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                       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, 1999

     [ ]    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

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


               DELAWARE                                 84-1090126
    -------------------------------                -------------------
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                Identification No.)


                 321 PALMER ROAD, DENVILLE, NEW JERSEY 07834
                                (973) 366-5250
             ------------------------------------------------------
             (Address and telephone number, including area code, of
                    registrant's principal executive office)


     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. [X]

     Aggregate market value of voting stock held by non-affiliates as of
September 15, 1999 was approximately $3,752,862 (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 September 15, 1999:
18,070,200.

     DOCUMENTS INCORPORATED BY REFERENCE: NONE

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                              SCANTEK MEDICAL INC.

                                     INDEX

Part I                                                                     Page
------                                                                     ----
    Item  1.  Business ...................................................    2

    Item  2.  Properties .................................................   23

    Item  3.  Legal Proceedings ..........................................   23

    Item  4.  Submission of Matters to Vote of Security Holders ..........   23


Part II
-------
    Item  5.  Market for Registrant's Common Equity and
                Related Stockholder Matters ..............................   23

    Item  6.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations ......................   25

    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; Promoters and
                Control Persons; Compliance with Section 16(a)
                of the Exchange Act ......................................   34

    Item 10.  Executive Compensation .....................................   37

    Item 11.  Security Ownership of Certain Beneficial
                Owners and Management ....................................   40

    Item 12.  Certain Relationships and Related Transactions .............   43


Part IV
--------

    Item 13.  Exhibits and Reports on Form 8-K ...........................   44

    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. (OTC: BB, SKML) (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 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. Research and developmental expenses increased
6.4% to $339,337 for the year ended June 30, 1999 from $291,013 for the year
ended June 30, 1998.

     The Company is headquartered in Denville, New Jersey, where it maintains
approximately 13,000 square feet of manufacturing and administrative space. At
this facility, the Company has two production lines in which to manufacture the


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BreastCare(TM)/BreastAlert(TM). These production lines are capable of producing
five million units per shift annually. The Company maintains a manufacturing and
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 high-tech 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) Differential Temperature Sensor 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


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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.

     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
1999, reported that if cancer is localized at the time of diagnosis, there is a
97% 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


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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.

     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 breast 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


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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.

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.


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     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.

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 breast (less than 3% of breast cancers
are believed to be bilateral generally).


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     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.

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%*BreastCare(TM)/BreastAlert(TM) for the initial screening trial 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


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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.

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

     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


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     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

     An ongoing study of 250 women with protocol designed to compare the
BreastCare(TM)/BreastAlert(TM) by the European Institute of Oncology, has
already yielded promising results vs clinical examination, mammography and
biopsy, if performed. This study is under the supervision of Dr. Virgilio
Sacchini, a renowned surgical oncologist. The results of the study will be
submitted for publication.

     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.

     The Company anticipates that such studies, as well as future studies, will
play a vital role for future screening projects in


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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; and (iv) organized forums and training
for doctors by region. 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., a Uruguayan company, to distribute the
BreastCare(TM)/BreastAlert(TM) in South America.

     The Company entered into an exclusive license agreement (the "License
Agreement"), dated September 22, 1997 and amended February 18, 1998, with
Sandell Corp. S.A. ("Sandell"), a Uruguayan corporation, whereby the Company
granted 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. As
of June 30, 1999, upon mutual consent of both parties, the Company terminated
the License Agreement with Sandell. In connection with the termination of the
License Agreement, the Company wrote off the balance of the $400,000 license fee
due the Company and approximately $103,000, which represented its investment in
Sandell. Certain of Sandell's key employees have joined Scantek Medical, S.A.,
Inc., and continue to play a major role of the Company's South American
marketing and sales. The Company has commenced to manufacture, market and
distribute the BreastCare(TM)/BreastAlert(TM) throughout South America through
its subsidiaries.

     On July 19, 1999, the Company, through its Brazilian subsidiary, Scantek
Medical do Brasil LTDA, executed a Letter of Intent with Contrutora CEC, LTDA
("CEC") and EPIC-Empress de Participacao, Investimento e Consultoria S/C LTDA
("EPIC") to create a joint venture with exclusive right to import, manufacture,
market and distribute the BreastCare(TM)/BreastAlert(TM) in Brazil. CEC and EPIC
are controlled 100% by the family members of the Campos Group, a multimillion
dollar Brazilian conglomerate with interests in hospital construction and
management, civil construction, construction management, warehouse and
logistics, and import and


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export trading. Management of the Company believes that the joint venture with
CEC and EPIC will have a major role in the upcoming Brazilian screening programs
and anticipates capturing 50% of the market share within five years. This Letter
of Intent is subject to a definitive agreement which is still in negotiations
between the parties.

     Currently, the Company through its wholly owned subsidiary, Scantek
Medical, S.A., Inc., has established an assembly facility in the Free Trade
Zone, within the city of Montevideo, Uruguay. This 2,000 square foot facility,
which receives product components from the Company's U.S. manufacturing
facility, employs nine product assemblers, and has the capacity to assemble up
to 2850 BreastCare(TM)/BreastAlert(TM) units per day. Products assembled by the
Company's subsidiary supply the entire product to customers in South America.
The Company is currently in the process of relocating this production facility
from Uruguay to Brazil. This will eliminate the high value added tax and thus
allow the Company to initiate sales.

     The Company is in advanced negotiations with the states of Brasilia, Sao
Paulo and Bahia to provide for statewide breast cancer screening programs. The
total BreastCare(TM)/BreastAlert(TM) units under consideration for these
programs is 200,000, which the Company anticipates will commence in the fourth
calendar quarter of 1999. The statewide programs are pilots, and if successful,
may lead to a larger screening program. The combined female population of these
regions is 25 million.

REGIONAL REPORT: CHILE AND SINGAPORE

     On August 15, 1996, the Company entered into a license agreement, which was
later amended on April 29 1997, with Health Technologies International Inc.
("HTI"), whereby HTI is to assemble, market and sell the
BreastCare(TM)/BreastAlert(TM) in Chile and Singapore, and pay the Company an
initial licensing fee of $250,000, which has been paid. In November, 1997, HTI
was acquired by D-Lanz Development Group, Inc. ("D-Lanz"). As part of the
licensing agreement, the Company received 2,000,000 shares of D-Lanz common
stock which is publicly traded on the Electronic Bulletin Board under the symbol
DLNZ. In June, 1999, the Company agreed to extend the due date for D-Lanz's
first minimum royalty payment of $80,000 until December 31, 1999. Pursuant to
the terms of the licensing agreement, D-Lanz is obligated to pay the Company
minimum royalties of $200,000 in the calendar year 2000 with increasing
royalties leveling out at a minimum of $300,000 in the calendar year 2001,
$400,000 in the year 2002 and thereafter. All royalties are paid based on a
percentage net sales of the BreastCare(TM)/BreastAlert(TM). Presently, no
revenues have been


                                       12
<PAGE>


derived pursuant to the license agreement with D-Lanz.

REGIONAL REPORT:  EUROPE

     Management of the Company is working to replicate the model it has
established in South America, in Europe as well. The Company, although
progressing in Europe, is not as advanced as the Company's South American
business due to the limited availability of human and financial resources.

     Management believes that the Company has been successful in gaining the
support of the medical field in Europe, identifying regional manufacturing
capacity and has identified with local marketing partners, as discussed in
further detail below.

     The Company entered into a letter of understanding with Grupo Grifols, a
publicly held medical products manufacturer and distributor, headquartered in
Barcelona, Spain. Grupo Grifols has approximately $600 million in sales.
Pursuant to this letter of understanding, the Company intends to grant to Grupo
Grifols the exclusive right to sell the BreastCare(TM)/BreastAlert(TM) to the
public and private markets of Portugal and Spain. Grupo Grifols has agreed to
purchase the BreastCare(TM)/BreastAlert(TM) from the Company at a price of
approximately $10.00 (U.S. dollars) per unit. No final agreement has been
executed with respect this arrangement between the Company and Grupo Grifols.

     On July 29, 1999, the Company granted an exclusive license to Nugard
Healthcare Ltd. ("Nugard"), an Irish Company, to market and distribute the
BreastCare(TM)/BreastAlert(TM) in Ireland and the United Kingdom. Pursuant to
this License Agreement, Nugard will pay a non-refundable licensing fee of
$350,000 in various stages, of which $45,000 was received as of September 10,
1999, and the Company received common shares equivalent to fifteen (15%) percent
of Nugard's total outstanding common shares. In accordance with the agreement,
Nugard is required to purchase a minimum of 5,000 units per month, to commence
September, 1999. The purchase price will range from $10 to $15 per unit based
upon shipment of the BreastCare(TM)/BreastAlert(TM) to the government or private
physicians.

