SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

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

                  for the fiscal year ended February 28, 2002

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

      For the transition period from February 28, 2000 to February 28,2002

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

         Issuer's telephone number, including area code: (856)-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-B 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-KSB
or any amendment to this Form 10-KSB [ X ]

The issuer's revenues for its most recent fiscal year were: $ none The aggregate
market value of the voting stock and non-voting common equity held by
non-affiliates computed by the average bid and asked price of the common equity
of the Registrant, as of, May 30, 2002 ($.012 per share) was: $4,437,722.44. The
number of shares outstanding of each of the registrant's classes of common
stock, as of May 30, 2002 was: 36, 976,870. 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                     36,976,870
Preferred Stock, par value $0.1 per share                        2074*



<PAGE>

* All issued Series A Preferred was converted at ten (10) shares of Common
valued at one dollar ($1.00) per share (20,740 shares issued) for each share of
Preferred by contractual agreement of all eight 8 preferred shareholders on
December 1, 2001 (see infra pg.25)

                      DOCUMENTS INCORPORATED BY REFERENCE:

8-k Report, filed June 1, 2002 Registrant executed a new contract with the
Research Foundation City University of New York (RFCUNY), that supercedes all
prior agreements with (RFCUNY), restructures all MTC debt to RFCUNY and reduces
MTC royalty rate from 5% to 3.25%

10-QSB/Amended as reviewed for all three quarters year 2002 -1 filed 6/17 /02

SC13G/A dated 2/14/02 filed by Allen & Co. indicating SHARE VOTING POWER of
3,041,500 (includes 1,041,500 shares of Common Stock underlying warrants
expiring 2003)

8-K Report, filed July 25,2001, effective July 9, 2001 Registrant entered into
an employment agreement with Mr. Sidney Braginsky as President COO of the
Company

10-Q dated 7/12/2001 for Quarter ending 5/31/2001 Effective June 1, 2001 with
notice to the Board of Directors Dr. Castellana voluntarily terminated his
employment agreement and verbally waived all salary to that date. He felt that
he could not satisfy the Company's needs and choose to step aside.

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.

8-K Report, filed 4/20/2000 Mediscience Technology and Sarnoff Research Corp.
letter of understanding of Sarnoff future equity participation incorporated by
reference into part 1 of this form.

8-K Report, filed 5/15/2001, Retention of new auditors and payment to CUNY/RF
curing of debt and patent issues.

10-QSB/Amended as reviewed for all three quarters year 2000-01 fled 6/6/01



<PAGE>


                                MEDISCIENCE CORP.
                          Annual Report on Form 10-KSB

                                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. Financial Statements and Supplemental Data Report of Independent Public
        Accountants

        Consolidated Balance Sheets- February 28, 2002 and February 29, 2001

        Consolidated Statements of Operations for the years ended February 28,
        2002, and February 29, 2001 and February 28,2000

        Consolidated Statement of Stockholders Deficit for the years ended
        February 28, 2002, and February 29, 2001 and February 28,2000

        Consolidated Statements of Cash Flows for the years ended February 28,
        2002, and February 29, 2001 and February 28,2000

        Consolidated Notes to Financial Statements

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosures

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant
Item 10.  Executive Compensation
Item 11.  Security Ownership of certain Beneficial Owners of Management
Item 12.  Certain Relationships and related transactions
Item 13.  Subsequent Events
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 " Safe
Harbor" statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E 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 is in full compliance with SEC
regulation FD "Full Disclosure" requirements, adopted August 10,2000 (see SEC
release No. 33-7881), by exclusive reporting of material events (disclosures
where it is reasonably foreseeable that the information will result in trading
in an issuer's securities), through periodic 8-K filings and postings on its
internet site MEDISCIENCETECH.com.

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.
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

<PAGE>

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 our 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.

On January 6, 1997, the Company received approval from the FDA of its
Investigational Device Exemption application to initiate human Phase II clinical
trials with its CD Scan medical device for early stage detection of cancer. This
trial has not been initiated because of the lack of funding.

On January 25, 1999 the FDA classified our Mediscience CD-Scan as a
non-significant risk device for human trial Phase I clinical investigation of
the biological basis of fluorescence as applied to medically significant female
OBGYN health issues. This pilot study is being conducted under a research
agreement with Yale University and CUNY under the direction of 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, our agreement provided that all
Intellectual property, which derives from, this project, as well as prototypes
and improvements of our patents 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.

On August 14, 2000 Mediscience and Sarnoff Research Corporation entered a letter
of understanding establishing Sarnoff's initial equity participation of 12% in a
joint venture based upon agreed to initial capitalization and valuation. The
parties purpose is to join respective world-class intellectual property, Sarnoff
engineering expertise and know-how to develop Mediscience/Sarnoff optical
diagnostic products as a broad platform of commercial applications to achieve a
dominant and first to market position in the area of photonic based cancer
diagnosis See 8-K filing dated 4/20/2000. Sarnoff corporation is a world leader
in all aspects of digital imaging and image analysis. Proprietary Sarnoff


<PAGE>

technologies, which are synergistic to, and enabling of the Company's commercial
development effort include high sensitivity and resolution UV digital detectors
(chips), low cost narrow bandwidth phosphor light sources and biomedical image
analysis software. Further in the area of the Company's commercialization
effort, Sarnoff has high expertise in design for manufacturing, manufacturing,
and manufacturing technology transfer. Under the terms of the agreement and
predicated on achieving targeted levels of initial capitalization, Sarnoff has
agreed to provide royalty free access to its technology, and to work exclusively
with the joint venture in the defined field of use--The application of native
tissue fluorescence and diffuse light scattering reflectance spectroscopy for
in-vitro and in-vivo cancer screening and diagnosis and characterization of
physiological function based on volume of interest measurements and two and
three dimensional imaging. Sarnoff will receive an equity interest in the joint
venture equal to 12% of Mediscience's interest plus an additional 6% based on
milestone achievement. Sarnoff has agreed 1) not to compete and/or work with
clients other than the joint venture and 2) to assign the joint venture an
exclusive royalty free license to all intellectual property developed in this
area under any research contract with Sarnoff. Having completed the research
phase Mediscience/Sarnoff strategy is to develop one or more products for the
non-invasive or minimally invasive diagnosis of specific types of cancer, which
we ultimately plan to market worldwide either directly or in various types of
partnering or licensing arrangements with other firms. Our principle focus will
be on the United States; we expect to address international markets via
partnering or licensing arrangements with other companies.

We believe that our Technology will be broadly applicable in cancer screening
and diagnosis; however, each approved labeled indication is expected to require
separate pre-marketing approval (a "PMA"), which will be both time-consuming and
costly. We plan to carefully select and prioritize our targeted diagnostic
indications to maximize the return on development and clinical 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
spectroscopy both in-vivo and in-vitro.

All above are Safe Harbor" statements per the Private Securities Litigation
Reform Act of 1995 as certain matters and subject areas discussed in our
strategy and not historical or current facts but deal with future circumstances
and developments. The discussion of such matters and subject areas is qualified
by the inherent risks and uncertainties surrounding future expectations
generally and may also differ materially from our future experience involving
any or more of such matters and subject areas. Such risks and uncertainties
include overall economic trends, successful development of products and
regulatory matters including but not limited to FDA as well as those more fully
described from time to time in our reports filed with the SEC

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. That effort is dedicated and on going in what has become a
difficult financial marketplace. Effective June 1, 2001 with notice to the Board
of Directors Dr. Castellana

<PAGE>

voluntarily terminated his employment agreement and verbally waived all salary
to that date. He felt that he could not satisfy the Company's needs and choose
to step aside. Dr. Castellana now has a full time consulting business and the
Company expects to use his consulting services in the future.

On June 14, 2001 Peter Katevatis, Esq. Chairman CEO entered into an agreement
with Drexel University, a Pennsylvania non-profit institution of higher
education wherein the parties agreed to explore a mutually satisfactory
arrangement or collaboration to develop uses for Mediscience's technology in the
field of fluorescence medical imaging. Drexel's successful efforts leading to
such funding would provide Drexel with compensation and/or equity interest from
Mediscience. This contract matter is in present negotiations with outside
counsel acting on behalf of Drexel.

Effective July 9th 2001 Peter Katevatis, Esq. Chairman CEO on behalf of the
Company entered into an employment relationship with Mr. Sidney Braginsky as the
new President, COO and immediate member of the Mediscience Board of Directors.
Mr. Braginsky was formerly with OLYMPUS OPTICAL LTD for 27 years most recently
as President CEO of OLYMPUS AMERICA, Inc., the Olympus US subsidiary. OLYMPUS
LTD. is a multi-national corporation headquartered in Tokyo Japan and a world
leader in microscopes, endoscopes, automatic blood and fluid chemistry analyzers
measuring research, industrial and consumer products. The Company will seek
investment and/or corporate 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. Mr. Braginsky is a present board member of,
NOVEN Pharmaceuticals, REDOX Pharmaceuticals, ELECTRO-OPTICAL SYSTEMS, Inc.,
ESTEK CARDIOLOGY, Chairman of Double D Venture Funds LLC and Chairman of the
Board of City College of New York's Robert Chambers Laboratory On July 9, 2001,
the Company entered into a three-year employment agreement beginning July 9,
2001 ending on the third anniversary of the Commencement Date July 9, 2004, with
Sidney Braginsky. Pursuant to the terms of such agreement, Mr. Braginsky became
the President, Chief Operating Officer of the Company and a member of the Board
of Directors. He is to be paid $100,000 per annum. In addition, on the date of
this Agreement, MDSC will grant to Employee an incentive stock option / Warrant
pursuant to the 1999 Plan (the "Option") to purchase a total of 2,000,000 shares
of MDSC common stock. (i) 1,850,000 shares of MDSC Common Stock at option price
of $.1.00 per share, and (ii) 150,000 shares at $.25 per share. Sidney
Braginsky's ability to exercise these options and remaining shares under the
warrant is subject to a series of milestones described in his employment
agreement. The Company may have to recognize compensation expense in the future
on 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 milestones are achieved. This option shall be effected as to any
adjustment in the event of first round funding, stock splits, reverse stock
splits, warrants, etc, excepting however contract rights, agreements
anti-dilution rights, etc (reflected in corporate SEC filings) in Peter
Katevatis and Dr. Robert Alfano founders.


