SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
       ACT OF 1934 For the fiscal year ended February 28, 1999

[ ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

      For the transition period from February 28, 1999 to February 28, 1999
                          Commission File No. 33-51218

                          MEDISCIENCE TECHNOLOGY CORP.
              (Exact name of registrant as specified in its charter

          New Jersey                                    22-1937826
          ---------                                     ----------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                     Identification No.)

               1235 Folkestone Way, Cherry Hill, New Jersey 08034
                     Address of Principal executive offices

Issuers telephone number, including area code: (609)- 428-7952

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, par value $.01 per share

     Check whether the registrant (1) has filed all reports required to be filed
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days, Yes [ X ] No [   ]

     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K contained  herein,  and will not be contained,  to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ]

     The issuer's revenues for its most recent fiscal  year were :  $ none

<PAGE>

     The aggregate market value of the voting stock and non-voting common equity
held by non-afiliates computed by the average bid and asked price of such common
equity of the  Registrant,  as of , Dec.  28,  1999  ($.25 per share)  was:
                                  $4,755,155.75


     The number of shares  outstanding  of each of the  registrant's  classes of
common  stock,  as of May 12,  1999  were:  35,326,130.  The issuer had no other
classes of common equity outstanding as of that date.

           Title of Each Class                      Number of Shares Outstanding
           -------------------                      ----------------------------

Common Stock, par value $.01 per share                       35,326,130

Preferred Stock, par value $0.1 per share                         2,074


                      DOCUMENTS INCORPORATED BY REFERENCE:

     8-K Report, filed 4/8/98, CUNY  introduction/review  Optical Biopsy-Optical
Mammography Photonics to detect Cancer, March 11, 1998. and

     8-K Report,  filed 11/23/99 Employment  Agreement with. Frank S. Castellana
M.D. as President and Chief Operating Officer of Mediscience Technology Corp are
incorporated by reference into Part 1 of this form.
<PAGE>
                                MEDISCIENCE CORP.
                           Annual Report on Form 10-K
                                Table of Contents

                                     PART I

Item 1.   Business
Item 2.   Description of Properties
Item 3.   Legal Proceedings
Item 4.   Submission of Matters to a Vote of Security-Holders

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Shareholder
               Matters
Item 6.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations
Item 7.   Selected Financial Data
Item 8.   Financial Statements and Supplemental Data

              Report of Independent Public Accountants

              Consolidated Balance Sheets- February  28, 1999 and 1998

              Consolidated Statements of Operations for the years ended
              February  28,1999,1998 and  February 29, 1997

              Consolidated Statement of Stockholders Equity  for the years
              ended  February 28,1999, 1998 and February 29, 1997

              Consolidated Statements of Cash Flows for the years ended
              February  28,1999, 1998 and February 29,1997

              Consolidated Notes to Financial Statements

Item 9.   Changes in and Disagreements with Accountants on Accounting and
              Financial Disclosures

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
Item 11.  Executive Compensation
Item 12.  Security Ownership of certain Beneficial Owners of Management
Item 13.  Certain Relationships and related transactions
Item 14.  Exhibits, List and Reports on Form 8-K
<PAGE>
                                     PART I


Item 1. Business

Introduction

This annual report on Form 10-KSB contains  certain  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the  Securities Act of 1934.  Actual events or results may differ  materially
from  those  projected  in the  forward-looking  statements  as a result  of the
factors described herein. Such  forward-looking  statements include, but are not
limited  to,   statements   concerning   business   strategy,   development  and
introduction of new products,  research and  development,  marketing,  sales and
distribution,  manufacturing, competition, third-party reimbursement, government
regulation (including, but not limited to, FDA requirements), continued clinical
trial  relationships  and  operating  and  capital  requirements.  Y2K  computer
configuration  is not of  concern to our design  because  it is  addressed  as a
matter of product development.

Mediscience  Technology  Corp.  ("the  Company"  "us" or "we"))  is  principally
engaged in the design and development of diagnostic  medical devices that detect
cancer  using  light  induced  native  tissue  fluorescence   spectroscopy  (the
"Technology") to distinguish between malignant and normal or benign tissue, year
2000 computer  configuration is not of concern or a problem to our design, it is
addressed  as a matter of the  product  development.  Animal  and  human  tissue
contains  molecules  that  fluoresce  naturally  when exited by light at certain
wavelengths.  Since the molecular and or structural  makeup of tissue changes as
it becomes  cancerous,  the Company's medical devices are able to detect a shift
in the resulting native tissue fluorescence  spectrum allowing it to distinguish
between normal, precancerous and cancerous tissue.

Background

On December 1, 1988, we acquired all the outstanding  stock of Laser  Diagnostic
Instruments, Inc. ("LDI") which is now a wholly owned subsidiary of the Company.
The  principle  asset of  ("LDI")  was the  ownership  of a  patent  application
entitled  "Method and  Apparatus for  Detecting  Cancerous  Tissue Using Visible
Luminescence",  which was subsequently granted as patent number 4.930,516 by the
US Patent and Trademark  Office on June 5, 1990.  The "516" claims were expanded
from 9 to 59 on August 8,1998 in a reexamination of that patent initiated by the
Company. Our research and development activities are centered around this patent
and other patents either acquired subsequently by Mediscience or for which

Mediscience is the exclusive licensee.

We have  successfully  conducted  preclinical  and  clinical  evaluations  which
continue  to support  our belief  that out  proprietary  technology,  when fully
developed,  will be useful in the  screening  and  diagnosis of cancer.  We also
believe that our Technology,  if successfully  developed,  will have substantial
commercial appeal due to its non-invasive character,  its delivery of immediate,
real time results,  its enhanced diagnostic  sensitivity and specificity and its
appeal to physicians who can generate  additional office revenues that currently
accrue to an off site pathology laboratory.
<PAGE>
On January 6, 1997,  we  received  FDA  approval of its  Investigational  Device
Exemption  to initiate  human  trial  Phase II clinical  trials with its CD Scan
medical device for early stage detection of cancer.

On  January   25,1999  the  FDA   classified  our   Mediscience   CD-Scan  as  a
non-significant  risk device for human trial Phase II clinical  investigation of
the biological basis of fluorescence as applied to medically  significant  women
OBGYN health  issues.  This study has begun and is presently  conducted  under a
research  agreement  with Yale  University  directed by Dr.  Frederick  Naftolin
chairman OBGYN Dept of Obstetrics and Gynecology.

Strategy

On  April  15,  1999  the  Company  entered  into a joint  effort  with  Sarnoff
Corporation.  of  Princeton  NJ for the  purpose of  raising  funds to develop a
series of instruments  based upon our Technology and the engineering  background
and expertise of Sarnoff and City  University of New York. On April 15, 1999 the
Company  and Sarnoff  jointly  filed a $2.5  Million  funding  request  with the
National Cancer Institute to support the development over a three year period of
an  "Instrument  to Screen,  Detect and Treat  Human  Cervical  Cancer  Based on
Intrinsic  Fluorescence  Imaging:"  Significantly,  this filing provided that al
intellectual  property  contributed  to this  development  project by us and all
patentable  improvements  which  result  from  the  use of  our  shop-knowledge,
know-how,  prototypes and improvements of our patents during this project are to
be our sole property unless we otherwise agree in writing. While the project was
considered  to have  scientific  merit by NCI  reviewers,  funding  was not made
available.

Our  strategy  is to  develop  one or  more  products  for the  non-invasive  or
minimally-invasive  diagnosis of specific  types of cancer  which it  ultimately
plans to market  worldwide  either  directly  for its own  account or in various
types of partnering or licensing  arrangements  with other firms.  Our principle
focus will be on the  United  States.  while we expect to address  international
markets via partnering or licensing arrangements with other companies.

We  believe  our  Technology  will  have  broad  application  utility  in cancer
diagnosis,  however,  each  approved  labeled  indication is expected to require
separate  premarketing approval (a "PMA"), which will be both time-consuming and
costly.  We plan to carefully  select and  prioritize  its  targeted  diagnostic
applications  to insure the best  possible  payback on its product and  clinical
development investments.  We regard our "516" and other related patents (such as
5,131,398) as pioneering,  blocking and dominant in the area of cancer diagnosis
using fluorescence in vivo and in vitro.

On November 29, 1999,  the Company  announced  that Frank S.  Castellana,  M.D.,
Eng.Sc.D.  would  join its  executive  team as  President  and  Chief  Executive
Officer,  effective  February  1, 2000.  It also  announced  that it was seeking
investment  partners to support the funding of a joint  effort  between  itself,
Sarnoff Corporation,  and the Mediphotonics Laboratory of the City University of
New York to develop and commercialize an advanced,  second generation version of
its  proprietary  two-dimensional  fluorescence  imaging system for early cancer
detection.
<PAGE>
Our  Products

We have developed three prototype products that employ our technology for cancer
diagnosis.  They include Cancer Detection ("CD") Scan, CD Ratiometer and CD Map.
These  devices  use lamp light to  provide a broad  spectrum  of safe,  scanning
excitation  light  wavelengths  to insure  that the  appropriate  target  tissue
molecules are sufficiently fluoresced to provide maximum diagnostic sensitivity.
A fiberoptic  probe is attached to each of our devices which is used to transmit
the optical excitation signal and to relieve the native  fluorescence  response.
We believe that the CD instruments  have a great deal of versatility and a broad
range  of  potential   alternative   application   depending  on  the  preferred
configuration of the fiberoptic probe. For example,  the fiberoptic probe can be
configured as a convenient hand held probe for easy-to-access  areas such as the
oral  cavity  or the skin  surface,  or the  optical  fiber  can be fed down the
working channel of a rigid or flexible  endoscope for assessment of the upper or
lower GI tract,  or the  optical  fiber can be  inserted  into a  cytoscope  for
urinary tract  exploration,  or a colposcope for  gynecological  evacuation or a
laparoscope  for evaluation of internal  organs,  and even through a core biopsy
needle,  to optically  assess breast  tumors or for optical  assessment of other
deep tissue tumors, such as sometimes occur in the pancreas, liver or prostate.

The CD Scan  product  prototype  is  oriented  toward  medical  research.  It is
designed to provide optical  scanning  capability of a broad spectrum of optical
wavelengths  for evaluation of tissue.  We use the CD Scan whenever  possible to
help define the critical  scanning and  emission  wavelengths  for its two other
prototype  products.  On the other hand we are  designing the CD Ratiometer as a
simple,  compact instrument with user friendly features and characteristics.  It
is being designed to optically assess the scanned tissue only at  preestablished
optical  wavelengths  and to  instantaneously  report out a "yes "no" or "maybe"
result  on a  computer  screen.  We  expect  that the CD  Ratiometer  with  it's
anticipated  assortment  of  disposable  probe  designs,  will be the  preferred
product for medical  practitioners to use in the office or clinical setting. The
CD Map is a vision instrument that is being designed to optically assess an area
of tissue rather than selective individual points.  Although it is at an earlier
stage of design than either CD Scan or CD  Ratiometer,  it is expected to report
out results  similar to the CD Ratiometer  but in the form of a colored map on a
computer screen  distinguishing  the normal areas from cancerous areas via color
differentiation.  If we can  successfully  develop theCD Map, we expect it to be
especially  useful in assisting cancer surgeons in clearly defining the surgical
margins of tumors, real time, during cancer surgery without the use of extrinsic
dyes, drugs or other invasive agents.

Research and Product Development

The potential  utility of native tissue  fluorescence  spectroscopy  for in vivo
cancer  detection in humans was first  discovered by Professor Robert R. Alfano,
Distinguished  Professor of Physics and  Engineering  at the City College of the
City  University  of New York  ("CUNY") in the early  1980's.  Subsequent to the
acquisition  by the Company of LDI from Dr. Alfano in 1988, we also  developed a
research  agreement  with the  Research  Foundation  of CUNY to  provide us with
research and development services. In 1992, the Company,  CUNY, and the Research
Foundation of CUNY established the Mediphotonics  Laboratory ("MPL") at the City
College of New York which  currently  provides us with research and  development
services.
<PAGE>

The staff of MPL,  which is  supervised  by Dr.  Alfano,  developed  our current
prototype CD devices.  MPL has also conducted in vitro  pre-clinical  testing of
various  human  tissue  types  such as  breast,  cervical,  colon  and the upper
aerodigestive  tract,  to develop the  preferred  optical  scanning and emission
wavelengths  that  yield  the  most  definitive  information  about  the  native
fluorescent  characteristics of specific scanned tissue. The insight gained from
this work has been the principal source of knowledge for the subsequently issued
and pending  patents which the Company either owns outright or possesses a world
wide  exclusive   license,   and  which  the  Company   regards  as  pioneering,
blocking.and  dominant in the area of cancer diagnosis using  fluorescence (e.g.
Patents  516--398).  The information  derived from this work was also the source
for a number of scientific papers published in peer-reviewed journals and

for  presentations  made at  scientific  symposia.  This in vitro  pre  clinical
research and  development  work also provided the starting basis for the optical
scanning parameters for the Company's in vivo human clinical studies.

Clinical Development

Our CD products are designed  primarily to be used directly on human patients in
vivo.  Part of the  process  of  product  development  and FDA  approval  is the
development of sufficiently  compelling  clinical evidence to demonstrate safety
and effectiveness of one or more of the Company's prototype CD products for each
intended  diagnostic  application  (labeled  or  intended  use).  Because of the
anticipated  clinical  utility of our Technology  and prototype CD products,  we
have been able to develop important collaborative relationships with some of the
most highly regarded  cancer center  research  hospitals in the United States to
assist  it in the  clinical  evaluation  of its  prototype  CD  products.  These
institutions include Memorial  Sloan-Kettering,  Columbia  Presbyterian Hospital
and the New York Hospital  (Cornell Medical  Center),  each of New York, and the
Massachusetts General Hospital (Harvard Medical School) in Boston.

The Phase I  clinical  feasibility  study of the upper  aerodigestive  tract was
carried out at Memorial  Sloan-Kettering  under the principle  investigation  of
Stimson P. Schantz,  M.D., Associate Professor of Surgery and Director of Cancer
Prevention.  It was  established  in  this  study  that  the  Company's  CD Scan
prototype product is able to distinguish  between cancerous and normal tissue in
the oral cavity  using its  Technology.  A Phase II clinical  study in the upper
aerodigestive tract is scheduled to begin shortly.

