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, 2003
                                   -----------------

  [ ]    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
                                                -------

                                 BIOFIELD CORP.
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                 (Name of small business issuer in its charter)

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

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

               Issuer's telephone number: (770) 740-8180
                                          --------------

       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:  None.
                                                                   ----

         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 $7,760,000 based on the closing sale price
                  ($0.55) on March 22, 2004, 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 March 22, 2004 - 30,517,460 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 device to assist in
detecting breast cancer in a non-invasive 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 occur, result in a 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, and is
measurable at the skin surface.

Our breast cancer diagnostic device, which we call the Biofield Diagnostic
System, 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 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 about the probability that a previously
identified lesion is malignant or benign, without regard to the size, weight or
volume of the lesion. The device currently is intended for palpable breast
lesions, in women under 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 clinical
studies, 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 ("FDA") and, therefore, is not available for commercial
distribution in the United States. We have obtained a CE mark Certification
administered by the European regulatory authorities, which permits us to market
the model of our device which has been certified in European Union member
countries. At the present time, our marketing activities have been curtailed, as
our limited cash resources are being utilized almost entirely in connection with
the activities necessary to seek FDA approval and to maintain our essential
operations. Although we have entered into marketing distribution agreements for
Brazil, Italy, the Philippines, Southern Africa and South Korea, our sales have
been negligible.

At December 31, 2003, we had a working capital deficiency of $3.8 million, which
amount has increased since such date. We require an immediate infusion of
additional financial resources in order for us to continue our operations after
May 2004. Unless such resources timely become available, we will be compelled to
cease operations.

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).

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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. 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, 1998, were utilized for research and development
activities and operating expenses.

In November 1998, we curtailed most of our operations due to lack of adequate
financial resources and thereafter, as we failed to raise additional capital, we
shut down all of our remaining operations. In December 1998, our common stock
was de-listed from trading on The Nasdaq Stock Market ("NASDAQ") 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 stockholders of
record of our common stock.

In December 1999, we sold 14 million unregistered 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 of $0.05
per share was the result of arms-length negotiation between the parties.
Although the price 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. Approximately $600,000 of
the proceeds from this private placement were used for operating expenses and
for payments to consultants for regulatory activities, and the balance of
approximately $100,000 was used for marketing the Biofield Diagnostic System.

Simultaneously with the December 1999 private placement, our Board of Directors
was reconstituted, Dr. David Long was appointed as our Chairman and Chief
Executive Officer and a director and all of our other then remaining directors
and executive officers resigned. Thereafter, we concentrated our efforts
primarily on activities which we believed to be appropriate to assist us in
obtaining FDA approval, CE mark Certification to market our device in European
Union countries and related marketing and regulatory activities. In 2000, we
engaged outside consultants for our marketing and FDA regulatory activities. In
May 2000, we were successful in obtaining CE mark Certification for the then
current model of our Biofield Diagnostic System, and were re-certified by
ISO-9001 Quality Systems. The CE mark Certification allows us to market the
model of our device which has been certified in certain European and other
countries that recognize the CE mark. Marketing of our device within the United
States is dependent on our obtaining FDA approval, which we have not yet
received.

On December 15, 2000 we sold three million unregistered shares of our common
stock in a private placement for $0.50 per share and raised $1,500,000. Dr.
David Long participated in the placement and bought 482,000 of such shares. On
December 15, 2000, the closing price of our common stock, as reported by
NASDAQ's InfoQuote service, was $0.57 per share. The proceeds from the placement
were used to fund our operations in 2001.

During 2002, our operating activities were funded almost entirely with
$1,750,000 of borrowings obtained from, or with the assistance of, Dr. David
Long and certain of his affiliates. During the first eleven months of 2003, our
operating activities were funded entirely with $680,000 of borrowings obtained
from, or with the assistance of, Dr. David Long and certain of his affiliates.

In December 2003, we sold an aggregate of $637,500 of our 12% promissory notes
due December 31, 2004 and 3,187,500 unregistered shares of our common stock for
an aggregate of $637,500 in the first two tranches of a private placement. This
placement was completed by the sale of an additional aggregate of $362,500 of
such 12% promissory notes and 1,812,500 unregistered shares of our common stock
for an aggregate of $362,500 in two additional tranches, one of which closed in
each of January and February 2004. In connection with this placement, we issued
five-year warrants to purchase an aggregate of 500,000 shares of our common
stock at a purchase price of $0.20 per share to the placement agent. We also
agreed to register, at our expense, the shares of common stock issued and
issuable in the placement. At the time of the sales, the closing price of our
common stock, as reported by NASDAQ's InfoQuote service, ranged from $0.25 to
$0.50 per share. We received an aggregate of $564,570 of net proceeds from the
placement, which we intend to use to finance (i) the completion of our
application to the FDA, (ii) the preparation of a registration statement
registering the shares issued in the placement with the SEC, (iii) the marketing
of our Biofield Diagnostic System in the United States and (iv) our operations
until May 2004. We continue to seek long-term financing, which is essential for
us to continue our operations after May 2004.

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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
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 conducted by a physician or by a woman performing breast
self-examination 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. As a result, other techniques
are used to detect breast cancer.

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

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<PAGE>

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, many patients with suspicious lesions proceeds to additional
diagnostic procedures, including surgical biopsy, which is 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 have to 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 a lesion should be removed by biopsy or
whether other action should be taken. Only a biopsy, followed by microscopic
examination, can determine whether a lesion is benign or malignant. A breast
examination utilizing our device is a non-invasive test, 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. Our device 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.

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 can use this information, together with other available clinical
information, to determine the appropriate course of action. We believe that our
device will offer several advantages compared with currently available
modalities, including the following:

     o    It provides 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    A physician or medical technician can perform the test 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.

     o    It is likely to be preferred by third party payers of health care
          costs, since it has the potential of reducing the number of expensive
          diagnostic tests, including surgical biopsies.

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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, detected either by x-ray mammography screening or a physical
examination (self or by physician). 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 our device cannot determine the presence of breast cancer in all
cases, we believe that our device, together with other available information,
could reduce diagnostic uncertainty and decrease the number of diagnostic
procedures, including surgical biopsies performed on suspicious lesions.

Our test is conducted under the supervision of a licensed medical practitioner.
Both the technician performing the test and the supervising physician must have
undergone appropriate training on the use of the Biofield Diagnostic System. Our
test does not replace the usual screening methods for detecting breast lesions
by mammography or palpation, nor evaluation using biopsy when appropriate.
Moreover, efficacy of our device has not been fully evaluated by our research in
the following types of patients:

     o    Patients with a history of breast cancer or breast augmentation;

     o    Patients who have had recent fine needle aspiration of a suspicious
          lesion; and

     o    Patients who have undergone chemotherapy or radiation therapy within
          the past three years.

Furthermore, women with certain conditions are believed to confound the results
of the test. These conditions include:

     o    Women who have undergone active tamoxifen or raloxifene therapy within
          the past three months,

     o    Women with clinically diagnosed active mastitis;

     o    Women with visible or known dermatological conditions or other
          physical abnormality that precludes the application of sensors;

     o    Women with a known allergy to adhesives or ECMs used to apply
          electrocardiogram or electroencephalogram sensors;

     o    Women with only a single breast;

     o    Women with active electrically powered implanted devices;

     o    Women with breast tattoos and nipple jewelry; and

     o    Pregnant women.

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), 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 have
contemplated a prototype design of an enhanced version of our device, which may
be of use as a screening system. The enhanced version of our device would
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.

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However, due to the cost of this research and our limited financial resources,
we have not made 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.

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 is within a type that is 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. The pre-market notification must
demonstrate that the device is substantially equivalent in intended use, 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
changed the classification requiring PMA approval process.

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. An application for PMA
approval must provide extensive preclinical and clinical trial data, and also
information about the device and its components including its 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, 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 conditions in an approvable letter are satisfied, the FDA
will approve the device 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

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<PAGE>

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 there is no assurance that any application for PMA
approval will ever be approved for marketing a device. Even after approval, if
any, 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 ("IDE") 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.

In December 1996, we submitted 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."

Commencing in September 2001, we had discussions with the FDA about our data
analysis, the CE mark Certification for our device, its comprehensive algorithm
and clinical efficacy, and also discussed our then proposed course of action in
support of the re-submission of our PMA application, including timing of
on-going data analysis and patient management categories. In 2002, we had
further discussions with the FDA about the science related to our device's
measurements, reviewed clinical study databases to be used for training and
testing, regulatory course of action related to a PMA application, statistical
methodology and clinical goals, and advised the FDA that a Pre-Market
Surveillance (PMS) Study was in progress in Europe. In March 2002, the FDA
orally informed us that it anticipated that our PMA application, upon
submission, would be reviewed under its expedited review policy. We subsequently
met with the FDA to outline the content of our proposed PMA application and to
introduce our next generation device and discuss necessary testing of such
device to demonstrate equivalency with our original device. In December 2002, we
submitted our detailed statistical analysis plan to the FDA and the application
thereof to a portion of the results of our testing, in an effort to receive
approval of such plan prior to proceeding with our PMA submission, and advised
the FDA that a portion of our test data had not yet been analyzed, and was being
maintained by a third party for subsequent analysis and algorithm validation
under an FDA-reviewed statistical analysis plan. During the first quarter of
2003, we had several telephone conferences with the FDA, in which the FDA raised
additional questions concerning our statistical analysis plan (which we
responded in a series of written communications) and the FDA indicated that our
training set data results appeared to be statistically significant.

In the last quarter of 2003, we determined to pursue an application for 510(k)
clearance of our device (instead of resubmitting a PMA application) after an
internal determination that the performance data from our device demonstrates
substantial equivalency to a predicate category of devices ("Thermographic
Systems"), which process is less costly and would allow us to commence marketing
our device sooner than under a PMA approval process. We have not discussed the
change in our proposed FDA submission with the FDA and there can be no assurance
that the FDA will determine that our device is substantially equivalent to an
approved device already in commercial distribution or that the FDA will grant
market clearance for our device.

On March 12, 2004, we submitted our application for 510(k) clearance to the
notified body, KEMA Registered Quality, Inc., for review prior to formal
submission to the FDA. Assuming that we are advised by KEMA to formally submit
our application to the FDA for 510(k) clearance and clearance is then obtained,

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we anticipate commencing our marketing efforts in the United States shortly
thereafter if we are successful in obtaining additional long-term financing.
However, due to our very limited financial resources, if the FDA does not find
that our device is substantially equivalent to an approved device already in
commercial distribution or requires substantial additional information in
support of our 510(k) application, we will need to obtain the necessary
financial resources to complete our application to the FDA, as well as to
sustain our operations during the time that our application is being considered
by the FDA.

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 requires that
manufacturers report to the FDA deaths or serious injuries associated with
regulated products and product malfunctions likely to cause or contribute to
death or serious injury. The FDA's generally prohibits promotion of 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. There is no assurance that
unanticipated changes in existing regulatory requirements or the 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; recalls or seizures 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; withdrawal of
product approvals already granted; and commencement of criminal prosecution. Any
FDA enforcement action could have a significant adverse effect on our business
and financial condition.

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, and we could
incur significant costs to comply with such laws and regulations.

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

Medical devices which are sold within the European Union are required to achieve
compliance with the requirements of the Medical Devices Directive issued by the
European Union and obtain a "CE" marking for the device. To obtain a CE marking,
the medical device is required to meet the Essential Requirements as defined
under the Directive, relating to safety and performance of the device, and the
supplier must successfully undergo verification of its regulatory compliance
(known as a "conformity assessment") by an appropriate approved standards agency
or "notified body". It also is required to comply with additional national
requirements that are beyond the scope of the Directive.

                                       9
<PAGE>

We have received approval by the notified body KEMA-Registered Quality, Inc. to
market a version of 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 such version 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 and did not comment on our clinical
research. At the conclusion of the review, KEMA issued 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. We will be required to apply for CE
recertification for our newly redesigned device, which we intend to do at an
appropriate time when adequate long-term funding is obtained.

The CE mark Certification and the ISO-9001 Quality System status, which status
is subject to semi-annual audit by KEMA, permit us to sell an approved device in
Europe and other countries that recognize CE mark Certification, without
obtaining any further regulatory approval. Failure to maintain compliance with
the appropriate Medical Devices Directive and other applicable requirements
could have a significant adverse effect on 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 our device and disposable
sensors, and intend to continue to use contract manufacturers to satisfy our
future needs. Electronic components and raw materials used in our 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 our device and our sensors are treated as a trade secret. We
own certain moulds and other equipment used to manufacture our components.

SeaMED Corporation was the contract manufacturer for the previous version of our
device, pursuant to an agreement, which expired May 15, 2001. TriVirix
International Limited has redesigned our device to reduce manufacturing costs
and make product platform improvements, a major portion of which work has been
completed. However, until we obtain additional financing, we are unable to
complete the payments under our redesign contract and finish the redesign of the
new version of our device. We have arranged with Ludlow Technical Products Inc.
to contract manufacture our sensors, which in turn has contracted with Dow
Pharmaceutical Sciences, Inc. to supply the gel, which is used with our sensors.

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 our device to reduce diagnostic uncertainty
and decrease the number of diagnostic tests performed on these suspicious
lesions. We believe that the potential market for our device 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 our device, we will market our device in the United States through one
or more distribution partners. We have not commenced discussions with any
potential distribution partner and cannot assure that any discussions, which we
may have, will result in any strategic or other relationship.

Based on obtaining CE mark Certification for our device, we have been able to
market the previous version of our device in the European Union and certain
other countries that recognize the CE marking. In December 2001, we signed an
exclusive three-year distribution agreement with Trilogy Critical Care (Pty)
Ltd. of Johannesburg, South Africa, a health care distributor in southern
Africa, to market and sell our device in South Africa and certain other southern
African countries, conditioned on achieving annual minimum sales. In 2002, we
have signed similar distribution agreements for Italy, South Korea, Republic of
the Philippines and Brazil, in 2003, we signed a similar distribution agreement
for certain countries in the Middle East and in 2004 we signed a similar
agreement for Malaysia. Each of our distribution agreements permit us to
terminate the distribution arrangement if minimum annual purchases are not made.

                                       10
<PAGE>

Although none of the minimum annual purchases have been made under any of these
distribution agreements, we have not exercised our election to terminate any of
such agreements. Except for the initial purchases of demonstration units made
under these agreements, no subsequent purchases have been made.

We believe that the cost for use of our device will be competitive with the
current procedure costs of diagnostic mammography and ultrasound. Although we
have not sold the device in the United States, at such time, if at all, as we
receive FDA approval, we currently expect to price our 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 a set.

Due to our current lack of cash resources, our marketing staff consists of only
one part-time independent marketing consultant, who has worked with us for
several years and is familiar with our device. Our marketing efforts, to date,
have achieved very limited success. The redesign of a new version of our device
is mostly complete, but we will not be able to commence marketing our redesigned
device until such time, if at all, as we secure additional financing to enable
us to complete the payments under our redesign contract, at which time we would
resume our marketing activities.

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

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, while working with professional organizations to foster
awareness. We also intend to seek support for our products, and enlist the
assistance of opinion leaders in making presentations to health care
administrators to inform them of the benefits of our device.

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, to limit coverage for new technology and to
limit or control the price of products and services. 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 our device in international markets will vary and will
be determined on a country-by-country basis. Although we intend to pursue our
efforts to obtain reimbursement status in major European markets, we do not yet
have a schedule for commencing these efforts, there is no assurance of success,
once such efforts are commenced, if at all, and our ability to achieve any
significant market penetration may depend upon the availability of third party
governmental reimbursement. Initially, we expect that the patient will be
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. 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.

                                       11
<PAGE>

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. 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.

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 2% of gross sales of a
prior version of our device and its sensors, which are no longer being marketed,
and 1% of gross sales of any pre-gelled electrodes used in connection with our
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
technology conceived 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. One
patent has been issued to us that is covered by this agreement.

In October 2000, we entered into a non-exclusive license agreement with Cardio
Dynamics International Corporation, a manufacturer of medical devices, for use
of our interconnect design patent on cables to be manufactured by them. The
agreement was due to expire on December 31, 2003 and was renewable by Cardio
Dynamics for an additional two years based on a mutual agreement of minimum
royalties. We received the contractual minimum royalties of $19,770 for 2001 and
$46,890 for 2002. The agreement was amended in December 2002 to reset the then
remaining royalty from $98,465 to $54,606. In consideration for prepayment of
such royalty in 2003, the agreement was extended (for no additional royalty)
until December 31, 2004.

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, although they have decreased significantly since 1998. In 2003, our
research and development expenditures were primarily devoted to the redesign of
our device. During the last two years, we have spent an aggregate of $425,117 on
our research and development activities.

