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

                                   ----------

                                   FORM 10KSB

(Mark One)

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

                   For the fiscal year ended December 31, 1999

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

                  For the transition period from _____ to _____

                        Commission File Number : 1-11765

                                   MEDJET INC.

              (Exact name of Small Business Issuer in its charter)

          Delaware                                      22-3283541
(State or Other Jurisdiction                (I.R.S. Employer Identification No.)
of Incorporation or Organization)

                     1090 King Georges Post Road, Suite 301
                            Edison, New Jersey 08837
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (732) 738-3990
           Securities registered pursuant to Section 12(b) of the Act:
                                      None
           Securities registered pursuant to Section 12(g) of the Act:
               Units, each consisting of one share of Common Stock
                             and one Class A Warrant
                     Common Stock, par value $.001 per share
                                Class A Warrants

     Check  whether  the Issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the Issuer was required to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].

     Issuer's  revenues  for the  fiscal  year  ended  December  31,  1999  were
$175,000.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Issuer as of March 16, 2000 was approximately $4,374,165.

     As of March 16, 2000,  3,901,431  shares of the Issuer's Common Stock,  par
value $0.001 per share, were outstanding.

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                      DOCUMENTS INCORPORATED BY REFERENCE.

     Proxy  Statement for the 2000 Annual Meeting of  Stockholders  (to be filed
with the  Securities  and  Exchange  Commission  on or before April 30, 2000) is
incorporated by reference in Part III hereof.

 Transitional Small Business Disclosure Format (check one):  Yes /__/ No /X/.
                                                                         --

<PAGE>



This annual report contains forward-looking statements within the meaning of the
federal  securities  laws.  These  include  statements  about our  expectations,
beliefs,  intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate,"  "expect," "intend," "plan," "will," "we believe,"
"the  Company  believes,"  "management  believes,"  and  similar  language.  The
forward-looking statements are based on our current expectations and are subject
to certain risks,  uncertainties  and assumptions,  including those set forth in
the discussion under "Description of Business" and "Management's  Discussion and
Analysis or Plan of Operation."  Our actual results may differ  materially  from
results   anticipated  in  these   forward-looking   statements.   We  base  our
forward-looking  statements  on  information  currently  available to us, and we
assume no obligation to update them.

                                     PART I

ITEM I.  DESCRIPTION OF BUSINESS.

Overview

Medjet Inc. (the  "Company") is engaged in research and  development  of medical
technology.  The Company  expects to introduce its first product during the year
2000.  The  plan  for the  Company  has been to  develop  products  based on its
platform  technology  and then to license  these until its income is adequate to
support  manufacturing  and marketing  activities  on new products.  The initial
emphasis has been on ophthalmic surgical  technology and equipment.  The Company
has developed a  proprietary  patented  technology  and  derivative  devices for
vision-correction  surgery of the cornea. The Company's  technology  platform is
based  on  small-diameter,  fluid  microjets  moving  at  various  speeds  above
supersonic,  depending on the  specific  application.  For cutting,  the beam is
scanned across the tissue to be cut. In each  application,  the scanned microjet
beam  substitutes  for  lasers  or  conventional  metal,   sapphire  or  diamond
oscillating blades.

The Company has been in the development stage and has not sold any products.  To
date, the Company's  research and  development  activities on vision  correction
have  been  limited  to  constructing  and  testing  experimental   versions  of
microkeratomes  for eye surgery and  conducting a limited  number of feasibility
studies using enuleated porcine,  rabbit and human cadaver eyes and live rabbits
to prove  that the beam of water can  smoothly  incise  and  shape the  anterior
surface of the cornea and that the cornea will heal properly  after the surgery.
Human blind eye trials are  anticipated  to begin in the third  quarter of 2000.
Assuming success in these trials, the Company plans to introduce a microkeratome
product later this year.

The Company is  currently  in  discussions  regarding a contract to supply,  for
non-ophthalmic  uses on an OEM basis,  its  Hydrobrush(TM)  Keratome,  which was
cleared for marketing by the U.S. Food and Drug Administration ("FDA") in 1998.

In July 1998, the Company entered into an agreement with Nestle S.A.  ("Nestle")
pursuant to which the Company  granted Nestle and its  wholly-owned  subsidiary,
Alcon Laboratories,  Inc. ("Alcon"), an exclusive, worldwide license for the use
of the Company's proprietary microjet technology for corneal refractive surgery.
Under the terms of the license agreement ("Agreement"), Alcon was to make a best
effort to register, manufacture,  promote and market refractive microjet devices
and  consumables  developed by the Company.  Among other  things,  the Agreement
provided for future  payments  based on the  attainment  of certain  milestones,
minimum  royalty  payments  starting in the year 2000,  royalties  upon sales by
Alcon of the

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<PAGE>

Company's products and payments to the Company to cover the cost of the transfer
to Alcon of the Company's technology, some of which payments were to be credited
against future  royalties  owed to the Company.  The Agreement was terminable on
three months' notice and, on December 13, 1999, the Company  received  notice of
Alcon's  termination  of  the  Agreement.   Alcon  offered  no  reason  for  the
termination.

The Company currently is assessing its plans for ophthalmologic applications for
its microjet  technology  in light of the  termination  of the Alcon  agreement.
Although  the  Company  currently  intends  to  undertake  the  manufacture  and
marketing  of its  microjet  products on a limited  scale,  it continues to have
discussions with several potential strategic partners and is investigating other
possible   arrangements   for   larger-scale   manufacturing,    marketing   and
distribution.  These  discussions  are  in  the  early  stages,  and  no  formal
understanding  or  agreement  has  been  reached  with any  potential  strategic
partner. The Company's objective in entering into any such arrangements would be
to obtain adequate funding to support development of other products, in addition
to their manufacture, promotion and marketing.

The Company has filed a patent  application  and is evaluating the potential use
of waterjets for treatment of dental caries. Initial feasibility tests have been
promising and the Company believes this development  program may yield a product
with significant market potential.  See "Management's Discussion and Analysis or
Plan of Operation."

The Company was incorporated under the laws of the State of Delaware on December
16, 1993.  Its offices are located at 1090 King  Georges  Post Road,  Suite 301,
Edison, New Jersey 08837; its telephone number is (732) 738-3990.

Applications of Company Technology

The Company  believes  that the  microjet  produces  less  tissue  trauma and is
potentially  more  accurate  than  blades or lasers  for  tissue  separation  or
removal.  The Company also believes that such  microjets will bring new surgical
capability  and  performance  to the clinic or operating room and may become the
standard of care for the  treatment  of several  diseases  and  conditions.  The
Company's  current focus has been on applications in ophthalmology  but believes
that its proprietary  microjet technology has additional surgical  applications.
Although only limited studies of such other  applications  have been carried out
to  date,   specific   applications   currently   being   investigated   include
ophthalmology and dentistry.  The Company intends to develop  additional product
applications, provided adequate funds become available.

Ophthalmology

Diseases of the Cornea and Therapeutic  Treatment.The cornea is the clear window
that,  in  addition  to  allowing  light into the eye for the purpose of vision,
provides  most of the  focusing  power of the  vision  system  of the  eye.  The
anterior  surface  of  the  cornea  is  covered  with a thin  layer  called  the
epithelium.  Although  the  epithelium  has no blood  cells,  it has nerve  cell
endings which can be a source of pain in the cornea.

First Product;  Removal of  Epithelium.  The Company has  demonstrated  that its
technology  can  be  used  to  remove  the   epithelium,   a  procedure   called
hydro-epithelial  keratoplasty ("HEK"). HEK may be used to treat diseases of the
epithelium or damage to the epithelium that sometimes occurs. Epithelial removal
is often the first step in surgery of the cornea. It may be used

                                       2
<PAGE>

beneficially as the first step in the currently-used  laser vision correction or
refractive  surgery  technique known as  photo-refractive  keratectomy  ("PRK").
Management  believes  that the HEK  procedure  is  superior  to  currently  used
techniques. However, interest in PRK has waned along with the growing enthusiasm
for a  modified  form  of the  PRK  technique.  The  device  to  carry  out  HEK
procedures,  the Hydrobrush(TM)  Keratome, has been cleared for marketing by the
FDA. However, the Company has decided to postpone  indefinitely the introduction
of this product because of cash  constraints (see  "Management's  Discussion and
Analysis or Plan of Operation - General - The Past Year") and the limited market
currently foreseen for this application.  Interest has been expressed in the use
of this device for  non-ophthalmic  applications.  The Company is  currently  in
discussions  regarding a contract to supply, for  non-ophthalmic  uses on an OEM
basis, its Hydrobrush(TM)  Keratome,  which was cleared for marketing by the FDA
in 1998.

Second  Product;  The  Microjet  Microkeratome.   The  Company's  microjet-based
microkeratome   is  known  as  the   HydroBlade(TM)   Keratome.   The   microjet
microkeratome  may be used to create a uniform  thickness hinged flap of corneal
tissue as the first step in a current modification of the PRK technique known as
the Laser Ablation System for In-situ Keratomileusis  ("LASIK").  Currently, the
hinged flap is made by blade-based  microkeratomes  which, in management's view,
are somewhat  unsafe,  difficult to learn and,  despite great success for LASIK,
have limited its use as an alternate to PRK.

Approximately  40,000  corneal  procedures,   primarily  full  transplants,  are
performed  annually in the United States. The Company believes that the microjet
microkeratome  would  allow  Hydro  Therapeutic  Keratoplasty  ("HTK"),  partial
transplants,  which would be more desirable and safer than full transplants.  In
the therapeutic application of the HTK microkeratome, the thickness and diameter
of the removed  tissue can be  predetermined.  The smooth and precise cut of the
HTK microkeratome  allows for relatively  simple  positioning of the replacement
(donor)  tissue  after  removal  of the  targeted  tissue and  relatively  quick
healing.  Partial  transplants greatly reduce rejection effects and allow use of
donors over age 65, thereby increasing the donor pool.

Third  Product;  Refractive  Correction.  A  subsequent,  and  potentially  more
commercially  valuable,  use  of  the  HydroBlade(TM)  Keratome  is  for  vision
correction  through  refractive surgery in a procedure known as Hydro Refractive
Keratoplasty   ("HRK").   Subsequent   to  the   permitted   marketing   of  the
HydroBlade(TM) Keratome for hinged flaps or HTK, the Company intends to seek FDA
clearance  to market the  device  for HRK.  Upon  clearance  or other  marketing
approval by the FDA of the HydroBlade(TM)  Keratome for HRK, the product will be
marketed to individual or affiliated groups of ophthalmologists for treatment of
patients  in a clinical  setting.  The Company  expects to generate  revenues by
selling the basic system and disposables.

Dental

Fourth Product.  Based on the Company's  product-development  criteria, the next
area identified for development is treatment of dental caries. The dental caries
is a progressive, infected and decayed portion of a tooth. A break in the enamel
allows  the  dentin  making up the hard  portion  of the  tooth to be  infected.
Unchecked,  the decayed region  enlarges,  leading to nerve  involvement,  pain,
temperature sensitivity,  and ultimately loss of the structural integrity of the
tooth. The standard  treatment for a dental caries is to remove all the decayed,
infected portion within the dentin and to fill the resulting cavity. The removal
process  involves  drilling out the affected  area of the tooth until only sound
dentin remains. More recently, dental lasers are coming into use.

                                       3
<PAGE>

It is frequently  necessary to use local anesthesia to avoid pain or the fear of
pain. Administration of anesthesia takes preparation,  requires time and adds to
the  cost.  The  area  surrounding  the  treated  tooth  is numb  following  the
procedure.  Patient  apprehension  is frequently high and treatment is sometimes
delayed for that  reason.  Not all regions of the tooth are readily  accessed by
the drill or laser.

Based on its limited  experiments to date, the Company believes that the decayed
and infected  tissue  within the cavity of a tooth,  the caries,  can be removed
without damage to the surrounding  sound dentin by directing a coherent microjet
of the  appropriate  parameters  into the volume of the caries.  The Company has
observed  that this  destroys the caries and washes it out.  Although it has not
yet been confirmed on live patients, the Company believes that the treatment, if
perfected,  may  require  no  anesthesia  in many  circumstances  and  that  the
associated  time and cost saving and the  perceived  advantages  of the microjet
technique over traditional treatments are potentially significant.

A patent application has been filed and a preliminary  associated  handpiece and
pump have been constructed.  Based on its own internal market study, the Company
believes that a significant  market  potentially  exists for this  procedure and
product.

Technology  for  Ophthalmology.  A scanned  circular  microjet  beam is used for
separating  thin,  uniform or shaped layers from the cornea in a procedure known
as lamellar keratoplasty or keratomileusis. The procedure may be used to produce
a  hinged  flap as the  first  step in a laser  shaping  procedure.  The  device
normally   used  to  perform   lamellar   keratoplasty   is  known  as  a  blade
microkeratome. The procedure with the new microjet microkeratome potentially may
be  used  to  treat  diseases  of  the  cornea  as  well  as to  correct  vision
deficiencies such as nearsightedness ("myopia"), farsightedness ("hyperopia") or
astigmatism,  eliminating or reducing the need for spectacles or contact lenses.
Shaped internal layers of the cornea (resembling contact lenses), are excised in
order to reshape the anterior cornea surface to achieve close-to-ideal focusing.
In combination with a template of prescribed  dimensions and shape, the shape of
the layer to be removed can be determined in advance.  This  procedure  combines
the hinged flap and laser shaping  technique into a one-step  procedure  without
the laser and without lifting the flap.

The Company's HydroBlade(TM) Keratome, which consists of a microjet nozzle and a
globe  positioning  device,  is used with a miniature high pressure  system.  It
operates at a pressure of 20,000- to 25,000-psi.  In this case, a small electric
motor is used to scan  the  microjet  nozzle  and the  associated  beam of water
across the cornea. The Company believes that the HydroBlade(TM)  Keratome,  when
used in HTK, would be used similarly to other microkeratomes but would allow for
safe removal of layers of corneal tissue of a predetermined  shape and thickness
with a higher  degree of accuracy and far less tissue  damage.  This has already
been  demonstrated  on cadaver and live  rabbit  eyes.  The  Company  intends to
perform  ease-of-use  clinical  trials  and  then to  submit  a  Section  510(k)
notification for a ruling of substantial  equivalence to current microkeratomes,
which may result in permission to market the HydroBlade(TM) Keratome for HTK.

In  combination  with other  elements  of the  Company's  devices,  a fan shaped
microjet  beam is capable of removing the  epithelium  (the front surface of the
eye),  without  damaging the underlying  Bowman's layer, in a procedure known as
epithelial keratoplasty.  Although scalpels are normally used to scrape away the
epithelium in treating  disorders or damage to the  epithelium,  they may damage
the Bowman's layer.

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<PAGE>

Technical  Background.  The  human eye  consists  of a  hollow,  flexible  globe
approximately 25 millimeters in diameter, which is filled with a vitreous fluid.
The optical part of the eye functions much like an automatic focus video camera,
incorporating  a variable  focus lens  system  (the fixed  focus  cornea and the
variable  focus  internal  lens) which adjusts the sharpness of the image on the
retina,  a variable  aperture  system (the iris) which  regulates  the amount of
light falling on the retina, and a sensory array (the retina) which converts the
focused image into electrical  signals which are  transmitted  through the optic
nerve to the brain for image  processing  and storage to achieve the best image.
Approximately  70% of the focusing  power of the eye resides in the cornea.  The
precise  focusing  power of the cornea is a  function  of the  curvature  of the
anterior corneal  surface.  The internal lens of the eye also has focusing power
and the ability to adjust its focusing  power to achieve the best focus for near
or far  objects;  however,  its  ability  to so adjust is  limited  and tends to
decrease with age, ultimately disappearing.

Most common  refractive  problems result from an inability of the optical system
of the eye to focus images on the retina properly with normal accommodation. The
extent of this inability to focus an image of an object at a distance of 20 feet
is known as refractive  error. For instance,  in the nearsighted eye, light rays
from an object at a distance  of 20 feet focus in front of the  retina,  because
the  curvature of the cornea is too great.  People with  uncorrected  myopia see
nearby  objects   clearly,   but  distant  objects  appear  blurry,   even  with
accommodation. Conversely, in the uncorrected farsighted eye, light rays from an
object at a distance of 20 feet focus behind the retina because the curvature of
the cornea is too low.  People with hyperopia see distant objects  clearly,  but
may  need  correction  so that  nearby  objects  do not  appear  blurry.  In the
astigmatic eye, the curvature of the cornea is not uniform. This lack of uniform
curvature  makes it impossible for a person to focus clearly on an object at any
distance without correction.

