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

                             ----------------------
                                   FORM 10-KSB


(Mark One)
               |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1997

             |_| TRANSITION REPORT UNDER 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 of             (I.R.S. Employer Identification No.)
Incorporation or Organization)
              
                     1090 King Georges Post Road, Suite 301
                            Edison, New Jersey 08837
                    (Address of principal executive offices)

         Issuer'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  preceding 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 not 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, 1997 were $0.0.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Issuer as of March 31, 1998 was approximately $13,844,500.

     As of March 31, 1998,  3,686,280  shares of the Issuer's Common Stock,  par
value $0.001 per share, were outstanding.
   ---------------------------------------------------------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE
    Proxy Statement for the 1998 Annual Meeting of Stockholders (to be filed
with the  Securities  and  Exchange  Commission  on or before April 30, 1998) is
incorporated by reference in Part III hereof.

  Transitional Small Business Disclosure Format (check one): Yes_______ No X .
================================================================================


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                                TABLE OF CONTENTS
                                                                            Page

PART I

ITEM I.  BUSINESS...........................................................  1

     The Company............................................................  1
     Diseases of the Cornea and Therapeutic Treatment.......................  4
     Refractive Disorders and Correction....................................  5
     The HRK Microkeratome..................................................  6
     Patents................................................................  7
     U.S. Government Regulation.............................................  7
     Foreign Government Regulation..........................................  8
     Competition............................................................  8
     Employees..............................................................  9
     Product Liability Insurance............................................  9

ITEM 2.  PROPERTIES.........................................................  9

ITEM 3.  LEGAL PROCEEDINGS.................................................. 10

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 10


PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........... 10

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......... 11

ITEM 7.  FINANCIAL STATEMENTS............................................... 12

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE............................................... 14


PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ................. 14

ITEM 10. EXECUTIVE COMPENSATION ............................................ 14

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 14

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 14

ITEM 13. EXHIBIT LIST AND REPORTS ON FORM 8-K............................... 14

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     THIS  ANNUAL  REPORT ON FORM  10-KSB  CONTAINS  FORWARD-LOOKING  STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES  ACT"),  AND SECTION 21E OF THE SECURITIES  EXCHANGE ACT OF 1934, AS
AMENDED (THE  "EXCHANGE  ACT").  SUCH  STATEMENTS  INCLUDE A NUMBER OF RISKS AND
UNCERTAINTIES  THAT COULD CAUSE  ACTUAL  RESULTS,  EVENTS AND  CIRCUMSTANCES  TO
DIFFER  MATERIALLY FROM THOSE SET FORTH IN SUCH STATEMENTS.  EXCEPT AS OTHERWISE
REQUIRED TO BE DISCLOSED IN PERIODIC  REPORTS  REQUIRED TO BE FILED BY COMPANIES
REGISTERED  UNDER THE EXCHANGE ACT BY THE RULES OF THE  SECURITIES  AND EXCHANGE
COMMISSION,  THE COMPANY HAS NO DUTY TO UPDATE SUCH  STATEMENTS.  SUCH RISKS AND
UNCERTAINTIES   INCLUDE  THE  COMPANY'S   ABILITY  TO  GENERATE   REVENUES  FROM
OPERATIONS,   THE  COMPANY'S  ABILITY  TO  PROFITABLY  COMMERCIALLY  MARKET  ITS
PRODUCTS,  THE  UNCERTAINTY  OF  APPROVAL  BY THE  UNITED  STATES  FOOD AND DRUG
ADMINISTRATION  (THE  "FDA") AND OTHER  REQUIRED  GOVERNMENTAL  AGENCIES  OF THE
COMPANY'S  OTHER  PRODUCTS  AND  THE  OUTCOME  OF  THE  COMPANY'S  RESEARCH  AND
DEVELOPMENT  ACTIVITIES.  SEE "RISK FACTORS" IN THE COMPANY'S  PROSPECTUS  DATED
AUGUST 6, 1996 WHICH CONSTITUTES A PART OF THE COMPANY'S  REGISTRATION STATEMENT
ON FORM SB-2 (FILE NO. 333-3184).

                                     PART I

ITEM I.  BUSINESS.

THE COMPANY

     Medjet Inc. (the  "Company"),  founded in December  1993, is engaged in the
research  and  development  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.  The  basic  technology
utilizes a hair-thin, 33 micron diameter, circular beam of saline water solution
moving  in  varying  excess  of  supersonic  speed,  depending  on the  specific
application.   In  each  application,   the  waterjet  beam  substitutes  for  a
conventional   metal or diamond blade. In combination with other elements of the
device, it is capable of removing the epithelium (the front surface layer of the
cornea of the eye) in a procedure  known as  epithelial  keratoplasty,  removing
pterygium,  a tumor-like growth covering the surface of the eye, or shaving thin
shaped layers from the cornea,  in a procedure  known as lamellar  keratoplasty.
The  device  normally  used to  perform  lamellar  keratoplasty  is  known  as a
microkeratome.   The   procedure   with  the  new  device   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. Internal
Layers of the cornea, either parallel or shaped (resembling contact lenses), are
excised  in  order  to  reshape   the   anterior   cornea   surface  to  achieve
close-to-ideal   focusing.   In  combination  with  a  proprietary  template  of
prescribed  dimensions  and shape,  the shape of the layer to be removed  can be
determined in advance.

     The Company has demonstrated  that its technology can be used to remove the
epithelium, a procedure called hydro-epithelial keratoplasty ("HEK") or to treat
diseased cornea in a procedure known as hydro-therapeutic  keratoplasty ("HTK"),
in which diseased  corneal tissue is removed.  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
beneficially as the first step in the  currently-used  laser refractive  surgery
technique known as  photo-refractive  keratectomy  ("PRK").  Management believes
that the HEK procedure is superior to currently used  techniques.  The device to
carry out HEK  procedures,  the  Hydrobrush(TM)  Keratome,  has been cleared for
marketing by the FDA.  Approximately  45,000 corneal procedures,  primarily full
transplants,  are performed  annually in the United States. The Company believes
that HTK will make partial transplants, which would be more desirable and safer,
feasible.  HTK may also be used to create a uniform  thickness  flap of  corneal
tissue as the first step in a current modification of the PRK technique known as
the light  ablation  system for  in-situ  keratomileusis  ("LASIK").  Currently,
blade-based  microkeratomes are used to make the flap and, in management's view,
are somewhat unsafe,  difficult to learn and have limited the use of LASIK as an
alternate to PRK.  The Company's waterjet-based microkeratome  is  known  as the
HydroBlade(TM)  Keratome.  

     The Company believes that the HydroBlade(TM) Keratome, through the use of a
procedure known as hydro-refractive  keratoplasty ("HRK"), has the potential to
reduce or eliminate a patient's  dependence on  eyeglasses or contact  lenses by
modifying the shape of the anterior  corneal surface to correct  inherent vision
deficiencies.  Based on  feasibility  studies  on  enucleated  eyes  and  animal
studies,  the  Company  believes  that the  HydroBlade(TM)  Keratome  cuts  more
precisely,  more quickly and with less tissue  damage than the  sharpest  metal,
diamond or laser scalpels and that the HRK microkeratome, if cleared by the FDA,
will result in a safer, more accurate and more stable corneal adjustment that is
less painful for patients than other refractive surgery procedures currently

<PAGE>

available.  The Company anticipates,  based on its studies,  that HRK could cost
less than other such procedures,  although the cost to the patient is determined
by the surgeon.

     The Company has not tested its  HydroBlade(TM)  Keratome on live human eyes
but has  tested it on over 1,000  porcine  and  rabbit  corneas,  over two dozen
cadaver  eyes  and 22 live  rabbits.  The  Company  is  currently  readying  its
prototype  HydroBlade(TM) Keratome for studies on blind human eyes in a clinical
setting.

