UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

(Mark One)


        X           QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
---------------
                    SECURITIES EXCHANGE ACT OF 1934

                    For quarterly period ended March 31, 1998

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

                    For the transition period from ____ to _____

Commission file number:    0-28790
                           -------


                           MEDCARE TECHNOLOGIES, INC.
             (exact name of registrant as specified in its charter)



DELAWARE                                     87-0429962 B
--------                                     ------------
(State or other  jurisdiction                (IRS Employer
of incorporation  or  organization)          Identification No.)

Suite 1210 - 1515 West 22nd Street, Oak Brook, Illinois       605232
-------------------------------------------------------       ------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:           (630) 472-5300
                                                              --------------


Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required by Section 13 or 15 (d) of the  Securities  Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required to file such reports),  and (2) has been subject to such filing for the
past 90 days.   Yes   X      No
                      
The number of shares of the Registrant's  Common Stock,  $0.001 par value, as of
March 31st, 1997: 7,225,839.
                  ----------

                                        1

<PAGE>



                           MEDCARE TECHNOLOGIES, INC.
                     FORM 10-Q, QUARTER ENDED MARCH 31, 1998

INDEX

PART I            FINANCIAL INFORMATION

Item 1            Financial Statements

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

Consolidated Balance Sheet at March 31, 1998 and December 31, 1997  .  F-2

Consolidated Statement of Operations For The Quarter Ended
     March 31, 1998, and For the Years Ended December 31, 1997
     and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-4 F-5

Consolidated Statement of Stockholders' Equity From Inception
     (January 17, 1986) Through March 31, 1998 . . . . . . . . . . . . F-6 F-12

Consolidated Statement of Cash Flows For The Quarter Ended
     March 31, 1998, and For the Years Ended December 31, 1997
     and 1996 . . . . . . . . . . . . . .  . . . . . . . . . . . . . . F-13 F-14

Notes to the Consolidated Financial Statements . . . . . . . . . . . . F-15 F-24

All  schedules  are omitted  because  they are not  applicable  or the  required
information is shown in the financial statements or notes thereto.

PART II         OTHER INFORMATION

Item 1          Legal Proceedings. . . . . . . . . . . . . .  . . . . . . . . 39

Item 2          Changes in Securities. . . . . . . . . . . . . .  . . . . . . 39

Item 3          Defaults Upon Senior Securities. . . . . . . . . . . . . .  . 39

Item 4          Submission of Matters to a Vote of Security Holders. . . . .  39

Item 5          Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 39

                Signature Page. . . . . . . . . . . . . .  . . . . . . . . . .40




2

<PAGE>



Item 1            Financial Statements








                          INDEPENDENT AUDITORS' REPORT


Board of Directors
MedCare Technologies, Inc. and
Subsidiaries
Oak Brook, Illinois 60521

We  have  audited  the  accompanying   consolidated  balance  sheet  of  MedCare
Technologies,   Inc.  and  Subsidiaries  (A  Development  Stage  Company),  (the
Company),  as of March 31,  1998,  December  31, 1997 and 1996,  and the related
statements of  operations,  stockholders'  equity and cash flows for the quarter
ended March 31,  1998,  and the years ended  December  31, 1997 and 1996.  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 audit.

We conducted our audit 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 audit of the  financial  statements  provides a  reasonable
basis for our opinion.

In our  opinion,  the  financial  statements  present  fairly,  in all  material
respects,  the financial position of the Company at March 31, 1998, December 31,
1997 and 1996 and the  results  of its  operations  and its cash  flows  for the
quarter  then  ended and the  years  then  ended in  conformity  with  generally
accepted accounting principles.


Clancy  and Co., P.L.L.C.
Phoenix, Arizona
May 6, 1998

                                       F-1

<PAGE>















                                 C O N T E N T S


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

Consolidated Balance Sheet at March 31, 1998 and December 31, 1997  .  F-2

Consolidated Statement of Operations For The Quarter Ended
     March 31, 1998, and For the Years Ended December 31, 1997
     and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-4 F-5

Consolidated Statement of Stockholders' Equity From Inception
     (January 17, 1986) Through March 31, 1998 . . . . . . . . . . . . F-6 F-12

Consolidated Statement of Cash Flows For The Quarter Ended
     March 31, 1998, and For the Years Ended December 31, 1997
     and 1996 . . . . . . . . . . . . . .  . . . . . . . . . . . . . . F-13 F-14

Notes to the Consolidated Financial Statements . . . . . . . . . . . . F-15 F-24

All  schedules  are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

                                       F-2

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEET
                      MARCH 31, 1998 AND DECEMBER 31, 1997


<TABLE>
<CAPTION>
                                                           MARCH 31,    DECEMBER 31,
                                                           1998         1997
                                                           ----         ----
<S>                                                        <C>          <C>

                                     ASSETS

Current Assets
   Cash                                                    $4,225,880   $3,440,791
Accounts Receivable, Net of Contractuals and Adjustments
of $114,452 and $0 at March 31, 1998 and December 31, 1997    149,439       47,286
   Prepaid Expenses                                                 0       62,313
                                                           ----------   ----------
   Total Current Assets                                     4,375,319    3,550,390

Property and Equipment, Net  (Note 3)                          38,883       33,526
Other Assets
   Intangible Assets-The MedCare Program, Net of
    Accumulated Amortization of $17 and $0 for March 31,
    1998 and December 31, 1997  (Note 4)                          983        1,000
   Security Deposits                                            2,150        1,500
                                                           ----------   ----------
   Total Other Assets                                           3,133        2,500
                                                           ----------   ----------

Total  Assets                                              $4,417,335   $3,586,416
                                                           ==========   ==========
</TABLE>












     The accompanying notes are integral part of these financial statements.
                                       

                                       F-3

<PAGE>


                  MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEET
                      MARCH 31, 1998 AND DECEMBER 31, 1997            
<TABLE>
<CAPTION>


                                                            MARCH 31,     DECEMBER 31,
                                                            1998          1997
                                                            ----          ----
<S>                                                         <C>           <C>   

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Accounts Payable and Other Accrued Liabilities          $    62,748    $    15,796
   Notes Payable, Related Party (Note 5)                             0          1,000
                                                           -----------    -----------
   Total Current Liabilities                                    62,748         16,796

Commitments and Contingencies (Note 10)                              0              0

Stockholders' Equity
Preferred Stock: $.25 Par Value, Authorized 1,000,000;
Issued and Outstanding, 159 and 165 Convertible Series
A Shares at March 31, 1998 and December 31, 1997                    39             41
Common Stock: $0.001 Par Value,  Authorized
   100,000,000; Issued and Outstanding, 7,225,839 Shares
    at March 31, 1998 and 6,992,185 at December 31, 1997         7,226          6,992
    Additional Paid In Capital                               7,420,992      6,107,314
    Loss Accumulated During The Development Stage           (3,073,670)    (2,544,727)
                                                           -----------    -----------
Total Stockholders' Equity                                   4,354,587      3,569,620
                                                           -----------    -----------

Total Liabilities and Stockholders' Equity                 $ 4,417,335    $ 3,586,416
                                                           ===========    ===========

</TABLE>










                The accompanying notes are integral part of these
                             financial statements.

