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

                               FORM 10-KSB/A

            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934
             For the Fiscal Year Ended December 31, 1996


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


 DELAWARE                                          87-0429962 B
-------------------------------                   -----------------
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                    Identification No.)
                                   
Suite 600 - 2443 Warrenville Rd., Lisle, Illinois               60532
-------------------------------------------------               ------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (630) 955-3711
                                                    --------------
Securities to be registered pursuant to Section 12(b) of the Act:     None

Securities to be registered pursuant to Section 12(g) of the Act:     Common 
Stock, $.001 par value     


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              

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of the registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K                                  ( X  )  

Aggregate market value of Common Stock, $0.001 par value, held by 
non-affiliates of the registrant as of March 21, 1997: $34,875,000. Number of 
Common Stock, $0.001 par value, outstanding as of March 21, 1997: 6,445,185.

DOCUMENTS INCORPORATED BY REFERENCE

Designated portions of the following document are incorporated by reference 
into this report on From 10-K where indicated: None



                        ANNUAL REPORT ON FORM 10-KSB
                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996


                            TABLE OF CONTENTS


                                                                 Page

PART I     
 ................................................................. 1     
Item 1. Business................................................  1
Item 2. Properties.............................................. 15
Item 3. Legal Proceedings....................................... 15
Item 4. Submissions of Matters to a Vote of Security Holders.... 15

PART II    
 ................................................................ 16       
Item 5.     Market for the Registrants' Common Equity 
            and Related Stockholder Matters..................... 16
Item 6.     Selected Financial Data............................. 17
Item 7.     Management's Discussion and Analysis of 
            Financial Condition and Results of Operations........18
Item 8.     Financial Statements ............................... 20
Item 9.     Changes in and Disagreements With Accountants
            on Accounting and Financial Disclosure...............20

PART III     
 ................................................................ 20       
Item 10. Directors and Executive Officers of the 
         Registrant............................................. 20
Item 11. Executive Compensation................................. 22
Item 12. Security Ownership of Certain Beneficial 
         Owners and Management.................................. 24
Item 13. Certain Relationships and Related Transactions......... 24

PART IV     
 .................................................................24      
Item 14. Exhibits, Financial Statement Schedules, and 
         Reports on Form 8-K.................................... 24

<PAGE>

     
PART I

ITEM 1.     BUSINESS

Except for the historical information contained herein, the discussion in this 
Annual Report on Form 10-KSB contains certain forward-looking statements that 
involve risk and uncertainties, such as statements of the Company's plans, 
objectives, expectations and intentions. The cautionary statements made in 
this document should be read as being applicable to all related 
forward-looking statements wherever they appear in this document. The 
Company's actual results could differ materially from those discussed here. 
Factors that could cause differences include those discussed below in "Risk 
Factors", as well as discussed elsewhere herein. 

THE COMPANY
Summary of Business

MedCare Technologies, Inc. ("MedCare" or 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.

Affecting an estimated 25 million Americans, urinary incontinence (UI) is the 
involuntary loss of bladder control and represents a significant cause of 
disability and dependence. Incontinence is one of the most prevalent, yet 
severely unrecognized problems in health care today. And as society ages, the 
physical, emotional and financial costs to those suffering and the costs to 
their caregivers, as well as the health care system, is expected to increase 
dramatically.

The psychosocial impact of UI imposes a tremendous burden on individuals, 
their families and health care providers. Patients experience odor, dampness, 
discomfort, depression, withdrawal from daily activities and a significant 
quality of life problem. Social interaction with friends and family, and even 
sexual activity, is restricted or avoided in the presence of incontinence. 
Sadly, many UI sufferers eventually confine themselves to a life of exile in 
their own homes. In fact, the U.S. Department of Health states that urinary 
incontinence is one of the major reasons why people institutionalize elderly 
family members, accounting for upwards of 50% of all admissions into nursing 
homes.

Despite the prevalence of incontinence, it is widely under-diagnosed and 
under-reported primarily because of the social stigma attached to UI. Many 
individuals are either too ashamed or too embarrassed to report the problem to 
their doctor or to a health care professional. Instead, a large number of 
people prematurely turn to the use of absorbent materials and supportive aids 
without having their condition properly diagnosed and treated. When sufferers 
do inquire, they discover that very few doctors are knowledgeable about UI. In 
fact, so few medical professionals have the adequate training to diagnose and 
offer treatment options that the U.S. Department of Health and Human Services, 
Agency for Health Care and Policy and Research, recommended that information 
about UI be included in the curricula of undergraduate and graduate health 
professional schools. 

<PAGE>

Urinary Incontinence

In March 1996, the US. Department of Health and Human Services published a 
Clinical Practice Guideline which estimated that urinary incontinence affects 
approximately 13 million Americans (of which 85% are woman) at an annual cost 
of $16 billion. However, because the incidence of incontinence is so widely 
under reported and under diagnosed, many industry observers believe that the 
total number of sufferers is well over 25 million, with approximately one 
third of these individuals also experiencing problems with bowel control.

Among the population between 15 and 64 years of age, the prevalence of UI 
ranges from 1.5% to 5% in men and from 10% to 25% in women. In one series of 
randomly selected women between the ages of 30 to 59, an amazing 26% reported 
having experienced UI at some time during adult life and 14% reported that 
they perceived UI as a social or hygienic problem. Woman suffer from UI far 
more often than men and at younger ages primarily because of the stress 
associated with pregnancy and childbirth.

For noninstitionalized individuals over the age of 60, the prevalence of UI 
ranges from 15% to 30%, with women having twice the prevalence of men. Between 
25% to 30% of those identified as incontinent had daily or weekly episodes of 
incontinence. Among the more than 1.5 million nursing home residents, the 
prevalence of UI is 50% or higher, with incontinence episodes occurring more 
than once a day. 

While most people associate the lack of bladder control with very old people, 
urinary incontinence affects adults of all ages and crosses all social, 
economic, racial and gender lines. Ingrid Nygaard, Assistant Professor of 
Obstetrics and Gynecology at the University of Iowa, conducted a study with 
144 female exercisers between the ages of 18 and 21. An amazing 28% of these 
relatively young individuals experienced urine loss at some point.

Incontinence is a symptom rather than a disease. UI can be caused from a 
variety of pathologic, anatomic and physiological factors including: Damage to 
pelvic muscles from pregnancy; spina bifida; spinal injury; bladder 
infections; drug side effects; multiple sclerosis; Parkinson's disease; 
stroke; diabetes; age related changes in lower urinary tract; obesity and 
surgery (hysterectomy, cesarean section or prostatectomy) that may damage the 
bladder or urinary tract. For example, each year about 500,000 men undergo 
surgery for prostate cancer and approximately 10% of these patients suffer 
sphincter damage during the procedure, leading to incontinence. 

There are six types of UI: urge, stress, overflow, reflex, functional and 
mixed. Of these six, urge and stress incontinence account for over 90% of all 
urinary incontinence. 

Urge Incontinence 

The involuntary loss of urine as a result of an abrupt and strong desire to 
void. The detrusor muscle, which controls bladder contractions, is irritated, 
unstable and contracts erratically. Individuals suffering from urge 
incontinence have the urge to urinate but cannot "hold it" until they reach 
the bathroom. 

Stress Incontinence 

The involuntary loss of urine during coughing, sneezing, laughing, exercise or 
other physical activity causes a sudden increase in intra-abdominal pressure. 
Stress incontinence is seen predominantly in women 

<PAGE>

and is often caused by a decrease in the pelvic muscle strength due to 
childbirth, surgery or reduced hormones associated with menopause.  

Overflow Incontinence 

Overflow incontinence is often the result of a blockage in the lower urinary 
tract. This type of incontinence may have a variety of symptoms including 
constant dribbling and/or frequency, which is not improved by lying down.

Reflex Incontinence 

Reflex incontinence is the loss of bladder control due to impaired nerve 
function.

Functional Incontinence 

Functional incontinence is caused by factors outside the urinary tract such as 
chronic impairments of physical and/or cognitive functioning. 

Mixed Incontinence 

Mixed incontinence sufferers display more than one type of symptom. The most 
common form of mixed incontinence is a combination of stress and urge 
incontinence.

The MedCare Program for Incontinence

The MedCare program is individualized for each patient's needs and 
circumstances. It focuses on their clinical, cognitive, and residential status 
to produce a comprehensive program for bladder and bowel disorder sufferers. 
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. All patients entering the MedCare treatment program are initially 
evaluated by a physician and a biofeedback clinician whose expertise is in 
bowel and bladder control.  

The MedCare Program is individualized for each patient's needs and 
circumstances. It focuses on their clinical, cognitive, and residential status 
to produce a comprehensive program for bladder and bowel disorder sufferers. 
The fundamental goals for the MedCare Program, as they relate to bladder and 
bowel function, are:

1.     Increase the strength and tone of the pelvic floor muscles that prevent 
incontinence;
2.     Augment the motor efficiency of the striated pelvic floor muscles; 
3.     Enhance sensory-response systems that trigger motor activity that  
prevent or limit incontinence;
4.     Decrease abnormal motor substitutions that are ineffective in 
preventing incontinence;

<PAGE>

5.     Re-establish normal muscle activity that may contribute to voiding and 
defecation dysfunction;
6.     Provide patients with strategies that establish normal bowel and 
bladder habits;
7.      Reduce incontinence and symptoms of urgency and frequency.

To reach these goals the MedCare Program may use the following treatments or 
procedures:

1.     Biofeedback using electromyography;
2.     Bladder ultrasound;
3.     Aerodynamicist;
4.     Electrical stimulation of the pelvic floor muscles;
5.     Anorectal Manometry;
6.     Weighted vaginal cones;
7.     Rectal pressure balloons;
8.     Pelvic floor muscle exercises;
9.     Various behavioural programs for bladder and bowel re-training;
10.     Behavioural strategies and home programs which generalize gains made 
within each treatment session to the patient's life situation.