     The Company  has an issued  patent on the method and device for HTK and HRK
and other patents,  including one relating to HEK, are pending.  Limited testing
of HTK has  been  done by  others  but,  to the  Company's  knowledge,  no other
relevant  patents  have issued to others in this field and the Company  believes
that its patent will dominate.

     HEK is performed with a device known as the HydroBrush(TM)  Keratome, which
precisely and safely debrides the epithelial layer of the cornea (with a minimum
of debris or residue) down to the Bowman's  layer (the layer of the cornea below
the  epithelium),  in a discrete  circular region with a well defined  boundary.
There is no discernible  damage to the Bowman's  layer using high  magnification
scanning  electron  microscope  imaging.  In  contrast,  knife blade  scrapes to
debride the epithelium leave substantial debris and damage to Bowman's layer. On
rabbits, the regrowth of the epithelium is observed to be about one-third faster
(typically  two days  instead  of three)  when the cornea is  debrided  with the
HydroBrush(TM)  Keratome  than when blade  scraping  is used.  In  addition,  in
contrast  to blade  scraping,  which  takes a few  minutes,  the  HydroBrush(TM)
debriding  process  takes  a  few  seconds  and  requires  minimal  training  or
experience,  and no initial dehydration is observed.  Thus, the Company believes
that HEK should be ideal for use with PRK procedures.

     The HydroBrush(TM)  Keratome utilizes a waterjet brush; a thin, high speed,
linear jet about 2 mm wide of  sterile,  saline  water  solution  flowing on and
along the  underside of a transparent  applanator  plate.  A circular,  passive,
globe alignment  device (the  "EyeMask") is placed against the anterior  corneal
surface and an insert in the EyeMask defines the circular region,  up to 8 mm in
diameter,  to be debrided.  The applanator,  which directs the flow of water, is
brought  into light  contact with the corneal  upper  surface at the apex of the
cornea.  The  applanator  is simply  slid by hand  across  the  EyeMask  and the
waterjet brush gently removes the epithelium. The spent water is collected in an
absorbent material shroud placed against the nose.

     The sterile,  saline water solution comes from a small, flexible,  sterile,
15 ml  plastic  bottle  in the  high  pressure  apparatus.  When the  device  is
activated by pressurizing a working fluid around the outside of the bottle,  the
bottle is pressurized, squeezed and emptied by the external hydrostatic pressure
of about 6000 pounds per square inch to produce a circular, 100 micron diameter,
constant,  high speed saline  waterjet which runs for 8 seconds,  and then shuts
off automatically  when the bottle is empty. The saline waterjet is converted to
the linear HydroBrush(TM) Keratome on the underside of the applanator plate.

     The high  hydrostatic  pressure  to  activate  the device is  produced by a
miniature  water  pressure  intensifier  driven  by a  liquid  CO2 air  gun-type
cartridge.  A small  diameter,  flexible tube carries high pressure water to the
device handle. The CO2 cartridge, the sterile saline bottle, the EyeMask inserts
and the spent water catcher constitute an inexpensive set of disposables.

     The  HydroBrush(TM)  Keratome is intended to become the first  commercially
available  product using the Company's  waterjet  technology  and may be both an
initial  source  of  revenue  for the  Company  and  the  basis  for  additional
applications to the FDA for permitted uses of the device. An application for use
in removal of  pterygium  is in  process.  Pterygium  afflicts  over 100 million
people  world  wide  and is  difficult  to treat  surgically  with a low rate of
recurrence.  If it can be  demonstrated  that the recurrence  rate is reduced by
using  this  product  the  procedure  could be  several  million  per  year.  No
arrangements  for commercial  marketing of any  HydroBrush(TM)  application have
been finalized to date.

     The Company's  HydroBlade(TM) Keratome, which consists of a waterjet nozzle
and a globe  fixation  device  is used with a  miniature  high  pressure  system
similar to that used for the HydroBrush(TM) Keratome. However, it operates at an
initial  pressure  of 20,000  psi. In this case,  scanning  is  accomplished  by
sliding the nozzle along tracks on the globe fixation device.

                                        2
<PAGE>

     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 eyes.  The Company  intends to file an  investigational
device  exemption   to   perform  clinical trials  and  then  submit  a  Section
510(k)  notification  for  a  ruling  of  substantial   equivalence  to  current
microkeratomes,   resulting  in  permission   for  the  Company  to  market  the
HydroBlade(TM) Keratome for HTK.

     A  subsequent  and  potentially  more  commercially  valuable  use  of  the
HydroBlade(TM) Keratome is for refractive surgery through HRK. Subsequent to the
permitted marketing of the HydroBlade(TM)  Keratome for HTK, the Company intends
to seek FDA clearance to market the device for HRK.

     Upon clearance or other marketing approval by the FDA of its HydroBlade(TM)
Keratome for HRK, the Company  intends to market this product to  individual  or
affiliated  groups of  ophthalmologists  for treatment of patients in a clinical
setting.  The  Company  expects to derive a  significant  part of its revenue by
selling  a basic  system  and  selling  disposables.  In  addition  to  standard
templates  for  standard  refractive  corrections,  the Company  expects to make
available custom templates for individual patient treatment as required.

     The  Company  believes  that  its  proprietary   waterjet   technology  has
additional  surgical  applications.   However,  only  limited  studies  of  such
applications   have  been  carried  out.  The  Company's  current  focus  is  on
applications to ophthalmology.

     The Company is in the  development  stage and has not sold any  products or
generated  any  revenues.  To  date,  the  Company's  research  and  development
activities have been limited to constructing and testing  experimental  versions
of the keratome and  conducting a limited  number of  feasibility  studies using
porcine,  rabbit  and  human  cadaver  eyes and  live  animals  to prove  that a
hair-thin  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
clinical trials are currently being performed.

     The FDA has  recommended  to the Company that it seek  permission to market
the HTK  microkeratome  through a Section  510(k)  notification  together with a
limited  number of clinical  trials,  and it is the  intention of the Company to
file a notification with the FDA in the second half of 1998 relating to two uses
of the HTK  microkeratome.  Although  there can be no  assurance  that this will
prove to be the case,  permission  granted for the 510(k)  notifications  should
enable the Company to commence its marketing  efforts sooner 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 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.  See "-- U.S. Government Regulation."

     Although the  therapeutic  uses described  above are the Company's  initial
intended uses for its two devices,  the Company  recognizes  that other uses may
eventually  be made of the waterjet  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 Company's FDA strategy
relates to the HRK  microkeratome.  Although the Company  believes  that the HRK
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
HTK use and the HRK use,  obtaining such permission for the HRK microkeratome is
likely to be somewhat more  complicated  than for HTK. There can be no assurance
that either the HTK use or the HRK use will be  permitted  for  marketing by the
FDA. The  differences  between the two uses are found in the  components,  other
than  the  waterjet  scalpel,  which  comprise  the  microkeratome.  For the HRK
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 waterjet

                                       3
<PAGE>

microkeratomes, there are no known or anticipated physical or chemical processes
that would impact on the safety of the HRK procedure. The waterjet microkeratome
cuts by mechanisms similar to that of conventional  scalpels (although at speeds
of more than 100 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 procedure. PRK could represent the strongest competition to HRK. 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 HRK 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 HRK  microkeratome  is the benign  nature of the
waterjet cut.  While a  conventional  scalpel tears the lamellae  (layers of the
stroma) and PRK  completely  or  partially  destroys the surface  lamellae,  the
waterjet 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 waterjet 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.

     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 the Company
decides to manufacture, market and sell its products. See "-- Foreign Government
Regulation."