At least two other clinical studies are also scheduled to begin during 1998. One
such  clinical  study is focused on diagnosis of breast  cancer using our second
prototype  product,  CD  Ratiometer.  This  clinical  study will be conducted at
Massachusetts  General  Hospital under the Principle  Investigation of Daniel B.
Kopans,  M.D.,  Associate  Professor of Radiology,  Harvard  Medical  School and
Section Head,  Breast  Imaging,  Massachusetts  General  Hospital,  to determine
whether our  Technology can optically  distinguish on a real-time  basis between
cancerous  and  benign  breast  tumors in vivo by passing a  specially  designed
optical fiber,attached to the CD Ratiometer, through a core biopsy needle placed
to within one millimeter of the tumor by  stereotactic  x-ray  guidance.  If the
technique  ultimately proves successful,  it will offer the potential to further
reduce the frequency of the  highly-invasive  practice of open  surgical  biopsy
currently employed while providing  additional cancer staging information to the
radiologist  when the tumor is cancerous.  If successful,  this Phase I clinical
feasibility study should provide the basis for additional clinical investigation
to  establish  the  safety  and  effectiveness  of CD  Ratiometer  in  providing
minimally-invasive, real-time, in vivo diagnosis of breast tumors.
<PAGE>
The other,  planned,  Phase I clinical study will be done at New York Hospital's
Cornell  Medical  Center to assess the  potential  utility of the  Company's  CD
Ratiometer with fiberoptic  probe adapted to a flexible  endoscope  furnished by
Pentax Precision Instrument  Corporation for monitoring Barrett's Esophagus.  On
April 24, 1997, we entered into a clinical trial agreement and provided  initial
funding for this clinical study.  However,  further  progress on this study will
require additional funding which cannot be provided at this time due to resource
constraints.  Barrett's  Esophagus  is a malady that is thought to be a possible
precursor  to  esophageal  cancer in  certain  people.  Barrett's  patients  are
routinely  monitored  because of the heightened risk that a small  proportion of
them is predisposed  toward the  development of esophageal  cancer.  The current
medical  practice  requires that multiple  accessional  biopsies be taken during
regularly scheduled follow-up  appointments  (typically annually) to monitor the
progression  of the  disease.  The  practice  is  painful,  costly and  probably
unnecessary  in the  majority  of the  Barrett's  suffering  population  but the
current  state  of  medical  practice  does  not  provide  sufficient  molecular
information to distinguish between the high risk group and the lower risk group.
It  is  hoped  that  endoscopic  application  of  our  Technology  will  provide
gastroenterologists with the ability to better assess the condition of Barrett's
tissue in the esophagus  without the need for the painful  multiple  accessional
biopsies.  It is also  hoped that this  additional  molecular  information  will
provide the ability to assess the relative risk of Barrett's patients toward the
development  of  esophageal  cancer  allowing  gastroenterologists  to establish
individual patient monitoring  schedules  appropriate to their relative level of
perceived  risk.  Dr.  Basuk  has  reported  that his  :work  shows UV  emission
measurements can effectively distinguish normal esophageal tissue from Barrett's
or adenocarcinoma.  Further preliminary data also indicates that the combination
of  UV  emission  and   excitation   measurements   can   potentially   separate
non-dysplasia  Barrett's  from  dysplasia  and  cancer  as well  as from  normal
tissues" On March 19,1999 The New England  Journal of Medicine  Vol.340,  No. 11
reported on a study of "Symptomatic  Gastrosophageal Reflux as a risk factor for
esophageal Adenocarcinoma" concluding that there is a strong and probable causal
relation   between   gastrosophageal   reflux  and  esophageal   adenocarcinoma.
Esophageal adenocarcinoma is treatable but rarely curable, mortality is high and
successful  treatment  depends  on early  detection,  thus  screening  high risk
patients would be appropriate. Mediscience experience in excitation of important
tissue  molecules  shows  improve  diagnostic  accuracy in the range of 80 to 90
percent with measurement time a few seconds (real-time).  The greatest incidence
of this  decease  is seen in males over age 60.  with the major risk  factors of
alcohol and tobacco.

Our  experience in  excitation  of important  tissue  molecules  shows  improved
diagnostic  accuracy in the range of 80 to 90 percent with measurement time of a
few seconds  (real-time).  The greatest incidence of Barrett's Esophagus is seen
in males over age 60, with the major risk factors of such  disease  being use of
alcohol and tobacco.

Business Development and Marketing

More than 120,000 new cancer cases are  diagnosed  annually in the United States
according to the American Cancer Society.  It is estimated by Theta Corporation,
a market research firm, that as many as 85 million people currently alive in the
United States,  nearly 1/3 of the  population,  will develop cancer during their
lifetimes. Cancer care and treatment is estimated to cost $104 billion annually,
$35 billion of which is estimated  to be the direct cost of the disease.  Cancer
therapy  has  progressed  rapidly  in  recent  years but the  axiom  that  early
diagnosis is still critical for successful  treatment for the majority of cancer
types still remains true.
<PAGE>
Although  several  cancer   screening   techniques  have  been  developed  early
indication of various types of cancer in humans, such as, mammography for breast
cancer,  PAP tests for cervical cancer,  PSA tests for prostate cancer and chest
x-rays for lung  cancer,  accessional  biopsy is still the "gold  standard"  for
making a definitive cancer diagnosis and for cancer staging,  i.e.,  determining
the extent of the  progression  of the  disease  prior to  mapping  out the most
appropriate course of therapy.

The accessional biopsy, however, often requires a significant amount of surgical
intervention to collect an adequate tissue sample to make a proper diagnosis and
staging  determination.   The  process  can  sometimes  expose  the  patient  to
unnecessary  risks,  lengthy  hospital  stays,  long  recovery  times,  pain and
discomfort  and  significant  health care expense.  The Company's  technology is
believed to offer the potential of a less physically invasive method to diagnose
and stage a variety of  cancers  without  the  excessive  costs and  potentially
debilitating  effects of accessional biopsy. The most widely practiced technique
for  definitive  diagnosis of breast  cancer,  the leading  cause of death among
American  women  between  the  ages of 40 and 55,  is open  surgical  biopsy  (a
specific type of  accessional  biopsy) which is done under a general  anesthetic
and typically results in surgical excision of a golf ball-sized mass

of breast tissue.  About 800,000 such  procedures are performed  annually in the
United States at an estimated  annual cost of between $2 billion and $4 billion.
If the Company  can  successfully  adapt its  technology  to diagnose  and stage
breast cancers, it believes it will save up to half the current cost,  eliminate
a significant amount of patient discomfort for those patients determined to have
cancer and  eliminate  most of the trauma for the 70% to 80% of the patients who
are found not to have cancer.


We believe that our Technology incorporated into one or more of our prototype CD
products  will be useful in  diagnosing  and  staging  for more than half of the
various  types  of  cancers.  In  addition  to  the  pre-clinical  and  clinical
evaluations   currently  on  the  docket  or  already  completed,   i.e.,  upper
aerodigestive  tract, breast and esophagus,  we are in the process of creating a
prioritized  list of other potential  applications to evaluate on a pre-clinical
basis. If successful, on a pre-clinical basis, we contemplate progressing to the
clinical evaluation phase and premarket approval ("PMA") application phase.

We plan to develop certain of our CD products for diagnostic applications,
(sometimes referred to as "labeled indications"), that we will ultimately market
for our own account in the United States. In addition, we plan to co-develop one
or more of our prototype CD products for specific cancer diagnostic applications
with one or more selected other companies. We have nurtured relationships with a
small number of highly  qualified  companies  which have  expressed  interest in
working with us to co-develop one or more of our existing CD prototype  products
or  possible  variations  thereof in exchange  for  certain as yet  undetermined
rights to commercially exploit a finished approved product in the marketplace or
a geographic segment thereof.
<PAGE>

We have , in the past,  and  continue  to  presently  encourage  these  possible
collaborations  especially  with firms that have strong  existing  franchises in
certain  specialized  fields of diagnosis and treatment and who have established
reputations  with  prospective  purchasers of  diagnostic  products and who have
proven  selling,  marketing and  distribution  capabilities.  A select number of
these kinds of relationships,  we are successful in fostering them, are expected
to add value to the  Company by  stretching  and  leveraging  the our  financial
resource base with development  licensing revenues that the Company can then use
to help fund the development of our own products.

We also  believe  that a market for our CD products  will exist in the  European
Union and possibly Asia. We contemplates  making a concerted  effort to identify
one or more  possible  licensees  to help  develop its  products  or  variations
thereof for the key

markets of the  European  Union  during  2000.  We will also make a  preliminary
investigation  of the  potential  for utility of its products in Asia and if the
findings are positive, will develop a strategy for exploiting its technology and
products in that region as well.

Manufacturing

Our prototype  products  have been  assembled to date by the staff of the MPL at
the City  College  of New  York  from  components  that  are  generally  readily
available from one or

more sources in the  marketplace.  We contemplate  continuing with this approach
until the quantity of devices  projected to be required makes it appropriate and
necessary to set up a contract  manufacturer to assemble our products.  Although
additional  design  improvements  will  likely be required to refine the current
prototype  products for commercial use, we still believe that the key components
will be available  from one or more  suppliers.  We executed a lease  agreement,
dated January 19, 1997 with City College  providing for 900 square feet of space
as a  "incubator"  in which  prototypes  of the products  have been designed and
assembled by MPL staff  working in concert with  personnel  from an  engineering
design firm engaged by the Company.

We plan to out  source  the  manufacture  and  assembly  of our  medical  device
products to contract  manufacturers when it is no longer feasible for the MPL to
perform that service. Our contract  manufacturer(s) will be selected from a list
of highly qualified companies who are familiar with the regulatory  requirements
of the FDA for the manufacture of medical  devices,  who are registered with and
in  good  standing  with  the  FDA and who  employ  current  Good  Manufacturing
Practices (GMP) in accordance with FDA guidelines.  Pepco Manufacturing  Company
("Pepco") of Somerdale,  N.J., is owed by John M. Kennedy, an officer,  director
and a principal  of the Company.  It is believed  that Pepco is currently or can
become qualified to manufacture our products. Additionally, an opportunity for a
business   arrangement  with  a  major  marketing   co-developer  could  involve
manufacture as well.
<PAGE>

Research Arrangements with the City University of New York

In June 1992, the Company and the Research  Foundation of CUNY  established  the
MPL at the Institute of Ultra fast  Spectroscopy and Lasers ("IUSL") at the City
of College of New York.  Dr. Robert Alfano,  Distinguished  Professor of Physics
and  Engineering  at  City  College  and  the  Director  of the  IUSL,  is  also
responsible  for  supervising  the  operations  of the MPL.  The  IUSL  includes
approximately  60 scientists of which about 20 hold Ph.D's, 9 hold various other
graduate degrees and about 30 are graduate students from which the MPL draws its
research, talent and expertise.

The Company  provides a funding grant to the MPL annually in  accordance  with a
budget of activities and expenditures  negotiated between the Company, CCNY, and
the Research  Foundation of CUNY. The arrangement is renewable  annually and may
be terminated  without cause by either party upon 90 days notice prior to June 1
of each year.  The  contract  with  CUNY-  "Establishment  of the  MediPhotonics
Laboratory"  was extended by agreement  September 8, 1997 until October 1, 1998.
The Company is reviewing its present  research needs with Dr. Alfano in order to
establish its grant of funds for the 1998/1999  budgetary  year. In  comparison,
the Company  committed to funding of $431,017 for the 1996/1997  budgetary  year
and provided  funding of $242,948 and $245,750 for the budgetary years ending on
May 31, 1996 and May 31, 1997 respectively.

The  objective  of the MPL is to research  the use of light and ultra fast laser
technology for cancer diagnosis and therapeutic purposes.  The major projects of
the MPL have been the development of the Company's prototype products,  CD Scan,
CD Ratiometer and CD Map, including the enhancement of fiberoptic attachments to
enable  devices to be used with  various  types of  endoscopes  and core  biopsy
needles. The MPL has additionally  conducted in vitro preclinical  evaluation of
various  tissues to  determine  the most  appropriate  excitation  and  emission
wavelengths  for use with a device  for  different  types  of human  tissue  and
cancers,  assembled the prototype CD products for use in vivo for human clinical
trials and  created the  algorithms  and  computer  software  necessary  for the
accurate performance of the instruments.

Prior to the current  arrangement,  the Company and the Research  Foundation  of
CUNY on behalf of the City College of New York worked  together under a Research
Agreement pursuant to which the Company and the City College of New York jointly
sponsored the research and  development of a cancer  detection  apparatus  using
visible  luminescence.  The results of such research includes the development of
the proprietary rights that are subjects of several of the Company's patents and
the  development  of some of the  Company's  prototype  products.  The  Research
Agreement  provided  that all patent  rights or any CD  inventions  conceived or
discovered during its term vest in the Company,  subject to a royalty payable to
the Research  Foundation of CUNY of 5% of the sales of products  resulting  from
any of the  inventions.  Beginning in 1992 in concert with the  formation of the
MPL, new  inventions and  patentable  discoveries  were assigned to the Research
Foundation  of CUNY  and the  Company  was (or  will be)  granted  an  exclusive
worldwide  license to exploit the  inventions.  The royalty  rate was reduced to
3.5% of the sales of products  resulting from patented  inventions  conceived or
discovered subsequent to June 1, 1992. In the event the Company has not made any
lawful sale of any products or  sublicensed  any patents at or above  reasonable
market price within 5 years from the date of patent application, the Company has
agreed to negotiate a minimum  royalty or return all rights with respect thereto
to the Research  Foundation of CUNY. As of the date of this filing,  six patents
for which the Company has an exclusive license from the Research Foundation have
<PAGE>

passed the five year  commercialization  window.  The  Company is  presently  in
negotiations  with the Research  Foundation to extend the period of  exclusivity
for  this  intellectual  property.  The  Research  Foundation  of CUNY  owns all
copyright and publication rights to the results of the research,  subject to the
Company's right to produce,  translate and use all materials  copyrighted by the
Research  Foundation of CUNY for the  Company's own purposes on a  royalty-free,
non-transferable and non-exclusive basis.


In 1994, the Company became a consortium  industrial  partner in the CUNY Center
for Advanced  Technology in Ultra fast Photonic  Materials and Applications (the
"CAT"). The participation fee paid was $25,000.  The Company's membership in the
CAT has  brought it into  contact  with other  members of the New York State CAT
consortium partners and has facilitated in several SBIR and NIST proposals.  The
Company has a continuing commitment to the CAT.

Competition

 The development of minimally  diagnostics  for cancer  detection is driven by a
critical  need for more  cost  effective  screening  procedures  with  increased
sensitivity and specificity.  In-vivo tissue autofluorescence spectral analysis,
as  pioneered by  Mediscience  Technology  Corp.  is a paradigm  shift  emerging
diagnostic  technology  with clear  potential  to favorably  impact  health care
clinical outcomes as well as economics. In spite of what we believe is a seminal
and dominant Mediscience  intellectual property position (in the United States),
there  is  intense  competitive  activity  in this  area,  with at  least  seven
companies conducting active research and development programs. Specifically:

Xillix  Technology  Corporation,  (Richmond,  B.C. Canada) is currently the only
competitor  with a commercial  product  (LIFE-Lung  System).  The Xillix system,
marketed by Olympus Corporation (Japan) at a cost of approximately $200,000 uses
visible light based  auto-fluorescence  spectroscopy to detect and localize lung
cancer.  In association with Olympus,  Xillix is also working actively to extend
application  of the  technology  to the GI tract and cervix.  On July 22,  1999,
Xillix  announced  that  it was  launching  legal  action  against  Olympus  for
"secretly  filing and prosecuting  patents  potentially  competitive to those of
Xillix."  On  August  19,  1999,  Xillix  announced  that it had  suspended  all
development and  distribution  of its products and had terminated  almost 80% of
its  professional  and  support  staff  in  order to  conserve  capital  for the
prosecution of its legal claims.