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

                                       12
<PAGE>

our device, including imaging equipment such as MRI systems manufactured by
Hitachi Medical Corporation of America, Royal Philips 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 our device 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(R), 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 our device 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 March 22, 2004, we had five full-time employees. One employee is involved
primarily in data management and also supervises our research and development
activities and the other four employees are involved in management,
manufacturing supervision, product development and financial and administrative
functions. In addition, when needed, we use the services of an independent
marketing consultant, and two other consultants who assist us with regulatory
work. Due to a lack of financial resources during 2003, we deferred compensation
due our employees for six months (and agreed to pay a 100% percent premium on
such deferred compensation) and we reduced our employee compensation for four
months (and issued options under our 1996 Stock Option Plan in an attempt to
make up for such shortfall). 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 business.
From time to time, we seek services of consultants who specialize in different
aspects of regulatory work. Although we do not have the financial resources or
any plan to hire new employees in the immediate future, competition for
qualified personnel is intense and there is no assurance that we will be able to
timely attract and retain qualified personnel who may be necessary for the
development of our business.

                                       13
<PAGE>

Risk Factors

We Need to Obtain Financing in Order to Continue Our Operations.
----------------------------------------------------------------

At March 22, 2004, we projected that our financial resources will be depleted by
the end of May 2004. Our line of credit of $1.2 million, which is secured by
personal guarantees from Dr. Long and his affiliates, expires on May 2, 2004.
Furthermore, the $1 million of 12% promissory notes which we issued in a private
placement in December 2003 and January and February 2004, matures on December
31, 2004, at which time the notes become due on demand, will bear interest
(until paid) at 1.5% per month and will require the issuance of an aggregate of
5,000,000 additional shares of our common stock. We have been seeking long-term
financing through investment banking channels for over two years, but have not
yet been successful in obtaining such financing.

We Anticipate Significant Dilution of Our Current Stockholders in Obtaining
---------------------------------------------------------------------------
Necessary Funding
-----------------

Our recently completed $1 million private placement required us, in order to
obtain $1 million of short-term financing, to issue (in addition to $1 million
of short-term notes) an aggregate of 5,500,000 shares of our common stock, and
we will be required to issue to the holders of these notes substantial
additional shares of our common stock if certain short-term goals are not timely
achieved. If we are successful in raising additional funds by selling our equity
securities, the equity ownership of our existing stockholders will be
significantly further diluted. If we are able to raise additional funds through
debt financing, which currently is unlikely without a third party guaranty, we
will incur significant borrowing costs.

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 our device, 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 Which Endangers our
-------------------------------------------------------------------------------
Viability as a Going-Concern
----------------------------

We currently have no significant source of operating revenue and have incurred
net operating losses since our inception. At December 31, 2003, we had an
accumulated deficit of approximately $66 million. 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, mainly
due to the anticipated expenses associated with the pre-market approval process
and proposed commercialization of our device, research and development and
marketing activities and administration costs. Our continuing losses have caused
our independent accountants to qualify their audit report regarding our use of
"going concern" basis of accounting in preparation of our 2003 consolidated
financial statements.

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

Our ability to achieve profitability will depend, in part, on our ability to
obtain regulatory approvals for our device, and to develop the capacity to
successfully manufacture and market our device within a reasonable time. We
cannot assure you when, or if, we will receive required regulatory approvals to
manufacture and market our device. Accordingly, the extent of future losses and
the time required to achieve profitability, are highly uncertain.

Our Cash Flow Problems Have Caused Us to Be Delinquent in Payments to Vendors
-----------------------------------------------------------------------------
and Other Creditors
-------------------

Since 1998, our lack of financial resources has caused us to delay payment of
our obligations as they became due in the ordinary course of our business. Such
delays have damaged some of our vendor and professional relationships, and have
caused us to incur additional expenses in the payment of late charges and
penalties. As of December 31, 2003, we had a working capital deficiency of $3.8
million and accounts payable, primarily to service providers and vendors,
aggregating approximately $900,000, substantially all of which are past due.
These amounts have increased since December 31, 2003. At December 31, 2003, we
also owed our employees approximately $350,000 for their past services and
interest on the unpaid remuneration.

                                       14
<PAGE>

We Have Not Met Our Previous Schedules to File our Application for Approval of
------------------------------------------------------------------------------
our Device with the FDA
-----------------------

During 2002 and 2003, we operated with minimum funding, which substantially
curtailed our business activities, including our ability to complete the
necessary materials needed to meet our previously internally scheduled FDA
filing deadlines. Our recently completed $1 million private placement provides
that if we do not submit our completed application for 510(k) clearance for the
Biofield Diagnostic System to the FDA by June 4, 2004, we will be required to
issue 500,000 shares of our common stock to the participants therein for each 30
day period of delay. Although we have completed our application for 510(k)
clearance, we have not yet submitted it to the FDA and are awaiting the
completion of its review by the notified body, KEMA Registered Quality, Inc. If
KEMA, during its review, or the FDA, during its approval process, requires us to
materially amend our application, engage in additional clinical trials, or
supply significant further materials, we currently do not have the necessary
financial resources to do so. Furthermore, there is no certainty that the FDA
will agree that our application for 501(k) clearance is appropriate or, if the
FDA processes our application, that the FDA will grant clearance for our device.

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

We expect that we will need significant additional funding to complete all the
steps necessary to receive approval from the FDA, for operating expenses and for
our marketing program. 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. 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 operating expenses, including the expected
cost of commercializing our device. We cannot assure you that additional
financing will be available when needed or, if available, will be available on
acceptable terms. Since 2001, insufficient funds have prevented us from
implementing our business strategy and have required us to delay, scale back or
eliminate certain activities.

We May Never Be Able to Bring our Device to Market or Sustain Its Sales After
-----------------------------------------------------------------------------
Regulatory Approval
-------------------

Our device faces a high degree of uncertainty, including the following:

     o    we may not be able to obtain United States regulatory approval.
          Obtaining regulatory approval may take significantly more time and
          cost significantly more money than anticipated. Lack of United States
          regulatory approval has significantly affected our ability to sell our
          device outside of the United States.

     o    we may not be able to produce our device in commercial quantities at
          reasonable cost.

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

     o    our device may not gain satisfactory market acceptance.

     o    our device 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 our device.

     o    after approval, our device 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 successfully market our device, 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 intend to develop additional applications for our device, based on
its core technology, none of these applications is expected to result in a
commercial product for at least several years, if at all. Consequently, until
such time, if at all, as our device is approved for commercial distribution in
the United States, limited distribution of our device overseas will account for
substantially all of our revenues, if any.

                                       15
<PAGE>

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

Our current contract manufacturer for our device has not yet completed the
redesign of a new version of our device due to our delay in payment for its
redesign services and has not yet manufactured our device. We cannot assure you
that it will complete its redesign services or be able to manufacture in volume,
when or if the need may arise. If this situation occurs, our business could be
significantly and adversely affected.

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

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 device and its 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 device as planned. Our dependence upon third parties for the
manufacture and supply of our device and components may significantly and
adversely affect our ability to attain profitability and our ability to
manufacture and deliver our device on a timely and competitive basis.

We May Not Be Able to Apply Our Technology to Other Uses and Products
---------------------------------------------------------------------

We cannot assure you that our technology will be approved and accepted for
breast cancer screening or for the detection of other cancers. Furthermore, we
also cannot assure you, even if we can develop any new products or uses for our
current device, that such products or uses would be approved by the FDA or by
any comparable foreign regulatory bodies, or would be commercially viable.

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

Regulation by governmental authorities in the United States will be 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. 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 Device Will Be Subject to Continuing Review by the FDA Which Could Impact On
--------------------------------------------------------------------------------
Our Ability to Sell It in the Future
------------------------------------

Changes to our device or the manner in which it is used after it is 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.

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

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 our device or prevent us from marketing it if we
obtain this approval, and would have a significant adverse effect on our
business.

                                       16
<PAGE>

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 prior version of our device in certain
foreign countries, will not be withdrawn or that our redesigned device, when
completed, will receive regulatory approval. 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 generate reasonable profit. 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 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.

Certain Foreign Governments May Not Give Reimbursement Code for Our Device
--------------------------------------------------------------------------

Government health authorities, especially in the countries where most of the
reimbursements flow through government agencies, may not provide us with a
reimbursement code, which is required for claiming the cost for the use of our
device from government agencies. If we are unable to obtain such reimbursement
codes in major markets, marketability of our device may be severely restricted.

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. We have not yet hired all of the required personnel we will
need to commercialize our device and meet the other objectives of our business
plan. Competition for qualified personnel in the medical device and
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 Device
---------------------------------------

We currently have not set up a full marketing or sales organization to market
our device. 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 and adversely
affected.

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

We intend to commence commercial sales of our device 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 our device 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

                                       17
<PAGE>

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 device, as well as any other
products that 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 Device 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 device 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 our device. Commercial availability of
any new product could render our device 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 our device
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 device will be successfully
defended or that any insurance which we then carry will be sufficient to cover
liabilities arising from these claims. A successful claim against us in excess
of any insurance coverage, which we may have, 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.

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.

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 patents will not be invalidated 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,

                                       18
<PAGE>

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, 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 Device May Infringe Third Party Intellectual Property Rights
----------------------------------------------------------------

Other companies may have obtained other proprietary rights to technology that
may be potentially useful to us. It is possible that a third party could
successfully claim that our device or its components infringe on its
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 that we could afford and we may not have the ability to timely redesign our
device. If we are required to pay material damages or are unable to obtain these
rights or are unable to successfully redesign our device at a reasonable cost,
our business could be significantly and 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, Dr.
Raymond Long, and their respective affiliated entities, beneficially own
approximately 48% of our outstanding shares of common stock. As a result, Dr.
David Long controls the nomination and election of our directors, our policies
and the outcome of all important 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.

We Lack Independent Directors
-----------------------------

We cannot assure you that our Board of Directors will have independent
directors. Our previous independent directors resigned in December 2002 due,
among other things, to our potential inability to maintain directors' and
officers' liability insurance and to our financial inability to continue to
assure that we will operate as a going concern. In the absence of a majority of
independent directors, our current three-member Board of Directors, which
consists of our two executive officers (one of whom is our principal
stockholder) and a non-employee director who is related to our principal
stockholder, could establish policies and enter into transactions without
independent review. This could present the potential for a conflict of interest
between us and our stockholders, and increases our difficulty in raising
necessary financing. In addition, we cannot establish an audit committee or
compensation committee without independent directors, which will prohibit us
from listing our shares of common stock for trading on a recognized national
securities exchange or on any electronic exchange regulated by NASDAQ.

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
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.

                                       19
<PAGE>

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 to
the interests of our stockholders, and also could limit the price certain
investors might be willing to pay 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.

Our Obligation to Register Shares of our Common Stock and Maintain Such
-----------------------------------------------------------------------
Registration for Two Years Will be Costly and May Lower the Market Price of Our
-------------------------------------------------------------------------------
Common Stock
------------

A condition of our recently completed $1 million private placement is that we
prepare and file with the SEC, no later than April 20, 2004, a registration
statement covering all 5,000,000 shares of our common stock issued in the
placement, the 500,000 shares of common stock issuable upon exercise of warrants
we issued in connection with the placement and all additional shares of common
stock which may be issued as a result of our inability to timely meet certain
contractual deadlines agreed by us with the participants in the placement. As a
result, we intend to register an aggregate of approximately 8,800,000 shares of
common stock in the registration statement. If the registration statement is not
declared effective by the SEC prior to July 20, 2004, we will be required to
issue 500,000 shares of our common stock to the participants in the placement
for each 30 days of delay. After the registration is declared effective, we are
required to maintain the effectiveness of the registration statement for two
years. The cost of such registration statement and maintaining the effectiveness
thereof will affect the availability of funds for our business operations.
Furthermore, sales of these registered 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.

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

At March 22, 2004, 31,079,972 shares of our common stock were outstanding, of
which approximately 6.2 million shares were freely tradable by the holders of
these shares without limitations under the Securities Act of 1933, and an
additional 5,000,000 shares (after registration, which is contractually required
to occur before July 20, 2004) will be freely tradable shortly. Approximately
79% of the remaining shares of our outstanding common stock were held by our
current executive officers and directors and their affiliated entities. These
persons, and other holders of restricted shares, are eligible to sell
substantially all of their shares subject to the volume and other limitations of
Rule 144 promulgated under the Securities Act of 1933. 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, collaborative licensing or other arrangements with corporate
partners. If additional funds are raised by issuing equity securities, dilution

                                       20
<PAGE>

to our existing stockholders will occur. As of March 22, 2004, options, warrants
and rights to purchase a total of 2,974,811 shares of our common stock were
outstanding with a weighted average exercise price of $0.42 per share, 982,609
of which were then exercisable. In addition, 1,048,532 shares of our common
stock were available for future option grants under our stock option plans.
Furthermore, under the terms of our recently completed $1 million private
placement, we are required to issue additional shares of common stock and
warrants to purchase shares of common stock if certain agreed deadlines are not
met, and to satisfy this contingent obligation, we are registering an additional
3,300,000 shares of our common stock in a registration statement currently being
prepared which are potentially issuable to the participants in such placement.
To the extent that any of the foregoing options are exercised or shares are
issued, 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,
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 any future 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 $1,818.

We intend to move our operations to Spring Valley, California if and when cash
resources become available. We are currently subleasing from Abel Laboratories,
Inc., an affiliate of Dr. David Long, our Chairman and Chief Executive Officer
and principal stockholder, approximately 5,000 square feet of furnished and
laboratory equipped space at 2737 Via Orange Way, Spring Valley, California.
Under the sublease arrangement, we are to pay Abel the same amount of rent
charged to Abel by the landlord of the premises, without any adjustment. Abel's
current monthly rent is $4,998. In 2003, we accrued rent of $62,600 under the
Abel sublease, including late charges imposed by the landlord. Abel's lease
currently expires April 1, 2005, and has a one year renewal option. 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 our move to California, including moving expenses and relocation costs
of employees, to be approximately $300,000. Although we have moved a portion of

                                       21
<PAGE>

our records relating to research and development activities to California, our
administrative and Regulatory and Quality Assurance functions are still carried
out in, and our full-time employees are still located at, our Alpharetta,
Georgia office.

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
exceeding 10% of our current assets, nor are we aware of any proceeding
concerning us that a governmental authority may be 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, 2003.


                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
        Issuer Purchases of Equity Securities.

Market Information

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 daily closing sales
prices for our common stock as reported by NASDAQ's InfoQuote service for the
periods indicated.

Year ended December 31, 2002
----------------------------

First Quarter                                                 $0.60        $0.35
Second Quarter                                                 0.50         0.31
Third Quarter                                                  0.60         0.40
Fourth Quarter                                                 0.47         0.20

Year ended December 31, 2003
----------------------------
First Quarter                                                  0.38         0.25
Second Quarter                                                 0.25         0.09
Third Quarter                                                  0.20         0.07
Fourth Quarter                                                 0.44         0.14

Year ending December 31, 2004
-----------------------------
First Quarter (through March 22, 2004)                         0.67         0.24


On March 22, 2004, the closing sale price for our common stock was $0.55 per
share, as reported by NASDAQ's InfoQuote service.

Holders

As of March 12, 2004, there were 191 holders of record of our common stock,
including Cede & Co., who held 5,728,592 shares for an undisclosed number of
beneficial holders.

                                       22
<PAGE>

Dividends

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

Recent Sale of Unregistered Securities

Set forth below is certain information concerning all sales made by us of our
securities since January 1, 2003 which were not registered under the Securities
Act of 1933 and were not previously disclosed by us in our Quarterly Reports on
Form 10-QSB.