     The  Company  intends to  continue  the  research  and  development  of its
technology  and related  manufacturing  processes and to commence human clinical
trials  of  the  HRK  microkeratome.   If  the  HTK  microkeratome  or  the  HRK
microkeratome is permitted to be marketed or otherwise approved for marketing in
the United  States,  the  Company  will be  required  to  establish  a marketing
organization and production facilities, which will require additional financing,
unless the Company  identifies  third  parties to perform such  functions  under
license or other  arrangements.  No  assurance  can be given that the  Company's
research and development efforts will be successfully completed, or that the HTK
microkeratome or the HRK  microkeratome  will prove to be safe and effective for
the purposes  intended,  will be permitted to be marketed or otherwise  approved
for marketing by the FDA or any other regulatory  agency or will be commercially
successful.

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

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.

     There are several  circumstances under which the epithelium is removed from
a cornea. An epithelium that is eroded,  cut,  damaged,  dystrophied or diseased
can be partially or fully  removed and will  regenerate to cover the cornea with
healthy tissue. The epithelium is also removed prior to refractive surgery using
a laser. In addition, in certain diseases of the cornea that render it partially
or completely  opaque, the cornea may be partially or fully removed and replaced
with a donor cornea from an eyebank.  Certain of such  transplants are performed
with a microkeratome  that removes a partial  thickness of tissue in a procedure
known as lamellar keratoplasty.


                                        4

<PAGE>



     Removal of the epithelium is typically done with a hand-held, steel scalpel
which is mechanically scraped across the cornea to accomplish the removal of the
epithelium in a rough and imprecise  manner,  often damaging the layer of tissue
underlying the epithelium.  The Company has  demonstrated  that by adjusting the
water pressure to be used, its waterjet microkeratome can precisely cut only the
epithelium in the defined area targeted for removal by separating such area from
the adjoining underlying tissue without damaging such underlying tissue.

     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 greatly increasing the donor pool.

REFRACTIVE DISORDERS AND CORRECTION

     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 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 produce a refractive correction that is within +/- 1/4 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 and keratomileusis in situ ("KIS").  In RK, PRK and KIS,
the  object of the  surgery  is to  change  the  shape of the  anterior  corneal
surface, thereby eliminating or reducing refractive error.

     RK is a surgical procedure used to correct myopia in which steel or diamond
knives  are  used to make a  series  of  deep,  perpendicular  cuts in a  radial
configuration  around the periphery of the cornea  outside the vision zone.  The
incisions  cause a  flattening  of the cornea and  eliminate  or reduce small to
moderate  amounts  of  myopia.  Tangential  cuts  are used to  correct  moderate
astigmatism, a technique known as astigmatic keratotomy.

     PRK uses  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  "photoablates," 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 (i.e., under 6 diopters) and for astigmatism.

                                        5

<PAGE>



     KIS,  which is also known as refractive  lamellar  keratoplasty  ("RLK") or
automated lamellar  keratoplasty  ("ALK"),  involves using an automated metal or
diamond  scalpel  in a  microkeratome  to  cut  and  pull  back a  corneal  flap
(consisting of the  epithelium,  the Bowman's layer and a portion of the stroma)
and to then shave away a portion of the exposed  stromal area of the cornea in a
second cut, thereby  changing the corneal  curvature after the flap is replaced.
LASIK  combines  elements of KIS and PRK.  In the LASIK  technique,  the corneal
flap is pulled back,  and  photoablation  is  performed  directly on the exposed
stromal surface to change its curvature.  In both KIS and LASIK, the hinged flap
is reset as close as possible to its original position,  where it adheres to the
underlying stroma.  Cutting errors in making the flap, occurring in about 50% of
the procedures, are a major disadvantage of LASIK.

     RK and PRK produce  corrections  that are usually  not  optimum,  typically
leaving  the eye within +/- 1 diopter  of  optimum,  but  sometimes  worse.  The
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.  The  accuracy  of KIS is
generally poorer,  but it is typically used to correct larger myopia and is more
stable. See "-- Competition."

THE HRK MICROKERATOME

     GENERAL

     The HRK microkeratome,  using the HydroBlade(TM)  Keratome,  uses a single,
hair-thin,  supersonic water beam with a diameter of approximately 33 microns to
incise  corneal  material  and a  disposable  template  to support and shape 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 water beam;  a scanning  mechanism to move the water 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),  to  which it is  attached  by a globe
fixation  device (a suction device to align and fix the eye in place relative to
a defining  template and the waterjet  parts during  surgery),  the surgical cut
takes less than one second.

     The total  water  volume used during the  procedure,  including  the amount
necessary to check the  waterjet  beam and its  performance,  is less than a few
drops.  Involuntary motions of the eye, including saccadic movement in which the
eye makes minute,  constant side-to-side movements to assist in imaging, have no
impact during HRK because the eye is fixed to the HRK  microkeratome  during the
procedure.  The template for any procedure will be constructed  according to the
specification  provided  by the  ophthalmologist  and  will be  provided  to the
surgeon with the HRK microkeratome.

     HRK, with the HRK microkeratome, can be done by three 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. In the second method,
HRK2 a hinged flap is cut into the cornea and the underlying  tissue is reshaped
before the flap is replaced.  Thereafter,  the HRK  microkeratome may be used to
make a second shaping cut or PRK may be used for shaping.  The Company  believes
that the first  method,  without the  creation of a flap,  is the  simplest  and
safest  and  initially  intends  to seek  FDA  permission  to  market,  or other
approval,  with respect to that method alone. In the third method, HRK3, the one
the Company  intends to  exploit,  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.

     STATUS

     Through December 31, 1997, the Company has spent  approximately  $5,000,000
in its  efforts  to make  products  based on  waterjet  technology  commercially
available. 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 two  experimental  versions of the Company's  keratome,  and, since
July 1994,  conducting  feasibility  studies on over  2,000  porcine  and rabbit
corneas,  dozens of human cadaver eyes and 22 live  rabbits.  The purpose of the
feasibility studies was to
                                        6
<PAGE>

determine if the water beam could smoothly incise and shape the anterior surface
of the cornea and to  determine  if the incised eye would heal.  A second  major
objective  has been to establish  that HRK3  produces 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 and post incision casts, has compared the cuts made by
the waterjet  scalpel with cuts made by scalpels and lasers in other  refractive
surgical  procedures.  The Company  believes  that the cuts made by the waterjet
scalpel  are  cleaner  and much less  damaging  than those made by  conventional
scalpels and lasers.  The Company has found the corneal flaps created by the HRK
microkeratome to be extremely close to parallel,  as desired, and of the desired
thickness  (approximately 140 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. a full range
of myopic,  hyperopic and astigmatic  corrections  have been  demonstrated.  The
Company's  studies on rabbits  have also shown that HRK  incisions  (resections)
heal  with much 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 non-human  primates and humans in a clinical setting.  The Company
has not yet  constructed  the  necessary manufacturing  equipment.

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.  The U.S.  patent  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 waterjet  microkeratome  device.  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. In addition, for countries not currently part of the PCT, patent
applications  have also been filed in Israel,  Taiwan and South  Africa.  A U.S.
patent  application  is  currently  pending and relates to  topographic  corneal
mapping, which has utility for surgery utilizing the HRK microkeratome. A patent
application for the HydroBrush(TM)  Keratome for HEK use is also pending.  Other
U.S. patents on HRK3 and templates have been filed.