LifeSpex,  Inc.,  (Kirkland  WA) is  developing  two  products  based on  tissue
auto-fluorescence  -  Cerviscan(tm)  for the detection of cervical  cancer,  and
Deriscan(tm)  for skin  cancer.  Lifespex  recently  reported  success  in a 100
patient  cervical cancer clinical trial in Canada,  claiming 98% sensitivity and
95% specificity.  LifeSpex is a privately held company with venture funding from
J&J Development Corporation, The

Centennial Funds and Vanguard Venture Partners.  During the 2nd quarter of 1999,
it was reported that the Hoya Corporation made an equity  investment in LifeSpex
to fund Cerviscan(tm) development and clinical trials.
<PAGE>

Polartechnics,  Inc (Sidney,  Australia) is developing  the  TruScan(tm)  tissue
auto-fluorescence  probe for cervical cancer detection.  The company anticipates
initiating clinical trials in Europe in 1999 and in the U.S. in 2000+ (favorable
data is  referenced  from a  previous  pilot  study in the  U.K.  using an early
version of the  TruScan(tm)  device)  Polartechnics  currently  has a  strategic
marketing alliance with J&J Ethic on. In 1998 Polartechnics  raised $8MM through
a rights issue;  they also received a $0.75MM  milestone  payment from J&J and a
$0.9mm  grant  from the  Australian  government.  The  company  projects  a 2000
European launch for TruScan(tm).

MediSpectra, Inc. (Lexington, MA) is developing an optical biopsy system for the
detection of cervical cancer based on tissue  fluorescence.  In 1998 MediSpectra
raised $9.0MM in a private placement through Euclid Partners (Lexington, MA).

SpectrRx,  Inc. (Norcross,  Ga) is developing a biophotonics  technology for the
detection of both cervical and skin (melanoma) cancers. In August, 1999, SpectRx
reported favorable results in cervical scans of 53 patients at three sites using
colposcopy  and pathology as reference  standards;  diagnostic  sensitivity  and
specificity were not reported; the study is ongoing. In February,  1999, SpectRx
entered into an agreement with Welsh Allyn to develop biophotonics  products for
the  diagnosis of cervical  cancer.  SpectRx also has strategic  alliances  with
Respironics and Abbott for the development of unrelated diagnostic products.

Spectra  Science,  Inc.  (Minneapolis,  NM) is focused on the  development of an
Optical  Biopsy  Forceps for polyp  evaluation  in the lower GI tract.  In 1998,
Spectra  Science  completed a multi-center  trial for  colorectal  cancer in 306
patients;  a diagnostic  sensitivity of 96.5% vs 86% from visual observation was
claimed;  specificity,  however, was reported to have decreased from 46% to 43%.
In  1999,  the  company  filed a PMA  submission  with  the  U.S.  FDA for  this
indication.  In  February,  1999,  the company  raised an  additional  $2.2MM in
funding from venture capital sources.

Karl  Storz  Gmbh & Co.  (Tuttlingen,  Germany)  is  known  to be  pursuing  the
development  of  a  fiberoptic   lung  imaging  system  based  on  visible  auto
fluorescence.

We are  aware of other  approaches  to  cancer  screening  based on  X-ray,  CT,
ultrasound,  magnetic resonance and radionuclide  imaging  technologies;  these,
however, are based on the detection of intra-tissue structural abnormalities and
are not  ideally  suited  to the  evaluation  of  tissue  surface  lesions.  Our
proprietary  approach based on imaging and analysis of  autofluorescence  native
spectra represents a new diagnostic paradigm. It offers the promise of providing
a more cost  effective  and user friendly  screening  procedure  with  increased
sensitivity and specificity, and ultimately, of replacing excision biopsy as the
diagnostic standard.

While we believe that we have a dominant  intellectual  property  position  that
will  ultimately  permit us to achieve  leadership  in this  important new area,
competition  from both new and  established  firms will  continue to be intense.
Many of these firms have greater resources than the Company, and more experience
in the field of cancer diagnostics. Finally, there can be no assurances that the
Mediscience  Technology,  even  if  developed  successfully,  will  be  accepted
commercially in the marketplace.
<PAGE>
Government Regulation (FDA) Matters

The FDA classifies  medical  devices into one of three classes,  Class I, II, or
III. This classification is based on the controls deemed necessary by the FDA to
reasonably  insure the safety and  effectiveness of the device.  Class I devices
are those whose safety and effectiveness  can be reasonably  ensured through the
use of general controls, such as labeling, adherence to GMP requirements and the
"510-(k)"  process of  marketing  pre-notification.  Class II devices  are those
whose safety and  effectiveness  can reasonably be ensured through implement ion
of general and special  controls,  such as  performance  standards,  post market
surveillance,  patient  registries,  and FDA  guidelines.  Class III devices are
those  devices  that must  receive  premarket  approval  ("PMA") to insure their
safety and effectiveness.  They are generally life-sustaining,  life-supporting,
or  implantable  devices,  and also include  devices that are not  substantially
equivalent to a legally  marketed  Class I or II device or to a Class III device
first  marketed prior to May 28, 1976 for which a PMA has not yet been requested
by the FDA.

We  believe  that  clinical  applications  of  our  native  tissue  fluorescence
spectroscopy  devices (CD Scan, CD Ratiometer  and CD Map) are Class III medical
devices because they lack substantial  equivalency to a legally marketed Class I
or II device or a pre-1976 Class III device. Because of this classification,  we
do not qualify for the 510-(k) process (market  pre-notification)  of regulatory
compliance  Instead  we are  obliged  to  submit  a full  PMA to the FDA for its
careful review and, hopeful, approval.  Laboratory versions of our native tissue
fluorescence  spectroscopy  devices for  non-clinical in vitro  applications may
face a less lengthy approval process.

FDA review and approval of PMA  applications  usually takes from 12 to 24 months
after  they are  submitted  and  considered  "complete"  (meaning  that they are
sufficiently  in  compliance  with  filing   requirements   that  the  FDA  will
substantively  review the application) but sometimes can take longer and on rare
occasions can take less time.  Additional delay often results from  insufficient
clinical data to satisfactorily  prove safety and effectiveness for the proposed
intended use of the device and it is not unusual for an applicant to be required
to produce  additional  data to satisfy  an  objection  raised by the FDA in its
review process prior to granting a PMA.

Although we believe  that our cancer  diagnostic  products  will  ultimately  be
approved,  there is no assurance the FDA will act favorably or quickly in making
such reviews and approving  our products for sale.  We may  encounter  delays or
unanticipated costs in our efforts to secure governmental approvals or licenses,
which could delay or possibly preclude us from marketing our CD products.

To the extent that we intend to market our CD products  in foreign  markets,  we
will  be  subject  to  foreign  governmental  regulations  with  respect  to the
manufacture  and sale of our  medical  device  products.  We  cannot  accurately
estimate  the cost and time that will be  required  in order to comply with such
regulations.
<PAGE>

Patents and Proprietary Rights

The medical device industry places  considerable  importance on obtaining patent
protection  and protecting  trade secrets for new  technologies,  products,  and
processes because of the substantial  length of time and expense associated with
bringing  new  products  through  development  and  regulatory  approval  to the
marketplace.  Accordingly,  the Company or the Research Foundation of CUNY files
patent  applications  to protect  technologies  that the  Company  believes  are
significant  to the  development of the Company's  business.  The Company either
owns or holds  exclusive  licenses to 28 U.S.  patents,  plus 1 in Japan,  for a
total of 29 and has rights to exclusively  license an additional 10 U.S. patents
pending.   There  can  be  no  assurance,   however,  that  the  pending  patent
applications will ultimately issue as patents,  or if patents do issue, that the
claims will be sufficiently broad to protect what the Company believes to be its
proprietary  rights. In addition,  there can be no assurance that issued patents
or  pending  patent  applications  will not be  challenged  or  circumvented  by
competitors,  or that the rights  granted  thereunder  will provide  competitive
advantage to the Company.

The Company also relies on trade  secrets and know-how  that it seeks to protect
in  part,  through  the  use  of  confidentiality  agreements.  There  can be no
assurance that these agreements will not be breached, that the Company will have
adequate  remedies  for any  breach,  or that the  Company's  trade  secrets and
know-how  will not  otherwise  become  known to or  independently  developed  by
competitors.

Third Party Reimbursement

If we are successful in developing  our cancer  diagnostic  technology,  and our
technology  is  incorporated  into medical  devices that are used by health care
providers for diagnostic  testing for which the providers may seek reimbursement
from third-party payers,  principally,  in the United States, Medicare, Medicaid
and private  health  insurance  plans,  and in many other  countries,  typically
national government  sponsored health and welfare plans, such reimbursement will
be subject to the regulations  and policies of  governmental  agencies and other
third-party payers.  Reduced governmental  expenditures in the United States and
in many  other  countries  continue  to put  pressure  on  diagnostic  procedure
reimbursement.  We cannot  predict what, if any changes,  may be  forthcoming in
these  policies  and  procedures,  nor the  effect  of such  changes  on the our
business potential.


Other Technologies and other applications

In addition to our  developments in native tissue  fluorescence  spectroscopy we
have also invented certain other potentially  useful diagnostic  optical imaging
technology.  The  optical  imaging  technology  uses laser  light to image dense
tissues by capturing  the early photons of light shown through the imaged tissue
and  gating  off  the  scattered,   later  arriving  light,  which  reduces  the
interference  and results in clearer  images than can be  traditionally  be seen
using  currently  available  optical  imaging  technologies,  such as,  computed
tomography  scanning  or x-rays or  mammograms.  In 1994 the Company and General
Electric  Company  ("GE")  acting  on  behalf  of  its  Corporate  research  and
Development  component signed a five year non-exclusive  Collaborative  Research
Agreement to explore potential uses of our optical imaging technology.
<PAGE>

Recent Patents Issued

     U.S.  Patent No.  5,769,081  issued  June 23,  1998  METHOD  FOR  DETECTING
CANCEROUS TISSUE USING OPTICAL SPECTROSCOPY AND FOURIER ANALYSIS.

     U.S.Patent No. 5,799,656 issued September 1, 1998 OPTICAL IMAGING OF BREAST
TISSUES TO ENABLE THE DETECTION THEREIN OF CALCIFICATION  REGIONS  SUGGESTIVE OF
CANCER.

     U.S. Patent No. 5,813,988 issued September 29,1998 TIME-RESOLVED  DIFFUSION
TOMOGRAPHIC IMAGING IN HIGHLY SCATTERING TURBID MEDIA.

     U.S. Patent No.  5,847,394  issued December 8,1998 IMAGING OF OBJECTS BASED
UPON THE POLARIZATION OR DEPOLARIZATION OF LIGHT.

     U.S. Patent No.  5,849,595  issued September 29, 1998 METHOD FOR MONITORING
THE EFFECTS OF CHEMOTHERAPEUTIC AGENTS ON NEOPLASTIC MEDIA.

     U S Patent No. 5,929,443 issued July 27, 1999 IMAGING OF OBJECTS BASED UPON
THE POLARIZATION OR DEPOLARIZATION OF LIGHT

     U S Patent No.  5,931,789  issued  August 3, 1999  TIME-RESOLVED  DIFFUSION
TOMOGRAPHIC 2D AND 3D IMAGING IN RICHLY SCATTERING TURBID MEDIA

     U.S. Patent No. 5,949,077 issued September 7, 1999 TECHNIQUE FOR IMAGING AN
OBJECT IN OR BEHIND A SCATTERED MEDIUM.

     U.S. Patent No.  5,983,125  issued November 9.1999 METHOD AND APPARATUS FOR
IN-VIVO  EXAMINATION  OF  SUBCUTANEOUS  TISSUES  INSIDE AN ORGAN OF A BODY USING
OPTICAL SPECTROSCOPY.

     U.S. Patent No.  6,006,001  issued  December 21, 1999  FIBEROPTIC  ASSEMBLY
USEFUL IN OPTICAL SPECTROSCOPY.

Scientific/Medical Advisory Board

The Company established a Scientific  Advisory Board in January,  1993 under the
chairmanship  of  Professor  Robert R.  Alfano to  provide  critical  review and
analysis  of its  research  and  product  development  programs  in the  area of
photonics  (lasers and optics)  and to serve as a source of  information  on new
product ideas, new technologies  and current research  activities.  Its function
served the Company well during the formative stages of its research.  Currently,
the Board  consisting of Dr. Alfano and one other  continuing  member,  is being
expanded to include increased  representation  from the medical arts,  including
pathology,  and will be staffed with medical  specialists who are skilled in the
medical  fields of primary  interest to the Company.  We believe that we will be
able to attract accomplished clinicians who will help guide us in clinical study
design aimed at gaining  regulatory  approval for applications of our diagnostic
Technology.  They  will also be called  upon to advise us about  priorities  and
unmet needs in their  respective  disciplines and in matters such as physician's
habits and preferences that would bear on product design and configuration.
<PAGE>

Employees

As of February  28,  1998,  the Company had one  full-time  employee and several
retained consultants who dedicate a substantial portion of their time toward the
affairs of the Company and the full-time  equivalent of a number of  scientists,
most of whom  hold  Ph.D.'s  in  physics  or  electrical  engineering  or lesser
advanced degrees in similar  disciplines from the MPL at the City College of New
York (see "Research Arrangements with the City University of New York"). None of
the employees,  retained  consultants or contract researchers is governed by any
collective  bargaining  agreement and the relations  between the Company and its
employees,  retained  consultants  and  contract  researchers  is believed to be
satisfactory to the present time.



ITEM 2. DESCRIPTION OF PROPERTIES

The Company's  headquarters are located at 1235 Folkestone Way, Cherry Hill, New
Jersey,  which is owned by Peter  Katevatis,  who is  Chairman  of the  Company.
Seventy-five percent of such office space is occupied in accordance with an oral
arrangement with Mr. Katevatis  pursuant to which the Company is required to pay
its  proportionate  share of total occupancy costs,  maintenance,  utilities and
taxes.  The New York Office is located at the leased  "incubator"  site at CCNY.
The Company files New York State tax Returns.



ITEM 3. LEGAL PROCEEDINGS


The Company is not presently a party to any litigation,  nor to the knowledge of
management  is  any  litigation  threatened  against  the  Company,   which  may
materially affect the Company.



