U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

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

               For the fiscal year ended December 31, 1998

        [  ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES  EXCHANGE ACT OF 1934

               For the transition period from _____________ to ______________

Commission file no.     0-24921     

                         Surgical Safety Products, Inc.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

          New York                                           65-0565144
-------------------------------                         -------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

         2018 Oak Terrace
         Sarasota, Florida                                      34231
--------------------------------------                       ----------
(Address of principal executive offices)                     (Zip Code)

Issuer's telephone number (941) 927-7874

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

                                                   Name of each exchange on
      Title of each class                          which registered

        None
-----------------------------                      ------------------------

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


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

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

        State issuer's revenues for its most recent fiscal year. $42,393.

     Of the  10,786,973  shares of voting  stock of the  registrant  issued  and
outstanding   as  of  December   31,   1998,   5,309,587   shares  are  held  by
non-affiliates.  The Company  trades on the OTC under the symbol  "SURG".  As of
March 29, 1999,  the average of the bid and asked price was $.656.  Accordingly,
the  aggregate  market value based of the  non-affiliate  shares based upon this
average as of March 29, 1999 was $3,483,089.

                                     PART I

Item 1. Description of Business.

        (a)    Business Development

     Surgical   Safety   Products,   Inc.  (the   "Company"  or  "Surgical")  is
incorporated  in the State of New York and qualified to do business as a foreign
corporation in the State of Florida.  Surgical Safety Products,  Inc. originally
was  incorporated  under the laws of the State of  Florida on May 15,  1992.  On
November 28, 1994 the Company  merged into Sheffeld Acres Inc., a New York shell
corporation which had approximately 1,100 shareholders,  but had never commenced
operations.  Although Sheffeld Acres, Inc. was technically the surviving entity,
the Company changed its name after the merger to Surgical Safety Products,  Inc.
Articles  of Merger were filed with the State of Florida on October 12, 1994 and
a  Certificate  of Merger  was filed with the State of New York on  February  8,
1995.  The Company  filed to do business as a foreign  corporation  on April 11,
1995 in the State of Florida. The Company  publically-trades on the OTC Bulletin
Board under the symbol  "SURG".  The Company's  executive  offices are presently
located at 2018 Oak Terrace,  Sarasota,  Florida 34231,  its telephone number is
(941) 927-7874 and its facsimile number is (941) 925-0515.

     The Company is filing this Form 10-KSB in compliance with the effectiveness
of its filing on Form 10-SB  which was on a  voluntary  basis so that the public
will have access to the  required  periodic  reports on the  Surgical's  current
status and financial  condition.  The Company will file periodic  reports in the
event its obligation to file such reports is suspended  under the Securities and
Exchange Act of 1934 (the "Exchange Act".)

<PAGE>


     The Company was formed for the initial  purpose of combating  the potential
spread  of  bloodborne  pathogen  infections,  such  as HIV and  hepatitis.  The
founding  philosophy arose from a concern  regarding the  occupational  risks of
healthcare  workers in the  operating  room.  Since  inception,  the Company has
broadened its mission to include the  research,  development  and  production of
innovative  products  and services  which  create and  maintain a safe  surgical
environment for medical and hospital staff,  healthcare workers and patients, as
well as enhance the level of surgical care available to patients.

     The Company is engaged in product  development,  sales and services for the
medical industry. The Company is currently engaged in one line of business which
is divided into three (3)  divisions  each of which is involved  with  specialty
medical product research and development:  (1) a division which develops various
medical-related  services to be marketed to healthcare facilities,  including an
entire family of computer  software  applications  designed to evaluate,  track,
organize and manage  infection  control data for  healthcare  facilities  and to
provide  multi-media  information  centers for a facility's  healthcare  workers
("Data Systems Division");  (2) a division which researches and develops medical
products for sale in the marketplace  ("Medical Products  Division");  and (3) a
division  which  provides  confidential  consultation  services  to third  party
developers of medical products,  usually  physicians and healthcare  technicians
("Medical Products  Consultation  Division").  The common thread interwoven into
each area  requires  medical  research,  education  and a  commitment  to safety
issues.  It is the Company's  intention to gradually make the transition  from a
research and  development-oriented  medical device company into a  multi-product
device manufacturer and distributor.

     In addition  to its current  activities,  the Company  also had  operated a
diagnostic  clinic  specializing  in women's  health.  On September 28, 1994 the
Company  formed a wholly- owned  subsidiary,  Women's  Diagnostic  Center,  Inc.
("WDC") under the laws of the State of Florida. WDC immediately acquired certain
personnel and assets,  consisting of a diagnostic clinic specializing in women's
health,  the Women's  Ambulatory  Services,  Inc.,  a Florida  corporation.  WDC
catered exclusively to women and their specific healthcare needs.  Patients were
attended to by an all female  staff in order to provide a uniquely  personal and
caring atmosphere while emphasizing women's healthcare  education and awareness.
WDC specialized in mammography,  ultrasounds, osteoporosis testing, chest x-rays
and comprehensive laboratory testing.

     To focus the Company's  growth efforts in the medical products and services
industry,  the  equipment,   furniture,  accounts  receivable,  trade  name  and
goodwill,  net of related  liabilities  of WDC,  were sold to Sarasota  Memorial
Hospital on June 13,  1996.  All business  operations  of WDC had ceased and the
corporation liquidated by December 31, 1996.

     On May 30, 1995, the Company  completed the  preparation of a self-directed
private placement  memorandum  offering shares of the Company's Common Stock and
Warrants. This offering was conducted pursuant to Section 4(2) of the Securities
Act of 1933,  as amended (the "Act"),  and Rule 506 of  Regulation D promulgated
thereunder  ("Rule  506").  The  offering  was  amended  on  October  30,  1995.
Initially,  the offering required a minimum investment of $5,000 in exchange for
which an investor  would receive  5,000 shares of common stock,  $.001 par value
per share (the "Common Stock") and three-year  warrants to purchase 2,500 shares
of the Company's  Common Stock at an exercise  price of $1.50.  Pursuant to this
offering,  the Company received gross proceeds in the amount of $37,500,  $5,000
of which  was  subsequently  refunded.  This  refund  was made  because  certain
paperwork  and  signatures  were not properly  executed.  By agreement  with the
investors,  in lieu of the unit arrangement,  the investors each acquired shares
at $.50 per share.  A total of 65,000 shares of the Company's  Common Stock were
issued pursuant to this offering.



<PAGE>


     On  December  8,  1997,  the  Company  acquired  all of the assets of Endex
Systems,  Inc.,  d/b/a  Interactive PIE ("Endex"),  a Florida  corporation.  The
assets of Endex  were  valued at  approximately  $14,000  for which the  Company
issued 250,000 shares of restricted common stock. Endex was a medical multimedia
software  company,  experienced  in  computer  graphics  related to the  medical
industry.  The  acquisition  was made to implement  the  Company's  Data Systems
Division's  development of its surgical  safety,  touch-screen  network known as
OASiS.  The  President  and Chief  Executive  Officer  ("CEO") of Endex,  Donald
Lawrence,  became the Vice President of Sales and Marketing of the Company.  Mr.
Lawrence  has an  employment  contract  with  the  Company  which  is  renewable
annually.

     From March through June 1998,  the Company  received  gross proceeds in the
amount of $999,000  from the sale or exchange for services of a total of 920,000
shares of Common Stock in four (4)  offerings . The Company  undertook its first
offering of 400,000  shares of Common Stock pursuant to Rule 504 of Regulation D
("Rule 504") on March 1, 1998,  exchanging shares with  Stockstowatch.com,  Inc.
("Stockstowatch")  and its legal  advisor in exchange for  services;  its second
offering of 400,000 shares of Common Stock pursuant to Rule 504 on April 1, 1998
upon the exercise of an option granted pursuant to a Stock Option Agreement; its
third  offering of 60,000 shares of Common Stock pursuant to Rule 504 on June 8,
1998; and its fourth  offering of 60,000 shares of Common Stock pursuant to Rule
504 on June 18, 1998. While no offering  memorandum was used in connections with
these offerings,  the business plan of the Company,  which was disclosed to each
prospective  investor,  was for the provision of product development,  sales and
services  for the medical  industry.  The  Securities  and  Exchange  Commission
("SEC") has brought an action  against  Stockstowatch  alleging that it violated
the anti-fraud and anti-touting  provisions of the federal  securities laws with
reference to shares which it received for services to the Company.

     In April 1998, the Company issued 2,500 shares of restricted  stock subject
to  Rule  144 of the Act to an  outside  consultant  in  exchange  for  computer
consulting services valued at $4,375.

     In November 1998, the Company  entered into a seven (7) year  collaborative
agreement with Dr. William B. Saye, the Medical Director and CEO of the Advanced
Laparoscopy  Training  Center in  Marietta,  Georgia  ("ALTC")  under  which the
Company  acquired the "digital  rights" of ALTC and the resulting  amalgam as it
relates to surgical  education and marketing rights to the ALTC database.  Under
this agreement, Dr. Saye became a member of the Company's Board of Directors and
agreed to act as the  Medical  Director of ALTC  VirtualLabs.  Dr. Saye is to be
compensated for travel expenses and will be paid an honorarium of $2,500 per day
when his services are requested by Surgical.  In addition,  Dr. Saye was awarded
stock options to purchase up to 1,000,000  shares of the Company's  Common Stock
over the period,  options for 300,000 of which were issued upon the execution of
the agreement, and the balance of which are issuable monthly.

     See (b) "Business of Issuer"  immediately  below for a  description  of the
Company's business.

(b)            Business of Issuer.

General

     The Company was formed in 1992,  and until 1996,  was primarily  engaged in
women's  healthcare,  medical  research and product  development with a focus on
safety-related  products  geared  to the  reduction  of  occupational  risks  to
healthcare  workers.  To date,  the Company has received four (4) patents on two
(2)  products,  is seeking  patent  protection  on other  products and is in the
process  of  developing  or  acquiring  the  rights  to  approximately  nine (9)
additional medical products intended to be marketed to the healthcare community.
The concepts and designs of the additional medical products are at various

<PAGE>



     stages of development or negotiation. The Company has an exclusive five (5)
year  manufacturing  and supply agreement for a line of protective  prescription
eyeglasses.   The  Company  markets  its  product  lines  under  the  trademark,
Compliance Plus(TM).

     The Company's premiere product in the Compliance Plus line,  marketed under
the trade name,  SutureMate(R),  is a  disposable  Food and Drug  Administration
("FDA") approved, multi-function,  suturing safety device for surgery. Three (3)
of  the  patents  apply  to  this  product.  The  original  instrument  and  its
developmental variations facilitate advanced surgical techniques, which increase
surgical  efficiency and reduce the occupational  risk of exposure to bloodborne
pathogens such as HIV and  hepatitis.  The original  product is currently  being
re-released.  The product has been re-engineered and updated after feedback from
over 4,000  surgeons and surgical  technologists.  New clinical  advantages  and
significantly  lower  manufacturing  costs create  potential for this  patented,
disposable  surgical  assist device which was originally  designed to facilitate
the preferred one-handed suturing technique.

     The Company  intends to market under the trade name,  Prostasert(R),  a FDA
listed  product  which was  developed  to improve  the  preparation  of pregnant
patients for labor by  providing a mechanism  for  applying  and  maintaining  a
pharmaceutical  gel to the cervix and vagina.  One (1) of the patents applies to
this product.

     The  Company  has  an  exclusive  marketing  and  supply  agreement  for  a
semi-disposable,  custom-made  prescription  protective  eyewear for  healthcare
workers which it markets under the trademark, MediSpecs Rx(TM), the initial term
of which  terminates  in September  2000.  In addition,  the Company  intends to
market an infection  control  equipment  kit for  healthcare  workers  under the
trademark, IcePak(TM).

     The  Company has two (2)  additional  products  in the  development  stage:
Prepwiz(TM),  which is a  revolutionary  surgical  prep  and  drape  system  and
FingerSafe(TM), which is a multi-featured surgical thimble.

     The Company  aggressively  protects  its  intellectual  properties  through
patents,  trademarks and copyrights,  as well as by proprietary software designs
(flow charts, algorithms, reports and databases). In addition to the utility and
design  patents  already  issued to the  Company,  the  Company  has many  other
products in various stages of development which have patent potential.

     The Company had executed distributorship  agreements for SutureMate(R) with
(1) Johnson & Johnson  Medical  Pty.,  Ltd with  respect to the  territories  of
Australia, New Zealand, Papua, New Guinea in April 1995; (2) Medicor Corporation
with  respect to the  Netherlands  in March 1995;  and (3) ISC Group,  a company
organized  under the laws of the country of Saudi Arabia,  with respect to Saudi
Arabia and the so-called GCC Nations  (comprising  of Oman,  Yemen,  United Arab
Emirates,  Qatar, Bahrain and Kuwait) in December 1994. None of these agreements
are currently  active since the original  distribution  was thwarted by the high
manufacturers suggested retail price. With the re-engineering of the product and
the lower cost of goods,  it is anticipated  to receive a more favorable  market
response.  In December  1996, the Company  executed an exclusive  seven (7) year
distribution  agreement for  SutureMate(R)  for the European  market with Noesis
Capital  Group  ("Noesis")  under which  Noesis was to  recruit,  hire and train
European master  distributors  and  distributor/dealer  networks  throughout the
European  continent.  This  agreement is  technically  in force but is currently
inactive  for the same  reasons  as the other  distributorship  agreements.  The
inactivity  of these  agreements  reduces the current  revenue  potential of the
Company.  Based upon the number of  surgical  procedures  done  annually,  it is
estimated that the domestic market for  SutureMate(R)  is 15 to 20 million units
and that the foreign markets could represent 70% to 80% of the domestic  market.
In August, 1997, the Company entered into a distribution agreement for the State
of


<PAGE>



Florida for its  MediSpecs  Rx(TM)  prescriptive  eyewear with  Hospital News of
Florida. Hospital News of Florida has not met its quota requirements.

     In 1997,  the  Company  focused on the  creation  and  establishment  of an
information system for multiple  applications within healthcare.  Formerly named
Surgical Safety Network,  this information system is now marketed under the name
OASiS which is the  acronym  for  Occupational  Automated  Services  Information
System. In April 1998, the Company filed for two (2) patents on this system, one
related  to this  touch-access  information  system  and the other  related to a
technology transfer  application.  This touch access system has developed into a
platform for initially managing three areas of need: (1) exposure (to bloodborne
pathogen)   management;   (2)healthcare   training;   and  (3)  healthcare  risk
management.  Effective  January 30,  1998,  the Company  entered a ten (10) year
lease arrangement with a leading Florida medical facility, the Sarasota Memorial
Hospital  ("SMH"),  under  which four (4) OASiS  kiosks  were  installed  at the
healthcare site.

     In January  1998,  the Company  entered  into a clinical  products  testing
agreement  with SMH whereby  such  facility  will  provide  clinical  testing of
designated products of the Company for a term of five (5) years.

     In February 1998, the Company  executed a letter of intent to joint venture
with U.S.  Surgical  Corporation  ("U S.  Surgical"),  a major  manufacturer  of
surgical products which distributes its products worldwide, for the marketing of
the OASiS system. The parties executed a final agreement dated October 28, 1998.

     In March 1998, the Company entered into an agreement with  Stockstowatch to
provide  investor  relations  services  as a media  consultant  to the  Company.
Stockstowatch  was issued 300,000 shares of the Company's  stock in exchange for
these services.

     In June 1998, the Company  executed a letter of intent with  Ad-vantagenet,
Inc. for the development of Version 2.0 software for the OASiS system.

     In  October  1998,  the  Company   entered  into  an  agreement  with  T.T.
Communications, Inc. to provide investor relations services for the Company.

     In November 1998, the Company committed to purchase twenty (20) OASiS units
from Kiosk Information Systems, Inc.

     The Company's  other  products and concepts in  development  generally fall
into the categories of occupational  safety,  infection control,  obstetrics and
gynecology, and new "minimally invasive" surgery devices and techniques. Most of
these development projects originated from within the Company,  although several
are being  co-developed  with  outside  third  party  inventors  who are  mainly
physicians  and medical  technicians  for whom the Company  provides  consulting
services in new product development.

     The  FDA  lists  Surgical  as  a  medical  device   specifier.   Under  FDA
Registration No. 1056687,  as a medical device specifier,  Surgical is permitted
to control the  specifications of its products.  The Company spent its formative
years in research and development and in obtaining patent protection on its core
products and services.  Tangential to its core competency, the Company had found
it necessary to diversify its  offerings,  but has, over the past twelve (12) to
sixteen (16) months,  refocused its efforts towards the commercialization of its
existing product lines. Additionally, the Company has enhanced its product lines
with the development of the touch-access information system, OASiS.



<PAGE>



     Surgical  efficiency is highly valued in today's healthcare  climate.  With
the looming  threat of  bloodborne  diseases such as HIV and  hepatitis,  safety
issues  are also of  critical  importance.  Hospitals  and  surgical  teams have
required,  and now  demand,  constant  improvement  in  available  products  and
technology.  In this rapidly growing market, new options for personal protective
equipment are not only valued by the surgical team and  appreciated by patients,
but mandated by government  agencies such as the Occupational  Safety and Health
Administration ("OSHA").

     The changing healthcare environment requires aggressive measures to improve
efficiency in medical care.  This is especially  true in high-tech areas such as
surgery,  obstetrics,  and emergency  care.  Time saving products and techniques
that improve patient care quality are of extreme value.

     Surgical's   medical  device  lines  are  designated  for   wholesaling  to
international  distributors.  These products are focused on improved  efficiency
and safety.  Clinical  research on the  original  Compliance  Plus(TM)  product,
SutureMate(R),  has demonstrated  dramatic reductions in sharps injuries (sharps
injuries  are  injuries  to  healthcare  workers  or  patients  caused by suture
needles,  syringes,  intravenous  catheters,  scalpels,  screws, wires and other
sharp instruments in the operating room) and a 60% to 85% decrease in bloodborne
pathogen exposure,  while at the same time improving procedure efficiency.  This
study was conducted by Donna Haiduven,  BSN, MSN, CIC, a member of the Company's
OASiS   Medical   Advisory   Panel.   Surgical   is   attempting   to  secure  a
research-backed,  OSHA  mandate  status for its OASiS  information  system which
would make the  availability  of Compliance  Plus(TM)  required in hospitals and
other medical facilities. The Company's plan is to accumulate enough research on
product lines to demonstrate  statistically  their significant safety advantages
to support such products  inclusion in OSHA  requirements  for workplace  safety
compliance. There can be no assurance that such statistics will demonstrate such
facts,  or even if  demonstrated,  that such  products  will be included in OSHA
requirements.

     OASiS  is now  installed  in four  hospitals.  Lease  payments  from  OASiS
currently are made  directly to Surgical  from the customer  hospital but may be
made, in the future, through a third party leasing intermediary.  In the case of
the third  party  intermediary,  Surgical is paid a lump sum at the front end of
the lease and the  hospital  then makes its  payments  to the  leasing  company.
Selection  of the leasing  arrangements  is made based upon  Surgical's  current
financial status and based upon the financial strength of the hospital involved.
SutureMate(R) was originally sold in limited  quantities and had limited success
due  to  the  high  manufacturers  suggested  retail  price.  New  manufacturing
arrangements  will  allow  sales in the $5 to $6  range,  more in  keeping  with
disposable products.  MediSpecs Rx(TM) sales continue tough limited.  Consulting
fees are derived from the Medical  Consultation  Division on an as needed basis.
The Company now is positioned to commercialize Compliance Plus(TM) product lines
and its  proprietary  OASiS system  through its alliance with U.S.  Surgical and
their full size  international  sales  force.  The  Company is  preparing  other
alliances  with one or more  established  industry  leaders in  healthcare.  The
Company  believes that recurring  multiple revenue streams and a "cookie cutter"
program and network  will allow for  potentially  rapid  growth in the number of
OASiS system  installations.  The Company targets revenues at $50 million within
five years.  At that level,  the Company will position  itself as an acquisition
target for major medical or information system entities.

     The Company is seeking  debt or equity  financing  in the amount of between
$2,000,000  and  $5,000,000.  In the event the Company is successful in securing
equity  financing,  the  Company is unable to project  the number of  additional
shares of its Common Stock which will be required to secure such  financing.  As
of December 31, 1998,  the Company has no short term debt. In the event that the
Company is successful in securing debt financing,  the amount of such financing,
depending upon its terms,  would increase  either the short or long term debt of
the Company or both. The Company is in preliminary discussions with several


<PAGE>



potential  funding  sources;  however,  to date, has not concluded terms for any
financing which it feels appropriately meets the requirements of the Company. In
the event additional debt is raised, it will incur future interest  expense.  In
the event additional equity is raised,  management may be required to dilute the
interest of existing  shareholders or forgo a substantial  interest in revenues,
if any.

     Subject to the availability of additional financing,  of which there can be
no assurance,  the Company plans (1) to facilitate  implementation  of its sales
strategies,  (2) to apply additional funding to existing new technology; and (3)
to apply  additional  funding to  complimentary  products and  services  through
corporate acquisition and exclusive licensing.

     The Company  currently  employs seven (7) people,  including its President,
Vice  President,  Treasurer  and  personnel  added in 1998 to perform  sales and
marketing  functions.  Total employee  salaries for the year ending December 31,
1998  were  $397,210  of  which  $266,530  was paid as  Executive  Compensation,
including  salaries and the value of Common Stock and Options issued and granted
to such executives.  The Company's  executive officers and directors devote such
time and effort as are necessary to participate in the day-to-day  management of
the Company.  During the fourth  quarter of 1998,  the Company  employed one (1)
additional  individual  in the area of computer  systems and  continues  to seek
another individual in the same area. The Company has no plans add any additional
staff beyond this one (1) individual in the foreseeable future.

     The Company is  dependent  upon the  services of three of its  officers and
directors.  Dr. G. Michael  Swor,  the founder and Chairman of the Board and the
Treasurer of the  Company,  is  responsible  for  inventing  all four (4) of the
patents,  which patents were assigned to the Company in exchange for stock.  Dr.
Swor  is  responsible  for  the  overall  corporate  policy  and  the  financing
activities  of the  Company.  The  Company  is the  beneficiary  of a  "key-man"
insurance policy currently owned by Dr. Swor. In addition to his duties with the
Company, Dr. Swor is a board certified, practicing physician with a specialty in
Obstetrics  and  Gynecology.  Frank M. Clark, a Director and President and Chief
Executive  Officer,  is responsible for the day to day management of the Company
and new product development and the manufacturing of the Company's products.  In
addition,   he  manages  new  ventures  for  the  Company  including,   mergers,
acquisitions,  joint ventures,  strategic  alliances and  licensing/distribution
agreements.  After a nineteen (19) year career with Johnson & Johnson, Mr. Clark
became  the  president  of R. P.  Scherer  and then  went on to  become a senior
partner in a consulting firm with responsibilities for business development with
Fortune 100  corporations.  Donald K.  Lawrence,  a Director and Executive  Vice
President,  Sales and Marketing,  is responsible  for sales  management,  market
planning,  advertising  for the  Company and acts as the  Executive  Director of
OASiS.  Mr.  Lawrence  in  addition  to nearly ten (10) years in medical  device
sales, has extensive  experience in computer graphics,  multi-media and computer
equipment  leasing  programs.  The  Company  plans  to  continue  to  use to its
advantage  the  reputations  and skills of these  three  officers in the medical
industry.  Nevertheless,  while these officers have been successful in the past,
there  can be no  assurance  that  they  will  be  successful  in the  continued
development  of the Company  which is needed for a  successful  operation of the
Company. The Company has employment agreements with each of these individuals.

Data Systems Division

     In 1997, the Company saw an opportunity to establish a landmark information
system  for  multiple   applications  within  the  healthcare   industry.   This
proprietary  surveillance  network,  called OASiS,  was  originally  designed to
export and tract occupational  safety emergencies such as needlesticks and fluid
exposures.  The new  Version 2 OASiS  provides  information  consolidation  in a
secure network of touchports located throughout a health care facility.  At each
on-site   location,   a  healthcare  worker  has  touch  access  to  multi-media
information.  The OASiS system at its current level of development,  is designed
to function in three areas: (1) exposure (to bloodborne pathogens) management;


<PAGE>



(2) healthcare training; and (3) healthcare risk management.

     In the area of exposure management, the healthcare industry is in need of a
standardized, efficient method for tracking, managing and analyzing occupational
safety emergencies such as needlesticks and other fluid exposures.  Standardized
and accurate reporting methods result in superior prevention controls and better
post-exposure management for follow- up and counseling.  Information relating to
the spread of bloodborne  pathogens  through  exposures  varies widely and OASiS
allows for cross-facility  standardization.  Healthcare workers need and are now
insisting they receive accurate, timely information relating to exposures.
Sharps injuries and other exposures occur frequently.

     Current  reporting  protocols  incorporated into the OASiS system involve a
typical chain of events  necessary to create an estimated risk assessment and to
provide access to testing, treatment and follow-up.

     Under current  non-computerized  protocols,  after an exposure, the injured
worker  may be  required  to  complete  an  incident  report  (provided  by risk
management),  meet  with a  supervisor  and  then  leave  the  worksite  to seek
evaluation,  testing  and  treatment  at an  employee  health  facility  or  the
emergency  room.  Evaluation  techniques,  testing and  available  treatment and
follow-up recommendations are inconsistent,  inefficient,  not timely and breech
the employee's  confidentiality  due to the multiple points of contact which are
involved.

     With the use of OASiS,  the injured  worker is provided  with  confidential
access  to  information,  statistics  and a  preliminary  risk  assessment.  The
healthcare worker begins the reporting process by "touching" their way through a
very detailed,  yet easy to use,  Occupational  Safety  Emergency  Report.  Data
collection for the exposure incident is mutually  exclusive and exhaustive.  The
system calculates the risk level based on data inputted into the system directly
by the  healthcare  worker.  The worker  receives a printed data sheet with risk
assessment (weighted towards higher risk) and a recommended  testing,  treatment
and follow-up  plan. The worker then is directed to employee health or emergency
care for direct,  complete and thorough  assessment  by a facility  staff member
designated  in  that  capacity.  If the  worker  decides  not to  proceed,  full
confidentiality is maintained while critical  information for decision making is
provided and documented.  If the worker proceeds, then complete incident data is
already  collected in the system,  sent to the appropriate  locations within the
facility and printed for use by the provider of counseling and treatment.

     In the area of employee training, current training systems involve a number
of methods including small groups,  large groups,  video and other audiovisuals.
Staff  training  on  required  courses is  commonly  done in small  groups.  New
surgical  equipment and  techniques are typically done by way of small groups by
product  representatives  or other trainers and often are enhanced or reinforced
with printed materials or videotapes.

     Practice also requires annual training on various subjects such as modes of
disease transmission,  information on the epidemiology of disease, procedures to
follow  in  the  event  of a  potential  exposure,  use of  personal  protective
equipment  and  standard  precautions.  Training  is provided at the time of job
entry,  at annual  retraining  and whenever  tasks are modified  which alter the
hazards posed. The person conducting the training must be knowledgeable not only
on the  subject  matter  but also on how it relates  to the  emergency  response
personnel.

     The Association of Operating Room Nurses ("AORN") recently issued a list of
training recommendations.  One such recommendation was a proposal to develop and
evaluate continuing education  requirements to assure the continuing  competence
of  regulated  healthcare  professionals.  Because of the rapid  development  of
technologic and scientific advances, AORN believes that one of the greatest


<PAGE>



challenges is ensuring the continued competence of the workers providing nursing
care. The competent use of technology involves not only the understanding of the
equipment but also the decision  making/critical  thinking  skills needed to use
the equipment effectively, safely and appropriately.

     Inadequate training has been implicated as a common cause of patient safety
incidents.  This issue has gained  increased  publicity among consumer  advocacy
groups. Recent surveys by the National Patient Safety Foundation at the American
Medical  Association  ("AMA") indicate that 42% of those surveyed said they were
involved in situations where a medical mistake was made. Of these mistakes,  22%
were made  during a  medical  procedure.  The  causes  cited by the  respondents
included  what they  believed to be  carelessness,  improper  training  and poor
communications.  The survey was commissioned by the AMA to evaluate the need for
initiatives to reduce errors in the healthcare industry.

     With the use of OASiS,  the  worker has  access to a  directory  of various
succinct  multimedia  interactive  training modules.  The Company produces these
modules using multimedia  material provided by outside  agencies,  organizations
and product suppliers. Quick reference is accessible to important safety-related
features and key user  information on medical  devices and new  techniques.  The
system was designed to decrease  the need for  personal  training and to improve
patient  and  worker  safety  by  increasing   the   availability   of  critical
information.  Improved  awareness of new  techniques  and devices by  healthcare
workers has shown improvement in the quality of care provided by the facility.

     The  Company  believes  that the use of the OASiS  system  benefits  device
distributors  and critical  care  departments  and that better  trained users of
devices should lower the rate of incidents  occurring due to misuse of a device.
The system also provides a mechanism whereby alleged  defective  products may be
efficiently  reported to the facility and manufacturer.  This aspect is expected
to assist product  distributors and  manufacturers  with field reporting.  OASiS
training programs are designed to provide not only a thorough and cost effective
method for  employee  training,  but also to provide  the  documentation  of the
learner's comprehension of the subject. Further, an established network of OASiS
terminals within a facility also acts as a point-of-sale for the Company's other
medical  devices  such as  MediSpecs  Rx(TM) semi  disposable  prescription  eye
protection.

     Each OASiS system involves "touch access" to a computer  terminal  designed
as a stand-alone kiosk. In essence,  kiosks are computers equipped with software
designed to guide people to information,  help them accomplish a task, or effect
a transaction. Kiosks can provide text information, graphical presentations, and
video and sound clips.