On December 4, 2003, we sold $300,000 of our securities in the first tranche of
a $1 million private placement. The remaining tranches of $337,500, $250,000 and
$112,500 closed on December 29, 2003, January 21, 2004 and February 20, 2004,
respectively. $100,000 principal amount of our 12% promissory notes due December
31, 2004 and 500,000 shares of our common stock were issued for each $100,000
received. CGF Securities, Inc. acted as placement agent and received, as its fee
(i) five-year warrants to purchase an aggregate of 500,000 shares of our common
stock at a purchase price of $0.20 per share, (ii) $100,000 (10% of the gross
proceeds), and (iii) $6,180 as reimbursement of its expenses. In addition, we
paid MRB Investor Relations, LLC a finder's fee of $26,815 (3% of the net
proceeds) for its introduction to the placement agent. The Notes are due and
payable on the earlier of the date that we receive gross proceeds aggregating at
least $2.5 million from the sale of our debt and equity securities (for which
purpose, all such sales within a six month period would be aggregated) or
December 31, 2004. If the notes are not paid by December 31, 2004 (i) we are
obligated to issue an additional 250,000 shares of common stock for each
$100,000 principal amount of notes, and (ii) the notes thereafter bear interest
at 1.5% per month. Until the Notes are repaid, the holders have the right to
participate in any offering by us of our equity securities (including of
convertible debt) by using the Notes (and accrued interest thereon) to acquire
the equity securities at a 25% discount from the offering price (and if the
offering is of convertible debt to acquire such debt at face with the conversion
feature at a 25% discount). A portion of the proceeds of the placement are being
used to complete our proposed submission to the FDA for our Biofield Diagnostic
Device. If the FDA filing is not made before June 20, 2004, we are required to
issue an additional 500,000 shares of common stock to the participants in the
placement, as well as an additional 500,000 shares of common stock for each
period of 30 days of delay thereafter. We are required to file a registration
statement with the SEC for all shares of common stock issued and issuable in the
placement, at our expense, by April 20, 2004 and, if such registration is not
effected by June 20, 2004, we are required to issue an additional 500,000 shares
of common stock to the participants in the placement, as well as an additional
500,000 shares of common stock for each period of 30 days of delay thereafter.

The foregoing transactions were effected in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933 and/or Rule
506 of Regulation D promulgated thereunder. Each of the recipients of these
securities was an accredited investor, as defined in the rules promulgated under
the Act, and agreed to accept the securities purchased for investment.

Repurchases of Securities

We did not engage in any repurchases of our securities during the fiscal quarter
ended December 31, 2003.

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.

Overview

As a development stage company, we have incurred net losses since inception
through December 31, 2003 of approximately $66 million. Our current liabilities
exceeded our current assets by approximately $3.8 million, and our total
liabilities exceeded our total assets by approximately $4 million. These factors
raise substantial doubt about our ability to continue our operations without
obtaining immediate funding.

                                       23
<PAGE>

In 2001 and 2002, our major efforts were focused primarily in connection with
the actions necessary to seek FDA approval to market our device in the United
States, marketing our device in certain overseas markets, redesigning our
device, seeking to obtain funds for our future operating and capital needs and
administrative support to sustain our then current activities. Despite our
efforts during such period, we were unable to obtain adequate third party
funding to pursue our business goals or to cover our operating costs, and Dr.
David Long and certain of his affiliates funded our minimum operating expenses.

In January 2003, Dr. David Long and certain of his affiliates advanced $450,000
to cover certain minimum operating expenses and, during the first quarter of
2003, we instituted a cost reduction program that included reducing salaries of
our six then current employees, reducing use of outside consultants, reducing
our marketing activities and arranging with our employees and one of our
consultants to accept options to acquire 514,227 of our common stock at $0.33
per share as compensation for a portion of their services. In June 2003, Dr.
Long and certain of his affiliates deposited additional collateral with our bank
as a condition to our bank increasing its line of credit to us by $200,000,
which amount was then drawn down. During the second half of 2003, Dr. Long
advanced an additional $30,000 to us and we commenced a private placement to
raise $1 million.

On December 4, 2003, we sold $300,000 of our securities in the first tranche of
the placement. The remaining tranches of $337,500, $250,000 and $112,500 closed
on December 29, 2003, January 21, 2004 and February 20, 2004, respectively.
$100,000 principal amount of our 12% promissory Notes and 500,000 shares of our
common stock were issued for each $100,000 received and we issued to the
placement agent five-year warrants to purchase an aggregate of 500,000 shares of
our common stock at a purchase price of $0.20 per share. The Notes are due and
payable on the earlier of the date that we receive gross proceeds aggregating at
least $2.5 million from the sale of our debt and equity securities (for which
purpose, all such sales within a six month period would be aggregated) or
December 31, 2004. If the notes are not paid by December 31, 2004 (i) we are
obligated to issue an additional 250,000 shares of common stock for each
$100,000 principal amount of notes, and (ii) the notes thereafter bear interest
at 1.5% per month. Until the Notes are repaid, the holders have the right to
participate in any offering by us of our equity securities (including of
convertible debt) by using the Notes (and accrued interest thereon) to acquire
the equity securities at a 25% discount from the offering price (and if the
offering is of convertible debt to acquire such debt at face with the conversion
feature at a 25% discount). A portion of the proceeds of the placement are being
used to complete our proposed submission to the U.S. Food and Drug
Administration ("FDA") for our Biofield Diagnostic Device. If the FDA filing is
not made before June 20, 2004, we are required to issue an additional 500,000
shares of common stock to the participants in the placement, as well as an
additional 500,000 shares of common stock for each period of 30 days of delay
thereafter. We are required to file a registration statement with the SEC for
all shares of common stock issued and issuable in the placement, at our expense,
by April 20, 2004 and, if such registration is not effected before July 20,
2004, we are required to issue an additional 500,000 shares of common stock to
the participants in the placement, as well as an additional 500,000 shares of
common stock for each period of 30 days of delay thereafter.

Our cash resources are being utilized primarily in connection with the actions
necessary to seek FDA approval to market our device in the United States and for
the minimum administrative support, including employee salaries, required to
sustain our current activities. We currently anticipate that our cash resources
will be depleted by the end of May 2004 and are continuing to seek additional
financing to support our activities after such time. There is no assurance that
we can obtain such financing on a timely basis, if at all.

Liquidity and Capital Resources

We have financed our operations since inception almost entirely by the issuance
of our securities, interest income on the then unutilized proceeds from these
issuances and with loans made directly, or guaranteed and collateralized, by Dr.
David Long and certain of his affiliates.

At December 31, 2003, we had a working capital deficiency of $3,824,468, an
increase of $877,039 from December 31, 2002. Our cash and cash equivalents were
$369,332 at December 31, 2003, as compared to $1,413 at December 31, 2002, which
increase was due to the receipt of cash proceeds from that portion of our
private placement which closed in December 2003.

                                       24
<PAGE>

At December 31, 2003, we had inventory of $81,480, as compared to inventory of
$83,438 at December 31, 2002 (in each case, net of a valuation reserve of
approximately $532,000). We believe that all items of inventory are currently
saleable at prices in excess of carrying cost.

During 2003, our operating activities utilized $845,180 of net cash and our
financing activities provided $1,213,099 of net cash, $200,000 of which
represented a draw-down of our bank line of credit (which has been guaranteed
and collateralized by Dr. David Long and certain of his affiliates), advances
aggregating $505,406 from Dr. David Long and certain of his affiliates, and
$507,693 (net of $129,807 of expenses) representing the net cash proceeds
received in December 2003 from the first two tranches of our $1 million private
placement. During 2002, our operating activities utilized $1,867,145 of net
cash, our investing activities provided $77,751 of net cash from the release of
cash in an escrow account and our financing activities provided $1,765,686 of
net cash, all of which (except for $15,686 received upon the exercise of a stock
option) represented loans made directly, or guaranteed and collateralized, by
Dr. Long and certain of his affiliates.

In June 2000, we obtained a $500,000 line of credit from a bank, repayment of
which has been guaranteed and collateralized by an affiliate of Dr. David Long.
The line of credit was increased in November 2001 to $750,000, in January 2002
to $1 million, and in December 2003 to $1.2 million The line of credit has been
fully drawn-down and is due to expire, unless extended, on May 2, 2004.

Since 2001, we have been seeking additional third-party funding. During such
time, we have retained a number of different investment banking firms to assist
us in locating available funding; however, we have not yet been successful in
obtaining any of the long-term funding needed to make us into a commercially
viable entity. During such period, Dr. David Long and certain of his affiliates
have made funding available to us to permit us to maintain certain minimum
operations; however, Dr. Long has advised us that we should not expect that he
or his affiliates will make any further funds available to us. During the period
from December 2003 to February 2004, we were able to obtain short-term financing
of $1 million from a private placement (which resulted in net proceeds to us of
$811,778, prior to any allocation for the cost of our required registration of
the shares of common stock issued in the placement). All of our current funding
is expected to be depleted by the end of May 2004. Although we are continuing
with our efforts to obtain funding to maintain our operations and complete our
FDA application, we cannot assure you that we will be successful or that any
funding we receive will be received timely or on commercially reasonable terms.
Due to our working capital deficiency, and if we do not receive adequate
financing, we will be unable to pay our vendors, lenders and other creditors if
we cease our operations, since the net realizable value of our non-current
assets will not generate adequate cash.

Until such time, if at all, as we receive adequate funding, we intend to
continue to defer payment of all of our obligations which are capable of being
deferred, which actions have resulted in some vendors demanding cash payment for
their goods and services in advance, and other vendors refusing to continue to
do business with us. 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 continue to
attempt to raise further capital through one or more further private placements.

Results of Operations

Comparison of the Year Ended December 31, 2003 with the Year Ended
------------------------------------------------------------------
December 31, 2002
-----------------

We did not sell any of our products in 2003. During 2002, we generated revenues
of $102,000 from the sale of six Biofield Diagnostic Systems to two of our
distributors as demonstration units and from the sale of sensors. Included in
these sales was a sale of five devices to a distributor for $65,000, and a sale
of sensors to a distributor for $6,000, payment for neither of which has been
received, as a result of which we fully provided for these receivables in 2003.

In 2003, as we did not sell any products, we did not incur any cost of sales. In
2002, cost of sales aggregated $65,285. In 2002, we wrote down in full our then
remaining inventory of devices and old sensors by making an additional provision
of $393,518; no similar write-down occurred in 2003.

                                       25
<PAGE>

Research and development expenses include the costs of engineering,
manufacturing and related activities conducted in connection with obtaining
required governmental and regulatory approvals for our device, expenses related
to the adoption of new technology and costs incurred in connection with the
redesign of our device. Research and development expenses decreased by $342,267,
or 89%, to $41,425 in 2003, from $383,692 in 2002, due to a slow down in
activities relating to redesign of our device as the project neared completion
and our limited cash resources.

Selling, general and administrative expenses decreased by $407,344, or 19%, to
$1,722,068 in 2003 from $2,129,412 in 2002. The decrease was largely
attributable to the cost reduction program we initiated in the first quarter of
2003. The costs related to personnel (employees and consultants) were lower by
approximately $567,000 (46%) in 2003, compared to 2002. These savings in
expenditure were partly offset by an increase of approximately $242,000 (394%)
in investment advisors' fees and expenses incurred in connected with our efforts
to obtain financing. Out of the total expenditure for investment advisors' fees
and expenses of approximately $304,000 in 2003, $195,250 (64%) was paid through
the issuance of 793,749 shares of our common stock at an average value of $0.25
per share.

As a result of our cost reduction program implemented in the first quarter of
2003, the reduction of our activities due to lack of cash resources, and the
completion of research and development activities started in previous years,
total operating expenses decreased $749,611, or 30%, from $2,513,104 in 2002 to
$1,763,493 in 2003.

We had net interest expense of $455,822 in 2003, compared to $65,772 in 2002, an
increase of $390,050, or 593%, due to our increased borrowings for operations
and accrual of interest ($192,243) payable to employees on deferred remuneration
due.

Royalty income increased by $7,727, or 16%, to $54,617 in 2003 compared to
$46,890 in 2002. Such royalty income was earned under a licensing agreement
which expires in 2004, and included prepayment in 2003 of all 2004 royalties.

As a result of the foregoing, we incurred a net loss of $2,164,698 in 2003,
compared to a net loss of $2,888,789 in 2002, a reduction of $724,091, or 25%.

Comparison of the Year Ended December 31, 2002 with the Year Ended
------------------------------------------------------------------
December 31, 2001
-----------------

During 2002, we generated revenues of $102,000 from the sale of six Biofield
Diagnostic Systems to two of our distributors as demonstration units and from
the sale of sensors. Cost of sales during 2002 aggregated $65,285. We did not
sell any products during 2001. In 2001, we determined to redesign our then
existing device and sustained a $218,502 charge from the write down of existing
inventory. Since such redesigned device was then scheduled to be available by
the end of 2002 or early 2003, in 2002, we wrote down in full our then remaining
inventory of old devices and sensors by an additional $393,518. As a result, our
gross loss increased 63%, or $138,301, from $218,502 in 2001 to $356,803 in
2002.

Research and development expenses increased by $160,520, or 72%, to $383,692 in
2002 from $223,172 in 2001, as a result of the costs incurred during 2002 in the
redesign of our Biofield Diagnostic System.

Selling, general and administrative expenses increased by $311,558, or 17%, to
$2,129,412 in 2002 from $1,817,854 in 2001, primarily as a result of consulting
fees incurred in connection with certain activities taken in connection with
preparing for our application to the FDA in order to seek approval of our device
as well as for costs associated with marketing of our device in certain overseas
markets.

As a result of such increases in operating expenses, our total operating
expenses increased $472,078, or 23%, from $2,041,026 in 2001 to $2,513,104 in
2002.

We had no interest income in 2002. In 2001, we had interest income of $14,793
due to cash available from a December 2000 financing, which cash was depleted
during 2001.

                                       26
<PAGE>

Net interest expense increased by $52,050, or 379%, to $65,772 in 2002 from
$13,722 in 2001 due to the increase in our borrowings during 2002, which
borrowings were used in our operations.

Royalty income increased by $27,120, or 137%, to $46,980 in 2002 compared to
$19,770 in 2001. Such royalties were earned under a licensing agreement and were
the minimum royalties payable thereunder.

As a result of the foregoing, we incurred a net loss of $2,888,789 in 2002,
compared to a net loss of $2,238,687 in 2001, an increase of $650,102, or 29%.

Application of Critical Accounting Policies

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

At December 31, 2003, we had $248,701 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 these assets not previously recorded. For the year ended
December 31, 2003, we had patent amortization expense of $37,600. In 2002,
amortization expense and write-off of previously capitalized patent costs were
$37,600 and $25,000, respectively. 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 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, 2003 and
2002, 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 net operating loss carryforwards are subject to limitation and may expire
unutilized.

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

We provide for inventory obsolescence based upon assumptions concerning 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. Due to our decision to introduce a new device with updated technology
and major design modifications in 2003 (which is now projected to occur in 2004,
subject to receipt of adequate financing to enable us to complete the project),
we created a reserve for our inventory of old devices amounting to $179,916 in
2001 and increased this reserve by $352,154 in 2002 to fully provide for the old
units and all the sensors for these units. Additionally, we wrote off obsolete
and scrapped inventory totaling $41,364 in 2002. In 2003, no further accruals
were necessary, as full provision existed for the inventory of our old devices.

Stock-Based Compensation
------------------------

We apply 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 our stock option plans. As such,
compensation expense is recorded on the date of grant of an employee stock
option only if the then current market price of the underlying stock exceeds 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, we have elected to
continue to apply the intrinsic value-based method of accounting described
above, and have adopted the disclosure requirements of SFAS No. 123. We also
have adopted the annual disclosure provisions of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS 123"
in our financial reports for the year ended December 31, 2003 and for the
subsequent periods.

                                       27
<PAGE>

Audit Committee and Financial Expert

Our Board of Directors has not had an Audit Committee since the resignation of
our two independent directors in December 2002, and we have not had the
available financial resources to obtain any replacement. None of our current
directors would be considered to have the experience to be considered to be an
audit committee financial expert.

Non-GAAP Financial Measures

The financial statements appearing in this annual report on Form 10-KSB do not
contain any financial measures which are not in accordance with generally
accepted accounting procedures.

New Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS 149 amends SFAS No. 133 to
provide clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The provisions of SFAS
149 are effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The adoption of
SFAS 149 will not have a material impact on the Company's results of operations
or financial position.

Item 7.  Financial Statements.

Table of Contents                                                         Page
-----------------                                                         ----

Independent Auditors' Reports                                        F-1 - F-2

Consolidated Balance Sheets                                                F-3

Consolidated Statements of Operations                                      F-4

Consolidated Statements of Stockholders' Equity (Deficit)            F-5 - F-8

Consolidated Statements of Cash Flows                                F-9 - F-10

Notes to Consolidated Financial Statements                          F-11 - F-29

                                       28
<PAGE>

                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Shareholders
Biofield Corp.

Alpharetta, Georgia

         We have audited the accompanying consolidated balance sheet of Biofield
Corp. (a development stage company) (the "Company") as of December 31, 2003 and
the related consolidated statements of losses, deficiency in stockholders'
equity, and cash flows for the year ended December 31, 2003. 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 audit 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 audit provides a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 2003 and the consolidated results of its operations and
its cash flows for the year ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America. We
express no opinion on the cumulative period from inception through December 31,
2002.