The following disorders respond to this treatment:

Urinary Dysfunction

1.     Stress incontinence;
2.     Urge incontinence;
3.     Mixed stress and urge incontinence;
4.     Bladder disorders secondary to neurologic disorders;
5.     Urinary frequency and urgency;
6.     Hyperactive or dyssynergic sphincters;
7.     Pelvic floor muscle strengthening prior to bladder suspension surgery;

Bowel Dysfunction

1.     Fecal incontinence, idiopathic, or due to muscle or nerve damage from 
obstetrical trauma, or surgery;
2.     Disordered defecation caused by excessive spasm or activity of the 
pelvic floor muscles, i.e. constipation, acquired megacolon;
3.     Bowel disorders secondary to neurologic disorders, i.e. CVA (stroke), 
incomplete spinal cord injury, multiple sclerosis, spina bifida, etc.;
4.     Hirschbrung's disease;
5.     Irritable bowel syndrome;
6.     Adjunct to surgical procedures such as muscle transpositions, ostomy 
reversal surgeries, anal spincteroplasty, and imperforated anus;     

Pelvic Floor Disorders

1.     Levator ani syndrome;
2.     Perineal descent syndrome;

<PAGE>

3.     Spastic floor syndrome.

Admission to the MedCare Program

Admission to MedCare's program is by a physician's order for pelvic floor 
muscle strengthening or pelvic floor muscle spasm. The referral may come from 
a physician who has completely evaluated the patient and has determined that 
EMG biofeedback therapy in conjunction with behavioural programs is a 
reasonable treatment for the patient. The referral may also come from a 
physician who would like more assessment of the patient. In that case, the 
patient would be referred to the physician working with MedCare's program for 
evaluation to see if he or she is an appropriate candidate for EMG biofeedback 
therapy. A patient can also self refer to the MedCare program, but must first 
be evaluated by the physician working with MedCare's program to see if they 
are appropriate. The cost of the MedCare program is covered by most insurance 
companies.

Course of  treatment

The MedCare Program begins by having the clinician review the patients medical 
history. The clinician then conducts an in-depth verbal interview with the 
patient regarding his or her bladder or bowel dysfunction. A patient diary is 
then given to the patient to fill out for a week at a time to better keep 
track of their symptoms. This diary is reviewed each visit and helps to track 
patient progress and improvement.  

The patient then undergoes a physical assessment which varies according to the 
patients disorder and symptoms. In the case of bladder dysfunction the 
physical assessment may include EMG measures of the pelvic floor showing 
baselines, maximum contraction/relaxation, and degree of  maladaptive 
abdominal substitution with attempts at pelvic floor muscle contraction. A 
bladder scan, catheterization, or aerodynamicist may also be done. These help 
to evaluate the patients post void residual volumes, bladder compliance, 
presence of uninhibited bladder contractions, and sensation related to 
increasing levels of bladder infusion.  
In the case of bowel dysfunction the physical assessment consists of EMG 
measures of the pelvic floor muscles showing baselines, maximum 
contraction/relaxation, degree of maladaptive abdominal substitution with 
attempts at pelvic floor muscle contractions, and the ability to relax with 
defecation maneuvers. Anal manometry, may also be done, to show the dynamic 
characteristics of the pelvic floor, coordination and synchrony of the 
internal and external anal sphincters, and sensation in response to varying 
degrees of rectal distention.

After the evaluation identifies the patients dysfunctional motor patterns, the 
MedCare treatment program is then individualized to include the modalities 
that will be used and a home exercise program. At each consecutive treatment 
session the patient's progress is reviewed, new goals are set, and the 
patient's program is changed to accommodate their current situation and 
symptoms.

Length of  Treatment

Treatment sessions are usually one hour in length, one week apart initially 
with the inter treatment interval increasing thereafter for most ambulatory 
non-neurological compromised outpatients. As a result most patients will be 
seen over a three to four month period with an average of six to eight 
treatment sessions. MedCare's program relies on patients following a specific 
individual home 

<PAGE>

exercise program that is updated during each treatment 
session. However, if the patient's condition demands more intensive therapy 
(i.e. neurologic disorders, cognitive dysfunction, pediatric patients), or if 
the patient's ability to perform the home program is compromised the treatment 
sessions may need to be scheduled more frequently and over a longer period of 
time.

Contradictions to Treatment

The most significant contradictions to MedCare's program is the patient's lack 
of motivation, inability to follow directions, and failure to remember to do 
their home exercise program.  However, since each patient is assessed 
carefully, thoroughly and followed closely, the clinician can determine within 
just a few sessions if the patient will benefit from the program or not. If 
the patient is found to be inappropriate for therapy, other methods of 
treatment will be offered such as regular toileting or adaptive equipment. In 
addition, the evaluating physician may also determine contradictions to 
therapy such as anatomic obstruction, severe descensus, prolapse, or severe 
neurologic disorder.      

Effectiveness Of The MedCare Program

The value and effectiveness of neuromuscular re-education therapy  and 
behavioural techniques has been well documented by many notable and respected 
researchers. Studies in the various application of biofeedback (EMG) combined 
with behavioural treatments report a range of 54% to 95% improvement in 
incontinence across different patient groups. The researchers of one such 
study were able to obtain a mean 82% reduction in stress incontinence and a 
range of 30% to 100% reduction in urge incontinence. With regard to fecal 
incontinence with various age groups, including geriatric patients and 
children with spina bifida, reports indicate a range of 66% to 77% using 
behavioural and neuromuscular re-education techniques. 

A combined analyses of 22 articles that dealt with behavioural techniques in 
community dwelling adults were reviewed by a subcommittee of behavioural 
experts and then by external reviewers. The number of patients (both male and 
female) studied in the combined analyses was 887, with an average age of 53 
years. The number of baseline incontinent episodes ranged from 4 to 21 per 
week, per article, with an overall average of 6 per week. Based on the 
weighted combined data, the average percent reduction in incontinence 
frequency at the end of treatment was 64.6%, with a 95% confidence interval 
ranging from 58.8% to 70.4%. 

Successful application of behavioural treatment and neuromuscular re-education 
therapy using biofeedback is highly dependent on the knowledge and skill of 
the health care provider. This very important factor is the principle reason 
for such a wide percentage range in the studies mentioned above. In contrast, 
MedCare's protocols are in-depth, standardized and comprehensive. All MedCare 
trained clinicians receive training in every aspect of the treatment program, 
including  familiarity with evaluation techniques, anatomic and physiologic 
correlates of the different forms and symptoms of bladder dysfunction, 
instrumentation and behavioural principles that guide the MedCare program for 
incontinence.

Expansion of The MedCare Program

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. 

<PAGE>

For the physician, the MedCare Program is a turn-key system that includes 
equipment, trained personnel, model policies and procedures, billing and 
collections assistance and an active marketing program in each local 
community where the Program is available. Inclusive of equipment and 
training costs, each site is expected to cost around $30,000 to establish.

As at March 21, 1997, the MedCare Program is available in the three states 
listed below: 

Oklahoma      
The MedCare Program with
Dr. Michael Blue 
800 - 500 E. Robinson
Norman, OK, 73071
Tel: 405-321-7817

Kansas
The MedCare Program with
Dr. Herb Hodes
4840 College Blvd
Overland Park, KS, 66211
Tel: 913-327-7723      

Florida
The MedCare Program with
Dr. Jake Jacobo
2 - 3586 Aloma Ave
Winter Park, FL, 32792
Tel: 407-671-1442

Additional locations are planned in 1997 for Colorado, Texas, Wisconsin, New 
York, Illinois, as well as possible additional sites in the Oklahoma, Kansas 
and Florida. To aid in the expansion of The MedCare Program, an experienced 
sales team consisting of ten representatives has been assembled to market the 
Program to Physicians. As compensation, each sales representative will receive 
consideration from the sale of the equipment that MedCare uses in each of its 
sites. This consideration is paid by the vendor of the equipment and not by 
the Company. 

Marketing of The MedCare Program

In a study of 3,638 patients over age 20 who saw their physicians during an 11 
week period, 43% of women and 11% of men (33% overall) reported current UI. 
75% of these patients had not yet informed a health care professional, 
however, more than a third said they would see a physician if treatment were 
available. In the meantime, many are pre-maturely drawn to the use of 
absorbent products as a result of extremely effective marketing by major 
manufacturers, such as Kimberly Clark, Procter & Gamble and Johnson & Johnson. 
Thus allowing millions of sufferers to hide their condition without anyone 
ever discovering their UI and resulting in an average sufferer waiting between 
7 and 9 years before seeking help.

This study reveals the crux of the problem: A significant number of 
incontinence sufferers do not seek medical guidance of any kind either because 
they are too embarrassed, believe their condition is a normal part of aging or 
bearing children or are not aware that a genuine medical treatment is 
available. This general ignorance on the part of the patient is compounded by 
the fact that so few people in the medical community are knowledgeable. 

When an effort is made to educate and market to incontinence sufferers, most 
are amazed at the significant drawing power of simple marketing and sales 
programs. For example, The New York Times  reported an incidence in which the 
authors of "Staying Dry: A Practical Guide to Bladder Control" (Dr. Kathryn L. 
Burgio, K. Lynette Pearce and Dr. Angelo J. Lucco) were rejected by 50 
publishers before Johns Hopkins Press accepted the manuscript. Within several 
days of a mention of the book in an Ann Landers column, Johns Hopkins Press 
was flooded by over 20,000 letters. Within a 

<PAGE>

matter of months, over 50,000 copies of the book had been sold, becoming the 
biggest selling book of its kind in such a short period of time. 

