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 JUNE 30, 2002

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

           FOR THE TRANSITION PERIOD FROM _________ TO ______________

                        COMMISSION FILE NUMBER 000-27592

                              SCANTEK MEDICAL INC.
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  DELAWARE                                       84-1090126
         -----------------------------                      --------------------
       (State or Other Jurisdiction                            (I.R.S.Employer
         Incorporation                                    or Identification No.)
         of Organization)

                  4B WING DRIVE, CEDAR KNOLLS, NEW JERSEY 07927
                                 (973) 401-0434
             ------------------------------------------------------
             (Address and telephone number, including area code, of
                    registrant's principal executive office)

                       321 Palmer Road, Denville, NJ 07834
              (Former name, former address and former fiscal year,
                          if changed since last report)

        Securities registered pursuant to Section 12(b) of the Act: NONE

         Securities registered pursuant to Section 12(g) of the Act:
        COMMON STOCK, $.001 PAR VALUE

         Indicate by check mark 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 [  ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not 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. [ ]

         Aggregate market value of voting stock held by  non-affiliates
as of September 30, 2002 was approximately $891,994 (based upon the closing
sales price of those shares reported on the National Association of Securities
Dealers Bulletin Board for that day).

 Number of shares of Common Stock outstanding as of October 1, 2002: 29,255,156.

         DOCUMENTS INCORPORATED BY REFERENCE:        NONE


<PAGE>



                              SCANTEK MEDICAL INC.

                                      INDEX
Part I
           Page
         Item 1.  Business                                                    1

         Item 2.  Properties                                                 21

         Item 3.  Legal Proceedings                                          21

         Item 4.  Submission of Matters to Vote of
                           Security Holders                                  21

Part II

         Item 5.  Market for Registrant's Common Equity
                           and Related Stockholders Matters                  22

         Item 6.  Management's Discussion and Analysis
                           of Financial Condition and Results
                           of Operations                                     27

         Item 7.  Financial Statements                                       33*

         Item 8.  Changes in and Disagreements with
                           Accountants on Accounting and
                           Financial Disclosure                              34
Part III

         Item 9.  Directors and Executive Officers;                          34
                           Promoters and Control Persons;
                           Compliance with Section 16(a)
                           of the Exchange Act

         Item 10.          Executive Compensation                            36

         Item 11.          Security Ownership of Certain Beneficial
                           Owners and Management                             38

         Item 12.          Certain Relationships and
                           Related Transactions                              41
 Part IV

         Item 13.          Exhibits and Reports on Form 8-K                  43

         Signatures                                                          48

         * Page F-1 follows page 33


<PAGE>



                                     PART I

     All statements  contained herein that are not historical facts,  including,
but not limited to, statements  regarding  anticipated growth in revenue,  gross
margins and  earnings,  statements  regarding  the  Company's  current  business
strategy,  the Company's  projected  sources and uses of cash, and the Company's
expectations,  are forward-looking  statements in nature and involve a number of
risks and uncertainties. Actual results may differ materially. Among the factors
that  could  cause  results  to  differ   materially  are  the  following:   the
availability  of sufficient  capital to finance the Company's  business plans on
terms  satisfactory  to the Company's  competitive  factors;  the ability of the
terms  satisfactory  to the Company's  competitive  factors;  the ability of the
Company to adequately  defend or reach a settlement of  outstanding  litigations
and  investigations  involving the Company or its management;  changes in labor,
equipment  and capital  costs;  changes in  regulations  affecting the Company's
business;  future acquisitions or strategic  partnerships;  general business and
economic  conditions;  and  other  factors  described  from  time to time in the
Company's reports filed with the Securities and Exchange Commission. The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking  statements.  These  statements are made pursuant to the Private
Litigation Reform Act of 1995 and, as such, speak only as of the date made.

ITEM 1.  BUSINESS

GENERAL

     Scantek  Medical,  Inc.  (OTCBB:  SKML.OB)  (the  "Company"),   a  Delaware
corporation, was organized under the name "Jenncor Acquisition Inc." on June 10,
1988, to obtain  funding for  prospective  business  opportunities  available to
publicly held entities.  Until October 3, 1991,  when the Company  exchanged its
shares with Scantek Digital Systems Inc.  ("SDSI"),  the Company's only business
activities  involved  raising  capital  through a public  offering  pursuant  to
Regulation A of the Securities Act of 1933, as amended (the "Act").  Pursuant to
the share  exchange  between the  Company  and SDSI,  the then holder of several
patents     relating     to    a     medical     product     known     as    the
BreastCare(TM)/BreastAlert(TM),     Differential    Temperature    Sensor/Breast
Abnormality  Indicator  (the  "BreastCare(TM)/BreastAlert(TM)"),  SDSI  became a
wholly-owned subsidiary of the Company. The Company was formerly a developmental
stage company and became fully operational in early 1999.

     On June 6, 2000, the Company  opened its web site,  www.scantekmedical.com.
The web site provides  information  about the Company and its business,  and its
principal product,  BreastCare(TM)/BreastAlert(TM).  Also included are summaries
of clinical studies,  sales and distribution  progress and plans, press releases
and financial  information,  participation at medical conferences,  and links to
other sites for information on breast cancer.







                                       -1-


<PAGE>




     The Company is headquartered in Cedar Knolls New Jersey, where it maintains
approximately  14,000 square feet of manufacturing and administrative  space. At
this facility,  the Company has two production lines in which to manufacture the
BreastCare(TM)/BreastAlert(TM).  These production lines are capable of producing
two million units per shift annually.  The Company  maintains an  administrative
staff and intends to add to its staff in key functional  areas,  pending funding
of the  Company  and  revenue  from sales of the  BreastCare(TM)/BreastAlert(TM)
units.

     The  Company is a medical  company  engaged in  developing,  manufacturing,
selling and  licensing of products and devices to assist in the early  detection
and  diagnosis  of  disease.  At the  present  time,  the Company is focusing on
manufacturing,   selling  and  licensing  the  Company's   first  product,   the
BreastCare(TM)/BreastAlert(TM)  in response  to the global  demand for the early
detection of breast  disease,  a major threat to women's health in developing as
well as industrial countries. In today's health care environment, containment of
medical care cost is a major  priority.  The Company has focused its business on
easy to use low cost  products and devices for its  domestic  and  international
markets,  which  will  have  an  impact  on  preventive  health  care  and  cost
containment. The  BreastCare(TM)/BreastAlert(TM) has United States Food and Drug
Administration ("FDA") marketing clearance;  the  BreastCare(TM)/BreastAlert(TM)
is to be used by  physicians  as an  adjunct  to  clinical  breast  examination,
mammography  and  other  established  procedures  for the  detection  of  breast
disease. The BreastCare(TM)/BreastAlert(TM) is a single-use,  non-invasive, easy
to use and  cost-effective  test to alert the physician to the  possibility of a
physiological condition that may be thermally active cancer.

     The  BreastCare(TM)/BreastAlert(TM)  can detect cellular  abnormalities  as
small as one-half  centimeter in diameter as  established  through biopsy proven
tumors.   The   Company   believes   that  this   technology   upon   which  the
BreastCare(TM)/BreastAlert(TM)  is based  will be  useful in  measuring  certain
other body disorders.

THE PRODUCT

     At present, the fear of breast cancer continues to escalate,  comparatively
because little is actually known with respect to managing  breast cancer.  It is
estimated  worldwide,  that each year,  over 300,000  women will die from breast
cancer. In fact, according to the America Cancer Society, this grave disease has
been identified to be the medical issue of highest  priority for women's health.
Moreover,  it cannot be predicted  who will develop this  epidemic  cancer;  any
woman at any age may develop breast cancer.  Breast cancer is the second leading
cause of death for women in the U.S.,  but the most common for women between the
ages of 35 and 54. Worldwide,  breast cancer ranked highest as the leading cause
of cancer deaths for women.  Early  detection and diagnosis of breast cancer are
important in the reduction of mortalities.



                                       -2-


<PAGE>




     In the United States,  American women are afforded with a preventive health
measure,  mammography.  In  developing  countries  however,  mammography  is not
readily  available to women,  even for those women who have the resources to pay
for  such.  There is a void  between  manifestation  of the  breast  cancer  and
detection due to unavailable screening systems. Failure to intervene during this
period may  significantly  reduce the likelihood of survival  because the cancer
then  metastasizes.  The American Cancer  Society,  on Cancer Facts & Figures in
2002, reported that if cancer is localized at the time of diagnosis,  there is a
96%  chance  of a  5-year  survival  rate,  which  has  risen  from 72% in 1940.
Nevertheless,  in spite of research and efforts to detect  breast  cancer in the
early stages, the rate of mortality due to breast cancer in developing countries
has consistently increased over the past four decades.

     Management  believes that the  BreastCare(TM)/BreastAlert(TM)  will help to
detect  breast  cancer  in  its  early  stages.  Management  believes  that  the
BreastCare(TM)/BreastAlert(TM)  will assist in the recognition of abnormal early
cellular  development  by recording the heat  differentiation  of  corresponding
areas of the breast. The BreastCare(TM)/BreastAlert(TM) is not a definitive test
for cancer (i.e., a biopsy, the removal and examination of, usually microscopic,
tissue from the living body,  performed to establish a precise diagnosis) but is
a  risk  marker  to  identify  and  follow  breast  abnormalities  by  means  of
temperature conductivity integration when used adjunctly with clinical palpation
and mammography.

     One of the  important  biological  activities  of  malignant  tumors is the
increased rate of growth as compared to the  surrounding  or "host" tissue.  The
malignant propensities are directly related to the speed of cell division;  this
in turn is  reflected  by  accelerated  local  metabolism,  which is  adequately
supported  by  increased  blood  and  lymphatic  vascularity.  These  biological
alterations  can be detected by measuring  temperature  differences in the tumor
and its immediate environment,  or by comparing to the same area of the opposite
breast.

     The  BreastCare(TM)/BreastAlert(TM)  is designed to assist in the detection
of pathology of the breast by recognizing  "significant" heat differences in the
underlying   tissue  of  a   particular   area,   by   comparing   corresponding
(mirror-image)   segments  of  one  breast  to  the  other.  The  cause  of  the
hyperthermia   cannot  be  determined  by  this  test  alone;   therefore,   the
BreastCare(TM)/BreastAlert(TM)  serves as an early  warning  signal to alert the
doctor to the fact that there is  evidence  of a  pathological  process,  one of
which could be thermally active breast cancer, which should be further evaluated
within a particular area of the breast.

     The  BreastCare(TM)/BreastAlert(TM) is designed to complement, not replace,
conventional  breast abnormality  screening methods and devices.  It is intended
for use by women of all ages.  The  BreastCare(TM)/BreastAlert(TM)  is available
for a routine,  primary office care procedure used by physicians,  gynecologists
and other medical  specialists  as part of a breast disease  monitoring  program
adjunctively  with Breast Self Examination  (BSE),  Clinical Breast  Examination
(CBE),  (depending  upon a patient's  age,  family  history,  and other factors)
mammography and other established clinical procedures.



                                       -3-



<PAGE>




     The basis for the  BreastCare(TM)/BreastAlert(TM)  is based upon data going
back a number  of years  which  show  that  blood on the  venous  side of breast
cancers is warmer than blood on the arterial side of the lesion. This indication
of heat  generation is presumably due to increased  metabolic rate of neoplastic
tissue, including more rapid cell division,  angiogenesis, etc. However, heat is
not  specific  to  neoplasia  and may for  example be due to  inflammation.  The
presence  of  asymmetrical  patterns  (one  side is  warmer  than the other by 2
degrees    Fahrenheit)   is   a   sign   that   may   be   detected   with   the
BreastCare(TM)/BreastAlert(TM).

     The  BreastCare(TM)/BreastAlert(TM)  consists  of a pair  of  mirror-image,
non-invasive,  lightweight,  disposable  soft  pads,  each of  which  has  three
wafer-thin foil segments  containing  columns of heat sensitive chemical sensors
that change color from blue to pink reflecting an 8.5 degree  temperature  range
between 90 and 98.5 Fahrenheit.  When placed against a woman's breast inside her
brassiere  for  a  period  of  15  minutes,  the  BreastCare(TM)/BreastAlert(TM)
registers  the  temperature  variations  due to heat  conducted  from within the
breast  tissue to the  surface of the skin.  The result will be  digitally,  not
analogically,  indicated  by  color  changes  for  each  temperature  gradation.
Significant  temperature  differences (2 degrees Fahrenheit or four bars) in the
corresponding  areas of the breast may indicate an abnormal  unilateral  thermal
activity  long  before  a  lump  is  discovered  by  self-examination,  clinical
examination or other  detection  methods such as mammography,  ultrasound,  etc.
Accordingly,  by comparing the mirror-image  temperature differences between the
two breasts  registered by the  BreastCare(TM)/BreastAlert(TM),  a determination
can be made as to whether a sufficient abnormality is present to warrant further
site-specific testing by other diagnostic techniques, including, but not limited
to mammography and/or biopsy. The  BreastCare(TM)/BreastAlert(TM)  test does not
replace recommended guidelines for scheduled mammographic screening.

     The BreastCare(TM)/BreastAlert(TM) is a safe, non-invasive,  economical and
easy to use test. The  BreastCare(TM)/BreastAlert(TM),  which is disposable, can
be administered and evaluated by health care providers after minimal instruction
and a  permanent  record  of  results  can be  placed  in the  patient's  files.
Management  believes that the utilization of the  BreastCare(TM)/BreastAlert(TM)
is cost effective and when used in combination with a mammographic work-up or at
intervals  of  recommended  screenings,  will have an  impact  on breast  cancer
mortality and improve a woman's preventive health strategy.












                                       -4-


<PAGE>



SCIENTIFIC BASIS

     Infrared  thermography  for the evaluation of breast lesions was introduced
in 1956,  and  systems  employing  thermosensitive  liquid  crystal  films  have
generated  renewed  interest  since  1978.  Studies  by Dr.  Michael  Gautherie,
University  of  Strasbourg,  France and others  dating  from 1970 have  directly
evaluated  the heat of cancerous  breast  tissue  compared  with that of healthy
breast tissue. These studies found that tumor temperature was always higher than
the  surrounding  temperature  and  suggested  that the  increase  in tumor heat
resulted from an increased  metabolism.  Furthermore,  two other  phenomena were
found  to  occur:  (i)  tumor  heat  was  found  to be  transported  within  the
surrounding  breast tissue  (principally by blood convection  through the veins)
resulting in local or diffuse  increases in skin  temperature  and (ii) vascular
changes were observed in the tumor area and further in the  subcutaneous  breast
tissues. In short, both hyperthermia and hypervascularization were found to have
occurred in the tumor and at its periphery, in comparison to the temperature and
blood flow of healthy tissue in the  contralateral  breast.  Further research by
Dr.  Gautherie and others has demonstrated an unequivocal  relationship  between
the  metabolic  heat  production of cancer tissue and the doubling time of tumor
volume: the faster the tumor grows the more heat it generates.

     The   BreastCare(TM)/BreastAlert(TM)   measures  underlying  breast  tissue
temperature and not skin surface  temperature by retaining emitted heat when the
BreastCare(TM)/BreastAlert(TM)  is placed  against the breast.  It differs  from
preexisting infrared and liquid crystal thermography techniques, which allow the
heat to escape or radiate during measurement. The BreastCare(TM)/BreastAlert(TM)
takes into  consideration  that the  average  temperature  patterns of a healthy
woman's breast are closely  symmetrical.  This method detects  abnormalities  by
comparing the temperature differences in the corresponding mirror image areas of
a woman's breast.

     Recently, the scientific foundation for the  BreastCare(TM)/BreastAlert(TM)
effectiveness has been  considerably  strengthened.  Comprehensive  research has
established in detail the mechanisms by which  malignancies  radically alter the
host  tissue   environment,   notably  through  two  quantitatively   measurable
processes:  (i) A  tumor  significantly  elevates  overall  rates  of  metabolic
activity and (ii) A tumor greatly intensifies capillary  vascularization in host
tissues. In particular,  this latter process of angiogenesis was a very critical
finding  because it is the probable  mechanism by which cancers with an enhanced
mestastic  potential  prepare to invade the host. These are only two of a number
of measurable  host  alterations  and each is associated  with  asymmetric  heat
distribution.





                                       -5-


<PAGE>




SUMMARY CLINICAL TESTING HISTORY

     Development and clinical trials of the BreastCare(TM)/BreastAlert(TM)  were
completed    between   1980   and   1984.   This   testing   showed   that   the
BreastCare(TM)/BreastAlert(TM)  is  capable of  detecting  lesions in the breast
earlier than through clinical  examination by sensing  metabolic  changes in the
breast.  Biopsy and screening clinical trials were conducted at well-established
U.S.   institutions   to  assess  and  validate   BreastCare(TM)/BreastAlert(TM)
usefulness in detecting  breast cancer at Memorial  Sloan-Kettering  Hospital in
New York, at M.D.  Anderson  Memorial  Hospital in Houston,  at Brotman Memorial
Hospital at UCLA,  and at Guttman Breast  Diagnostic  Institute in New York. The
BreastCare(TM)/BreastAlert(TM)  was  found  to  be  accurate  in  terms  of  the
documented sensitivity of the BreastCare(TM)/BreastAlert(TM)  (true positive for
cancer)  and  specificity  (true  negatives - no cancer  detectable  by accepted
medical  methods)  in relation  to the biopsy  (the "Gold  Standard"  diagnostic
procedure), clinical breast examination and mammography.

     BreastCare(TM)/BreastAlert(TM)  Test Results vs.  Biopsy  Findings:  In the
first  study  in 1984,  the  BreastCare(TM)/BreastAlert(TM)  was the  focus of a
clinical  trial  involving 179 women who underwent a biopsy.  This  multi-center
study was conducted at three  prestigious  cancer  institutions:  M.D.  Anderson
Hospital and Tumor Institute,  Memorial  Sloan-Kettering  Hospital,  and Brotman
Memorial Hospital.  The  BreastCare(TM)/BreastAlert(TM)  tested positive for the
suspicion of cancer in 93 of the 112 women who were diagnosed  with cancer,  for
an overall  sensitivity  index of 83.0% and was notably  stronger  in  detecting
unilateral  cancers  - a  sensitivity  index of  88.1%  (that  is,  74 of the 84
unilateral cancers diagnosed). The frequency of false negatives was higher among
patients who underwent  biopsies of both breasts (less than 3% of breast cancers
are believed to be bilateral generally).

     The biopsy  results were subjected to a breakdown by the size of the cancer
detected and the patient's  age. The threshold  tumor size  detectable  with the
BreastCare(TM)/BreastAlert(TM)  is  five  millimeters  and  up,  an  early-stage
cancer;  out of a total  of eight  cancers  under  1.0  centimeters  which  were
diagnosed  during  the  screening   study,   seven  tested  positive  using  the
BreastCare(TM)/BreastAlert(TM).         It        appears        that        the
BreastCare(TM)/BreastAlert(TM)   has  the  proven   ability  to  detect   small,
early-stage  cancers  which are most  likely  to be  associated  with  favorable
treatment outcomes. Moreover, a breakdown of the  BreastCare(TM)/BreastAlert(TM)
results by age suggests an  especially  high  efficacy in  detecting  suspicious
abnormalities  in younger  women.  This is  noteworthy  because a  pre-screening
method is  critically  needed for women  under 50 who have not been urged or who
have  chosen not to seek a mammogram  on an annual  basis,  since  fast-growing,
potentially  aggressive  cancers  are  associated  with  the  women  in this age
distribution. The BreastCare(TM)/BreastAlert(TM)  will be used adjunctively with
palpation and mammography.






                                       -6-



<PAGE>




     BreastCare(TM)/BreastAlert(TM)  Test  Results  vs.  Clinical  Findings  vs.
Mammography  and Physical  Examination:  In the second  clinical  trial study in
1984,  the  BreastCare(TM)/BreastAlert(TM)  was studied  prospectively  in 2,805
asymptomatic women for the test's ability to detect abnormalities  suspicious of
breast  cancer.  Specifically,  the   BreastCare(TM)/BreastAlert(TM)   data  was
compared to the  mammographic  and  clinical  findings,  as well as to a limited
number of cytological findings. Of the 2,805 women screened, 99 were recommended
for a  biopsy  based  on the  suspicion  of  cancer  in 86 of the  99  women  (a
sensitivity index of 86.9%). Fifty-nine biopsies were subsequently performed and
13    of    the    15    cancers     diagnosed    were    positive    for    the
BreastCare(TM)/BreastAlert(TM)  test  (a  sensitivity  index  of  86.7%  against
biopsy).  Of the 2,706 women who had no  suspicion  of cancer based on mammogram
and/or clinical examinations, 2,340 had negative  BreastCare(TM)/BreastAlert(TM)
results (a specificity index of 86.5%).

     The   BreastCare(TM)/BreastAlert(TM)   is   accurate,   both  in  terms  of
sensitivity  and  specificity.  Notably,  the very low false positive rate (true
negatives with a positive  BreastCare(TM)/BreastAlert(TM) test) of 13.5% for the
initial screening trial of  BreastCare(TM)/BreastAlert(TM)  actually assumes two
additional  circumstances:  (1) that no  mammographically  undetectable  cancers
occurred;  and (2) that the rate of  subsequent  cancers  within this  so-called
false positive group is not statistically  higher than that of the population of
women   as   a   whole.   A   lower   true   false   positive   rate   for   the
BreastCare(TM)/BreastAlert(TM)  can be assumed if abnormal thermal  distribution
is a  risk  marker  for  future  disease  incidences,  as  had  frequently  been
suggested.  In fact, several  publications have documented a positive predictive
value for thermographically  based tests to detect future cancers. The screening
study demonstrated reliability approaching that of mammography and significantly
greater than distantly related thermographic techniques.