<PAGE>

The five critical milestones (each, a "Critical Milestone") described in the
Business Plan for Sidney Braginsky to accomplish with appropriate funding to the
Company are:

      (i)   preclinical toxicity studies within 9 months of the initial funding
            contemplated by the Business Plan (the "Initial Funding Date"),
      (ii)  device development and preclinical validation within 15 months of
            the Initial Funding Date
      (iii) phase I clinical trials within 24 months of the Initial Funding
            Date,
      (iv)  phase 111 clinical trials and PMA submission to the FDA within
            34-1/2 months of the Initial Funding Date and
      (v)   PMA approval within 36 months of the Initial Funding Date.

The plan mentioned above has been approved by the Board of Directors. The plan
is subject to shareholder approval that the Company expects to obtain at some
future date and therefore any awards granted under the plan will not be deemed
granted until such approval is obtained from the shareholders.

The principal issue currently facing the Company is a lack of the financial
resources and liquidity required to maintain business momentum and to properly
leverage intellectual property assets; the resolution of this issue is the
highest priority of management. In the absence of the availability of such
financing on a timely basis, the Company may be forced to materially curtail or
cease its operations.

Two important derivative issues relate to the Company's research and licensing
agreements with the City University of New York. The Company has an outstanding
financial obligation to the University for work conducted during the period
August 1997 through July 1998. In 1999, an agreement was reached to extend the
time for payment until June 30, 2000. In October 2000, the Company and the City
University entered into a second agreement, which further extended the time for
payment until October 31, 2001. The time period for negotiating a minimum
royalty agreement on certain patents, which have or will pass the five-year
period for commercialization, was also extended until October 31, 2001. While we
are actively working to negotiate additional time extensions there is no
guarantee that we will be successful, and if so, that any subsequent agreements
will be on terms favorable to the Company. In addition, according to the terms
of our research and licensing agreement with the University, the Company must
negotiate a minimum royalty Agreement within 5 years of the date of filing for
all licensed patents for which product commercialization has not yet occurred.
As of the date of this filing, nine patents for which the Company has an
exclusive license from the Research Foundation have passed the five-year
commercialization window. The Company has negotiated with the Research
Foundation and extended the period of exclusivity for this intellectual
property. If the Company is unsuccessful in future negotiations, it could lose
rights to several of its key patents. The Company holds and totally owns certain
patents independent of CUNY that are not so affected which are seminal to its
basic technology.


<PAGE>

Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed a new contract with the Research Foundation City
University of New York (RFCUNY), that superceds all prior agreements with
(RFCUNY), restructures all MTC debt to RFCUNY and reduces MTC royalty rate from
5% to 3.25% as to all patent/patent applications of a Medical nature in exchange
for the following consideration to (RFCUNY): 1. Registrant's cash payment of
$85,045.00, 2. Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3.
Registrant's issuing a five (5) year. Warrant to (RFCUNY) providing (RFCUNY) the
right to purchase six hundred thousand (600,000) SEC144 shares at one dollar
($1.00) per share. The agreement protects Registrant by affirming Registrant's
ownership and/or exclusive license of all MEDICAL APPLICATIONS embodied in
Registrants patent list attached to the contract as exhibit A. (RFCUNY) has a
prior warrant to purchase five hundred thousand (500,000) shares of Mediscience
common Rule 144 shares at one dollar ($1.00) per share expiring December 31,
2003. Total warrants presently in RFCUNY for Mediscience common SEC 144 shares
is One Million one hundred thousand (1,100,000).

Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed and fully funded a new agreement with "The
Institute for Ultra fast Spectroscopy and Lasers Center for Ultrafast Photonics
and Mediphotonics Laboratory of City University of New York". Term: July 1, 2002
to June 30, 2003. The agreement provides continual technical and research
assistance to Registrant in support of existing and anticipated clinical trials
in the United States and India. See Registrants 8-K filed June 1, 2002

We believe that the Company is eligible to receive continued benefits under the
State of New Jersey Technology Business Tax Certificate Program. This program
allows emerging technology and biotechnology businesses to sell their unused Net
Operating Loss (NOL) carryover to any New Jersey corporate taxpayer for no less
than 75% of the audited and allowable tax benefit through the sale of its New
Jersey Net Operating Loss carryover. On June 28, 2000, the Company submitted an
application for benefits under this program. This application was approved and
the Company received $237,556 in net proceeds from the sale. On January 23, 2001
registrant paid the Research Foundation of CUNY $175,000 thus satisfying its
immediate financial obligations and curing all present patent issues with
RF/CUNY. See 8-K filing dated May 10, 2001 also registrants November 10-Q
filing. City University has agreed to accept receipts from the Company's tax
sale to repay the outstanding obligation over a three-year period. The Company
applied again as of June 25, 2001 (second of three year Agreement) and continues
in its belief that it is continually eligible for participation in this program.
It is our intention to use any proceeds derived over the three- year program to
fully fund the payment of our obligation to the City University and to support
other relevant development activity.

In relation to the sale of unused Net Operating Loses, the Company has entered
into a three-year agreement on very favorable terms (83.3%) with a New Jersey
corporate taxpayer, Public Service Electric and Gas Co. of New Jersey to
purchase the NOL. On September 27, 2001 Peter Katevatis Esq. successfully
re-negotiated this percentage increasing it from 83.3% to 87.0%. On November 16,
2001 the New Jersey Economic Development Authority advised that our (2nd)
application for State fiscal year 2002 (July 1, 2001 to June 30 2002) was


<PAGE>


approved with authority to transfer $278,008 from present total tax benefits of
$513,070 based on our total State audited NOL as of 2001 of $5,700,779. Under
the negotiated terms of our agreement with PSE&G the Company received $241,867
in proceeds on January 3, 2002. The Company expects to file for additional tax
benefits with the New Jersey EDA in the fiscal year 2003 pursuant its existing
agreement with PS&G of New Jersey.

Our Products

We have developed three prototype products that employ our technology for cancer
Diagnosis; they include the Cancer Detection ("CD") Scan, CD Ratiometer and CD
Map. These devices use lamplight 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 fiber optic probe is attached to each of our devices to transmit the optical
excitation signal and to retrieve the native fluorescence response. We believe
that the CD instruments have a great deal of versatility and a broad range of
potential alternative applications depending on the preferred configuration of
the fiber optic probe. For example, the fiber optic 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 endoscopes for assessment of the upper or lower GI tract,
through a cystoscope for study of the urinary tract, a colposcope for
gynecological evaluation or a laparoscope's for evaluation of internal organs,
and even through a core biopsy needle to optically assess breast tumors or other
deep tissue tumors, such as sometimes occur in the pancreas, liver or prostate.
The CD Scan product prototype is oriented to medical research. It is designed to
provide optical scanning capability over 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 our two other prototypes
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 pre-established optical
wavelengths and to instantaneously report out a "yes "no" or "maybe" result on a
computer screen. We expect that the CD Ratiometer with its 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
interrogate an area of tissue rather than selective individual points. Although
it is at an earlier stage of design than either the CD Scan or CD Ratiometer, it
is expected to report out similar results but in the form of a colored map on a
computer screen distinguishing normal areas from abnormal areas via color
differentiation. If we can successfully develop the CD 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.


<PAGE>

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 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 to provide research and development services in the area of
tissue spectroscopy and cancer detection and other biological applications.

The staff of MPL, which is supervised by Dr. Alfano, developed our current CD
prototype 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
fluorescence 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 for which it
possesses a world wide exclusive license, and which the Company regards as
pioneering, blocking and dominant in the area of cancer diagnosis using
fluorescence. The information derived from this work was also the source for a
number of scientific papers published in peer-review 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.

Because of lack of funding, Company support of research activities in the MPL is
presently suspended. We plan to resume our support of relevant programs when,
and if, current fund raising efforts are successful.

Effective May31, 2002 and unanimously approved by the Board of Directors May 30,
2002 Registrant executed and fully funded a new agreement with "The Institute
for Ultra fast Spectroscopy and Lasers Center for Ultrafast Photonics and
Mediphotonics Laboratory of City University of New York". Term: July 1, 2002 to
June 30, 2003. The agreement provides continual technical and research
assistance to Registrant in support of existing and anticipated clinical trials
in the United States and India. See Registrants 8-K filed June 1, 2002


<PAGE>


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 in the clinical evaluation of our prototype products. These institutions
include Memorial Sloan-Kettering Cancer Center, 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.

A Phase I clinical feasibility study of the upper aerodigestive tract was
carried out at Memorial Sloan-Kettering under the principal 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 when funding is available.

Another planned, Phase I clinical
study will be conducted 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 are predisposed to the
development of esophageal cancer. The current medical practice requires that
multiple excisional 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
Barrett's patients, 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 without a need for painful multiple biopsies. It is also
hoped that this additional molecular information will provide the ability to
assess the relative risk of Barrett's patients to 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 that 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 Barrett's from dysplasia and
cancer as well as from normal tissues. On March 19, 1999


<PAGE>


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 improved diagnostic accuracy in the range of 80 to 90 percent with
measurement time of a few seconds (real-time). The greatest incidence of this
decease is seen in males over age 60, with the major risk factors being the 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 critical for successful treatment for the majority of cancer types
still remains true.

Although several cancer screening techniques have been developed for the 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, excision 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 excision biopsy, however, often requires a significant amount of surgical
intervention to collect an adequate tissue sample to make a proper diagnosis and
staging determinations. 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 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
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 by reducing and /or eliminating extensive hospital
stays and frequency of surgery as well as impacting significantly the amount of
patient discomfort for those patients medically determined to



<PAGE>


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 projected 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 pre-market 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.

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, if we are successful in fostering them, are
expected to add value to the Company by leveraging the our financial resource
base with development and licensing revenues that the Company can then use to
help fund the development of its own products.

We also believe that a market for our CD products will exist in the European
Union and possibly Asia. We contemplate making a concerted effort to identify
one or more possible licensees to help develop our products or variations
thereof for the key markets of the European Union during 2002-3. We will also
make a preliminary investigation of the potential for our products in Asia and
if the findings are positive, will develop a strategy for exploiting our
technology 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 find a contract manufacturer. 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,


<PAGE>


dated January 19, 1997 with City College providing for 900 square feet of space
as an "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. The lease has terminated by its terms and
our prototypes are completed.

