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 29, 2001

[_] 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 28,2001

                          Commission File No. 33-51218

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

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

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

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, 2001 ($.18 per share) was: $
6,529,703.40 The number of shares outstanding of each of the registrant's
classes of common stock, as of May,30 2001 was: 36,276,130 The issuer had no
other classes of common equity outstanding as of that date.

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

Common Stock, par value $.01 per share                   36,276,130
Preferred Stock, par value $0.1 per share                     2,074


<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE:

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

     8-K Report, filed 11/23/99 Employment Agreement with. Frank S. Castellana,
M.D. as President and Chief Operating Officer of Mediscience Technology Corp are
incorporated by reference into Part 1 of this form.

     8-K Report, filed 4/20/2000 Mediscience Technology and Sarnoff Rsearch
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, 2001 and February 29, 2000

            Consolidated Statements of Operations for the years ended February
            28, 2001, and February 29, 2000 and February 28,1999

            Consolidated Statement of Stockholders Deficit for the years ended
            February 28, 2001, and February 29, 2000 and February 28,1999

            Consolidated Statements of Cash Flows for the years ended February
            28, 2001, and February 29, 2000 and February 28,1999

            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.  Exhibits, List and Reports on Form 8-K

                                     PART I

Item 1. Business

Introduction


<PAGE>

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
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
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

<PAGE>

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 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. That effort is dedicated and on-going in what has become a difficult
financial marketplace.

The principal issue facing the Company is a critical lack of the financial
resources and liquidity required to maintain business momentum and to properly
leverage our intellectual property assets; the resolution of this issue is the
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.

Two important and immediate 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. While we are actively working
to meet this deadline, there is no assurance that we will be successful, and if
not, that we will successfully negotiate an additional time extension. 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. If we are unsuccessful in our
negotiations, the Company may lose rights to several of its key patents.

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. On June 28,2000, the Company filed an application 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 Net Operating Loss (NOL) carryover to any New
Jersey corporate taxpayer for no less than 75% of the audited and allowable tax
benefit. On October 11 the company was informed that its application was audited
and approved and that it should receive its tax authorization before the end of
November 2000. The company is eligible to sell a maximum of $730,000 over a
three-year period. The Company has entered a three-year contract of sale to the
Public Service Electric and Gas Co. of New Jersey at 83.3% of the authorized
value. The company paid the Research Foundation $175,000 this year and City
University has agreed to accept receipts from the Company's tax sale to repay
the outstanding obligation over a two year period.

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.

<PAGE>

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.

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 preclinical 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.

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.

<PAGE>

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 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

<PAGE>

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, eliminate a significant amount of patient discomfort
for those patients determined to have cancer, and eliminate most of the trauma
for the 70% to 80% of the patients who are found not to have cancer.

We believe that our technology incorporated into one or more of our prototype CD
products will be useful in diagnosing and staging for more than half of the
various types of cancers. In addition to the pre-clinical and clinical
evaluations currently 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 2001. 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,
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.

<PAGE>

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.

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 year, $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 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

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
Research Foundation of CUNY for the Company's own purposes on a royalty-free,
non-transferable and non-exclusive

<PAGE>

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.

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

Competition

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

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
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 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.

<PAGE>

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
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.

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.

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.

Recent Patents Issued

<PAGE>

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

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

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

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

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

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

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

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

     U.S. Patent No. 5,983,125 issued November 9, 1999 METHOD AND APPARATUS FOR
IN-VIVO EXAMINATION OF SUBCUTANEOUS TISSUES INSIDE AN ORGAN OF A BODY USING
OPTICAL SPECTROSCOPY.

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

Scientific/Medical Advisory Board

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

Employees

As of February 29, 2000, the Company had two full-time employees, and one
retained consultant. 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.

ITEM 2. DESCRIPTION OF PROPERTIES

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

<PAGE>

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.