MedCare's marketing and sales strategy is designed to promote general 
awareness of incontinence and that an effective treatment program is readily 
available. The majority of the Company's advertising is  directed towards the 
sufferer through a combination of brochures, print ads, direct mail, radio, 
TV, doctor referrals, seminars and general public relations within a defined 
area. The Company's past experience with such marketing has been very 
favorable, with print and referrals being the best source of new patient 
flow. 

The Company targets much of its marketing and advertising to those individuals 
that are prime candidates, namely women over the age of 35, men who have 
undergone prostate surgery, nursing home residents, new mothers, female 
athletes and current incontinence patients. A secondary audience for MedCare's 
advertising will be friends and family and the professional audience, which 
includes gynecologists/obstetricians, general practitioners, family 
practitioners, geriatricians, gastroenterologists, nurse practitioners, and 
nursing home administrators. Past experience indicates that once an effective 
marketing program has been launched, much of the continued draw comes from 
word of mouth referrals from patients and doctor referrals.

Competitive Treatment Options for UI

Some currently available alternatives for the treatment of urinary 
incontinence include: 

Absorbent Products and Diapers

Similar to baby diapers, adult diapers and pads capture urine upon leakage. 
While the product has improved over the last few years, most users find the 
bulky size, inconvenience, lack of control over urine flow, discomfort from 
wetness, embarrassment over the appearance and odour of urine and ongoing cash 
outlay to be major disadvantages. 

It has been estimated that the typical UI sufferer in the US spends between 
$1200 to $1500 annually on these types of products. Retail sales of adult 
absorbent products surpassed $1.5 billion last year according to industry 
sources, compared to $496 million in 1987 and just $173 million in 1982. 

Early dependency on absorbent products is often a deterrent to continence by 
giving the wearer a false sense of security and removes their motivation to 
seek evaluation and treatment. When used improperly, absorbent products may 
contribute to skin breakdown and urinary tract infections. As a result, 
meticulous care and frequent changes are required.

Surgery

A variety of surgical procedures are utilized more for stress incontinence 
than urge or mixed incontinence. Surgeries usually involve elevating and 
stabilizing the urethra and the bladder neck in order prevent hypermobility. 
These procedures are delicate, complicated procedures whose success depends on 
a number of factors, including the degree of the pathology and the operating 
physician's experience. Accordingly, outcomes are generally varied. Surgery is 
quite an expensive and traumatic procedure requiring a hospital stay and 
several weeks of recovery time. A typical bladder suspension, 

<PAGE>

for example, costs over $10,000 to perform. An estimated 60,000 bladder 
suspension procedures are performed annually in America.

Indwelling Catheters

An indwelling, or Foley, catheter is a closed sterile system inserted into the 
bladder through the urethra in order to allow for drainage of the bladder 
directly through a tube into a urine collection bag. While the individual 
typically remains dry, most experience the inconvenience of the long tube and 
collection bag. For continuous users, urinary tract infections are of 
concern. 

Another similar product, called the Reliance and developed by UroMed Corp., is 
a balloon-tipped device that is inserted into the urethra and then inflated in 
order to block the flow of urine. When the user needs to urinate, a string is 
pulled to deflate and remove the device. On average, each patient is expected 
to use about 90 inserts monthly, or 1080 annually, and no insurance 
reimbursement is expected. In a recent multicenter study, almost 40% of the 
215 women enrollees withdrew from the study within four months primarily 
because of discomfort or an inability/unwillingness to use the product.   

Implanting Devices and Injectable Materials

Implantation of foreign materials into the body, such as an artificial 
sphincter, are used relatively infrequently due to the highly invasive and 
high complication rate as compared with other procedures. Injectables, which 
include collagen, polytetrafluoroethylene and other materials, are inserted 
into the tissue surrounding the urethral sphincter using a small-gauge 
hypodermic needle under local anaesthesia. The injection of the material 
increases muscle tone of the sphincter by increasing bulk and offering greater 
resistance to urine flow. 

Periurethral injections generally show promise when used in patients suffering 
from specific anatomical defects, principally intrinsic sphincteric 
deficiency, thus limiting its use to about 10% to 15% of the UI population. In 
addition to the high cost of such injections, around $2,500, there is some 
degree of side effects. 

Electrical Stimulation

Electrical stimulation involves the application of a low level electric 
current to stimulate or inhibit the pelvic muscles or their nerve supply.

Mechanical Devices

Most mechanical devices, such as vaginal pessaries, diaphragm rings and other 
inflatable and non-inflatable devices, work by supporting the urethrovesical 
junction. Despite their wide availability, these products have not gained wide 
acceptance among UI sufferers. In addition to the difficulty of properly 
fitting patients with these devices, other potential adverse side effects 
include vaginal discharge and tissue erosion. 

<PAGE>

Drugs

Drugs typically used for the treatment of incontinence act on the nerve 
receptors associated with the bladder neurotransmitter system and generally 
alleviate the symptoms in part but are seldom curative. Drugs also may cause 
adverse side effects, often affecting the cardiovascular and circulatory 
systems, along with the possibility of urinary retention and unwanted 
interactions with other drugs. Currently, most drugs require continual, life 
long usage in order to control urinary incontinence symptoms. 

Ignorance of Sufferers And The Medical Community

The greatest competition, by far, comes from the ignorance of the marketplace. 
A significant number of incontinence sufferers do not seek medical guidance of 
any kind either because they are too embarrassed, believe that their condition 
is a normal part of aging or bearing children or are not aware that a genuine 
medical treatment is available. Not only are UI sufferers ignorant of the care 
and treatment options available for their condition, but so are a vast number 
of people in the medical profession. In fact, so few doctors are knowledgeable 
about UI that the Agency for Health Care Policy and Research recommended that 
information about UI be included in the curricula of undergraduate and 
graduate health professional schools. 

Another area of competition for MedCare Technologies comes from 
gynaecologists, urologists and urogynaecologists. Many, if not most, of these 
medical professionals advocate drugs or surgery as their preferred choice of 
treatment for incontinent patients primarily because they have been trained to 
do so and are financially motivated to offer treatments surgery, drugs and 
other invasive treatment options. 

"Ma & Pa" Clinics

At present, there are a number of small incontinence clinics, or ancillary 
programs offered by doctors, hospitals or therapists, scattered across North 
America that use a combination of currently available non-invasive alternative 
treatment options to treat UI patients. Most, if not all, of these clinics 
have limited financial strength for adequate marketing and advertising and 
often operate a "ma and pa" type of business. Some of these clinics include 
small operations in Chicago, IL and Milwaukee, WI (The Continence Control 
Service), Southern Florida (Advantage Medical), Burbank, CA (Continence 
Restoration Service), Bryn Mawr, PA (Uro-Rehab) and First Choice for 
Continence.

Employees

At March 21, 1997, the Company employed 8 employees, including 1 part time 
employee. The Company's continued success will depend to a large extent upon 
its ability to retain skilled employees. No assurances can be given that the 
Company will be able to retain or attract such employees in the future, 
although management is committed to providing an attractive environment in 
which creative and high achieving people want to work. To the best of the 
Company's knowledge, none of the Company's officers or directors is bound by 
restrictive covenants from prior employers. None of the Company's employees is 
represented by labor unions or other collective bargaining groups. 

<PAGE>

RISK FACTORS

Limited Operating History; History of Losses; Profitability Uncertain

Since inception, MedCare Technologies has primarily been engaged in the 
research and development of its treatment program for bladder and bowel 
incontinence and has incurred significant operating losses. The Company 
expects to continue to incur significant operating losses as new MedCare sites 
are opened and as funds are expended to attract potential clients for the 
MedCare Program. While there is ample evidence that significant demand exists 
for a treatment program such as MedCare's, there is no guarantee that MedCare 
will be successful in achieving its operating goals or successful in gaining 
wide acceptance among physicians or sufferers. As a result, the Company may 
continue to suffer losses from operations in the future.

Reliance on Skilled and Key Personnel; Risk of Inadequate Funding 
 
As a part of its expansion plans, the Company plans to expend substantial 
funds for recruiting and training highly skilled personnel, purchasing medical 
equipment and for advertising and marketing. There can be no assurances that 
these highly skilled individuals, such as registered nurses, will be readily 
available and slower than anticipated sales growth may adversely affect the 
company's ability to continue funding its expansion program. The Company is 
also dependent upon a number of key management personnel. The loss of the 
services of one or more key individuals would have a material adverse effect 
on the Company. The Company's success will also depend on its ability to 
attract and retain other highly qualified scientific and management personnel. 
The Company faces competition for such personnel and there can be no assurance 
that the Company will be able to attract or retain such personnel. 

In order to finance the Company's future growth, MedCare intends to seek 
additional funding through public or private financings, collaborative or 
other arrangements, or from other sources. There can be no assurance that 
additional financing will be available from any of these sources or, if 
available, that it will be available on acceptable terms. In addition, sales 
of substantial amount of common stock in the public market could adversely 
affect prevailing market prices and impair the Company's future ability to 
raise capital through the sale of its equity securities. If additional funds 
are raised by issuing equity securities, significant dilution to existing 
stockholders may result. If the proposed offering is not successful or if 
adequate funds are not otherwise available, the Company may be required to 
scale back or delay the expansion of The MedCare Program and eliminate any 
future potential research and development project, or to obtain funds through 
entering into arrangements with collaborators or others that may require the 
Company to relinquish rights to certain parts of MedCare Program or to cease 
operations.

Dependence on One Treatment Program

MedCare Technologies expects to derive a substantial majority of its future 
revenues from its bladder and bowel incontinence program, as well revenues 
from the treatment of pelvic pain, chronic constipation, and disordered 
defecation. If the Company is unable to successfully commercialize its 
treatment program, the period during which the Company is in the development 
stage would be extended significantly. This would have a material adverse 
effect on the Company's business, financial condition and results of 
operations. 