Refractive  power is measured in diopters.  The current  ophthalmic  measurement
technology and the techniques  for  manufacturing  eyeglasses and contact lenses
can at its best produce a refractive  correction  that is within +/- 1/2 diopter
of the optimum value for ideal vision.  This residual error is generally  viewed
as acceptable for all purposes by ophthalmologists.

Vision disorders are currently treated  primarily by eyeglasses,  contact lenses
or surgery, all of which compensate for the existing refractive error. Among the
surgical  techniques  available to treat vision disorders are radial  keratotomy
("RK"),  PRK/LASIK and keratomileusis in situ ("KIS"). In RK, PRK/LASIK and KIS,
the  object of the  surgery  is to  change  the  shape of the  anterior  corneal
surface,  thereby eliminating or reducing refractive error. PRK and LASIK are by
far the dominant procedures.

PRK uses pulsed energy from a type of  ultraviolet  laser,  known as an "excimer
laser," to  correct  various  types of  refractive  disorders  by  changing  the
curvature of the anterior corneal surface.  The excimer laser emits  ultraviolet
light in very short, high energy pulses and "photo-ablates," or vaporizes,  part
of the  anterior  corneal  surface  to  achieve  a new  curvature.  PRK has been
approved for use in the United  States by the FDA for the  correction  of low to
moderate myopia, hyperopia and astigmatism.

In  the  LASIK   technique,   the  hinged  corneal  flap  is  pulled  back,  and
photo-ablation  is performed  directly on the exposed  stromal surface to change
its  curvature.  In both KIS and LASIK,  the hinged  flap is reset as closely as
possible to its original  position,  where it adheres to the underlying  stroma.
Cutting  errors in making the flap,  occurring in a substantial  fraction of the
procedures,  are a disadvantage of LASIK. PRK and LASIK produce corrections that
are  usually

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<PAGE>

not  optimum,  typically  leaving the eye within +/- 1 diopter of  optimum,  but
sometimes  worse.  The PRK  corrections  generally  are not  stable  to within 1
diopter.  This leaves the patient able to function without eyeglasses or contact
lenses  but not with the best  possible  vision  and not under  all  conditions.
Nighttime vision may be degraded. See "Competition."

In HRK,  using the  HydroBlade(TM)  Keratome,  a single,  hair-thin,  supersonic
microjet  beam with a  diameter  of  approximately  33 microns  incises  corneal
material  while a  disposable  template  supports  and shapes the cornea  during
surgery.  Other parts of the HRK microkeratome include a miniature high pressure
water storage element and related equipment, which together produce the microjet
beam; a scanning  mechanism to move the microjet  beam across the cornea;  and a
template  designed  to  support  and  shape  the  eye  during  surgery.  The HRK
microkeratome will be placed on the patient's eye during the surgical procedure.
Once the HRK microkeratome is placed into position on the eye (directly over the
area to be incised),  and the vacuum is  established  that holds the template to
the cornea,  the surgical cut takes less than one second. The total water volume
used during the procedure,  including the amount necessary to check the microjet
beam and its  performance,  is less than a few drops.  The Company believes that
the thickness  uniformity,  the thickness control, and the roundness of the flap
of the microjet microkeratome are superior to the blade devices.

HRK can be done by four methods.  In the first  method,  HRK1, a shaped slice of
corneal tissue is removed  without  damage to the rest of the cornea.  The shape
and size of the removed portion  corresponds to the error in refractive power of
the cornea to be corrected,  having the effect of the  permanent  removal of the
equivalent of a contact lens. This is akin to PRK. In the second method, HRK2, a
hinged flap is cut into the cornea and the underlying  tissue is reshaped before
the flap is  replaced.  The HRK  microkeratome  may be used to make the  second,
shaping cut or PRK may be used for shaping.  In the third method,  HRK3, the cut
used to make the flap also shapes the  underside  of the flap and stromal bed to
produce the desired  correction.  With a single cut lasting about 1 second,  the
entire  procedure  is complete.  No laser is  required.  A variation of the HRK3
procedure (HRK4)  potentially  allows even higher accuracy.  Additional  patents
have been  filed for these  procedures.  The  Company  believes  that the fourth
method is the simplest, most repeatable, and safest, and it initially intends to
seek FDA permission to market,  or other  approval,  with respect to that method
alone.

Patents and Licenses. The Company has obtained U.S. and international patents on
the method and device for HTK and HRK and other patents,  including one relating
to HEK. Other of the Company's patents are pending. To the Company's  knowledge,
no other  relevant  patents  have issued to others in this field and the Company
believes  that its patent  position is strong.  See "Legal  Proceedings,"  for a
discussion of a pending legal challenge to the Company's patent position.

The Company may distribute  its products  internationally.  Distribution  of the
Company's  products in countries  other than the United States may be subject to
regulation in those countries. In some countries, the regulations governing such
distribution  are less  burdensome than in the United States and the Company may
pursue marketing its products in such countries prior to receiving permission to
market  from  the FDA.  The  Company  will  endeavor  to  obtain  the  necessary
government approvals in those foreign countries where it decides to manufacture,
market and sell its products. See "Foreign Government Regulation."

Detailed   Discussion.   Through  December  31,  1999,  the  Company  has  spent
approximately  $9,500,000  in its  efforts to make  products  based on  microjet
technology  commercially  available.

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<PAGE>

Such expenditures include research and development costs and expenses related to
the  HydroBrush(TM)  Keratome  and the  HydroBlade(TM)  Keratome.  Research  and
development activities have consisted of developing,  designing and constructing
experimental  versions  of  the  Company's  keratomes,  and,  since  July  1994,
conducting feasibility studies on over 2,000 porcine and rabbit corneas,  dozens
of human cadaver eyes and dozens of live rabbits. The purpose of the feasibility
studies was to determine if the microjet  beam could  smoothly  incise and shape
the  anterior  surface  of the  cornea,  without  erosion  when only  cutting is
required,  and to  determine  if the  incised  eye would  heal.  A second  major
objective  has been to  establish  that HRK3 and HRK4  produce  a full  range of
refractive corrections.

The  Company  has been  highly  satisfied  with the  results of the  feasibility
studies conducted to date.  Specifically,  the Company, using light and electron
microscopes,  has compared the cuts made by the microjet  scalpel with cuts made
by scalpels  and lasers in other  refractive  surgical  procedures.  The Company
believes  that  the cuts  made by the  microjet  scalpel  are  cleaner  and less
damaging than those made by  conventional  scalpels and lasers.  The Company has
found the corneal flaps created by the HTK  microkeratome  to be extremely close
to parallel,  as desired, and of the desired thickness  (approximately 157 +/- 5
microns).  The  Company  also found the shape of the cut  stromal  bed to be the
desired  spherical  shape and the  restored  flap to fit the stromal bed with no
discernable  disparity in size or alignment.  Tissue removal  consistent  with a
full  range  of  myopic,   hyperopic  and  astigmatic   corrections   have  been
demonstrated.  The  Company's  studies  on  rabbits  have  also  shown  that HRK
incisions  heal with less wound healing  response and haze than results from PRK
removals.

The Company has constructed  prototypes of a  microkeratome  designed for use in
surgery on humans in a clinical setting. An outstanding feature of the Company's
microkeratome is that the pressure  internal to the eye is relatively  unchanged
during the  procedures,  in contrast to an order of  magnitude  increase  with a
blade microkeratome.

Patents

The  Company  has  sought  to  protect  its  proprietary  interest  in  the  HRK
microkeratome  by applying  for patents in the United  States and  corresponding
patents abroad.  In September  1994, a U.S. patent  application was filed in the
name of Dr.  Eugene I. Gordon and two  employees of the Company,  as  inventors,
which application was assigned to the Company. See "Legal Proceedings." The U.S.
patent was issued on  September  17, 1996 and covers a method and device for use
of the HRK  microkeratome,  including use of a template for corneal  shaping and
holding, during use of a microjet microkeratome device. Although there can be no
assurance,  the Company  believes  that this is a blocking  patent on the use of
waterjets for keratomileusis  procedures for refractive surgery. A corresponding
international  application  has been filed,  pursuant to the Patent  Cooperation
Treaty ("PCT"),  with designation of all member countries  foreign to the United
States,  including but not limited to Japan,  the members of the European Patent
Office, Canada, Mexico, Australia,  Russia, China and Brazil. The PCT filing was
published on October 16, 1996 and separate patent  applications  have been filed
pursuant to the PCT filing.  Some have issued.  In addition,  for  countries not
currently part of the PCT, patent  applications  have also been filed in Israel,
Taiwan and South Africa.  A related U.S. patent has issued on November 10, 1998.
The U.S. patent relating to topographic  corneal mapping,  which has utility for
surgery  utilizing the HRK  microkeratome,  was issued to the Company on January
19, 1999. A patent application for the  HydroBrush(TM)  Keratome for HEK use has
issued. Other U.S. patents on HRK3, HRK4 and templates have been filed. A patent
application  has been filed for the  treatment  of dental  caries.  Other patent
applications  are in  various  stages  of  preparation.

                                       7
<PAGE>

There is no assurance,  however,  that any additional patents will issue or that
any issued patents will afford significant protection from competition.

FDA Regulation

The  components of the Company's HTK  microkeratome  and HRK  microkeratome  are
medical devices.  Accordingly, the Company is subject to the relevant provisions
and  regulations  of the Federal Food,  Drug, and Cosmetic Act (the "FD&C Act"),
under which the FDA regulates the  manufacturing,  labeling,  distribution,  and
promotion of medical  devices in the United States.  The FD&C Act provides that,
unless  exempted  by  regulation,   medical  devices  may  not  be  commercially
distributed  in the United  States  unless they have been approved or cleared by
the FDA.  There are two review  procedures by which medical  devices can receive
such  approval or clearance.  Some  products may qualify for  clearance  under a
510(k) notification. Pursuant to that procedure, the manufacturer submits to the
FDA a pre-market  notification  that it intends to begin  marketing its product.
The notification  must demonstrate that the product is substantially  equivalent
to another legally marketed product (i.e., that it has the same intended use and
that it is as safe and effective as, and does not raise  different  questions of
safety and effectiveness  than does, a legally marketed device).  In some cases,
the 510(k)  notification must include data from human clinical studies. In March
1995,  the FDA  issued a draft  guidance  document  in  connection  with  510(k)
notifications  for  medical  devices,  "Addendum:  How  to  Submit  a  Premarket
Notification  [(510(k)]," which states that clinical data is not needed for most
devices cleared by the 510(k) process. However, the Company anticipates that the
FDA  will  require  submission  of  human  clinical  trial  ease-of-use  data in
connection with the Company's 510(k) notifications.

A successful  510(k)  notification  results in the issuance of a letter from the
FDA in which the FDA  acknowledges  the substantial  equivalence of the reviewed
device to a legally marketed device and clears the reviewed device for marketing
to the public.  The Company has received  successful  510(k)  notification  with
respect to its device to carry out HEK procedures.  Under FDA  regulations,  the
FDA has a 90-day  period to  respond  to a 510(k)  notification,  although  such
response has been known to take longer.

Based on a  recommendation  from the FDA,  the Company  intends to file a 510(k)
notification  in 2000 in which it will seek to demonstrate  that the hinged flap
microkeratome is substantially  equivalent to currently available microkeratomes
having metal or diamond  scalpels  used for two types of lamellar  keratoplasty.
Under  current  FDA  regulations,  a  microkeratome  is  defined as a device for
shaving thin layers from the cornea and is classified  as a Class I device,  for
which the simplest and quickest clearance process is available. The Company will
seek to demonstrate  that, for the purpose of making lamellar,  or substantially
lamellar,  corneal incisions,  the microjet scalpel and template included in the
hinged flap  microkeratome are substantially  similar to a microkeratome  with a
metal or diamond scalpel.

The FDA has recommended to the Company that it seek permission to market the HTK
microkeratome  through a Section 510(k)  notification  together with ease-of-use
data resulting from a small clinical trial. An investigational  device exemption
(IDE) will not be required. It is the Company's intention to file a notification
with the FDA at the  beginning of the second half of 2000 relating to use of the
HTK microkeratome. Although there can be no assurance that this will prove to be
the case,  permission  granted  for the 510(k)  notification  should  enable the
commencement of marketing efforts shortly thereafter. The time required would be
far less than if the  Company  had to submit  to the FDA a  pre-market  approval
("PMA") application. To obtain FDA clearance of a 510(k) notification, a company
must prove its device is  substantially  similar

                                       8
<PAGE>

to a  marketed  product  and that the  device  is safe.  PMA  applications  must
demonstrate,  among  other  matters,  that the  device  is safe  and  effective.
Although human clinical trial data is sometimes  required to be submitted with a
510(k)  notification,  a PMA application is typically a more complex  submission
which  usually  includes  the  results of clinical  studies,  and  preparing  an
application is a detailed and time-consuming process. Once a PMA application has
been  submitted,  the FDA's  review may be lengthy and may include  requests for
additional data.

Although the therapeutic  uses described above are the initial intended uses for
its two  devices,  the Company  intends  that other uses be made of the microjet
microkeratome. One such use, for which the Company believes the potential market
could be significant,  is for refractive  surgical  correction.  Therefore,  the
later phase of the FDA strategy relates to the HRK4 microkeratome.  Although the
Company believes that the HRK4 microkeratome may be considered for permission to
market by the FDA through a 510(k)  notification  based upon the similarities of
the microkeratome  between the hinged flap use and the HRK4 use,  obtaining such
permission for the HRK  microkeratome  is likely to be somewhat more complicated
than for the hinged flap  microkeratome.  There can be no assurance  that either
the hinged flap use or the HRK4 use will be permitted  for marketing by the FDA.
The differences between the two uses are found in the components, other than the
microjet scalpel, which comprise the microkeratome.  For the HRK4 microkeratome,
the Company may be required to show that the procedure is effective,  stable and
does not decrease visual acuity to any significant extent.

The Company  believes that, based on two features of the HRK  microkeratome,  it
may also be considered for 510(k)  notification by the FDA. First,  based on the
preliminary experimentation conducted with microjet microkeratomes, there are no
known or  anticipated  physical or chemical  processes  that would impact on the
safety of the HRK  procedure.  The  microjet  microkeratome  cuts by  mechanisms
similar to that of conventional  scalpels (although at speeds more than 10 times
greater),  except that the Company  believes that HRK would not produce  certain
side effects incident to other refractive surgery procedures.  Such side effects
include the inferior cut produced by the oscillating  blade used in conventional
microkeratomes,   and  the  potential  carcinogenic  effects,  dehydration  from
overheating  and high  amplitude  shock waves to the eye resulting from the high
energy, pulsed radiation used in the PRK/LASIK procedure.  LASIK could represent
the strongest competition to HRK4. As a result of the anticipated safety issues,
the FDA approval  process for PRK involved  numerous  clinical  studies on human
eyes and took  several  years to  complete.  The Company  believes  that the FDA
approval process for the HRK4  microkeratome  should be shorter and entail fewer
clinical  studies in light of the  expected  higher  level of safety and lack of
anticipated side effects, in comparison to other previously  permitted products,
but there can be no assurance that this will be the case.

The  second  feature  of the HRK4  microkeratome  is the  benign  nature  of the
microjet cut.  While a  conventional  scalpel tears the lamellae  (layers of the
stroma) and PRK  completely  or  partially  destroys the surface  lamellae,  the
microjet beam has a unique cutting action which  separates the various  lamellae
prior to cutting the targeted  tissue,  thereby  preserving the integrity of the
remaining lamellae and both localizing and minimizing the damage to the lamellae
generally.  The healing process  following a microjet cut is expected to be less
traumatic  than that  following  a  conventional  scalpel  cut or a PRK cut,  as
observed in rabbits,  although  the  improved  healing  process has not yet been
demonstrated in human eyes.

