31, 2001, 2000, and
1999 Mr. Gordon and his affiliated entities received aggregate payments of $0,
$0, and $83,889, respectively, from the Company. In connection with the Long
Transaction, Mr. Gordon and his wife sold to Dr. Long their 1,068,034 shares of
Common Stock for $53,700. Such proceeds, along with $109,300 of Company funds
(see Note 2) were then deposited with a third-party escrow agent who was
furnished instructions to release such funds to the Company during the period
through March 2002 upon satisfactory evidence that the Company has continued to
obtain, at least through the period ending March 17, 2003, directors and
officers liability insurance covering the persons who were directors and
executive officers of the Company immediately prior to consummation of the Long
Transaction comparable to such insurance which was in effect at such time. In
the event that such insurance is not obtained, the escrow funds are to be
delivered to Mr. Gordon.

Harvey Horowitz, who resigned as a director in connection with the Long
Transaction, had performed legal services for the Company prior to his
resignation. During the years ended December 31, 2001, 2000, and 1999, and for
the period from inception to December 31, 2001, Mr. Horowitz and his affiliated
law firms received aggregate payments of $0, $0, $85,244, and $109,095,
respectively, for services rendered by Mr. Horowitz.

                                      F-18
<PAGE>

As part of its continued efforts to pare costs, along with focusing its efforts
on seeking additional funding and strategic alliances, during 1998 and 1999, the
Company incurred certain attrition within its top management positions. Thus,
certain events and financial obligations were incurred that included the
following:

o    In January 1999, as part of the former Vice President of Operations
     separation agreement, a one-time payment of $28,500 was made.

o    In accordance with its separation agreement with the former Vice-President
     of Sales and Marketing-Europe, the Company paid a severance of $45,000
     during the first quarter of 1999 and the former employee was allowed to
     retain any and all proceeds from the disposition of the office furnishings
     located at its international business location in full settlement of any
     and all obligations owed to the employee.

o    In February 1999, the Executive Vice-President and General Counsel, who had
     been employed under an agreement expiring March 31, 1999, resigned. In
     February 1999, the Company paid a bonus in the amount of $25,000 for work
     in connection with the successful disposition of the Roswell office and
     related matters. In connection therewith, the Company entered into a
     consulting agreement providing for a $7,500 monthly fee, which terminated
     in March 1999. An aggregate of $15,000 was paid under such agreement during
     its existence.

In January 2000, the Board of Directors authorized the sale of 100,000 shares of
Common Stock to each of its two nonaffiliated directors and three of its then
principal executive officers, at a price of $0.05 per share, the same price at
which shares of Common Stock were sold by the Company in the Long Transaction.
The sale to the directors was based on their foregoing any compensation for
their services to the Company during the year 2000. The sale to the executive
officers was based on their agreement to accept compensation for the year 2000
at the rate of $100,000. The Company has recognized $198,000 as compensation
expense related to the issuance of these stock purchase rights.

Dr. Long was not paid any cash compensation for his services for 2000 and 2001.
The value of his services was estimated at $100,000 for each year, and was
recorded as a non-cash expense with a corresponding increase in the additional
paid-in capital. In December 2001, Dr. Long was issued an option to purchase
350,000 shares of Common Stock at $0.62 per share, which was the market share
price on the date of grant, as compensation for his guaranty and
collateralization of the Company's credit line in 2001 and for his services
rendered to the Company in 2001.

Chairman of the Scientific and Clinical Advisory Boards - The Company formed its
Scientific and Clinical Advisory Boards (collectively, the "Advisory Boards")
during 1994. In connection therewith, the Company entered into a one-year
consulting agreement dated January 1, 1994 subject to an annual renewal option
with the Chairman of the Advisory Boards, which provides for compensation of
$150,000 per year. In addition, options to purchase 58,823 shares of Common
Stock at $10.20 per share were granted. As of December 31, 1998, such options
were fully vested. In June 1997, the Chairman of the Advisory Boards was granted
options to purchase 50,000 shares of Common Stock at $4.69 per share pursuant to
the Biofield Corp. 1996 Option Plan. Such options vested ratably over a two-year
period commencing on June 4, 1997. The Chairman of the Advisory Boards also
served as a member of the Company's Board of Directors from 1997 until his
resignation in February 1999. Both set of options expired unexercised.

                                      F-19
<PAGE>

The Company had entered into a separate one-year agreement dated January 1,
1995, subsequently renewed on an annual basis until 1999, with an entity
affiliated with the previous Chairman of the Advisory Boards to provide services
in conducting certain research projects. The Company has not paid any fees to
such entity during the three years ended December 31, 2001.

On June 20, 2000, California Bank & Trust extended a one-year $500,000 line of
credit to the Company. Loans under the line are at the bank's prime rate from
time to time plus one percent. The repayment of loans under the line is
guaranteed by Dr. David Long, his wife and Long Family Partners II, LP and is
secured by certain of their assets. The line of credit was increased to $750,000
in November 2001, and subsequently, in January 2002, to $1,000,000. In March
2002, Dr. Long issued his written commitment to the Company to provide all of
the Company's financing needs to enable the Company to meet its operating and
capital requirements through the end of 2002.

In January 2001, the Company entered into an oral arrangement with Abel for the
sublease of approximately 5,000 square feet of furnished and laboratory equipped
space at an annual cost of $54,328, with an automatic annual adjustment based
upon any increase that may occur in the Consumer Price Index and under the same
terms and rental as the Abel lease, which expires on April 1, 2004.


12.      STOCK OPTIONS

At December 31, 2001, the Company has three stock option plans (the "Plans"),
which are described below.

