================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 _______________

                                   FORM 10-KSB

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004     COMMISSION FILE NUMBER:  0-27943

                                 _______________

                          OMNICORDER TECHNOLOGIES, INC.

                (Exact name of small business issuer as specified
                                 in its charter)

              DELAWARE                                          11-3386214
   (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                           Identification No.)

          125 WILBUR PLACE
          BOHEMIA, NEW YORK                                     11716-2415
        (Address of principal                                   (Zip Code)
         executive offices)
                                 _______________


         Issuer's telephone number, including area code: (631) 244-8244

       Securities registered under Section 12(b) of the Exchange Act: None

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

                             COMMON STOCK, PAR VALUE
                                 $.001 PER SHARE
                                 _______________

     Check whether the issuer 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 the filing requirements for the past 90 days. Yes [X] No [ ]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B and no disclosure will be contained, to the best of the
issuer'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. [ ]

     The issuer's revenues for the fiscal year ended December 31, 2004 were
$69,800.

     The aggregate market value of the Common Stock held by non-affiliates of
the issuer as of March 24, 2005 was $15,715,157

     The number of shares outstanding of the issuer's Common Stock as of March
25, 2005 was 29,951,107 shares.

                       __________________________________

                       DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III will be incorporated by reference from
portions of a definitive Proxy Statement, which is expected to be filed by the
issuer within 120 days after the close of its fiscal year.

================================================================================



<PAGE>


                          OMNICORDER TECHNOLOGIES, INC.

                         2004 FORM 10-KSB ANNUAL REPORT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page

                                     PART I

<S>  <C>                                                                                                         <C>
Item 1.  Description of Business..................................................................................1
Item 2.  Description of Property.................................................................................12
Item 3.  Legal Proceedings.......................................................................................12
Item 4.  Submission of Matters to a Vote of Security Holders.....................................................13

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters................................................13
Item 6.  Management's Discussion and Analysis or Plan of Operation...............................................20
Item 7.  Financial Statements....................................................................................28
Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................28
Item 8A. Controls and Procedures.................................................................................28

                                    PART III

Item 9, 10, 11 and 12............................................................................................30
Item 13. Exhibits and Reports on Form 8-K........................................................................30
Item 14. Principal Accountant Fees and Services..................................................................31

</TABLE>

<PAGE>


                                     PART I

Item 1.       DESCRIPTION OF BUSINESS

OVERVIEW

     OmniCorder was founded in 1997 to acquire, develop and commercialize
advanced medical imaging technology for the diagnosis and management of a large
variety of diseases including cancer and vascular disease. Our lead product, the
BioScanIR system, detects diseases that affect the perfusion or reperfusion
(movement or flow) of blood in tissues and organs. Diseases such as cancer and
vascular disease affect perfusion. The BioScanIR system assists physicians and
researchers in differentiating between normal and abnormal tissues by detecting
very small changes in perfusion. The BioScanIR uses an infrared sensor, called a
Quantum Well Infrared Photodetector, or QWIP, which we have licensed on an
exclusive basis from the California Institute of Technology. QWIP was developed
by scientists at the Jet Propulsion Laboratory of the National Aeronautics and
Space Administration, or NASA, for the U.S. Department of Defense's Strategic
Defense Initiative (commonly referred to as the Star Wars program).

     In addition to our current technology, we continue to develop more advanced
sensors through collaboration with aerospace and defense laboratories. We are
presently developing "next generation" sensor technology. We have had funding
through Phase I of the project from the U.S. Department of Defense's Missile
Defense Agency and collaborated with NASA's Jet Propulsion Laboratory, the Army
Research Laboratory and Goddard Space Flight Center.

     We have received FDA Section 510(k) clearance permitting our sale of
BioScanIR in the United States and CE mark approval permitting our sale of
BioScanIR in Europe. Our approved labeling permits us to market the BioScanIR
system for use in imaging a large variety of diseases - such as cancer and
vascular disease - that affect the movement of blood (known as blood perfusion),
in tissue and organs.

     We received notice that we have been awarded a New Technology Ambulatory
Procedure Code (APC) effective April 1, 2005 for usage of our system in
providing the service "dynamic infrared blood perfusion imaging." The APC
provided by Medicare allows users of the new technology to submit claims for
reimbursement for their use of the new technology in an outpatient setting for
Medicare patients. This type of code is used to collect actual clinical history
on the costs of using the new technology as a precursor to the assignment of a
permanent Current Procedural Terminology (CPT) code. A critical element of our
efforts over the next three years must be to build a history of claims
submissions using the APC for the use of our system in order to demonstrate the
viability of the technology and pave the way for securing a CPT code which is
issued by the American Medical Association. The service associated with the use
of the BioScanIR system has been assigned APC Code 1502 and HCPCS Code C9723.
The service will be reimbursed at $75.00 per scan plus a $15.00 co-pay effective
April 1, 2005.

CORPORATE INFORMATION AND HISTORY

     We were originally formed as a Colorado corporation in September 1992 and
operated a promotional products business under the corporate name Promos, Inc.
On December 19, 2003, we completed a transaction in which we acquired all the
assets and assumed all the liabilities of OmniCorder in consideration for the
issuance of a majority of our shares of common stock. This transaction was
accounted for as a recapitalization of OmniCorder, who was the acquirer for
accounting purposes. Concurrent with the closing of the recapitalization
transaction, we completed a private placement of 5,686,027 shares of common
stock, from which we received gross proceeds of $7,820,405. Also, concurrent
with the recapitalization transaction, we sold the promotional products business
to one of our previous directors, and succeeded to the business of OmniCorder as
our sole line of business.

     In February 2004, at a special meeting of stockholders, our stockholders
approved resolutions to change our state of incorporation to Delaware and our
corporate name to OmniCorder Technologies, Inc. by means of a merger with and
into a new wholly-owned Delaware corporation called OmniCorder Technologies,
Inc., with OmniCorder Technologies surviving as the publicly-traded company; and
ratify our assumption and adoption of the OmniCorder

<PAGE>


1998 Stock Option Plan and approved an amendment to the plan increasing the
number of shares of common stock available for option grants.

     In December 2004, we completed a private placement of 1,550,000 shares of
our newly-created series A convertible preferred stock (convertible into
1,409,091 shares of common stock) and warrants to purchase 465,000 shares of our
common stock, which resulted in gross proceeds to us of $1,550,000. In January
2005, we filed with the SEC a Registration Statement on Form SB-2, which if
declared effective will register for resale the shares of common stock issuable
upon conversion and exercise of these shares of series A convertible preferred
stock and warrants. This Registration Statement is also being used in connection
with a proposed rights offering to our stockholders to purchase an additional
3,500,000 shares of series A convertible preferred stock.

     On March 4, 2005, we announced the appointment of Denis A. O'Connor as our
new President and Chief Executive Officer, effective March 23, 2005. Mr.
O'Connor was also appointed to our Board of Directors on March 7, 2005.

     Our principal executive offices are located at 125 Wilbur Place, Suite 120,
Bohemia, New York 11716, and our telephone number is (631) 244-8244.

INTRODUCTION TO TECHNOLOGY

     Our lead product, the BioScanIR system, is an advanced digital infrared
imaging device which is intended for use in biomedical imaging applications. The
BioScanIR system measures minute changes in passively-emitted infrared radiation
which are produced by tissue. It then identifies abnormal blood flow associated
with the presence of tumors and vascular disease, and assists physicians and
researchers in differentiating between normal and abnormal tissues.

     The basic principle behind the unit is the precise, rapid and repeatable
measurements of naturally occurring infrared energy that is emitted from the
human body. Like all objects, a human body emits infrared radiation at a
characteristic rate and frequency. Slight changes in this emission behavior
indicate the presence of disease. Thus, precisely measuring the changing rate of
this emission allows the remote detection of disease with no physical contact,
no contrast agent and with no source of outside radiation, such as x-rays.

     The medical usefulness of this information is a function of how accurately
and quickly it can be acquired and the data processed. The BioScanIR uses an
infrared sensor, called a Quantum Well Infrared Photodetector, or QWIP. Using
the QWIP sensor technology and our proprietary methods, these measurements can
then be collected up to 400 times per second and to an accuracy of 0.006 degrees
by the BioScanIR system and processed to provide precise information about
subtle changes in blood perfusion that are caused by diseases. We believe this
combination of high precision measurement and sophisticated processing is
without precedent in medical infrared imaging.

     The flow of blood throughout the body varies naturally due to normal
physiology changes. For example, when the heart pumps, blood circulates faster
and thus infrared emission increases, but just for the fraction of a second that
the contraction of a single beat lasts. When the heart is resting between
contractions, the circulation slows and the opposite occurs, again for a
fraction of a second. This differing rate of blood transport leads to small
periodic changes in emitted infrared radiation that the BioScanIR can detect.
Similar periodic changes are driven by other mechanisms in the body designed to
maintain homeostasis. For example, a periodic change in blood perfusion is
driven by the autonomic nervous system intended to maintain precise core body
temperature. These types of changes are subtle and require precise
instrumentation and complex data processing. We believe the ability to measure
these changes provides the ability to detect disease.

     As determined by published peer review research from several independent
investigators and documented in our patents, a growing tumor modifies blood flow
in a way that disrupts some of these periodic blood flow changes. Consequently,
there is measurable evidence of its presence and continued growth. The areas in
the body where this disruption is occurring can be analyzed using our
proprietary software, providing visual and analytical evidence of the tumor's
presence and activity.


                                       2
<PAGE>


     In addition to its featured speed and accuracy capabilities, the technology
used in the BioScanIR system also benefits from being compact and relatively
inexpensive. When combined with its ability to image without touching the
patient's body, the BioScanIR system is highly functional in the operating room
environment. In surgical applications, BioScanIR can measure the effects from
brain activity and blood flow as they occur, and assist surgeons in modifying
their procedures in real time.

ADVANCED RESEARCH AND DEVELOPMENT

     In the area of technology advancement, we have adopted and implemented a
low-cost co-development strategy based upon our extensive contacts and
relationships in the defense and aerospace industries, NASA laboratories and
with U.S. Department of Defense, or DOD, agencies. This approach permits us to
develop the latest sensor, and related camera technology, by entering into
contracts with the DOD on projects that are of mutual interest. For example, we
received a contract from the DOD in August 2003 for the purpose of developing a
multi-band infrared sensor. This sensor is of great interest to the DOD for
weapons targeting applications, and equally important to us, for future medical
imaging applications. The new sensor will incorporate a multi-band detector with
five times the resolution and the ability to analyze gases, fluids and other
diagnostically important characteristics in living things. We were asked, under
the DOD contract, to develop the sensor and, in turn, we subcontracted the work
to expert institutions such as NASA's Jet Propulsion Laboratory, the Army
Research Laboratory and Goddard Space Flight Center, to assist with research and
development. We earned and recognized the amount of this contract of $69,800 in
the quarter ended June 30, 2004. The contract has no special indemnification or
renewal terms. We have submitted a proposal to the DOD to continue with Phase II
of the development of the new sensor. There can be no assurance at this time
that we will receive a new contract from the DOD.

     We also have an agreement, described below under "Licensing Agreement -
CalTech License Agreement," with NASA's Jet Propulsion Laboratory, through the
California Institute of Technology, for new technical innovations (and rights to
potential patents) in this technology. The end result is we are able to advance
in the technology race by developing and licensing next generation sensors
while, at the same, mitigating or eliminating the high costs associated with
such projects by entering into partnerships with direct funding sources, such as
the DOD and the Jet Propulsion Laboratory. This cost-effective approach to the
procurement of new technologies and their associated medical applications will
continue to be one of our core competencies.

     We have conducted research and development on advanced infrared focal plane
arrays and other technologies relating to the ongoing development of our
BioScanIR system since 1997. Research and development expenditures were
approximately $1,413,194 and $1,129,248 in the years ended December 31, 2004 and
2003, respectively.

PATENTS AND INTELLECTUAL PROPERTY

     The BioScanIR system detects changes in blood flow distribution in tissues
and organs characteristic of a cancer or vascular disease utilizing new patented
QWIP sensor technology provided under exclusive license for specific biomedical
applications to us by the California Institute of Technology. NASA's Jet
Propulsion Laboratory, which is managed by the California Institute of
Technology, developed this technology for the Ballistic Missile Defense
Organization for the Strategic Defense Initiative (commonly referred to as the
Star Wars program). The sensor is thousands of times more powerful than ones
used previously for infrared breast cancer detection. The data collected by this
sensor technology are analyzed using proprietary and patented methods and
software, which were developed by our scientists and computer programmers.

     We use both the sensor and the method patents in the infrared biomedical
imaging field either through direct ownership or exclusive, worldwide licenses.
As part of our relationship with the California Institute of Technology, we have
received subsequent rights to new patents. We have a growing portfolio of six
issued and ten pending U.S. patents, along with corresponding foreign patents
covering more than 25 other developed countries. We also hold registered
trademarks on several product names and logos, including BioScanIR.


                                       3
<PAGE>


LICENSING AGREEMENTS

     The acquisition and licensing of intellectual property integral to the
BioScanIR system is an important element of our business strategy. Through our
portfolio of exclusive licensing agreements, we control the patents that protect
the core diagnostic software and detection technology and other intellectual
property upon which the BioScanIR system is based. Our principal agreements are
summarized below.

     CALTECH LICENSE AGREEMENT. In May 1998, based on an option granted in
September 1997, we entered into an agreement with NASA's Jet Propulsion
Laboratory, which is managed by the California Institute of Technology, known as
CalTech. Pursuant to this agreement, we obtained the exclusive license to
exploit infrared radiation detection technology as embodied in certain issued
and pending patents and any related U.S. or foreign patents or patent
applications relating to QWIP technology. The CalTech technology was originally
developed for earth/space science and weapon systems applications, through the
efforts of the:

     o    Jet Propulsion Laboratory;
     o    Center for Space Microelectronics Technology;
     o    NASA Office of Space Access and Technology; and
     o    Ballistic Missile Defense Organization/Innovative Science and
          Technology Office.

     Under this agreement, we own an exclusive license for the worldwide use of
the CalTech technology for detection of passively-emitted infrared radiation
from tissue, organs and organ systems for the generation of temperature related
images for certain biomedical applications. Under defined circumstances, CalTech
may permit other parties to exploit the CalTech technology, for specific
applications or markets, if we are not exploiting the specific application or
market, and choose not to do so after notification by CalTech that a third party
is ready to do so. We must pay CalTech a minimum royalty of $10,000 per year as
a condition of the license. As of March 25, 2005 we are current with our royalty
payments to CalTech. The CalTech agreement also provides us with the right to
enter into agreements, including sublicenses, to exploit the CalTech technology
worldwide, subject to payment of royalties. The license from CalTech does not
expire other than as a result of a breach of the license by us, but following
the expiration of the last of the patents that are the subject of the license
(October 2018), the license becomes non-exclusive and royalty-free.

     LOCKHEED MARTIN LICENSE AGREEMENT. In September 1998, we entered into a
license agreement with Lockheed Martin Corporation pursuant to which we were
initially granted an exclusive license to exploit biomedical applications of
certain enhanced infrared detector technologies known as Enhanced Quantum Well
Infrared Photodetectors, or EQWIP. The EQWIP technology is protected by a patent
owned by Lockheed Martin. In addition, we licensed the same rights with respect
to patent filings on the EQWIP technology in a number of foreign countries. At
the time we entered into the license agreement with Lockheed Martin, we believed
that these technologies would enhance the sensitivity of the technology we
licensed from CalTech.

     In order to maintain the exclusivity of the license, we were required to
meet certain milestones relating to royalty generation, development of markets
and territories and utilization of the EQWIP technology in certain percentages
of our installed base of diagnostic equipment. If the license agreement remained
exclusive and Lockheed provided a source of manufactured EQWIP detectors, we
agreed to pay Lockheed Martin certain minimum royalties. We also agreed to pay
Lockheed Martin royalties on revenues we derived from utilization of the EQWIP
technology. To date, no manufacturer has produced EQWIPS and we have not
utilized the EQWIP technology licensed from Lockheed Martin and, therefore,
believe that the license is no longer exclusive and that no minimum or other
royalties are due to Lockheed Martin. Lockheed Martin, however, believes that
royalties are due and has demanded payment. See Item 3, "Legal Proceedings." If,
pursuant to the license agreement, royalty payments are ever required to be paid
by us to Lockheed Martin, such payments will range from 1.5% to 3% of revenues
derived from the technology as defined in the agreement. If and when a viable
EQWIP's manufacturer is provided, we are required to make specified annual
minimum payments in order for us to maintain the exclusive rights to the EQWIP
technology.

     The license from Lockheed Martin does not expire other than as a result of
a breach of the license by us, but five years following the expiration of the
last of the patents that are the subject of the license (July 2016), the


                                       4
<PAGE>


license becomes non-exclusive and royalty-free. We do not believe that the
loss of exclusivity of the license granted under our agreement with Lockheed
Martin will have a significant impact on us.

     ANBAR LICENSE AGREEMENT. In March 1997, we entered into an option agreement
with Michael Anbar, Ph.D., Professor in the Department of Physiology and
Biophysics, School of Medicine, and Chairman of Biomedical Sciences, at the
State University of New York at Buffalo (now retired), pursuant to which we
acquired the exclusive worldwide right to commercialize the technology relating
to a patent owned by Dr. Anbar, subject to specified research funding
requirements being met. The Anbar patent is entitled "Detection of cancerous
lesions by their effect on the periodic modulation of perfusion on the
surrounding tissue." This patent describes the disease related physiological
processes, which occur in the presence of cancerous tumors, as well as the
method by which BioScanIR analyzes radiation emitted by tissue surrounding
cancerous tumors. We are required to pay Dr. Anbar, who currently owns
approximately 9.2% of our outstanding shares of common stock, a royalty of $300
for each commercial BioScanIR system installed at a client site. The Anbar
license does not expire other than as a result of a breach of the license by us.
The Anbar patent expires in January 2015.

     Effective February 1, 2005, we have entered into a new two year consulting
agreement with Dr. Anbar, which provides for Dr. Anbar to advise management on
the optimization of our technology. As part of this agreement, we will acquire
one patent on complimentary technology developed and held by Dr. Anbar, who will
work closely with senior management, to provide direction, support and
assistance in order to advance our commercialization strategy, expand our
clinical applications and enhance new product development efforts. We have
obtained from Dr. Anbar U.S. Patent 5,771,261 which comprises methods and
apparatus for assessment of the mental stress effects involving the measurement
of periodic changes in skin perfusion. Using a remotely mounted infrared camera,
dynamic area telethermometry (DAT) measures the autonomic nervous activity by
monitoring and quantitatively analyzing the modulation of cutaneous perfusion.
Our strategy initially is to utilize OmniCorder patents which relate to
perfusion in medical pathology. At a later date, we might look to utilize the
patent that we obtained from Dr. Anbar, which relates to psychological
evaluation through the assessment of changes in perfusion.

     AEG INFRAROT-MODULE GMBH. Our primary supplier for BioScanIR camera
components is AEG Infrarot-Module GmbH, or AEG, a subsidiary of DaimlerChrysler
AG. We entered into a strategic contract with AEG to manufacture and market
advanced infrared disease detection systems and services to the healthcare
industry for the early detection and management of cancer and other diseases. As
part of the agreement, we have provided a non-exclusive technology license to
AEG to utilize our proprietary digital infrared QWIP technology. AEG has granted
us the exclusive right to market AEG's QWIP camera for a wide array of cancer
and vascular disease detection applications.

     We have committed to purchase infrared camera systems and components from
AEG for approximately U.S. $260,000 (200,000 euros) as of December 31, 2004. In
March 2005 we committed to purchase an additional $533,000 (410,000 euros) of
camera systems and components. These cameras represent the most current
technology and replace our order for previous generation units. These systems
and components utilize QWIP technology, for which we are the exclusive licensee.

POTENTIAL STRATEGIC ALLIANCES

     As part of our marketing efforts, we are also pursuing strategic alliances
with large pharmaceutical companies, as well as research foundations and
government agencies. Our revenue model assumes we will be able to establish
licensing agreements with pharmaceutical and medical device businesses, and
these companies are expected to bear a majority of the expenses associated with
the sales and marketing of the technology, in exchange for exclusive, or
non-exclusive, performance-based royalties.

PRODUCT OVERVIEW

     HOW THE BIOSCANIR SYSTEM WORKS. During the BioScanIR examination, which
takes less than ten minutes, the QWIP camera is positioned in front of the area
on the patient to be studied, and records minute changes in infrared radiation
that is passively emitted from the patient's body. The BioScanIR system consists
of two modules:

                                       5
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     o Data Acquisition - the QWIP camera and positioning system
     o Data Processing - proprietary software and hardware

     The camera is a commercially-built, modular, high precision instrument
manufactured exclusively for our applications. For more information on this
instrument, see "Manufacturing" below. The data collected by the instrument are
analyzed using our proprietary software and hardware, which process the data
according to patented diagnostic principles. The results of this analysis are
provided to the patient's doctor for interpretation.

     In certain markets where we might employ a transaction-based model, the
BioScanIR system can be configured to employ a single-use, disposable scan card.
The scan card is a CD-ROM, about the size and shape of a credit card, which
contains the encryption key for the analytical software program to be used for
the type of application for which the site is licensed. To begin data
processing, the scan card is inserted into the BioScanIR system. At the
conclusion of the individual image scanning session, the scan card is locked
out, thus preventing its reuse. The BioScanIR provides critical medical
information in a comfortable, non-invasive, cost-effective and timely manner.
Unlike existing imaging modalities, BioScanIR does not require contrast agents
and does not emit potentially damaging radiation. We believe that, in addition
to its superior detection capabilities, a strong advantage of the BioScanIR
system is its lower cost as compared with competing modalities. The per-use cost
of the BioScanIR is estimated to be significantly less than the cost of some
other functional imaging modalities. We believe that the quality of the
patient's experience may lead to greater participation in earlier disease
screening and, therefore, detection, and a lower dropout rate among patients in
clinical drug trials.

     The sensitivity of the product's detector technology, the increased speed
of data collection made possible by newly advanced camera technology, patented
algorithms that analyze changes in blood flow and the development of fast and
inexpensive CPU's, have together achieved a threshold that, for the first time,
make the BioScanIR system's diagnostic process possible.

COMMERCIALIZATION STRATEGY

     PILOT PROGRAM. We have completed clinical studies of the BioScanIR
technology in each of our chosen market segments over a five-year period, and
commenced a non-revenue generating pilot program at prestigious medical centers
in the United States and Europe. The BioScanIR has been clinically tested at
Harvard's Dana-Farber Cancer Institute (therapeutic monitoring), the Mayo Clinic
(surgical applications) and the State University of New York at Stony Brook
(breast cancer detection). Our pilot program sites have included Pasadena's
Huntington Memorial Hospital (neurosurgery), the University of Geneva in
Switzerland (reconstructive surgery) and the University of Leipzig in Germany
(heart surgery), the Heidelberg Cancer Research Center in Germany (cancer
therapy) and the University of Bergamo Hospital in Italy (brain surgery). In
2004 we added Milan Tumor Institute in Italy and in the first quarter of 2005,
we added Karolinska Institute in Sweden (peripheral vascular disease - wound
healing). We shipped the BioScanIR to the Cleveland Clinic in Ohio (breast
cancer therapy monitoring), where clinical trials are expected to begin in the
second quarter of 2005. Our pilot program has already produced what we believe
to be positive results based on feedback from physicians, technicians and
patients.