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

During its fiscal year ending February  28,1998,  no matters were submitted to a
vote of the Company's security holders.
<PAGE>
                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's  Common Stock is traded on the  over-the-counter  market under the
symbol."MDSC"  The  following  table  sets  forth  the range of high and low bid
quotations  of the  Company's  Common  Stock for the periods set forth  below,as
reported by the National Association of Securities Dealers, Inc. Such quotations
represent  inter-dealer  quotations,  without  adjustment  for  retail  markets,
markdowns or commissions, and do not necessarily represent actual transactions.


Fiscal Period                                         Common Stock
-------------                                 ---------------------------
                                              High Bid            Low Bid
                                              --------            -------

1999

1st  Quarter           5/31/98                  0.33               0.27
2nd Quarter            8/31/98                  0.18               0.13
3rd  Quarter          11/30/98                  0.18               0.10
4th  Quarter           2/28/99                  0.16               0.10


1998

1st  Quarter           5/31/97                  0.34               0.9/16
2nd Quarter            8/31/97                  0.68               0.43
3rd  Quarter          11/30/97                  0.73               0.52
4th  Quarter           2/28/98                  0.9/16             0.40

     (b) Holders.  The  approximate  number of holders of record of the Companys
Common Stock and Series A Preferred  Stock as of December 4, 1998 were 880 and 8
respectively .

     (c)  Dividends.  The Company has not paid or declared any  dividends on its
Common Stock since its inception,  and intends to reinvest earnings,  if any, in
the  Company  to  accelerate  its  growth.  Accordingly,  the  Company  does not
contemplate  or  anticipate  paying any  dividends  upon its Common Stock in the
foreseeable future.
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS

Results of Operations:

Year ending February 28, 1999 compared to year ended February 28, 1998.

The Company  had no revenues  during its fiscal  years ended  February  28, 1999
"(its 1999 Fiscal  Year") and  February 28, 1998 ("its 1998 fiscal  year").  The
Company's  primary focus was the development of its  light-based  technology.The
Company's technology embedded in its design and computer related format confirms
to year 2000 requirements.

General and  administrative  expenses  decreased  approximately  $313,700 or 33%
during its 1999 fiscal year as  compared  to its 1998 fiscal  year.  A principle
reason  for  the  decline  was  a  reversal  of  accrued  professional  fees  of
approximately $145,000,  which were no longer required. The Company also reduced
approximately  $61,000 of its consulting  costs  associated with its general and
financial  management.  As a result of writing off its patent costs and goodwill
in  the  prior  fiscal  year  (1998),   the  current  year's   depreciation  and
amortization  also declined  $40,000.  The balance in the decline of general and
administrative expenses primarily represented a decrease in advertising,  travel
and marketing expense  approximating 59% or $50,000 during its 1999 fiscal year.
This was directly related to a decrease in activity with  prospective  corporate
business  partners  which  was the  result of a decline  in  available  funds to
conduct these activities.

The  Company's  product  development  expense  decreased  approximately  64%  or
$340,000  during the 1999 fiscal year when compared to the 1998 fiscal year. The
Company  conducts a number of R&D projects with the City College of C During the
1999 fiscal year, the Company advanced or accrued approximately $171,000 to CUNY
for   reimbursement  of  development   costs.  This  represented  a  decline  of
approximately  $197,000 to the City College of CUNY. There was also a decline in
patent  application  and filing fees  approximating  $35,000  during the current
fiscal  year 1999.  The primary  balance of the  decline in product  development
expense represented a decline in Food and Drug  Administration  (FDA) monitoring
costs approximating  $58,000 and a decrease in product or equipment design costs
of $34,000.

During  fiscal  year  1998 The  Company  concluded  that its  intangible  assets
including  goodwill and patents should be written-off.  As a result, The Company
recorded a non-cash charge of $274,675,  which represents the difference between
the  carrying  value of these  assets and their fair  value  based on  estimated
discounted future cash flows.

Other  income decreased by approximately $225,000 in the 1999 fiscal year when
compared to the 1998 fiscal year. The decrease was primarily comprised of a 1998
receipt of $200,000 from Spectrx,  Inc., which entered into a no-shop  agreement
while it studied possible merger,  joint venture  licensing or other substantial
collaboration  with the Company by accessing  the  Company's  United  States and
Japanese  patent  portfolio  and research  capabilities  for both  corporate and
world-wide  synergy.  The no-shop  agreement  expired on January 18,  1998.  The
balance represented a decline of approximately $14,000 of interest income due to
decreased  cash  balances  previously  invested  in money  market  funds and the
recognition of  approximately  $11,000  interest expense as related to a warrant
issued to a creditor in exchange for a loan.
<PAGE>
Year ended February 28, 1998 Compared to Year ended February 29, 1997

     The Company had no revenues during its fiscal years ended February 28, 1998
(its 1998 fiscal  year") and  February  29,1997 (its "1997  fiscal  year").  The
Company's primary focus was the development of its light-based technology.

General and administrative  expenses  decreased  approximately 55% or $1,147,000
during its 1998 fiscal year as compared to its 1997 fiscal year.  The  principle
reason for the decrease was in fiscal 1997,  various  directors and shareholders
of the  Company,  collectively  exercised  options for  2,763,166  shares of the
Company's common stock at no cost in  consideration  for the cancellation of the
remaining  452,582  options held by these  individuals.  The exercise  price for
these  options  was $0.25 per  share  and,  accordingly,  the  Company  recorded
approximately $691,000 as additional  compensation expense. An additional reason
for the  decrease  was in 1997 the  Company  incurred a  compensation  charge in
connection  with the  amendment of an employment  agreement  with a key officer,
whereby annual  compensation was fixed at $100,000 per year. As a result,  stock
was issued to an officer as  additional  compensation  for the  amendment  which
increased  compensation  in the prior  year by  $353,000  when  compared  to the
current year.

The  Company's  product  development  expense  decreased  approximately  22%  or
$145,000  during the 1998 fiscal year when compared to the 1997 fiscal year. The
Company  conducts  a number of R&D  projects  with the City  College of the City
University  of New York.  During the 1998 fiscal  year the  Company  advanced or
accrued  approximately  $369,000 to CUNY for  reimbursement of development costs
which approximated a decline of approximately $15,000 when compared to 1997. The
balance of the  decrease  represented  a decline  in costs for  cancer  research
conducted at Sloan-Kettering Institute, $81,000, for patent applications filings
and fees, $23,000 and other research and development costs totaling $26,000.

During  fiscal  year  1998 the  Company  concluded  that its  intangible  Assets
including  goodwill  and patents  should be written off. As a result the Company
recorded a non-cash charge of $274,675 which  represents the difference  between
the  carrying  value of these  assets and their fair  value  based on  estimated
discounted cash flows.

Other income  increased by  approximately  $152,000 in the 1998 fiscal year when
compared to the 1997 fiscal  year.  The increase  was  primarily  comprised of a
$200,000 receipt from Spectrx Inc, which entered into a no-shop  agreement while
it studied  possible  merger,  joint  venture,  licensing  or other  substantial
collaboration  with the Company by accessing  the  Company's  United  States and
Japanese  patent  portfolio  and research  capabilities  for both  corporate and
world-wide  synergy.  The no-shop  agreement  expired on January 18,  1998.  The
increase was offset by a decline of  approximately  $48,000 of interest  income,
due to decreased cash balances previously invested in money market funds.

Liquidity and Capital Resources:

     The Company has a deficiency in working  capital as of February 28, 1999 of
approximately   ($1,487,293)   representing   an  increase  in  the   deficiency
approximating  ($597,000)  during  the  1999  fiscal  year.  The  deficiency  is
primarily  comprised of accruals for professional fees, research and development
costs and salaries and wages.  The Company's  ability to maintain its operations
throughout its history has been dependent upon the periodic  infusion of capital
and the willingness of its creditors to accept payment beyond normal terms.
<PAGE>

The ability of the Company to generate  significant  revenues from operations is
largely dependent upon obtaining  regulatory approval for the  commercialization
of its cancer detection  technology.  There can be no assurance as to whether or
when the various requisite government approvals will be obtained or the terms or
scope of these  approvals.  The Company intends to defray the costs of obtaining
regulatory  approval  for  the  commercialization  of  such  technology  by  the
establishment of clinical trial arrangements with medical institutions,  similar
to its agreement with Sloan Kettering Memorial Hospital.  The Company intends to
continue to pursue the  establishment  of  co-promotional  arrangements  for the
marketing,  distribution  and commercial  exploitation  of its cancer  detection
technology.  Such  arrangements,  if established,  may include up-front payments
sharing of sales revenues after  deduction of certain  expenses,  and/or product
development funding.

Management  of the  Company  anticipates  that  substantial  resources  will  be
committed  to a  continuation  of its research  and  development  efforts and to
finance government regulatory  applications.  While management believes that the
Company  will  obtain  sufficient  funds to satisfy  its  liquidity  and capital
resources  needs for the short term, no assurances can be given that  additional
funding, or capital from other sources, such as co-promotion arrangements,  will
be obtained on a  satisfactory  basis.  In the  absence of the  availability  of
financing on a timely basis, the Company may be forced to materially  curtail or
cease its  operations.  The  Company's  operating and capital  requirements,  as
described  above,  may change  depending upon several  factors,  including:  (i)
results  of  research  and   development   activities;   (ii)   competitive  and
technological  developments;  (iii) the  timing and cost of  obtaining  required
regulatory  approvals for its products;  (iv) the amount of resources  which the
Company devotes to clinical  evaluation and the  establishment  of marketing and
sales  capabilities;  and (v) the Company's  success in entering  into, and cash
flows derived from, co-promotion arrangements.
<PAGE>
Item  7  SELECTED FINANCIAL DATA

The selected  financial  data set forth below is qualified by reference  to, and
should be read in conjunction  with, the  Consolidated  Financial  Statments and
Notes thereto and  Management's  Discussion and Analysis of Financial  Condition
and results of  operations  included  elsewhere in this Form 10-K.  The selected
financial  data have been  derived  from the  Company's  Consolidated  Financial
Statements  which have been audited by Arthur Andersen LLP,  independent  public
accountants as indicated in their report.
<TABLE>
<CAPTION>
Statement of Operations:                For the Years Ended February 29 (28)
                               1999         1998           1997           1996         1995
                               ----         ----           ----           ----         ----
<S>                         <C>          <C>           <C>            <C>           <C>
Net Sales                         -0-            -0-           -0-            -0-           -0-

Operating Loss              (824,574)    (1,753,336)   (2,770,931)    (1,625,386)   (1,377,517)

Interest (income)             11,332        (14,144)      (62,475)        (9,042)       43,679
Expense

Net Loss                    (835,906)    (1,539,192)   (2,708,456)    (1,616,344)   (1,621,196)

Net Loss per
Common Share                   ($.02)         ($.04)        ($.08)         ($.06)        ($.07)

<CAPTION>

Balance Sheet Data                                 As of February 29 (28)
                               1999         1998           1997           1996         1995
                               ----         ----           ----           ----         ----
<S>                         <C>          <C>           <C>            <C>           <C>
Working Capital           (1,487,293)      (890,423)      189,199       (390,376)     (411,886)
(deficit)

Total Assets                  59,539         64,767     1,050,619        503,525       506,237

Long Term Debt                    -0-            -0-           -0-            -0-           -0-

Total Liabilities          1,532,424        928,786       520,862        500,537       467,499

Stockholders
Equity (deficit)          (1,472,885)      (864,019)      529,757          2,988        38,738
</TABLE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS          ARTHUR ANDERSEN LLP












                   Mediscience Technology Corp. and Subsidiary

       Consolidated Financial Statements as of February 28, 1999 And 1998

                                  Together With

                    Report of Independent Public Accountants
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Mediscience Technology Corp.:

We have audited the  accompanying  consolidated  balance  sheets of  Mediscience
Technology  Corp. (a New Jersey  corporation)  and subsidiary as of February 28,
1999  and  1998,  and  the  related   consolidated   statements  of  operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period  ended   February  28,  1999.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Mediscience  Technology Corp.
and  subsidiary  as of  February  28,  1999 and 1998,  and the  results of their
operations  and their cash flows for each of the three years in the period ended
February 28, 1999 in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  The Company has no  revenues,  has
incurred  significant  losses from  operations and has an  accumulated  deficit.
These  factors  raise  substantial  doubt  about the  ability of the  Company to
continue as a going concern.  Management's  plans in regard to these matters are
described in Note 1. The  financial  statements  do not include any  adjustments
relating to the  recoverability  and classification of asset carrying amounts or
the amount and  classification  of  liabilities  that  might  result  should the
Company be unable to continue as a going concern.

/s/ARTHUR ANDERSEN LLP

Roseland, New Jersey
December 27, 1999
<PAGE>
<TABLE>
<CAPTION>
                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

            CONSOLIDATED BALANCE SHEETS -- FEBRUARY 28, 1999 AND 1998

                                                                              1999               1998
                                                                          ------------       ------------
<S>                                                                       <C>                <C>
                                     ASSETS
                                     ------
CURRENT ASSETS:
   Cash and cash equivalents (Note 2) ..............................      $     24,940       $     21,240
   Other assets ....................................................            20,191             17,123
                                                                          ------------       ------------
                Total current assets ...............................            45,131             38,363

EQUIPMENT, net of accumulated depreciation of $189,570 and
   $177,574 in 1999 and 1998, respectively (Note 2) ................            14,408             26,404
                                                                          ------------       ------------
                Total assets .......................................      $     59,539       $     64,767
                                                                          ============       ============

                        LIABILITIES AND STOCKHOLDERS' DEFICIT
                        -------------------------------------
CURRENT LIABILITIES:
   Accounts payable ................................................      $     47,108       $     30,860
   Accrued liabilities (Note 4) ....................................         1,421,207            897,926
   Officer and other loans (Note 3) ................................            64,109                  0
                                                                          ------------       ------------
                Total current liabilities ..........................         1,532,424            928,786
                                                                          ------------       ------------

COMMITMENTS AND CONTINGENCIES (Notes 3 and 7)

STOCKHOLDERS' DEFICIT (Notes 2, 3, and 8):
   Preferred stock, $.01 par value; authorized 50,000 shares-
     Series A preferred stock; issued and outstanding 2,074 shares
       (preference on liquidation $20,740) .........................                21                 21
   Common stock, $.01 par value; authorized 39,950,000 shares;
     issued and outstanding 35,276,130 and 34,943,618 shares in 1999
     and 1998, respectively ........................................           352,761            349,436
   Additional paid-in capital ......................................        17,796,811         17,573,096
   Accumulated deficit .............................................       (19,622,478)       (18,786,572)
                                                                          ------------       ------------
                Total stockholders' deficit ........................        (1,472,885)          (864,019)
                                                                          ------------       ------------

                Total liabilities and stockholders' deficit ........      $     59,539       $     64,767
                                                                          ============       ============
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
<TABLE>
<CAPTION>
                          MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                             CONSOLIDATED STATEMENTS OF OPERATIONS