(a)  The 1992 Employee Stock Incentive Plan (the "1992 Plan") provides for the
     grant of stock options, stock appreciation rights ("Rights"), and stock
     bonus awards ("Awards") to acquire a maximum of 147,060 shares of Common
     Stock. The 1992 Plan permits the granting of incentive stock options
     ("ISOs") and nonqualified stock options ("NSOs") at the discretion of the
     Stock Option Committee (the "Committee"). The 1992 plan provides that the
     Committee must establish an exercise price for ISOs and Rights that is not
     less than the fair market value per share at the date of grant and an
     exercise price of NSOs as shall be determined. Each ISO or Right must
     expire within 10 years of the date of grant. However, if ISOs are granted
     to persons owning more than 10 percent of the voting stock of the Company,
     the exercise price may not be less than 110 percent of the fair market
     value per share at the date of grant and the term of such ISOs may not
     exceed five years. Vesting of options granted under the 1992 Plan is
     determined by the Committee and has generally been set at the end of two or
     three years.

(b)  The Biofield Corp. 1996 Option Plan, as amended (the "1996 Plan"), provides
     for the grant of options to acquire a maximum of 1,500,000 shares of Common
     Stock. The 1996 Plan permits the granting of ISOs and NSOs. ISOs may be
     granted to individuals who, at the time of grant, are employees of the
     Company or its affiliates. NSOs may be granted to directors, employees,
     consultants, and other agents of the Company or its affiliates. The 1996
     Plan provides that the exercise price for ISOs may not be less than the
     fair market value per share of the Common Stock at the date of grant and an
     exercise price for NSOs of not less 85 percent of such fair market value.
     Each ISO must expire within 10 years of the date of grant. However, if ISOs

                                      F-20
<PAGE>

     are granted to persons owning more than 10 percent of the voting stock of
     the Company, the exercise price may not be less than 110 percent of the
     fair market value per share at the date of grant and the term of such ISOs
     may not exceed five years. Unless otherwise provided by the 1996 Plan
     Administrator, options granted under the 1996 Plan vest at a rate of 25
     percent per year over a four-year period.

(c)  The Biofield Corp. 1996 Stock Options Plan for Non-Employee Directors (the
     "1996 Directors' Stock Plan") provides for the automatic grant of NSOs to
     nonemployee directors. Options under the 1996 Directors' Stock Plan may be
     granted only to directors of the Company who are not employees of the
     Company. Under the 1996 Directors' Stock Plan, 150,000 shares of Common
     Stock have been reserved for issuance upon exercise of the options. The
     1996 Directors' Stock Plan provides for the automatic grant of options to
     eligible directors. Pursuant to the 1996 Directors' Stock Plan, each
     eligible director serving on the Board of Directors on the effective date
     of the 1996 Directors' Stock Plan automatically received an option to
     purchase 10,000 shares of Common Stock, subject to vesting in three equal
     annual installments. Subsequently, whenever a new director joins the Board,
     such director automatically receives options to purchase 10,000 shares of
     Common Stock on the date of his or her election to the Board, subject to
     vesting in three equal annual installments. In each year, other than the
     year in which a director receives an initial grant of options, such
     director automatically receives options to purchase 2,500 shares of Common
     Stock. The term of each option granted under the 1996 Directors' Stock Plan
     is 10 years. The exercise price of each option under the 1996 Directors'
     Stock Plan must be equal to the fair market value of the Common Stock
     subject to the option on the date of the grant.

A summary of the status of the Plans as of December 31, 2001, 2000, and 1999 and
the changes during the years ended December 31, 2001, 2000, and 1999 is
presented below:

<TABLE>
<CAPTION>
                                                    2001                        2000                        1999
                                         --------------------------  --------------------------  --------------------------
                                                        Weighted-                   Weighted-                   Weighted-
                                                         Average                     Average                     Average
                                           Options   Exercise Price    Options   Exercise Price    Options   Exercise Price

<S>                                      <C>           <C>           <C>           <C>           <C>           <C>
Outstanding at beginning of period           35,000    $     4.43        75,000    $     4.37       793,648    $     4.51
Granted                                     440,000          0.61
Exercised
Canceled                                    (10,000)         4.50       (40,000)         4.32      (718,648)         4.52
                                         ----------    ----------    ----------    ----------    ----------    ----------
Outstanding at end of year                  465,000          0.82        35,000          4.43        75,000          4.37
                                         ----------    ----------    ----------    ----------    ----------    ----------
Options exercisable at year end             110,000          1.48        28,750          4.43        68,750          4.37
                                         ----------    ----------    ----------    ----------    ----------    ----------
Options available for future grant        1,018,529
                                         ----------

Weighted-average fair value of options
  granted during the period              $     0.59                  $      N/A                  $      N/A
                                         ----------                  ----------                  ----------
</TABLE>


All options granted under the Plans have an exercise price equal to the fair
market price of the Common Stock on the grant date.

The Company, through 1998, granted NSOs outside of the Plans to certain officers
and directors of and consultants to the Company, which are exercisable over
various periods through June 24, 2008. Certain of these NSOs are
performance-based options and become exercisable solely upon the achievement of
certain milestones as described in the option agreements, and certain NSOs
granted become exercisable immediately in the event of a merger or sale of all

                                      F-21
<PAGE>

or substantially all of the assets of the Company. The option grant in 2001 was
to the Chairman and CEO. The options were granted in consideration of his
services to the Company in 2001 and as compensation for his guaranty and
collateralization of the Company's Bank Credit Line during 2001. The options
vested upon issuance and expire in five years. A summary of the status of the
Company's NSOs granted outside of the Plans as of December 31, 2001, 2000, and
1999 and the changes during the years ended December 31, 2001, 2000, and 1999
are presented below:

<TABLE>
<CAPTION>
                                                    2001                        2000                        1999
                                         --------------------------  --------------------------  --------------------------
                                                        Weighted-                   Weighted-                   Weighted-
                                                         Average                     Average                     Average
                                           Options   Exercise Price    Options   Exercise Price    Options   Exercise Price

<S>                                      <C>           <C>           <C>           <C>           <C>           <C>
Outstanding at beginning of period          323,531    $     4.71       419,117    $     6.59     1,072,262    $     5.50
Granted                                     350,000          0.62
Exercised
Canceled                                          0          0.00       (95,586)        12.95      (653,145)         4.80
                                         ----------    ----------    ----------    ----------    ----------    ----------
Outstanding at end of year                  673,531          2.59       323,531          4.71       419,117          6.59
                                         ----------    ----------    ----------    ----------    ----------    ----------
Options exercisable at year end             673,531          2.59       323,531          4.71       419,117          6.59
                                         ----------    ----------    ----------    ----------    ----------    ----------