     The Company executed a letter of intent on August 20, 1997 with respect to
the acquisition of a Hungarian based manufacturer of plastic medical packaging
products and the manufacturing facility for an aggregate purchase price of
$1,750,000. It is the Company's intention to use this facility as a production
center for the BreastCare(TM) device for Eastern and Western Europe. The
acquisition is subject to the Company obtaining financing for the purchase of
the Hungarian manufacturer.


                                       13
<PAGE>


     Through the efforts of the Company, the European Institute of Oncology,
located in Milan, Italy, is now performing clinical studies on the
BreastCare(TM)/BreastAlert(TM). The study, which involves 250 women, began in
January, 1999 under the supervision of Dr. Virgilio Sacchini, a world renowned
surgical oncologist. Upon completion of the study, Dr. Sacchini will submit the
study for publication in Breast and Cancer journals.

     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 as 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 financing is completed.

     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 this
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


                                       14
<PAGE>


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 April 15, 1999 the Company amended its lease to include an additional
6,000 square feet adjacent to its corporate headquarters in the United States.
The Company anticipates that it will complete renovations for its two line
production facility operations with a capacity to produce 5 million units per
shift annually, when additional funding is obtained. The Company believes that
this capacity will virtually meet the entire sales forecast through 2003.

     The manufacturing process maintains a rigid quality control program to
ensure product efficacy. The Company believes that its Quality System meets the
requirements of the international standards of the International Organization.
The Quality System will cover the design, production, packaging, labeling,
storage, distribution and servicing of products of the Company.

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).

     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.


                                       15
<PAGE>


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., Inc., and marketing
partners 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.

     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", is a partial continuation of Patent No.
4,190,058 above


                                       16
<PAGE>


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

     Foreign patents for the BreastCare(TM)/BreastAlert(TM) include:

-- Belgium            Patent No. 884,382; issued July 18, 1980; expires July 18,
                      2000

-- Israel             Patent No. 58422; issued March 1, 1983; expires October 9,
                      1999

-- Venezuela          Patent No. 44,664; registered April 20, 1987; will
                      automatically be extended upon shipment of products from
                      Venezuela

     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:

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

-- Patent No. 08/926,790, filed September 10, 1997, entitled "Differential
Temperature Measuring Device and Method

-- Patent No. 09/018,765, filed February 5, 1998, entitled "Differential
Temperature Sensor Device for Use in the Detection of Breast Cancer and Breast
Disease.

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.

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


                                       17
<PAGE>


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. However, all sensor manufacturing will remain in
the United States under the Company's Quality Control.

     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 shall 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 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 in 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. The Company intends to establish
Regional centers, as well as a distribution network in Hungary,


                                       18
<PAGE>


Ireland, China, and Brazil.

     The territories under negotiations for exclusive marketing and distribution
rights are as follows: (i) Eastern and Western European countries, (ii) Asia and
(iii) South America. In markets where there are no definite leaders or where the
distributors are highly fragmented, the Company intends to seek two or three
non-exclusive partners to cover such market. Additionally, as an integral part
of the marketing plan, the Company intends to focus in target markets where
there are the highest incidences of breast cancer, as well as in the majority of
European countries where the death rates are increasingly high, including, but
not limited to: Ireland, United Kingdom and Germany, all of which have higher
death rates then the United States.

     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.

     Strategically, the Company intends to centralize manufacturing and
decentralize marketing in a 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 distributor's 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


                                       19
<PAGE>


private hospitals, clinics and physicians. Simultaneously, the Company intends
to launch the BreastCare(TM)/BreastAlert(TM) Centers with some of the most
renowned physician specialists in the field of breast disease, beginning with
Brazil. Over 25 sites are anticipated to be launched within the first full year
of operations with a capacity to screen 100 women per site per day. 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 and 1999 and 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.

     In addition, as indicated previously, the Company signed a letter of intent
with CEC and EPIC, which is still being further negotiated, to create a joint
venture with exclusive right to import, manufacture, market and distribute the
BreastCare(TM)/BreastAlert(TM) in Brazil.

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 is exhibiting the BreastCare(TM)/BreastAlert(TM) at medical
congresses to introduce the device to the physician market.

     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 larger independent Eastern European
countries, including but not limited to, Romania, Bulgaria, Ukraine, Russia,
Greece and Turkey.

     Exploration has commenced on the feasibility of establishing breast care
centers in Europe. If found to be appropriate and effective for certain
countries, the Company intends to commence development in the year 2000.

     As previously discussed, the Company is presently investigating the
potential of purchasing a medical plastic manufacturing facility in Hungary as
the central production and distribution location for supplying the
BreastCare(TM)/BreastAlert(TM) to Eastern and Western Europe.

UNITED STATES AND CANADA MARKETING

     The Company's first introduction of the


                                       20
<PAGE>


BreastCare(TM)/BreastAlert(TM) product was by its former United States and
Canadian licensee, HumaScan which launched the product December 1997. The
Company plans to take a carefully constructed approach to the marketplace in the
United States 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 South America's approach with respect to advisement and leadership from
renowned breast disease specialists.

FUTURE MARKETS

     The Company intends to market and sell the BreastCare(TM)/BreastAlert(TM)
worldwide. It has inaugurated potential distributorships in China and Korea. The
Company intends to concentrate its efforts through 2001 in South America, Europe
and the United States. Simultaneously, the Company intends to investigate and
develop the marketplace in Asia, the Middle East and the African continent;
sales are anticipated to flow from these areas beginning in the year 2002 and
on.

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 the
BreastCare(TM)/BreastAlert(TM) has 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.

     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 then 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


                                       21
<PAGE>


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 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 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.

EMPLOYEES

     The Company employs a total of 13 employees. Three of these employees are
employed in the U.S. as follows: (i) two full time employees: President and
Chief Executive Officer and Vice President and Secretary, and (ii) one part time
employee: Vice President of Corporate Development of the Company. Additional
personnel and consultants are utilized, as required, on a contractual basis.

     The remaining 10 employees are employed in South America by the Company's
subsidiary Scantek Medical, S.A., Inc., as follows: a General Manager, a Medical
Director, four (4) other Senior employees and four (4) 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.

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


                                       22
<PAGE>


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 which will be available in the near future,
http://www.scantekmedical.com.

ITEM 2. PROPERTIES

     The Company occupies approximately 13,000 square feet of warehouse and
office space, all of which is leased through leases expiring in June, 2000. See
Note 13 of Notes to Consolidated Financial Statements for additional
information.


ITEM 3. LEGAL PROCEEDINGS

     None.

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, 1999.


                                     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 in the "pink sheets" published by the National Quotation Bureau,
Incorporated and on the "bulletin board" operated by NASD. The following table
sets forth


                                       23
<PAGE>


the periods indicated the high and low bid quotation for the Common Stock:

                                              HIGH                   LOW
                                              ----                   ---
Fiscal Year Ended June 30, 1998
         First Quarter                        1 7/8                  1 1/32
         Second Quarter                       1 5/8                  13/16
         Third Quarter                        1 5/8                  17/32
         Fourth Quarter                       1 3/16                 1/2

Fiscal Year ended June 30, 1999
         First Quarter                        1                      3/16
         Second Quarter                       19/32                  3/16
         Third Quarter                        23/32                  1/4
         Fourth Quarter                       1/2                    5/32

     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,
mark-down or commission, and may not necessarily reflect actual transactions.

     (b) Holders

     As of September 15, 1999, there were 203 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.

     (d) Recent Sales of Unregistered Securities

     On November 16, 1999, the Company sold 150,000 shares of Common Stock each
to Kenneth Courey, Director of the Company and Louis Gottlieb, Vice President of
Corporate Development of the Company, at a purchase price of $.3333 per share,
pursuant to Section 4(2) of the Securities Act of 1933, as amended, based upon
the nature of the sale and the purchasers.

     On December 1, 1998, the Company issued 75,000 shares of Common Stock of
the Company pursuant to financing, to three individuals at an issue price of
$.1875 per share.


                                       24
<PAGE>


     On March 13, 1998, the Company issued 125,000 shares of Common Stock of the
Company pursuant to financing, to two individuals at an issue price of .5625 per
share.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS OVERVIEW

     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
conclusions that such results, causes or trends necessarily will continue in the
future.

     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:

                                         % Increase (Decrease) from Prior Period
                                         ---------------------------------------
                                             June 30, 1999       June 30, 1998
                                          compared with 1998  compared with 1997
                                          ------------------  ------------------
Sales (1)                                         --                --
License fee revenue                              (59.6)             --
Cost of sales (1)                                 --                --
General and administrative
 expenses                                          8.3             169.1
Research and development                          44.7              16.5
Interest expense                                  52.8              62.2
----------
(1) Percentage not meaningful

     REVENUES

     Net sales increased to $127,775 for the year ended June 30, 1999 from $-0-
for the year ended June 30, 1998 as the Company commenced initial shipments of
its BreastCare(TM) device during the first quarter of its current fiscal year.
The Company expects its manufacturing and distribution operations to be in full
operation during the latter part of the fourth quarter of calendar 1999.