         The accompanying consolidated financial statements for the year ended
December 31, 2003 have been prepared assuming that the Company will continue as
a going concern. As shown in the financial statements, the Company has incurred
net losses since its inception. This raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to this matter are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                 /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                 -----------------------------------------------
                                     Russell Bedford Stefanou Mirchandani LLP
                                     Certified Public Accountants

New York, New York
February 13, 2004

                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Biofield Corp.

We have audited the accompanying consolidated balance sheet of Biofield Corp. (a
development stage company) (the "Company") as of December 31, 2002 and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended December 31, 2002 and 2001 and for the period
October 16, 1987 (date of inception) through December 31, 2002. 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, 2002
and the results of its operations and its cash flows for the years ended
December 31, 2002 and 2001 and for the period October 16, 1987 (date of
inception) through December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 19 to the Consolidated Financial Statements, the Company is
in the development stage as of December 31, 2002.

The accompanying consolidated financial statements for the year ended December
31, 2002 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, during
the years ended December 31, 2002 and 2001 the Company incurred net losses
available to common shareholders of $2,888,789 and $2,238,687, respectively,
operating cash flow deficiencies of $1,867,145 and $1,761,521, respectively,
and, as of December 31, 2002, the Company had a working capital deficiency of
$2,953,740. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ Deloitte & Touche LLP

Atlanta, Georgia
March 28, 2003

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
BIOFIELD CORP
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------
                                                                           December 31,
                                                                   ----------------------------
ASSETS                                                                 2003            2002
<S>                                                                <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                             369,332           1,413
  Accounts receivable                                                      --            71,000
  Inventories                                                            81,480          83,438
  Deferred financing costs                                              896,540            --
  Other current assets                                                     --            34,017
                                                                   ------------    ------------
      Total current assets                                            1,347,352         189,868

PROPERTY AND EQUIPMENT - Net                                              8,131          18,054
OTHER ASSETS                                                             22,753          22,753
PATENT AND PATENT APPLICATION - Net                                     248,701         286,295
                                                                   ------------    ------------
      TOTAL                                                        $  1,626,937    $    516,970
                                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable                                                      925,875         896,018
  Accrued expenses                                                      605,999         122,965
  Due to affiliate                                                      198,281          68,314
  Bank line of credit                                                 1,200,000       1,000,000
  Short-term notes payable                                              637,500            --
  Advances from stockholder                                           1,604,165       1,050,000
                                                                   ------------    ------------
      Total current liabilities                                       5,171,820       3,137,297

LONG-TERM LIABILITIES:
  Long-term debt - related party                                        501,942         456,311
                                                                   ------------    ------------
      Total long-term liabilities                                       501,942         456,311

COMMITMENT AND CONTINGENCIES (Note 14)

STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred Stock, $.001 par value;  authorized
    12,300,000 undesignated shares;
    no shares issued or outstanding
  Common Stock, $.001 par value; authorized 40,000,000
    shares; issued 31,573,603 and 27,592,354 shares at
    December 31, 2003 and December 31, 2002, respectively                31,574          27,593
  Treasury stock - 2,306,131 shares                                      (3,100)         (3,100)
  Additional paid-in capital                                         62,167,320      60,976,790
  Accumulated deficit during development stage                      (66,242,619)    (64,077,921)
                                                                   ------------    ------------
    Total stockholders' equity (deficit)                             (4,046,825)     (3,076,638)
                                                                   ------------    ------------
  TOTAL                                                            $  1,626,937    $    516,970
                                                                   ============    ============
</TABLE>

See notes to consolidated financial statements

                                       F-3
<PAGE>

<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------------------------------------------------
                                                                   Year Ended                          Period October 16,
                                                                   December 31,                          1987 (Date of
                                               ---------------------------------------------------     Inception) Through
                                                    2003              2002              2001            December 31, 2003
                                                                                                      -------------------
<S>                                            <C>                <C>                <C>                <C>
REVENUE                                                --              102,000               --              124,582
COST OF SALES
  Cost of goods sold                                   --               65,285               --               75,447
  Loss on write down of inventory                      --              393,518            218,502            612,020
                                               ------------       ------------       ------------       ------------
GROSS PROFIT                                           --             (356,803)          (218,502)          (562,885)

OPERATING EXPENSES:
  Research and development                           41,425            383,692            223,172         40,481,889
  Selling, general, and administrative            1,722,068          2,129,412          1,817,854         26,805,245
  (Gain) loss on disposition of fixed assets           --                 --                 --               (8,084)
                                               ------------       ------------       ------------       ------------
      Total operating expenses                    1,763,493          2,513,104          2,041,026         67,279,050


OTHER INCOME (EXPENSE):
  Interest income                                      --                 --               14,793          2,476,723
  Interest expense                                 (455,822)           (65,772)           (13,722)          (987,503)
  Royalty income                                     54,617             46,890             19,770            129,845
                                               ------------       ------------       ------------       ------------
      Net (expense) other income                   (401,205)           (18,882)            20,841          1,619,065
                                               ------------       ------------       ------------       ------------
LOSS BEFORE INCOME TAXES                         (2,164,698)        (2,888,789)        (2,238,687)       (66,222,870)
PROVISION FOR INCOME TAXES                             --                 --                 --              (19,749)
                                               ------------       ------------       ------------       ------------
NET LOSS                                       $ (2,164,698)      $ (2,888,789)      $ (2,238,687)      $(66,242,619)
                                               ============       ============       ============       ============

NET LOSS PER SHARE:
     Basic and Diluted                         $      (0.08)      $      (0.11)      $      (0.09)
                                               ============       ============       ============

WEIGHTED-AVERAGE SHARES
     Basic and Diluted                           25,890,366         25,267,922         25,223,478
                                               ============       ============       ============
</TABLE>

See notes to consolidated financial statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
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>

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
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>
See notes to unaudited consolidated financial statements.

                                       F-6
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
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>
                                       F-7
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
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
                                                       ============   =======  ============   ========  ===========
                                                                                                                       (Continued)
</TABLE>

See notes to unaudited consolidated financial statements.

                                       F-8
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
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
Exercise of Common Stock options                                                                                    62,745       63
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss (unaudited)
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2002                                    -       -         -      -           -       -  27,592,354 $ 27,593
                                                       ==========  ======  ========  =====  ==========  ======  ========== ========
Issuance of Common Stock for consulting
  services ($0.30 per share, net)                              --      --        --     --          --      --      50,000       50
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                                                                                  468,749      468
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                                                                                  275,000      275
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)                                                                 3,187,500    3,188
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances
Memorandum entry to record as expense for
   honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2003                                                                                    31,573,603 $ 31,574
                                                       ==========  ======  ========  =====  ==========  ======  ========== ========
</TABLE>

                                      F-9
<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 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)
Exercise of Common Stock options                             15,623                                          15,686
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,888,789)             (2,888,789)
Total comprehensive income (loss)                                                                                    $ (2,888,789)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2002                           $ 60,976,790   $(3,100) $(64,077,921)  $     --  $(3,076,638)
                                                       ============   =======  ============   ========  ===========

Issuance of Common Stock for consulting
  services ($0.30 per share, net)                            14,950                                           15,000
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                           149,532                                          150,000
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                            29,975                                          30,250
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)            793,687                                          796,875
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances            102,386                                          102,386
Memorandum entry to record as expense for
   honorary services rendered by a shareholder              100,000                                          100,000
Net loss                                                                         (2,164,698)              (2,164,698)
Total comprehensive income (loss)                                                                                    $ (2,164,698)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2003                           $ 62,167,320  $ (3,100) $(66,242,619)  $     --  $(4,046,825)
                                                       ============   =======  ============   ========  ===========
                                                                                                                        (Concluded)
</TABLE>

See notes to unaudited consolidated financial statements.

                                      F-10
<PAGE>

<TABLE>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                                          Period
                                                                                                                        October 16,
                                                                                                                      1987 (Date of
                                                                                                                        Inception)
                                                                                       December 31,                      Through
                                                                       -------------------------------------------     December 31,
                                                                           2003            2002            2001            2003
                                                                       ------------    ------------    ------------    -------------
<S>                                                                    <C>             <C>             <C>             <C>
OPERATING ACTIVITIES
  Net loss                                                             $ (2,164,698)   $ (2,888,789)   $ (2,238,687)   $(66,242,619)
  Adjustments to reconcile net loss to net cash
      used in operating activities:
    Depreciation and amortization                                            47,517          48,541          46,308       2,673,074
    Amortization of premiums on short-term investments                                                                      156,692
    Amortization of deferred financing costs                                 30,142                                          30,142
    Loss on disposal of property and equipment                                                                              194,102
    Loss on license and settlement agreements                                                                                49,026
    Loss on abandonment of patent applications                                               25,361          29,867         303,234
    Loss on inventory write-down                                                            393,518         218,502         612,020
    Vendor settlements                                                                                                      (77,257)
    Noncash compensation                                                    100,000         100,000         100,000       3,308,451
    Gain from disposition of fixed assets                                                                                  (159,473)
    Interest paid in Common Stock                                           102,386                                         399,534
    Consultancy fees paid in Common Stock                                   195,250                                         195,250
    Changes in assets and liabilities:
       Accounts receivable                                                   71,000         (46,786)        (24,214)           --
       Inventories                                                            1,958          63,319         (66,025)       (693,500)
      Other current assets                                                   34,017          97,903         (97,321)           --
      Other assets                                                                                           (1,715)       (134,582)
      Interest payable                                                      100,701                                         100,701
      Due to affiliate                                                      129,967           6,943           4,526         198,281
      Accounts payable and accrued expenses                                 506,580         332,845         267,238       1,488,257
                                                                       ------------    ------------    ------------    ------------
          Net cash used in operating activities                            (845,180)     (1,867,145)     (1,761,521)    (57,598,667)
                                                                       ------------    ------------    ------------    ------------

INVESTING ACTIVITIES
  Acquisitions of property and equipment                                                     (8,681)         (7,458)     (2,605,407)
  Costs incurred for patents and patent applications                                                         (9,892)       (782,527)
  Proceeds from sale of property and equipment                                                                              294,748
  Purchases of short-term investments                                                                                   (26,476,638)
  Proceeds from sale and maturity of short-term investments                    --            86,432                      26,406,378
                                                                       ------------    ------------    ------------    ------------
          Net cash provided by (used in) investing activities                  --            77,751         (17,350)     (3,163,446)
                                                                       ------------    ------------    ------------    ------------

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                                                            --                                        33,023,206
  Proceeds from exercise of Common Stock options and
     Common Stock warrants                                                                   15,686                         298,546
  Proceeds from issuance of notes payable                                   637,500                                         637,500
  Notes financing costs                                                    (129,807)                                       (129,807)
  Net bank borrowings under a line of credit                                200,000         250,000         464,000       1,200,000
  Advances from stockholder and related party                               505,406       1,050,000                       1,555,406
  Repayments of advances from stockholder                                                                                  (145,000)
  Repurchases of Common Stock held in treasury                                                                               (3,100)
  Proceeds from notes payable issued to stockholder and
     related party                                                             --           450,000                       2,546,533
                                                                       ------------    ------------    ------------    ------------
          Net cash provided by financing activities                       1,213,099       1,765,686         464,000      61,242,942
                                                                       ------------    ------------    ------------    ------------
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    367,919         (23,708)     (1,314,871)        480,829
    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                                           (111,497)

  CASH AND CASH EQUIVALENTS:
    BEGINNING OF PERIOD                                                       1,413          25,121       1,339,992
                                                                       ------------    ------------    ------------    ------------
    END OF PERIOD                                                      $    369,332    $      1,413    $     25,121    $    369,332
                                                                       ============    ============    ============    ============
<FN>
See notes to consolidated financial statements                                                                           (continued)
</FN>
</TABLE>
                                      F-11
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Period
                                                                                                                        October 16,
                                                                                                                           1987
                                                                                                                         (Date of
                                                                                                                         Inception)
                                                                                           December 31,                   Through
                                                                                  ------------------------------------  December 31,
                                                                                      2003        2002         2001         2003
                                                                                  ----------   ----------   ----------   -----------
<S>                                                                               <C>          <C>          <C>          <C>
SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid during the period for interest                                        $   62,227   $   53,419   $   10,171   $   578,004
                                                                                  ----------   ----------   ----------   -----------

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
                                                                                                                         ===========

  During the fiscal year ending December 31, 2003, the Company exchanged 793,749
    shares of Common Stock for services rendered by consultants:
    Fair value of services rendered                                                                                      $  195,250
                                                                                                                         ----------
    Issuance of Common Stock                                                                                             $  195,250
                                                                                                                         ==========

  During the fiscal year ending December 31, 2003, the Company transferred
    accrued interest on advances
    from a stockholder to be exchanged for 410,358 shares of Common Stock:
    Accrued interest                                                                                                     $   102,386
                                                                                                                         -----------
    Issuance of Common Stock                                                                                             $   102,386
                                                                                                                         ===========

  During the fiscal year ending December 31, 2003, the Company issued 3,187,500
    shares as incentive for notes payable secured under a private placement
    funding:
    Fair value of Finance costs                                                                                          $  796,875
                                                                                                                         -----------
    Issuance of Common Stock                                                                                             $  796,875
                                                                                                                         ===========

See notes to consolidated financial statements                                                                           (Concluded)

</TABLE>
                                      F-12
<PAGE>

                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP

BIOFIELD CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


1. GOING CONCERN BASIS OF ACCOUNTING

As shown in the accompanying financial statements, the Company has incurred
significant losses. As of December 31, 2003, the Company's current liabilities
exceeded its current assets approximately by $3.8 million and its total
liabilities exceeded its total assets approximately by $4 million. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.

During 2002, the Company financed its operations almost entirely with $1,750,000
of borrowings obtained from, or with the assistance of, Dr. David M. Long, Jr.,
M.D., Ph.D., its Chairman, Chief Executive Officer and principal stockholder
("Dr. Long"), and certain of his affiliates.

In the first quarter of 2003, the Company instituted a cost reduction program
that included lowering salaries of its six then current employees and some of
its consultants, minimizing use of outside consultants, arranging with its
employees and a consultant to accept options to acquire the Company's Common
Stock for a portion of their services, and limiting its marketing activities. In
January 2003, Dr. Long advanced $475,000 to enable the Company to meet its then
projected minimum financial requirements. As of December 31, 2003, the amount
due Dr. Long , including additional advances and expenses incurred on behalf of
the Company of $30,406, is $505,406 and is included in the accompanying
financial statements as advances from stockholders.

During the seven months commencing April 16, 2003, the Company was unable to
meet its payroll commitments. Five of its six employees agreed to the deferment
of the payment of the salary due to them, payable with 100% interest thereon,
until the receipt of the proceeds from new funding. The Company also granted
options to acquire 514,227 shares of Common Stock to these employees at an
exercise price of $0.33 per share, the closing market price of the Common Stock
on the date of the grant, in consideration for the reduction in remuneration
accepted by them during the first four months of 2003.

In June 2003, the Company's bank line of credit was increased by $200,000 to
$1.2 million upon the furnishing of additional collateral provided to the bank
by Dr. Long and certain of his affiliates. In addition, advances aggregating
$30,000 were received from Dr. Long in 2003.

In October 2003, the Company entered into an agreement with a placement agent
for assistance in obtaining short-term bridge financing agreement of up to
$700,000 (subsequently increased to $1 million) in a private placement on a best
effort basis. In December 2003, the Company received gross proceeds of $637,500
against issuance of $637,500 principal amount of notes payable and 3,187,500
shares of Common Stock. See Note 10. During January and February 2004, the
Company received further gross proceeds of $362,500 and issued an additional
$362,500 of notes payable and 1,812,500 shares of Common Stock. See Note 20. The
Company intends to use the proceeds from this placement to finance the expense
to complete its FDA application to obtain approval to market the Biofield
Diagnostic System in the United States and to keep the Company operational for
approximately six months. The Company is attempting to raise long-term capital
of approximately $5 million to $7 million to enable it to commercialize its
device (assuming FDA approval is obtained) and maintain its operations. The
infusion of long-term capital is essential for the Company to continue its
operations.

The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. However, no assurance
can be given that management's actions will result in profitable operations or
the resolution of the Company's liquidity problems. The accompanying
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that might result should the
Company be unable to continue as a going concern.

                                      F-13
<PAGE>
2. THE COMPANY

Biofield Corp. is a development stage company that has developed a system to
assist in detecting breast cancer using a non-invasive procedure. The Company's
breast cancer diagnostic device, the Biofield Diagnostic System, employs
single-use sensors to measure 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, seeking permission from various regulatory
authorities to market the device and raising capital. The Company operates in
one market segment, the biomedical device segment.

In March 1996, the Company completed its initial public offering of 1,819,000
shares of Common Stock, at a purchase price of $11.00 per share, for net
proceeds of approximately $18 million.