Weighted-average fair value of options
  granted during the period              $     0.60                  $      N/A                  $      N/A
                                         ----------                  ----------                  ----------
</TABLE>


The exercise prices of some NSOs granted during 1995 outside of the Plans
differed from the market price of the Common Stock on the grant date, and a
summary of the weighted-average prices and weighted-average fair values of the
NSOs granted during 1995 outside of the Plans is presented below:

                                                          Weighted-    Weighted-
                                                           Average      Average
                                                           Exercise      Fair
                                                            Price        Value

Exercise price less than the market price                  $  5.10      $  6.56
Exercise price equal to the market price                      9.18         3.86
Exercise price more than the market price                    11.90         2.69


The following table summarizes information about stock options outstanding at
December 31, 2001:

                                      F-22
<PAGE>

                        Number                       Number
                      Outstanding    Weighted-    Exercisable    Weighted-
          Range           at          Average          at         Average
       of Exercise   December 31,    Remaining    December 31,    Exercise
         Prices          2001       Life (Yrs.)       2001         Price

         $ 0.13         39,216         0.38          39,216       $ 0.13
           0.44         15,000         4.67               0         0.00
           0.62        775,000         4.92         435,000         0.62
           1.00          6,127         3.08           6,127         1.00
           2.04         67,402         0.49          67,402         2.04
           3.50          5,000         6.04           5,000         3.50
           4.00        112,746         1.34         112,746         4.00
           4.62         20,000         5.37          20,000         4.62
           8.16         36,765         1.00          36,765         8.16
          10.20         61,275         1.23          61,275        10.20
                     1,138,531                      783,531


As provided by SFAS 123, the fair value of each option granted before the IPO is
estimated on the date of grant using the minimum value method, and the fair
value of each option grant after the IPO is estimated on the date of grant using
the Black-Sholes option pricing model. The following weighted-average
assumptions were used for option grants during 2001 with an expected life of
five years: (i) dividend yield of 0 percent; (ii) expected volatility of 191
percent; and (iii) risk-free interest rate of 4.38 percent. There were no option
grants in 1999 and 2000.

Had compensation cost for the Plans been determined based on the fair value at
the grant dates consistent with the method of SFAS 123, the Company's net loss
and net loss per common and common equivalent share for the years ended December
31, 2001, 2000 and 1999 would have been increased to the pro forma amounts
indicated below:


                                     2001             2000             1999

Net loss:
  As reported                     ($2,238,687)     ($1,534,653)     ($1,253,696)
  Pro forma                       ($2,502,842)     ($1,534,653)     ($1,275,668)

Basic and diluted loss
per share:
  As reported                          ($0.09)          ($0.07)          ($0.15)
  Pro forma                            ($0.10)          ($0.07)          ($0.16)


13.      DEVELOPMENT STAGE COMPANY

The Company is in the development stage and, to date, has generated nominal
revenues, has incurred expenses, and has sustained losses. Consequently, its
operations are subject to all of the risks inherent in the establishment of a
new business enterprise. For the period from inception through December 31,
2001, the Company had accumulated a deficit of $61,189,132. The Company has
financed its operations since inception almost entirely by the issuance of
equity securities, interest income on the then unutilized proceeds from these

                                      F-23
<PAGE>

issuances and with short-term borrowings. As of December 31, 2001, the Company
had cash and cash equivalents and short-term investments aggregating $25,121,
and was financing its recent activities with short-term borrowings, the
repayment of which is personally guaranteed by Dr. David Long, the Chairman and
Chief Executive Officer of the Company and certain of his affiliates and secured
by their collateral. During 2002, the Company intends to seek additional funding
through a private placement of the Company's securities. In March 2002, Dr. Long
issued his written commitment to the Company to provide all of the financial
needs of the Company during 2002 in order for the Company to meet its operating
and capital requirements. There can be no assurance that the Company will have
sufficient funds available to complete its research and development programs or
be able to commercially manufacture or market any products in the future, that
future revenues will be significant, or that any sales will be profitable. The
Company expects operating losses to increase for at least the next several
years, due principally to the anticipated expenses associated with the proposed
commercialization of the Biofield Diagnostic System, and other research and
development activities.


14.      SUBSEQUENT EVENTS

In March 2002, Dr. David Long, the Chairman and Chief Executive Officer of the
Company, issued his written commitment to the Company to provide all of the
financial needs of the Company during 2002 in order for the Company to meet its
operating and capital requirements.

                                      F-24

<PAGE>

Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure

         In connection with its audits of the two fiscal years ended December
31, 2001, there have been no disagreements with Deloitte & Touche, LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Deloitte & Touche LLP would have caused them to make reference
thereto in their report on the financial statements for such years.


                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

Our directors and executive officers are:

Name                                Age      Positions and offices with Biofield
----                                ---      -----------------------------------

David M. Long, Jr., M.D. Ph.D.      73       Chairman of the Board and Chief
                                             Executive Officer

Amy S. Langer                       47       Director

Raymond A. Long, M.D.               42       Director

Arthur Taylor                       67       Director

John D. Stephens                    43       Senior Vice President and Chief
                                             Operating Officer


Each of our current directors was appointed to serve as a director by the then
existing Board of Directors. Each director serves until the next annual meeting
of stockholders and until his or her respective successor is elected and
qualified, or until his or her earlier resignation. Our executive officers are
appointed by, and serve at the discretion of, our Board of Directors.

Dr. David Long was appointed a director of our company as of December 28, 1999
and was elected Chairman and Chief Executive Officer of our company on January
9, 2000. Dr. Long previously had served as a director of our company from August
1992 until April 1993. Dr. Long is a private investor and President of Abel
Laboratories Inc., a currently inactive private research laboratory that, from
time to time, has conducted research and development on a contract basis
relating to medical devices and pharmaceutical applications of interest to Dr.
Long. Dr. Long previously was a Professor of Surgery and Chief of Cardiovascular
and Thoracic Surgery at the University of Illinois, Abraham Lincoln School of
Medicine and a Clinical Associate Professor of Surgery and Radiology at the
University of California, San Diego.