     Each  OASiS  touch  point   strategically   located   within  the  hospital
environment  and is linked to a main center for  accumulation  of hospital data.
The system is designed to provide healthcare workers with previously unavailable
access to a wide variety of pertinent  information.  Unlike traditional  systems
which require a certain level of computer  aptitude  (even if only using a mouse
or keyboard),  OASiS' distinct advantage is its foundational  design in a "touch
access"  format.  Virtually  every  command  or task on  OASiS is  performed  by
touching a user friendly icon driven interface. In other words, if one can point
to and touch a picture on a screen,  then one has access to a world of  valuable
and  potentially  life saving  information  through the OASiS network.  By using
Apple  Quicktime  VR(TM) at an OASiS  touchpoint,  the system allows the user to
touch an image on OASiS, drag their finger on the screen and view the image from
multiple angles.  The Company markets this feature under the name "Virtual Touch
Reality".

     Upon  approaching  OASiS,  the healthcare  worker may select from a menu of
icon based options including  exposure  reporting,  hospital exposure  policies,
device inservices, safety training,  communicable disease information and safety
news and events. Each of these areas is accessed and navigated by a simple touch


<PAGE>



of the  screen.  The graphic  design of the system is  designed  to  accommodate
workers with minimal reading skills and little computer experience.

     The  uniqueness  of OASiS is not  only the fact  that it is a touch  access
system,  but that it is the first  nationwide  network for  healthcare  which is
totally independent of the facility's existing  information system. Once thought
to be a disadvantage,  the absence of integration  into the facility's  existing
systems is actually one of the features of OASiS which has gained praise for the
system from the Information Systems Department of SMH, the first installation of
OASiS.

     The Company has applied for two (2) patents on the OASiS system which cover
propriety  aspects  of the  software,  algorithms  and  reports,  as well as the
inservice training modules which are owned by the Company. OASiS is powered by a
Windows NT platform with  full-multimedia,  Pentium 233 processors  operating at
each  station.  The stations  connect to the OASiS server by way of the Internet
and send and receive data at prescheduled times. This allows the OASiS server to
send new  information,  training or updates to single stations or on a broadcast
basis to the entire network.

     Hospitals employing OASiS will use an average of one (1) to three (3) units
initially.  The units are strategically placed in varying hospital  departments.
Pricing is structured so as to simplify the  hospital's  approval  process.  The
OASiS system can be leased to the  hospitals on a three-year  contract  arranged
through Rockford Industries,  Inc. of Santa Ana, California ("Rockford"),  which
acts as the third party lessor.  After early stage  discounting to the hospital,
the Company expects that leasing fees,  industry content production and use fees
and  software  subscription  fees will combine for a per unit revenue of $10,200
initially  and  $2,200 per  month.  After the  three-year  period  expires,  the
residual  value of each OASiS will be added to the Company's  assets.  The OASiS
system will be upgraded at that time and it is  anticipated  that an  additional
$400 per month will be added to gross revenue for each unit in place.

     Under the leasing  arrangement with Rockford,  lease approval will be based
upon the  credit-worthiness of the lessee hospital.  Once approved,  the Company
receives a discounted present value of the lease income stream in advance as the
supplier of the equipment. It is these funds which the Company will use to cover
the acquisition costs of the OASiS hardware delivered to the lessee.

     Fees also are  anticipated  in the future on a  percentage  of the  product
sales  made  through  the OASiS  platform  and on  information  sales of generic
occupational  safety data.  Market share is expected to increase for the Company
as it brings on additional facility users, additional industry content providers
and added on  plug-in  program  modules  developed  by the  Company  in house or
through Company acquisitions.

     As an information  system,  OASiS production  consists of an integration of
proprietary  software  with  hardware  from  original  equipment   manufacturers
("OEM's"). The Company designed and is the sole owner of the software portion of
OASiS.  This was as a result of  approximately  three (3) years of research  and
development. The software presentation consists of the frontline user interface,
the programs and all supporting  database  gathering programs and administrative
"back office"  facilities.  The software  exists as a user ready or standardized
foundation  with  widespread  adaptability  as the  system is  installed  at the
hospital's  facility.  As of January 1998,  Version 1.1 was fully operational at
the initial  installation  at SMH and was ready for  installation  in additional
facilities.  OASiS Version 1 worked acceptably for accident  reporting,  but was
unacceptable  for  constant  updating  of  content  and from the  administrative
monitoring standpoint.  Version 2, now operational, uses nothing from Version 1.
Plans for  upgrades  to Version 2 are in progress  and are being  adapted to the
needs of the end- user market as they are discovered.


<PAGE>



     Within the  original  site  installation,  OASiS is being used for exposure
reporting, inservices and new technology, communicable disease information, news
and events,  safety education and hospital policies.  New installations will add
user identification log on capability,  additional levels of news and events and
training  with  certification.  Since  Version 2.0 has become  operational,  the
Company has expanded the system with software plug-in  integrations and advanced
data reporting and management.

     In  initially  designing  a system for a  hospital  facility,  the  Company
completes a site survey to determine the needs of the facility  regarding  OASiS
and  system  installation,  as well as other  pertinent  information  related to
station location within the facility and available telecommunication  resources.
The site survey also  includes  details for  customizing  the  software  for the
specific facility's application.

     The  Company has  determined  that the most  economical  way to deliver the
integrated  hardware/software  product to the customer is through a full service
integration  specialist  (the  "Integration   Specialist").   The  services  and
responsibilities  covered by such specialist will be: (1) hardware  installation
into the OASiS kiosk and configuring the components;  (2) software installation;
(3) software  configuration;  (4) 24-hour  "burn in" and  testing;  (5) hardware
disassembly,  packing  and  shipping;  (6)  on-site  installation;  (6)  on-site
testing;  and (7) three-year 24 hour turn around warranty on all hardware.  Many
potential  integrators  exist  and the  Company  has  entered  into  preliminary
agreements with two initial candidates. The Company expects to use no fewer than
two  integrators  on  a  regular  basis  to  ensure  the  quality,  service  and
performance required in a competitive situation.

     The production  cycle begins at the end of the initial sales cycle with the
completion   of  the   site   survey.   Information   regarding   communications
availability,  station location and on-site  coordinator data is integrated into
the  customization  process.  A purchase  order is placed  with the  Integration
Specialist who in turn orders components from the various OEM's. The site survey
is then used by the integration  house for coordination of on-site services such
as station location, service subcontractors and others.

     Effective  January 30, 1998,  the Company  entered  into a Prepaid  Capital
Lease Agreement with Community  Health  Corporation  (the  "Lessee"),  a Florida
not-for-profit  corporation  which  acts  in  support  of SMH ( the  "SMH  Lease
Agreement").  Since  delivery of under this  agreement was in December 1997, the
SMH Lease Agreement is treated as income in 1997. SMH is the site of the initial
OASiS installation. Pursuant to the terms of the SMH Lease Agreement, SMH leased
four (4) OASiS kiosks and accompanying software and technical support for a term
of ten (10) years  commencing  on a date  which was to follow an  initial  trial
period.  The Company was required to install the kiosks  within five (5) days of
the  execution  of the SMH Lease  Agreement.  SMH was  entitled  to  review  the
performance  of the  installations  for a  period  of  thirty  (30)  days  after
installation.  Provided the systems performed in accordance with pre-established
standards during such trial period,  the SMH Lease Agreement term would commence
at the time of  acceptance.  Pursuant to the SMH Agreement,  at acceptance,  the
Lessee  agreed  to  prepay  all  rent  payments  for the  term of the SMH  Lease
Agreement,  which sum amounted to  $250,000.  All  modifications,  improvements,
additions and enhancements ("Modifications") which result from this installation
belong to the Company;  however,  in the event a Modification is proposed by SMH
and the Company  incorporates it into the OASiS system, the Company will pay SMH
one  half  of one  percent  (.5%)  of  any  net  revenue  the  Company  receives
attributable to such  Modification.  The Company is obligated during the term of
the SMH Lease  Agreement  to  provide  software  maintenance,  improvements  and
updates  to the  OASiS  system  and  training  for the use of the units to SMH's
personnel.  In addition,  the Company is required to carry comprehensive general
and products liability insurance in the amount of $2,000,000 covering the use of
the OASiS  system  and  naming SMH and the  Lessee as  co-insured  parties.  And
further, the Company agreed to indemnify the Lessee and SMH against any liens,


<PAGE>



liabilities  or other  damages  incurred by the Lessee or SMH as a result of the
installation or use of the OASiS system.  At the end of the term, the Lessee has
an option to purchase the four (4) OASiS kiosks for the sum of $1. Neither party
to the SMH  Lease  Agreement  may  assign  nor  delegate  any of the  rights  or
obligations  contained  in the  agreement  The  units  were  installed  and  are
operational.  At the current  time the SMH Lease  Agreement is in full force and
effect.  The Company  received the payment due under the SMH Lease  Agreement on
January 30, 1998.

     Following  a  presentation  before the  Association  of  Infection  Control
Professionals  and  Epidemiologist  ("APIC") in May, 1998, the Company  received
nearly a dozen applications from multi-facility hospital systems wanting to be a
part of the next wave of OASiS installations. And, the Company received inquires
for at least four times that many facilities  seeking more information about the
development of OASiS.  To date, none of these inquiries has resulted in an OASiS
installation agreement.

     From March 31st through April 2nd, 1998, the Company, in conjunction with U
S Surgical,  demonstrated the OASiS touch-access  information system at the AORN
convention in Orlando,  Florida.  This is the largest nursing  convention in the
world.  OASiS  accounted  for over 21% of all leads  generated by US Surgical at
AORN. Based upon the evaluation forms competed by the nurses,  it was found that
(1)  the  most  useful  section  of  OASiS,  as it now  exists,  is  the  device
inservices;  (2) most of the nurses characterized the system as a convenient way
to receive  inservices,  while a few of them viewed it as a sales and  marketing
tool for  device  manufacturers;  (3) an  overwhelming  number of the nurses who
responded  stated that they would rely on OASiS on a daily  basis;  (4) the most
requested  additional  features  were  a  Surgeons'  Preference  Card  which  is
scheduled for Version 2.x testing, electronic PDR and Latex sensitivity which is
under  development;  and (5) most of the nurses would  recommend OASiS for their
operating room.

     Following the AORN convention,  the Company and US Surgical agreed to terms
for the further presentation of OASiS. On October 28, 1998, the parties executed
a three year agreement under which US Surgical will arrange for the installation
of ten (10) OASiS systems in hospital  facilities  which US Surgical  defines as
"Centers of Excellence." Each system will include thirty (30) inservice training
modules.  Following an initial nine (9) month trial at each of these  facilities
and subject to satisfactory  performance by the system and the technical support
group, US Surgical has the right to have additional  systems  installed in other
healthcare facilities  nationwide.  US Surgical will finance the development and
installation  of the ten (10)  systems.  No  decision  has been made as to which
party  will  pay for such  additional  systems  as US  Surgical  elects  to have
installed. If it is the Company,  additional capital may be needed, the securing
of which on favorable  terms to the Company cannot be assured.  The Company will
receive a fee in the amount of $36,000 for the  initial  ten (10)  installations
during the testing period and a fee in the amount of $108,000 for the balance of
a three (3) year term for such initial  installations.  In addition, the Company
will  earn  profits  on the  sales of its  products  through  the  point-of-sale
facility  in the OASiS  system and from the fees it receives  from other  device
providers and training  companies  through the use of the inservice modules (the
"Long Term US Surgical Agreement.").

     On  June  30,  1998,   the  Company   executed  a  letter  of  intent  with
Ad-vantagenet Inc. of Sarasota,  Florida  ("Ad-vantagenet").  Under the terms of
the letter of intent,  Ad-  vantagenet  assisted in the  creation of version 2.0
OASiS software, including creating the art and graphics. Version 2.0 is designed
to allow for more  dynamic  features on the system  including  instant  updates,
information-gathering  and editing features.  The Company chose Ad-vantagenet to
complete Version 2.0 after unsatisfactory results were achieved by Gambit, Inc.,
d/b/a  MediaWorks.  The functions  Ad-vantagenet  incorporated  into Version 2.0
include  features  which had been requested of MediaWorks but were not provided.
The total projected cost of the Ad- vantagenet project is one-fourth of the cost
which MediaWorks  projected.  The Company was in litigation with MediaWorks over
the termination of their agreement.  Subject to the successful completion of the
letter of intent project with Ad-vantagenet, the Company intends to enter into a
more structured, long-term agreement for further OASiS development.

     In November 1998, the Company  entered into a seven (7) year  collaborative
agreement with Dr. William B. Saye, the Medical Director and CEO of the Advanced
Laparoscopy  Training  Center in  Marietta,  Georgia  ("ALTC")  under  which the
Company  acquired the "digital  rights" of ALTC and the resulting  amalgam as it
relates to surgical  education and marketing rights to the ALTC database.  Under
this agreement, Dr. Saye became a member of the Company's Board of Directors and
agreed to act as the  Medical  Director of ALTC  VirtualLabs.  Dr. Saye is to be
compensated for travel expenses and will be paid an honorarium of $2,500 per day
when his services are requested by Surgical.  In addition,  Dr. Saye was awarded
stock options to purchase up to 1,000,000  shares of the Company's  Common Stock
over the period,  options for 300,000 of which were issued upon the execution of
the agreement,  and the balance of which are issuable monthly.  The intention of
the agreement is that any educational activity involving ALTC or Dr. Saye on the
Internet  or other  digital  presence  would be the  property  of and  under the
control of  Surgical.  The  purpose  of the  agreement  is to shift  traditional
training methods in advanced surgical technique to a new distance-based approach
delivered  through  OASiS,  the Internet and  emerging  mediums.  The goal is to
educate and train a wide audience on safe and efficient surgical  techniques and
procedures through the expansion of the OASiS network.  Dr. Saye has an existing
agreement  with Ethicon  Endo-Surgery,  a division of Ethicon,  Inc.,  which the
parties do not believe will conflict with this agreement.

     In November 1998, the Company committed to purchase twenty (20) stand alone
kiosk OASiS units from Kiosk  Information  Systems,  Inc.  for a total  purchase
price of $133,000  plus  freight  charges This  commitment  was in the form of a
purchase  order from the Company.  By December  31,  1998,  the Company had paid
$66,500  and  received a partial  delivery  under the  agreement.  To date,  the
Company has paid approximately $97,000 and has received 18 units.

     OASiS Version 2.0 became operational at SMH in February, 1999. Surgical has
outsourced  Internet services to Verio, Inc.  ("Verio") , a provider of Internet
services such as broadband connectivity,  WEB hosting solutions, virtual private
networks,  e-commerce and other enhanced Internet services. Verio provides OASiS
with fast,  reliable and secure access to the Internet via Tier 1  connectivity.
In February  1999,  Surgical  entered  into an  agreement  with Verio for access
service  at  SMH.  The  agreement  required  payment  of a set up fee of $60 and
monthly charges of $199. Surgical is responsible for paying the monthly charges.
A comparable  agreement  with Verio is  contemplated  for each hospital at which
OASiS is installed.

     In February 1999,  Surgical  completed  negotiations which had commenced in
the summer of 1998 to install  OASiS units in St.  Francis  Hospital in Trenton,
New Jersey ("St. Francis Hospital") as a test site. Three units with Version 2.0
software were installed in February.  The Company has an oral  arrangement  with
St.  Francis  Hospital under which the hospital pays Surgical $200 per month per
unit as a monthly  software license fee and pays $50 per month per unit for "hot
swap" maintenance service based upon a monthly invoice.

     In February 1999, the first  installations  under the US Surgical agreement
became  operational,  each with  Version  2.0  software.  One OASiS  system  was
installed at Atlanticare  Hospital in  Massachusetts  and two OASiS systems were
installed  at  Columbia  Presbyterian  Hospital  in New York.  In  addition,  US
Surgical  inservice  modules were  installed in the SMH system and in the system
installed at St. Francis Hospital.

     The Company  knows of only one other system which is designed to accumulate
exposure  data which is called  Epinet,  a single  system  designed to track and
report bloodborne pathogen exposure in the healthcare setting.  The Company


<PAGE>



believes that OASiS is the superior product and that it represents the leader in
the  industry  at this  time.  The  basis for this  belief  is that  Epinet is a
software only product and that the OASiS system can be adapted to accept Epinet.

Medical Products Division

     Compliance  Plus(TM)  is the  designation  under  which  all the  Company's
products are developed.  The Company  trademarked this term in order to indicate
that the criteria used in the research and development of every Surgical product
and service  meets or exceeds  compliance  mandates  set forth by the OSHA,  the
Centers for Disease Control and Prevention  ("CDC") and other governing  bodies.
It is the goal of the Company to exceed existing  standards in order to assume a
leadership role in the area of medical prevention and safety products.

     The Compliance Plus(TM) Exposure Prevention Program includes several safety
engineered  products  dedicated to reducing exposure and cross  contamination in
the operating room. These exposure  prevention products are designed to maximize
surgical  efficiency while reducing  bloodborne  pathogen exposure to healthcare
workers and improving patient care in a wide range of applications.  The Company
has already  introduced  the first two  Compliance  Plus(TM)  products  into the
market  MediSpecs  Rx(TM) and  SutureMate(R).  These are the only two Compliance
Plus(TM) products which it currently  markets.  Both of these products meet OSHA
and CDC  mandates.  Additional  Compliance  Plus(TM)  products are scheduled for
release in 1999. The remainder of the proposed  Compliance Plus(TM) line will be
added through further in-house  development and acquisitions,  which are already
in process.

     The  Compliance  Plus(TM)  devices  include:   SutureMate(R),   a  patented
single-patient-use  surgical  assist  device  for safe and  efficient  suturing;
MediSpecs Rx(TM), a disposable  prescription  protective  eyewear for healthcare
workers;    Prostasert(TM),    a   patented   obstetrics/gynecology   ("OB/GYN")
pharmaceutical  applicator;  IcePak(TM),  an infection control equipment kit for
healthcare workers;  PrepWiz(TM), a revolutionary surgical preparation and drape
system (in development);  and FingerSafe(TM),  a multi-featured surgical thimble
(in development).

     The  Company  believes  that  the  use of  Surgical's  Compliance  Plus(TM)
exposure  prevention  strategy provides  numerous direct and indirect  benefits.
These benefits relate to a significant reduction in bloodborne pathogen exposure
from  needlesticks  and  glove  perforations,  as  well as  improved  procedural
efficiency. The Company believes that prevention through the use of its products
reduces expenditures in employee health post-exposure work-up and treatment, and
lost employee  time. The Company  further  believes that there are also benefits
from improved employee morale,  community  relations,  and reduced liability and
workers' compensation costs.

     In January 1998, the Company executed a clinical products testing agreement
with  SMH for a term of five  (5)  years.  Under  the  terms  of the  agreement,
Surgical will submit ten (10) surgical and medical  products to SMH for clinical
testing (the "SMH Clinical Testing Agreement.")  Surgical will reimburse SMH for
certain  designated  budgeted  costs and pay a fixed  amount of $25,000 for each
study,  payable in monthly increments over the term of each study.  Further, the
agreement  provides that Surgical is obligated to pay SMH $250,000 over the term
of the agreement in the event  Surgical  determines  not to have SMH perform the
clinical testing. In addition, SMH will receive one half of one percent (.5%) of
the proceeds  received by the Company from the sale of the products tested.  The
products to be tested include SutureMate(R),  MediSpecs Rx(TM),  Prostasert(TM),
PrepWiz(TM),  FingerSafe(TM)  and five (5) other  products in various  stages of
development.

SutureMate(R)


<PAGE>



     SutureMate(R),  a  patented,   disposable,   surgical  assist  device,  was
introduced  in 1993.  Its  unique  design  facilitates  the  highly  recommended
one-handed suturing technique which is advocated by occupational safety experts.
When one-handed suturing is not used, extra steps are required by the surgeon or
the assistant in cutting the needle free of the suture thread and extra time and
hand movements are required of the surgeon in manually  adjusting  needles while
using a needle  holder in most  suturing  processes.  SutureMate(R)  allows  the
surgeon to use a safer, more efficient method of surgical stitching. The product
has features which include a foam needle-cushion, and a suture cutting slot.

     SutureMate(R)  can be  used in a wide  variety  of  specialties,  including
surgery,  OB/GYN,  emergency  room  treatment,  plastic  surgery,  podiatry  and
dentistry. It was designed by Dr. Swor, the Company's Chairman, who is a surgeon
himself for use by surgeons and surgical assistants. The Company is not aware of
any comparable  product on the market.  New  applications  for its use are being
devised  regularly  and  several  variations  of  the  original  product  are in
development, including a laparoscopic version, for use in the fast growing field
of minimally invasive surgery.

     The product acts as a needle bank for temporarily "parking" suture needles,
and a cutting  slot for removing  the needle from the suture  thread.  Using the
SutureMate(R)  device  enables the user to "free-up"  the  non-dominant  hand to
engage in additional tasks such as holding instruments and exposing tissues.

     Data from the CDC  indicates  that  seventy-seven  percent  (77%) of sharps
injuries are caused by suture needles. In one-third of all injuries to surgeons,
the sharp instrument was re-exposed to the patient.  When one-handed suturing is
not used, the surgeon's non-dominant hand is particularly vulnerable.  Sixty-six
(66%) percent of all suture  needlesticks  occur to the first two fingers of the
non-dominant   hand.   This  is  where   SutureMate(R)'s   application  is  most
significant.

     Clinical   data   suggests  that   SutureMate(R)   dramatically   decreases
needlestick injuries and other exposures such as glove perforations. The cutting
slot feature  enables the user to efficiently  remove the needle from the suture
thread  without the need for an  assistant,  and with  greater  efficiency  than
traditional methods.

     SutureMate(R)  has been cited by safety  advocates  and  infection  control
specialists  in several  publications  and manuals.  A study from Canada by Drs.
Bebbington and Treissman was published in the October 1996 issue of the American
Journal of Obstetrics and Gynecology,  Volume 175, No. 1, Part I. This study was
supported by the Company.  The study concluded that there was a 71% reduction in
glove  perforations when  SutureMate(R)n  was used and stated that the "surgical
assist  device  [SutureMate(R)]  appeared  to  be  useful  in  decreasing  glove
perforations  regardless  of  the  degree  of  training  and  expertise  of  the
operator."  The  study  concluded  that  the "use of this  device  significantly
reduced the number of glove  perforations  that occurred  during  vaginal repair
after delivery. Therefore it can be of benefit to the safety of operators during
an  all-too-frequent  procedure  in  obstetrics.  This is  especially  true when
universal  precautions are being advocated for all patients. A decrease in glove
perforations  deceases the exposure to potential pathogens." The study did state
that the reduction in glove  perforations may not have been exclusively  related
to the use of the device.

     The need for  sharps  management  in  surgery  has  generated  a number  of
articles.  In an article by Dr. Mark Davis which was published in the April 1995
issue of  Infection  Control &  Sterilization  Technology,  Volume 1, No. 1, Dr.
Davis  stated that "most  percutaneous  injuries  can be prevented by the use of
currently  available  safety-engineered  devices and by the application of known
safety  protocols and  techniques...Other  techniques such as double gloving and
suturing with a device  requiring one hand,  offers some protection  against the
growing threat of HIV, and hepatitis B and C. The one-handed suturing device


<PAGE>

discussed  in the  article is  SutureMate(R)  which was being  evaluated  by the
surgical and OB/GYN  staff at Dr.  Davis'  institution.  Dr. Davis served on the
Scientific Advisory Board of the Company.

     SutureMate(R)  research  findings  have been  presented  to  several  major
medical organizations  including: the American College of Surgeons and Center of
Disease  Control and Prevention  ("CDC") at a joint meeting on the prevention of
bloodborne  pathogens  in  surgery  and  obstetrics  which was held in  Atlanta,
Georgia in February 1994 (the "February 1994 Conference"); at the annual meeting
of the Society of Hospital  Epidemiologist of America in Santa Clara, California
in  March  1994;  at  the  annual   meeting  of  the   Association  of  Surgical
Technologists  in  Atlanta,  Georgia in May 1995;  at the annual  meeting of the
Society of Perinatal Obstetricians in Vancouver, Canada in February 1996; at the
annual meeting of the Association of Surgical Technologists in Atlanta,  Georgia
in June 1996 and at the annual meeting of the ACORN in Atlanta, Georgia in April
1997.

     The February 1994 Conference was the first joint conference of the American
College  of  Surgeons  and the CDC.  Donna J.  Haiduven,  an  infection  control
specialist  and a member of the Company's  Scientific  Advisory  Board,  and Dr.
Maria D. Allo of Santa  Clara  Valley  Medical  Center  presenting  an  abstract
entitled  "Evaluation  of a  one-handed  surgical  suturing  device to  decrease
intraoperative needlestick injuries and glove perforations." The study concluded
that the "[u]se of "Suture  Mate"  facilitates  one-handed  suturing  technique,
resulting  in  less  likelihood  of  glove   perforations  and   intra-operative
needlestick  injuries"  and "[t]he  "Suture  Mate" device  obviates the need for
two-handed  suturing and provides a safe place to "bank" needles on the surgical
field."

     The  use of  SutureMate(R)  eliminates  the  need  for the  more  expensive
"control   release-type"   sutures.   By  virtue  of  improved  surgical  safety
efficiency,  the Company  believes that the patient will experience  significant
savings  through  reduced  anesthesia and operating room time. In addition,  the
Company  believes that this product reduces cross  contamination  which can save
expenses related to surgical wound infection.

     SutureMate(R)  has  recently  been   re-released.   The  product  has  been
re-engineered  and updated after  feedback from over 4,000 surgeons and surgical
technologists  who have used or reviewed the product since its  inception.  As a
result of the  re-design,  the Company  believes that there will be new clinical
advantages  and  that the  product  can be  produced  at a  significantly  lower
manufacturing  cost.  These  beliefs  are based on the fact  that the  re-design
includes a tent-  like  configuration  with a hidden  cutting  device  contained
between the  adhesive  base and the holding  device.  This allows the surgeon to
separate  the needle from the suture  without a scrub nurse  intervening  with a
scissor.  The cost reduction will result from the fact that the original version
cost  approximately  $6.00 per unit while the new  version  costs  approximately
$1.50 per unit including  packaging and sterilization and can be marketed in the
$5 to $6 range which is more in keeping with pricing for a disposable product.

     Currently,  the  re-designed  SutureMate(R)  is  manufactured by the Hansen
Plastic  Division of Tuthill  Corporation  at their plant located in Clearwater,
Florida  ("Tuthill").  Tuthill  manufactures  each non-sterile unit at a cost of
$.902 per unit. The non-sterile product is then shipped to Gamma Services,  Inc.
in Lakeland, Florida for sterilization.  The cost per unit for the sterilization
process is $.172.  This results in a total cost per unit of $1.074.  The Company
currently is considering other manufacturing sources.

MediSpecs Rx(TM)

     MediSpecs  Rx(TM)  is a  prescription  protective  eyewear  which  Surgical
co-developed for use in the operating room and related areas. The Company has an
exclusive, renewable 5-year, distribution agreement which covers the United


<PAGE>



States with Morrison  International,  Inc., a Pennsylvania  corporation with its
principal place of business in Sarasota, Florida ("Morrison").  The initial term
expires  in  September  2000.  Under the terms of the  agreement  with  Morrison
executed in  September,  1996,  the Company has the right to purchase,  promote,
resell and distribute Morrison's trademarked glasses under the Company's private
label trademark,  MediSpecs  Rx(TM).  The price for the product is fixed for the
initial  five-year term and requires minimum purchases which are scaled over the
first five-year period from 2,750 units the first year to 56,000 the fifth year.
Under the  agreement,  the Company its entitled to distribute the product either
directly or through other dealers.

     MediSpecs   Rx(TM)   are    featherweight    prescription    glasses   with
OSHArecommended   protective  side  shields.  A  proprietary  manufacturing  and
assembling  process  minimizes  the cost of  production  and  allows  healthcare
workers to purchase  prescription  protective eyeglasses for dedicated use in an
occupational  setting.  The Company  believes that users will purchase  multiple
pairs of glasses.  It is anticipated that each pair will have an average life of
approximately  50-100  uses.  While an average pair of  prescription  eyeglasses
costs over $150, MediSpecs Rx(TM) glasses are being sold for approximately $25 a
pair and can be  ordered by mail.  The cost to the  Company  under the  Morrison
agreement is $6.98 per pair.

     MediSpecs  Rx(TM)  glasses  protect  against  splashing of blood and bodily
fluids into the user's eyes,  thus further  reducing  exposure risk.  Medi-Specs
Rx(TM) are ultra lightweight, making it unnecessary to the user to wear the more
cumbersome Eyewear currently available for eye protection.

     In August 1997, the Company  entered into a distribution  agreement for the
sale of  MediSpecs  Rx(TM)  in the  State of  Florida.  This  agreement  is with
Hospital  News, a Florida  corporation  with its principal  place of business in
Tampa,  Florida  ("Hospital  News").  SMH and Doctors  Hospital of Sarasota  are
excluded from the agreement and remain under the distributorship of the Company.
The initial term of the Hospital News  agreement was through  December 1997, and
is renewable by the parties for successive  one (1) year periods.  The price for
the  product  is fixed  for the  initial  term at $12.95  per pair and  requires
minimum  purchases  which are scaled  over the first six (6) months from 0 units
the first month to 800 the sixth month.  Under the agreement,  Hospital News its
entitled to distribute  the product  either  directly or through other  dealers.
Although  Hospital News has not meet its quota to date,  the Company has elected
to extend this arrangement for an additional one (1) year period.

     Due to the price at which MediSpecs  Rx(TM) may be offered to users and the
prevention of  cross-case  contamination,  the Company  believes that there is a
large international  market available for the use of this product. The basis for
this  belief  is  because  it is low  cost  prescription  eyewear  which  can be
assembled on site from low costs kits. The international  market is estimated at
150% of the domestic market.