     In conclusion,  these studies have  demonstrated the following with respect
to     use     of     the      BreastCare(TM)/BreastAlert(TM):      (i)      the
BreastCare(TM)/BreastAlert(TM)   measures  differences  in  temperature  between
corresponding    areas   of   the   left   and   right    breasts,    (ii)   the
BreastCare(TM)/BreastAlert(TM)  is a safe  device;  no  adverse  reactions  were
observed,  (iii)  minimal  variances  were found due to clinical  influences  of
hormones, (iv) a positive test result was found to be a strong indication that a
breast abnormality exists which warrants further examination by a physician with
respect to the possibility of breast cancer;  and (v) it is advisable to confirm
a positive  test result with a repeat test.  The best results were achieved upon
arising in the morning, a time which is characterized by low body temperature in
normal  tissue (a  positive  result was  confirmed  with a  retest).  Although a
negative  test  result was found to  indicate a greatly  reduced  likelihood  of
cancer,  it does  not  mean  that the  woman  is free of  breast  abnormalities,
including cancer. The BreastCare(TM)/BreastAlert(TM) may fail to detect the very
slow  growing  (cold)  tumors  which  have a  relatively  low rate of  metabolic
activity.  In a study of 200  asymptomatic  women,  comparison of two successive
tests  indicated that 12 of 178 negative scores (7%) shifted to a positive level
in the second test.






                                       -7-


<PAGE>




     In the  screening  study of 2,805  women at the Guttman  Breast  Diagnostic
Institute,    the    observed    13.5%   "false    positive"    index   of   the
BreastCare(TM)/BreastAlert(TM)  test on 366  women  did not  correlate  with the
Guttman  clinical  staff  conclusion on any breast  abnormality  indicating  the
positive of cancer. The observed 13.5% "false positive" index does not mean that
the  BreastCare(TM)/BreastAlert(TM)  yielded a positive  reading in 13.5% of the
women with no  abnormalities  of the  breast.  The  clinical  staff  screens for
conditions  that  warrant  investigation  regarding  the  possibility  of breast
cancer.  Thus, breast abnormalities that produce elevation of temperature in one
breast may result in a positive BreastCare(TM)/BreastAlert(TM) score, but may be
classified  as  nonmalignant  by the clinical  staff.  Furthermore,  because the
thermal  signal will often  proceed  the  tentative  confirmation  by imaging or
clinical findings by trained physicians,  a number of women classified as "false
positive"  could have cancer and would be  confirmed  by biopsy at a later time.
Various follow-up studies using other thermology technologies have shown this to
be true and  unofficial  1-year  follow-ups  by  Sloan  Kettering  of the  false
positive  results were proven to be fast growing fatal cancers.  The 2,805 women
in the  Guttman  study  may  not be  considered  representative  of the  general
population  since many  symptomatic  women were referred to this center by other
concerned  physicians (In a separate home study test of 200 asymptomatic  women,
only 5.5% had false positive).

ADDITIONAL CLINICAL STUDIES

     Through the efforts of the  Company,  the  European  Institute of Oncology,
located   in   Milan,   Italy,   has   performed   clinical   studies   on   the
BreastCare(TM)/BreastAlert(TM).  The study,  which involves 250 women, was under
the supervision of Dr. Virgilio Sacchini, a world-renowned  surgical oncologist.
The final report is forthcoming.

     On June 11,  1999,  at the  International  Mastology  Meeting in Sao Paulo,
Brazil,  Dr. Alfred Barros,  surgical  oncologist and president of the Brazilian
Society of  Mastology,  and Dr.  Carlos  Menke,  gynecologist,  professor of the
University of Rio Grande Do Sul and  Mastologist of the Clinical Center of Porto
Alegre,  presented the results of the Brazilian  multi center  clinical study of
the  Company's  BreastCare(TM)/BreastAlert(TM)  device.  The clinical  study was
conducted by physician  members of the  Brazilian  Society of Mastology  using a
uniform      protocol     to     examine     the     capabilities     of     the
BreastCare(TM)/BreastAlert(TM) with a screening method and diagnostic validation
of cases suspicious of cancer. The  BreastCare(TM)/BreastAlert(TM)  was compared
with  corresponding  mammographic (909 cases) and /or biopsy (151) results.  The
results were  analyzed and  evaluated by Dr.  Alvaro  Ronco,  the head of Cancer
Epidemiology at Pronacam  (National  Breast Cancer  Program,  Ministry of Public
Health of Uruguay)  and a member of the New York  Academy of Sciences and of the
Society for  Epidemiological  Research in Baltimore as follows:  (i) If clinical
breast  examination  is normal or doubtful  (absence of suspicion of cancer) and
the BreastCare(TM)/BreastAlert(TM)  test is negative, the probability of absence
of cancer confirmed by biopsy is around 95%; (ii) if clinical breast examination
is suspicious of cancer and the  BreastCare(TM)/BreastAlert(TM) is positive, the
probability  of having  cancer is about 98%;  and (iii) the  performance  of the
BreastCare(TM)/BreastAlert(TM)  is slightly  better in women under 50 years old,
who are mainly pre menopausal.

                                       -8-


<PAGE>




     In  August  1999,  the  BreastCare(TM)/BreastAlert(TM),  was  presented  by
speakers via  satellite at the  European  School of Oncology  Congress in Rio de
Janeiro,  Brazil. The Chairmen were Professors Umberto Veronesi (Italy) and Jose
A. Pinotti (Sao Paulo)

     Dr. Virgilio  Sacchini,  Surgical  Oncologist of the European  Institute of
Oncology Milan, Italy presented  "Experience in the Clinical  Application of the
BreastCare(TM)/BreastAlert(TM)  in  Medical  Practices",  via  satellite,  which
related to the European and Brazilian  experience which  discussed:  1) The need
for a low-cost,  accurate test, which provides  immediate  results with physical
examination,     and    mammography;     2)    A    new    technology     called
BreastCare(TM)/BreastAlert(TM),  which can  supply  the need;  3) That  there is
evidence of recent clinical studies in South America and Europe that suggest the
evaluation    of    heat    on    the    surface    of    the    breast,    that
BreastCare(TM)/BreastAlert(TM) can be an auxiliary modality in diagnosing breast
cancer; 4) With the new modality,  objective  results are produced  immediately;
and,  5) That the  technology  is  based on  cellular  epithelial  increases  in
temperature when abnormal  metabolic process happens,  which is proliferation of
atypical epithelial.

     Dr.  Carlos Menke,  Gynecologist,  professor of University of Rio Grande Do
Sul and  Mastologist of the Clinical  Hospital of Porto Alegre also spoke on the
Brazilian  experience  with the clinical  studies.  Management is very confident
with the results of the studies i.e.,  when clinical  examination  is normal and
BreastCare(TM)/  BreastAlert(TM) is negative,  the probability of the absence of
breast  cancer  is  95%,  and  if  clinical   examination   is  suspicious   and
BreastCare(TM)/BreastAlert(TM)  is positive,  the probability of the presence of
cancer is 98%.

     In September 1999, the  BreastCare(TM)/BreastAlert(TM) was presented at its
exhibition and several  symposiums at the III North East  Mastology  Congress in
Salvador-Bahia-Brazil.  Dr. Ezio Novais Dias,  president of the  Congress,  is a
renowned   gynecologist   and   mastologist  at  the  San  Rafael   Hospital  in
Salvador-Bahia.  Dr.  Dias is vice  president  of the  International  Society of
Mastology,  President of the Brazilian Mastology School and is the new president
of the Brazilian Mastology Society.

     The Company's  BreastCare(TM)/BreastAlert(TM)  was given extensive exposure
at the Congress by some of the most renowned  mastologists in South America,  as
well as,  in the  world.  Dr.  Jose  Antonio  Ribeiro  Filho,  Gynecologist  and
Mastologist,  and President of the Brazilian  Academy of Medicine  coordinated a
symposium  on  "BreastCare(TM)/  BreastAlert(TM);  A New Method of  Diagnosis of
Breast Cancer."

     Also Dr. Alvaro Ronco,  head of Cancer  Epidemiology at Pronocam  (National
Breast Cancer Program,  Ministry of Public Health of Uruguay), member of the New
York  Academy of  Sciences  (New York) and of the  Society  for  Epidemiological
Research    (Baltimore)     presented    the    "Epidemiology    Aspects    with
BreastCare(TM)/BreastAlert(TM)."



                                       -9-


<PAGE>




     Dr. Alfredo  Barros,  Gynecologist  and  Mastologist at University  Medical
Hospital in Sao Paulo and president of the Brazilian  Mastology Society gave the
results of the  Brazilian  Mastology  Society's  "BreastCare(TM)/BreastAlert(TM)
clinical  studies."  Dr.  Carlos  Henrique  Menke,  gynecologist,  professor  at
University of Rio Grande Do Sul and  Mastologist at the Clinical Center of Porto
Alegre, presented "Clinical Applications of BreastCare(TM)/BreastAlert(TM)."

     The Company anticipates that such studies, as well as future studies,  will
play a vital  role for  future  screening  projects  in  hospital  and  clinical
settings.

REGIONAL REPORT: SOUTH AMERICA

     The Company has focused a  substantial  portion of its  resources  in South
America.  The  Company's  efforts,  though not well  funded,  have  provided  an
important  proving ground for the Company's  operating model,  which consists of
(i) regionalized production and assembly, supported by local marketing partners;
(ii) the support of opinion leaders,  medical societies and mastologists;  (iii)
public    and    medical     awareness    of    the     advantages     of    the
BreastCare(TM)/BreastAlert(TM) screening; (iv) organized forums and training for
doctors by region; and (v) government screening programs. The Company intends to
deploy  this  model in other  regions  throughout  the  world.  A summary of the
Company's efforts in South America are as follows:

     In January 1998, the Company organized a wholly owned  subsidiary,  Scantek
Medical   S.A.,    Inc.,    an   Uruguayan    company,    to   distribute    the
BreastCare(TM)/BreastAlert(TM)in South America.

     Through its Brazilian subsidiary,  the Company signed an agreement with the
State of Pernambuco  in December  1999.  The State of Pernambuco  has the second
largest  concentration  of hospitals in Brazil offering quality care and is also
the  most  desirable  location  for  production,  shipping,  financing  and  tax
incentive.

     The State of  Pernambuco  and the federal  government  has offered  various
incentives  including acreage, at a reduced price, to build the facility,  a 75%
reduction in income taxes through 2013, free shipping  outside the state, and in
connection  with the federal  programs  offered in Northeast  Brazil,  financing
programs to help fund the operations and capital improvements.

     In 2002, the Company's  Brazilian  subsidiary  received  notification  of a
termination  of its agreement  with a federal  program  organized to develop the
Northeast  area of Brazil.  The Company's  Brazilian  subsidiary was approved to
receive funding but failed to fulfil certain milestones by December 31, 2001.

     On June 1, 2000 Scantek Medical do Brasil Ltda signed letters of commitment
with the Infantile Maternal  Institute of Pernambuco  ("IMIP") and Unimed Recife
("Unimed").




                                      -10-

<PAGE>

     IMIP  will  use  the  BreastCare(TM)/BreastAlert(TM)  in a  pilot-screening
program for the detection of breast  cancer.  Scantek  Medical do Brasil Ltda is
supporting the pilot program by donating BreastCare(TM)/  BreastAlert(TM) units.
The IMIP will reaffirm its social commitment by developing and incorporating the
BreastCare(TM)/BreastAlert(TM) usage in its pilot screening program.

     Unimed,   a   Brazilian   healthcare   provider,   will   incorporate   the
BreastCare(TM)/BreastAlert(TM)   into  the  program  of   approved   examination
procedures for the detection of breast cancer.  Unimed Recife is part of Unimed,
a national organization that is a major health care provider for over 11 million
participants  in Brazil.  Scantek  Medical  do Brasil  Ltda is  supporting  this
pioneering  institution in the private sector of the medical community in Recife
with the first sale to Unimed for 3,000 BreastCare(TM)/BreastAlert(TM) units.

     Both IMIP and Unimed programs will be molded after the methodology  used at
the  Gynecology  and  Obstetrics  of the  University  of  Medicine  of Sao Paulo
University.

     In early July 2001 a classification  number was assigned to BreastCare(TM).
Thereafter,  based  on  the  State  of Rio de  Janeiro's  classification  number
assigned to BreastCare(TM),  any government agencies,  municipalities and states
in Brazil will not have to go through any  preliminary  process before  ordering
the BreastCare(TM).

     At the end of July 2001,  the  Company's  Brazilian  Managers  and  medical
representatives met with the Health Municipal Partnership for Baixada Fluminense
(CISBAF) to discuss the expansion of the Women's  Health Project for the Baixada
Fluminense  territory for an approximate $3 million order. Baixada Fluminense is
a region in the northern  section of the State of Rio de Janeiro  composed of 13
municipalities  with an aggregate  population of 4 million  people and 71 health
centers.  CISBAF is the  representative for all the municipalities of the Health
Ministry in Brazil.  CISBAF is the most important health organization in Baixada
Fluminense.   The  final  agreement  and  receipt  of  the  purchase  order  are
anticipated before the end of June 2003.

     In  August/September  2001, Fiocruz, a government agency in the Ministry of
Health assisted in the BreastCare(TM) educational program for the Women's Health
Program for the City of Nova Iguacu.

     The  Company  plans  to ship  the  BreastCare(TM)/BreastAlert(TM)  from the
United States until a production facility in Brazil is operational.

         FEDERAL PROGRAM

     In October, 1999, the Company donated 2,100 BreastCare(TM)/ BreastAlert(TM)
units to Fiocruz, a federal agency in Recife,  Pernambuco-Brazil to be used in a
pilot  screening  project  for 2,000 women over 40 years of age.  Dr.  Alexandre
Bezerra de  Carvalho,  Director  of  CPqam/Fiocruz,  of the  Ministry  of Health
organized  the  government-sponsored  project  specifically  for  validation  of
BreastCare(TM)/BreastAlert(TM)'s  usefulness in a major breast  cancer-screening
program being organized in Brazil.

                                      -11-



<PAGE>




     This  pilot   program  is   intended   to  prove  the   viability   of  the
BreastCare(TM)/BreastAlert(TM)  as a low-cost,  accurate  test to  increase  the
indexes of early  detection of breast cancer in Brazil.  With the  assistance of
SUS (Public  System of Health),  the Primary  Assistance  Program uses  Sanitary
Agents  (skilled  health  personnel) to screen  indigent women for breast cancer
with the  BreastCare(TM)/BreastAlert(TM)  test.  The Company is confident of the
acceptance  of the use of  BreastCare(TM)/BreastAlert(TM)  by  Agents  of Health
(ACS),    the    Ministry    of    Health    and    Secretaries    of    Health.
BreastCare(TM)/BreastAlert(TM)  has proven its value in the Fiocruz pilot cancer
project. The Company is anticipating to receive confirmation from the government
of Pernambuco to confirm  BreastCare(TM)/BreastAlert(TM)  usage in its screening
program.

     As is known,  in developed  countries,  the strategy of early  detection of
breast cancer is based on the wide use of mammography for women over 40 years of
age. In developing  countries the lack of mammography  equipment,  trained human
resources and financial  resources are major  constraints  to use this strategy.
According  to Dr.  Bezerra de  Carvalho,  Brazil  would  need 4,000  mammography
machines to assist the population of approximately  120 million people that uses
the Public  System of Health of which about 14.5  million  women who are over 40
years of age.  This gives a good  picture  of the  dimension  of the  problem in
Brazil.

         SAO PAULO

     In December 1999, BreastCare(TM)/BreastAlert(TM) has been integrated into a
very important Brazilian Breast Cancer Prevention  Collaborative  Project in Sao
Paulo Brazil.  The Collaborative  Project is being coordinated by Professor Jose
Aristodemo  Pinotti,  and is being  implemented by the Gynecology  Clinic of the
University  Medical  School of Sao  Paulo,  with the  support  of the  Brazilian
Mastology  Society,  Anna Bove  Foundation  and  "Fundacao  Pro  Mulher"  at the
Clinical Hospital of the University at Sao Paulo.

     The Company's  BreastCare(TM)/BreastAlert(TM) is being used in adjunct with
clinical breast  examination and the Gail Risk Factor  (criteria used to measure
ones risk for breast cancer) in a pilot breast cancer  screening  program at the
Gynecology  Clinic of the  University  Medical  School of Sao Paulo.  This pilot
breast  cancer-screening  center is the first collaborative project to establish
Breast  Cancer  Screening   Centers  and  the  integration  of   BreastCare(TM)/
BreastAlert(TM) in the detection process.

     The cases detected at the Breast Cancer Screening  Centers will be properly
guided to diagnosis and treatment.  This process of referral will be facilitated
by the fact that "PRO-MULHER" (a private,  non-profit  institution) is linked to
Gynecologic  services  under Dr.  Pinotti  at Sao Paulo  University,  which have
substantially  all the  facilities for diagnosis and treatment of breast cancer,
and after the program is  completed  in the first half of 2003 the final  report
will be issued.

     Brazil and its  various  states are  currently  back to where it started in
terms of Breast  Cancer  Control  Programs,  but are  undergoing a transition to
provide better screening for women.


                                      -12-



<PAGE>




REGIONAL REPORT: CHILE AND SINGAPORE

     On April 15,  2000,  D-Lanz  Development  Group,  Inc.  ("D-Lanz")  and the
Company entered into an agreement to amend its previous license  agreement dated
April 29, 1997 and amended June 11, 1999. D-Lanz had a change in control and the
License will be assigned to a new  corporation,  Global  Agri-Med  Technologies,
Inc.  ("Global").  The  Company  agreed to assign and  transfer  the  license to
Global,  which  includes  the  exclusive  license  in Chile  and  Singapore.  In
addition, the Company has agreed to give Global non-exclusive license extensions
to Africa,  Korea, and South Asia.  Global must receive final clearance from the
Company before any participation or distribution can proceed in any city, state,
territory  or country in the  non-exclusive  extensions  as stated  above.  Both
parties have agreed to update certain terms in the previous  agreement that will
be beneficial to both parties.

REGIONAL REPORT: EUROPE

     Management of the Company has currently suspended the expansion into Europe
due to limited availability of human and financial resources. However, strategic
planning  with  potential  European  partners  have been  examining the model it
established in South America and are designing a plan for the target markets.

     On July 14,  1999,  the  Company  granted  an  exclusive  license to NuGard
HealthCare  Ltd.   ("NuGard"),   an  Irish  Company,  to  market  the  Company's
BreastCare(TM)/BreastAlert(TM)  in Ireland and the United  Kingdom.  Pursuant to
this  licensing  agreement,  NuGard will pay a  non-refundable  licensing fee of
$350,000 in various  stages,  of which $59,000 was received as of June 30, 2000,
and the Company  received  common shares  equivalent to fifteen (15%) percent of
NuGard's total outstanding common shares. The purchase price will range from $10
to $15 per unit - FOB US. The license  agreement  requires minimum  purchases of
5,000 units a month and payments of licensing  fees,  both of which NuGard is in
default. At this time, the Company has not renegotiated the license agreement.

     Through the efforts of the  Company,  the  European  Institute of Oncology,
located   in   Milan,   Italy,   has   performed   clinical   studies   on   the
BreastCare(TM)/BreastAlert(TM).  The study,  which involved 250 women, under the
supervision of Dr. Virgilio Sacchini, a world-renowned surgical oncologist.  The
final report is forthcoming in 2003.

     In  order  to  sell  medical  devices  to the  new  European  Community,  a
Certification  Europe  ("CE")  is  required,   which  is  based  primarily  upon
documentation of a compliant Quality Control System. In August 1999, the Company
received a CE for the BreastCare(TM)/BreastAlert(TM).

REGIONAL REPORT: UNITED STATES

         The Company 's goals in North America for the immediate future are to
review and reorganize marketing and sales, utilizing the Company's experience
     and approach it has used in South America.  However, in order to accomplish
this,
additional funding will be needed to implement a new marketing and sales
strategy in order to re-launch the BreastCare(TM)/BreastAlert(TM), which it
anticipates will begin 10 to 12 months after major financing is completed.


                                      -13-

<PAGE>



     Pursuant to a License  Agreement,  dated March 17, 1995, as amended on July
31, 1995,  October 20, 1995 and May 31, 1996,  together with three extensions on
February  26,  1996,  March 17,  1996 and April  29,1996,  the  Company  granted
HumaScan Inc.  ("HumaScan")  an exclusive  license to  manufacture  and sell the
BreastCare(TM)/BreastAlert(TM)  in the United  States and  Canada.  On March 15,
1999,  pursuant  to a  Settlement  Agreement,  dated as of the 11th day of March
1999,   the   Company   regained   the   rights   to   market   and   sell   its
BreastCare(TM)/BreastAlert(TM)   in  the  U.S.  and  Canada.   Pursuant  to  the
Settlement Agreement, all licensing agreements between the Company and HumaScan,
which   gave   HumaScan   the  right  to   manufacture,   market  and  sell  the
BreastCare(TM)/BreastAlert(TM),  were  terminated.  Pursuant to the original and
amended licensing  agreements,  HumaScan was indebted to the Company for failure
to pay license  fees,  royalties  and other sums of money.  In exchange  for the
cancellation  of $575,000  of  indebtedness,  due to it by HumaScan  and for the
payment by the Company to HumaScan of an additional $340,000, HumaScan agreed to
assign certain special manufacturing equipment, furniture, raw materials, tools,
materials, laboratory equipment and inventory of HumaScan for the manufacture of
the  BreastCare(TM)/BreastAlert(TM).  In addition,  the Company received 150,000
shares of HumaScan's common stock as part of the Settlement Agreement.

     The Company has two complete  sensor  manufacturing  and assembly lines for
the production of the BreastCare(TM)/BreastAlert(TM) product. The value of these
two  manufacturing  lines is estimated by the Company to be  approximately  $5.5
million.

     On July 11, 2000 the  Company was issued a new patent for its  Differential
Temperature  Sensor Device For Use in the Detection of Breast Cancer. The patent
No.  6,086,247 will expire on February 5, 2018,  twenty (20) years from the date
of filing. The patent was filed on the invention for improvements over the prior
art.

     On October 24, 2000, the U.S.  Letters Patent No.  6,135,968 was issued for
its   Differential   Temperature   Measuring  Device  and  Method  for  prostate
examination.  The device is trademarked  under the name  ProstAlert.  The patent
will remain in effect for 20 years after initial filing,  expiring September 10,
2017.  Preliminary  testing was done in 1998 with very  promising  results.  The
Company will be unable to expand its product line unless  additional  funding is
completed. Clinical trials need to be performed to determine the efficacy of the
test with results  presented to the United  States Food and Drug  Administration
("FDA") for marketing clearance.