     Our studies completed in the period before 2004 served to validate our
basic technology. As part of our rollout strategy, we intend to establish new
pilot installations, with the goal of validating a commercially viable product
in specific application areas, further demonstrating the efficacy of the
BioScanIR system.

     o ADDRESSABLE MARKETS AND REVENUE OPPORTUNITIES. We continue to build a
     persuasive base of successful clinical studies and published papers through
     the successful conclusion of pilot studies in cancer therapy monitoring,
     reconstructive surgery, and neurosurgery in order to begin the rollout of
     our BioScanIR system in the United States and Europe. According to Medtech
     Insight's December 2002 report entitled "The Worldwide Market for
     Diagnostic Imaging Equipment," one-third of the world's annual healthcare
     budget, or $1.17 trillion, is spent on the detection and treatment of
     cancer and vascular disease. In the United States alone, according to the
     report, $400 billion is spent annually on cancer and vascular disease.
     Medical imaging comprises a large component of the total healthcare market,
     in the United States and abroad, and globally over one billion imaging
     procedures were performed in 2002. These procedures are performed using
     computed axial tomography (CTs), magnetic resonance imaging (MRIs),
     position


                                       6
<PAGE>


     emission tomography (PETs), x-ray and ultra-sound machines. CT scans use
     computerized analysis of x-rays to detect tumors. MRIs use magnetic fields
     and radio-frequency waves to produce three-dimensional images of normal and
     abnormal tissue. PET scans use a radioactive tracer to detect increased
     metabolic activity found in cancerous growths. According to Medtech
     Insight's report, the estimated number of annual procedures using these
     machines are:

              CT Scans:                               57.5 million
              MRIs:                                   29.5 million
              PETs (nuclear medicine):                34.5 million
              X-rays:                                 711 million
              Ultra-sounds:                           204 million

     The installed United States base of larger machines is approximately 15,000
units (8,100 CT scanners, 6,100 MRI scanners and 380 PET scanners). In view of
BioScanIR's attributes and cost advantages, large and growing global healthcare
expenditures, and the vast number of imaging procedures and applications for
which the BioScanIR is suited, we believe that we will attract market share. Our
plan is to initially target revenue-generating opportunities in the following
two high-value areas: therapy/drug development and surgery.

     The estimated $4 billion market for therapy/drug development includes
cancer research and development, vascular research and development, and cancer
and vascular clinical trials. According to a 2003 report by the Pharmaceutical
Research and Manufacturers Association, there are approximately 400 drugs under
development for the treatment of cancer. Of these, we estimate that 219 are
ideal candidates for development with the imaging assistance of the BioScanIR
system. The drug discovery, development and approval process lasts, on average,
74 months, according to a 2003 report by The Tufts Center for the Study of Drug
Development, and the average drug costs $802 million to develop and bring to
market. Only five in 5,000 compounds that enter pre-clinical testing advance to
human clinical testing, and only one of those five is ever approved for sale. We
believe any research tool that can reduce the time and costs of drug development
is of interest to biopharmaceutical companies. The BioScanIR system is designed
to monitor patients in trials, and has product features which give it
competitive advantages, particularly with respect to quick and effective
tracking of a therapeutic regimen.

     The estimated $7 billion market for surgery includes brain, cardiovascular,
vascular, and general surgery, and post-surgical monitoring. We believe any
imaging tool that helps improve surgical outcomes, reduces the risk to patients
and lowers healthcare costs, should be widely accepted by physicians,
researchers, technicians and patients alike.

     If we are successful in penetrating the therapy/drug development and
surgery markets, we will implement the second phase of our business strategy by
addressing the estimated $12 billion diagnostics/screening market, which
includes breast, cervical, skin and other cancers, and diabetes. The
technologies available today to screen and diagnose cancer vary greatly
according to the specific form of the disease being considered. X-ray
mammography is the most widely-used method of diagnosing breast cancer despite
the technology's severe limitations. For skin cancer detection, there are no
effective diagnostic means other than surgical biopsy, and for cervical cancer,
the inaccuracies of routinely conducted "pap smears" result in tens of thousands
of unnecessary cervical biopsies. We believe that the BioScanIR system can
potentially provide an easy-to-use, significantly lower cost, completely
non-invasive, patient-friendly method of cancer detection in each of these
areas.

     With an estimated market size of $12 billion, the diagnostic/screening
market represents a significant opportunity for us. We recognize that, despite
the substantial potential in this market segment, there are many clinical,
regulatory and marketing hurdles to overcome in order to establish the BioScanIR
as the standard of care in this fragmented and complex market. Consequently, we
plan to partner with large research foundations, healthcare organizations and
government agencies for the funding of large clinical trials to establish the
BioScanIR as the standard of care in cancer detection and screening.


                                       7
<PAGE>


     We expect that these studies will progress in tandem with the BioScanIR
system's success in the therapy/drug development and surgery segments. Success
in these areas will provide us with both the medical validity and financial
underpinnings to invest more aggressively in self-funded programs and studies
that can accelerate the market acceptance of the BioScanIR system as the
diagnostic and screening modality of choice in any number of important diseases,
such as breast cancer and diabetes. We do not intend to build-out a full-scale
internal sales and marketing force. In conjunction with successful clinical
trials and publication of positive operating results, our strategy will be to
establish marketing partnerships with medical device and pharmaceutical
companies with a strong presence in each of the segments of the market.

     In addition, we have identified over 20 other potential applications for
our system, many of which address markets of significant size such as breast
cancer screening as an adjunct to mammography, head and neck cancers, melanoma,
dermatological diseases like psoriasis and peripheral vascular diseases such as
Reynauds Disease, which we intend to pursue as our system becomes more widely
accepted and our resources permit.

     REVENUE MODEL. We believe that initial revenues will come primarily from
the sale of the BioScanIR system to customers for use in cancer therapy
monitoring and drug discovery, as well as in reconstructive and neurosurgery
applications. In addition, initial customers will likely include imaging
research organizations that will purchase BioScanIR systems for use in their own
research programs. It is possible, however, that initial revenues in certain
applications, such as cancer therapy monitoring, could involve a fee per use,
either as the sole revenue source, or more likely in combination with other
forms of revenue. Such other forms could include up front licensing fees, and/or
annual maintenance fees over the estimated 4-5 year life of the BioScanIR
system. Even if the initial source of revenue is the sale of the BioScanIR
system, it is anticipated that such sales would also be accompanied by annual
maintenance fees.

     As we expand our efforts into other applications we will evaluate our
revenue model options. For example, as we move into the diagnostic/screening
market it is anticipated that a fee per use model could be more appropriate. In
this model, which may also apply to other initiatives as noted above, revenues
would be generated through a combination of a fee per use, a one-time up-front
fee for licensing, installation and training, and annual maintenance fees. We
believe that the fee per use model may be more appropriate for physician
office-based diagnostic and screening applications by minimizing capital
equipment purchase barriers. This model is expected to generate sufficient fees
to recoup the cost of the BioScanIR system within one year.

     SALES AND MARKETING. Given the significant overall market size - there are
thousands of prospective installation sites and millions of potential screenings
- we believe there will be significant demand for our BioScanIR system.
According to industry data, there are approximately 6,280 hospitals, 9,100
free-standing surgical centers, outpatient clinics and sub-acute care sites and
15,000 skilled nursing homes in the United States, approximately 9,266 hospitals
in Japan and approximately 9,310 hospitals in France, Germany, Italy, Spain and
the United Kingdom, as well as clinics and offices of obstetricians,
gynecologists, oncologists, radiologists and other physicians and surgeons
throughout the developed world.

     To drive broad distribution of our systems throughout our target
applications markets, we will rely upon the establishment of channel partners.
Channel partners will perform the primary sales and marketing functions for our
systems. We expect that we may have different channel partners for different
applications. Channel partners could include distributors (on a regional,
national, multinational, or even global basis), manufacturers of medical
equipment (OEM relationship), manufacturer's representative organizations, drug
companies who market our system to physicians and hospitals as part of their
drug's protocol for patient treatment, or other interested parties that can
bring a strategy channel value to OmniCorder Technologies. To support these
channel partners, we do envision adding a limited set of our own sales and
customer support resources wherever appropriate globally.

     CLINICAL STUDIES AND EFFICACY. The BioScanIR system has been rigorously
tested for a variety of applications at leading institutions. We have conducted
clinical testing of our BioScanIR technology in our initial target market
segments over a five-year period, and we have commenced a non-revenue generating
pilot program at several prestigious medical centers in the United States and
Europe for applications in surgery and therapy. Our clinical test sites (alpha
sites) included Harvard's Dana-Farber Cancer Institute (for therapy monitoring),
the Mayo Clinic (for surgical applications) and the State University of New York
at Stony Brook (for breast cancer detection). Our beta site pilot program
involves the installation of our systems for evaluation by physicians,
technicians and


                                       8
<PAGE>


patients. Units are situated in The Karolinska Institute (skin cancer,
wound healing), The Ospedali Riuniti di Bergamo (brain surface perfusion changes
related to tumor pathology), HUG-Hopitaux Universitaires de Geneve (plastic
reconstructive surgery applications), and The Istituto Nazionale dei Tumori in
Milan (breast cancer and cutaneous angioma therapy monitoring). The BioScan IR
was shipped to The Cleveland Clinic (neoadjuvant breast chemotherapy), where
clinical trials are expected to begin in the second quarter of 2005. Additional
beta site pilot studies in the USA are planned. All of our published testing
results were reviewed and evaluated by medical or research experts in the
specific fields of use through the peer review process. Leading physicians have
documented the clinical efficacy of the BioScanIR in key peer-reviewed
publications supporting the use of our technology as a viable and economic
adjunct to these established imaging modalities. A recent study completed by
neurosurgeons at the Mayo Clinic and published in the Journal of Neurosurgery
described the BioScanIR system as "The Vision of the Future." In addition, at
the 2001 and 2002 American Society of Clinical Oncology conventions, we were
invited to present the results of the Dana-Farber Cancer Institute's study
documenting the advantages and imaging capabilities of the BioScanIR system. In
the most recent peer reviewed publication entitled "Dynamic Infrared Image of
Newly Diagnosed Malignant Lymphoma Compared with Gallium-67 and Fluorine-18
Fluorodeoxyglucose (FDG) Positron Emission Tomography (PET)," researchers from
Harvard's Dana-Farber Cancer Institute favorably compared the performance of the
BioScanIR system with that of PET imaging for applications involving cancer
treatment.

     REGULATORY AFFAIRS AND MILESTONES. We believe that we have sufficient
regulatory clearance to execute our business plan in the United States and
Europe. In December 1999, we received FDA Section 510(k) market clearance which
permits marketing of the BioScanIR service as an adjunctive method to detect
breast cancer and other diseases affecting the perfusion or reperfusion of blood
in tissue and organs. In August 2003, we received "CE mark" clearance that
permits us to market our BioScanIR throughout the European Union. For more
information about how governmental regulation affects our business, see
"Governmental Regulation" below.

COMPETITION AND INDUSTRY

     PRODUCT FEATURE COMPARISONS AND COMPETITIVE ADVANTAGES. Compared to other
imaging modalities such as CTs, MRIs and PETs, the BioScanIR exhibits lower
up-front and maintenance costs to hospitals, clinics and other healthcare
providers and, as a result, a lower cost per procedure. The BioScanIR
examination is non-invasive and patient-friendly, and the machine is easy for
technicians to operate. We believe that a less expensive, functional imaging
tool like the BioScanIR system will enable the use of many of the new, targeted
cancer therapies that are being produced, as they require accurate, lower cost
functional imaging techniques to ascertain early tumor response.

GOVERNMENTAL REGULATION

     FDA REGULATION. Our products and manufacturing activities are subject to
regulation by the U.S. Food and Drug Administration, or FDA, and by other
federal, state, local and foreign authorities. Pursuant to the Food, Drug, and
Cosmetic Act of 1938, commonly known as the FD&C Act, and the regulations
promulgated under it, the FDA regulates the development, clinical testing,
manufacture, packaging, labeling, storage, distribution and promotion of medical
devices. Before a new device can be introduced into the market, the manufacturer
must generally obtain marketing clearance through a Section 510(k) notification
or approval through a Premarket Approval, or PMA.

     CLASSIFICATION OF MEDICAL DEVICES. In the United States, medical devices
intended for human use are classified into three categories, Class I, II or III,
on the basis of the controls deemed reasonably necessary by the FDA to assure
their safety and effectiveness with Class I requiring the fewest controls and
Class III the most. Class I, unless exempted, and Class II devices are marketed
following FDA clearance of a Section 510(k) premarket notification. Since Class
III devices (e.g., implantable devices and life sustaining devices) tend to
carry the greatest risks, the manufacturer must demonstrate that such a device
is safe and effective for its intended use by submitting a PMA application. PMA
approval by the FDA is required before a Class III device can be lawfully
marketed in the United States. Usually, the PMA process is significantly more
time consuming and costly than the 510(k) process.

     Breast cancer screening devices that use infrared detection
instrumentation, such as that used in the BioScanIR system, which are intended
to be used by physicians as an adjunct (supplement) to other established


                                       9
<PAGE>


clinical detection methods for breast disease, are currently classified as Class
I devices, requiring clearances under Section 510(k) before marketing. Such
devices that are intended for stand-alone use, i.e., for use as a sole
diagnostic screening tool for detection of breast cancer, are classified as
either Class II or Class III devices, requiring PMA before marketing.

     CHANGES IN APPROVED DEVICES. The FD&C Act requires device manufacturers to
obtain a new FDA 510(k) clearance when there is a substantial change or
modification in the intended use of a legally marketed device or a change or
modification, including product enhancements and, in some cases, manufacturing
changes, to a legally marketed device that could significantly affect its safety
or effectiveness. Supplements for approved PMA devices are required for device
changes, including some manufacturing changes, that affect safety or
effectiveness. For devices marketed pursuant to 510(k) determinations of
substantial equivalence, the manufacturer must obtain FDA clearance of a new
510(k) notification prior to marketing the modified device. For devices marketed
with PMA, the manufacturer must obtain FDA approval of a supplement to the PMA
prior to marketing the modified device.

     GOOD MANUFACTURING PRACTICES AND REPORTING. The FD&C Act requires device
manufacturers to comply with Good Manufacturing Practices regulations. The
regulations require that medical device manufacturers comply with various
quality control requirements pertaining to design controls, purchasing
contracts, organization and personnel, including device and manufacturing
process design, buildings, environmental control, cleaning and sanitation;
equipment and calibration of equipment; medical device components; manufacturing
specifications and processes; reprocessing of devices; labeling and packaging;
in-process and finished device inspection and acceptance; device failure
investigations; and record keeping requirements including complaint files and
device tracking. We are in compliance with the above requirements.

     CURRENT REGULATORY STATUS. The FDA found that the BioScanIR system was
substantially equivalent to an existing legally marketed device, thus permitting
it to be marketed as an adjunct (supplemental) screening/diagnostic device. We
received 510(k) clearance in December 1999 and, together with our field test
data, are marketing the BioScanIR System as an adjunct (supplemental) method for
the diagnosis of breast cancer and other diseases affecting the perfusion or
reperfusion of blood in tissue or organs.

     REIMBURSEMENT BY THIRD-PARTY PAYORS. Most purchasers of medical devices
such as physicians, hospitals and imaging centers rely on reimbursements from
third-party payors including, by way of example, private indemnity health
insurers, managed care health insurers, federal health insurance programs (e.g.,
Medicare), and state administered programs (e.g., Medicaid). Therefore,
decisions by third-party payers concerning reimbursement for use of the
BioScanIR system are likely to affect the use of this device. Use of the
BioScanIR System for its current FDA cleared uses is not covered by any
third-party insurer. Failure to secure third-party coverage, or failure to
maintain coverage after it is received, could have an material adverse impact on
our operations.

     Favorable coverage determinations for a medical device do not automatically
follow FDA approval or clearance of the medical device. Rather, manufacturers of
medical devices must affirmatively seek favorable coverage determinations from
private and public insurers. A coverage determination usually involves two
fundamental decisions. First, the insurer decides whether there are
circumstances under which it will pay for a procedure involving the device or
will pay an additional amount for use of the device, where the device is an
adjunct to an already covered procedure. Second, if there are circumstances
where coverage would be appropriate, the insurer sets out the conditions
necessary to support coverage (e.g., medical history). The coverage conditions
can be broad allowing many patients to qualify for coverage or so narrow, that
few patients qualify for coverage. Following a favorable coverage determination,
the insurer sets a level of reimbursement or a formula for determining that
level.

     Coverage determinations by private and public insurers can proceed slowly,
their outcomes are uncertain and can vary even within a single program owing in
part to the fact that many determinations are made regionally, locally or on a
case-by-case basis, rather than nationally. This is even so for Medicare, the
federal health insurance program for the aged and disabled and single largest
third-party payor.

     New technologies can receive a special temporary reimbursement code (a New
Technology Ambulatory Procedure Code, or APC) provided by Medicare that allows
users of the new technology to submit claims for


                                       10
<PAGE>


reimbursement for their use of the new technology in an outpatient setting
for Medicare patients. This type of code is used to collect actual clinical
history on the costs of using the new technology as a precursor to the
assignment of a permanent Current Procedural Terminology, or CPT code. We
received notice that we have been awarded an APC code effective April 1, 2005
for usage of our system in providing the service, "dynamic infrared blood
perfusion imaging." A critical element of our efforts over the next two years
must be to build a history of claims submissions using the APC for the use of
our system in order to demonstrate the viability of the technology and pave the
way for securing a CPT code which is issued by the American Medical Association.
The service associated with the use of the BioScanIR system has been assigned
APC Code 1502 and HCPCS Code C9723. The service will be reimbursed at $75.00 per
scan plus a $15.00 co-pay effective April 1, 2005.

MANUFACTURING

     We subcontract the manufacturing of components for our BioScanIR system to
several third parties. We provide the manufacturing specifications for all of
these components. Incoming components are tested and assembled, and the final
units are retested, before being shipped to customers. We believe that our
manufacturing environment is compliant with FDA GMP and ISO 9001. The BioScanIR
is UL-certified.

EMPLOYEES

     As of March 23, 2005, we had a total of 13 full-time employees, 5 part-time
employees and 8 additional outside consultants (part-time). Together,
approximately 10 of these individuals are engaged in technology, research and
product development, 6 in sales and marketing, and customer service, and 10 in
management and finance. We have never experienced a work stoppage and believe
our employee relations are very good.



                                       11
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

     Our corporate headquarters are located at 125 Wilbur Place, Suite 120,
Bohemia, New York, in approximately 6,550 square feet of space occupied under a
lease with a monthly rental rate of approximately $4,800 that expires in
November 2009. In addition, we leased office space in New York, New York under a
lease that expired on September 30, 2004, but continued on to occupy the space
on a month-to-month basis at a monthly rental rate of approximately $1,350. We
will vacate the space on March 31, 2005.

ITEM 3.  LEGAL PROCEEDINGS

     In September 1998, we entered into a license agreement with Lockheed Martin
Corporation, pursuant to which we were initially granted an exclusive license to
exploit biomedical applications of certain enhanced infrared detector
technologies known as Enhanced Quantum Well Infrared Photodetectors, or EQWIP.
We believed that these technologies would enhance the sensitivity of the
technology we licensed from CalTech. We have not utilized the EQWIP technology
licensed from Lockheed.

     In a letter dated October 12, 2004 and in subsequent correspondence,
Lockheed advised us that it believes that minimum royalties and other amounts
aggregating approximately $2,500,000 were owed to Lockheed by us pursuant to the
license agreement and demanded payment of such sum. In a letter dated November
1, 2004, Lockheed notified us that, in its view, we were in default under
certain of the provisions of the license agreement and, unless such conditions
were remedied within 60 days thereafter, Lockheed would regard the license
agreement as cancelled and terminated. We have responded to Lockheed that, among
other reasons, no sums are due to Lockheed by us, the license agreement by its
terms has become a non-exclusive license requiring no minimum or other royalties
be paid and that Lockheed failed to perform certain of its obligations provided
by the license agreement. Although we believe that we have no current monetary
obligations to Lockheed pursuant to the license agreement or otherwise, Lockheed
may determine to pursue its claims through litigation, creating the possibility
that we may incur substantial costs and expenses, including legal and other
professional fees, in connection with such litigation.

     On March 8, 2003, our former Chief Financial Officer ("CFO"), filed a
declaratory judgment action against us in the US District Court for the District
of New Jersey. The complaint alleges that while serving as both a director and
CFO, he was awarded stock options to purchase 2,538,324 shares of common stock.
He is seeking specific determination that he is entitled to these options, as
well as approximately $462,000 in deferred salary.

     On July 23, 2004, the District Court granted, in part, our motion to
dismiss. The Court dismissed claims relating to 2,501,328 stock options, which
were to expire in April 2005, as unripe for adjudication. The Court found that a
justiciable dispute existed with respect to 36,966 options which expired on
April 1, 2004. We moved to dismiss the deferred salary claim based on an
arbitration provision in Plaintiff's employment agreement. The Court declined to
dismiss the deferred salary claim, but ordered the parties to conduct limited
discovery on the validity of the employment agreement and revisit the issue on
summary judgment.

     While the ultimate outcome of this matter cannot presently be determined
with certainty, according to our counsel, Greenberg Traurig, LLP, the remaining
claims are without merit, and we intend to vigorously defend the claims in this
lawsuit. We believe that our provision for such in the accompanying financial
statements is adequate at December 31, 2004.

     On December 22, 2004, our former President and Chief Executive Officer Mark
A. Fauci, who was terminated from employment on December 13, 2004, filed for
arbitration under his employment agreement with the American Arbitration
Association alleging that his termination was without cause as defined in the
agreement, and demanding monies allegedly due and owing under the agreement,
claimed to be in excess of $1 million but not exceeding $5 million. Mr. Fauci is
a director and significant stockholder of our company.

     On March 9, 2005, in settlement of an arbitration proceeding arising from
the December 13, 2004 termination of his employment agreement as President and
CEO, we announced that we entered into a Consulting Agreement with Mark A.
Fauci. Mr. Fauci remains a member of our board of directors. The agreement,
which terminates Mr. Fauci's previous employment agreement with us, provides
that Mr. Fauci will perform consulting services for us for a retroactive
two-year period in exchange for consulting fees of $200,000 per year during the
term of the agreement which expires December 2006. Mr. Fauci will be nominated
at the next two annual meetings of shareholders to continue as a board member.
The agreement also provides for a three-year payout schedule of our obligation
to pay Mr. Fauci's deferred accrued salary under his previous employment
agreement, in the amount of $625,000. Those payments will commence on the
earlier of (i) September 1, 2005, or (ii) the closing of the current
subscription rights offering with gross proceeds of at least $2.5 million. This
amount is payable at the rate of $10,000 per month for the initial 12 months and
$20,000 per month thereafter.


                                       12
<PAGE>


     We are not a party to any other pending or threatened legal proceedings.
The outcome of the matters described above could have a material impact on our
financial condition, results of operations and cash flows.

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

     None.