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

2001

1st Quarter       05/31/00              0.32           0.27
2nd Quarter       08/31/00              0.40           0.23
3rd Quarter       11/30/00              0.21           0.20
4th Quarter       02/28/01              0.17           0.17

2000

1st Quarter       05/31/99              0.34           0.11
2nd Quarter       08/31/99              0.34           0.14
3rd Quarter       11/30/99              0.45           0.20
4th Quarter       02/29/00              1.78           0.19

1999

1st Quarter       05/31/98              0.33           0.27
2nd Quarter       08/31/98              0.18           0.13
3rd Quarter       11/30/98              0.18           0.10
4th Quarter       02/28/99              0.16           0.10


     (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 .

     (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, 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 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 as income 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 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.


Year ending February 29, 2000 compared to year ended February 28, 1999.

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 The Company had no revenues during its fiscal
years ended February 29, 2000 ("its 2000 Fiscal Year") and February 28, 1999
("its 1999 fiscal year"). The Company's primary focus was the development of its
light-based technology. The Company's technology embedded in its design and
computer related format conforms to year 2000 requirements.

<PAGE>

General and Administrative Expenses increased approximately $274,600 or 43%
during its 2000 fiscal year as compared to its 1999 fiscal year. A principle
reason for the increase was the recognition of approximately $259,000 in costs
associated with the issuance of warrants to purchase stock of the Company in
exchange for services and employment costs. This amount included a warrant 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 development costs.

The increase in fiscal year 2000 was also attributable to an increase in travel
and entertainment expenses of $14,000, salaries and wage accruals for a new
corporate officer of $13,000 and professional fees of $73,000.

The principle reason for the increase in professional fees for fiscal year 2000
when compared to fiscal 1999, was in 1999, the Company reversed approximately
$145,000 of accrued professional fees in 1999 which were no longer required.

The increase in general and administrative expenses for fiscal year 2000 were
partially offset by a decrease in certain consulting of $25,000, administrative
secretarial of $25,000, fringe benefit accruals of $20,000 and general
administrative expenses of $16,000.

The Company's product development expense decreased approximately 70% or
$132,600 during the 2000 fiscal year when compared to the 1999 fiscal year.
During the 2000 fiscal year, the Company advanced $50,000 to CUNY for
reimbursement of patent costs. This represented a decline of approximately
$121,000 of development reimbursement costs to the City College of CUNY. The
balance of the decline in product development expense primarily represented a
decline in general research and monitoring costs.

Other expense (income) net decreased by approximately $12,000 in the 2000 fiscal
year when compared to the 1999 fiscal year. The decrease primarily represented a
decline of $11,000 of interest expense incurred in relation to a warrant issued
to a creditor in exchange for a loan in the 1999 fiscal year.

Liquidity and Capital Resources:

The Company has a deficiency in working capital as of February 28, 2001 of
approximately ($2,287,000) representing an increase in the deficiency
approximating ($265,000) during the 2001 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 islargely dependent upon obtaining regulatory approval for the
commercialization of its cancer detection technology. There can be no assurance
as to whether or when the various requisite government approvals will be
obtained or the terms or scope of these approvals. The Company intends to defray
the costs of obtaining regulatory approval for the commercialization of such
technology by the establishment of clinical trial arrangements with medical
institutions, similar to its agreement with Sloan Kettering Memorial Hospital.
The Company intends to continue to pursue the establishment of co-promotional
arrangements for the marketing, distribution and commercial exploitation of its
cancer detection technology. Such arrangements, if established, may include
up-front payments sharing of sales revenues after deduction of certain expenses,
and/or product development funding.

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

The Company has a deficiency in working capital as of February 29, 2000 of
approximately ($2,021,500) representing an increase in the deficiency
approximating ($535,000) during the 2000 fiscal year. The Company's ability to
maintain its operations throughout its history has been dependent upon the
periodic infusion of capital and the willingness of its creditors to accept
payment beyond normal terms.