During the first half of 1997, the Company formed a wholly owned Delaware
corporation, Biofield International, Inc., which established a branch in
Switzerland. The Subsidiary 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. Simultaneously, the Company issued 643,639 shares of Common Stock in
exchange for previously issued warrants to purchase 1,574,930 shares of Common
Stock.

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
inability to meet certain financial criteria 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 if it was unsuccessful in raising additional
capital.

In December 1999, the Company sold 14 million shares of Common Stock for
$700,000 to Dr. Long and a related investor and certain of their affiliated
entities. Simultaneously, the Company's Board of Directors was reconstituted and
Dr. Long was appointed as the Chairman and Chief Executive Officer of the
Company.

In 2000, the Company's then existing device and sensors received CE mark
certification and were granted ISO-9001 quality system status, which allows the
Company to market such device and sensors within the European community.

In 2001 and 2002, the Company's major efforts have been focused primarily on
activities to seek FDA approval to market the Company's device in the United
States, marketing the device in certain overseas markets and attempting to
obtain funds for the operating and capital needs of the Company.

In 2003, the Company has had to severely curtail its activities as its cash
resources depleted and Dr. Long and his affiliates did not extend additional
funding for operations beyond March 31, 2003. In December 2003, the Company
received short-term funding of $637,500, from the closing of the initial
tranches of a $1 million private placement. See Note 10. This short-term funding
should enable the Company to complete the preparation of an application to the
FDA for its device and to continue operations for approximately six months,
during which time the Company intends to continue to actively source long-term
funding.

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Biofield International, Inc. Significant
intercompany transactions have been eliminated in consolidation.


3. SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Company considers cash on hand, deposits in banks, and short-term
investments purchased with an original maturity date of three months or less to
be cash and cash equivalents. The carrying amounts reflected in the balance
sheets for cash and cash equivalents approximate the fair values due to short
maturities of these instruments.

                                      F-14
<PAGE>

Accounts Receivable

The Company provides an allowance for doubtful accounts equal to the estimated
uncollectible amounts. At December 31, 2003, a provision of $71,000 was made for
bad and doubtful accounts, representing an allowance of 100% for the outstanding
accounts receivable. At December 31, 2002, no provision was made for such
accounts.

Inventory and Inventory Valuation Reserve

Inventories are stated at the lower of cost or market, determined by the
first-in, first-out (FIFO) method, including provisions for obsolescence.
Obsolescence is based upon assumptions concerning 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.

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, but not exceeding 17 years.

Revenue recognition and deferred revenue

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements". SAB No. 101
requires that four basic criteria must be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the selling price is fixed and determinable; and (4) collectibility is
reasonably assured. Determination of criteria (3) and (4) are based on
management's judgments regarding the fixed nature of the selling prices of the
products delivered and the collectibility of those amounts. Provisions for
discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period that the related sales are
recorded. Royalty revenues are recognized in the period they are earned. The
Company defers any revenue for which the product has not been delivered or is
subject to refund until such time that the Company and the customer jointly
determine that the product has been delivered or no refund will be required.

Income Taxes

Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under this method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be removed or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the statement of operations in the period that includes the enactment date.

Impairment of Long-Lived Assets

The Company has adopted SFAS No. 144, which requires that long-lived assets and
certain identifiable intangibles held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undercounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. SFAS No. 144 also
requires that assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.

                                      F-15
<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.
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 18. The Company has also adopted the annual
disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure - an Amendment of SFAS 123" in its financial reports
for the year ended December 31, 2003 and for the subsequent periods.

In accordance with Financial Accounting Standards Board Emerging Issues Task
Force ("EITF") 96-18, the measurement date to determine fair value for shares
issued to consultants was the date at which a commitment for performance by the
consultant to earn the equity instrument was reached. The Company valued the
shares issued for consulting services at the rate which the Company believes
represents the fair value of the services received, which did not differ
materially from the value of the Common Stock issued.

Research and Development

The Company accounts for research and development costs in accordance with the
SFAS No. 2, "Accounting for Research and Development Costs". Under SFAS No. 2,
all research and development costs must be charged to expense as incurred.
Accordingly, internal research and development costs are expensed as incurred.
Third-party research and developments costs are expensed when the contracted
work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. Total expenditures on
research and product development incurred for 2003, 2002, and the period from
October 16, 1987 (date of inception) to December 31, 2003 were $41,425,
$383,692, and $40,481,889, respectively.

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 totaling 1,926,717 as at December 31, 2003 (508,639 as at
December 31, 2002) are not included in the per share calculations of diluted
loss per share, since 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.

Reclassification

Certain prior period figures have been reclassified to conform to the current
year's presentation.

Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income", establishes standards for
reporting and displaying of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity,
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company does not have any
items of comprehensive income in any of the periods presented.

                                      F-16
<PAGE>

New Accounting Pronouncements

In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" was issued. SFAS No. 149 amends SFAS No. 133
to provide clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The provisions of SFAS
No. 149 are effective for contracts entered into or modified after June 30,
2003, and for hedging relationships designated after June 30, 2003. The adoption
of SFAS No. 149 will not have a material impact on the Company's results of
operations or financial position.

In May 2003, SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" was issued. SFAS No. 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS No. 150 will not have a material impact on the Company's
results of operations or financial position.


4. INVENTORIES

Inventories at December 31, 2003 and 2002 consisted of the following:


                                                          2003            2002
                                                        --------        --------

Components and supplies                                 $ 37,749        $ 37,749
Finished goods                                           575,801         577,759
                                                        --------        --------
                                                         613,550         615,508
Less: Reserve for potential losses                       532,070         532,070
                                                        --------        --------
                                                        $ 81,480        $ 83,438
                                                        ========        ========

Due to a 2001 Company decision to introduce an enhanced model of its device with
updated technology and design modifications by 2003, the Company created a
reserve for the inventory of the old device. By December 31, 2002, the Company
had set aside $532,070 to fully provide for the old units and all of the sensors
for these units. Additionally, the Company wrote off obsolete and scrapped
inventory totaling $41,364 in 2002. These amounts have been disclosed as a
separate line item, "Loss on write down of inventory" in the accompanying
Consolidated Statements of Operations. In 2003, the Company replaced inventory
worth $1,958 held by a distributor at no charge. This amount is disclosed as a
part of "Selling, general and administrative" in the accompanying Consolidated
Statements of Operations.

5. DEFERRED FINANCING COST

Deferred financing costs at December 31, 2003 and 2002 consisted of the
following:

                                                         2003             2002
                                                       --------          -------

Deferred financing costs                                773,405             --
Private placement expenses                              123,135             --
                                                       --------          -------
                                                       $896,540          $  --
                                                       ========          =======

Financing expenses pertaining to the bridge financing, as discussed in Note 10,
were $926,682, which includes the fair market value of $796,875 for the
3,187,000 shares issued ($0.25 per share) and private placement costs and legal
fees of $129,807. Costs relating to the bridge financing are capitalized and
amortized over the period ending December 31, 2004, the term of the debt, using
the straight-line method. Accumulated amortization at December 31, 2003 was
$30,142, and deferred financing costs charged to operations were $30,142 for
2003. When a loan is paid in full, any unamortized financing costs are removed
from the related accounts and charged to operations. See Note 10.

                                      F-17
<PAGE>

6. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2003 and 2002 consisted of the following:

                                                         2003             2002
                                                       --------         --------
Furniture and office equipment                         $ 49,454         $ 49,454
Plant and production equipment                          144,308          144,308
                                                       --------         --------
                                                        193,762          193,762
Less accumulated depreciation                           185,631          175,708
                                                       --------         --------
                                                       $  8,131         $ 18,054
                                                       ========         ========

Depreciation expense in 2003, 2002 and 2001, and for the period from inception
through December 31, 2003, was $9,923, $10,947, $8,715 and $2,378,962,
respectively.

7. 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 5% of the Net Sales Price of
Covered Inventions (as defined), if any, subject to a limit of $2.5 million. No
royalties have been paid or accrued as of December 31, 2003.

The Company has a patent royalty agreement with Dr. Long and his affiliated
corporation which assigns all rights to the Company for patented inventions, if
any, resulting from performance under a laboratory service agreement (see Note
17). The Company has been issued a United States patent in which Dr. Long is a
named co-inventor. No royalties have been paid or accrued as of December 31,
2003.

Accumulated amortization for patents was $217,405 and $179,811 at December 31,
2003 and 2002, respectively. Patent amortization expense for 2003, 2002 and
2001, and for the period from inception through December 31, 2003, was $37,594,
$37,594, $37,593 and $294,114, respectively.

In 2002 and 2001, the Company evaluated its patent application program and
related costs and, as a result, has written off previously capitalized costs of
approximately $25,000 and $30,000, 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.

                                      F-18
<PAGE>

8. ACCRUED EXPENSES

Accrued expenses at December 31, 2003 and 2002 consisted of the following:


                                                           2003           2002
                                                         --------       --------

Professional fees                                        $255,614       $110,791
Unpaid employees' remuneration                            157,596           --
Interest due on unpaid remuneration                       192,243           --
Other                                                         546         12,174
                                                         --------       --------
                                                         $605,999       $122,965
                                                         ========       ========


Due to severe cash flow constraints experienced by the Company in 2003, its
employees were not paid salaries from April 16, 2003 to October 31, 2003. Five
of its six employees agreed to the deferment of the payment of the salary due to
them, payable with 100% interest thereon, until the receipt of the proceeds from
new funding. The Company also granted options to acquire 514,227 shares of
Common Stock to these employees at an exercise price of $0.33 per share, the
closing market price of the Company's Common Stock on the date of the grant in
consideration for the reduction in remuneration accepted by them during the
first four months of 2003. The unpaid salary and interest thereon is recorded as
accrued expenses in these financial statements.

9. BANK LINE OF CREDIT

The Company has a revolving line of credit with a commercial bank for $1.2
million. The line is secured by personal guarantees from and collateral of Dr.
Long and certain of his affiliates. The line of credit expires on May 2, 2004,
unless extended, and bears interest at the greater of 0.5% above the bank's
prime rate (4% at December 31, 2003) or 5%.

10. SHORT-TERM NOTES PAYABLE

During December 2003, the Company received gross proceeds of $637,500 from the
sale of 12.75 Units (each Unit consisting of (a) a non-negotiable,
non-transferable, unsecured promissory note (the "Note") in the principal amount
of $50,000, bearing interest at 12% per annum, payable monthly, and (b) 250,000
shares of Common Stock) in a $700,000 private placement. The fair value of the
shares issued was determined as $796,875, based on the market price ($0.25 per
share) at the time of first issuance. The amount raised in the private placement
was subsequently increased from $700,000 to $1 million. See Note 20.

Financing expenses pertaining to the Notes amounting to $926,682, which includes
the fair market value of $796,875 for the shares issued, were capitalized, and
set forth as deferred financing costs in these financial statements. These
deferred finance costs are amortized over the term of the Note, which matures
December 31, 2004, using the straight-line method. Accumulated amortization at
December 31, 2003 was $30,143, and deferred financing costs charged to
operations were $30,143 for 2003. In addition to receiving 10% of gross proceeds
as commission in cash, the placement agent is to receive five year cashless
warrants, excercisable at $0.20 per share, to purchase 10% of the number of
shares of Common Stock issued to the holders of the Units. A finder's fees equal
to 2.7% of the gross proceeds is payable to an unaffiliated third party.

The Notes are due and payable on the earlier of the date that the Company
receives gross proceeds of at least $2.5 million from the sale of its debt and
equity securities (for which purpose, all such sales within a six month period
would be aggregated) or December 31, 2004. If the Notes are not paid by December
31, 2004, the Company would be obligated to issue an additional 125,000 shares
of Common Stock for each $50,000 principal amount of unpaid Notes and the Notes
would be reset to bear interest at 1.5% per month. Until the Notes are repaid,
the holders have the right to participate in any offering by the Company of its

                                      F-19
<PAGE>

equity securities (including of convertible debt) by using the Notes (and
accrued interest thereon) to acquire such equity securities at a 25% discount
from the offering price (and if the offering is of convertible debt to acquire
such debt at face with a conversion feature at a 25% discount). The Company has
undertaken to register all unregistered shares of Common Stock issued as part of
the private placement, at its expense, before July 20, 2004, and to file a
registration statement with the SEC to effect the registration by April 20,
2004. If the registration is not effected timely, the Company is required to
issue an additional 25,000 shares of its Common Stock, for each Unit, at the
beginning of each 30 day period of delay. The proceeds of the private placement
are intended to be used to complete the Company's proposed filing to the FDA for
clearance of its device and sustain minimal operations for up to six months. If
the FDA filing is not made within 180 days after December 4, 2003, the Company
is required to issue an additional 25,000 shares of its Common Stock, for each
Unit, at the beginning of each 30 day period of delay. The Notes can be prepaid
at any time without penalty.

11. ADVANCES FROM STOCKHOLDERS

Advances from stockholders included payments amounting to $1,050,000 received
from Dr. Long and his affiliates during 2002 to finance the Company's working
capital needs. The debt is unsecured and became payable on demand after December
31, 2002. The debt bears interest of 2% above the prime rate (4% at December 31,
2003). The interest is calculated quarterly, and is payable in unregistered
shares of Common Stock, unless Dr. Long requests payment in cash at the start of
the applicable quarter. The number of shares to be issued for the interest
accrued during any quarter is determined using the closing price of the Common
Stock on the last business day of the quarter. In 2003 and 2002, the interest
amounted to $65,432 and $36,954, respectively. At December 31, 2003 and 2002,
since no cash payment was requested for any quarter, an aggregate of 410,358
shares and 111,712 shares of Common Stock were reserved for issuance in payment
of the interest. As at December 31, 2003, total accrued interest of $102,386 has
been credited to Additional Paid-In Capital.

Advances from stockholders also included payments amounting to $505,406 received
from Dr. Long and his affiliates in 2003. The debt bears interest of 10% per
annum. The interest for 2003 amounted to $48,759 and has been accrued and added
to the debt.

12. LONG-TERM DEBT - RELATED PARTY

On November 8, 2002, the Company issued its 10% three-year promissory
convertible note in the principal amount of $450,000 to Dr. Long in
consideration for his loan to the Company in such amount. The note (with
accrued, unpaid interest thereon) is convertible at the end of three years, at
the option of the holder, into unregistered shares of Common Stock at the rate
of $0.40 per share, the closing price of the Common Stock on November 5, 2002.
Interest for 2003 and 2002 amounted to $45,631 and $6,311, respectively, and has
been added to the note amount in these financial statements.

13. INCOME TAXES

Due to the Company's operating losses, there was no provision for U.S. income
taxes in 2003, 2002 and 2001.

At December 31, 2003, the Company had Federal net operating loss carry forwards
of approximately $62 million, which expire in years 2004 through 2023. However,
substantially all of the net operating loss carry forwards are not 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. To the extent that
these losses are utilizable, they may be offset against future U.S. taxable
income, if any, during the carry forward period.

                                      F-20
<PAGE>

The tax effects of temporary differences that give rise to deferred tax assets
at December 31, 2003 and 2002 are as follows:

                                                     2003              2002
                                                 ------------      ------------
Deferred tax assets:
    Net operating loss carryforwards             $ 23,398,615      $ 22,822,793
    Research and development credits                  510,609           506,466
    Other                                                --                --
                                                 ------------      ------------
Total gross deferred tax assets                    23,909,224        23,329,259

Deferred tax liabilities:
    Depreciation and amortization                     (38,727)         (117,219)
                                                 ------------      ------------
Net deferred tax assets                            23,870,497        23,212,040
Less valuation allowance                          (23,870,497)      (23,212,040)
                                                 ------------      ------------
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.

14. COMMITMENTS AND CONTINGENCIES

Lease Commitments

Total rental expense relating to operating expenses for the years 2003, 2002 and
2001, and for the period from inception to December 31, 2003, was $87,729,
$72,911, $79,859 and $1,406,440, respectively.

In 1999, the Company canceled or terminated various office leases that were
being rented for approximately $17,000 per month. Beginning in 1999, the Company
rented an office at an annual rental of $12,000. As of December 31, 2003, the
Company occupied an aggregate of approximately 4,000 square feet near Atlanta,
Georgia under month-to-month leases, for an annual rental of $21,816.

The Company intends to move its operations to San Diego, California when cash
resources become available. It is currently subleasing from Abel Laboratories,
Inc. ("Abel"), an affiliate of Dr. Long, approximately 5,000 square feet of
furnished and laboratory equipped space. Under the arrangement, the Company is
to pay Abel the same amount of rent paid by Abel to the landlord, without any
adjustment. Abel's rent is $58,230, with an automatic annual adjustment based
upon any increase that may occur in the Consumer Price Index. Abel waived the
rental charge during three months of 2002. In 2003, the Company accrued rent of
$62,606 payable to Abel, including late charges imposed by the landlord. Abel's
lease expires April 1, 2004.