                                     PART II

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

     In September 2000, our common stock became eligible for quotation on the
NASD's OTC Bulletin Board under the symbol "PMOS.OB." Upon the change of our
corporate name to OmniCorder Technologies, Inc. on February 26, 2004, our
trading symbol was changed to "OMCT.OB." The following table sets forth the high
and low bid and asked prices for our common stock for the periods indicated as
reported by the OTC Bulletin Board:
<TABLE>
<CAPTION>

         YEAR ENDED DECEMBER 31, 2003:                                      HIGH              LOW
         ----------------------------                                       ----              ---

<S>                                                                          <C>              <C>
         First Quarter............................................           $.15             $.03
         Second Quarter...........................................            .10              .10
         Third Quarter............................................            .10              .04
         Fourth Quarter (October 1 to December 18)................            .10              .04

         Fourth Quarter (December 19, closing date of
         recapitalization transaction)............................          $1.20             $.45

         Fourth Quarter (December 22 to December 31)..............          $8.00            $1.50

         YEAR ENDED DECEMBER 31, 2004:
         -----------------------------

         First Quarter............................................          $8.50            $2.80
         Second Quarter...........................................           4.90             3.25
         Third Quarter............................................           4.05              .75
         Fourth Quarter...........................................           1.60              .58

         YEAR ENDING DECEMBER 31, 2005:
         ------------------------------

         First Quarter (January 1 to March 28)....................          $1.10            $ .81

</TABLE>


     These bids represent prices quoted by broker-dealers on the OTC Bulletin
Board. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

     Prior to the completion of the recapitalization transaction on December 19,
2003, OmniCorder's stock was not traded on a public trading market and
OmniCorder had no registered securities outstanding.

     As of March 25, 2005, there were 29,951,107 shares of OmniCorder common
stock outstanding with approximately 359 stockholders of record.


                                       13
<PAGE>


DIVIDEND POLICY

     As of March 25, 2005 we had one class of common stock and 359 holders of
record for the 29,951,107 shares outstanding. At March 25, 2005, we had
1,550,000 shares of series A convertible preferred stock outstanding, and nine
holders of record of such shares. We have never declared or paid cash dividends
on our common stock. We currently intend to retain future earnings to finance
the operation, development and expansion of our business. We do not anticipate
paying cash dividends on our common stock in the foreseeable future. Payment of
future cash dividends, if any, will be at the discretion of our board of
directors and will depend on our financial condition, results of operations,
contractual restrictions, capital requirements, business prospects and other
factors that our board of directors considers relevant.

     Holders of our series A convertible preferred stock are entitled to receive
a cumulative dividend of 4% per annum, payable annually in cash or, at our
option, in additional shares of series A convertible preferred stock (computed
on the basis of the 10-day volume-weighted average price of our common stock on
the American Stock Exchange or Nasdaq SmallCap Market or, if not traded on such
exchange or market, on the OTC Bulletin Board).

EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information regarding the status of our
existing equity compensation plans at March 23, 2005. It reflects the amendment
to OmniCorder's 1998 Stock Option Plan, which was approved by our stockholders
at a special meeting of stockholders held on February 26, 2004.

<TABLE>
<CAPTION>

                                                                                          NUMBER OF SECURITIES
                                                                                          REMAINING AVAILABLE FOR
                                                                                          FUTURE ISSUANCE UNDER
                                     NUMBER OF SECURITIES TO    WEIGHTED-AVERAGE          EQUITY COMPENSATION PLANS
                                     BE ISSUED UPON EXERCISE    EXERCISE PRICE OF         (EXCLUDING SECURITIES
                                     OF OUTSTANDING OPTIONS,    OUTSTANDING OPTIONS,      REFLECTED IN THE SECOND
PLAN CATEGORY                        WARRANTS AND RIGHTS        WARRANTS AND RIGHTS       COLUMN)
-------------                        -------------------        -------------------       -------

<S>                                            <C>                        <C>             <C>
Equity Compensation plans approved
by security holders                            4,308,517                  $1.22           0

Equity Compensation plans not
approved by security holders                   1,929,339                  $1.06           0

Total                                          6,237,856                  $1.17           0
</TABLE>


     Through March 23, 2005, we granted stock options to purchase 13,942 shares
of our common stock in excess of the shares reserved under the 1998 Stock Option
Plan.

     Our board of directors has proposed a new 2005 Incentive Compensation Plan
that will reserve 5,000,000 shares of common stock, which is pending stockholder
approval at our June 2005 annual meeting of our stockholders. The purpose of the
plan is the same as the OmniCorder 1998 Stock Option Plan and the grants under
the 2005 Incentive Compensation Plan may be either stock options, stock
appreciation rights, restricted shares of stock, deferred shares of stock,
shares granted as a bonus or in lieu of another award, dividend equivalent, and
other stock based award or performance award.

FACTORS THAT MAY AFFECT THE FUTURE RESULTS OF OUR BUSINESS

     SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS. Certain statements in
"Management's Discussion and Analysis or Plan of Operation" below, and elsewhere
in this annual report, are not related to historical results, and are
forward-looking statements. Forward-looking statements present our expectations
or forecasts of future events. You can identify these statements by the fact
that they do not relate strictly to historical or current facts. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,


                                       14
<PAGE>


performance or achievements expressed or implied by such forward-looking
statements. Forward-looking statements frequently are accompanied by such words
such as "may," "will," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue,"
or the negative of such terms or other words and terms of similar meaning.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, achievements, or timeliness of such results. Moreover,
neither we nor any other person assumes responsibility for the accuracy and
completeness of such forward-looking statements. We are under no duty to update
any of the forward-looking statements after the date of this annual report.
Subsequent written and oral forward looking statements attributable to us or to
persons acting in our behalf are expressly qualified in their entirety by the
cautionary statements and risk factors set forth below and elsewhere in this
annual report, and in other reports filed by us with the SEC.

     WE HAVE INCURRED LOSSES IN PAST AND HAVE A LIMITED OPERATING HISTORY ON
WHICH TO BASE AN EVALUATION OF OUR PROSPECTS, WHICH CAN HAVE A DETRIMENTAL
EFFECT ON THE LONG-TERM CAPITAL APPRECIATION OF OUR STOCK. We have a limited
operating history on which to base an evaluation of our business and prospects.
Our prospects must be considered in light of inherent risks, expenses and
difficulties encountered by companies in their early stage of development,
particularly companies in new and evolving markets. These risks include
acceptance by physicians, researchers, technicians and patients in an evolving
and unpredictable business environment, the lack of a well-developed brand
identity and the ability to bring products to market on a timely basis. For the
years ended December 31, 2004 and 2003, we had net losses attributable to common
stockholders of $5,093,270 and $2,375,919, respectively. We cannot give any
assurance that we will ever generate significant revenue or have profits. In
addition, we anticipate that we may require additional capital commitments
during 2005 and 2006 to sustain our operations. This could have a detrimental
effect on the long-term capital appreciation of our stock.

     WE ARE DEPENDENT ON OUR TECHNOLOGY LICENSE AGREEMENTS WITH THIRD PARTIES
WHICH REQUIRE US TO SATISFY OBLIGATIONS TO KEEP THEM EFFECTIVE, AND IF THESE
AGREEMENTS ARE TERMINATED, OUR TECHNOLOGY AND OUR BUSINESS WOULD BE SERIOUSLY
AND ADVERSELY AFFECTED. We have entered into important, long-term license
agreements with the California Institute of Technology and Michael Anbar, Ph.D.
to incorporate their proprietary technologies into our BioScanIR system. These
license agreements require us to, in some cases, pay minimum royalties and
satisfy other conditions. We cannot give any assurance that sales of products
incorporating these technologies will be sufficient to recover the amount of
third-party payments. Failure by us to satisfy our obligations under these
agreements may result in modification of the terms or early termination of the
respective agreement, which would have a serious adverse effect on us. We expect
that we will be dependent on these licensors for the foreseeable future.

     WE RELY ENTIRELY ON OUTSIDE MANUFACTURERS FOR OUR KEY COMPONENTS AND CANNOT
GUARANTEE THAT THEY WILL NOT HAVE PROLONGED SUPPLY SHORTAGES, RESULTING IN OUR
INABILITY TO TIMELY SATISFY CUSTOMER ORDERS. All of the infrared cameras and
other key components utilized in our BioScanIR system are manufactured by
outside companies. Our ability to enter new markets and sustain satisfactory
levels of sales in each market will depend in significant part upon the ability
of these companies to manufacture the components for introduction into our
markets. We cannot give any assurance that we will be successful in entering
into agreements with all of the manufacturers to maintain a constant supply of
our key components. In addition, once we enter into manufacturing contracts, we
face the possibility that the contracts will not be extended or replaced. This
could result in our inability to timely satisfy customer orders, and cause us to
possibly lose business to alternative providers of diagnostic scanning devices.

     WE HAVE NOT FULLY DEVELOPED AN EFFECTIVE INTERNAL SALES FORCE TO MARKET AND
SELL THE BIOSCANIR SYSTEM, AND IF WE ARE UNSUCCESSFUL, OUR OVERALL GROWTH WILL
BE HAMPERED. We have limited marketing experience and limited financial,
personnel and other resources to undertake the extensive marketing activities
necessary to market our BioScanIR system. Our ability to generate revenue from
the licensing of our BioScanIR system will be dependent upon, among other
things, our ability to manage an effective internal direct sales force. We will
need to develop a sales force and a marketing group with technical expertise to
coordinate marketing efforts with strategic partners. In addition, we cannot
give any assurance that we will be able to market our products or services
effectively through an internal direct sales force, independent sales
representatives, through arrangements with an outside sales force or through
strategic partners, which could hamper our overall growth.


                                       15
<PAGE>


     WE MAY EXPERIENCE INFRINGEMENT OF OUR INTELLECTUAL PROPERTY RIGHTS,
INCLUDING OUR PATENTS, PROPRIETARY TECHNOLOGY AND CONFIDENTIAL INFORMATION,
WHICH WOULD UNDERMINE OUR TECHNOLOGY PLATFORM. Our success will depend, in large
part, on our ability to obtain and protect patents, protect trade secrets and
operate without infringing on the proprietary rights of others. We cannot give
any assurance that the patent applications that have been or will be filed on
products developed by us will be approved, that any issued patents will provide
us with competitive advantages or will not be challenged by others, or that the
patents of others will not have an adverse effect on us.

     EXISTING AND NEWLY-DEVELOPED TECHNOLOGIES MAY COMPETE WITH OUR BIOSCANLR
SYSTEM, POTENTIALLY MAKING BIOSCANLR LESS ATTRACTIVE TO PROSPECTIVE CUSTOMERS
AND RESULTING IN IT BECOMING NO LONGER IN DEMAND. We are not aware of any
devices currently on the market which will be capable of competing directly with
our BioScanIR system, although several new companies are developing technologies
aimed at the same market niche as the BioScanIR system, and there may be others
of which we are unaware. Our potential competitors may succeed in developing
products that are more effective or less costly (or both) than our products, and
such competitors may also prove to be more successful than us in manufacturing,
marketing and sales. Some of our potential competitors may be large,
well-financed and established companies that have greater resources and,
therefore, may be better able than us to compete for a share of the market even
in areas in which we may have superior technology.

     We also compete with existing diagnostic alternatives, most notably x-ray
mammography, CT, MRI and PET. Significant barriers to our success are posed by
these existing alternatives. See "Business -- Competition and Industry."

     OUR PRODUCT LIABILITY INSURANCE COVERAGE MAY NOT BE ADEQUATE IN A
CATASTROPHIC MEDICAL SITUATION, AND A LARGE CLAIM MAY CAUSE US TO PAY DAMAGES TO
THIRD PARTIES AND INCUR BAD PUBLICITY. The nature of our medical products may
expose us to product liability risks. Although we have obtained $2.0 million of
product liability insurance coverage, our current annual premiums of
approximately $35,000 are expected to increase. We cannot give any assurance
that this insurance will provide adequate coverage against product liability
claims. In addition, some of our key license agreements require this coverage to
be maintained when we sell licensed services. While no product liability claims
are pending or threatened against us to date, a successful product liability
claim against us in excess of our insurance coverage could have a serious
adverse effect on us, including bad publicity.

     WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION BY THE U.S. FOOD AND DRUG
ADMINISTRATION AND OTHER AUTHORITIES ON ALL ASPECTS OF OUR BUSINESS, AND IF WE
DO NOT COMPLY WITH THESE REGULATIONS, WE COULD BE PREVENTED FROM MARKETING OUR
PRODUCTS. The U.S. Food and Drug Administration, or FDA, has established
procedures and standards for initial approval to market medical devices and for
the manufacture of the devices. We are subject to inspection by the FDA for
compliance with these standards. Should the FDA determine, at any time, that we
or any of our products are not in compliance with these standards, it may
withhold approval and prevent the marketing of our products. Negative
determinations by the FDA and other governmental authorities and third-party
payors, such as Medicare and private insurers, could have a serious adverse
effect on us. For more information on how we are impacted by governmental
regulation, see Item 1, "Description of Business -- Governmental Regulation."

     MEDICARE REIMBURSES PATIENTS FOR THE USE OF OUR BIOSCANLR SYSTEM ON A
TEMPORARY BASIS AND, ALTHOUGH WE WILL SEEK PERMANENT COVERAGE AT A HIGHER RATE
OF REIMBURSEMENT, THAT PROCESS IS LENGTHY AND COMPLEX, WHICH WILL MAKE OUR
PROSPECTS LESS CERTAIN. Whether a medical procedure involving a medical device
is covered by a third-party payor can significantly influence the marketability
of that device. Medicare, the federal health insurance program for the aged and
disabled, is the single largest third-party payor. Medicare coverage decisions
frequently influence private third-party payors. Medicare covers medically
necessary therapies, surgery and diagnostic tests. By contrast, Medicare
generally does not cover screening tests. However, it does cover a few expressly
delineated screening procedures or tests. Thus, by way of example, Medicare
covers screening pap smears, screening pelvic examinations, screening tests for
early detection of prostate cancer, screening for coloretal cancer and screening
mammography for early detection of breast cancer. With respect to breast cancer,
mammography is the only screening technique covered by Medicare and the amount
of that coverage is set by a free schedule or by the Outpatient Prospective
Payment System, depending on where the test is performed.


                                       16
<PAGE>


     Effective April 1, 2005, we received a temporary reimbursement code. See
Item 1, "Description of Business - Governmental Regulation." We will seek
permanent Medicare coverage of our system for treatment and diagnosis. The
coverage process is lengthy, complex and the results are uncertain and could
vary geographically.

     Even if BioScanIR were to be covered by Medicare on a permanent basis, the
amounts of those payments can be changed by legislative or regulatory actions
and by determinations of the fiscal agents for the program. In addition, private
payors and the states, under their Medicaid programs for the poor, increasingly
are demanding or imposing discounted fee structures. Efforts to impose greater
discounts and more stringent cost controls by third-party payors and healthcare
providers are expected to continue. Even if Medicare and other third-party
payors were to cover procedures involving BioScanIR, we cannot be certain that
the reimbursement levels will be adequate. We will be seeking a higher level of
reimbursement than we received effective April 1, 2005.

     WE PURCHASE INFRARED CAMERA COMPONENTS IN EUROS, AND THEREFORE OUR COST OF
GOODS AND OPERATING MARGINS MAY BE ADVERSELY AFFECTED BY CURRENCY FLUCTUATIONS
AND RESULT IN EXCHANGE LOSSES. We purchase infrared camera components from AEG
Infrarot-Module GmbH, a German company, in Euros, which is the prevailing
currency of Europe, rather than in U.S. dollars. In fiscal 2003, we paid
approximately 44,000 Euros (or $51,583 at then current exchange rates) for
camera systems from this supplier. As of December 31, 2004, we committed to
purchase approximately 200,000 Euros (or $260,000 at current exchange rates) of
camera components from this supplier this year. In March 2005, we committed to
purchase an additional 410,000 Euros ($533,000 at current exchange rates) of
camera systems and components. Accordingly, exchange rate fluctuations in the
Euro relative to the U.S. dollar could affect our cost of goods and operating
margins and could result in exchange losses. In fiscal 2003, we incurred a small
loss resulting from foreign currency transactions, and this loss can be expected
to increase with larger component orders. We do not use derivative financial
instruments to hedge our exposure to changes in foreign currency exchange rates.
Our results of operations will be adversely affected if we are unable to
mitigate the effects of currency fluctuations in the future.

     IF WE FAIL TO ENTER INTO STRATEGIC ALLIANCES WITH LARGE PHARMACEUTICAL
COMPANIES, RESEARCH FOUNDATIONS OR GOVERNMENT AGENCIES, OUR BUSINESS MAY GROW
SLOWER THAN ANTICIPATED. In addition to our direct marketing efforts, we are
pursuing strategic alliances with large pharmaceutical companies, as well as
research foundations and government agencies, that have a significant presence
in our target markets, can introduce BioScanIR as an accepted technology to
industry participants and can bear a portion of the expenses associated with the
sales and marketing of our technology. However, we have not yet and we cannot be
certain that we will ever enter into any definitive strategic alliance with
these companies, foundations and agencies, or that any future strategic alliance
will be on terms and conditions that will enable us to generate profits. If we
are unsuccessful in obtaining one or more strategic alliances, our business may
grow slower than anticipated, and our results of operations may suffer.

     OUR ABILITY TO RAISE ADDITIONAL CAPITAL IS UNCERTAIN AND MAY CAUSE US TO
CURTAIL OUR OPERATION OR TAKE ACTIONS THAT MAY DILUTE YOUR FINANCIAL INTEREST,
IF WE ARE NOT TIMELY IN THESE FUNDING EFFORTS. We do not currently generate
sufficient cash to fully fund our operations. If additional funds are raised
through the issuance of equity securities, the percentage of ownership of our
then-current stockholders will be reduced and such equity securities may have
rights, preferences or privileges senior to those of the existing holders of our
common stock. Further, we may have to raise substantial additional capital
thereafter if changes in our production plans cause unexpected large future
capital expenditures or changes in our sales and distribution plans cause a
significant increase in distribution expenses or decrease in revenues.

     We also contemplate raising funds in the future through public or private
financings, or from other sources. We cannot give any assurance that necessary
additional financing will be available to us or available on acceptable terms.
The uncertainties regarding the availability of continued financing and
commencement of adequate commercial revenues raise substantial doubt about our
ability to continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business.

     WE ARE SUBJECT TO SECTION 203 OF THE GENERAL CORPORATION LAW OF THE STATE
OF DELAWARE WHICH MAY INHIBIT A TAKEOVER AT A PREMIUM PRICE THAT MAY BE
BENEFICIAL TO OUR STOCKHOLDERS. We are subject to Section 203 of the Delaware
General Corporation Law. Subject to limited exceptions, Section 203 prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that such
stockholder became an interested stockholder unless the proposed business
combination

                                       17
<PAGE>


was approved by the corporation's board of directors before the stockholder
became an interested stockholder. In general, Section 203 defines an interested
stockholder as any stockholder directly or indirectly owning 15% or more of the
outstanding voting stock of a Delaware corporation. Section 203 could have the
effect of discouraging others from making tender offers for our shares, and also
may have the effect of preventing changes in our management.

     THERE HAS PREVIOUSLY BEEN NO ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK AND
WE CANNOT BE CERTAIN THAT AN ACTIVE TRADING MARKET WILL BE ESTABLISHED OR THAT
SUCH SECURITIES CAN BE RESOLD AT OR ABOVE THE PRICE AT WHICH THEY WERE
PURCHASED, OR AT ALL. There has been no active public market for our common
stock. An active public market for our common stock may not develop or be
sustained. The market price of our common stock may fluctuate significantly in
response to factors, some of which are beyond our control, and as a result you
may incur a loss on your investment. These factors include:

     o    product liability claims or other litigation;

     o    the announcement of new products or product enhancements by us or our
          competitors;

     o    developments concerning intellectual property rights and regulatory
          approvals;

     o    quarterly variations in our competitors' results of operations;

     o    developments in our industry; and

     o    general market conditions and other factors, including factors
          unrelated to our own operating performance.

     The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, market prices of securities of medical
technology companies have experienced fluctuations that often have been
unrelated or disproportionate to the operating results of these companies.
Continued market fluctuations could result in extreme volatility in the price of
shares of our common stock, which could cause a decline in the value of our
shares. Price volatility may be worse if the trading volume of our common stock
is low. The market price of our common stock has exhibited volatility since the
closing of our recapitalization transaction on December 19, 2003. Our common
stock has traded as high as $8.50 and as low as $.58 since then.

     OUR COMMON STOCK MAY BE CONSIDERED A "PENNY STOCK" UNDER SEC REGULATIONS
AND MAY BE DIFFICULT TO SELL WHEN DESIRED DUE TO BROKER-DEALER RESTRICTIONS. The
SEC has adopted regulations which generally define "penny stock" to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to specific exemptions. The market
price of our common stock is currently less than $5.00 per share. This
designation requires any broker or dealer selling these securities to disclose
specified information concerning the transaction, obtain a written agreement
from the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers or
dealers to sell our common stock and may affect the ability of investors to sell
their shares. In addition, since our common stock is currently quoted on the OTC
Bulletin Board, stockholders may find it difficult to obtain accurate quotations
of our common stock and may experience a lack of buyers to purchase our shares
or a lack of market makers to support the stock price.

     SHARES ELIGIBLE FOR PUBLIC SALE AFTER THE PENDING RIGHTS OFFERING AND THEIR
SALE OR POTENTIAL SALE WILL PROBABLY DEPRESS THE MARKET PRICE OF OUR COMMON
STOCK. Sales of a significant number of shares of our common stock in the public
market could harm the market price of our common stock. We plan to register
subscription rights to purchase shares of series A convertible preferred stock
which are convertible into 3,181,818 shares of common stock. The series A
convertible preferred stock is convertible into shares of common stock (i) at
any time at the option of the holder thereof, and (ii) automatically, as of the
close of business on the 20th consecutive trading day on which the closing bid
price for the common stock on the principal stock exchange or market on which it
is listed, including the American Stock Exchange or Nasdaq SmallCap Market, or
if not traded on such exchange or market, on the OTC Bulletin Board, is at least
$2.20, or 200% of the $1.10 conversion price per share, subject to adjustment.


                                       18
<PAGE>


     We also plan to register the resale by our earlier series A convertible
preferred stockholders of up to 1,409,091 shares of common stock and up to
465,000 shares of common stock issuable under warrants exercisable at a price
per share equal to $1.10. If the subscription rights are exercised in full, we
expect all shares of series A convertible preferred stock and warrants to
convert or exercise into a total of 5,055,909 shares of our common stock.

     As additional shares of our common stock become available for resale in the
public market pursuant to these registrations of shares and future registrations
of shares, the supply of our common stock will increase, which could decrease
its price. Some or all of the shares of our common stock also may be offered
from time to time in the open market pursuant to Rule 144, and these sales may
have a depressive effect on the market for our common stock. All of the shares
of common stock currently held by our executive officers and directors are
subject to so-called "lockup" agreements, which restrict open market sales by
those officers and directors through December 31, 2005. 12,932,495 shares of
common stock, including shares issuable upon exercise of outstanding warrants,
are subject to these lock-up agreements. In general, a person who has held
restricted shares for a period of one year may, upon the filing with the SEC of
a notification on Form 144, sell into the market common stock in an amount equal
to the greater of 1% of the outstanding shares or the average weekly number of
shares sold in the last four weeks prior to such sale. These sales may be
repeated once each three months, and any of the restricted shares may be sold by
a non-affiliate after they have been held two years.

     OUR CORPORATE CHARTER CONTAINS AUTHORIZED, UNISSUED "BLANK CHECK" PREFERRED
STOCK WHICH CAN BE ISSUED WITHOUT STOCKHOLDER APPROVAL WITH THE EFFECT OF
DILUTING THEN CURRENT STOCKHOLDER INTERESTS. Our certificate of incorporation
authorizes the issuance of up to 10,000,000 shares of "blank check" preferred
stock with designations, rights and preferences as may be determined from time
to time by our board of directors. Accordingly, our board of directors is
empowered, without stockholder approval, to issue a series of preferred stock
with dividend, liquidation, conversion, voting or other rights which could
dilute the interest of, or impair the voting power of, our common stockholders.
We have issued 1,550,000 shares of series A convertible preferred stock and plan
to issue rights to acquire an additional 3,500,000 of such shares. The issuance
of a series of preferred stock could be used as a method of discouraging,
delaying or preventing a change in control.