<PAGE>

Protection of Proprietary Treatment Program

The Company's ability to compete and expand effectively will depend, in part, 
on its ability to develop and maintain proprietary aspects of its treatment 
program for bladder and bowel incontinence. The Company relies on an 
unpatented proprietary treatment protocol and there can be no assurances that 
others may not independently develop the same or similar program or otherwise 
obtain access to the Company's unpatented proprietary protocols. 

In addition, the Company cannot be certain that others will not independently 
develop substantially equivalent or superseding proprietary protocols, or that 
an equivalent program will not be marketed in competition with the Company's 
program, thereby substantially reducing the value of the Company's proprietary 
treatment program. There can be no assurance that any confidentiality 
agreements between the Company and its employees will provide meaningful 
protection for the Company's trade secrets, know-how or other proprietary 
information in the event of any unauthorized use or disclosure of such trade 
secrets, know-how or other proprietary information. 

Uncertainty Relating to Service Pricing,  Reimbursement and Related Matters

The Company's business may be materially adversely affected by the continuing 
efforts of governmental and third party payors to contain or reduce the costs 
of health care through various means. For example, in certain foreign markets 
the pricing or profitability of health care products and services is subject 
to government control. In the United States, there have been, and the Company 
expects there will continue to be, a number of federal and state proposals to 
implement similar government control. While the Company cannot predict whether 
any such legislative or regulatory proposals or reforms will be adopted, the 
announcement of such proposals or reforms could have a material adverse effect 
on the Company's ability to raise capital or form collaborations, and the 
adoption of such proposals or reforms  could have a material adverse effect on 
the Company.

In addition, in both the United States and elsewhere, sales of health care 
products and services are dependent in part on the availability of 
reimbursement from third party payors, such as government and private 
insurance plans. In the United States and in certain foreign countries, 
third-party reimbursement is currently generally available for certain 
procedures, such as surgery and biofeedback training by EMG application, and 
generally unavailable for patient management products such as diapers, pads, 
and urethral plugs. While the Company's treatment program is currently covered 
by third party payers, there can be no assurances that such coverage will 
remain in effect in the future. 

<PAGE>

Volatility of Stock Price; No Dividends; Dilution

The market prices for securities of early stage development and technology 
companies (including the Company) have historically been highly volatile, and 
the market has from time to time experienced significant price and volume 
fluctuations that are unrelated to the operating performance of particular 
companies.  Future announcements concerning the Company, its competitors or 
other technology companies including the development of new treatment 
protocols, drugs or therapies, technological innovations, governmental 
regulations, developments in patent or other proprietary rights, litigation or 
public concern as the safety of the services and products offered by the 
Company or others and general market conditions may have a significant effect 
on the market price of the Common Stock. The Company has not paid any cash 
dividends on its Common Stock and does not anticipate paying any dividends in 
the foreseeable future.

<PAGE>

Anti-Takeover Provisions
The Company is subject to provisions of the Delaware General Corporation Law 
which may make certain business combinations more difficult.

EXECUTIVE OFFICERS

Each executive officer is elected to office by the Board of Directors and 
holds the office until his successor is elected and qualified. The executive 
officers of the Company are:

HARMEL S. RAYAT (35) - Chairman of the Board, Chief Executive Officer and 
Chief Financial Officer. Mr. Rayat is one of the co-developers of the MedCare 
Program. Mr. Rayat has been in the venture capital industry since 1981 and 
since January 1993 has been the president of Hartford Capital Corporation, a 
company specializing in providing early stage funding and investment banking 
services to emerging growth corporations. From 1989 through December 1992, Mr. 
Rayat was the president of  K.S. Rayat & Company, an investment banking and 
venture capital company, where he was responsible for research, due diligence 
and investment strategy in early stage, start up venture capital investments. 
From April 1996 to the present, he has been president of Hartford Capital 
Management, Inc., an investment management corporation where he is responsible 
for research and making direct equity investments in emerging growth 
companies. Mr. Rayat has been a director of the Company since September 1995 
and the president since June, 1996. Mr. Rayat is also a director of Far West 
Resources, Inc., a non-reporting company trading on the NASD OTC Bulletin 
Board.

VALERIE BOELDT-UMBRIGHT (31) - Vice President - Clinical Services. Mrs. 
Boeldt-Umbright is registered nurse, with a Bachelors of Science degree in 
community health education from Northern Illinois University. With over two 
years of actual management experience in the day-to-day operation of the 
Incontinence Clinic in Chicago, Mrs. Boeldt-Umbright has supervised personnel, 
dealt with insurance and reimbursement matters, marketing and physician 
interaction and referrals. She has instructed patients in biofeedback for 
their pelvic floor muscles, established individualized neuromuscular 
re-education programs, written new clinical protocols and articles for 
publication and has worked as a member of a university team to provide excellent
 care and medical treatment for patients. Mrs. Boeldt-Umbright was a nurse 
insurance examiner in the PMI Division of Equifax Systems from October 1991 to 
September 1992. From June 1992 to July 1994, she was employed at the Premier 
Rehabilitation Center of Chicago, where she established a nursing and health 
education program and was the sole nurse responsible for traumatic brain 
injury and spinal cord injury clients. At this facility she also established a 
medication program and bowel/bladder programs, and taught inservices, training 
classes and health care classes for clients and staff. From March 1994 to 
September 1996, Mrs. Boeldt-Umbright was the Manager of Incontinence Control 
Services. In this position, she handled all manager responsibilities, 
including supervising personnel, insurance claims, marketing and physician 
interaction and referral, wrote articles for publication and assisted in 
research. Since March, 1996, she has been Vice President and Director of 
Clinical Services of the Company.

DIANE NUNZIATO (42) - Ms. Nunziato has a Bachelors of Science and a Masters of 
Clinical Science from the University of Western Ontario, as well as numerous 
certifications in courses ranging from adult learning, clinical supervision 
and instruction, group dynamics, learning theories and management. Ms. 
Nunziato has been instrumental in developing and refining the clinical 
protocols for The MedCare Program and in structuring and developing training 
courses, developing new teaching techniques and methods of presentation, 
quality assurance and evaluation of clinical and support staff and has an 
in-depth knowledge of every aspect of establishing a clinical system, 
including marketing, billing, medical products and equipment, patient and 
physician interaction and the training and 
<PAGE>

supervision of personnel. Since July 1990, Ms. Nunziato has been one of the 
21 international instructors of the Hanen Resource Center, where she is 
responsible for the presentation of intensive adult learning courses throughout 
Canada, the United States and internationally. Ms. Nunziato has been a 
Director of the Company since November 1995.

KUNDAN S. RAYAT (68) - Secretary - Mr. Rayat has over 45 years of experience 
as an entrepreneur and owner of a diverse spectrum of businesses, ranging from 
automotive to heavy construction, on three different continents. Since 1985, 
Mr. Rayat has been a principal of K.S Rayat & Company and has primarily 
devoted his time to venture capital, investing in numerous start up venture, 
and providing seasoned management advice to emerging market companies. He has 
been a Director and Secretary of the Company since August 1995. 

MICHAEL M. BLUE (53) - Medical Director - Dr. Michael Blue is a member of the 
American Medical Association, Oklahoma State Medical Association and the 
American Urological Association. Dr. Blue is a board certified urologist who 
has practiced general urology in private practice for twenty years. He joined 
the Board of Directors of the Company in August 1996 and is responsible for 
supervising and continuing the development of all medical aspects of the 
MedCare Program, as well as interacting and answering questions from other 
doctors within the MedCare system.

ITEM 2:     PROPERTIES

The Company currently has the use of approximately 500 square feet of office 
space, the use of 2 board rooms, and all office equipment, including a photo 
copier and telephone equipment, on a shared basis with the Company's 
President. These premises are located at suite 1408 - 400 Burrard Street, 
Vancouver, BC, V6C 3G2 and there is no lease in place. Through Manon 
Consultants Ltd., the Company also maintains a clinic currently being utilized 
as a developmental facility for the MedCare Program. This clinic is 200 sq 
feet in size and is located within a senior citizens health facility at the 
Kerby Center For Seniors located at 1133 - 7th Ave, SW, Calgary, Alberta, T2T 
1B2. The rent on this facility is approximately $400 per month. Additional 
clinical facilities are being maintained at suite 800 - 500 E. Robinson,  
Norman, OK, 73071 and 4840 College Blvd, Overland Park, KS, 6621. No rent is 
being paid on these facilities. 

ITEM 3:     LEGAL PROCEEDINGS

(a)          The Company is not a party to any legal proceedings.
(b)          No material legal proceedings were terminated in the fourth 
quarter.

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

No matters were submitted to a vote of the Company's stockholders during the 
quarter ended December 31, 1996

<PAGE>

PART II

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

(a)     Market Information

The Company's common stock trades on the NASD Electronic Bulletin Board under 
the symbol "MCAR". On August 11, 1995, the Company authorized a reverse split of
1200:1.  Prior to August 11, 1995, the Company traded under the name of Multi-
Spectrum Group, Inc. The following table sets forth the high and low sale price 
information as reported by America Online for the periods indicated:

                                                  
<TABLE>
<CAPTION>
                                        High           Low
                                        ----        ---
<S>                                     <C>         <C>
January-March 1997                      $8.1875     $5.125
October-December 1996                   $5.125      $4.375
July-September 1996                     $5.625      $4.75
April-June 1996                         $5.625      $4.75
January-March 1996                      $4.785      $4.25
October-December 1995                   $6.00       $3.75
July-September 1995                     $24*        $6.5*
April-June 1995                         $36*        $24*
January-March 1995                      $36*        $24*
October-December 1994                   $36*        $24*

* Adjusted to reflect 1200:1 stock split
</TABLE>

     Prior to this period, the Company traded as Multi Spectrum Group, Inc.  and
traded between $0.02 and $0.03 per share for many years.   The jump in share 
price during the period July-September 1995 from $6.50 to $24.00 is most likely 
attributable to the reverse split of the Company's stock which occurred during 
this time.  Positive expectations from investors regarding the potential of the 
Company's prospects may also have attributed to the jump in share price.