     License fee revenue decreased to $727,500 for the year ended June 30, 1999
from $1,801,582 for the year ended June 30, 1998 as the Company recognized lower
license fees from Sandell and D-Lanz as compared to the license fees from
HumaScan the preceding year.


                                       25
<PAGE>


The current year license fee revenue was further impacted as $400,000 of the
license fee revenue from Sandell was written off against the current year
revenue.

     COST OF SALES

     Cost of sales increased to $411,834 for the year ended June 30, 1999 from
$-0- for the year ended June 30, 1998 primarily due to the initial shipments of
its BreastCare(TM) device during the first quarter of the Company's current
fiscal year. Depreciation expense of approximately $221,000 on the production
equipment also increased the cost of sales for the year.

     GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expenses increased 8.3% for the year ended June
30, 1999 compared to June 30, 1998. This increase is primarily due to increases
in consulting, travel and outside services mainly attributable to the Company's
South American operations offset in part by decreased legal fees.

     General and administrative expenses increased 169.1% to $1,060,766 for the
year ended June 30, 1998, from $394,229 for the year ended June 30, 1997. This
increase was primarily due to the purchasing of keyman and directors and
officers insurance coupled with increases in rent for the leasing of office and
warehouse space in Denville, New Jersey, professional fees and financial
services. This was offset in part by decreases in consulting expenses.

     RESEARCH AND DEVELOPMENT EXPENSES

     Research and development expense increased 44.7% to $490,482 for the year
ended June 30, 1999 from $339,037 for the year ended June 30, 1998. The increase
is primarily attributable to stock-based bonuses given to two officers of the
Company working in the experimental area of development, for deferring their
salaries so the Company could use those funds for working capital.

     Research and development expense increased 16.5% to $339,337 for the year
ended June 30, 1998 from $291,013 for the year ended June 30, 1997. The increase
was primarily attributable to increased salaries incurred by the Company in the
experimental area of development of its product.


                                       26
<PAGE>


     INTEREST EXPENSE

     Interest expense was $280,978 for the year ended June 30, 1999 compared to
$183,889 for the year ended June 30, 1998. The 52.8% increase was primarily
attributable to increased short-term loans and officer loans coupled with
imputed interest on stock issued in consideration for the short-term loans.

     Interest expense was $183,889 for the year ended June 30, 1998, compared to
$113,344 for the year ended June 30, 1997. The 62.2% increase was attributable
to interest expense on the short-term debt margin loan.

     OTHER INCOME

     The Company was required to sell marketable securities to meet a margin
call on its secured margin loan resulting in a gain on marketable securities of
approximately $400,000 for the year ended June 30, 1998. No sales of marketable
securities were recorded in the current fiscal year.

     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 domestic and international trademarks and international patent protection;
licensing and pre-marketing activities; and attempts to raise the necessary
capital for initial production. 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 and borrowed money against common stock received in connection with the
license agreements. In addition, the Company's auditors' report for the year
ended June 30, 1999 dated August 24, 1999 expressed an opinion as to the Company
continuing as a going concern.

     During September 1998, the Company commenced the sale of its BreastCare(TM)
device in Brazil, Uruguay and Paraguay through its South American licensee.
During February 1999, the Brazilian economy declined and the Brazilian currency
lost fifty (50%) percent of its value. Brazil increased the import and value
added tax from twenty-one (21%) percent in December 1998 to seventy-four
(74%) percent in February 1999. Due to these factors, sales substantially
decreased in Brazil, which represents approximately eighty (80%) percent of the
Company's present revenue. The Company plans to move the production facility
from Uruguay to Brazil. This will eliminate the high value-added tax and will
be able to initiate sales. The Company terminated its


                                       27
<PAGE>


license agreement (see below) with its present licensee in South America and
signed a letter of intent to create a joint venture with exclusive rights to
import, manufacture, market and distribute the BreastCare(TM) device in Brazil.
The Company expects to be fully operational during the fourth quarter of
calendar 1999. However, until that time, the Company needs financing to fund its
current overhead and various capital requirements. As of June 30, 1999, the
Company borrowed $1,150,000 from unaffiliated third parties. These loans are
payable by the Company on various dates through June 2000. In addition, Mr. Sagi
advanced the Company an additional $317,000 during the fiscal year. These loans
have supported the Company through the current fiscal year, and the Company
expects the cash flow from sales commencing in the latter part of 1999 to cover
the operations of the Company providing the Company is successful in raising
additional capital to support the operations through the end of calendar 1999.

     As previously noted, the Company terminated its license agreement with its'
South American licensee. The Company had entered into an exclusive license
agreement, dated September 27, 1997 and amended February 18, 1998, with Sandell
Corp. 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) device 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. Under the
Sandell Agreement, Sandell was to pay the Company a non-refundable license fee
of (i) $500,000 and (ii) thirty-five (35%) percent of the outstanding shares
of Sandell on a fully diluted basis. Upon execution of this agreement the
Company received $100,000. As of June 30, 1999, upon mutual consent of both
parties, the Company terminated its agreement with Sandell. In connection with
the termination of the agreement, the Company wrote off the balance of the
$400,000 license fee due the Company and approximately $103,000, which
represented its value of stock in Sandell. The Company will manufacture, market
and distribute the BreastCare(TM) device throughout South America through the
Company's South American subsidiaries.

     On July 19,1999 the Company, through its Brazilian subsidiary, Scantek
Medical Do Brasil LTDA, executed a letter of intent with Contrutoro CEC LTDA
("CEC") and EPIC - Empressa de Participacano, Investimnto e Consultoia s/c LTDA.
("EPIC") to create a joint venture with exclusive rights to import, manufacture,
market and distribute the BreastCare(TM) device in Brazil. The letter of intent
is subject to a definitive agreement which is still in negotiations between the
parties.

     On July 29, 1999 the Company granted an exclusive license to


                                       28
<PAGE>


Nugard Healthcare Ltd, an Irish company, ("Nugard") to market Scantek's
BreastCare(TM) device in Ireland and the United Kingdom. Nugard will pay a
non-refundable licensing fee of $350,000 in various stages, of which $45,000 was
received as of September 10, 1999, and the Company received common shares
equivalent to fifteen (15%) percent of Nugard's total outstanding common shares.
The agreement requires minimum purchase of 5,000 units per month beginning
September 1999. The purchase price will range from $10 to $15 per unit based on
shipment of the BreastCare(TM) device to the government or private physicians.

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

     Pursuant to the Agreement, all licensing agreements between Scantek 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 Scantek for failure to
pay license fees, royalties and other sums of money. In exchange for this
cancellation of $575,000 of indebtedness due to it by HumaScan and for the
payment by Scantek 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). Scantek recognized $375,000 as license fee
income in its statement of operations for the year ended June 30, 1999 that was
previously written off and reflected as a reduction of the license fee revenue
recognized during the year ended June 30, 1998 in accordance with the amended
licensing agreement. Scantek recorded raw materials and finished goods in the
amount of approximately $859,000, which represents the fair 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.

     In addition, the Company received 150,000 shares of HumaScan common stock
as part of the Agreement.

     The Company executed a letter of intent on August 20, 1997 with respect to
the acquisition of a Hungarian based manufacturer of plastic medical packaging
products and the manufacturing facility for an aggregate purchase price of
$1,750,000. It is the Company's intention to use this facility as a production
center for the BreastCare(TM) device for Eastern and Western Europe. The
acquisition is subject to the Company obtaining financing for the purchase of
the Hungarian manufacturer.


                                       29
<PAGE>


     The Company's working capital and capital requirements will depend on
numerous factors, including the level of resources that the Company devotes to
the purchase of manufacturing equipment to support start-up production and to
the marketing aspects of its products. The Company intends to construct
production and/or assembly centers abroad to manufacture, market and sell the
BreastCare(TM) in the international market. The Company entered into an
agreement with Zigmed Inc. pursuant to which Zigmed Inc. will manufacture the
production equipment needed for manufacturing of the BreastCare(TM) device for
the contract price of $1,850,680. The Company as of June 30, 1999, has advanced
Zigmed Inc. payments of $921,179 and in September 1996 issued Zigmed Inc.
100,000 shares of the Company's common stock (valued at $1.00 per share) against
the contract price. The balance of $935,180 will be paid when the Company raises
the additional capital.

     The Company's success is dependent on raising sufficient capital to
establish a production and assembly facility to manufacture the BreastCare(TM)
for the international market. The Company believes the BreastCare(TM) 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.

OTHER MATTERS

       Year 2000

     Background

     The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable years. Any of the
Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.