                                       F-4

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF OPERATIONS
          FOR THE QUARTER ENDED MARCH 31, 1998 AND FOR THE YEARS ENDED
                        DECEMBER 31, 1997 AND 1996 , AND
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998



<TABLE>
<CAPTION>
                                                                              Loss
                                                                              Accumulated
                                                                              During The
                                Quarter Ended  Year Ended      Year Ended     Development
                                March 31,      December        December       Stage
                                1998           31, 1997        31, 1996      (Unaudited)
                                ----           --- ----        --- ----      -----------
<S>                             <C>            <C>             <C>           <C>    

Revenues                        $   227,008    $    91,802     $        0    $   318,810


Expenses
   General and Administrative       765,710      1,515,459        452,037      3,464,946
                                -----------    -----------     ----------    -----------

Operating Loss                     (538,702)    (1,423,657)      (452,037)    (3,146,136)

Other Income (Expense)
   Interest Income                   42,669        119,146          2,801        164,616
   Loss From Discontinued
          Operations                      0         (4,489)             0         (4,489)
   Gain on Sale of Subsidiary             0         15,770                        15,770
                                -----------    -----------                   -----------
Total Other Income (Expense)         42,669        130,427          2,801        175,897
                                -----------    -----------    -----------    -----------

Net  Loss                       $  (496,033)   $(1,293,230)   $  (449,236)   $(2,970,239)
                                ===========    ===========    ===========    ===========

</TABLE>






                The accompanying notes are integral part of these
                             financial statements.

                                       F-5

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF OPERATIONS
      FOR THE QUARTER ENDED MARCH 31, 1998 AND FOR THE YEARS ENDED DECEMBER
                             31, 1997 AND 1996 , AND
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)


<TABLE>
<CAPTION>
                                                                                                                     Loss
                                                                                                                  Accumulated
                                                                                                                  During The
                                    Quarter Ended    Year Ended       Year Ended       Development
                                    March 31,        December         December         Stage
                                    1998             31, 1997         31, 1996         (Unaudited)
                                    ----             --- ----         --- ----         -----------
<S>                                 <C>              <C>              <C>              <C>    

Primary Loss Per Common
     Share and Common Share
       Equivalents:
Loss from Continuing Operations     $       (0.07)   $       (0.18)   $       (0.08)   $       (0.40)
Loss from Operations of Business
      Segment Disposed of                    0.00             0.00             0.00             0.00
Gain on Disposal of Business
      Segment                                0.00             0.01             0.00             0.01
                                    -------------    -------------    -------------    -------------
Net Loss                            $       (0.07)   $       (0.17)   $       (0.08)$           (.39)
                                    =============    =============    =============    =============

Number of Weighted Shares
      Outstanding - Primary             7,523,647        7,270,185        5,884,019        7,523,647
                                    =============    =============    =============    =============

Fully Diluted Loss Per Common
      Share and Common Share
        Equivalents:
Loss from Continuing Operations     $       (0.08)   $       (0.19)   $       (0.08)   $       (0.49)
Loss from Operations of Business
      Segment Disposed of                   0.00              0.00             0.00             0.00
Gain on Disposal of Business
      Segment                               0.00             0.01             0.00             0.01
                                    -------------    -------------    -------------    -------------
Net Loss                            $       (0.08)   $       (0.18)   $       (0.08)   $       (0.48)
                                    =============    =============    =============    =============
Number of Weighted Shares
      Outstanding - Fully Diluted       6,226,614        7,024,350        5,884,019        6,226,614
                                    =============    =============    =============    =============
</TABLE>

                The accompanying notes are integral part of these
                             financial statements.

                                       F-6

<PAGE>




                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                   Loss
                                                                                                   Accumulated
                                                                                                   During the
                                                                                   Additional      Development
                                    Preferred    Stock      Common      Stock      Paid In         Stage
                                    Shares       Amount     Shares      Amount     Capital        (Unaudited)      Total
                                    ------       ------     ------      ------     -------        -----------      -----
<S>                                 <C>          <C>        <C>         <C>        <C>            <C>

Balance, January 17, 1986                   0   $     0          0     $     0    $              $                $    0
Issued to Officers and
    Directors at $.002 Per Share                         2,500,000       2,500          2,500                      5,000
Issued Pursuant to Public
     Offering at $.01                                    3,645,000       3,645         32,805                     36,450
Cost of Offering                                                                       (7,946)                    (7,946)
Net Loss from Inception on                  0
    January 17, 1986 Through
      December 31, 1987                                                                                 (316)       (316)
                                                                                                   ----------   --------
Balance, December 31, 1987                  0         0  6,145,000       6,145         27,359           (316)     33,188
Escrow Fee for Public                                                                    (200)                      (200)
Offering
Net Loss Year Ended
    December 31, 1988                                                                                 (1,030)     (1,030)
                                                                                                   ----------   --------
Balance, December 31, 1988                  0         0  6,145,000       6,145         27,159         (1,346)     31,958
Net Loss Year Ended
    December 31, 1989                                                                                (21,707)    (21,707)
                                                                                                   ----------   --------
Balance, December 31, 1989                  0         0  6,145,000       6,145         27,159        (23,053)     10,251
</TABLE>

                The accompanying notes are integral part of these
                             financial statements.

                                       F-7

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998


<TABLE>
<CAPTION>
                                                                                                              Loss
                                                                                                              Accumulated
                                                                                                              During the
                                                                                              Additional     Development
                                   Preferred        Stock          Common        Stock        Paid In        Stage
                                   Shares           Amount         Shares        Amount       Capital        (Unaudited)     Total
                                   ------           ------         ------        ------       -------        -----------     -----
<S>                                <C>              <C>            <C>           <C>          <C>            <C>             <C>


Issuance of Stock  in
Accordance with Plan of
Merger with Multi-Spectrum
Group, Inc. February 28, 1990                                    $55,305,000    $55,305      $ (55,305)     $               $    0
Net Loss Year Ended
 December 31, 1990,                                                                                              (10,201)  (10,201)
                                                                                                             -----------    ------
Unaudited
Balance, December 31, 1990                 0             0        61,450,000     61,450        (28,146)          (33,254)       50
Net Loss Year Ended
   December 31, 1991,                                                                                                  0         0
                                                                                                             -----------    ------
Unaudited
Balance, December 31, 1991                 0             0        61,450,000     61,450        (28,146)          (33,254)       50
Issued to Group Five, Inc. 
     November 13, 1992                                             8,772,800      8,773                                        877
Net Loss Year Ended
December 31, 1992,                         0             0                                                        (8,773)   (8,773)
                                   ---------     ---------                                                  ------------    ------
Unaudited
Balance, December 31, 1992                 0             0        70,222,800     70,223        (28,146)          (42,027)       50
Net Loss Year Ended
    December 31, 1993                                                                                                  0         0
                                                                                                            ------------    ------
</TABLE>
     The accompanying notes are integral part of these financial statements.