(b)     Holders

As of March 21, 1997, there were approximately 188 stockholders of record of 
the Company's Common stock. 

(c )     Dividend Policy

The Company has never paid a dividend and does not anticipate paying any 
dividends in the foreseeable future. It is the present policy of the Board of 
Directors to retain the Company's earnings, if any, for the development of the 
Company's business. 

<PAGE>

ITEM 6:     SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the 
Company for the five years ended December 31, 1996:

Consolidated Statements of 
Operations Data                         Years Ended December 31, 1996

                               1996       1995       1994     1993       1992 
Revenues                 $     8,118      1,729      0        0           0

Expenses
     General and Admin       487,324    692,762      0         0       8,773
     Total Expenses          487,324    692,762      0         0       8,773

Other Income
     Interest Income           2,801          0      0         0           0

Net Loss                    (476,405)  (691,033)     0         0           0

Net (Loss) Per Share          ($0.07)    ($0.11)     -         -          -


                                   
Consolidated Balance
Sheet Data                              Years Ended December 31, 1996

                               1996        1995       1994      1993     1992

Cash                     $   220,562      44,975         0         0        0

Total Current Assets         256,920      45,615         0         0        0

Total Assets                 573,618     358,130        50        50       50

Total Current Liabilities     57,007      24,114         0         0        0

Accumulated Deficit       (1,185,465)   (733,060)  (42,027)  (42,027) (42,027)

Total Stockholder's          573,618     334,016        50        50       50
equity

The Company expects to incur substantial additional costs prior to reaching 
profitability, including costs related to site research, personnel training 
and on-going training costs, advertising and marketing costs related to each 
MedCare Program opening, costs related to purchase of equipment and printing 
costs. As a result, the Company will require substantial additional funds, and 
the Company may seek expansion funding, private or public equity investments, 
and possible future collaborative agreements 
<PAGE>

to meet such needs. 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 favorable. There is no assurance that such additional funds 
will be available for the Company to finance its operations on acceptable terms,
if at all.

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

The following discussion should be read in conjunction with the financial 
statements and notes thereto included in Item 8 of this Form 10-K.

Except for the historical information contained herein, the discussion in this 
Annual Report on Form 10-K contains certain forward-looking statements that 
involve risk and uncertainties, such as statements of the Company's plans, 
objectives, expectations and intentions. The cautionary statements made in 
this document should be read as being applicable to all related 
forward-looking statements wherever they appear in this document. The 
Company's actual results could differ materially from those discussed here. 
Factors that could cause differences include those discussed below in "Risk 
Factors", as well as discussed elsewhere herein. 

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.

To date, MedCare has not received any significant revenues. The Company has 
been unprofitable since its inception and expects to continue to incur 
substantial losses for at least the next 12 to 24 months, and perhaps into the 
foreseeable future, due the "start up" nature of the Company's business and  
to costs related to site research, management personnel training and on-going 
training costs, advertising and marketing costs related to each MedCare 
Program opening, and the costs related to purchase of equipment and printing 
costs. As a result, the Company will require substantial additional funds, and 
the Company may seek expansion funding, private or public equity investments, 
and possible future collaborative agreements to meet such needs. 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 favorable. 
There is no assurance that such additional funds will be available for the 
Company to finance its operations on acceptable terms, if at all. 
While the Company expects to start generating revenues from two recently 
established MedCare centers in Norman, Oklahoma and Overland Park, Kansas, 
there can be no assurance that the Company will achieve either significant 
revenues from these, or any other future sites, or profitable operations. The 
Company expects that losses will vary from quarter to quarter. The Company has 
financed its research and development activities and operations primarily 
through private placements of its equity 

<PAGE>

securities. As of December 31, 1996, the Company's accumulated deficit was 
approximately $1.2 million. 

Results of Operations

The Company had revenues of $8,118, $1,729 and $0 for the years ended December 
31, 1996, 1995 and 1994. Revenues for 1996 and 1995 are primarily from the 
Company's Canadian developmental and research clinic in Calgary, Alberta. 
Since the Company does not expect to receive any third party insurance 
reimbursement, which limits any significant revenue potential for this site, 
and since the majority of the Company's activities are US based, MedCare may 
consider various options with regard to this location, including the 
possibility of closure in the very near future. The majority of the Company's 
future continued research and development will be conducted at the Company's 
present locations and any future potential centers. 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 for several years. During the 
next several years, the Company expects to derive the majority of its 
potential revenues from the opening of new MedCare Program centers in the 
United States.  

The Company incurred start up costs from January 1, 1995 to September 30, 1995 
amounting to $542,706. This total amount was charged to operations during the 
year ended December 31, 1995, resulting in a total loss of $691,033 or $0.11 
loss per share for the year ended December 31, 1995. Total expenses declined 
by 33% for the year ended December 31, 1996, resulting in a total loss 
$452,405, or $0.07 per share. Since the Company is currently in the process of 
hiring additional staff, incurring greater advertising and marketing expenses 
at current centers and future potential centers, and other costs related to 
opening additional centers in various parts of the United States, MedCare 
expects its general and administrative expenses to increase dramatically in 
1997 and 1998. Should the Company not generate any significant revenues from 
its present and future contemplated operations, the Company may continue to 
incur significant losses from operations into the foreseeable future. Interest 
income was $2,801, $0 and $0 for the years ended December 31, 1996, 1995 and 
1994. Interest earned in the future will be dependent on Company funding 
cycles and prevailing interest rates. There was no interest expense incurred 
on notes payable of $60,635 and $23,135 during the year ended December 31, 
1996 and December 31, 1995. 

Since inception, the Company has incurred substantial losses,  and as a 
result, there has been no provision for income taxes. The has net operating 
losses that will expire beginning with the years 2003 through 2008, in the 
amount of $1,200,691 and $575,960, in 1996 and 1995, respectively, unless 
utilized by the Company.  

Liquidity and Capital Resources

MedCare Technologies has financed its operations primarily through private 
placements of Common Shares and the exercise of Stock Options totalling 
$755,000 for the year ended December 31, 1995, and $611,000 for the year ended 
December 31, 1996. At December 31, 1996, the Company had a cash balance of 
$220,562, compared to a cash balance of $44,975 at December 31, 1995. On 
February 4, 1997, the Company agreed to a private placement of 176,000 Common 
Shares at an offering price of $6.25 per share for a total value of 
$1,100,000.

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, 

<PAGE>

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 
continue to incur substantial losses for at least the next 12 to 24 months, 
and perhaps into the foreseeable future. As a result, the Company will require 
substantial additional funds, and the Company may seek additional expansion 
funding, private or public equity investments, and possible future 
collaborative agreements to meet such needs. 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 favorable. There is no assurance that such 
additional funds will be available for the Company to finance its operations 
on acceptable terms, if at all. 

ITEM 8:     FINANCIAL STATEMENTS
 
The financial statements and financial statement schedules are incorporated by 
reference in this report on pages F-1 through F-15.

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

None. 

PART III

ITEM 10:     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Following is a list of that sets forth as of March 21, 1997 the names, ages 
and positions within the Company of all of the Executive Officers of the 
Company and the Directors of the Company. Each such director has been 
nominated for election at the Company's 1996 Annual Meeting, which was held on 
June 18, 1996. All Directors hold office until the next annual meeting of 
stockholders or until their successors are elected. Officers serve at the 
discretion of the Board of Directors.

HARMEL S. RAYAT (35) - Chairman of the Board, Chief Executive Officer and 
Chief Financial Officer. Mr. Rayat is one of the co-developers of the MedCare 
Program. Mr. Rayat has been in the venture capital industry since 1981 and 
since January 1993 has been the president of Hartford Capital Corporation, a 
company specializing in providing early stage funding and investment banking 
services to emerging growth corporations. From 1989 through December 1992, Mr. 
Rayat was the president of  K.S. Rayat & Company, an investment banking and 
venture capital company, where he was responsible for research, due diligence 
and investment strategy in early stage, start up venture capital investments. 
From April 1996 to the present, he has been president of Hartford Capital 
Management, Inc., an investment management corporation where he is responsible 
for research and making direct equity investments in emerging growth 
companies. Mr. Rayat has been a director of the Company since September 1995 
and the president since June, 1996. Mr. Rayat is also a director of Far West 
Resources, Inc., a non-reporting company trading on the NASD OTC Bulletin 
Board.

<PAGE>

VALERIE BOELDT-UMBRIGHT (31) - Vice President - Clinical Services. Mrs. 
Boeldt-Umbright is registered nurse, with a Bachelors of Science degree in 
community health education from Northern Illinois University. With over two 
years of actual management experience in the day-to-day operation of the 
Incontinence Clinic in Chicago, Mrs. Boeldt-Umbright has supervised personnel, 
dealt with insurance and reimbursement matters, marketing and physician 
interaction and referrals. She has instructed patients in biofeedback for 
their pelvic floor muscles, established individualized neuromuscular 
re-education programs, written new clinical protocols and articles for 
publication and has worked as a member of a university team to provide 
excellent care and medical treatment for patients. Mrs. Boeldt-Umbright was a 
nurse insurance examiner in the PMI Division of Equifax Systems from October 
1991 to September 1992. From June 1992 to July 1994, she was employed at the 
Premier Rehabilitation Center of Chicago, where she established a nursing and 
health education program and was the sole nurse responsible for traumatic 
brain injury and spinal cord injury clients. At this facility she also 
established a medication program and bowel/bladder programs, and taught 
inservices, training classes and health care classes for clients and staff. 
From March 1994 to September 1996, Mrs. Boeldt-Umbright was the Manager of 
Incontinence Control Services. In this position, she handled all manager 
responsibilities, including supervising personnel, insurance claims, marketing 
and physician interaction and referral, wrote articles for publication and 
assisted in research. Since March, 1996, she has been Vice President and 
Director of Clinical Services of the Company.