Other U.S. Government Regulation

                                       9
<PAGE>

In addition to laws and regulations  enforced by the FDA, the Company's products
may also be subject to  labeling  laws and  regulations  enforced by the Federal
Trade  Commission.  The  Company  is  also  subject  to  government  regulations
applicable to all businesses, including, but not limited to, regulations related
to  occupational   health  and  safety,   workers'  benefits  and  environmental
protection.

Foreign Government Regulation

Sales of  medical  devices  outside  the United  States  are  subject to foreign
regulatory  requirements  that vary  widely from  country to  country.  The time
required  to obtain  approvals  required by foreign  countries  may be longer or
shorter than that required for FDA approval,  and requirements for licensing may
differ from FDA requirements.  Export sales of investigational devices that have
not received FDA marketing  clearance generally are subject to FDA export permit
requirements.   Material  failure  to  comply  with  any  applicable  regulatory
requirements could have a material adverse effect on the Company.

Competition

The Company believes that primary  competition for the  HydroBlade(TM)  Keratome
will be  blade-based  microkeratomes.  Mechanical  blades  cut  diseased  tissue
intended  for  removal  or  make  hinged  flaps  as a first  step  in the  LASIK
procedure.  The use of such blades  requires a high degree of skill and training
and often does not produce satisfactory results.

If permitted or otherwise approved by the FDA and other regulatory  authorities,
HRK,  using the  Company's  HydroBlade(TM)  Keratome,  will  compete  with other
corrective means for refractive problems, including eyeglasses,  contact lenses,
other refractive  surgery procedures (such as RK, PRK, LASIK and ALK), and other
technologies  under development,  such as refractive  intraocular lenses (lenses
which are inserted into the eye behind the cornea),  intrastromal lenses (lenses
which are  inserted  into the stroma),  corneal  rings  (transparent  circles of
acrylic which are inserted within the cornea outside the vision zone in order to
correct  the  curvature  of the  corneal  surface)  and  injection  of  hydrogel
materials  into layers of corneal  tissue to change the curvature of the cornea.
The healthcare  field is  characterized by rapid  technological  change.  At any
time,  competitors  may  develop  and bring to market new  products  or surgical
techniques  with  vision  correction  capabilities  superior  to  those  of  the
Company's  products  or which  would  otherwise  render the  Company's  products
obsolete.

Generally,  refractive  surgical  techniques  are  considered  to be  "elective"
surgery and are typically not reimbursed under healthcare  insurance policies in
the United States. However, in certain countries outside the United States, such
as China, the costs of refractive surgery are paid by the government, because it
is believed that such surgery is, over time, less costly than glasses or contact
lenses.  It  can be  expected  that  many  individuals  will  choose  to  forego
refractive surgery, if not reimbursed,  and instead obtain eyeglasses or contact
lenses,  which  are  covered  under  some  healthcare  insurance  plans  and are
considerably less expensive than refractive surgery in the short term.

Other  companies  are engaged in refractive  surgery  research.  Two  companies,
Summit Technology,  Inc.  ("Summit") and VISX Inc.  ("VISX"),  have received PMA
approval on PRK and are profitable.  In addition to Summit and VISX, there are a
number of other large  entities  that  currently  market and sell laser  systems
overseas  for  use  in  refractive  surgery,  including  Aesculap-Meditec  GmbH,
Technolas  and  Schwind,  each of  Germany,  and Nidek of  Japan.  Many

                                       10
<PAGE>

of these companies have  substantially  greater  financial,  technical and human
resources  than the Company and may be better  equipped to develop,  manufacture
and  market  their  technologies.  In  addition,  many of these  companies  have
extensive experience in preclinical testing and human clinical studies.  Certain
of these companies may develop and introduce  products or processes  competitive
with or superior to those of the Company.

Furthermore,  with respect to any other products the Company may, in the future,
be permitted to  commercially  sell,  it will also be competing  with respect to
manufacturing efficiency and marketing capabilities,  areas in which the Company
has no experience.

The Company's competition will be determined in part by those refractive surgery
technologies  that are ultimately  approved for sale by regulatory  authorities.
The   relative   speed  at  which  the  Company  is  able  to  develop  the  HRK
microkeratome,  complete the  necessary  governmental  and  regulatory  approval
processes,  and manufacture  and market  commercial  quantities  thereof will be
important  competitive  factors.  The  Company is aware of ongoing  research  at
certain  companies and  institutions  into a variety of  procedures  for corneal
adjustment,   as  noted  above,  and  refractive  surgery,   including  microjet
technology under development by Visijet  (Surgijet) Inc. Visijet (Surgijet) Inc.
holds narrow,  apparatus  patents for certain  microjet  technology  utilized in
connection  with  the  treatment  of  cataracts  and for HRK.  Although  Visijet
(Surgijet)  Inc. has not yet  commercialized  any products,  it is possible that
Visijet  (Surgijet)  Inc. or other companies will bring products to market prior
to such  time,  if  ever,  that  the  Company  is able  to  economically  market
commercial quantities of products.

Although  the HRK  microkeratome  is still in  development  and has neither been
tested on live human eyes nor received the  regulatory  approval  necessary  for
sale, the Company believes that it has the potential to effectively compete with
other refractive surgical techniques because of its relative simplicity, safety,
efficacy and reduced risk of significant  pain. In addition,  HRK is expected to
be less costly than PRK/LASIK,  because of the high costs of the laser equipment
and laser facility necessary for PRK/LASIK, and to be competitively priced with,
or less costly than, other refractive surgery procedures.

Employees

As of December  31,  1999,  the Company had seven  full-time  employees  and one
part-time  employee,   the  majority  of  whom  were  engaged  in  research  and
development  activities.  As of such  date,  the  Company  also  had  consulting
arrangements  with one medical  consultant,  one  marketing  consultant  and two
strategic planning and business development  consultants.  The Company's ability
to design, develop, manufacture,  market and sell its products successfully will
depend  to a large  extent  on its  ability  to  attract  and  retain  qualified
personnel,  for which  competition  is or may be intense.  None of the Company's
employees are  represented by a union.  The Company  believes that its relations
with its employees are satisfactory.

Product Liability Insurance

The use of medical devices,  both in clinical and commercial  settings,  entails
the risk of allegations of product liability, and there can be no assurance that
substantial  product  liability claims will not be asserted against the Company.
The Company does not now have any product liability insurance, but it expects to
obtain such insurance prior to the  commencement of clinical  testing.  However,
there can be no assurance that adequate  insurance coverage will be available at
an acceptable cost, if at all. Consequently,  a material product liability claim
or other material

                                       11
<PAGE>

claims with respect to uninsured liabilities or in excess of insured liabilities
would have a material adverse effect on the Company.

ITEM 2.  DESCRIPTION OF PROPERTY.

Principal Business Facilities

The Company had been  leasing  approximately  7,358  square feet of research and
development, manufacturing and office space in Edison, New Jersey. The base rent
under this lease,  which was to expire  December 31, 1999, was $93,550 per year.
During  February  and March  1999,  the Company  renegotiated  the terms of this
lease,  returned the manufacturing space and a portion of the office space under
the lease,  and entered into a new lease agreement for the  approximately  4,982
square feet of research and  development and office space  remaining.  Under the
terms of the new lease,  which will expire  December 31, 2004,  the base rent is
$78,197 per year.

In  1998,  the  Company  began  conducting  certain  pre-clinical  research  and
development  activities  in  facilities  located at the  Department  of Veterans
Affairs New Jersey  Health Care  System,  East Orange,  New Jersey  ("VANJHCS").
Under the terms of an agreement with the VANJHCS, the Company paid fees based on
its usage of the facility.  During 1999, the Company completed its activities at
the facility and terminated the agreement effective December 31, 1999.

The Company  believes the space currently  available to it will be sufficient to
meet the Company's requirements for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS.

New Jersey Institute of Technology

On April 21,  1998,  the Company  was served with a complaint  by the New Jersey
Institute  of  Technology  ("NJIT")  commencing  a lawsuit in the United  States
District Court for the District of New Jersey ("U.S.  District Court").  Each of
the Company, Eugene I. Gordon, Ph.D. (the Company's Chairman and Chief Executive
Officer),  a former  employee of the  Company,  certain  patent law firms and an
individual patent attorney were named as defendants.  The complaint alleged that
the defendants,  with deceptive intent,  failed to name an NJIT professor and/or
NJIT  research  associate as a  co-inventor  on the  Company's  U.S.  Patent No.
5,556,406 on the "Lamellar  Surgical  Device and  Procedure"  (the "Patent") and
breached  fiduciary  duties  and  contractual  obligations  owed  to  NJIT.  The
complaint  sought monetary  damages from the Company and an order directing that
the Company's Patent (and corresponding foreign patents and patent applications)
be assigned and  transferred  to NJIT. It further  sought an order that NJIT has
not infringed  any claims of such Patent and a declaratory  judgment that all of
the  Company's  claims under such Patent are invalid and  unenforceable  against
NJIT.

NJIT had  submitted a patent  application  relating  to a  different  refractive
corrective procedure based on the use of an isotonic waterjet to the U.S. Patent
and Trademark  Office.  That patent has recently issued.  The three inventors of
the  subject  of such  patent  application,  one of which  was Dr.  Gordon,  had
assigned  such patent  application  to NJIT as part of a dispute  settlement  in
which

                                       12
<PAGE>

NJIT agreed to grant an  exclusive  license to the Company of the patent  rights
under such patent application.  That license was terminated by the Company based
on its  evaluation of the patent  potential.  In its U.S.  District Court pleas,
NJIT claims that the Company's Patent emanates from the earlier invention. Prior
to being served with the  complaint by NJIT,  the Company and Dr. Gordon filed a
complaint, on March 27, 1998, against NJIT in the Superior Court of the State of
New Jersey,  Middlesex  County ("State Court"),  seeking a declaratory  judgment
that NJIT had no  ownership  or other  interest  in the rights to the  Company's
Patent and seeking  payment for damages.  NJIT removed the Company's  lawsuit to
the U.S. District Court,  seeking to have it consolidated with its lawsuit.  The
Company  moved to have its suit remanded to the State Court and to have the NJIT
lawsuit dismissed on the grounds that the federal court lacked jurisdiction over
either action.

During  October 1998,  the lawsuit  brought in U.S.  District  Court by NJIT was
dismissed on jurisdictional  grounds. In addition,  the U.S. District Court also
held that NJIT  improperly  removed the Company's state court action and ordered
that action  remanded to the state court.  NJIT  appealed the remand  action and
appealed the  dismissal of its lawsuit  brought in U.S.  District  Court.  These
appeals have been  dismissed.  On April 26, 1999, NJIT commenced a second action
in U.S.  District Court.  NJIT alleged that the defendants failed to name a NJIT
professor  and/or a NJIT research  associate as  co-inventors  of the Patent and
breached  fiduciary  duties and contractual  obligations owed to NJIT. As in the
first federal court action,  NJIT sought  monetary  damages,  an order directing
that the Company's Patent,  foreign patents and patent  applications be assigned
and  transferred  to NJIT, a declaratory  judgment that all of the claims of the
Company's  Patent  are  invalid  and  unenforceable  against  NJIT  and an order
amending  the  named  inventors  of the  Company's  Patent to  include  the NJIT
professor and/or the NJIT research  associate.  Briefing to the federal court on
the motion to dismiss the action against the Company,  Dr. Gordon and the former
employee of the Company is complete, and a ruling is expected shortly.

With respect to the Company's  lawsuit against NJIT,  NJIT has asserted  similar
counterclaims and/or third party claims against each of the Company, Dr. Gordon,
a former patent  attorney for the Company,  a former employee of the Company and
certain  patent  law firms.  The state  court  action is still in the  discovery
phase, which by court order is to be completed by April 18, 2000. The deposition
phase has now been  completed.  Based on the evidence,  the Company is virtually
certain  that its  Patent  is valid and  enforceable  and that the  Company  has
substantial and valid defenses to each of NJIT's counterclaims.  The Company has
recently  filed a motion  for  summary  judgement  on the  basis  that  NJIT has
presented  absolutely  no evidence or  testimony  that  support its claims.  The
Company believes that an unfavorable  outcome is highly unlikely,  and therefore
no amounts have been accrued with respect to this lawsuit.

Other

On April 16, 1999, the Company was served with a complaint  commencing a lawsuit
in the United States  District Court for the District of New Jersey by Robert G.
Donovan, a former officer and director, seeking payment of $129,500 for services
alleged to have been  performed by Mr. Donovan as a temporary  Co-President  for
the Company. A compensation package approved by the Company's Board of Directors
and offered by the Company  previously

                                       13
<PAGE>

had been rejected by Mr.  Donovan.  Since Mr.  Donovan has so far been unable to
name or document services performed for the Company as Co-President, the Company
believes the probability of a significant  unfavorable  outcome is remote.  This
matter is currently in the  preliminary  stages and no prediction can be made of
the ultimate outcome.

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

In November 1999, the Board of Directors of the Company adopted,  subject to the
approval of the Company's stockholders,  the Amendment to increase the number of
authorized shares of Common Stock from 7,000,000 shares to 30,000,000 shares and
resetting  the  Company's  authorized  number of shares of Preferred  Stock from
890,000 to  1,000,000.  In accordance  with Section 228 of the Delaware  General
Corporation Law,  stockholders owning a majority of the outstanding Common Stock
approved the  Amendment by written  consent,  without a meeting,  on November 5,
1999. The Amendment was filed and accepted by the Delaware Secretary of State on
November 22, 1999, with a delaying  provision that it would not become effective
until January 31, 2000.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

During the third  quarter of 1996,  the Company  consummated  an initial  public
offering  in which it issued and sold to the public a total of  1,232,143  Units
(the  "Units"),  each Unit  consisting of one share of common  stock,  $.001 par
value,  of the Company  (the "Common  Stock") and one Class A Redeemable  Common
Stock Purchase  Warrant (the "Class A Warrants") to purchase one share of Common
Stock at a price of  $10.00  per  share  for a  24-month  period  commencing  on
November 6, 1996.  Prior to November 6, 1996, there was no market for the Common
Stock or the Class A Warrants.  The Units became  separable on that date and the
Common Stock and the Class A Warrants  began  trading  separately on November 8,
1996.  In July 1998, in connection  with a private  placement  (described in the
following  paragraph),  the Company agreed to extend the exercise  period of the
Class A Warrants for an additional 12 months. As a result,  the Class A Warrants
expired on November 6, 1999.

In January 1998, the Company  commenced a private  placement of its Series A 10%
Cumulative   Convertible   Preferred  Stock,  $.01  par  value  (the  "Series  A
Preferred"),  at a price of $10 per  share.  At the  closing  for  this  private
placement,  which was held in April 1998,  the Company  sold and issued  110,000
shares  of  Series  A  Preferred  for  an  aggregate  price  of  $1,100,000.  In
conjunction  with this  transaction,  a total of 18,272  four-year  warrants  to
purchase  one  share of Common  Stock,  each at an  exercise  price of $4.34 per
share,  was also issued to the placement agent. The net proceeds of this private
placement were used to augment the Company's working capital.

The Series A Preferred  bore a  cumulative  annual  dividend of 10%  (subject to
increase to 12% in certain events) and was convertible into  approximately  1.66
shares  of  Common  Stock  for each

                                       14
<PAGE>

share of Series A Preferred,  subject to adjustment for any stock splits,  stock
dividends, recapitalizations, reclassifications and similar events.

The private  placement,  which was  terminated on July 31, 1998, was carried out
pursuant to available  exemptions  from  registration  under Section 4(2) of the
Securities Act of 1933 and rules promulgated under that section.

On October 9, 1998,  the 110,000 shares of Series A Preferred  outstanding  were
converted  into  182,724  shares of Common  Stock.  At the same time, a total of
12,154 shares of Common Stock was issued in payment of the cumulative  dividends
on the  Series A  Preferred.  The  dividend  was  computed  at 10% per annum and
totalled approximately $51,534.

In December  1999,  the Company  commenced a private  placement  of its Series B
Convertible  Preferred  Stock,  $.01 par value (the "Series B Preferred"),  at a
price of $125 per share.  At the closing for this private  placement,  which was
held on December 6, 1999,  the Company sold and issued 16,000 shares of Series B
Preferred  for an aggregate  price of  $2,000,000.  In addition,  the  investors
received 1.6 million  five-year  warrants  (the "Series B Warrants") to purchase
one share of Common  Stock,  each at an exercise  price of $3.50 per share.  The
Company also entered into an investment  banking  agreement with a New York firm
affiliated  with certain of the investors,  and issued the firm 500,000 Series B
Warrants.