     The Company will rely heavily on computer technologies to operate its
business. In 1998, the Company conducted an initial assessment of its
information technology to determine which Year 2000 related problems might cause
processing errors or computer


                                       30
<PAGE>


system failures. The Company also did a complete analysis of its present
computer system and its needs for the future. Based on the results of that
analysis, the Company's executive management identified the Year 2000 problem as
a top corporate priority and established an internal group to provide a
solution.

     The following discussion of the implications of the Year 2000 problem for
the Company contains numerous forward-looking statements based on inherently
uncertain information. The cost of the project and the date on which the Company
plans to complete its internal Year 2000 modifications are based on the
Company's best estimates, which were derived utilizing a number of assumptions
of future events including the continued availability of internal and external
resources, third party modifications and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could
differ. Moreover, although the Company believes it will be able to make the
necessary modifications in advance, there can be no guarantee that failure to
modify the systems would not have a material adverse effect on the Company.

     In addition, the Company places a high degree of reliance on computer
systems of third parties, such as customers, trade suppliers and computer
hardware and commercial software suppliers. Although the Company is assessing
the readiness of these third parties and preparing contingency plans, there can
be no guarantee that the failure of these third parties to modify their systems
in advance of December 31, 1999, would not have a material adverse effect on the
Company.

Readiness

     The Year 2000 project is intended to ensure that all critical systems,
devices and applications, as well as data exchanged with customers, trade
suppliers and other third parties have been evaluated and will be suitable for
continued use into and beyond the Year 2000.

     The Company was formerly a development stage company and became fully
operational in early 1999. All computers the Company operates now are compatible
with the Year 2000. The Company expects to vastly upgrade its computer system as
it becomes fully operational in 1999.

     Since early 1998, the Company has required Year 2000 compliance statements
from all suppliers of the Company's computer hardware and commercial software.
Regardless of the compliance statements, all third party hardware and software
will also be subjected to testing to reconfirm the Year 2000 readiness.


                                       31
<PAGE>


Cost

     The Company estimates that the total cost of achieving Year 2000 readiness
for its internal systems, devices and applications and a complete upgrade of its
computer system is approximately $250,000. The cost of the Year 2000 problem is
not material but the extent of upgrading the computer system will absorb most of
the cost. Year 2000 project costs are difficult to estimate accurately, and the
projected cost could change due to unanticipated technological difficulties and
Year 2000 readiness of third parties.

Contingency Plans

     In the event that the efforts of the Company's Year 2000 project do not
address all potential systems problems, the Company is currently developing
business interruption contingency plans. The Company believes, however, that due
to the widespread nature of potential Year 2000 issues, the contingency planning
process is an ongoing one which will require further modifications as the
Company obtains additional information regarding (1) the Company's internal
systems during the remediation and testing phases of its Year 2000 project and
(2) the status of third party Year 2000 readiness.

Contingency planning for possible Year 2000 disruptions will continue to be
defined, improved and implemented.

Risks

     The Company believes that completed and planned modifications and
conversions of its critical systems, devices and applications will allow it to
be Year 2000 compliant in a timely manner. There can be no assurances, however,
that the Company's internal systems, devices and applications or those of a
third parties on which the Company relies will be Year 2000 compliant by year
2000 or that the Company's or third parties' contingency plans will mitigate the
effects of any noncompliance. An interruption of the Company's ability to
conduct its business due to a Year 2000 readiness problem could have a material
adverse effect on the Company.

     The Form 10-KSB, other than historical financial information, may consist
of forward-looking statements that include risks and uncertainties, including,
but not limited to, statements contained in "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations". Such
statements are based on many assumptions and are subject to risks and
uncertainties. Actual results could differ materially from the results discussed
in the forward-looking statements due to a number of factors, including, but not
limited to, those identified in the preceding paragraphs as well as those set
forth under "Business Risks and Uncertainties" in this Form 10-KSB.


                                       32
<PAGE>


                         New Accounting Pronouncements

     During Fiscal 1997, the Financial Accounting Standards Board issued the
following accounting standard: Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS No.130). The Company has adopted
SFAS No. 130 in the current fiscal year. The standard has not had a material
impact on the Company.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The Company is required to adopt the
provisions of this Statement in the Year 2000 year-end financial statements.
This Statement requires that all derivatives be recorded in the balance sheet as
either an asset or liability measured at fair market value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company is in
the process of evaluating this Statement and has not yet determined the future
impact on the Company's consolidated financial statements.


ITEM 7. FINANCIAL STATEMENTS

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         PAGE
                                                                      ----------

Independent Auditors' Report                                          F-1 - F-2

     Financial Statements:

          Consolidated Balance Sheets, June 30, 1999 and 1998               F-3

         Consolidated Statements of Operations, Years Ended
           June 30, 1999, 1998 and 1997                                     F-4

         Consolidated Statements of Stockholders' Equity,
           Years Ended June 30, 1999, 1998 and 1997                   F-5 - F-6

         Consolidated Statements of Cash Flows, Years Ended
           June 30, 1999, 1998 and 1997                               F-7 - F-8

         Notes to Consolidated Financial Statements                   F-9 - F-26


                                       33
<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, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for each of the three years ended June 30, 1999.
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 generally accepted auditing standards.
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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years ended June 30, 1999
in conformity with generally accepted accounting principles.


                                       F-1

<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

August 24, 1999


                                       F-2
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                         June 30,
                                           ------------------------------------
                                              1999                      1998
                                           -----------              -----------
Current Assets:
  Cash                                     $     5,516              $    55,929
  Marketable securities                        409,272                2,295,253
  Inventories                                  898,796                     --
  Due from licensees                              --                    726,900
  Prepaid expenses                              84,287                   23,517
                                           -----------              -----------
          Total Current Assets               1,397,871                3,101,599
                                           -----------              -----------

Property and equipment - net                 1,803,974                  822,043
Marketable securities - non-current               --                    901,520
Other assets - net                             160,179                  383,275
                                           -----------              -----------
         TOTAL ASSETS                      $ 3,362,024              $ 5,208,437
                                           ===========              ===========


                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
  Short-term debt                          $ 1,274,271              $   100,000
  Deferred income                                 --                    752,500
  Accounts payable                           1,210,861                  266,869
  Accrued interest                             224,279                  110,470
  Accrued salaries                           1,106,119                  841,119
  Accrued expenses                              84,213                   65,785
                                           -----------              -----------
     Total Current Liabilities               3,899,743                2,136,743
                                           -----------              -----------

Long-term debt                               1,827,009                1,509,999
                                           -----------              -----------
Total Liabilities                            5,726,752                3,646,742
                                           -----------              -----------

Commitments and Contingencies

Stockholders' Equity (Deficiency):
  Preferred stock, par value $.001
   per share - authorized 5,000,000
   shares; none issued                            --                       --
  Common stock, par value $.001 per
   share - authorized 45,000,000;
   outstanding 18,070,200 and
   17,220,200                                   18,070                   17,220
  Additional paid-in-capital                 3,433,002                2,993,206
  Unrealized gain (loss) on marketable
   securities                                 (165,885)               2,621,616
  Deficit                                   (5,649,915)              (4,070,347)
                                           -----------              -----------
         Total Stockholders' Equity
           (Deficiency)                     (2,364,728)               1,561,695
                                           -----------              -----------

         TOTAL LIABILITIES AND STOCK-
          HOLDERS' EQUITY (DEFICIENCY)     $ 3,362,024              $ 5,208,437
                                           ===========              ===========

                 See notes to consolidated financial statements.

                                       F-3
<PAGE>


                       SCANTEK MEDICAL INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                             For the Years Ended June 30,
                                  ------------------------------------------------
                                      1999              1998             1997
                                  ------------      ------------      ------------
<S>                               <C>               <C>               <C>
Revenues:
  Net sales                       $    127,775      $       --        $       --
  License fees                         727,500         1,801,582              --
                                  ------------      ------------      ------------
                                       855,275         1,801,582              --
                                  ------------      ------------      ------------
Costs and expenses:
  Cost of sales                        411,834              --                --
  General and adminis-
   trative expenses                  1,148,449         1,060,766           394,229
  Research and
   development                         490,482           339,037           291,013
                                  ------------      ------------      ------------
                                     2,050,765         1,399,803           685,242
                                  ------------      ------------      ------------
Income (loss) from operations       (1,195,490)          401,779          (685,242)
                                  ------------      ------------      ------------
Other income (expense):
  Interest and dividends                  --              21,507            23,763
  Gain on sale of marketable
   securities                             --             413,504             1,100
  Loss on investments                 (103,100)             --                --
  Interest expense                    (280,978)         (183,889)         (113,344)
  Miscellaneous                           --               1,900              --
                                  ------------      ------------      ------------
                                      (384,078)          253,022           (88,481)
                                  ------------      ------------      ------------
Net earnings (loss)               $ (1,579,568)     $    654,801      $   (773,723)
                                  ============      ============      ============
Earnings (loss) per
 common share - basic                    $(.09)             $.04             $(.05)
                                         =====              ====             =====
Earnings (loss) per
 common share - diluted                  $(.09)             $.03             $(.05)
                                         =====              ====             =====
Weighted average
 number of common shares
 outstanding - basic                17,679,575        17,220,200        16,802,145
                                  ============      ============      ============
Weighted average
 number of common shares
 outstanding - diluted              17,679,575        18,742,501        16,802,145
                                  ============      ============      ============
</TABLE>
                  See notes to consolidated financial statements.