Employee Agreements

The Company has no current employment agreements. Pursuant to an agreement with
a former officer, the Company is obligated to pay royalties of 2% and 1%,
respectively, on two inventions for which the officer was the inventor or
co-inventor through December 31, 2005 or until such royalties reach $8 million,
whichever occurs first. No royalties had been paid or accrued to the officer as
of December 31, 2003.

Vendor Commitments

As part of its ongoing efforts to conserve cash resources, the Company, in 1999,
negotiated agreements and settlements with certain vendors. During the period
ended December 31, 1999, certain vendor-payable amounts were settled for about
$77,000 less than the invoiced amounts. In addition, approximately $101,000 of
the current accounts payable balances at December 31, 2003 and 2002 has been
deferred by agreement with vendors until the Company has adequate financial
resources.

Bank Line of Credit

The Company has a revolving line of credit arrangement with a commercial bank to
borrow up to $1.2 million with interest at the greater of the bank's prime rate
(4% at December 31, 2003) plus 0.5% or 5%. The borrowing limit under the line of
credit, which originally was $500,000, was increased in November 2001 to
$750,000, in January 2002 to $1 million and in June 2003 to $1.2 million. The
line of credit expires, unless renewed, on May 2, 2004. Dr. Long and certain of
his affiliates have guaranteed the repayment of all borrowings, which also are
secured with certain assets of the guarantors. As of December 31, 2003, the
Company had drawn the full amount of $1.2 million under the line of credit.

                                      F-21
<PAGE>
Redesign Agreement

In October 2001, the Company entered into a $364,000 contract to redesign the
Biofield Diagnostic System. As of December 31, 2003, the Company had paid
$237,504 and owed $152,195 under the contract, including cost relating to
contract amendments.

Distribution Agreements

In December 2001, the Company signed an exclusive three-year distribution
agreement to market and to sell the Biofield Diagnostic System in southern
Africa, subject to the distributor achieving specified annual sales targets. The
Company signed similar distribution agreements in 2002 for South Korea, Brazil,
Italy and Philippines and in 2003 for certain Middle Eastern countries. Except
for initial purchases of demonstration devices, no subsequent purchases have
been made and each of the agreements may be terminated by the Company.

Notes Payable

In connection with the issuance of its Notes and shares of Common Stock in a
private placement (see Notes 10 and 20), the Company made commitments to perform
certain tasks within specified time periods. Non-compliance with these
commitments would require the Company to make the following concessions:

     (a)  If the Notes are not paid by December 31, 2004, the Company would be
          obligated to issue an additional 125,000 shares of its Common Stock
          for each $50,000 principal amount of unpaid Notes and the Notes would
          be reset to bear interest at 1.5% per month.

     (b)  If the shares of Common Stock are not registered before July 20, 2004,
          the Company would be obligated to issue an additional 25,000 shares,
          for each Unit sold in the private placement, at the commencement of
          each 30 day period of delay.

     (c)  If the Company does not file its application with the FDA for
          clearance in the United States of its device within 180 days after
          December 4, 2003, the Company would be obligated to issue an
          additional 25,000 shares of its Common Stock, for each Unit sold in
          the private placement, at the commencement of each 30 day period of
          delay.

The Notes are due and payable on the earlier of the date that the Company
receives gross proceeds of at least $2.5 million from the sale of its debt and
equity securities (for which purpose, all such sales within a six month period
would be aggregated) or December 31, 2004. Until the Notes are repaid, the
holders have the right to participate in any offering by the Company of its
equity securities (including of convertible debt) by using the Notes (and
accrued interest thereon) to acquire such equity securities at a 25% discount
from the offering price (and if the offering is of convertible debt to acquire
such debt at face with a conversion feature at a 25% discount).

15. ROYALTY AGREEMENT

In October 2000, the Company entered into a non-exclusive license agreement with
a manufacturer of medical devices to use the Company's patented cable designs.
The agreement, which was due to expire on December 31, 2003, was extended to
December 31, 2004 in consideration for the acceleration of the final royalty
payment, which was paid in 2003. The Company received $54,616 and $46,890 in
2003 and 2002, respectively, under the agreement.

16. STOCKHOLDERS' EQUITY

Private Placements in 1993, 1994 and 1995

In December 1993, the Company completed a private placement of 2,342,118 shares
of its Series A Preferred Stock for $9,413,490 (net of related expenses of
$1,126,041). $1 million of the net proceeds were used to pay off related party
loans (see Note 17).

                                      F-22
<PAGE>

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

During 1995, the Company completed a private placement of 2,914,771 units of its
securities for $11,980,771 (net of related expenses of $1,135,699). Each unit
consisted of (a) a share of Series C Preferred Stock, (b) one-half of a warrant
to purchase a share of Series D Preferred Stock at $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 (c) 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 warrants to purchase 357,192 shares of
Common Stock at an exercise price of $9.18 per share. The warrants expired
unexercised in March 2000.

Initial Public Offering (IPO) in 1996

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 $18,028,238 (net of related expenses
of $1,980,762). Upon completion of the IPO (a) each outstanding share of Series
A Preferred Stock was converted into .5729 shares of Common Stock, (b) each
outstanding share of Series B Preferred Stock was converted into .5729 shares of
Common Stock, (c) each outstanding share of Series C Preferred Stock was
converted into .4902 shares of Common Stock, (d) each outstanding warrant to
purchase a share of Series C Preferred Stock became exercisable for .4902 shares
of Common Stock, and (e) each outstanding warrant to purchase a share of Series
D Preferred Stock became exercisable for .4902 shares of Common Stock. The
Series C warrants entitled the holders to purchase an aggregate of 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. The Series C warrants expired
unexercised in June 2000. In June 1996, the Company issued to the Unit
Purchasers warrants to purchase 357,192 shares of Common Stock at an exercise
price of $9.18 per share. These warrants expired unexercised in March 2000.

Private Placements in 1997, 1999 and 2000

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

In December 1999, the Company completed a private placement of 14 million shares
of Common Stock for $700,000 (see Note 17).

In December 2000, the Company completed a private placement of 3 million shares
of Common Stock for $1.5 million.

Share Issues to Directors and Officers in 2000

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 the Company sold shares of Common Stock in December 1999 in a private
placement. The sale to the directors was based on their foregoing compensation
for their services to the Company during 2000, and the sale to the executive
officers was based on their agreements to accept a maximum salary of $100,000 in
2000. The Company recognized $198,000 as compensation expense in 2000 for the
issuance of these shares.

Voluntary services rendered by Dr. David Long since 2000

During 2000 and every year thereafter, Dr. Long has provided services to the
Company without compensation. The value of his services has been estimated at
$100,000 for each year, which amount was recorded as a non-cash expense with a
corresponding increase in the additional paid-in capital.

Changes to Authorized Share Capital in 2000

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

                                      F-23
<PAGE>

Convertible note in favor of Dr. Long in 2002

In November 2002, the Company issued its 10% three-year promissory convertible
note in the principal amount of $450,000 to Dr. Long in consideration for his
loan to the Company in such amount. The note (with accrued, unpaid interest
thereon) is convertible at the end of three years, at the option of the holder,
into unregistered shares of Common Stock at the rate of $0.40 per share, the
closing price of the Common Stock on November 5, 2002. At December 31, 2003, the
principal and unpaid interest amounted to $501,942 (December 31, 2002 -
$456,311).

Shares due for interest accrued on 2002 advances by Dr. Long

Interest on advances amounting to $1,050,000 from Dr. Long during 2002 is
payable in unregistered shares of Common Stock, unless Dr. Long requests payment
in cash for a quarter before the beginning of that quarter. The number of shares
to be issued for the interest accrued during any quarter is determined using the
closing price of the Common Stock on the last business day of the quarter. At
December 31, 2003, an aggregate of 410,358 (December 31, 2002 -111,712)
unregistered shares of Common Stock have been reserved for issuance in payment
of the then accrued interest. At December 31, 2003, the total accrued interest
of $102,386 was added to additional paid-in capital, pending the issuance of
410,358 shares of Common Stock.

Treasury Stock

In December 1998, the Company repurchased 2,246,131 shares of Common Stock for
$100. In June 2000, the Company repurchased 60,000 shares of Common Stock for
$3,000 from an executive who resigned. The Company holds all of these shares in
its treasury.

Shares issued to consultants for service rendered in 2003

In January 2003, the Company issued 50,000 unregistered shares of Common Stock
as consideration for advising the Company in attempting to obtain additional
capital, which services were valued by the Company at $15,000.

In April 2003, the Company issued 468,750 unregistered shares of Common Stock as
consideration for business and financial advisory services valued by the Company
at $150,000.

In August 2003, the Company issued 225,000 unregistered shares of Common Stock
as consideration for public relations and corporate imaging services valued by
the Company at $24,750, and 50,000 unregistered shares of Common Stock as
consideration for financial advisory services valued by the Company at $5,500.

Private Placement in 2003

In December 2003, the Company issued 3,187,500 unregistered shares of its Common
Stock to the purchasers in a private placement of 12.75 Units of its securities
for $507,693 (net of related expenses of $129,807). Each Unit consisted of (i) a
non-negotiable, non-transferable, unsecured promissory Note in the principal
amount of $50,000, due and payable on December 31, 2004 and bearing interest at
12% per annum, payable monthly, and (ii) 250,000 shares of Common Stock. See
Note 10.

The purchasers of the Units are to receive (i) an additional 125,000 shares of
Common Stock for each $50,000 principal amount of Notes which are not repaid by
December 31, 2004, (ii) an additional 25,000 shares of Common Stock per Unit at
the start of each 30 days of delay if the Company has not made an FDA filing
within 180 days of December 4, 2003, and (iii) an additional 25,000 shares of
Common Stock per Unit at the start of each 30 days of delay if the shares of
Common Stock issued as a result of the private placement are not effectively
registered with the SEC before July 20, 2004. See Note 14.

In addition, the placement agent is to receive five year cashless warrants,
excercisable at $0.20 per share, to purchase 10% of the shares of Common Stock
received by the purchasers of the Units.

17. RELATED PARTY TRANSACTIONS

The Laboratory Agreement

In June 1992, the Company entered into a series of agreements with Dr. Long,
then a director of the Company, and Abel Laboratories, Inc. ("Abel") which is
owned by Dr. Long. One of the agreements (the "Laboratory Agreement") engaged
Abel to provide specified preclinical research. Although the Laboratory

                                      F-24
<PAGE>

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. Abel has conducted preclinical
research for the Company since such time, but none during the three years ended
December 31, 2003. Amounts owed to Abel at December 31, 2003 and 2002 are
recorded as "Due to affiliate" in the accompanying financial statements.

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
expired unexercised in June 2002.

During 1995, the Company granted Dr. Long options to acquire 24,510 shares of
Common Stock at $10.20 per share, exercisable when services were to be rendered
in future. These options expired unexercised in March 2000.

The Company, in January 1994, entered into a patent royalty agreement with Dr.
Long and Abel, which assigned all rights to the Company for any patented
inventions resulting from performance under the Laboratory Agreement. In return,
the Company agreed to pay royalties, ranging from 5% to 20% of revenue
generated from such patented inventions, up to a maximum of $2 million per
invention. As of December 31, 2003, the Company has been issued one United
States patent in which Dr. Long is a named co-inventor, but the Company had not
paid or accrued any royalties to Dr. Long under the agreement.

The Long Transaction

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 certain of their affiliated
entities, purchased 14 million shares of Common Stock from the Company (the
"Long Transaction") for $700,000. Simultaneously, Dr. Long was appointed a
director of the Company, and the remaining directors and the executive officers
resigned. Dr. Long reconstituted the Board of Directors of the Company. Dr.
Raymond Long was appointed a director, and the Board elected Dr. Long as
Chairman and Chief Executive Officer.

In connection with the Long Transaction, D. Carl Long ("Mr. Long"), a son of Dr.
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, as well as for a release of all then
outstanding options to purchase Common Stock. The employment agreement, dated
July 7, 1997, was for a term through July 7, 2000 and provided for Mr. Long's
employment, as President and Chief Executive Officer of the Company, at an
initial base compensation of $250,000 annually, plus a bonus of $70,000 subject
to realization of certain milestones, and an automatic 5% cost-of-living
increase. Mr. Long also had been issued options to purchase an aggregate of
338,238 shares of Common Stock at prices ranging from $1.02 to $9.18 per share.
The consulting arrangement had been entered into as of April 15, 1999 for a
monthly fee of $15,000. Although Mr. Long received no compensation for the three
years ended December 31, 2003, he received $702,467 for the period from
inception to December 31, 2003. In addition, although Mr. Long received no
reimbursements for any expenses during the three years ended December 31, 2003,
he received reimbursement of $313,425 for the period from inception to December
31, 2003.

An entity controlled by C. Leonard Gordon, who had been the Chairman, President
and Chief Executive Officer of the Company until his resignation in 1999 (in
connection with the Long Transaction), had been receiving a fee of $80,000
annually for Mr. Gordon's services. During the three years ended December 31,
2003, Mr. Gordon and his affiliated entities received no payments from the
Company. In connection with the Long Transaction, Mr. Gordon and his wife sold
to Dr. Long 1,068,034 shares of Common Stock for $53,700.

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 three years ended December 31, 2003, Mr. Horowitz and
his affiliated law firm received no payments, but received $109,095 for the
period from inception to December 31, 2003.

                                      F-25
<PAGE>

Share Issues to Directors and Officers in 2000

In January 2000, the Board of Directors authorized the sale of 100,000 shares of
Common Stock to each of its then two nonaffiliated directors and three of its
then principal executive officers, at a price of $0.05 per share, the same price
at which the Company sold shares of Common Stock in a private placement in
December 1999. See Note 16.

Voluntary services rendered by Dr. Long Since 2000

From 2000 to 2003, Dr. Long provided services to the Company without
compensation. 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.

Sub-Lease from Abel Laboratories, Inc.

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 in San Diego, California. See Note 14.

Stock options to Dr. Long for line of credit guarantee in 2001

In 2001, the Company granted Dr. Long options to acquire 350,000 shares of
Common Stock at $0.62 per share, the market price of the Common Stock on the
date of the grant, as compensation for his guaranty and collateralization of the
Company's line of credit from a bank during 2001. The options were exercisable
upon issuance and expire on November 28, 2006.

Advances and Long-Term Loan received from Dr. Long in 2002 and 2003

From March 2002 to March 2003, Dr. Long and his affiliates extended financial
support to the Company aggregating $2.05 million, $450,000 of which is repayable
in November 2005 and the balance of which is repayable on demand. See Notes 11
and 12.

18.      STOCK OPTIONS

At December 31, 2003, the Company has three stock option plans (the "Plans"),
which are described below.

The 1992 Employee Stock Incentive Plan (the "1992 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"). The 1992 plan provides
that the exercise price for ISOs and Rights may not be less than the fair market
value per share at the date of grant. The price of NSOs is determined at the
time of grant. ISOs and Rights must expire within 10 years of the date of grant.
However, if ISOs are granted to persons owning more than 10% of the voting
stock of the Company, the exercise price may not be less than 110% 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
at the time of grant and has generally been set at two or three years. No
further options may be granted under the 1992 Plan.

The Biofield Corp. 1996 Option Plan (the "1996 Plan")

The 1996 Plan, as amended, provides for the grant of options to acquire a
maximum of 1.5 million 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 the exercise price for NSOs may not be less than 85% of such fair
market value. Each ISO must expire within 10 years of the date of grant.
However, if ISOs are granted to persons owning more than 10% of the voting
stock of the Company, the exercise price may not be less than 110% 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 at the time of grant, options
granted under the 1996 Plan vest at a rate of 25% per year over a four-year
period.

                                      F-26
<PAGE>

The Biofield Corp. 1996 Stock Options Plan for Non-Employee Directors (the
"Directors' Plan")

The Directors' Plan provides for the automatic grant of NSOs to non-employee
directors. Options under the Directors' Plan may be granted only to directors of
the Company who are not employees of the Company. Under the Directors' Plan,
150,000 shares of Common Stock have been reserved for issuance upon exercise of
the options. Each eligible director serving on the Board of Directors on the
effective date of the Directors' 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, unless waived, 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, unless waived, options to purchase 2,500 shares of
Common Stock. The term of each option granted under the Directors' Plan is 10
years. The exercise price of each option under the Directors' Plan must be equal
to the fair market value of the Common Stock on the grant date.