     The Company  received a license from the New Jersey Institute of Technology
("NJIT") for the patent right under a patent  application  assigned to it by Dr.
Gordon and two other individuals  relating to a refractive  correction procedure
based on the use of an isotonic  waterjet,  in the manner  similar to PRK.  Such
patent  application  was  subsequently  denied by the United  States  Patent and
Trademark  Office and on August 15, 1996, such license  agreement was terminated
by the Company.  NJIT has indicated in  correspondence  and discussions with the
Company that it believes the  Company's  existing  patent  emanates  from NJIT's
technology.  The  Company  believes  NJIT's  claims  are  without  merit and has
initiated an action to preclude NJIT from hindering or otherwise  interfering in
the Company's use of its patent. Such matter is in its earliest stages. Based on
currently available evidence and information,  the Company believes that it will
prevail in this matter.

U.S. GOVERNMENT 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

                                        7
<PAGE>

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 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 three
510(k)  notifications in 1998 in which the Company will seek to demonstrate that
the HTK  microkeratome  is substantially  equivalent to the currently  available
keratomes  having a metal or  diamond  scalpel  used for two  types of  lamellar
keratoplasty  and one use of the keratomes  for  treatment of  pterygium.  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  approval  process is available.  The Company will seek to
demonstrate that, for the purpose of making lamellar, or substantially lamellar,
corneal  incisions,  the  waterjet  scalpel  and  template  included  in the HTK
microkeratome  are  substantially  similar  to a  microkeratome  with a metal or
diamond scalpel.

     In addition to laws and  regulations  enforced  by the FDA,  the  Company's
products may also be subject to labelling 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  HydroBrush(TM)
Keratome will be hand-held,  steel scalpels, and for the HydroBlade(TM) Keratome
will be blade-based microkeratomes, all of which are mechanically scraped across
the cornea to accomplish  the removal of the  epithelium,  and other  mechanical
blades,  which cut diseased tissue intended for removal.  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 and ALK), and other
technologies under  development,  such as LASIK,  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.

                                        8
<PAGE>


     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,  most of which are larger and  better  financed  than the
Company,  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, Chiron-Technolas and
Schwind,  each of  Germany,  and Nidek of Japan.  Many 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 HEK and 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  waterjet
technology under development by Visijet  (Surgijet) Inc. Visijet (Surgijet) Inc.
holds a patent for certain waterjet  technology  utilized in connection with the
treatment  of  cataracts.   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 the early stages of 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,  because of the
high costs of the laser  equipment and laser facility  necessary for PRK, and to
be  competitively  priced with, or less costly than,  other  refractive  surgery
procedures.

EMPLOYEES

     As of December 31, 1997, the Company had sixteen full-time  employees,  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,  one FDA  consultant  organization  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.


                                        9

<PAGE>



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.  It is expected that such insurance will be in the amount of $1 million
per  claim  with  an  annual   aggregate   limit  of  $20  million.   After  any
commercialization  of  its  products,   the  Company  will  seek  to  obtain  an
appropriate  increase in its coverage.  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 claims with
respect to uninsured  liabilities or in excess of insured liabilities would have
a material adverse effect on the Company.


ITEM 2.  PROPERTIES.

     The  Company  leases  approximately  7,358  square  feet  of  research  and
development,  manufacturing and office space in Edison,  New Jersey. The term of
the lease expires December 31, 1999. The base rent is $93,550 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").  The Company has
agreed to pay fees to the VANJHCS based on the Company's  usage of the facility.
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.

     There are no  pending  legal  proceedings  to which the  Company is a party
which,  in the  opinion  of  Company  management,  are likely to have a material
adverse effect on the Company's financial condition or results of operations.


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

     None.


                                     PART II

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

PRICE RANGE OF OUTSTANDING COMMON STOCK

     On August 14, 1996, the Company  consummated  its initial  public  offering
(the  "Offering")  and,  accordingly,  issued  and  sold  1,071,429  units  (the
"Units").  Each Unit consisted of one share of common stock,  $.001 par value of
the Company (the  "Common  Stock"),  and one  redeemable  Common Stock  Purchase
Warrant (the  "Warrants")  to purchase one share of Common Stock at $10.00 for a
period of 24 months  commencing on November 6, 1996. On September 13, 1996,  the
Company  issued  and  sold  160,714  additional  Units  in  connection  with the
underwriters' exercise of its  over-allotment  option.  The Units,  which became
separable on November 6, 1996,  began  trading on the  Over-the-Counter  ("OTC")
Bulletin  Board on August 6, 1996.  Prior to that date,  there was no market for
the Units.

     The  following  table sets forth the high and low bid  quotations  per Unit
(symbol MJETU) 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.


                                       10

<PAGE>




UNITS                                                            Bid
                                                                 ---

1996:                                                   High              Low
                                                        ----              ---

Period from August 6 through September 30, 1996        $8.25             $7.50

Fourth Quarter                                          8.50              6.75


The  Common  Stock and  Warrants  began  trading  on the OTC  Bulletin  Board on
November 8, 1996.  Prior to November 6, 1996, there was no market for the Common
Stock or the Warrants. On December 31, 1997, there were approximately 47 holders
of record of the  Common  Stock and 16 holders  of record of the  Warrants.  The
Company  estimates  that  approximately   1,149  holders  of  Common  Stock  are
represented by nominees.

     The following table sets forth the high and low bid quotations per share of
the Common Stock (symbol MDJTC) and the Warrants  (symbol MDJTW) 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.

COMMON STOCK                                                    Bid
                                                                ---

1996:                                                   High              Low
                                                        ----              ---

Period from November 8 through December 31, 1996       $7.375            $6.50

1997:

First Quarter                                           7.625             6.75
Second Quarter                                          8.625             7.625
Third Quarter                                           8.625             7.00
Fourth Quarter                                          8.875             7.125


WARRANTS                                                         

1996:

Period from November 8 through December 31, 1996       $1.50               .625

1997:

First Quarter                                           2.375             1.50
Second Quarter                                          2.375             2.25
Third Quarter                                           2.3125            2.00
Fourth Quarter                                          2.375             1.625


DIVIDENDS

     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.

USE OF PROCEEDS OF THE OFFERING

     Since the  consummation of the Offering in August 1996 through December 31,
1997,  the Company has applied net  proceeds  realized in the  Offering  (in the
aggregate  approximate  amount of $5,600,000) in the following manner:  $198,000
for the purchase and  installation of machinery and equipment;  $715,000 for the
repayment  of  indebtedness;  $973,000 for working  capital;  $50,000 for patent
filings;  and $2,240,000 for research and  development and human clinical trials
(which includes compensation expense attributable to employees performing solely
research and  development  functions in the amount of $763,000);  $1,490,000 for
temporary  investments,  of  which  $1,112,000  is  intended  for  research  and
development and human clinical trials and $378,000 for working capital,  and all

                                       11
<PAGE>

of which has been invested in short-term  money market  instruments.  Other than
repayment of certain indebtedness,  in the aggregate amount of $415,000, none of
such payments were made to directors,  officers, general partners of the Company
or their  associates,  to  persons  owning  10% or more of any  class of  equity
securities of the Company, or to affiliates of the Company.


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

GENERAL

     The  Company,  founded in December  1993,  is engaged in the  research  and
development of medical technology, with a current emphasis on opthalmic surgical
technology  and  equipment  and  has  developed  a  proprietary  technology  and
derivative  devices for corneal surgery.  The Company  expects,  during 1998, to
continue  its  research  and  development  activities  focusing  principally  on
ophthalmic  surgical  technology and equipment and to commence early exploratory
work on  orthopedic  applications  of  waterjet  technology.  The  Company  is a
development stage company.

RESULTS OF OPERATIONS

     The Company has not yet initiated sales of its products and,  consequently,
had no revenues during the year ended December 31, 1997.