REGULATIONS

     The Company's  development and manufacture of medical devices is controlled
by the Food, Drug and Cosmetic Act (the "Act"). The Food and Drug Administration
("FDA"),  which  administers  the Act, has  promulgated a number of  regulations
which  dictate the method by which new  products are allowed to enter the United
States  market  (Title 21, CFR Section  807,  Premarket  Notification),  and the
documentation and control of manufacturing processes (Title 21, CFR Section 820,
Good manufacturing Practices for the Manufacturing,  Storage and Installation of
Medical Devices).



                                      -14-


<PAGE>




     Subject to the potential changes in regulatory status, the Company believes
that it is in full  compliance  with  the  requirements  of Part  807  Premarket
Notification,  as promulgated  under Section 510(k) of the Act, and has received
permission  to market the  BreastCare(TM)/BreastAlert(TM).  On January 24, 1984,
the FDA  determined  that the  BreastCare(TM)/BreastAlert(TM)  is  substantially
equivalent to a device  marketed in interstate  commerce and  accordingly may be
freely marketed without further FDA authorization.  Also included under Part 807
is a  requirement  for  product  registration  and  listing,  which the  Company
believes has been satisfied.

     Management believes that the proprietary nature of the product is protected
under patent rights issued in the United States and certain foreign countries.

FOREIGN REGULATION

     Because  the  Company   proposes  to  distribute  its  product  in  foreign
countries,  the Company will be required to comply with the regulations of those
countries where its product is distributed by the Company through licensees.  No
assurances  can be given that the Company  and/or its licensees  will be able to
comply with the  regulatory  requirements  of the  foreign  markets in which the
BreastCare(TM)/BreastAlert(TM) will be sold.

     Most countries require product  registration  before you can sell. In South
America,  the Company's  subsidiary,  Scantek  Medical S.A. have applied for and
have  received  product  registration  in Brazil,  Uruguay,  Argentina and Peru.
Paraguay and Bolivia have no registration requirements to sell. In addition, the
Company has applied  for and  received a  Certification  Europe  (CE),  which is
required, as of June, 1998, of all products marketed in the European Union.

PATENTS

     The proprietary nature of the  BreastCare(TM)/BreastAlert(TM)  is protected
under  patent  rights  issued in the U.S.  and foreign  countries.  However,  in
general,  the level of protection afforded by a patent is directly  proportional
to the ability of the patent  owner to protect and enforce his rights  under the
patent.  Since the financial resources of the Company are currently limited, and
patent litigation can be both expensive and time consuming, there is a risk that
enforcing  the  patents  for  the  BreastCare(TM)/BreastAlert(TM)  will  have  a
material  adverse  financial  effect on the Company or the Company will not have
the  financial  resources  necessary to enforce its patents.  Once the Company's
existing  patents expire,  other  companies may be able to create  substantially
similar products. If this were to happen, the Company would not be able to avail
itself of the protection afforded by the patent laws.


                                      -15-


<PAGE>




         U.S. patents for the BreastCare(TM)/BreastAlert(TM)include:

-   - Patent No. RE 32,000, granted and issued on October 8, 1985; this patent
    is a reissue of Patent No, 4, 190,058 for a "Device For Use in Early
    Detection of Breast Cancer", which was granted and issued on February 26,
    1980 and has since expired.

-   - Patent No. 4,651,749, granted on March 24, 1987, entitled "Cancer
    Detection Patch for Early Detection of Breast Cancer; Temperature,
    Indicators, Flexibility, Thermoconductivity, Webs"; this patent is a partial
    continuation of Patent No. 4,190,058 above

-    - Patent No. RE 4,624,264 granted November 24, 1986; this patent has been
     reinstated and expires November 25, 2003.

-   - Patent No. 6,086,247 granted on July 11, 2000, for Differential
    Temperature Sensor Device for Use in the Detection of Breast Cancer and
    Breast Disease; this patent expires February 5, 2018.
--  Patent No.  6,135,968  granted on October 24, 2000,  for  Differential
    Temperature  Measuring  Device and Method for prostate examination; this
    patent expires September 10, 2017.

     In  addition,  in  accordance  with the  Settlement  Agreement  between the
Company  and  HumaScan,  HumaScan  has  assigned  all of its  rights,  title and
interests in certain U.S. patents and U.S. and foreign trademarks, including the
following patents:

- -  File No. 08/854,144, filed May 14, 1997, entitled "Breast and Axilla Cancer
     Screening Device and Method"

SUPPLIES AND RAW MATERIALS

     Supplies    and    raw    materials    for   the    manufacture    of   the
BreastCare(TM)/BreastAlert(TM) are available from various sources. Historically,
other than on a few rare occasions, the supplies and raw materials for producing
the  BreastCare(TM)/BreastAlert(TM)  have been readily available and the cost of
such materials has not  experienced  any material  fluctuation.  The Company has
determined  the  inventory  planning  and control,  as well as other  production
management  systems,  it intends to use. In  addition,  the Company has acquired
supplies and raw materials in connection with its settlement with HumaScan.

                                      -16-


<PAGE>




MARKETING AND DISTRIBUTION

     The Company has created an  international  marketing plan for licensing and
distribution  to capture a significant  portion of the $6 billion  annual global
breast  cancer market with a device that alerts the physician and patient to the
possibility  of either  proliferating  thermally  active  breast cancer cells or
certain types of thermally active breast disease.

     Management  believes  that  in  emerging  and  developing  countries,   the
BreastCare(TM)/BreastAlert(TM)  has the potential to become an important part of
the overall  screening  protocols used to detect breast  disease.  To market the
BreastCare(TM)/BreastAlert(TM)  abroad,  the  Company  intends  to  utilize  the
following basic strategies:

         o Foreign production: The Company intends to set up its own Regional
Production Centers overseas. All sensor manufacturing will remain in the United
States under the Company's control, unless manufacturing is established at the
Company's subsidiary.

         o Foreign Licensing: The Company intends to enter into exclusive
agreements with various foreign entities, whereby the Company will either permit
such entity to distribute the BreastCare(TM)/BreastAlert(TM) or give such entity
the right to utilize the Company's trademark and patent in a specified
geographical area.

         o Joint Ventures: The Company intends to enter into agreements whereby
the Company will grant one or more partners (usually partner of the host
country) the right to share in the risks, cost and management of a foreign
operation. The Company, however, will retain control of the manufacturing. The
joint venture, if established, is anticipated to be with a major medical supply
manufacturer or pharmaceutical company which could benefit from the sales and
distribution of the BreastCare(TM)/BreastAlert(TM).

         o  Government Programs: Municipalities, State and Federal.

         o BreastCare(TM)/BreastAlert(TM) Centers: The Company anticipates that
it will establish breast care centers in cooperation with governments and
private businesses in order to utilize the BreastCare(TM)/BreastAlert(TM) with
an established protocol.

     The Company intends to manufacture the  BreastCare(TM)/BreastAlert(TM)  for
sale to partners  pursuant to distribution  agreements or intends to control the
manufacturing  if a joint venture is  established.  With respect to pursuing the
International market for distribution of the BreastCare(TM)/BreastAlert(TM), the
Company  intends to enter into new markets by establishing  Regional  Production
centers to  manufacture  and distribute  within each target  market.  Management
believes   that   partnerships   with   companies   which  either  have  working
relationships  with  distributors  throughout  the world or have a  distribution
network established in the medical communities of the target markets, will be an
excellent  marketing  vehicle for the Company.  Each agreement will be exclusive
and tailored to maximize the  penetration of each market.  Initially the Company
intends to establish regional  production  centers and distribution  networks in
the U.S., Brazil, Hungary, Ireland, United Kingdom and China.


                                      -17-


<PAGE>




     The  Company,  as it has done in the past,  intends to conduct a  premarket
investigation  of  the  market  before  marketing  is  commenced  and  prior  to
finalizing any agreements. A market profile for each market will be completed to
analyze  the  target   markets.   The  profile  will   establish  the  strongest
distributors  and  the  buying  decision-makers  (i.e.,  physicians,  hospitals,
clinics,  government  agencies  and  over  the  counter  customers).  Management
believes that a standard market profile will permit comparisons  between markets
at a later date and provide  profiles of the types of markets  that  provide the
best  results.  In  addition,  the Company will expand  communications  with the
Ministries of Health,  Department of Health and Clinical Services to investigate
the statutory controls regulating the sale of medical devices.

     The  Company  has  focused  on   developing   partnerships   with   various
international  companies who have relationships with distributors throughout the
world and who have connections in the medical communities of the target markets.
Recently,  the Company has been  negotiating  with  distributors who have direct
contact with the distribution of medical product to government  agencies,  i.e.,
Brazil and will be the distributors for BreastCare(TM).

     Strategically,   the  Company  intends  to  centralize   manufacturing  and
decentralize marketing in each geographical region. Specific markets within that
region shall be covered by individual agreements which provide for the promotion
and distribution of the BreastCare(TM)/BreastAlert(TM). Accordingly, the Company
intends to utilize  centralization for control and  decentralization  for market
penetration.  Management  believes  that  the  Company's  expansion  of  several
regional  centers for the  manufacturing  locations  will give the Company  good
access to shipping, tax considerations and low manufacturing cost, and to police
the crossover among distributors' areas where distribution is segmented.

South America Marketing

     The  Company  intends  to open a  production  center  in  Brazil.  In South
America, the development of distributorships  with selling partners has been and
are further being developed to approach private hospitals,  clinics,  physicians
and governments.  The Company is introducing the BreastCare(TM)  program,  which
has  been  developed  at  the  Sao  Paulo  University   Hospital,   for  use  in
municipality, state, and federal screening programs.

     A carefully  structured  program of publications and professional  meetings
between such revered  specialists  and the rest of the physician  population has
been underway  throughout  1998,  1999 and 2000 and it is anticipated  that such
will be expanded in ensuing years.  This marketing  approach will be directed by
the International  Medical Advisory Board of the Company,  consisting of some of
the top  specialists  in the  world in the  diagnosis  and  treatment  of breast
disease.  State and Federal  governments  are also  helping to create  screening
programs in accordance with the above activities.

     On October 1, 2002 the Company signed an exclusive  distribution  agreement
with Compat Comercio  Exterior Ltda, a Brazilian  commercial  company located in
Rio De Janerro,  Brazil,  for a long-term  marketing and sales agreement for the
BreastCare(TM)  product.  Pursuant  to the  Compat  Comercio  agreement,  Compat
Comercio  has  agreed to a minimum  purchase  of the  BreastCare(TM)  product of
100,000  units  during  the first six  months of the term of the  agreement  and
400,000  units during the second six months.  The second year  minimum  purchase
order is 1,000,000 units. Management believes that the timely fulfillment of the
Compat Comercio agreement will result in net profits in excess of $2,000,000 for
the first  year of the Compat  Comercio  agreement,  subject to Compat  Comercio
meeting  its  minimum  purchase  obligations  to the  Company.  Pursuant to such
agreement  which has a term of five years with a renewal  term of an  additional
five  years,  subsequent  to the  initial  two year term of the  agreement,  the
Company has the right to terminate  the  agreement  if the parties  cannot agree
upon the minimum number of units. There can be no assurance that Compat Comercio
will meet the minimum purchase requirement, or that the Company will recover any
damages that may result from such failure.





                                      -18-


<PAGE>




Europe Marketing

     The  Company has been  introducing  the  BreastCare(TM)/BreastAlert(TM)  in
Europe at  educational  forums which were  covered by the press and  television.
Also,  the Company  will be  exhibiting  the  BreastCare(TM)/BreastAlert(TM)  at
medical  congresses to introduce the device to the physician  market in the very
near future.

     The  Company  intends to utilize  government  contracts  to mass market the
BreastCare(TM)/BreastAlert(TM).  Countries,  such  as  Ireland  and  Spain  lend
themselves to this approach,  as well as do larger independent  Eastern European
countries,  including but not limited to, Romania,  Bulgaria,  Ukraine,  Russia,
Greece and Turkey.

United States and Canada Marketing

     The  Company's  first  introduction  of the  BreastCare(TM)/BreastAlert(TM)
product was by its former United States and Canadian  licensee,  HumaScan  which
launched   the   product   in   December   1997.    Before    relaunching    the
BreastCare(TM)/BreastAlert(TM) the Company plans to take a carefully constructed
approach to the marketplace in the United Sates and Canada.  The Company intends
to  spend  between  nine to  twelve  months  reviewing  and  analyzing  the best
marketing and sales  approaches  focused  toward the physician  user and managed
care insurers.  The Company intends to mirror the approach used in South America
with  respect  to  advisement  and  leadership   from  renowned  breast  disease
specialists.

FUTURE MARKETS

     The  Company  intends  to  concentrate  its  efforts to market and sell the
BreastCare(TM)/  BreastAlert(TM)  through  2003 in South  America,  primarily in
Brazil.  Thereafter,  the Company also intends to commence its marketing efforts
for the  BreastCare(TM)/BreastAlert(TM)  in Europe  and the  United  States  and
investigate and develop the marketplace in Asia, the Middle East and the African
continent.  Ultimately,  the  Company  intends to expand its  marketing  efforts
worldwide.

COMPETITION

     The  Company  believes  that  the   BreastCare(TM)/BreastAlert(TM),   which
provides  digital  quantitative  recordings  of underlying  tissue  temperature,
represents a significant  improvement  over  thermographic  technology  products
because such other  products are subject to the inherent  problems of subjective
evaluation of heat patterns. Based upon these differences,  the Company believes
that the  prospects  for the  BreastCare(TM)/BreastAlert(TM)  as a supplement to
currently existing screening tests are very good.

     The Company  believes it is in a unique position because there are no known
competing low cost screening  devices on the market which would compete directly
with the BreastCare(TM)/BreastAlert(TM) for use by primary care physicians. As a
result,  the  Company  believes  that  the  BreastCare(TM)/BreastAlert(TM)  will
augment other existing forms of screening and technology.

                                      -19-


<PAGE>




     Some of the Company's future competitors may be large,  well-financed,  and
established companies which have greater resources for research and development,
manufacturing,  and marketing than the Company has and, therefore, may be better
able than the  Company to compete  for a share of the  market,  even in areas in
which the Company may have superior  technology.  There can be no assurance that
the Company can continue to produce a product which is commercially  acceptable,
or, that if continued to be produced,  such a product will be  competitive  with
existing  or  future   products.   It  is  also  possible  that  there  will  be
technological  changes or  developments  by  competitors  which will  render the
Company's products noncompetitive or obsolete.

FUTURE PRODUCTS

     The  Company  believes  that  the  BreastCare(TM)/BreastAlert(TM)  may have
applicability as a screening device for other abnormalities, including measuring
ovulation cycles for infertile couples,  measuring changes in the cardiovascular
system to screen for potential  stroke victims,  and detecting  abnormalities in
the kidneys, prostate and testicles.  Although some testing was performed during
the  BreastCare(TM)/BreastAlert(TM)  development stage, these initial tests were
preliminary  only, and in order to obtain FDA approval,  which would be required
in order to market a future product.  The Company intends to further explore its
initial  findings  and  perhaps,  introduce  products  in  furtherance  of these
findings.

     On October 24, 2000,  patent  #6,135,968  was granted for its  Differential
Temperature Measuring Device and Method for prostate examination. This device is
trade marked under the name, ProstAlert(TM).

EMPLOYEES

     The Company  employs a total of 8  employees.  Two of these  employees  are
employed  in the  U.S.  as  President  and  Chief  Executive  Officer  and  Vice
President/  Corporate  Secretary.   Additional  personnel  and  consultants  are
utilized,  as required,  on a  contractual  basis.  Additionally,  manufacturing
personnel  have been targeted to be utilized when the purchase order from Brazil
has been received.

     The remaining  employees are employed in South America by the Company's two
South American subsidiaries,  as follows: a General Manager, a Medical Director,
two (2) other Senior employees, and two (2) support staff employees.

     None of the  Company's  employees  are covered by a  collective  bargaining
agreement  with a  union.  The  Company  considers  its  relationship  with  its
employees to be good.


                                      -20-


<PAGE>



RISKS AND UNCERTAINTIES

     The Company's  business is subject to a number of risks and  uncertainties,
including,  but not  limited  to;  (a) the risk  that it may be  unable to raise
enough  capital  to fund  the  Company's  operations,  (b)  the  risk  that  the
BreastCare(TM)/BreastAlert(TM)  will  not  be  accepted  commercially,  (c)  the
Company's reliance on certain  customers,  and (d) the highly competitive nature
of the  Company's  industry  and the impact that  competitors'  new products and
pricing may have upon the Company.  Such  factors,  as well as shortfalls in the
Company's results of operations as compared with analyst's expectations, capital
market  conditions and general economic  conditions,  may also cause substantial
volatility in the market price of the Company's Common Stock.

PUBLIC INFORMATION

     The  Company   electronically   files  with  the  Securities  and  Exchange
Commission  (the  "SEC") all its  reports,  including,  but not  limited to, its
annual and quarterly reports.  The SEC maintains an Internet site which contains
all such  reports  and other  information  with  respect  to the  Company on its
website,  http://www.sec.gov.  Additional  information  on  the  Company  may be
obtained from the Company's web site, http://www.scantekmedical.com.

ITEM 2.  PROPERTIES

     The Company  occupies  approximately  14,000  square feet of warehouse  and
office space, all of which is leased through leases expiring in August 2005. See
Note  13  of  Notes  to   Consolidated   Financial   Statements  for  additional
information.

ITEM 3.  LEGAL PROCEEDINGS

     There are several  lawsuits  against  the Company  that may have a material
impact on the consolidated  results of operations or financial  condition of the
Company.

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

     No matters were  submitted to a vote of the Company's  shareholders  during
the fourth quarter of the year ending June 30, 2002.



                                      -21-


<PAGE>





                                     PART II

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

         (a) Market Information

     The Company's common stock, par value $.001 per share (the "Common Stock"),
is traded in the  over-the-counter  market.  The Common Stock is  available  for
quotation on the NASD Over the Counter  Bulletin Board. The following table sets
forth the periods  indicated  high and low bid quotation (as reported by the OTC
Bulletin Board) for the Common Stock:
<TABLE>
<CAPTION>

                                                                  HIGH                             LOW
                                                              --------------                     -----------
Fiscal Year ended June 30, 2001
<S>                                                              <C>                          <C>
         First Quarter                                           $.75000                      $  .12500
         Second Quarter                                           .37500                         .09375
         Third Quarter                                            .12500                         .06250
         Fourth Quarter                                           .28125                         .06250

Fiscal Year ended June 30, 2002
         First Quarter                                            .27                            .08
         Second Quarter                                           .09                            .03
         Third Quarter                                            .13                            .04
         Fourth Quarter                                           .08                            .02
</TABLE>

     The Common Stock is reported  under the Symbol SKML. As of the date of this
report, the Company's shares of Common Stock were "non-designated" securities as
defined under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

     These  quotations  reflect an inter-dealer  price,  without retail mark-up,
markdown or commission, and may not necessarily reflect actual transactions.

         (b) Holders

         As of September 30, 2002, there were 210 shareholders of record of the
Company's Common Stock.

         (c) Dividends

         The Company has not paid any cash dividends and has no current plans to
pay any such dividends. There are no restrictions on the Company's ability to
pay dividends.

                                      -22-


<PAGE>




         (d) Recent Sales of Unregistered Securities

     On July 1,  1999  the  Company  issued  Zsigmond  L.  Sagi,  the  Company's
President  and Chief  Executive  Officer,  79,250  shares of Common Stock of the
Company pursuant to financing, at an issue price of $.416 per share.

     On July 1, 1999 the Company  issued Ms.  Patricia  Furness,  the  Company's
Vice-President/Corporate  Secretary, 5,703 shares of Common Stock of the Company
pursuant to financing, at an issue price of $.5625 per share.

     On July 1, 1999 the  Company  issued  Mr.  Louis  Gottlieb,  the  Company's
Vice-President  of Corporate  Development,  25,000 shares of Common Stock of the
Company pursuant to financing, at an issue price of $.375 per share.

     On July 1, 1999 the Company  issued  52,500  shares of Common  Stock of the
Company  pursuant to  financing,  to two  individuals  including  Paul Nelson (a
Director of the Company), at an issue price of $.40625 per share.

     On July 7, 1999 the Company  sold 45,767  shares of Common Stock to Maurice
Siegel,  Vice-President  and  Director of the  Company,  at a purchase  price of
$.2185 per share,  pursuant to Section 4(2) of the Securities Act of 1933, based
upon the nature of the sale and the purchaser.

     On July 7, 1999,  the Company  issued  50,000 shares of Common Stock of the
Company to Kenneth  Courey,  a former  Director  of the  Company,  pursuant to a
consulting contract, at an issue price of $.1875 per share.

     On December 30, 1999 the Company issued 7,500 shares of Common Stock of the
Company  pursuant to financing,  to two  individuals  including  Paul Nelson,  a
Director of the Company, at an issue price of $.07 per share.

     On March 8, 2000 the Company  issued  2,500  shares of Common  Stock of the
Company to Paul Nelson,  pursuant to financing, at an issue price of $.53125 per
share.

     On March 8, 2000 the Company  issued  23,750  shares of Common Stock of the
Company to Louis  Gottlieb,  pursuant to financing,  at an issue price of $.1875
and $.25 per share.


                                      -23-


<PAGE>




         On April 14, 2000 the Company issued 50,000 shares of Common Stock of
the Company to Louis Gottlieb pursuant to financing, at an issue price of $.25
per share.

     On April 14, 2000 the Company  issued  35,200 shares of Common Stock of the
Company to Maurice Siegel,  a  Vice-President  and Director of the Company,  for
consulting services, at an issue price of $.25 per share.

     On April 14, 2000 the Company  issued 125,000 shares of Common Stock of the
Company to Stock Siren LLC, pursuant to advertising and public relations,  at an
issue price of $.1875 per share.

     On July 6, 2000 the  Company  issued  2,500  shares of Common  Stock of the
Company to Paul  Nelson,  pursuant to  financing,  at an issue price of $.51 per
share.

     On August 1, 2000 the Company  issued  67,900 shares of Common Stock of the
Company to Zsigmond L. Sagi, the Company's President and Chief Executive Officer
pursuant to financing, at an issue price of $.51 per share.