                      FOR THE YEARS ENDED FEBRUARY 28, 1999, 1998 AND 1997

                                                 1999               1998                1997
                                             ------------       ------------       ------------
<S>                                          <C>                <C>                <C>
NET SALES .............................      $          0       $          0       $          0

COST OF SALES .........................                 0                  0                  0
                                             ------------       ------------       ------------
                Gross profit ..........                 0                  0                  0
                                             ------------       ------------       ------------

GENERAL AND ADMINISTRATIVE EXPENSE
   (Notes 2, 3 and 4) .................           635,406            949,110          2,095,753

PRODUCT DEVELOPMENT EXPENSE ...........           189,168            529,551            675,178

WRITE-OFF OF INTANGIBLES (Note 10) ....                 0            274,675                  0
                                             ------------       ------------       ------------
                Total expenses ........           824,574          1,753,336          2,770,931
                                             ------------       ------------       ------------

OTHER:
   Interest expense (income), net .....            11,332            (14,144)           (62,475)
   Other income (Note 9) ..............                 0           (200,000)                 0
                                             ------------       ------------       ------------
                Total other income ....            11,332           (214,144)           (62,475)
                                             ------------       ------------       ------------
                Net loss ..............      ($   835,906)      ($ 1,539,192)      ($ 2,708,456)
                                             ============       ============       ============

BASIC AND DILUTED LOSS PER COMMON SHARE      ($       .02)      ($       .04)      ($       .08)
                                             ============       ============       ============

WEIGHTED AVERAGE COMMON SHARES ........        35,046,594         34,893,011         33,908,028
                                             ============       ============       ============
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
                                             MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                                        FOR THE YEARS ENDED FEBRUARY 28, 1999, 1998 AND 1997



                                                                              Preferred                   Common
                                                                                Stock                      Stock
                                                                              Number of   Preferred      Number of      Common
                                                                               Shares       Stock          Shares       Stock
                                                                               ------       -----          ------       -----
<S>                                                                             <C>          <C>        <C>            <C>
BALANCE, February 29, 1996                                                      2,074        $21        28,474,455     $284,745

   Collection of stock subscription receivable                                      0          0                 0            0
   Issuance of common stock for cash in connection with a private placement         0          0         2,666,667       26,666
   Stock issued upon exercise of stock options at no cost                           0          0         2,843,166       28,432
   Stock issued to officer as additional compensation                               0          0           602,664        6,027
   Exercise of warrants for common stock                                            0          0           100,000        1,000
   Issuance of common stock for consulting services                                 0          0             5,000           50
   Net loss for the year ended February 28, 1997                                    0          0                 0            0
                                                                                -----        ---        ----------     --------
BALANCE, February 28, 1997                                                      2,074         21        34,691,952      346,920

   Issuance of common stock for services                                            0          0            85,000          850
   Stock issued to a director at no cost                                            0          0           166,666        1,666
   Net loss for the year ended February 28, 1998                                    0          0                 0            0
                                                                                -----        ---        ----------     --------
BALANCE, February 28, 1998                                                      2,074         21        34,943,618      349,436

   Issuance of common stock and warrants for cash                                   0          0           200,000        2,000
   Issuance of common stock for legal services                                      0          0           132,512        1,325
   Issuance of warrants                                                             0          0                 0            0
   Net loss for the year ended February 28, 1999                                    0          0                 0            0
                                                                                -----        ---        ----------     --------
BALANCE, February 28, 1999                                                      2,074        $21        35,276,130     $352,761
                                                                                =====        ===        ==========     ========

<PAGE>
<CAPTION>
                                                                                                      Common
                                                                                    Additional         Stock
                                                                                     Paid-in       Subscriptions       Accumulated
                                                                                     Capital         Receivables         Deficit
                                                                                     -------         -----------         -------
<S>                                                                                 <C>                  <C>           <C>
BALANCE, February 29, 1996                                                          $14,275,896          ($18,750)     ($14,538,924)

   Collection of stock subscription receivable                                                0            18,750                 0
   Issuance of common stock for cash in connection with a private placement           1,953,333                 0                 0
   Stock issued upon exercise of stock options at no cost                               662,360                 0                 0
   Stock issued to officer as additional compensation                                   484,657                 0                 0
   Exercise of warrants for common stock                                                 49,000                 0                 0
   Issuance of common stock for consulting services                                       4,950                 0                 0
   Net loss for the year ended February 28, 1997                                              0                 0        (2,708,456)
                                                                                    -----------          --------      ------------
BALANCE, February 28, 1997                                                           17,430,196                 0       (17,247,380)

   Issuance of common stock for services                                                102,900                 0                 0
   Stock issued to a director at no cost                                                 40,000                 0                 0
   Net loss for the year ended February 28, 1998                                              0                 0        (1,539,192)
                                                                                    -----------          --------      ------------
BALANCE, February 28, 1998                                                           17,573,096                 0       (18,786,572)

   Issuance of common stock and warrants for cash                                        48,000                 0                 0
   Issuance of common stock for legal services                                          164,315                 0                 0
   Issuance of warrants                                                                  11,400                 0                 0
   Net loss for the year ended February 28, 1999                                              0                 0           835,906
                                                                                    -----------          --------      ------------
BALANCE, February 28, 1999                                                          $17,796,811                $0      ($19,622,478)
                                                                                    ===========          ========      ============

</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
                                  MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                             FOR THE YEARS ENDED FEBRUARY 28, 1999, 1998 AND 1997

                                                                  1999             1998               1997
                                                              -----------       -----------       -----------
<S>                                                           <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ............................................      ($  835,906)      ($1,539,192)      ($2,708,456)
                                                              -----------       -----------       -----------

   Adjustments to reconcile net loss to net
     cash used in operating activities-
       Depreciation and amortization ...................           23,396            52,362            57,815
       Write-off of intangibles ........................                0           274,675                 0
       Stock issued for consulting services and interest                0           103,750             5,000
       Stock issued upon exercise of stock options
         at no cost ....................................                0                 0           690,792
       Stock issued to a director at no cost ...........                0            41,666                 0
       Stock issued to officer as additional
         compensation ..................................                0                 0           490,684
       Stock issued for legal services .................          165,640                 0                 0
   Changes in assets and liabilities-
     Decrease (increase) in other assets ...............           (3,068)           14,541           (31,664)
     (Decrease) increase in accounts payable ...........           16,248           (70,453)           84,528
     (Decrease) increase in accrued liabilities ........          523,281           478,377           (64,203)
                                                              -----------       -----------       -----------
                Total adjustments ......................          725,497           894,918         1,232,952
                                                              -----------       -----------       -----------
                Net cash used in operating activities ..         (110,409)         (644,274)       (1,475,504)
                                                              -----------       -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES --
   Purchase of fixed assets ............................                0           (12,883)           (5,009)
                                                              -----------       -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in stock subscription receivable ...........                0                 0            18,750
   Proceeds from issuance of common stock and
     warrants ..........................................           50,000                 0         2,029,999
   Proceeds from officer and other loans ...............           64,109                 0                 0
                                                              -----------       -----------       -----------
                                                                  114,109                 0         2,048,749
                                                              -----------       -----------       -----------

                Net (decrease) increase in cash ........            3,700          (657,157)          568,236

CASH AND CASH EQUIVALENTS, beginning of year ...........           21,240           678,397           110,161
                                                              -----------       -----------       -----------

CASH AND CASH EQUIVALENTS, end of year .................      $    24,940       $    21,240       $   678,397
                                                              ===========       ===========       ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                      1999             1998             1997
                                                                    --------         --------         --------
<S>                                                                 <C>              <C>              <C>
SUPPLEMENTAL SCHEDULE OF
  NONCASH ACTVITIES:
     Common stock was issued for the following-
       Legal and consulting services rendered .............         $165,640         $103,750         $  5,000
       To officer as additional compensation ..............                0           41,666          490,684
                                                                    --------         --------         --------
                                                                    $165,640         $145,416         $495,684
                                                                    ========         ========         ========
</TABLE>






The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  ORGANIZATION OF THE COMPANY:

       The consolidated financial statements include the accounts of Mediscience
       Technology Corp.  ("Mediscience") and its wholly-owned subsidiary,  Laser
       Diagnostic Instruments, Inc. ("Laser") (collectively the "Company").

       The Company operates in one business  segment and is principally  engaged
       in the design and  development  of medical  diagnostic  instruments  that
       detect  cancer in vivo in humans by using  light to excite the  molecules
       contained  in tissue  and  measuring  the  differences  in the  resulting
       natural fluorescence between cancerous and normal tissue.

       The Company is subject  but not  limited to a number of risks  similar to
       those  of  other  companies  at  this  stage  of  development,  including
       dependence on key  individuals,  the development of  commercially  usable
       products  and  processes,   competition   from  substitute   products  or
       alternative  processes,  the impact of research  and product  development
       activity, competitors of the Company, many of whom have greater financial
       or other resources than those of the Company,  the uncertainties  related
       to  technological  improvements  and  advances,  the  ability  to  obtain
       adequate additional financing necessary to fund continuing operations and
       product  development and the uncertainties of future  profitability.  The
       Company expects to incur substantial additional costs before beginning to
       generate  income from product sales,  including  costs related to ongoing
       research and development  activities,  preclinical studies and regulatory
       compliance.  Although the Company was able to obtain additional financing
       in 1997 and 1996 (Note 8), substantial  additional financing is needed by
       the Company.

       On April 21, 1997, the Company announced a joint collaboration  agreement
       with General Electric  Company ("GE") and the Research  Foundation of the
       City  University  of New York  ("CUNY")  to develop  proprietary  imaging
       technology for medical purposes. The development and commercialization of
       non x-ray based optical  mammography and optical tomography products with
       greater   effectiveness,   decreased   side  effects  and  improved  cost
       efficiencies are the objective of this  collaboration.  The collaboration
       will  focus on  noninvasive  methods  to image  subsurface  tumors in the
       breast,  brain, etc. CUNY, through a NSASA Institutional  Research Award,
       through a Navy  grant,  and  through  the New York  State  HEAT  program,
       anticipates  more than  $3,800,000  of funding over a five year period to
       support this collaboration  agreement.  GE did not disclose the amount it
       intends  to  spend  on  the  development  and  commercialization  of  the
       Company's  proprietary  technology.  To date no funding has been received
       pursuant to this collaboration agreement.
<PAGE>
       The Company's financial  statements have been prepared on a going concern
       basis which  contemplates  the  realization  of assets,  liabilities  and
       commitments  in  the  normal  course  of  business.  The  Company  has no
       revenues,  has  incurred  substantial  net losses and has an  accumulated
       deficit  through   February  28,  1999.  The  Company  expects  to  incur
       substantial expenditures to further the development and commercialization
       of its  products.  To  achieve  this,  management  will  seek  additional
       financing through private placements or other financing alternatives, and
       might also seek to sell the  Company or its  technology.  There can be no
       assurance that continued  financings  will be available to the Company or
       that, if available, the amounts will be sufficient or that the terms will
       be acceptable to the Company.

(2)  SIGNIFICANT ACCOUNTING POLICIES:

       Use of Estimates-

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

       Cash and Cash Equivalents-

         Cash and cash  equivalents  include cash held in banks and is stated at
         cost, which approximates  market. For purposes of the statement of cash
         flows, the Company  considers all highly liquid  financial  instruments
         purchased  with an initial  maturity of three months or less to be cash
         equivalents.

       Equipment-

         Equipment  is  stated  at cost.  Depreciation  is  computed  using  the
         straight-line method over an estimated useful life of five years.

       Long-Lived Assets-

         The provisions of Statement of Financial  Accounting Standards No. 121,
         "Accounting  for the  Impairment  of  Long-Lived  Assets"  ("SFAS 121")
         requires,  among other  things,  that an entity  review its  long-lived
         assets and certain related  intangibles for impairment whenever changes
         in circumstances  indicate that the carrying amount of an asset may not
         be fully recoverable (see Note 10 for write-off of intangibles).

       Income Taxes-

         The provisions of Statement of Financial  Accounting Standards No. 109,
         "Accounting  for Income  Taxes"  ("SFAS 109")  utilizes  the  liability
         method, and deferred taxes are determined based on the estimated future
         tax effects of  differences  between the  financial  statement  and tax
         bases of assets  and  liabilities  at  currently  enacted  tax laws and
         rates.
<PAGE>
       Accounting for Stock-Based Compensation-

         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
         Stock-Based  Compensation" ("SFAS 123") requires that an entity account
         for  employee  stock  compensation  under  a fair  value-based  method.
         However,  SFAS 123  also  allows  an  entity  to  continue  to  measure
         compensation cost for employee stock-based compensation plans using the
         intrinsic  value-based  method of accounting  prescribed by APB Opinion
         No. 25,  "Accounting  for Stock Issued to  Employees"  ("APB 25").  The
         Company has elected the  disclosure  requirements  of SFAS 123 and will
         continue to account for employee stock-based compensation under APB 25.

(3)  RELATED PARTY TRANSACTIONS:

       In May 1992, the Company  entered into a five year  employment  agreement
       with  Peter  Katevatis,  then  Chief  Executive  Officer,  President  and
       Stockholder of the Company.  Pursuant to the terms of such agreement, Mr.
       Katevatis was to be paid $190,000 per year,  plus annual  increases based
       on the consumer price index.  The employment  agreement  further provided
       for a bonus and fringe  benefits in accordance with policies and formulas
       mutually agreed upon by Mr. Katevatis and the Board of Directors.

       In January 1996, the Company  elected a new President and Chief Executive
       Officer, Herbert L. Hugill. Mr. Katevatis remained Chairman and Treasurer
       of the Company.  Accordingly, the employment agreement with Mr. Katevatis
       was amended  effective  March 1, 1996  providing  for an annual salary of
       $100,000  per year for the next  three  years.  In  connection  with this
       amendment, in March, 1996 the Company issued 552,664 restricted shares of
       the  Company's  common  stock to Mr.  Katevatis,  which was  recorded  as
       additional  compensation  expense in fiscal 1997 of  $453,184.  All other
       provisions of the agreement remained the same.

       Pursuant to the terms of an employment  agreement,  Mr. Hugill, was to be
       paid $50,000 per annum,  was issued options to purchase 200,000 shares of
       the  Company's  stock  (Note 8), and was to receive  warrants to purchase
       shares equal to 5% of the number of common shares  outstanding on January
       18, 1996 (or up to 10% as of such date at the  discretion of the Board of
       Directors) at an option price of $1.00 per share,  upon the attainment of
       certain  milestones  in the  future.  On January  31,  1997,  Mr.  Hugill
       resigned as President and Chief Executive  Officer of the Company and the
       200,000  options were  cancelled.  The warrant  agreement was amended and
       effective  January 31, 1997, Mr. Hugill was granted a warrant to purchase
       up to 473,220  shares of the  Company's  common stock at a price of $1.00
       per share.  This warrant is  exercisable  at any time through July,  2003
       except for 315,480 shares which is  exercisable  only upon the attainment
       of certain  milestones.  Compensation  expense will be recognized for the
       difference  between  the warrant  price and the fair market  value of the
       stock at the date that the  milestones  are attained.  As of February 28,
       1999, no milestones have been achieved.