Prostasert(TM)

     Prostasert(TM)  , originally named  LaborMate,  is a patented,  disposable,
obstetrical/gynecological  specialty device with many potential uses,  including
use for  patients  undergoing  the  induction of labor.  The product  provides a
vaginal  application of a precise dosage of pharmaceutical gel which is designed
to shorten  and  improve  the labor and  delivery  process.  Although  simple in
design,  the Company believes that  Prostasert(TM)  is unique in that it differs
from its  competitors  by  allowing  for a more  site-specific  application  and
improved  maintenance  of the  pharmaceutical  gel used.  Prostasert(TM),  a FDA
listed  device,  is a specially  designed  medication  delivery and  maintenance
system which allows a physician to deliver the proper  dosage and maintain  that
dosage  precisely.  With over four (4)  million  births  annually  in the United
States alone, the Company  estimates the potential market for obstetrical use of
this product to be


<PAGE>



approximately  200,000 to 400,000 cases  annually.  These estimates are based on
the fact that 10% to 20% of the four (4)  million  births  annually  are induced
(labor  stimulated  medically)  and such numbers of induced births is increasing
because of the lower risks and  patient/doctor  convenience  factors.  Alternate
uses and other  applications  for this product are under  development  including
treatment  for cervical  infections  and PAP smear  abnormalities  for which the
market is estimated to be 1,000,000 cases per year.

     No FDA clearance was needed for this product  because it is assembled  from
FDA  approved  parts.   The  product  was  listed  by  the  FDA  in  June  1994.
Prostasert(TM)  was approved for clinical research by the  Institutional  Review
Board of the SMH where it has been undergoing clinical trials for the past three
(3) to four (4) years to document the clinical  usefulness of the product.  Once
such trials are completed and provided additional funding is available (of which
there can be no  assurance),  the  Company  intends  to make  final  engineering
adjustments  and then  commence  manufacturing  for initial  market entry in the
United States by the end of 1999. The Company is seeking a  distribution  outlet
while the additional clinical trials are developed.

Icepak(TM)

     The Company is researching patent protection for this specialty product and
its  accessory  components.  This  product is a belt which is  designed to carry
various infection  control-related  products  providing  healthcare workers with
easy  access to  personal  protective  supplies.  The belt  itself is a durable,
reusable  product with  consumable  supplies  attached.  The Company  intends to
market  and  sell  this  product  primarily  through  catalogs,  with a focus on
distribution to nurses. The Company is in the process of developing arrangements
with  suppliers of the  consumable  supplies to be used in the belt. A prototype
has been manufactured and the product is expected to enter the market before the
end   of   calendar   1999   if   the   required   agreements   with   potential
manufacturers/suppliers  have  been  completed  and  if  additional  funding  is
available  (of which there can be no  assurance).  There is no  requirement  for
regulatory approval of this product.

Research and Development

     The Company  engages in extensive  research and  development of new medical
technology.  Many product  concepts and  partially  developed  designs have been
accumulated from internal and external sources. As funding becomes available, of
which  there can be no  assurance,  new  products  will be brought  through  the
development process. Initial products in development include:

     RD91862:  PrepWiz(TM):  This  is  a  multiple  product  for  preparing  the
patient's  surgical  site.  The  Company  anticipates  that  this  product  will
potentially  solve  major  efficiency,  costs and safety  problems.  The Company
currently   plans  to  co-develop   this  product  line  with  a  major  medical
manufacturer and subsequently license it for sales and distribution.  Currently,
pattern  designs are in process and the Company  expects to receive  non-sterile
samples for  evaluation  by October 30, 1998.  The samples will be provided to a
contract converter who will produce non-sterile disposable samples to be used in
finalization of the design.

     RD121096:  Finger-Safe(TM)  Surgical Thimble: The Company is seeking patent
protection on this fingertip protection device. It is expected that this product
can be added to the Compliance  Plus(TM)  product line in the event that Company
secures additional capital, of which there can be no assurance.  This product is
used much like a thimble for sewing,  but has special  features that  facilitate
the  suturing  technique  and also has  special  safety  features  and a storage
component.  The product is designed to reduce  further the risk of  needlesticks
and glove perforations to the non-dominant hand.



<PAGE>



     Both  RD91862  and  RD121096  require  regulatory  approval  from  the FDA.
PrepWiz(TM) is in the development  phase and no application under 501(K) will be
undertaken until final designs and approvals have been executed. Finger-Safe(TM)
Surgical  Thimble  is on the  shelf and no  development  activity  is  currently
underway.

Advanced Surgical Techniques

     The Company  has  several  products  in  development  that are  designed to
contribute to the rapidly  growing market of "minimally  invasive"  surgery with
increasing emphasis on small incisions,  laparoscopy,  laser treatment, and more
efficient  post-surgery  convalescence.  The  Company  believes  that there is a
significant  demand for improved  technology to facilitate these newly developed
procedures. The Company has several concepts and projects in development related
to this type of surgery,  and many of the new  product  ideas  presented  to the
Medical  Products  Consultation  Division by third  parties are included in this
group.


Medical Consultation Division

     The  Medical   Consultation   Division  provides   consulting  services  to
individual  inventors  on a fee basis.  Currently  Dr.  Swor,  Mr. Clark and Mr.
Stuart, a Director of the Company, provide such services depending upon the type
of expertise  required.  The  principal  function of the division is to find new
ideas and potential products which compliment the Company's product mix.

     This division has been retained to conduct several research  evaluations of
various  proprietary  medical products and has completed two such projects,  one
for  London  International  U.S.  Holdings,  Inc.  (a  study  to  determine  the
spermicidal activity of several  concentrations of nonoxynol-9 lubricated condom
products)  and another  for Purely  Cotton (a study of a tissue made from cotton
rather than paper to determine whether the product was less irritating to people
with  chronic  skin  conditions).  Based upon the  initial  evaluation  of these
products,  the Company  believes that one or more could be very  successful  and
lead to additional business for the Company.

Business Strategy

     The  Company's  business  strategy,  which is dependent  upon its obtaining
sufficient  additional financing with which to enhance the  commercialization of
existing and future products of the Compliance  Plus(TM) exposure prevention and
surgical  efficiency  product  line and the OASiS  information  system (of which
there is no  assurance),  is to provide  innovative  products and services which
create and maintain a safe surgical  environment for medical and hospital staff,
healthcare  workers  and  patients,  as well as to enhance the level of surgical
care available to patients. The Company's revenues are based upon lease payments
from its Data Systems Division,  sale of its products and distribution fees from
the  Medical  Products  Division  and  consulting  fees  earned  by the  Medical
Consultation  Division.  The  Company's  revenues are dependent on the volume of
sales from its products.

     Revenues  from sales are  recognized in the period in which sales are made.
The  Company's  gross profit margin will be determined in part by its ability to
estimate  and  control  direct  costs  of  manufacturing   and  its  ability  to
incorporate such costs in the price charged to clients.

     The Company's objective is to become a dominant provider of medical devices
and systems which improve occupational  safety,  advance surgical techniques and
provide  greater  efficiency.  To achieve  this  objective,  and  assuming  that
sufficient operating capital becomes available, the Company intends to:


<PAGE>



(i) develop international  distribution channels and co-marketing  alliances for
the Company's products and services;  (ii) continue research and development and
acquisitions of synergistic products and software programs; and (iii) frequently
fine tune market  strategies  based upon ongoing  evaluations of customer needs,
capital budgeting opportunities and market economy fluctuations.

     Management  believes that Surgical is posed to lead in the ever  developing
surgical and medical  safety market and plans to  capitalize on the  opportunity
while  providing  significant  benefits to its customers  and improving  overall
patient care.  Management  expects,  in the event Surgical  continues to achieve
product  acceptance,  to  increase  the  Company's  market  penetration  through
additional  acquisitions  and potential  merger  opportunities  with appropriate
bases  of  business  development.   However,  such  expansion  presents  certain
challenges and risks and there could be no assurance  that Surgical,  even if it
were  successful  in  acquiring  other bases of business  development,  would be
successful in profitably penetrating these potential markets.

Sales and Marketing

     The  following  discussion  of the medical  industry,  as it relates to the
Company's  objectives,  is of course pertinent only if the Company is successful
in  obtaining  sufficient  debt and/or  equity  financing to  commercialize  its
existing  products and OASiS,  to add additional key personnel and to supplement
new product and software program development.  In addition,  the Company must be
able to generate  significant profits from operations (which are not expected in
the foreseeable  future) and/or additional  financing to continue  expanding the
business and/or to fund the anticipated  growth,  assuming  Surgical's  proposed
expanded business is successful. There can be no assurance such financing can be
obtained or that the Company's proposed expanded business will be successful.

Background

     According to the World Health Organization,  forty (40) million people will
be infected with HIV by the year 2000.  There are nearly ten (10) million people
worldwide currently infected,  including close to one (1) million children. Over
four (4) million Americans carry the HIV virus.  Approximately ten percent (10%)
of individuals  will contract this very serious illness when exposed by way of a
sharps injury.

     Auto Immune  Deficiency  Syndrome ("AIDS") is now the top killer of men age
17 to 54 in the United  States.  The CDC and the National  Institutes  of Health
("NIH")  have  focused  a great  deal of  effort  and  research  into  improving
occupational  safety and  decreasing  the risk of  bloodborne  pathogens  in the
healthcare setting.  The American Hospital  Association reports that needlestick
injuries are the most common  injury to  healthcare  workers and  represent  the
greatest  risk of  occupational  exposure  to AIDS,  Hepatitis,  and other viral
diseases.  There are over two (2) dozen  diseases  that  have been  involved  in
documented  transmission  by way of  exposure.  Over one and a  quarter  million
(1,250,000)  Americans have chronic  Hepatitis B and when their blood is exposed
to a healthcare  worker's intact skin, the  transmission  rate is thirty percent
(30%).  Since  operating room personnel and surgeons are in particular high risk
categories,  the  Company  has  committed  itself  to  developing  products  and
techniques to decrease the potential for deadly viral  transmission  to and from
healthcare workers and patients.

Market Overview, Size and Occupational Safety

     Healthcare  workers  need  secure and safe  working  conditions  as much as
life's other necessities.  Surgical seeks to provide solutions to meet that need
in the  critical  care  setting.  Value is built  into  Surgical's  products  by
reducing costs of inefficient surgery, occupational exposures and patient risks.
Exposure to bloodborne diseases occurs in up to fifty percent (50%) of surgical


<PAGE>

cases,  with  needlesticks and other sharps injuries  magnifying the risk. Up to
75% of sharps injuries in the operating room are related to suturing.  Currently
used safety  measures are  inadequate,  with an  unbelievable  23% exposure rate
documented even in known or suspected HIV cases. Hepatitis C is a new, incurable
threat and HIV is now the number one cause of death in 25 to 44 year-olds in the
United States.  Significant  resources are devoted to occupational  risks,  with
over $3 billion  expended  annually in the United States on sharps  injuries and
bloodborne  exposures.  According to the Canadian Medical  Association  Journal,
treating one HIV-infected  healthcare worker may cost in excess of $500,000.  In
addition to the risk of exposure, significant pressures have been made to reduce
costs in surgery and in critical care units.

     With the increased  prevalence of HIV, hepatitis and other deadly diseases,
OSHA  has  set  increasingly  strong  standards.  Despite  the  standard  use of
protective  gloves and clothing,  operating room personnel and surgeons are at a
particularly  high risk.  According the United  States  Department of Health and
Human  Services,   healthcare  workers  contract  more  than  15,000  bloodborne
infections  from  occupational  exposure  per year,  resulting in 300 deaths and
thousands of illnesses.  Surgical wound  infections  are  relatively  common and
result in increased  costs,  longer  hospital  stays and increased  morbidity in
patients.  A Yale  University  study found that visible  contact with  patient's
blood occurred in 63% of surgical cases and sharps injury rates range from 7% to
50%,  depending on the type of case. At current  rates,  researchers  from major
medical institutions have estimated the lifetime career risk of occupational HIV
infractions  for surgeons as high as 20%,  depending on the patient  population.
Despite this data,  HIV is  overshadowed  by Hepatis B and C which are 100 times
more infective.

     Due to  increased  awareness of these  problems,  there has been a movement
from healthcare workers themselves for facilities to provide adequate protection
and  safety  engineered   technology.   Hospitals  also  benefit  from  improved
technology and can significantly decrease post-exposure follow-up and treatment.

     A large body of research and statistical evidence has been accumulated over
the last ten (10) years regarding the significant risk of bloodborne  disease to
healthcare  workers.  Similar kinds of risks exist regarding the transmission of
disease from health workers to patients. Since the AIDS virus was discovered and
blood testing became available in 1985, even greater  awareness has been focused
on  these  problems.   The  Company  has  focused  its  efforts  on  identifying
occupational  risks in the healthcare  industry and seeking to provide solutions
to various problems regarding these risks.

     As noted,  the bloodborne  pathogens which have received the most attention
are AIDS and Hepatitis.  There are an estimated ten (10) million people infected
with the AIDS virus worldwide,  and because of the nature of the disease,  it is
impossible to determine  infected  individuals  with certainty,  even with blood
tests. Hepatitis is even more widespread and, according to medical experts, much
more contagious. These diseases and others are transmitted by contact with blood
or bodily fluids and reports of infection through needlesticks, sharps injuries,
and skin to skin contact are accumulating. The American Hospital Association, in
1992,  reported  over 800,000  occupational  needlestick  injuries in the United
States each year, and estimated that  approximately  16,000 were contaminated by
HIV.  They also  estimated  that as many as 60  healthcare  workers  may  become
infected annually with HIV as a result of occupational exposure. There have been
estimates  as high as 12,000  Hepatitis  B  infections  annually  to  healthcare
workers.  A newer form of Hepatitis,  Hepatitis C, is rapidly becoming even more
important and more serious.

     OSHA now has strict guidelines for personal protective  equipment,  such as
gloves,  gowns, and eye wear. However, with a reported rate of glove perforation
in surgery of up to 50%, sharps injuries of up to 25% and concerns regarding the
prevention  of  bloodborne  pathogen  transmission,   healthcare  professionals,
workers and patients are requesting more protection. Most professionals agree


<PAGE>



that many sharps injuries in surgery are preventable  with changes in techniques
and the use of new devices and protective equipment.

     The cost of these types of  exposures is also a  significant  factor in the
Company's business. The direct financial burden that facilities bear for medical
evaluation and follow-up  after a single  needlestick  injury is estimated to be
$200 to  $1,300  ($3  billion  in the  United  States  as  reported  in  Nursing
Economics, Vol. 12, No. 4, pp. 208-214 (1994) based upon 1987 date regarding the
cost of diagnosis and treatment of needlestick  injuries in the United  States).
According to the United  States  Department  of Health and Human  Services,  the
average cost of treating an accidental needlestick is $1,300. These costs do not
include factors such as worker's lost time and potential  liability  litigation.
This figure does not include indirect costs such as time lost from work, medical
expense and potential  liability  loss.  With annual  expenditures in the United
States on medical and surgical supplies estimated by current medical journals at
more than $6  billion  annually,  there  would  appear to be a large  budget for
safety-related products.  Surprisingly, there have been few significant advances
in new technology  regarding bloodborne  pathogens.  The Company is focusing its
research and  development  efforts  directly on  improvements  in this area with
operating room, infection control, and personal safety equipment product lines.

     The Company's  initial  product,  SutureMate(R)  was designed  primarily to
reduce the risk of needlestick and glove perforation during suturing.  Infection
can  also  be  transmitted  by skin to  skin  (mucocutaneous)  contact,  and the
Company's  Infection Control  Equipment Pack (IcePak(TM))  product was developed
from the need to reduce this hazard. Customer demand for the Company's' products
and  services is expected to be  stimulated  further by recent  scientific  data
suggesting   that  the  risks   related  to  these   hazards   were   originally
underestimated.   In  addition,   new  serious  viral  diseases  are  discovered
regularly.

     With an  estimated  25 million  surgical  procedures  and 4 million  births
annually in the United States alone, and a fertile international market as well,
the Company is focused upon the development of innovative  protective equipment,
efficiency related  instruments,  and cost efficient supplies for furthering the
concept for cost conscious safety in healthcare.

     Hospitals  are under  increasing  pressure to evaluate and adopt the use of
safety-  related  technology,  especially with regards to sharps  injuries.  New
regulations,  hospital  policies,  and federal  guidelines  will  encourage  any
efficient means of improving safety, especially with regard to HIV transmission.
Because of the size and demands of these markets, the Company believes that this
is an area of  potentially  significant  growth if it can continue to strengthen
the market niche is has created.

Markets

     The  primary  medical  industry  markets  include   hospitals,   healthcare
facilities,  surgeons, nurses, technologists in procedure-oriented  specialties,
including  obstetricians,  dentists,  emergency room personnel and other medical
professionals.

     The  potential   global  market  for  Surgical's   products   (devices  and
information systems) is estimated at over $1.3 billion.  This data was presented
in an  article  written  by Dr.  Swor  which  appeared  in  Surgical  Technology
International, Vol. II were Dr. Swor was referencing an article from the Florida
Healthcare Report and Hospital News which appeared in December 1997.

     The  initial  target  market  areas for the product  side of the  Company's
business are in the major  metropolitan  centers in the United States and abroad
that presently have large teaching programs, higher disease prevalence and acute
problem awareness. Entry into these target areas is expected by the Company to


<PAGE>

significantly ease general market penetration.

     The Company  plans to continue to export its products  worldwide to markets
including  Europe,  South America and Asia, the Middle East and the Pacific Rim.
Previously it had exclusive  distributorship  agreements  with Johnson & Johnson
Medical Pty. Ltd.  with respect to the  territories  of Australia,  New Zealand,
Papua,  New Guinea and Fiji,  with Medicor Corp. with respect to the Netherlands
and with ISC Group with  respect to Saudi  Arabia and the so- called GCC Nations
which expired  principally due to the Company's  financial  inability to sustain
sufficient levels of production under prior manufacturing arrangement.  Although
technically in force,  the agreement with Noesis relative to Europe is inactive.
The  Company  believes  that it will be able to  reactivate  these  distribution
arrangements  with  the  re-designed   SutureMate(R)   under  the  manufacturing
arrangement  with  Tuthill  or other  suitable  suppliers  under  consideration,
provided  additional  funding is available to Company to  manufacturer  adequate
inventory.  The basis of this  belief is that  initial  marketing  efforts  were
thwarted by the high  manufacturers  suggested  retail price and in  discussions
with one of these  distributors,  it has been  indicated  that such  distributor
would reinstate its agreement when adequate inventory is available. There can be
no assurance that such distribution  arrangements can be re-established nor that
there will additional funding available to the Company.

     OASiS   has  been   foundationally   designed   to   accept   multi-lingual
applications.  The Company expects that this will not only facilitate acceptance
in the  cosmopolitan  markets  within the United  States,  but also will  enable
instant  adaptations to  international  markets which  traditionally  follow the
United States leadership in developments of safety and exposure guidelines.

     A major  portion of the safety  products and services  currently  ready for
marketing  by the Company  including  both device and  information  services are
unique and are without apparent  competition by design since they were specified
and  designed  by the  Company to create  previously  unavailable  products  and
services. In most cases, Surgical's  state-of-the-art  products,  techniques and
services  position  the  Company as a pioneer in new  markets.  This is a direct
result of the Company  election to avoid the typical  commodity sales of gloves,
gowns,  shields,  and other  products  of that type and to focus on  innovative,
safety related products such as SutureMate(R), which was the first device of its
kind to provide for lower risk, one-handed suturing.

     The market for Surgical's products is divided into three (3) segments:  end
users, healthcare risk managers and medical-related companies.

     The  primary  end user  market for the  products  and  services of Surgical
include 8,000 hospitals, 100,000 surgeons and over 1,000,000 surgical nurses and
technologists.  Secondary end user markets include out-patient  clinics,  dental
offices,  emergency medical  services,  fire and rescue  organizations,  medical
offices  and  laboratories.  This  segment of the  Company's  market will be the
ultimate  user of both the  medical  devices  and OASiS  and it is  particularly
defined by the need for protection against bloodborne  diseases from body fluids
and sharps injuries, such as needlesticks.

     The healthcare risk manager market is defined by similar  statistics as the
end user market.  The major difference is that this segment is represented at an
administrative level. Additionally, it encompasses insurance companies and other
parties  interested  in capturing  safety and  occupational  injury  data.  This
segment of the market focuses on ensuring a safer, more efficient  workplace for
the healthcare worker and in obtaining previously unavailable  information about
actual occurrences of bloodborne pathogen exposure and the management thereof.

     The market segment for medical-related  companies consists of approximately
11,600  medical device  manufacturers,  360  pharmaceutical  companies and 1,260
training and educational organizations. The Company believes that this is a


<PAGE>

significant  segment for them for three reasons.  First, these companies will be
enlisted as content  providers (a content  provider  supplies  OASiS with device
information  and other  educational  components)("Content  Providers").  Content
Providers are potential customers for the Company because they pay a reoccurring
fee to broadcast their  information on OASiS.  Secondly,  this market segment is
desirous  of the  data  collected  by  OASiS as it  relates  to the  information
surrounding exposure occurrences.  The Company already has received requests for
access to this (yet-to-be collected) data. The third reason the Company believes
this segment to be  significant  is that these  companies are a key component to
the Company's sales strategy for its medical  devices.  The Company  anticipates
that it may  develop  a  relationship  with a  strategic  partner  based  on the
integration of OASiS and the Company's Compliance Plus(TM) line of products.

     The Company believes that the criteria for an appropriate strategic partner
for an alliance  with the Company  would have a worldwide  presence,  maintain a
dedicated,  highly  trained sales force with access to the operating  room, be a
respected  and  acknowledged  leader in the  industry,  be among the Fortune 500
companies or equivalent and have an interest in  diversification of its existing
product lines. In this regard,  the Company believes that its proposes long term
arrangement  with US Surgical  establishes  a strategic  alliance with a company
which meets these criteria.

Distribution of Products

     SutureMate(R),  MediSpecs Rx(TM) and OASiS are currently the Company's only
products in the  marketplace.  With reference to such products,  the Company has
entered into a number of agreements regarding their distribution.

     In December 1994, the Company entered into a distributorship  agreement for
a period of one (1) year with ISC Group, a corporation  organized under the laws
of the country of Saudi Arabia, for the exclusive right to purchase,  inventory,
promote  and  re-sell  SutureMate(R)  in Saudi  Arabia and the GCC  Nations.  An
initial order was placed and shipped.

     In March 1995,  the Company  entered  into a  distribution  agreement  with
Medicor  Corporation for the exclusive right to purchase and sell  SutureMate(R)
in the  Netherlands.  An initial order was shipped pursuant to this agreement in
April 1995.  The agreement had no term and the parties were awaiting  evaluation
of the product in the marketplace.

     In April 1995, the Company  entered into a  distributorship  agreement with
Johnson & Johnson Medical Pty. Ltd. ("J&J") to exclusively sell SutureMate(R) in
Australia, New Zealand, Papua, New Guinea and Fiji. An initial order was placed.
Under the terms of the  agreement,  J&J had no sales quota for the first  ninety
(90) days and the  parties  were to agree by July 1995 as to the sales quota for
the remaining  term.  J&J had a right to terminate  this agreement on sixty (60)
days notice.

     ISC Group, Medicor Corporation and Johnson & Johnson Medical Pty., Ltd. are
not  currently  distributing  Surgical's  product.  The Company has not actively
pursued  additional  business  from these  companies  since it has  placed  such
business  on hold  pending  further  developments  in the  Company.  The Company
believes  that it can reinstate  these  agreements at any time and has discussed
reinstatement  with one of these  former  distributors  which  advised  that the
agreement can be reinstated when adequate inventory is available. However, since
each  of  these  companies  distribute  many  other  products,  there  can be no
assurance that they will agree to distribute  SutureMate(R)  at such time as the
Company is ready for such additional distribution. Further, although the Company
currently plans to proceed with attempting to re-establish these relationship at
such  time  as  the  Company  has   sufficient   funding  to  fully  supply  the
re-engineered SutureMate(R), there can be no assurance that such funding will be
available to it.


<PAGE>

     In  December  1996,  the Company  entered  into an  exclusive  distribution
agreement with Noesis Capital Corporation ("Noesis"), a Florida corporation, for
a term of seven (7) years for the  European  market  under  which  Noesis was to
recruit,  hire and train European  master  distributors  and  distributor/dealer
networks throughout the Continent for sales of SutureMate(R). Under the terms of
the agreement, the parties were to set minimum annual quantities which had to be
sold.  The price per unit to Noesis  was set at the  greater of $1.50 or, in the
event  of a cost  increased  to  the  Company  for  manufacturing,  150%  of the
Company's  revised cost.  Although still  technically in force, this contract is
not currently  active and has been placed on hold by the Company pending further
developments,  including  the  availability  of  the  re-designed  SutureMate(R)
currently being manufactured by Tuthill.

     In July 1997,  the  Company  entered  into a  distribution  agreement  with
Hospital  News of  Florida,  a Florida  corporation  ("HNF").  Pursuant  to this
agreement, HNF was granted the exclusive distributorship of the MediSpecs Rx(TM)
eyewear  in the  State of  Florida.  SMH was  specifically  excluded  from  this
agreement.  The original  agreement  was to terminate on December 31, 1997,  but
could be renewed if the parties so agreed for  successive  one (1) year periods.
The price of each pair of eyewear was set at $19.95 plus $4.95 for  shipping and
handling.  The  Company  agreed  to pay HNF  $7.00  for  each  pair  sold and no
commission  was  due to HNF  for  any  subsequent  re-orders  from  an  existing
customer.  The agreement  required HNF to generate 800 orders by December  1997.
HNF was responsible for  soliciting,  collecting and delivering  completed order
forms on the form  designated  by the Company.  Although HNF did not achieve its
initial quota, the Company has elected to extend this arrangement.

     In  February  1998,  the  Company  executed a Letter of Intent  with United
States  Surgical  Corporation  ("U S  Surgical").  Pursuant to such letter,  U S
Surgical stated that, after investigation of the Company, it intends to pursue a
joint venture or equity buy-in  relationship,  subject to due diligence  review.
Part of such  due  diligence  review  was to be  observation  of the  healthcare
workers'  reactions  to the OASiS  presentation  at the AORN 1998  meeting.  The
Company  granted U S  Surgical  status as a Charter  Sponsor  of OASiS and a 33%
discount off the proposed retail value of services provided at the AORN meeting.
OASiS  accounted  for over 21% of all leaded  generated  by US  Surgical at AORN
meeting.

     In July 1998, the parties  agreed to the terms of a long term  relationship
subject to execution of a contract which occurred on October 28, 1998. Under the
terms of the executed  agreement,  US Surgical will arrange for the installation
of ten (10) OASiS systems in hospital  facilities  which US Surgical  defines as
"Centers of  Excellence",  including  initially  Harvard  and Yale.  US Surgical
continues  to change the centers and as of this date,  Harvard  will be replaced
with  Northwestern  University  Medical Center.  Each system will include thirty
(30) inservice  training  modules with US Surgical  products.  In addition,  the
Company is permitted to include modules for other  manufacturers  subject to the
approval of US  Surgical.  Following  an initial nine (9) month trial at each of
these  facilities and subject to satisfactory  performance by the system and the
technical  support group, US Surgical has the right to have  additional  systems
installed in other healthcare  facilities  nationwide.  US Surgical will finance
the development and  installation of the ten (10) systems.  No decision has been
made as to  which  party  will  pay for the  additional  installations  which US
Surgical elects to have installed.  In the event the Company is required to pay,
additional financing may be required from outside sources, the securing of which
cannot be assured.  The Company  will receive a fee in the amount of $36,000 for
the initial ten (10)  installations  during the testing  period and a fee in the
amount of  $108,000  for the  balance of a three (3) year term for such  initial
installations.  In  addition,  the Company will earn profits on the sales of its
products  through the  point-of-sale  facility in the OASiS  system and from the
fees it receives from other device providers and training  companies through the
use of the inservice modules.

Methods of Distribution


<PAGE>

     Whether or not the Company is successful in raising  additional capital (of
which there can be no  assurance),  in the event that  Surgical is successful in
completing the alliance with US Surgical,  the Company  intents to provide sales
support to such  partner.  The partner will manage the primary  sales  functions
with the Company acting as an additional  resource for sales support.  As to the
OASiS system, Surgical and its strategic partner will complete a site survey for
each  customer  facility.  As  currently  structured,  in the event that a final
contract  cannot be completed  with US  Surgical,  the Company will seek another
strategic  partner for these  functions.  Surgical will coordinate the necessary
follow-through with the Integration Specialist.

     Until such time as the US  Surgical  contract  is  executed  or the Company
establishes such alliance with another strategic partner, Surgical will continue
to rely on a  significant  database  and network of  consultants,  international
business  contacts,  researchers,  medical advisors and potential  distributors,
suppliers  and  manufacturers  for  sales  of  its  products.  The  Company  has
accumulated over 3,000 sales leads and customer contacts,  with a majority being
United States based surgeons and operating room technologists.  The Company will
continue  to sell its  products  direct  to  hospitals  and other  medical  care
providers.

     In addition to sales by  distributors,  the Company  also  solicits  orders
through  direct mail sales,  trade  publications  and  advertising  by targeting
specific market groups. Since joining the Company, Mr. Clark has begun an active
campaign to establish repeat markets for Surgical's products. Customer follow-up
is currently handled by in-house sales staff of which there are five (5). Orders
obtained can be shipped from in-house inventory or warehousing arrangements. The
Company has the  original  SutureMate(R)  and  MediSpecs  Rx(TM) in stock and is
finalizing  manufacturing,  sterilization  and  inspection  procedures  for  the
re-designed  SutureMate(R)  so that inventory can be established.  Customers may
return defective merchandise for a full refund, credit or replacement. In recent
years, such returns have been insignificant.

Status of Publicly Announced Products and Services

     Based upon feedback from surgeons and operating  room  technologists  since
the introduction of  SutureMate(R) in 1993, this product has been  re-engineered
and is  currently  readied  for  distribution,  subject to the  availability  of
additional  funding,   of  which  there  can  be  no  assurance.   The  original
SutureMate(R) is available and on the market.  The Company is seeking additional
distribution channels for this product.

     MediSpecs Rx(TM)  currently is available and on the market.  The Company is
seeking additional distribution channels for this product.