     On August 1, 2000 the Company issued Ms.  Patricia  Furness,  the Company's
Vice-President  and  Corporate  Secretary,  8,750  shares of Common Stock of the
Company pursuant to financing, at an issue price of $.51 per share.

         On October 20, 2000, the Company issued 100,000 shares of Common Stock
of the Company to Carriage House pursuant to financing at an issue price of $.20
per share.

     On October 24, 2000,  the Company  issued  19,000 shares of Common Stock of
the Company to (2) two individuals for loan extensions at an issue price of $.20
per share.

     On October 24, 2000,  the Company  issued 120,000 shares of Common Stock of
the Company to the Company's attorney for services  rendered,  at an issue price
of $.25 per share.

         On November 10, 2000, the Company sold 60,000 shares of Common Stock of
the Company to a former director at a purchase price of $.20 per share, pursuant
to Section 4(2) of the Securities Act of 1933, as amended, based upon the nature
of the sale and the purchaser.

         On November 10, 2000, the Company issued 12,000 shares of Common Stock
of the Company to a former director at an issue price of $.20 as a bonus for the
sale of stock.

     On December 29, 2000,  the Company issued 100,000 shares of Common Stock of
the Company to a former  director at an issue price of $.10 per share,  pursuant
to converting a $10,000 loan.

     On December 29, 2000,  the Company  issued 15,000 shares of Common Stock of
the Company to Paul Nelson pursuant to loan extensions at an issue price of $.10
per share.




                                      -24-


<PAGE>





         On February 9, 2001 and April 3, 2001, the Company issued 45,000 and
105,000 shares of Common Stock of the Company to Carriage House at an issued
price of $.09 and $.08, respectively pursuant to loan extensions.

         On April 3, 2001, the Company sold 2,986,250 shares of the Common Stock
of the Company to outside parties at a purchase price of $.08 per share pursuant
to Sections 4(2) of the Securities Act of 1933, as amended, based upon the
nature of the sale and the purchasers.

         On April 3, 2001, the Company issued 750,000 shares of Common Stock of
the Company to Zsigmond L. Sagi the Company's President and Chief Executive
Officer for bonuses, at an issue price of $.08 per share.

         On April 3, 2001, the Company issued 350,000 shares of Common Stock of
the Company to Ms. Patricia Furness the Company's Vice President and Secretary
for bonuses at an issued price of $.08 per share.

         On April 3, 2001, the Company issued 250,000 shares of Common Stock of
the Company to Zsigmond G. Sagi for consultant services at an issue price of
$.08 per share.

         On April 3, 2001, the Company issued Mr. Louis Gottlieb the Company's
Vice President of Corporate Development, 86,250 shares of Common Stock of the
Company pursuant to loan extensions, at an issue price of $.08 per share.

         On April 3, 2001, the Company issued 132,500 shares of Common Stock of
the Company to (3) three individuals and (1) one company at an issue price of
$.08 per share, pursuant to loan extensions.

         On April 3, 2001, the Company issued 950,000 shares of Common Stock of
the Company to DC Consultants, pursuant to consulting services, at an issue
price of $.08 per share.

         On July 6, 2001, the Company issued 500,000 shares of Common Stock of
the Company to employees of the Company's Brazilian subsidiary, pursuant to
consulting services and bonuses, at an issue price of $.20 per share.

         On July 31, 2001, the Company sold 775,000 shares of Common Stock of
the Company to outside parties at a purchase price of $.08 per share pursuant to
Section 4(2) of the Securiteis Act of 1933, as amended, based upon the nature of
the sale and the purchases.

         On December 14, 2001, the Company issued 22,500 shares of Common Stock
of the Company to two individuals, pursuant to loan extensions, at an issue
price of $.042 per share.

         On December 14, 2001, the Company issued 110,000 shares of Common Stock
of the Company to the Company's attorney for legal services at an issue price of
$.042 per share.


                                      -25-



         On December 14, 2001 the Company issued 300,000 shares of Common Stock
of the Company to a lender pursuant to financing at an issue price of $.042 per
share.

         On December 14, 2001 and June 30, 2002, the Company issued 130,000 and
130,000 shares of Common Stock of the Company to Carriage House at an issue
price of $.042 and $.035 per share, pursuant to loan extension.

         On February 8, 2002 the Company sold 200,000 shares of Common Stock the
Company to outside parties at a purchase price at $.05 per share pursuant to
Section 4(2) of the Securities Act of 1933, as amended, based upon the nature of
the sale and the purchases.

         On June 30, 2002, the Company issued 79,390 shares of Common Stock of
the Company to (2) two companies at an issue price of $.035 per share, pursuant
to financing.

         On June 30, 2002 the Company issued 6,435 shares of Common Stock of the
Company to Zsigmond L. Sagi, the Company's President and Chief Executive Officer
pursuant to financing at an issue price of $.035 per share.

         On June 30, 2002 the Company issued 31,141 shares of Common Stock of
the Company to Ms. Patricia Furness, the Company's Vice President and Secretary
pursuant to financing at an issue price of $.035 per share.

         On August 20, 2002 the Company issued 2,000,000 shares of Common Stock
of the Company to Ms. Angela Chen Sabella, pursuant to financing at an issue
price of $.035 per share.














                                      -26-

<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS


     The following  discussion and analysis  should be read in conjunction  with
the Company's  consolidated  financial statements and the notes related thereto.
The  discussion  of results,  causes and trends should not be construed to infer
any conclusion that such results,  causes or trends will necessarily continue in
the future.

         Critical Accounting Policies

     The  Company's  discussion  and  analysis of its  financial  condition  and
results  of  operations  are based  upon the  Company's  consolidated  financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States.  The  preparation  of these  financial
statements  requires the Company to make estimates and judgments that affect the
reported  amounts of assets,  liabilities,  revenues and  expenses,  and related
disclosure of  contingent  assets and  liabilities.  On an on-going  basis,  the
Company evaluates its estimates, including those related to product returns, bad
debts,   inventories,   intangible   assets,   investments,   income  taxes  and
contingencies  and  litigation.  The Company  bases its  estimates on historical
experience and on various other  assumptions  that are believed to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily apparent from other sources.  Actual results under different assumptions
or conditions may differ from these estimates.

     The Company believes the following critical  accounting policies affect its
more  significant  judgments  and  estimates  used  in  the  preparation  of its
consolidated financial statements. The Company maintains allowances for doubtful
accounts for estimated  losses  resulting from the inability of its customers to
make required payments.  If the financial  condition of the Company's  customers
were to  deteriorate,  resulting  in an  impairment  of  their  ability  to make
payments, additional allowances may be required.

     The Company makes purchasing  decisions  principally  based upon firm sales
orders  from  customers,  the  availability  and  pricing of raw  materials  and
projected customer requirements. Future events that could adversely affect these
decisions and result in significant charges to the Company's  operations include
slow down in customer demand, customers delaying the issuance of sales orders to
the Company,  miscalculating  customer  requirements,  technology  changes which
render the raw materials and finished goods obsolete,  loss of customers  and/or
cancellation  of  sales  orders.  The  Company  writes  down its  inventory  for
estimated obsolescence or unmarketable inventory equal to the difference between
the  cost  of  inventory  and  the   estimated   market  value  based  upon  the
aforementioned  assumptions. If actual market conditions are less favorable than
those projected by management, additional inventory write-downs may be required.




                                      -27-

<PAGE>


     The  Company  seeks  sales and  profit  growth by  expanding  its  existing
customer base,  developing new products and by pursuing  strategic  acquisitions
that meet the  Company's  criteria  relating to (i) the market for the products;
(ii) the  Company's  ability  to  efficiently  manufacture  the  product;  (iii)
synergies  that are created by the  acquisition;  and (iv) a purchase price that
represents fair value. If the Company's evaluation of a target company misjudges
its technology, estimated future sales and profitability levels, or inability to
keep pace with the latest  technology,  these  factors could impair the value of
the  investment,   which  could   materially   adversely  affect  the  Company's
profitability.

     The Company files income tax returns in every  jurisdiction in which it has
reason to  believe  it is subject to tax.  Historically,  the  Company  has been
subject to examination by various taxing  jurisdictions.  To date, none of these
examinations has resulted in any material additional tax.  Nonetheless,  any tax
jurisdiction may contend that a filing position claimed by the Company regarding
one or more of its  transactions  is  contrary  to that  jurisdiction's  laws or
regulations.

     The Company has evaluated its disclosure  controls and procedures within 90
days (the "Evaluation  Date") prior to this report and concluded that there were
no material  weaknesses in those controls and procedures as of that date. To the
best of  Management's  knowledge  and  belief,  there  have been no  significant
changes in internal controls and other factors subsequent to the Evaluation Date
that could materially affect internal controls and procedures.

         RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated the percentage
increase or decrease of items included in the Company's consolidated statement
of operations:


<TABLE>
<CAPTION>

                                                         % Increase (Decrease) from Prior Period
                                              ---------------------------------------------------------------
                                                     June 30, 2002                     June 30, 2001
                                                   compared with 2001                compared with 2000
                                              -----------------------------     -----------------------------

<S>                                                   <C>                                 <C>
Sales                                                 (100.00) %                          (29.00)
License fee revenues                                        *                                  *
Cost of sales                                          (46.20)                            (13.40)
General and administrative
 expenses                                              (11.70)                            (32.20)
Research and development                                    *                              (2.20)
Interest expense                                       (11.40)                             22.50
</TABLE>


         REVENUES

         Net sales decreased to $-0- for the year ended June 30, 2002 from
$21,137 for the year ended June 30, 2001. The Company is refocusing its South
American marketing strategy in Brazil. The Company expects to ship the
BreastCare(TM)/BreastAlert(TM) device from the United States during the fourth
quarter of calendar 2002 to Brazil until a manufacturing facility in Brazil is
complete and operational. Shipments to other parts of South America will
commence during 2003. Manufacturing in Brazil is planned to commence after the
construction of a manufacturing facility in Brazil. The Company expects to find
a new location and construct a facility during 2003. Manufacturing for Europe
will continue in the United States facility until the Company establishes a
manufacturing facility in Europe.



                                      -28-
<PAGE>


         Net sales decreased to $21,137 during the year ended June 30, 2001 from
$29,775 during the year ended June 30, 2000. The Company contributes the decline
due to the factors mentioned above.

         No licensing revenue was recognized during the year ended June 30, 2002
or 2001.

         License fee revenue decreased to $-0- during the year ended June 30,
2001 from $59,000 for the year ended June 30, 2000 as the Company recognized
lower license fees from NuGard Healthcare Ltd. as compared to higher license
fees from Sandell Corp, D-Lanz Corp and HumaScan from the preceding year.

         COST OF SALES

         Cost of sales decreased to $250,256 for the year ended June 30, 2002
from $465,282 for the year ended June 30, 2001 primarily due to an inventory
write-off of $119,000 for expired product at the South American location during
the year ended June 30, 2001.

         Cost of sales decreased to $465,282 during the year ended June 30, 2001
from $537,216 during the year ended June 30, 2000 primarily due to the reduction
in manufacturing labor and reduced write-offs of obsolete material during the
year.

         GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses decreased 11.7% to $1,018,069 for
the year ended June 30, 2002 compared to $1,152,915 for the year ended June 30,
2001. This decrease is primarily due to decrease in travel expenses,
professional fees, outside services, insurance and rent expenses offset by
higher consulting fees in South America due to the issuance of common stock for
$100,000 in services and bonuses.

         General and administrative expenses decreased 32.2% to $1,152,915 for
the year ended June 30, 2001 compared to $1,699,922 for the year ended June 30,
2000. This decrease is primarily due to a reduction of consulting services in
Brazil and reversal of an over accrual for consulting services in Uruguay.

         RESEARCH AND DEVELOPMENT

         Research and development expense of $280,000 stayed the same for the
years ended June 30, 2002 and 2001. Salaries incurred by the Company in the
experimental area of development of its product remained constant.

         Research and development expenses decreased 2.2% to $280,000 for the
year ended June 30, 2001 from $286,223 for the year ended June 30, 2000. The
decrease is primarily attributable to the elimination of minor research and
development expenses.



                                      -29-

<PAGE>

         INTEREST EXPENSE

         Interest expense was $452,779 for the year ended June 30, 2002 compared
to $511,141 for the year ended June 30, 2001. The 11.4% decrease was primarily
attributable to lower interest rates and a decrease in interest related
financing activities.

         Interest expense was $511,141 for the year ended June 30, 2001 compared
to $417,109 for the year ended June 30, 2000. The 22.5% increase was primarily
attributable to increases in the Company's short-term debt.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's need for funds has increased from period to period, as it
has incurred expenses for among other things, research and development;
applications for and maintenance of domestic and international trademarks and
international patent protection; licensing and pre-marketing activities; and,
attempts to raise the necessary capital to expand the Company's production
capacity. Since inception, the Company has funded these needs through private
placements of its equity and debt securities and advances from the Company's
President, Chief Executive Officer and major shareholder. The Company has
entered into various license agreements that have raised additional funds. In
addition, the Company's auditors' report for the year ended June 30, 2002 dated
October 10, 2002, expressed an opinion as to the Company continuing as a going
concern.

         During September 1998, the Company commenced the sale of its
BreastCare(TM)/BreastAlert(TM) device in Brazil, Uruguay and Paraguay through
its South American licensee. The Company terminated its license agreement with
its former licensee in South America. The Company's Brazilian subsidiary plans
to manufacture, market and distribute the BreastCare(TM)/BreastAlert(TM) device
in Brazil and export to other South American countries. As of this date only
minimal shipments have been made and the Company has not generated any material
revenues.

         Until cash flow generated from the shipment of the BreastCare(TM)
device is sufficient to support the Company's operations, the Company will
require financing to fund its current overhead and various capital requirements.
As of June 30, 2002, the Company borrowed approximately $2.3 million from
unaffiliated third parties. These loans are payable by the Company on various
dates through December 31, 2003. In addition, as of June 30, 2002, the Company's
President advanced the Company approximately $1.1 million. These loans have
supported the Company through the prior and the current fiscal year. The Company
expects the cash flow from sales commencing in the fourth quarter of calendar
2002 to cover the operations of the Company through December 2003, provided the
Company is successful in raising additional capital to support the operations
until cash flows generated for the sales of the BreastCare(TM)/BreastAlert(TM)
device commences.

         In 2003, the Company will market and distribute the
BreastCare(TM)/BreastAlert(TM) device throughout South America through the
Company's South American subsidiaries.

                                      -30-
<PAGE>


         Through its Brazilian subsidiary, the Company signed an agreement with
the State of Pernambuco in December 1999. The State of Pernambuco has the second
largest concentration of hospitals in Brazil offering quality care and
management believes that the location is also the most desirable for production,
shipping, financing and tax incentives. The State of Pernambuco has offered
various incentives, including acreage to build the facility at a reduced price,
an 85% reduction in taxes through 2013, free shipping outside the state, and in
connection with the federal programs offered in Northeast Brazil, financing
programs to help fund the operations and capital improvements.

         The Company plans to ship the BreastCare(TM)/BreastAlert(TM) device
from the United States until a production facility in Brazil is operational.

         On July 14, 1999, the Company granted an exclusive license to NuGard
HealthCare Ltd. ("NuGard"), an Irish Company; to market Scantek's
BreastCare(TM)/BreastAlert(TM) device in Ireland and the United Kingdom.
Pursuant to the licensing agreement, NuGard will pay a non-refundable licensing
fee of $350,000 in various stages, of which $59,000 was received as of June 30,
2000, and the Company received common shares equivalent to fifteen (15%) percent
of NuGard's total outstanding common shares. The purchase price will range from
$10 to $15 per unit - FOB US. The licensing agreement requires minimum purchases
of 5,000 units a month and payments of licensing fees both of which NuGard is in
default. At the present time the Company has not renegotiated the license
agreement.

         In August/September 2001, Fiocruz, a government agency in the Ministry
of Health assisted in the BreastCare(TM) educational program for the Women's
Health Program for the City of Nova Iguacu and Fiocruz will be an integrated
part of the Company's BreastCare(TM) educational process.

         On October 1, 2002, the Company signed an agreement with Compat
Comercio Exterior Ltda, a Brazilian company located in Rio De Janeiro, Brazil,
for a long-term exclusive marketing and sales agreement for the BreastCare(TM)
product in the country of Brazil, excluding 4 states where the Company is
pursuing more direct agreements. The Compat Comercio agreement calls for the
shipment of a minimum of 100,000 units during the first six months of the term
of the agreement, 400,000 units during the second six months and 1,000,000 units
during the second year. Management believes that the timely fulfillment of the
Compat Comercio agreement will result in net profits in excess of $2,000,000 for
the first year of the Compat Comercio agreement, subject to Compat Comercio
meeting its minimum purchase obligations to the Company. Pursuant to such
agreement which has a term of five years with a renewal term of an additional
five years, subsequent to the initial two year term of the agreement, the
Company has the right to terminate the agreement if the parties cannot agree
upon the minimum number of units. There can be no assurance that Compat Comercio
will meet the minimum purchase requirement, or that the Company will recover any
damages that may result from such failure.

         Pursuant to the Compat Comercio agreement, the first shipment of 10,000
BreastCare(TM) units have been prepaid and deposited into a bank escrow account
and will be released when a Brazil government import license is secured.
Subsequent shipments will be paid fifty (50%) at the time of request and fifty
(50%) percent sixty (60) days later.

         The Company's working capital and capital requirements will depend on
numerous factors, including the level of resources that the Company devotes to
support start-up production and to the marketing aspects of its products. The
Company intends to construct assembly centers abroad to manufacture, market and
sell the BreastCare(TM)/BreastAlert(TM) device in the international market. The
Company entered into an agreement with Zigmed Inc., pursuant to which Zigmed
Inc. will manufacture the sensor production equipment needed for manufacturing
of the BreastCare(TM)/BreastAlert(TM) device. The balance of $718,276 will be
paid when the Company raises the additional capital.

         The Company's success is dependent on raising sufficient capital to
establish a fully operable production and assembly facility to manufacture the
BreastCare(TM)/BreastAlert(TM) device for the international market. The Company
believes the device will be commercially accepted throughout the international
market. The Company does not have all the financing in place at this time, nor
may it ever, to meet these objectives.

         This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes forward-looking statements that may or may not
materialize. Additional information on factors that could potentially affect the
Company's financial results may be found in the Company's filings with the
Securities and Exchange Commission.

New  Accounting Pronouncements
         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments,  including
certain derivative instruments embedded in other contracts, and for hedging
activities. Under SFAS 133, certain contracts that were not formerly considered
derivatives may now meet the definition of a derivative. The Company adopted
SFAS 133 effective July 1, 2000. The adoption of SFAS 133 has not had a
significant impact on the consolidated financial position, results of
operations, or cash flows of the Company.

         On June 29, 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and
Intangible Assets". Major provisions of these Statements are as follows: all
business combinations initiated after June 30, 2001 must use the purchase method
of accounting; the pooling of interest method of accounting is prohibited;
goodwill and intangible assets with indefinite lives are not amortized but are
tested for impairment annually, except in certain circumstances, and whenever
there is an impairment indicator; all acquired goodwill must be assigned to
reporting units for purposes of impairment testing; effective July 1, 2002,
goodwill will no longer be subject to amortization.




                                      -31-

<PAGE>


         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No. 143 on July 1,
2003, and management does not expect its adoption to have a material impact on
the Company's results of operations or financial position.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", effective for fiscal years
beginning after December 15, 2001. Under SFAS No. 144 assets held for sale will
be included in discontinued operations if the operations and cash flows will be
or have been eliminated from the ongoing operations of the entity and the entity
will not have any significant continuing involvement in the operations of the
component. The Company is planning to adopt SFAS No. 144 for the fiscal year
beginning July 1, 2002. The Company believes the adoption of SFAS No. 144 will
not have a material impact on the Company's results of operations or financial
position.


         In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30 "Reporting Results of
Operations". This statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. This statement will be effective for the Company for
the year ending December 31, 2003. The adoption of this statement will not have
a material effect on the Company's results of operations or financial position.

     In July 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
will supersede Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that costs  associated with an exit or disposal plan be recognized when incurred
rather than at the date of a commitment  to an exit or disposal  plan.  SFAS No.
146 is to be applied  prospectively  to exit or  disposal  activities  initiated
after December 31, 2002.












                                      -32-




<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        PAGE
                                                                     -----------
Independent Auditors' Reports                                         F-1 - F-3

Financial Statements:

         Consolidated Balance Sheets,
          June 30, 2002 and 2001                                      F-4

         Consolidated Statements of Operations,
          Years Ended June 30, 2002, 2001, 2000                       F-5

         Consolidated Statements of Stockholders'
          Deficiency Years Ended June 30, 2002, 2001, 2000            F-6

         Consolidated Statements of Cash Flows,
          Years Ended June 30, 2002, 2001, 2000                       F-7 - F-8

Notes to Consolidated Financial Statements                            F-9 - F-30

                                       33
<PAGE>




                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Scantek Medical, Inc. and Subsidiaries


         We have audited the accompanying consolidated balance sheet of Scantek
Medical, Inc. and Subsidiaries as of June 30, 2002, and the related consolidated
statements of operations, changes in stockholders' deficiency 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 audit.

         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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Scantek Medical, Inc. and Subsidiaries as of June 30, 2002, and the consolidated
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.

         The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has sustained continuing losses
and a working capital deficiency of approximately $5,500,000 at June 30, 2002,
which raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described
further in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty


                                                /s/ Grassi & Co. CPAs, P.C.
                                                    ----------------------------
                                                    Grassi & Co. CPAs,  P.C
                                                    Certified Public Accountants

October 10, 2002
New York, New York



                                       F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Scantek Medical, Inc.


We have audited the accompanying  consolidated balance sheet of Scantek Medical,
Inc. and  subsidiaries  (the  "Company")  as of June 30,  2001,  and the related
consolidated statements of operations,  stockholders' deficiency, and cash flows
for each of the two years in the period ended June 30, 2001. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
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, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Scantek Medical,
Inc. and subsidiaries at June 30, 2001, and the results of their
operations and their cash flows for each of the two years in the period ended
June 30, 2001 in conformity with principles generally accepted in the United
States of America.