We plan to outsource 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 owned 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.

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 Ultrafast Spectroscopy and Lasers ("IUSL") at the City
College of New York. Dr. Robert Alfano, Distinguished Professor of Physics and
Engineering at City College and 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. On January 8, 2001 The Coherent Laser Group and the Center for
Fluorescence Spectroscopy awarded Dr. Robert R. Alfano the Lifetime Achievement
Award in Biomedical Optics in recognition of his work in this exiting field.

Until July, 1998, the Company provided annual funding grants to the MPL in
accordance with a budget of activities and expenditures negotiated between the
Company, CCNY, and the Research Foundation of CUNY. The arrangement was
renewable annually and could be terminated without cause by either party upon 90
days notice prior to June 1st of each year. The contract with CUNY
"Establishment of the MediPhotonics Laboratory" was extended by agreement at no
cost until October 1, 1998. Because of funding limitations, the Company was
unable to renew its contract following expiration of the October 1998 extension.
We plan to resume our support of relevant programs when, and if, current fund
raising efforts are successful. For reference, the Company committed to funding
of $406,353 for the 1997/1998 budgetary years, $431,017 for the 1996/1997
budgetary year, and $242,948 and $245,750 for the budgetary years ending on May
31, 1996 and May 31, 1997, respectively. The Company currently has an
outstanding financial obligation to the University for work conducted during the
1997/1998-contract period. In 1999, an agreement was reached to extend the time
for payment until June 30, 2000. While we are actively working to meet this
deadline, there is no assurance that we


<PAGE>


will be successful, and if not, that we will successfully negotiate an
additional time extension. See 8-k dated 5/15/2001 payment of $175,000 to CUNY
Research Foundation.

Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed a new contract with the Research Foundation City
University of New York (RFCUNY), that supercedes all prior agreements with
(RFCUNY), restructures all MTC debt to RFCUNY and reduces MTC royalty rate from
5% to 3.25% as to all patent/patent applications of a Medical nature in exchange
for the following consideration to (RFCUNY): 1. Registrant's cash payment of
$85,045.00, 2. Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3.
Registrant's issuing a five (5) year. Warrant to (RFCUNY) providing (RFCUNY) the
right to purchase six hundred thousand (600,000) SEC144 shares at one dollar
($1.00) per share. The agreement protects Registrant by affirming Registrant's
ownership and/or exclusive license of all MEDICAL APPLICATIONS embodied in
Registrants patent list attached to the contract as exhibit A. (RFCUNY) has a
prior warrant to purchase five hundred thousand (500,000) shares of Mediscience
common Rule 144 shares at one dollar ($1.00) per share expiring December 31,
2003. Total warrants presently in RFCUNY for Mediscience common SEC 144 shares
is One Million one hundred thousand (1,100,000).

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 on 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. 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

<PAGE>


Research Foundation of CUNY for the Company's own purposes on a royalty-free,
non-transferable and non-exclusive basis. 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, nine patents for which the Company has an exclusive license from the
Research Foundation have passed the five-year commercialization window. The
Company is presently negotiating with the Research Foundation to extend the
period of exclusivity for this intellectual property. If the Company is
unsuccessful in its negotiations, it may lose rights to several of its key
patents.

 Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed a new contract with the Research Foundation City
University of New York (RFCUNY), that supercedes all prior agreements with
(RFCUNY), restructures all MTC debt to RFCUNY and reduces MTC royalty rate from
5% to 3.25% as to all patent/patent applications of a Medical nature in exchange
for the following consideration to (RFCUNY): 1.Registrant's cash payment of
$85,045.00, 2. Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3.
Registrant's issuing a five (5) year. Warrant to (RFCUNY) providing (RFCUNY) the
right to purchase six hundred thousand (600,000) SEC144 shares at one dollar
($1.00) per share. The agreement protects Registrant by affirming Registrant's
ownership and/or exclusive license of all MEDICAL APPLICATIONS embodied in
Registrants patent list attached to the contract as exhibit A. RFCUN has a prior
warrant to purchase five hundred thousand (500,000) shares of Mediscience common
Rule 144 shares at one dollar ($1.00) per share expiring December 31, 2003.
Total warrants presently in RFCUNY for Mediscience common SEC 144 shares is One
Million one hundred thousand (1,100,000).

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 presently has a non-financial but continuing discretionary 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 auto fluorescence spectral analysis,
as pioneered by Mediscience Technology 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.


<PAGE>


Specifically:
-------------

Xillix Technology Corporation*, (Richmond, B.C. Canada) is currently the only
competitor with a commercial product (LIFE-Lung System). The Xillix system,
until recently, 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.


*NOTE: As of July 9, 2001 Sidney Braginsky former President of Olympus USA has
assumed the role of President COO and Board of Director Member of Mediscience
Technology under a three-year milestone structured equity compensation
agreement. (see 8-K dated July 25, 2001)


LifeSpex, Inc., (Kirkland, WA) is developing two products based on tissue
auto-fluorescence - Cerviscan(tm) for the detection of cervical cancer, and
Dermascan(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.

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 Ethicon. 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

<PAGE>


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.

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 implementation 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 pre-market 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


<PAGE>


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 the projected clinical indications for our native
tissue fluorescence spectroscopy devices (CD Scan, CD Ratiometer and CD Map)
will cause them to be classified as 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.

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 27 U.S. patents, plus 1 in Japan, for a
total of 28, 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. Of the 21 patents owned by the City University and for
which the Company is the exclusive licensee, nine have passed the five-year
period (from date of filing) for commercialization. According to the terms of
our research and licensing agreement with the University, the Company must


<PAGE>


negotiate a minimum royalty agreement for these patents to maintain its
exclusive licensee position. If the Company is unsuccessful in its negotiations,
it may lose rights to several of its key patents. Effective May 31, 2002 and
unanimously approved by the Board of Directors May 30, 2002 Registrant executed
a new contract with the Research Foundation City University of New York
(RFCUNY), that supercedes all prior agreements with (RFCUNY), restructures all
MTC debt to RFCUNY and reduces MTC royalty rate from 5% to 3.25% as to all
patent/patent applications of a Medical nature in exchange for the following
consideration to (RFCUNY): 1. Registrant's cash payment of $85,045.00, 2.
Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3. Registrant's
issuing a five (5) year. Warrant to (RFCUNY) providing (RFCUNY) the right to
purchase six hundred thousand (600,000) SEC144 shares at one dollar ($1.00) per
share. The agreement protects Registrant by affirming Registrant's ownership
and/or exclusive license of all MEDICAL APPLICATIONS embodied in Registrants
patent list attached to the contract as exhibit A. RFCUN has a prior warrant to
purchase five hundred thousand (500,000) shares of Mediscience common Rule 144
shares at one dollar ($1.00) per share expiring December 31, 2003. Total
warrants presently in RFCUNY for Mediscience common SEC 144 shares is One
Million one hundred thousand (1,100,000).

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 our business
potential.

<PAGE>


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 1997 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. To this
date, no material activity has occurred under this contract.

Significant Patents covered by the present May 31,2002 contract with the
Research Foundation City University of New York (RFCUNY), see 8-K filed June 1,
2002, superceding all prior agreements with (RFCUNY). RFCUNY/Mediscience May 31,
2002 contract Attachment "A" MTC Licensed/Funded Patents:


                                  ATTACHMENT A

                      Medical Diagnostic Optical technology

#5,042,494, August 27, 1991, Method and Apparatus for Detecting Cancerous Tissue
using Luminescence Excitation Spectra, R. R. Alfano.

#5,131,398, July 21, 1992, Method and Apparatus for Distinguishing Cancerous
Tissue from Benign Tumor Tissue, Benign Tissue or Normal Tissue using Native
Fluorescence, R. R. Alfano, B. Das, G. Tang.

#5,261,410, November 16, 1993, Method for determining if a Tissue is a Malignant
Tumor Tissue, a Benign Tumor Tissue, or a Normal Benign Tissue using Raman
Spectroscopy, R. R. Alfano, C.-H. Liu, W. S. Glassman.

#5,293,872, March 15, 1994, Method for Distinguishing between Calcified
Atherosclerotic Tissue and Fibrous Atherosclerotic Tissue or Normal
Cardiovascular Tissue Using Raman Spectroscopy, R. R. Alfano, C. H. Liu

#5,348,018, September 20, 1994, Method for determining if Tissue is Malignant as
opposed to Non-Malignant using Time-Resolved Fluorescence Spectroscopy, R. R.
Alfano, A. Pradhan, G. C. Tang, L. Wang, Y. Budansky, B. B. Das.

#5,413,108, May 9, 1995, Method and Apparatus for Mapping a Tissue Sample for
and Distinguishing Different Regions thereof based on Luminescence Measurements
of Cancer-indicative Native Fluorophor, R. R. Alfano.


<PAGE>

#5,467,767, November 21, 1995, Method for Determining if Tissue is Malignant as
opposed to Non-Malignant using Time-resolved Fluorescence Spectroscopy, R. R.
Alfano, Asima Pradhan, G. C. Tang, L. Wang, Y. Budansky, B. B. Das.

#5,635,402, June 3, 1997. Technique for Determining whether a Cell is Malignant
as opposed to Non-malignant using Extrinsic Fluorescence Spectroscopy, R. R.
Alfano, Cheng H. Liu, Wei L. Sha, Yury Budansky.

#5,769,081, June 23, 1998, Method for Detecting Cancerous Tissue using Optical
Spectroscopy and Fourier Analysis, R. R. Alfano, A. Katz, Y. Yang.

#5,849,595, December 15, 1998, Method for Monitoring the Effects of
Chemotherapeutic Agents on Neoplasmic Media, R. R. Alfano, G. C. Tang, S. P.
Schantz.

#5,983,125, November 9, 1999, Method and apparatus for in vivo examination of
subcutaneous tissues inside an organ of a body using optical spectroscopy, R. R.
Alfano, Y. Budansky.

#6,006,001, December 21, 1999, Fiber optic assembly useful in optical
spectroscopy, R. R. Alfano, S. Demos, G. Zhang.