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

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

<PAGE>

ITEM 7    Financials, Notes, Supplemental Data and Audit Letter


                          MEDISCIENCE TECHNOLOGY CORP.
                                 AND SUBSIDIARY

                       CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                      FEBRUARY 28, 2001, FEBRUARY 29, 2000
                              AND FEBRUARY 28, 1999
                                        &
                          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 accompanying consolidated balance sheet of Mediscience
Technology Corp. and subsidiary as of February 28, 2001, and the related
consolidated statements of operations, changes in stockholders' deficit and cash
flows for the year then ended. 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, and for each of the two years in the period
ended 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 audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the 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, 2001, and the results of
their operations and their cash flows for the year 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.


/s/ Parente Randolph, LLC
-------------------------
Parente Randolph, LLC




Philadelphia, Pennsylvania
April 19, 2001


                                       3

<PAGE>

<TABLE>
<CAPTION>
                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                     FEBRUARY 28, 2001 AND FEBRUARY 29, 2000
----------------------------------------------------------------------------------------------------

                                                                         2001               2000
----------------------------------------------------------------------------------------------------

                                     ASSETS
<S>                                                                  <C>                <C>
CURRENT ASSETS:
         Cash and cash equivalents                                   $      7,120       $     17,066
         Other assets                                                          --             20,191
                                                                     ------------       ------------

                               Total current assets                         7,120             37,257

EQUIPMENT, net of accumulated depreciation of
         $199,178 in 2001 and $195,390 in 2000                              4,800              8,588
                                                                     ------------       ------------

                                              TOTAL                  $     11,920       $     45,845
                                                                     ============       ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
         Accounts payable                                            $     14,943       $     39,396
         Accrued liabilities                                            2,127,028          1,877,456
         Officer and other loans                                          152,229            141,955
                                                                     ------------       ------------

                               Total current liabilities                2,294,200          2,058,807
                                                                     ------------       ------------

STOCKHOLDERS' DEFICIT:
         Preferred stock, $.01 par value, 50,000 shares
                authorized, 2,074 shares issued and outstanding                21                 21
         Common stock, $.01 par value, 100,000,000 shares
                authorized, 36,276,130 and 35,976,130 shares
                issued and outstanding in 2001 and 2000,
                respectively                                              362,761            359,761
         Additional paid-in capital                                    18,274,977         18,215,977
         Accumulated deficit                                          (20,920,039)       (20,588,721)
                                                                     ------------       ------------

                               Total stockholders' deficit             (2,282,280)        (2,012,962)
                                                                     ------------       ------------

                                              TOTAL                  $     11,920       $     45,845
                                                                     ============       ============
</TABLE>
--------------------------------------------------------------------------------
                 See Notes to Consolidated Financial Statements

                                       4

<PAGE>

<TABLE>
<CAPTION>
                   MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF OPERATIONS
                               FOR THE YEARS ENDED
           FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
----------------------------------------------------------------------------------------------------

                                                      2001               2000               1999
----------------------------------------------------------------------------------------------------
<S>                                               <C>                <C>                <C>
NET SALES                                         $         --       $         --       $         --

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

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

GENERAL AND ADMINISTRATIVE
         EXPENSE                                       615,563            910,043            635,406

PRODUCT DEVELOPMENT EXPENSE                                 --             56,540            189,168
                                                  ------------       ------------       ------------

                               Total expense           615,563            966,583            824,574

OTHER (INCOME) EXPENSE, INTEREST, NET                    1,311               (340)            11,332
                                                  ------------       ------------       ------------

LOSS BEFORE INCOME TAXES                              (616,874)          (966,243)          (835,906)

INCOME TAX BENEFIT                                     237,556                 --                 --
                                                  ------------       ------------       ------------

LOSS BEFORE EXTRAORDINARY ITEM                        (379,318)          (966,243)          (835,906)

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

NET LOSS                                          $   (331,318)      $   (966,243)      $   (835,906)
                                                  ============       ============       ============