                                       F-8

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998


<TABLE>
<CAPTION>
                                                                                                           Loss
                                                                                                           Accumulated
                                                                                                           During the
                                                                                            Additional     Development
                                 Preferred      Stock           Common        Stock         Paid In        Stage
                                 Shares         Amount          Shares        Amount        Capital       (Unaudited)       Total
                                 ------         ------          ------        ------        -------       -----------       -----
<S>                              <C>            <C>             <C>           <C>           <C>           <C>               <C>


Balance, December 31, 1993                0                    $ 70,222,800  $  70,223     $  (28,146)   $    (42,027)     $   50
                                                          0
Net Loss Year Ended
    December 31, 1994                                                                                               0           0
                                                                                                          -----------     -------

Balance, December 31, 1994                0               0      70,222,800     70,223        (28,146)        (42,027)         50
Reverse Split 1200:1,
     August 11, 1995                                            (70,164,281)   (70,164)        70,164
Acquisition of MedCare UI
System Assets August 4, 1995                                      2,000,000      2,000         (1,000)                      1,000
Issued Pursuant to a Public                                                                                               630,000
  Offering at $.15 Per Share
  September 20, 1995                                              4,200,000      4,200        625,800
Cost of Offering                                                                              (30,000)                    (30,000)
Issued for Cash at $3.00 Per
    Share, December 31, 1995                                         16,666         17         49,983                      50,000
Issued for Services at $3.00
Per Share, December 31, 1995                                         25,000         25         74,975                      75,000
Net Loss Year Ended
    December 31, 1995                                                                                        (689,713)   (689,713)
                                                                                                              -------     -------
</TABLE>
     The accompanying notes are integral part of these financial statements.

                                       F-9

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                            Loss
                                                                                                            Accumulated
                                                                                                            During the
                                                                                            Additional      Development
                                        Preferred      Stock       Common      Stock        Paid In         Stage
                                        Shares         Amount      Shares      Amount       Capital         (Unaudited)     Total
                                        ------         ------      ------      ------       -------         -----------     -----
<S>                                     <C>            <C>         <C>         <C>          <C>             <C>             <C> 



   Balance, December 31, 1995                   0    $      0    6,300,185   $  6,301     $    761,776     $   (731,740)   $ 36,337

   Issuance of Common Stock
   Under 1995 Stock Option Plan
   at $3.00 Per Share During 1996                                   36,000         36          107,964                      108,000
   Issuance of Common Stock
   Under 1996 Stock Option Plan
   at $4.50 Per Share During 1996                                    3,000          3           13,497                       13,500
   Issuance of Common Stock
   Under Private Placement at
   $4.75 Per Share Dated
   June 22, 1996                                                    50,000         50          237,450                      237,500
   Issuance of Common Stock
   Under Private Placement at
   $4.50 Per Share Dated
   November 18, 1996                                                56,000         56          251,944                      252,000
   Write Off of Excess of
   Liabilities over Assets on
   Purchase of Manon Consulting,
   Ltd.                                                                                                          11,283      11,283
</TABLE>

     The accompanying notes are integral part of these financial statements.

                                      F-10

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                        Loss
                                                                                                        Accumulated
                                                                                                        During the
                                                                                        Additional      Development
                                  Preferred      Stock       Common        Stock        Paid In         Stage
                                  Shares         Amount      Shares        Amount       Capital         (Unaudited)        Total
                                  ------         ------      ------        ------       -------         -----------        -----
<S>                               <C>            <C>         <C>           <C>          <C>             <C>                <C>


Net Loss  Year Ended
  December 31, 1996                       0    $      0           0       $     0 $           0        $   (449,236)   $(449,236)
                                                -------   ---------        ------     ---------         -----------     --------    
Balance, December 31, 1996                0           0   6,445,185         6,445     1,372,631          (1,169,693)     209,383
Recovery of Write Off of
  Excess of Liabilities over
  Assets on Sale of Manon
  Consulting, Ltd.                                                                                          (11,283)     (11,283)
Issuance of Common Stock
  Under 1996 Stock Option
  Plan at $4.50 Per Share
  through December 31, 1997                                  17,000            17        76,483                           76,500
Issuance of Common Stock
Under 1995 Stock Option
Plan at $3.00 Per Share
Through December 31, 1997                                    54,000            54       161,946                          162,000
Issuance of Common Stock
  Under a Private Placement
  Dated March 25, 1997, at
$6.25 Per Share                                             176,000           176     1,099,824                        1,100,000
</TABLE>


     The accompanying notes are integral part of these financial statements.
                                      F-11

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                         Loss
                                                                                                         Accumulated
                                                                                                         During the
                                                                                         Additional      Development
                                       Preferred      Stock      Common      Stock       Paid In         Stage
                                       Shares         Amount     Shares      Amount      Capital         (Unaudited)     Total
                                       ---------      ------     ------      ------      ----------      -----------     -----
<S>                                    <C>            <C>        <C>         <C>         <C>             <C>             <C>


Issuance of Preferred Stock
  Under a Private Placement
  Dated July 8, 1997, at $10,000
  Per Share                                  165     $    41          0     $     0     $ 1,649,959       $          0  $ 1,650,000
Less cost of Private Placement                                                             (123,750)                       (123,750)
Periodic Imputed Cost of
Preferred Stock Issued on July
8, 1997, through December 31,
1997                                                                                         70,521            (70,521)           0
Issuance of Common Stock
  Under a Private Placement
  Dated July 7, 1997, at $6.00                                  300,000         300       1,799,700                       1,800,000
  Per Share
Net Loss Year Ended
  December 31, 1997                                                                                         (1,293,230)  (1,293,230)
                                                                                                            -----------  -----------
Balance, December 31, 1997                   165          41  6,992,185       6,992       6,107,314         (2,544,727)   3,569,620
Issuance of Common Stock
  Under 1996 Stock Option
  Plan at $4.50 Per Share
  Through March 31, 1998                                          6,000           6          26,994                          27,000
</TABLE>

     The accompanying notes are integral part of these financial statements.
                                      F-12

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                             THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                           Loss
                                                                                                           Accumulated
                                                                                                           During the
                                                                                           Additional      Development
                                     Preferred      Stock        Common       Stock        Paid In         Stage
                                     Shares         Amount       Shares       Amount       Capital         (Unaudited)      Total
                                     ---------      ------       ------       ------       ----------      -----------      -----
<S>                                  <C>            <C>          <C>          <C>          <C>             <C>              <C>