     Total  expenses  during the year  ended  December  31,  1997  increased  by
$1,391,780  (104.8%) to $2,719,991  from $1,328,211 for the prior year. This was
primarily  due to the net  increase  in staff  (from an average of 10  full-time
employees in 1996 to an average of fifteen  full-time  employees  in 1997,  with
sixteen   full-time   employees  at  December  31,  1997)  and  an  increase  in
professional fees and consultant costs as the Company continued its research and
development  activities  and pursued  regulatory  filings  and initial  clinical
trials.  Expenses  were also higher  during 1997 due to increased  purchases for
materials,   testing  and  analysis  and  greater  insurance,   occupancy  costs
(reflecting  additional office and laboratory space assumed on April 1, 1996 and
on January 1, 1997) and advertising  expenses,  which includes costs  associated
with the production of instructional and promotional materials for the Company's
products.

     Other  income/expense  consists of interest  income and  interest  expense.
Interest  income  increased by $60,867 to $147,569 in 1997 from $86,702 in 1996.
This  increase  is  principally  the  result of income  earned on the  Company's
short-term investments which were greater after the consummation of the Offering
in August  1996.  Interest  expense  decreased by $26,235 to $5,833 in 1997 from
$32,068 in 1996.  This  decrease is  principally  the result of a  reduction  in
interest charges on short-term  borrowings made by the Company during 1996 which
were repaid during the third quarter of 1996 and the second  quarter of 1997.

LIQUIDITY AND CAPITAL RESOURCES

     From its inception until the  consummation  of the Offering,  the Company's
liquidity  requirements were met through private sales of Common Stock and short
term borrowings from affiliates of the Company,  including Dr. Eugene I. Gordon.
All such loans were repaid utilizing  proceeds of the Offering.  The Company has
no long-term indebtedness.

     As a result of the Offering,  the  Company's  liquidity  position  improved
significantly.  However,  as a result of operating losses incurred subsequent to
the  Offering,  the  Company's  working  capital  was reduced to  $1,334,270  at
December 31, 1997.

     In connection  with a private  placement  (the "Private  Placement") of the
Company's  preferred stock  commenced in the first quarter of 1998, the Company,
through its placement agent, has raised approximately $1,100,000 as of April 13,
1998.  These funds are  escrowed and will be released  following a closing.  The
Company  anticipates  that the net  proceeds  from the  Private  Placement,  the
remaining net proceeds from the Offering,  as well as projected  cash flows from
operations,  including  fees the Company may earn from  licensing  its products,
will be  sufficient  to meet the  Company's  1998  working  capital  and planned
capital expenditure  requirements.  There can, however, be no assurance that the
Company will realize cash flow from operations  within the time period projected
by the Company, if ever.

     The Company's current strategy is to exclusively  license its ophthalmology
products.  As of the date of filing of this Annual  Report on Form  10-KSB,  the
Company has not entered into any agreement to license or otherwise  commercially
market any of its  products.  If the Company does not enter into such  licensing
arrangements,  it will need to engage in the  manufacture  and  marketing of its
products.  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,  the
Company would 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 would 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  expected  dependence  upon  third  parties  for the
manufacture  of its products may adversely  affect the Company's  profit margins
and its  ability  to  develop  and  deliver  such  products  on a timely  basis.
Moreover,  there  can be no  assurance  that such  third  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.

     If the  Company  does not enter into any  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.  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.

     If the Company is unable to realize cash flow from operations,  the Company
will be  required  to seek  debt or  additional  equity  financing  to fund  its
operations.  There can be no assurance  that such  additional  financing will be
available  to the  Company  on  commercially  reasonable  terms,  if at all.  If
required additional


                                       12
<PAGE>


financing is not available,  the Company would be materially  adversely affected
and would be unable to maintain its current  operations  or otherwise  carry out
its business plan.


ITEM 7.           FINANCIAL STATEMENTS.

                                                                        Page No.

Independent Auditors' Report......................................         14

Balance Sheet as of December 31, 1997.............................         15

Statements of Operations for the years ended December 31, 1996 and
1997, and for the period from inception to December 31, 1997......         16

Statements of Stockholders' Equity for the period from inception
to December 31, 1997..............................................         17

Statements of Cash Flows for the years ended December 31, 1996 and
1997, and for the period from inception to December 31, 1997......         19

Notes to Financial Statements.....................................         20

                                       13

<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, 1997 and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1997  and  1996.  These  financial  statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

      We conducted our audits in accordance  with  generally  accepted  auditing
standards.  Those standards  require that we plan and perform an 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, 1997 and the results of its operations and its
cash flows for the years ended  December  31, 1997 and 1996 in  conformity  with
generally accepted accounting principles.


                                         ROSENBERG RICH BAKER BERMAN & COMPANY


Maplewood, New Jersey
March 19, 1998, except for
 the "SUBSEQUENT EVENT" note
 to the financial statements
 which is dated April 13, 1998



<PAGE>


                                   MEDJET INC.
                          (A Development Stage Company)
                                  Balance Sheet
                                December 31, 1997


          Assets
Current Assets
     Cash and cash equivalents                                      $ 1,491,040
     Prepaid expenses                                                    63,723
                                                                    ------------
Total Current Assets                                                  1,554,763
                                                                    ------------
Property and Equipment
     Leasehold improvements                                              21,286
     Histological equipment                                              13,773
     Ophthalmic equipment                                                35,151
     Office furniture                                                    19,458
     Lab furniture                                                       19,829
     Computer equipment                                                  77,428
     Optical equipment                                                   77,663
     Waterjet equipment                                                  46,320
     Software                                                            26,619
     Mechanical equipment                                                23,256
     Electronic equipment                                                 8,311
                                                                    ------------
                                                                        369,094
     Less - Accumulated depreciation                                    180,025
                                                                    ------------
          Total Property and Equipment                                  189,069
                                                                    ------------
Organization Costs - less accumulated amortization
     of $27,614                                                           9,773

Patents and Trademarks - less accumulated amortization
     of $8,897                                                          101,003
Security deposits                                                         7,650
                                                                    ------------
          Total Assets                                                1,862,258
                                                                    ============

          Liabilities and Stockholders' Equity
Current Liabilities
     Accounts payable and accrued expenses                              218,749
     Income taxes payable                                                   150
     Deferred rental obligation - current                                 1,594
                                                                    ------------
          Total Current Liabilities                                     220,493
     Deferred rental obligation, net of
          current portion                                                 3,698
                                                                    ------------
          Total Liabilities                                             224,191
                                                                    ============
Stockholders' Equity
     Common stock, $.001 par value, 7,000,000
          shares authorized, 3,708,719 shares 
          issued and 3,674,930 shares outstanding                         3,709
     Preferred stock, $.01 par value, 1,000,000
          shares authorized, no shares issued                             -
     Additional paid-in capital                                       4,896,955
     Accumulated deficit (including deficit accumulated
          during development stage of $4,817,101 of 
          which $1,556,204 was applied to additional
          paid-in capital upon conversion from an "S" to
          a "C" corporation)                                         (3,260,897)
     Less: Treasury stock, 33,789 shares, at cost                        (1,700)
                                                                    ------------
          Total Stockholders' Equity                                  1,638,067
                                                                    ------------
          Total Liabilities and Stockholders' Equity                $ 1,862,258
                                                                    ============


                    See notes to the financial statements.