                                       F-2

<PAGE>




   The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company is engaged in
manufacturing and marketing a product that detects early breast tissue
abnormalities including cancer. As more fully explained in Note 1 of Notes to
Consolidated Financial Statements, the Company needs to obtain additional
financing to fulfill its activities and achieve a level of sales adequate to
support its cost structure. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Managements' plans are also
described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties should the
Company be unable to continue as a going concern.






WIENER, GOODMAN & COMPANY, P.C.
Certified Public Accountants
Eatontown, New Jersey

September 18, 2001




                                       F-3



<PAGE>
                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                       June 30,
                                                                  -------------------------------------------------
                                                                           2002                      2001
                                                                           ----                      ----
                             ASSETS
Current Assets:
<S>                                                                            <C>                        <C>
    Cash                                                                       $ 11,229                   $ 6,026
    Marketable securities                                                         3,041                     2,765
    Inventories                                                                 562,037                   547,824
                                                                                --------                ---------
        Total Current Assets                                                    576,307                   556,615

Property and equipment - net                                                    910,092                 1,248,558
Other assets - net                                                               33,352                    33,567
                                                                                --------                ---------

    TOTAL ASSETS                                                            $ 1,519,751               $ 1,838,740
                                                                            ============              ===========

            LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
    Short-term debt                                                         $ 1,354,080               $ 1,298,628
    Current portion of long-term debt                                                 -                   850,000
    Accounts payable (Including $800,003 and $810,178 to                      1,346,734                 1,269,839
       a related party in 2002 and 2001)
    Accrued interest                                                          1,323,886                   927,490
    Accrued salaries                                                          1,892,472                 1,612,472
    Accrued expenses                                                            611,193                   554,435
                                                                              ----------                ---------
        Total Current Liabilities                                             6,528,365                 6,512,864

Long-term debt-less current portion                                           3,271,750                 2,141,609
                                                                              ----------                ---------
        Total Liabilities                                                     9,800,115                 8,654,473
                                                                              ----------                ---------

Commitments and Contingencies

Stockholders' Deficiency:
    Preferred stock, par value $.001
     per share - authorized 5,000,000
     shares; none issued                                                              -                         -
    Common stock, par value $.001
     per share - 45,000,000 shares authorized; Issued and outstanding -
     28,045,156 shares at June 30, 2002 and 24,970,690 shares at
     June 30, 2001                                                               28,045                    24,971
    Additional paid-in-capital                                                4,839,697                 4,286,082
    Cumulative other comprehensive loss                                        (298,959)                 (299,235)
    Accumulated deficit                                                     (12,849,147)              (10,827,551)
                                                                             ------------              ------------
        Total Stockholders' Deficiency                                       (8,280,364)               (6,815,733)
                                                                             ------------              ------------

    TOTAL LIABILITIES AND STOCKHOLDERS'
     DEFICIENCY                                                             $ 1,519,751               $ 1,838,740
                                                                            ============              ===========
</TABLE>
                 See notes to consolidated financial statements

                                      F-4
<PAGE>
                    SCANTEK MEDICAL INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                               For the Years Ended June 30,
                                                                 2002                    2001                   2000
                                                                 ----                    ----                   ----
Revenues:
<S>                                                       <C>                              <C>                  <C>
    Net sales                                             $                               $ 21,137              $ 29,775
    License fees                                                         -                       -                59,000
                                                             --------------           ---------------          -------------
                                                                         -                  21,137                88,775
                                                             --------------           ---------------          -------------

Costs and expenses:
    Cost of sales (principally depreciation expense
     of $250,000, $264,000 and $277,000 in 2002,
     2001 and 2000 respectively)                                   250,256                 465,282               537,216


    General and administrative
     expenses                                                    1,018,069               1,152,915             1,699,922
    Research and development                                       280,000                 280,000               286,223
                                                             --------------           ---------------          -------------
                                                                 1,548,325               1,898,197             2,523,361
                                                             --------------           ---------------          -------------

Loss from operations                                            (1,548,325)             (1,877,060)           (2,434,586)
                                                             --------------           ---------------          -------------

Other income (expense):
    Interest and dividends                                               8                      30                   223
    Loss on investment                                             (20,500)                      -                     -
    Gain on sale of marketable
     securities                                                          -                       -                25,007
    Interest expense                                              (452,779)               (511,141)             (417,109)
    Miscellaneous                                                        -                  27,000                10,000
                                                             --------------           ---------------          -------------
                                                                  (473,271)               (484,111)             (381,879)
                                                             --------------           ---------------          -------------

Net loss                                                      $ (2,021,596)           $ (2,361,171)         $ (2,816,465)
                                                             =============            =============         =============

Loss per common share - basic and diluted                          $ (0.08)                $ (0.12)              $ (0.15)
                                                             =============            =============         =============


Weighted average number of common
 shares outstanding - basic and diluted                         26,557,923              20,521,527            18,431,820
                                                             =============              ===========           ==========

</TABLE>

                 See notes to consolidated financial statements

                                      F-5
<PAGE>
                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                                                                     Cumulative
                                                                                       Other                             Additional
                                                        Comprehensive  Accumulated  Comprehensive     Common Stock         Paid-In
                                                                                                      ------------
                                             Total      Income (Loss)   Deficit     Income (Loss)  # of Shares  Value      Capital
                                             -----      -------------   -------     -------------  -----------  -----      -------
<S>          <C> <C>                      <C>                         <C>          <C>           <C>          <C>      <C>
Balance June 30, 1999                     $(2,364,728)                $(5,649,915) $ (165,885)   18,070,200   $18,070  $ 3,433,002
Sale of common stock (at $.2185 per share)     10,000                                                45,767       46         9,954
Common stock issued for loan
 financing and services rendered
 (issued at $.01 to $.5625 per share)         199,254                                               694,573      694       198,560
Issuance of stock warrants for services
 (issued at $.1875 to $.75 per share)          85,460                                                                       85,460
Net unrealized loss on marketable
 securities                                  (115,380)  $ (115,380)                  (115,380)
Net loss                                   (2,816,465)  (2,816,465)  (2,816,465)
                                                         -----------
   Comprehensive loss                                   $(2,931,845)
                                                         ===========


------------------------------------------------------------------------------------------------------------------------------------
 Balance, June 30, 2000                     (5,001,859)              (8,466,380)     (281,265)   18,810,540   18,810     3,726,976

Common stock issued for loan financing and
 services  rendered (issued at
   $.08 to $.51 per share)                    302,517                                             3,013,900    3,015       299,502
Common stock issued for loan conversion
 (issued at $.10 per share)                    10,000                                               100,000      100         9,900
Sale of common stock (at $.08 to $.20
   per share                                  250,900                                             3,046,250    3,046       247,854
Issuance of stock warrants for services
 (issued at $.07 per share)                     1,850                                                                        1,850
Net unrealized loss on marketable securities  (17,970)    $ (17,970)                   (17,970)
Net loss                                   (2,361,171)   (2,361,171) (2,361,171)
                                                          -----------
   Comprehensive loss                                  $ (2,379,141)
                                                        =============

------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2001                     (6,815,733)               (10,827,551)     (299,235)   24,970,690  24,971     4,286,082

Sale of common stock ($.05 to $.08 per share)  72,000                                                975,000     975        71,025
Common stock issued for loan financing and
  services rendered (issued at $.035
     to $.20 per share)                       159,918                                              2,099,466   2,099       157,819
Issuance of stock warrants for services
   (issued at $.015 to $.07 per share)        324,771                                                                      324,771
Net unrealized gain on marketable securities      276         $ 276                        276
Net loss                                   (2,021,596)   (2,021,596)  (2,021,596)
                                                          -----------
   Comprehensive loss                                   $ (2,021,320)
                                                        =============

------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2002                   $ (8,280,364)             $ (12,849,147)   $ (298,959)   28,045,156 $28,045   $ 4,839,697
                                         =============                ============  ===========   ========== ======== ============
</TABLE>
                 See notes to consolidated financial statements


                                      F-6
<PAGE>
                   SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                 For The Years Ended June 30,
                                                                --------------------------------------------------------------
                                                                2002                   2001                   2000
                                                                ----                   ----                   ----
Cash flows from operating activities:
<S>                                                             <C>                    <C>                    <C>
    Net loss                                                    $ (2,021,596)          $ (2,361,171)          $ (2,816,465)
Adjustments to reconcile net
 (loss) to net cash
 used in operating activities:
    Depreciation and amortization                                    295,181                367,065                367,065
    Net gain on sale of marketable
     securities                                                            -                      -                (25,007)
    Loss on investment                                                20,500                      -                      -
    Write-off of obsolete inventory                                        -                119,286                      -
    Non-employee stock based
     compensation                                                    158,603                167,600                124,725
    Non-cash officers compensation                                   281,315                136,767                 74,529
    Other non-cash items                                              44,771                      -                 85,460
    Changes in operating assets
     and liabilities                                                 795,836                787,646              1,259,815
                                                                    --------               --------             ---------
       Net Cash Used in
        Operating Activities                                        (425,390)              (782,807)              (929,878)
                                                                    ---------              ---------              ---------

Cash flows from investing activities:
    Proceeds from sale of marketable
     securities                                                            -                      -                298,164
    Purchase and deposits of property
     and equipment                                                         -                      -                (43,500)
                                                                           -                     --                --------
       Net Cash Provided by
        Investing Activities                                               -                      -                254,664
                                                                           -                     --               -------

Cash flows from financing activities:
    Proceeds from borrowings                                         311,460                575,600                473,215
    Proceeds from officer loans                                       58,137                      -                309,413
    Repayment of officer loans                                        (3,759)               (15,000)               (76,084)
    Repayment of notes                                                (7,245)               (25,565)               (43,948)
    Proceeds from sale of common stock                                72,000                250,900                 10,000
                                                                     -------               --------                ------
       Net Cash Provided by
        Financing Activities                                         430,593                785,935                672,596
                                                                    --------               --------               -------

Net Increase (Decrease) in Cash                                        5,203                  3,128                 (2,618)

Cash - beginning of year                                               6,026                  2,898                  5,516
                                                                    --------               --------                --------

Cash - end of year                                                 $  11,229                $ 6,026                $ 2,898
                                                                   =========               ========                =======
</TABLE>



                 See notes to consolidated financial statements

                                      F-7
<PAGE>
                   SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                               For The Years Ended June 30,
                                                                2002                   2001                   2000
                                                                ----                   ----                   ----
Changes in operating assets and liabilities consist of:
<S>                                                          <C>                     <C>                   <C>
    Decrease (increase) in accounts receivable               $       -               $ 24,000              $ (24,000)
    (Increase) decrease in inventory                           (14,213)                54,205                177,481
    Decrease in prepaid
     expenses                                                        -                  8,511                 75,776
    (Increase) in other assets                                       -                      -                 (8,602)
    Increase in accounts payable
     and accrued expenses                                      810,049                700,930              1,039,160
                                                              --------               ---------            ---------

                                                             $ 795,836              $ 787,646            $ 1,259,815
                                                              ==========             ==========           ===========

Supplementary information:
    Cash paid during the year for:
       Interest                                                 $ 225               $ 18,937               $ 38,583
                                                              ==========            ===========           ===========
       Income Taxes                                             $ 240                  $ 400                  $ 450
                                                              ==========            ===========           ===========

    Non-cash investing activities:
     Unrealized gain (loss) on
      marketable securities                                     $ 276               $(17,970)            $ (115,380)
                                                              ==========            ============          ===========

    Non-cash financing activities:
    Conversion of notes payable to common stock                 $   -               $ 10,000                    $ -
                                                              ==========            ============          ===========
    Common stock issued for loan financing and
     extensions                                             $ 159,918              $ 302,517              $ 199,254
                                                              ==========             ==========            ==========
    Issuance of stock warrants for services
     rendered                                               $ 324,771              $   1,850               $ 85,460
                                                              ==========             ==========            ==========



</TABLE>



                 See notes to consolidated financial statements




                                      F-8
<PAGE>




                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Organization
        Scantek Medical, Inc. and its subsidiaries (the "Company"), operates in
       one industry segment and is engaged, in developing, manufacturing,
       marketing, and licensing the BreastCare(TM)/BreastAlert(TM). The
       BreastCare(TM)/BreastAlert(TM) is an early screening device which can
       detect certain breast tissue abnormalities, including breast cancer. This
       device has been patented and has Food and Drug Administration ("FDA")
       approval for sale.

        During the year ended June 30, 1999, the Company's principal operations
       commenced shipments of the BreastCare(TM)/BreastAlert(TM) device in South
       America. The Company also regained rights to manufacture and sell
       BreastCare(TM)/BreastAlert(TM) in the United States of America, Canada
       and their territories and possessions. See Note 6 of Notes to
       Consolidated Financial Statements for further information. Accordingly,
       the Company is no longer considered a development stage enterprise, as it
       was through June 30, 1998. There is no assurance that commercially
       successful products will be developed, nor that the Company will achieve
       a profitable level of operations.

       Basis of Presentation
        The accompanying consolidated financial statements have been prepared on
       a going concern basis, which contemplates the realization of assets and
       the satisfaction of liabilities in the normal course of business.

        The Company has experienced losses during its development stage. Losses
       and negative cash flows from operations have continued in the current
       fiscal year and subsequent to June 30, 2002. As of June 30, 2002, the
       Company has a working capital deficit of approximately $5.5 million.

        The activities of the Company are being financed through the sale of its
       common stock and debt securities. The Company's continued existence is
       dependent upon its ability to obtain needed working capital through
       additional equity and/or debt financing, and the commercial acceptability
       of the BreastCare(TM)/BreastAlert(TM) to create sales that will help the
       Company achieve a profitable level of operations. However, there is no
       assurance that additional capital will be obtained or the
       BreastCare(TM)/BreastAlert(TM) will be commercially successful. This
       raises substantial doubt about the ability of the Company to continue as
       a going concern.

        The financial statements do not include any adjustments relating to the
       recoverability and classification of recorded asset amounts or the
       amounts and classifications of liabilities that might be necessary should
       the Company be unable to continue as a going concern.

       Principles of Consolidation
        The consolidated financial statements include the accounts of Scantek
       Medical, Inc. and its wholly-owned subsidiaries (the "Company"). All
       intercompany transactions have been eliminated.


                                       F-9
<PAGE>

       Use of Estimates
        The preparation of the 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.

       Marketable Securities
        The Company classifies its investment in equity securities, as
       "available for sale", and accordingly, reflects unrealized losses as a
       separate component of stockholders' deficiency.

        The fair values of marketable securities are estimated based on quoted
       market prices. Realized gains or losses from the sales of marketable
       securities are based on the specific identification method.

       Concentration of Credit Risk
        Financial instruments, which potentially subject the Company to
       concentrations of credit risk, consist principally of temporary cash
       investments. The Company places its temporary cash investments with high
       credit quality financial institutions and by policy, in the future, will
       limit the amount of credit exposure with any one financial institution.

       Inventories
        Inventories are stated at the lower of weighted average cost or market.

       Revenue Recognition
        Revenue is recognized when the BreastCare(TM)/BreastAlert(TM) is shipped
        and title passes to customers.

        Revenue from licensing the BreastCare(TM)/BreastAlert(TM) is usually
       recognized when licensees commence operations and substantial performance
       has occurred. The Company historically has amended and renegotiated its
       licensees' agreements. Therefore, the Company recognizes license fee
       income when received.

       Depreciation
        Equipment is stated at cost, less accumulated depreciation. Depreciation
       is recorded using the straight-line method over the estimated useful
       lives of the assets, which are between 5 and 10 years.

       Patent Costs

       The costs associated with the acquisition and filings of the United
       States, French, English, Dutch and other patents have been capitalized.
       The patents are amortized using the straight-line method over their
       respective lives, not to exceed ten (10) years. The Company
       periodically reviews the carrying value of intangible assets and
       impairments are recognized when the expected future operating cash
       flows to be derived from such intangible assets is less than their
       carrying value.



                                      F-10
<PAGE>

         Income Taxes
          The Company accounts for income taxes using an asset and liability
         approach under which deferred income taxes are recognized by applying
         enacted tax rates applicable to future years to the differences between
         the financial statement carrying amounts and the tax basis of reported
         assets and liabilities.

          The principal items giving rise to deferred taxes are certain expenses
         which are not currently deductible for income tax purposes and the
         future tax benefit of certain net operating loss carry-forward.

         Research and Development
          Research and development costs are expensed as incurred.

         Evaluation of Long-Lived Assets
          Long-lived assets are assessed for recoverability on an ongoing basis.
         In evaluating the fair value and future benefits of long-lived assets,
         their carrying value would be reduced by the excess, if any, of the
         long-lived asset over management's estimate of the anticipated
         undiscounted future net cash flows of the related long-lived asset. As
         of June 30, 2002, management concluded that no impairment exists.

         Stock-Based Compensation
           The Company accounts for employee stock options in accordance with
         the provisions of Accounting Principles Board Opinion No. 25,
         "Accounting for Stock Issued to Employees." Accordingly, stock options
         granted to employees are recorded using the intrinsic value method. The
         Company has adopted the disclosure-only provisions of Statement Of
         Financial Accounting Standards No. 123, "Accounting for Stock-Based
         Compensation." The standard encourages, but does not require, companies
         to recognize compensation expense for grants of stock, stock options
         and other equity instruments to employees based on fair value.

         Loss Per Share
          Basic loss per common share is computed by dividing net loss by the
         weighted average number of common shares outstanding during the year.
         Diluted earnings per common share are computed by dividing net earnings
         by the weighted average number of common and potential common shares
         outstanding during the year. Potential common shares used in computing
         diluted earnings per share relate to stock options and warrants that,
         if exercised, would have a dilutive effect on earnings per share. The
         number of potential common shares outstanding were 16,595,000,
         20,056,170 and 14,402,170 for the years ended June 30, 2002, 2001 and
         2000, respectively. During the years ended June 30, 2002, 2001 and
         2000, potential common shares were not used in the computation of
         diluted loss per common share, as their effect would be antidilutive.


         Fair Value of Financial Instruments
          For financial instruments including cash, amounts due from licensees,
         accounts payable, accrued expenses and short term debt, it was assumed
         that the carrying amount approximated fair value because of the
         short-term nature of these instruments. The fair value of marketable
         securities is based on quoted market prices. It is not practicable to
         estimate the fair value of the non-publicly traded long-term debt.

                                      F-11


<PAGE>



New Accounting Pronouncements
         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company adopted SFAS 133
effective July 1, 2001. The adoption of SFAS 133 has not had a significant
impact on the consolidated financial position, results of operations, or cash
flows of the Company.

         On June 29, 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and
Intangible Assets". Major provisions of these Statements are as follows: all
business combinations initiated after June 30, 2001 must use the purchase method
of accounting; the pooling of interest method of accounting is prohibited;
goodwill and intangible assets with indefinite lives are not amortized but are
tested for impairment annually, except in certain circumstances, and whenever
there is an impairment indicator; all acquired goodwill must be assigned to
reporting units for purposes of impairment testing; effective July 1, 2002,
goodwill will no longer be subject to amortization.

         In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No. 143 on July 1,
2003, and management does not expect its adoption to have a material impact on
the Company's results of operations or financial position.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", effective for fiscal years
beginning after December 15, 2001. Under SFAS No. 144 assets held for sale will
be included in discontinued operations if the operations and cash flows will be
or have been eliminated from the ongoing operations of the entity and the entity
will not have any significant continuing involvement in the operations of the
component. The Company is planning to adopt SFAS No. 144 for their fiscal year
beginning July 1, 2002. The Company believes the adoption of SFAS No. 144 will
not have a material impact on the Company's results of operations or financial
position.

         In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30 "Reporting Results of
Operations". This statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. This statement will be effective for the Company for
the year ending December 31, 2003. The adoption of this statement will not have
a material effect on the Company's results of operations or financial position.



                                      F-12

<PAGE>

     In July 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
will supersede Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that costs  associated with an exit or disposal plan be recognized when incurred
rather than at the date of a commitment  to an exit or disposal  plan.  SFAS No.
146 is to be applied  prospectively  to exit or  disposal  activities  initiated
after December 31, 2002.


2.       INVESTMENT IN SUBSIDIARIES

(a)        In July 1999, the Company organized Scantek Medical do Brazil LTDA, a
Brazilian Company and a wholly owned subsidiary, to distribute the
BreastCare(TM)/BreastAlert(TM) in Brazil. The subsidiary will manufacture the
BreastCare(TM)/BreastAlert(TM) for South America in a proposed production
facility in the state of Pernambuco. The facility previously expected to be
constructed has been terminated due to non-performance by the Company. During
the year ended June 30, 2002 the Company wrote off the land in the amount of
$43,500 in connection with the non-performance. See Note 5 of Notes to
Consolidated Financial Statements. The Company expects to find a new location
and construct a facility during 2003.

(b)      In January,  1998, the Company  organized a wholly-owned  subsidiary,
Scantek Medical S.A. Inc., a Uruguayan  company,  to  distribute the
BreastCare(TM)/BreastAlert(TM)in South America.

3.       MARKETABLE SECURITIES

<TABLE>
<CAPTION>

                                                            Estimated             Gross                Gross
                                                              Fair              Unrealized          Unrealized
                                           Cost               Value               Gains               Losses
                                     -----------------  ------------------  -------------------  ------------------
June 30, 2002:
  Marketable securities-
   current:
<S>                                          <C>                 <C>                  <C>                     <C>
      Common stock                           $ 2,000             $ 3,041              $ 1,041                 $ -
                                             ========            ========             ========           ========
      Warrants                             $ 300,000                 $ -                  $ -            $300,000
                                            =========            ========             ========           ========
June 30, 2001:
  Marketable securities-
   current:
      Common stock                           $ 2,000             $ 2,765                $ 765                 $ -
                                             ========            ========               ======           ========
      Warrants                             $ 300,000     $       -           $             -             $300,000
                                             ========            ========               =======          ========


</TABLE>

         Gross realized gains were $-0- in 2002, $-0-in 2001 and $145,912 in
2000. Gross realized losses were $-0- in 2002, $-0- in 2001 and $120,905 in
2000.