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

In 2003, the Company granted NSOs under the 1996 Stock Option Plan to purchase
an aggregate of 514,227 shares of Common Stock at $0.33 per share, the closing
market price of the Common Stock on the date of the grant, to five of its
employees in connection with the reduction in their remuneration during the
first four months of 2003.

A summary of the status of the Plans as of December 31, 2003, 2002, and 2001,
and the changes during the years ended December 31, 2003, 2002, and 2001 is
presented below:
<TABLE>
<CAPTION>

                                                               2003                       2002                       2001
                                                    --------------------------   -------------------------   -----------------------
                                                                    Average                     Average                    Average
                                                                    Exercise                    Exercise                   Exercise
                                                      Options        Price        Options        Price        Options        Price
                                                    ---------       --------      -------       --------      -------       --------
<S>                                                 <C>             <C>           <C>           <C>            <C>          <C>
Outstanding at beginning of year                      450,000       $   0.83      465,000       $   0.82       35,000       $   4.43
Granted                                               514,227           0.33                                  440,000           0.61
Exercised
Canceled                                             (135,000)          1.32      (15,000)          0.53      (10,000)          4.50
                                                    ---------       --------      -------       --------      -------       --------
Outstanding at end of year                            829,227           0.44      450,000           0.83      465,000           0.82
                                                    ---------       --------      -------       --------      -------       --------
Options exercisable at year end                       614,227           0.38      121,875           1.39      110,000           1.48
                                                    ---------       --------      -------       --------      -------       --------
Options available for future grant                  1,048,532
                                                    ---------
Weighted-average fair value of options
  granted during the period                          $   0.33                     $ N/A                        $0.59
</TABLE>


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 November 28, 2006. 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 become
exercisable immediately in the event of a merger or sale of all or substantially
all of the assets of the Company.

In 2001, NSOs were granted to Dr. Long as compensation for his guaranty and
collateralization of the Company's line of credit from a bank during 2001. The
options were exercisable upon issuance and expire on November 28, 2006.
See Note 17.

                                      F-27
<PAGE>

A summary of the status of the Company's NSOs granted outside the Plans as of
December 31, 2003, 2002, and 2001 and the changes during 2003, 2002, and 2001
are presented below:

        The following table summarizes information about stock options
outstanding at December 31, 2003:

<TABLE>
<CAPTION>
                                                              2003                         2002                       2001
                                                    ------------------------      ----------------------      ----------------------
                                                                   Weighted-                    Weighted-                  Weighted-
                                                                    Average                      Average                    Average
                                                                    Exercise                    Exercise                    Exercise
                                                     Options         Price        Options        Price        Options        Price
                                                    ---------       --------      -------       --------      -------       --------
<S>                                                 <C>               <C>        <C>             <C>          <C>           <C>
Outstanding at beginning of period                   386,764           1.06       673,531           2.59      323,531           4.71
Granted                                                                                                       350,000           0.62
Exercised                                                                         (62,745)          0.25
Canceled                                             (18,382)          7.48      (224,022)          5.88         --              --
                                                    ---------       --------      -------       --------      -------       --------
Outstanding at end of year                           368,382           0.74       386,764           1.06      673,531           2.59
                                                    ---------       --------      -------       --------      -------       --------
Options exercisable at year end                      368,382           0.74       386,764           1.06      673,531           2.59
                                                    ---------       --------      -------       --------      -------       --------

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



The following table summarizes information about stock options outstanding at
December 31, 2003:



                    Number                              Number
                 Outstanding        Weighted-         Exercisable      Weighted-
    Range             at             Average              at            Average
 of Exercise     December 31,       Remaining         December 31,      Exercise
   Prices            2003          Life (Yrs.)           2003            Price
----------          -------           ----             -------         ---------

$     0.33          514,227           4.08             514,227         $    0.33
      0.44            5,000           2.75               2,500              0.44
      0.62          660,000           2.92             447,500              0.62
      1.00            6,127           0.08               6,127              1.00
      4.00           12,255           0.08              12,255              4.00
                  ---------                            -------
                  1,197,609                            982,609
                  =========                            =======


As provided by SFAS 148, the fair value of each option granted before the IPO in
1996 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-Scholes option pricing model. The following weighted-average
assumptions were used for option grants during 2003 with an expected life of
five years: (a) dividend yield of 0.0%; (b) expected volatility of 98.76%; and
(c) risk-free interest rate of 3.98%. The following weighted-average assumptions
were used for option grants during 2001 with an expected life of five years: (a)
dividend yield of 0.0%; (b) expected volatility of 191%; and (c) risk-free
interest rate of 4.38%. There were no options granted in 2002.

                                      F-28
<PAGE>

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, 2003, 2002 and 2001 would have been increased to the pro forma amounts
indicated below:

                                         2003           2002           2001
                                      -----------    -----------    -----------
Net loss, as reported                 $(2,164,698)   $(2,888,789)   $(2,238,687)
Add: Total stock-based
  employee compensation
  expense determined under
  fair value based method for
  all awards, net of related tax
  effects                                (133,961)        (8,455)      (264,155)
                                      -----------    -----------    -----------
Pro forma net loss                    $(2,298,659)   $(2,897,244)   $(2,502,842)
                                      ===========    ===========    ===========
Earnings per share:
Basic and diluted loss per share:
  As reported                         $     (0.08)   $     (0.11)   $     (0.09)
                                      ===========    ===========    ===========
  Pro forma                           $     (0.09)   $     (0.11)   $     (0.10)
                                      ===========    ===========    ===========


19. DEVELOPMENT STAGE COMPANY

The Company is in the development stage, and its operations are subject to the
risks inherent in the establishment of a new business with previously untested
technology. The Company has generated nominal revenues and has accumulated
losses of more than $66 million for the period from inception through December
31, 2003. Since inception, the Company has financed its operations primarily by
the issuance of equity securities, interest income on the then unutilized
proceeds from these issuances and short-term borrowings.

During 2003, the Company financed its operations with (a) borrowings of $200,000
from a bank credit facility repayable on May 2, 2004, repayment of which is
guaranteed, and collateralized, by Dr. Long and his affiliates, (b) $500,000 of
advances from Dr. Long and his affiliates, and (c) $637,500 of Notes due
December 31, 2004. See Notes 9, 10 and 11.

The Company requires the immediate infusion of long-term capital to continue it
operations. See Note 1.

20. SUBSEQUENT EVENT

Subsequent to the date of the financial statements, the Company completed, on
February 20, 2004, its $1 million private placement commenced in 2003 by selling
an additional 7.25 Units (each Unit consisting of $50,000 principal amount of
Notes and 250,000 shares of Common Stock) for an aggregate of $362,500. See Note
10. In addition to receiving 10% of gross proceeds as commission in cash, the
placement agent received five year cashless warrants, exercisable at $0.20 per
share, to purchase 10% of the number of shares of Common Stock issued to the
holders of the Units. A finder's fees equal to 2.7% of the gross proceeds also
was paid to an unaffiliated third party.

                                      F-29
<PAGE>

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

On November 20, 2003, upon recommendation of our Board of Directors, we
dismissed our independent accountant, Deloitte & Touche LLP ("Deloitte").
Deloitte's reports on our financial statements for the two years ended December
31, 2002 and 2001 did not contain an adverse opinion or disclaimer of opinion;
however, the audit reports for both these years contained an explanatory
paragraph regarding substantial doubt about our ability to continue as a going
concern. During the two years ended December 31, 2002 and the subsequent interim
period through November 20, 2003, we had no disagreement with Deloitte on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. We have engaged Russell Bedford Stefanou
Mirchandani LLP ("RBSM") as our independent accountant as of November 20, 2003
to audit our financial statements for the year ended December 31, 2003. Prior to
its engagement, we did not consult with RBSM with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our consolidated
financial statements, or with regard to any of the items set forth in Item
304(a) (2) (i) and (ii) of Regulation S-B.

Item 8A.     Controls and Procedures.

Dr. David Long, our chief executive officer, and John Stephens, our chief
financial officer, have evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934) as they existed at December 31, 2003. Based upon that
evaluation, they concluded that our disclosure controls and procedures are
effective to timely alert them to material information required to be disclosed
in our periodic filings with the Securities and Exchange Commission.

No changes in our internal controls over financial reporting have occurred since
September 30, 2003 that has materially affected our internal controls over
financial reporting or is reasonably expected to materially affect our internal
controls over financial reporting.

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

David M. Long, Jr., M.D., Ph.D.      75       Chairman of the Board and Chief
                                              Executive Officer

Raymond A. Long, M.D.                44       Director

John D. Stephens                     45       Director and 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 respective successor is elected and qualified, or
until his earlier resignation or removal. Our executive officers are appointed
by, and serve at the discretion of, our Board of Directors for a term ending at
the first meeting of our Board of Directors after the next annual meeting of
stockholders, or until his earlier resignation.

Dr. David Long was appointed a director as of December 28, 1999 and was elected
our Chairman and Chief Executive Officer on January 9, 2000. Dr. Long previously
had served as a director 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.

                                       29
<PAGE>

Dr. Raymond Long was appointed a director on January 9, 2000. Dr. Raymond Long,
a graduate of The University of Michigan Medical School, is an orthopedic
surgeon in private practice in Saint Albans, Vermont. From July 1999 to June
2000, Dr. Raymond Long was a Fellow in shoulder and elbow surgery at Florida
Orthopedics Institute, and for more than the five years prior thereto was
associated with the University of Montreal, initially as a Resident in
orthopedics and then as a Fellow in anthroplasty and arthroscopy.

John D. Stephens was elected our Senior Vice President and Chief Operating
Officer on January 3, 2000 and was appointed a director on December 29, 2002.
For more than the three years prior to January 3, 2000, Mr. Stephens was our
Senior Director - Manufacturing, Operations and Logistics.

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

As none of our directors would be considered to be independent, we do not have
an Audit Committee. Our most recent independent directors resigned in December
2002, and we have not had the available financial resources to obtain any
replacements. Furthermore, none of our directors would be considered to have the
experience to be considered to be an audit committee financial expert.

Our Board of Directors does not have a separate nominating committee, and has no
formal procedures relating to consideration of nominees by its stockholders of
persons proposed to be elected to its Board of Directors.

None of our directors or executive officers has been involved in any legal
proceedings during the past five years that would be material to an evaluation
of his ability or integrity to act as such.

Our Board of Directors has adopted a Code of Ethics which applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller and persons performing similar functions. A copy of our
Code of Ethics will be furnished, without charge, to any person upon written
request to John Stephens, Senior Vice President, at our principal executive
offices.

Other Significant Employees

In addition to our executive officers, Steve Preiss, age 47, our Vice President
of Regulatory and Clinical Affairs and Quality Assurance since June 2001, is
considered by us to make a significant contribution to our business by assisting
us in connection with matters relating to our FDA filing. The services provided
to us by Mr. Preiss are as a consultant on behalf of his employer, Synteract,
Inc., a regulatory consulting company, where he has been Vice President of
Corporate Regulatory and East Coast Business Operations since April 2001. For
the five-year period prior thereto, Mr. Preiss was Vice President of Clinical
and Regulatory Affairs of UroSurge, Inc., a manufacturer of urological medical
devices.

Section 16(a) Beneficial Ownership Reporting Compliance

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 2003
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
(a) the Long Family Partners II, LP, a 10% beneficial owner of our common stock,
failed (on one occasion) to timely file a Forms 4 reporting the distribution of
shares of our common stock to its partners, (b) Dr. David Long failed to timely
file Forms 4 (on two occasions) reporting (i) interest on a loan to us by a
Trust of which Dr. Long is trustee which was payable in shares of our common
stock, (ii) the distribution of shares from a family partnership to its
partners, and (iii) a gift to a trust in which Dr. Long's spouse is a trustee,
and (c) John Stephens failed to timely file a Form 4 reporting options granted
to him to acquire shares of our common stock.

                                       30
<PAGE>

Item 10.   Executive Compensation.

Summary of 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 officer who received, on an accrual basis, cash
compensation from us aggregating at least $100,000 during the year ended
December 31, 2003.
<TABLE>
<CAPTION>
                                          Summary Compensation Table
                                                                                         Long-Term
                                                                                        Compensation
                                                      Annual Compensation                  Awards
                                                      -------------------                  ------
Name                                                                                No. of Securities       All Other
and Principal Positions              Year        Salary       Bonus       Other     Underlying Options    Compensation
-----------------------              ----        ------       -----       -----     ------------------    ------------
<S>                                  <C>      <C>           <C>        <C>            <C>                  <C>
David M Long, Jr., M.D.,Ph.D.        2003          --           --           --               --               --
  Chairman and Chief
  Executive Officer
                                     2002          --           --           --               --               --
                                     2001          --           --           --      350,000 shares(1)         --

John D. Stephens                     2003     $ 60,843(2)    $ 2,000         --      101,538 shares(3)         --
  Senior Vice President and
  Chief Operating Officer
                                     2002     $110,000          --           --               --               --
                                     2001     $100,000       $20,000    $11,723(4)    85,000 shares(5)         --

</TABLE>
-------------------------------

     (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 currently are immediately exercisable.

     (2)  Excludes $33,574 salary due to him for 2003, but not paid. This unpaid
          salary, and an agreed premium thereon (and for late paid salary) of
          $48,583, aggregating $82,157, is being deferred until we determine
          that adequate funds are available.

     (3)  Represents stock options granted on February 4, 2003 under our 1996
          Stock Option Plan at an exercise price of $0.33 per share, the closing
          price of our common stock on the date of grant. These options
          currently are immediately exercisable. The options were issued in lieu
          of salary for four months in 2003.

     (4)  Represents reimbursement for a personal tax-related expense incurred
          in a prior year.

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

Stock Options Granted

The following table sets forth the details of stock options granted during 2003
to our Executive Officers named in the above Summary Compensation Table. We did
not grant any stock appreciation rights in 2003.

<TABLE>
<CAPTION>
                               Options Granted in Last Fiscal Year

                          Number of Securities      % of Total Options       Exercise or
                           Underlying Options      Granted to Employees       Base Price     Expiration
Name                             Granted              in Fiscal Year          ($/Share)         Date
----                             -------              --------------          ---------         ----
<S>                            <C>                         <C>                  <C>            <C>
John D. Stephens               101,538(1)                  19.7%                $0.33          2/4/08
</TABLE>

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

     (1)  The options, which were granted under our 1996 Stock Option Plan as of
          February 4, 2003, became exercisable on August 4, 2003.

Aggregated Options Exercised and Year-End Values

The following table sets forth the total number of exercisable and unexercisable
stock options held by each of our executive officers named in the above Summary
Compensation Table who held any stock options as of December 31, 2003. No
options to purchase our common stock were exercised by any of our executive
officers during the year ended December 31, 2003 and no stock appreciation
rights were outstanding during such year.

<TABLE>
<CAPTION>

              Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

                                   Number of Securities Underlying          Value of Unexercised
                                         Unexercised Options                In-the-Money Options
                                         at December 31, 2003               at December 31, 2003
                                         --------------------               --------------------
Name                               Exercisable       Unexercisable      Exercisable    Unexercisable
----                               -----------       -------------      -----------    -------------
<S>                                <C>                    <C>             <C>                <C>
David M. Long, Jr.                 350,000 shares         -0-               -0-              -0-

John D. Stephens                   186,538 shares         -0-             $2,031             -0-
</TABLE>

Compensation of Directors

No cash compensation was paid to our directors during the year ended December
31, 2003, and we have no standard arrangements pursuant to which directors are
compensated for any services provided as such.

Our 1996 Stock Option Plan for Non-Employee Directors provides for the automatic
grant of nonqualified stock options to non-employee directors. Under the Plan,
150,000 shares of our common stock have been reserved for issuance upon exercise
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, unless waived, an initial grant of options to
purchase 10,000 shares of our 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,
unless waived, options to purchase 2,500 shares of our common stock on the date
of the Annual Meeting of Stockholders, which vest immediately upon being
granted. No options have been granted under the Plan during the last five years.
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 date of termination of
service. The exercise price of an option is payable upon exercise in cash. As of
February 20, 2004, options for 150,000 shares of our common stock are available
for future grant under the Plan. Unless sooner terminated by the Board, the Plan
expires in January 2006.

Employment contracts

We do not have any employment contracts or change-in-control arrangements with
any of our executive officers. Mr. Stephens is currently employed by us at an
annual salary of $110,000, although a portion of his 2003 salary has been
voluntarily deferred until such time, if at all, as we obtain sufficient
funding, at which time Mr. Stephens will receive such deferred amount plus a
premium of 100% thereon.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters.

The following table sets forth, as of March 22, 2004, 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 10. - "Executive Compensation", and (d)
all our directors and executive officers, as a group (three 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.