The Series B Preferred is  convertible  into 100 shares of Common Stock for each
share of Series B Preferred,  subject to adjustment for any stock splits,  stock
dividends, recapitalizations, reclassifications and similar events.

This private  placement  was carried out pursuant to available  exemptions  from
registration  under  Section  4(2)  of the  Securities  Act of  1933  and  rules
promulgated under that section.

On January 28, 2000, the Company returned  $700,000 of the $2,000,000  aggregate
price received from the sale of the Series B Preferred.  The original investment
was made  based,  in part,  on the  Company's  Agreement  with Alcon  which,  as
previously  mentioned in this report,  was  unexpectedly  terminated by Alcon on
December 13, 1999. In light of the termination of the Agreement, and in order to
resolve any possible disputes  relating to the termination,  the Company and the
investors  reevaluated the assumptions on which the original investment was made
and  determined  that a return  of a  portion  of the  original  investment  was
appropriate.  The  return  of funds was made  pursuant  to an  agreement,  dated
January 28, 2000,  under which the Company  received a return of a proportionate
share of the Series B  Preferred  and Series B  Warrants  issued in the  private
placement.  In connection with this agreement,  the investment banking agreement
entered  into by the  Company at the time of the  original  investment  also was
cancelled.

The net  proceeds  of this  private  placement  will be used by the  Company  to
complete the development  and  introduction  of its waterjet  microkeratome  for
vision correction applications.

The  following  table  sets forth the range of high and low bid  quotations  per
share of the Common Stock (symbol MDJT) for the periods indicated as reported by
the OTC Bulletin Board. These quotations  reflect  interdealer  prices,  without
retail  mark-up,   mark-down  or  commission,   and  may  not  represent  actual
transactions.

                                       15
<PAGE>

                         Range of High and Low Bid Prices
                                  1999                     1998

COMMON STOCK

     First Quarter       $1.3125 - $ .5625         $8.25   - $6.00
     Second Quarter      $3.1875 - $ .78125        $7.25   - $6.0625
     Third Quarter       $2.00   - $1.03125        $7.5625 - $3.00
     Fourth Quarter      $2.25   - $ .625          $3.00   - $ .59375

As of March 16,  2000,  there  were  approximately  54  holders of record of the
Common Stock.

The  Company  has never paid a cash  dividend  on its Common  Stock and does not
presently  anticipate doing so in the foreseeable  future, but expects to retain
earnings, if any, to finance operations.

Prior to November 6, 1999, the Company also had outstanding Class A Warrants. On
November 6, 1999, the Class A Warrants expired by their terms.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

This annual report contains forward-looking statements within the meaning of the
federal  securities  laws.  These  include  statements  about our  expectations,
beliefs,  intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate,"  "expect," "intend," "plan," "will," "we believe,"
"the  Company  believes,"  "management  believes,"  and  similar  language.  The
forward-looking statements are based on our current expectations and are subject
to certain risks,  uncertainties  and assumptions,  including those set forth in
the following  discussion and in the previous  discussion under  "Description of
Business." Our actual results may differ materially from results  anticipated in
these  forward-looking  statements.  We base our  forward-looking  statements on
information  currently  available to us, and we assume no  obligation  to update
them.

General

The Company is engaged in research and  development  for  manufacture of medical
technology,  with a current  emphasis  on  ophthalmic  surgical  technology  and
equipment and has developed a proprietary  technology and derivative devices for
corneal surgery based on microjets.  The Company expects,  during 2000, assuming
the appropriate regulatory clearances are obtained, to continue its research and
development  activities  focusing  principally on ophthalmic surgical technology
and equipment and to offer for sale its first microjet microkeratome product. It
also  expects to  commence  early  exploratory  work on dental  applications  of
microjet technology. The Company is a development-stage company.

Overview.  Since its inception in December 1993, the Company has been engaged in
developing a technology  suitable for surgery of the eye, in particular,  vision
correction surgery.  The cost of entry into this market with a medical device is
typically large and, being a fledgling company, the Company initially focused on
developing  the  technology  to a point  that it could  license  it.  Using  the
technology already developed for ophthalmic  applications,  the Company believed
that  microjets  can be used in a  variety  of  other  medical  markets.  Hence,
management  believed that it

                                       16
<PAGE>

might be  possible,  using the income  resulting  from  royalties on its initial
products,  to develop new devices,  and  potentially to  manufacture  and market
these.  A  license  vs.  make and  sell  decision  would  be made in each  case.
Management  exercises  the  following  algorithm  for  choice  of new  areas for
development:

     o    A broad or blocking patent could result.
     o    The size of the  conservatively  estimated  market  could  justify the
          development expense.
     o    The new device could satisfy an unmet need.

In 1998, the Company licensed its refractive  surgery  technology to Nestle S.A.
and its Alcon Laboratories  ophthalmic division ("Alcon"). On December 13, 1999,
the Company received notice of termination of the license  agreement.  In giving
the  three-months  notice of termination  required  under the  agreement,  Alcon
offered no reason for the termination.  The Company is currently discussing with
Alcon  the  Company's  assertion  that  Alcon  owes  the  Company  certain  fees
associated with the license agreement.

While continuing its efforts associated with its refractive surgery  technology,
the Company has initiated a new product area associated with treatment of dental
caries.

The  Past  Year.  Due to the  Company's  limited  working  capital,  1999  was a
difficult  year.  The Company has sought to keep  operating  costs to a minimum,
consistent  with  completing  the  technology  transfer  to Alcon  and  allowing
development of a new technology option. The overriding  constraint has been cash
flow. The current rate of expenditures for staff and direct  expenses,  with the
Company's current cash balances and cash flow projections,  is expected to allow
the Company to continue operating in its present manner until year-end 2000. The
cash flow  projections  include  the sale of NJ tax  losses as  described  under
"Liquidity and Capital Resources."

Refractive Surgery. The Company's initial product,  expected to be introduced in
2000, is a microkeratome  for producing hinged flaps.  Management of the Company
believes this product has certain  advantages  compared to blade  microkeratomes
for producing flaps for the popular vision correction surgery using lasers known
as LASIK.  Management believes it should increase surgeon interest in performing
this type of surgery and reduce the  potential  for patient  complications.  The
perceived advantages of the waterjet microkeratome include:

     o    It produces uniform and precise thickness flaps
     o    It operates at normal IOP
     o    The flap is circular every time, with the desired vertical-edge shape
     o    The procedure is quick and relatively easy
     o    Tissue damage is minimal

The  basic  microkeratome  can be  modified  to  make  it  suitable  for  vision
correction  surgery  without the need for the laser.  The Company  believes this
should have a  significant  impact on the vision  correction  market in terms of
cost of the  procedure  and  quality of the  result.  Depending  on the level of
funding available,  the Company  anticipates that this product will be available
in 2001.

                                       17
<PAGE>

Dental  Caries.  The Company's  next proposed  product  development  area is for
waterjet  treatment of dental caries. The Company has filed a patent application
for this use. The waterjet  product has the potential for treating dental caries
and preparation of the tooth for filling.

Future  Products.  The Company  has made an  excellent  start in its  ophthalmic
products. There are new product areas that build on the same technology platform
that are under development,  e.g.,  arthroscopic  surgery. The Company's limited
resources  currently  restrict its product  development  efforts.  Nevertheless,
management is optimistic about the Company's ability to move forward and patents
are being filed.

Results Of Operations

The Company has not yet initiated sales of its products and,  consequently,  had
no sales revenues  during the year ended  December 31, 1999.  Under the terms of
the Alcon Agreement (as described under  "Description of Business"),  a total of
$350,000 was paid to the Company during the year ended  December 31, 1999.  This
amount has been  reflected  as license fee income and  deferred  revenues in the
accompanying financial statements.

Total  expenses  during the year ended December 31, 1999 decreased by $1,469,288
(51.0%) to $1,410,518 from $2,879,806 for the prior year. This was primarily due
to the net  decrease  in staff  during the year  (from an  average of  seventeen
full-time  employees in 1998 to an average of eight full-time employees in 1999,
with seven full-time  employees and one part-time employee at December 31, 1999)
and a decrease in consulting and professional  fees as the Company  continued to
curtail  several  operational  activities  in order to husband  and  stretch its
existing  capital.  See  "Liquidity and Capital  Resources."  Expenses were also
higher  during  1998 due to  increased  purchases  for  materials,  testing  and
analysis and greater insurance and occupancy costs reflecting  additional office
and laboratory space for pre-clinical research and development activities. Total
expenses  for the year  ended  December  31,  1999 also  included  approximately
$350,000 in legal fees,  primarily  related to the NJIT  litigation.  See "Legal
Proceedings."

Other income/expense  consists of interest income,  interest expense and finance
charges.  For the year ended December 31, 1999, net interest expense amounted to
$2,310  compared  with net  interest  income of $55,259 for 1998.  This  overall
decrease in net interest income  principally  resulted from income earned on the
Company's  short-term  investments,  which  were  lower in 1999  reflecting  the
utilization  of these funds to continue the Company's  research and  development
activities, and the interest expense incurred on funds borrowed during 1999.

Liquidity and Capital Resources

As of December 31, 1999, the Company's working capital was $540,527.

Throughout the second half of 1998 and into 1999, the Company sought  additional
capital  to  finance  its  1999  and  2000  business  plans.  Pending  obtaining
additional  financing,   the  Company  made  the  decision  to  curtail  several
operational  activities  as well as to downsize  its  employee  base in order to
husband and stretch its existing  capital to the next financing.  In October and
November,   1998,  the  Company  dismissed  9  of  its  19  employees  and  also
significantly reduced the salary of the management group, in some cases by up to
50%. The specific goal was to reduce the Company's monthly  expenditures by 60%,
to approximately $100,000.

                                       18
<PAGE>

In December  1999,  the Company  commenced a private  placement  of its Series B
Convertible  Preferred  Stock at a price of $125 per  share.  The  Preferred  is
convertible into 100 shares of Common Stock for each share of Preferred, subject
to  adjustment  for  any  stock  splits,  stock  dividends,   recapitalizations,
reclassifications and similar events. At the closing for this private placement,
held on December 6, 1999, the Company sold and issued 16,000 shares of Preferred
for an aggregate price of $2,000,000.  In addition,  the investors  received 1.6
million  five-year  warrants to purchase Common Stock, each at an exercise price
of $3.50  per  share.  The  Company  also  entered  into an  investment  banking
agreement with a New York firm  affiliated  with certain of the  investors,  and
issued the firm 500,000 warrants with the same terms.

As discussed under "Market for Common Equity and Related  Stockholder  Matters,"
on January 28, 2000, the Company returned  $700,000 of the $2,000,000  aggregate
price  received  from the sale of the Series B  Preferred,  in exchange  for the
surrender of a corresponding number of shares of Series B Preferred and Series B
Warrants.

In January 1998, the State of New Jersey enacted  legislation  allowing emerging
technology  and/or  biotechnology  companies to sell their unused New Jersey Net
Operating Loss ("NOL")  Carryover and Research and Development Tax Credits ("R&D
Credits") to corporate taxpayers in New Jersey. During 1999, the Company entered
into an  agreement  under which it  retained a third party  broker to identify a
buyer for the Company's NOL Carryover and R&D Credits. The total anticipated net
proceeds of this transaction  ($594,209) were recorded as a non-current deferred
tax asset in the accompanying financial statements. Due to limitations placed by
the State of New Jersey on the total  amount of NOL  Carryover  and R&D  Credits
eligible to be sold in any one year, the sale of only a portion of the Company's
NOL Carryover and R&D Credits  ($327,000)  was completed in 1999. The receipt of
these  funds,  on  December  16,  1999,  was  recorded  as a  reduction  to  the
non-current  deferred tax asset in the accompanying  financial  statements.  The
sale of the remaining  balance of the Company's NOL Carryover and R&D Credits is
anticipated by the end of the third quarter of 2000. There can be no assurances,
however,  that  this  proposed  sale  will  occur.  To the  extent  that the NOL
Carryover and R&D Credits are sold,  they will be  unavailable to the Company to
offset future New Jersey state taxes.

During March 1999,  Dr. Gordon agreed to make available to the Company a loan of
up to $250,000.  Under the terms of this  agreement,  the Company  issued to Dr.
Gordon  warrants to purchase up to 50,000 shares of the  Company's  Common Stock
and pays a market  interest  rate on  amounts  borrowed.  During  1999,  amounts
advanced under this agreement totalled $250,000.  At December 31, 1999, $100,000
of this amount, plus accrued interest, had been repaid.

The Company  anticipates that its cash on hand, plus the loan available from Dr.
Gordon and the sale of its New Jersey State NOL Carryover and R&D Credits,  will
be  sufficient to meet the Company's  2000 working  capital and planned  capital
expenditure  requirements.  If, however, the Company incurs unexpected expenses,
or if the New Jersey NOL Carryover and R&D Credits are not sold as  anticipated,
the Company may require  additional  financing prior to the end of 2000 in order
to maintain its current  operations.  The Company currently has no commitment or
arrangement  for any capital,  and there can be no assurance  whether or on what
terms it will be able to obtain any needed capital.  If additional  financing is
not  available,  the  Company  would be  materially  adversely  affected  and be
required to further curtail or cease altogether its current operations.

                                       19
<PAGE>

During  2000,  the  Company  intends  to seek  additional  funding  in  order to
accelerate its product development efforts and augment its working capital.

Additional Factors That May Affect Future Results

No Revenues;  Uncertain  Profitability;  Development  Stage Company;  History of
Losses.  Since its  inception,  the  Company  has been  principally  engaged  in
developmental and  organizational  activities.  To date, the Company has not yet
initiated  sales of its products and,  consequently,  has had no sales revenues.
The Company's Agreement with Alcon, under which payments totalling $850,000 were
made by Alcon to the Company,  was  terminated by Alcon,  and the Company has no
other agreements with respect to the license, manufacture or distribution of its
products.  Although the Company is currently discussing with Alcon the Company's
assertion  that  Alcon  owes  the  Company  certain  fees  associated  with  the
termination,  there can be no assurance  that the Company will be  successful in
these discussions.

No sales revenues are expected until, and only if, the Company begins commercial
marketing of the Company's microkeratome or other products. Commercial marketing
of the  Company's  products in the U.S. will be  contingent  upon  obtaining FDA
permission or approval and possibly the approval of other governmental agencies.
To date,  only the  Company's  HydroBrush(TM)  Keratome has been granted  510(k)
notification  from the FDA and is the Company's  only product which has received
the  regulatory  approvals  required  prior to the  commencement  of  commercial
marketing.  The Company is currently  discussing  sale of this product on an OEM
basis.  The  Company is also  currently  planning to seek FDA  clearance  of the
HydroBlade(TM)  Keratome  device in 2000.  Regulatory  clearance  procedures are
often extremely time consuming, expensive and uncertain.  Accordingly, there can
be no assurance  that the Company  will be  successful  in  obtaining  marketing
clearance  of the  HydroBlade(TM)  Keratome  or other  devices or that,  if such
devices are cleared,  it will be able to generate sufficient revenues to operate
on a profitable basis.

The Company,  which was founded in December 1993, is in the  development  stage,
and its business is subject to all of the risks inherent in the establishment of
a new  business  enterprise.  The  likelihood  of success of the Company must be
considered  in  light  of  the  problems,  expenses,  complications  and  delays
frequently  encountered in connection with the formation of a new business,  the
development of new products, the competitive and regulatory environment in which
the Company is operating and the possibility that its activities will not result
in  the  development  of  any  commercially  viable  products.  There  can be no
assurance  that  the  Company's   activities  will  ultimately   result  in  the
development of commercially saleable or useful products.

The Company has experienced  annual operating losses and negative operating cash
flow since  inception.  At December  31,  1999,  the Company had an  accumulated
deficit of approximately  $6,000,000,  excluding approximately  $1,500,000 which
was applied to  additional  paid-in  capital when the Company  converted  from a
subchapter S corporation  to a C corporation  for federal income tax purposes in
connection with its initial public offering during August 1996. Unless and until
the Company's  product  development and marketing  activities are successful and
its products are sold, of which there can be no assurance,  the Company will not
have any revenues to apply to operating  expenses and the Company will  continue
to incur losses.