                                      F-13

<PAGE>


 4.INVENTORIES




                                                  June 30,
                                     -----------------------------

                                          2002                2001
                                     ---------           ---------
        Raw materials                $ 562,037           $ 547,824
                                     ----------          ---------
                                     $ 562,037           $ 547,824
                                     ==========          =========



4.       PROPERTY AND EQUIPMENT


<TABLE>
<CAPTION>

                                                                        June 30,
                                                      -----------------------------------------
                                                             2002                  2001
                                                      -------------------   -------------------
<S>                                                     <C>                      <C>
        Land                                            $         -              $ 43,500
        Equipment                                         2,014,545             2,014,545
        Furniture and fixtures                               27,489                27,489
        Leasehold improvements                               16,525                16,525
                                                          ----------           ----------
                                                          2,058,559             2,102,059
        Less accumulated depreciation                     1,148,467               853,501
                                                          ----------           ----------
                                                          $ 910,092           $ 1,248,558
                                                          ==========           ==========

</TABLE>



         Depreciation expense for the years ended June 30, 2002, 2001 and 2000
was $294,966, $299,458 and $299,458, respectively.

5.       OTHER ASSETS
                                                         June 30,
                                            ------------------------------------
                                                 2002               2001
                                            -----------------  -----------------

Patent costs                                   $ 676,069          $ 676,069
Security deposits                                 33,352             33,352
                                                 -------             ------
                                                 709,421            709,421
Less accumulated amortization                    676,069            675,854
                                                --------            -------
                                                $ 33,352           $ 33,567
                                               =========           ========




6.         HUMASCAN AGREEMENT/SETTLEMENT

         On March 15, 1999 pursuant to a Settlement Agreement ("Agreement")
         dated as of the 11th day of March 1999, between the Company and
         HumaScan, Inc. ("HumaScan"), the Company regained the rights to market
         and sell its BreastCare(TM)/BreastAlert(TM) in the United States and
         Canada.

                                      F-14
<PAGE>


          Pursuant to the Agreement, all licensing agreements between the
         Company and HumaScan, which gave HumaScan the right to manufacture,
         market and sell the BreastCare(TM)/BreastAlert(TM), were terminated.
         Pursuant to the original and amended licensing agreements, HumaScan was
         indebted to the Company for failure to pay license fees, royalties and
         other sums of money. In exchange for the cancellation of $575,000 of
         indebtedness due to the Company by HumaScan and for the payment by the
         Company to HumaScan of an additional $340,000, HumaScan agreed to
         assign certain special manufacturing equipment, furniture, raw
         materials, tools, materials, laboratory equipment and inventory of
         HumaScan for the manufacture of the BreastCare(TM)/BreastAlert(TM). The
         Company recorded raw materials and finished goods in the amount of
         approximately $856,000, which represents the fair market value of the
         inventory received. Equipment with an initial acquisition cost of
         approximately $2.5 million has been recorded for approximately $59,000,
         which represents the cost the Company paid HumaScan as part of the
         Agreement.


7.       LICENSE AGREEMENTS

     a)  The Company entered into an exclusive license agreement, dated
         September 22, 1997, and amended February 18, 1998, with Sandell
         Corporation S.A. (the "Sandell Agreement"), a Uruguayan corporation,
         ("Sandell"), pursuant to which the Company granted to Sandell an
         exclusive license to market and distribute the
         BreastCare(TM)/BreastAlert(TM) in Brazil, Venezuela, Columbia, Costa
         Rica, Ecuador, Nicaragua, Paraguay, Panama, Peru, Bolivia, Argentina
         and Uruguay. The Sandell Agreement was for a term of fourteen (14)
         years. As of June 30, 1999, upon mutual consent of both parties, the
         Company terminated its agreement with Sandell. The Company will
         manufacture, market and distribute the BreastCare(TM)/BreastAlert(TM)
         throughout the majority of South America through the Company's South
         American subsidiaries.

     b)   In July 14, 1999, the Company  granted an exclusive  license to NuGard
          HealthCare Ltd. ("NuGard"),  an Irish Company; to market the Company's
          BreastCare(TM)/BreastAlert(TM)in   Ireland  and  the  United  Kingdom.
          Pursuant to the licensing agreement,  NuGard will pay a non-refundable
          licensing  fee of $350,000,  of which  $59,000 was received as of June
          30, 2001,  and recorded as income during the year ended June 30, 2000.
          The purchase  price for the  BreastCare(TM)/BreastAlert(TM)will  range
          from  $10 to $15 per unit - FOB US.  The  license  agreement  requires
          minimum  purchases  of 5,000 units a month and  payments of  licensing
          fees,  both of which NuGard is in default.  The Company also  received
          common  shares  equivalent  to fifteen  (15%) percent of NuGards total
          outstanding  common  shares.  The  shares  received  have no value and
          nothing has been  recorded.  As of June 30, 2002,  the Company has not
          been able to renegotiate  the license  agreement and no shipments have
          been made nor monies received which were due on the license agreement.



                                      F-15

<PAGE>

     c)  On April 15, 2000, D-Lanz Development Group, Inc. ("D-Lanz")
         and the Company entered into an agreement to amend its previous license
         agreement dated April 29, 1997 and amended June 11, 1999. D-Lanz had a
         change in control and the License will be assigned to a new
         corporation, Global Agri-Med Technologies, Inc. ("Global"). The Company
         agreed to assign and transfer the license to Global, which includes the
         exclusive license in Chile and Singapore. In addition, the Company has
         agreed to give Global non-exclusive license extensions to Africa,
         Korea, and South Asia. Global must receive final clearance from the
         Company before any participation or distribution can proceed in any
         city, state, territory or country in the non-exclusive extensions as
         stated above.


         The Company received 2,000,000 common shares of Global and $27,500 in
         cash, which the Company recorded as income during the year ended June
         30, 1999. The payment extinguishes the Company's right to minimum
         royalties in any year until the first full calendar year following the
         fiscal year in which Global becomes profitable. The shares will be
         delivered, prior the establishment of a trading market for Global
         shares. The terms in this agreement will be deemed to amend the prior
         agreement, and thus will govern the prior agreement in the terms
         related to the previous agreement. Both parties have agreed to update
         certain terms in the previous agreement that will be beneficial to both
         parties. At June 30, 2001, the Company wrote down the marketable
         securities to $-0- as there was no quoted market value for the
         marketable securities.




                                      F-16


<PAGE>



8.       DEBT
Short-term debt at June 30, is as follows:




<TABLE>
<CAPTION>

                                                                                     2002                        2001
                                                                            ------------------------      --------------------
           Secured notes, interest at 10% to 12%
            per year, due on demand.
            The loans are secured by inventory,
<S>                                   <C>                                          <C>                         <C>
            receivables and equipment (1)                                          $ 492,500                   $ 330,000

           Unsecured notes, interest
            at 10% to 16% per year, due on demand (2)                                654,323                     890,628

           Unsecured note, interest at 10%,
            due February 2003 (6)                                                    100,000                           -

           Unsecured officer loans, due
            6/30/03, interest at prime plus
            2% (6.75% at June 30, 2002) (3)                                          107,257                      78,000
                                                                                    --------                     ------

                                                                                 $ 1,354,080                 $ 1,298,628
                                                                                 ============                ===========
 Long-term debt at June 30, is as follows:
                                                                                     2002                        2001
                                                                            ------------------------      --------------------
           Secured note due December 31,
            2003, interest at 12% per year.
            The loan is secured by production
            equipment                                                              $ 850,000                 $   850,000

           Secured notes, interest at 10% to 12% per
            year.  The loans are secured by
            equipment. (1)                                                                 -                     150,000

           Unsecured officer loans, due
            December 31, 2003 interest
            at prime plus 2% (6.75% at
            June 30, 2002)  (4)                                                    1,128,684                   1,103,603

           Unsecured notes, interest at 10% per year,
            due December 31, 2003 (2)                                                405,060                           -

           Unsecured notes, interest at prime
            plus 2% (6.75% at June 30, 2002)
            due December 31, 2003 (5)                                                888,006                     888,006
                                                                                    --------                     -------

                                                                                   3,271,750                   2,991,609
           Current portion of long-term
            debt                                                                           -                     850,000
                                                                                   -----------                  -------
                                                                                 $ 3,271,750               $   2,141,609
                                                                                   ============              ===========


</TABLE>


                                      F-17
<PAGE>



          Annual maturities on long-term debt as of June 30, 2002 during the
          next five years are:

                   Year Ending June 30,
              -------------------------------

                           2003                                     $ 3,764,250
                           2004                                               -
                           2005                                               -
                           2006                                               -
                           2007                                               -
                                                                   -------------
                                                                   $ 3,764,250
                                                                   =============


         (1) The holders of these notes received as additional
         consideration 135,625 shares of the Company's common stock. For the
         years ended June 30, 2002, 2001 and 2000 the Company recorded interest
         expense of $109, $ 6,600 and $20,313, respectively.

          (2) The holders of these notes received as additional consideration
         2,377,765 shares of the Company's common stock. For the year ended June
         30, 2002, 2001 and 2000 the Company recorded interest and consulting
         expense in the amount of $26,224, $126,425 and $70,802, respectively.

          (3) The unsecured note payable represents loans made to the Company by
         the Company's Vice-President and Secretary. Interest expense for the
         year ended June 30, 2002, 2001 and 2000 amounted to $8,674, $7,536 and
         $1,223, respectively. Accrued interest at June 30, 2002 and 2001 was
         $14,292 and $5,618, respectively. In consideration for the loan, the
         Company issued 45,594 shares of the Company's common stock and recorded
         additional interest expense in the amount of $1,090, $4,463 and $3,208
         for the years ended June 30, 2002, 2001 and 2000.

          (4) The unsecured note payable represents loans made to the Company by
         Mr. Zsigmond Sagi ("Mr. Sagi"), the Company's president and Chief
         Executive Officer. Interest expense for the years ended June 30, 2002,
         2001 and 2000 amounted to $83,840, $108,800 and $105,452, respectively.
         Accrued interest at June 30, 2002 and 2001 was $340,244 and $256,404,
         respectively. In consideration for loans, the Company issued
         153,585shares of the Company's common stock and recorded additional
         interest expense in the amount of $225, $34,629 and $32,969 for the
         years ended June 30, 2002, 2001 and 2000.

          (5) The holder of the note was a corporation controlled by Mr. Sagi.
         On March 31, 1998, the corporation holding the note dissolved and
         distributed the note to its five shareholders in equal amounts of
         $177,601. Two of the five shareholders are executive officers of the
         Company, including Mr. Sagi and Carlo Civelli, former Vice President of
         Finance International. The note terms were renegotiated with the
         lenders with principal payments due December 31, 2000 and interest at
         prime plus two (2%) percent. The notes have been extended to December
         31, 2003. Accrued interest at June 30, 2002 and 2001 was $385,170 and
         $318,570, respectively. Interest expense for the years, ended June 30,
         2002, 2001 and 2000, amounted to $66,600, $88,800 and $88,800,
         respectively.



                                      F-18


<PAGE>



         (6) The unsecured note payable was renegotiated on August 20, 2002. The
         unaffiliated third party advanced an additional $150,000 and, including
         accrued interest, the new note amounted to $253,206. The note matures
         on February 20, 2003. The Company is required to make payments of
         $50,000 per month commencing November 20, 2002 and the balance payable
         at maturity or, if greater, the Company will pay $0.475 for each unit
         of the BeastCare devices sold in Brazil for which the Company receives
         payment.

9.       INCOME TAXES

          At June 30, 2002, the Company had a net operating loss ("NOL")
         carryforward of approximately $12,000,000 for financial reporting
         purposes and approximately $7,700,000 for tax purposes. The difference
         between financial reporting and tax purposes results from the temporary
         difference caused by the capitalization of start-up expenditures for
         tax purposes required by Internal Revenue Code Section 195 and the net
         unrealized losses on marketable securities. The Company has not
         reflected any benefit of such net operating loss carryforwards in the
         accompanying financial statements in accordance with Financial
         Accounting Standards Board Statement No. 109 as the realization of this
         deferred tax benefit is not more than likely. The tax NOL carryforwards
         expire in the years 2005 through 2020.

         A reconciliation of taxes on income at the federal statutory rate to
         amounts provided is as follows:

<TABLE>
<CAPTION>
                                                           Years Ended June 30,
                                                 ----------------------------------------------------------------
                                                       2002                  2001                   2000
                                                 ------------------   --------------------  ---------------------

Tax benefit computed
<S>                                                       <C>                  <C>                  <C>
 at the Federal statutory rate                           $(687,000)            $ (945,000)          $ (1,127,000)
Increase (decrease) in taxes
 resulting from:
Effect of unused tax losses                                687,000               945,000              1,127,000
                                                 ------------------   --------------------  ---------------------

                                                              $ -                    $ -                    $ -
                                                 =================    ===================   =====================
</TABLE>

                                      F-19


<PAGE>





         The types of temporary differences between the tax basis of assets and
         liabilities and their financial reporting amounts that give rise to a
         deferred tax asset and deferred tax liability and their approximate tax
         effects are:

<TABLE>
<CAPTION>


                                                                                     June 30,
                                               -------------------------------------------------------------------------------------

                                                                   2002                                      2001
                                               -------------------------------------------   --------------------------------------
                                                    Temporary                 Tax              Temporary                Tax
                                                   Difference               Effect            Difference              Effect
                                               --------------------   --------------------   -----------------  --------------------
Net operating
        loss carry-
<S>                                                   <C>                     <C>                    <C>                   <C>
        forward                                       $ (7,700,000)           $(3,080,000)        $(6,635,000)          $(2,654,000)
       Deferred start-
        up expenses                                     (3,666,000)            (1,466,000)         (3,666,000)           (1,466,000)
       Unrealized (losses)
        on marketable
        securities                                        (299,000)              (120,000)           (299,000)             (120,000)
       Valuation
        allowance                                      11,665,000              4,666,000           10,600,000             4,240,000
                                                       -----------             ----------         -----------            ----------
                                                              $ -                    $ -                 $ -                   $ -
                                                       ===========             ==========         ===========            ==========
</TABLE>


10.      SEGMENTS - GEOGRAPHIC AREAS

          The Company does not have reportable operating segments as defined in
         the Statement of Financial Accounting Standards No. 131, "Disclosure
         about Segments of an Enterprise and Related Information". The method
         for attributing revenues to individual countries is based on the
         destination to which finished goods are shipped. The Company operates
         facilities in the United States and South America.

          All sales attributable to South America of the
         BreastCare(TM)/BreastAlert(TM) for the year ended June 30, 2000, were
         to the Company's South American licensee, Sandell Corporation
         S.A.("Sandell"), a related party, which the Company previously owned
         35% of the outstanding shares. Sales of the
         BreastCare(TM)/BreastAlert(TM) were not recorded by the Company until
         Sandell shipped the BreastCare(TM)/BreastAlert(TM) to unrelated
         entities. As of June 30, 1999 the Company terminated its license
         agreement with Sandell. All sales for the year ended June 30, 2001 were
         shipped from the United States to one customer in Brazil. Revenues
         include license fees received by the Company in connection with various
         arrangements contracted throughout the world. See Note 7 of Notes to
         Consolidated Financial Statements for further information.






                                      F-20
<PAGE>


<TABLE>
<CAPTION>



                                          June 30,
                                      -----------------  -----------------   -----------------
                                            2002               2001                2000
                                      -----------------  -----------------   -----------------

Revenues from unrelated entities and countries of Company's domicile:
<S>                                                <C>                <C>            <C>
            United States                          $ -                $ -            $ 59,420
            South America                            -             21,137              24,000
            Ireland                                  -                  -               5,355
                                                    --                 --              -----
                                                  $  -           $ 21,137            $ 88,775
                                           ============       ============        ============
Total Revenues:
            United States                         $ -                $ -             $ 59,420
            South America                           -             21,137               24,000
            Ireland                                 -                  -                5,355
                                                   --                 --              -----
                                                    -             21,137               88,775
     Less: intergeographic
         revenue                                    -                  -                   -
                                                    --                 --                  -
                                                  $ -           $ 21,137            $ 88,775
                                           ===========        ============        ==========
Loss from operations:
            United States                  $(1,432,331)       $(1,510,441)       $(1,880,632)
            South America                     (115,994)          (366,619)          (553,954)
                                              ---------          ---------          ---------
                                           $(1,548,325)       $(1,877,060)       $(2,434,586)
                                           ============       ============        ============
Assets:
            United States                  $ 2,710,448        $ 2,867,192        $ 3,125,614
            South America                        8,389            103,474            118,599
                                           -----------        -----------         ----------
                                             2,718,837          2,970,666          3,244,213
     Less: intergeographic
         eliminations                       (1,199,086)        (1,131,926)          (887,564)
                                            -----------        -----------         ---------
                                          $  1,519,751        $ 1,838,740        $ 2,356,649
                                          ============       ============        ===========
Capital Expenditures:
            United States                          $ -                $ -                $ -
            South America                            -                  -             43,500
                                                    --                 --             ------
                                                  $  -               $  -           $ 43,500
                                          ============       ============        ===========
Depreciation and amortization
     expense:
            United States                    $ 295,180          $ 367,065          $ 367,065
            South America                           -                  -                   -
                                                    --                 --                  -
                                            $ 295,180          $ 367,065           $ 367,065
                                           ============       ============        ===========
</TABLE>



                                      F-21


<PAGE>




         Transfers between geographic areas include raw materials manufactured
         in the United States, which are shipped to South America to be
         manufactured into finished products. Loss from operations represents
         total revenue less operating expenses.

         Identifiable assets are those assets of the Company that are
         identified with the operation of each geographic area.

11.      STOCK ISSUED FOR SERVICES AND LOAN FINANCING

          For the years ended June 30, 2002, 2001 and 2000, the Company issued
         2,099,466, 3,013,900 and 694,573, respectively of the Company's common
         stock to employees and non-employees as stock-based compensation in the
         amount of $159,918, $302,517 and $199,254, respectively.

12.      STOCK OPTIONS AND WARRANTS

          The Company has adopted the disclosure-only provisions of the
         Statement of Financial Accounting Standards No. 123 "Accounting for
         Stock-Based Compensation". Accordingly, no compensation cost has been
         recognized for the stock options awarded. Had compensation cost for the
         Company's issuance of stock options and warrants been determined based
         on the fair value at the grant date for awards in fiscal years ended
         2002, 2001 and 2000, consistent with the provision of SFAS No. 123, the
         Company's net loss and net loss per share would have increased to the
         pro-forma amounts indicated below:

<TABLE>
<CAPTION>


                                                                 June 30,

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

                                       --------------------   --------------------   --------------------
<S>                                           <C>                    <C>                    <C>
 Net (loss) - as reported                     $ (2,021,596)          $ (2,361,171)          $ (2,816,465)
 Net (loss) - pro-forma                         (2,219,413)            (2,823,392)            (3,260,223)
 Loss per share - basic
  and diluted - as reported                        $ (0.08)               $ (0.12)               $ (0.15)
 Loss per share - basic
  and diluted -pro-forma                           $ (0.08)               $ (0.14)               $ (0.18)
</TABLE>






                                      F-22


<PAGE>




12.  STOCK OPTIONS AND WARRANTS (Continued)

         The fair value of options and warrants are estimated on the date of
         grant using the Black-Scholes option pricing method with the following
         weighted average assumptions issued for grants in 2002, 2001 and 2000,
         respectively: dividend yield of 0%, expected volatility of 151% to
         180%, risk free interest rate of 5.0% and expected lives of 2 1/2
         years.

         The Company has granted stock options and warrants as follows:

          (a)  On March 7, 1995, the Company established a Non-Qualified
         Stock Option Plan (the "Plan"), which provides for the granting to key
         employees stock options. The Plan provides for the issuance of up to
         500,000 shares, none of which have been registered. No shares have been
         granted as of June 30, 2002.

          (b) On March 7, 1995, the Company established a Stock Grant Program,
         which provides for the granting to key employees common stock of the
         Company. The Stock Grant Program provides for the issuance of up to
         500,000 shares, none of which have been registered. No shares have been
         granted as of June 30, 2002.

         (c)  The following options and warrants were granted outside the two
              March 7, 1995 Plans:

               On May 1, 2002, the Company granted 750,000 warrants to purchase
               the Company's common stock at an exercise price of $.015 per
               share, which was below the fair value on the date of grant, to
               professionals and consultants for services rendered  in the
               amount of $25,597. The warrants are exercisable immediately and
               expire April 30, 2007.

               On May 1, 2002, the Company granted options to purchase up to
               10,000,000 shares of the Company's common stock at an exercise
               price of $.015, which was below the fair value at the date of
               grant to the Company's President and Chief Executive Officer. The
               Company recorded additional compensation expense of $200,000 for
               the year ended June 30, 2002, which is included in selling,
               general and administrative expenses. The options are exercisable
               immediately and expire on April 30, 2007.

               On May 1, 2002, the Company granted options to purchase 4,000,000
               shares of the Company's common stock at an exercise price of
               $.015, which was below the fair value at the date of grant, to
               the Company's Vice President and Secretary. The Company recorded
               additional compensation expense of $80,000 for the year ended
               June 30, 2002, which is included in selling, general and
               administrative expenses. The options are exercisable immediately
               and expire April 30, 2007.

               On February 8, 2002, the Company granted 1,050,000 warrants to
               purchase the Company's common stock at an exercise price of $.035
               per share, the fair value on the date of grant, to professionals
               and consultants for services rendered, in the amount of $35,317.
               The warrants are exercisable immediately and expire February 6,
               2007.

                                      F-23

<PAGE>

          On April 3, 2001 the Company granted warrants to purchase 550,000
          shares of the Company's common stock at an exercise price of $.07 per
          share, the fair market value at the date of grant to the Company's
          attorneys and consultants for services rendered charged to general and
          administrative expenses in the amount of $1,850. The warrants were
          cancelled on October 8, 2001.

          On April 3, 2001, the Company granted options to three directors
          totaling 40,000 shares each (120,000 shares) of the Company's common
          stock at an exercise price of $.07 per share, the fair value at the
          date of grant. The options are exercisable immediately and expire
          April 2, 2006.

          On April 3, 2001, the Company granted options to purchase up to
          3,392,857 shares of the Company's common stock at an option price of
          $.07 per share, the fair value at the date of grant, for the
          conversion of accrued salaries from January 1, 2000 through March 31,
          2001 to the Company's President and Chief Executive Officer. The
          options were cancelled on October 8, 2001.