#6,080,584, June 27, 2000, Method and apparatus for detecting the presence of
cancerous and precancerous cells in a smear using native fluorescence
spectroscopy, Robert R. Alfano, Singaravelu Ganesan, and Yury Budansky.

#6,091,985, July 18, 2000, Detection of cancer and precancerous conditions in
tissues and/or cells using native fluorescence excitation spectroscopy, Robert
R. Alfano, Singaravelu Ganesan, Alvin Katz, Yang Yuanlong.



                      Optical Imaging for Medical Purposes

#5,371,368, December 6, 1994, Ultrafast Optical Imaging of Objects in a
Scattering Medium, R. R. Alfano, P. P. Ho, L. Wang.


#5,625,458, April 29, 1997, Method and System for Imaging Objects in Turbid
Media using Diffusive Fermat Photons, R. R. Alfano, A. Y. Polishchuk.

#5,644,429, July 1, 1997 (see #5,371,368), 2-Dimensional Imaging of Translucent
Objects in Turbid Media, R. R. Alfano, P. P. Ho, X. Liang.

#5,710,429, January 20, 1998, Ultrafast Optical Imaging of objects in or Behind
Scattering Media, R. R. Alfano, Feng Liu, Q. Z. Wang P. Ho, L. M. Wang, X.
Liang.

#5,719,399, February 17, 1998, Imaging and Characterization of Tissue based upon
the Preservation of Polarized Light transmitted therethrough, R. R. Alfano, S.
G. Demos.


<PAGE>

#5,799,656, September 1, 1998, Optical Imaging of Breast Tissues to enable the
Detection therein of Calcification Regions Suggestive of Cancer, R. R. Alfano,
P. P. Ho, L. Wang, X. Liang, P. Galland.

#5,813,988, September 29, 1998, Time Resolved Diffusion Tomographic Imaging in
Highly Scattering Turbid Media, R. R. Alfano, W. Cai, F. Liu, M. Lax, Bidyut B.
Das.

#5,847,394, December 8, 1998, Imaging of Objects Based upon the Polarization or
Depolarization of Light, R. R. Alfano, S. G. Demos.

#5,931,789, August 3, 1999, Time-resolved diffusion tomographic 2D and 3D
imaging in highly scattering turbid media, Robert R. Alfano, Wei Cai, Feng Liu,
Melvin Lax.

# 6,208,886 B1, March 27, 2001, Non-linear optical tomography of turbid media,
Robert R. Alfano, Yici Guo, Feng Liu, Ping Pei Ho.

# 6,215,587, April 10, 2001, Microscope imaging inside highly scattering media,
Robert R. Alfano, Gordon Anderson, Feng Liu.

The Company and CUNY Research Foundation have been diligent in the payment of
maintenance obligations to the US Patent Office during the life of each of the
Company's significant patents

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.

Employees

As of February 29, 2000, the Company had two full-time employees: Sidney
Braginsky President COO, Peter Katevatis Chairman CEO and one retained
consultant, Dr. Robert R. Alfano Neither the employees nor the retained
consultant is governed by any collective bargaining agreement; the relations
between the Company and its employees and retained consultant are believed to be
satisfactory at the present time.


<PAGE>



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/CEO 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.

 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 its operation.

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

During its fiscal year ending February 28, 2001, no matters were submitted to a
vote of the Company's security holders.



                                     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.



<PAGE>


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

2002

1st Quarter       05/31/01              0.26            0.18
2nd Quarter       08/31/01              0.15            0.15
3rd Quarter       11/30/01              0.10            0.09
4th Quarter       02/28/02              0.11            0.10

2001

1st Quarter       05/31/00              0.32           0.27
2nd Quarter       08/31/00              0.40           0.23
3rd Quarter       11/30/00              0.22           0.20
4th Quarter       02/28/01              0.17           0.17

2000

1st Quarter       05/31/99              0.21           0.20
2nd Quarter       08/31/99              0.24           0.24
3rd Quarter       11/30/99              0.50           0.42
4th Quarter       02/29/00              0.99           0.87

(a) Holders. The approximate number of holders of record of the Company's Common
Stock and Series A Preferred Stock as of February 29, 2001 were 880 and 8*
respectively *On Dec.1 2001 with the unanimous approval of the Board of
Directors the 1972 Series "A" preferred was by agreement converted at the rate
of ten (10) shares of Mediscience Common for each share of preferred with a
total issuance of 20,740 shares to the eight (8) holders. This transaction was
valued by all parties at one dollar ($1.00) for each Mediscience Common share in
the conversion.

NAME                       1972"A" RETIRED      COMMON SHARES RULE 144 ISSUED

Nick Fisfis                      366                          3,660
John Kusturis                    244                          2,440
Thomas & Katherine
Lennox                           122                          1,220
Donald Taggart                   488                          4,880
Robert Ryeson                    366                          3,660
Vincent Valdorale                244                          2,440
Peter Katevatis                  122                          1,220
Sylvester Kowalsky               122                          1,220

-----------------------------------------------------------------------------
TOTALS                         2,074                         20,740


<PAGE>


This conversion has retired the Series "A" 1972 Preferred with the issuance of
restricted Rule 144 per SEC Act of 1933 to each of the above during December
2001.

(b) 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.




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

Results of Operations:

     Year ending February 28, 2002 compared to year ending February 28, 2001
     -----------------------------------------------------------------------

The Company had no revenues during its fiscal years ending February 28, 2002
("its 2002 fiscal year). The Company's primary focus was the development of its
light-based technology.

General and administrative expenses decreased approximately $46,300 or 7.5%
during 2002 fiscal year as compared to its 2001 fiscal year. This decline was
comprised of the net decrease and increase in several key operating expense
categories. Salaries, wages and benefits declined approximately $202,000 in the
current fiscal year. The decline was primarily the result of a reversal of an
accrual for wages approximating $169,000 of the former President.

Travel and entertainment declined approximately $39,000 in the current fiscal
year when compared to the prior fiscal year. The decline was primarily the
result of decreased activity as a result of decreased funds.

The decrease in general and administrative expenses were net of increases in
professional fees and costs for secretarial and financial consulting.

Professional fees increased approximately $102,000 in the current fiscal year
when compared to the prior fiscal year. A principle reason for the current
increase was a change in estimate in the prior year for previously accrued
professional fees amounting to approximately $90,000 which was recognized as
income in the prior year.

Another reason for the increase in general and administrative expenses was the
recognition of expense associated with the issuance of stock and warrants for
secretarial and financial consulting costs approximating $83,000 during the
current fiscal year. No costs of this type were incurred in fiscal 2001.


<PAGE>


The Company's product development expense was zero during the 2002 fiscal year.
The Company had previously conducted a number of research and development
projects with the City College of City University of New York. Due to a lack of
resources, R&D activities at CUNY have been temporarily suspended.

In the 2002 fiscal year the Company recognized as an income tax benefit
approximating $241,900 under the State of New Jersey Technology Business Tax
Certificate Program. The program allows emerging technology and biotechnology
companies to sell their unused state net operating losses to corporate taxpayers
in New Jersey. The proceeds have been used to pay approximately $73,500 to an
officer for prior loans to the Company with the balance approximating $168,400,
to be used for general operations.

In the 2001 fiscal year the Company recognized as income a $48,000 extraordinary
gain on the settlement of $65,000 debt with the issuance of 100,000 shares of
common stock at its fair market value of $17,000. No gains on the structuring of
payables were recorded in the 2002 fiscal year.


     Year ending February 28, 2001 compared to year ending February 29, 2000
     -----------------------------------------------------------------------

The Company had no revenues during its fiscal years ending February 28, 2001
("its 2001 fiscal year). The Company's primary focus was the development of its
light-based technology.

General and administrative expenses decreases approximately $294,500 or 32%
during 2001 fiscal year as compared to its 2000 fiscal year. This decline was
comprised of the net decrease and increase in several key operating expense
categories. A principle reason for the decrease was the recognition of a warrant
issued in the prior fiscal year with an estimated value of $110,000 to the City
College of New York to defer the payment of the Company's accrued research and
the development costs.

Another reason for the decrease in general and administrative expenses was a
decline in professional fees of approximately $145,000. This decline was
comprised of a change in estimate for previously accrued legal fees amounting to
$90,000 which was recognized as income plus a net reduction in accruals for the
current yer approximating $55,000.

In the prior fiscal year the Company also recognized approximately $167,000 in
costs associated with the issuance of warrants to purchase stock of the Company
by individual investors and creditors. No costs of this type have been incurred
in fiscal 2001.

The decreases in fiscal 2001 for general and administrative expenses were net of
an increase of $125,000 for salaries and benefits accrual for a new corporate
officer.

The Company's product development expense decreased 100% or approximately
$56,500 during the 2001 fiscal year when compared to the 2000 fiscal year. The
Company had previously conducted a number of research and


<PAGE>


development projects with the City College ofCity University of New York. During
the 2000 fical year, he Company advanced $50,000 to CUNY for reimbursement of
patent costs. Due to a lack of resources, R&D activities at CUNY have been
temporarily suspended.

In the 2001 fiscal year the Company recognized an income tax benefit
approximating $237,500 under the State of New Jersey Technology Business Tax
Certificate Program. The program allows emerging technology and biotechnology
companies to sell their unused state net operating losses to corporate taxpayers
in New Jersey. The proceeds have been used to pay $175,000 to CUNY for prior
accrued research and development costs with the balance approximating $62,500,
to be used for general operations.

In the 2001 fiscal year the Company also recognized as income a $48,000
extraordinary gain on the settlement of $65,000 debt with the issuance of
100,000 shares of common stock at its fair market value of $17,000



Liquidity and Capital Resources:

The Company has a deficiency in working capital as of February 28, 2002 of
approximately ($2,480,500) representing an increase in the deficiency
approximating ($193,400) during the 2002 fiscal year. The deficiency is
primarily comprised of accruals for professional fees, research and development
costs, consulting and salaries and wages. The Company's ability to maintain its
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;


<PAGE>

(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.