                                        F-4
<PAGE>

<TABLE>
                                          SCANTEK MEDICAL INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

                                                                                                             Cumulative
                                                                        Compre-            Retained             Other
                                                                        hensive            Earnings         Comprehensive
                                                      Total          Income (Loss)         (Deficit)        Income (Loss)
                                                   -----------       -------------       ------------       -------------
<S>                                                <C>               <C>                 <C>                 <C>
Balance, July 1, 1996                              $(1,859,975)                          $(3,951,425)        $   364,500
Issuance of stock in connection
 with private placement offering
 (issued at $1.00 per share)                         1,070,000
Issuance of stock for professional
 services rendered (at $.167 to
 $1.00 per share)                                       22,500
Issuance of stock in lieu of payment
 on equipment (at $1.00 per share)                     100,000
Stock options exercised ($.10 to
 $.375 per share)                                       28,000
Issuance of stock for rent (at
 $2.01 per share)                                       35,196
Net unrealized gain on marketable
 securities                                          5,202,115         $ 5,202,115                             5,202,115
Net (loss)                                            (773,723)           (773,723)         (773,723)
                                                                       -----------
   Comprehensive Income                                                $ 4,428,392
                                                                       ===========
-------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1997                               3,824,113                            (4,725,148)          5,566,615
Issuance of stock warrants for
 services (issued at $.55 to
 $1.125 per share)                                      27,780
Net unrealized loss on marketable
 securities                                         (2,944,999)        $(2,944,999)                           (2,944,999)
Net earnings                                           654,801             654,801           654,801
                                                                       -----------
   Comprehensive Loss                                                  $(2,290,198)
                                                                       ===========
-------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1998                               1,561,695                            (4,070,347)          2,621,616



<CAPTION>


                                                                       Additional
                                                                        Paid-In
                                                   Common Stock         Capital
                                                   ------------        -----------
<S>                                                   <C>              <C>
Balance, July 1, 1996                                 15,790           $1,711,160
Issuance of stock in connection
 with private placement offering
 (issued at $1.00 per share)                           1,070            1,068,930
Issuance of stock for professional
 services rendered (at $.167 to
 $1.00 per share)                                         73               22,427
Issuance of stock in lieu of payment
 on equipment (at $1.00 per share)                       100               99,900
Stock options exercised ($.10 to
 $.375 per share)                                        170               27,830
Issuance of stock for rent (at
 $2.01 per share)                                         17               35,179
Net unrealized gain on marketable
 securities
Net (loss)

   Comprehensive Income

---------------------------------------------------------------------------------
Balance, June 30, 1997                                17,220            2,965,426
Issuance of stock warrants for
 services (issued at $.55 to
 $1.125 per share)                                                         27,780
Net unrealized loss on marketable
 securities
Net earnings

   Comprehensive Loss

---------------------------------------------------------------------------------
Balance, June 30, 1998                                17,220            2,993,206
</TABLE>
                                                                     (Continued)

                 See notes to consolidated financial statements

                                       F-5
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
<TABLE>
<CAPTION>
                                                                                                           Cumulative
                                                                         Compre-            Retained          Other
                                                                         hensive            Earnings       Comprehensive
                                                        Total          Income (Loss)        (Deficit)      Income (Loss)
                                                     -----------       -------------      ------------     -------------
<S>                                                  <C>                <C>               <C>               <C>
Common stock issued in lieu of
 compensation (issued at $.1875
 per share)                                               65,625
Sale of common stock (at $.3333
 per share)                                              100,000
Common stock issued for loan
 financing (issued at $.1875 to
 $.5625 per share)                                        84,375
Issuance  of stock warrants for
 services (issued at $.1875 to $1.125
 per share)                                               60,853
Compensation for stock options
 cancelled and re-issued (from
 $.375 to $.21875 per share)                             129,793
Net unrealized loss on marketable
 securities                                           (2,787,501)       $(2,787,501)                        (2,787,501)
Net (loss)                                            (1,579,568)        (1,579,568)       (1,579,568)
                                                                        -----------
   Comprehensive Loss                                                   $(4,367,069)
                                                                        ===========
------------------------------------------------------------------------------------------------------------------------
Balance, June  30, 1999                              $(2,364,728)                         $(5,649,915)      $ (165,885)
------------------------------------------------------------------------------------------------------------------------


<CAPTION>

                                                                        Additional
                                                                          Paid-In
                                                     Common Stock         Capital
                                                     ------------       -----------
<S>                                                     <C>             <C>
Common stock issued in lieu of
 compensation (issued at $.1875
 per share)                                                350              65,275
Sale of common stock (at $.3333
 per share)                                                300              99,700
Common stock issued for loan
 financing (issued at $.1875 to
 $.5625 per share)                                         200              84,175
Issuance  of stock warrants for
 services (issued at $.1875 to $1.125
 per share)                                                                 60,853
Compensation for stock options
 cancelled and re-issued (from
 $.375 to $.21875 per share)                                               129,793
Net unrealized loss on marketable
 securities
Net (loss)

   Comprehensive Loss

----------------------------------------------------------------------------------
Balance, June  30, 1999                                 18,070          $3,433,002
----------------------------------------------------------------------------------
</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,
                                            ---------------------------------------------
                                                1999             1998             1997
                                            -----------      -----------      -----------
<S>                                         <C>              <C>              <C>

Cash flows from operating activities:
  Net earnings (loss)                       $(1,579,568)     $   654,801      $  (773,723)
Adjustments to reconcile net earnings
 (loss) to net cash used in operating
 activities:
  Depreciation and amortization                 288,655           84,220           93,384
  Net gain on sale of marketable
   securities                                      --           (413,504)          (1,100)
  Non-employee stock based
   compensation                                  84,375             --               --
  Non-cash officers compensation                195,418             --               --
  Other non-cash items                           60,853           27,780          157,696
  Changes in operating assets
   and liabilities                              512,755       (1,015,074)         (28,140)
                                            -----------      -----------      -----------
          Net Cash (Used in)
      Operating Activities                     (437,512)        (661,777)        (551,883)
                                            -----------      -----------      -----------

Cash flows from investing activities:
  Proceeds from sale of marketable
   securities                                      --          1,168,445           22,868
  Purchase and deposits of equipment         (1,202,980)        (447,203)        (394,915)
  Purchase of marketable securities                --           (345,342)        (432,192)
                                            -----------      -----------      -----------
         Net Cash Provided by (Used in)
     Investing Activities                    (1,202,980)         375,900         (804,239)
                                            -----------      -----------      -----------

Cash flows from financing activities:
   Proceeds from borrowings                   1,150,000          101,202          966,000
   Proceeds from officer loans                  342,281          317,000             --
   Repayment of officer loans                    (1,000)            --               --
   Repayment of notes                            (1,202)        (994,789)         (37,000)
   Proceeds from sale of options                   --               --             28,000
   Proceeds from sale of common stock           100,000             --          1,070,000
                                            -----------      -----------      -----------
         Net Cash Provided by (Used in)
         Financing Activities                 1,590,079         (576,587)       2,027,000
                                            -----------      -----------      -----------

Net Increase (decrease) in Cash                 (50,413)        (862,464)         670,878

Cash - beginning of period                       55,929          918,393          247,515
                                            -----------      -----------      -----------

Cash - end of period                        $     5,516      $    55,929      $   918,393
                                            ===========      ===========      ===========

                                                                               (Continued)
</TABLE>

                      See notes to consolidated financial statements.