       In  addition,  the Company  issued  50,000  shares of common stock to Mr.
       Hugill upon his termination. The Company recorded $37,500 as compensation
       expense for the fair value of the shares issued.
<PAGE>
       In February 1997, Mr.  Katevatis  resumed the role as President and Chief
       Executive  Officer.   Accordingly,  the  employment  Agreement  with  Mr.
       Katevatis  was amended  for an annual  salary of  $200,000  per year.  In
       August  1999,  the  Board of  Directors  approved  the  extension  of Mr.
       Katevatis's  existing  contract  from  March 5,  2002 to  March 5,  2007,
       maintaining all other original contract terms and conditions.

       Legal services rendered by Mr. Katevatis  amounted to $50,000 for each of
       the three years ended February 28, 1999.  These amounts have been charged
       to operations.

       In 1999, Mr. Katevatis  advanced funds to the Company in order to provide
       the Company with the funding to pay  operational  expenses as they became
       due. These  advances do not accrue  interest and are to be repaid as soon
       as the Company  raises  additional  funds.  As of February 28, 1999,  the
       balance  of  the  advances  payable  to Mr.  Katevatis  is  $39,109.  Mr.
       Katevatis  has  loaned  additional  money to the  Company  subsequent  to
       February 28, 1999 in order to continue to sustain operations.

       In fiscal 1999,  the Company  borrowed  $25,000 from Tami  Adelstein  and
       issued  Mr.  Adelstein  a  warrant  to  purchase  100,000  shares  of the
       Company's  common  stock at $.25 per  share.  The  warrant  was valued at
       $11,400 and was recorded as interest expense. The loan is due and payable
       by the Company without interest on or before August 12, 1999, thereafter,
       interest  is payable at the rate of 1.5% per month.  On August 12,  1999,
       the Company did not repay the note. On October 12, 1999, Peter Katevatis,
       advanced the funds for the repayment of the note and accrued  interest to
       October 12, 1999.

       On November 17, 1999,  the Company  entered into a three-year  employment
       agreement  beginning  February  1,  2000  with Dr.  Frank S.  Castellana.
       Pursuant to the terms of such agreement,  Dr. Castellana is to become the
       President  and Chief  Executive  Officer of the Company and is to be paid
       $100,000 per annum. In addition, he will be issued options to purchase up
       to 914,373  shares of the  Company's  common  stock at an option price of
       $.32 per share and will be issued a warrant to purchase  up to  1,978,746
       shares of the  Company's  common  stock at an exercise  price of $.05 per
       share for the first 150,000  shares and at an exercise  price of $.50 per
       share for the remaining  1,828,746 shares.  Dr.  Castellana's  ability to
       exercise  these options and warrants is subject to a series of milestones
       described in his employment agreement.  The Company may have to recognize
       compensation  expense in the future on the issuance of these  options and
       warrants  calculated  as the  difference  between  the option and warrant
       prices and the fair market  value of the  Company's  common  stock on the
       date the  warrants  and  options  are  issued  or for  those  subject  to
       milestones, on the date the milestones are obtained.
<PAGE>

(4)  ACCRUED LIABILITIES:

       Accrued liabilities consist of the following-

<TABLE>
<CAPTION>
                                                         1999            1998
                                                      ----------      ----------
<S>                                                   <C>             <C>
       Legal and professional fees .............      $  165,937      $  240,350
       Research and development (see Note 7) ...         810,137         485,141
       Salaries and wages ......................         445,133         172,435
                                                      ----------      ----------
                                                      $1,421,207      $  897,926
                                                      ==========      ==========
</TABLE>
<PAGE>
(5)  INCOME TAXES:

       As of February 28, 1999, the Company has operating loss  carryforwards of
       approximately  $11,900,000  which  may be used to  reduce  future  income
       subject to income taxes and expire in various  amounts from 1999 to 2013.
       As of February 28, 1999 and February 28, 1998, the Company had a deferred
       tax asset of approximately $4,000,000 and $3,800,000,  respectively,  for
       which valuation allowances for the entire amounts were provided.

(6)  LOSS PER COMMON SHARE:

       Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
       ("SFAS 128") requires the presentation of basic earnings (loss) per share
       and diluted  earnings (loss) per share.  Basic loss per share is based on
       the average number of shares  outstanding  during the year.  Diluted loss
       per share is the same as basic loss per share, as the inclusion of common
       stock equivalents would be antidilutive.

(7)  COMMITMENTS AND CONTINGENCIES:

       In April 1992, the Company entered into a five year consulting  agreement
       (the "Agreement")  with Dr. Robert R. Alfano, a principal  shareholder of
       the Company and Chairman of its Scientific  Advisory  Board.  Pursuant to
       the terms of such Agreement, Dr. Alfano is to be paid a consulting fee of
       not less than  $150,000 per annum in exchange for services to be rendered
       for  approximately  fifty  (50)  days per  annum in  connection  with the
       Company's medical photonics business. The Agreement further provides that
       Dr. Alfano is to be paid a bonus and fringe  benefits in accordance  with
       policies  and formulas  provided to key  executives  of the  Company.  In
       August  1999,  the  contract  was  extended  to  March  2007.  All  other
       provisions of the agreement remained the same.

       The  Company  has  committed  to  fund  approximately   $295,000  over  a
       twelve-month  period beginning June 1, 1995 for Mediphotonics  Laboratory
       research at the City College of the City  University of New York ("CCNY")
       under a contract which is renewed  annually.  The Company has funded CCNY
       approximately   $157,565,   $402,000   and   $384,000  for  each  of  the
       twelve-month periods ending May 31, 1999, 1998 and 1997.

       In  connection  with the  acquisition  of  patent  rights  to its  cancer
       detection  technology,  the Company  assumed an  obligation to pay to Dr.
       Alfano's  daughter a royalty of one  percent of the gross  sales  derived
       from any  equipment  made,  leased or sold which  utilizes  the  concepts
       described in the Company's cancer  detection  patent.  Additionally,  the
       Company  is to pay a royalty  equal to three and one half  percent of the
       gross sales of any invention from the Company's existing patents or newly
       obtained  patents,  respectively.  No amounts  have been paid  during the
       three years ended February 28, 1999.

       In addition to the above  royalties,  the Company has obtained  worldwide
       licensing  rights for patents from two universities and has agreed to pay
       royalties of four percent of the net sales of all products generated from
       the patents and fifty percent of any income received from sublicensing of
       the  patents.  No amounts  have been paid  during the three  years  ended
       February 28, 1999.
<PAGE>
(8)  STOCKHOLDERS' EQUITY:

       Preferred Stock-

         The Company is authorized  to issue 50,000  shares of preferred  stock,
         $.01 par value per share,  which may be issued from time-to-time in one
         or more series,  the terms of which may be  designated  by the Board of
         Directors  without  further  action  by  shareholders.   The  Board  of
         Directors has  designated  2,074 shares of preferred  stock as series A
         preferred  stock,  all of which series is issued and  outstanding as of
         February 28, 1999.  Any  preferred  stock issued will have  preferences
         with respect to dividends,  liquidation and other rights,  but will not
         have preemptive rights.

         Holders of series A preferred stock are entitled to a preference of $10
         per share  before any  payment  is made to  holders of common  stock in
         liquidation  of the  assets of the  Company.  Additionally,  holders of
         series A preferred stock have no redemption or dividend rights and vote
         only with  respect to  corporate  matters  affecting  their  respective
         rights, preferences or limitations, but do not vote for the election of
         directors or on general corporate matters.

       Private Placement Offerings-

         During  fiscal  1997,  the  Company  successfully  completed  a private
         placement  offering  (the "97  Offering")  of  2,666,667  shares of its
         common stock for proceeds to the Company of  approximately  $2,000,000.
         In  connection  with the 97 Offering,  the Company  issued  warrants to
         purchase  400,000  shares of the Company's  common stock at an exercise
         price of $1.00 per share. The warrants are  exercisable,  at the option
         of the holder,  at any time through  March 27, 2003.  During 1999,  the
         Company issued 200,000 shares of the Company's common stock and 200,000
         warrants to purchase the Company's common stock at an exercise price of
         $.25 per share for $50,000. The warrants expire in 2003.

       Common Stock Issued for Service-

         During fiscal 1999,  1998 and 1997,  respectively,  the Company  issued
         132,512,  85,000 and 5,000 shares,  respectively,  of restricted common
         stock  for  various  legal  and  consulting  services  provided  to the
         Company.  The number of shares issued were determined based on the fair
         market value of the services provided.

       Stock Options-

         Prior to fiscal 1996,  all stock options were issued at the  discretion
         of management.  In fiscal 1996, the Company  adopted the 1996 incentive
         stock option plan (the "Plan") which provides for granting of incentive
         stock  options  ("ISO's") to  employees.  Options vest over a period of
         time as determined by the Board of Directors  upon the granting of such
         options, except that no option shall be exercisable in whole or in part
         prior to the first  anniversary of the date of granting of such option.
         Options  are  exercisable  10 years from the grant date.  The  exercise
         price of ISO's granted under the Plan will not be less than 100% of the
         fair market value on the date of grant (110% for ISO's  granted to more
         than 10% stockholders).
<PAGE>
         In April 1996,  Messrs.  Katevatis,  Kouvatis,  Kennedy and  Armstrong,
         directors  and  stockholders  of the  Company,  collectively  exercised
         options for 2,843,166  shares of the Company's  common stock at no cost
         in consideration  for the cancellation of the remaining 452,582 options
         held by these  individuals.  The exercise  price for these  options was
         $0.25 per share and,  accordingly,  the  Company  recorded  $690,792 as
         additional compensation expense.

         In May 1997, Mr. Kraum, a director and stockholder of the Company,  was
         issued  166,666  shares  of the  Company's  common  stock at no cost in
         consideration  for the cancellation of the remaining 200,000 options he
         held. The Company recorded $41,666 as additional  compensation  expense
         in connection with the issuance of the stock.

         Stock option  activity  during the three year period ended February 28,
         1999, was as follows-
<TABLE>
<CAPTION>
                                                                                         Weighted
                                                                                         Average
                                                                         Exercise        Exercise
                                                         Shares         Price Range        Price
                                                         ------         -----------        -----
<S>                                                    <C>             <C>                 <C>
Outstanding, February 29, 1996                          3,930,748      $0.25 - $2.00       $0.40

Exercised                                              (2,843,166)         $0.25           $0.25
Cancelled                                                (652,582)      $0.25-$1.00        $0.48
                                                       ----------      -------------       -----

Outstanding, February 28, 1997                            435,000       $1.00-$2.00        $1.25

Cancelled                                                (200,000)         $1.00           $1.00
                                                       ----------      -------------       -----

Outstanding, February 28, 1998                            235,000       $1.00-$2.00        $0.95
                                                       ----------      -------------       -----
Outstanding, February 28, 1999                            235,000       $1.00-$2.00        $0.95
                                                       ==========      =============       =====
</TABLE>

       Stock Warrants-

         Stock warrant  activity during the three year period ended February 28,
         1999, was as follows-
<TABLE>
<CAPTION>
                                                                         Shares           Exercise
                                                                        Available        Price Range
                                                                        ---------        -----------
<S>                                                                     <C>              <C>
Outstanding, February 29, 1996                                          1,273,412        $.50 -$1.20

Granted                                                                   873,220           $1.00
Exercised                                                                (100,000)          $.50
                                                                        ---------        -----------

Outstanding, February 28, 1997                                          2,046,632        $.50-$1.20
                                                                        ---------        -----------

Outstanding, February 28, 1998                                          2,046,632        $.50-$1.20
Granted                                                                   300,000           $.25
                                                                        ---------        -----------

Outstanding, February 28, 1999                                          2,346,632        $.25-$1.20
                                                                        =========        ===========
</TABLE>
<PAGE>
(9)    OTHER INCOME:

         On  October  20,  1997  the  Company  entered  into a 90 day "no  shop"
         agreement with SpectRx,  Inc. Norcross Ga., a developer of products for
         less  invasive  and  painless  alternatives  to blood tests for glucose
         monitoring,   diabetic   screening,   and  infant   jaundice  based  on
         proprietary  technology for the consideration of $200,000.  This was to
         enable  discussions  toward a merger,  joint venture licensing or other
         substantial  collaboration  with the Company by accessing the Company's
         United States and Japanese patent  portfolio and research  capabilities
         for both corporate and world-wide  synergy.  On January 18, 1998 the no
         shop agreement  expired.  In 1998, the Company recorded the $200,000 as
         other income in the accompanying statement of operations.

(10)     WRITE-OFF OF INTANGIBLES:

         Applying the criteria  established by Statement of Financial Accounting
         Standards No. 121,  Accounting for the Impairments of Long-Lived Assets
         and for Long-Lived Assets to Be Disposed Of, the Company concluded that
         certain intangible assets including goodwill and patents were impaired.
         Goodwill of $460,000  represented the excess of the purchase price over
         the net  assets  acquired  in the  acquisition  of Laser  and was being
         amortized over twenty years, using straight-line  method. In 1998, as a
         result of the  impairment,  the Company  recorded a non-cash  charge of
         $274,675, which represents the difference between the carrying value of
         these assets and their fair value based on estimated  discounted future
         cash  flows.  The  circumstances  that  led to this  impairment  relate
         primarily from the Company's inability to generate revenue.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

               None

                                    PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT

Officers and Directors

The directors, executive officers and significant employees of the Company are:

<TABLE>
<CAPTION>
Name                                    Age                          Position
----                                    ---                          --------
<S>                                     <C>             <C>
Peter Katevatis                         65              Chairman of the Board, Chief Executive
  Officer and Treasurer

John M. Kennedy                         62              Vice President and Secretary

William Armstrong                       82              Director

Mathew Culligan                         79              Director

Michael N. Kouvatas                     72              Director

John P. Matheu                          77              Director
</TABLE>

Directors hold office until the next annual shareholders' meeting or until their
successors  have  been  duly  elected  and  qualified.  Executive  officers  are
appointed and serve at the pleasure of the Board of Directors

     Peter  Katevatis  has served as  Chairman of the Board of  Directors  since
1993.  He served as President  and Chief  Executive  Officer of the Company from
November, 1983 until the appointment of Herbert L. Hugill and served as director
of the Company  since 1981.  From 1981 until his election as President and Chief
Executive  Officer,  Mr.  Katevatis  was a Vice  President of the  Company.  Mr.
Katevatis was elected  Treasurer of the Company in January,  1996. Mr. Katevatis
has been a practicing  attorney in Philadelphia  Penna.  and Marlton New Jersey,
and is also licensed as an attorney in the State of New York and in the District
of Columbia.  Mr.  Katevatis was a trustee of the New Jersey  State's Police and
Fireman  Retirement  Pension  Fund and  served  as a member  of the State of New
Jersey  Investment  Council from 1990 until December , 1992. He is also a member
of the American  Arbitration  Association and a member of the National  District
Attorney's Association.
<PAGE>
     John M. Kennedy  currently  serves a Vice  President  and  Secretary of the
Company,  as well as being a director of the Company since 1982. Mr. Kennedy has
served the Company as Vice  President  since  1983,  as  Treasurer  from 1984 to
January, 1996 and as secretary since 1986. Mr. Kennedy is Chairman of the Board,
Secretary-Treasurer  and General Manager,  of Pepco  Manufacturing  Co., a sheet
metal fabricator for the electronics industry located in Somerdale,  New Jersey.
Mr.  Kennedy  also was a director of First  Peoples Bank of New Jersey from 1979
and served as a member of its executive board until 1994 when  Core-States  Bank
purchased First Peoples Bank.