<PAGE>

 
                                   MEDJET INC.
                          (A Development Stage Company)
                            Statements of Operations


                                                                December
                                                                16, 1993
                                    Year Ended December 31,   (Inception)
                                 ---------------------------  to December
                                      1997         1996        31, 1997
                                 -----------------------------------------
Net Sales                        $        -     $       -     $       -
                                 -----------------------------------------

EXPENSES:
Salaries                              882,595       613,259     2,005,650
Consultant Fees                       389,960       138,203       614,263
Professional Fees                     354,506       126,042       528,963
Rent                                   98,148        49,405       189,332
Mechanical Supplies                   402,165        97,919       558,460
Depreciation                           76,585        56,313       180,025
Ophthalmology Research                 14,099        12,776        46,524
Insurance                             117,233        52,885       183,371
Amortization                           13,850         9,228        36,511
Travel                                 50,443        22,440        93,214
Payroll Taxes                          68,210        47,613       154,198
Optical Supplies                        2,602         3,932        12,080
Telephone                              22,678        10,810        43,172
Miscellaneous Expenses,
 Fees and Taxes                        26,488        21,882        62,762
Advertising                            83,099         5,663        91,866
Biological Supplies                    19,071         7,319        36,120
Freight                                21,351        14,479        43,243
Office Supplies                         7,261         8,375        21,462
Employee Welfare                       27,562        11,750        51,015
Electrical Supplies                       461         3,238         6,742
Chemical Supplies                      10,293         6,736        21,688
Payroll Processing Fees                 1,376         1,087         3,991
Bank Charges                              -             166           754
Postage                                 1,292         1,312         3,639
Blueprinting and Photostats            26,842         4,838        36,052
Security System                           794           471         1,607
Membership Fees                         1,020            70         1,180
                                 -----------------------------------------
                                    2,719,984     1,328,211     5,027,884
                                 -----------------------------------------
OTHER INCOME/(EXPENSE):
Interest Income                       147,569        86,702       249,534
Interest Expense                       (5,833)      (32,068)      (37,901)
                                 -----------------------------------------
                                      141,736        54,634       211,633
                                 -----------------------------------------

   Loss Before Income Tax          (2,578,248)   (1,273,577)   (4,816,251)

     Federal Income Tax                   -             -             -
     State Income Tax                     200           400           850
                                 -----------------------------------------
  Total Income Tax                        200           400           850
                                 -----------------------------------------

         Net Loss                $ (2,578,448)  $(1,273,977)  $(4,817,101)
                                 =========================================
   Net Loss Per Share            $      (0.70)  $     (0.43)  $     (1.71)
                                 =========================================

Weighted Average Common
  Shares Outstanding                3,660,609     2,936,075     2,816,697
                                 =========================================

                     See notes to the financial statements.



<PAGE>




                                   MEDJET INC.
                          (A Development Stage Company)
                        Statement of Stockholders' Equity
     Period From December 16, 1993 (Date of Inception) to December 31, 1997


<TABLE>
<CAPTION>

                                                          Total     Common
                                       Common   Price   Consider-    Stock        Paid-      Accum-
                                       Shares    Per      ation     ($.001         In        ulated    Treasury
       Date            Description     Issued   Share     Paid      Par Value)   Capital     Deficit    Stock
-------------------  --------------- --------- ------- ----------  ----------  ----------  ---------- --------
<S>                  <C>             <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                        -      -          -           -           -      (287,291)      -
                                     ---------  =====   --------     ------     --------   ---------    -----

Balance, December 31, 1994           1,213,004           847,824      1,213      846,611    (287,291)      -

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                       -      -          -           -            -     (677,385)     -
                                     ---------  =====   --------     ------     --------   ---------    -----

Balance, December 31, 1995           2,450,312          $966,824     $2,450     $964,374   $(964,676)   $ -
                                     ---------  =====   --------     ------     --------   ---------    -----
</TABLE>


                                      See notes to the financial statements.



<PAGE>



                                   MEDJET INC.
                          (A Development Stage Company)
                        Statement of Stockholders' Equity
     Period From December 16, 1993 (Date of Inception) to December 31, 1997

<TABLE>
<CAPTION>


                                                                     Total      Common
                                                Common     Price   Consider-    Stock         Paid-         Accum-
                                                Shares     Per       ation      ($.001          In          ulated      Treasury
     Date             Description               Issued     Share     Paid      Par Value)     Capital       Deficit      Stock
----------------     --------------            ---------  -------  ----------  ----------  ------------  -------------  --------
<S>                                            <C>         <C>     <C>           <C>       <C>           <C>            <C>
Balance, December 31, 1995, brought forward    2,450,312           $  966,824    $2,450    $   964,374   $   (964,676)  $    -
August 6, 1996       Share Issuance            1,071,429   $5.60    6,000,002     1,071      5,998,931            -          -
September 3, 1996    Share Issuance              160,714    5.60      899,998       161        899,838            -          -
Reclassification of deferred offering costs          -       -            -         -       (1,436,052)           -          -
Acquisition of treasury shares                       -       -            -         -              -              -      (1,700)
Reclassification of accumulated deficit for
  change from S corporation to C corporation         -       -            -         -       (1,556,204)     1,556,204        -
Net Loss, Year Ended December 31, 1996               -       -            -         -              -       (1,273,977)       -
                                               ---------  -------  ----------  ----------  ------------  -------------  --------

Balance, December 31, 1996                     3,682,455            7,866,824     3,682      4,870,887       (682,449)   (1,700)

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         24,993            -          -
Net Loss, Year Ended December 31, 1997               -       -            -         -              -       (2,578,448)       -
                                               ---------  =======  ----------  ----------  ------------  -------------  --------

Balance, December 31, 1997                     3,708,719            7,892,919     3,709      4,896,955     (3,260,897)   (1,700)
                                               =========           ==========  ==========  ============  =============  ========

</TABLE>

                                See notes to the financial statements.



<PAGE>




                                   MEDJET INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                          December
                                                                                          16, 1993
                                                            Year Ended December 31,    (Inception) to
                                                           --------------------------      December
                                                                1997         1996          31, 1997
                                                           ------------  ------------  --------------
<S>                                                        <C>           <C>            <C>         
Cash Flows From Operating Activities:
Net loss                                                   $(2,578,448)  $(1,273,977)   $(4,817,101)

Adjustments to Reconcile Net Loss to
     Net Cash Used by Operating Activities:
          Depreciation and amortization                         90,435        65,541       216,536
          (Increase) Decrease in accounts receivable             2,083        (2,083)          -
          (Increase) Decrease in prepaid expenses              (17,131)      (44,049)     ( 63,723)
          Increase (Decrease) in accounts payable
             and accrued expenses                               41,227       112,769       218,749
          Increase (Decrease) in accrued interest payable       (7,167)        7,167           -
          Increase in income taxes payable                         -             -             150
          Increase in deferred rental obligation                 5,292           -           5,292
                                                           ------------  ------------  --------------
Net Cash (Used) by Operating Activities                     (2,463,709)   (1,134,632)   (4,440,097)
                                                           ------------  ------------  --------------

Cash Flows From Investing Activities:
     Redemptions of marketable securities                          -             -         320,605
     Cash purchases of marketable securities                       -             -        (320,605)
     Cash purchases of property, plant & equipment             (94,542)     (153,921)     (369,094)
     Cash purchase of organization costs                           -             -         (37,387)
     Cash payments for patents and trademarks                  (53,789)      (36,706)     (109,900)
     Cash payments for security deposits                           -          (3,948)       (7,650)
                                                           ------------  ------------  --------------
Net Cash (Used) by Investing Activities                       (148,331)     (194,575)     (524,031)
                                                           ------------  ------------  --------------

Cash Flows From Financing Activities:
     Proceeds from issuance of common stock and
        initial public offering                                 26,095     5,500,214     6,456,868
     Purchase of treasury stock                                    -          (1,700)       (1,700)
     Proceeds from officer loans                                   -         165,000       321,000
     Repayment of officer loans                               (165,000)     (150,000)     (321,000)
     Proceeds from notes payable                                   -         400,000       400,000
     Repayment of notes payable                                    -        (400,000)     (400,000)
                                                           ------------  ------------  --------------
Net Cash (Used) Provided by Financing Activities              (138,905)    5,513,514     6,455,168
                                                           ------------  ------------  --------------

Net Increase (Decrease) in Cash and Cash Equivalents        (2,750,945)    4,184,307     1,491,040
Cash and Cash Equivalents at Beginning of Period             4,241,985        57,678           -
                                                           ------------  ------------  --------------
Cash and Cash Equivalents at End of Period                   1,491,040     4,241,985     1,491,040
                                                           ============  ============  ==============

  SUPPLEMENTAL DISCLOSURES OF
       CASH FLOW INFORMATION:
Cash paid for:
     Income taxes                                           $     200     $      200    $     650
                                                           ============  ============  ==============
     Interest expense                                       $  13,000     $   24,901    $  37,901
                                                           ============  ============  ==============
</TABLE>


                                          See notes to the financial statements.