                                            F-7
<PAGE>


                           SCANTEK MEDICAL INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
                                                       For the Years Ended June 30,
                                             ---------------------------------------------
                                                1999             1998             1997
                                             -----------      -----------      -----------
<S>                                          <C>              <C>              <C>
Changes in operating assets and
 liabilities consist of:
  (Increase) in inventory                    $  (898,796)     $      --        $      --
  (Increase) decrease in due from
    licensee                                     801,900          248,100         (550,000)
  (Increase) decrease in prepaid
    expenses                                     (60,770)          47,191          (70,708)
    (Increase) in marketable securities
     -non-current                                   --           (300,000)            --
     Increase (decrease) in other assets          80,490          (92,115)        (513,025)
  Increase (decrease) in accounts
   payable and accrued expenses                1,342,431          458,332         (196,907)
  Increase (decrease) in deferred
   income                                       (752,500)      (1,376,582)       1,302,500
                                             -----------      -----------      -----------
                                             $   512,755      $(1,015,074)     $   (28,140)
                                             ===========      ===========      ===========
Supplementary information:
 Cash paid during the year for:
      Interest                               $   103,924      $   155,709      $   278,838
                                             ===========      ===========      ===========
      Income taxes                           $     5,637      $      --        $      --
                                             ===========      ===========      ===========
 Non-cash investing activities:
  Unrealized gain (loss) on marketable
   securities                                $(2,787,501)     $(2,944,999)     $ 5,202,115
                                             ===========      ===========      ===========
  Deposit on equipment for common
   stock                                                                       $   100,000
                                                                               ===========
 Other Non-Cash Activities:
  Conversion of accounts payable
   and accrued expenses to common
   stock                                     $    84,375                       $    57,696
                                             ===========                       ===========
  Conversion of accounts payable
   to warrants                               $    60,853      $    27,780
                                             ===========      ===========
  Conversion of accrued officers
   salaries to common stock                  $    65,625
                                             ===========
  Common stock issued to officers
   in connection with cancellation
   and re-issue of stock options             $   129,793
                                             ===========
 Details of settlement agreement:
  Fair value of assets received              $   915,000
  Liabilities  forgiven                          575,000
                                             -----------
  Net cash paid                              $   340,000
                                             ===========
</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 subsidiaries (the "Company"), operates in one
     industry segment and is engaged, in developing, manufacturing, marketing,
     and licensing the BreastCare(TM) ("BreastCare(TM)") device. The
     BreastCare(TM) device 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 principal operations commenced and the
     Company commenced shipments of the BreastCare(TM) device in South America.
     The Company also obtained the rights to manufacture and sell the
     BreastCare(TM)/BreastAlert(TM) device in the United State 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, 1999. As of June 30, 1999, the Company has
     working capital deficit of approximately $2.5 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) device 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) device will
     be commercially successful. This raise 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.


                                       F-9
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

     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.

     USE OF ESTIMATES

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

     MARKETABLE SECURITIES

     The Company classifies its investment in equity securities, as "available
     for sale", and accordingly, reflects unrealized gains, net of deferred
     taxes, as a separate component of stockholders' equity (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 (first-in,
     first-out) or market.

     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 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 carrying value of intangible assets is
     periodically reviewed by the Company 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>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

     RESEARCH AND DEVELOPMENT

     Research and development costs are expensed as incurred.

     DEFERRED INCOME

     Deferred income consists of initial payments of licensing fees and
     marketable securities received by the Company, valued as of the date the
     licensing agreements were entered into, in connection with the licensing of
     the BreastCare(TM) device. The Company has substantially performed all
     material conditions of the licensing agreement giving the licensee the
     right to manufacture and sell the BreastCare(TM) device. This revenue has
     been recognized in income during the years ended June 30, 1999 and 1998 as
     the licensees have commenced operations, since substantial performance has
     occurred.

     IMPAIRMENT OF LONG-LIVED ASSETS

     In March 1995, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
     for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
     Disposed of". This statement was adopted by the Company in 1996. Since
     adoption, no impairment losses have been recognized.

     STOCK-BASED COMPENSATION

     Effective July 1, 1996, the Company adopted 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 accounting rules. The Company
     has adopted the disclosure only provisions of SFAS No. 123.

     The Company has cancelled various stock options to officers and reissued
     new stock options. The Company has recorded as additional compensation
     expense the difference between the new option price and the cancelled
     option price for the options that were cancelled.

     EARNINGS (LOSS) PER COMMON SHARE

     In February, 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
     Share", which requires companies to present basic earnings per share (EPS)
     and diluted earnings per share, instead of the primary and fully diluted
     EPS that was required. The new standard requires additional informational
     disclosures, and also makes certain modifications to the currently
     applicable EPS calculations defined in Accounting Principles Board No. 15.


                                      F-11
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

     Basic earnings (loss) per common share are computed by dividing net
     earnings (loss) by the weighted average number of common shares outstanding
     during the year. For the year ended June 30, 1998 diluted earnings per
     common share are computed by dividing net earnings by the weighted average
     number of common and common stock equivalent shares outstanding during the
     year. Common stock equivalents used in computing diluted earnings per share
     relate to stock options and warrants which, if exercised would have a
     dilutive effect on earnings per share. The number of common stock
     equivalent shares outstanding were 5,587,527, 2,013,178 and 1,163,178 for
     the years ended June 30, 1999, 1998 and 1997, respectively. During the
     years ended June 30, 1999 and 1997, common stock equivalents 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 licensee,
     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 are
     based on quoted market prices. It is not practicable to estimate the fair
     value of the non-publicly traded long-term debt.

     NEW FINANCIAL ACCOUNTING STANDARDS

     During fiscal 1997, the Financial Accounting Standards Board issued the
     following accounting standard: Statement of Financial Accounting Standards
     No. 130 "Reporting Comprehensive Income" (SFAS No.130); and Statement of
     Financial Accounting Standards No. 131, "Disclosure about Segments of an
     Enterprise and Related Information" (SFAS No.131). The Company has adopted
     SFAS No. 130 and SFAS 131 in the current fiscal year. In June 1998, The
     Financial Accounting Standards Board issued Statement of Financial
     Accounting Standards No. 133, "Accounting for Derivative Instruments and
     Hedging Activities" ("SFAS No. 133"). The Company is required to adopt the
     provisions of this Statement for all fiscal quarters of fiscal years
     beginning after June 15, 2000. This Statement requires that all derivatives
     be recorded in the balance sheet as either an asset or liability measured
     at fair value. The statement requires that changes in the derivative's fair
     value be recognized currently in earnings unless specific hedge accounting
     criteria are met. The Company is in the process of evaluating this
     Statement and has not yet determined the future impact on the Company's
     consolidated financial statements.

     RECLASSIFICATIONS

     Certain reclassifications have been made to prior year balances in order to
     conform with the current year's presentation.


                                      F-12
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENT IN SUBSIDIARIES

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

     (b) The Company has executed a contract to acquire a Hungarian based
     manufacturer of plastic medical packaging products and its manufacturing
     facility for an aggregate purchase price of $1,750,000. The acquisition is
     subject to the Company obtaining financing and the signing of a definitive
     agreement.

3.   MARKETABLE SECURITIES
                                          Estimated        Gross         Gross
                                             Fair       Unrealized    Unrealized
                               Cost         Value          Gains        Losses
                             --------    ----------     ----------     --------
June 30, 1999:
  Marketable securities-
    current:
      Common stock           $275,157    $  409,272     $  318,000     $183,885
                             ========    ==========     ==========     ========
      Warrants               $300,000    $     --       $     --       $300,000
                             ========    ==========     ==========     ========
June 30, 1998:
  Marketable securities-
    current:
      Common stock           $275,157    $2,295,253     $2,020,096     $   --
                             ========    ==========     ==========     ========
  Marketable securities-
    non-current:
      Warrants               $300,000    $  901,520     $  601,520     $   --
                             ========    ==========     ==========     ========

     Gross realized gains were $-0- in 1999, $435,352 in 1998 and $1,377 in
     1997. Gross realized losses were $-0- in 1999, $21,848 in 1998 and $277 in
     1997.

4.   INVENTORIES

     Inventories at June 30 consist of the following:

                              June 30,
                        -------------------
                         1999         1998
                        --------     ------
     Raw materials      $783,175     $ --
     Finished goods      115,621       --
                        --------     ------

                        $898,796     $ --
                        ========     ======


                                      F-13
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   PROPERTY AND EQUIPMENT

                                                June 30,
                                       -------------------------
                                          1999           1998
                                       ----------     ----------

     Equipment                         $2,014,545     $  101,565
     Furniture and fixtures                27,489         27,489
     Deposit on equipment                    --          710,000
     Leasehold improvements                16,525         16,525
                                       ----------     ----------
                                        2,058,559        855,579
     Less accumulated depreciation        254,585         33,536
                                       ----------     ----------

                                       $1,803,974     $  822,043
                                       ==========     ==========

     Depreciation expense for the years ended June 30, 1999, 1998 and 1997 was
     $221,049, $16,612 and $5,809, respectively.

5.   OTHER ASSETS

                                               June 30,
                                       ----------------------
                                         1999          1998
                                       --------     --------

     Patent costs                      $676,069     $676,069
     Long-term portion of amount
     due from licensees                    --         75,000
     Security deposits                   24,750       13,125
     Other                                 --         92,114
                                       --------     --------
                                        700,819      856,308
     Less accumulated amortization      540,640      473,033
                                       --------     --------

                                       $160,179     $383,275
                                       ========     ========

6.   HUMASCAN AGREEMENT/SETTLEMENT

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

     Pursuant to the Agreement, all licensing agreements between Scantek 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 Scantek 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 Scantek 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).