DIANE NUNZIATO (42) - Director. Ms. Nunziato has a Bachelors of Science and a 
Masters of Clinical Science from the University of Western Ontario, as well as 
numerous certifications in courses ranging from adult learning, clinical 
supervision and instruction, group dynamics, learning theories and management. 
Ms. Nunziato has been instrumental in developing and refining the clinical 
protocols for The MedCare Program and in structuring and developing training 
courses, developing new teaching techniques and methods of presentation, 
quality assurance and evaluation of clinical and support staff and has an 
in-depth knowledge of every aspect of establishing a clinical system, 
including marketing, billing, medical products and equipment, patient and 
physician interaction and the training and supervision of personnel. Since 
July 1990, Ms. Nunziato has been one of the 21 international instructors of 
the Hanen Resource Center, where she is responsible for the presentation of 
intensive adult learning courses throughout Canada, the United States and 
internationally. Ms. Nunziato has been a Director of the Company since November 
1995.

KUNDAN S. RAYAT (68) - Secretary. Mr. Rayat has over 45 years of experience as 
an entrepreneur and owner of a diverse spectrum of businesses, ranging from 
automotive to heavy construction, on three different continents. Since 1985, 
Mr. Rayat has been a principal of K.S Rayat & Company and has primarily 
devoted his time to venture capital, investing in numerous start up venture, 
and providing seasoned management advice to emerging market companies. He has 
been a Director and Secretary of the Company since August 1995. 

MICHAEL M. BLUE (53) - Medical Director.  Dr. Michael Blue is a member of the 
American Medical Association, Oklahoma State Medical Association and the 
American Urological Association. Dr. Blue is a board certified urologist who 
has practiced general urology in private practice for twenty years. He joined 
the Board of Directors of the Company in August 1996 and is responsible for 
supervising and continuing the development of all medical aspects of the 
MedCare Program, as well as interacting and answering questions from other 
doctors within the MedCare system.

<PAGE>

ITEM 11:     EXECUTIVE COMPENSATION

The following tables shows, for the three years period ended December 31, 
1996, the cash compensation paid by the Company, as well as certain other 
compensation paid or accrued for such year, to the Company's Chief Executive 
Officer and the Company's other executive officers.

Summary Compensation Table
                                                   Long-Term
                    Annual Compensation           Compensation Awards

Name and                               Securities Underlying
Principal Position     Year   Salary $   Bonus $       Stock Options   Other

Harmel S. Rayat       1996     - 0 -     - 0 -          160,000          - 0 -
President, CEO        1995     2,500     - 0 -          150,000     
& CFO                 1994     - 0 -     - 0 -           - 0 -           - 0 - 

Valerie Boeldt-       1996     18,125    - 0 -           40,000          - 0 -
Umbright              1995     - 0 -     - 0 -           - 0 -           - 0 - 
Clinical Director     1994     - 0 -     - 0 -           - 0 -           - 0 - 

Michael Blue          1996     - 0 -     - 0 -           40,000          - 0 -
Medical Director      1995     - 0 -     - 0 -           - 0 -           - 0 -
                      1994     - 0 -     - 0 -           - 0 -           - 0 - 

Kundan S. Rayat       1996     - 0 -     - 0 -           - 0 -           - 0 -
Secretary,Treasurer   1995     - 0 -     - 0 -           - 0 -           - 0 - 
Director              1994     - 0 -     - 0 -           - 0 -           - 0 - 
               
Diane Nunziato        1996     - 0 -     - 0 -           - 0 -           - 0 -
Director              1995     - 0 -     - 0 -           - 0 -           - 0 - 
                      1994     - 0 -     - 0 -           - 0 -           - 0 - 


Stock Options

The following table contains information concerning the grant of stock options 
to the named executive officers of the Company during the Company's fiscal 
year ended December 31, 1996:

                                % of Total Options
                                Granted to Employees   Exercise    Expiration
Name          Stock Options(1)  In Fiscal Year         Price       Date

Harmel S. Rayat     160,000          53.3%             $4.50       June 20, 2001
President, CEO          

<PAGE>


                                % of Total Options
                                Granted to Employees   Exercise    Expiration
Name          Stock Options(1)  In Fiscal Year         Price       Date

Valerie Boeldt-     40,000 (3)       13.3%             $4.50       June 20, 2001
Umbright          

Michael Blue        40,000 (4)       13.3%             $4.50       June 20, 2001
          

(1)     All of these options were granted pursuant to the Company's 1996 
Employee Stock Option Plan.
(2) These options fully exercisable at any time.
(3) These options are fully exercisable after June 20, 1997.
(4) These options are fully exercisable after August 15, 1997.

Option Holdings

                                                  Value of unexercised options
        Number of unexercised options             in-the- money
             at fiscal year end                   Options at fiscal year end (1)
Name         Exercisable     Unexercisable        Exercisable     Unexercisable

Harmel S. Rayat  160,000                          $90,000          
President, CEO          

Valerie Boeldt-   40,000          40,000                             $22,500  
Umbright          

Michael Blue      40,000          40,000                             $22,500  

(1) Represents the fair market value of the Company's Common Stock on December 
31, 1996 ($5.0625 per share on the closing on the NASD Electronic Bulletin 
Board) minus the exercise price per share, of the in-the-money options, 
multiplied by the number of shares subject to each option. 

ITEM 12:     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 21, 1997, the beneficial ownership 
of the Company's Common Stock by each person known by the Company to 
beneficially own more than 5% of the Company's Common Stock outstanding as of 
such date and by the officers and directors of the Company as a group.  Except 
as otherwise indicated, all shares are owned directly.

Person or Group               Number of Shares               Percent

Harmel S. Rayat               2,000,000                       31.03%
5131 Highgate Street
Vancouver, B.C., V5R 3G9

All directors and executive 
officers as a group(1 person) 2,000,000                       31.03%

<PAGE>

ITEM 13:     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company maintains offices on a shared basis with its President and Chief 
Executive Officer. The President and Chief Executive Officer loaned the 
Company $12,500 and is also the son of one of the Directors. On October 1, 
1995, the Company acquired 100% of Manon Consulting Ltd for nominal value. 
Diane Nunziato, a Director of the Company, was a minority shareholder of Manon 
Consulting at the time of the transaction, which was approved by both boards 
after disclosure.       

PART IV

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

(a)     (1)     Financial Statements:                              Page

          Report of Independent Public Accountants               F-1
          
          Balance Sheets as of December31, 1996 and 1995          F-2

          Statement of Income for the Years ended 
          December 31, 1996, 1995, 1994                         F-4

          Statement of Stockholders' Equity for the years ended 
          December 31, 1996, 1995, 1994                         F-5
          
          Statement of Cash Flows for the years ended 
          December 31, 1996, 1995, 1994                         F-8

          Notes to Financial Statements                         F-10



(a)     (2)     Exhibits 

The following exhibits are referenced or included in this report:

<PAGE>

          Articles of Incorporation
          By-Laws




(b)          Reports on 8-K

The registrant did not file any reports on Form 8-K during the fourth quarter 
of fiscal 1996.


Pursuant to the requirements of Sections 13 or 15 (d) of the Securities and 
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
                                        By Harmel S. Rayat, President & 
Chief                                         Executive Officer
                                   

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in capacities and on the dates indicated.


Signature                                   Title                    Date
/s/ Harmel S. Rayat                        President and CEO         7/23/97

                                      CONTENTS

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

Consolidated Balance Sheet at December 31, 
  1996 and 1995 ...................................................... F-2-F-3

Consolidated Statement of Operations for the 
  years ended December 31, 1996, 1995 and 1994............................ F-4

Consolidated Statement of Stockholders' Equity
  from Inception (January 17, 1986) Through
  December 31, 1996................................................... F-5-F-7

Consolidated Statement of Cash Flows for the 
  years ended December 31, 1996, 1995 and 1994........................ F-8-F-9

Notes to the Consolidated Financial Statements...................... F-10-F-15

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

<PAGE>

                                 26th Place
                           2601 East Thomas Road            PH: (602) 266-2646
                                 Suite 110                 FAX: (602) 224-9496
Clancy and Co., P.L.L.C.   Phoenix, Arizona 85016   E-MAIL: CLANCYPLLC@AOL.COM
------------------------------------------------------------------------------

                        INDEPENEDENT AUDITORS REPORT

Board of Directors
MedCare Technologies, Inc. and
Subsidiaries
Lisle, Illinois  60532

We have audited the acccompanying consolidated balance sheet of MedCare
Technologies, Inc. and Subsidiaries (A Development Stage Company), 
(the Company), as of December 31, 1996 and 1995, and the related
statements of income, stockholders' equity and cash flow for the years 
then ended.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion
on these consolidated 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 consolidated 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 
consolidated financial statements provides a reasonable basis for our opinion.