     Once trials are  completed  and subject to the  availability  of additional
funding,   the  Company  intends  to  make  final  engineering   adjustments  to
Prostasert(TM)  and then commence  manufacturing for initial market entry in the
United States by the end of 1999.

     The  OASiS  system  is fully  operational  at its  initial  sight at SMH in
Sarasota, Florida and the Company is ready for additional installations at other
locations, including the ten (10) Centers of Excellence which are part of the US
Surgical arrangement. Version 2.0 will be installed at the US Surgical sites and
is in final stages of test trials.

     A prototype of IcePak(TM) has been manufactured and the product is expected
to enter the market before the end of calendar  1999 if the required  agreements
with  potential  manufacturers/suppliers  have  been  completed  and  additional
funding is available.

Competition

     There is intense competition in the markets in which the Company engages in


<PAGE>

business.  However,  the  Company  believes  that  there  is  relatively  little
competition for its products at this time.

     Notwithstanding its innovative product line, there are many major companies
which could  compete  with the Company due to their size and market share in the
medical  products area.  These include such companies as U S Surgical,  Ethicon,
Inc.  ("Ethicon"),  a Johnson & Johnson  subsidiary and Sherwood-Davis & Geck, a
division of American Home Products Corporation,  all of which have a wider range
of other  medical  products  and  dominate  much of the  markets for these other
products.  These  companies  focus on  sutures  and  related  suturing  devices.
Traditionally  such companies  have not focused on safety  related  products but
they are now  modifying  the  design of some  sutures  to  reduce  needlesticks.
Several  medical  products  firms,  including  Johnson  & Johnson  and  Graphics
Controls,  Inc.  ("Graphics  Control")  have  operations in the surgical  safety
product niche. Graphics Control sells approximately 50% of all safety devices to
the medical  industry.  The Company  believes  that these major  companies  will
continue their efforts to develop and market competitive devices. It is for this
reason that the Company has sought to align itself with a strategic  partner and
has entered into the letter of intent with U S Surgical.

     A major  purveyor of safety  devices is Devon  Industries  ("Devon")  which
commands about 75% of this market.  Devon's product line includes  approximately
one hundred "me-too" type products,  that is products  designed to copy or which
copy products already in the market.  Specialized Health Products International,
Inc.  ("SHPI") designs and develops  products to minimize the risk of accidental
needlesticks  in order to reduce the spread of bloodborne  diseases in heathcare
workers.  SHPI's  strategy  to is become a single  source  provider  for  needle
protection devices.  Many other device companies market these same products with
only slight  variations.  However,  the Company  believes  that one of the major
pitfalls  with these types of  companies  is that they have no  distinctive  new
product  concepts  to  distinguish  themselves  from  other  companies  in their
industry.  The Company believes that its product line does distinguish  Surgical
from other medical device providers.  For example: (1) SutureMate(R) is the only
device of its kind  which  allows  for  one-handed  suturing  and its  tent-like
configuration  combined with the adhesive  backing and the hidden cutting device
separates it from all competitive products; and (2) MediSpecs Rx(TM) is the only
low-cost,  ultra-light  prescriptive  eyewear  specifically  designed to protect
against splashing blood and bodily fluids.

     There is intense competition in sales of products for use in gynocological,
spinal,  vascular,  cardiovascular,  interventional  cardiology,  breast biopsy,
urologic,  orthopedic  and  oncological  procedures.  A broad range of companies
presently  offer  products  or are  developing  products  for  the  use in  such
procedures.  Many of these companies have significantly greater capital than the
Company and are expected to devote  substantial  resources to the development of
newer  technologies  which would be competitive  with products which the Company
may  offer.  There are also a number  of  smaller  companies  which  offer  such
products which present additional competition.

     Many of the large chemical companies market solvents that are claimed to be
useful as a barrier protection to bloodborne pathogen  infection.  Some of these
companies are being  scrutinized by the FDA because of a lack of proper clinical
research and statistics to substantiate barrier effectiveness.

     The  market  for  products  for  minimally   invasive   surgery  is  highly
competitive.  The Company believes if it enters this market that it could gain a
significant  share of the market as the  result of its  innovative  efforts  and
superior products. This is principally due to the Company's involvement with Dr.
Saye and the ALTC which is currently training surgeons in advanced  laparoscopic
surgery  since it is felt that if the Company  develops a suitable  product,  it
could be incorporated  into this training program.  Ethicon,  through a division
known as Ethicon Endo-Surgery, markets a line of endoscopic instruments directly


<PAGE>

competitive  with the  Company's  proposed  products and this  company  would be
Surgical's   principal   competitor  in  minimally  invasive  surgery.   Ethicon
Endo-Surgery has an agreement with Dr. Saye. However,  Dr. Saye's agreement with
the Company  specifically  provides  that it will not  compete  with the Ethicon
agreement.  The Company believes that Ethicon devotes considerable  resources to
research  and  development  and sales  efforts  in this  field.  Numerous  other
companies  manufacture  and  distribute  single use endoscopic  instruments.  In
addition,  Richard Wolf Medical Instruments Corp. (a subsidiary of Richard Wolf,
GmbH) and Karl Storz Endoscopy-America, Inc. (a subsidiary of Karl Storz, GmbH),
would compete directly with the Company in this area.

     Surgical faces  competition in its data service line by a system  developed
by the  University  of Virginia  and  promoted by the  International  Healthcare
Worker Safety Center.  Designated  EpiNet,  this is a single system  designed to
track and report bloodborne  pathogen exposures in the healthcare setting. It is
installed in approximately seventy (70) healthcare facilities;  however, Company
research  indicates  that  EpiNet is  actually  used in only a fraction of those
facilities.  This research was assembled by interviewing  healthcare workers who
were users of the system at the American  College of Surgeons annual meeting and
by interviews  with members of the Medical  Advisory Panel who are familiar with
the system.  This  system has been  analyzed by  infection  and systems  control
experts and has been found to be  "non-user  friendly".  That is because it is a
DOS based  systems  which  requires  a  sophisticated  user,  it is  limited  to
bloodborne  pathogen programs and content, it requires keyboard interface and is
research based rather than user information based. Although this system has been
available for several years,  it has not achieved large market  acceptance  most
likely because of the  characteristics  which make it "non-user  friendly".  The
Company is  encouraged  by the fact that  EpiNet has been  installed  in so many
facilities as evidence that computer aided reporting and services are desired by
the  healthcare  community and  notwithstanding  EpiNet's  failure to gain large
market  acceptance,  believes that the Company's OASiS system could find greater
acceptance  because of its ease of use due to the touch  access  concept and the
broader availability of information which OASiS can provide on site.

     There are  approximately  two hundred  (200)  companies  with at least some
products  designed to facilitate  healthcare  training.  With a technology shift
toward  computer  based  training  ("CBT"),   this  market  is  undergoing  some
redefinition.  Certain  companies  are  shifting  from a  VCR/booklet  format to
multimedia applications. Other companies are new and were formed specifically to
develop CBT programs for healthcare  training.  The Company  believes that these
competitors  are relying  upon the  healthcare  facility to provide the delivery
system, a personal computer,  for such training  programs.  The Company believes
that OASiS offers a complete  system,  software and hardware,  in a touch access
format.

     The  Company's  principal  methods  of  competing  are the  development  of
innovative  products,   the  performance  and  breadth  of  its  products,   its
technically  trained  sales  force,  and  its  educational  services,  including
sponsorship  of  training  programs.  Most  of  the  Company's  potential  major
competitors  have greater  financial  resources  than the  Company.  Some of its
potential  competitors,  particularly Ethicon, have engaged in substantial price
discounting  and other  significant  efforts  to gain  market  share,  including
bundled  contracts  for  a  wide  variety  of  healthcare  products  with  group
purchasing   organizations.   In  the  current  healthcare   environment,   cost
containment  has  become  a  significant  factor  in  purchasing   decisions  by
hospitals. Additional cost effectiveness was one of the principle factors in the
redesign of  SutureMate(R)  and a principle  consideration  in the lease pricing
structure for OASiS.

     Surgical's  sales  force is being  trained on an ongoing  basis to focus on
healthcare  worker  safety  issues.  In the ten (10) years  prior to joining the
Company,  its President,  Mr. Clark,  was  instrumental  in assisting  three (3)
companies in establishing sales organizations within the healthcare industry. He
has recruited, trained and supervised these sales organizations. For these


<PAGE>

reasons,  the Company believes that it has the management  expertise to have its
sales force  distinguish  itself from the competition.  More  specifically,  the
Company is developing a clear and concise  understanding  of the inherent safety
risks  associated  with  the  healthcare  worker's  everyday  work  place.  This
understanding  is  accomplished   through  its  personnel  which  has  extensive
experience  in  the  healthcare   industry,   medical   expertise,   engineering
capabilities,  communications skills with customers, as well as an understanding
of the medical marketplace and a variety of manufacturing practices. The Company
believes  that the end result is that it is able to provide the customer  with a
unique product or service specifically  developed with individualized safety and
utility in mind, while providing that product or service to the customer so that
its value exceeds its cost.

     One of the biggest  attractions to the Company of a strategic alliance with
US  Surgical  is the fact that U S Surgical  collaborates  with some of the most
prestigious  academic  medical  centers  in the world to  establish  Centers  of
Excellence for training in many diverse  disciplines.  These centers are devoted
to teaching residents and surgeons in the use of new instrumentation, developing
new technologies,  conducting  preclinical  trials and other research  projects.
Under the terms of the joint venture  between the Company and U S Surgical,  the
OASiS system will be introduced  to ten (10) of these Centers of Excellence  for
an initial nine (9) month trial period. At that end of such trials, if the OASiS
performs as  expected,  U S Surgical  intends to  introduce  the system into one
hundred  (100) of these  centers.  In today's  managed care  environment,  these
multi-center  studies are expected to bring into sharper focus the cost benefits
of a wide range of the Company's products.

     The Company  believes that the  advantages of its various  products and its
customer  assistance  programs  will  continue  to provide the best value to its
customers.  However,  there is  considerable  competition in the industry and no
assurance can be given as to the Company's competitive  position.  The impact of
competition will likely have an effect on sales volumes and on prices charged by
the Company.  In addition,  increased cost consciousness has revived competition
from reusable  instruments to some extent.  The Company believes that single use
instruments  are safer and more cost  efficient for hospitals and the healthcare
system  than  reusable  instruments,  but it cannot  predict the extent to which
reusable  instruments will  competitively  impact the Company.  The Company also
offers semi-disposable instruments,  components of which may be reused a certain
number of times, to respond to the preferences of its customers.

     Current and future customers were interviewed at major medical organization
exhibits. Overall statistics indicate that 50% of vascular, thoracic and general
surgeons  found  the  Compliance  Plus(TM)  products  to  be  useful,  safe  and
potentially cost effective.  OB/GYN's urologists and plastic surgeons gave a 90%
favorable  evaluations,  while over 90% of surgical technologists gave "high" to
"very high" ratings to SutureMate(R) and MediSpecs Rx(TM).  The Company believes
that it has chosen a developing market with no well-established industry leaders
at this  time.  Further it  believes  that its  products  are unique and that by
maintaining a relatively narrow market focus, combined with technical expertise,
that it can achieve rapid growth.

     The Company targets  revenues at $50 million within five (5) years. At that
level,  the Company  will  position  itself as an  acquisition  target for major
medical or information systems entities.

Sources and Availability of Raw Materials

     Raw materials  necessary for the hardware  requirements of the OASiS system
are available from numerous  third-party OEM's. The software integrated into the
assembled system is proprietary to the Company.



<PAGE>

     Raw  materials  necessary for the  manufacturer  of parts,  components  and
packaging supplies for all of the Company's products manufactured by the Medical
Products Division are readily available from numerous third-party suppliers.

     The Company  does not rely on any  principal  suppliers  for any of its raw
materials.  However,  with regard to MediSpecs  Rx(TM),  the Company has entered
into a manufacturing  agreement with Morrison, the initial term of which expires
in September 2000 and, with regard to SutureMate(R),  the Company has received a
price   quotation   from  Tuthill  for  the   manufacture   of  the   redesigned
SutureMate(R).

Dependence on Major Customers

     At the current  time,  Surgical is reliant upon a few major  customers  for
several of its  products.  For the fiscal year ending  December  31,  1997,  the
Company derived approximately 99% of its revenue from sales of its OASiS to SMH.
For fiscal year ending December 31, 1998, the Company derived  approximately 93%
of its revenue  from  technical  services  it  provided to US Surgical  during a
medical products convention.

     With regard to the OASiS system,  the Company is reliant upon its agreement
for the  installation  at SMH, its agreement with US Surgical for sales revenues
and further  exploitation of the system,  its arrangement  with Rockford for the
financing of the leasing to facilities and its  arrangement  with  Ad-vantagenet
for completion of the Version 2.0 software.

     SutureMate(R)  sales  are  currently   principally  reliant  upon  in-house
distribution  and  re-establishment  of various  distribution  arrangements  for
generating revenues for this product.

     MediSpecs  Rx(TM),  in addition to in-house sales efforts,  is reliant upon
Hospital News of Florida for sales in the State of Florida.

     Subject to the availability of additional funding, of which there can be no
assurance,  the Company  believes that it can increase its customer base so that
the  loss of any one  client  will  not  adversely  impact  upon  the  financial
condition of the Surgical.


Research and Development

     The Company  believes that research and development is an important  factor
in its future  growth.  The Company  engages in a continuing  product  research,
development  and  improvement  program.  The Company's  research and development
group  (currently  consisting  of three (3)  persons) is actively  working on in
excess of four (4) additional products for the medical and healthcare community,
all of which are in various stages of development, from prototype to patent. The
Company  is also  devoting  a  substantial  amount of time to the  research  and
development of products within distinct product lines.  Substantially all of the
products in research and development have been designed,  drawn, had preliminary
market  research  conducted and have been  submitted for review to the Company's
patent counsel.

     As a natural  by-product of an active research and development  department,
some product  concepts have been generated which do not fit the Company's chosen
focus.  Several  surgical and obstetrical  devices have been designed and either
will be licensed or sold outright to appropriate corporate entities.

Patents, Copyrights and Trademarks

     Patents are  significant  to the  conduct of the  Company's  business.  The
Company owns four (4) patents on two (2) products.  Dr. Swor was the inventor


<PAGE>

who  originally  secured the patents  which he later  assigned to the Company in
exchange for stock.

     The  Company's  first  medical  device  patent is United  States Patent No.
4,969,893,  issued on November 13, 1990 for SutureMate(R),  The patent was filed
on June 16,  1989 and covers a unique  surgical  suturing  device for its suture
cutting and needle rest  utility.  Additional  patents (U. S. Patent  No.'s Des.
353,672 and 5,385,569) were issued on December 20, 1994 and January 31, 1995 and
both  were  filed on May 21,  1993.  The  additional  patents  are for  surgical
accessories to SutureMate(R) for both design and utility. Patents number 4969893
and 353,672 are for a term of seventeen (17) years from the issuance date; while
patent  number  5,385,569 is for a term of fourteen (14) years from the issuance
date.

     Prostasert(TM) is the Company's second medical device on which a patent was
issued. This patent, United States Patent No. 5,364,375,  was issued on November
15, 1994 and filed on September 24, 1993.  The patent covers for a unique device
designed to introduce and maintain a precise amount of  pharmaceutical  material
to the uterine  cervix and upper vagina.  This patent is for a term of seventeen
(17) years from the issuance date.

     The  Company  filed a  Section  501(k)  notification  of  intent  to market
SutureMate(R)  with the FDA. On May 19, 1998, the Company was granted permission
by the FDA to market this device.  Prostasert(TM)  was listed with the FDA under
its original  name,  LaborMate on June 2, 1994.  No FDA  clearance  was required
because  the  components  were  each  FDA  approved  prior  to  assembly  in the
Prostasert(TM) format.

     On June 1, 1998,  the Company filed for two (2) patents on the OASiS system
which includes  propriety  aspects of the software,  algorithms and reports,  as
well as the inservice  training modules which are owned by the Company.  Neither
of these patents have been issued to date.

     The Company  currently  has the rights to several  new product  concepts in
various  stages of  development.  These  products are  surgical and  obstetrical
devices for which patent  protection  is in progress or will be initiated in the
near future.

     The patents held by the Company have expiration dates ranging from nine (9)
to fourteen (14) years.

     The  Company  has an  extensive  library  of  copyrighted  educational  and
training material related to occupational safety and surgical techniques.  These
include the Surgical Safety Manual published in 1994, which was revised in 1996.

     The  Company  filed on July 1,  1993 for  trademark  registration  with the
United States Patent and Trademark Office for SutureMate(R).  This trademark was
registered on April 5, 1994.

     The Company applied for trademark  registration on the Compliance  Plus(TM)
on December  6,1996.  It was published  for  opposition on June 23, 1998 and the
Company is awaiting notice of allowance.

     The Company applied for trademark  registration  for the OASiS Touch Access
Information  on  April  29,  1998 and the  examination  of this  application  is
pending.

     The  Company   applied  for  trademark   registration   for  TouchPort  and
VirtualTouch Reality on November 16, 1998. Examination of these applications are
pending.



<PAGE>

     The Company is not a party to any actions  claiming patent  infringement of
any of its products.

Governmental Regulation

FDA Approval

     Regulation  by  governmental  authorities  in the United States and foreign
countries is a significant factor in the development,  manufacture and marketing
of the Company's  proposed products and services and in its ongoing research and
product  development  activities.  It is  anticipated  that virtually all of the
products  developed by the  Company's  Medical  Products  Division  will require
regulatory approval by governmental agencies prior to commercialization.

     It  is  expected  that  many  of  the  Company's  products,   as  presently
contemplated, will be regulated as medical devices. Prior to entering commercial
distribution, all medical devices must undergo FDA review under one or two basic
review  procedures:  a Section  510(K)  premarket  notification  ("510(K)") or a
premarket approval application ("PMA").

     A 510(K)  notification  is  generally a relatively  straightforward  filing
submitted  to  demonstrate  that  the  device  in  question  is   "substantially
equivalent"  to  another  legally  marketed  device.  The  term   "substantially
equivalent"  for 501(K)  purposes  does not mean that a product  is not  unique.
Rather it means that a product can be  categorized  with  existing  products for
sterilization  and safety  purposes.  Approval under this procedure is typically
granted  within  ninety  (90)  days  if the  product  qualifies,  however,  this
procedure may take longer.

     When the product does not qualify for approval under the 510(K)  procedure,
the  manufacturer  must  file a PMA which  shows  that the  product  is safe and
effective  based on extensive  clinical  testing among several  diverse  testing
sites and population groups,  and shows acceptable  sensitivity and specificity.
This  requires  much more  extensive  prefiling  testing  than  does the  510(K)
procedure  and  involves a  significantly  longer  FDA review  after the date of
filing.

     In the past, the Company's  products have been cleared by the FDA under the
501(K)  expedited  form of pre-market  review or have not required FDA approval.
While the industry had for several years  experienced  lengthy delays in the FDA
approval  process,  more  recently,  the  timeliness  of the  FDA's  review  has
improved.  Timely  product  approval is important to the  Company's  maintaining
and/or obtaining a technological  competitive advantage.  Other than FDA product
approval  waiting  periods,  the Company has not  encountered  any other unusual
regulatory impediments to the introduction of new products.

     To the  extent  the  Company  develops  products  for use in more  advanced
surgical  procedures,  the  regulatory  process  may be more  complex  and  time
consuming.  Some of the Company's  potential future products may require lengthy
human  clinical  trials and the PMA  application  relating  to class III medical
devices.  The Company  knows of no reason to believe that it will not be able to
obtain regulatory approval for its products, to the extent efficacy,  safety and
other  standards  can be  demonstrated,  but the lengthy  approval  process will
require additional capital (of which there is no assurance that the Company will
be able to  secure),  risk of entry by  competitors  and risk of  changes in the
marketplace prior to market approvals being obtained.

     Overseas,  the degree of government regulation affecting the Company varies
considerably  among  countries,  ranging  from  stringent  testing and  approval
procedures  in certain  locations to simple  registration  procedures in others,
while in some  countries  there is  virtually no  regulation  of the sale of the
Company's products. In the past, the Company has not encountered material delays
or unusual  regulatory  impediments  in marketing its products  internationally.
Establishment  of uniform  regulations  for European  Economic Area nations took
place on January 1, 1995. The new regulations subject the Company to a single


<PAGE>

regulatory  scheme for all of the  participating  countries.  Once the Company's
domestic channels are satisfied,  Surgical will commence its program for meeting
regulatory  requirements  internationally.  The Company  expects that it will be
able to market its products in Europe with a single  registration  applicable to
all  participating  countries.  The Company also is  establishing  procedures to
respond  to  various  local  regulatory   requirements  existing  in  all  other
international markets in which it intends to market its products.

     By letter dated May 19, 1993, the Company received  notifications  from the
FDA that  the  510(K)  notification  of  intent  to  market  device  related  to
SutureMate(R)  had been received and reviewed,  and the FDA had determined  that
the device was  substantially  equivalent to the devices  marketed in interstate
commerce  prior to May 28, 1976.  The receipt of this letter allowed the Company
to immediately begin marketing and selling SutureMate(R).  The Prostasert device
was listed with the FDA on June 2, 1994 under its original name, LaborMate.

OSHA Mandatory Reporting of Illness and Injury

     Federal rules administered by the OSHA require healthcare workers to report
if they have been accidentally stuck with a needle previously used by a patient,
or splashed by blood or bodily fluids.

     On February 11, 1997,  in the Federal  Register,  OSHA issued a final rule,
effective  March 13,  1997,  that  amended the  Occupational  Injury and Illness
Reporting  Regulation  (29 CFR Part 1904)  established  in 1971.  Under the 1971
regulation,  employers were required to collect and maintain  injury and illness
data and have it  available  for OSHA to  examine  when they came on site for an
inspection.  It was  determined  that  OSHA  needed  a  separate  provision  for
collection of data by mail.

     The final rule requires,  employers,  upon request, to report to OSHA their
illness and injury data,  in addition to the number of workers and the number of
hours worked in a designated  period.  It  establishes  a mechanism  for OSHA to
conduct an annual  survey of ten (10) or more  employers by mail or other remote
transmittal.  The specific  request may come directly from OSHA or its designee,
e.g., the National Institute of Occupational Safety and Health ("NIOSH").

     The rule was finalized since OSHA believed that this  comprehensive data on
worker  injury and illness  would  provide more  reliable  data suited to OSHA's
needs  than any other  available  source.  The data also is  planned  to provide
information  to target OSHA  activities,  including  workplace  inspections;  to
evaluate the  effectiveness of educational  programs;  and to determine the need
for additional standards.

     Employers  have thirty (30) days to submit  their data after the request is
received.  Regulations  set  forth  the type of  information  which  needs to be
collected. Much of the initial injury and illness information reported was taken
from records that employers already were required to create, maintain, and post.

     The  finalized  rule  provides  an  additional   incentive  for  healthcare
facilities  to implement  worker  safety and health  programs and to provide the
necessary  safety  equipment  and  supplies  to reduce the risk of  occupational
illness and  injuries.  Those  healthcare  facilities  that have good health and
safety programs will likely benefit from this rule.

     OSHA also  initiated  a number  of  partnerships  with  other  federal  and
national  organizations  in  an  effort  to  reduce  the  increasing  number  of
occupational  illness and injuries among workers.  This effort was prompted,  in
part,  by  OSHA's  inability  to  inspect  and  enforce  worker  safety  in  the
approximately  five million  (5,000,000)  work sites in the United States and to
collect accurate worker injury and illness data to assist in targeting the


<PAGE>

approximately  8,000  annual  inspections  in the face of  continuing  shrinking
budgets.

     In  August  1996,  OSHA  and  the  Joint  Commission  on  Accreditation  of
Healthcare  Organizations ("JCAHO") announced a three-year partnership to reduce
the increasing number of healthcare  worker-related  illnesses and injuries. The
announced goal of this partnership is to foster improvement in the management of
safety  and  health  issues  in  healthcare  organizations.  The  result is that
healthcare organizations face an additional authority testing OSHA compliance.

     This  partnership  does not transfer any authority for  enforcement of OSHA
standards   to  JCAHO.   Rather,   JCAHO   continues   to  survey  a  healthcare
organization's  performance  against JCAHO's standards.  JCAHO surveyors monitor
how compliance with JCAHO meshes with OSHA's  expectations  related to heath and
safety of  employees.  When  deficiencies  are  identified,  the JCAHO  surveyor
provides guidance and educational materials.

     A specific  recommendation  based on a JCAHO standard can be made only when
an OSHA  citation has already been issued and the  healthcare  organization  has
failed to take corrective  action to clear the citation.  If an immediate threat
to a worker's  safety is found  during a survey,  the facility is cited by JCAHO
under  their  application  standards.  A  determination  is made  regarding  the
organization receiving conditional accreditation status in accordance with JCAHO
policies and procedures.

     Most  hazards  to  workers  in  healthcare  organizations  that  have  been
identified by both OSHA and JCAHO resulted from injuries and illness  related to
patient handling;  exposures to bloodborne  pathogens,  tuberculosis,  hazardous
drugs and anesthetic gases; workplace violence; and fire and electrical hazards.

     Example of JCAHO  requirements that are linked to OSHA standards for worker
safety  include many of the  components  of the  Environment  of Care  Standards
(safety,  hazardous  material and waste,  emergency  preparedness,  life safety,
medical  equipment,  utility systems) and the Infection Control  Standards.  The
1997 JCAHO Accreditation  Manual for hospitals includes a number of OSHA-related
examples of implementation of JCAHO standards to assist healthcare organizations
with compliance.

     Healthcare  organizations  are able to  demonstrate  compliance  with JCAHO
standards  by  advising  the  surveyors  how  they  meet  both  OSHA  and  JCAHO
requirements and by showing them OSHA documents and reports such as the OSHA 200
log of occupational illness and injury, lock- out/tag-out procedures, bloodborne
pathogen  exposure  control plans and records of Hepatitis B  vaccination  among
workers exposed to blood and body fluids.

     In August 1996,  OSHA also  announced a  seven-state  initiative to protect
workers in nursing  homes and  personal  care  facilities,  one of the  nation's
largest  growing  industries.   The  seven  states  include  Florida,  Illinois,
Massachusetts,  Missouri, New York, Ohio and Pennsylvania.  Nationwide there are
1.6  million  nursing  home  workers  in  more  than  21,000  facilities.  It is
anticipated that by the year 2005, the nursing home and personal care facilities
will be one of the largest  industries in the United States.  Potential  nursing
home hazards include back injuries from incorrect  and/or  strenuous  lifting of
residents,  slips  and  falls,  workplace  violence  and risks  from  bloodborne
pathogens, tuberculosis and other infectious diseases.

State and Local Licensing Requirements

     Other than the governmental regulatory schemes listed above, the Company is
not subject to any other state or local regulations which apply to the operation
and business of the Company.


<PAGE>

Effect of Probable Governmental Regulation on the Business

     The  Company is not  currently  engaged in the  development  of any product
which would be categorized as therapeutic.  Under the current regulatory scheme,
in the event any product of the Company were defined as  therapeutic,  then such
therapeutic  product will be subject to  regulation  by the FDA and will require
FDA approval before it may be commercially marketed for human therapeutic use in
the United  States.  The Company  believes that any  therapeutic  products to be
developed by it will be regulated either as biological products or as new drugs.
New drugs are subject to regulation  under the Federal Food,  Drug, and Cosmetic
Act (the "FFDC Act"), and biological  products,  in addition to being subject to
certain  provisions  of the FFDC Act,  are  regulated  under the  Public  Health
Service Act. Both statutes and the regulations  promulgated  thereunder  govern,
among other things,  the testing,  manufacturing,  safety,  efficacy,  labeling,
storage,  recordkeeping,  advertising and other promotional  practices involving
biologics or new drugs as the case may be. FDA approval or other clearances must
be obtained before clinical testing, and before manufacturing and marketing,  of
biologics or other  products.  At the FDA, the Center for Biological  Evaluation
and Research ("CBER") is responsible for the regulation of new biologics and the
Center  for  Drug  Evaluation  and  Research  ("CDER")  is  responsible  for the
regulation of new drugs.

     Obtaining FDA approval for  therapeutic  products has  historically  been a
costly and time consuming process. Generally, in order to gain approval from the
FDA, a developer first must conduct preclinical studies in the laboratory and in
animal model systems to gain preliminary information on a product's efficacy and
to identify any major safety problem. The results of these studies are submitted
as part of an Investigational New Drug ("IND")  application,  which the FDA must
review before human clinical trials of an  investigational  drug can start.  The
application includes a detailed description of the clinical investigations to be
undertaken.

     In order to commercialize any therapeutic products,  the Company must first
prepare  and file an IND  application.  It must act as the  sponsor  of  product
testing and will be responsible  for planning,  initiating and monitoring  human
clinical studies which must be adequate to demonstrate safety and efficacy.  The
Company will be responsible  for selecting  well-trained  physicians as clinical
investigators  to supervise the  administration  and evaluation of new products.
The Company,  however will bear the responsibility for monitoring the studies to
ensure that they are  conducted in accordance  with the general  investigational
plan and protocols contained in the IND. Human clinical trials are normally done
in three phases.  Phase I trials,  which are concerned primarily with the safety
and preliminary  effectiveness of the drug, involve fewer than 100 subjects, and
may take from six months to over a year.  Phase II trials normally involve a few
hundred  patients and are designed  primarily to  demonstrate  effectiveness  in
treating or diagnosing  the disease or condition for which the drug is intended,
although  short-term  side  effects and risks in people whose health is impaired
may also be examined.  Phase III trials are expanded clinical trials with larger
numbers of patients which are intended to gather the  additional  information on
safety and effectiveness needed to clarify the drug's benefit-risk relationship,
discover  less  common  side  effects  and  adverse   reactions,   and  generate
information  for proper dosage and labeling of the drug.  Human clinical  trials
generally take four to six years, but may take longer, to complete.