                          MEDISCIENCE TECHNOLOGY CORP.
                                 AND SUBSIDIARY


                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                      FEBRUARY 28, 2002, FEBRUARY 28, 2001
                              AND FEBRUARY 29, 2000
                                        &
                          INDEPENDENT AUDITORS' REPORT



<PAGE>




                                TABLE OF CONTENTS

                                                                        Page

INDEPENDENT AUDITORS' REPORT...................................           2

CONSOLIDATED FINANCIAL STATEMENTS:

    BALANCE SHEET..............................................           4

    STATEMENT OF OPERATIONS....................................           5

    STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT..............           6

    STATEMENT OF CASH FLOWS....................................           7

    NOTES TO FINANCIAL STATEMENTS..............................           8




                                       1



<PAGE>



                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Shareholders
Mediscience Technology Corp.:

We have audited the consolidated balance sheet of Mediscience Technology Corp.
and subsidiary as of February 28, 2002 and 2001, and the related consolidated
statements of operations, changes in stockholders' deficit and cash flows for
the two years in the period ended February 28, 2002. 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. The
Company's financial statements as of February 29, 2000, were audited by other
auditors whose report dated May 19, 2000, expressed an unqualified opinion on
those statements and included an explanatory paragraph that described certain
conditions that raised substantial doubt about the Company's ability to continue
as a going concern.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 2002 and 2001 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Mediscience Technology Corp. and subsidiary as of February 28, 2002 and 2001,
and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.


                                       2

<PAGE>


The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has no revenues, has incurred significant
losses from operations and has an accumulated deficit which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also 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.






Philadelphia, Pennsylvania
May 24, 2002, except for Note 10
as to which the date is June 10, 2002


                                       3


<PAGE>



                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                           FEBRUARY 28, 2002 AND 2001
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                                                           2002              2001
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                  <C>
                                                        ASSETS
                                                       -------

CURRENT ASSETS,
      Cash and cash equivalents                                                       $    115,551         $      7,120

EQUIPMENT, net of accumulated depreciation
      of $202,689 in 2002 and $199,178 in 2001                                               1,289                4,800
                                                                                      ------------         ------------

                          TOTAL                                                       $    116,840         $     11,920
                                                                                      ============         ============

                                         LIABILITIES AND STOCKHOLDERS' DEFICIT
                                         --------------------------------------

CURRENT LIABILITIES:
      Accounts payable                                                                $     13,373         $     14,943
      Accrued liabilities                                                                2,503,960            2,127,028
      Officer and other loans                                                               78,711              152,229
                                                                                      ------------         ------------

                  Total current liabilities                                              2,596,044            2,294,200
                                                                                      ------------         ------------

STOCKHOLDERS' DEFICIT:
      Preferred stock, $.01 par value, 50,000 shares
          authorized, 0 and 2,074 shares issued and
          outstanding in 2002 and 2001, respectively                                          --                     21
      Common stock, $.01 par value, 39,950,000
          shares authorized, 36,976,870 and 36,276,130
          shares issued and outstanding in 2002 and 2001,
          respectively                                                                     369,769              362,761
      Additional paid-in capital                                                        18,400,490           18,274,977
      Accumulated deficit                                                              (21,249,463)         (20,920,039)
                                                                                      ------------         ------------

                  Total stockholders' deficit                                           (2,479,204)          (2,282,280)
                                                                                      ------------         ------------

                          TOTAL                                                       $    116,840         $     11,920
                                                                                      ============         ============
</TABLE>



                 See Notes to Consolidated Financial Statements


                                        4
<PAGE>


                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF OPERATIONS
                               FOR THE YEARS ENDED
           FEBRUARY 28, 2002, FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------
                                            2002                 2001                2000
-------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>                  <C>
NET SALES                               $       --           $       --           $       --

COST OF SALES                                   --                   --                   --
                                        ------------         ------------         ------------

GROSS PROFIT                                    --                   --                   --
                                        ------------         ------------         ------------

GENERAL AND ADMINISTRATIVE
     EXPENSE                                 569,270              615,563              910,043

PRODUCT DEVELOPMENT EXPENSE                     --                   --                 56,540
                                        ------------         ------------         ------------

                  Total expense              569,270              615,563              966,583

OTHER (INCOME) EXPENSE, INTEREST               2,021                1,311                 (340)
                                        ------------         ------------         ------------

LOSS BEFORE INCOME TAXES                    (571,291)            (616,874)            (966,243)

INCOME TAX BENEFIT                           241,867              237,556                 --
                                        ------------         ------------         ------------

LOSS BEFORE EXTRAORDINARY ITEM              (329,424)            (379,318)            (966,243)

EXTRAORDINARY GAIN ON
     RESTRUCTURING OF PAYABLES                  --                 48,000                 --
                                        ------------         ------------         ------------

NET LOSS                                $   (329,424)        $   (331,318)        $   (966,243)
                                        ============         ============         ============

BASIC AND DILUTED LOSS
     PER COMMON SHARE                   $      (0.01)        $      (0.01)        $      (0.03)
                                        ============         ============         ============

WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING                   36,690,543           36,115,034           35,559,418
                                        ============         ============         ============
</TABLE>


                 See Notes to Consolidated Financial Statements


                                        5
<PAGE>



                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
 FOR THE YEARS ENDED FEBRUARY 28, 2002, FEBRUARY 28, 2001 AND FEBRUARY 29, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                   PREFERRED STOCK              COMMON STOCK            ADDITIONAL
                                                ---------------------     -------------------------       PAID-IN        ACCUMULATED
                                                 SHARES      AMOUNT         SHARES         AMOUNT         CAPITAL          DEFICIT
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>       <C>           <C>            <C>            <C>            <C>
BALANCE FEBRUARY 28, 1999                         2,074     $     21      35,276,130     $ 352,761      17,796,811     $(19,622,478)

      Issuance of stock for cash and services                                150,000         1,500          31,320
      Issuance of stock for services                                         150,000         1,500          29,755
      Issuance of warrants for services                                                                     33,419
      Issuance of warrants for services                                                                     20,449
      Issuance of stock and warrants for cash                                300,000         3,000          72,000
      Exercise of warrant                                                    100,000         1,000          24,000
      Issuance of warrant for services                                                                     208,223
      Net loss                                                                                                             (966,243)
                                               --------    ---------      ----------     ---------    ------------     ------------

BALANCE FEBRUARY 29, 2000                         2,074           21      35,976,130       359,761      18,215,977      (20,588,721)

      Issuance of stock for cash                                             100,000         1,000          24,000
      Issuance of stock for cash                                              50,000           500          12,000
      Issuance of stock for services                                          50,000           500           7,000
      Issuance of stock for services                                         100,000         1,000          16,000
      Net loss                                                                                                             (331,318)
                                               --------    ---------      ----------     ---------      -----------     ------------

BALANCE FEBRUARY 28, 2001                         2,074           21      36,276,130       362,761      18,274,977      (20,920,039)

      Conversion of preferred stock              (2,074)         (21)         20,740           208            (187)
      Issuance of stock for cash                                             180,000         1,800          43,200
      Issuance of stock for services                                         400,000         4,000          72,000
      Issuance of stock for services                                          50,000           500           6,500
      Issuance of stock for services                                          50,000           500           4,000
      Net loss                                                                                                             (329,424)
                                               --------    ---------      ----------     ---------    ------------     ------------
BALANCE FEBRUARY 28, 2002                            --      $    --      36,976,870     $ 369,769    $ 18,400,490     $(21,249,463)
                                               ========    =========      ==========     =========    ============     ============

</TABLE>

                 See Notes to Consolidated Financial Statements


                                       6
<PAGE>

                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                               FOR THE YEARS ENDED
           FEBRUARY 28, 2002, FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                                                      2002              2001              2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                       $(329,424)        $(331,318)        $(966,243)
     Adjustments to reconcile net loss to net cash
         provided by (used in) operating activities:
             Depreciation and warrant amortization                      3,511             3,788           214,043
             Common stock and warrants issued for legal
                 and other services                                    87,500            24,500            56,543
             Extraordinary gain on restructuring of payables               --           (48,000)               --
             Changes in assets and liabilities:
                 Decrease in other assets                                  --            20,191                --
                 Decrease in accounts payable                          (1,570)          (24,453)           (7,712)
                 Increase in accrued liabilities                      376,932           297,572           506,249
                                                                    ---------         ---------         ---------

                         Net cash provided by (used in)
                             operating activities                     136,949           (57,720)         (197,120)
                                                                    ---------         ---------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common
         stock and warrants                                            45,000            37,500           111,400
     Proceeds net of repayments from officer
         and other loans                                              (73,518)           10,274            77,846
                                                                    ---------         ---------         ---------

                         Net cash (used in) provided by
                             financing activities                     (28,518)           47,774           189,246
                                                                    ---------         ---------         ---------

NET INCREASE (DECREASE) IN CASH
     AND CASH EQUIVALENTS                                             108,431            (9,946)           (7,874)

CASH AND CASH EQUIVALENTS, BEGINNING                                    7,120            17,066            24,940
                                                                    ---------         ---------         ---------

CASH AND CASH EQUIVALENTS, ENDING                                   $ 115,551         $   7,120         $  17,066
                                                                    =========         =========         =========

SUPPLEMENTAL SCHEDULE OF NONCASH
     FINANCING ACTIVITIES,
         Common stock and warrants issued for
             legal and other services rendered in
             settlement of accounts payable                         $  87,500         $  24,500         $  56,543
                                                                    =========         =========         =========
</TABLE>


                 See Notes to Consolidated Financial Statements


                                       7
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


 1.   NATURE OF OPERATIONS AND SUMMARY OF
      SIGNIFICANT ACCOUNTING PRINCIPLES

      NATURE OF OPERATIONS

         The consolidated financial statements include the accounts of
         Mediscience Technology Corp. ("Mediscience") and its wholly-owned
         inactive 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. Substantial
         additional financing is needed by the Company.



                                       8
<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


         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 ("RFCUNY") 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.

         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, 2002. 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.

      USE OF ESTIMATES

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

         During fiscal 2001, the Company recognized income of $90,000 from a
change in estimate for accrued legal fees.


                                       9
<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      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.
         Depreciation expense was $3,511, $3,788, and $5,820 in the years ended
         February 2002, 2001 and 2000, respectively.

      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.

      RESEARCH AND DEVELOPMENT

         Research and development costs are charged to operations when incurred.
         The amounts charged to expense were $0, $0 and $56,540 during the years
         ended February 2002, 2001 and 2000, respectively.