Amy S. Langer was appointed a director of our company on January 3, 2000. Ms.
Langer, a breast cancer survivor, is, and for more than the past five years has
been, the Executive Director of the National Alliance of Breast Cancer
Organizations (NABCO), a New York-based non-profit resource for breast cancer
information and education. Ms. Langer currently serves as a member of numerous
public and private advisory committees, including the Board of Scientific
Advisors of the National Cancer Institute. Ms. Langer serves as a member of the
Biofield Board of Directors in a personal capacity, not as a representative of
NABCO or of any other organization affiliated with her professional employment.

Dr. Raymond Long was appointed a director of our company on January 9, 2000. Dr.
Long, a graduate of The University of Michigan Medical School, for more than
five years and until June 30, 2000 was associated with the University of
Montreal initially as a Resident in orthopedics and then as a Fellow in
anthroplasty and arthroscopy. From July 1999 to June 2000, Dr. Long was a Fellow

                                       29
<PAGE>

in shoulder and elbow surgery at Florida Orthopedics Institute. Commencing in
August 2000, Dr. Long has been an orthopedic surgeon in private practice in
Saint Albans, Vermont.

Arthur Taylor was appointed a director of our company on January 3, 2000. Mr.
Taylor is, and for more than the past five years has been, the President of
Muhlenberg College, Allentown, Pennsylvania. Mr. Taylor is a director of various
Asian mutual funds managed by Nomura Securities - Nomera Pacific Basin Fund,
Japan OTC Equity Fund Inc., Jakarta Growth Fund and Korea Equity Fund Inc.

John D. Stephens was appointed Senior Vice President and Chief Operating Officer
of our company on January 3, 2000. For more than the five years prior thereto,
Mr. Stephens was our Senior Director - Manufacturing, Operations and Logistics.

No family relationship exists among any of the directors or executive officers,
except that Dr. Raymond Long is the son of Dr. David Long.

Based solely upon our review of Forms 3, 4 and 5 filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and a review of
written representations received by us, no person who at any time during Fiscal
2001 was a director, executive officer or beneficial owner of 10% or more of the
outstanding shares of our common stock failed to file, on a timely basis, the
reports required by Section 16(a) of the Securities Exchange Act, except that
Dr. Raymond Long has failed to file one Form 5 reporting the grant of a stock
option by us.


In addition to our executive officers, Arthur C. Hilmer, Nancy Patterson and
Steve Preiss occupy significant positions in our company. Mr. Hilmer works for
us full time, while Ms. Patterson and Mr. Preiss have their own businesses and
work for us as consultants, and bill us based on time spent. Mr. Hilmer, age 53,
was appointed Vice President of Sales in August 2001. For the five-year period
prior thereto, Mr. Hilmer was Vice President of Marketing and Sales, Deltex
Medical Inc., Chichester, United Kingdom, (from January 1999 to July 2001), a
manufacturer of esophageal doppler cardiac output monitoring devices for
anesthesia and critical care, was International Marketing Director for our
company from February 1998 to December 1998 and was International Marketing
Director, Imatron Inc., South San Francisco, California (from January 1995 to
February 1998), a manufacturer of Electron Beam Tomography - Ultrafast CT. Ms.
Patterson, age 48, was appointed Vice President of Worldwide Sales and Marketing
in September 2001. For more than the five years prior thereto, Ms. Patterson was
Global Director of Marketing for EndoSonics Corporation, Rancho Cordova,
California, an intravascular ultrasound company. Mr. Preiss, age 46, was
appointed Vice President of Regulatory and Clinical Affairs and Quality
Assurance in June 2001. For the five-year period prior thereto, Mr. Preiss was
Vice President of Clinical and Regulatory Affairs, UroSurge, Inc., Coralville,
Iowa, a manufacturer of urological medical devices.

Item 10. Executive Compensation.

The following table sets forth information concerning compensation for services
in all capacities awarded or paid to or earned by our chief executive officer
and our other executive officers who received cash compensation from us
aggregating at least $100,000 during the year ended December 31, 2001.

<TABLE>
<CAPTION>
                                          Summary Compensation Table
                                                                            Long-Term
                                                                            Compensation
                                         Annual Compensation                Awards
Name and                         --------------------------------------     No. of Securities      All Other
Principal Positions     Year       Salary        Bonus         Other        Underlying Options     Compensation
-------------------     ----     ------------------------------------------------------------------------------

<S>                     <C>       <C>          <C>          <C>                 <C>                 <C>
David M. Long, Jr.      2001            --           --           --            350,000(1)                --
 Chairman and           2000            --           --           --                 --                   --
 Chief Executive        1999            --           --           --                 --                   --
 Officer

John D. Stephens        2001      $110,000     $ 20,000     $ 11,723(2)          85,000(3)
 Senior VP and          2000      $100,000           --           --                 --             $ 45,000(4)
 Chief Operating        1999      $ 90,433           --           --                 --                   --
 Officer
</TABLE>
-------------------------

                                       30
<PAGE>

(1)  Represents stock options granted at an exercise price of $0.62 per share,
     the closing price of our common stock on the date of grant, in lieu of
     compensation as an executive officer in 2001 and as consideration for
     guaranteeing our bank line of credit in 2001. These options are immediately
     exercisable.

(2)  Represents reimbursement of a personal tax-related expense incurred in a
     prior year.

(3)  Represents stock options granted under our 1992 Employee Stock Incentive
     Plan at an exercise price of $0.62 per share, the closing price of the
     common stock on the date of grant. These options are immediately
     exercisable.

(4)  Represents the difference between the $5,000 purchase price paid for
     100,000 restricted shares of our common stock and the fair market value of
     such shares at the time of purchase.