     The FDA receives  reports on the  progress of each phase of human  clinical
testing,  and it may require the  modification,  suspension,  or  termination of
clinical trials if an unwarranted risk is presented to patients. There can be no
assurance  as to the  length  of the  clinical  trial  period  or the  number of
patients the FDA will require to be enrolled in the clinical  trials in order to
establish the safety,  efficacy, and potency of the products. In addition, it is
uncertain  that the clinical data  generated in these studies will be acceptable
to the FDA to support marketing approval.

     After  completion  of clinical  trials of a new  therapeutic  product,  FDA
marketing  approval  must be  obtained.  If the  product is  regulated  as a new
biologic, CBER will require the submission and approval of both a Product


<PAGE>

License  Application  ("PLA") and an Establishment  License  Application ("ELA")
before  allowing  commercial  marketing  of  the  biologic.  If the  product  is
classified as a new drug, the Company must file a New Drug  Application  ("NDA")
with CDER and receive approval before commercial  marketing of the drug. The NDA
or PLA must  include  results of product  development,  preclinical  studies and
clinical trials. The testing and approval processes require substantial time and
effort  and there can be no  assurance  that any  approval  will be granted on a
timely  basis,  if at all.  NDA's and PLA's  submitted  to the FDA can take,  on
average, two years to receive approval. If questions arise during the FDA review
process,  approval can take longer.  Notwithstanding  the submission of relevant
data,  the FDA may  ultimately  decide  that the NDA or PLA does not satisfy its
regulatory criteria for approval and require additional  clinical studies.  Even
if FDA  regulatory  clearances  are obtained,  a marketed  product is subject to
continual review,  and later discovery of previously unknown problems or failure
to comply with the applicable regulatory requirements may result in restrictions
on the  marketing of a product or  withdrawal  of the product from the market as
well as possible civil or criminal sanctions.

     Other than the government  regulations  previously discussed with reference
to FDA and OSHA,  the Company does not believe that there are any other  effects
from  probable  government  regulation,  including  state or local laws,  on the
business.

Cost of Research and Development

     For fiscal years 1997 and 1998, the Company  expended  $113,740 and $34,536
of its revenues,  respectively, on research and development.  These expenditures
represented 44.5% and 81.5%, respectively,  of the total revenues of the Company
for such fiscal  years.  The  principal  decrease  in the cost of  research  and
development  for  fiscal  1998 from  1997 was the  reduction  in cost,  time and
expenses  incurred through the use of Ad-Vantagenet as opposed to MediaWorks for
the enhancement of the OASiS system and the completion of Version 2.0.

     At the  current  time,  none of the  costs  associates  with  research  and
development are bourne  directly by the customer;  however there is no guarantee
that such  costs  will not be bourne by  customers  in the  future  and,  at the
current  time,  the Company does not know the extent to which such costs will be
bourne by the customer, if at all.

Cost and Effects of Compliance with Environmental Laws

     The Company's  business is also subject to  regulation  under the state and
Federal  laws  regarding  environmental   protection  and  hazardous  substances
control,  including the  Occupational  Safety and Health Act, the  Environmental
Protection  Act, and Toxic  Substance  Control Act. In 1992,  the United  States
Congress  expressed  increasing  interest in the issues of sharp  injuries.  The
House  Subcommittee on Regulation held hearings regarding  needlestick  injuries
and the implementation of mandated guidelines on safer medical devices. However,
the Company is unaware of any bills currently pending in Congress on this issue.
The  Company  believes  that it is in material  compliance  with the current and
other applicable laws and that its continual  compliance therewith will not have
a material adverse effect on its business.

Employees and Consultants

     As of December 31, 1998, the Company employed seven (7) persons,  including
personnel added in 1998 to perform sales and marketing functions.  None of these
employees  are   represented  by  a  labor  union  for  purposes  of  collective
bargaining.  The  Company  considers  its  relations  with its  employees  to be
excellent.

     On March 30, 1998,  the Company  entered into a Consulting  Agreement  with
Stockstowatch   whereby  Stockstowatch  agreed  to  provide  investor  relations
services as a media consultant to the Company in exchange for the issuance of


<PAGE>

300,000 share of the Company's Common Stock. The agreement was for a term of six
(6) months which is renewable at the option of the Company for an additional six
(6)  months.   The  services  are  provided  on  a  non-exclusive   basis  since
Stockstowatch is in the business of providing such services to companies.  After
an initial due diligence  period,  Stockstowatch  is  responsible  for all costs
associated  with providing the services  required  under the agreement.  The SEC
brought  an  action  against  Stockstowatch  alleging  that  they  violated  the
anti-fraud  and  anti-touting  provisions  of the federal  securities  laws with
reference  to the shares  which it received  from the Company for  services.  No
allegations  have been made that the Company acted improperly with regard to the
alleged charges.

     On  June  30,  1998,   the  Company   executed  a  letter  of  intent  with
Ad-vantagenet.  Under the  terms of the  letter of  intent,  Ad-vantagenet  will
assist in the creation of version 2.0 OASiS software, including creating the art
and graphics.  Version 2.0 is designed to allow for more dynamic features on the
system including  instant updates,  information-gathering  and editing features.
The Company chose  Ad-vantagenet  to complete  Version 2.0 after  unsatisfactory
results  were  achieved  by  Gambit,  Inc.,  d/b/a  MediaWorks.   The  functions
Ad-vantagenet is currently incorporating into Version 2.0 include features which
had been requested of MediaWorks but were not provided. The total projected cost
of the  Ad-vantagenet  project  is  one-fourth  of  the  cost  which  MediaWorks
projected. The Company was in litigation with MediaWorks over the termination of
their  agreement.  Subject to the successful  completion of the letter of intent
project with Ad-vantagenet, the Company intends to enter into a more structured,
long-term agreement for further OASiS development but has not done so to date.

     In  October  1998,  the  Company   entered  into  an  agreement  with  T.T.
Communications,  Inc. to provide  investor  relations  services for the Company.
T.T.  Communications,  Inc.'s function is to contact investment and media people
throughout  the  United  States  and  to  participate  in  the   preparation  of
communication  packages  including annual and quarterly  reports,  new and press
releases and publicity and corporate  profiles.  The initial  agreement is for a
period of three (3) months for which T.T.  Communications,  Inc. receives $2,000
per month  and  reimbursement  of out of  pocket  expenses.  In  addition,  T.T.
Communications,  Inc.  was  granted  options to  purchase  25,000  shares of the
Company's  Common  Stock at an  exercise  price  of  $1.50.  In the  event T. T.
Communications, Inc. introduces the Company to a suitable financing source, they
will be  compensated  by a cash  finder's  fee  equal  to  1.5%  on the  initial
financing and .75% on any subsequent  financing.  The agreement is cancelable by
either party with 30 days written notice.

Item 2.  Description of Property

     The Company's executive offices are located at 2018 Oak Terrace,  Sarasota,
Florida 34231.  Its telephone  number is (941) 927-7874 and its facsimile number
is (941) 925- 0515.

     The Company  pays rent in the amount of $3500 per month  which  consists of
3,500 square feet of office space.  The lease is for a term of two (2) years and
is automatically renewable for an additional year. The initial term of the lease
expires in May 2000. The property is owned by Savannah Leasing which is owned by
Dr. and Mrs.  Swor.  The  Company  has a first  right of refusal on  surrounding
properties  owned by Savannah  Leasing and  therefore  believes  that the leased
space and the property  under the first right of refusal will be sufficient  for
its corporate offices for the next ten (10) years.

     The Company owns no real  property and its  personal  property  consists of
furniture,  fixtures and equipment,  prototype molds and leasehold  improvements
with an original cost of $155,930 on December 31, 1998.



<PAGE>

     The Company  currently employs its capital reserves in a money market sweep
account. Activity is monitored on a daily basis and for a thirty (30) day period
commencing on July 1, 1998,  had returned on average  4.75% on assets  employed.
Additionally,  Surgical has acquired stock in two (2) privately owned companies,
25,000 shares in ParView Inc. as part of its  acquisition  of Endex Systems Inc.
and 3,750 shares in Linters Inc. which was received as partial  compensation for
clinical products research completed by the Medical Consultants  Division. It is
the Company's  strategy to engage in transactions which minimize dilution of the
Company's equity.

Item 3.  Legal Proceedings

     In August 5, 1997, the Company entered into an agreement with Gambit, Inc.,
d/b/a MediaWorks  ("MediaWorks")  as a producer of record of the Surgical Safety
Network, now known as OASiS. Pursuant to the agreement, MediaWorks estimated the
cost of its work on the project at no more than $217,000, a portion of which was
to be paid  over a three (3)  month  period  against  billable  hours,  with the
balance less $60,000  payable  after the third payment at an amount equal to not
less than fifty  percent  (50%) of  Surgical's  revenue  stream after  operating
expenses,  sales,  marketing and hardware  equipment costs for all installations
after the SMH contract. Subject to on-time delivery of the work to be performed,
Surgical agreed to pay, as a performance bonus,  unrestricted Common Stock equal
to twenty  five  percent  (25%) of the total cost of the SMH  project,  with the
number of shares  determined by the value of the  Company's  Common Stock at the
time of issuance.  Further,  it was understood  that all material and production
rights, including source codes and related documentation, upon completion of the
presentation and payment of the outstanding  balance,  would become the property
of Surgical.

     On July 13, 1998,  the Company was served with a Summons and  Complaint for
an action brought against it by MediaWorks.  (Gambit,  Inc. d/b/a  MediaWorks v.
Surgical Safety Products,  Inc.,  Circuit Court of the Twelfth Judicial Circuit,
Sarasota County, Florida, Case No. 98-4022-CA-01) The Complaint sets forth three
(3) causes of action: an action for specific performance demanding that Surgical
issue  289,720  shares  unrestricted  shares  based upon the twenty five percent
(25%) of the cost of the SMH installation divided by the share price on February
20, 1998 of the Company's  Common Stock; in the  alternative  seeking damages in
the amount of $732,993 which was the number of shares  determined by the formula
multiplied by the share price on July 1, 1998 of the Company's Common Stock; and
seeking  an  accounting  based  upon  a  dissolution  of the  partnership  which
MediaWorks alleges was formed with Surgical.

     On or about July 31, 1998,  the Company  filed Motions to Dismiss and for a
More  Definite  Statement of Count II of the Company.  The purpose of the Motion
for a More  Definite  Statement is so that the  plaintiff  will clarify how they
contend  they are  entitled  to the stock bonus so that  Surgical  can frame its
defense  and  show  defects,  delays  and  deficiencies  in the  performance  by
MediaWorks.  Surgical believes that MediaWorks failed to perform on the contract
since the OASiS  version 1 software has problems and that  MediaWorks  failed to
meet  performance and delivery  requirements as agreed.  Therefore,  the Company
believed that it has just and  meritorious  defenses and  counterclaims  to this
action.  Pursuant to a settlement  agreement dated December 1, 1998, the Company
agreed to pay  MediaWorks  $50,000 and to issue 40,000 shares of Rule 144 stock.
MediaWorks  was permitted to remove its software from SMH and agreed to return a
computer to the Company.  The suit was dismissed  with  prejudice and each party
paid their own costs of the case.


     The Company knows of no other legal  proceedings  to which it is a party or
to which any of its  property is the subject  which are pending,  threatened  or
contemplated or any unsatisfied judgments against the Company.



<PAGE>

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

     There were no matters  submitted to the vote of the security holders during
the fourth quarter 1998.

                                            PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

        (a)    Market Information.

     The Common Stock of the Company  trades on the OTC Bulletin Board under the
symbol "SURG".  The high and low bid  information for each quarter for the years
ending  December  31,  1996,  December  31,  1997 and  December  31, 1998 are as
follows:
<TABLE>
<CAPTION>
        Quarter                  High Bid            Low Bid        Average Bid
        <S>                      <C>                 <C>            <C>

        First Quarter 1996              1/4            3/16            .218
        Second Quarter 1996             3/4            1/8             .445
        Third Quarter 1996              1/4            1/8             .177
        Fourth Quarter 1996             1/4            1/8             .176
        First Quarter 1997              1/4            3/32            .135
        Second Quarter 1997             1/4            3/32            .106
        Third Quarter 1997              3/8            1/8             .183
        Fourth Quarter 1997             9/64           1/8             .132
        First Quarter 1998             29/32           9/64            .215
        Second Quarter 1998            3-1/8          11/16           2.299
        Third Quarter 1998             2-9/64        1-9/64           1.646
        Fourth Quarter 1998            31/32          17/32            .750
</TABLE>

     The quotations may reflect  inter-dealer  prices,  without retail  mark-up,
mark-down or commissions and may not reflect actual transactions.

        (b)    Holders.

     As of December 31, 1998,  the Company has 1,080  shareholders  of record of
its  10,786,973  outstanding  shares of  Common  Stock,  6,244,290  of which are
restricted  Rule 144 shares and 4,542,683 of which are  free-trading.  As of the
date hereof, the Company has outstanding options to purchase 5,557,764 shares of
Common Stock (without regard to the additional  options to Dr. Saye which accrue
at the rate of 8,333 per month).  Of the Rule 144 shares,  5,177,386 shares have
been held by affiliates of the Company for more than one (1) year.

        (c)    Dividends.

     The Company has never paid or declared  any  dividends  on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.

     There  are  no  limitations  on  the  ability  of the  Company  to  declare
dividends;  except  those set  forth in New York  Statute  510  which  prohibits
dividends  if the  Company  is  insolvent  or  would  be made  insolvent  by the
declaration of a dividend and all dividends must be made out of surplus only.

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



<PAGE>

Discussion and Analysis

     The  Company  was  founded  in 1992  to  combat  the  potential  spread  of
bloodborne pathogenic infections such as HIV and hepatitis. It has broadened its
mission to research, develop, manufacture,  market and sell medical products and
services to the healthcare community.

     The  Company  was in  the  development  stage  until  1993  when  it  began
commercial  shipments of  SutureMate(R),  its first  product.  From inception in
June,  1992  through  December  31,  1998,  the  Company  generated  revenues of
approximately  $1,100,000  from a limited number of customers.  Since  inception
through  December  31,  1998,  the Company has  generated  cumulative  losses of
approximately  $1,690,000.  Although the Company has  experienced  a significant
percentage  growth in revenues from fiscal 1992 to fiscal 1998, the Company does
not believe  prior  growth rates are  indicative  of future  operating  results,
especially  in  light  of  the  contract  with  US  Surgical  to  assist  in the
introduction  of OASiS.  Due to the  Company's  operating  history  and  limited
resources,  among other factors, there can be no assurance that profitability or
significant  revenues on a quarterly  or annual  basis will occur in the future.
Moreover,  the Company expects to continue to incur operating  losses through at
least the first half of 2000, and there can be no assurance that losses will not
continue after such date.

     With the  implementation of its agreement with US Surgical and in the event
of the reactivation of its various distribution agreements,  the Company expects
to experience a period of growth,  which requires it to  significantly  increase
the scale of its  operations.  This  increase  will  include  the  hiring of one
additional  person and will result in significantly  higher operating  expenses.
The  increase in  operating  expenses is expected to be  partially  funded by an
increase in revenues.  However, the Company's net loss may continue to increase.
Expansion of the  Company's  operations  may cause a  significant  strain on the
Company's  management,  financial and other resources.  The Company's ability to
manage recent and any possible future growth,  should it occur, will depend upon
a significant  expansion of its research and  development,  accounting and other
internal management systems and the implementation and subsequent improvement of
a variety of systems,  procedures  and controls.  There can be no assurance that
significant  problems in these areas will not occur. Any failure to expand these
areas and  implement  and improve such  systems,  procedures  and controls in an
efficient  manner at a pace consistent with the Company's  business could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results  of  operations.  As  a  result  of  such  expected  expansion  and  the
anticipated  increase in its operating  expenses,  as well as the  difficulty in
forecasting  revenue  levels,  the Company  expects to  continue  to  experience
significant fluctuations in its revenues, costs and gross margins, and therefore
its results of operations. (See Part I, Item 1. "Description of the Business (b)
Business  of  the  Issuers  -  Risk  Factors  -   Fluctuations   in  Results  of
Operations".)

     The Company's  plan of operations for the next twelve months is to focus on
building  revenue  by  installing  the OASiS  system  in the ten (10)  hospitals
designated by US Surgical and to install  additional  OASiS systems in hospitals
not  under  the US  Surgical  agreement  but with  whom the  Company  has  begun
negotiations and in some cases reached a commitment.  Additionally,  the Company
intends to install the  inservice  modules  from US Surgical  and other  medical
product manufacturers at both the US Surgical and the other hospitals.

     The Company  estimates  that  revenues  will be  sufficient to fund ongoing
operations at the current level when the number of OASiS  installations  reaches
30 to 35 and the total number of inservice  modules  reaches 60-70.  The Company
has purchased 20 OASiS units from Kiosk  Information  Systems,  Inc., 3 of which
were installed under the US Surgical agreement, 3 of which were installed at St.
Francis Hospital, and the balance of which are dedicated to its commitment to US
Surgical for hospitals it has ready for installation and to other hospitals


<PAGE>

which are committed to proceed,  which  installations are scheduled on or before
April 30,  1999.  Based  upon  potential  additional  commitments,  the  Company
believes  that if it were to order 20 more  units,  that all such units would be
placed  by the  end of the  third  quarter  1999.  The  Company  already  has 30
inservice  modules under the US Surgical  agreement  and is in  discussion  with
various  manufacturers  interested  in using OASiS to inservice  more than 50 of
their  products.  The Company  believes  that each of the initial  installations
should have a position as to long term  acceptance  within  three (3) to six (6)
months and that this initial time is the test period to determine  the potential
for market  acceptance at that hospital.  In the case of US Surgical  hospitals,
this  period  will be for nine (9) months by  contract.  At the end of such test
period,  the Company believes it will be in a position to execute three (3) year
leases  and  finance  such  leases  through  the  Rockford   leveraged   leasing
arrangement.

     In the short term, to fund  operations  through the third quarter 1999, the
Company will be required to seek additional  funds from its  shareholders,  seek
funds from a limited  number of accredited  investors in a private  placement of
its restricted  securities,  seek additional third party financing or seek third
party  debt  or  equity  financing  other  than  those  planned  by the  current
anticipated private placement. In the event no such funding is available or only
partial  funding  is  available,  the  Company  will be  required  to scale back
operations  and to  reduce  its  breakeven  point  by such  measures  as  salary
reductions,  staffing  cuts,  or the  licensing or sale of some of the Company's
assets or product lines to third parties. Provided such funding or scale back is
successful,  the Company believes that it can meet its capital needs through the
testing period and until such time as the Company has sufficient additional long
term  capital to expand.  There can be no  assurance  that the  Company  will be
successful in these efforts.

     Once the testing period is over, the Company will require between $2 and $5
million  in  additional  capital  in the  form  of debt or  equity  to fund  the
continued  expansion of the OASiS system and its  development  to meet increased
demand and to implement its plans for increased  marketing of its medical device
products.  The Company has met with several  venture  capital firms,  investment
bankers,  factoring companies and traditional lending sources, each of whom have
expressed  early  interest and many of whom are awaiting the  conclusion  of the
testing period. No definite offer has been accepted by the Company. There can be
no assurance  that such long term  financing will be available to the Company or
that it will be on terms which the Company may seek.

Results of Operations - Full Fiscal Years

Revenues

     To date, a limited number of customers and distributors  have accounted for
substantially  all of the Company's  revenues with respect to product sales. For
the fiscal year ending December 31, 1997, the Company derived  approximately 99%
of its revenue from sales of its OASiS to SMH.  For fiscal year ending  December
31, 1998, the Company derived approximately 93% of its revenue for product sales
from  technical  services it provided to US Surgical  during a medical  products
convention.

     The Company  anticipates that the main focus of its selling efforts will be
to focus on the US Surgical  arrangement and to continue to sell its products to
a relatively small group of medical products  distributors with the objective of
having its products  distributed  on a large national and  international  scale.
Although  the Company had entered into an  exclusive  distributorship  agreement
with Johnson & Johnson  Medical Pty Ltd. to sell its  SutureMate(R)  product (in
the territories of Australia,  New Zealand,  Papua, New Guinea and Fiji), Noesis
for sales in Europe,  and with two other  distributors  to sell such  product in
Saudi  Arabia and the  Netherlands,  none of these  arrangements  are  currently
active.  And,  although  the Company is currently  engaged in a joint  marketing
agreement with US Surgical,  there is no assurance that the Company will be able
to obtain


<PAGE>

adequate  distribution  of its products to the  intended end user.  Most medical
product  distributors  carry an extensive  line of products  (some of which they
manufacture  themselves)  which  they make  available  to end users  (hospitals,
surgeons,  healthcare  workers)  and various of these  products may compete with
each other as to function, price or other factors. In addition, numerous medical
product  distributors  are not themselves  well  capitalized and their financial
condition  may  impact  their  ability  to  properly  distribute  the  Company's
products.

     The  Company's  ability to achieve  revenues  in the future  will depend in
significant part upon its ability to obtain orders from, maintain  relationships
with  and  provide  support  to,  existing  and  new  customers,  as well as the
condition of its customers. As a result, any cancellation, reduction or delay in
orders by or  shipments  to any  customer or the  inability  of any  customer to
finance its purchases of the Company's products may materially  adversely affect
the Company's business, financial condition and results of operations. There can
be no assurance  that the Company's  revenues  will  increase in the future.  In
addition,  the Company  expects that the average  selling  price of a particular
product  line will also  decline as such  products  mature,  and as  competition
increases  in the  future.  Accordingly,  the  Company's  ability to maintain or
increase  revenues  will depend in part upon its ability to increase  unit sales
volumes of its products and to introduce and sell products at prices  sufficient
to  compensate  for  reduced  revenues  resulting  from  declines in the average
selling  price of the  Company's  more  mature  products.  ( See Part I, Item 1.
"Description  of the  Business - (b),  Business  of the  Issuers - Risk  Factors
Significant  Customer  and  Product  Concentration,  Fluctuations  in Results of
Operations, Declining Average Selling Prices and International Operations; Risks
of Doing business in Developing Countries.")

Net Sales

     For the year  ended  December  31,  1997,  net  sales  and cost of sales of
$248,760  and $22,002  respectively,  related  primarily to the sale of four (4)
units of the OASiS system to one customer. Net sales for the year ended December
31,  1998 of  $16,545  are  comprised  of  sales  of the  Company's  proprietary
SutureMate(R) products, MediSpecs Rx(TM) eyewear and technical services provided
to US Surgical.  Product sales and related cost of sales  amounted to $1,203 and
$5,560,  respectively  for the  year  ended  December  31,  1998.  Cost of sales
includes  a  write-down  of  approximately  $4,500  for  defective  units of the
re-designed  SutureMate(R).  There were no sales of the OASiS system during 1998
due to the Company's focus on enhancements to the product design and development
of a new version of the product.

     The Company has an ongoing program to reduce the costs of manufacturing its
products.  As part of this program,  the Company has been  attempting to achieve
cost reductions principally through engineering and manufacturing  improvements,
product  economies  and  utilization  of  third  party  subcontractors  for  the
manufacture of the Company's  products.  Notwithstanding a delivery of defective
units, to date, it has been successful in  substantially  reducing such costs by
re- designing  SutureMate(R).  The success of these cost reduction programs will
not be known until  production  volumes are scaled up. There can be no assurance
that the Company's  ongoing or future  programs can be accomplished or that they
will increase gross profits.

     To the extent  the  Company  is unable to reduce  its  production  costs or
introduce new products with higher margins,  the Company's results of operations
could be  materially  adversely  affected.  The  Company's  results  may also be
affected by a variety of other  factors,  including mix of products and services
sold;  production,  reliability  or quality  problems;  price  competition;  and
warranty expenses and discounts.

Operating Expenses

     Sales and Marketing:  These expenses  consist of advertising,  meetings and
conventions  and  entertainment  related to product  exhibitions and the related
travel expenses. Since inception, the Company has spent approximately $359,000


<PAGE>

on sales and  marketing  expenses.  For the years  ended  December  31, 1997 and
December 31,  1998,  sales and  marketing  expenses  were $62,028 and  $265,261,
respectively.  In 1998, the Company increased its advertising  particularly with
reference to OASiS and hired  additional  sales and marketing  personnel  during
1998.  The Company has  invested  significant  resources to expand its sales and
marketing effort,  including the hiring of additional personnel and establishing
the infrastructure  necessary to support future operations.  The Company expects
that such  expenses in 1999 will  increase  in  absolute  dollars as compared to
1998.

     General and Administrative. These expenses consist primarily of the general
and administrative expenses for salaries,  contract labor and other expenses for
management and finance and  accounting,  legal and other  professional  services
including  ongoing  expenses  as a  publicly  owned  Company  related  to legal,
accounting and other administrative services and expenses.  Since inception, the
Company  has  spent  approximately  $1,562,000  on  general  and  administrative
expenses.  For the years ended December 31, 1997 and December 31, 1998,  general
and  administrative  expenses  were  $182,787 and  $517,189,  respectively.  The
increase of $334,402 is due primarily to higher  executive  compensation,  legal
and  accounting  fees   associated  with  the  Company's  SEC  filings,   higher
depreciation   and   amortization   and   additional   rent  for  the  Company's
headquarters.  The  Company  expects  general  and  administrative  expenses  to
increase  in  absolute  dollars  in 1999 as  compared  to 1998,  as the  Company
continues to expand its operations.

Research and Development

     These expenses  consist  primarily of costs  associated  with personnel and
equipment  costs  and   field/clinical   trials.   The  Company's  research  and
development activities include the development of the OASiS system and more than
six (6)  operating  room,  OB/GYN,  advanced  surgical  and  protective  related
products including SutureMate(R) and MediSpecs RX(TM).

     Since inception,  the Company has spent approximately  $156,000 on research
and  development.  For the years ended  December 31, 1997 and December 31, 1998,
research  and  development  expenses  were  approximately  $113,740 and $34,536,
respectively. During 1997, research and development expenses were significant as
the Company  concentrated on the OASiS System.  The Company made enhancements to
the  software for the OASiS  system in 1998,  and the majority of these  related
costs were  capitalized  and will be amortized  over a period not to exceed five
(5) years.  The Company intends to continue to invest  significant  resources to
continue  the  development  of  new  products  and  expects  that  research  and
development  expenses in 1999 will  increase in absolute  dollars as compared to
1998.

Interest and Other Income (Expense), Net

     Interest and other  income  (expense),  net consists  primarily of interest
expenses  accrued  on the  direct  loan to the  Company  under a line of  credit
agreement for $100,000, interest related to loans from the majority stockholder,
miscellaneous   income  and  underwriting   costs.  In  May  1997,  the  Company
established  a line  of  credit  in the  amount  of  $100,000  with a  financial
institution at 1.5% above the prime rate, interest only payments are due monthly
with an expiration date of May 2, 2017. The line is due on demand and is secured
by  inventory,  accounts  receivable  and  equipment.  There was no  outstanding
balance as of December 31, 1998. The outstanding balance as of December 31, 1997
was  $100,000.  The interest  rate at December  31, 1997 was 10.0%.  The line of
credit is personally  guaranteed by Dr. Swor. (See Part I, Item 2. "Management's
Discussion and Analysis or Results of Operations Financial Condition,  Liquidity
and Capital Resources.")

     The  Company did not report any  foreign  currency  gains or losses for the
years ended December 31, 1997 and 1998 since there were no contracts  negotiated
in foreign currencies for those period. In the event its contract with Johnson &
Johnson


<PAGE>

Medical Pty. Ltd.,  Noesis and the Company's  distribution  arrangements  in the
Netherlands and in Saudi Arabia are  reactivated,  the Company may in the future
be exposed to the risk of foreign  currency  gains or losses  depending upon the
magnitude  of a change  in the  value of a local  currency  in an  international
market.  The  Company  does not  currently  engage in foreign  currency  hedging
transactions, although it may implement such transactions in the future.

Financial Condition, Liquidity and Capital Resources

     At  December  31,  1998,  the  Company  had assets  totaling  $373,514  and
liabilities  totaling $55,331.  Since its inception in June of 1992, the Company
has financed its  operations and met its capital  requirements  through sales of
its products,  fees from OASiS, proceeds from the sale of or exchange for common
stock  aggregating  approximately  $1,405,000,  through  borrowing  from current
shareholders  and  through  the  $100,000  line of  credit  with  the  financial
institution which is guaranteed by Dr. Swor.

     Operating  activities  used net cash of $216,991  and  $441,458  in1997 and
1998, respectively.

     At December 31, 1998,  the Company had a working  capital of  approximately
$73,000,  including  $41,000  of  cash,  $58,700  of  deposits  and  $26,898  of
inventory.  This represents an increase of approximately $315,000 over a working
capital deficiency of $242,411 at December 31, 1997.

     At December 31, 1998, the Company's outstanding  indebtedness  consisted of
accounts payable in the amount of $35,262 and accrued expenses of $20,069.

     The Company's principal  commitments for capital expenditures are (1) those
associated  with the  arrangement  with US Surgical under which the Company will
provide  initially  ten (10) units for  installation  at  Centers of  Excellence
designated by US Surgical;  (2) the Company's  obligation to pay SMH $25,000 for
each of ten (10)  studies  or  $250,000  over the term of the  clinical  testing
agreement if the Company  determines not to have SMH perform  clinical  testing;
and (3) the Company's  obligations to pay the balance due on the order of twenty
(20) OASiS  units from Kiosk  Information  Systems,  Inc..  (See Part I, Item 1.
"Description  of the Business - (b) Business of Issuer - Data Systems  Division;
and  -  Medical  Products  Division.")  The  sources  of  funds  to  meet  these
commitments will be partially made through cash on hand from the prior year, use
of the line of credit, a loan from Dr. Swor, revenues generated by the long term
US Surgical  agreement  and other  revenues  which the Company  believes it will
generate over the five (5) year term.