      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-based 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.


                                       10
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


 2.   RELATED PARTY TRANSACTIONS

      Legal services rendered by Mr. Katevatis (Note 8) amounted to $50,000 for
      each of the three years ended February 28, 2002. These amounts are
      recorded in general and administrative expense.

      As part of Mr. Katevatis's employment agreement, the Company pays property
      taxes and certain operating expenses on the home of Mr. Katevatis in lieu
      of rent, since the Company's operations are located in Mr. Katevatis's
      home. Expenses recognized were $9,371, $11,059 and $10,732 in 2002, 2001
      and 2000, respectively.


 3.   OFFICER AND OTHER LOANS

      In fiscal 2000, the Company entered into two interest-bearing convertible
      notes. Both notes bear interest at the rate of 8.25% per annum and are
      convertible into common stock on the basis of $.25 per share. The
      conversion option is unlimited in duration. Both notes are demand
      instruments and the holder can demand and receive payment in full
      including interest. The principal balance of the notes amounted to $30,000
      at February 28, 2002 and February 28, 2001. Accrued interest on the notes
      at February 28, 2002 and February 28, 2001 totaled $5,676 and $3,201,
      respectively.

      In 2002 and 2001, 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, 2002 and
      February 29, 2001, the balance of the officer loans payable to Mr.
      Katevatis was $48,711 and $122,229, respectively.


 4.   ACCRUED LIABILITIES

      Accrued liabilities consist of the following:

                                                       2002            2001
                                                       ----            ----

         Legal and professional fees                 $ 256,418      $ 180,100
         Consulting and university fees              1,125,731        962,399
         Salaries and wages                          1,081,000        943,833
         Other                                          40,811         40,696
                                                    ----------     ----------

                                                    $2,503,960     $2,127,028
                                                    ==========     ==========


                                       11
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      Accrued legal and professional fees include services rendered by Mr.
      Katevatis, Chief Executive Officer and Chairman. The amount of the accrual
      was $187,500 and $137,500 as of February 28, 2002 and February 28, 2001,
      respectively.

      Accrued research and development include costs owed to Dr. Alfano (Note 8)
      with respect to his consulting agreement of $798,650 and $635,318 as of
      February 28, 2002 and February 28, 2001, respectively.

      Accrued salaries and wages include amounts to Mr. Katevatis, Chief
      Executive Officer and Chairman, of $1,006,333 and $806,333 as of February
      28, 2002 and February 28, 2001, respectively.

      Accrued salaries and wages include amounts to Mr. Castellana, (former
      President and Chief Executive Officer) (Note 8), of $0 and $137,500 as of
      February 28, 2002 and February 28, 2001, respectively. Effective June 1,
      2001, Mr. Castellana voluntarily terminated employment with the Company
      and verbally waived all rights to any accrued compensation owed to him as
      of that date. Accordingly, in fiscal 2001 the Company reversed a $168,750
      accrual related to compensation earned by Dr. Castellana through June 1,
      2001.

      Accrued salaries and wages include an amount to Mr. Braginsky, (President
      and Chief Operating Officer) (Note 8), of $74,667 as of February 28, 2002.


 5.   INCOME TAXES

      Income taxes consist of the following:

                                         2002          2001          2000
                                         ----          ----          ----

         Current                        $241,867      $237,556      $    --
                                        ========      ========      =======

         Deferred                       $     --      $     --      $    --
                                        ========      ========      =======

      In 2001, the Company became eligible to receive benefits under the State
      of New Jersey Technology Business Tax Certificate Program. This program
      allows emerging technology and biotechnology businesses to sell their
      unused state net operating losses (NOL) to any corporate taxpayer in the
      State of New Jersey for at least 75% of the tax benefits. The Company is
      eligible to sell a maximum of $713,987 and the amount sold and realized
      during the years ended February 28, 2002 and February 28, 2001 was
      $241,867 and $237,556, respectively. Proceeds from the sale of net
      operating losses are shown as income tax benefit in the consolidated
      statement of operations.



                                       12
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      As of February 28, 2002 and 2001, the Company has net operating loss
      carryforwards of approximately $11,652,000 and $11,100,000, respectively
      for federal purposes and $2,707,000 and $5,300,000, respectively for state
      purposes which may be used to reduce future income subject to income taxes
      and expire in various amounts from 2002 to 2017. As a result of these loss
      carryforwards, as of February 28, 2002 and 2001, the Company had a
      deferred tax asset of approximately $4,205,000 and $4,300,000,
      respectively, for which valuation allowances for the entire amounts were
      provided as of February 28, 2002 and 2001.


 6.   EXTRAORDINARY ITEM

      In 2001, the Company issued 100,000 shares of common stock at its fair
      value of $.17 per share at the date of transfer to a creditor to settle a
      $65,000 account payable. As a result, an extraordinary gain on
      restructuring of payables of $48,000 was recognized. The per share amount
      of the gain is $.0013. There is no tax effect due to the net operating
      loss carryforward.


 7.   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.


  8.  COMMITMENTS AND CONTINGENCIES

      DR. ROBERT R. ALFANO

      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.


                                       13

<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      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. No amounts have been paid during
      the three years ended February 28, 2002.

      Other Royalties

      In addition to the above royalty, the Company has obtained worldwide
      licensing rights for patents from Yale University and has agreed to pay
      royalties based on net sales of all products generated from the patents
      and fifty percent of any income received from sublicensing of the patents.
      The Company has not recorded any revenues since the inception of this
      agreement and therefore has not recorded or paid any royalties during the
      three years ended February 28, 2002.

      Employment Agreements

      Mr. Peter Katevatis, the Chief Executive Officer and a shareholder of the
      Company, has an employment agreement. The agreement states that Mr.
      Katevatis is to be paid $200,000 per year. The agreement also provides for
      a bonus and fringe benefits in accordance with policies and formulas
      mutually agreed upon by Mr. Katevatis and the Board of Directors. The
      contract expires March 5, 2007.

      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 became the
      President and Chief Executive Officer of the Company and was to be paid
      $100,000 per annum. On June 1, 2001, Dr. Castellana voluntarily terminated
      employment as President and Chief Executive Officer of the Company and
      verbally waived all salary accruing to him as of that date.

      On July 9, 2001, the Company entered into a three-year employment
      agreement with Sidney Braginsky. Pursuant to the terms of the agreement,
      Mr. Braginsky became the President and Chief Operating Officer of the
      Company and is to be paid $100,000 per annum.


                                       14
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      Stock Option Commitments

      The Board of Directors has approved a 1999 Incentive Stock Option Plan
      (the "Plan"). The aggregate number of shares that may be issued under the
      options shall not exceed 3 million. The Plan is subject to shareholder
      approval that the Company expects to obtain at some future date and
      therefore any awards granted under the Plan will not be deemed granted
      until such approval is obtained from the shareholders.

      In connection with their employment agreements, the Company has granted
      stock options under the Plan to Mr. Castellana and Mr. Braginsky. Such
      stock options are exercisable upon the attainment of certain milestones as
      defined in each of their employment agreements.

      Mr. Castellana was granted options to purchase up to 914,373 shares of the
      Company's common stock at an option price of $.32 per share, which is
      subject to a series of milestones as described in his employment contract.
      As of June 1, 2001 Mr. Castellana resigned from the Corporation and
      forfeited the stock options. In prior years the Company disclosed in its
      footnotes that Mr. Castellana's stock options were granted and
      outstanding. The disclosure of Mr. Castellana's stock option award has
      been moved to the commitments and contingencies footnote because the Plan
      has not been approved by the Company's shareholders. There is no financial
      statement impact to this change in disclosure.

      Mr. Braginsky was granted options to purchase up to 2,000,000 shares of
      the Company's common stock at an option price of $.25 per share for the
      first 150,000 shares and at an option price of $1.00 per share for the
      remaining 1,850,000 shares. Mr. Braginsky's ability to exercise these
      options is subject to a series of milestones described in his employment
      agreement. In the event shareholders approve the Plan and these options
      become exercisable, the Company would record the estimated fair value of
      the award in accordance with the expense recognition method as described
      in APB 25.


                                       15
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      Activity related to contingent stock option commitments during the
three-year period ended February 28, 2002 is as follows:

                                                                       WEIGHTED
                                                         EXERCISE      AVERAGE
                                                           PRICE       EXERCISE
                                            SHARES         RANGE        PRICE
                                            ------       --------      --------

        Outstanding, February 28, 1999           -0-
        Granted                              914,373       $.32          $.32
                                             -------

        Outstanding, February 29, 2000 and
           February 28, 2001                 914,373       $.32          $.32

        Outstanding, February 28, 2001       914,373       $.32          $.32
        Granted                            2,000,000    $.25-$1.00      $ .94
        Forfeited                           (914,373)      $.32          $.32
                                            --------

        Outstanding, February 28, 2002     2,000,000    $.25-$1.00       $.94


 9.   STOCKHOLDERS' DEFICIT

      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. During the fiscal year ended February 28, 2002, this
         stock was redeemed for 20,740 shares of common stock. 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.


                                       16
<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


      PRIVATE OFFERINGS

         During 2000, the Company issued 300,000 shares of common stock at a
         price of $.25 per share for $75,000. During 2001, the Company issued
         150,000 shares of common stock at a price of $.25 per share for
         $37,500. During 2002, the Company issued 180,000 shares of common stock
         at a price of $.25 per share for $45,000.

      COMMON STOCK ISSUED FOR SERVICE

         During 2000, the Company issued 300,000 shares of common stock at a
         value of $56,543 for services provided to the Company. This amount has
         been recorded as general and administrative expense in the consolidated
         statement of operations.

         During 2001, the Company issued 50,000 shares of restricted common
         stock at a value of $7,500 for services provided to the Company. This
         amount has been recorded as general and administrative expense in the
         consolidated statement of operations.

         During 2002, the Company issued 500,000 shares of restricted common
         stock at a value of $87,500 for services provided to the Company. This
         amount has been recorded as general and administrative expense in the
         consolidated statement of operations.