Issuance of Common Stock                                         18,000
 Under 1995 Stock Option
 Plan at $3.00 Per Share
Through March 31, 1998                       0     $     0                   $    18      $    53,982     $          0   $   54,000
Issuance of Common Stock                                                                                                  1,200,000
  For Warrants Exercised on
  March 31, 1998, at $6.00 Per
  Share                                                         200,000          200        1,199,800
Converted Preferred Stock to
  Common Stock at $6.45131
  Per Share on January 5, 1998              (3)         (1)       4,851            5               (4)                            0
Converted Preferred Stock to                                                                                                      0
  Common Stock at $6.51875
  Per Share on January 6, 1998              (3)         (1)       4,803            5               (4)
Periodic Imputed Cost of
  Preferred Stock Issued on
  July 8, 1997, For the Quarter
  Ended March 31, 1998                                                                         32,910          (32,910)           0
Net Loss for the Quarter Ended
  December 31, 1997                    _______      _______    ________       _______        ________         (496,033)    (496,033)
                                                                                                            -----------    ---------
Balance, March 31, 1998                    159    $     39    7,225,839     $  7,226      $ 7,420,992      $(3,073,670) $ 4,354,587
                                      ========     ========   =========       =======      ==========       ===========  ===========
</TABLE>

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

                                      F-13

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE QUARTER ENDED MARCH 31, 1998 AND
                 FOR THE YEARS ENDED DECEMBER 31, 1997, AND 1996
          AND FROM INCEPTION (JANUARY 17, 1986) THROUGH MARCH 31, 1998


<TABLE>
<CAPTION>
                                                                                           From
                                                                                           Inception
                                                                            Year Ended     Through
                                                             Year Ended     December       March 31,
                                              Quarter Ended  December       31, 1996       1998
                                              March 31, 1998 31, 1997       --- ----       (Unaudited)
                                              ----- --- ---- --- ----                      -----------
<S>                                           <C>            <C>            <C>            <C>    

Cash Flows from Operating Activities
   Net Loss                                   $  (496,033)   $(1,293,230)   $  (449,236)   $(2,970,239)

 Adjustments to Reconcile Net Loss to Net
   Cash Provided by Operating Activities
 Depreciation and Amortization                      3,385          9,546          7,733         20,727
 Common Stock Issued for Services                       0              0              0         83,773
 Contractuals and Adjustments of Accounts
    Receivable                                    114,452        114,452
 Net Assets of Manon Consulting, Ltd                    0        (11,281)             0              0
Changes in Assets and Liabilities
 (Increase) Decrease in Accounts Receivable      (216,605)       (39,935)        (6,711)      (263,891)
(Increase) Decrease in Prepaid Expenses            62,313        (34,697)       (29,115)        (1,500)
(Increase) Decrease in Organizational Costs             0              0             50              0
(Increase) Decrease in Security Deposits             (650)             0              0           (650)
Increase (Decrease) in Accounts Payable            46,952         (3,995)        20,080         62,748
                                              -----------    -----------    -----------    -----------
</TABLE>












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

                                      F-14

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE QUARTER ENDED MARCH 31, 1998 AND
                 FOR THE YEARS ENDED DECEMBER 31, 1997, AND 1996
          AND FROM INCEPTION (JANUARY 17, 1986) THROUGH MARCH 31, 1998


<TABLE>
<CAPTION>
                                                                                           From
                                                                                           Inception
                                                                             Year Ended    Through
                                                               Year Ended    December      March 31,
                                               Quarter Ended   December      31, 1996      1998
                                               March 31, 1998  31, 1997      --- ----      (Unaudited)
                                               ----- --- ----  --- ----                    -----------

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

       Total Adjustments                            9,847         (80,362)       (7,963)       15,659
                                               ----------      ----------    ----------    ----------
Net Cash Used by Operating Activities            (486,186)     (1,373,592)     (457,199)   (2,954,580)

Cash Flows from Investing Activities
      Purchase of Property and Equipment           (8,725)        (33,642)      (15,969)      (59,594)
                                               ----------      ----------    ----------    ----------
Net Cash Flows from Investing Activities           (8,725)        (33,642)      (15,969)      (59,594)

Cash Flows from Financing Activities
   Proceeds from Sale of Common Stock           1,281,000       3,138,500       611,000     5,751,950
   Proceeds from the Sale of Preferred Stock            0       1,650,000             0     1,650,000
   Offering Costs                                       0        (123,750)            0      (161,896)
   Advances (Repayments) Notes Payable                  0         (24,000)       25,000         1,000
   Advances (Repayements) To Officers              (1,000)        (12,500)       12,500        (1,000)
                                               ----------      ----------    ----------    ----------
</TABLE>












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

                                      F-15

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE QUARTER ENDED MARCH 31, 1998 AND
                 FOR THE YEARS ENDED DECEMBER 31, 1997, AND 1996
          AND FROM INCEPTION (JANUARY 17, 1986) THROUGH MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                                   From
                                                                                                   Inception
                                                                                      Year Ended   Through
                                                                     Year Ended       December     March 31,
                                                Quarter Ended        December         31, 1996     1998
                                                March 31, 1998       31, 1997         --- ----     (Unaudited)
                                                ----- --- ----       --- ----                      -----------
<S>                                             <C>                  <C>              <C>           <C>                           

Net Cash Provided by Financing Activities                1,280,000        4,628,250      648,500    7,240,054
                                                ------------------   --------------   ----------   ----------
Increase (decrease) in Cash and Cash
        Equivalents                                        785,089        3,221,016      175,332    4,225,880

Cash and Cash Equivalents, Beginning of                  3,440,791          219,775       44,443            0
                                                ------------------   --------------   ----------   ----------
Year

Cash and Cash Equivalents, End of Year          $        4,225,880   $    3,440,791   $   219775   $4,225,880
                                                ==================   ==============   ==========   ==========

Supplemental Information:
Cash paid for:
  Interest                                      $                0   $            0   $        0   $        0
                                                ==================   ==============   ==========   ==========
  Income taxes                                  $                0   $            0   $        0   $        0
                                                ==================   ==============   ==========   ==========

Noncash Financing:
Intangible Assets Purchased With Common
   Stock                                        $                0   $            0   $        0   $    1,000
                                                ==================   ==============   ==========   ==========
   Common Stock Issued for Services             $                0   $            0   $        0   $   83,773
                                                ==================   ==============   ==========   ==========
Three (3) Shares of Preferred Stock
Converted to 4,851 Shares of Common             $                0   $            0   $        0   $        0
                                                ==================   ==============   ==========   ==========
Stock
Three (3) Shares of Preferred Stock
Converted to 4,803 Shares of Common             $                0   $            0   $        0   $        0
                                                ==================   ==============   ==========   ==========
Stock

</TABLE>


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

                                      F-16

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996



   NOTE 1 - ORGANIZATION

         MedCare   Technologies,   Inc.  (The   Company),   formerly   known  as
         Multi-Spectrum Group, Inc., was incorporated under the name Santa Lucia
         Funding, Inc., under the laws of the State of Utah on January 17, 1986,
         with an authorized capital of 50,000,000 common shares with a par value
         of $.001.  On  February 8, 1990,  the Company  adopted a plan of merger
         with  Multi-Spectrum  Group,  Inc.,  a Delaware  Corporation,  in which
         Multi-Spectrum  Group,  Inc.,  would be dissolved and the name of Santa
         Lucia Funding, Inc., would be changed to Multi-Spectrum Group, Inc. The
         Company authorized a reverse split of 1200:1 to be effective August 11,
         1995.  On August 29,  1995,  the  Company  approved  an increase in the
         authorized  capital to 101,000,000 of which 100,000,000 shares shall be
         Common  Stock with a par value of $.001 and  1,000,000  shares shall be
         Preferred  Stock with a par value of $.25 per share,  and a name change
         to MedCare Technologies,  Inc. On August 1, 1996, an agreement and plan
         of  merger  was   entered   into   between   the  Company  and  MedCare
         Technologies,  Inc.  (A  Delaware  Corporation)  whereby  the  state of
         incorporation  was  changed  to  Delaware  from the state of Utah.  The
         effective  date of the agreement is August 27, 1996,  the date accepted
         by the state of  Delaware.  The  Company was  inactive  during the year
         1991,  issued  stock for prior  years  services  during  1992,  and was
         inactive during 1993 and 1994. The Company had no revenues nor incurred
         any operating  expenses during these inactive  periods,  other than the
         transaction during 1992.