                                   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 or ice 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.

                  On August 14, 1996, the Company consummated its initial public
                  offering (the "Offering") and, accordingly, issued and sold to
                  the public 1,071,429 Units (the "Units"), each Unit consisting
                  of one share of common stock,  $.001 par value, of the Company
                  (the "Common Stock"), and one redeemable Common Stock Purchase
                  Warrant (the "Warrants") to purchase one share of Common Stock
                  at $10.00 for a period of 24 months  commencing on November 6,
                  1996  (see   "Warrants"   note).   In   conjunction   with  an
                  over-allotment  option  granted  to  the  underwriter  of  the
                  Offering,  the Company  issued and sold an additional  160,714
                  Units on  September  13,  1996.  The Units were  separated  on
                  November 6, 1996 and the Common Stock and the  Warrants  began
                  trading on November 8, 1996.

         Cash and Cash Equivalents
                  For  the  purpose  of  the  statements  of  cash  flows,  cash
                  equivalents   include  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.



<PAGE>





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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

         Amortization
                  Organization  costs are being amortized over sixty months on a
                  straight-line  basis.  Total  amortization for the years ended
                  December   31,   1997  and  1996  was   $7,477   and   $7,476,
                  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,   1997  and  1996  was   $6,373   and   $1,752,
                  respectively.

         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 income taxes has been
                  offset entirely by a valuation  allowance  against the related
                  deferred tax asset for the year ended December 31, 1997.

                  Pursuant to the Offering (see "Nature of Organization"  note),
                  the Company's  status changed from an "S" corporation to a "C"
                  corporation for Federal income tax purposes.  Accordingly, the
                  deficits accumulated during the development stage were charged
                  against additional paid-in capital.


<PAGE>





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


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

         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.

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.

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 449,688 and
         249,688 shares at December 31, 1997 and 1996, 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


<PAGE>





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

STOCK OPTION PLAN -- (Continued)

         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
                                                            December 31,
                                                     ---------------------------
                                                          1997            1996
                                                     --------------     --------
             Outstanding, beginning of year              87,520         39,750
              Granted during the year                    67,500         47,770
              Canceled during the year                  (37,000)          -
              Exercised during the year at $.05         (21,800)          -
                 per share                              -------        ---------
              Outstanding, end of year (at prices
                 ranging from $.05 to $8.47 per          96,220        87,520
                 per share                             =========       =========

              Eligible, end of year for exercise
                 prices ranging from $.05 to $8.37
                 per share)                              23,091        33,725
                                                       =========       =========

         At December 31, 1997, the weighted  average exercise price and weighted
         average remaining  contractual life is $5.56 per share and 8 years 81/2
         months, respectively.

         At December 31, 1997 and 1996,  there were 331,668 and 162,168  shares,
         respectively, reserved for future grants.


<PAGE>


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


WARRANTS

         The Company issued common stock purchase  warrants  separately and as a
         part of the Offering (see "Nature of Organization") as follows:

                              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
         07/19/96      4,464      5.60   07/19/96  07/19/99     50% at issue,
                                                                  balance after
                                                                  one year
         08/14/96  1,071,429     10.00   11/06/96  11/06/98    100% on 11/06/96
         08/14/96    107,143     10.00   08/06/97  08/06/99    100% on 08/06/97
         09/13/96    160,714     10.00   11/06/96  11/06/98    100% on 11/06/96
                   ----------
                   1,441,139   Outstanding at December 31, 1996
                      (4,464)  Exercised during the year at $5.60 per share
                   ---------
                   1,436,675   Outstanding at December 31, 1997
                   =========

         At  December  31,  1997  and  1996,  there were 1,363,633 and 1,341,518
         shares eligible for exercise at prices ranging from $3.37 to $10.00 per
         share.

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.



<PAGE>




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


INCOME TAXES

         The income tax  provision is comprised of the  following  for the years
         ended December 31, 1997 and 1996:

                  State current provision                     $200         $400
                                                              ====         ====

         The  Company's  total  deferred  tax asset and  valuation  allowance at
         December 31, 1997 are as follows:

                  Total deferred tax asset                    $1,236,000
                  Less valuation allowance                    (1,236,000)
                                                              ----------
                  Net deferred tax asset                      $       -
                                                              ==========

         The Company has available approximately $4,547,331 net operating losses
         to carryforward which may be used to reduce future State taxable income
         available through December 31, 2002 and approximately $2,904,139 of net
         operating  losses to  carryforward  which may be used to reduce  future
         Federal taxable income available through December 31, 2010.

OPERATING LEASES

         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, 1997 under  operating  leases that have  initial or
         remaining non-cancelable lease terms in excess of one year:

                  Year Ended December 31,
                                    1998                      $ 97,090
                                    1999                        95,654
                                                              --------
                           Total Minimum Lease
                             Payments Required                $192,744
                                                              ========

<PAGE>

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


OPERATING LEASES -- (Continued)

         Rent expense under the operating  leases  totaled  $98,148  and $49,405
         for the years  ended  December  31, 1997 and 1996, respectively.

         Beginning  in 1997,  the lease for the building and office space has an
         annual  escalation  factor.  The above rental  commitments  reflect the
         periods  during  which  the  actual  obligations  arise  (per the lease
         agreement).  Rental  expense  has  been  charged  to  operations  on  a
         straight-line   basis.  The  associated   deferred  rental   obligation
         liability  of $5,292 is  presented  in the  balance  sheet as a current
         liability of $1,594 and a long-term liability of $3,698 at December 31,
         1997.

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

EMPLOYMENT AGREEMENTS

         Effective  March 15,  1996,  the  Company  entered  into an  employment
         agreement with its President - Technology  Development,  for an initial
         term of three years. The agreement,  which was amended  effective as of
         January 1, 1997, provides 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 his participation) may
         also increase such base compensation in its sole discretion.


<PAGE>

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


EMPLOYMENT AGREEMENTS -- (Continued)

         The  agreement  may 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. 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 President - Technology Development.

         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-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.

SUBSEQUENT EVENT

         In  connection  with a private  placement  of the  Company's  preferred
         stock, the Company,  through its placement agent, as of April 13, 1998,
         has raised approximately $1,100,000. The funds are escrowed and will be
         released following a closing.


<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  appearing under the captions  "Election of Directors,"
"Certain   Transactions"  and  "Section  16(a)  Beneficial  Ownership  Reporting
Compliance"  in the Company's  Proxy  Statement  for its 1998 Annual  Meeting of
Stockholders (the "1998 Proxy Statement") is incorporated herein by reference.

ITEM 10.          EXECUTIVE COMPENSATION.

     Information  appearing under the caption  "Executive  Compensation"  in the
1998 Proxy Statement is incorporated herein by reference.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

     Information  appearing under the caption "Security  Ownership of Beneficial
Owners and  Management" in the 1998 Proxy  Statement is  incorporated  herein by
reference.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information appearing under the caption "Certain  Transactions" in the 1998
Proxy Statement is incorporated herein by reference.