BASIC AND DILUTED LOSS
         PER COMMON SHARE                         $      (0.01)      $      (0.03)      $      (0.02)
                                                  ============       ============       ============

WEIGHTED AVERAGE COMMON
         SHARES OUTSTANDING                         36,115,034         35,559,418         35,046,594
                                                  ============       ============       ============
</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, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                     ..PREFERRED STOCK..     ....COMMON STOCK....       ADDITIONAL
                                                                                                         PAID-IN       ACCUMULATED
                                                     SHARES      AMOUNT      SHARES        AMOUNT        CAPITAL         DEFICIT
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>        <C>          <C>            <C>            <C>
BALANCE MARCH 1, 1998                                 2,074     $   21     34,943,618   $    349,436   $ 17,573,096   $(18,786,572)

         Issuance of stock and warrants for cash                              200,000          2,000         48,000
         Issuance of stock for legal services                                 132,512          1,325        164,315
         Issuance of warrants                                                                                11,400
         Net loss                                                                                                         (835,906)
                                                      -----     ------   ------------   ------------   ------------   ------------

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 cash and 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 and warrants for services                           50,000            500         12,000
         Issuance of stock and warrants for cash                               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)
                                                      =====     ======   ============   ============   ============   ============
</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, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------

                                                                                   2001          2000         1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
         Net loss                                                               $(331,318)    $(966,243)    $(835,906)
         Adjustments to reconcile net loss to net cash
                used in operating activities:
                        Depreciation and warrant amortization                       3,788       214,043        23,396
                        Common stock and warrants issued for legal
                               and other services                                  24,500        56,543       165,640
                        Extraordinary gain on restructuring of payables           (48,000)           --            --
                        Changes in assets and liabilities:
                               Decrease (increase) in other assets                 20,191            --        (3,068)
                               (Decrease) increase in accounts payable            (24,453)       (7,712)       16,248
                               Increase in accrued liabilities                    297,572       506,249       523,281
                                                                                ---------     ---------     ---------

                                              Net cash used in operating
                                                     activities                   (57,720)     (197,120)     (110,409)
                                                                                ---------     ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from issuance of common
                stock and warrants                                                 37,500       111,400        50,000
         Proceeds net of repayments from officer
                and other loans                                                    10,274        77,846        64,109
                                                                                ---------     ---------     ---------

                                              Net cash provided by financing
                                                     activities                    47,774       189,246       114,109
                                                                                ---------     ---------     ---------

NET (DECREASE) INCREASE IN CASH
         AND CASH EQUIVALENTS                                                      (9,946)       (7,874)        3,700

CASH AND CASH EQUIVALENTS, BEGINNING                                               17,066        24,940        21,240
                                                                                ---------     ---------     ---------

CASH AND CASH EQUIVALENTS, ENDING                                               $   7,120     $  17,066     $  24,940
                                                                                =========     =========     =========

SUPPLEMENTAL SCHEDULE OF NONCASH
         FINANCING ACTIVITIES,
                Common stock and warrants issued for
                        legal and other services rendered                       $  24,500     $  56,543     $ 165,640
                                                                                =========     =========     =========
</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
               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 ("CUNY") to develop
               proprietary imaging technology for medical purposes. The
               development and commercialization of non x-ray based optical
               mammography and optical tomography products with greater
               effectiveness, decreased side effects and improved cost
               efficiencies are the objective of this collaboration. The
               collaboration will focus on noninvasive methods to image
               subsurface tumors in the breast, brain, etc. CUNY through a NSASA
               Institutional Research Award, through a Navy grant, and through
               the New York State HEAT program, anticipates more than $3,800,000
               of funding over a five year period to support this collaboration
               agreement. GE did not disclose the amount it intends to spend on
               the development and commercialization of the Company's
               proprietary technology. To date no funding has been received
               pursuant to this collaboration agreement.

               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, 2001. 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.

         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.


                                       9
<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


         OTHER ASSETS

               Included in other assets at February 29, 2000 is a receivable
               from the U.S. Army in the amount of $20,191. The Company is due
               the money for reimbursement of research and development expenses.