         On November 13, 1992,  the Company  issued  8,772,800  shares of common
         stock to Group Five,  Inc., in exchange for services  rendered at $.001
         per share or $8,773.


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


                                      F-17

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         On August 11, 1995,  the  Stockholders  authorized  a reverse  split of
         1200:1 reducing the outstanding common shares to 58,519.

         On August 11,  1995,  the  Company  purchased  100% of the  outstanding
         shares of Medcare Technologies,  Corporation, a Nevada corporation that
         was  incorporated  on April 26, 1995 for $1.00.  Medcare  Technologies,
         Corporation was inactive from the date of incorporation  through August
         11, 1995,  the date the Company  purchased  it.  Medcare  Technologies,
         Corporation is a wholly owned subsidiary of the company.

         On August 14,  1995,  the  Company  acquired  the rights to The MedCare
         Program,  a urinary  incontinence  procedure in exchange for  2,000,000
         shares of the Company's  common stock at $0.0005,  for a total value of
         $1,000.

         On September  20, 1995,  the Company  authorized  in a 504D  Disclosure
         Memorandum,  4,200,000  shares of its common stock at an offering price
         of $0.15.  On September 20, 1995,  the offering was completed  with all
         shares being issued for a total value of $630,000,  less offering costs
         of $30,000.

         NOTE 1 - ORGANIZATION (CONTINUED)

         On October 1,  1995,  the  Company  purchased  100% of the  outstanding
         shares of Manon Consulting,  Ltd. Manon  Consulting,  Ltd., is a wholly
         owned subsidiary of the Company.  Manon  Consulting,  Ltd.,  operates a
         clinic in Calgary, Canada.

         The following is a condensed balance sheet of Manon  Consulting,  Ltd.
         at October 31, 1995:

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


                                      F-18

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
<S>                                <C>    


Total Assets                       $ 12,558
                                   ========

Total Liabilities                    23,841
Total Capital
    Common Stock                          7
    Retained Earnings-A Deficit     (11,290)
                                   --------
   Total Liabilities and Capital   $ 12,558
                                   ========
</TABLE>


         The  Company  paid $7 for the  outstanding  common  stock and  assumed
         liabilities in excess of assets of $11,290.  The excess was charged to
         operations  during  1995.  On January 1, 1997,  the Company sold Manon
         Consulting,  Ltd. and recorded a gain on the sale of $15,770. See Note
         8 - Discontinued Operations.

         On December 31, 1995,  the Company  issued  16,666 shares of its common
         stock at $3.00 per share or $50,000 cash.

         On December 31, 1995,  the Company  issued  25,000 shares of its common
         stock  in  exchange  for  consulting  services  at $3.00  per  share or
         $75,000.

         During 1996,  the Company  issued  36,000 shares of its common stock at
         $3.00 per share under its 1995 Stock Option Plan, or $108,000.

         During  1996,  the Company  issued  3,000 shares of its common stock at
         $4.50 per share under its 1996 Stock Option Plan, or $13,500.


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


                                      F-19

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         On June 22, 1996,  the Company issued 50,000 shares of its common stock
         at $4.75 per share in a 504D private place memorandum or $237,500.

         On November 18, 1996,  the Company  issued  56,000 shares of its common
         stock  at  $4.50  per  share a 504D  private  placement  memorandum  or
         $252,000.



          NOTE 1 - ORGANIZATION (CONTINUED)

         During 1997,  the Company issued 17,000 shares of common stock at $4.50
         per share under the 1996 Stock Option Plan or $76,500.

         During 1997,  the Company issued 54,000 shares of common stock at $3.00
         per share under the 1995 Stock Option Plan or $162,000.

         On February 4, 1997,  the Company issued 176,000 shares of common stock
         at $6.25 per share under a private placement memorandum or $1,100,000.

         On July 7, 1997,  the Company  issued 300,000 shares of common stock at
         $6.00 per share  under a private  placement  memorandum  dated June 20,
         1997 or $1,800,000.

         On July 8, 1997,  the Company  issued 165 shares of  Preferred  Stock -
         Series A at $10,000 per share or  $1,650,000,  less  offering  costs of
         $123,750.  The Preferred  Stock has conversion  features that allow for
         the conversion into 266,747 common shares, at a


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


                                      F-20

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         discount  range of 10% to 20% from June 20, 1997 through June 20, 1998.
         Additionally, the Company is recording the periodic imputed cost of the
         Preferred  Stock - Series A from the date of closing of the offering at
         8% per annum through December 31, 1997, or $70,521, and for the quarter
         ended March 31, 1998, or $32,910 .

         Through  March 31, 1998,  the Company  issued  18,000  shares of common
         stock at $3.00 per share under the 1995 Stock Option Plan or $54,000.

         Though March 31, 1998,  the Company issued 6,000 shares of common stock
         at $4.50 per share under the 1996 Stock Option Plan or $27,000.

         On March 30, 1998, the Company issued 200,000 shares of common stock at
         $6.00 per share under a private placement memorandum, or $1,200,000.

         On January 5, 1998, the Company  converted three (3) shares of $.25 per
         share preferred stock to 4,851 shares of $.001 common stock at $6.45131
         per share.

         On January 6, 1998, the Company  converted three (3) shares of $.25 per
         share preferred stock to 4,803 shares of $.001 common stock at $6.51875
         per share.

         The Company is a development stage company, as defined in the Financial
         Accounting Standards Board No. 7. The Company is devoting substantially
         all of its present efforts in securing and establishing a new business,
         and although planned principal  operations have commenced,  substantial
         revenues have yet to be realized.


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


                                      F-21

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


    NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

         A. Method of Accounting

          The  Company's  financial  statements  are prepared  using the accrual
          method of accounting.

               B. Cash and Cash Equivalents

            The Company considers all highly liquid debt instruments
             with a maturity of three months or less to be cash and
                                cash equivalents.

         C. Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of the Company and its wholly owned subsidiary,  Medcare  Technologies,
         Corporation.   Intercompany   transactions   have  been  eliminated  in
         consolidation.