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

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern.  As discussed in Note 1 to the 
consolidated financial statements, the Company is a development stage Company as
defined in Financial Accounting Standards Board Statement No. 7.  The Company
is devoting substantially all of its present efforts in establishing a new 
business and although planned principal operations have commenced, there have 
been no significant revenues.  Management's plans regarding the matters which
raise doubts about the Company's ability to continue as a going concern are 
disclosed in Note 1 to the financial statements.  These factors raise 
substantial doubt about its ability to continue as a going concern.  The 
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/S/CLANCY AND CO.
--------------------
Clancy and Co., P.L.L.C.
Phoenix, Arizona
March 21, 1997

<PAGE>
<TABLE>
                       MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            (A Development Stage Company)
                             CONSOLIDATED BALANCE SHEET
                             DECEMBER 31, 1996 AND 1995

                                       ASSETS
<CAPTION>
                                            1996                        1995
<S>                                         <C>                         <C>
Current Assets
  Cash                                    $ 220,562               $   44,975
  Accounts Receivable -- Trade                7,351                      640
  Prepaid Expenses                           29,007                        0
                                            -------                   ------
  Total Current Assets                      256,920                   45,615

Property and Equipment
  Office Equipment                            5,274                    4,103
  Medical Equipment                          31,597                   16,799
                                            -------                  -------
                                             36,871                   20,902
  Less Accumulated Depreciation              20,237                    8,575
                                            -------                  -------
  Net Book Value                             16,634                   12,327


Other Assets
  Organization Costs 
   - Net of Amortization                         64                      188
  Intangible Assets 
   - The MedCare Program 
   - Note 3                                 300,000                  300,000
                                          ---------                ---------
  Total Other Assets                        300,064                  300,188
                                         ----------               ----------

Total Assets                            $   573,618             $    358,130
                                            =======                  =======


</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                   F-2

<PAGE>
<TABLE>
                       MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                             (A Development Stage Company)
                              CONSOLIDATED BALANCE SHEET
                              DECEMBER 31, 1996 AND 1995

                          LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
                                           1996                        1995
<S>                                        <C>                         <C>
Current Liabilities
  Accounts Payable                  $    20,372                     $   979
  Notes Payable                          48,135                      23,135
  Notes Payable - Officers               12,500                           0
                                        -------                      ------
  Total Current Liabilities              81,007                      24,114

Stockholders' Equity
  Preferred Stock, 
  $.25 Par Value, Authorized 
    1,000,000; Issued and 
    Outstanding, at
    December 31, 1996 
    and 1995, NONE                            0                           0

  Common Stock:  $0.001 Par 
   Value, Authorized
   100,000,000; Issued 
   and Outstanding,
   6,445,185 Shares at 
   December 31, 1996 and
   6,300,185 at December 
   31, 1995                               6,445                      6,300

Additional Paid 
 In Capital                           1,671,631                  1,060,776
Loss Accumulated 
 During The Development 
 Stage                               (1,185,465)                  (733,060)
                                     ------------              ------------
Total Stockholders' Equity              492,611                    334,016
                                     ------------              ------------

Total Liabilities and 
 Stockholders' Equity                $  573,618                 $  358,130
                                        =======                    =======


</TABLE>

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

                                  F-3

<PAGE>

<TABLE>
                    MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                       CONSOLIDATED STATEMENT OF OPERATIONS
                  FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                           THROUGH DECEMBER 31, 1996 

<CAPTION>
                                                                   Loss
                                                                   Accumulated
                     Year ended     Year ended     Year ended      During The
                     December       December       December        Development
                     31, 1996       31, 1996       31, 1996        Stage
<S>                  <C>            <C>            <C>             <C>
Revenues             $  8,118      $   1,729          $   0        $   9,847

Expenses
  General and
    Administrative    463,324        692,762              0        1,200,900
                      _______        _______        ________       _________
  Total Expenses      463,324        692,762              0        1,200,900

Other Income
  Interest Income       2,801              0              0            5,588
                      _______       ________        ________       __________

Net Loss        $    (452,405)   $  (691,033)       $     0   $   (1,185,465)
                     =========      =========      ========       ===========
Net (Loss) Per
 Share of Common
 Stock            $     (0.07)     $   (0.11)       $   NIL    $        0.18
                     =========      =========      ========        ===========

</TABLE>

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

                                        F-4

<PAGE>
<TABLE>
                  MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        (A Development Stage Company)
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                          THROUGH DECEMBER 31, 1996
                                                            
<CAPTION>
                                                                                
                                                       Loss
                                                       Accumulated
                                          Additional   During the    
                       Common Stock       Paid In      Development
                    Shares      Amount    Capital      Stage             Total
<S>                 <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
  January 17, 
  1986 through
  December 31, 1987                                        (316)          (316)
                    -----------  -------   --------      --------       --------
Balance, December 
  31, 1987           6,145,000   6,145      27,359         (316)        33,188

Escrow fee for 
 public offering                              (200)                       (200)
          
Net loss year ended
  December 31, 1988                                      (1,030)        (1,030)
                    ----------   -------    --------    ---------     ---------
Balance, December 
  31, 1988           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           6,145,000     6,145     27,159     (23,053)        10,251

Issuance of 
  stock in
  accordance 
  with plan of
  merger with 
  Multi Spectrum 
  Group, Inc.
  February 
  28, 1990          55,305,000    55,305    (55,305)

Net loss year ended
  December 31, 1990 
  Unaudited                                              (10,201)      (10,201)
                    ----------    ------    --------    -----------   ----------
Balance, 
  December 
  31, 1990          61,450,000    61,450    (28,146)     (33,254)           50

Net loss 
  year ended
  December 
  31, 1991 
  Unaudited                                                    0             0
                    ----------   -------    --------      ---------   ----------
Balance, December 
  31, 1991          61,450,000    61,450    (28,146)     (33,254)           50


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

                                    F-5
</TABLE>

<PAGE>
<TABLE>

                        MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                              (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                     FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                                THROUGH DECEMBER 31, 1996

<CAPTION>
                                                         Loss
                                                         Accumulated
                                         Additional      During the       
                   Common Stock          Paid In         Development
                 Shares    Amount        Capital         Stage          Total
<S>              <C>       <C>           <C>             <C>            <C>
Issued to 
  Group of 
  Five, Inc.
  November 
  13, 1992       8,772,800  $ 8,773       $ 0             $ 0           $ 8773

Net loss 
  year ended
  December 
  31, 1992 
  Unaudited                                            (8,773)         (8,773)
                 ----------   -------  --------     ----------       ---------

Balance, December 
  31, 1992       70,222,800   70,223   (28,146)       (42,027)              50

Net loss 
  year ended
  December 
  31, 1993                                                  0                0
                -----------  -------   --------       ---------       ---------
Balance, December 
  31, 1993       70,222,800   70,223   (28,146)       (42,027)              50

Net loss 
  year ended
  December 
  31, 1994                                                  0                0
                 ----------   ------   ----------     ----------      ---------
Balance, December 
  31, 1994        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  298,000                         300,000

Issued pursuant 
  to a public 
  offering at 
  $.001 per 
  share September 
  20, 1995        4,200,000     4,200   625,800                        630,000

Cost of offering                        (30,000)                       (30,000)

Purchase of 
 100% of the 
 outstanding 
 stock of Manon
 Consulting, Ltd. on 
 October 1, 1995 
 - Note 1                                                     0              0

Issued for 
  cash December
  31, 1995           16,666        17     49,983                        50,000

Issued for 
  services
  December 
  31, 1995           25,000        25     74,975                        75,000

Net loss 
  year ended
  December 
  31, 1995                                               (691,033)    (691,033)

                ------------     -------  ----------     ----------   ---------
Balance,
  December
  31, 1995         6,300,185    6,301   1,060,776        (733,060)     334,016

</TABLE>
    The accompanying notes are an integral part of these financial statements.
                                       F-6

<PAGE>
<TABLE>

                         MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                              (A Development Stage Company)
                       CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
                                THROUGH DECEMBER 31, 1996

<CAPTION>
                                                           Loss
                                                           Accumulated
                                           Additional      During the        
                      Common Stock         Paid In         Development
                  Shares       Amount      Capital         Stage         Total
<S>               <C>          <C>         <C>             <C>           <C>

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 
  December, 1996    56,000       56            251,944                   252,000

Net loss for 
  year ended 
  December 
  31, 1996                                                (452,405)    (452,405)
                    --------    -------       --------    ---------    ---------
Balance, December 
  31, 1996         6,445,185    $ 6,445    $  1,671,631  $(1,185,465)  $492,611

</TABLE>

     The accompanying notes are an integral part of these financial statements.
                                    F-7

<PAGE>

<TABLE>
                         MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                              (A Development Stage Company)
                           CONSOLIDATED STATEMENT OF CASH FLOWS
                  FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
                          AND FROM (INCEPTION (JANUARY 17, 1986)
                                THROUGH DECEMBER 31, 1996

<CAPTION>
                           Year Ended    Year Ended   Year Ended    From
                           December      December     December      Inception
                           31, 1996      31, 1995     31, 1994      Through
                                                                    December 31,
                                                                    1996
<S>                        <C>           <C>          <C>           <C>
Cash Flows 
  from Operating 
  Activities 
  Net (Loss)             $ (452,405)    $ (691,033)   $  0          $(1,185,465)

Common Stock issued 
  for services                    0              0       0                8,773

Adjustments to 
  reconcile net 
  (loss) to net 
  cash provided 
  by operating activities

  Depreciation and 
    Amortization             11,662          8,575       0               20,237
Changes in Assets 
 and Liabilities
  (Increase) Decrease in
    Accounts Receivable      (6,711)         (640)                       (7,351)
  (Increase) Decrease in 
    Prepaid Expenses        (29,007)            0        0              (29,007)
  (Increase) Decrease in
    Organizational Costs        124          (138)       0                  (64)
  Increase (Decrease) in 
    Accounts Payable         19,393           978        0               20,371
                         ----------     ---------      ------           --------
  Total Adjustments          (4,539)        8,775        0               12,959
                         ----------     ---------      ------           --------
Net cash provided 
  (used) by 
  operating 
  Activities               (456,944)     (682,258)       0           (1,172,506)
  