Need for Future  Financing.  The Company currently is focusing on its efforts to
undertake the limited manufacture and marketing of its products. To proceed with
its planned research and development and marketing activities,  the Company will
require  additional  capital  before,  if ever,  it  reaches  profitability  and
positive  cash  flow.  As a  result,  the  Company  will be  required  to

                                       20
<PAGE>

raise additional funds through public or private financing including grants that
may be available  for its  research  and  development.  In  connection  with two
private placement offerings for the Company's Preferred Stock (one in the second
quarter of 1998 and one in the  fourth  quarter  of 1999) the  Company  raised a
total of $2,400,000  (net of the amount  returned to investors in January 2000).
There can,  however,  be no  assurance  that the Company  will be able to obtain
additional  financing on terms favorable to it, if at all. If adequate funds are
not  available to satisfy  short-term  or long-term  capital  requirements,  the
Company may be required to reduce substantially,  or eliminate, certain areas of
its product  development  activities,  limit its  operations  significantly,  or
otherwise modify its business strategy. The failure of the Company to obtain any
other  acceptable  financing  would  have  a  material  adverse  effect  on  the
operations of the Company.  Without additional  financing or the exercise of the
Company's  outstanding  options and  warrants or  otherwise,  the Company  would
become  unable to maintain its current  operations  and would be unable to carry
out its business plan.  Except for currently  outstanding  warrants and options,
the Company has no current  plans,  understandings  or commitments to obtain any
additional  financing from the sale of its  securities or otherwise.  Additional
financing  from  the  sale of its  securities  may  result  in  dilution  of the
Company's then current stockholders.

Dependence  Upon A Key Officer;  Attraction and Retention of Key Personnel.  The
business of the Company is highly dependent upon the active participation of its
founder and Chief Executive  Officer,  Dr. Eugene I. Gordon, age 69. The loss or
unavailability to the Company of Dr. Gordon would have a material adverse effect
on  the  Company's  business  prospects  and  potential  earning  capacity.  The
recruitment  of  skilled  scientific  personnel  is  critical  to the  Company's
success.  There can be no assurance  that it will be able to continue to attract
and retain such personnel in the future. In addition,  the Company's anticipated
growth and expansion into areas and activities requiring  additional  expertise,
clinical  testing,  governmental  approvals,  production  and  marketing  of the
Company's  products  (which would be required if the Company does not enter into
licensing  arrangements)  is  expected  to  place  increased  demands  upon  the
Company's  financial resources and corporate  structure.  The Company expects to
satisfy such demands, if they arise, through the hiring of additional management
personnel and the development of additional expertise by existing management.

No Assurance  of FDA and Other  Regulatory  Approval.  As medical  devices,  the
Company's microkeratomes are subject to regulation by the FDA under the FD&C Act
and implementing regulations. Pursuant to the FD&C Act, the FDA regulates, among
other  things,  the  development,   manufacture,   labeling,  distribution,  and
promotion of  microkeratomes in the United States. If the Company fails to enter
into  licensing  arrangements,  it will be required to pursue FDA approval of or
clearance to market its products at its own cost.

The process of obtaining  required  regulatory  clearances  or approvals  can be
time-consuming  and expensive,  and compliance with the FDA's Good Manufacturing
Practices  regulations  and other  regulatory  requirements  can be  burdensome.
Moreover, there can be no assurance that the required regulatory clearances will
be  obtained,  and  such  clearances,   if  obtained,  may  include  significant
limitations  on the uses of the product in  question.  In  addition,  changes in
existing  regulations  or  guidelines  or the  adoption  of new  regulations  or
guidelines could make regulatory compliance by the Company more difficult in the
future. The failure to comply with applicable regulations could result in fines,
delays or suspensions of clearances,  seizures or recalls of products, operating
restrictions and criminal prosecutions, and would have a material adverse effect
on the Company.

                                      21
<PAGE>

Uncertainty of Market Acceptance;  Reliance on Single Technology.  Acceptance of
the  Company's  products is difficult  to predict and will  require  substantial
marketing efforts and the expenditure of significant funds by the Company. There
can be no assurance that the products will be accepted by the medical  community
once they are permitted or approved. Market acceptance of the Company's products
will  depend  in large  part  upon the  Company's  ability  to  demonstrate  the
operational  advantages,  safety and cost-effectiveness of its products compared
to other  comparable  surgical  techniques.  Failure of the  products to achieve
market acceptance will have a material adverse effect on the Company's financial
condition and results of operations.

At present,  the Company's only products  (although still in development  stage)
are its microkeratomes, and the Company expects that its microkeratomes will be,
if and when commercially  available,  its sole products for an indefinite period
of time.  The Company's  present  narrow focus on particular  products makes the
Company vulnerable to the development of superior competing products and changes
in technology  that could eliminate the need for the Company's  products.  There
can be no assurance that  significant  changes in the foreseeable  future in the
need for the Company's  products or the  desirability of those products will not
occur.

Dependence on Patents and Proprietary  Rights. The Company's success will depend
in part on whether it successfully  obtains and maintains patent  protection for
its products,  preserves its trade secrets and operates  without  infringing the
proprietary rights of third parties.

The Company has sought to protect its  proprietary  interest in its  products by
applying for patents in the United States and corresponding  patents abroad. The
Company  currently has four issued U.S.  patents and two issued foreign patents.
The Company also has several  dozen U.S. and foreign  patents in process.  There
can be no assurance  that any other  patent will be issued to the Company,  that
any patents owned by or issued to the Company,  or that may issue to the Company
in the future,  will provide a competitive  advantage or will afford  protection
against competitors with similar technology,  or that competitors of the Company
will not  circumvent,  or challenge  the validity of, any patents  issued to the
Company.  There also can be no assurance  that any patents issued to or licensed
by the Company will not be infringed upon or designed  around by others or would
prevail in a legal  challenge,  that  others  will not obtain  patents  that the
Company will need to license or design around,  that the  microkeratomes  or any
other potential product of the Company will not inadvertently  infringe upon the
patents of others,  or that others will not manufacture  the Company's  patented
products  upon  expiration  of such  patents.  There  can be no  assurance  that
existing or future patents of the Company will not be invalidated. Additionally,
patent  applications  filed in foreign  countries  and  patents  granted in such
countries are subject to laws,  rules and procedures  which differ from those in
the United  States.  Patent  protection in such  countries may be different from
patent protection  provided by United States laws and may not be as favorable to
the Company.

Also, there can be no assurance that the Company's non-disclosure agreements and
other  safeguards will protect its proprietary  information and trade secrets or
provide  adequate  remedies for the Company in the event of unauthorized  use or
disclosure of such information, or that others will not be able to independently
develop such information.  As is the case with the Company's patent rights,  the
enforcement by the Company of its  non-disclosure  agreements can be lengthy and
costly,  with no  guarantee  of  success.  There  can be no  assurance  that the
Company's  program of patent  protection,  internal  security of its proprietary
information  and  non-disclosure  agreements  will be  sufficient to protect the
Company's proprietary technology from competitors.

                                       22
<PAGE>

Infringement Claims;  Litigation.  If any of the Company's products are found to
infringe upon the patents or proprietary  rights of another  party,  the Company
may be required to obtain  licenses under such patents or proprietary  rights of
such other party. No assurance can be given that any such licenses would be made
available on terms  acceptable to the Company,  if at all. If required  licenses
were to be unavailable, the Company could be prohibited from using, marketing or
selling  certain  technology  and  devices  and such  prohibition  could  have a
material adverse effect on the Company.

The Company is currently  involved in ongoing  litigation,  as  described  under
"Legal Proceedings."

Competitive Technologies,  Procedures and Companies. The Company is engaged in a
rapidly  evolving  field.  There are many  companies,  both public and  private,
universities and research  laboratories  engaged in research activities relating
to other  vision  correction  alternatives.  Competition  from these  companies,
universities  and  laboratories  is intense  and is expected  to  increase.  The
Company's  initial products will compete with other presently  existing forms of
treatment for vision disorders,  including eyeglasses,  contact lenses,  corneal
transplants,  other refractive  surgery  procedures and other technologies under
development.  There  can  be no  assurance  that  persons  whose  vision  can be
corrected  with  eyeglasses or contact lenses will elect to undergo the surgical
procedures  with the Company's  products  when  non-surgical  vision  correction
alternatives are available.

The Company is aware of ongoing  research at certain  companies and institutions
into a variety of procedures  for corneal  adjustment  and  refractive  surgery,
including waterjet  technology under development by Visijet (Surgijet) Inc. Some
of these companies and institutions,  which may in the future become competitors
of the Company, have substantially  greater resources,  research and development
staffs  and  facilities,   as  well  as  greater   experience  in  research  and
development,  obtaining  regulatory  approval and  manufacturing  and  marketing
medical device  products than the Company.  On the other hand, the nature of the
Company's patents is blocking.

Additionally,  there can be no assurance that the Company's competitors will not
succeed  in  developing  technologies,  procedures  or  products  that  are more
effective or economical  than those being developed by the Company or that would
render the Company's technology and proposed products obsolete or noncompetitive
or that would allow for the bypassing of the Company's patents.  Furthermore, in
connection  with the commercial  sale of its products,  the Company will also be
competing with respect to manufacturing  efficiency and marketing  capabilities,
areas in which the Company has no experience.

No Manufacturing Experience; Dependence on Third Parties. Although the Company's
current  strategy is to focus on the  manufacture and marketing of its products,
if marketing  clearance is obtained,  the Company  continues to have discussions
with several potential  strategic  partners and is investigating  other possible
arrangements.  To the extent the Company does not enter into such  arrangements,
it will  need to  engage  in the  manufacture  and  marketing  of its  products.
Manufacturing will consist of purchasing  existing parts, having parts formed by
vendors,  incoming inspection,  assembly,  qualification  testing and packaging,
i.e., virtual manufacturing. The Company has no volume manufacturing capacity or
experience in manufacturing medical devices or other products. To be successful,
the Company's proposed products must be manufactured in commercial quantities in
compliance  with  regulatory  requirements  at acceptable  costs.  Production in
clinical or  commercial-scale  quantities will involve technical  challenges for
the  Company.  If the  Company is unable or elects  not to pursue  collaborative
arrangements  with other  companies  to  manufacture  certain  of its  potential
products,

                                       23
<PAGE>

the  Company   will  be  required  to  establish   manufacturing   capabilities.
Establishing  its  own  manufacturing  capabilities  would  require  significant
scale-up  expenses and additions to facilities  and  personnel.  There can be no
assurance that the Company will be able to obtain necessary regulatory approvals
on a timely  basis or at all.  Delays in receipt  of or failure to receive  such
approvals or loss of previously received approvals would have a material adverse
effect on the Company.  There can be no assurance  that the Company will be able
to develop clinical or commercial-scale manufacturing capabilities at acceptable
costs  or enter  into  agreements  with  third  parties  with  respect  to these
activities.  The Company's  dependence upon third parties for the manufacture of
its products may adversely affect the Company's profit margins and the Company's
ability to develop and deliver such products on a timely basis. Moreover,  there
can be no assurance that such parties will perform adequately,  and any failures
by third parties may delay the submission of products for  regulatory  approval,
impair the Company's ability to deliver products on a timely basis, or otherwise
impair the  Company's  competitive  position and any such  failure  could have a
material adverse effect on the Company.

No  Marketing  or Sales  Experience.  Unless the Company  enters into  licensing
arrangements,  it will undertake the marketing and sale of its own products.  In
such event,  the Company  intends to market and sell its  products in the United
States  and  certain  foreign  countries,  if and when  regulatory  approval  is
obtained,  through a direct sales force or a combination of a direct sales force
and distributors or other strategic  partnerships.  The Company currently has no
marketing  organization  and has never sold a product.  Establishing  sufficient
marketing and sales capability will require significant resources.  There can be
no assurance  that the Company will be able to recruit and retain  skilled sales
management, direct salespersons or distributors, or that the Company's marketing
or sales efforts will be successful.  To the extent that the Company enters into
distribution  arrangements  for the sale of its  products,  the Company  will be
dependent on the efforts of third  parties.  There can be no assurance that such
efforts will be successful.

Risk of Product Liability Litigation; Potential Unavailability of Insurance. The
testing, manufacture, marketing and sale of medical devices entails the inherent
risk of liability  claims or product recalls.  As a result,  the Company faces a
risk of exposure to product liability claims and/or product recalls in the event
that the use of its  current or future  potential  products  are alleged to have
caused injury. There can be no assurance that the Company will avoid significant
liability  in spite of the  precautions  taken to  minimize  exposure to product
liability  claims.  Prior to the commencement of clinical  testing,  the Company
intends to procure product liability insurance.  After any  commercialization of
its  products,  the Company will seek to obtain an  appropriate  increase in its
coverage.  There can, however,  be no assurance that adequate insurance coverage
will be available at an  acceptable  cost,  if at all.  Consequently,  a product
liability  claim,  product  recall or other  claims  with  respect to  uninsured
liabilities or in excess of insured  liabilities  could have a material  adverse
effect on the Company.

Surgical  Risks.  There can be no assurance that the Company's  products will be
successful  in providing  reliable  surgical  corrections.  As with all surgical
procedures,  the procedures for which the Company's products are intended entail
certain inherent risks,  including defective equipment or human error, infection
or other injury resulting in partial or total loss of vision.  Such injury could
expose the Company to product  liability or other claims.  The Company  believes
competing  products  have the same risks and have  experienced a small number of
these  situations  without  undue  impact on the  commercial  prospects  of such
products.  There  can be no  assurance  that  the  Company's  product  liability
insurance in effect from time to time will be sufficient to cover any such claim
in part or in whole. Any such claim could adversely impact the commercialization
of the  Company's  products  and could  have a  material  adverse  effect on the
Company.

                                       24
<PAGE>

Other  Matters.  The Year 2000 problem has not to date had a material  impact on
the Company's  operations,  and the Company  believes that the Year 2000 problem
will not have a significant  impact on the Company's  future  operations.  Costs
incurred to insure that the Company's  systems are Year 2000  compliant  have to
date not been, and are not expected to be, material to the Company's  results of
operations,  financial  position or cash flows,  and no Year 2000  problems have
been encountered by the Company's systems to date.




                                       25
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS.

                                                                        Page No.
                                                                        --------

Independent Auditors' Report............................................   27

Balance Sheet as of December 31, 1999...................................   28

Statements of Operations for the years ended
December 31, 1999 and 1998, and for the period
from inception to December 31, 1999.....................................   29

Statement of Stockholders' Equity for the period
from inception to December 31, 1999.....................................   30

Statements of Cash Flows for the years ended
December 31, 1999 and 1998, and for the period
from inception to December 31, 1999.....................................   32

Notes to Financial Statements...........................................   33



                                       26
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Medjet Inc. (A Development Stage Company):


We have audited the  accompanying  balance  sheet of Medjet Inc. (A  Development
Stage Company) as of December 31, 1999 and the related statements of operations,
stockholders'  equity and cash flows for the years ended  December  31, 1999 and
1998.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Medjet Inc. (A  Development
Stage Company) as of December 31, 1999 and the results of its operations and its
cash flows for the years ended  December  31, 1999 and 1998 in  conformity  with
generally accepted accounting principles.