         D.Purchase Method

         Investments  in companies  have been included in the  financial  report
         using the equity  method of  accounting.  The  Company's  wholly  owned
         subsidiary,  MedCare  Technologies,   Corporation  is  engaged  in  the
         business of medical consulting and management in the United States.

         E. Deferred Charges



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


                                      F-22

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         The Company has  incurred  start up costs from  January 1, 1995 through
         September 30, 1995 amounting to $542,706.  The total amount was charged
         to operations during the year ended December 31, 1995.

         F. Property and Equipment

         Property  and  equipment,  stated  at cost,  is  depreciated  under the
         straight-line method over their estimated useful lives as follows:
<TABLE>
<CAPTION>
<S>      <C>                 <C>    

         Office Equipment    3 to 5 years
         Medical Equipment   3 to 5 years
         Furniture           7 years

</TABLE>



   NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  G. Income Taxes

         There has been no  provision  for income  taxes,  because of the losses
         that the Company has  incurred to date.  The Company has net  operating
         losses that will expire, beginning with the years 2002 through 2012, in
         the amount of $1,293,230, $449,236, $689,713 and $42,027 in 1997, 1996,
         1995 and prior years, respectively, unless utilized by the Company.




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


                                      F-23

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         H. Earnings or (Loss) Per Share

         Earnings or loss per share is computed  based on the  weighted  average
         number of common shares and common share equivalents outstanding. Stock
         options are  included as common  share  equivalents  using the treasury
         stock method.  The number of shares used in computing  primary earnings
         (loss) per common share at March 31, 1998, December 31, 1997, and 1996,
         was 7,523,647,  7,270,185, and 5,884,019,  respectively.  The number of
         shares used in computing fully diluted earnings (loss) per common share
         at  March  31,  1998,  December  31,  1997  and  1996,  was  6,226,614,
         7,024,350, and 5,884,019, respectively.

         I. Leases

         The  Company's  corporate  offices are located at 1515 W. 22nd  Street,
         Suite 1210, Oak Brook,  Illinois 60521.  The office space  approximates
         2,400  square feet and is  subleased  for a period of one year with the
         option to renew for four additional  years, at a monthly rate of $4,800
         per month plus a common area monthly charge of $400.

         The Company  currently has the use of a second office of  approximately
         1,500  square feet of office  space,  the use of one board room and all
         office  equipment,  including  a  network  computer  system,  a postage
         machine,  filing cabinets, a photocopier and telephone  equipment.  The
         office  space  is  owned  by one of the  Company's  directors  and  the
         Chairman's  wife.  The offices are located at Suite 216 - 1628 West 1st
         Avenue, Vancouver, British Columbia, Canada. The monthly rent is $2,000
         per  month,  plus a common  area  monthly  charge of $200.  There is an
         option to renew for an


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


                                      F-24

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         additional year.

         J. Medcare Program Sites

         The following  program site  locations and the date of openings area as
         follows:



   NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
<TABLE>
<CAPTION>


         City, State                        Open Date         City, State                        Open Date
         ----- -----                        ---- ----         ----- -----                        ---- ----
<S>      <C>                                <C>               <C>                                <C>    

         Norman, Oklahoma                   11/04/96          Toledo, Ohio                       02/09/98
         Winter Park, Florida               03/10/97          Lake Worth, Florida                03/02/98
         Denver, Colorado                   06/02/97          Coral Springs, Florida             03/09/98
         Raleigh, North Carolina            09/30/97          Phoenix, Arizona                   03/09/98
         Kankakee, Illinois                 11/17/97          Fremont, California                03/09/98
         Cleveland, Texas                   01/05/98          New York, New York                 03/30/98
</TABLE>


          New locations to be opened subsequent to March 31, 1998, are Stamford,
          Connecticut;


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


                                      F-25

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         Roswell,  Georgia;  Fayetteville,  North Carolina;  New Rochelle,  New
         York; Dallas,  Texas; West Palm Beach, Florida;  Baltimore,  Maryland;
         Clackamas, Oregon; Amherst, Ohio; St. Louis, Missouri; Columbus, Ohio;
         Alexandria, Virginia; Silver Springs, Maryland; Mine Hill, New Jersey;
         and Peekskill, New Jersey.
         K. Use of Estimates

         Management  uses  estimates  and  assumptions  in  preparing  financial
         statements in accordance with generally accepted accounting principles.
         Those estimates and assumptions  affect the reported  amounts of assets
         and liabilities,  the disclosure of contingent  assets and liabilities,
         and the reported revenues and expenses.  Actual results could vary from
         the estimates that were assumed in preparing the financial statements.

         L. Presentation

         Certain  accounts  from prior years have been  reclassified  to conform
         with the current year's presentation.

         M. Pending Accounting Pronouncements

            It is anticipated that current pending accounting  pronouncements
            wilL not have an adverse impact on the financial statements of 
            the Company.

NOTE 3 - PROPERTY, EQUIPMENT, AND DEPRECIATION



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


                                      F-26

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         Property  and  equipment  consists of the  following at March 31, 1998,
         December 31, 1997 and 1996:



NOTE 3 - PROPERTY, EQUIPMENT, AND DEPRECIATION (CONTINUED)
<TABLE>
<CAPTION>

                                                     March 31,   35,794
                                                     1998
                                                     --------
<S>                                                  <C>         <C>    

Office Equipment                                     $ 11,931    $  9,541

Computer Equipment                                     16,363      11,528

Medical Equipment                                      29,799      29,799

Furniture                                               1,500           0
                                                     --------    --------

Total                                                  59,593      50,868

Less Accumulated Depreciation                         (20,710)    (17,342)
                                                     --------    --------

Net Book Value                                       $ 38,883    $ 33,526
                                                     ========    ========
</TABLE>





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


                                      F-27

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996


         Depreciation  charged to expense  during the  quarter  ended  March 31,
         1998,  and for the years ended December 31, 1997 and 1996, and 1995 was
         $3,368, $9,546 and $7,733, respectively.

         NOTE 4 - LONG-LIVED ASSETS - THE MEDCARE PROGRAM

         On August 14,  1995,  the  Company  acquired  the rights to The MedCare
         Program,  a urinary  incontinence  procedure in exchange for  2,000,000
         shares of its  common  stock.  The  transaction  was  accounted  for in
         accordance  with the  process for  valuation  of  intangible  assets as
         described in Statement No. 17 of the Accounting  Principles  Board. The
         Company has  continued to further  enhance The MedCare  Program for the
         treatment  of  urinary  incontinence  that  significantly   reduces  or
         completely  eliminates  the  majority  of UI  cases  using  a  nondrug,
         nonsurgical  protocol that takes into account the clinical,  cognitive,
         functional,  and residential status of the patient. The Company intends
         to amortize the cost of the system over 15 years, based on Management's
         estimated useful life of the protocol, beginning with the first year in
         which  commercial  sales  occur.  Management  reassesses  annually  the
         estimated useful life. Such amortization will result in charges against
         earnings  of $66 per year for each of the years.  Amortization  expense
         charged to operations during the quarter ended March 31, 1998, was $17.