Cash Flows from 
 Investing Activities
  Purchase of Property 
   and Equipment            (15,969)      (20,902)       0              (36,871)
                          ----------     ---------     ------          --------
Net cash flows from 
 investing activities       (15,969)      (20,902)       0              (36,871)

Cash Flows from 
 Financing Activities
  Proceeds from Sale 
   of Common Stock          611,000       755,000        0            1,407,450
  Offering Costs                          (30,000)       0              (38,146)
  Notes Payable              25,000        23,135        0               48,135
  Notes Payable - Officers   12,500             0        0               12,500
                         ----------     ---------      ------         --------

Net cash provided by 
  financing activities      648,500       748,135        0            1,429,939
                         ----------     ---------      ------         ---------

</TABLE>
     The accompanying notes are an integral part of these financial statements.
                                        F-8

<PAGE>
<TABLE>
                         MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                               (A Development Stage Company)
                            CONSOLIDATED STATEMENT OF CASH FLOWS
                    FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
                           AND FROM (INCEPTION (JANUARY 17, 1986)
                               THROUGH DECEMBER 31, 1996

<CAPTION>
                        Year Ended   Year Ended   Year Ended    From
                        December     December     December      Inception
                        31, 1996     31, 1995     31, 1994      Through
                                                                December 31,
                                                                1996 (Unaudited)
<S>                     <C>          <C>          <C>           <C>

Increase (decrease) 
  in cash 
  and cash 
  equivalents           $ 175,587    $ 44,975     $ 0            $   220,562

Cash and cash 
  equivalents at 
  beginning of period      44,975           0       0                      0

Cash and cash 
  equivalents at 
  end of period         $ 220,562  $   44,975    $  0            $   220,562
                          ======       =====       ===               ======

Supplemental Information
Cash paid for:

   Interest              $ 0       $    0        $   0           $   0
                         ======        =====        ===             ======

   Income taxes          $ 0       $   0         $   0           $   0
                         ======        =====        ===             ======

Non-cash financing
   Intangible assets 
   purchased with
   Common Stock          $ 0       $   300,000    $  0            $   300,000
                         ======        =======       ===              =======

</TABLE>
      The accompanying notes are an integral part of these financial statements.
                                     F-9

<PAGE>

                        MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                             (A Development Stage Company)
                           NOTES TO THE FINANCIAL STATEMENTS
                              DECEMBER 31, 1996 AND 1995

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 of Five, Inc. in exchange for services rendered at $.001 per share or 
$8,773.

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 will be a wholly owned 
subsidiary of the company.

On August 14, 1995, the Company, acquired the MedCare UI System (Now, The 
MedCare Program) assets in exchange for 2,000,000 shares of the Company's 
common stock at $0.15 for a total value of $300,000.

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.

   The accompanying notes are an integral part of these financial statements.
                                 F-10

<PAGE>

                     MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                           (A Development Stage Company)
                        NOTES TO THE FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995

NOTE 1 - ORGANIZATION (CONTINUED)

On October 1, 1995, the Company purchased 100% of the outstanding shares of 
Manon Consulting, Ltd. Manon Consulting, Ltd. will be a wholly owned 
subsidiary of the Company. Manon Consulting, Ltd. operates a clinic in 
Calgary, Canada. Since its purchase by the Company, it has been partially 
responsible for the development of the MedCare program.

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

<TABLE>

<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 December 31, 1995, the Company issued 16,666 shares of its common stock 
for $50,000 cash.

On December 31, 1995, the Company issued 25,000 shares of its common stock in 
exchange for consulting services for a total value of $75,000.

During 1996, the Company issued 44,000 shares of its common stock at $3.00 
per share under its 1995 Stock Option Plan, or $132,000.

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.

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.

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

<PAGE>

                  MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        (A Development Stage Company)
                      NOTES TO THE FINANCIAL STATEMENTS
                         DECEMBER 31, 1996 AND 1995

NOTE 1 - ORGANIZATION (CONTINUED)

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, there have been no significant 
revenues. This factor raises substantial doubt about its ability to continue 
as a going concern.

The financial statements have been prepared on the basis of accounting 
principles applicable to a going concern. Accordingly, they do not purport to 
give effect to adjustments, if any, that may be necessary should the Company 
be unable to continue as a going concern. The continuation of the Company as 
a going concern, is dependent upon its ability to establish itself as a 
profitable business. The Company's ability to achieve these objectives cannot 
be determined at this time. It is the Company's belief that it will continue
to incur losses for at least 12 months, and as a result will require additional
funds.  The additional funding will be accomplished by seeking additional funds
from private or public equity investments, with possible future additional
funds from private or public equity investments, and possible future 
collaborative agreements to meet such needs and the Company will be a viable 
entity.

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 subsidiaries, MedCare Technologies Corporation 
and Manon Consulting, Ltd. Intercompany transactions have been eliminated in 
consolidation.

D. Equity Method

Investments in companies have been included in the financial report using the 
equity method of accounting. The Company's wholly owned subsidiaries, MedCare
Technologies, Corporation and Manon Consulting, Ltd., are engaged in the 
business of medical consulting and services in Canada and the United States.

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

<PAGE>

                       MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                              (A Development Stage Company)
                            NOTES TO THE FINANCIAL STATEMENTS
                              DECEMBER 31, 1996 AND 1995

E. Deferred Charges

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

F. Organizational Expenses

Organizational expenses represent legal and filing fees. The Company is 
amortizing its organization costs over sixty (60) months using the straight 
line method.

G. Property and Equipment

Property and equipment, stated at cost, is depreciated under the 
straight-line method over their estimated useful lives as follows:

Office Equipment: 3 to 5 years
Medical Equipment: 3 to 5 years

Depreciation charged to expense during the period was $ 11,662 in 1996 and 
$8,575 in 1995.

H. 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 2003 through 2008, in the amount of 
$1,200,691 and $575,960, in 1996 and 1995, respectively, unless utilized by 
the Company.

I. 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 earnings (loss) per common share was 
6,749,935 in 1996 and 6,497,155 in 1995.

J. Leases

The Company currently has the use of approximately 500 square feet of of fice 
space, the use of 2 board rooms, and all office equipment, including a 
photocopier and telephone equipment, on a shared basis with one of the 
Company's directors. The


   The accompanying notes are an integral part of these financial statements.
                                   F-13

<PAGE>

                  MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        (A Development Stage Company)
                      NOTES TO THE FINANCIAL STATEMENTS 
                        DECEMBER 31, 1996 AND 1995 

offices are located at Suite 1408-400 Burrard Street, Vancouver, British 
Columbia, Canada. No rent is paid. There is no lease agreement in place. A 
second office is located at 2443 Warrenville Road, Suite 600, Lisle, Ilinois, 
60532. These offices are rented on a month-to-month basis for $ 160 per month. 
Additional offices are located in Kansas City, Missouri and Oklahoma City, 
Oklahoma. No rent is currently being paid on these offices.

The Company also maintains a clinic currently being utilized as a 
developmental facility for The MedCare Program at 1133 Seventh Street, S.W., 
Calgary, Alberta, Canada. This clinic is 200 square feet in size and is 
located within a senior citizens' health facility at the Kerby Center for 
Seniors. The rent on this facility is approximately Canadian $400 per month.

NOTE 3 - THE MEDCARE PROGRAM

On August 14, 1995, the Company acquired The MedCare Program 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 
developed The MedCare Program for the treatment of urinary incontinence that 
significantly reduces or completely eliminates the majority of UI cases using 
a non-drug, non surgical 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 beginning with the 
first year in which commercial sales occur. Such amortization will result in 
charges against earnings of $20,000 per year for each of the years.

NOTE 4 - NOTES PAYABLE

The Company has loans payable to officers of related Companies in amount of 
$23,135 that are paid back as cash flows allow. The notes are demand notes 
with no interest rate currently applicable. On March 7, 1996, the Company 
borrowed $25,000 from a nonrelated company. The note is a demand note with no 
interest rate currently applicable.

TRANSACTIONS WITH RELATED PARTIES

Notes payable represent advances from related of ficers that are paid back as 
cash flows allow. The notes are demand notes with no interest rate currently 
applicable. The President of Company loaned the Company $12,500 on August 8, 
1996. The note is a demand notes with no interest rate currently applicable.


 The accompanying notes are an integral part of these financial statements.
                                  F-14

<PAGE>

                         MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
                               (A Development Stage Company)
                             NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996 AND 1995

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 grant. The Company maker no charge to operations in relation to 
option grants.

The Company's stock option transactions for the years ended December 31, 1996 
and 1995 are summarized as follows:

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

Options outstanding and exercisable at                500,000           $3.00
December 31, 1995

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                                     758,000      $3.00-4.50
                                                    ===========    ==========

</TABLE>

NOTE 7 - SUBSEQUENT EVENTS

1. On February 4, 1997, the Company authorized in a 144 Disclosure Memorandum, 
176,000 shares of its common stock at an offering price of $6.25 per share 
for a total value of $1,100,000.

2. As of March 21, 1997, 24,000 shares of common stock at $3.00 have been 
exercised under the Company's 1995 stock option plan and 7,500 shares at 
$4.50 have been exercised under the Company's 1996 stock option plan.

3. On November 1, 1996, the Company authorized the 1997 Stock Option Plan and 
reserved 500,000 shares of its common stock for issuance thereunder subject 
to stockholder approval at the next annual general meeting.

4. In February, 1997, the Company opened another facility in Winter Park, 
Florida.


  The accompanying notes are an integral part of these financial statements.
                                  F-15
<PAGE>