         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 $3,788, $5,820 and $11,996 in the years
               ending February 2001, 2000 and 1999, respectively.

         LONG-LIVED ASSETS

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

         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.

         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

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

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

         Pursuant to the terms of an employment agreement, Mr. Hugill, was to be
         paid $50,000 per annum, was issued options to purchase 200,000 shares
         of the Company's stock (Note 9), and was to receive warrants to
         purchase shares equal to 5% of the number of common shares outstanding
         on January 18, 1996 (or up to 10% as of such date at the discretion of
         the Board of Directors) at an option price of $1.00 per share, upon the
         attainment of certain milestones in the future. On January 31, 1997,
         Mr. Hugill resigned as President and Chief Executive Officer of the
         Company and the 200,000 options were cancelled. The warrant agreement
         was amended and effective January 31, 1997, Mr. Hugill was granted a
         warrant to purchase up to 473,220 shares of the Company's common stock
         at a price of $1.00 per share. This warrant is exercisable at any time
         through July 2003 except for 315,480 shares which is exercisable only
         upon the attainment of certain milestones. Compensation expense will be
         recognized for the difference between the warrant price and the fair
         market value of the stock at the date that the milestones are attained.
         As of February 28, 2001, no milestones have been achieved.

         In addition, the Company issued 50,000 shares of common stock to Mr.
         Hugill upon his termination. The Company recorded $37,500 as
         compensation expense for the fair value of the shares issued.

         In February 1997, Mr. Katevatis resumed the role as President and Chief
         Executive Officer. Accordingly, the employment agreement with Mr.
         Katevatis was amended for an annual salary of $200,000 per year. In
         August 1999, the Board of Directors approved the extension of Mr.
         Katevatis's existing contract from March 5, 2002 to March 5, 2007,
         maintaining all other original contract terms and conditions.


                                       11

<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



         Legal services rendered by Mr. Katevatis amounted to $50,000 for each
of the three years ended February 28, 2001. These amounts have been charged to
operations.

         In 2000 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, 2001 and February 29, 2000, the balance of the officer and other
         loans payable to Mr. Katevatis was $117,229 and $111,229, respectively.
         Mr. Katevatis loaned additional money to the Company subsequent to
         February 28, 2001 in order to continue to sustain operations.

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

         In addition, 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 $11,059, $10,732 and $7,777 in 2001, 2000 and 1999,
         respectively.

         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 is to be paid
         $100,000 per annum. In addition, he was issued options to purchase up
         to 914,373 shares of the Company's common stock at an option price of
         $.32 per share and 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. 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.

                                       12

<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


 3.      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, 2001 and February 29, 2000. Accrued interest on
         the notes at February 28, 2001 and February 29, 2000 totaled $3,201 and
         $726, respectively.


 4.      ACCRUED LIABILITIES

         Accrued liabilities consist of the following:


                                                      2001              2000
                                                      ----              ----
               Legal and professional fees        $  180,100        $  258,600
               Research and development              962,399           974,067
               Salaries and wages                    943,833           618,834
               Other                                  40,696            25,955
                                                   ---------         ---------

                                                  $2,127,028        $1,877,456

         Included in legal and professional fees as of February 28, 2001 and
         February 29, 2000 is $137,500 and $87,500, respectively, for legal
         services rendered by Mr. Katevatis (Note 2).

         Included in research and development as of February 28, 2001 and
         February 29, 2000 is $635,318 and $471,986, respectively, owed to Dr.
         Alfano (Note 8) with respect to his consulting agreement.

         Included in salaries and wages as of February 28, 2001 and February 29,
         2000 is $806,333 and $618,834, respectively, owed to Mr. Katevatis and
         $137,500 and $0, respectively, owed to Mr. Castellana in accordance
         with their respective employment agreements.