                                       19
<PAGE>


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

     You should read the following description of our financial condition and
results of operations in conjunction with the financial statements and
accompanying notes included in this report beginning on page F-1.

OVERVIEW AND EFFECT OF RECAPITALIZATION TRANSACTION

     Unless the context otherwise requires, "we," "our," "us" and similar
phrases refer to OmniCorder Technologies, Inc. (a publicly-traded company
formerly known as Promos, Inc.), which acquired all the assets and assumed all
the liabilities of OmniCorder Technologies, Incorporated, a privately-held
company ("OmniCorder"), in a recapitalization transaction on December 19, 2003,
and succeeded to the business of OmniCorder as its sole line of business.

     OmniCorder was founded in 1997 to acquire, develop and commercialize
advanced technology for the diagnosis and management of a large variety of
diseases including cancer and vascular disease. Our lead product, the BioScanIR
system, measures abnormal blood flow associated with the presence of tumors and
vascular disease, and assists physicians and researchers in differentiating
between normal and abnormal tissues. For a more complete description of
OmniCorder, see Item 1, "Description of Business."

     On December 19, 2003, we completed a recapitalization transaction in which
we acquired all the assets and assumed all the liabilities of OmniCorder in
exchange for the issuance of a majority of our shares of common stock.
Concurrent with the closing of the recapitalization transaction, we completed a
private placement of 5,686,027 shares of common stock from which gross proceeds
of $7,820,405 were received. Following the completion of the recapitalization
transaction, private placement, related stock purchase and payment of
equity-based transaction fees, OmniCorder owned 21,538,400 shares, or 72.8% of
the outstanding shares of our common stock. OmniCorder filed a Certificate of
Dissolution on December 29, 2003 with the Delaware Secretary of State and
promptly thereafter, in accordance with the tax-free reorganization provisions
of Internal Revenue Code Section 368(a)(1)(C), liquidated the shares of our
common stock it received in the recapitalization transaction to its stockholders
in proportion to their respective interests in OmniCorder. The consideration and
other terms of these transactions were determined as a result of arm's-length
negotiations between the parties.

     Since the closing of the recapitalization and private placement
transactions, the stockholders of OmniCorder owned a majority of the shares of
our common stock as a result of the dissolution of OmniCorder. For accounting
purposes, OmniCorder was deemed to be the acquirer. The transaction has been
accounted for as a recapitalization of the company. Since we had no significant
business activities prior to the recapitalization transaction and our
promotional products business was sold to one of our former directors
concurrently with the recapitalization transaction, no goodwill or other
intangibles arose from the recapitalization transaction. In addition, since our
future business will be solely that of OmniCorder and the former OmniCorder
stockholders now control us, all information and described below will be that of
OmniCorder as if OmniCorder had been the registrant for all accounting periods
presented. The audited financial information in this annual report is also that
of OmniCorder prior to the date of the recapitalization transaction, as it
provides the most relevant information about us on a continuing basis.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

     For presentation purposes, we are considered to be a "development stage
enterprise" in accordance with Statement of Financial Accounting Standards No.
7, "Accounting and Reporting by Development Stage Enterprises." Our primary
activities since inception have been the research and development of its
technology, negotiating strategic alliances and other agreements, and raising
capital. We have not commercialized any of our products, and as result we have
not generated any significant revenues from operations. We believe that we will
generate revenues from the sale of licenses, user fees and sales of our
BioScanIR system to provider networks to use its cancer screening and vascular
disease diagnosis technology in the United States, Europe and Asia. However, we
cannot give any assurance that we will be able to generate any revenues.


                                       20
<PAGE>


     We account for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the recognition of deferred
tax assets and liabilities for the expected impact of differences between the
financial statements and the tax basis of assets and liabilities and for the
expected future tax benefits to be derived from tax loss and tax credit
carryforwards. SFAS No. 109 additionally requires the establishment of a
valuation allowance to reflect the likelihood of realization of deferred tax
assets. We have recorded a full valuation allowance against our deferred tax
assets since we believe that, based upon currently available objective evidence,
it is more likely than not that the deferred tax asset will be realized.

     We account for the fair value of options and warrants for non-employees in
accordance with SFAS No. 123, "Accounting for Stock Based Compensation," which
requires that compensation cost be measured after the grant date based on the
value of the award and is recognized over the service period, which is also the
vesting period. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model. We will be required to
account for options and warrants for employees during the annual reporting
period beginning after December 15, 2005 as a result of the FASB's issuance of
SFAS No. 123R "Accounting For Stock Based Compensation."

     We have no off-balance sheet arrangements or liabilities, and none are
planned.

REVENUE MODEL

     We believe that initial revenues will come primarily from the sale of the
BioScanIR system to customers for use in cancer therapy monitoring and drug
discovery, as well as in reconstructive and neurosurgery applications. In
addition, initial customers will likely include imaging research organizations
that will purchase BioScanIR systems for use in their own research programs. It
is possible, however, that initial revenues in certain applications, such as
cancer therapy monitoring, could involve a fee per use, either as the sole
revenue source, or more likely in combination with other forms of revenue. Such
other forms could include up front licensing fees, and/or annual maintenance
fees over the estimated 4-5 year life of the BioScanIR system. Even if the
initial source of revenue is the sale of the BioScanIR system, it is anticipated
that such sales would also be accompanied by annual maintenance fees.

     As we expand our efforts into other applications we will evaluate our
revenue model options. For example, as we move into the diagnostic/screening
market it is anticipated that a fee per use model could be more appropriate. In
this model, which may also apply to other initiatives as noted above, revenues
would be generated through a combination of a fee per use, a one-time up-front
fee for licensing, installation and training, and annual maintenance fees. We
believe that the fee per use model may be more appropriate for physician
office-based diagnostic and screening applications by minimizing capital
equipment purchase barriers. This model is expected to generate sufficient fees
to recoup the cost of the BioScanIR system within one year.

     We are presently in the development stage and will adopt revenue
recognition accounting policies that are reflective of our business model at the
time we begin to generate each type of revenue.

     We recognize revenues and costs and expenses generally utilizing the
accrual method of accounting. For specific discussion of these activities, see
Note 2, "Summary of Significant Accounting Policies - Basis of Presentation" in
the accompanying financial statements. Based upon our circumstances at the time,
we will apply the appropriate methods with respect to revenue recognition,
inventory and capitalized costs associated with our product that comply with
accounting principles generally accepted in the United States, as follows:

     o    Sale - We may sell BioScanIR systems to medical, diagnostic or any
          other end user. These contracts may be for single or multiple units.
          We intend to recognize revenue associated with single or multiple unit
          contracts upon shipment and acceptance of each specific unit by the
          end-user. We may provide an initial warranty period of one year as
          part of their sales arrangements. We will establish a liability for
          estimated warranty costs as appropriate and record actual warranty
          expenses against this liability as incurred. We may offer an extended
          warranty and maintenance arrangement to our customers after the
          expiration of the initial warranty period. This arrangement would be
          sold pursuant to a contract distinctly separate from the original
          sales arrangement. These


                                       21
<PAGE>


          extended warranty and maintenance fees would be recognized ratably
          over the life of the extended warranty and maintenance contracts.

     o    Rental - We may enter into rental agreements with end-users for
          various periods of time. Under this arrangement, we would provide the
          user with a non-exclusive right to use the software and hardware and
          receive software upgrades as required to provide the level of services
          contracted for. This arrangement would require a one-time,
          non-refundable fee and monthly rental charge to be earned for the
          period of service and the passage of time. This one-time fee would be
          initially recorded on the balance sheet as deferred revenue and then
          recognized as revenue ratably over the rental period. The costs and
          major improvements of these Systems would be capitalized and
          depreciated on a straight-line basis over their estimated five-year
          useful life.

     o    Licensing - We may enter into licensing agreements for our technology
          as part of sublicensing or distribution agreements with third parties.
          We also intend to enter into licensing agreements that provide third
          parties with exclusive or semi-exclusive rights to some portion of our
          intellectual property in certain well defined fields of use. License
          revenues are expected to be recognized ratably over the life of the
          license.

     o    Development contracts - We may engage in research and development
          contracts or other specialized arrangements with specific customers.
          While each project may vary, it is planned that each would have
          milestones in the development or delivery process for which stipulated
          amounts of the contract value would be earned. We intend to recognize
          revenues as milestones are achieved and upon substantial evidence of
          acceptance by the customer.

     BioScanIR systems available for sale, either newly-constructed or which may
have been previously rented to customers, would be maintained in inventory at
cost determined on a first-in, first-out method, or at depreciated cost (if
previously rented); in all cases at the lower of cost or market.

RESULTS OF OPERATIONS

     The following represents a summary of the results of operations for the
years ended December 31, 2004 and 2003:
<TABLE>
<CAPTION>

                                                                                      For the Years Ended
                                                                                         December 31,
                                                                            ---------------------------------------
                                                                                   2004                    2003
                                                                            ------------------        -------------
<S>                                                                          <C>                      <C>
     DEVELOPMENT REVENUES                                                    $     69,800             $          -
     DEVELOPMENT COSTS                                                             20,000                        -
                                                                            ------------------        -------------
         Gross Profit                                                              49,800                        -
                                                                            ------------------        -------------
OPERATING EXPENSES
------------------
     Research and development                                                   1,413,194                1,129,248
     Selling, general and administrative                                        3,288,844                1,206,036
                                                                            ------------------        -------------
         Total Operating Expenses                                               4,702,038                2,335,284
                                                                            ------------------        -------------
         Operating Loss                                                        (4,652,238)              (2,335,284)
         Interest and other (income) expenses, net                                (17,089)                  40,635
                                                                            ------------------        -------------
         Net Loss                                                              (4,635,149)              (2,375,919)


      Series A Convertible Preferred Stock beneficial conversion
      feature                                                                     458,121                        -
                                                                            ------------------        -------------
         Net loss attributable to common stockholders- basic and
         diluted                                                             $ (5,093,270)            $ (2,375,919)
                                                                            ==================        =============
         Basic and diluted net loss per share                                $      (0.17)            $      (0.11)
                                                                            ==================        =============
         Weighted average number of shares outstanding                         29,584,357               21,656,945
                                                                            ==================        =============
</TABLE>

                                       22
<PAGE>


YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

     NET LOSS. The net loss for the year ended December 31, 2004 as compared to
the net loss for the year ended December 31, 2003 increased by $2,259,230 from
$2,375,919 to $4,635,149. The net loss attributable to common stockholders
increased by $2,717,351 from $2,375,919 to $5,093,270. This included in 2004 a
non-cash charge of $458,121 associated with the sale of our series A convertible
preferred stock. The charge measures the difference between the relative fair
value of the series A convertible preferred stock and the fair market value of
the shares of our common stock issuable pursuant to the conversion terms on the
date of issuance. As more fully described below, we have been a development
stage enterprise and have had a cumulative net loss of $15,413,090 since
inception in 1997. During this period we have expended cash raised through
various equity offerings, and issued stock and options and warrants to purchase
shares of our common stock in exchange for services. The increased loss has been
funded by the proceeds of the December 19, 2003 private placement and more
recently the proceeds of the December 14, 2004 private placement, which has
enabled us to continue product development, build our administrative
organization and promote the sales and marketing of BioScanIR System through
expanding direct sales and other marketing activities.

     DEVELOPMENT REVENUES. There was $69,800 in revenue for the year ended
December 31, 2004 as compared to $0 revenues for the year ended December 31,
2003. The revenue generated was due to completion of a research and development
contract with the Department of Defense. We are still a development stage
enterprise.

     DEVELOPMENT COSTS. There was $20,000 in development costs for the year
ended December 31, 2004 as compared to $0 costs for the year ended December 31,
2003. There was no revenue in 2003 and no associated development costs were
incurred.

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expense
increased by $283,946, to $1,413,194 from $1,129,248, for the year ended
December 31, 2004 as compared to the year ended December 31, 2003 and is
expected to continue to increase as we employ new technical personnel and
consultants in the development of our BioScanIR technology, purchases materials
and components for development and expand our facilities. Cash proceeds from
private placements in 2003 and 2004 provided the funding for these activities,
which were more limited in 2002. Refer to the Statement of Stockholders Equity
included in the accompanying financial statements for sources of capital,
including cash and noncash services received in exchange for equity. We hired
consultants and employees to obtain licensing, patent applications, support
trial systems deployed in the field and registration of our product.

     Significant components of the increase for the year ended December 31, 2004
as compared to December 31, 2003 were: Salaries and consulting expense increased
by $84,527 to $591,425 from $506,898; Recruitment expense increased by $40,151
to $41,136 from $985; business auto and travel and entertainment increased by
$27,081 to $161,562 from $134,481 due to additional business trips to pilot
sites for training and evaluation of equipment, purchasing cameras, and
developing business relationships. Increased staff and travel contributed to the
$24,641 increase in telephone expenses for the year ended December 31, 2004 to
$49,641 from $25,000 incurred for the year ended December 31, 2003. For the year
ended December 31, 2004 the increase in office expense was $17,838 to $73,197
from $55,359 incurred for the year ended December 31, 2003. In May 2003 we
signed a new lease for additional office space as our staff increased. This
resulted in an increase of $17,414 for rent and utility expenses for the year
ended December 31, 2004 to $55,147 from $37,733 for the year ended December 31,
2003.

     Expenses for materials used in research and development increased by
$82,118 to $183,072 for the year ended December 31, 2004 from $100,954 in the
year ended December 31, 2003 as we continue our product development. During the
year ended December 31, 2004 patent expenses decreased by $26,618 to 62,370 from
$88,988 in the year ended December 31, 2003.

     We incurred $31,453 in postage and delivery costs for the year ended
December 31, 2004 compared to $16,131 expensed for the year ended December 31,
2003, an increase of $15,322 - most of which was due to moving the product from
pilot site locations.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) Selling, general and
administrative expenses increased by $2,082,808 to $3,288,844 from $1,206,036
for the year ended December 31, 2004 as compared to the


                                       23
<PAGE>


year ended December 31, 2003. The level of S,G&A expenses increased in 2004
as we hired administrative, marketing and sales personnel. Significant
components of the increase for the year ended December 31, 2004 as compared to
year ended December 31, 2003 were: insurance increased by $90,184 to $222,061
from $131,877. The premium for Directors and Officers Insurance accounted for
most of the increased expense. In the year ended December 31, 2004, we added
nine new personnel in sales, marketing and administration, increasing payroll
and payroll related expenses by $1,037,299 to $1,376,867 from $339,568. As a
result of the delay in commencing commercial sales, we reduced sales personnel
and salaries during the first quarter of fiscal 2005.

     Effective December 19, 2003, we became a public company. Consequently,
legal and accounting costs have increased, as have the administrative costs of
enhancing our systems and procedures and accounting controls to comply with
rules and regulations of the Securities and Exchange Commission, including the
Sarbanes-Oxley Act. Accounting, legal and other professional fees incurred for
the year ended December 31, 2004 increased by $723,469 to $860,339 as compared
to $136,870 for the year ended December 31, 2003. Consulting fees decreased by
$200,207 to $372,256 from $572,463 for the year ended December 31, 2004.

     For the year ended December 31, 2004, investor relations expenses including
rent paid for our New York City location was $136,419 compared to $0 for the
year ended December 31, 2003. This expense is expected to decline in 2005 as the
lease was not extended and we expect to vacate the space on March 31, 2005. In
addition, travel and related expenses for our investor relations and sales staff
was $121,297 for the year ended December 31, 2004 compared to $0 for the year
ended December 31, 2003. We incurred $176,492 in expenses for marketing costs
and meetings and seminars during the year ended December 31, 2004 compared to
$23,680 during the year ended December 31, 2003.

     DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense, which is included in the results of operations, approximated $145,000
and $165,000 for the years ended December 31, 2004 and 2003, respectively. This
primarily reflected depreciation expense associated with BioScanIR equipment
installed in various clinics and hospitals for use in clinical trials, computer
and development tools, and in 2004 the increased purchases of furniture, office
equipment, computers and telephones to support operations.

     INCOME TAXES. No income taxes were recorded for either of the years ended
December 31, 2004 and 2003. As of December 31, 2004 and 2003, we had net
operating loss carryforwards of approximately $13,530,000 and $8,768,000. A full
valuation allowance has been provided against the deferred tax asset of
$5,854,000 and $4,258,000 as of December 31, 2004 and 2003, respectively, in the
accompanying financial statements.

LIQUIDITY AND CAPITAL RESOURCES

     We have a deficit accumulated during the development stage, which commenced
on February 7, 1997 through December 31, 2004, of $15,413,090. The accumulated
loss resulted principally from costs incurred in developing our business plan,
acquiring licenses for our technology, research and development, general and
administrative expenses, establishing sales channels and fund raising
activities. As more fully described in Note 7 to the accompanying financial
statements, we received gross and net proceeds approximating $7.8 million and
$6.7 million, respectively, on December 19, 2003 in a private placement of our
common stock and warrants. We could receive additional gross proceeds upon the
exercise of the associated warrants (which expire December 19, 2006) of
approximately $327,000, although there is no assurance that they will be
exercised.

     As of December 14, 2004, we completed a private placement of 1,550,000
shares of our series A convertible preferred stock (convertible into 1,409,091
shares of common stock) and warrants to purchase 465,000 shares of our common
stock at $1.10 per share. We received gross proceeds of $1,550,000 and incurred
offering expenses of $31,072. We allocated $387,667 of the gross proceeds to the
warrants based on estimated fair value. In accordance with EITF Issue No. 00-27
"Application of EITF Issue No. 98-5 to Certain Convertible Instruments", we
recorded a non-cash charge of $458,121 to deficit accumulated during the
development stage, which is the difference between the relative fair value of
the series A convertible preferred stock and the fair market value of our common
stock issuable pursuant to the conversion terms on the date of issuance. Holders
of the series A convertible preferred stock are entitled to receive a cumulative
dividend of 4% per annum, payable either in cash or, at the our option,
additional shares of series A convertible preferred stock. The series A
convertible preferred stock is


                                       24
<PAGE>


convertible into shares of our common stock at a conversion price of $1.10
per share. We could receive additional gross proceeds upon the exercise of the
associated warrants (which expire December 14, 2009) of approximately $511,000,
although there is no assurance that they will be exercised. As of December 31,
2004, we had cash balances and working capital of $3,403,712 and $2,593,075,
respectively and total stockholders' equity of $2,474,870. At March 28, 2005, we
had approximately $2,300,000 in cash balances.

     We estimate that we will require additional cash resources in 2005, based
upon our current operating plans and condition. We are currently investigating
financing alternatives, including equity and/or debt financing and asset based
funding sources associated with the commencement of product delivery. There is
no assurance that capital in any form would be available to us, and if
available, on terms and conditions acceptable to us. Our success depends upon
many factors, including securing market acceptance for our products, obtaining
adequate additional financing on acceptable terms, and our ability to roll out
our BioScanIR system in sufficient quantities and at profitable revenue levels.
The uncertainties regarding the availability of continued financing and
commencement of adequate commercial revenues raise substantial doubt about our
ability to continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. The
accompanying financial statements do not include any adjustments relating to the
recoverability of the recorded assets or the classification of liabilities that
may be necessary should we be unable to continue as a going concern.

     We are in the process of preparing a subscription rights offering to
distribute to holders of our common stock of up to 3,500,000 transferable
subscription rights to purchase shares of our series A convertible preferred
stock. We will issue the subscription rights at the rate of one right for
approximately eight shares of our common stock held on the record date of
January 19, 2005. Each subscription right represents the right to purchase one
share of our series A convertible preferred stock for $1.00 per share. The
shares of series A convertible preferred stock are convertible into shares of
common stock at $1.10 per share at any time at the option of the holder, and
automatically, as of the close of business on the 20th consecutive trading day
on which the closing bid price for our common stock on the principal stock
exchange or market on which it is listed, or if not traded on such exchange, on
the OTC Bulletin Board, is at least $2.20 per share, or 200% of the $1.10
conversion price per share. If all 3,500,000 subscription rights are exercised,
then we will receive gross proceeds, prior to expenses, of $3,500,000. If the
rights offering is fully subscribed, we estimate we will have cash resources to
support its operating expenses through the first quarter of 2006. There can be
no assurance as to how many rights will be exercised.

     Operations used cash of $4,427,238 for the year ended December 31, 2004
compared to $1,593,195 used for the year ended December 31, 2003 as we further
developed our technology for commercialization and in support of increased
sales, technical and administrative staff and expenses.

     The BioScanIR system has received FDA Section 510(k) clearance permitting
its sale in the US, and CE mark approval permitting its sale in Europe. We have
designed and implemented manufacturing systems and procedures to be ISO 9000,
FDA CFR 21 and EC MDD Directive 93/42 EEC compliant. We estimate that our build
cycle approximates 120 days from the date of receipt of a firm order to shipment
date.

     We continue to further improve our system for our target end-market
applications based upon pilot site feedback. Current systems production is
driven by our need for units for pilot site and internal development activities.
Such units are non-revenue generating at this time, but could be sold or leased
at some time in the future. We will build and deploy these units to the extent
that they advance our product development and validation efforts and our drive
to commercialization. On November 1, 2004, we delivered the new cancer therapy
monitoring configuration of our BioScanIR System to the Cleveland Clinic for
test and evaluation in detecting the effects of cancer treatments in patients
undergoing neoadjuvant breast cancer therapy; clinical trials are expected to
begin in the second quarter of 2005. As of February 7, 2005, we have four fully
functional prototype or commercial units installed in various U.S. and European
medical institutions for testing and evaluation.

     In August 2003, we entered into a research and development contract with
the U.S. Department of Defense's Missile Defense Agency to further develop core
sensor technology. We earned and recognized the amount of this contract of
$69,800 in the quarter ended June 30, 2004. Successful completion of this
project could result in a significant follow-on contract for further application
of our technology to this customer's needs. No assurance, however, can be given
as to this additional order.


                                       25
<PAGE>


     We have committed to purchase infrared camera components from AEG
Infrarot-Module GmbH for approximately $260,000 (200,000 euros) as of December
31, 2004. In March 2005, we committed to purchase an additional $533,000
(410,000 euros) of camera systems and components). These systems and components
utilize QWIP technology, for which we are the exclusive licensee.

     We do not currently have any additional off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to our stockholders.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In March 2004, The Emerging Issues Task Force ("EITF") reached a consensus
on recognition and measurement guidance previously discussed under EITF 03-01,
"The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." The consensus clarifies the meaning of other-than-temporary
impairment and its application to investments classified as either
available-for-sale or held-to-maturity under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," and investments accounted
for under the cost method or the equity method. The EITF 03-01 includes new
disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the FASB delayed the accounting provisions of EITF
03-1; however the disclosure requirements remain effective for annual periods
ending after June 15, 2004. The implementation of the disclosure requirements
did not have a material effect on our financial position or results of
operations.

     In April 2004, the EITF issued Statement No. 03-06 "Participating
Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per
Share" ("EITF 03-06"). EITF 03-06 addresses a number of questions regarding the
computation of earnings per share by companies that have issued securities other
than common stock that contractually entitle the holder to participate in
dividends and earnings of the company when, and if, it declares dividends on its
common stock. The issue also provides further guidance in applying the two-class
method of calculating earnings per share, clarifying what constitutes a
participating security and how to apply the two-class method of computing
earnings per share once it is determined that a security is participating,
including how to allocate undistributed earnings to such a security. EITF 03-06
is effective for fiscal periods beginning after March 31, 2004. The adoption of
this statement did not have any effect on our calculation of EPS.