     The Company's  future capital  requirements  will depend upon many factors,
including  the  continued  development  of OASiS,  its current  products and new
products and  services,  the extent and timing of  acceptance  of the  Company's
products  and  services  in  the  market,   requirements  to  maintain  adequate
manufacturing   arrangements,   the  progress  of  the  Company's  research  and
development efforts, expansion of the Company's marketing and sales efforts, the
Company's  results of  operations  and the status of  competitive  products  and
services.  In the  short  terms,  it is likely  that the  Company  will  require
additional financing.  In addition, the Company may require additional financing
after  such  date to fund its  operations.  There can be no  assurance  that any
additional financing will be available to the Company on acceptable terms, or at
all,  when required by the Company.  If  additional  funds are raised by issuing
equity securities, further dilution to the existing stockholders will result. If
additional  funds are raised by issuing debt securities  future interest expense
will be  incurred.  If  adequate  funds are not  available,  the  Company may be
required  to  delay,  scale  back the  development  of  OASiS  or scale  back or
eliminate one or more of its research and development or manufacturing  programs
or obtain funds  through  arrangements  with partners or others that may require
the Company to relinquish rights to certain of its products or potential


<PAGE>

products  or other  assets  that the  Company  would not  otherwise  relinquish.
Accordingly,  the  inability  to obtain  such  financing  could  have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

Impact of the Year 2000 Issue

     The Year 2000  Issue is the  result of  potential  problems  with  computer
systems or any equipment  with computer  chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording  mechanism  including date sensitive  software which uses only
two digits to represent  the year,  may  recognize the date using 00 as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculations causing disruption of operations,  including among other things,
a temporary  inability  to process  transactions,  send  invoices,  or engage in
similar activities.

     Management has reviewed its current  internal systems and is in the process
of upgrading its accounting  system to be Year 2000  compliant.  The Company has
purchased  new  hardware  in 1998 that is Year 2000  compliant  and  expects its
internal  systems  upgrades  to be  completed  in the  third  quarter  of  1999.
Management  does not  anticipate  any  significant  additional  costs that would
relate to upgrading its systems to support the Year 2000.

     Further,  management  does  not  believe  the Year  2000  will  impact  the
operation  of the OASiS  system since the software for this system does not rely
on legacy  applications or subsystems.  OASiS is designed to handle dates in the
form of a two digit month and day and a four digit year,  thus avoiding the Year
2000 problem

     The  Company  believes  that  it has  disclosed  all  required  information
relative to Year 2000 issues relating to its business and  operations.  However,
there can be no  assurance  that the  systems  of other  companies  on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another  company  would not have an adverse  affect on the  Company's
business, operations or financial condition.




<PAGE>

Item 7.  Financial Statements






                         SURGICAL SAFETY PRODUCTS, INC.

                          INDEPENDENT AUDITORS' REPORT,
                            FINANCIAL STATEMENTS AND
                            SUPPLEMENTARY INFORMATION

                           DECEMBER 31, 1998 AND 1997




<PAGE>


<TABLE>
<CAPTION>


                                    CONTENTS
                                    --------


<S>                                                                 <C>
                                                                    Page
                                                                    ----
INDEPENDENT AUDITORS' REPORT                                        F-1

FINANCIAL STATEMENTS
  Balance Sheets                                                    F-2
  Statements of Operations                                          F-4
  Statements of Changes in Stockholders' Equity (Deficit)           F-5
  Statements of Cash Flows                                          F-7
  Notes to Financial Statements                                     F-9


SUPPLEMENTARY INFORMATION
  Independent Auditors' Report on Supplementary Information         F-18
  Schedules of Operating Expenses                                   F-19
</TABLE>


<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



The Board of Directors
Surgical Safety Products, Inc.

We have audited the  accompanying  balance sheets of Surgical  Safety  Products,
Inc. as of December 31, 1998 and 1997, and the related statements of operations,
changes  in  stockholders'  equity  (deficit)  and cash flows for the years then
ended.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Surgical Safety Products,  Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 10 to the
financial   statements,   the  Company's   significant  operating  losses  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  regarding  those matters are also  described in Note 10. These  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.




Sarasota, Florida
March 12, 1999


                                      F-1

<PAGE>



                         SURGICAL SAFETY PRODUCTS, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

  Assets                                         1998           1997
  ------                                         ----           ----
<S>                                              <C>            <C>

Current Assets
  Cash                                           $  41,191      $ 
  Trade receivables                                               250,125
  Other receivables                                  1,941
  Deposits                                          58,700
  Inventory                                         26,898         11,742
                                                   -------        -------
    Total current assets                           128,730        261,867
                                                   -------        -------

Furniture and equipment, net                        92,429         71,368
                                                    ------         ------

Other Assets
  Deferred loan costs, net                              317           412
  Intangible assets, net                             48,915        45,102
  Software development costs, net                    92,873        52,486
  Investments                                         9,750        13,500
  Deposits                                              500           500
                                                    -------       -------
    Total other assets                              152,355       112,000
                                                    -------       -------

Total Assets                                      $  373,514    $ 445,235
                                                     =======      =======
</TABLE>



                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-2

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>

Liabilities and Stockholders' Equity (Deficit)    1998                1997
---------------------------------------------     ----                ----
<S>                                               <C>                 <C>
Current Liabilities
  Bank overdraft                                  $                   $  13,984
  Line of credit                                                        100,000
  Notes payable - related parties                                       233,720
  Accounts payable                                    35,262            117,776
  Accrued expenses                                    20,069             21,131
  Accrued interest                                                       17,667
                                                      ------            -------
    Total current liabilities                         55,331            504,278
                                                      ------            -------

Stockholders' Equity (Deficit)
  Common stock, $.001 par value,
    20,0000,000 shares authorized;
    10,786,973 and 9,774,473 shares
    issued and outstanding in 1998
    and 1997, respectively                            10,787              9,775
  Additional paid-in capital                       1,998,242            824,366
  Accumulated deficit                             (1,690,846)          (893,184)
                                                  ----------            --------
    Total stockholders' equity (deficit)             318,183            (59,043)
                                                     -------            --------


Total Liabilities and Stockholders'Equity(Deficit) $ 373,514          $ 445,235
                                                     =======            =======
</TABLE>














                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-3

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

                                                  1998               1997
                                                  ----               ----
<S>                                               <C>                <C>

Revenue
  Net sales                                       $  16,545          $  248,760
  Other income                                       16,564               6,626
  Interest income                                     9,284
                                                     ------             -------
    Total revenue                                    42,393             255,386
                                                     ------             -------

Costs and expenses
  Cost of medical products sold                       5,560              22,002
  Operating expenses                                782,450             244,815
  Research and development expenses                  34,536             113,740
  Interest expense                                   13,759              15,651
  Other                                               3,750
  Underwriting costs                                                      7,600
                                                     -------            -------
    Total costs                                      840,055            403,808
                                                     -------            -------

Net loss before income taxes                        (797,662)          (148,422)
                                                    ---------          ---------

Provision for income taxes                               -                 -
                                                    ---------           --------

Net loss                                          $ (797,662)        $ (148,422)
                                                    =========          =========

Net loss per share                                $   (0.076)        $   (0.016)
                                                    =========          =========

</TABLE>













                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-4

<PAGE>

                         SURGICAL SAFETY PRODUCTS, INC.

             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                       YEARS ENDED DECEMBER 1998 AND 1997

<TABLE>
<CAPTION>

                                                           Common Stock
                                                           ------------
                                                      Shares           Amount
                                                      ------           ------
<S>                                                   <C>              <C>
Balances - December 31, 1996                           9,524,473       $  9,525

Issuance of common stock for acquisition of assets       250,000            250

Net loss
                                                       ---------          -----

Balances - December 31, 1997                           9,774,473          9,775

Issuance of common stock for cash                        520,000            520

Issuance of common stock for services                    492,500            492

Stock options granted to employees

Net loss
                                                      ----------         ------

Balances - December 31, 1998                          10,786,973       $ 10,787
                                                      ==========         ======
</TABLE>


                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-5

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                       YEARS ENDED DECEMBER 1998 AND 1997
(Continued)


<TABLE>
<CAPTION>


                                             Total
     Additional                              Stockholders'
     Paid-in             Accumulated         Equity
     Capital             Deficit             (Deficit)
     -------             -----------         ---------
     <S>                 <C>                 <C>

     $   810,959         $  (744,762)        $   75,722

          13,407                                 13,657

                            (148,422)          (148,422)
        --------            ---------          ---------

         824,366            (893,184)           (59,043)

         938,476                                938,996

         144,287                                144,779

          91,113                                 91,113

                            (797,662)          (797,662)
         -------            ---------          ---------

     $ 1,998,242         $(1,690,846)         $  318,183
       =========          ===========          =========
</TABLE>












                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-6

<PAGE>

                         SURGICAL SAFETY PRODUCTS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>

<S>                                               <C>               <C>
                                                  1998              1997
                                                  ----              ----
Cash Flows From Operating Activities
 Net loss                                         $ (797,662)       $ (148,422)
                                                     --------          --------
 Adjustments to reconcile net loss to cash
    used in operating activities
    Depreciation and amortization                     57,461            20,557
    Common stock issued for services                 144,779
    Stock option compensation expense                 91,113
    Write-down of investments                          3,750
    Gain on disposal of assets                                            (396)
    Decrease (increase) in operating assets
      Receivables                                    250,125          (220,553)
      Other receivables                               (1,941)
      Inventory                                      (15,156)           (6,658)
      Deposits                                       (58,700)
 Increase (decrease) in operating liabilities
      Bank overdraft                                 (13,984)           13,984
      Accounts payable                               (82,514)          103,747
      Accrued expenses                                (1,062)           15,131
      Accrued interest                               (17,667)           10,619
      Stock subscription proceeds                                       (5,000)
                                                     -------           --------
    Total Adjustments                                356,204           (68,569)
                                                     -------           --------
       Net cash used in operating activities        (441,458)         (216,991)
                                                    ---------         ---------

Cash Flows From Investing Activities
  Proceeds from disposal of assets                                       1,100
  Furniture and equipment purchased                  (57,294)          (65,958)
  Software development additions                     (56,256)          (55,248)
  Patent and trademark costs                          (9,077)           (2,386)
                                                    ---------         ---------
    Net cash used in investing activities           (122,627)         (122,492)
                                                    ---------         ---------

Cash Flow From Financing Activities
  Proceeds from related party loans                   23,000           233,720
  Advances/(repayments) on line of credit, net      (100,000)          100,000
  Repayment of stockholder loans                    (256,720)
  Proceeds from issuance of common stock             938,996
                                                     --------          --------
      Net cash provided by financing activities      605,276           333,720
                                                     -------           --------

Net increase (decrease) in cash                       41,191            (5,763)
Cash at beginning of year                               -                5,763
                                                      ------            -------
Cash at end of year                               $   41,191        $      -   
                                                      ======            =======
</TABLE>




                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-7


<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 1998 AND 1997
(continued)
<TABLE>
<CAPTION>

                                                  1998              1997
                                                  ----              ----
<S>                                               <C>               <C>
Supplemental Cash flow Information:
  Cash paid for interest                          $31,426          $5,032
                                                  =======           =====
</TABLE>


For purposes of the statement of cash flows,  management  considers all deposits
and financial  instruments with original maturities of less than three months to
be cash and cash equivalents.

Material  non-cash  transactions  not  reflected in the  statement of cash flows
include:

Year Ended December 31, 1998
----------------------------
       There  were  no  material  non-cash  transactions  not  reflected  in the
statements of cash flows during the fiscal year ending December 31, 1998.

Year Ended December 31, 1997
----------------------------
       Purchase of assets of Endex Systems, Inc.through issuance of stock valued
at $13,657.




















                     The accompanying notes are an integral
                      part of these financial statements.

                                       F-8


<PAGE>



                         SURGICAL SAFETY PRODUCTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1998 AND 1997


Note  1  -  Summary  of  Significant  Accounting  Policies
-------     ----------------------------------------------
Business  Activities
--------------------
SurgicalSafety Products, Inc. (Company) is engaged in product development, sales
and  services  for the medical  industry.  The Company is  primarily  focused on
medical  research and product  development.  It has developed a product,  OASiS,
designed  to  reduce  the  occupational  risks  of  bloodborne  diseases  in the
operating room and other related areas. In 1997, the Company  enhanced its OASiS
system  for  multiple   applications  within  health  care,  including  exposure
management,  health care training, and health care risk management.  Its medical
products are sold to health care providers within the United States.

Financial Statements
--------------------
The  financial  statements  and  notes  are  representations  of  the  Company's
management  who  is  responsible  for  their  integrity  and  objectivity.   The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.

Preparation  of financial  statements  in  accordance  with  generally  accepted
accounting principles requires the use of management's estimates. Actual results
could differ from those estimates.

Accounts Receivable
-------------------
Accounts  receivable  consist  of  amounts  due from  customers.  There  were no
outstanding accounts receivable from customers at December 31, 1998. The balance
of $250,125 at December  31,  1997 was due  primarily  from one  customer in the
amount of $250,000.

Inventory
---------
Inventory is stated at the lower of cost  (first-in,  first-out)  or market (net
realizable value) and consists of finished goods.

Investments
-----------
Investments  are  valued  at cost  and  represent  shares  of  common  stock  in
privately-held  companies.  Management believes the value of the investments are
not below cost. Fair market value is not determinable.

Property and Equipment
----------------------
Purchases  of property and  equipment  are  recorded at cost.  Expenditures  for
maintenance  and repairs  which extend the useful life are charged to operations
as incurred.  Depreciation is provided on an accelerated method over the assets'
useful lives which range from three to seven years.  Leasehold  improvements are
being amortized over the life of the lease term which is two years.


                                       F-9

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 1 - Summary  of  Significant  Accounting  Policies  (Continued)
------   -----------------------------------------------------------
Intangible Assets
-----------------
Intangible assets subject to amortization include goodwill,  organization
costs,  trade names and patent costs.  Organization costs are being amortized on
the  straight-line  method over five years.  Patent costs are being amortized on
the  straight-line  method over seventeen years from the granting of the patent.
The other assets are being  amortized on the  straight-line  method over fifteen
years.

Software Development Costs
--------------------------
Certain software development costs are capitalized when incurred. Capitalization
of software  development  costs begins upon the  establishment  of technological
feasibility.  The  establishment  of  technological  feasibility and the ongoing
assessment of recoverability of capitalized  software  development costs require
considerable  judgement by management with respect to certain external  factors,
including,  but not limited to, anticipated future revenues,  estimated economic
life, and changes in software and hardware technologies.

Amortization of capitalized  software  development costs is calculated using the
straight-line  method  over a period  of five  years.  All  other  research  and
development costs are charged to expense in the period incurred.

Income Taxes
------------
The Company  accounts for income taxes using the asset and  liability  method in
accordance  with  Statement of Financial  Accounting  Standards  (SFAS) No. 109,
"Accounting for Income Taxes."

Long-Lived Assets
-----------------
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long- Lived Assets and for  Long-Lived  Assets to Be Disposed Of,"
requires that long-lived assets, including certain identifiable intangibles, and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying value amount of the asset
in question  may not be  recoverable.  Management  has  reviewed  the  Company's
long-lived  assets  and  has  determined  that  there  are no  events  requiring
impairment loss recognition.

Revenue Recognition
-------------------
The Company  recognizes  revenue at the point of passage of title of  inventory,
which is generally at the time of shipment to the customer.  Revenue  related to
services is recognized at the point the service has been rendered.


                                      F-10

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 1 - Summary of Significant  Accounting  Policies (Continued)
------   --------------------------------------------------------
Net Loss Per Share
------------------
Net loss per share has been  computed  in  accordance  with  Statement  of
Financial Accounting Standards (FASB) No. 128, "Earnings Per Share," by dividing
net loss by the weighted average number of shares outstanding during the period.
Common stock  equivalents  have not been included in the computation of weighted
average  number  of  shares   outstanding  since  the  effect  would  have  been
anti-dilutive.

Stock Based Compensation
------------------------
The Company  grants stock  options for a fixed number of shares to employees and
consultants. The Company accounts for stock option grants in accordance with APB
Opinion No. 25,  "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations   because  the  company  believes  the  alternative  fair  value
accounting  provided under FASB Statement No. 123,  "Accounting  for Stock Based
Compensation,"  requires  the use of  option  valuation  models  that  were  not
developed for use in valuing  employee stock options.  Under APB 25, the Company
only  recognized  compensation  expense to the extent that the fair value of the
shares exceeds the exercise price of the stock option at the date of grant.

The  Company  recorded  compensation  expense  related to the  issuance of stock
options in the amount of $91,113 for the year ended  December  31,  1998.  There
were no stock options issued during the year ended December 31, 1997.

Impact of Recently Issued Accounting Standards
----------------------------------------------
In June 1998,  the FASB issued  Statement No. 133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities."  The  Company  expects  to adopt the new
Statement  effective  January 1, 2000. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value.  This Statement is
not applicable to the Company as of December 31, 1998.


Note 2 - Property and Equipment
------   ----------------------
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                  1998              1997
                                                  ----              ----
<S>                                               <C>               <C>
Property and equipment                            $ 90,703          $  38,982
Prototype molds                                     59,652             82,778
Leasehold improvements                               5,575
                                                   -------            -------
                                                   155,930            121,760
Less accumulated depreciation                       63,501             50,392
                                                   -------            -------
  Furniture and equipment, net                    $ 92,429          $  71,368
                                                    ======             ======
</TABLE>

Total depreciation and amortization  expense amounted to $36,234 and $14,014 for
1998 and 1997, respectively.



                                      F-11

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 3 - Line-of-Credit
------   --------------
Effective May 1997, the Company had established a  line-of-credit  in the amount
of $100,000 with a financial  institution at 1.5% above the prime rate, interest
only payments are due monthly with an expiration  date of May 2, 2017.  The line
is  due  on  demand  and is  secured  by  inventory,  accounts  receivable,  and
equipment.  The  outstanding  balance at  December  31, 1998 and 1997 was $0 and
$100,000,  respectively.  The interest rate at December 31, 1997 was 10.00%. The
line-of-credit is personally guaranteed by the major stockholder.

Note 4 - Related Party Transactions
------   --------------------------
At December 31, 1997,  the Company was indebted to the major  stockholder in the
amount of  $197,720.  In  addition,  the Company was  indebted to an  affiliated
company owned by the major stockholder. The amount owed at December 31, 1997 was
$36,000.  Interest  on the notes was  10.00%.  At December  31,  1997,  interest
payable on these loans  totaled  $17,667.  During  fiscal  1998,  an  additional
$23,000 was loaned to the Company by the major  stockholder.  The balance of the
notes payable was repaid during fiscal 1998,  and at December 31, 1998 there are
no amounts  due to related  parties.  Interest  expense  relating to these notes
amounted to $9,882 and $15,314 for the years ended  December  31, 1998 and 1997,
respectively.

The Company leases office space from an entity owned by a major stockholder. See
Note 13.

Note 5 - Software Development Costs
------   --------------------------
During the fiscal year ended December 31, 1997, the Company  focused its efforts
in developing the software for its major product, OASiS. The company engaged the
services of a software  development  company,  and  incurred  significant  costs
related to the design and  development  of the  software.  The Company  achieved
technological feasibility in its development of the software in fiscal 1997.

For the year ended  December 31,  1998,  the Company  incurred  and  capitalized
expenditures  relating  to the  enhancement  of the  software  in the  amount of
$56,256. For the year ended December 31, 1997, the Company incurred expenditures
related to software  development of $162,409,  of which $54,653 was capitalized,
and the  remainder of $107,756 was  expensed.  Amortization  expense of software
development  costs  amounted to $21,227 and $6,543 for the years ended  December
31, 1998 and 1997, respectively.

Note 6 - Stock Option Plans
------   ------------------
Options granted under the 1994 and 1998 stock option plans are exercisable  only
after the  respective  vesting  period which is two years from the date of grant
under the 1994 plan,  and  determined  by the Company's  stock option  committee
under th 1998 plan. Options expire seven years from the date of grant.

Pro forma information regarding net income and earnings per share is required by
Statement  123, and has been  determined as if the Company had accounted for its
stock options under the fair value method of that Statement.  The fair value for
these options was estimated at the date of


                                      F-12

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 6 - Stock Option Plans (Continued)
------   ------------------------------
grant using a Black-Scholes option pricing model with the following  assumptions
for 1998:  risk- free interest rate of 5.0%;  dividend  yield of 0%;  volatility
factor of the expected market price of the Company's  common stock of .20; and a
weighted-average  expected  life of the  option of three  years.  There  were no
options granted during the fiscal year ended December 31, 1997.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the Company's stock options have  characteristics  significantly  different from
those of traded options, and because changes in the subjective input assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is charged to expense over the options' vesting period.  The Company's pro forma
information for the fiscal year ended December 31, 1998 is as follows:

  Proforma net loss                                           $ (837,065)
                                                                 --------
  Pro forma earnings per common share:
    Basic                                                     $   (0.080)
                                                                   ------

A summary of the Company's stock option activity and related information for the
years ended December 31 follows:

<TABLE>
<CAPTION>

                                         1998                   1997
                                ----------------------    --------------------


                                              Weighted                Weighted
                                              Average                 Average
                                              Exercise                Exercise
                                 Options      Price        Options    Price
                                 -------      --------     -------    --------
<S>                               <C>         <C>          <C>        <C>
Outstanding at the beginning
  of the year                    4,512,431    $  0.32      4,512,431  $   0.32
Granted                            737,333       1.50
                                  --------    --------      --------   -------
Outstanding at the end
  of the year                    5,249,764    $  0.46      4,512,431   $  0.32
                                 =========       ====      =========      ====
Exercisable at the end of
  the year                       4,820,764    $  0.36      4,512,431   $  0.32
                                 =========       ====      =========      ====

Weighted-average fair value of
  options granted during the
  year                                        $  1.96                  $   -
                                                 ====                     ==== 
</TABLE>



                                      F-13

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 6 - Stock Option Plans (Continued)
------   ------------------------------
The weighted-average  exercise price and weighted-average  fair value of options
granted  during  1998 was $0.96  and  $0.75,  respectively,  for  options  whose
exercise  price  exceeded the market  price of the stock on the grant date.  The
weighted  average  exercise  price and  weighted-average  fair  value of options
granted  during  1998 was $1.75  and  $2.33,  respectively,  for  options  whose
exercise price was less than the market price of the stock on the grant date.

The following  table  summarizes  information  about the options  outstanding at
December 31, 1998:

<TABLE>
<CAPTION>

                                         Weighted
                                         Average
                                         Remaining              Weighted
                       Number            Contractual            Average
Exercise Price         Outstanding           Life               Exercise Price
--------------         -----------       -----------            --------------
<S>                    <C>               <C>                    <C>
$ 0.32 to 0.48           4,511,931        2.50 years            $        0.32
          0.50              54,000        6.00 years                     0.50
  0.90 to 1.00             308,833        6.89 years                     1.00
  1.50 to 1.75             375,000        6.55 years                     1.73
                           -------                                       ----
  0.32 to 1.75           5,249,764        3.08 years            $       00.46
                         =========                                      =====
</TABLE>



Note 7 - Common Stock Issuance
------   ---------------------
During the fiscal year ended  December  31,  1998,  the Company  issued  492,500
shares of common  stock in exchange  for legal,  computer  hardware and software
consulting services,  and public relations services. Of the total issued, 90,000
shares were restricted stock. The value of the shares issued ranged from $0.15 -
$1.75 per share based on either the fair market  value of the shares at the time
the agreement for services was executed,  or the value of the services received,
whichever was more estimable.

The Company also issued 520,000 shares of common stock in exchange for cash. The
value of the shares issued ranged from $1.75 - $2.19 per share based on the fair
market value of the shares at the time of issuance.

During the year ended  December 31, 1997,  the Company  issued 250,000 shares of
restricted  common stock in exchange for the  acquisition of the assets of Endex
Systems,  Inc.  (See Note 9). The  shares  could not be sold for a period of two
years;  therefore  the shares  issued were valued at $.06 per share based on the
value of the assets received.


                                      F-14

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 8 - Income Taxes
------   ------------
At December  31,  1998,  the Company has net  operating  loss  carryforwards  of
approximately  $1,300,000  which expire during the years 2008 through 2012.  The
1998 and 1997 tax benefits relating to the losses incurred in each year amounted
to  approximately  $158,000 and $29,800,  respectively.  Based on the  Company's
financial  history,  there is no basis to conclude that the tax benefits will be
realized.  Therefore, the tax benefit that has been recorded in the accompanying
financial  statements  for the years ended  December  31, 1998 and 1997 has been
offset by an allowance equal to the benefit.

Note 9 - Asset Purchase
------   --------------
On December 8, 1997, the Company purchased the assets of Endex Systems, Inc. for
which it issued  250,000  shares of  restricted  common  stock based on the fair
value of the assets received.  The Company  purchased  furniture,  equipment and
investments valued at approximately $14,000.


Note 10 - Realization of Assets
-------   ---------------------
The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles,  which contemplate the continuation of
the Company as a going concern. The Company has sustained substantial losses and
has minimal revenues for the current fiscal year.

In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded  asset amounts shown in the  accompanying  balance
sheet is dependent upon the Company's ability to achieve  profitable  operations
and to obtain  additional  sources of funds.  Management  believes the Company's
prospects for profitability are significant,  based on the development of OASiS,
a proprietary product. The Company has aggressively promoted this product during
fiscal year 1998 and anticipates  revenues in fiscal 1999 related to the leasing
of these units to medical facilities.  Management is considering both equity and
debt  financing  in the range of $2 to $5  million.  Management  believes  these
factors will provide the basis for significant  growth and  profitability in the
near term.


Note 11 - Commitments
-------   -----------
On January 30, 1998,  the Company  entered into an agreement  with a health care
provider in which the provider will perform  clinical testing of ten surgical or
medical  products  submitted by the Company.  The agreement is for a term not to
exceed five years and  requires  the  Company to pay the health care  provider a
fixed  amount of $25,000  for each of the ten  studies.  The  agreement  further
provides  that the Company is obligated to pay the  provider  $250,000  over the
term of the  agreement  in the  event  the  Company  determines  not to have the
provider perform the clinical  testing.  The Company did not submit any products
for clinical testing during the fiscal year ended December 31, 1998.

In  November  1998,  the  Company  entered  into an  agreement  with a vendor to
manufacture  20 units of its OASiS system for a total of  $133,000.  At December
31,  1998,  the  Company  had paid 50% or $66,500  to the vendor and  received a
partial

                                      F-15

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 11 - Commitments (Continued)
-------   -----------------------
shipment of units.  The remaining  balance of $66,500 is payable upon receipt of
the remaining units.


Note 12 - Concentrations
-------   --------------
During the year ended December 31, 1998, the company  derived 93% of its revenue
from technical services provided to one customer. The Company derived 99% of its
revenues from the sale of medical  products sold to one customer during the year
ended December 31, 1997.


Note 13 - Lease Commitments
-------   -----------------
On June 1, 1998,  the Company  entered  into an  agreement to lease office space
from an affiliated entity. The lease term expires on May 21, 2000 with automatic
one year  renewals.  Minimum lease  payments are as follows for the fiscal years
ending:

                  1999                             $    42,000
                  2000                             $    17,500

Rent expense for the fiscal years ending  December 31, 1998 and 1997 amounted to
$30,750 and $6,912, respectively.

The Company also leases  office  equipment.  The lease term is for 60 months and
expires October 2003.  Monthly payments are $344.  Minimum lease payments are as
follows for the fiscal years ending:

                  1999                             $     4,128
                  2000                                   4,128
                  2001                                   4,128
                  2002                                   4,128
                  2003                                   3,440


Note 14 - Year 2000 Issue
-------   ---------------
The Year 2000 Issue is the result of potential problems with computer systems or
any equipment  with computer chips that use dates where the date has been stored
as just two digits  (e.g.  98 for 1998).  On January 1, 2000,  any clock or date
recording  mechanism,  including  date  sensitive  software  which uses only two
digits to represent the year, may recognize the date, using 00, as the year 1900
rather  than  the  year  2000.   This  could  result  in  a  system  failure  or
miscalculations causing disruption of operations,  including among other things,
a temporary  inability  to process  transactions,  send  invoices,  or engage in
similar activities.

Management  has reviewed its current  internal  systems and is in the process of
upgrading its


                                      F-16

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 1998 AND 1997

Note 14 - Year 2000 Issue (Continued)
-------   ---------------------------
accounting system to be Year 2000 compliant.  The Company purchased new hardware
in 1998  that  is Year  2000  compliant.  Management  does  not  anticipate  any
significant  additional  costs that would  relate to  upgrading  its  systems to
support the Year 2000.

Further,  management does not believe the Year 2000 will impact the operation of
the OASiS  system  since the  software  for this  system does not rely on legacy
applications  or subsystems.  OASiS is designed to handle dates in the form of a
two digit  month and day and a four  digit  year,  thus  avoiding  the Year 2000
problem.

The Company believes it has disclosed all required  information relative to Year
2000 issues  relating to its business and operations.  However,  there can be no
assurance  that the systems of other  companies on which the  Company's  systems
rely  also will be timely  converted  or that any such  failure  to  convert  by
another company would not have an adverse affect on the Company's  operations or
financial condition.

                                      F-17
<PAGE>




                                   SUPPLEMENTARY INFORMATION




<PAGE>





            INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
            ---------------------------------------------------------



The Board of Directors
Surgical Safety Products, Inc.


We have  audited  the  accompanying  financial  statements  of  Surgical  Safety
Products,  Inc. as of and for the years ended  December  31, 1998 and 1997,  and
have issued our report  thereon  dated March 12, 1999.  Our audits were made for
the purpose of forming an opinion on the financial  statements taken as a whole.
The supplementary  schedules of operating expenses are presented for purposes of
additional  information and are not a required part of the financial statements.
Such  information has been subjected to the auditing  procedures  applied in the
examination of the financial statements and, in our opinion, is fairly stated in
all material respects in relation to the financial statements taken as a whole.




Sarasota, Florida
March 12, 1999



                                      F-18

<PAGE>


                         SURGICAL SAFETY PRODUCTS, INC.