      STOCK WARRANTS

         Stock warrant activity during the three year period ended February 28,
2002, was as follows:

                                         SHARES           EXERCISE
                                       AVAILABLE         PRICE RANGE
                                      ----------         -----------
Outstanding February 28, 1999          2,346,632         $.25-$1.20
Granted                                3,045,412         $.05-$. 75
Exercised                               (100,000)        $   .25
                                      ----------

Outstanding, February 29, 2000         5,292,044         $.05-$1.20
Granted                                  200,000         $   .25
                                      ----------         ----------

Outstanding, February 28, 2001         5,492,044         $.05-$1.20
Granted                                2,250,000         $.25-$1.00
Forfeited                             (1,978,746)
                                      ----------         ----------

Outstanding, February 28, 2002         5,763,298         $.05-$1.20
                                      ==========         ==========



                                       17
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


         In connection with private placement offerings during fiscal 1997, 1996
         and 1995, the Company granted warrants to purchase 400,000, 1,025,000
         and 256,250 shares of common stock, respectively. The warrants are
         exercisable at $ 1.00 per share and expire in March 2003.

         During fiscal 1997, Mr. Herbert L. Hugill, former President and Chief
         Executive Officer of the Company 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 upon
         the attainment of certain defined 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, 2002, no milestones have been achieved.

         During fiscal 1999 the Company borrowed funds from Mr. Tami Adelstein
         and issued him a warrant to purchase 100,000 shares of the Company's
         common stock at $.25 per share. Also during 1999, the Company issued
         Mr. Adelstein 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.

         During fiscal 2000, Dr. Costellana, in connection with his employment
         agreement was 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. The 150,000 shares vested upon his
         first day of work which was February 1, 2000. In connection with
         vesting on February 1, 2000, the Company recognized an expense of
         $98,079 which represented the fair market value of the warrant on the
         vesting date since the warrant was issued prior to the effective
         employment date. Dr. Castellana's ability to exercise these options and
         remaining shares under the warrant is subject to a series of milestones
         described in his employment agreement. On June 1, 2001, Dr. Castellana
         resigned as President and Chief Executive Officer of the Company. As a
         result of his resignation and the milestones not being attained as of
         that date, the warrants have been forfeited.

         Also, during 2000 warrants were issued to purchase 566,666 shares of
         the Company's common stock at an exercise price of $.25 to $.75 per
         share for cash and services. The Company also granted CCNY a warrant to
         purchase 500,000 shares of the Company's common stock at an exercise
         price of $1.00, which expires in 2003.


                                       18
<PAGE>



         During 2001 warrants were issued to purchase 50,000 shares of the
         Company's common stock at an exercise price of $.25 per share for
         services provided to the Company. The warrants expire in March 2003.
         Also during 2001, the Company issued 150,000 shares of common stock and
         warrants to purchase 150,000 shares of the Company's common stock at an
         exercise price of $.25 per share for $37,500. The warrants expire in
         March 2003.

         During fiscal 2002, Sidney Braginsky in connection with his employment
         agreement, was issued a warrant to purchase up to 2,000,000 shares of
         the Company's common stock at an exercise price of $.25 per share for
         the first 150,000 shares and at an exercise price of $1.00 per share
         for the remaining 1,850,000 shares. Mr. Braginsky's ability to exercise
         these options and shares under the warrant is subject to a series of
         milestones described in his employment agreement.

         Also during 2002, the Company issued 50,000 shares of common stock at a
         value of $7,000 and warrants to purchase 50,000 shares of the Company's
         common stock at an exercise price of $.25 per share, which was above
         the current market price for secretarial services provided to the
         Company. The warrants expire in March 2003.

         In 2002, the Company issued 400,000 shares of common stock at a value
         of $76,000 and issued warrants to purchase 200,000 shares of the
         Company's common stock at an exercise price of $.25 per share, which
         was above the current market price for financial advisory services. The
         warrants expire in 2006.


10.   SUBSEQUENT EVENTS

      RESEARCH FOUNDATION OF THE CITY UNIVERSITY OF NEW YORK

      The Company and the Research Foundation of the City University of New York
      ("RFCUNY") entered into a Research Agreement in June 1992, which has been
      amended from time to time. The agreement called for the Company to
      commercialize certain technology owned by "RFCUNY" and granted an
      exclusive, worldwide license to the technology. In respect to the
      licensing, the Company is liable to pay royalties based on net sales of
      products and any income received from sublicensing. As of February 28,
      2002 and 2001, the Company owed "RFCUNY" $283,404, which is included in
      accrued consulting and university fees.


                                       19
<PAGE>


      On June 10, 2002, the parties entered into an agreement to amend the terms
      and conditions of their previous arrangements to reduce the royalty
      percentage charged. The parties also agreed to restructure the liability
      owed to "RFCUNY" by the Company issuing 283,228 shares of common stock at
      a price of $ .25 per share as repayment of 25% of the obligation; a cash
      payment of $ 85,045, which represented 30% of the obligation; and a five
      year option to purchase 600,000 shares of the Company stock at $ 1.00 per
      share for the remaining 45% of the obligation. These shares can be
      exercised at anytime within a five year period ending June 2007.

      MEDIPHOTONICS LABORATORY AT THE INSTITUTE OF ULTRAFAST
      SPECTROSCOPY OF THE CITY UNIVERSITY OF NEW YORK

      In June 1992, the Company and "RFCUNY" established the Mediphotonics
      Laboratory at the Institute of Ultrafast Spectroscopy and Lasers at the
      City University of New York ("MPL") to provide technical and research
      assistance to the Company to support its clinical trials and research.

      Until July 1998, the Company provided annual funding grants to MPL. The
      arrangement was renewed annually, and could be terminated without cause by
      either party upon 90 days notice prior to June 1st of each year. Because
      of funding limitations, the Company was unable to renew the contract
      following expiration in 1998.

      On June 10, 2002, the Company and MPL executed an agreement to provide
      technical and research assistance to the Company for the period from July
      1, 2002 to June 30, 2003 at a cost of $35,000.


                                       20
<PAGE>



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
None


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (A) OF THE EXCHANGE ACT Officers and Directors The directors,
executive officers and significant employees of the Company are:


Name                   Age             Position
----                   ---             --------
Sidney Braginsky       60         President chief operating officer

Peter Katevatis        68         Chairman of the Board,
                                  Chief Executive Officer
                                  and Treasurer

John M. Kennedy        65         Vice President and Secretary

William Armstrong      85         Director

Mathew Culligan        82         Director *

Michael N. Kouvatas    75         Director

John P. Matheu         80         Director

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.

Sidney Braginsky, as of July 9, 2001 has assumed the role of President COO and
Board of Director Member of Mediscience Technology under a three year milestone
structured equity



<PAGE>

compensation agreement. ( see 8-K dtd July 25, 2001 ). Mr. Braginsky was
formerly with OLYMPUS OPTICAL LTD for 27 years most recently as President CEO of
OLYMPUS AMERICA, Inc., the Olympus US subsidiary. OLYMPUS LTD. is a
multi-national corporation headquartered in Tokyo Japan and a world leader in
microscopes, endoscopes, automatic blood and fluid chemistry analyzers measuring
research, industrial and consumer products. Mr. Braginsky is a present board
member of, NOVEN Pharmaceuticals, REDOX Pharmaceuticals, ELECTRO-OPTICAL
SYSTEMS, Inc., ESTEK CARDIOLOGY, Chairman of Double D Venture Funds LLC and
Chairman of the Board of City College of New York's Robert Chambers Laboratory.

Peter Katevatis has served as Chairman of the Board of Directors since 1993 and
CEO as of July 9th 2001 when Sidney Braginsky by contract became President, and
COO. 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, PA 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 a member of the
American Arbitration Association and also serves as an arbitrator with the
National Association of Security Dealers (NASDQ. He is a member of the National
District Attorney's Association.

John M. Kennedy currently serves a Vice President and Secretary of the Company,
as well as being a director of the Company since 1982 and audit committee
chairman since 2000. 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 and member of
the Audit Committee of First Peoples Bank of New Jersey from 1979 and also
served as a member of its executive board until 1994 when Core-States Bank
purchased First Peoples Bank. Mr. Kennedy is a member and the Chairman of the
Mediscience Audit Committee.

William W. Armstrong has served as a director of the Company since 1978 and
audit committee member since 2000. 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. Mr. Armstrong is a
member of the Mediscience Audit Committee.


<PAGE>


 * Mathew Culligan passed away January 2002 after a brief illness. He had 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 President 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, and
audit committee member since 2000. 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. Mr. Matheu is a member of the Mediscience Audit Committee.

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.

Audit Committee CHARTER - "The audit committee is responsible for reviewing and
considering actions of the Company's Board of Directors in matters related to
audit functions; selecting and terminating the Company's independent accountants
and auditors, reviewing with the Company's independent accountants and auditors
the scope and results of their audit, reviewing the internal audits and the
effectiveness of procedures. The members of the audit committee who are
directors are "independent" as required by the SEC Rules and are financially
literate with accounting and financial experience appropriate for proper and
competent oversight."


<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. . Dr. Alfano is a principal stockholder of the
Company and a contracted paid consultant. (see infra)

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 principal 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


<PAGE>

and phase III trials on a multi-organ basis involving diseases of the breast,
upper and lower aerodigestive tract, and gynecologic tissues. 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 10. EXECUTIVE COMPENSATION The following sets
forth a summary of compensation paid or accrued to the executive officers of the
Company for fiscal years ending February 29, 2002, February, 28 2001, February
28, 2000 and February 28, 1999 whose compensation exceeded $100,000.


                       SUMMARY COMPENSATION TABLE

Name and                  Year ended                      Other Annual
Principle Position       Feb. 28 (29)      Salary         Compensation
------------------       ------------     --------        ------------
Peter Katevatis             2002          $200,000        $ 53,041 (1)
CEO                         2001          $200,000        $ 61,977 (1)
Chairman                    2000          $200,000        $ 67,614 (1)
                            1999          $200,000        $ 61,936 (1)


Sidney Braginsky            2002          $74,333            --0--
President COO

(1)   Includes payment to Mr. Katevatis of $50,000 for legal services rendered
      during each of the fiscal years ending in February 2002. February
      29,2001,February 28, 2000 February 28,1999, February 28, 1998 (fiscal
      years 2001 2000, 1999, 1998 respectively), and partial contract benefits
      for fiscal year ending 2002 under his employment agreement of automobile
      expense $2,407 and health insurance$647.00

Contract benefits for fiscal year 2001 under his employment agreement were
automobile expense $7,318, auto insurance $705.00, and health insurance $3,954.
Contract benefits for 2000 were automobile expense $10,535, auto insurance
$2,828, and health insurance $4,251. Contract benefits paid in 1999; automobile
expense of $5,464, automobile insurance of $3,541 and health insurance of
$2,931. See Note 3 to consolidated Financial 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


<PAGE>


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-exercisable stock options held by the Company's executive officers at
February 28, 2002. 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 $0.875 which was the closing price for the
Company's Common Stock in the over-the-counter market on February 28, 2002.