                                           ROSENBERG RICH BAKER BERMAN & COMPANY


Bridgewater, New Jersey
February 17, 2000

                                       27
<PAGE>

                                   MEDJET INC.
                          (A Development Stage Company)
                                  Balance Sheet
                                December 31, 1999
<TABLE>
<CAPTION>
   Assets
<S>                                                                    <C>
Current Assets:
     Cash and cash equivalents                                              $ 1,063,749
     Restricted cash                                                            700,000
     Prepaid expenses                                                            58,049
                                                                       ----------------
              Total Current Assets                                            1,821,798
                                                                       ----------------

Property and Equipment - less accumulated depreciation of $323,802              111,444
Patents and Trademarks - less accumulated amortization of $29,172               163,403
Deferred tax asset                                                              267,063
Security deposits                                                                 4,837
                                                                       ----------------
              Total Assets                                                  $ 2,368,545
                                                                       ================
                      Liabilities and Stockholders' Equity

Current Liabilities:
     Accounts payable and accrued liabilities                               $   206,271
     Deferred revenues                                                          175,000
     Notes payable - Officer                                                    150,000
     Notes payable - Other                                                       50,000
     Amount due investors                                                       700,000
                                                                       ----------------
              Total Liabilities                                               1,281,271
                                                                       ----------------
Stockholders' Equity:
     Common stock, $.001 par value, 30,000,000 shares authorized,
        3,935,220 shares issued and 3,901,431 shares outstanding                  3,935
     Preferred stock, $.01 par value, 1,000,000 shares authorized,
        10,400 shares designated as Series B Convertible Preferred
        issued and outstanding                                                      104
     Additional paid-in capital                                               7,365,932
     Accumulated deficit (including deficit accumulated during
        development stage of $7,785,667 of which $1,556,204 was
        applied to additional paid-in capital upon conversion
        from an "S" to a "C" corporation)                                    (6,280,997)
     Less: Treasury stock, 33,789 shares, at cost                                (1,700)
                                                                       ----------------
              Total Stockholders' Equity                                      1,087,274
                                                                       ----------------
Total Liabilities and Stockholders' Equity                                  $ 2,368,545
                                                                       ================
</TABLE>

                     See notes to the financial statements.

                                       28
<PAGE>

                                   MEDJET INC.
                         (A Development Stage Company)
                            Statements of Operations
<TABLE>
<CAPTION>
                                                                                 Period from
                                            Year Ended December 31,           December 16, 1993
                                      ------------------------------------      (Inception) to
                                            1999               1998           December 31, 1999
                                      -----------------  -----------------   --------------------
<S>                                   <C>                <C>                 <C>
Revenues:
 License fee income                          $ 175,000          $ 500,000              $ 675,000
                                      -----------------  -----------------   --------------------
      Total Revenues                           175,000            500,000                675,000
                                      -----------------  -----------------   --------------------
 Expenses:
 Research, development,
    general and administrative               1,410,518          2,879,806              9,318,208
                                      -----------------  -----------------   --------------------
      Total Expenses                         1,410,518          2,879,806              9,318,208
                                      -----------------  -----------------   --------------------

 Loss from Operations                       (1,235,518)        (2,379,806)            (8,643,208)
                                      -----------------  -----------------   --------------------
 Other Income/(Expense):
 Net interest income/(expense)                  (2,310)            55,259                264,582
                                      -----------------  -----------------   --------------------

        Loss Before Income Tax              (1,237,828)        (2,324,547)            (8,378,626)
           Federal income tax                        -                  -                      -
           State income tax                        200           (594,009)              (592,959)
                                      -----------------  -----------------   --------------------
     Total Income Tax                              200           (594,009)              (592,959)
                                      -----------------  -----------------   --------------------
 Net Loss                                   (1,238,028)        (1,730,538)            (7,785,667)
 Dividends on Preferred Stock                        -            184,923                184,923
                                      -----------------  -----------------   --------------------
 Net Loss Attributable to
  Common Shareholders                     $ (1,238,028)      $ (1,915,461)          $ (7,970,590)
                                      =================  =================   ====================
         Net Loss Per Share                    $ (0.32)           $ (0.51)               $ (2.52)
                                      =================  =================   ====================
       Weighted Average Common
         Shares Outstanding                  3,894,045          3,728,594              3,159,023
                                      =================  =================   ====================
</TABLE>
                     See notes to the financial statements.

                                       29
<PAGE>
                                   MEDJET INC.
                          (A Development Stage Company)
                        Statement of Stockholders' Equity
     Period From December 16, 1993 (Date of Inception) to December 31, 1999
<TABLE>
<CAPTION>
                                                                             Total       Common    Preferred
                                         Preferred    Common      Price    Consider-     Stock      Stock       Paid-
                                          Shares      Shares       Per       ation       ($.001     ($.01        In
                Date/Description          Issued      Issued      Share       Paid      Par Value) Par Value)  Capital
---------------------------------------  ---------  -----------  --------  -----------  ---------  --------- ------------
<S>                                      <C>        <C>          <C>       <C>          <C>        <C>        <C>
March 12, 1994     Share Issuance             -      800,000    $ 0.10     $ 80,000      $ 800        $ -     $ 79,200
April 21, 1994     Share Issuance             -       15,000      0.10        1,500         15          -        1,485
May 1, 1994        Share Issuance             -       63,000      0.10        6,300         63          -        6,237
May 25, 1994       Share Issuance             -       50,000      1.00       50,000         50          -       49,950
May 31, 1994       Share Issuance             -       25,000      1.00       25,000         25          -       24,975
June 6, 1994       Share Issuance             -       50,000      1.00       50,000         50          -       49,950
June 7, 1994       Share Issuance             -       50,000      1.00       50,000         50          -       49,950
June 13, 1994      Share Issuance             -       25,000      1.00       25,000         25          -       24,975
June 20, 1994      Share Issuance             -       25,000      1.00       25,000         25          -       24,975
July 28, 1994      Share Issuance             -       25,000      1.00       25,000         25          -       24,975
September 23, 1994 Share Issuance             -       45,002      6.00      270,012         45          -      269,967
October 20, 1994   Share Issuance             -       20,501      6.00      123,008         21          -      122,987
October 28, 1994   Share Issuance             -        2,500      6.00       15,000          2          -       14,998
November 10, 1994  Share Issuance             -       14,500      6.00       87,000         15          -       86,985
November 16, 1994  Share Issuance             -        2,501      6.00       15,004          2          -       15,002
Net Loss, Year Ended December 31, 1994        -            -         -            -          -          -            -
                                       ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1994                    -    1,213,004                847,824      1,213          -      846,611

August 8, 1995     Share Issuance             -        5,000    $ 6.00       30,000          5          -       29,995
August 28, 1995    Share Issuance             -        4,000      6.00       24,000          4          -       23,996
September 21, 1995 Share Issuance             -        5,000      6.00       30,000          5          -       29,995
September 29, 1995 Share Issuance             -        5,000      6.00       30,000          5          -       29,995
December 31, 1995  Share Issuance             -          833      6.00        5,000          1          -        4,999
December 31, 1995  Stock Split:
                     1.987538926-to-1
                     Share Outstanding        -    1,217,475         -            -      1,217          -       (1,217)
Net Loss, Year Ended December 31, 1995        -            -         -            -          -          -            -
                                       ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1995                    -    2,450,312              $ 966,824    $ 2,450        $ -    $ 964,374
                                       ---------  -----------  ========  -----------  ---------  --------- ------------

                                              Paid-In
                                              Capital     Accum-
                                             (Beneficial  ulated      Treasury
                Date/Description             Conversion)  Deficit      Stock
---------------------------------------      ---------- ------------  ---------
<S>                                          <C>        <C>           <C>
March 12, 1994     Share Issuance                $ -          $ -        $ -
April 21, 1994     Share Issuance                  -            -          -
May 1, 1994        Share Issuance                  -            -          -
May 25, 1994       Share Issuance                  -            -          -
May 31, 1994       Share Issuance                  -            -          -
June 6, 1994       Share Issuance                  -            -          -
June 7, 1994       Share Issuance                  -            -          -
June 13, 1994      Share Issuance                  -            -          -
June 20, 1994      Share Issuance                  -            -          -
July 28, 1994      Share Issuance                  -            -          -
September 23, 1994 Share Issuance                  -            -          -
October 20, 1994   Share Issuance                  -            -          -
October 28, 1994   Share Issuance                  -            -          -
November 10, 1994  Share Issuance                  -            -          -
November 16, 1994  Share Issuance                  -            -          -
Net Loss, Year Ended December 31, 1994             -     (287,291)         -
                                           ---------- ------------  ---------
Balance, December 31, 1994                         -     (287,291)         -

August 8, 1995     Share Issuance                  -            -          -
August 28, 1995    Share Issuance                  -            -          -
September 21, 1995 Share Issuance                  -            -          -
September 29, 1995 Share Issuance                  -            -          -
December 31, 1995  Share Issuance                  -            -          -
December 31, 1995  Stock Split:
                     1.987538926-to-1
                     Share Outstanding             -            -          -
Net Loss, Year Ended December 31, 1995             -     (677,385)         -
                                           ---------- ------------  ---------

Balance, December 31, 1995                       $ -   $ (964,676)       $ -
                                           ---------- ------------  ---------
</TABLE>
                     See notes to the financial statements.

                                       30
<PAGE>
                                   MEDJET INC.
                          (A Development Stage Company)
                        Statement of Stockholders' Equity
     Period From December 16, 1993 (Date of Inception) to December 31, 1999
<TABLE>
<CAPTION>
                                                                                       Total       Common    Preferred
                                                   Preferred    Common      Price    Consider-     Stock      Stock       Paid-
                                                    Shares      Shares       Per       ation       ($.001     ($.01        In
                Date/Description                    Issued      Issued      Share       Paid      Par Value) Par Value)  Capital
-------------------------------------------------  ---------  -----------  --------  -----------  ---------  --------- ------------
<S>                                                <C>        <C>          <C>       <C>          <C>        <C>       <C>
Balance, December 31, 1995, brought forward               -    2,450,312              $ 966,824    $ 2,450        $ -    $ 964,374
August 6, 1996       Share Issuance                       -    1,071,429    $ 5.60    6,000,002      1,071          -    5,998,931
August 6, 1996       Reclassification of deferred
                       offering costs                     -            -         -            -          -          -   (1,436,045)
August 6, 1996       Reclassification of accumulated
                       deficit for change from an S to
                       a C corporation                    -            -         -            -          -          -   (1,556,204)
September 3, 1996    Share Issuance                       -      160,714      5.60      899,998        161          -      899,837
December 30, 1996    Acquisition of treasury shares       -            -         -            -          -          -            -
Net Loss, Year Ended December 31, 1996                    -            -         -            -          -          -            -
                                                   ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1996                                -    3,682,455              7,866,824      3,682          -    4,870,893
July 18, 1997        Share Issuance                       -       21,800    $ 0.05        1,097         22          -        1,075
July 24, 1997        Share Issuance                       -        4,464      5.60       24,998          5          -       24,994
Net Loss, Year Ended December 31, 1997                    -            -         -            -          -          -            -
                                                   ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1997                                -    3,708,719              7,892,919      3,709          -    4,896,962
January 27, 1998     Share Issuance                       -        1,350    $ 5.60        7,560          1          -        7,559
March 31, 1998       Share Issuance                       -       10,000      3.02       30,188         10          -       30,178
April 20, 1998       Share Issuance                 110,000            -     10.00    1,100,000          -      1,100      945,511
April 20, 1998       Placement Agent Warrants             -            -         -            -          -          -           18
October 9, 1998      Preferred Conversion          (110,000)     182,724      6.02            -        183     (1,100)     184,911
October 9, 1998      Preferred Dividend                   -       12,154      4.24       51,534         12          -          917
Net Loss, Year Ended December 31, 1998                    -            -         -            -          -          -            -
                                                   ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1998                                -    3,914,947              9,082,201      3,915          -    6,066,056
May 13, 1999         Share Issuance                       -       19,588    $ 1.00            -         19          -          (19)
June 11, 1999        Share Issuance                       -          685      1.70            -          1          -           (1)
December 3, 1999     Share Issuance                  16,000            -    125.00    2,000,000          -        160    1,999,840
December 31, 1999    Partial Rescission of Preferred (5,600)           -    125.00     (700,000)         -        (56)    (699,944)
Net Loss, Year Ended December 31, 1999                    -            -         -            -          -          -            -
                                                   ---------  -----------  ========  -----------  ---------  --------- ------------
Balance, December 31, 1999                           10,400    3,935,220             $10,382,201   $ 3,935      $ 104  $ 7,365,932
                                                   =========  ===========            ===========  =========  ========= ============

                                                      Paid-In
                                                      Capital     Accum-
                                                     (Beneficial  ulated      Treasury
                Date/Description                     Conversion)  Deficit      Stock
-------------------------------------------------    ---------- ------------  ---------
<S>                                                  <C>         <C>          <C>
Balance, December 31, 1995, brought forward                $ -   $ (964,676)       $ -
August 6, 1996       Share Issuance                          -            -          -
August 6, 1996       Reclassification of deferred                                    -
                       offering costs                        -            -
August 6, 1996       Reclassification of accumulated
                       deficit for change from an S
                       to a C corporation                    -    1,556,204          -
September 3, 1996    Share Issuance                          -            -          -
December 30, 1996    Acquisition of treasury shares          -            -     (1,700)
Net Loss, Year Ended December 31, 1996                       -   (1,273,977)         -
                                                     ---------- ------------  ---------
Balance, December 31, 1996                                   -     (682,449)    (1,700)
July 18, 1997        Share Issuance                          -            -          -
July 24, 1997        Share Issuance                          -            -          -
Net Loss, Year Ended December 31, 1997                       -   (2,578,448)         -
                                                     ---------- ------------  ---------
Balance, December 31, 1997                                   -   (3,260,897)    (1,700)
January 27, 1998     Share Issuance                          -            -          -
March 31, 1998       Share Issuance                          -            -          -
April 20, 1998       Share Issuance                    133,389            -          -
    "                Placement Agent Warrants                -            -          -
October 9, 1998      Preferred Conversion             (133,389)           -          -
    "                Preferred Dividend                      -      (51,534)         -
Net Loss, Year Ended December 31, 1998                       -   (1,730,538)         -
                                                     ---------- ------------  ---------
Balance, December 31, 1998                                   -   (5,042,969)    (1,700)
May 13, 1999         Share Issuance                          -            -          -
June 11, 1999        Share Issuance                          -            -          -
December 3, 1999     Share Issuance                          -            -          -
December 31, 1999    Partial Rescission of Preferred         -            -          -
Net Loss, Year Ended December 31, 1999                       -   (1,238,028)         -
                                                     ---------- ------------  ---------
Balance, December 31, 1999                                 $ -  $(6,280,997)  $ (1,700)
                                                     ========== ============  =========
</TABLE>
                     See notes to the financial statements.
                                       31
<PAGE>
                                   MEDJET INC.
                          (A Development Stage Company)
                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                     For the Year Ended           Period from
                                                                        December 31,            December 16, 1993
                                                                 ---------------------------    (Inception) to
                                                                    1999          1998          December 31, 1999
                                                                 -------------  ------------   -------------------
<S>                                                              <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                         $ (1,238,028)  $ (1,730,538)      $ (7,785,667)

Adjustments to Reconcile Net Loss to
     Net Cash (Used) by Operating Activities:
          Depreciation and amortization                                81,895       102,723             401,154
          Loss on abandonment of property and equipment                28,987             -              28,987
          (Increase) Decrease in prepaid expenses                     (26,977)       32,651             (58,049)
          (Increase) Decrease in deferred tax asset                   327,146      (594,209)           (267,063)
          Increase (Decrease) in accounts payable
               and accrued expenses                                   (85,338)       72,717             206,278
          Increase (Decrease) in deferred revenues                    175,000             -             175,000
          Increase (Decrease) in deferred rental obligation            (3,698)       (1,594)                  -
                                                                 -------------  ------------    ----------------
     Net Cash (Used) by Operating Activities                         (741,013)   (2,118,250)         (7,299,360)
                                                                 -------------  ------------    ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Cash redemptions of marketable securities                                   -             -             320,605
Cash (purchases) of marketable securities                                   -             -            (320,605)
Cash purchases of property, plant & equipment                          (3,650)     (102,282)           (475,026)
Cash purchase of organization costs                                         -             -             (37,387)
Cash payments for patents and trademarks                              (37,395)      (45,280)           (192,575)
Cash receipts (payments) for security deposits                          2,213           600              (4,837)
                                                                 -------------  ------------    ----------------
     Net Cash (Used) by Investing Activities                          (38,832)     (146,962)           (709,825)
                                                                 -------------  ------------    ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of preferred stock                           1,300,000     1,080,018           2,380,018
Proceeds from issuance of common stock
     and initial public offering                                            -        37,748           6,494,616
Purchase of treasury stock                                                  -             -              (1,700)
Proceeds from officer notes payable                                   250,000             -             571,000
Repayment of officer notes payable                                   (100,000)            -            (421,000)
Proceeds from other notes payable                                      50,000             -             450,000
Repayment of other notes payable                                            -             -            (400,000)
                                                                 -------------  ------------    ----------------
     Net Cash Provided by Financing Activities                      1,500,000     1,117,766           9,072,934
                                                                 -------------  ------------    ----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  720,155    (1,147,446)          1,063,749

Cash and Cash Equivalents - Beginning of Period                       343,594     1,491,040                   -
                                                                 -------------  ------------    ----------------

Cash and Cash Equivalents - End of Period                        $  1,063,749   $   343,594        $  1,063,749
                                                                 =============  ============    ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
     Income taxes                                                $        200   $       200        $        600
                                                                =============  ============    ================
     Interest expense                                            $     11,964   $       521        $     25,485
                                                                =============  ============    ================
</TABLE>

SUPPLEMENTAL  SCHEDULE OF NON-CASH FINANCING  ACTIVITIES:
During the year ended December  31,  1999,  amount due
investors  was  increased by $700,000 due to a
partial rescission of the preferred stock issuance.