     In September 2004, the EITF issued statement EITF Issue No. 04-08, "The
Effect of Contingently Convertible Debt on Diluted Earnings per Share" ("EITF
04-08"). Contingently convertible debt instruments are generally convertible
into common shares of an issuer after the common stock price has exceeded a
predetermined threshold for a specified period of time (the "market price
contingency"). EITF 04-08 requires that shares issuable upon conversion of
contingently convertible debt be included in diluted earnings per share
computations regardless of whether the market price contingency contained in the
debt instrument has been net. EITF 04-08 is effective for reporting periods
ending after December 15, 2004 and requires restatement of prior periods to the
extent applicable. The adoption of this statement is not expected to have an
effect on our calculation of EPS.

     In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The
statement amends Accounting Research Bulletin ("ARB") No. 43, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material. ARB No. 43 previously
stated that these costs must be "so abnormal as to require treatment as
current-period charges." SFAS No. 151 requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overhead to the costs of conversion be based on the normal capacity
of the production facilities. The statement is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005, with earlier
application permitted for fiscal years beginning after the issue date of the
statement. The adoption of SFAS No. 151 is not expected to have any impact on
our current financial condition or results of operations.

     In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting
For Nonmonetary Transactions," is based on the opinion that exchanges of
nonmonetary assets should be measured based on the fair value of the assets
exchanged. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive


                                       26
<PAGE>


assets and replaces it with a general exception for exchanges of nonmonetary
assets whose results are not expected to significantly change the future cash
flows of the entity. We are currently evaluating the impact that this statement
 will have on our financial condition or results of operations.

     In December 2004, the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award.
Changes in fair value during the requisite service period are to be recognized
as compensation cost over that period. In addition, the revised statement amends
SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be
reported as a financing cash flow rather than as a reduction of taxes paid. For
small business issuers, the provisions of the revised statement are effective
for financial statements issued for the first interim or annual reporting period
beginning after December 15, 2005, with early adoption encouraged. We are
currently evaluating the impact that this statement will have on our financial
condition or results of operations.




                                       27
<PAGE>



ITEM 7.   FINANCIAL STATEMENTS.

     The response to this item is submitted as a separate section of this Report
beginning on page F-1.

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

     None.

ITEM 8A.  CONTROLS AND PROCEDURES.

EVALUATION OF OUR DISCLOSURE CONTROLS AND INTERNAL CONTROLS

     As of the end of the period covered by this Annual Report, we carried out
an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Exchange Act Rule 13-d-15(e) and
15d-15(e)). Based upon that evaluation and the material weakness described
below, our Chief Executive Officer ("CEO") and Principal Accounting Officer
("PAO") concluded that as of the end of the period covered by this Annual Report
on Form 10-KSB our disclosure controls and procedures were adequate to enable us
to record, process, summarize and report information required to be included in
our periodic SEC filings within the required time period.

CEO AND PFO CERTIFICATIONS

     Appearing as exhibits to this Annual Report are "Certifications" of the CEO
and the PAO. The Certifications are required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2003 (the "Section 302 Certifications"). This section of
the Annual Report contains information concerning the Controls Evaluation
referred to in the Section 302 Certifications and this information should be
read in conjunction with the Section 302 Certifications for a more complete
understanding of the topics presented.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS

     Disclosure Controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in our reports filed under
the Securities Exchange Act of 1934 ("Exchange Act"), such as this Annual
Report, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. Disclosure Controls are also designed
with the objective of ensuring that such information is accumulated and
communicated to our management, including the CEO and PAO, as appropriate to
allow timely decisions regarding required disclosure. Internal Controls are
procedures which are designed with the objective of providing reasonable
assurance that (1) our transactions are properly authorized, recorded and
reported; and (2) our assets are safeguarded against unauthorized or improper
use, to permit the preparation of our financial statements in conformity with
generally accepted accounting principles.

     Our company is not an accelerated filer (as defined in the Securities
Exchange Act) and is not required to deliver management's report on control over
our financial reporting until our fiscal year ended December 31, 2006.
Nevertheless, in our efforts to comply with Section 404 of the Sarbanes-Oxley
Act of 2002, during the quarter ended December 31, 2004, we identified certain
matters that would constitute material weakness (as such term is defined under
the Public Company Accounting Oversight Board Auditing Standard No.2) in our
internal controls over financial reporting.

     The first material weakness is the lack of the necessary corporate
accounting resources to realign and cross-train other current personnel. This
has led to dependence on our Controller, the loss of whom could impair our
ability to ensure consistently complete and accurate financial reporting. In
order to correct this deficiency, we have hired an outside consulting firm to
assist with Sarbanes-Oxley compliance. With our limited resources, it would be
difficult to hire additional competent personnel to assist in the segregation of
duties. We have implemented internal control procedures such as dual approval
procedures at the CEO and Controller level, as well as requiring approvals for
purchases by two authorized signers and check signatories from the CEO and/or
Controller plus, in the absence of the CEO and Controller, another department
head, to help prevent error and fraud.



                                       28
<PAGE>


     In another area, the material weakness is the lack of necessary accounting
resources to ensure consistently complete and accurate reporting of financial
information with respect to equity-based transactions. In order to correct this
deficiency we are working with our outside consulting firm that was hired in
January 2005 to assist with Sarbanes Oxley compliance to document procedures and
internal controls for equity-based transactions.

     We believe that, for the reasons described above, we will be able to
improve our disclosure controls and procedures and remedy the material
weaknesses identified above.

     Except as described above, there were no significant changes in our
internal controls over financial reporting that occurred during the year ended
December 31, 2004 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

     We believe that a control system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the control system are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to provide a
reasonable assurance of achieving their objectives and our Chief Executive
Officer and Principal Accounting Officer have concluded that such controls and
procedures are effective at the "reasonable assurance" level.



                                       29
<PAGE>


                                    PART III

ITEM 9, 10, 11 AND 12

     Part III (Items 9 through 12) is omitted since we expect to file with the
U.S. Securities and Exchange Commission within 120 days after the close of the
fiscal year ended December 31, 2004, a definitive proxy statement pursuant to
Regulation 14A under the Securities Exchange Act of 1934 that involves the
election of directors. If for any reason such a statement is not filed within
such a period, this annual report will be appropriately amended.

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

     (a) Exhibits:

     EXHIBIT NO.                 DESCRIPTION

     2.1        Agreement of Purchase and Sale, dated as of December 19, 2003,
                between Promos, Inc. and OmniCorder Technologies, Inc.(1)

     3.1        Amended and Restated Articles of Incorporation of OmniCorder
                Technologies, Inc.(1)

     3.2        By-laws of OmniCorder Technologies, Inc.(2)

     3.3        Certificate of Designation, Preferences and Rights of Series A
                Convertible Preferred Stock of OmniCorder Technologies, Inc. (3)

     4.1        Form of Lead Investor Warrant.(2)

     4.2        Form of Warrant to Purchase Common Stock of OmniCorder
                Technologies, Inc. (3)

     4.3        Form of Subscription Rights Certificate.(4)

     10.1       Employment Agreement, dated as of December 19, 2003, between
                Mark A. Fauci and OmniCorder Technologies, Inc., as assigned to
                Promos, Inc.(1)

     10.2       Indemnification Agreement, dated as of December 19, 2003, among
                Promos, Inc., Judith F. Harayda and Stephan R. Levy.(1)

     10.3       Form of Private Placement Subscription Agreement.(1)

     10.4       Registration Rights Letter of Promos, Inc.(1)

     10.5       OmniCorder Technologies, Inc. 1998 Stock Option Plan, as
                amended.(5)

     10.6       License Agreement, dated as of May 11, 1998, between California
                Institute of Technology and OmniCorder Technologies, Inc., with
                amendments.(2)

     10.7       Exclusive License Agreement, dated as of September 29, 1998,
                between Lockheed Martin Corporation and OmniCorder Technologies,
                Inc.(2)

     10.8       Option Agreement, dated March 19, 1997, between Michael A. Anbar
                and OmniCorder Technologies, Inc., with amendments.(2)

     10.9       Exclusive Sale Agreement, dated February 2000, between AEG
                Infrarot-Module GmbH and OmniCorder Technologies, Inc.(2)

     10.10      Agreement, dated August 12, 2003, between the Department of
                Defense and OmniCorder Technologies, Inc.(2)

     10.11      Form of Subscription Agreement between OmniCorder Technologies,
                Inc. and the private placement subscribers. (3)

     10.12      Employment Agreement, dated as of February 9, 2004, between
                Loring D. Anderson and OmniCorder Technologies, Inc. (4)


                                       30
<PAGE>


     10.13      Employment Agreement, dated as of March 23, 2005, between Denis
                A. O'Connor and OmniCorder Technologies, Inc.(6)

     10.14      Consulting Agreement, dated as of March 1, 2005, between Mark A.
                Fauci and OmniCorder Technologies, Inc.(7)

     10.15      Consulting Agreement, dated as of February 17, 2005, between
                Michael Anbar, Ph.D. and OmniCorder Technologies, Inc.

     14.1       Code of Business Conduct and Ethics.

     31.1       Certification of Principal Executive Officer Required by
                Exchange Act Rule 13a-14(a).

     31.2       Certification of Principal Financial Officer Required by
                Exchange Act Rule 13a-14(a).

     32.1       Joint Certification of Principal Executive Officer and Principal
                Financial Officer Required by Exchange Act Rule 13a-14(b).

________________

(1)  Incorporated by reference from the exhibits filed with the Current Report
     on Form 8-K, dated December 19, 2003 (filed on January 5, 2004).

(2)  Incorporated by reference from the exhibits filed with the Annual Report on
     Form 10-KSB, dated December 31, 2003 (filed on April 15, 2004).

(3)  Incorporated by reference from the exhibits filed with the Current Report
     on Form 8-K, dated December 14, 2004 (filed on December 20, 2004).

(4)  Incorporated by reference from the exhibits filed with the Registration
     Statement on Form SB-2 (filed on January 27, 2005).

(5)  Incorporated by reference from the exhibits filed with the definitive
     Information Statement on Schedule 14C, dated February 3, 2004 (filed on
     February 3, 2004).

(6)  Incorporated by reference from the exhibits filed with the Current Report
     on Form 8-K (filed on March 14, 2005).

(7)  Incorporated by reference from the exhibits filed with the Current Report
     on Form 8-K (filed on March 9, 2005).

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

     The aggregate fees billable to us by Marcum & Kliegman LLP during 2004 for
the audits of our annual financial statements for the fiscal years and review of
our financial statements included in our Forms 10-QSB totaled approximately
$184,000. We did not incur any fees to Janet Loss, C.P.A., P.C., the auditor for
Promos, Inc., for the audit of its annual financial statements.

AUDIT-RELATED FEES

     We incurred assurance and audit-related fees during 2004 and 2003 of
$77,000 and $125,000, respectively to Marcum & Kliegman LLP in connection with
the audit of the financial statements of OmniCorder Technologies, Inc. from
February 7, 1997 (Inception) through December 31, 2003 and for the reviews of
registration statements and issuance of related consents and assistance with SEC
letters of comment.

     We did not incur or pay any fees to Janet Loss, C.P.A., P.C., and this firm
did not provide any services related to assurance and other audit-related fees,
in either of the last two fiscal years.

TAX FEES

     We incurred fees of $12,000 and $ 0 billed to us by Marcum & Kliegman for
services rendered to us fiscal years for tax compliance, tax advice, or tax
planning for the years ended December 31, 2004 and 2003.



                                       31
<PAGE>


ALL OTHER FEES

     There were no fees billed to us by Marcum & Kliegman LLP or Janet Loss,
C.P.A., P.C. for services rendered to us during the last two fiscal years, other
than the services described above under "Audit Fees" and "Audit-Related Fees."

     It is the audit committee's policy to pre-approve all services provided by
Marcum & Kliegman LLP.

     As of the date of this filing, our current policy is to not engage Marcum &
Kliegman LLP to provide, among other things, bookkeeping services, appraisal or
valuation services, or international audit services. The policy provides that we
engage Marcum & Kliegman LLP to provide audit, tax, and other assurance
services, such as review of SEC reports or filings.



                                       32
<PAGE>


                                   SIGNATURES

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

                                       OMNICORDER TECHNOLOGIES, INC.

Date:  March 31, 2005                  By:/s/Denis A. O'Connor
                                          --------------------------------------
                                           Denis A. O'Connor
                                           President and Chief Executive Officer


                                       By:/s/Celia I. Schiffner
                                          --------------------------------------
                                           Celia I. Schiffner
                                           Controller
                                           (Principal Financial Officer)

                                POWER OF ATTORNEY

     We, the undersigned officers and directors of OmniCorder Techologies, Inc.
hereby severally constitute and appoint Denis A. O'Connor and Celia I. Schiffner
and each of them (with full power to each of them to act alone), our true and
lawful attorneys-in-fact and agents, with full power of substitution, for us and
in our stead, in any and all capacities, to sign any and all amendments to this
annual report and all documents relating thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing necessary or advisable to be done in and about the premises,
as full to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all the said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>

/s/Hon. Joseph F. Lisa
--------------------------------
<S>                                    <C>                                    <C>
Hon. Joseph F. Lisa                    Chairman of Board of Directors         March 31, 2005

/s/Michael A. Davis
--------------------------------
Michael A. Davis, M.D., D.Sc.          Director, Chair of Executive
                                       Committee of Board of Directors        March 31, 2005

/s/Denis A. O'Connor
--------------------------------
Denis A. O'Connor                      President and Chief
                                       Executive Officer                      March 31, 2005

/s/Celia I. Schiffner
--------------------------------
Celia I. Schiffner                     Controller                             March 31, 2005

/s/ Mark A. Fauci
--------------------------------
Mark A. Fauci                          Director                               March 31, 2005

/s/Jed Schutz
--------------------------------
Jed Schutz                             Director                               March 31, 2005

/s/George Benedict
--------------------------------
George Benedict                        Director                               March 31, 2005

/s/Joseph T. Casey
--------------------------------
Joseph T. Casey                        Director                               March 31, 2005

/s/Gordon A. Lenz
--------------------------------
Gordon A. Lenz                         Director                               March 31, 2005




<PAGE>

/s/Anthony A. Lombardo
--------------------------------
Anthony A. Lombardo                    Director                               March 31, 2005


--------------------------------
Robert W. Loy                          Director                               March 31, 2005

/s/Richard R. Vietor
--------------------------------
Richard R. Vietor                      Director                               March 31, 2005

/s/William J. Wagner
--------------------------------
William J. Wagner                      Director                               March 31, 2005

</TABLE>

<PAGE>



                          OMNICORDER TECHNOLOGIES, INC.

                                   FORM 10-KSB

                                     ITEM 7

                          INDEX OF FINANCIAL STATEMENTS

                          OMNICORDER TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)

                              FINANCIAL STATEMENTS

                      For the Years Ended December 31, 2004
                 and 2003, and the Period From February 7, 1997
                        (Inception) to December 31, 2004



<PAGE>

<TABLE>
<CAPTION>


                                                                                                       OMNICORDER TECHNOLOGIES, INC.
                                                                                                    (A Development Stage Enterprise)

                                                                                                                            CONTENTS
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                                Page

<S>                                                                                                                              <C>
Report of Independent Registered Public Accounting Firm                                                                          F-1

FINANCIAL STATEMENTS

Balance Sheet - December 31, 2004 and 2003                                                                                     F-2-3

Statements of Operations - For the Years Ended December 31, 2004 and 2003, and
         For the Period From February 7, 1997 (Inception) to December 31, 2004                                                   F-4

Statement of Stockholders'  Equity
         - For the Years Ended December 31, 2004 and 2003,
         and For the Period From February 7, 1997 (Inception) to
         December 31, 2004                                                                                                     F-5-8

Statements of Cash Flows - For the Years Ended December 31, 2004 and 2003, and
         For the Period From February 7, 1997 (Inception) to December 31, 2004                                                F-9-10

NOTES TO FINANCIAL STATEMENTS                                                                                                F-11-28


</TABLE>


<PAGE>


             Report of Independent Registered Public Accounting Firm

To the Audit Committee of the Board of Directors and Stockholders
OmniCorder Technologies, Inc.

We have audited the accompanying balance sheets of OmniCorder Technologies, Inc.
(the "Company") (A Development Stage Enterprise) as of December 31, 2004 and
2003 and the related statements of operations, stockholders' equity
(deficiency), and cash flows for the years ended December 31, 2004 and 2003, and
for the period from February 7, 1997 (inception) to December 31, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 OmniCorder Technologies, Inc.
(A Development Stage Enterprise) as of December 31, 2004 and 2003 and the
results of its operations and its cash flows for the years ended December 31,
2004 and 2003, and for the period from February 7, 1997 (inception) to December
31, 2004, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has incurred a deficit accumulated during the
development stage of $15,413,090, and cash flows used in operating activities of
$10,245,899 during the development stage, which commenced on February 7, 1997
through December 31, 2004. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Marcum & Kliegman LLP

New York, New York
March 10, 2005



                                      F-1
<PAGE>

<TABLE>
<CAPTION>

                                                                   OMNICORDER TECHNOLOGIES, INC.
                                                                (A Development Stage Enterprise)

                                                                                  BALANCE SHEETS
-------------------------------------------------------------------------------------------------
                                                         December 31, 2004    December 31, 2003
                                                         -----------------    -----------------
CURRENT ASSETS
--------------
<S>                                                          <C>                  <C>
     Cash and cash equivalents                               $3,403,712           $6,816,254
     Prepaid expenses and other current assets                  226,519              198,162
                                                         -----------------    -----------------

         Total Current Assets                                 3,630,231            7,014,416

     Property and equipment, net                                284,850              271,241
     Other assets                                               151,945                3,538
                                                         -----------------    -----------------

         TOTAL ASSETS                                        $4,067,026           $7,289,195
                                                        =================     =================


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

</TABLE>

                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                                                                                       OMNICORDER TECHNOLOGIES, INC.
                                                                                    (A Development Stage Enterprise)

                                                                                                      BALANCE SHEETS
                    -------------------------------------------------------------------------------------------------
                                                LIABILITIES AND STOCKHOLDERS' EQUITY
                                                ------------------------------------

                                                                             December 31, 2004    December 31, 2003
                                                                             -----------------    -----------------
                    CURRENT LIABILITIES
                    -------------------
<S>                                                                             <C>                  <C>
                         Notes payable                                          $     165,883        $     239,952
                         Accounts payable and accrued expenses                        439,718              515,465
                         Deferred officers salaries                                   431,555              979,632
                                                                             -----------------    -----------------
                             Total Current Liabilities                              1,037,156            1,735,049

                         Deferred officers salaries, non current                      555,000                    --
                                                                             -----------------    -----------------
                             Total Liabilities                                      1,592,156            1,735,049
                                                                             -----------------    -----------------
                    COMMITMENTS AND CONTINGENCIES
                    -----------------------------

                    STOCKHOLDERS' EQUITY
                    --------------------

                         Preferred stock, $.01 par value, 4,000,000
                             shares authorized; 0 shares issued and
                             outstanding                                                    --                    --
                         Series A Convertible preferred stock, $.01 par
                             value, 6,000,000 shares authorized;
                             1,550,000 and 0 shares issued and
                             outstanding, respectively, liquidation
                             preference $1,550,000                                     15,500                    --
                         Common stock, $.001 par value; 50,000,000 shares
                             authorized; 29,695,889 and 29,570,100 shares
                             issued and outstanding, respectively                      29,695               29,570
                         Additional paid-in capital                                17,842,765           15,844,396
                         Deficit accumulated during the development stage         (15,413,090)         (10,319,820)
                                                                             -----------------    -----------------
                             Total Stockholders' Equity                             2,474,870            5,554,146
                                                                             -----------------    -----------------
                                 TOTAL LIABILITIES AND
                                      STOCKHOLDERS' EQUITY                      $   4,067,026        $   7,289,195
                                                                             =================    =================
------------------------------------------------------------------------------------------------------------------------------------


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



                                                                F-3

<PAGE>

<TABLE>
<CAPTION>

                                                                                        OMNICORDER TECHNOLOGIES, INC.
                                                                                     (A Development Stage Enterprise)

                                                                                             STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------

                                                                                                     Cumulative For
                                                                                                    the Period From
                                                                                                    February 7, 1997
                                                                    For the Years Ended                 (inception)
                                                                       December 31,                 through December 31,
                                                            ------------------------------------   ---------------------
                                                                 2004                2003                  2004
                                                            ---------------     ----------------   ---------------------
<S>                                                         <C>                 <C>                   <C>
     DEVELOPMENT REVENUES                                   $      69,800       $           --        $      69,800
     DEVELOPMENT COSTS                                             20,000                   --               20,000
                                                            ---------------     ----------------   ---------------------
             GROSS PROFIT                                          49,800                   --               49,800
                                                            ---------------     ----------------   ---------------------

OPERATING EXPENSES
     Research and development                                   1,413,194            1,129,248            6,139,108
     Selling, general and administrative                        3,288,844            1,206,036            6,821,208
     Related party legal expense                                       --                   --              544,881
     Write-off of public offering costs                                --                   --              501,992
                                                            ---------------     ----------------   ---------------------
         TOTAL OPERATING EXPENSES                               4,702,038            2,335,284           14,007,189
                                                            ---------------     ----------------   ---------------------

         OPERATING LOSS                                        (4,652,238)          (2,335,284)         (13,957,389)

     Interest and other (income) expenses, net                    (17,089)              40,635              997,580
                                                            ---------------     ----------------   ---------------------
         NET LOSS                                              (4,635,149)          (2,375,919)         (14,954,969)

     Series A Convertible Preferred Stock beneficial
         conversion feature                                       458,121                   --              458,121
                                                            ---------------     ----------------   ---------------------
     NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS-BASIC
         AND DILUTED                                        $  (5,093,270)        $(2,375,919)        $ (15,413,090)
                                                            ===============     ================   =====================
     Basic and diluted net loss per share                          $(0.17)            $(0.11)
                                                            ===============       =============
     Weighted average number of shares outstanding             29,584,357          21,645,945
                                                            ===============       =============


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


</TABLE>

                                                                F-4

<PAGE>

<TABLE>
<CAPTION>


                                                                                        OMNICORDER TECHNOLOGIES, INC.
                                                                                      (A Development Stage Enterprise)
                                                                                     STATEMENT OF STOCKHOLDERS' EQUITY
                                           For the period from February 7, 1997 (inception) through December 31, 2004
---------------------------------------------------------------------------------------------------------------------
                                                                                     Deficit
                                                                                   Accumulated
                                             Series A Preferred      Additional     During the     Stock
                        Common Stock               Stock              Paid-in      Development   Subscription
                     Shares      Amount      Shares      Amount       Capital         Stage      Receivable    Total
                   ----------- ----------- ----------- ----------- ------------- -------------- ----------- ---------
<S>                <C>          <C>           <C>              <C>         <C>           <C>           <C>         <C>
Issuance of
   common stock
   to founders     10,301,259   $10,301          --       $--         $ 6,419       $     --      $(15,070)   $ 1,650

Sale of common
   stock at $.55
   per share,
   net of
   expense of
   $35,164            361,437       361          --        --         164,469             --            --     164,830

Issuance of
   common stock
   warrants to
   related party
   for legal
   services                --        --          --        --          75,000             --            --      75,000

Sale of common
   stock
   warrants to
   related party           --        --          --        --          40,000             --       (30,000)     10,000