                                       31
<PAGE>
<TABLE>
<CAPTION>
Name (1)                                             Shares Beneficially Owned (2)      Percent of Class
--------                                             -------------------------          ----------------
<S>                                                            <C>                           <C>
Long Family Partners II, LP(3)                                  3,568,697                    11.5%
David M. Long, Jr., M.D. Ph.D.                                 11,208,459(4)                 35.2%
Raymond A. Long, M.D.                                           4,077,370(5)                 13.1%
Hambrecht & Quist Capital Management LLC (6)                    1,878,866                     6.0%
John D. Stephens                                                  286,538(7)                  0.9%
All directors and executive officers, as a group               15,572,367(8)                 48.6%
</TABLE>

-----------------------------------
     (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, LP is a Delaware limited partnership, the
         general partners of which are Dr. David Long and his spouse, Donna R.
         Long. Dr. Long, as managing partner of the partnership, has the ability
         to sell its assets and vote any of its securities.

     (4) Consists of (a) 3,568,697 shares owned by Long Family Partners II, LP
         (referred to in note 3, above), of which Dr. Long is the managing
         partner, (b) 3,348,095 shares held of record, (c) 8,087 shares held in
         "street name" by the Long Family Trust, of which Dr. Long and his
         spouse are co-trustees, (d) 1,227,508 shares held by the David and
         Donna Long Family Foundation, of which Dr. Long and his spouse are
         co-trustees, (e) 504,108 shares held by the David M. Long, Jr. Separate
         Property Trust, of which Dr. Long is trustee (including 410,358
         unissued shares (which are currently issuable) accrued to the Trust's
         account for interest due on the Trust's loan to us, which interest is
         payable in shares of our common stock at the end of each quarter (f)
         657,391 shares held by Donna R. Long, Dr. Long's spouse, with respect
         to which beneficial ownership is disclaimed, (g) 923,223 shares held by
         the Donna R. Long Separate Property Trust, of which Dr. Long's spouse
         is trustee, with respect to which beneficial ownership is disclaimed,
         (h) 621,350 shares held in trusts for the benefit of Dr. Long's
         grandchildren, of which Dr. Long is co-trustee, and (i) 350,000 shares
         currently issuable upon exercise of stock options.

     (5) Consists of (a) 1,272,370 shares held of record, (b) 2,800,000 shares
         held by Raymond A. Long u/a 01/01/91 retirement plan, and (c) 5,000
         shares currently issuable upon exercise of stock options.

     (6) Hambrecht & Quist Capital Management LLC has filed a Schedule 13G with
         the SEC, dated February 6, 2004, in which it indicates that as of
         December 31, 2003 (a) its address is 30 Rowes Wharf, 4th Floor, Boston,
         Massachusetts 02110-3328, (b) it disclaims any beneficial ownership in
         the shares it reports, (c) such shares are owned for certain client
         accounts, and (d) 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) 186,538 shares
         currently issuable upon exercise of stock options.

     (8) Consists of the amounts listed in the table as being beneficially owned
         by Dr. David Long, Dr. Raymond Long and John D. Stephens.

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

                                       32
<PAGE>

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth, as of December 31, 2003 (a) the number of our
securities issuable upon the exercise of outstanding options, warrants and
rights, (b) the weighted-average exercise price of such outstanding options,
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

                                                                                                     (c)
                                                                                             Number of securities
                                       (a)                                                 remaining available for
                              Number of securities to be             (b)                   future issuances under
                              issued upon exercise of        Weighted-average exercise    equity compensation plans
                                outstanding options,       price of outstanding options,    (excluding securities
Plan category                   warrants and rights           warrants and rights          reflected in column (a))
-------------                   -------------------           -------------------          ------------------------
<S>                                  <C>                             <C>                          <C>
Equity compensation
  plans approved by
  security holders                    829,227                        $0.56                        1,048,532
Equity compensation
  plans not approved by
  security holders                     318,750                        0.20                          181,250
                                     ---------                       -----                        ---------
     Total                           1,147,977                       $0.46                        1,229,782
                                     =========                       =====                        =========
</TABLE>

From time to time, we have entered into agreements with third parties who have
agreed to render investment banking, public relations and financial advisory
services to us. During 2003, we issued an aggregate of 793,749 shares of our
common stock to such third parties for their services, which shares were valued
at the closing market price of our common stock on the date the shares were
issued or the services were rendered. In addition, we agreed to issue to CGF
Securities, Inc., the placement agent for our $1 million private placement which
commenced in December 2003 and was completed in February 2004, as partial
compensation for its services in the placement, warrants to purchase 10% of the
shares of our common stock which we issued to the investors in the placement.
The warrants are exercisable during a five year period at $0.20 per share. The
equity compensation plan not approved by shareholders that is referred to in the
above table represents our agreement with CGF Securities, and assumes that we
will not be required to issue any additional shares of our common stock to the
investors in the placement as a result of our failure to meet certain time
schedules agreed with the investors.

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. 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. Although from time to time Abel has conducted additional
preclinical research for us, no research had been preformed by Abel since 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. David 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 the 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 March
22, 2004, one patent has been issued to us that is covered by the agreement,
although we have not obtained any revenues therefrom.

                                       33
<PAGE>

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.
Under the arrangement, we pay Abel the same amount of rent charged Abel, Abel's
current monthly rent is $4,998. The lease currently expires April 1, 2005, and
has a one year renewal option. We intend to move all of our operations to this
leased space when, and if, cash resources become available. We have moved a
portion of our research and development records to this leased space, although
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, Georgia office. We paid monthly rent to Abel until September 30,
2002, at which time Abel waived the rental charges from the three months ended
December 31, 2002. For additional information, see Item 2. "Description of
Property." As of December 31, 2003, we owed an aggregate of $198,281 for rent
and other expenses paid by Abel on our behalf, including $55,516 for services
rendered prior to 1998.

In June 2000, we obtained a $500,000 line of credit from California Bank &
Trust, repayment of which has been personally guaranteed by Dr. David Long and
certain of his affiliates and secured by their collateral. The line was
increased in November 2001 to $750,000, in January 2002 to $1 million and, in
June 2003, to $1.2 million. As of December 31, 2003, the line was fully
utilized. In December 2001, we granted Dr. Long an option to acquire 350,000
shares of our common stock at $0.62 per share (the closing price of our common
stock on the date of grant) as compensation for such guaranty and
collateralization with respect to the 2001 year; we have not compensated Dr.
Long or any of his affiliates with respect to their guaranty or
collateralization since such time, nor do we have any written obligation to do
so.

In March 2002, Dr. David Long issued his written commitment to us to provide all
of our financing needs to enable us to meet our operating requirements through
the end of 2002. Dr. Long then advanced $1,050,000 to us. The advances, which
bear interest at 2% above the prime rate, are unsecured and currently payable on
demand. Interest on the advances is calculated quarterly, and is payable in
unregistered shares of our common stock unless Dr. Long requests payment in cash
for the calendar quarter before the beginning of that quarter. The number of
shares to be issued for quarterly interest is determined using the closing price
of our common stock on the last business day of the calendar quarter. During
2002 and 2003, interest on the advances amounted to $36,954 and $65,432,
respectively and, since Dr. Long did not request any cash payment, an aggregate
of 111,712 and 298,646 shares of our common stock were reserved for issuance in
payment of such accrued interest with respect to 2002 and 2003, respectively. At
March 22, 2004, none of such 410,358 reserved shares of our common stock have
been issued.

On November 5, 2002, an affiliate of Dr. David Long lent us $450,000 for our
operating requirements against a three-year convertible note. The note bears
interest of 10% per annum, payable on maturity of the note. The note contains an
option, at maturity, to convert all amounts due, including accrued interest,
thereunder into unregistered shares of our common stock at the rate of $0.40 per
share, the closing price on November 5, 2002. Interest for 2002 and 2003 under
the note amounted to $6,311 and $39,320, respectively.

In order to meet our operating requirements, an affiliate of Dr. David Long lent
us $475,000 in January 2003, and lent us an additional $30,406 later in 2003.
These advances, which were outstanding on March 22, 2004, bear interest at 10%
per annum and are due on demand. Dr. Long has discussed a possible amendment to
the terms of the loan, including possible conversion into shares of our common
stock. At December 31, 2003, interest of $48,759 has been accrued for these
loans.

During 2003, we were unable to pay our employees, including John Stephens, our
Senior Vice President and Chief Operating Officer, all previously agreed
compensation. We agreed with Mr. Stephens to defer $33,574 of his 2003
compensation until such time, if at all, as we have the financial ability to
make such payment and agreed that, at the time of such payment, we would pay him
an additional $48,583. In addition, during 2003, in consideration for Mr.
Stephens' voluntary agreement to temporarily reduce his compensation during a
four month period, we issued him non-qualified options under our 1996 Stock
Option Plan to acquire an aggregate of 101,538 shares of our common stock at a
price of $0.33 per share, the closing price of our common stock on the date of
grant. Such options became fully exercisable on August 4, 2003 and expire
February 4, 2008.

                                       34
<PAGE>

Item 13.   Exhibits and Reports on Form 8-K.

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

     2.    Plan of purchase, sale, reorganization, arrangement, liquidation or
           succession. - None

     3.(i) Articles of incorporation.

          3.1       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)

      (ii) By-laws.

          3.2       By-laws of Biofield Corp. (2)

     4.    Instruments defining the rights of security holders, including
           indentures.

          4.1       Form of Promissory Note, due December 31, 2004, issued by
                    Biofield Corp. in 2003 private placement. (8)

          4.2       Form of Subscription Agreement between Biofield Corp. and
                    investors who participated in 2003 private placement. (8)

     9.   Voting trust agreement and amendment. - None

     10.  Material contracts.

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

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

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

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

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

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

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

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

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

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

                                       35
<PAGE>

          10.11     Form of Share Option Agreement between Biofield Corp. and
                    Raymond A. Long, M.D., dated September 5, 2001. (5)

          10.12     Share Option Agreement, dated as of November 29, 2001, with
                    David M. Long, Jr., M.D. (5)

          10.13     Share Option Agreement, dated as of November 29, 2001, with
                    John D. Stephens. (5)

          10.14     Form of Share Option Agreement, dated November 29, 2001,
                    with Steven Preiss. (5)

          10.15     Form of Share Option Agreement, dated November 29, 2001,
                    with various Biofield Corp. employees. (5)

          10.16     10% Convertible Promissory Note, dated November 8, 2002 by
                    Biofield Corp. in favor of David M. Long, Jr. (6)

          10.17     Demand Promissory Note, dated January 3, 2003, by Biofield
                    Corp. in favor of David M. Long Separate Property Trust. (7)

          10.18     Investment Banking Services Agreement, dated March 5, 2003,
                    between Biofield Corp. and iCapital Finance, Inc. (7)

          10.19     Consulting Agreement, dated March 5, 2003, between Biofield
                    Corp. and Randall Letcavage and Rosemary Nguyen. (7)

          10.20     Redesign Agreement, dated October 15, 2001, between Biofield
                    Corp. and TriVirix International Limited. (7)

          10.21*    Form of Share Option Agreement, dated February 4, 2003, with
                    various Biofield Corp. employees.

          10.22*    Service Agreement, dated July 8, 2003, between Biofield
                    Corp. and MRB Investor Relations, LLC.

          10.23*    Agreement for Financial Advisor, Investment Banker &
                    Placement Agent, dated April 25, 2003 between Biofield Corp
                    and Brooks Houghton & Company, Inc. and Brooks, Houghton
                    Securities, Inc.

          10.24*    Agreement, dated February 9, 2004, between Biofield Corp.
                    and ROI Group Associates, Inc.

          10.25*    Agreement, dated October 16, 2003 between Biofield Corp, and
                    CGF Securities, LLC.

          10.26*    Change in Terms Agreement, dated December 11, 2003, between
                    Biofield Corp. and California Bank & Trust.

          10.27*    Agreement, dated June 11, 2003, as amended December 11,
                    2003, by Biofield Corp. to John Stephens.

     13.  Annual report to security holders for the last fiscal year, Form 10-Q
          or 10-QSB or quarterly report to security holders. - Not applicable.

     14.  Code of ethics

          14.1*     Code of Ethics adopted on February 16, 2004.

     16.  Letter on change in certifying accountant

          16.1      Letter from Deloitte & Touche, LLP, Certified Public
                    Accountants to the Commission, dated November 24, 2003. (9)

                                       36
<PAGE>

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

     20.  Other documents or statements to security holders or any other
          document incorporated by reference. - None

     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, LLP

          23.2*     Consent of Russell Bedford Stefanou Mirchandani LLP

     24.  Power of attorney - Not applicable.

     27.  Financial Data Schedule - Not applicable.

     31.  Rule 13a-14(a)/15d-14(a) Certifications

          31.1*     Certification of David M. Long, Jr. President and Chief
                    Executive Officer

          31.2*     Certification of John D. Stephens, Senior Vice President,
                    Chief Operating Officer and Chief Financial Officer

     32.  Section 1350 Certifications

          32.1*     Certification of David M. Long, Jr. President and Chief
                    Executive Officer

          32.2*     Certification of John D. Stephens, Senior Vice President,
                    Chief Operating Officer and Chief Financial Officer

     99.  Additional Exhibits - None

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

     (*)  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.

          (5)       Incorporated by reference to Biofield's Annual Report on
                    Form 10-KSB for the fiscal year ended December 31, 2001

          (6)       Incorporated by reference to Biofield's Quarterly Report on
                    Form 10-QSB for the fiscal quarter ended September 30, 2002.

                                       37
<PAGE>

          (7)       Incorporated by reference to Biofield's Annual Report on
                    Form 10-KSB for the fiscal year ended December 31, 2002

          (8)       Incorporated by reference to Biofield's December 4, 2003
                    Current Report on Form 8-K.

          (9)       Incorporated by reference to Biofield's Current Report on
                    Form 8-K filed on November 20, 2003.


(b)  Reports on Form 8-K. We filed the following Current Reports on Form 8-K
     with the Securities and Exchange Commission during the quarter ended
     December 31, 2003 and responded therein to the following items:

          (1)       November 21, 2003 (filed November 25, 2003) - Items 4 and 7
                    (with respect to a change in the Company's independent
                    accountants)

          (2)       December 4, 2003 (filed December 19, 2003) - Item 5 (with
                    respect to the closing of a $300,000 tranche of a private
                    placement)

Item 14.  Principal Accountant Fees and Services.

The following table sets forth fees billed to us by our independent accountants
during the fiscal years ended December 31, 2003 and December 31, 2002 for: (i)
services rendered for the audit of our annual financial statements and the
review of our quarterly financial statements, (ii) services rendered that are
reasonably related to the performance of the audit or review of our financial
statements and that are not reported as Audit Fees, (iii) services rendered in
connection with tax compliance, tax advice and tax planning, and (iv) all other
fees for services rendered. "Audit Related Fees" consisted of consulting fees
regarding accounting issues. "All Other Fees" consisted of fees related to the
issuance of consents for our S-8 Registration Statements and this Annual Report:


                                         Year ended December 31,
                                       ---------------------------
                                       2003                   2002
                                       ----                   ----

       Audit Fees(1)                 $40,500                $62,247

       Audit Related Fees(2)             -0-                    -0-

       Tax Fees(3)                       -0-                    -0-

       All Other Fees(4)                 -0-                    -0-
                                     -------                -------
       Total                         $40,500                $62,247
                                     =======                =======

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

     (1)  The aggregate fees billed for the audit of our annual financial
          statements and review of our financial statements which were included
          in our Forms 10-QSB.

     (2)  The aggregate fees billed for assurance and related services that are
          reasonably related to the performance of the audit or the review of
          our financial statements and not included as "Audit Fees".

     (3)  The aggregate fees billed for professional services rendered for tax
          compliance, tax advice and tax planning.

     (4)  The aggregate fees billed for products and services provided, other
          than Audit Fees, Audit-Related Fees or Tax Fees.

                                       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 30, 2004
                                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 30, 2004              /s/ David M. Long, Jr.
                                    --------------------------------------------
                                    David M. Long, Jr., M.D., Ph.D.
                                    Chairman and Chief Executive Officer
                                    and Director
                                    (Principal Executive Officer)

March 30, 2004                      /s/ Raymond A. Long
                                    --------------------------------------------
                                    Raymond A. Long, M.D.
                                    Director

March 30, 2004                      /s/ John D. Stephens
                                    --------------------------------------------
                                    John D. Stephens
                                    Senior Vice President, Chief Operating
                                    Officer and Chief Financial Officer
                                    and Director
                                    (Principal Financial and Accounting Officer)

                                       40