         NOTE 5 - NOTES PAYABLE-OFFICERS (RELATED PARTY TRANSACTIONS)

         An Officer of the Company  loaned the Company  $1,000,  which is due on
         demand and with no  interest  rate  currently  applicable.  The Company
         repaid this loan in March 1998.



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


                                      F-28

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996






         NOTE 6 - STOCK OPTIONS

         The Company has issued stock options to various directors, officers and
         employees.  The option prices are based on the fair market value of the
         stock  at the  date of the  grant.  The  Company  makes  no  charge  to
         operations in relation to option grants, unless the options granted are
         less than fair market,  then a charge to operations  would be made over
         the vesting  period.  The Company's stock option  transactions  for the
         quarter ended March 31, 1998, and for the years ended December 31, 1997
         and 1996 are summarized as follows:
<TABLE>
<CAPTION>


                                          Number of  Option
                                          Shares     Price
                                          ---------  ------
<S>                                       <C>        <C>    

Options outstanding and exercisable at
     December 31, 1995                    500,000    $   3.00
Options granted in 1996                   300,000        4.50
Options exercised during 1996 under
     the 1995 Stock Option Plan           (36,000)       3.00
Options exercised during 1996 under
   the 1996 Stock Option Plan              (3,000)       4.50
                                            -----
Options outstanding and exercisable
     at December 31, 1996                 761,000
</TABLE>





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


                                      F-29

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>



<S>                                        <C>           <C>    

Options granted in 1997                    200,000       4.50
Options granted in 1997                    300,000       6.50
Options exercised during 1997 under
     the 1995 Stock Option Plan           (54,000)       3.00

Options exercised during 1997 under
     the 1996 Stock Option Plan           (17,000)       4.50
                                           ------
Options outstanding and exercisable
    at December 31, 1997                1,190,000       $3.00-$6.50
 Options exercised during 1998 under
     the 1995 Stock Option Plan           (18,000)       3.00

Options exercised during 1998 under
     the 1996 Stock Option Plan            (6,000)       4.50
                                            -----

Options outstanding and exercisable
    at March 31, 1998                   1,166,000       $3.00-$6.50
                                        =========
</TABLE>



         The  Company has  authorized  the 1998 Stock  Option Plan and  reserved
         500,000  shares of its common stock,  of which  290,000  shares will be
         offered at $6.50 and the  balance  of  210,000  shares at a price to be
         determined,  for issuance thereunder subject to stockholder approval at
         the next annual meeting.

NOTE 7 - STOCK WARRANTS

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


                                      F-30

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996



                  In July,  1997, the Company  offered  300,000 shares of common
         stock at  $6.00  each,  along  with an  additional  300,000  shares  of
         purchase  warrants  at $6.00  each,  good until July 7, 2002.  In March
         1998, 200,000 shares of common stock were exercised at $6.00 per share,
         or $1,200,000.

         NOTE 8 - PREFERRED STOCK - SERIES A

         On June 20, 1997,  the Company  began  offering for sale a Regulation D
         offering  under Rule 506.  This offering was for the Series A Preferred
         Stock of the Company  and was sold for  $10,000  per share,  in minimum
         subscription   amounts  of  at  lease  ten  shares  ($100,000)  and  in
         increments of five shares in excess thereof. The total offering was for
         $3,000,000,  with a minimum of $1,650,000.  The offering closed on July
         8, 1997 with the  minimum  offering  placed.  The  preferred  stock was
         accompanied  by warrants to purchase a number of shares of common stock
         of the Company equal to 33 1/3%  multiplied  by the aggregate  purchase
         price of the Subscriber's  preferred stock outstanding on each of nine,
         twelve and fifteen  months  following the closing date of the offering,
         divided by the Fixed Conversion Price as herein defined.

         The  Series A  Preferred  Shareholder  shall be  entitled  to  convert,
         subject to the Company's right of redemption,  if the conversion  price
         is less than the Fixed  Conversion  Price at the time of  receipt  of a
         notice of conversion.  The  conversion  price is equal to the lessor of
         115% of the average  Closing Bid Price for five  trading days ending on
         June 6,  1997,  which is  $7.346  (The  Fixed  Conversion  Price)  or a
         discount,  ranging  from 10% to 20% over a 12 months  period  beginning
         July 8, 1997,  of the average  Closing Bid Price for five  trading days
         immediately  preceding the Date of Conversion divided into the original
         purchase price of the preferred  stock,  plus an 8% per annum accretion
         rate equal to the


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


                                      F-31

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996



         period that has passed since the closing  date.  Assuming that all the
         of the warrants  would be exercised,  an additional  271,850 shares of
         common would be issued as of March 31, 1998.

         On January 5, 1998,  three (3) shares of preferred stock were converted
         to 4,851 shares of common  stock at $6.45131  per share.  On January 6,
         1998,  three (3)  shares of  preferred  stock were  converted  to 4,803
         shares of common stock at $6.51875 per share.

NOTE 9 - DISCONTINUED OPERATIONS OF A BUSINESS SEGMENT

         On January 1, 1997,  the  Company  sold Manon  Consulting,  LTD at book
         value.  No  revenues  or  expenses  are  included  in the  consolidated
         financial statements for the year ended December 31, 1997 and 1996. The
         statement of operations for the years ended


NOTE 9 - DISCONTINUED OPERATIONS OF A BUSINESS SEGMENT(CONTINUED)

         December 31, 1996 and 1995 have been  restated to remove the net losses
         of $3,169 and $1,320, respectively.  Gross revenues for the years ended
         December 31, 1996 and 1995 were $8,118 and $1,729. The Company reported
         a gain on the  transaction  of $15,770.  The  following  is a condensed
         balance sheet and statement of operations of Manon Consulting,  LTD, as
         of December 31, 1996 and 1995:
<TABLE>
<CAPTION>

                                          1996                    1995
                                          ----                    ----
<S>                                       <C>                     <C>    

         Condensed Balance Sheet
         Current Assets                   $787                    $533
</TABLE>




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


                                      F-32

<PAGE>



                   MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                   MARCH 31, 1998, DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>


<S>                       <C>         <C>    

Equipment, Net               7,203      11,132
Other Assets                    64         138
                          --------    --------
                             8,054    $ 11,803
                          ========    ========

                              1996        1995
                          --------    --------

Current Liabilities       $ 23,825    $ 24,405
Common Stock                     7           7
 Deficit                   (15,778)    (12,609)
                          --------    --------
                          $  8,054    $ 11,803
                          ========    ========


Expenses                    11,287       3,049
                          --------    --------
Net Loss                  $ (3,169)   $ (1,320)
                          ========    ========
</TABLE>


NOTE 10 - COMMITMENTS

         The  company  leases  certain  office  equipment  under   noncancelable
         operating  leases for a period of less than three  years.  Total  lease
         expense  charged to  operations  for the period ended March 31, 1998 is
         $939.