          On April 3, 2001, the Company granted options to purchase up to
          1,606,143 shares of the Company's common stock at an option price of
          $.07 per share, the fair value at the date of grant, for the
          conversion of accrued salaries from January 1, 2000 through March 31,
          2001 to the Company's Vice President and Secretary. The options were
          cancelled on October 8, 2001.

          On December 30, 1999 the Company granted warrants to purchase 190,000
         shares of the Company's common stock at an exercise price of $.07 per
         share, the fair value at the date of grant, to the Company's attorneys,
         for legal services, which were charged to general and administrative
         expenses, in the amount of $9,728. The warrants are exercisable
         immediately and expire December 29, 2004.

          On December 30, 1999, the Company granted options to purchase up to
         5,428,571 shares of the Company's common stock at an option price of
         $.07 per share, the fair value at the date of grant, for the conversion
         of accrued salaries to the Company's President and Chief Executive
         Officer. The options were cancelled on October 8, 2001.

          On December 30, 1999, the Company granted options to purchase up to
         1,428,572 shares of the Company's common stock at an option price of
         $.07 per share, the fair value at the date of grant, for the conversion
         of accrued salaries to the Company's Vice President and Secretary. The
         options were cancelled on October 8, 2001.

          On December 30, 1999, the Company granted warrants to purchase 100,000
         shares of the Company's common stock at an exercise price of $.07 per
         share, the fair value at the date of grant, to consultants for
         financial consulting services rendered, which was charged to general
         and administrative expense, in the amount of $5,120. The warrants were
         cancelled on October 8, 2001.



                                      F-24
<PAGE>


          On December 30, 1999, the Company granted warrants to purchase 600,000
         shares of the Company's common stock at an exercise price of $.07 per
         share, the fair value at the date of grant, to the Company's President
         and Chief Executive Officer. The warrants were cancelled on October 8,
         2001.

          On December 30, 1999, the Company granted warrants to purchase 340,000
         shares of the Company's common stock at an exercise price of $.07, the
         fair value at the date of grant, to the Company's Vice-President and
         Secretary. Such warrants were cancelled on October 8, 2001.


          On December 30, 1999, the Company granted options to three directors
         totaling 40,000 shares each (120,000 shares) of the Company's common
         stock at an exercise price of $.07, the fair value at the date of
         grant. The options are exercisable immediately and expire December 29,
         2004.

          On December 30, 1999, the Company granted warrants to purchase 750,000
         shares of the Company's common stock at an exercise price of $.07, the
         fair value at the date of the grant, to employees of the Company. The
         warrants were cancelled on October 8, 2001.

         On May 14, 1999, the Company granted 4,375,027 options to officers and
         employees to purchase the Company's common stock at an exercise price
         of $.21875 per share, the fair value at the date of grant. The options
         are exercisable immediately and expire May 14, 2004. On October 8,
         2001, 4,275,027 options were cancelled.

         On December 14, 1998 the Company granted warrants to purchase 100,000
         shares of the Company's common stock at an exercise price of $.1875 per
         share, the fair value at the date of grant, to consultants in exchange
         for professional services rendered which were charged to general and
         administrative expense, in the amount of $3,981. The warrants were
         cancelled on October 8, 2001.

         On August 5, 1998, the Company granted options to two directors
         totaling 40,000 shares each (80,000 shares) of the Company's common
         stock at an option price of $.5625 per share, the fair value at the
         date of grant. The options are exercisable immediately and expire
         August 5, 2003.

         During the year ended June 30, 1998, the Company granted 400,000
         warrants to purchase the Company's common stock at exercise prices
         ranging from $.55 to $1.125, the fair value on the date of grant, to
         consultants for services rendered, which were charged to general and
         administrative expenses, in the amount of $27,780. The warrants are
         exercisable immediately and expire on dates ranging from July 31, 2000
         to January 26, 2003. 15,000 warrants on July 31, 2000 and 200,000
         warrants were cancelled on October 31, 2001.

          On January 26, 1998, the Company granted options to officers of the
         Company to purchase a total of 450,000 shares of the Company's common
         stock at an exercise price of $.55 per share, the fair value at the
         date of grant. The options were cancelled on October 8, 2001.


                                      F-25


<PAGE>




          Information regarding the Company's Stock Option Plan and Warrants,
         for fiscal years ended 2002, 2001 and 2000, is as follows:

<TABLE>
<CAPTION>
                                         2002                          2001                              2000
                                -----------------------------  -------------------------------- ----------------------------------
                                                  Weighted                        Weighted                           Weighted
                                                   Average                         Average                            Average
                                                  Exercise                        Exercise                           Exercise
                                    Shares          Price         Shares            Price           Shares             Price
                                ---------------- ------------  --------------  ---------------- ----------------  ----------------
Options and warrants
 outstanding
 beginning of
<S>                                  <C>              <C>         <C>                   <C>           <C>                  <C>
 year                                20,056,170       $ 0.11      14,402,170            $ 0.15        6,418,205            $ 0.28
Options and warrants
 exercised                                    -            -               -                 -                -                 -
Options and
 warrants granted                    15,800,000        0.016       5,669,000              0.07        8,957,163              0.07
Options and warrants
 expired /cancelled                 (19,261,170)       (0.12)        (15,000)             1.13         (973,198)             0.48
Options and
 warrants out-
 standing, end
                                    -----------                  -----------                        ----------
 of year                            16,595,000       $ 0.030     20,056,170             $ 0.11      14,402,170             $ 0.15
                                    ===========                  ===========                        ===========


Option and warrants
 price range at
 end of year                    $.015 - $.75                   $.07 to $.75                     $.07 to $1.13
Option and warrants price
 range for exercised
 shares                                -                             -                                 -
Options and warrants
 available for grant              1,000,000                    1,000,000                          1,000,000

Weighted average fair value
 of options and warrants
 granted during the year           $ 0.034                        $ .05                             $ .05

Options and warrants
 granted below fair
 market value                   14,750,000          $ 0.015
</TABLE>




                                      F-26


<PAGE>




The following table summarizes  information  about fixed-price stock options and
warrants outstanding at June 30, 2002:



<TABLE>
<CAPTION>


                                    Weighted
                                    Number              Average            Weighted            Number            Weighted
                                 Outstanding           Remaining            Average         Exercisable           Average
     Range of Exercise           at June 30,          Contractual          Exercise         at June 30,          Exercise
          Prices                     2002                 Life               Price              2002               Price
----------------------------  -------------------  -------------------  ---------------- -------------------  ----------------
<S>    <C>     <C>                    <C>              <C>                      <C>              <C>                  <C>
       $.015 - $.035                  15,800,000       4.0 years                $ 0.016          15,800,000           $ 0.016
           $.07                          430,000       3.0 years                $ 0.040             430,000           $ 0.090
          $21875                         100,000       1.8 years                $ 0.220             100,000           $ 0.220
          $.5625                         265,000        .4 years                $ 0.690             265,000           $ 0.690
                                        --------                                                   --------

                                      16,595,000                                                 16,595,000
                                      ===========                                                ==========
</TABLE>


13.      RELATED PARTY TRANSACTIONS


       (a)On March 31, 1998, SMC Corp.  dissolved and  distributed  the note due
          from the  Company to its five  shareholders,  including  Mr.  Sagi and
          Carlo  Civelli.  See  Number  (5) in Note 8 of Notes  to  Consolidated
          Financial Statements for further information.  The principal amount of
          the note at June 30, 2002 and 2001 was  $177,601  for Mr. Sagi and Mr.
          Civelli.  Interest  expense for the year ended June 30, 2002, 2001 and
          2000 was  $13,320,  $17,538  and  $17,760  each,  for Mr. Sagi and Mr.
          Civelli.  As of June 30, 2002 and 2001 accrued  interest in the amount
          of $77,034 and $63,714 was due Mr. Sagi and Mr. Civelli.

       (b)On June 30, 2002,  August 1, 2000 and July 1, 1999, the Company issued
          6,435,  67,900 and 79,250 shares of the Company's  common stock to Mr.
          Sagi in consideration for loan financing for operations. In connection
          with the  transaction  the Company  recorded  interest  expense in the
          amount of $225,  $34,629  and  $32,969  for the years  ending June 30,
          2002, 2001 and 2000, respectively.



                                      F-27


<PAGE>





(c)  On June 30, 2002, August 1, 2001 and July 1, 1999, the Company
     issued 31,141, 8,750 and 5,703 shares of the Company's common stock to the
     Company's Vice President and Secretary, in consideration for loan financing
     for operations. In connection with the transaction the Company recorded
     interest expense in the amount of $1,090, $4,463 and $3,208 for the years
     ending June 30, 2002, 2001 and 2000, respectively.

(d)  On December 29, 2000, July 6, 2000, March 8, 2000, December 30, 1999
     and July 1, 1999 the Company issued a total of 25,000 shares of the
     Company's common stock to a Company director in consideration for loan
     financing for operations. In connection with the transaction the Company
     recorded interest expense in the amount of $2,775 and $2,419 for the year
     ending June 30, 2001 and 2000, respectively.

(e)  On July 7, 1999, the Company issued 50,000 shares of the Company's
     common stock to a former director of the Company as part of his employment
     agreement. In connection with the transaction the Company recorded
     compensation expense in the amount of $9,375 for the year ending June 30,
     2000.

(f)  On July 7, 1999, the Company sold 45,767 shares of the Company's
     common stock to an officer and director of the Company. The Company
     received $10,000 net proceeds from the sale. On April 14, 2000, the Company
     also issued 35,200 shares of the Company's common stock to the same officer
     and director in exchange for consulting services worth $8,800.

(g)  On April 3, 2001, the Company issued 750,000 and 350,000 shares of
     the Company's common stock to Mr. Sagi and the Company's
     Vice-President/Secretary, respectively for bonuses. In connection with the
     transaction the Company recorded compensation expense in the amount of
     $88,000 for the year ended June 30, 2001.

(h)  The Company and Zigmed Corporation ("Zigmed") have entered into
     various agreements. Zigmed is owned and controlled by two sons of Mr. Sagi,
     who, prior to 1990, owned Zigmed. The Company has contracted with Zigmed to
     manufacture its sensor production equipment needed for its production
     centers. The Company sublets warehouse space to Zigmed for $1,970 per month
     and received $23,148 and $23,640 as rental income from Zigmed for the years
     ended June 30, 2001 and 2000. The Company has also contracted with Zigmed
     for the production of the BreastCare(TM)/BreastAlert(TM) sensors. Zigmed
     provided material, labor and product testing services of $30,000 and
     $34,748 for the years ended June 30, 2002 and 2001. The Company owes Zigmed
     approximately $82,000 and $92,000 as of June 30, 2002 and 2001 for labor.









                                      F-28


<PAGE>




14.      COMMITMENTS AND CONTINGENCIES

         Leases

          The Company leases office and warehousing facilities. Certain of these
         leases require the Company to pay certain executory costs (such as
         insurance and maintenance). In June, 1997 the Company signed a three
         (3) year lease for office and warehouse space in Denville, New Jersey
         and amended its lease on April 15, 1999 to include an additional 6,000
         square feet adjacent to its corporate headquarters. The lease was
         further amended on June 14, 2001 for 7,000 square feet of office and
         warehouse space and extended through June 14, 2003. The Company also
         rents office space in Brazil, on a month-to-month basis, costing
         approximately $350 a month.

          Future minimum lease payments for operating leases are as follows:
                   Years Ending June 30,
                   ---------------------
                  2003                              $120,463
                  2004                               131,032
                  2005                               131,032
                  2006                                21,839
                  2007                                     -
                  Thereafter                               -
                                              --------------
                                                    $404,366

          Rent expense for the years ended June 30, 2002, 2001 and 2000 was
         approximately $120,000, $126,000 and $104,000, respectively.

         Employment Agreements

               The Company has entered into  employment  contracts  with the two
          officers/directors  of the  Company.  The  agreements  all provide the
          following: base salaries increasing upon certain conditions, incentive
          bonus plans and severance benefits.

         Production Agreements

               The  Company has entered  into an amended  agreement  with Zigmed
          pursuant to which Zigmed manufactured the sensor production  equipment
          needed  for the  manufacturing  centers  for  the  contract  price  of
          $1,850,680  plus 100,000  shares of the  Company's  common  stock.  In
          August 1996, the Company paid Zigmed an advance deposit of $200,000 to
          begin production of the manufacturing equipment, and in September 1996
          issued Zigmed 100,000 shares of the Company's  common stock (valued at
          $1.00 per share) against the contract. The manufacturing equipment has
          been  completed  and  delivered to the Company for use. As of June 30,
          2002, the Company owes Zigmed $718,276.




                                      F-29


<PAGE>




          The  Company's  Brazilian   subsidiary   terminated  an  agreement  to
          construct  a 2,550  square  meter  manufacturing  facility  in Recife,
          Pernambuco - Brazil at the new port of Suape due to non-performance by
          the Company.  The Company expects to find a new location and construct
          a facility during 2003.

          Financial Agreements

          In 2002, the Company's Brazilian subsidiary received notification of a
          termination  of its  agreement  with a federal  program  organized  to
          develop  the  Northeast  area  of  Brazil.  The  Company's   Brazilian
          subsidiary  was  approved  to  receive  funding  but  failed to fulfil
          certain milestones by December 31, 2001.

          Legal Proceedings

          The Company is a defendant in various legal proceedings seeking claims
          aggregating approximately $100,000, which has been included in accrued
          expenses in the Company's financial statements at June 30, 2002.

























                                      F-30






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

     On  October  2,  2002  Wiener,  Goodman  &  Company,  P.C.,  the  Company's
Independent  Public  accountants  resigned.  Wiener,  Goodman  &  Company,  P.C.
determined that it would be necessary to provide  internal  accounting  services
with respect to the Company which it determined would make it inappropriate  for
it to continue as the Company's Independent Accountants.

     The Company engaged Grassi & Co., CPA's,  P.C. as the Company's  certifying
accountants  to audit the financial  statements  for its fiscal year ending June
30, 2002.

                                    PART III

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

     The following table and biographical outlines set forth the directors,  and
officers within the Company,  positions presently held by each executive officer
of the  Company,  and a brief  account of the business  experience  of each such
director and officer for the past five years.

                                                      Positions and Officers
                                                       within the Company/
          Name                   Age                   Business Experience
          ----                  -----         ----------------------------------

Zsigmond L. Sagi, Ph.D.          69           President, Chairman of
                                              the Board, and Chief
                                              Executive Officer

Patricia B. Furness              55           Vice President, Corporate
                                              Secretary and Director

Maurice Siegel, Ph.D.            72           Vice President of
                                              Research and
                                              Development and Director

Louis Gottlieb                   74           Vice President of
                                              Corporate Development

Paul Nelson                      72           Director




                                      -34-






     ZSIGMOND L. SAGI,  PH.D.,  has served as President,  Chairman of the Board,
Chief  Executive  Officer and Chief Scientist of the Company since October 1991.
Mr. Sagi has over 30 years experience in the health-care  field and has invented
or developed several commercial medical devices and technological products. From
1968  until  1977 he served as  Executive  Vice  President  and Chief  Operating
Officer of Bio-Medical  Sciences,  Inc., a publicly held company of which he was
one of the founders.  Thereafter,  he organized and managed  several  companies,
including Zigmed Corp., a healthcare  engineering firm. In 1974, he founded BCSI
Laboratories,      Inc.,      the     company      which      developed      the
BreastCare(TM)/BreastAlert(TM).  From  1986  until  1991,  Mr.  Sagi  served  as
Chairman of the Board and President of SMC Corp.,  a company he founded in 1986.
Mr.  Sagi has been issued  numerous  United  States and  foreign  patents in the
fields  of  healthcare,   chemical  applications,   electronics  and  mechanics,
including  the  disposable  oral  thermometer,  the Zigzag  sewing  machine,  an
ambulatory automated feeding device, and a sterilization  indicator. He received
his master's in mechanical  engineering  in 1954 and his doctorate in Physics in
1956 from the Technical University of Hungary.

     PATRICIA  B.  FURNESS,  has  served as the Vice  President,  Secretary  and
Director of the Company since 1991. In addition to managing marketing and public
relations for the Company,  Ms.  Furness is also  responsible  for  coordinating
product and business  information to the medical and financial community and for
coordinating clinical follow up studies. From 1988 until 1991 she served as Vice
President and Secretary of Scantek  Medical Corp.,  and, in 1989, was elected to
its Board of Directors.  In 1987,  Ms.  Furness  became the Manager of Corporate
Development of Zigmed,  Inc., a manufacturer of automated systems for the health
care industry.  Ms.  Furness  received a Bachelor of Science Degree in education
from Appalachian State University in Boone,  North Carolina in 1969 and graduate
course study in Human Relations.

     MAURICE  SIEGEL,  PH.D.,  has served as the  Company's  Vice  President  of
Research  and  Development  since 1991 and as a Director  of the  Company  since
August 1997.  Since 1989,  Mr.  Siegel  served in the same capacity with Scantek
Medical  Corp.,  the Company's  predecessor.  From 1980 to 1984,  Mr. Siegel was
responsible    for   the   continuing    research   and   development   of   the
BreastCare(TM)/BreastAlert(TM).  He supervised the analytical and  manufacturing
operation  and was  involved in the  process of  receiving  FDA  medical  device
approval  for the  BreastCare(TM)/BreastAlert(TM)for  sale  to the  professional
market.  Mr.  Siegel was employed by Faberge,  Inc.  from 1957 through  1987, as
Director of Research and  Development  from 1957 to 1996,  as Vice  President of
Research  and  Development  from 1966 to 1977,  and last holding the position of
Executive Vice President of Research and  Development  from 1977 to 1987.  Since
1987, Mr. Siegel has been self employed and has served,  and continues to serve,
as a consultant to numerous  companies,  including  Tri-Scent,  Imported  Beauty
Lines, Telebrands and Sun Laboratories.  Mr. Siegel received a Ph.D. in Physical
and Organic Chemistry from New York University in 1957.

     LOUIS GOTTLIEB, has served as Vice President of Corporate Development since
August 1996.  Presently,  he is on the Board of Directors at Brookdale  Hospital
Medical  Center,  Linrock  Nursing Home,  First  Central  Financial  Corp.  From
1992-1995,  Mr.  Gottlieb  was  Treasurer  and a board  member  of  South  Shore
Association  for  Independent  Living.  Since  1973 he has  served as CEO of the
Gottlieb Group, one of the largest 500 construction  firms in the U.S. From 1942
to 1945, Mr. Gottlieb served in the US Air Corps. as a Commissioned  Lt. Fighter
pilot.  Mr.  Gottlieb  studied  civil  engineering  at  Brooklyn   Polytechnical
Institute.



                                      -35-


<PAGE>




     PAUL NELSON,  has served on the  Company's  Board of Directors  since 1991.
From 1987 until 1991,  he served as a Director  of Scantek  Medical  Corp.,  the
Company's  Predecessor.  In 1968,  Mr. Nelson  founded  compressed  Gas, Inc., a
wholesale supplier of medical and industrial compressed gases, whereby he served
as  President  and a Director  of such  company;  Mr.  Nelson has since sold his
ownership in such company. Mr. Nelson received a Bachelor of Science Degree from
the University of North Carolina in Chapel Hill, North Carolina.

Compliance with 16(a) of the Securities and Exchange Act of 1934

         To the Company's knowledge, based solely on a review of such materials
as are required by the Securities and Exchange Commission, no officer, director
or beneficial holder of more than ten (10%) percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended June 30, 2002.

ITEM 10.          EXECUTIVE COMPENSATION

         The following sets forth, for the fiscal years ended June 30, 2002,
2001 and 2000, the annual and long-term compensation paid or accrued of the
Company's named officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                     Long-Term
                                                                                 Compensation Awards
                                                                                  Securities
Name and                                  Annual Compensation   Underlying
Principal Position               Year         Salary   Bonus      Other          Options/SARs (#) Compensation
------------------               ----         ------   -----      -----          ---------------- ------------

<S>                  <C>     <C>              <C>         <C>              <C>
Zsigmond L. Sagi     2002    $190,000         $--         10,000,000       $--
President, Chairman  2001     190,000 $60,000 $--          3,392,857       $--
of the Board, Chief  2000     190,000         $--          6,028,571       $--
Executive Officer

Patricia Furness     2002     90,000         $--           4,000,000       $--
Vice President       2001     90,000  28,000 $--           1,606,143       $--
Secretary and        2000     90,000    --   $--           1,768,572       $--
</TABLE>

EMPLOYMENT AGREEMENTS

     In July 1996, the Company entered into  employment  agreements in principle
with Mr. Sagi and Ms.  Furness.  The  agreements  provide  for base  salaries of
$190,000 and $75,000 respectively, incentive bonus plans and severance benefits.
Mr. Furness's base salary was increased to $90,000 effective July 1997.

     In April  2001,  the  Company  issued  750,000  and  350,000  shares of the
Company's  common stock to Mr. Sagi and Ms. Furness as bonuses and for deferring
their salaries for the part three years.




                                      -36-


<PAGE>





         The following table contains information regarding the grant of stock
options during the year ended June 30, 2002 to the named Executive Officers.
<TABLE>
<CAPTION>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                                                                                   Potential Realizable
                                                    Percent
                            Number of              of Total                                          at Assumed Value
                           Securities             Options/SARs                                            Annual Rates of Stock
                           Underlying              Granted to       Exercise or                             Price Appreciation
                         Options/SARs              Employees        Base Price       Expiration        For Option Term (3)
                                                                                                      -------------------
Name                      Granted (#)                in 2001           ($/sh.)          Date         5%                ($)
----                      -----------                -------           -------          ----         ------          ------
                            10% ($)
Zsigmond
<S>     <C>                <C>                         <C>               <C>       <C>   <C>       <C>              <C>
L. Sagi (1)                10,000,000                  71.4 %            $.015     04/30/2007      445,000          562,000

Patricia
Furness (2)                 4,000,000                  28.6 %            $.015     04/30/2007      178,000          224,800
</TABLE>




(1)      On May 1, 2002 the Company issued  10,000,000  options to purchase the
         Company's  common stock to Mr. Sagi for accrued salaries.

(2)      On May 1, 2002 the  Company  issued  4,000,000 options to purchase the
         Company's  common  stock to Ms. Furness for accrued salaries.