                     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 contingent 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 11. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT

The following table sets forth certain information at February 29, 2000 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:


<PAGE>


                          Amount of Beneficial              Percentage of
Name and Address             Ownership                          Class
---------------          --------------------               -------------
Peter Katevatis
P.O. Box 598 08003
Woodcrest Cherry Hill NJ  4,725,595 (1)(2)(3)(4)(5)(12)(15)       13.4

John M. Kennedy
c/o Pepco Mfg.  Co.
100 Somerdale, NJ 08083   2,677,933 (5)(6)(12)                     7.5

William W. Armstrong
P.O Box 607
Tupper Lake, NY 2986        355,200 (5)(7)(12)                    0.09

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)                        0.005

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)                      4.0

All directors and officers as a group
7 persons                      8,770,894 (13)                     24.7


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

(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.

(3)  Includes 552,664 restricted shares issued in consideration for contractual
     reduction in salary.


<PAGE>

(4)  Excludes 200,000 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). Also included are 6,000 shares registered in the name of Mr.
     Armstrong's wife.

(8)  Includes the 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 65,000 restricted shares acquired by Mr.
     Krum pursuant to the exercise of stock options on May 1, 1997; also
     includes 6000 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.


<PAGE>


(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) reflected in Amendment
     No. 6 to their Schedule SC13G/A dated 2/14/02 filed by Allen & Co. Mr.
     Miller is a vice president and a director of Allen & Company, Incorporated.

(15) On Dec.1 2001 with the unanimous approval of the Board of Directors the
     Series A preferred was by agreement converted at the rate of ten (10)
     shares of Mediscience Common for each share of preferred with a total
     issuance of 20,740 shares to the eight (8) holders. This transaction was
     valued at $1.00 per share in the conversion. Peter Katevatis owned 122
     shares of the Series "A" 1972 Preferred which he converted into 1,220
     shares of Common Restricted per Rule 144 Sec Act of 1933. 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.



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 1, 1988, the Company acquired from Dr. Robert Alfano, a principal
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. Additionally, 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 be paid a bonus and fringe benefits in accordance with
policies and formulas applied to the key executives of the Company. 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 principal 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


<PAGE>


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.

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. In 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 may buy 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 broad anti-dilution
protection for Dr. Castellana and founders Dr. Robert Alfano and Peter Katevatis
subject to adjustment in the event of stock splits, reverse stock splits and
other similar events and also in the event of the issuance of any shares of MDSC
common stock in lieu of salary, consulting fees, options, warrants or services
rendered. As of June 1, 2001 Dr. Castellana terminated his agreement in total
and verbally waived all salary.


ITEM 13. SUBSEQUENT EVENTS:

                   REGISTRANTS 8-k FILING dated JUNE 12, 2002
                   ------------------------------------------

Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed a new contract with the Research Foundation City
University of New York (RFCUNY), that supercedes all prior agreements with
(RFCUNY), restructures all MTC debt to RFCUNY and reduces MTC royalty rate from
5% to 3.25% as to all patent/patent applications of a Medical nature in exchange
for the following consideration to (RFCUNY): 1. Registrant's cash payment of
$85,045.00, 2. Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3.
Registrant's issuing a five (5) year. Warrant to (RFCUNY) providing (RFCUNY) the
right to purchase six hundred thousand (600,000) SEC144 shares at one dollar
($1.00) per share. The agreement protects Registrant by affirming Registrant's
ownership and/or exclusive license of all MEDICAL APPLICATIONS embodied in
Registrants patent list attached to the contract as exhibit A. RFCUN has a prior
warrant to purchase five hundred thousand (500,000) shares of Mediscience common
Rule 144 shares at one dollar ($1.00) per share expiring December 31, 2003.
Total warrants presently in RFCUNY for Mediscience common SEC 144 shares is One
Million one hundred thousand (1,100,000).



B Effective May 31, 2002 and unanimously approved by the Board of Directors May
30, 2002 Registrant executed and fully funded a new agreement with "The
Institute for Ultra fast Spectroscopy and Lasers Center for Ultrafast Photonics
and Mediphotonics Laboratory of City University of New York". Term: July 1, 2002
to June 30, 2003. The agreement provides continual technical and research
assistance to Registrant in support of existing and anticipated clinical trials
in the United States and India.



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)


<PAGE>


10.08       Research Agreement between the Research Foundations 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, 1993 amending 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 30,1994 between the Registrant
            and the National Institutes of Health (17)


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


<PAGE>


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 dated 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 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)


<PAGE>


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


(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.


<PAGE>


(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:  June 1 , 2001              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.


Signature & Date                                     Title
-------------------------                            -----


/s/ Peter Katevatis                Chairman of the Board, Principl Officer
-------------------------          and Financial Officer
Peter Katevatis, Esq.
June 14,2002



/s/ William Armstrong
-------------------------
William Armstrong                                  Director
June 14,2002



<PAGE>



/s/ John M. Kennedy
-------------------------
John M. Kennedy                                    Director
June 14,2002


/s/ Michael N. Kouvatas
-------------------------
Michael N. Kouvatas, Esq.                          Director
June 14,2002


/s/ John P, Matheu
-------------------------
John P.Matheu                                      Director
June 14,2000


/s/ Sidney Braginsky,                     President/COO Director
-------------------------
June 14,2002


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

                          MEDISCIENCE TECHNOLOGY CORP.

In parallel and while building on our prior accomplishments, the Company
continues to address several critical unresolved issues, the most important of
which is the lack of adequate funding to maintain business momentum and properly
leverage our intellectual property assets; the resolution of this issue
continues to be a principle focus and the highest priority of management. In the
absence of the availability of such financing on a timely basis, the company may
be forced to materially curtail or cease its operations. We are faced with a
broad world-wide market presently dominated by pessimism and a desire for
security in investment that we intend to overcome.

As previously reported, the Company had an outstanding financial obligation to
the University (RFCUNY). Effective May 31, 2002 (8-K SEC filing June 11,2002)
and unanimously approved by the Board of Directors May 30, 2002 Registrant
executed a new contract with the Research Foundation City University of New York
(RFCUNY), that supercedes all prior agreements with (RFCUNY), erases all MTC
debt to RFCUNY and reduces MTC royalty rate from 5% to 3.25% as to all
patent/patent applications of a Medical nature in exchange for the following
consideration to (RFCUNY): 1. Registrant's cash payment of $85,045.00, 2.
Registrant's issuance to RFCUNY of 283,228 SEC144 shares. 3. Registrant's
issuing a five (5) year. Warrant expiring May 31, 2007 to (RFCUNY) providing
(RFCUNY) the right to purchase six hundred thousand (600,000) SEC144 shares at
one dollar ($1.00) per share. The agreement protects Registrant by affirming


<PAGE>


Registrant's ownership and/or exclusive license of all MEDICAL APPLICATIONS
embodied in Registrants patent list attached to the contract as exhibit A.
(RFCUNY) also has a prior issued warrant to purchase five hundred thousand
(500,000) shares of Mediscience common SEC Rule 144 shares at one dollar ($1.00)
per share expiring December 31, 2003. Total warrants presently in RFCUNY for
Mediscience common SEC 144 shares is One Million one hundred thousand
(1,100,000).

 Also Effective May31, 2002 and unanimously approved by the Board of Directors
May 30, 2002 Registrant executed and fully funded a new agreement with "The
Institute for Ultraffast Spectroscopy and Lasers Center for Ultrafast Photonics
and Mediphotonics Laboratory of City University of New York". Term: July 1, 2002
to June 30, 2003. The agreement provides continual technical and research
assistance to Registrant in support of existing and anticipated clinical trials
in the United States and India.

We have reduced the company's debt significantly and successfully, negotiated an
agreement with RFCUNY that is in the best interests of our shareholders. The
Company and the City University have a long and productive history of
cooperation and are committed to continuing and building upon the relationship
that has been so beneficial to both parties.

The Company continues to be eligible to receive additional benefits under the
State of New Jersey Technology Business Tax Certificate Program through the sale
of its New Jersey Net Operating Loss carryover. The Company applied for and
received such benefits and intends to apply successfully this year. The
Company has already entered into an agreement on very favorable terms with a New
Jersey corporate taxpayer to purchase the NOL subsequent to State approval.
(This NJ tax benefit allows emerging technology and biotechnology businesses to
sell their unused Net Operating Loss (NOL) carryover to any corporate taxpayer
in the state for no less than 75% of benefits -- our sale contract was for 83.3%
negotiated up to the present 87.0%. We intend that the year 2002 will mark a
turning point for the Company as we focus on achieving the following key
objectives: 1) complete financing activities and fully initiate business plan
implementation; 2) complete development and testing of a second generation
imaging system with fiberoptic capability to support clinical trials for product
registration; 3) Insure the continuity of intellectual property ownership and
basic research programs; and 4) continue to evaluate and prioritize new areas of
opportunity for our technology. We and our development partners firmly believe
that the platform technology developed by Mediscience and the City University
over the past ten years is paradigm shift, and has the potential to
significantly impact both the quality and the cost of healthcare. The Company
and the City University have developed and refined working prototypes that have
been validated in both pre-clinical and clinical trials at leading medical
institutions (e.g. Sloan Kettering Cancer Center, Cornell University New York
Medical Center, etc.); we are ready to begin the process of product
commercialization. With your support, we will make every effort to ensure that
the full potential of our technology is realized, and that our company plays a
leadership role in its introduction to the healthcare market.

For your continued information we have developed and launched a Mediscience web
site MEDISCIENCETECH.com There is a video on the site prepared by CUNY and
narrated by Dr. Alfano that you will find informative.


Peter Katevatis, Esq.
Chairman