                                      F-14
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   HUMASCAN AGREEMENT/SETTLEMENT (Continued)

     Scantek recognized $375,000 as license fee income in its statement of
     operations for the year ended June 30, 1999 that was previously written off
     and reflected as a reduction of the license fee revenue recognized during
     the year ended June 30, 1998 in accordance with the amended licensing
     agreement. Scantek recorded raw materials and finished goods in the amount
     of approximately $859,000, 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

     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) device 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. Under
     the Sandell Agreement, Sandell was to pay the Company a non-refundable
     license fee of (i) $500,000 and (ii) thirty-five (35%) percent of the
     outstanding shares of Sandell on a fully diluted basis. Upon execution of
     the agreement the Company received $100,000. As of June 30, 1999 upon
     mutual consent of both parties, the Company terminated its agreement with
     Sandell. In connection with the termination of the agreement the Company
     wrote off the balance of the $400,000 license fee due the Company and
     approximately $103,000, which represented its investment in Sandell. The
     Company will manufacture, market and distribute the BreastCare(TM) device
     throughout the majority of South America through the Company's South
     American subsidiaries.

     On July 19, 1999 the Company executed a letter of intent with Contrutoro
     CEC LTDA ("CEC") and EPIC - Empressa de Participacano, Investmentoe
     Consultoria s/c LTDA. ("EPIC") to create a joint venture with exclusive
     rights to import, manufacture, market and distribute the BreastCare(TM)
     device in Brazil. The letter of intent is subject to a definitive
     agreement, which is still in negotiations between the parties.


                                      F-15
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   LICENSE AGREEMENTS (Continued)

     On July 29, 1999 the Company granted an exclusive license to Nugard
     Healthcare Ltd, an Irish Company ("Nugard"), to market Scantek's
     BreastCare(TM) device in Ireland and the United Kingdom. Nugard will pay a
     non-refundable licensing fee of $350,000 in various stages, of which
     $45,000 was received as of September 10, 1999. Additionally, the Company
     received common shares of Nugard equivalent to fifteen (15%) percent of
     Nugard's total outstanding common shares. The agreement requires minimum
     purchases of 5,000 units per month beginning September 1, 1999. The
     purchase price will range from $10 to $15 per unit based on the volume of
     shipment of the BreastCare(TM) device to the government or private
     physicians.

     On August 15, 1996, the Company entered into a license agreement with
     Health Technologies International Inc. ("HTI"), whereby HTI is to assemble,
     market and sell the BreastCare(TM) device in Chile and Singapore, and pay
     the Company a licensing fee of $250,000, which has been received by the
     Company. During November 1997, HTI was acquired by D-Lanz Development
     Group, Inc. ("D-Lanz"). As part of the licensing agreement, the Company
     received 2,000,000 shares of D-Lanz common stock which is publicly traded
     on the Electronic Bulletin Board under the Symbol DLNZ. The Company will
     classify its investment as "available for sale" and accordingly reflect
     unrealized gains, net of deferred taxes, as a separate component of
     stockholders' equity. At June 30, 1999, the quoted value of D-Lanz's common
     stock was $320,000. Also, pursuant to the terms of the agreement, the
     company agreed to extend the due date for D-Lanz's first minimum royalty
     payment of $80,000 until October 31, 1999. Pursuant to the terms of the
     licensing agreement, D-Lanz is obligated to the Company minimum royalties
     of $200,000 in the calendar year 2000 with increasing royalties leveling
     out at a minimum of $300,000 in the calendar year 2001, $400,000 in the
     year 2002 and thereafter. All royalties are paid based on a percentage of
     net sales of the BreastCare(TM) device.

8.   DEBT

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

                                                  1999           1998
                                               ----------     ----------
     Unsecured notes, interest
      at 6% to 10%per year, due on
      various dates through 6/12/00 (1)        $  500,000     $  100,000

     Unsecured officer loans, due on
      demand, interest at 15% per year (2)         24,271           --

     Secured note, due March 15, 2000
      interest at 12% per year
      The loan is secured by production
      equipment                                   750,000           --
                                               ----------     ----------
                                               $1,274,271     $  100,000
                                               ==========     ==========


                                      F-16
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   DEBT (Continued)

     Long-term debt at June 30, is as follows:

                                               1999           1998
                                            ----------     ----------
     Unsecured officer loans, due
      December 31, 2000 interest
      at prime plus 2% (10% at
      June 30, 1999)  (3)                   $  939,003     $  621,993

     Unsecured notes, interest at prime
      plus 2% (10% at June 30, 1999)
      due December 31, 2000 (4)                888,006        888,006
                                            ----------     ----------
                                             1,827,009      1,509,999
     Current portion of long-term
      debt                                        --             --
                                            ----------     ----------

                                            $1,827,009     $1,509,999
                                            ==========     ==========

     Annual maturities on long-term debt as of June 30, 1999 during the next
     five years are:

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

          2000                    $     --
          2001                     1,827,009
          2002                          --
          2003                          --
          2004                          --
                                  ----------
                                  $1,827,009
                                  ==========

     (1) The holders of these notes received as additional consideration 100,000
     shares of the Company's common stock. For the year ended June 30, 1999 the
     Company recorded interest expense and consulting expense in the amount of
     $84,375 in connection with this financing of which $42,187 is included in
     prepaid expenses at June 30, 1999.

     (2) The unsecured note payable represents loans made to the Company by one
     of its officers. Interest expense for the year ended June 30, 1999 amounted
     to $946.

     (3) 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, 1999, 1998 and 1997
     amounted to $107,317, $31,906 and $28,212, respectively. Accrued interest
     at June 30, 1999 and 1998 was $76,621 and $56,973, respectively.


                                      F-17
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   DEBT (Continued)

     (4) 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, Vice President of Finance International. The note terms
     were renegotiated with the lenders with principal payments due September
     30, 1999 and interest at prime plus two (2%) percent. The notes have been
     extended to December 31, 2000. Accrued interest at June 30, 1999 and 1998
     was $142,080 and $53,280, respectively. Interest expense for the year,
     ended June 30, 1999, 1998 and 1997, amounted to $88,800, $71,040 and
     $71,040, respectively.

9.   INCOME TAXES

     At June 30, 1999, the Company has a net operating loss ("NOL") carryforward
     of approximately $5,520,000 for financial reporting purposes and
     approximately $2,850,000 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 gain 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 2011.

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

                                                  Years Ended June 30,
                                          -------------------------------------
                                             1999          1998         1997
                                          ----------     ---------    ---------
     Tax provision (benefit) computed
      at the Federal statutory rate       $(341,000)     $ 345,000    $(355,000)
     Increase (decrease) in taxes
      resulting from:
       Utilization of Federal net
        operating loss carryforward            --         (345,000)        --
       Effect of unused tax losses          341,000           --        355,000
                                          ---------      ---------    ---------
                                          $    --        $    --      $    --
                                          =========      =========    =========


                                      F-18
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.   INCOME TAXES (Continued)

     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,
                                    --------------------------------------------------------------
                                                 1999                            1998
                                    ----------------------------      ----------------------------
                                    Temporary           Tax           Temporary             Tax
                                    Difference         Effect         Difference          Effect
                                    -----------      -----------      -----------      -----------
<S>                                 <C>              <C>              <C>              <C>
     Net operating
         loss carry-
         forward                    $(2,850,000)     $(1,140,000)     $(1,504,000)     $  (602,000)
     Deferred start-
         up expenses                 (2,051,000)        (820,000)      (2,330,000)        (932,000)
     Unrealized gains
         (losses) on marketable
         securities                    (166,000)         (66,000)       2,622,000        1,049,000
     Valuation
         allowance                   (5,067,000)      (2,026,000)       1,212,000          485,000
                                    -----------      -----------      -----------      -----------
                                    $      --        $      --        $      --        $      --
                                    ===========      ===========      ===========      ===========
</TABLE>

10.  SEGMENTS - GEOGRAPHIC AREAS

     The Company does not have reportable operating segments as defined in
     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.

     One hundred (100%) percent of the sales (127,775) of the BreastCare(TM)
     device for the year ended June 30, 1999 were to the Company's South
     American licensee, Sandell Corporation S.A. Sales of the BreastCare(TM)
     device are not recorded by the Company until Sandell Corporation S.A. ships
     the BreastCare(TM) device to unrelated entities. Revenues include license
     fees received by the Company in connection with various arrangements
     contracted throughout the world. As of June 30, 1999 the Company has
     terminated its license agreement with Sandell Corporation S.A. See Note 7
     of Notes to Consolidated Financial Statements for further information.