     William W. Armstrong has served as a director of the Company since 1978. He
has been in  retirement  since  1982  following  a 36 year  career as a research
scientist with Pfizer Inc, a world wide health care, personal care and specialty
chemicals manufacturer headquartered in New York City. Since his retirement, Mr.
Armstrong has continued to serve as a consultant to Pfizer  concerning  programs
involved with disperse  systems and complex  liquids his field of expertise.  He
has been awarded 14 patents  concerned in general with therapeutic  agent dosage
delivery systems.

     Mathew Culligan has served as a director of the Company since March,  1990.
Since  1988,  Mr.  Culligan  has  served  as  Chairman  and Chief  Executive  of
Culligan/Kahn  Associates,  a broadcast  production company located in New York,
New York. Mr.  Culligan,  in 1984 founded  Environmental  Monitor,  a non-profit
organization  dedicated to  providing a  computerized  service of  environmental
conditions  and currently  serves as its Chairman.  Mr.  Culligan has at various
times during his career,  served as Present of the NBC Radio  Network;  Elective
Vice President of NBC Television;  Chairman of the Mutual Broadcasting  Company;
and as Chairman and President of Curtis  Publishing Inc., the publisher of among
other periodicals,  Saturday Evening Post, Ladies Home Journal and Holiday.  Mr.
Culligan has also been the author of twelve  published books and was the creator
of two television shows.

     John P. Matheu has served as a director  of the Company  since July , 1996.
Mr Matheu is currently  general partner and co-founder of MATCO & Associates,  a
firm specializing in providing management consulting services to decision makers
in biopharmaceutical,  medical devices and health care firms. Previously, he was
employed by Pfizer  Inc.  during  which time he held a wide range of  management
positions primarily in distribution,  marketing and sales. As Vice President, he
established  and  directed  Pfizer's  generic  drug  division.   Prior  to  that
assignment he directed  Pfizer  Laboratories  800 person field sales force,  its
hospital marketing group and its training department. He left Pfizer in 1984 and
founded Matheu Associates, a management consulting firm.

 Michael N. Kouvatas has served as a Director of the Company since 1971. For
 the past 10 years Mr. Kouvatas has been an attorney with offices in Haddonfield
New Jersey and  additionally  is a principal in various food  operations  in the
Southern New Jersey area.

There are no family  relationships  among directors and, to the knowledge of the
Company,  there have been no legal proceedings or judgments during the past five
years which would be material to the  evaluation of the ability and integrity of
any director.
<PAGE>

Scientific Advisory Board

The Scientific  Advisory Board's Chairman is Dr. Robert R. Alfano  distinguished
Professor  of Science and  Engineering  and the Director of the IUSL at the City
College of CUNY. He is co-author of a number of patents concerning the Company's
photonic  technology and a principal  stockholder of the Company.  He supervises
the research and development of the Company's cancer  diagnostic  technology and
is principal  investigator at CCNY.  Since 1972, he has been affiliated with the
Physics  Department of CCNY.  He presently  directs the institute for Ultra fast
Spectroscopy  and  Lasers and the  Photonics  Engineering  Laboratories  at City
College.  From 1964 to 1972, he was a member of the  technical  staff of General
Telephone & Electronics  Laboratories.  Dr.  Alfano  received an Alfred P. Sloan
Fellowship  Research  corporation  Award and was made a Fellow  of the  American
Physical  Society in 1976. In 1983 he received the Outstanding  Italian-American
Award for Science.  In May, 1989, Dr. Alfano was elected a Fellow of the Optical
Society  of America  for his  studies  of ultra  fast  phenomena.  He has been a
consultant to several major corporations including GTE, Clairol, Phillips Dental
and  Hamamatsu  Photonics.  Dr.  Alfano is on the  advisory  board of  Photonics
Spectra Magazine. He is a reviewer for prestigious  professional journals in the
fields of physics,  optics,  photo biology,  photochemistry  and biophysics.  He
received  his  B.S.  and  M.S.  degrees  in  Physics  from  Fairleigh  Dickinson
University in 1963 and 1964, respectively.  He received his Ph.D in Physics from
New York University in 1972.

Stimson P. Schantz, M.D. is Director of Cancer Prevention, Department of Surgery
Cornell University Memorial Sloan-Kettering Cancer Center, New York. Dr. Schantz
has been appointed as the principle  investigator  under the Company's  Clinical
Trial  Agreement  with Memorial  Hospital for Cancer and Allied  Diseases and in
such capacity,  oversees the pilot study of tissue auto fluorescence pursuant to
such  agreement.  Between 1984 and 1991, Dr.  Schantz served in various  faculty
positions at the M.D.  Anderson Cancer Center in the Department of Head and Neck
Surgery.  Dr. Schantz is presently a member of the Society of Surgical Oncology,
American  Society  for Head  and Neck  Surgeons,  the  Society  of Head and Neck
Surgery,  and has served as the Director of research programs and as a member of
the research  committee at the University of Texas,  M.D Anderson Cancer Center.
He has been the  recipient  of several  honors and awards,  including  the First
Independent Investigator Award of the

National  Cancer  Institute  awarded in March 1988 and an NCI  contract to study
biomarkers  awarded in 1995.  Dr.  Schantz  serves as  reviewer  and editor of a
number of  professional  medical  publications  and is the  author  of  numerous
articles.  papers, books and chapters, and abstracts.  He was awarded a Bachelor
of Arts Degree from Harvard  College in 1970 and his M.D. from the University of
Cincinnati  in  1975.  In  April  ,1998  Dr.  Schantz  was  recruited  to lead a
multi-institutional  effort revolving around cancer prevention clinical research
programs and constituting a consortium effort with hospitals in the metropolitan
New York City area supported by the National Cancer Institute  approval and high
priority  rating  on a $1.6  million  dollar  grant to carry  out  collaborative
clinical trials which will be targeted  specifically  at developing  Mediscience
Technology  and  positioned  to  conduct  phase II and  phase  III  trials  on a
multi-organ   basis   involving   diseases  of  the  breast,   upper  and  lower
aerodigestive tract, and gynecologic tissues.
<PAGE>

Each member of the  Scientific  Advisory  Board is paid a fee of $1,000 for each
meeting  attended.  Additionally,  certain  members  past and present  have been
granted an option of  unlimited  duration  to  purchase  10,000  shares from the
Company's Common Stock at a price of $2.00 per share.


ITEM 11. EXECUTIVE COMPENSATION

     The following sets forth a summary of  compensation  paid or accrued to the
executive  officers of the Company or fiscal  years  ending  February,  28,1998,
February 28, 1997 and February 28, 1996 whose compensation exceeded $100,000.
<TABLE>
<CAPTION>
                                       SUMMARY COMPENSATION TABLE

Name and                             Year ended                                      Other Annual
Principle Position                  Feb. 28 (29)                  Salary             Compensation
------------------                  ------------                  ------             ------------
<S>                                  <C>                         <C>                 <C>
Peter Katevatis                      1999                        $200,000            $ 61,936 (2)
Chairman and Chief                   1998                        $200,000            $ 64,865 (2)
Executive Officer                    1997                        $100,000 (1)        $523,231 (2)
</TABLE>

--------------------

(1)  See Note 3 of Notes to Consolidated Financial Statements.

(2)  Includes  payment to Mr.  Katevatis of $50,000 for legal services  rendered
     during each of the fiscal years ending February 28,1999  February  28,1998,
     February  28,1997 (fiscal years  1999,1998,1997  respectively).  and fringe
     benefits  under  his  employment  agreement  for 1999;  automobile  expense
     $5,464,  auto  insurance  $3,541,  and health  insurance  $2,931.  Contract
     benefits paid in 1998;  automobile expense of $6,000 , automobile insurance
     of $2,856 and health insurance of $4,800.  Contract  benefits paid in 1997;
     automobile  expense  $12,721,   automobile   insurance  $2,155  and  health
     insurance $4,470. Also included $453,184 of stock compensation expense. See
     Note 3 to Notes to Consolidated Statements.

Option Exercises and Holdings

In April 1996, Messrs. Katevatis, Kouvatas, Kennedy and Armstrong, directors and
shareholders of the Company, collectively exercised options for 2,763,166 shares
of the Company's common stock at no cost in  consideration  for the cancellation
of the remaining 452,582 options held by these  individuals.  The exercise price
for these  options was $0.25 per share and  accordingly,  the  Company  recorded
$690,792 as additional compensation expense.

The flowing table provides information regarding the number of shares covered by
both  exercisable  and  non-execisable  stock  options  held  by  the  Company's
executive officers at February 28, 1998 (sea Notes to Consolidated  Statements).
In  addition  the  following  table sets  forth the  values  for  "in-the-money"
options,  which  represent the positive spread between the exercise price of the
existing options and $___________  which was the closing price for the Company's
Common Stock in the over-the-counter market on February 28, 1998.
<PAGE>
                     UNEXERCISED OPTIONS AT FISCAL YEAR-END

 Number of shares underlying                        Value of unexercised
unexercised options at year end              in-the-money options at year end
--------------------------------          -------------------------------------
Exercisable        Unexercisable          Exercisable             Unexercisable
-----------        -------------          -----------             -------------

    0                    0                      0                       0

The Company does not have any other continent forms of compensation for officers
and  directors,   including  any   pension,retirement,   stock  bonus  or  other
compensation  plan. No compensation has been paid to any individual for services
rendered as a director.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT

     The following table sets forth certain information at December 4, 1998 with
respect to (i) those  persons known by the Company to be the owners of more than
5% of the  Company's  Common Stock,  (ii) the ownership of the Company's  Common
Stock by each  director  and  (iii) the  ownership  of the  Common  Stock by all
elective  officers and directors of the Company as a group.  Except as otherwise
indicated,  each of the stockholders  named below has sole voting and investment
power with respect to the Shares of Common Stock beneficially owned by him:
<TABLE>
<CAPTION>
                                             Amount of Beneficial           Percentage of
Name and Address                                  Ownership                     Class
----------------                             --------------------           -------------
<S>                                      <C>                                    <C>
Peter Katevatis
P.O. Box 598
Woodcrest Cherry Hill NJ 08003           4,725,595 (1)(2)(3)(4)(5)(12)          13.4%

John M. Kennedy
c/o Pepco Mfg.  Co.
100 Somerdale, NJ 08083                  2,677,933 (5)(6)(12)                    7.6

William W.Armtsrong
P.O Box 607
Tupper Lake, NY 2986                       355,200 (5)(7)(12)                    1.0

Michael Kouvatas
27 Kings Highway
East Haddonfield NJ 08033                  684,666 (5)(8)(12)                    1.9

Mathew Culligan
410 East 65 Street
New York, NY 10021                          20,000 (10)                          0.006

Robert C. Miller
c/o Allen &Company, Inc
711 Fifth Avenue
New York, NY 10022                               0 (14)                          0.00

Dr. Robert R. Alfano
c/o City College of CUNY
Convent Avenue @ 138th Street
New York, NY 10031                       1,414,000 (11)                          4.02

All directors and officers as a group
7 persons                                8,770,894 (13)                          24.9
</TABLE>
---------------------

(1)  Includes the issuance of a net of 398,167 restricted shares acquired by Mr.
     Katevatis  pursuant to the exercise of stock options described in footnotes
     (5) and (12) below.

(2)  Includes 824,500 restricted shares issued for past performance and services
     rendered  to the  Company.  see Note 8 of Notes to  Consolidated  Financial
     Statements.

(3)  Includes 552,664  restricted shares issued in consideration for contractual
     reduction in salary described in Note 3 of Notes to Consolidated  Financial
     Statements.

(4)  Excludes 50,000 shares owned by Mr.  Katevatis's  daughter as custodian for
     his  grandchildren,  and a total of 500,000 shares owned by his sons, as to
     all of which he disclaims beneficial ownership.

(5)  On December 13, 1985 the Company granted stock options at an exercise price
     of $0.25 per share to the following  Officers and Directors in exchange for
     cancellation  of  certain of the  Company's  accrued  indebtedness  to such
     persons, portions of which were assigned as follows: Mr. Katevatis received
     options to purchase  4,400,000 shares  (2,200,000 of which were assigned by
     Mr. Katevatis to Mr. Kennedy);  Winston Frost, a former Director,  received
     options to purchase  476,000 shares,  238,000 of which were assigned by Mr.
     Frost to Mr.  Armstrong;  and Mr.  Kouvatas  received  options to  purchase
     560,000 shares.

(6)  Includes the issuance of a net of 1,833,333  restricted  shares acquired by
     Mr. Kennedy pursuant to the exercise of stock options described in footnote
     (5) and (12).  Also includes  100,000 shares  registered in the name of Mr.
     Kennedy wife

(7)  Includes the issuance of a net of 65,000  restricted shares acquired by Mr.
     Armstrong  pursuant to the exercise of stock options described in footnotes
     (5) and (12).  Ado included are 6,000 shares  registered in the name of Mr.
     Armstrong's wife.

(8)  Includes lithe issuance of a net of $466,666  restricted shares acquired by
     Mr.  Kouvatas  pursuant  to the  exercise  of  stock  options  describe  in
     footnotes  (5) and (12).  Also  included  are;  14,000  shares owned by Mr.
     Kouvatas's  wife; 6000 shares for which Mr. Kouvatas is custodian for three
     (3) of his children and 36,000 shares for which Mr. Kouvatas's  daughter is
     custodian for her two children  under the New Jersey Uniform Gift to Minors
     Act; and 30,000 shares registered in the names of each his children.

(9)  Includes  the  issuance  of a net of 166,666  shares  acquired  by Mr Krumm
     pursuant to the  exercise of stock  options on May 1, 1997;  also  includes
     6,000 shares registered in the name of his wife's IRA.

(10) Includes  20,000 shares which may be acquired by Mr.  Culligan at $2.00 per
     share pursuant to immediately exercisable stock options.