Net loss                   --        --          --        --              --       (168,516)           --    (168,516)
                   -----------  -----------  ---------  ---------  ------------  --------------  ----------  -----------
Balance at
   December 31,
   1997            10,662,696    10,662          --        --         285,888       (168,516)      (45,070)     82,964
                   -----------  -----------  ---------  ---------  ------------  --------------  ----------  -----------

Issuance of
   common stock
   to founders      2,710,858     2,711          --        --           1,689             --            --       4,400

Sale of common
   stock at $.55
   per share,
   net of
   expenses of
   $62,900            885,539       886          --        --         426,209             --            --     427,095

Issuance of
   common stock
   for research
   and
   development        271,086       271          --        --         149,729             --            --     150,000

Issuance of
   common stock
   warrants to
   related party
   for legal
   services                --        --          --        --          20,000             --            --      20,000

Cash received
   from sale of
   common stock
   warrant                 --        --          --        --              --             --        30,000      30,000

Issuance of
   common stock
   warrants in
   connection
   with sale of
   bridge notes            --        --          --        --         329,625             --            --     329,625

Net loss                   --        --          --        --              --     (1,594,054)           --  (1,594,054)
                   -----------  -----------  ---------  ---------  ------------  --------------  ----------  -----------

Balance at
   December 31,
   1998            14,530,179    14,530          --        --       1,213,140     (1,762,570)      (15,070)   (549,970)
                   -----------  -----------  ---------  ---------  ------------  --------------  ----------  -----------

Conversion of
   bridge notes
   into common
   stock            1,433,015     1,433          --        --         789,192             --            --     790,625


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



                                                                F-5
<PAGE>


<TABLE>
<CAPTION>

                                                                                       OMNICORDER TECHNOLOGIES, INC.
                                                                                    (A Development Stage Enterprise)
                                                                                   STATEMENT OF STOCKHOLDERS' EQUITY

                               For the period from February 7, 1997 (inception) through December 31, 2004 (continued)
---------------------------------------------------------------------------------------------------------------------
                                                                                     Deficit
                                                                                   Accumulated
                                             Series A Preferred      Additional     During the     Stock
                        Common Stock               Stock              Paid-in      Development   Subscription
                     Shares      Amount      Shares      Amount       Capital         Stage      Receivable    Total
                   ----------- ----------- ----------- ----------- ------------- -------------- ----------- ---------
<S>                <C>            <C>         <C>          <C>       <C>           <C>           <C>         <C>

Issuance of common
   stock for
   research and
   development        135,543      $ 136                              $74,864      $     --       $     --    $75,000
Sale of common stock
   at $1.14 per share 945,282        945                            1,073,055            --             --  1,074,000
       Net loss            --         --                                   --    (1,547,973)            -- (1,547,973)
                   ----------     ------      ------    ------      ---------   -----------       --------  ---------
Balance at December
     31, 1999      17,044,019    $17,044                           $3,150,251   $(3,310,543)      $(15,070) $(158,318)
Issuance of common
   stock for research
   and development    135,543       $136                             $74,864    $        --       $     --  $ 75,000
Issuance of common
   stock for
   services
   rendered             8,810          9                               10,001            --             --     10,010
Sale of common
   stock at $1.14
   and $1.38 per
   share for
   691,269 and
   924,156 shares,
   respectively      1,615,425     1,615                            2,058,786            --             --  2,060,401
Issuance of stock
   options and
   warrants for
   services
   rendered                --         --                               51,357            --             --     51,357
           Net loss        --         --         --       --               --    (1,446,203)            -- (1,446,203)
                   ----------     ------      ------    ------      ---------     ----------       -------   --------
Balance at
   December 31,
   2000            18,803,797     18,804                            5,345,259    (4,756,746)       (15,070)   592,247
Issuance of common
   stock for
   services
   rendered            12,322         12                               29,988            --             --     30,000
Sale of common
   stock at $2.44
   per share          164,294        164                              399,836            --             --    400,000
Issuance of stock
   options and
   warrants for
   services
   rendered                --         --                               21,012            --             --     21,012
           Net loss        --         --         --       --              --     (1,675,158)            -- (1,675,158)
                   ----------     ------      ------    ------      ---------     ----------       -------   --------
Balance at
   December 31,
   2001            18,980,413     18,980         --       --        5,796,095    (6,431,904)       (15,070)  (631,899)
Issuance of common
   stock in
   accordance with
   anti-dilution
   provisions         164,294        164                                 (164)           --             --        --
Sale of common
   stock at $1.22
   and $.97 per
   share for
   102,684 and
   385,065 shares,
   respectively       487,749        488                              499,512            --             --    500,000
Issuance of stock
   options and
   warrants for
   services
   rendered                --         --                              595,188            --             --    595,188
           Net loss        --         --         --       --               --    (1,511,997)            -- (1,511,997)
                   ----------     ------      ------    ------      ---------     ----------       -------   --------
Balance at
   December 31,
   2002            19,632,456     19,632                            6,890,631    (7,943,901)       (15,070)(1,048,708)
Elimination of
   subscription
   receivable                                                         (15,070)                      15,070        --
Sale of common
   stock at $.97
   per share        1,317,849      1,318                            1,282,084            --             --  1,283,402
Issuance of stock
   options and
   warrants for
   services
   rendered                                                           691,377                                 691,377

                                                          The accompanying notes are an integral part of these Financial Statements.
</TABLE>

                                                                F-6
<PAGE>

<TABLE>
<CAPTION>

                                                                                       OMNICORDER TECHNOLOGIES, INC.
                                                                                    (A Development Stage Enterprise)
                                                                                   STATEMENT OF STOCKHOLDERS' EQUITY

                               For the period from February 7, 1997 (inception) through December 31, 2004 (continued)
---------------------------------------------------------------------------------------------------------------------
                                                                                     Deficit
                                                                                   Accumulated
                                             Series A Preferred      Additional     During the     Stock
                        Common Stock               Stock              Paid-in      Development   Subscription
                     Shares      Amount      Shares      Amount       Capital         Stage      Receivable    Total
                   ----------- ----------- ----------- ----------- ------------- -------------- ----------- ---------
<S>                <C>            <C>         <C>          <C>       <C>           <C>           <C>         <C>

Issuance of common
   stock in
   accordance with
   antidilution
   provisions          107,822        108                                 (108)                                    --
Exercise of
   warrants            480,274        480                                 (480)                                    --
Issuance of common
   shares to
   shareholders of
   company
   acquired in
   recapitalization
   transaction       1,133,600      1,134                               (1,134)                                    --
Net assets
   of Promos,
   Inc.                                                                 20,584                                 20,584
Sale of common
   stock for cash
   at $1.375 per
   share, net        5,486,027      5,486                            6,702,924                              6,708,410
Conversion of
   Bridge Loan at
   $1.375 per share    200,000        200                              274,800                                275,000
Issuance of common
   stock for
   offering
   services          1,212,073      1,212                               (1,212)                                    --
           Net loss        --          --         --         --             --     (2,375,919)         --  (2,375,919)
                    ----------     ------      ------    ------      ---------     ----------       -----  ----------
Balance at
   December 31,
   2003             29,570,100     29,570         --         --     15,844,396    (10,319,820)         --   5,554,146
Issuance of stock
   options and
    warrants for
   services
   rendered                                                             53,156                                 53,156
Issuance of stock
   granted for
   services
   rendered             15,000         15                               43,485                                 43,500
Sale of Series A
   preferred stock
   at $1.00 per
   share                                   1,550,000     15,500      1,534,500                              1,550,000
Series A Preferred
   Stock
   beneficial
   conversion
   feature                                                             458,121       (458,121)                     --
Costs incurred
   associated with
   the sale of
   stock and
   recapitalization
   transactions                                                       (101,711)                              (101,711)
Costs incurred
   associated with
   sale of Series
   A preferred
   stock                                                               (31,072)                               (31,072)
Exercise of options     76,101         76                               41,924                                 42,000
Exercise of
   options
   (cashless)           27,388         27                                  (27)                                    --
Adjustments of
   sale of common
   stock for cash
   at $1,375 per
   share                 7,300          7                                   (7)                                    --



                                                          The accompanying notes are an integral part of these Financial Statements.
</TABLE>
                                                                F-7
<PAGE>


<TABLE>
<CAPTION>

                                                                                       OMNICORDER TECHNOLOGIES, INC.
                                                                                    (A Development Stage Enterprise)
                                                                                   STATEMENT OF STOCKHOLDERS' EQUITY

                               For the period from February 7, 1997 (inception) through December 31, 2004 (continued)
---------------------------------------------------------------------------------------------------------------------
                                                                                     Deficit
                                                                                   Accumulated
                                             Series A Preferred      Additional     During the     Stock
                        Common Stock               Stock              Paid-in      Development   Subscription
                     Shares      Amount      Shares      Amount       Capital         Stage      Receivable    Total
                   ----------- ----------- ----------- ----------- ------------- -------------- ----------- ---------
<S>                <C>            <C>         <C>          <C>       <C>           <C>           <C>         <C>


Net Loss                   --          --         --         --              --    (4,635,149)        --  (4,635,149)
                    ----------     ------      ------    ------      ---------     ----------       -----  ----------
Balance at
   December 31,
   2004             29,695,889    $29,695  1,550,000    $15,500    $17,842,765   $(15,413,090) $      --   $2,474,870
                    ==========    ======= ==========    =======    ===========   ============  =========   ==========

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

</TABLE>


                                                                F-8
<PAGE>

<TABLE>
<CAPTION>

                                                                                                 OMNICORDER TECHNOLOGIES, INC.
                                                                                              (A Development Stage Enterprise)
                                                                                                      STATEMENTS OF CASH FLOWS
    ---------------------------------------------------------------------------------------------------------------------------
                                                                                                               Cumulative
                                                                                                             For the Period
                                                                                                            from February 7,
                                                                                                            1997 (inception)
                                                                        For the Years Ended                     through
                                                                            December 31,                      December 31,
                                                                     2004                   2003                  2004
                                                            ------------------------ -------------------- ---------------------

    CASH FLOWS FROM OPERATING ACTIVITIES
    ------------------------------------
<S>                                                           <C>                      <C>                  <C>
    Net loss                                                  $      (4,635,149)       $      (2,375,919)   $     (14,954,969)
                                                              -----------------        -----------------    -----------------

         Adjustments to reconcile net loss to net cash
             used in operating activities:
             Depreciation and amortization                              144,846                  165,132              763,199
             Loss on disposal of net assets                                   --                  20,584               20,584
             Unrealized loss from foreign currency
                 transactions                                                 --                   4,778               19,271
             Warrants issued to related party for legal
                 services                                                     --                       --               95,000
             Issuance of stock options and warrants for
                 services rendered                                       53,156                  691,377             1,412,090
             Issuances of stock options and warrants for
                 services rendered                                       43,500                        --               83,510
             Issuance of common stock for research and
                 development                                                  --                       --              300,000
             Amortization of original issue discount                          --                       --              329,625
             Amortization of deferred financing costs                         --                       --              188,125

             Changes in operating assets and liabilities:
             Prepaid expenses and other current assets                  183,638                 (126,321)              (14,524)
             Other assets                                              (148,407)                     (85)             (151,945)
             Accounts payable and accrued expenses                      (75,745)                 (68,260)              677,580
             Deferred officers salaries                                   6,923                   95,519               986,555
                                                              -----------------        -----------------    -----------------

                 NET CASH USED IN OPERATING ACTIVITIES               (4,427,238)              (1,593,195)          (10,245,899)
                                                              -----------------        -----------------    -----------------
    CASH FLOWS USED IN INVESTING ACTIVITIES
    ---------------------------------------
         Purchases of property and equipment                           (179,348)                 (72,144)           (1,068,943)
                                                              -----------------        -----------------    -----------------
    CASH FLOWS FROM FINANCING ACTIVITIES
    ------------------------------------
         Proceeds from (costs of) issuance of common stock             (101,711)               7,991,812            12,522,477
         Net proceeds from issuance of Series A preferred
             stock                                                    1,518,928                        --            1,518,928
         Proceeds from issuance of warrants                                   --                       --               40,000
         Proceeds from options exercised                                 42,000                        --               42,000
         Issuance of bridge note payable                                      --                  275,000            1,025,000
         Payment of deferred financing costs                                  --                       --             (147,500)
         Repayment of notes payable                                    (265,173)                   69,499             (282,351)
                                                              -----------------         -----------------    -----------------

                                                          The accompanying notes are an integral part of these Financial Statements.
</TABLE>
                                                                F-9
<PAGE>

<TABLE>
<CAPTION>


                                                                                                 OMNICORDER TECHNOLOGIES, INC.
                                                                                              (A Development Stage Enterprise)
                                                                                                      STATEMENTS OF CASH FLOWS
    ---------------------------------------------------------------------------------------------------------------------------
                                                                                                               Cumulative
                                                                                                             For the Period
                                                                                                            from February 7,
                                                                                                            1997 (inception)
                                                                        For the Years Ended                     through
                                                                            December 31,                      December 31,
                                                                     2004                   2003                  2004
                                                            ------------------------ -------------------- ---------------------

<S>                                                                   <C>                       <C>                 <C>
             NET CASH PROVIDED BY FINANCING ACTIVITIES                1,194,044                 8,336,311           14,718,554
                                                              -----------------        ------------------    -----------------
             NET (DECREASE) INCREASE IN CASH                         (3,412,542)                6,670,972            3,403,712

    CASH AND CASH EQUIVALENTS -Beginning                              6,816,254                   145,282                   --
    ------------------------------------                      -----------------        ------------------    -----------------

    CASH AND CASH EQUIVALENTS - Ending                        $       3,403,712        $        6,816,254    $       3,403,712
    ----------------------------------                        =================        ==================    =================

    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
    -------------------------------------------------
         Cash paid during the periods for:

             Interest                                         $           7,277        $          11,008    $         964,038
             Income Taxes                                     $              --        $           1,867    $           4,509

         Non cash investing and financing activities:

             Conversion of bridge notes                       $              --        $         275,000    $       1,065,625
             Conversion of accounts payable to notes
                 payable                                      $              --        $              --    $         237,861
             Insurance premiums financed using a note         $         191,104        $              --    $         373,835
         Cashless exercise of common stock resulting in
             the issuance of 27,399 shares of common
             stock.                                           $              27        $              --    $              27

         Beneficial conversion charge attributable to
             Series A preferred stock                         $         458,121        $              --    $         458,121


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

</TABLE>


                                                                F-10



<PAGE>


NOTE 1 - Organization and Business

OmniCorder Technologies, Inc. (the "Company") was incorporated in the State of
Delaware on February 7, 1997, to develop and commercialize an advanced digital
imaging technology for the diagnosis and management of a large variety of
diseases including cancer and vascular disease through its lead product, the
BioScanIR System ("System").

In December 1999, the Company received FDA Section 510(k) market clearance,
which permits marketing, throughout the United States, of the BioScanIR System,
an adjunctive method to detect breast cancer and other diseases affecting the
perfusion of blood in tissue and organs. In August 2003, the Company received CE
mark clearance to market its BioScanIR System throughout the European Union. The
Company believes that it will generate revenues from the sale of licenses, user
fees and sale of the medical device to commercial, institutional and clinical
customers to use its technology for cancer and vascular disease applications
throughout the United States and Europe. However, there is no assurance that the
Company will be able to generate any revenues.

Recapitalization Transaction

On December 19, 2003, the Company completed a transaction with Promos, Inc.
("Promos") in which Promos acquired all the assets and assumed all the
liabilities of the Company, in consideration for the issuance of a majority of
Promos'shares of common stock (the "Recapitalization"). The transaction was
completed pursuant to an Agreement of Purchase and Sale, dated as of December
19, 2003. On December 29, 2003, the Company subsequently merged into a newly
formed Delaware corporation under the original name of the accounting acquirer,
OmniCorder Technologies, Inc. Subsequent to the Recapitalization, the original
shareholders of the Company owned 95% of the outstanding shares of the Company
and the original Promos shareholders owned 5% before the impact of the
concurrent private placement. Concurrent with the Recapitalization, all of the
net assets of Promos, Inc. were sold to its former President for no monetary
consideration and her indemnification to the Company against any potential
liabilities from the historical Promos operations. After the sale of all of the
net assets, Promos, in substance, became a public shell. For accounting
purposes, the Company is deemed to be the acquirer in the transaction and has
been accounted for as a recapitalization. Consequently the assets and
liabilities and the historical operations reflected in the financial statements
are those of the Company and are recorded at the historical cost basis of the
Company.

Since the transaction is in substance a recapitalization of the Company and not
a business combination, pro forma information is not presented. Such pro forma
statements of operations would be substantially identical to the historical
statements of operations of the Company, which are presented in the accompanying
statements of operations.

Following the completion of the Recapitalization, the December 19, 2003 private
offering (Note 7), related stock purchase and payment of equity-based
transaction fees, the shareholders of the Company owned 21,538,400 shares, or
72.8% of the outstanding shares of Promos' common stock. The Company filed a
Certificate of Dissolution on December 29, 2003 with the Delaware Secretary of
State and promptly thereafter, in accordance with the tax-free reorganization
provisions of Internal Revenue Code Section 368(a) (1) (C), liquidated the
shares of Promos' common stock it received in the Recapitalization to its
stockholders in proportion to their respective interests in OmniCorder
Technologies, Inc. The consideration and other terms of these transactions were
determined as a result of arm's-length negotiations between the parties.

As more fully described in Note 7, all share and per share amounts have been
retroactively restated in all periods for the effect of the Recapitalization.

NOTE 2 - Summary of Significant Accounting Policies

Basis of Presentation

The Company has been presented as a "development stage enterprise" in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company's primary activities
since inception have been securing technology licenses, the research and
development of its technology and the commercial development of its BioScanIR
System including negotiating strategic alliances, securing production component
purchase agreements including customized infrared cameras and related
components, and securing FDA clearance, UL and CE approval and raising capital.


                                       F-11
<PAGE>


Management's Liquidity Plans

The Company has a deficit accumulated during the development stage, which
commenced on February 7, 1997 through December 31, 2004 of $15,413,090 and cash
flows used in operating activities during the development stage of $10,245,899.
The accumulated loss resulted principally from costs incurred in developing its
business plan, acquiring licenses for its technology, research and development,
general and administrative expenses, establishing sales channels and fund
raising activities. As more fully described in Note 7, the Company received
gross and net proceeds approximating $7.8 million and $6.7 million,
respectively, on December 19, 2003 in a private placement of its common stock
and warrants. The Company could receive additional gross proceeds upon the
exercise of the associated warrants (which expire December 19, 2006) of
approximately $327,000, although there is no assurance that they will be
exercised.

As of December 14, 2004, the Company completed a private placement of 1,550,000
shares of its series A convertible preferred stock (convertible into 1,409,091
shares of common stock) and warrants to purchase 465,000 shares of its common
stock. The Company received gross proceeds of $1,550,000. The Company could
receive additional gross proceeds upon the exercise of the associated warrants
(which expire December 14, 2009) of approximately $511,000, although there is no
assurance that they will be exercised. As of December 31, 2004, the Company had
cash balances and working capital of $3,403,712 and $2,593,075, respectively and
total stockholders' equity of $2,474,870. At March 28, 2005, the Company has
approximately $2.3 million in cash balances (unaudited).

Management estimates that it will require additional cash resources during 2005,
based upon its current operating plan and condition. The Company is currently
investigating additional financing alternatives, including equity and/or debt
financing and asset based funding sources associated with the commencement of
product delivery. There is no assurance that capital in any form would be
available to the Company, and if available, on terms and conditions that are
acceptable. The success of the Company depends upon many factors, including
securing market acceptance for its products, obtaining adequate additional
financing on acceptable terms, and its ability to roll out the BioScanIR system
in sufficient quantities and at profitable revenue levels. The uncertainties
regarding the availability of continued financing and commencement of adequate
commercial revenues raise substantial doubt about the Company's ability to
continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability of the
recorded assets or the classification of liabilities that may be necessary
should the Company be unable to continue as a going concern.

The Company is in the process of preparing a subscription rights offering to
distribute to holders of its common stock of up to 3,500,000 transferable
subscription rights to purchase shares of our series A convertible preferred
stock. The Company will issue the subscription rights at the rate of one right
for approximately eight shares of our common stock held on the record date of
March 25, 2005, which represents the ratio of subscription rights to total
common shares outstanding 29,951,107. Each subscription right represents the
right to purchase one share of our series A convertible preferred stock for
$1.00 per share. The shares of series A convertible preferred stock are
convertible into shares of common stock at $1.10 per share (i) at any time at
the option of the holder thereof, and (ii) automatically, as of the close of
business on the 20th consecutive trading day on which the closing bid price for
the common stock on the principal stock exchange or market on which it is
listed, or if not traded on such exchange, on the OTC Bulletin Board, is at
least $2.20 per share, or 200% of the $1.10 conversion price per share. If all
3,500,000 subscription rights are exercised, then the Company will receive gross
proceeds, prior to expenses, of $3,500,000. There is no assurance as to how many
rights will be exercised.

In August 2003, the Company entered into a research and development contract
with the U.S. Department of Defense's Missile Defense Agency to further develop
core sensor technology. We earned and recognized the amount of this contract of
$69,800 in the quarter ended June 30, 2004

Use of Estimates

The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, 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. Critical estimates include management's
judgments associated with deferred income tax valuation allowance and the
capitalization and depreciation of long-term assets. Actual results could differ
from those estimates.


                                      F-12


<PAGE>


Employee Benefit Plans

The Company provides medical insurance coverage to eligible employees through a
third party provider. Employees pay a percentage of the associated premium.
Other than medical plans and Stock Based Compensation Plans described below, the
company does not provide any other employee benefit plans.

Cash and Cash Equivalents

For the purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with maturity of three months or less
to be cash equivalents.

Concentration of Credit Risk

The Company maintains cash and cash equivalents with major financial
institutions. Cash is insured by the Federal Deposit Insurance Corporation
("FDIC") up to $100,000 at each institution. At times, such amounts may exceed
the FDIC limits. At December 31, 2004 the uninsured cash balance at one bank was
approximately $3.4 million.

Property and Equipment

Property and equipment are recorded at cost and depreciated, using the
straight-line method, over the estimated useful lives of the related assets,
generally five to seven years. Upon retirement or other disposition of these
assets, the cost and related accumulated depreciation of these assets are
removed from the accounts and the resulting gain or losses are reflected in the
results of operations. Expenditures for maintenance and repairs are charged to
operations. Renewals and betterments are capitalized.

Software Development Costs

Software development costs have been charged to operations as incurred since
technological feasibility for the Company's computer software is generally based
upon achievement of a detail program design, free of high risk development
issues and the completion of research and development on the product hardware in
which it is to be used. These costs are included in research and development in
the accompanying financial statements.

Research and Development

Research and development costs are charged to operations as incurred.

Revenue Recognition

The Company recognizes revenues and costs and expenses generally utilizing the
accrual method of accounting. The Company is presently in the development stage
and will adopt revenue recognition accounting policies that are reflective of
its business model at the time the Company begins to generate each type of
revenue. For specific discussion of these activities, see the "Summary of
Significant Accounting Policies-Basis of Presentation." Based upon its
circumstances at the time, the Company will apply the appropriate methods that
comply with accounting principles generally accepted in the United States as
they relate to its business practices, as follows:

1. Rental - The Company may enter into rental agreements with end-users for
various periods of time. Under this arrangement, the Company would provide the
user with a non-exclusive right to use the software and hardware and receive
software upgrades as required to provide the level of services contracted for.
This arrangement would require a one-time, non-refundable fee and monthly rental
charge to be earned for the period of service and the passage of time. This
one-time fee would be initially recorded on the balance sheet as deferred
revenue and then recognized as revenue ratably over the rental period. The costs
and major improvements of these Systems would be capitalized and depreciated on
a straight-line basis over their estimated five-year useful life.