The following table sets forth the individual grants of stock options made to
each of our executive officers named in the Summary Compensation Table during
the year ended December 31, 2001. During the year ended December 31, 2001, we
did not grant any stock appreciation rights.

<TABLE>
<CAPTION>
                          Number of        % of Total
                          Securities       Options/SARs
                          Underlying       Granted to
                          Options/SARs     Employees in     Exercise or Base     Expiration
Name                      Granted(1)       Fiscal Year      Price ($/Sh)         Date
-----                     -----------------------------------------------------------------
<S>                       <C>              <C>              <C>                  <C>
David M. Long, Jr.        350,000          45.2%            $0.62                11/29/06

John D. Stephens           85,000(2)       11.0%            $0.62                11/29/06
</TABLE>

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

(1)  The options are immediately exercisable.

(2)  Granted under the 1992 Employee Stock Incentive Plan.

The following table sets forth the total number of excercisable and
unexercisable stock options held by each of our executive officers named in the
Summary Compensation Table who held any stock options as of December 31, 2001.
No options to purchase our common stock were exercised by any of our executive
officers during the year ended December 31, 2001 and no stock appreciation
rights were outstanding during such year.

<TABLE>
<CAPTION>

                                  Number of Securities                    Value of Unexercised
                          Underlying Unexercised Stock Options            In-the-Money Options
                                  at December 31, 2001                    at December 31, 2001
                          ------------------------------------        -----------------------------
Name                      Exercisable            Unexercisable        Exercisable     Unexercisable
----                      -----------            -------------        -----------     -------------
<S>                       <C>                          <C>                 <C>              <C>
David M. Long, Jr.        350,000 shares              -0-                 -0-              -0-

John D. Stephens          160,147 shares              -0-                 -0-              -0-
</TABLE>

No cash compensation was paid to our directors during the year ended December
31, 2001. Each of our non-employee directors were each granted a non-qualified
option on September 5, 2001 by the Compensation Committee of our Board of

                                       31
<PAGE>

Directors to purchase an aggregate of 5,000 shares of our common stock under our
1996 Stock Option Plan, at $0.44 per share, an exercise price of 10% in excess
of the closing price for our common stock on September 4, 2001, for their
services in the year 2001, in lieu of any right to receive options for such year
under our 1996 Stock Option Plan for Non-Employee Directors. The options are
exercisable in four equal annual installments commencing on the first
anniversary of the date of grant and expire on September 5, 2006.

Under our 1996 Stock Option Plan for Non-Employee Directors, 150,000 shares of
common stock have been reserved for issuance of options to non-employee
directors. The Plan provides for the automatic grant of options to eligible
directors. Each non-employee director who joins the Board will automatically
receive an initial grant of options to purchase 10,000 shares of common stock at
an exercise price equal to the fair market value per share at the date of grant,
subject to vesting in three equal annual installments. In each year, other than
the year in which a director receives an initial grant of options, that director
will automatically receive options to purchase 2,500 shares of common stock on
the date of the Annual Meeting of Stockholders, which vest immediately upon
being granted. No options were issued under the Plan during 2001, since there
was no Annual Meeting of Stockholders in 2001. If any options granted under the
Plan, for any reason, expire or are canceled or otherwise terminated without
having been exercised in full, the shares allocable to the unexercised portion
of these options again become available for grants under the Plan. The term of
each option granted under the Plan is ten years. Options granted under the Plan
must be exercised before the earlier of (a) the scheduled expiration date, or
(b) one year following the dated of termination of service. The exercise price
of an option is payable upon exercise in cash. As of February 28, 2002, no
shares had been issued upon the exercise of options granted under the Plan and
150,000 shares remained available for future grant. Unless sooner terminated by
the Board, the Plan will terminate in January 2006.

We do not have any employment contracts or termination of employment and
change-in-control arrangements with any of our executive officers. Mr. Stephens
is currently employed by us at an annual basic salary of $110,000.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth, as of February 28, 2002, the number of shares of
our common stock beneficially owned by (a) each person or group who is known to
us to be the beneficial owner of more than 5% of our outstanding common stock,
(b) each of our current directors, (c) each of the persons named in the Summary
Compensation Table appearing under Item 6. - "Executive Compensation", and (d)
all our directors and executive officers, as a group (five persons). Except as
indicated in the footnotes to this table, we believe that the persons named in
this table have sole voting and investment power with respect to the shares of
our common stock indicated.

                                       32
<PAGE>

<TABLE>
<CAPTION>
Name (1)                                                 Shares Beneficially Owned (2)    Percent of Class
--------                                                 -----------------------------    ----------------

<S>                                                             <C>                             <C>
Long Family Partners II, LP (3)                                  6,235,218                      24.7%
David M. Long, Jr., M.D. Ph.D.                                  11,246,826 (4)                  44.0%
Raymond A. Long M.D.                                             4,017,255 (5)                  15.9%
Hambrecht & Quist Capital Management Incorporated (6)            1,878,766 (6)                   7.5%
Amy S. Langer                                                      105,000 (7)                    *
Arthur Taylor                                                      105,000 (7)                    *
John D. Stephens                                                   260,147 (8)                   1.0%
All directors and executive officers, as a group                15,734,228 (9)                  61.1%
</TABLE>

-------------------------
*    Less than 1%.

(1)  The address for each person or entity, except as otherwise indicated, is
     c/o Biofield Corp., Suite M, 1025 Nine North Drive, Alpharetta, Georgia
     30004.

(2)  All shares are held of record, unless otherwise stated.

(3)  Long Family Partners II, L.P., is a Delaware limited partnership, the
     general partners of which are Dr. David Long and his wife, Donna R. Long.
     Dr. Long is the Managing Partner of the partnership and, in this capacity,
     has the ability to sell its assets and vote any securities owned by the
     partnership.

(4)  Consists of (a) 6,235,218 shares owned by Long Family Partners II, L.P.
     (referred to in Note 3 above), of which Dr. David Long is the Managing
     Partner, (b) 3,871,130 shares held of record, (c) 8,087 shares held in
     "street name" by a family partnership, (d) 782,391 held of record by Donna
     R. Long, Dr. Long's wife, with respect to which beneficial ownership is
     disclaimed, and (e) 350,000 shares issuable upon exercise of presently
     outstanding stock options.