(3)      Amounts represent hypothetical gains that could be achieved if
         the listed options were exercised at the end of the option term. These
         gains are based on assumed rates of stock price appreciation of 5% and
         10% compounded annually from the date the options were granted to their
         expiration date, based upon fair market value of the Common Stock as of
         the date the options were granted. Actual gains, if any, on stock
         option exercises and stock holdings are dependent upon the future
         performance of the Company and overall financial market conditions.
         There can be no assurance that amounts reflected in this table will be
         achieved.

Option Exercises and Holdings

         The following table sets forth information regarding stock options
exercised by the Named Officers during the year ended June 30, 2002, including
the aggregate value of gains on the date of exercise. In addition, the following
table provides data regarding the number of shares covered by both exercisable
and non-exercisable stock options at June 30, 2002. Also reported are the values
for "in-the-money" options, which represent the positive spread between the
exercise price of existing options and $.07 the closing sale price of the
Company's common stock on June 30, 2002.







                                      -37-


<PAGE>





AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>




                                Realized
                                 Value
                                (Market                               Number of
                                 Price                                Securities                      Value of
              Common               on                            Underlying Unexercised            Unexercised
               Shares            Exercise                                                           In-The-Money
              Acquired          Date Less                         Options/SARs at Year            Options/SARs at Year
              Acquired          Date Less                                 End #                          End $
              on                Exercise                   -------------------------------   -------------------------------
Name          Exercise #        Price) ($)                 Excersiable        Unexercisable   Excersiable      Unexercisable
             -----------       -----------                 -------------  -----------        -------------     -------------

Zsigmond
<S>                                                         <C>                                  <C>
L. Sagi            -                   --                   10,000,000         --                550,000                 --

Patricia
Furness            -                   --                    4,000,000         --                220,000                 --

</TABLE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information known to the Company
as of the date of this Statement, with respect to beneficial ownership of: (i)
each person who is known by the Company to be the beneficial owner of more than
five (5%) percent of the Company's outstanding Common Stock; (ii) each of the
Company's directors and executive officers; and (iii) all officers and directors
as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws, where applicable.















                                      -38-



<PAGE>
<TABLE>
<CAPTION>

Title of Class                 Name & Address of            Amount & Nature of          Percent of Class
                               Beneficial Owner             Beneficial Owner
------------------------------ ---------------------------- --------------------------- ----------------------------

<S>                                                         <C>                           <C>
Common Stock                   Zsigmond L. Sagi             14,701,002                    37.4 %
                               P.O. Box 307
                               Mountain Lakes, NJ 07046     (2), (3), (4), (5)
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   361 Acquisition Corp.        2,121,250                     7.3 %
                               885 W. Georgia St. Suite
                               1200
                               Vancouver, BC
                               Canada V6L 3E8
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   Patricia B. Furness          5,412,594                     16.3 %
                               25 Beechway Road
                               Mountain Lakes, NJ 07046     (6), (7), (8),  (9)
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   Angela Chen Sabella          2,000,000                       6.8 %
                               853 East Valley Blvd,
                               Suite 200
                               San Garbrial, CA 91776
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   Louis Gottlieb               646,250                       2.2 %
                               20 N. Central Avenue
                               Valley Stream, NY 11580      (10)
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   Paul Nelson                  244,500                       .01 %
                               69 Lookout Road
                               Mountain Lakes, NJ 07046     (11)

------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   Maurice L. Siegel            230,967                       .01 %
                               560 W. 43rd Street
                               New York, NY 10036            (12)
------------------------------ ---------------------------- --------------------------- ----------------------------
Common Stock                   All Directors & Officers         21,235,313                  48.8%
                               as a Group (consisting of
                               5 persons)
------------------------------ ---------------------------- --------------------------- ----------------------------
(1) There were 29,255,156 shares of Common Stock outstanding as of October 1,
2002.
</TABLE>

                                      -39-

(2) Includes 750,000 shares of the Company's Common Stock issued to Mr. Sagi on
April 3, 2001 for deferring annual salary.

(3) Includes 10,000,000 shares issuable to Mr. Sagi upon the exercise of options
granted on May 1, 2002 for the conversion of accrued salary.

(4) Does not include 45,000 shares of the Company's Common Stock owned by Mr.
Sagi's former wife, and 98,500 shares of the Company's Common Stock owned by Mr.
Sagi's children and their spouses, as to which Mr. Sagi disclaims beneficial
ownership.

(5) Includes 6,435 shares issued on June 30,2002 in connection with financing
for the Company.

(6)  Includes  10,000  shares  owned  by Ms.  Furness'  children,  as to which
Ms.  Furness  disclaims  beneficial ownership.

(7) Includes 350,000 shares of the Company's Common Stock issued to Ms. Furness
on April 3, 2001 for deferring annual salaries.

(8) Includes 4,000,000 shares issuable to Ms. Furness upon the exercise of
options granted on May 1, 2002 for the conversion of accrued salary.

(9) Includes 31,441 shares issued to Ms. Furness on June 30, 2002 in connection
with financing for the Company.

 (10) Includes 40,000 shares issuable to Mr. Gottlieb upon the exercise of
options granted April 3, 2001.

(11) Includes 80,000 shares issuable to Mr. Nelson upon the exercise of options
granted on December 30, 1999 and April 3, 2001.

(12) Includes  120,000  shares of the  Company's  Common  Stock,  issuable upon
the exercise of options  granted on August 5, 1998, December 30, 1999 and April
3, 2001 to Mr. Siegel.



                                      -40-


<PAGE>





ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)       The Company and SMC Corp. entered into various agreements with an
     investment banking firm ("361 Acquisition Corp.") to, among other things,
     provide financing for the Company in exchange for shares of common stock.
     In exchange for terminating all prior agreements between 361 and the
     Company and SMC Corp., the Company issued 621,250 shares of its common
     stock to 361 representing services valued at approximately $78,000, which
     was approved by the Board of Directors on March 7, 1995. On March 31, 1998,
     SMC Corp. dissolved and distributed the note receivable of $888,006 from
     the Company to its five shareholders in equal amounts of $177,601,
     including Mr. Sagi (the Company's President and Chief Executive Officer),
     Carlo Civelli (former Vice President of Finance International of the
     Company), Kilham Management, Malir Enterprises Corp., and Zurow Investment
     S.A. The note terms were renegotiated with the lenders with interest at
     prime plus two (2%) percent. As of June 30, 2002, accrued interest in the
     amount of $77,034was due Mr. Sagi, of which $13,320 was expensed during the
     year ended June 30, 2002. The notes have been extended to December 31,
     2003.

(b)   The Company intends to construct regional production centers
     throughout the world to manufacture, assemble and market the
     BreastCare(TM)/BreastAlert(TM). Accordingly, the Company entered into an
     agreement dated August 25, 1996, as amended, with Zigmed, Inc. ("Zigmed"),
     a company owned by the two sons of Mr. Zsigmond Sagi; Zigmed, Inc. was
     owned by Mr. Sagi prior to 1990. Pursuant to such agreement, Zigmed agreed
     to manufacture the sensor production equipment for such manufacturing
     centers for the contract price of $1,850,680 plus 100,000 shares of the
     Company's Common Stock. In August 1996, the Company paid Zigmed an advance
     deposit of $200,000 to begin production of the manufacturing equipment, and
     in March 1997 issued Zigmed 100,000 shares of the Company's Common Stock
     (valued at $1.00 per share) against the contract. As of June 30, 2002, the
     Company owes Zigmed $718,276.

(c)   The Company and Zigmed have entered into various agreements. The
     Company contracted with Zigmed for the production of the
     BreastCare(TM)/BreatAlert(TM) sensors. Zigmed provided material, labor and
     product testing services of $30,000 for the year ended June 30, 2002. The
     Company owes Zigmed approximately $82,000 as of June 30, 2002 for labor.
     See Note 13 of Notes to Consolidated Financial Statements for further
     information.

                                      -41-


<PAGE>




(d)   The Company has borrowed funds from Mr. Zsigmond Sagi, the Company's
     President and Chief Executive Officer. The promissory note to Mr. Sagi
     bears interest at prime plus two (2%) percent, 6.75% at June 30, 2002, and
     is payable on December 31, 2003. The principal amount of the note is
     $1,128,684 at June 30, 2002. Interest expense for the year ended June 30,
     2002 was $83,840.

(e)   On June 30, 2002, the Company issued 6,435 shares of Common Stock of
     the Company to Zsigmond L. Sagi the Company's President and Chief Executive
     officer pursuant to financing. In connection with the transaction the
     Company recorded interest expense of $225 for the year ended June 30, 2002.

(f)   The Company has borrowed funds from Ms. Patricia Furness, the
     Company's Vice President and Secretary. The promissory note to Ms. Furness
     bears interest at prime plus two (2%) percent, 6.75% at June 30, 2002 and
     is payable on June 30, 2003. The principal amount of the note is $107,257
     at June 30, 2002. Interest expense for the year ended June 30, 2002 was
     $8,674.

(g)   On June 30, 2002 the Company issued Ms. Patricia Furness, the
     Company's Vice-President and Secretary 31,141 shares of Common Stock of the
     Company pursuant to financing. In connection with the transaction the
     Company recorded interest expense of $1,090 for the year ending June 30,
     2002.

















                                      -42-


<PAGE>







ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a) The following financial statements are filed as part of this Annual
Report on Form 10-KSB:

                                                                          Page

         1.  Financial Documents:

         Independent Auditors' Report                                 F-1 - F-3

         Consolidated Balance Sheets, June 30,
         2001 and 2000                                                F-4

         Consolidated Statements of Operations, Years
         Ended June 30, 2001, 2000 and 1999                           F-5

         Consolidated Statements of Stockholders' Deficiency,
         Years Ended June 30, 2001, 2000 and 1999                     F-6

         Consolidated Statements of Cash Flows, Years
         Ended June 30, 2001, 2000 and 1999                           F-7 - F-8

         Notes to Consolidated Financial Statements                   F-9 - F-30



















                                      -43-


<PAGE>





         2.  Financial Statement Schedules:

         All schedules are omitted because they are inapplicable, not required
         or the information is included in the financial statements or notes
         thereto.

         (b) Reports on Form 8-K:

                  There were no reports on Form 8-K during the quarter ended
         June 30, 2001.

         (c) The following Exhibit Index sets forth the applicable exhibits
             (numbered in accordance with Item 601 of Regulation S-B) which are
             required to be filed with this Annual Report on Form 10-KSB.
<TABLE>
<CAPTION>

Exhibit
Number                                      Title
----------                                 -------

<S>                <C>
3.1               Certificate of Incorporation and Bylaws of the
                  Registrant -- Incorporated by Reference to Exhibit 2.1 and 2.2
                  of the Company's Report on Form 10-SB/A-1 dated September 17,
                  1996.

3.2               Amendment to the Certificate of Incorporation
                  filed March 31, 1997 -- Incorporated by Reference to Exhibit
                  3.2 of the Company's Report on Form 10-KSB for the year ended
                  June 30, 1997.

10.1              Private  Placement  Memorandum  dated May 17, 1994 -- Incorporated by Reference to Exhibit 3.1 of
                  the Company's Report on Form 10-SB/A-1 dated September 17, 1996.

10.2              Instrument  defining  shareholder  rights  regarding  18,000 shares of the Company's Common Stock
                  purchased on November  29, 1991 --  Incorporated  by  Reference  to Exhibit 3.2 of the  Company's
                  Report on Form 10-SB/A-1 dated September 17, 1996.

10.3              Instruments  defining  shareholder  rights  regarding 18,000 shares of the Company's Common Stock
                  purchased  between  June and August,  1993 --  Incorporated  by  Reference  to Exhibit 3.3 of the
                  Company's Report on Form 10-SB/A-1 dated September 17, 1996.

10.4              Agreement  defining  Bio-Life  shareholders'  rights  regarding  35,000  shares of the  Company's
                  Common  Stock --  Incorporated  by  Reference  to  Exhibit  3.4 of the  Company's  Report on Form
                  10-SB/A-1 dated September 17, 1996.

10.5              Asset Transfer  Agreement  among SDSI (as SMC  Acquisition  Corp.),  Mr. Sagi and Scantek Medical
                  Corp.  dated August 12, 1991 -- Incorporated by Reference to Exhibit 6.1 of the Company's  Report
                  on Form 10-SB/A-1 dated September 17, 1996.

10.6              Letter  Agreement  between  SMC Corp.  and Zigmed  Corporation  dated  January  8, 1991  ("Zigmed
                  Agreement")  --  Incorporated  by  Reference  to  Exhibit  6.2 of the  Company's  Report  on Form
                  10-SB/A-1 dated September 17, 1996.

                                      -44-


<PAGE>




10.7              Amendment to Purchase Order Agreement dated
                  August 28, 1996 - Incorporated by Reference to Exhibit 10.7 of
                  the Company's Form 10-KSB for the year ended June 30, 1997.

10.8              Purchase  Order  between SMC Corp.  and Zigmed Corp.  dated January 22, 1991 --  Incorporated  by
                  Reference to Exhibit 6.3 of the Company's Report on Form 10-SB/A-1 dated September 17, 1996.

10.9              Amendment  to Purchase  Order  Agreement  dated  August 28, 1996 -  Incorporated  by Reference to
                  Exhibit 10.9 of the Company's Form 10-KSB for the year ended June 30, 1997.

10.10             Non-Disclosure   Agreement  between  SMC  Corp.  and  Zigmed  Corp.  dated  January  7,  1990  --
                  Incorporated  by  Reference  to  Exhibit  6.4 of the  Company's  Report on Form  10-SB/A-1  dated
                  September 17, 1996.

10.11             Escrow  Agreement  among SMC Corp.,  361  Acquisition  Corp.  and Chase  Lincoln First Bank dated
                  August 20, 1991 --  Incorporated  by  Reference  to Exhibit 6.5 of the  Company's  Report on Form
                  10-SB/A-1 dated September 17, 1996.

10.12             Termination  Agreement  among  Scantek  Medical  Corp.,  Mr. Sagi,  361  Acquisition  Corp.,  Dal
                  Brynelsen,  Douglas E. McRae and Scantek  Medical Ltd. dated August 12, 1991 --  Incorporated  by
                  Reference to Exhibit 6.6 of the Company's Report on Form 10-SB/A-1 dated September 17, 1996.

10.13             Acquisition  Agreement  (Amendment  No. 2) between SMC Corp.,  Mr. Sagi, 361  Acquisition  Corp.,
                  Brynelsen,  Scantek  Medical Ltd. and Scantek  Medical,  Inc. dated March 7, 1995 -- Incorporated
                  by Reference to Exhibit 6.7 of the Company's Report on Form 10-SB/A-1 dated September 17, 1996.

10.14             HumaScan  Inc.  Licensing  Agreement  between  Scantek  Medical,  Inc. and HumaScan,  Inc.  dated
                  October 20, 1995 --  Incorporated  by  Reference to Exhibit 6.8 of the  Company's  Report on Form
                  10-SB/A-1 dated September 17, 1996.

10.15             Amendment to the HumaScan Inc.  Licensing  Agreement between Scantek Medical,  Inc. and HumaScan,
                  Inc.  dated April 29, 1996 --  Incorporated  by Reference to Exhibit 6.9 of the Company's  Report
                  on Form 10-SB/A-1 dated September 17, 1996.

10.16             Lease between Scantek  Medical,  Inc. and Kabert Realty  Corporation for Storage and Office Space
                  --  Incorporated  by Reference to Exhibit 6.10 of the Company's  Report on Form  10-SB/A-1  dated
                  September 17, 1996.

10.17             Lease  between  Scantek  Medical,  Inc.  and  Carol  Yang for  Office  Space --  Incorporated  by
                  Reference to Exhibit 6.11 of the Company's Report on Form 10-SB/A-1 dated September 17, 1996.



                                      -45-



<PAGE>




10.18             Lease between  Scantek  Medical,  Inc. and Pablito,  L.L.C.  for Warehouse and Office Space dated
                  June 13, 1997 -  Incorporated  by Reference to Exhibit 10.18 of the Company's Form 10-KSB for the
                  year ended June 30, 1997.

10.19             Letters of Employment for Mr. Zsigmond Sagi and Ms.  Patricia  Furness dated February 26, 1993 --
                  Incorporated  by  Reference  to Exhibit  6.12 of the  Company's  Report on Form  10-SB/A-1  dated
                  September 17, 1996.

10.20             Amendment to the HumaScan Inc.  Licensing  Agreement between Scantek Medical,  Inc. and HumaScan,
                  Inc. dated May 31, 1996 -- Incorporated  by Reference to Exhibit 6.13 of the Company's  Report on
                  Form 10-SB/A-1 dated September 17, 1996.

10.21             Licensing  Agreement with Health  Technologies  International Inc. and Scantek Medical Inc. dated
                  August 15, 1996 --  Incorporated  by Reference to Exhibit 10.21 of the Company's  Form 10-KSB for
                  the year ended June 30, 1997.

10.22             Amendment  to  Licensing   Agreement   dated   August  15,  1996  between   Health   Technologies
                  International  Inc. and Scantek  Medical,  Inc. dated April 30, 1997 -- Incorporated by Reference
                  to Exhibit 10.22 of the Company's Form 10-KSB for the year ended June 30, 1997.

10.23             Licensing  Agreement with Scantek  Medical,  Inc. and Sandell Corp. S.A. dated September 22, 1997
                  --  Incorporated  by Reference to Exhibit 10.23 of the  Company's  Form 10-KSB for the year ended
                  June 30, 1997.

10.24             Amendment to Licensing  Agreement between  HumaScan,  Inc. and Scantek Medical Inc. dated May 15,
                  1998 -- Incorporated by Reference to Exhibit 10.1 of the Company's Form 8-K filed May 27, 1998.

10.25             Amendment to Licensing  Agreement  with  Scantek  Medical,  Inc.  and Sandell  Corp.  S.A.  dated
                  February 18, 1998 --  Incorporated  by Reference to Exhibit  10.25 of the  Company's  Form 10-KSB
                  for the year ended June 30, 1998.

10.26             Settlement  Agreement  between Scantek  Medical,  Inc and HumaScan,  Inc. dated March 11, 1999 --
                  Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed April 2, 1999.

10.27             Amendment to Lease Agreement between Scantek Medical,  Inc. and Pablito,  L.L.C.  dated April 15,
                  1999--Incorporated  by reference to Exhibit 10.27 of the Company's  Form 10-KSB for the year ended
                  June 30, 1999.

10.28             Distribution  Agreement  with Scantek  Medical,  Inc. and Nugard  HealthCare  Ltd. dated July 14,
                  1999. --Incorporated  by reference  to Exhibit  10.28 of the  Company's  Form 10-KSB for the year
                  ended June 30, 1999.



                                      -46-


<PAGE>




     10.29        A Business Implantation Agreement with Scantek Medical S.A.
                  and the Government of Pernambuco dated November 19, 1999 - -
                  Incorporated by reference to Exhibit 10.29 of the Company's
                  Form 10-KSB for the year ended June 30, 2000.

     10.30        Consulting Agreement with Scantek Medical Inc. and
                  Multiconsulteria S/C LTDA dated November 1999 - - Incorporated
                  by reference to Exhibit 10.30 of the Company's Form 10-KSB for
                  the year ended June 30, 2000.


     10.31        Letter of Approval for funding with Scantek Medical
                  Inc./Scantek Medical do Brasil Ltda and North East Brazil
                  Federal Program of Sudene Finor Article 9 dated May 11, 2000 -
                  - Incorporated by reference to Exhibit 10.31 of the Company's
                  Form 10-KSB for the year ended June 30, 2000.


     10.32        Letter of Intent Agreement with Scantek Medical Inc. and
                  Scantek Medical do Brasil Ltda and Instituto Materno Infantil
                  de Pernambuco dated May 31, 2000 - - Incorporated by reference
                  to Exhibit 10.32 of the Company's Form 10-KSB for the year
                  ended June 30, 2000.


     10.33        Suape Land  Purchase  Agreement  with Scantek  Medical do Brasil Ltda and the State of Pernambuco
                  dated May 25, 2000 - -  Incorporated  by reference to Exhibit 10.33 of the Company's  Form 10-KSB
                  for the year ended June 30, 2000.


     10.34        Letter of Commitment  for  BreastCare(TM)usage and purchase  order with Scantek  Medical do Brasil
                  Ltda and Unimed  Recife-Cooperativa  de Trabalho  Medico dated June 1, 2000 - -  Incorporated  by
                  reference to Exhibit 10.34 of the Company's Form 10-KSB for the year ended June 30, 2000.

     10.35        Subscription Agreement and Promissory Note dated August 20, 2002

     10.36        Compat Comercio Exterior Ltda. Exclusive Distribution Agreement dated August 19, 2002

     11           A statement regarding the computation of earnings
                  per share is omitted because such computation can be clearly
                  determined from the material contained in this Annual Report
                  on Form 10-KSB.

     21           Subsidiaries of the  Registrant:  (i) Scantek Medical S.A.,  Inc.,  incorporated in Uruguay;  and
                  (ii) Scantek Medical do Brasil, LTDA, incorporated in Brazil.

   99.1           Reinstatement  of Patent No.  RE.4,624,264  United States,  Extension to November 25, 2003, dated
                  August 12, 1997 --  Incorporated  by  reference of the  Company's  Form 10-KSB for the year ended
                  June 30, 1998.

   99.2           Certification  of Chief Executive and Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley
                  Act of 2002.

   99.3           Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

                                    -47-




</TABLE>


<PAGE>




                                            SIGNATURES

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

                                                     SCANTEK MEDICAL INC.

                                             By: /s/ ZSIGMOND L. SAGI
                                            ------------------------------------
                                                     Zsigmond L. Sagi, President

                                                     Date:  October 15, 2002





















                                      -48-


<PAGE>




         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



/s/ ZSIGMOND L. SAGI
 - --------------------------------------
Zsigmond L. Sagi
President, Chairman of the Board,
Chief Executive Officer
and Director

/s/ PATRICIA B. FURNESS
- --------------------------------------
Patricia B. Furness
Vice President, Corporate Secretary
and Director

/s/ PAUL NELSON
- --------------------------------------
Paul Nelson
Director


/s/ MAURICE SIEGEL
- --------------------------------------
Maurice Siegel
Vice-President and Director




















                                      -49-