2. Sale - The Company may sell Systems to medical, diagnostic or any other end
user. These contracts may be for single or multiple units. The Company intends
to recognize revenue associated with single or multiple unit contracts upon
shipment and acceptance of each specific unit by the end-user. The Company may
provide an initial warranty period of one year as part of their sales
arrangements. The Company will establish a liability for estimated warranty
costs as appropriate and record actual warranty expenses


                                      F-13
<PAGE>


against this liability as incurred. The Company may offer an extended
warranty and maintenance arrangement to its customers after the expiration of
the initial warranty period. This arrangement would be sold pursuant to a
contract distinctly separate from the original sales arrangement. These extended
warranty and maintenance fees would be recognized ratably over the life of the
extended warranty and maintenance contracts.

3. Licensing - The Company may enter into licensing agreements for its
technology as part of sublicensing or distribution agreements with third
parties. The Company also intends to enter into licensing agreements that
provide third parties with exclusive or semi-exclusive rights to some portion of
its intellectual property in certain well defined fields of use. License
revenues are expected to be recognized ratably over the life of the license.

4. Development contracts - The Company may engage in research and development
contracts or other specialized arrangements with specific customers. While each
project may vary, it is planned that each would have milestones in the
development or delivery process for which stipulated amounts of the contract
value would be earned. The Company intends to recognize revenues as milestones
are achieved and upon substantial evidence of acceptance by the customer.

Systems available for sale, either newly constructed or which may have been
previously rented to customers, would be maintained in inventory at cost
determined on a first-in, first out method, or at depreciated cost (if
previously rented); in all cases at the lower of cost or market.

Patents

Patent costs have been charged to operations as incurred as their realizability
was uncertain. These costs are included in research and development in the
accompanying financial statements.

Income Taxes

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the recognition of deferred
tax assets and liabilities for the expected impact of differences between the
financial statements and the tax basis of assets and liabilities and for the
expected future tax benefits to be derived from tax loss and tax credit
carryforwards. SFAS No. 109 additionally requires the establishment of a
valuation allowance to reflect the likelihood of realization of deferred tax
assets.

Foreign Currency Transactions

The Company entered into exclusive agreement with a Germany manufacturer to
manufacture the BioScanIR System, payable in Euro dollars. The translation from
Euro dollars to U.S. dollars is performed for the balance sheet accounts using
current exchange rates in effect at the balance sheet date and for operations
accounts using the actual rate at the time of the transaction. The Company
incurred transaction losses of $ 0 , $4,778, and $19,271 resulting from foreign
currency transactions included in interest and other expenses for the years
ended December 31, 2004 and 2003 and for the period from February 7, 1997
(inception) to December 31, 2004, respectively in the accompanying financial
statements.

Loss Per Common Share

Loss per share ("EPS") is computed based on weighted average number of common
shares outstanding and excludes any potential dilution. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock, which would then share in the earnings of the Company.
The shares issuable upon the exercise of stock options, warrants and conversion
of the series A convertible preferred stock are excluded from the calculation of
net loss per share as their effect would be antidilutive.

Securities that could be potentially dilute basic EPS in the future that were
not included in the computation of diluted EPS because to do so would have been
antidilutive for the periods presented consist of the following:

         Total potential common shares as of December 31, 2004:

         Warrants to purchase common stock           1,915,397



                                      F-14
<PAGE>

         Options to purchase common stock            3,039,875

         Series A convertible preferred stock        1,409,091
                                                     ---------
                                                     6,364,363
                                                     =========

Stock-Based Compensation

In accordance with SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" which amends SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has elected to continue to follow the
intrinsic value method in accounting for its stock-based employee compensation
arrangements as defined by APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and FASB Interpretation No. ("FIN") 44, "Accounting for Certain
Transactions Involving Stock Compensation". No compensation expense has been
recognized for options granted to employees, as all options granted under those
plans have an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
loss and net loss per share had the Company applied the fair value recognition
provisions of SFAS No. 123 to options granted to employees.

As discussed in "New Accounting Pronouncements" SFAS No. 123R will require the
Company to expense stock options based on grant date fair value in its financial
statements. The effect of expensing stock options on the Company's results of
operations using the Black-Scholes option pricing model is presented in the
following proforma table:
<TABLE>
<CAPTION>

                                                                 For the Years Ended December 31,
                                                              2004                                   2003
                                                         --------------                         ---------------
<S>                                                       <C>                                     <C>
Net loss attributable to common                           $(5,093,270)                            $(2,375,919)
stockholders -  basic and diluted
Deduct:
    Total stock-based employee
    compensation expense determined
    under fair value-based method for
    all awards                                               (342,877)                               (435,706)
                                                         -------------                         ---------------
Pro forma net loss attributable to
    common stockholders                                   $(5,436,147)                            $(2,811,625)
                                                         =============                         ===============
Basic and diluted net loss per share
   as reported                                                 $(0.17)                                 $(0.11)
                                                         =============                         ===============
Basic and diluted pro forma net loss
   per share                                                   $(0.18)                                 $(0.13)
                                                         =============                         ===============

   The fair value of the Company's options at date of grant was estimated using the Black-Scholes fair value
   based method with the following weighted average assumptions:

</TABLE>

                                            For the Years Ended December 31,
                                           2004                         2003
Expected life (years)                       4.3                         5.3
Risk free interest rate                     3.61%                       3.25%
Volatility                                147.7%                          77%




                                      F-15
<PAGE>


     The weighted average fair value of options at the date of grant using the
     Black-Scholes fair value based methodology for options granted in the years
     ended December 31, 2004 and 2003 is estimated at $3.79 and $1.31,
     respectively.

Impact of Recently Issued Accounting Standards

In March 2004, The Emerging Issues Task Force ("EITF") reached a consensus on
recognition and measurement guidance previously discussed under EITF 03-01, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." The consensus clarifies the meaning of other-than-temporary
impairment and its application to investments classified as either
available-for-sale or held-to-maturity under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," and investments accounted
for under the cost method or the equity method. The EITF 03-01 includes new
disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the FASB delayed the accounting provisions of EITF
03-1; however the disclosure requirements remain effective for annual periods
ending after June 15, 2004. The application of the disclosure requirements did
not have a material effect on the Company's financial position or results of
operations.

In April 2004, the EITF issued Statement No. 03-06 "Participating Securities and
the Two-Class Method Under FASB Statement No. 128, Earnings Per Share " ("EITF
03-06"). EITF 03-06 addresses a number of questions regarding the computation of
earnings per share by companies that have issued securities other than common
stock that contractually entitle the holder to participate in dividends and
earnings of the company when, and if, it declares dividends on its common stock.
The issue also provides further guidance in applying the two-class method of
calculating earnings per share, clarifying what constitutes a participating
security and how to apply the two-class method of computing earnings per share
once it is determined that a security is participating, including how to
allocate undistributed earnings to such a security. EITF 03-06 is effective for
fiscal periods beginning after March 31, 2004. The adoption of this statement
did not have any effect on the Company's calculation of EPS.

In September 2004, the EITF issued statement EITF Issue No. 04-08, "The Effect
of Contingently Convertible Debt on Diluted Earnings per Share" ("EITF 04-08").
Contingently convertible debt instruments are generally convertible into common
shares of an issuer after the common stock price has exceeded a predetermined
threshold for a specified period of time (the "market price contingency"). EITF
04-08 requires that shares issuable upon conversion of contingently convertible
debt be included in diluted earnings per share computations regardless of
whether the market price contingency contained in the debt instrument has been
met. EITF 04-08 is effective for reporting periods ending after December 15,
2004 and requires restatement of prior periods to the extent applicable. The
adoption of this statement is not expected to have an effect on the Company's
calculation of EPS.

In December 2003, the FASB issued revised SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits - an amendment of FASB
Statements No. 87, 88, and 106." This statement revises employers' disclosures
about pension plans and other postretirement benefit plans. It does not change
the measurement or recognition of those plans required by SFAS No. 87,
"Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Except as noted, this statement
was effective for financial statements with fiscal years ending after December
15, 2003. The adoption of revised SFAS No. 132 had no impact on the Company's
financial condition or results of operations.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The statement
amends Accounting Research Bulletin ("ARB") No. 43, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. ARB No. 43 previously stated that these
costs must be "so abnormal as to require treatment as current-period charges."
SFAS No. 151 requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this statement requires that allocation of fixed production overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005, with earlier application permitted
for fiscal years beginning after the issue date of the statement. The adoption
of SFAS No. 151 is not expected to have any impact on the Company's current
financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An Amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting For
Nonmonetary Transactions," is based on the opinion that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets whose results are not expected to
significantly change the future cash flows of the entity. The Company is
currently evaluating the impact that this statement will have on its financial
condition or results of operations.



                                      F-16
<PAGE>


In December 2004. the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award.
Changes in fair value during the requisite service period are to be recognized
as compensation cost over that period. In addition, the revised statement amends
SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be
reported as a financing cash flow rather than as a reduction of taxes paid. For
small business issuers, the provisions of the revised statement are effective
for financial statements issued for the first interim or annual reporting period
beginning after December 15, 2005, with early adoption encouraged. The Company
is currently evaluating the impact that this statement will have on its
financial condition or results of operations.

Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires
that the Company disclose estimated fair values of financial instruments. The
carrying amounts reported in the statement of financial position for current
assets and current liabilities qualifying as financial instruments is a
reasonable estimate of fair value.

Reclassifications

Certain accounts in the prior year financial statements have been reclassified
for comparative purposes to conform with the presentation in the current year
financial statements. These reclassifications have no effect on previously
reported income.

NOTE 3 - Property and Equipment

         Property and equipment consists of the following:

                                                     December       December 31,
                                                       2004               2003
         Research and development equipment         $876,563          $856,093
         Office equipment                             67,603            22,497
         Furniture and fixtures                       26,804            11,004
         Leasehold Improvements                       17,465                --
                                                    ---------       -----------
                                                     988,435           889,594
                                                    ---------       -----------
         Less:  accumulated depreciation and
          amortization                               703,585           618,353
                                                    ---------       -----------
                                                    $284,850          $271,241
                                                    =========       ===========

     Depreciation and amortization expenses charged to operations for the years
     ended December 31, 2004 and 2003 and for the period February 7, 1997
     (inception) to December 31, 2004 was $144,846, $165,132 and $763,199,
     respectively.

NOTE 4 - Notes Payable

The Company financed its annual insurance premiums over a nine-month period with
one financing Company through two notes payable. The notes payable balances at
December 31, 2004 and 2003 were $165,883 and $159,627, respectively. The balance
as of December 31, 2004 is due in monthly installments approximating $17,246 and
$3987, including interest at the rates of 6.85 % and 7.75% per annum through
August 2005. The balance as of December 31, 2003 was due in monthly installments
approximating $17,433 and $3,333, including interest at the rates of 5.0 % and
7.75% per annum through August 2004.

In September 2001, the Company converted its accounts payable balance due to a
vendor into a note payable. The balance at December 31, 2003 amounted to
$80,325, which was due in monthly installments of $12,930, including interest at
the rate of 8% per annum commencing in June 2003 through May 2004. This note was
paid in full in January 2004.


                                      F-17
<PAGE>


NOTE 5 - Income Taxes

     The tax effect of temporary differences and carryforwards that give rise to
     significant portions of the deferred assets are as follows:

                                             December 31,           December 31,
                                                 2004                   2003
                                             ------------           -----------
Deferred tax assets(liabilities):
Net operating loss carryforward              $ 5,412,000            $ 3,807,000
Property and Equipment                            (1,000)               (30,000)
Accrued Expenses                                 443,000                481,000
     Valuation allowance                      (5,854,000)            (4,258,000)
                                             ------------           ------------
      Net Deferred Tax Asset                 $        --            $        --
                                             ============           ============

     The expiration dates for the net operating loss carry forward are as
follows:


                            2019                 $  2,746,000
                            2020                    1,467,000
                            2021                    1,688,000
                            2022                    1,260,000
                            2023                    1,607,000
                            2024                    4,762,000
                                                  -------------
                                                  $13,530,000
                                                  =============

     The Company has recorded a full valuation allowance against its deferred
     tax assets since management believes that based upon current available
     objective evidence it is more likely than not that the deferred tax
     asset will not be realized. The Company's effective tax rate differs from
     the federal statutory rate as a result of the change in the valuation
     allowance.

     A reconciliation between the effective rate for income taxes and the amount
     computed by applying the statutory Federal income tax rate to loss from
     continuing operations before provision for income taxes and cumulative
     effect for a change in accounting principle as follows:

                                          For the Years Ended
                                          -------------------
                                             December 31,
                                          -------------------
                                           2004        2003
                                          --------   --------

Tax provision at statutory rate              (34%)      (34%)
Non deductible expenses                       (1%)       (1%)
Other                                           1%         0%
Change in valuation allowance
  for net deferred tax assets                  34%        33%
                                          --------   --------
                                                0%         0%
                                          ========   ========

     The change in the valuation allowance for deferred tax assets are
     summarized as follows:

                               Years Ended December 31,
                               2004                          2003
                           ----------                    -----------
Beginning Balance          $4,258,000                    $3,321,000
Change in Allowance         1,596,000                      937,000
                           ----------                    -----------


                                      F-18
<PAGE>



Ending Balance             $5,854,000                    $4,258,000
                           ==========                    ===========

As of December 31, 2004 and 2003, the Company has net operating loss
carryforwards of $13,530,000 and $8,768,000, respectively, available to offset
future taxable income. These carryforwards will expire at various dates through
2024. Internal Revenue Code Section 382 rules limit the utilization of net
operating losses upon a change of control of a company. The Company has not
performed an evaluation whether a change of control has taken place and as such,
utilization of its net operating losses may be subject to substantial limitation
in future periods.

NOTE 6 - Accounts Payable, Accrued Expenses and Deferred Officers Salaries
PICK UP
The Company has incurred legal fees of $544,178 since inception to a former law
firm in which a former director of the Company is a partner. The Company had an
accounts payable balance of $320,297 due to the law firm at December 31, 2002.
The balance was settled in full for a payment of $200,000 in March 2004. This
liability, included in accrued expenses, was reduced to $200,000 as of December
31, 2003 in the accompanying balance sheet, and legal expense was reduced by
$120,297 for the year ended December 31, 2003. Deferred officers salaries
represents payroll amounts deferred by the former CEO and former CFO which
aggregated $986,555 and $979,632 at December 31, 2004 and 2003 respectively.
(See Note 10, Litigation).

NOTE 7 - Stockholders'  Equity

Initial Capitalization and Founders'shares

In February 1997 and March 1998, the Company issued to its founders 10,301,259
and 2,710,858 shares of common stock, respectively, for an aggregate of $6,050
including technology rights (valued at $4,400) transferred to the Company.

Stock Splits and Recapitalization

In August 1998, the Company's board of directors approved a 2.2 for 1 stock
split on its common stock and in June 2001, the Company's board of directors
approved a 3 for 1 stock split on its common stock. On December 19, 2003, the
company completed the recapitalization transaction with Promos, Inc. This
resulted in the issuance of 2.054 shares of Promos, Inc. (subsequently renamed
OmniCorder Technologies, Inc.) for each outstanding share of the original
OmniCorder, and the corresponding adjustment of the number of options and
warrants and their exercise prices. All share information in the accompanying
financial statements have been retroactively restated to reflect such stock
splits and the Recapitalization .

Private Placements

In October 1997, the Company commenced a private placement of shares of common
stock at a price of $.55 per share. The placement agent received a commission of
5% of the aggregate purchase price of the common stock placed, and was granted
warrants with a five year term to purchase 76,810 shares of common stock on
August 31, 1998, at an exercise price of $.55 per share, which expired on August
31, 2003. The Company issued 1,246,976 shares of its common stock at $.55 per
share, which related to this private placement, from October 1997 through May
1998 for net proceeds of $591,925.

In April 1999, the Company issued 945,282 shares of common stock at a price of
$1.14 per share for aggregate proceeds of $1,074,000. The Company's former chief
financial officer purchased 184,831 of these shares.

In 2000, the Company issued 1,615,425 shares of common stock to various
investors for aggregate proceeds of $2,060,401.

In 2001, the Company issued 164,294 shares of common stock to various investors
for aggregate proceeds of $400,000.

In 2002, the Company issued 487,749 shares of common stock for aggregate
proceeds of $500,000. Additionally, the Company issued 164,294 shares of common
stock to the stockholders who participated in the 2001 private placement in
accordance with the anti-dilution provisions of the subscription agreements. In
October 2003, the Company issued to these stockholders an additional 107,822
shares of common stock based on the anti-dilution provisions of the subscription
agreements.

In 2003, the Company issued 1,317,849 shares of common stock to various
investors for aggregate proceeds of $1,238,402 at $.97 per share. Concurrent
with the closing of the recapitalization transaction on December 19, 2003, the
Company completed a private

                                      F-19
<PAGE>

offering of 5,686,027 (including the issuance of 200,000 common shares upon the
conversion of the $275,000 Bridge Promissory Note) shares common stock at a
price of $1.375 per share, with gross proceeds of $7,820,405. Promos also issued
warrants to three investors to purchase an aggregate of 218,189 shares of its
common stock at an exercise price of $1.50 per share for a three-year period.
Prior to the completion of the recapitalization transaction, Promos redeemed and
cancelled 1,135,300 shares of its outstanding common stock from seven existing
stockholders for a total cash consideration of $10. At the time of the
completion of the recapitalization transaction, private offering, related stock
purchase and payment of equity-based transaction fees, OmniCorder had 29,570,100
outstanding shares of common stock, warrants to purchase 1,450,397 shares and
stock options to purchase 2,781,899 shares of common stock.

In connection with the private offering and recapitalization transaction, the
Company incurred cash transaction expenses which reduced the proceeds as
follows: (i) placement agent fees associated with the private offering of
approximately $289,000, which included reimbursement expenses were paid on
closing; (ii) investor and financial relations services fees associated with the
recapitalization transaction of approximately $135,000 and (iii) legal fees and
reimbursement expenses associated with the recapitalization transaction of
approximately $223,000.

As part of the transaction, the Company purchased and distributed to its
shareholders as part of the recapitalization transaction purchase of 7,764,700
shares of Promos common stock for a consideration of $180,000 from a former
director of Promos. This payment has been reflected as a reduction of the
proceeds of the December 19, 2003 private placement. In the transaction,
13,773,700 shares held by Promos shareholders were redeemed and distributed to
shareholders of the Company, and an aggregate of 1,135,300 shares of Promos
common stock from seven unaffiliated and existing stockholders were cancelled.

In addition, the Company issued 1,212,073 of its common stock to the placement
agent and its financial advisors in connection with the private offering and
recapitalization transaction.

On December 14, 2004, the Company completed a private placement of 1,550,000
shares of its series A convertible preferred stock (convertible into
1,409,091shares of common stock) and warrants to purchase 465,000 shares of its
common stock at $1.10 per share. The Company received gross proceeds of
$1,550,000. The Company allocated $387,667 of the gross proceeds to the warrants
based on estimated fair value. In accordance with EITF Issue No. 00-27
"Application of EITF Issue No. 98-5 to Certain Convertible Instruments", "the
Company recorded a non-cash charge of $458,121 to deficit accumulated during the
development stage. The noncash charge measures the difference between the
relative fair value of the series A convertible preferred stock and the fair
market value of the Company's common stock issuable pursuant to the conversion
terms on the date of issuance. Holders of the series A convertible preferred
stock are entitled to receive a cumulative dividend of 4% per annum, payable
either in cash or, at the Company's option, additional shares of series A
convertible preferred stock. The series A convertible preferred stock is
convertible into shares of our common stock at a conversion price of $1.10 per
share. The series A convertible preferred stock is convertible into shares of
common stock (i) at any time at the option of the holder thereof, and (ii)
automatically, as of the close of business on the 20th consecutive trading day
on which the closing bid price for the common stock on the principal stock
exchange or market on which it is listed, including the American Stock Exchange
or Nasdaq SmallCap Market, or if not traded on such exchange or market, on the
OTC Bulletin Board, is at least $2.20, or 200% of the $1.10 conversion price per
share, subject to adjustment. No underwriter or selling agent is involved in
this offering.

Warrants

In 1997, the Company received $40,000 from the sale of stock warrants, to a
former director of the Company who is a partner at the Company's former law
firm. These warrants entitled the holder to purchase up to $180,000 of any
securities the Company may issue through January 6, 2004, on the same terms and
conditions as those issued. In October 2003, these warrants were exercised on a
cashless basis and the Company issued 142,304 shares of common stock.

In 1997 the Company issued warrants to a law firm in which a former director of
the Company is a partner, in consideration for the deferral of payment of legal
fees. The warrants entitled the Company's former legal counsel to purchase up to
$427,500 of any securities sold by the Company to outside investors at the same
prices as sold to such investors on January 6, 2004 (as to $337,500 worth of
such securities) and on February 15, 2004 (as to $90,000 worth of such
securities). The estimated fair value of the warrants was $95,000, of which
$75,000 and $20,000 was charged to general and administrative expense for the
period February 7, 1997 (inception) to December 31, 1997 and the year ended
December 31, 1998. In October 2003, these warrants were exercised on a cashless
basis and the Company issued 337,970 shares of common stock.

                                      F-20
<PAGE>

In 2004 the Company issued warrants in connection with the December 14, 2004
private placement transaction. The warrants entitled the participants of the
private placement to purchase up to 465,000 shares of common stock at an
exercise price of $1.10 per share. These warrants will expire if unexercised on
December 14, 2009.

For the years ended December 31, 2004 and 2003, the Company had warrants
outstanding to purchase an aggregate of 1,915,397 and 1,450,397 common shares,
respectively.

Bridge Financing

On August 31, 1998, the Company sold an aggregate of $750,000 of 10%
Exchangeable Senior Bridge Notes ("Bridge Notes") to accredited investors. The
net proceeds of the Bridge Notes were approximately $602,500 after the payment
of offering costs of $147,500. The Company issued warrants to purchase 1,540,260
shares of common stock at an exercise price of $.97 per share. Included in the
Bridge Financing is $150,000 of Bridge Notes and 308,052 warrants with related
parties. The Company allocated $329,625 of the gross proceeds to the Bridge
Warrants based on estimated fair value, which resulted in $329,625 of original
issue discount and a corresponding amount of additional paid-in capital.

In March 1999, the Company exercised its option to convert the Bridge Notes and
accrued interest into common stock at a conversion price of $.55 per share. The
Company issued 1,443,015 shares of its common stock in conjunction with the
conversion. As a result of the Bridge Notes conversion, the amount of
convertible warrants was reduced by half to 770,130 shares of warrants to
purchase common stock. These warrants expired unexercised on August 31, 2003.

On November 20, 2003, the Company entered into a one-year Bridge Promissory Note
in the amount of $275,000 bearing interest at 1%. By its terms, this note was
automatically converted into 200,000 common shares of the Company at $1.375 per
share as part of the December 19, 2003 private placement.

NOTE 8 - Stock Option Plan and Warrants

In 1998, the Company adopted a stock option plan under which it may grant
qualified and nonqualified options to purchase up to 4,435,500 shares of common
stock to employees and consultants, as amended on February 26, 2004. Qualified
options shall be exercisable for a period of up to ten years from the date of
the grant at no less than the fair value of the common stock on the date of
grant. The term of such options shall be five years from the date of grant for
stockholders who own more than ten percent of the voting power of all classes of
stock of the Company at the date of grant, and shall be exercisable for no less
than 110% of fair value on the date of grant for such holders.