                                     PART IV

ITEM 13.          EXHIBIT LIST, 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:




           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    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).

            +10.1    Employment  Agreement  between the Registrant and Eugene I.
                     Gordon,  dated as of March 15, 1996 (incorporated herein by
                     reference to Exhibit 10.1 to the Registrant's  Registration
                     Statement on Form SB-2, Registration No. 333-3184).


                                       14

<PAGE>





            +10.2    Employment  Agreement  between the Registrant and Thomas M.
                     Handschiegel,  dated as of  March  18,  1996  (incorporated
                     herein by  reference  to Exhibit  10.2 to the  Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

             10.3    Consulting  Agreement  between the Registrant and Joseph F.
                     Carroll,  III, dated as of April 1994 (incorporated  herein
                     by   reference   to  Exhibit   10.3  to  the   Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

             10.4    Consulting  Agreement  between the Registrant and Joseph P.
                     Calderone,  Jr.,  dated as of April 1,  1994  (incorporated
                     herein by  reference  to Exhibit  10.4 to the  Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

            +10.6    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).

            +10.7    Amendment,   dated  January  1,  1997,  to  the  Employment
                     Agreement  between  the  Registrant  and Eugene I.  Gordon,
                     dated  as  of  March  15,  1996  (incorporated   herein  by
                     reference to Exhibit 10.7 to the  Registrant's  Form 10-KSB
                     for the year ended December 31, 1996).

            +10.8    Amendment,   dated  January  1,  1997,  to  the  Employment
                     Agreement    between   the   Registrant   and   Thomas   M.
                     Handschiegel,  dated as of  March  18,  1996  (incorporated
                     herein by  reference  to Exhibit  10.8 to the  Registrant's
                     Form 10-KSB for the year ended December 31, 1996).

             10.9    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).

             10.10   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).

             10.11   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).

             10.12   Consulting  Agreement  between the Registrant and Steven G.
                     Cooperman, dated as of May 20, 1996 (incorporated herein by
                     reference to Exhibit 10.20 to the Registrant's Registration
                     Statement on Form SB-2, Registration No. 333-3184).

             10.13   Consulting  Agreement between the Registrant and Sanford J.
                     Hillsberg, dated as of May 20, 1996 (incorporated herein by
                     reference to Exhibit 10.21 to the Registrant's Registration
                     Statement on Form SB-2, Registration No. 333-3184).

             10.14   Promissory  Note from the  Registrant in favor of Eugene I.
                     Gordon in the principal  amount of $100,000,  dated May 28,
                     1996 (incorporated  herein by reference to Exhibit 10.22 to
                     the  Registrant's  Registration  Statement  on  Form  SB-2,
                     Registration No. 333-3184).

             10.15   Promissory  Note from the  Registrant in favor of Eugene I.
                     Gordon in the principal  amount of $65,000,  dated June 26,
                     1996 (incorporated  herein by reference to Exhibit 10.23 to
                     the  Registrant's  Registration  Statement  on  Form  SB-2,
                     Registration No. 333-3184).

             10.16   Consulting  Agreement between the Registrant and Ophthalmic
                     Research  Associates,  Inc.,  dated  as  of  July  1,  1996
                     (incorporated  herein by reference to Exhibit  10.16 to the
                     Registrant's  Form 10-KSB for the year ended  December  31,
                     1996).

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

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

            *27.1    Financial Data Schedule - December 31, 1997.

            *27.2    Financial Data Schedule - December 31, 1996 (Restated).

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



                                       16

<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 New
York, State of New York, on the 15th day of April 1998.

                             MEDJET INC.



                             By: /s/Eugene I. Gordon
                                 -------------------
                                 President - Technology Development and Chairman
                                  of the Board


         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-K,  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 15th day of April 1998.

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


     /s/ Eugene I. Gordon                           President - Technology
----------------------------------                  Development  and Chairman of
       Eugene I. Gordon                             the Board


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


    /s/ James R. Adwers                             Director
----------------------------------
      James R. Adwers


    /s/ James J. Bialek                             Director
----------------------------------
      James J. Bialek


                                                    Director 
----------------------------------
      Robert G. Donovan


   /s/ Sanford J. Hillsberg                         Director
----------------------------------
     Sanford J. Hillsberg


<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    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).

            +10.1    Employment  Agreement  between the Registrant and Eugene I.
                     Gordon,  dated as of March 15, 1996 (incorporated herein by
                     reference to Exhibit 10.1 to the Registrant's  Registration
                     Statement on Form SB-2, Registration No. 333-3184).

            +10.2    Employment  Agreement  between the Registrant and Thomas M.
                     Handschiegel,  dated as of  March  18,  1996  (incorporated
                     herein by  reference  to Exhibit  10.2 to the  Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

             10.3    Consulting  Agreement  between the Registrant and Joseph F.
                     Carroll,  III, dated as of April 1994 (incorporated  herein
                     by   reference   to  Exhibit   10.3  to  the   Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

             10.4    Consulting  Agreement  between the Registrant and Joseph P.
                     Calderone,  Jr.,  dated as of April 1,  1994  (incorporated
                     herein by  reference  to Exhibit  10.4 to the  Registrant's
                     Registration  Statement  on  Form  SB-2,  Registration  No.
                     333-3184).

            +10.6    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).

            +10.7    Amendment,   dated  January  1,  1997,  to  the  Employment
                     Agreement  between  the  Registrant  and Eugene I.  Gordon,
                     dated  as  of  March  15,  1996  (incorporated   herein  by
                     reference to Exhibit 10.7 to the  Registrant's  Form 10-KSB
                     for the year ended December 31, 1996).

            +10.8    Amendment,   dated  January  1,  1997,  to  the  Employment
                     Agreement    between   the   Registrant   and   Thomas   M.
                     Handschiegel,  dated as of  March  18,  1996  (incorporated
                     herein by  reference  to Exhibit  10.8 to the  Registrant's
                     Form 10-KSB for the year ended December 31, 1996).

             10.9    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).

             10.10   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).

             10.11   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).

             10.12   Consulting  Agreement  between the Registrant and Steven G.
                     Cooperman, dated as of May 20, 1996 (incorporated herein by
                     reference to Exhibit 10.20 to the Registrant's Registration
                     Statement on Form SB-2, Registration No. 333-3184).

             10.13   Consulting  Agreement between the Registrant and Sanford J.
                     Hillsberg, dated as of May 20, 1996 (incorporated herein by
                     reference to Exhibit 10.21 to the Registrant's Registration
                     Statement on Form SB-2, Registration No. 333-3184).

             10.14   Promissory  Note from the  Registrant in favor of Eugene I.
                     Gordon in the principal  amount of $100,000,  dated May 28,
                     1996 (incorporated  herein by reference to Exhibit 10.22 to
                     the  Registrant's  Registration  Statement  on  Form  SB-2,
                     Registration No. 333-3184).

             10.15   Promissory  Note from the  Registrant in favor of Eugene I.
                     Gordon in the principal  amount of $65,000,  dated June 26,
                     1996 (incorporated  herein by reference to Exhibit 10.23 to
                     the  Registrant's  Registration  Statement  on  Form  SB-2,
                     Registration No. 333-3184).

             10.16   Consulting  Agreement between the Registrant and Ophthalmic
                     Research  Associates,  Inc.,  dated  as  of  July  1,  1996
                     (incorporated  herein by reference to Exhibit  10.16 to the
                     Registrant's  Form 10-KSB for the year ended  December  31,
                     1996).

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

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

            *27.1    Financial Data Schedule - December 31, 1997.

            *27.2    Financial Data Schedule - December 31, 1996 (Restated).

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


                                       19