                                       13

<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



 5.      INCOME TAXES

         Income taxes consist of the following:

                                      2001         2000         1999
                                      ----         ----         ----

               Current              $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 year ended February 28, 2001 was $237,556.

         As of February 28, 2001, the Company has net operating loss
         carryforwards of approximately $11,100,000 for federal purposes and
         $5,300,000 for state purposes which may be used to reduce future income
         subject to income taxes and expire in various amounts from 2001 to
         2016. As a result of these loss carryforwards, as of February 28, 2001,
         the Company had a deferred tax asset of approximately $4,300,000, for
         which valuation allowances for the entire amounts were provided.


 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.


                                       14

<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


 8.      COMMITMENTS AND CONTINGENCIES

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

         The Company has committed to fund approximately $295,000 over a
         twelve-month period beginning June 1, 1995 for Mediphotonics Laboratory
         research at the City College of the City University of New York
         ("CCNY") under a contract which is renewed annually. The Company has
         funded CCNY approximately $157,565 for the twelve-month periods ended
         May 31, 1999. The Company did not provide any funding during the years
         ended February 28, 2001 and February 29, 2000 except for $50,000 in
         2000 to reimburse CCNY for patent costs.

         In connection with the acquisition of patent rights to its cancer
         detection technology, the Company assumed an obligation to pay to Dr.
         Alfano's daughter a royalty of one percent of the gross sales derived
         from any equipment made, leased or sold which utilizes the concepts
         described in the Company's cancer detection patent. Additionally, the
         Company is to pay a royalty equal to three and one half percent of the
         gross sales of any invention from the Company's existing patents or
         newly obtained patents, respectively. No amounts have been paid during
         the three years ended February 28, 2001.

         In addition to the above royalties, the Company has obtained worldwide
         licensing rights for patents from two universities and has agreed to
         pay royalties of four percent of the net sales of all products
         generated from the patents and fifty percent of any income received
         from sublicensing of the patents. No amounts have been paid during the
         three years ended February 28, 2001.


                                       15

<PAGE>

MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


 9.      STOCKHOLDERS' EQUITY

         PREFERRED STOCK

               The Company is authorized to issue 50,000 shares of preferred
               stock, $.01 par value per share, which may be issued from
               time-to-time in one or more series, the terms of which may be
               designated by the Board of Directors without further action by
               shareholders. The Board of Directors has designated 2,074 shares
               of preferred stock as series A preferred stock, all of which
               series is issued and outstanding as of February 28, 2001. Any
               preferred stock issued will have preferences with respect to
               dividends, liquidation and other rights, but will not have
               preemptive rights.

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

         PRIVATE PLACEMENT AND OTHER OFFERINGS

               During fiscal 1997, the Company successfully completed a private
               placement offering (the "97 Offering") of 2,666,667 shares of its
               common stock for proceeds to the Company of approximately
               $2,000,000. In connection with the 97 Offering, the Company
               issued warrants to purchase 400,000 shares of the Company's
               common stock at an exercise price of $1.00 per share. The
               warrants are exercisable, at the option of the holder, at any
               time through March 27, 2003. During 1999, the Company issued
               200,000 shares of the Company's common stock and 200,000 warrants
               to purchase the Company's common stock at an exercise price of
               $.25 per share for $50,000. The warrants expire in 2003. During
               2000, the Company issued 300,000 shares of common stock and
               warrants to purchase 300,000 shares of the Company's common stock
               at an exercise price of $.25 per share for $75,000. The warrants
               expire in 2003. 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 2003.


                                       16

<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


         COMMON STOCK/WARRANTS ISSUED FOR SERVICE

               During 1999, the Company issued 132,512 shares of restricted
common stock for various legal and consulting services provided to the Company.

               During 2000, the Company issued 300,000 shares of common stock
               and warrants to purchase 266,666 shares of the Company's common
               stock at an exercise price of $.25 to $.75 per share for cash and
               services. In addition, during 2000 the Company 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. The number
               of shares under the warrant was determined based on the fair
               market value of the services provided ($110,163).