As a result of stock options awarded in February and March 2005 the Company has
issued 13,942 stock options in excess of the shares reserved under the 1998
Stock Option Plan.

A summary of activity under the stock option plan is as follows:
<TABLE>
<CAPTION>

                                                               December 31,                    December 31,
                                                                   2004                            2003
                                                                          Weighted                         Weighted
                                                                           Average                         Average
                                                                          Exercise                         Exercise
                                                          Shares            Price           Shares          Price

<S>                                                  <C>              <C>             <C>                  <C>
         Outstanding, beginning of year             2,781,899         $ .96           4,173,622            $1.15

         Options granted                              565,983          2.66           1,267,794              .98

         Options exercised                           (113,067)          .74            --                     --
                                                     (194,940)         1.34          (2,659,517)            1.16
         Options forfeited                          ----------        -----          -----------           -----
                                                    3,039,875         $ .73           2,781,899            $ .96
         Outstanding, end of year                   ==========        =====          ===========           =====
                                                    2,739,306         $ .84           2,384,107            $1.07
         Exercisable, end of year                   ==========        =====          ===========           =====
</TABLE>


                                      F-21
<PAGE>


The following table summarizes stock option information as of December 31, 2004:

<TABLE>
<CAPTION>

                                                                    Options Outstanding
                                                                                                     Options
                                                                       Weighted Average       Number Exercisable
                                         Number Outstanding at             Remaining                    At
                  Exercise                    December 31,                Contractual              December 31,
                   Prices                         2004                       Life                      2004

     <S>                                       <C>                           <C>                  <C>
        $ .55                                     167,877                       3.27                 167,877
        $ .97                                   1,480,871                       3.36               1,388,358
        $1.13                                     449,755                       3.44                 449,755
        $1.135                                    221,796                       1.25                 221,796
        $1.375                                    250,000                       8.75                 250,000
        $1.378                                     41,865                        .88                  31,853
        $1.38                                         727                       1.96                     727
        $2.43                                     175,588                       1.02                 166,090
        $3.95                                       6,646                       4.41                   1,662
        $4.00                                     124,750                       4.33                  31,188
        $4.40                                     120,000                       4.33                  30,000
                                              -----------                      -----              -----------
                    Total                       3,039,875                       3.36               2,739,306
                                              ===========                      =====              ===========
</TABLE>

The Company had granted a total of 2,550,760 shares of stock options to its
former chief financial officer during his employment with the Company. Upon
expiration of a 90-day period subsequent to the termination of the former chief
financial officer's employment, effective on February 28, 2003 2,464,416 shares
of stock options were forfeited. However, this former chief financial officer
will retain non-qualified stock options to purchase 86,254 shares of common
stock that were granted to him in his capacity as a director, and which expire
in April 2005 and 2006 (See Note 10, Litigation).

A summary of stock warrant activity is as follows:
<TABLE>
<CAPTION>

                                                 December 31,                     December 31,
                                                     2004                             2003
                                                              Weighted                          Weighted
                                                              Average                            Average
                                                              Exercise                          Exercise
                                                  Shares       Price            Shares            Price

<S>                                              <C>               <C>         <C>                 <C>
         Outstanding, beginning of year          1,450,397         $1.05       3,183,229           $.65
         Warrants granted                          465,000          1.10         218,189           1.50
         Warrants exercised                             --            --     (1,104,081)            .55
         Warrants expired                               --            --       (846,940)            .94
                                                 ---------         -----     -----------          ------
         Outstanding, end of year                1,915,397          1.06       1,450,397          $1.05
                                                 =========         =====     ===========          ======
         Exercisable, end of year                1,915,397         $1.06       1,450,397          $1.05
                                                 =========         =====     ===========          ======

</TABLE>

The warrants that were exercised in 2003 contained cashless exercise provisions.
Consequently no cash proceeds resulted.

The following table summarizes warrants information as of December 31, 2004:

                                      F-22
<PAGE>

<TABLE>
<CAPTION>
                                                        Warrants Outstanding
                                                                                             Warrants
                        Number Outstanding    Weighted Average         Weighted         Number Exercisable
                                at                Remaining            Average                  at
       Exercise            December 31,          Contractual           Exercise            December 31,
        Prices                 2004                 Life                Price                  2004
        ------                 ----                 ----                -----                  ----

       <S>                 <C>                     <C>                 <C>                <C>
        $0.97               1,232,208               7.67                $ .97              1,232,208
        $1.10                 465,000               4.96                 1.10                465,000
        $1.50                 218,189               1.97                 1.50                218,189
                          ----------------   -----------------      -----------         ------------
                            1,915,397               6.36               $1.06               1,915,397
                          ================   =================      ===========         =============
</TABLE>

During the year ended December 31, 2002, the Company issued warrants to purchase
1,026,840 shares of common stock at $.97 per share to a consultant for services
rendered, of which 400,000 were earned in 2002, and the remainder in 2003. The
Company recorded a charge to operations of approximately $473,000 for the fair
value of the warrants earned in 2002. For the year ended December 31, 2003, the
Company issued additional warrants to purchase 205,368 shares of common stock at
$.97 per share to another consultant for services rendered, all of which were
earned in 2003. The company recorded a charge to operations of approximately
$236,000 for the fair value of the warrants earned in 2003. As of December 31,
2004, these warrants are fully vested and are exercisable through September 1,
2012.

The Company issued warrants to purchase 218,189 shares of its common stock to
lead investors in its December 19, 2003 Private Placement (Note 7). These
warrants were immediately exercisable at $1.50 per share through December 19,
2006.

The Company issued warrants to purchase 465,000 shares of its common stock to
investors in its December 14, 2004 Private Placement (Note 7). These warrants
were immediately exercisable at $1.10 per share through December 14, 2009.

NOTE 9 - License Agreements

Technology License Agreement

In 1997, and in connection with the formation of the Company, the founding
stockholders entered into an agreement pursuant to which the Company could
acquire the exclusive worldwide right to exploit technology related to the
detection of cancerous lesions by their effect on the periodic modification of
perfusion in the surrounding tissues (the "Technology"). In February 1998, the
Company funded the required research budget and in March 1998, issued 1,320,000
shares of previously reserved common stock to one of the founders, Dr. Anbar.
The Company recorded the issuance of these shares at the historical cost
($4,400) of the technology transferred from Dr. Anbar. The license, as amended,
required the Company to fund future research and development costs in the amount
of $495,000. The Company funded the first $110,000 of this obligation in late
1997 with the balance paid in March 1998. The Company also entered into a
consulting agreement with a company controlled by this stockholder of the
Company. Under the terms of the agreement, the Company is contractually
obligated to pay a maximum of $26,000 for consulting services; $25,000 for
travel; and $50,000 for research supplies for a twelve month period. The Company
satisfied this entire obligation with a one-time $50,000 payment, which is
included in the $495,000 as discussed above. The Company will also be obligated
to pay this shareholder a royalty of $300 for each device installed at client's
site based only on installations at which the Company derived revenues from the
licensed technology. As more fully described in Note 13, the Company entered
into a two yeat consulting agreement with Dr. Anbar subsequent to year-end.

Caltech License Agreement

In September 1997, the Company entered into an option agreement with the
California Institute of Technology ("Caltech"), which grants the Company the
right to enter into an exclusive license to exploit Caltech's infrared radiation
detection technology in the field of detection of infrared radiation for
commercial medical applications. In addition, the Company has the right to
sublicense this technology. The Company is obligated to pay Caltech a royalty
based on revenues derived from licensed products and services and from
sublicenses. As of December 31, 2004, the Company has issued Caltech 542,172
shares of its common stock in connection with the license agreement. The license
may be cancelled at Caltech's option if it has not received minimum license fees
of $10,000 in any

                                      F-23
<PAGE>

one-year period commencing June 30, 1999. The license continues in effect for as
long as the patent rights remain effective, which will be until 2018 through
2020, depending on the relevant patent.

While in effect, the agreement requires that the Company pay 50% of all attorney
fees in connection with preparation, filing and prosecution, issuance and
maintenance of the licensed patent rights in the United States. The Company is
also obligated to pay 100% of patent costs in foreign jurisdictions.

The Lockheed Martin License Agreement

In September 1998, we entered into a license agreement with Lockheed Martin
Corporation pursuant to which we were initially granted an exclusive license to
exploit biomedical applications of certain enhanced infrared detector
technologies known as Enhanced Quantum Well Infrared Photodetectors, or EQWIP.
The EQWIP technology is protected by a patent owned by Lockheed Martin. In
addition, we licensed the same rights with respect to patent filings on the
EQWIP technology in a number of foreign countries. In order to maintain the
exclusivity of the license, the Company was required to meet certain milestones
relating to royalty generation, development of markets and territories and
utilization of the EQWIP technology in certain percentages of our installed base
of diagnostic equipment. If the license agreement remained exclusive, the
Company agreed to pay Lockheed Martin certain minimum royalties. The Company
also agreed to pay Lockheed Martin royalties on revenues we derived from
utilization of the EQWIP technology. To date, the Company has not utilized the
EQWIP technology licensed from Lockheed Martin and, therefore, believes that the
license is no longer exclusive and that no minimum or other royalties are due to
Lockheed Martin. If, pursuant to the license agreement, royalty payments are
ever required to be paid by the Company to Lockheed Martin, such payments will
range from 1.5% to 3% of revenues derived from the technology as defined in the
agreement. If and when a viable EQWIP's manufacturer is provided, the Company
would be required to make specified annual minimum payments in order to maintain
the exclusive rights to the EQWIP technology.

The license from Lockheed Martin does not expire other than as a result of a
breach of the license by the Company, but five years following the expiration of
the last of the patents that are the subject of the license (July 2016), the
license becomes non-exclusive and royalty-free. In October 2004, Lockheed
requested that the Company pay minimum royalties and other amounts aggregating
$2,500,000. See Note 10 Commitments and Contingencies under "Litigation".

NOTE 10 - Commitments and Contingencies

Purchase Commitments

The Company has committed to purchase infrared camera components from AEG
Infrarot-Module GmbH ("AIM") in the amount of 200,000 Euros or $266,000 as of
December 31, 2004. In March 2005 we committed to purchase an additional 410,000
Euros or $533,000 of camera systems and components from AIM.

Operating Lease Commitments

The Company leases facilities in Bohemia, New York for approximately 6,550
square feet of space which expires November 30, 2009.

Future annual minimum lease payments under noncancelable operating leases and
arrangements as of December 31, 2004 are as follows:

             For the Year Ending
                December 31,                        Amount
                    2005                         $    58,300
                    2006                              60,500
                    2007                              62,800
                    2008                              65,100
                    2009                              61,800
                                                 ------------
                    Total                        $   308,500
                                                 ============
                                      F-24
<PAGE>

Rent expense charged to operations for the years ended December 31, 2004 and
December 31, 2003 and for period February 7, 1997 (inception) to December 31,
2004 amounted to $60,590, $31,714 and $182,249, respectively.

Litigation

In September 1998, the Company entered into a license agreement with Lockheed
Martin Corporation, pursuant to which the Company was initially granted an
exclusive license to exploit biomedical applications of certain enhanced
infrared detector technologies known as Enhanced Quantum Well Infrared
Photodetectors, or EQWIP. We believed that these technologies would enhance the
sensitivity of the technology the Company licensed from CalTech. The Company has
not utilized the EQWIP technology licensed from Lockheed.

In a letter dated October 12, 2004 and in subsequent correspondence, Lockheed
advised the Company that it believes that minimum royalties and other amounts
aggregating approximately $2,500,000 were owed to Lockheed pursuant to the
license agreement and demanded payment of such sum. In a letter dated November
1, 2004, Lockheed notified management of the Company that, in its view, the
Company was in default under certain of the provisions of the license agreement
and, unless such conditions were remedied within 60 days thereafter, Lockheed
would regard the license agreement as cancelled and terminated. The Company
responded to Lockheed that, among other reasons, no sums are due to Lockheed by
the Company, the license agreement by its terms has become a non-exclusive
license requiring no minimum or other royalties be paid and that Lockheed failed
to perform certain of its obligations provided by the license agreement.
Although the Company believes that it has no current monetary obligations to
Lockheed pursuant to the license agreement or otherwise, Lockheed may determine
to pursue its claims through litigation, creating the possibility that the
Company may incur substantial costs and expenses, including legal and other
professional fees, in connection with such litigation.

On March 8, 2003, our former Chief Financial Officer ("CFO"), filed a
declaratory judgment action against the Company in the US District Court for the
District of New Jersey. The complaint alleges that while serving as both a
director and CFO, he was awarded stock options to purchase 2,538,324 shares of
common stock. He is seeking specific determination that he is entitled to these
options, as well as approximately $462,000 in deferred salary.

On July 23, 2004, the District Court granted, in part, the Company's motion to
dismiss. The Court dismissed claims relating to 2,501,328 stock options, which
were to expire in April 2005, as unripe for adjudication. The Court found that a
justiciable dispute existed with respect to 36,966 options which expired on
April 1, 2004. The Company moved to dismiss the deferred salary claim based on
an arbitration provision in Plaintiff's employment agreement. The Court declined
to dismiss the deferred salary claim, but ordered the parties to conduct limited
discovery on the validity of the employment agreement and revisit the issue on
summary judgment.

While the ultimate outcome of this matter cannot presently be determined with
certainty, according to the Company's counsel, Greenberg Traurig, LLP, the
remaining claims are without merit, and we intend to vigorously defend the
claims in this lawsuit. The Company believes that its provision for such in the
accompanying financial statements is adequate at December 31, 2004.

The outcome of these matters may have material effect impact on the Company's
financial condition, and results of operations and cash flows.

The Company is not a party to any other pending or threatened legal proceedings.

Employment and Consulting Agreements

In March 2005, the Company entered into a two year agreement with a new CEO and
President, which provides for an annual salary of $225,000. See Note 13 -
Subsequent events.

On March 9, 2005, we announced that we entered into a Consulting Agreement with
Mark A. Fauci, which terminates the pending arbitration proceeding and includes
a mutual release by the parties. The agreement, which terminates Mr. Fauci's
previous employment agreement with us, provides that Mr. Fauci will perform
consulting services for us for a two-year period in exchange for consulting fees
and other consideration and will be nominated at our upcoming annual meeting of
shareholders to continue as a board member. See Note 13 - Subsequent events.

                                      F-25
<PAGE>

Effective February 1, 2005, the Company amended a settlement agreement dated
October 3, 2001 and entered into a two year consulting agreement with Dr.
Michael A. Anbar, founding scientist of the company, which provides for Dr.
Anbar to advise management on the optimization of its technology. The agreement
awards Dr. Anbar $1,000 and 1,000 restricted shares of common stock per day with
a minimum fee of $12,000 for the first twelve month period as well as a grant of
250,000 additional restricted shares. As part of this agreement, the Company
will acquire one patent on complimentary technology developed and held by Dr.
Anbar .

In December 2003, the Company entered into a five-year employment agreement with
its then CEO and President, which provided for an annual salary of $180,000 with
annual cost of living increases and an annual performance bonus at the
discretion of the board of directors or compensation committee. Pursuant to his
agreement, he has been granted stock options to purchase 250,000 shares of
common stock at $1.375 per share, which vest upon granting and have a ten year
life. He is also entitled to payment of deferred salary of approximately
$625,000, the payment terms of which are more fully described in Note 13-
Subsequent Events for additional information. Mr. Fauci ceased being an officer
on December 13, 2004. On March 1, 2005, Mr. Fauci signed a two year consulting
agreement with our Company. See Note 13 - Subsequent Events for additional
information.

In February 2004, the Company entered into a one-year employment agreement with
its Senior Vice President of Operations and Planning, which provides for an
annual salary of $140,000. Pursuant to his agreement, he has been granted
incentive stock options to purchase 120,000 shares of common stock at $4.40 per
share. The options vest 25% upon grant and the remainder at 25% per year over
the following three years' anniversary dates. These options have a five-year
life. The agreement was subject to the approval of the Compensation Committee of
the Board of Directors, which approved it in May 2004. This agreement expired in
February 2005 at which time the employee was offered and he accepted a new role
in the Company (without an employment agreement) as Vice President of Market
Development.

The following table summarizes the aggregate commitments under employment and
related agreement obligations by year as of December 31, 2004:

             Year Ending December 31      Aggregate Annual Commitment
                      2005                    $    443,000
                      2006                         615,000
                      2007                         292,000
                      2008                         125,000
                                              ------------
                     Totals                   $  1,475,000
                                              ============
NOTE 11 - Related Party Transactions

In December 2004, the Company sold 1,550,000 shares of series A convertible
preferred stock at a purchase price of $1.00 per share and five-year warrants to
purchase 465,000 shares of our common stock at an exercise per share of $1.10 in
a private placement. Among the purchasers of these securities were Jed Schutz,
George Benedict and Joseph T. Casey, each of whom is a director of the Company.
Mr. Schutz purchased 250,000 shares of series A convertible preferred stock for
a purchase price of $250,000, and was issued warrants to purchase 75,000 shares
of common stock. Mr. Benedict purchased 100,000 shares of series A convertible
preferred stock for a purchase price of $100,000, and was issued warrants to
purchase 30,000 shares of common stock. Mr. Casey purchased 250,000 shares of
series A convertible preferred stock for a purchase price of $250,000, and was
issued warrants to purchase 75,000 shares of common stock.

The Company purchases all of its insurance policies from a company in which a
member of its Board of Directors is the Chairman. Policy premiums for the
2004/2005 policy years approximated $239,000.


                                      F-26
<PAGE>

NOTE 12 - Public Offering Costs

The Company discontinued its efforts to pursue an initial public offering in
April 1999. The Company expensed $501,992 of costs incurred in connection with
its proposed initial public offering in the year ended December 31, 1998.

Note 13 - Subsequent Events

On March 9, 2005, in settlement of an arbitration proceeding arising from the
December 13, 2004 termination of his employment agreement as President and CEO,
we announced that the Company entered into a Consulting Agreement with Mark A.
Fauci. Mr. Fauci remains a member of the board of directors. The agreement,
which terminates Mr. Fauci's previous employment agreement with the Company,
provides that Mr. Fauci will perform consulting services for the Company for a
retroactive two-year period in exchange for consulting fees of $200,000 per year
during the term of the agreement which expires December 2006. Mr. Fauci will be
nominated at the next two annual meetings of shareholders to continue as a board
member. The agreement also provides for a three-year payout schedule of the
Company's obligation to pay Mr. Fauci's deferred accrued salary under his
previous employment agreement, in the amount of $625,000. Those payments will
commence on the earlier of (i) September 1, 2005, or (ii) the closing of the
current subscription rights offering with gross proceeds of at least $2.5
million. This amount is payable at the rate of $10,000 per month for the initial
12 months and $20,000 per month thereafter.

On March 7, 2005, the Company's board of directors unanimously agreed to extend
the original stock lock-up agreements entered into in September 2004 and set to
expire on March 17, 2005, until December 31, 2005. Under this agreement, all
board members, including Mr. Fauci, extended their commitment not to publicly
sell any of their shares through the end of 2005. Further, Mr. Fauci has agreed
to be bound by the same restrictions as all other board members regarding the
sale of director stock through the term of his consulting agreement, whether or
not he remains a member of the Company's board of directors.

On March 4, 2005, the Company announced the appointment of Denis A. O'Connor as
its new President and Chief Executive Officer, effective March 23, 2005. Mr.
O'Connor was also appointed to the Company's Board of Directors on March 7,
2005.

The Company has entered into an employment agreement with Mr. O'Connor, with a
two-year term expiring in March 2007, with an option to renew for one additional
year. The employment agreement provides that Mr. O'Connor will receive a fixed
salary at an annual rate of $225,000. The Company also agreed to issue to Mr.
O'Connor, upon commencement of employment, options to purchase an aggregate of
852,000 shares of our common stock at an exercise price of $1.00 per share, with
27,000 shares vesting immediately and the remaining 825,000 shares vesting in
three equal installments on the first, second and third anniversary of the
commencement of employment. The Company further agreed to issue an option to
purchase an additional 825,000 shares of our common stock at an exercise price
of $1.00 per share following approval by our stockholders of a new incentive
compensation plan, vesting in three equal installments on the first, second and
third anniversary of the commencement of employment. The Company is also
obligated to pay Mr. O'Connor the balance of his prior employment contract bonus
of $55,000 if unpaid as a result of his change of employment. Finally, based
upon the attainment of specified performance goals determined by our
Compensation Committee and Mr. O'Connor, we agreed to pay Mr. O'Connor (1) up to
$28,000 at the end of each of our fiscal years during the term of the agreement,
and (2) at the end of our second and each subsequent fiscal year during the term
of the agreement, options to purchase up to 27,000 shares of our common stock at
an exercise price of the market price of our common stock on the date of grant,
vesting in three equal installments on the first, second and third anniversary
of the date of grant. All stock options described above are exercisable for a
10-year period from the date of grant.

Effective February 1, 2005, the Company amended a settlement agreement dated
October 3, 2001 and entered into a two year consulting agreement with Dr.
Michael A. Anbar, founding scientist of the Company, which provides for Dr.
Anbar to advise management on the optimization of its technology. The agreement
awards Dr. Anbar $1,000 and 1,000 restricted shares of common stock per day with
a minimum consulting fee of $12,000 for the first twelve month period as well as
a grant of 250,000 additional restricted shares. As part of this agreement, the
Company will acquire one patent on complimentary technology developed and held
by Dr. Anbar. The consulting agreement may be extended at either parties option
for an additional 2 year terms.

                                      F-27
<PAGE>

On February 14, 2004, the Board of Directors voted and approved to grant options
to purchase shares of the Company's common stock to its employees and outside
directors. Stock options to purchase an aggregate of 200,000 shares of common
stock to individual employees of the Company, each at an exercise price of $1.00
per share. Each outside director was granted stock options to purchase 30,000
shares of the common stock at an exercise price of $1.00 per share vesting over
three years under the 1998 Stock Option Plan and a stock option grant to
purchase 30,000 shares of common stock at an exercise price of $1.00 per share
vesting over three years under the proposed 2005 Incentive Compensation Plan.
Additionally, members of the Executive Committee of the Board of Directors each
received a grant of stock options to purchase 15,000 shares of common stock at
an exercise price of $1.00 per share vesting over three years under our 1998
Stock Option Plan and a grant of stock options to purchase 15,000 shares of the
common stock at an exercise price of $1.00 per share vesting over three years
under the proposed 2005 Incentive Compensation Plan. The Chairman of the
Executive Committee will receive an additional grant of 5,000 stock options
under the 1998 Stock Option Plan and 5,000 stock options from the proposed 2005
Incentive Compensation Plan with the same vesting terms. The proposed 2005
Incentive Compensation Plan is subject to shareholder approval at the Company's
annual stockholder meeting to be held in May 2005.

On March 7, 2005 the Board of Directors voted and approved a grant to each
outside Director options to purchase 30,000 shares of the Company's common stock
at an exercise price of $1.00 per share vesting over three years and 30,000
restricted shares of common stock, which may not be sold for two years under the
proposed 2005 Incentive Compensation Plan.  Additionally, members of the
Executive Committee of the Board of Directors each received a grant of options
to purchase 30,000 shares of common stock at an exercise price of $1.00 vesting
over three years under the proposed 2005 Incentive Compensation Plan.  The
Chairman of the Executive Committee received an additional grant of options to
purchase 10,000 shares of common stock at an exercise price of $1.00 vesting
over three years under the proposed 2005 Incentive Compensation Plan.

                                      F-28