          Future minimum payments under noncancelable  operating leases at March
          31: are:
<TABLE>
<CAPTION>


<S>                       <C>                        <C>

                          1999                       $  2,204
                          2000                       $  2,204
                          2001                       $  2,204

</TABLE>



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







                                      F-33

<PAGE>




         Item 2     Management's Discussion and Analysis of Financial Condition 
                    and Results of Operations

         When  used in this  discussion,  the words  "believes",  "anticipates",
         "expects"   and   similar   expressions   are   intended   to  identify
         forward-looking  statements.  Such  statements  are  subject to certain
         risks and  uncertainties  which  would could  cause  actual  results to
         differ  materially from those  projected.  Readers are cautioned not to
         place undue reliance on these  forward-looking  statements  which speak
         only as of the date hereof.  The Company  undertakes  no  obligation to
         republish  revised  forward-looking  statements  to  reflect  events or
         circumstances  after the date  hereof or to reflect the  occurrence  of
         unanticipated  events.  Readers are also urged to carefully  review and
         consider the various  disclosures  made by the Company which attempt to
         advise  interested  parties of the factors  which affect the  Company's
         business,  in this report, as well as the Company's periodic reports on
         Forms  10-K,  10Q  and 8-K  filed  with  the  Securities  and  Exchange
         Commission.

         Overview

         The  Company  has  developed  The  MedCare  Program,   a  non-surgical,
         non-drug, non-invasive and cost effective treatment program for urinary
         incontinence,  as well as  pelvic  pain,  chronic  constipation,  fecal
         incontinence,  and  disordered  defecation.  The  MedCare  program is a
         multi- modality  program based primarily on behavioural  techniques for
         treatment.  These techniques include biofeedback using electromyography
         (EMG),   pelvic   floor  muscle   exercises,   and  bladder  and  bowel
         re-training.  The program is designed to activate  and  strengthen  the
         various  sensory-  response  mechanisms that maintain bladder and bowel
         control.  The therapy is  provided  through  computerized  instrumental
         electromyography  biofeedback  and is  based  on  operant  conditioning
         strategies whereby specific  physiological  responses are progressively
         shaped, strengthened, and coordinated.

         The MedCare  Program is available  through the  practices of physicians
         (urologist,  urogynecologist,  gastroenterologist,  and/or colon rectal
         surgeon), either in a private office, clinic, or a hospital setting. As
         at  March  31,  1998,   the  Company  had  12  MedCare   Program  sites
         established, and was in the process of opening an additional 15 MedCare
         Program sites in various parts of the country.

         The  Company   plans  to  devote  the  majority  of  its  resources  to
         establishing new MedCare Program sites, in operating  existing centres,
         and in  developing  new  business  models for the  introduction  of the
         MedCare  Program  into new  markets,  such as  nursing  homes and other
         institutions, and possibly foreign countries.

         Results of Operations

         The Company had revenues of $227,008 for the three month period  ending
         March 31, 1998  compared to $37,236 for the three month  period  ending
         March 31, 1997, and $91,802 for fiscal 1997. Since the Company had only
         12 MedCare Program  centres  operating as at March 31, 1998, of which 8
         were  recently  opened (1 in November  1997,  1 in January  1998,  1 in
         February  1998,  and 5 in March 1998),  the  majority of the  Company's
         first quarter revenues were generated by

                                       37

<PAGE>



         previously  established  sites.  Until public  awareness builds amongst
         incontinence  sufferers and local area physicians  through  advertising
         and word of mouth  referrals from patients,  the Company expects modest
         revenues  from all newly  opened  sites  during  the first 12 months of
         operations.  To date,  the Company has not relied on any  revenues  for
         funding its  activities  and it does not expect to receive  significant
         revenues  from  operation in the near  future.  During the next several
         years,  the Company  expects to derive the  majority  of its  potential
         revenues from the opening of new MedCare  Program centres in the United
         States, and possible abroad.

         For the three month period ending March 31, 1998, the Company's general
         and administrative  expenses increased to $765,710 compared to $197,731
         for the  corresponding  period in 1997.  The 1998 amount  represents an
         increase of 287% due primarily to the hiring of  additional  management
         and  nursing  staff,  expenses in moving to larger  office  facilities,
         greater advertising and marketing expenses,  increased expenses related
         to financial  public  relations and increased legal and accounting fees
         related to the Company's Form 10-SB2 and application for listing on the
         NASDAQ Small Cap market.

         The Company's net loss was $496,033,  or $0.02 per share, for the first
         quarter of 1998 compared to a net loss of $158,564, or $0.08 per share,
         for the  corresponding  period in 1997. This increase was primarily due
         to the increase in general and administrative costs described above.

         Liquidity and Capital Resources

         As at March 31,  1998,  the  Company's  cash  balance  was  $4,225,880,
         compared to $1,202,631  as at March 31, 1997.  The Company has financed
         its  operations  primarily  through the  exercise of Stock  Options and
         Share Purchase  Warrants from a previous  private  placement  totalling
         $1,187,000 for the three month period ending March 31, 1998.

         The  Company's  future  funding  requirements  will  depend on numerous
         factors,  including  the  Company's  ability to  establish  and operate
         profitability current and future MedCare Program locations,  recruiting
         and training  qualified  management and clinical  personnel,  competing
         against  any  potential  technological  advances  in the  treatment  of
         urinary  incontinence  and other  afflictions of the pelvic floor area,
         and the Company's  ability to compete against other better  capitalized
         corporations  who offer  alternative or similar  treatment  options for
         urinary incontinence and other afflictions of the pelvic floor area.

         Due to the "start up" nature of the  Company's  business,  the  Company
         expects to incur losses as it expands its  business.  While the Company
         has enough cash to fund its early stage  expansion  plans,  the Company
         may choose to raise  additional  funds through private or public equity
         investment  in order to expand  the  range  and  scope of its  business
         operations.  Even if the Company  does not have an  immediate  need for
         additional cash, it may seek access to the public equity markets if and
         when  conditions  are  favourable.  There  is no  assurance  that  such
         additional  funds will be  available  for the  Company  to finance  its
         operations on acceptable terms, if at all.



                                       38

<PAGE>



         Item 1            Legal Proceedings

         None

         Item 2            Changes in Securities

         As detailed in the  financial  statements,  the Company  issued  24,000
         common shares for the exercise of stock options  ranging in prices from
         $3.00 to $4.50 per share,  issued  200,000  common  shares at $6.00 per
         share for the  exercise  of share  purchase  warrants  from a  previous
         private  placement  completed at $6.00 per share,  converted 3 Series A
         Preferred  Shares into 4,851 common  shares,  and  converted 3 Series A
         Preferred  Shares into 4,803 common  shares.  The total  common  shares
         issued  during the three month period ending March 31, 1998 was 233,654
         shares.

         Item 3            Defaults Upon Senior Securities

         None

         Item 4            Submission of Matters to a Vote of Security Holders

         None

         Item 5            Exhibits and Reports on Form 8-K

         None


                                       39

<PAGE>


         Signature Page

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



                                              MEDCARE TECHNOLOGIES, INC.




                                              /s/ Harmel S. Rayat
                                              Harmel S. Rayat
                                              Chairman of the Board and
                                              Chief Executive Officer


         Dated: May 12, 1998

                                       40

<PAGE>