               During 2001, the Company issued 50,000 shares of restricted
               common stock at a value of $7,500 and warrants 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.

         STOCK OPTIONS

               Prior to fiscal 1996, all stock options were issued at the
               discretion of management. In fiscal 1996, the Company adopted the
               1996 incentive stock option plan (the "Plan") which provides for
               granting of incentive stock options ("ISO's") to employees.
               Options vest over a period of time as determined by the Board of
               Directors upon the granting of such options, except that no
               option shall be exercisable in whole or in part prior to the
               first anniversary of the date of granting of such option. Options
               are exercisable 10-years from the grant date. The exercise price
               of ISO's granted under the Plan will not be less than 100% of the
               fair market value on the date of grant (110% for ISO's granted to
               more than 10% stockholders).

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

                                       17

<PAGE>


MEDISCIENCE TECHNOLOGY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



               Stock option activity during the three year period ended February
               28, 2001, was as follows:

<TABLE>
<CAPTION>
                                                                                      WEIGHTED
                                                                        EXERCISE      AVERAGE
                                                                          PRICE       EXERCISE
                                                         SHARES           RANGE        PRICE
                                                         ------           -----        -----
<S>                                                     <C>            <C>            <C>
                  Outstanding, February 28, 1999          235,000      $1.00-$2.00    $   0.95
                  Granted                                 914,373      $       .32    $    .32

                  Outstanding, February 29, 2000        1,149,373      $.32-$2.00     $    .55

                  Outstanding, February 28, 2001        1,149,373      $.32-$2.00     $    .55
</TABLE>


               Pro forma information regarding net loss is required by SFAS 123
               and has been determined as if the Company had accounted for its
               stock options under the fair value method of SFAS 123. If the
               alternative method of accounting for the plan prescribed by SFAS
               123 had been followed in the year ended February 28, 1999, the
               Company's net loss would not have been materially different.

         STOCK WARRANTS

               Stock warrant activity during the three year period ended
               February 28, 2001, 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


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


                                       18

<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
----                   ---             --------

Peter Katevatis        67         Chairman of the Board,
                                   Chief Executive Officer
                                  and Treasurer

John M. Kennedy        64         Vice President and Secretary

William Armstrong      84         Director

Mathew Culligan        81         Director

Michael N. Kouvatas    74         Director

John P. Matheu         79         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

     Peter Katevatis has served as Chairman of the Board of Directors since
1993. He served as President and Chief Executive Officer of the Company from
November, 1983 until the appointment of Herbert L. Hugill and served as director
of the Company since 1981. From 1981 until his election as President and Chief
Executive Officer, Mr. Katevatis was a Vice President of the Company. Mr.
Katevatis was elected Treasurer of the Company in January, 1996. Mr. Katevatis
has been a practicing attorney in Philadelphia, 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. 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,

<PAGE>

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. 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

     Mathew Culligan has served as a director of the Company since March, 1990.
Since 1988, Mr. Culligan has served as Chairman and Chief Executive of Culligan
/ Kahn Associates, a broadcast production company located in New York, New York.
Mr. Culligan, in 1984 founded Environmental Monitor, a non-profit organization
dedicated to providing a computerized service of environmental conditions and
currently serves as its Chairman. Mr. Culligan has at various times during his
career, served as 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.
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."

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

<PAGE>

College. From 1964 to 1972, he was a member of the technical staff of General
Telephone & Electronics Laboratories. Dr. Alfano received an Alfred P. Sloan
Fellowship Research corporation Award and was made a Fellow of the American
Physical Society in 1976. In 1983 he received the Outstanding Italian-American
Award for Science. In May, 1989, Dr. Alfano was elected a Fellow of the Optical
Society of America for his studies of ultra fast phenomena. He has been a
consultant to several major corporations including GTE, Clairol, Phillips Dental
and Hamamatsu Photonics. Dr. Alfano is on the advisory board of Photonics
Spectra Magazine. He is a reviewer for prestigious professional journals in the
fields of physics, optics, photo biology, photochemistry and biophysics. He
received his B.S. and M.S. degrees in Physics from Fairleigh Dickinson
University in 1963 and 1964, respectively. He received his Ph.D in Physics from
New York University in 1972.