(11) Includes  44,000  shares owned by Dr.  Alfano's  daughter and 44,000 shares
     held by Dr. Alfano's wife in trust for their minor son.

(12) In  April  1996,  Messrs.  Katevatis,   Kouvatas,  Kennedy  and  Armstrong,
     directors and shareholders of the Company,  collectively  exercised options
     for  2,763,166  shares  of  the  Company's  common  stock  at  no  cost  in
     consideration for the cancellation of the remaining 452,582 options held by
     these individuals. The exercise price for these options was $0.25 per share
     and  accordingly,the  Company recorded $690,792 as additional  compensation
     expense.

(13) Includes the shares  described in notes (1),  (6),  (7),  (8), (9) and (10)
     above.

(14) Excludes   3,041,500  shares   beneficially   owned  by  Allen  &  Company,
     Incorporated, (8.5%- includes 1,041,500 warrants) as reflected in Amendment
     No. 4 to their  Schedule 13G filed  February 11, 1998. Mr. Miller is a vice
     president and a director of Allen & Company, Incorporated.

(15) See Note 3 of Notes to Consolidated Financial Statements.

The foregoing table does not include options granted to former  placement agents
of the Company's securities to purchase 111,912 shares of Common Stock.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 1, 1988, the Company  acquired from Dr. Robert  Alfano,  a principle
stockholder of the Company and Chairman of the Scientific Advisory Board, all of
the issued and outstanding  stock of Laser  Diagnostic  Instruments,  Inc. whose
only  asset was US patent  number  4,930,516  (previously  defined  as "LDI") in
exchange for 1,500,000 shares of the Company's Common Stock. Additional,  LDI is
under an  obligation  to pay a royalty  in the  aggregate  amount of 1% of gross
sales from any  equipment  made,  leased or sold  which  embodies  the  concepts
described in patent number 4,930,516 to Michelle Alfano,  Dr. Alfano's daughter.
In April,  1992 the Company  entered into a five (5) year  Consulting  Agreement
with Dr. Alfano. By letter Agreement, dated August 5, 1995, the Company extended
his Employment  Agreement to March 5, 2002 under the same terms and  conditions.
Pursuant to the terms of such Consulting  Agreement,  Dr. Alfano is to be paid a
consulting fee of no less that $150,000 per annum in exchange for services to be
rendered  for  approximately  fifty (50) days per annum in  connection  with the
Company's medical photonics business.. The Consulting Agreement further provides
that Dr.  Alfano is to paid a bonus  and  fringe  benefits  in  accordance  with
policies and formulas applied to the key executives of the Company.

Ronald Krumm,  resigned from the Board of Directors  effective  August 18, 1998.
Herbert L. Hugill  terminated  his tenure as  President  /CEO  January 31, 1998,
whereupon  Mr.  Katevatis  reassumed  those  responsibilities,  and  Mr.  Hugill
resigned from the Board of Directors effective March 6, 1998. Mr. Clarence Wurtz
resigned from the board effective September 30, 1998.

Peter Katevatis Pres/CEO and Dr. Alfano principle scientific advisor have agreed
to forbear any and all collection action against  Mediscience for accrued salary
and related  contractually  entitled items including  forgiveness of interest in
exchange for the option of  converting  such accrued debts into MTC common stock
on the basis of (0.25 cents),  which is above the average High Bid price on June
9 through the 12th 1998,  which was 0.15 cents.  Said option to be  unlimited in
duration.  Should MTC receive funding  Katevatis and Alfano may elect to receive
all or part of such accrued debt in cash/shares.  This right shall be assignable
in whole or in part without  condition to any assignee or heirs and in no way is
intended to negate the  corporate  debt  accrued and owing to  Katevatis/Alfano.
This  offer  by  Katevatis/Alfano  was  unanimously  accepted  by the  Board  of
Directors  December 4, 1998 and continues in effect. On August 18,1999 the board
of directors  unanimously  extended Mr. Katevatis's existing contract expiration
date  from  March 5,  2002 to March 5,  2007,  maintaining  all  other  original
contract  terms  and  conditions,  in  recognition  of  his  personal  financial
investment  in  the  Company,  the  periodic  voluntary   non-assertion  of  his
contractual  anti-dilution  rights and other  significant  consideration  to the
Company.  On August  18,1999 Dr. Alfano agreed to extend his  agreement,  on the
same original  contract terms and conditions,  from its expiration date of March
5, 2002 to March 5, 2007.
<PAGE>
On November 17, 1999 the Company entered into a three year employment  agreement
beginning  February 1, 2000 with Dr. Frank S.  Castellana,  approved by Board of
Director action November 18, 1999. Pursuant to the terms of such agreement,  Dr.
Castellana will assume the position as President and Chief Executive  Officer at
a salary of $100,000 per annum with eligibility for an additional $50,000 annual
bonus based on milestone achievement.  I addition, Dr. Castellana will be issued
options to  purchase  up to 914,373  shares of  Mediscience  Common  Stock at an
option  price of $.32 per share and will  purchase a warrant to  purchase  up to
1,978,746  shares of  Mediscience  Common Stock at an exercise price of $.05 per
share for the first  150,000  shares and at an exercise  price of $.50 per share
for  the  remaining  1,828,746.  Dr.  Castellana  is  subject  to  a  series  of
contractual  milestones  described  in his business  plan  (approved by Board of
Directors  11/18/99) for  development  and marketing the  registrant's  platform
technology with Sarnoff Research Corporation, including the obtaining of funding
on terms  favorable to the Company.  The  agreement  provides for  anti-dilution
protection  for  Dr.  Castellana  and  founders  Dr.  Robert  Alfano  and  Peter
Katevatis.
<PAGE>
ITEM 14. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits.

10.01    Employment Agreement dated May 1, 1992 between the registrant and Peter
         Katevatis. (1)

10.02    Consulting  Agreement  dated April 21, 1992 between the  Registrant and
         Dr. Robert R. Alfano (2)

10.03    Extension Agreement between the Registrant and City College of the City
         of New York (3)

10.04    Research  Proposal to Registrant  submitted jointly by the City Collage
         of the City  University of New York and the Research  Foundation of the
         City University of New York (4)

10.07    Agreement  dated  December 1, 1988 by and among the  Registrant,  Laser
         Diagnosis  and Robert  Alfano,  as amended and  modified on October 24,
         1988 (7)

10.08    Research  Agreement  between  the  Research   Foundation  of  the  City
         University of New York and the Registrant dated as of June 1, 1992 (9)

10.10    License  Agreement  between  Virginia  Commonwealth  University and the
         Registrant (10)

10.11    Letter  Agreement  between  Memorial  Hospital  for  Cancer  and Allied
         Diseases and the Registrant dated March 30, 1993amending Clinical Trial
         Agreement dated June 1, 1992 (11)

10.12    Amendment No. 3 to Agreement between the Registrant and City College of
         the City University of New York

10.13    Research  Agreement  effective  July 1, 1994 between the Registrant and
         Sloan-Kettering Institute for Cancer Research (12)

10.14    License  Agreement between Yale University and the Registrant dated May
         4, 1993

10.15    License  Agreement  between Yale  University and the  Registrant  dated
         November 30, 1993

10.16    Research Agreement effective July 1,1994 between tar Registrant and the
         Trustees of Columbia University in the City of New York (13)

10.17    Research  Agreement  effective July 1, 1994 between  Registrant and the
         Free University, Amsterdam N.V. (14)

10.18    Microbial  Detection  protocol  dated  August  15,1994  between and the
         Registrant and Merck & Co. (15)

10.19    Collaborative  Research Agreement  effective September 23, 1994 between
         the Registrant and General Electric Company (16)

10.20    SBIR Grant Award  effective  September  September  30,1994  between the
         Registrant and the National Institutes of Health (17)
<PAGE>

10.21    Award/Contract  effective September 30, 1994 between the Registrant and
         the U.S. Army Medical Research Acquisition Activity (18)

10.22    Clinical  Trial  Agreement  effective  December  1,  1994  between  the
         Registrant and the General  Hospital  Corporation,  d.b.a.Massachusetts
         General Hospital (19)

10.23    Investment  Banking  Agreement  effective  August 8, 1995  between  the
         Registrant and Allen & Company Incorporated (20)

10.24    Employment  Agreement  between the Registrant and H.L Hugill  effective
         January 18, 1996 (21)

10.25    Collaborative  Research  Agreement  effective June 15, 1996 between the
         Registrant,  Mallinckrodt  Medical Inc. and the Research  Foundation of
         the City University of New York (22)

10.26    Investigational Device Exemption gaited January 3, 1997 by the U.S Food
         and Drug Administration (FDA) (23)

10.27    Employment  Agreement  Extension effective January 17, 1997 between the
         Registrant and H.L.Hugill (24)

10.28    Research  Agreement  effective  April 21,  1997  among the  Registrant,
         General Electric Co, and the Research Foundation of the City University
         of New York (25)

10.29    Employment Agreement between the Registrant and Dr. Frank S. Castellana
         dated November 17, 1999


(b) Reports on Form 8-K

See Exhibit 10.25
Collaborative Research Agreement effective June 15, 1996 between the Registrant,
Mallinckrodt  Medical Inc. and the Research Foundation of the City University of
New York. (22)

See Exhibit 10.26
Investigational  Device  Exemption  granted January 6, 1997 by the U.S. Food and
Drug Administration (FDA) (23)

See Exhibit 10.27
Employment  Agreement effective January 17, 1997 between the Registrant and H.L.
Hugill (24)

See Exhibit 10.28
Research  Agreement  effective April 21, 1997 with General  Electric Company and
the Research Foundation of the City University of New York (25)

See Exhibit  10.29
Employment Agreement dated November 17, 1999 between Registrant and Dr. Frank S.
Castellana (32)
<PAGE>

------------------

(1)  Filed as Exhibit 10.1 to  Registrant's  Annual  Report on Form 10-K for the
     fiscal year ended February 28, 1993

(2)  Filed as Exhibit 10.2 to  Registrant's  Annual  Report on Form 10-K for the
     fiscal year ended February 28, 1993

(3)  Filed as Exhibit 10.3 to  Registrant's  Annual  Report on Form 10-K for the
     fiscal year ended February 28,1993

(4)  Filed as Exhibit  10.1 to  registrant's  Annual  Report 10-K for the fiscal
     year ended February 28, 1989 and incorporated by reference thereto.

(5)  Filed as Exhibit 10.3 to  Registrant's  registration  Statement on Form S-1
     filed on July 5, 1991 and incorporated herein by reference thereto.

(6)  Filed as Exhibit 10.3 to  Registrant's  Annual  Report on Form 10-K for the
     fiscal year ended February 28, 1987 and incorporated by reference thereto.

(7)  Filed as Exhibit 10.5 to  Registrant's  Registration  Statement on Form S-1
     filed on July 5,1991 and incorporated herein by reference thereto.

(8)  Filed as Exhibit 10.8 to  Registrant's  Registration  Statement on Form S-1
     filed on August 24,1992 and incorporated by reference hereto.

(9)  Filed as Exhibit 10.9 to  Registrant's  Registration  Statement on Form S-1
     filed on August 24, 1992 and incorporated herein by reference hereto.

(10) Filed as Exhibit 10.10 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1993.

(11) Filed as exhibit 10.11 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1993.

(12) Filed as Exhibit 10.13 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 195.

(13) Filed as Exhibit 10.16 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1995.

(14) Filed as Exhibit 10.17 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1995.

(15) Filed as Exhibit 10.18 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1995.

(16) Filed as Exhibit 10.19 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1995.

(17) Filed as Exhibit 10.20 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year ended February 28, 1995.

(18) Filed as Exhibit 10.21 to  Registrant's  Annual Report on Form 10-K for the
     fiscal year February 28, 1995.

(19) Filed as Exhibit  10.22 to  Registrants  Annual Report on Form 10-K for the
     fiscal year February 28, 1995.

(20) Filed as  Exhibit A to  Registrant's  current  report  on Form  10-K  dated
     September 23, 1995.

(21)Filed as Exhibit A to  Registrant's  current report on Form 10-K dated April
     23, 1996.

(22) Filed as Exhibit A to  Registrant's  current  report on Form 8-K dated June
     15, 1996.

(23) Filed as Exhibit A to Registrant's current report on Form 8-K dated January
     6, 1997.

(24) Filed as Exhibit A to Registrant's current report on Form 8-K dated Jan 13,
     1997

(25) Filed as Exhibit A to Registrants  current report on Form 8-K dated January
     28, 1997

(26) Filed as Exhibit A to  Registrant's  current report on Form 8-K dated April
     21, 1997.

(27) Filed as  Exhibit A to  Registrant's  current  report on Form 8-K dated May
     16.1997

(28) Filed as Exhibit A to Registrant's current report on Form 8-K dated Oat 21,
     1997

(29) Filed as Exhibit A to Registrant's  current report on Form SEC13G dated Feb
     12, 1998

(30) Filed as Exhibit A to  Registrant's  current report on Form 8-K dated April
     8, 1998

(31) Filed as Exhibit A to Registrant's current report on Form 8-K dated May 29,
     1998

(32) Filed as exhibit A to Registrant's current report on Form 8-K dated Nov 23,
     1999
<PAGE>
                                   SIGNATURES

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


                                      Mediscience Technology Corp.

                                      /s/Peter Katevatis
                                      ------------------------------------------
Date:  Dec 10, 1999                   By: Peter Katevatis, Chairman of the Board
                                          and Chief Executive Officer


                           POWER OF ATTORNEY AND SIGNATURES

We, the  undersigned  officers and  directors of  Mediscience  Technology  Corp.
hereby  severally  constitute and appoint Peter  Katevatis,  our true and lawful
attorney,  with  full  power to sign for us and in our  names in the  capacities
indicated below, any amendments to this report on form 10-KSB,  and generally to
do all  things  in our  names and on our  behalf  in such  capacities  to enable
Mediscience  Technology  Corp. to comply with the  provisions of the  Securities
Exchange Act of 1934, as amended, and all the requirements of the Securities and
Exchange Commission.

Pursuant  to the  requirements  of  section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature                                Title                                           Date
---------                                -----                                           ----
<S>                       <C>                                                      <C>
/s/Peter Katevatis        Chairman of the Board,Principle Officer
-----------------------       and Financial Officer                                December 10, 1999
Peter Katevatis, Esq.

/s/William Armstrong
-----------------------
William Armstrong                       Director                                   December 10, 1999

/s/Mathew J. Culligan
-----------------------
Mathew J. Culligan                      Director                                   December 10, 1999

/s/John M. Kennedy
-----------------------
John M. Kennedy                         Director                                   December 10, 1999

/s/ Michael N. Kouvatas
-----------------------
Michael N. Kouvatas, Esq.               Director                                   December 10, 1999

/s/John P, Matheu
-----------------------
John P.Matheu                           Director                                   December 10, 1999
</TABLE>