                     See notes to the financial statements.

                                       32
<PAGE>

                                   Medjet Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Organization

         Medjet Inc. (the "Company") is a development stage company incorporated
         in the  State of  Delaware  on  December  16,  1993.  The  Company  was
         organized  as a medical  device  company  with the goal of  developing,
         manufacturing  and selling new  cutting,  drilling,  layer  removal and
         shaping tools for a variety of surgical procedures. The core technology
         is based on small-diameter,  fluid microjets moving at high speeds. The
         Company believes that such jets will bring new surgical  capability and
         performance to the clinic or operating  room. The initial  product area
         is devices for surgical use in ophthalmology.

         During the third quarter of 1996,  the Company  consummated  an initial
         public  offering  (the  "Offering")  in which it issued and sold to the
         public a total of 1,232,143  Units (the "Units"),  each Unit consisting
         of one share of common  stock,  $.001 par value,  of the  Company  (the
         "Common  Stock")  and one  Class A  Redeemable  Common  Stock  Purchase
         Warrant (the "Class A Warrants")  to purchase one share of Common Stock
         at a price of $10.00  per share for a  24-month  period  commencing  on
         November  6,  1996.  The Units  became  separable  on that date and the
         Common  Stock and the Class A  Warrants  began  trading  separately  on
         November 8, 1996. In July 1998, in connection with a private  placement
         (described in the following  paragraph),  the Company  agreed to extend
         the  exercise  period  of the Class A  Warrants  for an  additional  12
         months. As a result, the Class A Warrants expired on November 6, 1999.

         In January  1998,  the  Company  commenced a private  placement  of its
         Series A 10% Cumulative  Convertible  Preferred  Stock,  $.01 par value
         (the "Series A Preferred"), at a price of $10 per share. At the closing
         for this private  placement,  which was held in April 1998, the Company
         sold and issued  110,000  shares of Series A Preferred for an aggregate
         price of $1,100,000.  In conjunction with this transaction,  a total of
         18,272  four-year  warrants,  each at an  exercise  price of $4.34  per
         share, was also issued to the placement agent. The net proceeds of this
         private placement were used to augment the Company's working capital.

         The private  placement,  which was  terminated  on July 31,  1998,  was
         carried out pursuant to available  exemptions from  registration  under
         Section 4(2) of the Securities Act of 1933 and rules  promulgated under
         that section.

         On  October  9,  1998,   the  110,000  shares  of  Series  A  Preferred
         outstanding  were converted into 182,724 shares of Common Stock. At the
         same  time,  a total of 12,154  shares of  Common  Stock was  issued in
         payment of the  cumulative  dividends  on the Series A  Preferred.  The
         dividend  was  computed  at 10% per  annum and  totalled  approximately
         $51,534.

                                       33
<PAGE>

         In December  1999,  the Company  commenced a private  placement  of its
         Series B  Convertible  Preferred  Stock,  $.01 par value (the "Series B
         Preferred"),  at a price of $125 per  share.  At the  closing  for this
         private placement, which was held on December 6, 1999, the Company sold
         and issued 16,000  shares of Series B Preferred for an aggregate  price
         of  $2,000,000.   In  addition,  the  investors  received  1.6  million
         five-year warrants (the "Series B Warrants"), each at an exercise price
         of $3.50 per share. The Company also entered into an investment banking
         agreement  with  a  New  York  firm  affiliated  with  certain  of  the
         investors, and issued the firm 500,000 Series B Warrants.

         The net proceeds of this private  placement will be used by the Company
         to complete  specific  development for manufacture and to introduce its
         waterjet microkeratome for vision correction applications.

         The Series B Preferred is convertible into  approximately 100 shares of
         Common  Stock  for  each  share  of  Series  B  Preferred,  subject  to
         adjustment for any stock splits,  stock  dividends,  recapitalizations,
         reclassifications and similar events.

         This private placement was carried out pursuant to available exemptions
         from registration  under Section 4(2) of the Securities Act of 1933 and
         rules promulgated under that section.

         In accordance  with an agreement  entered into on January 28, 2000, the
         Company  returned  $700,000 of the $2,000,000  aggregate price received
         from the sale of the Series B Preferred. See "Subsequent Event" note.

         The Company has  continued to incur losses since its  inception  and at
         December 31, 1999 has accumulated deficits.  Management has implemented
         a program to reduce costs and to reduce the break-even  point necessary
         for continuing operations.  Management believes that its 2000 operating
         plan, which  anticipates the program to reduce costs as well as certain
         funding  sources,   is  reasonable  and  attainable  and  will  provide
         sufficient  cash to sustain  operations  during 2000.  In  addition,  a
         principal   stockholder   of  the  Company  has  committed  to  provide
         additional working capital, if necessary.

Cash and Cash Equivalents

         For the  purpose of the  statements  of cash  flows,  cash  equivalents
         includes all highly  liquid  instruments  with  original  maturities of
         three months or less.

Property and Equipment

         Equipment and leasehold improvements are recorded at cost. Depreciation
         is  computed  using  primarily   accelerated  methods  based  upon  the
         estimated  useful lives of the assets which range from 5 to 7 years for
         equipment  and  39  years  for  leasehold  improvements.   Repairs  and
         maintenance  which do not extend the useful lives of the related assets
         are expensed as incurred.

                                       34
<PAGE>

Amortization

         Organization   costs  have  been  amortized  over  sixty  months  on  a
         straight-line basis and were completely amortized at December 31, 1999.
         Total  amortization  for the years ended December 31, 1999 and 1998 was
         $2,295 and $7,477, respectively.

         Patents are being  amortized  over seventeen  years on a  straight-line
         basis.  These costs will be expensed if and when it is  concluded  that
         non-approval  or  no  future  economic  benefits  are  probable.  Total
         amortization for the years ended December 31, 1999 and 1998 was $11,237
         and $9,038, respectively.

Revenue Recognition/Deferred Revenues

         The Company's  revenue for 1999 and 1998 is generated from license fees
         and is  recognized  in  accordance  with the  terms  of the  agreements
         reached with third parties.

Net Loss Per Share

         Net loss per share,  in  accordance  with the  provisions  of Financial
         Accounting  Standards  No.  128,  "Earnings  Per Share," is computed by
         dividing  net loss by the weighted  average  number of shares of Common
         Stock outstanding during the period.  Common stock equivalents have not
         been included in this computation as the effect would be anti-dilutive.

Income Taxes

         In accordance with the provisions of Financial Accounting Standards No.
         109,  "Accounting for Income Taxes,"  deferred taxes are recognized for
         operating  losses that are available to offset future  taxable  income.
         Valuation  allowances are established when necessary to reduce deferred
         tax assets to the amount expected to be realized.  The Company incurred
         net  operating  losses  for   financial-reporting   and   tax-reporting
         purposes.  Accordingly,  the benefit for federal  income taxes has been
         offset entirely by a valuation  allowance  against the related deferred
         tax asset for the year ended  December 31, 1999.  Since the sale of the
         Company's  state net  operating  losses and  research  and  development
         credits is now available,  the net estimated  proceeds from the sale of
         these assets has been recorded as a deferred tax benefit.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

CONCENTRATIONS OF CREDIT RISK

         The Company maintains cash balances in several financial  institutions.
         Accounts  at  each  institution  are  insured  by the  Federal  Deposit
         Insurance  Corporation up to $100,000,  of which the Company's accounts
         may, at times, exceed the federally insured limits.

                                       35
<PAGE>

DEVELOPMENT STAGE OPERATIONS

         The Company was formed  December 16, 1993.  Operations  since then have
         consisted   primarily  of  raising  capital,   locating  and  acquiring
         equipment,  obtaining qualified staff, installing and testing equipment
         and experimenting,  testing and developing the procedures  necessary to
         produce  positive  results  and  to lay  the  foundation  for  specific
         development for manufacturing and various regulatory approvals.

NOTES PAYABLE - OFFICER/OTHER

         Notes payable - officer represents an unsecured loan from an officer of
         the Company with interest at 8.27% per annum, earliest due date May 15,
         2000.

         Notes  payable - other  represents  an  unsecured  loan from an outside
         party  with  interest  at 10% per  annum.  The loan was paid in full in
         January 2000.

STOCKHOLDERS' EQUITY

Stock Option Plan

         On October 31,  1994,  the Company  adopted its 1994 Stock  Option Plan
         (the "Plan").  The Plan  provides that certain  options to purchase the
         Company's  common stock granted  thereunder  are intended to qualify as
         "incentive  stock  options"  within the meaning of Section  422A of the
         United  States  Internal  Revenue  Code of  1986,  while  non-qualified
         options  may also be  granted  under the  Plan.  The  initial  plan and
         subsequent  amendments  provide for  authorization of up to 700,000 and
         449,688 shares at December 31, 1999 and 1998, respectively.  The option
         price per share of stock  purchasable  under an Incentive  Stock Option
         shall be  determined  at the time of grant  but  shall not be less than
         100% of the Fair  Market  Value of the stock on such  date,  or, in the
         case of a 10% Stockholder,  the option price per share shall be no less
         than  110%  of the  Fair  Market  Value  of the  stock  on the  date an
         Incentive Stock Option is granted to such 10% Stockholder.

                                              Qualified and Non-Qualified Shares
                                                Under Option as of December 31,
                                              ----------------------------------
                                                     1999               1998
                                                     ----               ----
 Outstanding, beginning of year                    377,550             96,220
 Granted during the year                           210,000            412,025
 Canceled during the year                         (218,727)          (119,345)
 Exercised during the year:
          At $1.00 per share                       (19,588)              -
          At $1.70 per share                          (685)              -
          At $3.02 per share                             -            (10,000)
             At $5.60 per share                          -             (1,350)
                                                  --------           --------
 Outstanding, end of year                          348,550            377,550
                                                  ========           ========
 Eligible, end of year, for exercise               110,924             51,714
                                                  ========           ========
 Range of exercise price per share             $.05 to $7.63       $.05 to $7.63
                                               =============       =============

                                       36
<PAGE>

     At December 31, 1999 and 1998,  the average  exercise  price and  remaining
     contractual life were $2.13 and $4.15 per share, and 8 years 3 months and 9
     years 6 months, respectively.

     At  December  31,  1999 and 1998,  there were  298,027  and 38,988  shares,
     respectively, reserved for future grants.

Warrants

     The Company has issued common stock  purchase  warrants  separately  and in
     conjunction  with the  Offering  and both of the  preferred  stock  private
     placements (see "Nature of Organization"), as well as to consultants and to
     lenders, as follows:

     As of December 31, 1999:


                              Exercise      Exercise Term
    Date of        No. of     Price Per --------------------
     Grant         Shares       Share     Start   Expiration  Vesting Rights
   --------     ----------    ---------   -----   ----------  --------------
   05/20/96        97,389      $3.37    05/20/96   05/20/01  25% per year
   04/20/98        18,272       4.34    04/20/98   04/20/02  100% on 4/20/98
   07/15/99        50,000       1.00    07/15/99   07/15/04  100% on 7/15/99
   07/16/99        10,000       1.37    07/16/99   07/16/01  100% on 7/16/99
   11/12/99         7,500       3.50    11/12/99   11/12/04  100% on 11/12/99
   12/03/99     1,365,000       3.50    02/01/00   12/03/04  100% after 1/31/00
                ---------
                1,548,161    Outstanding at December 31, 1999
                =========

    As of December 31, 1998:

                              Exercise      Exercise Term
    Date of        No. of     Price Per --------------------
     Grant         Shares       Share     Start   Expiration  Vesting Rights
   --------     ----------    ---------   -----   ----------  --------------
   5/20/96         97,389     $ 3.37    05/20/96   05/20/01  25% per year
   8/14/96      1,071,429      10.00    11/06/96   11/06/99  100% on 11/6/96
   8/14/96        107,143      10.00    08/06/97   08/06/99  100% on 8/6/97
   9/13/96        160,714      10.00    11/06/96   11/06/99  100% on 11/6/96
   4/20/98         18,272       4.34    04/20/98   04/20/02  100% on 4/20/98
               ----------
                1,454,947    Outstanding at December 31, 1998
               ==========

     There were no warrants exercised during 1999 and 1998. At December 31, 1999
     and 1998, there were 158,813 and 1,406,253 shares,  respectively,  eligible
     for exercise at prices ranging from $1.00 to $10.00 per share.

                                       37
<PAGE>

Pro Forma Information

     In 1996, the Company adopted the disclosure only provisions of Statement of
     Financial  Accounting Standards (SFAS) No. 123, "Accounting for Stock Based
     Compensation". Accordingly, no compensation expense has been recognized for
     stock options and warrants issued. Had compensation expense for the options
     and the warrants which vested in 1999 and 1998 been determined based on the
     fair value at the grant date  commensurate  with the provisions of SFAS No.
     123,  the  Company's  net loss and net loss per  share  for 1999 and  1998,
     respectively,  would have been increased to the pro forma amounts indicated
     below:

                                                1999                   1998
                                                ----                   ----
      Net loss:
               As reported                 $(1,238,028)             $(1,915,461)
               Pro forma                   $(1,589,895)             $(2,065,689)

               Basic loss per share:
               As reported                      $(0.32)               $(0.51)
               Pro forma                        $(0.41)               $(0.55)

     The fair value of each option and warrant grant is estimated on the date of
     grant using the  Black-Scholes  pricing model with the  following  weighted
     average  assumptions  for grants in 1999 and 1998,  respectively:  dividend
     yield of 0% and 0%; expected volatility of 182% and 44%; risk-free interest
     rate of 4.5% in both years and expected lives of 5 and 10 years.

RETIREMENT PLAN

     The Company  sponsors a qualified  401(k) plan covering  substantially  all
     full time employees  under which eligible  employees can defer a portion of
     their  annual  compensation.   The  Company  currently  makes  no  matching
     contribution to the plan.

INCOME TAXES

     The income tax provision is comprised of the following:

                                                  Year Ended December 31,
                                                  ------------------------
                                                      1999          1998
                                                  -----------  -----------
      State current provision                      $   200     $     200
      State deferred provision                          --      (594,209)
                                                  -----------  ---------
                                                   $   200     $(594,009)
                                                  ===========  =========

     In 1998,  the State of New Jersey  enacted  legislation  allowing  emerging
     technology and/or  biotechnology  companies to sell their unused New Jersey
     Net  Operating  Loss ("NOL")  Carryover  and Research and  Development  Tax
     Credits ("R&D Credits") to corporate taxpayers in New Jersey.  During 1999,
     the Company entered into an agreement under which it retained a third party
     broker to identify a buyer for its NOL Carryover and R&D Credits. The total
     anticipated net proceeds of this transaction  ($594,209) were recorded as a
     non-current  deferred tax asset in the accompanying  financial  statements.

                                       38
<PAGE>

     Due to limitations placed by the State of New Jersey on the total amount of
     NOL Carryover and R&D Credits eligible to be sold in any one year, the sale
     of only a portion of the Company's NOL Carryover and R&D Credits  ($327,146
     was  completed  in 1999.  The  receipt  of these  funds was  recorded  as a
     reduction  to the  non-current  deferred  tax  asset  in  the  accompanying
     financial  statements.  The sale of the remaining  balance of the Company's
     NOL  Carryover  and R&D  Credits  is  anticipated  by the end of the  third
     quarter of 2000.