                         SCHEDULES OF OPERATING EXPENSES

                     YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>

                                                 1998                1997
                                                 -------             -------
<S>                                          <C>                 <C>
Accounting and legal                         $    58,260         $    16,761
Advertising                                      103,281              12,507
Contract labor                                    28,950               2,137
Meetings/conventions                              27,694               9,749
Depreciation and amortization                     57,461              20,557
Salaries and related expenses                    368,417             115,193
Travel and entertainment                          18,087               8,426
Postage                                            4,953               5,772
Insurance                                         11,542               9,479
Equipment rental                                   7,724               3,778
General and administrative                        18,201              11,428
Rent                                              30,750               6,912
Repairs and maintenance                            4,188               5,467
Samples and supplies                               3,195
Supplies                                          22,606               8,416
Taxes                                              1,615                 998
Telephone                                         15,526               6,397
Utilities                                                                838
                                                 -------             -------
                                             $   782,450         $   244,815
                                                 =======             =======
</TABLE>

                                      F-19

<PAGE>

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

     The Company has used the accounting firm of Kerkering, Barberio & Co., P.A.
since 1993. There address is 1858 Ringling Boulevard,  Sarasota,  Florida 34236.
This firm began providing audited financial  statements for the Company in 1994.
There has been no change in the  Company's  independent  accountant  during  the
period  commencing  with the Company's  retention of Kerkering,  Barberio & Co.,
P.A. through the date hereof.

                                           PART III

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

     (a) Set forth below are the names,  ages,  positions,  with the Company and
business experiences of the executive officers and directors of the Company.

Name                                Age            Position(s) with Company

Dr. G. Michael Swor                 40             Chairman and Treasurer
4485 S. Shade Avenue
Sarasota, FL 34237

Frank M. Clark (1)                  66             Director, CEO and President
7313 Oak Leaf Way
Sarasota, FL 34241

Donald K. Lawrence (1)              35             Director, Executive Vice 
716 Edgemer Lane                                   President and Secretary
Sarasota, FL 34242

David Collins  (1)                  57             Director and Acting Chief 
6210 Sun Boulevard                                 Financial Officer (2)
St. Petersburg, FL 33715

James D. Stuart                     40             Director
880 Jupiter Park Drive
Suite 14
Jupiter, FL 33458

Irwin Newman                        50             Director
1515 SW 22nd Avenue Circle
Boca Raton, FL 33486

Sam Norton                          39             Director
1819 Main Street
Suite 610
Sarasota, FL 34236

David Swor                          66             Director
6385 Presidential Court
Suite 104
Fort Meyers, FL 33919



<PAGE>



Tom DeCesare                        66             Director
15316 Gulf Boulevard
#802
Madiera Beach, FL 33708

Dr. William B.Saye (1)              59             Director and Medical Director
4614 Chattahoochee Crossing                        of ALTC VirtualLabs
Marietta, GA 30067


(1)  Except for Mr. Clark,  Mr. Lawrence,  Dr. Saye and Mr. Collins,  who had no
     role in founding or organizing the Company,  the above-named persons may be
     deemed to be "promoters"  and "parents" of the Company,  as those terms are
     defined under the Rules and Regulations promulgated under the Act.

(2)  Mr.  Collins is not engaged as a full time  employee of the Company.  He is
     devoting  and will  continue to devote such time as required to fulfill the
     obligations as the Company's Acting Chief Financial  Officer.  At such time
     as the  Company  has  sufficient  additional  revenue or is  successful  in
     securing  additional funding from outside sources,  it is intended that Mr.
     Collins will be employed by the Company as the Chief Financial  Officer and
     that he will devote his full time to the business of the Company.

     All  directors  hold office until the next annual  meeting of the Company's
shareholders and until their successors have been elected and qualify.  Officers
serve at the pleasure of the Board of Director.  The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary  to  perform  their  responsibilities  as  executive  officers  and/or
directors of the Company.

Family Relationships

     There are no family  relationships  between or among the executive officers
and  directors of the Company  except  that David Swor is Dr. G.  Michael Swor's
father and Tom DeCesare is Dr. Swor's father-in-law.

Business Experience

     G. Michael Swor,  M.D.,  M.B.A, age 40, has served as Chairman of the Board
and Medical/Technical Advisor of the Company since its inception in 1992 and has
served as Treasurer to the Company since June, 1998.

     Dr.  Swor,  a board  certified,  practicing  physician  with a specialty in
OB/GYN, is the founder of Surgical. From 1992 until June 12, 1998, Dr. Swor also
served as  President  and CEO.  With a Masters in Business  Administration,  Dr.
Swor's duties for the Company include investor relations,  corporate  financing,
and  overall  corporate  policy  and  management.  He  is a  clinical  assistant
professor in the OB/GYN department at University of South Florida.  Dr. Swor was
the inventor of SutureMate(R) and  Prostasert(TM) and the original holder of the
patents  issued  to each of  these  products.  Dr.  Swor  has  written  numerous
articles,  published the "Surgical Safety Handbook," and given numerous lectures
on  safety  and  efficiency  in  the  surgical  environment.   His  professional
affiliations   include  American  College  of  Surgeons,   American  College  of
Obstetrics and Gynecology and the Florida Medical  Association.  From 1996 until
the present, Dr. Swor has acted as an independent  consultant for Concise Advise
which  provides  consulting  services  related to product  development,  patent,
research,  distribution,  joint venture, mergers and other business issues. From
1994  through  1996,  Dr. Swor oversaw the  operation of WDC.  From 1987 through
1995,Dr. Swor was the managing partner of Women's Care Specialists/Physicians


<PAGE>



Services Inc. where he oversaw four (4) physicians,  two (2) practitioners and a
staff of over twenty five (25).  From 1987 through 1992,  Dr. Swor was a partner
and board member of Women's  Ambulatory  Services,  Inc.,  a diagnostic  testing
facility.  From 1982 through  1985,  Dr. Swor was the President of University of
Florida at Jacksonville,  Health Sciences Center resident staff association with
over 200 members.  Dr. Swor received a B.A degree in 1978 from the University of
South Florida,  a M.D.  degree from the  University of South Florida  College of
Medicine in 1981,  and an M.B.A.  degree from the University of South Florida in
1998.  From 1981  through  1985 he  received  his  training  in OB/GYN  from the
University of Florida  Department of Obstetrics and Gynecology in  Jacksonville,
Florida.  He has received  several special  achievement  awards  including being
honored by the  University  of South  Florida in May, 1998 with the Alumni Award
for Professional Achievement.

     Frank M. Clark,  age 66, has served as a Director,  CEO and President since
June, 1998.

     Mr. Clark is  responsible  for the day to day operations of the Company and
is responsible  for new product  development and  manufacturing  and manages new
business ventures,  including mergers,  acquisitions,  joint ventures, strategic
alliances and  licensing/distribution  agreements for the Company.  From 1991 to
1997,  Mr. Clark was Chairman and CEO of  Corporate  Consulting  Services  Group
where his primary  activities  were  providing  consulting  services to start-up
companies, under-performing companies and training people in career transitions.
From 1984 to 1991,  Mr.  Clark was COO and  Executive  Vice  President  of Right
Associates,  a consulting firm with  responsibilities  for business  development
with  Fortune  100  corporations  for which he acted.  He acquired a Los Angeles
based consulting firm and became the Managing Principal.  From 1981 to 1984, Mr.
Clark was a Vice President of National Medical Care, a subsidiary of W.R. Grace,
Inc. where his innovative  marketing  leadership  helped the company recapture a
dominant  share of the dialysis  market.  From 1978 to 1981, Mr. Clark served as
President,  Corporate Vice President and a Director of R.P.  Scherer,  Inc., the
world's  leading  producer of soft  gelatin  capsules  where he was in charge of
worldwide  businesses.  From 1959 to 1984,  Mr.  Clark was employed by Johnson &
Johnson,  Inc., first with Ethicon, Inc. where he served as a Vice President and
Director,  then with  Ethnor  Medical  Products  where he was a Vice  President,
General Manager and a Director and then with  Stimulation  Technology,  where he
served as Executive Vice President and a Director.  From 1956 to 1958, Mr. Clark
was employed by Federated Department stores in the executive training program at
Bloomingdales  in New York City. Mr. Clark received a certificate  from Teachers
College in Connecticut in 1955.

     Donald K. Lawrence, age 35, has served as a Director, Vice President, Sales
& Marketing and Secretary  since May, 1997 and Executive  Vice  President  since
January, 1998.

               Mr. Lawrence's responsibilities include sales management,  market
planning,  advertising,  and management for Compliance  PlusTM products and most
recently  he has become the  Executive  Director  of OASiS.  His  arrival to the
Company was facilitated by the Company's  acquisition in 1997 of InterActive PIE
Multimedia, Inc., of which Mr. Lawrence was founder and Chief Executive Officer.
From February 1996 until February 1997, Mr.  Lawrence was the CEO of InterActive
PIE.  From  December  1991 until  February  1996,  Mr.  Lawrence was employed by
Ethicon Endo-Surgery/Johnson & Johnson as a surgical sales representative.  From
July  1989  until  December  1991,  Mr.  Lawrence  acted  as  a  surgical  sales
representative  for Davis and Geck. Prior to entering the area of medical device
sales, from February 1985 until July 1989, Mr. Lawrence was an account executive
with DHL Worldwide  Express.  During  college,  Mr.  Lawrence was an independent
dealer for  Southwestern  Publishing  Co. Mr  Lawrence  received a B.S degree in
Marketing and Communications in 1984 from Appalachian State University.

     David Collins,  age 57, has served as a Director since January 1999 and its
Acting Chief Financial Officer since March 1999.


<PAGE>



     Mr. Collins  responsibilities  include  overseeing the financial affairs of
the Company on a part time basis and he is currently  engaged as a consultant to
the Company. Mr. Collins devotes such time as is necessary to fulfill his duties
to the Company.  During 1997 and 1998,  Mr. Collins was Controller for the Sales
and Marketing  Division for GES  Exposition  Services,  a subsidiary of the NYSE
listed Viad Corporation.  From 1993 to 1996, Mr. Collins was General Manager and
Chief Financial Officer of Spectra Services Corporation.  From 1989 to 1992, Mr.
Collins was a Partner and Consultant to Quantum  Corporation,  a venture capital
firm.  From 1977 to 1988, Mr. Collins rose from  Controller to Vice President of
Finance (1982) and then to Vice President of Finance and Chief Financial Officer
(1984) of R.P. Scherer  Corporation,  a NYSE listed company.  From 1975 to 1977,
Mr.  Collins  was Vice  President  and  Controller  of  Wheelhorse  Products,  a
subsidiary of American Motors/Chrysler. From 1971 to 1975, Mr. Collins rose from
Controller of the Midwest  Dental  Division to Vice  President and Controller of
the American Hospital Division of American Hospital Supply  Corporation  (1974).
From 1969 to 1971,  Mr.  Collins was a Senior  Auditor and  Consultant in Public
Accounting with Deloitte & Touche. Mr. Collins received a BSBA from Northwestern
University in 1964 and a MBA from the Kellogg  Graduate  School of Management at
Northwestern  University in 1967. He became a Certified Public Accountant in the
State of Illinois in 1971.

     James D.  Stuart,  age 40, has served as a Director  since 1993,  initially
acting as Director of Marketing and Sales.

     Mr. Stuart served as Executive Vice  President  from 1993 until June,  1998
and initially  acted as the Director of Marketing and Sales.  During his time as
an  officer  of  the  Company,  Mr.  Stuart  was  responsible  for  new  product
development  and  manufacturing  and manages new  business  ventures,  including
mergers,    acquisitions,    joint    ventures,    strategic    alliances    and
licensing/distribution agreements for the Company. From November 1994 until July
1996,  Mr.  Stuart acted as  President  and CEO of WDC and was  responsible  for
managing and operating the facility.  From March 1986 until May 1993, Mr. Stuart
was employed by Liquid Air Corporation,  Buld Gases Division first as a Business
Manager for South Florida and then as a Program Manager for Food Freezing.  From
February 1981 until February 1986, Mr. Stuart was employed by NCR Corporation in
the Systemedia  Division  initially as a Territory  Manager and then as a Senior
Account Manager. Mr. Stuart received a B.A. degree in marketing in 1980 from the
University of South Florida.

     Irwin Newman, age 50, has served as a Director since 1993

     Currently,  Mr. Newman provides financial advisory services to the Board of
Directors.  From 1993 until the present,  Mr.  Newman  served as the Senior Vice
President of Finance for Falcon  Marketing &  Management,  Inc. From 1993 to the
present,  Mr.  Newman has served as the President of Jenex  Financial  Services,
Inc. ("Jenex"), an affiliate of Falcon Marketing & Management Inc. Mr. Newman is
the principal of Jenex.  Mr. Newman is and has been a practicing  attorney since
1973. From 1993 to 1998, Mr. Newman served as Vice President and General Counsel
for Boca Raton Capital  Corporation,  a publicly owned, NASDAQ listed investment
holding  company where he completed an Initial Public  Offering for a $4 million
subsidiary,  completed a $3.5 million secondary offering and was responsible for
shareholder  and investor  relations.  From 1983 to 1988, Mr. Newman served with
the New York  Stock  Exchange  firms of Gruntal & Co. and  Butcher  and  Signer,
specializing in common and preferred  stocks,  options,  municipal and corporate
bonds and GNMA's.  During this period,  he broadcast a daily  television  market
comments  program over the Financial  News Network.  Mr. Newman  received a B.S.
degree in Business  Administration  from Syracuse  University in 1970 and a J.D.
degree from the University of Florida in 1973.

     Sam Norton, age 39, has served as a Director since 1992.



<PAGE>



     Mr. Norton  provides  business and legal advisory  services to the Board of
Directors. Mr. Norton is an attorney with the firm Norton, Gurley,  Hammersley &
Lopez, P.A. in Sarasota, Florida. Mr. Norton practices primarily in the areas of
real estate,  banking,  corporate and business transactions and is a Florida Bar
board  certified real estate  specialist,  having earned such  certification  in
1991. He has  practiced  law in Sarasota  since 1985 and is the past Chairman of
the Joint  Committee  of the  Sarasota  Board of  Realtors/Sarasota  County  Bar
Association.  Mr. Norton is active in Sarasota civic organizations and currently
serves  as a member of the Board of  Directors  of  Sarasota  Bank.  Mr.  Norton
graduated from the  University of Florida in 1981 and earned a J.D.  degree from
Stetson  University School of Law in 1984 where he graduated Cum Laude. While in
law school, Mr. Norton was chosen to serve on the Law Review. He was admitted to
the Florida Bar in 1985.

     David Swor, age 66, has served as a Director since 1992.

     Mr.  Swor,  who is the  father  of Dr.  Swor,  provides  business  advisory
services for the Board of Directors.  From 1985 until the present,  Mr. Swor had
been engaged in the real estate  brokerage  business as the owner of Swor,  Inc.
The firm  specializes in the  development of commercial  real estate  properties
along with operating other related  business  interest,  holdings and investment
properties. From 1992 to the present, Mr. Swor has been a member of the Board of
Directors of SunTrust Bank in Sarasota,  Florida. From 1974 until 1985, Mr. Swor
was a co-owner of the real estate firm of Swor & Santini, Inc. which specialized
in commercial real estate and investments.  From 1973 until 1975, Mr. Swor was a
realtor  with Russ  Gorgone,  Inc..  From 1971  until  1973,  Mr.  Swor was Vice
President  and  co-owner  of  Carroll  Oil  Company,  which  operated  a  Texaco
distributorship  in Fort Myers,  Florida.  From 1959 until 1971,  Mr. Swor was a
salesman for Texaco and from 1958 until 1959, Mr. Swor was in advertising  sales
for the  Orlando  Sentinel  Star.  Mr.  Swor  received  a B.A.  degree  from the
University of Kentucky in 1955 and holds teaching  certificates  from the states
of Kentucky and Florida.

     Tom DeCesare, age 66, has served as a Director since 1992.

     Mr.  DeCesare,  who is the  father in law of Dr.  Swor,  provides  business
advisory services for the Board of Directors. Mr. DeCesare has been the Mayor of
Madeira Beach,  Florida since August 1993. Prior to that time, he served as Vice
Mayor from April 1993 and as a  Commissioner  from April 1991 until  April 1993.
From 1967 until 1987, was employed by Metropolitan  Life Insurance Company where
he ended his career as a Vice  President.  Mr.  DeCesare  received a Bachelor of
Arts degree from the University of Minnesota in 1959.

     William B. Saye, MD, FACOG, FACS, age 59, has served as Medical Director of
ALTC VirtualLabs since November 1998 and as a Director since January, 1999.

     Dr. Saye is the founder, CEO and Medical Director of ALTC. ALTC was started
in 1990. Dr. Saye is also the Clinical  Assistant  Professor of OB/GYN for Emory
University  School of Medicine in  Atlanta,  Georgia.  Dr.  Saye,  with  another
pioneering   surgeon,   made  medical   history  when  he  performed  the  first
laparoscopic cholecystectomy (removal of the gall bladder) in the United States.
In the past nine (9) years, Dr. Saye has been instrumental in training more than
15,000  surgeons  in  various   laparoscopic   techniques  and  spearheaded  the
development  of  a  new  minimally  invasive  therapy,   laparoscopic  Doderlien
hysterectomy.  Dr. Saye  received a BS from Georgia  Institute of  Technology in
1962 and his MD degree from Tulane  University  Medical School in 1965. Dr. Saye
is board  certified  in  Obstetrics  and  Gynecology  and in  Advance  Operative
Paparoscopy. Dr. Saye is the author of numerous articles on laparoscopic surgery
and techniques.

Scientific Advisory Board



<PAGE>



     In addition to the  officers and  directors of the Company,  Surgical has a
scientific  advisory  board  which  has  provided  advisory  input on  products,
research and  educational  projects for the  Company.  Inactive  members of this
board can be called on to address  issues  which arise in ongoing  research  and
development  projects.   Active/Inactive   status  depends  upon  the  level  of
participation in the Company's  current  activities.  Scientific  Advisory Board
members  receive no salaries  for their  services  but are  compensated  for any
reasonable out of pocket expenses incurred on behalf of the Company. Included on
such board are the following:

Mark Davis, M.D.
OB/GYN Physician & Safety Consultant
DeKalb Medical Center
Atlanta, Georgia

Donna Haiduven, RN/C.I.C.
Infection Control Specialist
Santa Clara Valley Medical Center
San Jose, California

Robert Morrison, M.D.
Optometrist/Chairman, Morrison International
New York, New York

Gail Lebovic, M.D. (Inactive)
Breast Surgeon
Co-Founder, Bay Area Breast Center
Palo Alto, California

Sharon Tolhurst, RN, MBA
Director, Cape Surgery Center
Sarasota, Florida

John Nora, M.D.
General Surgeon
Sarasota, Florida

George Maroulis, M.D. (Inactive)
Professor, University of South Florida
College of Medicine, Department of OB/GYN

Marguerite Barnett, M.D. (Inactive)
Plastic Surgeon
Venice, Florida

Ruth Dyal, M.D. (Inactive)
OB/GYN, Women's Care Specialists
Sarasota, Florida

Neil Pollack, M.D.
OB/GYN, Women's Care Specialists
Sarasota, Florida

Michael Shroder, M.D.
OB/GYN, Women's Care Specialists
Sarasota, Florida


<PAGE>



Galen Swartzendruber, M.D.
OB/GYN, Women's Care Specialists
Sarasota, Florida

Phyliss Barber
FDA Compliance Consultant
Sarasota, Florida

Anne Johnson, O.R.T.
Surgical Technician
Columbus, Ohio

Andrew Garlisi, M.D.
Emergency Medicine
LaPorte, Indiana

Dr. Nathan Belkin
Former Researcher and Author in the infection control field

Scott Silverstein, M.D.
Occupational Health and Information Systems Specialist
Wilmington, Delaware

Gail Vallone
Operating Room Technologist
Las Vegas, Nevada

OASiS Medical Advisory Panel

     In addition to the  officers and  directors of the Company,  Surgical has a
medical  advisory  panel  which  approves,  edits  and  contributes  to  content
information  for the OASiS system.  Medical  Advisory  Panel members  receive no
salaries for their services but are compensated for any reasonable out of pocket
expenses  incurred  on behalf of the  Company.  Included  on such  panel are the
following:

Michael Abidin, MD
Nathan Belkin, PhD
Trish  Carlson, RN, CEN, CFRRN  
Dorothy  Corrigan, RN 
Mark  Davis, MD 
Donna Haiduven, BSN, MSN, CIC 
Pamela Hart, CLS 
Richard  Howard, MD 
James Li, MD 
Mark Lipman, MD 
James A. McGregor, MD CM 
Trista Negele, MD 
Heidi M. Stephens, MD 
Pam Tenaerts, MD 
Steven Weinstein, MT

     (b) Section 16(a) Beneficial Ownership Reporting Compliance

     No Director,  Officer,  Beneficial  Owner of more than ten percent (10%) of
any class of equity  securities  of the  Company  failed  to file on a timely


<PAGE>

basis  reports  required by Section  16(a) of the  Exchange  Act during the most
recent fiscal year or prior fiscal years.

Item 10.  Executive Compensation

<TABLE>
<CAPTION>
                                                      Long Term Compensation
                                                  ------------------------------

                       Annual Compensation           Awards              Payouts
            ---------------------------------    ---------------------   -------

(a)         (b)      (c)      (d)      (e)       (f)         (g)         (h)       (i)
Name                                   Other     Restricted  Securities            All Other
and                                    Annual    Stock       Underlying  LTIP      Compen-
Principal            ($)      ($)      Compen-   Award(s)    Options/    Payouts   sation ($)
Position    Year     Salary   Bonus    sation    ($)                               (1)
---------------------------------------------------------------------------------------------
<S>         <C>      <C>      <C>      <C>       <C>         <C>         <C>       <C>
G.          1996     -                                                             5,280
Michael     1997     -                                                             4,877
Swor,       1998     32,500                                                        5,400
Chairman
of the
Board
and
Treasurer
(2)
---------------------------------------------------------------------------------------------
Frank M.    1996     -
Clark       1997     -
President   1998     32,731                      50,000      70,417
and CEO
(3)
---------------------------------------------------------------------------------------------
Donald      1996     -
K.          1997     16,675                      13,657
Lawrence    1998     57,278                                  17,604
Executive
Vice
President
(4)
---------------------------------------------------------------------------------------------
James D.    1996     49,536                                                        8,944
Stuart      1997     47,166                                                        5,676
Former      1998      6,000                                                        4,020
Executive
Vice
President
(5)
---------------------------------------------------------------------------------------------
</TABLE>

(1)  All other compensation  includes certain health and life insurance benefits
     paid by the Company on behalf of its employee.

(2)  Dr. Swor did not  receive  any salary  prior to June 1998 at which time the
     Company and he executed an Employment Agreement for a salary of $60,000 per
     year. Other compensation includes life insurance paid by the Company.


<PAGE>


(3)  Mr. Clark  executed an Employment  Agreement  with the Company in June 1998
     for an annual salary of $60,000.  As a signing  bonus,  Mr. Clark  received
     50,000 shares of restricted stock in the Company which is valued at $50,000
     and options to purchase  200,000 shares of the Company's Common Stock at an
     exercise  price of $1.75 per share.  The Company's  options have no current
     trading value.

(4)  Mr. Lawrence executed an Employment  Agreement with the Company in May 1997
     for an annual salary of $50,000.  As  consideration  for the acquisition of
     the assets of Endex,  Mr.  Lawrence  received  250,000 shares of restricted
     stock in the  Company.  Such  shares  were  valued  at the  asset  value of
     $13,657. In June 1998, the Company granted Mr. Lawrence options to purchase
     100,000 shares of the Company's  Common Stock at an exercise price of $1.75
     per share. The Company's options have no current trading value.

(5)  Mr. Stuart acted as the Executive Vice President of the Company until June,
     1998.  Other  compensation  includes  a  portion  of his  health  insurance
     premiums which were paid by the Company and life insurance.

Year End Option Values for Executive Officers

<TABLE>
<CAPTION>

Name              Exercised      Value Realized    No. of          Value of
                                                   Unexercised     Unexercised
                                                   Exercisable/    Exercisable/
                                                   Unexercisable   Unexercisable
--------------------------------------------------------------------------------
<S>               <C>            <C>               <C>             <C>
G. Michael        0              0                 3,850,686/      473,634/
Swor                                                0               0

Frank M. Clark    0              0                 200,000/         0/
                                                    0               0

Donald K.         0              0                 100,000/         0/
Lawrence                                            0               0

James D. Stuart   0              0                  (1)            (1)
</TABLE>



(1)  Mr. Stuart was not an executive officer at the year end 1998 and the number
     of  unexercised   exercisable/unexercised  and  the  value  of  unexercised
     exercisable/unexercised options were not included in this table.

     In November 1998, the Company  entered into a seven (7) year  collaborative
agreement with Dr. William B. Saye, the Medical Director and CEO of the Advanced
Laparoscopy  Training  Center in  Marietta,  Georgia  ("ALTC")  under  which the
Company  acquired the "digital  rights" of ALTC and the resulting  amalgam as it
relates to surgical  education and marketing rights to the ALTC database.  Under
this agreement, Dr. Saye became a member of the Company's Board of Directors and
agreed to act as the  Medical  Director of ALTC  VirtualLabs.  Dr. Saye is to be
compensated for travel expenses and will be paid an honorarium of $2,500 per day
when his services are requested by Surgical.  In addition,  Dr. Saye was awarded
stock options to  purchase  up to  1,000,000  shares of the  Company's Common 


<PAGE>

Stock over the period,  300,000 of which were issued upon the  execution  of the
agreement,  and the balance of which are issuable monthly.  The intention of the
agreement is that any  educational  activity  involving  ALTC or Dr. Saye on the
Internet  or other  digital  presence  would be the  property  of and  under the
control of Surgical.

     Except for certain shares of the Company's Common Stock issued and sold and
options  granted to the ten (10)  executive  officers  and/or  directors  of the
Company in consideration for various cash, loans and services  performed for the
Company by each of them,  and rent paid to a company  controlled by Dr. Swor for
the Company's facility,  cash or non-cash compensation in the amount of $276,083
was awarded to,  earned by or paid to  executive  officers or  directors  of the
Company for all services rendered in all capacities to the Company since January
1, 1996.

     The  Company has adopted an  Employee  Stock  Option Plan and a  Consultant
Stock Option Plan.

Employee Contracts and Agreement

     The Company has entered into Employee  Agreements  with Dr. Swor, Mr. Clark
and Mr. Lawrence.

     The agreement  with Dr. Swor was entered into on June 15, 1998. Dr. Swor is
employed  as the  Treasurer  and  Medical  Director  of the Company at an annual
salary of $60,000.  The  agreement is for a term of one (1) year,  which term is
renewable year to year unless either party  provides  notice to the other within
fourteen  (14)  days  prior to the  expiration  that it seeks to  terminate  the
agreement.  Dr.  Swor is  required to devote such time as is required to fulfill
his duties to the  Company.  Dr. Swor is  reimbursed  reasonable  and  necessary
expenses  incurred  on behalf of the  Company.  Prior to the  execution  of this
agreement, Dr. Swor received no salary for his services to the Company since its
inception.

     The agreement  with Mr. Clark was entered into on June 15, 1998.  Mr. Clark
is employed as the  President  and CEO of the Company for a term of one (1) year
at a salary of $60,000, which term is renewable year to year unless either party
provides  notice to the other within  fourteen (14) days prior to the expiration
that it seeks to terminate the  agreement.  Mr. Clark is required to devote such
time as is  required  to  fulfill  his  duties  to the  Company.  Mr.  Clark  is
reimbursed  reasonable and necessary expenses incurred on behalf of the Company.
Mr. Clark  received a signing bonus of 50,000 shares of restricted  stock in the
Company and was  granted  options to purchase  200,000  shares of the  Company's
Common Stock at an exercise price of $1.75 per share.

     The  agreement  with Mr.  Lawrence was entered  into on April 1, 1997.  Mr.
Lawrence is employed as the Marketing  Director of the Company for a term of one
(1) year at a salary of  $50,000,  which term is  renewable  year to year unless
either party provides notice to the other within fourteen (14) days prior to the
expiration that it seeks to terminate the agreement. Commencing January 1, 1998,
Mr. Lawrence became the Executive Vice President of the Company. Mr. Lawrence is
required  to devote  such  time as is  required  to  fulfill  his  duties to the
Company.  Mr. Lawrence is reimbursed  reasonable and necessary expenses incurred
on behalf of the Company.

Key Man Life Insurance

     The Company currently does not maintain key-man life insurance  coverage on
any of its officers or directors.  However, the Company is the named beneficiary
of a key-man life insurance policy currently owned by Dr. Swor.


<PAGE>

Employee and Consultants Stock Option Plans

Employee Stock Option Plan

     On July 21, 1994,  the Board of Directors  adopted an Employee Stock Option
Plan which is  available  to employees  and  Directors of the Company  ("ESOP").
Pursuant  to the ESOP,  employees  are  given  the  opportunity  to  purchase  a
designated  number of shares of the  Company's  common  stock at a pre-set  flat
rate.  The  options  are  granted  for a period  of seven  (7) years and are not
transferable except by will or laws of descent and distribution. The options may
not be  exercised  unless  the  Company  has  filed  an  effective  registration
statement  on Form S-8  relating  to the shares  underlying  the  option.  As to
employees who are not also  directors,  such employees must agree to remain with
the  Company  for a period of two (2) years from the date the option is granted.
In the event that such  employee is  terminated  during such two (2) year period
for cause or at the request of the employee,  to the extent any options have not
been exercised,  the options  terminate  immediately upon the termination of the
employee.  If  termination  is for any other  reason,  the  employee has two (2)
months  from the date of  termination  to  exercise.  In the case of death,  the
options must be exercised within the lesser of (i) three (3) years from the date
of death or (ii) five (5) years from the option  issuance  date.  In the case of
the  capital  restructure  of the  Company,  the  options  are  effective  as if
exercised prior to the capital  restructuring  event. The employee is limited to
exercise  the  equivalent  of  $100,000  of Common  Stock in the  Company in any
calendar year.