(5)  Consists of (a) 1,200,000 shares held of record, (b) 2,800,000 shares held
     by Raymond A. Long u/a 01/01/91, a retirement plan, and (c) 17,255 shares
     issuable upon exercise of outstanding stock options.

(6)  Hambrecht & Quist Capital Management Incorporated has filed a Schedule 13G
     with the SEC, dated January 24, 2002 in which it indicates that its address
     is 30 Rowes Wharf - 4th Floor, Boston, Massachusetts 02110-3328, that it
     disclaims any beneficial ownership in the shares it reported, that such
     shares are owned for certain client accounts and that it and such accounts
     are not acting as a group for purposes of Section 13(d) under the
     Securities Exchange Act of 1934.

(7)  Consists of (a) 100,000 shares held of record, and (b) 5,000 shares
     issuable upon exercise of outstanding stock options.

(8)  Consists of (a) 100,000 shares held of record, and (b) 160,147 shares
     issuable upon exercise of outstanding stock options.

(9)  Consists of the shares and options listed in the table as being
     beneficially owned by Dr. David Long, Amy S. Langer, Dr. Raymond Long,
     Arthur Taylor, and John D. Stephens.

We do not know of any arrangements that may result in a change of control of our
company.

The following table sets forth, as of December 31, 2001 (a) the number of our
securities to be issued upon the exercise of outstanding options, warrants and
rights, (b) the weighted-average exercise price of such outstanding options,

                                       33
<PAGE>

warrants and rights and (c) the number of our securities remaining available for
future issuance, with respect to each of our compensation plans (including
individual compensation arrangements).

<TABLE>
<CAPTION>
                                    Equity Compensation Plan Information

                                     Number of Securities                                      Number
                                       to be Issued Upon         Weighted Average         of  Securities
                                    Exercise of Outstanding     Exercise Price of       Remaining Available
                                            Options            Outstanding Options    for Future Issuance (1)
                                    -----------------------    -------------------    -----------------------

<S>                                        <C>                        <C>                    <C>
Equity compensation plans
approved by security holders                 465,000                  $0.82                  1,018,529

Equity compensation plans
not approved by security holders             612,256                  $2.64                     -0-

Total                                      1,077,256                  $1.85                  1,018,529
</TABLE>

-------------------------
(1)  Excludes securities to be issued upon the exercise of outstanding options.


Item 12. Certain Relationships and Related Transactions

In June 1992, we entered into several agreements with Abel Laboratories, Inc.,
an affiliate of Dr. David Long, our current Chairman and Chief Executive
Officer. One of these agreements, a laboratory services agreement, which expired
December 31, 1993, engaged Abel to provide specified preclinical research to be
managed by Dr. Long. Effective January 1, 1994, pursuant to a master laboratory
services agreement, Abel agreed that any research thereafter conducted for us by
Abel would be on substantially the same terms as the laboratory services
agreement and would be on the basis of a budget approved by us. Thereafter, from
time to time, Abel has conducted additional preclinical research for us.
Although no research had been performed since 1998 by Abel, approximately
$246,000 was performed in 1998.

In June 1992, we entered into a patent royalty agreement with Abel, which
assigned to us all of Abel's rights and interests in all inventions and/or
technology conceived and/or developed by Abel or Dr. Long in connection with
laboratory services performed by Abel for us which relate to the use of
bioelectronics in the diagnosis, screening or management of disease, infection,
ovulation or other bioelectric events. Under our agreement, Abel is entitled to
royalties of 5% of the net sales of products incorporating any of these
inventions or technology which are embodied in any patent issued to us, during
the life of the patent, as well as 20% of the net proceeds we may receive from
the license of the patent to others, up to a maximum of $2 million. As of
February 28, 2002, one patent has been issued to us that is covered by the
agreement, although we have not obtained any revenues therefrom.

Effective as of June 1992, in connection with the patent royalty agreement and
the laboratory services agreement, we granted Abel options to purchase an
aggregate of 61,275 shares of common stock at $8.16 per share, which exercise
price was reduced to $2.04 per share following completion of our Series A
Preferred Stock private placement in December 1993, based on our market
capitalization at that time. None of these options, which expire June 1, 2002,
had been exercised as of February 28, 2002. Abel has transferred these options
to five of the children of Dr. David Long.

In January 2001, we entered into an oral arrangement with Abel for the sublease
of approximately 5,000 square feet of furnished and laboratory equipped space at
an annual cost of $54,328, with an automatic annual adjustment based upon any
increase that may occur in the Consumer Price Index and under the same terms as
the Abel lease, which expires on April 1, 2004. Although we have begun to move
records relating to research and development used by Dr. Long, who operates
principally from California, the Company's administrative and regulatory and
quality assurance functions are still carried out in, and our full-time
employees are still located at, our Alpharetta Office. For additional
information, see Item 2. "Description of Property".

                                       34
<PAGE>

As of December 31, 2001, we owed an aggregate of $61,371 to Abel, including
$55,516 for services rendered prior to 1999.

In March 1995, pursuant to a determination made by our Board of Directors in May
1994 to grant an option to purchase shares of our common stock to Dr. David
Long, in consideration for his past services to us, Dr. Long was granted an
option to purchase an aggregate of 24,510 shares of common stock at $10.20 per
share. At neither of such times was Dr. Long a member of our Board of Directors.
The option was not exercised prior to its expiration on March 16, 2000.