     The  Company's  total  deferred  tax  asset  (related  entirely  to the NOL
     Carryover and R&D Credits) and valuation allowance are as follows:

                                                             December 31,
                                                             ------------
                                                          1999          1998
                                                        -------        ------

       Total deferred tax asset, noncurrent           $2,037,702    $ 2,063,279
       Less valuation allowance                       (1,763,639)    (1,469,070)
                                                      ----------    -----------
       Net deferred tax asset, noncurrent             $  267,063    $   594,209
                                                      ==========    ===========

     The total  change in the  valuation  allowance  amounted  to  $294,569  and
     $233,070 for the years ended December 31, 1999 and 1998, respectively.

     The differences between income tax benefits in the financial statements and
     the tax benefit computed at the U.S.  Federal  statutory rate of 34% are as
     follows:

                                                   Year Ended December 31,
                                                        1999            1998
                                                   -------------    ------------
         Tax benefit                                    (34%)           (34%)
         Valuation allowance                             34%              8%
                                                      -----            ----
         Effective tax rate                               -             (26%)
                                                      =====            ====

     At December 31, 1999, the Company has available approximately $6,263,486 of
     net operating losses to carryforward and which may be used to reduce future
     federal taxable income through December 31, 2019.

     At December 31, 1999, the Company has available approximately $1,208,293 of
     net operating losses to carryforward and which may be used to reduce future
     state taxable income through December 31, 2006.

COMMITMENTS AND CONTINGENCIES

     The Company leases its building and office space and automobiles.

     The following is a schedule by years of future minimum lease payments as of
     December  31, 1999 under  operating  leases that have  initial or remaining
     non-cancelable lease terms in excess of one year:

                                       39
<PAGE>

                  Year Ended December 31,
                           2000                      $73,474
                           2001                       74,730
                           2002                       80,210
                           2003                       83,000
                           2004                       83,448
                                                    --------
                    Total Minimum Lease
                    Payments Required               $394,862
                                                    ========

     Rent expense under the operating  leases totalled  $87,024 and $100,446 for
     the years ended December 31, 1999 and 1998, respectively.

     The Company had been  leasing  approximately  7,358 square feet of research
     and development,  manufacturing and office space in Edison, New Jersey. The
     base rent under this lease,  which was to expire  December  31,  1999,  was
     $93,550 per year. During February and March 1999, the Company  renegotiated
     the terms of this lease,  returned the manufacturing space and a portion of
     the office space under the lease,  and entered  into a new lease  agreement
     for the  approximately  4,982 square feet of research and  development  and
     office space remaining. Under the terms of the new lease, which will expire
     December 31, 2004, the base rent is $78,197 per year.

     In 1998, the Company began  conducting  certain  pre-clinical  research and
     development  activities in facilities located at the Department of Veterans
     Affairs New Jersey Health Care System, East Orange, New Jersey ("VANJHCS").
     Under the terms of an  agreement  with the  VANJHCS,  the Company paid fees
     based on its usage of the facility.  During 1999, the Company completed its
     activities at the facility and terminated the agreement  effective December
     31, 1999.

     The Company believes the space currently available to it will be sufficient
     to meet the Company's requirements for the foreseeable future.

     During 1998, the Company  instituted  litigation  regarding  certain patent
     rights issues. The Company intends to vigorously prosecute this litigation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     Cash, accounts payable and accrued expenses:

          The carrying amount  approximates fair value because of the short term
          maturity of these instruments.

     Limitations

          Fair value  estimates are made at a specific  point in time,  based on
          relevant  information and information about the financial  instrument.
          These estimates are subjective in nature and involve uncertainties and
          matters of  significant  judgment

                                       40
<PAGE>

          and  therefore  cannot  be  determined  with  precision.   Changes  in
          assumptions could significantly affect these estimates.

EMPLOYMENT AGREEMENTS

         In 1996, the Company and its Chairman and Chief Executive  Officer (the
         "Executive")  entered into an  employment  agreement  which  expired on
         March 15,  1999.  The  agreement,  which was  amended  effective  as of
         January 1, 1997, provided for a base compensation of $160,000 per year,
         bonuses  aggregating  a maximum  of  $75,000  for 1997  based  upon the
         attainment of certain goals and other additional compensation as may be
         determined by the Board of Directors (without his participation) in its
         sole  discretion.  The  Board of  Directors  (without  the  Executive's
         participation)  could also increase such base  compensation in its sole
         discretion.  In  conjunction  with a  voluntary  reduction  in his base
         compensation,  beginning  November  1998,  to  $85,000  per  year,  the
         Executive  was issued a total of 42,500  options to purchase the common
         stock  of  the  Company.  These  options,  the  vesting  of  which  was
         contingent on the number of months such base  compensation was reduced,
         were fully vested on April 30, 1999.

         The  expired  agreement  could be  terminated  for cause and  contained
         proprietary information, invention and non-competition provisions which
         prohibited disclosure of any of the Company's  proprietary  information
         and  precluded  competition  with  the  Company  for  two  years  after
         termination of employment.

         In 1999, a new agreement was signed.  This agreement,  which expires on
         March 15, 2002,  provides for a base compensation of $170,000 per year,
         bonuses  aggregating  a maximum of $60,000  for any one year based upon
         the attainment of certain goals and other  additional  compensation  as
         may be determined by the Board of Directors (without his participation)
         in its sole discretion. The Board of Directors (without the executive's
         participation)  could also increase such base  compensation in its sole
         discretion.  The new  agreement,  which can be terminated for cause and
         contains   proprietary   information,   invention  and  non-competition
         provisions   which   prohibit   disclosure  of  any  of  the  Company's
         proprietary  information and preclude  competition with the Company for
         two years  after  termination  of  employment,  also  provides  for the
         payment of an amount upon the death or disability of the Executive. The
         agreement  also  provides  for the grant of an option to purchase up to
         150,000 shares of the Company's common stock,  such option to vest over
         the period of the agreement.

         The Company has procured life  insurance in the amount of $1 million to
         compensate  it for  the  loss,  through  death  or  disability,  of the
         Company's Chairman and Chief Executive Officer.

         Effective  March 16,  1996,  the  Company  entered  into an  employment
         agreement with its Vice President - Finance and Human Resources, for an
         indefinite  term.  The  agreement,  which was amended  effective  as of
         January 1, 1997, provides for a base compensation of $101,100 per year.
         The  agreement  may be  terminated by either party at any time upon two
         weeks' prior notice and contains proprietary information, invention and
         non-

                                       41
<PAGE>

          competition  provisions  which  prohibit  disclosure  of  any  of  the
          Company's  proprietary  information and preclude  competition with the
          Company for two years after termination of employment.  In conjunction
          with  a  voluntary  reduction  in  his  base  compensation,  beginning
          November  1998, to $80,000 per year,  the Vice President - Finance and
          Human  Resources was issued a total of 10,000  options to purchase the
          common  stock  of  the  Company.  Effective  May  1,  1999,  the  base
          compensation  of the Vice  President - Finance and Human  Resource was
          restored.  The  options,  the vesting of which was  contingent  on the
          number of months such base compensation was reduced, were fully vested
          at April 30, 1999.

SUBSEQUENT EVENT

         As explained in the "Nature of Organization" section of the "Summary of
         Significant Accounting Policies" note, on December 6, 1999, the Company
         sold and issued  16,000  shares of its Series B Preferred  stock for an
         aggregate price of $2,000,000.  In addition, the investors received 1.6
         million five-year  warrants to purchase one share of Common Stock, each
         at an exercise price of $3.50 per share.  The Company also entered into
         an investment  banking  agreement with a New York firm  affiliated with
         certain  of the  investors,  and  issued  the  firm  500,000  Series  B
         warrants.

         On January 28, 2000,  the Company  returned  $700,000 of the $2,000,000
         aggregate  price received from the sale of the Series B Preferred.  The
         original investment was made based, in part, on the Company's exclusive
         worldwide  refractive  surgery  license  agreement with Alcon which was
         unexpectedly  terminated by Alcon on December 13, 1999. In light of the
         termination  of the  license  agreement,  and in order to  resolve  any
         possible  disputes  relating  to the  termination,  the Company and the
         investors  reevaluated the assumptions on which the original investment
         was made and  determined  that a return  of a portion  of the  original
         investment was appropriate. The return of funds was made pursuant to an
         agreement,  dated January 28, 2000,  under which the Company received a
         return of a proportionate  share of the Series B Preferred and Series B
         Warrants  issued in the  private  placement.  In  connection  with this
         agreement, the investment banking agreement entered into by the Company
         at the time of the original investment also was cancelled.

         The amount  rescinded has been  recorded as restricted  cash and amount
         due investors in the accompanying financial statements. This amount was
         returned to the investors on January 28, 2000.

                                       42
<PAGE>




ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

None.


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The  information  required  by this  item  will be  contained  in the  Company's
definitive Proxy Statement for its 2000 Annual Meeting of  Stockholders,  and is
incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION.

The  information  required  by this  item  will be  contained  in the  Company's
definitive Proxy Statement for its 2000 Annual Meeting of  Stockholders,  and is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  information  required  by this  item  will be  contained  in the  Company's
definitive Proxy Statement for its 2000 Annual Meeting of  Stockholders,  and is
incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The  information  required  by this  item  will be  contained  in the  Company's
definitive Proxy Statement for its 2000 Annual Meeting of  Stockholders,  and is
incorporated herein by reference.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(A) Reports on Form 8-K.

     None.

(B)  Index to Exhibits

     The following is a list of all Exhibits filed as part of this Report:

                                       43
<PAGE>

Exhibit                          Description of
Number                              Document

3.1    Amended and  Restated  Certificate  of  Incorporation  of the  Registrant
       (incorporated  herein by  reference  to Exhibit  3.1 to the  Registrant's
       Registration Statement on Form SB-2, Registration No. 333-3184).

3.2    Certificate   of  Amendment  of  Amended  and  Restated   Certificate  of
       Incorporation  of the  Registrant  (incorporated  herein by  reference to
       Exhibit 3.1 to the Registrant's  Report on Form 8-K filed on December 17,
       1999).

3.3    By-Laws of the  Registrant  (incorporated  herein by reference to Exhibit
       3.2 to the Registrant's Registration Statement on Form SB-2, Registration
       No. 333-3184).

3.4    Certificate of  Designations  of Series B Convertible  Preferred Stock of
       Medjet  Inc.  (incorporated  herein by  reference  to Exhibit  3.2 to the
       Registrant's Report on Form 8-K filed on December 17, 1999).

4.1    Subscription  Agreement  for  Series B  Convertible  Preferred  Stock and
       Warrants,  dated as of December 3, 1999, by and among the  Registrant and
       the "Investors" (as defined therein) (incorporated herein by reference to
       Exhibit 4.1 to the Registrant's  Report on Form 8-K filed on December 17,
       1999).

4.2    Composite copy of Common Stock Purchase Warrant,  dated December 3, 1999,
       by the  Registrant  in favor of the  Investors  (incorporated  herein  by
       reference to Exhibit 4.2 to the Registrant's  Report on Form 8-K filed on
       December 17, 1999).

4.3    Registration  Rights Agreement,  dated December 3, 1999, by and among the
       Registrant and the Investors (incorporated herein by reference to Exhibit
       4.3 to the Registrant's Report on Form 8-K filed on December 17, 1999).

4.5    Investment  Banking  Agreement,  dated  December  3,  1999,  between  the
       Registrant  and  Adam  Smith &  Company,  Inc.  (incorporated  herein  by
       reference to Exhibit 3.2 to the Registrant's  Report on Form 8-K filed on
       December 17, 1999).

*4.6   Settlement Agreement, dated January 28, 2000, by and among the Registrant
       and the Investors. *+10.1 Employment Agreement between the Registrant and
       Eugene I. Gordon,  dated as of April 9, 1999.  +10.2 The Medjet Inc. 1994
       Stock  Option  Plan,  as amended  (incorporated  herein by  reference  to
       Exhibit  10.6 to the  Registrant's  Registration  Statement on Form SB-2,
       Registration  No.   333-3184).   10.3  Agreement  of  Lease  between  the
       Registrant   and  Linpro  Edison  Land   Limited,   dated  May  13,  1994
       (incorporated  herein by reference to Exhibit  10.16 to the  Registrant's
       Registration Statement on Form SB-2, Registration No. 333-3184).

10.4   First Amendment to Lease between the Registrant and BCE Associates, L.P.,
       dated  February  28, 1996  (incorporated  herein by  reference to Exhibit
       10.17  to  the   Registrant's   Registration   Statement  on  Form  SB-2,
       Registration No. 333-3184).

10.5   Second  Amendment to Lease  between the  Registrant  and BCE  Associates,
       L.P.,  dated  December  13, 1996  (incorporated  herein by  reference  to
       Exhibit 10.11 to the Registrant's Form 10-KSB for the year ended December
       31, 1996).

                                       44
<PAGE>

*10.6  Third Amendment to Lease between the Registrant and BCE Associates, L.P.,
       dated March 25, 1999.

10.17  Exclusive License  Agreement,  effective as of July 22, 1998, between the
       Company and Nestle S.A.  (incorporated  herein by reference to Exhibit 10
       to the  Registrant's  Form 10-QSB for the  quarter  ended  September  30,
       1998).

*11    Computation of Net (Loss) Per Common Share.

*24.1  Power of Attorney (included on signature page).

*27    Financial Data Schedule - December 31, 1999.

99.1   Press  release of  December 7, 1999,  relating  to the Private  Placement
       (incorporated  herein by reference  to Exhibit  99.1 to the  Registrant's
       Report on Form 8-K filed on December 17, 1999).

99.2   Press release of December 16, 1999,  relating to the  termination  of the
       Alcon Agreement  (incorporated herein by reference to Exhibit 99.2 to the
       Registrant's Report on Form 8-K filed on December 17, 1999).

--------------------------------------------------------------------------------
+ Management contract or compensatory plan or arrangement.
* Filed herewith.

                                       45
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized,  in the City of Edison,
State of New Jersey, on the 23rd day of March, 2000.

                                                        MEDJET INC.

                                                By: /s/ Eugene I. Gordon
                                                    ----------------------------
                                                        Eugene I. Gordon,
                                                    Chairman of the Board and
                                                    Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes and appoints Eugene I. Gordon and Thomas M.  Handschiegel,  and each
of them  individually,  his true and lawful  attorney-in-fact,  proxy and agent,
with full power of  substitution  and  resubstitution,  for him and in his name,
place  and  stead,  in any  and all  capacities,  to act  on,  sign  any and all
amendments to this Annual Report on Form 10-KSB,  and to file the same, with all
exhibits  thereto  and  other  documents  in  connection  therewith,   with  the
Securities  and  Exchange  Commission,  granting  unto  said  attorneys-in-fact,
proxies and agents, and each of them  individually,  full power and authority to
do and perform each and every act and thing necessary and appropriate to be done
in and about the  premises,  as fully as he might or could do in person,  hereby
approving, ratifying and confirming all that said attorneys-in-fact, proxies and
agents or any of his or their  substitute  or  substitutes,  may  lawfully do or
cause to be done by virtue hereof.

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 the capacities indicated on the 23rd day of March, 2000.

            Signature                                          Title(s)
            ---------                                          --------

  /s/ Eugene I. Gordon                           Chairman of the Board and
  ----------------------------------------
  Eugene I. Gordon                               Chief Executive Officer

  /s/ Thomas M. Handschiegel                     Vice President - Finance and
  ----------------------------------------
      Thomas M. Handschiegel                     Human Resources

  /s/ Edward E. David, Jr.                       Director
  ----------------------------------------
      Edward E. David, Jr.

  /s/ William C. Hittinger                       Director
  ----------------------------------------
      William C. Hittinger

  /s/ Ronald B. Odrich                           Director
  ----------------------------------------
      Ronald B. Odrich

  /s/ Elias Snitzer                              Director
  ----------------------------------------
      Elias Snitzer

                                       46
<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number                       Description of Document
-------                      -----------------------

   4.6  Settlement Agreement, dated January 28, 2000, by and among the
        Registrant and the Investors.

  10.1  Employment Agreement between the Registrant and Eugene I. Gordon,
        dated as of April 9, 1999.

  10.6  Third Amendment to Lease between the Registrant and
        BCE Associates, L.P., dated March 25, 1999.

    11  Computation of Net (Loss) Per Common Share.

  24.1  Power of Attorney (included on signature page).

    27  Financial Data Schedule - December 31, 1999.

                                       47