     In  January,  1998,  the Board of  Directors  revised  the term of the ESOP
("1998 Revised  ESOP").  Under the revised plan, the term is now determined by a
Committee  consisting of Frank Clark, Thomas DeCesare and Sam Norton (the "Stock
Option Committee"). The Stock Option Committee is evaluating recommendations for
adjusting stock compensation for the Company employees and consultants.

     In January,  1999, the Board of Directors  further  revised the ESOP ("1999
Revised ESOP"). Under the further revised plan which is designated the "Surgical
Safety  Products  1999 Stock  Option  Plan",  employees  qualify for issuance of
Incentive  Stock  Options  under  Section 422 of the Internal  Revenue  Code, as
amended, Non-incentive Stock Options and Reload Options. Directors,  consultants
and  advisors  who are  issued  options  under  the plan only  qualify  for Non-
incentive Stock Options and Reload  Options.  All of the options under this plan
terminate ten (10) years (except  those issued to 10% or more  shareholders,  in
which  case  they  terminate  in five  (5)  years)  from  issuance  and vest for
employees  at the rate of  one-third  each  year for three (3) years and vest as
established  by the  Stock  Option  Committee  for  Directors,  Consultants  and
Advisors.  The plan is overseen by the Board of  Directors  or the Stock  Option
Committee and all issuances are at fair market value as defined in the plan (and
110% of fair market  value in the case of a 10% or more  shareholder).  The plan
provides the exercise rights on death,  disability or termination of employment.
The Company may, at its option,  provide  change of control rights to designated
persons and if granted,  the option  holder is entitled to certain cash payments
on all options granted whether or not vested if the Company changes control.

     Pursuant to the ESOP, the Company has granted options to purchase 4,166,316
shares of the  Company's  Common  Stock  representing  proceeds  on  exercise of
$1,320,000  under the 1994 ESOP,  708,333  shares of the Company's  Common Stock
representing  proceeds  on  exercise of  $683,333  under the 1998  Revised  ESOP
(without  regard to the additional  options to Dr. Saye which accrue at the rate
of  8,333  per  month)  and  193,000  shares  of  the  Company's   Common  Stock
representing  proceeds on exercise of $193,000  under the 1999  Revised  ESOP to
date as follows:



<PAGE>
<TABLE>
<CAPTION>

Employee              Date Option     No. of           Exercise Price    Term
                        Granted       Share subject                      Years
                                      to Exercise
<S>                   <C>             <C>              <C>               <C>
1994 ESOP (1)

G. Michael Swor (2)   07/21/94        3,850,686        $ .317             7

Irwin Newman (3)      07/21/94           63,126        $ .317             7

James D. Stuart       07/21/94           63,126        $ .317             7

Samuel Norton         07/21/94           63,126        $ .317             7

David Swor            07/21/94           63,126        $ .317             7

Thomas DeCesare       07/21/94           63,126        $ .317             7


1998 Revised ESOP

Frank M. Clark (4)    06/15/98          200,000        $1.00              7

Donald L. Lawrence(4) 06/15/98          100,000        $1.00              7

Stacy Quaid (4)       01/01/98           50,000        $0.50              7

Mike Williams (4)     08/03/98           50,000        $1.00              7

William B. Saye (5)   11/20/98          308,333        $1.00              7


1999 Revised ESOP

G. Michael Swor (2)    1/01/99           10,000        $1.00              10

Frank M. Clark         1/01/99           10,000        $1.00              10

Donald L. Lawrence     1/01/99           10,000        $1.00              10

Mike Williams          1/01/99            5,000        $1.00              10

Mike Williams          1/08/99           50,000        $1.00              10

Leann Lafko-Spofford   1/01/99            5,000        $1.00              10

Leann Lafko-Spofford   1/08/99           50,000        $1.00              10

Stacy Quaid            1/01/99            3,500        $1.00              10

Stacy Quaid            1/08/99           21,500        $1.00              10

Eric Hill              1/01/99            3,000        $1.00              10

Eric Hill              1/08/99           25,000        $1.00              10
</TABLE>

--------------------------------------------------------------------------------
(1)  The options  granted  under the 1994 ESOP have been adjusted to reflect the
     new conversion rate in accordance with the capital restructuring provision


<PAGE>

     which came into effect when Surgical Safety Products,  Inc. of Florida 
     merged into Sheffeld Acres, Inc., the surviving New York corporation.

(2)  Dr. Swor received  options for 63,126 shares of the Company's  Common Stock
     as a Director  and options for  3,787,560  shares of the  Company's  Common
     Stock in exchange  for  transfer  of patents and rights to existing  patent
     concepts.  Dr. Swor was granted Non Incentive  Stock Options under the 1999
     Revised ESOP.

(3)  In addition to the options  granted to Mr. Newman for 63, 126 shares of the
     Company's Common Stock as a Director of the Company, options to purchase up
     to 315,630  shares of the  Company's  Common  Stock  were  granted to Jenex
     Financial  Services,  Inc., a company of which Mr. Newman is the principal.
     Jenex is a financial service company which was issued the options under the
     Company's 1994 CSOP.

(4)  Each of these four (4) employees  received  their  options as a bonus;  Mr.
     Clark's as an  additional  incentive  to join the  Company as its CEO,  Mr.
     Lawrence  and Ms. Quaid in  consideration  of  outstanding  services to the
     Company for the prior year and Mr.  Williams as an additional  incentive to
     join the Company as the Sales Manager.  Although the options granted to Mr.
     Clark,  Mr. Lawrence and Mr. Williams were  exercisable at $1.75 per share,
     the Board of  Directors  on January 20,  1999 voted to reduce the  exercise
     price to $1.00.  Since the change was made after  December  31,  1998,  the
     original  exercise price was used in the financial  statements for purposes
     of determining weighted averages. In addition, the Board of Director at the
     January 1999 meeting increased the term of Mr. Clark's options from one (1)
     to seven (7) years.

(5)  Dr. Saye  received  300,000  issued on November  20,  1998.  Dr. Saye is to
     receive   additional   100,000   options  per  year  on  a  monthly  basis.
     Accordingly, 8,333 options are attributable for the month of December 1998.
     The  exercise  price for the options is $1.00 for year one,  $1.50 for year
     two, $2.00 for year three and $2.50 for years 4 through 7.

     On July 21, 1994,  the Board of Directors  also adopted a Consultant  Stock
Option Plan which is available to certain  consultants  who provide  services to
the  Company  ("CSOP").   Pursuant  to  the  CSOP,  consultants  are  given  the
opportunity  to purchase a designated  number of shares of the Company's  common
stock at a pre-set flat rate.  The options are granted for a period of seven (7)
years  and  are  not  transferable  except  by  will  or  laws  of  descent  and
distribution.  The options may not be exercised  unless the Company has filed an
effective  registration  statement on Form S-8 relating to the shares underlying
the  option.  In the  event  the  consultant's  services  are  terminated,  such
consultant  has two (2) months from the date of termination in which to exercise
and in the case of death,  the estate has the lesser of (i) three (3) years from
the date of death or (ii) five (5) years from the option  issuance date in which
to exercise.  In the case of the capital restructure of the Company, the options
are effective as if exercised prior to the capital  restructuring  event.  There
are no yearly  limitation  on the amount of options  which may be  exercised  by
consultants.

     In  January,  1998,  the Board of  Directors  revised  the term of the CSOP
("1999 Revised CSOP"). Under the revised plan, the term is now determined by the
Stock  Option  Committee.  The  1998  CSOP  requires  that the  options  are not
exercisable for a period of two (2) years from issuance

     In January,  1999,  the Board of  Directors  adopted the 1999  Revised ESOP
which covers consultants and advisors to the Company.

     Pursuant to the CSOP, the Company has granted options to purchase 346,115


<PAGE>

shares of the Company's  Common Stock  representing  proceeds of $110,700 to the
Company under the 1994 CSOP,  options to purchase29,000  shares of the Company's
Common  Stock  representing  proceeds of $39,500 to the  Company  under the 1998
Revised  CSOP and 115,000  shares of the  Company's  Common  Stock  representing
proceeds of $115,000 under the 1999 Revised ESOP to date as follows:

<TABLE>
<CAPTION>

Consultant/                  Date       No. of           Exercise Price    Term
Services Rendered            Option     Share subject                      Years
                             Granted    to Exercise
<S>                          <C>        <C>              <C>               <C>
1994 CSOP(1)

Danielle Chevalier           07/21/94     3,156           $ .317           7
   For marketing assistance
   at conventions

Donna Haiduven               07/21/94    15,782           $ .317           7
   For medical advisory and
   clinical studies

Jenex Financial Services
Inc. (2)                     07/21/94   315,630           $ .317           7
   For financial advisory and
   corporate financing
   consulting services

Leann Swor                   07/21/94     6,313           $ .317           7
   For marketing assistance
   at conventions

Loren Schuman                07/21/94     4,734           $ .480           7
   For marketing consulting
   services

Bruce Cohen                  01/24/95       500           $0.90            7
   Performed business
   valuations of acquisition
   candidates

1998 Revised CSOP

Danielle Chevalier           01/01/98     2,000           $0.50            7
   For marketing assistance
   at conventions

Leann Swor                   01/01/98     2,000           $ .050           7
   For marketing assistance
   at conventions

T.T. Communications          10/15/98    25,000           $1.50            7
   For investor relations
   services
</TABLE>





<PAGE>
<TABLE>

<S>                          <C>        <C>              <C>               <C>
1999 Revised ESOP
David Collins (3)             1/01/99   10,000           $1.00             10
   For financial consulting
   services

David Collins (3)             1/19/99   65,000           $1.00             10
   For financial consulting
   services

Scott Heap, Ad-Vantagenet     1/8/99    20,000           $1.00             10
   For OASiS development
   services

Ray Villares, Ad-Vantagenet   1/8/99    20,000           $1.00             10
   For OASiS development
   services
</TABLE>

--------------------------------------------------------------------------------
(1)  The options  granted  under the 1994 CSOP have been adjusted to reflect the
     new conversion rate in accordance with the capital restructuring  provision
     which came into  effect  when  Surgical  Safety  Products,  Inc. of Florida
     merged into Sheffeld Acres, Inc., the surviving New York corporation.

(2)  These  options  were  granted to Jenex in exchange  for  certain  financial
     services provided to the Company. Mr. Newman, a Director of the Company, is
     the principal of Jenex.  Mr. Newman is deemed the beneficial owner of these
     options.

(3)  David Collins  received  these options as a consultant to the Company prior
     to his election to the Board of Directors on January 20, 1999.

Compensation of Directors

     The Company has no standard  arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets  forth  information  as of  December  31,  1998,
regarding the ownership of the Company's Common Stock by each shareholder  known
by the Company to be the beneficial  owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group.  Except as otherwise  indicated,  each of the shareholders
has sole voting and  investment  power with respect to the share of Common Stock
beneficially owned.
<TABLE>
<CAPTION>

<S>                   <C>           <C>                     <C>
Name and Address of   Title of      Amount and Nature of    Percent of
Beneficial Owner      Class         Beneficial Owner        Class

Dr. G. Michael Swor   Common        3,792,890 (1)           35.16

Frank M. Clark        Common           50,000                 .47

Donald K. Lawrence    Common          250,000                2.32

James D. Stuart       Common          848,182 (2)            7.86
</TABLE>



<PAGE>

<TABLE>
<S>                   <C>           <C>                     <C>
Irwin Newman          Common        -0-                     -0-

Sam Norton            Common         53,400                  .50

David Swor            Common        473,445                 4.39

Tom DeCesare          Common          9,469                  .09

Dr. William B. Saye   -             -                       -

David Collins         -             -                       -
</TABLE>

All Executive Officers 
and Directors
as a Group (ten (10) persons)      5,477,386 (3)             50.78 (3)
----------

(1)  This  includes  631,260  owned by Dr. Swor's wife of which he is deemed the
     beneficial owner

(2)  This  include  31,563  which Mr.  Stuart owns  jointly with his brother and
     816,619 which Mr. Stuart received as a gift from Dr. Swor in 1996.

(3)  In addition to the shares owned by the Executive  Officers and Directors as
     a group,  said  officers and directors own  (including  those  beneficially
     held) options to purchase  5,278,094  shares of the Company's  Common Stock
     (without  regard to the additional  options to Dr. Saye which accrue at the
     rate of 8,333 per month) pursuant to Employee Stock Option Plans adopted in
     1994,  1998 and 1999.  In the  event  all such  options  to  purchase  were
     exercised,  this  group  would  own a total  of  10,755,480  shares  of the
     Company's  Common Stock which would represent 66.95% of the total shares of
     Common Stock outstanding.

     There are no arrangements  which may result in the change of control of the
Company.

Item 12.  Certain Relationships and Related Transactions

     On  June 1,  1992,  the  Company  issued  11,300  shares  of the  Company's
restricted stock to Dr. Swor and 2,000 shares to Mrs. Swor (of which Dr. Swor is
deemed the beneficial  owner) each in exchange for services rendered to Surgical
valued at a total of $1,400.  Following  the merger with Sheffeld  Acres,  Inc.,
these shares were converted into 4,197,879 shares in the  restructured  company.
In 1996, Dr. Swor received 478,630 shares of restricted stock as payment of debt
and  related  interest  on loans  which Dr.  Swor made to the  Company  totaling
$239,315.  In 1996, Dr. Swor gifted 816,619 of his shares to James D. Stuart. In
September,  1996  Savannah  Leasing  purchased the  Company's  executive  office
building  at 2018 Oak Terrace  with cash from Dr. Swor and 50,000  shares of his
stock which were valued at $0.50 per share. These shares were transferred to the
third party seller.  At December 31, 1997,  the Company was indebted to Dr. Swor
in the amount of  $197,720.  In  addition,  the Company was indebted to Savannah
Leasing,  a company owned by Dr. and Mrs.  Swor. The amount owed at December 31,
1997 was  $36,000.  Interest  on the notes was  10.0%.  At  December  31,  1997,
interest payable on these loans totaled $17,667. Out of the proceeds of the sale
of the Company's Common Stock during the period of March 1998 through June 1998,
the Company made  repayment of principal and interest on the 1997  indebtedness.
During  fiscal  1998,  Dr. Swor loaned the Company an  additional  $23,000.  The
balance of these notes payable was repaid during fiscal 1998 and at December 31,
1998, there was not amounts due to Dr. Swor.  Interest expense relating to these
notes  amount to $9,882 and $15,314 for the years  ended  December  31, 1998 and
1997  respectively.  Dr. Swor has a year to year  employment  contract  with the
Company.


<PAGE>


     On June 1, 1992,  the Company  issued 1,500 shares of  restricted  stock to
David Swor for which it received  $15,000.  Following  the merger with  Sheffeld
Acres, Inc., these shares were converted into 473,445 shares in the restructured
company.

     On  November  5, 1992,  the  Company  issued  120  shares of the  Company's
restricted stock to Sam Norton for which it received  $6,000.  On March 1, 1993,
the Company issued 34 shares of the Company's restricted stock to Sam Norton for
which it received $2,000.  Following the merger with Sheffeld Acres, Inc., these
shares were converted  into 48,607.  In 1996, the Company issued 4,793 shares of
the  Company's  restricted  stock to Mr.  Norton as payment  for legal  services
valued at $4,793.

     On March 1, 1993, the Company issued 100 shares of the Company's restricted
stock to James D. Stuart and David Stuart jointly for which it received  $6,000.
On May 9, 1993, the Company issued 100 shares of the Company's  restricted stock
to Mr.  Stuart in exchange for services  rendered  valued at par.  Following the
merger with Sheffeld Acres,  Inc.,  these shares were converted into 63,126.  In
1996, Mr. Stuart received  816,619 shares of restricted stock from Dr. Swor as a
gift.

     On March 1, 1993, the Company issued 30 shares of the Company's  restricted
stock to Tom DeCesare in exchange for services rendered valued at par. Following
the merger with Sheffeld Acres, Inc., these shares were converted into 9,469.

     On July 21, 1994, the Board of Directors  adopted the 1994 ESOP and awarded
options to purchase the post-merger equivalent of 63,126 shares of the Company's
Common Stock to each of the Company's six (6) directors at an exercise  price of
$.317.  There was no value  attached to the grant of such  options.  At the same
time, the Company awarded Dr. Swor options to purchase  3,787,560  shares of the
Company's  Common  Stock at an  exercise  price of  $.317  in  exchange  for the
transfer of certain  patents and rights to previously  patented  concepts to the
Company, which patents and rights were valued at approximately $1,200,000.

     On July 21, 1994,  the Board of Directors  also adopted the 1994 CSOP under
which it awarded  options to purchase the  post-merger  equivalent of a total of
346,115  shares of the  Company's  Common  Stock.  These options were granted to
consultants in  consideration of services  valued;  however,  there was no value
attached to the grant of such options.

     On  December  8,  1997,  the  Company  acquired  all of the assets of Endex
Systems,  Inc.,  d/b/a  InterActive PIE ("Endex"),  a Florida  corporation.  The
assets of Endex  were  valued at  approximately  $14,000  for which the  Company
issued 250,000 shares of restricted common stock. Endex was a medical multimedia
software  company,  experienced  in  computer  graphics  related to the  medical
industry.  The  acquisition  was made to implement  the  Company's  Data Systems
Division's  development of its surgical  safety,  touch-screen  network known as
OASiS.  The  President  and Chief  Executive  Officer  ("CEO") of Endex,  Donald
Lawrence,  became the Vice President of Sales and Marketing of the Company.  Mr.
Lawrence has a year to year employment  contract with the Company.  (See Part I,
Item 6.  "Executive  Compensation - Employee  Contracts".) In  consideration  of
outstanding  service to the Company in 1997, Mr.  Lawrence was granted an option
to purchase  100,000  shares of the  Company's  Common Stock at a price of $1.75
under the 1998  Revised  ESOP.  In January  1999,  the Board voted to reduce the
exercise price on the option to $1.00 per share.  There was no value attached to
the grant of such options.

     In March 1998, the Company  entered into an agreement  with  Stockstowatch,
whereby  Stockstowatch  agreed to provide investor relations services as a media
consultant  to the Company in  exchange  for  issuance of 300,000  shares of the
Company's  Common Stock valued at $45,000.  On October 27, 1998, the SEC brought
an action against Stockstowatch and its principal,  Steven  A.  King, for


<PAGE>

injunctive and other relief to enjoin the defendants from touting and "scalping"
securities in violation of the  anti-fraud  and  anti-touting  provisions of the
federal securities laws (Securities and Exchange Commission v. Stockstowatch.com
and Steven A. King,  United States District  Court,  Middle District of Florida,
Tampa Division, Case No. 98-2198-CIV- T-26B). The SEC alleges that since October
1997,  the  defendants  touted  the  securities  of  at  least  five  "microcap"
companies,  one of which is Surgical,  over the Internet  through e-mail sent to
over 200,000  subscribers and on the defendant's  website.  The SEC has taken no
action  against  Surgical  nor has it made  any  allegations  that  the  Company
directly  or  indirectly  acted  improperly  in  this  matter  or was in any way
involved in the alleged violations.

     In the Stockstowatch  complaint,  the SEC further alleges that almost every
stock touted by the  defendants (1) the volume and/or price  increased  sharply,
sometimes as much as 200% shortly after the defendants' buy recommendations; and
(2) the defendants took advantage of the market interest they created by selling
into  the  inflated   market  large  amounts  of  the  stock  they  received  in
consideration of their  promotional  services.  Further the SEC alleges that the
defendants  realized  profits  in  excess  of $1  million  from  sales  of these
securities. The SEC alleges that the defendants failed to disclose that they had
received stock as  compensation  from the issuers of the securities  they touted
and did not disclose  that they intended to sell the stock in  contravention  of
their buy  recommendations  which is a fraudulent  practice known as "scalping".
The SEC is seeking  permanent  injunctive  and  equitable  relief,  including an
accounting,   disgorgement  of  gains  with  pre-judgement  interest  and  civil
penalties against each defendant.  The SEC alleges,  with reference to Surgical,
that Surgical  entered into a consulting  agreement with  Stockstowatch on March
19, 1998 in which  Stockstowatch  agreed to profile  Surgical  in  exchange  for
300,000  free-trading  shares of its Common Stock.  On the date the contract was
executed, Surgical's Common Stock was trading at $.145. The shares were received
by Stockstowatch on April 9, 1998, on which date Surgical's  Common Stock closed
at $.87. According to the Complaint,  on April 21, 1998,  Stockstowatch e-mailed
the Surgical Profile to its subscribers.  In the profile,  Stockstowatch  stated
that Surgical  "represents the most positive upside  potential of any company we
have  profiled." This profile  continued:  "[a]s a result of our own independent
due diligence,  our industry  insiders believe this stock will be a $20.00 stock
within 18 months." The SEC states in its complaint  that there was a small print
disclaimer  which  accompanied the profile which stated that  Stockstowatch  had
entered  into  a  compensation  agreement  valued  at  $43,500,  but  that  such
disclaimer did not disclose that Stockstowatch  received Surgical's Common Stock
and that it intended to sell the stock after the profile.

     In March 1998, the Company  issued  100,000 shares of the Company's  Common
Stock valued at $15,000 to Mintmire & Associates in exchange for legal services.

     In April 1998,  the Company  issued  2,500  shares of  restricted  stock to
Xavier Calderon in exchange for computer consulting services valued at $4,375.

     On June  15,  1998,  the  Company  engaged  Frank  M.  Clark  to act as the
President of the Company.  As such he received  50,000  shares of the  Company's
Common Stock as a signing  bonus valued at $50,000 and options to purchase up to
200,000 shares of the Company's Common Stock at a price of $1.75 per share under
the 1998 Revised ESOP.  In January 1999,  the Board voted to reduce the exercise
price on the option to $1.00 per share and to increase  the exercise  term.  Mr.
Clark's  shares were  valued at $50,000  and there was no value  attached to the
grant of his options.  Mr. Clark has a year to year employment contract with the
Company.

     In  October  1998,  the  Company   entered  into  an  agreement  with  T.T.
Communications,  Inc. to provide  investor  relations  services for the Company.
T.T.  Communications,  Inc.'s function is to contact investment and media people
throughout  the  United  States  and  to  participate  in  the   preparation  of
communication  packages  including annual and quarterly  reports,  new and press
releases and publicity and corporate profiles. The initial agreement is for a


<PAGE>

period of three (3) months for which T.T.  Communications,  Inc. receives $2,000
per month  and  reimbursement  of out of  pocket  expenses.  In  addition,  T.T.
Communications,  Inc.  was  granted  options to  purchase  25,000  shares of the
Company's  Common  Stock at an  exercise  price  of  $1.50.  In the  event T. T.
Communications, Inc. introduces the Company to a suitable financing source, they
will be  compensated  by a cash  finder's  fee  equal  to  1.5%  on the  initial
financing and .75% on any subsequent  financing.  The agreement is cancelable by
either party with 30 days written notice.

     In November 1998, the Company  entered into a seven (7) year  collaborative
agreement with Dr. William B. Saye, the Medical Director and CEO of the Advanced
Laparoscopy  Training  Center in  Marietta,  Georgia  ("ALTC")  under  which the
Company  acquired the "digital  rights" of ALTC and the resulting  amalgam as it
relates to surgical  education and marketing rights to the ALTC database.  Under
this agreement, Dr. Saye became a member of the Company's Board of Directors and
agreed to act as the  Medical  Director of ALTC  VirtualLabs.  Dr. Saye is to be
compensated for travel expenses and will be paid an honorarium of $2,500 per day
when his services are requested by Surgical.  In addition,  Dr. Saye was awarded
stock options to purchase up to 1,000,000  shares of the Company's  Common Stock
over the  period,  300,000  of which  were  issued  upon  the  execution  of the
agreement,  and the balance of which are issuable monthly.  The intention of the
agreement is that any  educational  activity  involving  ALTC or Dr. Saye on the
Internet  or other  digital  presence  would be the  property  of and  under the
control of Surgical.

     Pursuant to a settlement  agreement  dated December 1, 1998 relative to the
litigation between the parties,  the Company agreed to pay MediaWorks,  a former
consultant to Surgical $50,000 and to issue 40,000 shares of Rule 144 stock.

Item 13.  Exhibits and Reports on Form 8-K

        (a)    Exhibits

Item
No.  Description

2.1  Articles of  Incorporation  of Surgical  Safety  Products,  Inc., a Florida
     corporation filed May 15, 1992,

2.2  Articles of Amendment filed December 9, 1992

2.3  Articles of Amendment filed July 19, 1994

2.4  Articles of Amendment filed October 11, 1994

2.5  Articles of Incorporation  of Sheffeld Acres,  Inc., a New York Corporation
     filed May 7, 1993

2.6  Articles of Merger filed in the State of Florida October 12, 1994

2.7  Certificate of Merger filed in the State of New York February 8, 1995

2.8  Certificate to Do Business in the State of Florida filed April 11, 1995

2.9  Certificate of Amendment filed May 1, 1998

2.10 Bylaws of Sheffeld Acres, Inc., now known as Surgical Safety Products, Inc.



<PAGE>



2.11 Amended Bylaws of Surgical Safety Products, Inc.

6.1  Acquisition of Endex Systems, Inc. d/b/a/ InterActive PIE dated December 8,
     1997

6.2  Prepaid Capital Lease Agreement with Community Health Corporation  relative
     to Sarasota Medical Hospital OASiS Installation dated January 30, 1998

6.3  Letter of Intent with United States Surgical Corporation dated February 12,
     1998

6.4  Form of Rockford  Industries,  Inc. Rental Agreement and Equipment Schedule
     to Master Lease Agreement

6.5  Ad-Vantagenet Letter of Intent dated June 19, 1998

6.6  Distribution Agreement with Morrison International Inc. dated September 30,
     1996

6.7  Distribution Agreement with Hospital News dated August 1, 1997

6.8  Clinical  Products Testing  Agreement with Sarasota Memorial Hospital dated
     January 30, 1998

6.9  Real Estate Lease for Executive Offices effective June 1, 1998

6.10 Employment Agreement with Donald K. Lawrence dated April 1, 1997

6.11 Employment Agreement with G. Michael Swor dated June 15, 1998

6.12 Employment Agreement with Frank M. Clark dated June 15, 1998

6.13 Agreement for Consulting Services with  Stockstowatch.com  Inc. dated March
     30, 1988

6.14 Form of Employee Option Agreement dated July 1994

6.15 Form of Employee Option Agreement dated 1998

6.16 Form of Consultants Option Agreement dated July 1994

6.17 Form of Consultants Option Agreement dated 1998

6.18 Confidential Private Offering Memorandum dated May 30, 1995

6.19 Supplement to Private Offering Memorandum dated October 30, 1995

6.20 Stock Option Agreement with Bay Breeze Enterprises LLC dated April 9, 1998

6.21 Revolving  Loan  Agreement,   Revolving  Note,   Security   Agreement  with
     SouthTrust Bank dated May 2, 1997

6.22 Agreement between the Company and T. T. Communications,  Inc. dated October
     15, 1998

6.23 Agreement between the Company and U.S.  Surgical  Corporation dated October
     28, 1998.


<PAGE>



6.24 Collaborative  Agreement  between the Company and Dr. William B. Saye dated
     November 16, 1998.

6.25 Kiosk Information System, Inc. Purchase Order dated November 3, 1998

6.26 Surgical Safety Products 1999 Stock Option Plan adopted January 1999

6.27 Form of the Employee  Option  Agreement  under the Surgical Safety Products
     1999 Stock Option Plan dated January 1999

6.28 Form of the Director,  Consultant  and Advisor Option  Agreement  under the
     Surgical Safety Products 1999 Stock Option Plan dated January 1999

6.29 Verio,   Inc.   Access   Service   Agreement   dated   February  16,  1999.
     ----------------

(All of the above  Exhibits  previously  have been filed with the Company's Form
10-SB or Amendment No. 1 to the Form 10-SB)

(b)  Reports on Form 8-K

     The Company  did not file any  reports on Form 8-K during the last  quarter
covered by this report.

                                           SIGNATURE

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


                                           Surgical Safety Products, Inc.
                                               (Registrant)


Date: March 31, 1999                        By:/s/ Frank M. Clark
                                                ------------------
                                                Frank M. Clark
                                                President and CEO

                                             By:/s/ Donald K. Lawrence
                                                ----------------------
                                                Donald K. Lawrence
                                                Vice President and Secretary

                                             By:/s/ G. Michael Swor
                                                -------------------
                                                G. Michael Swor
                                                Treasurer

                                             By:/s/ David Collins
                                                -----------------
                                                David Collins
                                                Acting Chief Financial Officer

     Pursuant to the  requirements  of the  Exchange  Act,  this report has been
signed by the following persons in the capacities and on the dates indicated.



<PAGE>

Signature                    Title                               Date
- ---------                  -----                               ----


/s/ G. Michael Swor          Chairman of the Board               March 31, 1999
- -------------------         and Treasurer
 G. Michael Swor


/s/ Frank M. Clark           President and Chief Executive       March 31, 1999
- -------------------         Officer and Director
 Frank M. Clark


/s/ David Collins            Acting Chief Financial Officer      March 31, 1999
 -------------------         and Director
 David Collins                (principal financial
                              or accounting officer)


/s/ Donald K. Lawrence       Secretary, Vice President and       March 31, 1999
 --------------------        Director
 Donald K. Lawrence


/s/ James D. Stuart          Director                            March 31, 1999
 ---------------------
 James D. Stuart


 /s/ Sam Norton              Director                            March 31, 1999
-----------------------
 Sam Norton


 /s/ David Swor              Director                            March 31, 1999
-----------------------
 David Swor


 /s/ Tom DeCesare            Director                            March 31, 1999
-----------------------
 Tom DeCesare


 /s/ William B. Saye         Director                            March 31, 1999
-----------------------
 William B. Saye


<PAGE>