In January 2000, our Board of Directors approved the sale to each of Amy S.
Langer and Arthur Taylor, our two independent directors who were appointed
directors in January 2000, of 100,000 shares of common stock, without any
registration rights, at a price of $0.05 per share, which was equal to the price
that shares of common stock had been sold by us in our December 1999 private
placement, which price the Board of Directors determined was the fair market
value for these shares. However, on the date that such transaction was approved,
the closing price of our common stock, as reported by The Nasdaq Stock Market,
Inc. InfoQuote service furnished by Financial Insight Systems, Inc., was $0.50.
In consideration for such issuance, Ms. Langer and Mr. Taylor waived their
rights to any payment for their services as directors in 2000. At the same time,
the Board of Directors approved the sale to each of John D. Stephens, our newly
elected Senior Vice President and Chief Operating Officer, Anita T. Thibeault,
our then newly elected President and Acting Vice President of
Regulatory/Clinical Affairs and Quality Assurance, and Nancy Bruyneel, our newly
elected Vice President of Worldwide Sales and Marketing, of 100,000 shares of
common stock, also without any registration rights, at a price of $0.05 per
share, pursuant to an agreement under which if the executive officer voluntarily
terminates his or her relationship with us or is terminated by us for just
cause, as defined in the agreement, within one year, we have the right to
repurchase his or her shares for their original purchase price. On June 30,
2000, Ms. Thibeault voluntarily terminated her relationship with us and we
repurchased 60,000 of the shares sold to her for an amount equal to her purchase
price therefore. Ms Bruyneel voluntarily terminated her relationship with us in
June 2001. With respect to the foregoing transactions, we treated the difference
between the purchase price for the shares and $0.50 as compensation expense for
financial reporting purposes.

On December 15, 2000, Dr. David Long purchased 482,000 unregistered shares of
our common stock from us for an aggregate of $241,000 or $0.50 per share, a
price determined by our Board of Directors (with Dr. Long abstaining) to be the
fair market value of these shares. Such shares were sold to Dr. Long pursuant to
a stand-by commitment originally given to our company by Dr. Long on September
6, 2000. On such date, our Board of Directors determined that it was necessary
for our company to raise an additional $1,000,000 for operating expenses before
the end of 2000, and determined to raise such funds through the private sale of
authorized, unissued shares of our common stock. At such time, Dr. Long offered
his stand-by commitment to purchase any unsubscribed shares, if such shares were
being sold for not more than $0.50 per share and the closing occurred prior to
November 1, 2000, and Dr. Long advised the Board that he would purchase such
shares without any registration rights or any equity inducement, such as a
further right to subscribe for additional shares in any further offering at a
reduced price. During the thirty day period prior to September 6, 2000 the
average closing price for our common stock, as reported by The Nasdaq Stock
Market, Inc InfoQuote service furnished by Financial Insight Systems, Inc. was
$0.439 per share and such closing price on September 5, 2000 was $0.39 per
share. Thereafter, we attempted to sell our common stock at $0.50 per share and
under the other terms offered by Dr. Long by contacting several larger previous
investors in our company and other parties who had advised our officers and
directors of a possible interest in investing in our company. Due to the small
size of the proposed offering and the fact that our common stock was not trading
on any recognized securities exchange, we did not retain a financial advisor to
assist us in the offering. By November 1, 2000, and despite interest from
several investor groups and Dr. Long's stand-by commitment, we were unable to
place all of the offered shares of common stock; whereupon, Dr. Long agreed to
extend his stand-by commitment until December 1, 2000. On December 1, 2000, only
1,518,000 shares of our common stock had been subscribed for at $0.50 per share
and we advised Dr. Long that we intended to accept his stand-by commitment for
the then unsubscribed portion of the $1,000,000 offering or 482,000 shares, and
that he should wire transfer $241,000 to us for a closing during the week of
December 4, 2000. On such date, the closing price of our common stock, as
reported by The Nasdaq Stock Market, Inc InfoQuote service furnished by

                                       35
<PAGE>

Financial Insight Systems, Inc. was $0.40 per share. On December 2, 2000,
Hambrecht & Quist Capital Management Inc. advised us that two investment
companies for which it had investment authority might be interested in
participating in the offering if it were not too late. Our Board of Directors
then determined to increase the size of the offering by $500,000 and to delay
the closing thereof until December 18, 2000, and the other subscribers agreed to
such extension and increase. The closing of the $1,500,000 private offering
occurred on December 15, 2000 and 3,000,000 of our authorized, unissued shares
of common stock were sold at such time, including the 482,000 shares sold to Dr.
Long. On such date, the closing price of our common stock, as reported by The
Nasdaq Stock Market, Inc InfoQuote service furnished by Financial Insight
Systems, Inc. was $0.57 per share.

On June 20, 2000, California Bank & Trust extended a one-year $500,000 line of
credit to us. Loans under the line are at the bank's prime rate from time to
time plus one percent. The repayment of loans under the line is guaranteed by
Dr. David Long, his wife and Long Family Partners II, LP and is secured by
certain of their assets. The line of credit was increased to $750,000 in
November 2001, and subsequently, in January 2002, to $1,000,000. In March 2002,
Dr. Long issued his written commitment to us to provide all of our financing
needs to enable us to meet our operating and capital requirements through the
end of 2002. It is anticipated that the financial support that Dr. Long will
provide may be in the nature of assisting in having the bank further increase
the line, by extension of his guarantee to the bank, secured by assets of Dr.
Long, his wife and his affiliated partnership. For additional information, see
Item 6. "Management's Discussion and Analysis or Plan of Operations - Liquidity
and Capital Resources".

On November 29, 2001, the Compensation Committee of our Board of Directors
granted an option to Dr. David Long to purchase an aggregate of 350,000 shares
of our common stock at $0.62 per share, the closing share price on such date. In
determining the number of shares to be granted, the term of the option and the
per share exercise price, the Compensation Committee relied upon a valuation
report from independent consultants, which valued the option grant at an
aggregate of $80,500, in consideration for Dr. Long's services to us (without
any cash compensation) in 2001 and as compensation for his guaranty and
collateralization of our bank credit line during 2001. The options are
exercisable immediately and expire on November 29, 2006. On November 29, 2001,
the Compensation Committee also granted an option to John Stephens under the
1992 Employee Stock Incentive Plan to purchase an aggregate of 85,000 shares of
our common stock at $0.62 per share, the closing price per share on the date of
the grant. The options are exercisable immediately and expire on November 29,
2006.