Stimson P. Schantz, M.D. is Director of Cancer Prevention, Department of Surgery
Cornell University Memorial Sloan-Kettering Cancer Center, New York. Dr. Schantz
has been appointed as the 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 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, 2000,
February, 28 1999, February 28, 1998 and February 28, 1997 whose compensation
exceeded $100,000.

                           SUMMARY COMPENSATION TABLE

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

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

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


<PAGE>

(2)  Includes payment to Mr. Katevatis of $50,000 for legal services rendered
     during each of the fiscal years ending in February 29,2001,February 28,2000
     February 28,1999, February 28, 1998 (fiscal years 2001 2000, 1999, 1998
     respectively), and fringe benefits under his employment agreement
     automobile expense $7,318, auto insurance $705.00, and health insurance
     $3,954. Contract benefits for 2000; 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
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 29, 2000 (see Notes to Consolidated Statements).
In addition the following table sets forth the values for "in-the-money"
options, which represent the positive spread between the exercise price of the
existing options and $0.875 which was the closing price for the Company's Common
Stock in the over-the-counter market on February 29, 2000.

                     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:

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

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

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
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                          Amount of Beneficial         Percentage of
Name and Address                               Ownership                  Class
----------------                          --------------------         -------------
<S>                                               <C>                      <C>
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
</TABLE>

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

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

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

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

(4)  Excludes 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.


<PAGE>


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

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

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

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

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

The foregoing table does not include options granted to former placement agents
of the Company's securities to purchase 111,912 shares of Common Stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 1, 1988, the Company acquired from Dr. Robert Alfano, a principle
stockholder of the Company and Chairman of the Scientific Advisory Board, all of
the issued and outstanding stock of Laser Diagnostic Instruments, Inc. whose
only asset was US patent number 4,930,516 (previously defined as "LDI") in
exchange for 1,500,000 shares of the Company's Common Stock. 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.

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

Peter Katevatis Pres/CEO and Dr. Alfano principle scientific advisor have agreed
to forbear any and all collection action against Mediscience for accrued salary
and related contractually entitled items including forgiveness of interest in
exchange for the option of converting such accrued debts into MTC common stock
on the basis of (0.25 cents), which is above the average High Bid price on June
9 through the 12th 1998, which was 0.15 cents. Said option to be unlimited in
duration. Should MTC receive funding Katevatis and Alfano may elect to receive
all or part of such accrued debt in cash/shares. This right shall be assignable
in whole or in part without condition to any assignee or heirs and in no way is
intended to negate the corporate debt accrued and owing to Katevatis/Alfano.
This offer by Katevatis/Alfano was unanimously accepted by the Board of
Directors December 4, 1998 and continues in effect. On August 18, 1999 the board
of directors unanimously extended Mr. Katevatis's existing contract expiration
date from March 5, 2002 to March 5, 2007, maintaining all other original
contract terms and conditions, in recognition of his personal financial
investment in the Company, the periodic voluntary non-assertion of his
contractual anti-dilution rights and other significant consideration to the
Company. On August 18, 1999 Dr. Alfano agreed to extend his agreement, on the
same original contract terms and conditions, from its expiration date of March
5, 2002 to March 5, 2007.

On November 17, 1999 the Company entered into a three year employment agreement

<PAGE>

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 April 1, 2001 Dr. Castellana waived all salary except documented
Expenses.

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

(a)  Exhibits.

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

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

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

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

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

10.08    Research Agreement between the Research 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)


<PAGE>

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)

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

<PAGE>

(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)

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


<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

(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 19, 2000                  By: Peter Katevatis, Chairman of the Board
                                          and Chief Executive Officer