Item 13. Exhibits and Reports on Form 8-K

(a)      Exhibits.
         --------

2.       Articles of incorporation and by-laws

         2.1      Fifth Amended and Restated Certificate of Incorporation of
                  Biofield Corp., as filed with the Secretary of State of the
                  State of Delaware on October 6, 2000. (1)

         2.2      By-laws of Biofield Corp. (2)

3.       Instruments defining the rights of security holders, including
         indentures. - None

5.       Voting trust agreement and amendment. - None

6.       Material contracts.

         6.01     Registration Rights Agreement between Biofield Corp. and John
                  D. Stephens dated as of April 22, 1993. (3)

         6.02     Form of Stock Purchase Option Agreement between Biofield Corp.
                  and Abel Laboratories, Inc., dated as of June 1, 1992. (3)

                                       36
<PAGE>

         6.03     Patent Royalty Agreement between Biofield Corp. and Abel
                  Laboratories, Inc., dated as of June 1, 1992. (3)

         6.04     Master Laboratory Services Agreement between Biofield Corp.
                  and Abel Laboratories, Inc., dated as of January 1, 1994. (3)

         6.09     Biofield Corp. 1992 Stock Incentive Plan. (3)

         6.10     Biofield Corp. 1996 Stock Option Plan, as amended. (4)

         6.11     Biofield Corp. 1996 Stock Option Plan for Non-Employee
                  Directors. (3)

         6.12     Stock Purchase Agreement between Biofield Corp. and David M.
                  Long, Jr., M.D., Ph.D., individually and on behalf of Long
                  Family Partners II, LP, Raymond A. Long and Raymond A. Long
                  u/a 01/01/91, dated December 28, 1999. (1)

         6.13     Escrow Agreement among C. Leonard Gordon, Biofield Corp. and
                  Warshaw Burstein Cohen Schlesinger & Kuh, LLP, as escrow
                  agent, dated December 28, 1999. (1)

         6.14     Form of Stock Purchase Agreement between Biofield Corp. and
                  each of Arthur Taylor and Amy Langer dated January 10, 2000.
                  (1)

         6.15     Form of Stock Purchase Agreement between Biofield Corp. and
                  each of John Stephens and Nancy Bruyneel dated January 10,
                  2000. (1)

         6.16     License Agreement between Biofield Corp. and Cardio Dynamics
                  International Corporation dated October 16, 2000. (1)

         6.17     Share Option Agreement, dated as of March 16, 1995, between
                  Biofield Corp. and David M. Long, Jr., M.D. (1)

         6.18*    Form of Share Option Agreement between Biofield Corp. and each
                  of Amy Langer, Raymond A. Long, M.D. and Arthur Taylor, dated
                  September 5, 2001.

         6.19*    Share Option Agreement, dated as of November 29, 2001, between
                  Biofield Corp. and David M. Long, Jr., M.D.

         6.20*    Share Option Agreement, dated as of November 29, 2001, between
                  Biofield Corp. and John D. Stephens.

         6.21*    Form of Share Option Agreement between each of Arthur C.
                  Hilmer, Nancy Patterson and Steven Preiss, dated November 29,
                  2001.

         6.22*    Form of Share Option Agreement between various Biofield Corp.
                  employees and Biofield Corp., dated November 29, 2001.

7.       Material foreign patents. - None

10.      Consents - None

11.      Statement re computation of per share earnings - Not required since
         this computation can be clearly determined from the material contained
         in this report on Form 10-KSB.

                                       37
<PAGE>

13.      Annual report to security holders for the last fiscal year, Form 10-Q
         or 10-QSB or quarterly report to security holders, if incorporated by
         reference in the filing - Not applicable.

16.      Letter on change in certifying accountant - Not applicable.

18.      Letter on change in accounting principles - Not applicable.

21.      Subsidiaries of the small business issuer

                  Biofield International, Inc. - Incorporated in Delaware

22.      Published report regarding matters submitted to vote of security
         holders - Not applicable.

23.      Consent of experts and counsel

         23.1*    Consent of Deloitte & Touche, LLC

24.      Power of attorney - Not applicable.

27.      Financial Data Schedule - Not applicable.

28.      Information from reports furnished to state regulatory authorities -
         Not applicable.

99.      Additional Exhibits - Not applicable.

-------------------------
(*)      Filed herewith.

         (1)      Filed with the Securities and Exchange Commission as an
                  exhibit to Biofield's Registration Statement on Form 10-SB
                  (Registration No. 0-27848) which became effective on October
                  18, 2000.

         (2)      Incorporated by reference to Biofield's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1996.

         (3)      Incorporated by reference to Biofield's Registration Statement
                  on Form S-1 (Registration No. 333-00796) declared effective on
                  March 19, 1996.

         (4)      Incorporated by reference to Biofield's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1997.

(b)      Reports on Form 8-K. We did not file a Current Report on Form 8-K
         during the quarter ended December 31, 2001.

                                       38
<PAGE>

Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Dated: March 29, 2002

                                       BIOFIELD CORP.


                                       By: /s/ DAVID M. LONG, JR.
                                           -------------------------------------
                                           David M. Long, Jr., M.D., Ph.D.
                                           Chairman and Chief Executive Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:

Dated:

March 29, 2002                         /s/ DAVID M. LONG, JR.
                                       -----------------------------------------
                                       David M. Long, Jr., M.D., Ph.D.
                                       Chairman and Chief Executive Officer and
                                       Director (Principal Executive Officer)


March 29, 2002                         /s/ AMY S. LANGER
                                       -----------------------------------------
                                       Amy S. Langer
                                       Director


March 29, 2002                         /s/ RAYMOND A. LONG
                                       -----------------------------------------
                                       Raymond A. Long, M.D.
                                       Director


March 29, 2002                         /s/ ARTHUR TAYLOR
                                       -----------------------------------------
                                       Arthur Taylor
                                       Director


March 29, 2002                         /s/ JOHN D. STEPHENS
                                       -----------------------------------------
                                       John D. Stephens
                                       Senior Vice President and Chief Operating
                                       Officer (Principal Financial and
                                       Accounting Officer)

                                       39