                                      F-19
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.  SEGMENTS - GEOGRAPHIC AREAS (Continued)

                                                 June 30,
                                        ----------------------------
                                            1999             1998
                                        -----------      -----------
     Revenues from unrelated
       entities and countries of
       Company's domicile:
                     United States      $   727,500      $ 1,801,582
                     South America          127,775             --
                                        -----------      -----------
                                        $   855,275      $ 1,801,582

     Total Revenues:
                     United States      $   832,936      $ 1,801,582
                     South America          127,775             --

         Less: intergeographic
                     revenue                (75,436)            --
                                        -----------      -----------
                                        $   855,275      $ 1,801,582

     Income (loss) from operations:
                     United States      $  (952,368)     $   405,871
                     South America         (243,122)          (4,092)
                                        -----------      -----------
                                        $(1,195,490)     $   401,779
                                        ===========      ===========

     Assets:
                     United States      $ 3,645,404      $ 5,212,438
                     South America          127,883           18,360

         Less: intergeographic
                     eliminations          (411,263)         (22,451)
                                        -----------      -----------
                                        $ 3,362,024      $ 5,208,347
                                        ===========      ===========

     Capital Expenditures:
                     United States      $ 1,202,980      $   447,203
                     South America             --               --
                                        -----------      -----------
                                        $ 1,202,980      $   447,203
                                        ===========      ===========

     Depreciation and amortization
        expense:

                     United States      $   288,655      $    84,220
                     South America             --               --
                                        -----------      -----------
                                        $   288,655      $    84,220
                                        ===========      ===========

     Transfers between geographic areas include raw materials manufactured in
     the United States which are shipped to South America to be manufactured
     into finished products. Income (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.


                                      F-20
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  STOCK OPTIONS AND WARRANTS

     The Company has adopted the disclosure-only provisions of 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 issuing
     of stock options and warrants been determined based on the fair value at
     the grant date for awards in fiscal years ended 1999, 1998 and 1997
     consistent with the provision of SFAS No. 123, the Company's net earnings
     (loss) and net earnings (loss) per share would have increased to the
     pro-forma amounts indicated below:

                                                           June 30,
                                               ----------------------------
                                                  1999              1998
                                               -----------        ---------

     Net earnings (loss) - as reported         $(1,579,568)       $ 654,801
     Net earnings (loss) - pro-forma            (1,722,680)         411,836
     Earnings (loss) per share - basic
      - as reported                                  $(.09)           $ .04
     Earnings (loss) per share - basic
      -pro-forma                                     $(.10)           $ .02
     Earnings (loss) per share - diluted
      - as reported                                  $(.09)           $ .03
     Earnings (loss) per share - diluted
      - pro-forma                                    $(.10)           $ .02

     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 1999 and 1998, respectively:
     dividend yield of -0-%, expected volatility of 145% to 161% and 66% to
     208%, risk free interest rate of 5.0% and 5.72% and expected lives of 2-1/2
     years.

     The Company grants 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,
     1999.

     (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,
     1999.

     (c) The following options were granted outside the two March 7, 1995 Plans
     during the year ending June 30, 1999:

     On August 5, 1998, the Company granted options to two directors to purchase
     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 expire August 5, 2003.


                                      F-21
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  STOCK OPTIONS AND WARRANTS (Continued)

     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 the grant to D.C. Consultants in
     exchange for $17,060 of professional services rendered. The warrants expire
     November 30, 2003.

     On May 14, 1999, the Company granted warrants to purchase 100,000 shares of
     the Company's common stock at an exercise price of $.21875 per share the
     fair value at the date of the grant to Daniel Alvarez, the Company's
     employee in South America. The warrants expire on May 14, 2004.

     On May 14, 1999,, the Company cancelled options granted to the Company's
     president and chief executive officer to purchase 484,827 shares of the
     Company's common stock at an option price of $.375 per share for the
     conversion of accrued salaries to August 30, 1996 in the amount of $181,810
     and granted options to purchase up to 2,847,900 shares of the Company's
     common stock at an option price of $.21875 per share, the fair value at the
     date of the grant, for the conversion of accrued salaries through April 30,
     1999 totaling $622,978. The Company recorded as additional compensation
     expense the difference between the new option price and the cancelled
     option price for the 484,827 options that were cancelled amounting to
     $75,754 for the year ended June 30, 1999. The option is exercisable
     immediately and expires on May 13, 2004.

     On May 14, 1999 the Company cancelled options granted to the Company's
     Vice-President and Secretary to purchase 345,851 shares of the Company's
     common stock at an option price of $.375 per share for the conversion of
     accrued salaries to August 30, 1996 in the amount of $129,694 and granted
     options to purchase up to 1,427,127 shares of the Company's common stock at
     an option price of $.21875 per share, the fair value at the date of grant,
     for the conversion of accrued salaries through April 30, 1999 totaling
     $312,184. The Company recorded as additional compensation expense the
     difference between the new option price and the cancelled option price for
     the 345,881 options that were cancelled amounting to $54,039 for the year
     ended June 30, 1999. The option is exercisable immediately and expires on
     May 13, 2004.


                                      F-22
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  STOCK OPTIONS AND WARRANTS (Continued)

     Information regarding the Company's Stock Option Plan and Warrants, for
     fiscal years ended 1999, 1998 and 1997, is as follows:

<TABLE>
<CAPTION>
                                   1999                       1998                       1997
                        ------------------------     -----------------------    ----------------------
                                       WEIGHTED                    WEIGHTED                   WEIGHTED
                                        AVERAGE                     AVERAGE                   AVERAGE
                                       EXERCISED                   EXERCISED                 EXERCISED
                           SHARES        PRICE        SHARES         PRICE        SHARES       PRICE
                        ----------     ---------     ---------     ---------    ---------    ---------
<S>                      <C>              <C>        <C>             <C>        <C>            <C>
Options out-
 standing -
 beginning of
 year                    2,013,178        $.54       1,163,178       $.49         330,000      $.33
Options exer-
 cised                        --                          --          --         (170,000)      .17
Options and
 warrants granted        4,555,027         .22         850,000        .60       1,053,178       .47
Options
 cancelled or
 expired                  (980,678)        .41            --          --          (50,000)      .01
                        ----------        ----       ---------       ----       ---------      ----
Options and
 warrants out-
 standing, end
 of year                 5,587,527        $.30       2,013,178       $.54       1,163,178      $.49
                        ==========        ====       =========       ====       =========      ====
Option and warrants
 price range at
 end of year                   $.19 to .56              $.38 to $1.125              $.01 to $1.06
Option price range
 for exercised
 shares                             --                       --                     $.10 to $ .38
Options available
 for grant                     1,000,000                   1,000,000                  1,000,000
</TABLE>

                                                  F-23
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  STOCK OPTIONS AND WARRANTS (Continued)

     The weighted exercise price and weighted fair value of options and warrants
     granted by the Company for the fiscal years ended 1999, 1998 and 1997 are
     as follows:

<TABLE>
<CAPTION>

                                      1999                        1998                        1997
                             ----------------------      ----------------------       ----------------------
                              WEIGHTED     WEIGHTED      WEIGHTED      WEIGHTED       WEIGHTED      WEIGHTED
                              AVERAGE       AVERAGE       AVERAGE       AVERAGE        AVERAGE      AVERAGE
                             EXERCISED       FAIR        EXERCISED       FAIR         EXERCISED      FAIR
                               PRICE         VALUE         PRICE         VALUE         PRICE         VALUE
                             ---------     --------      ---------     --------       ---------     --------
<S>                              <C>          <C>           <C>           <C>           <C>            <C>
Weighted average
  of options and
  warrants granted
  during the year
  whose exercise
  price exceeded
  fair market value
  at the date of
  grant                          --           --            .75           .36           --             --

Weighted average
  of options and
  warrants granted
  during the year
  whose exercise
  price was equal to
  fair market value
  at the date of
  grant                          .22         .14            .56           .38           .47            .42
</TABLE>

     The following table summarizes information about fixed-price stock options
     and warrants outstanding at June 30, 1999:

<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                  1999                  Life              Price           1999           Price
     -----------------        ----------             ---------         ---------      -----------      --------
     <S>                       <C>                   <C>                 <C>           <C>               <C>
     $ .19 to $ .63            5,245,027             4.7 years           $ .26         5,245,027         $ .26
     $ .75 to $1.13              342,500             2.9 years           $ .90           342,500         $ .90
                               ---------                                               ---------
                               5,587,527                                               5,587,527
                               =========                                               =========
</TABLE>

                                      F-24
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  RELATED PARTY TRANSACTIONS

     a) On December 1, 1998 the Company issued 200,000 and 150,000 shares of the
     Company's common stock to Mr. Sagi and the Company's vice
     president/secretary, respectively in consideration for deferring their
     current year salaries. In connection with the transaction the Company
     recorded compensation expense in the amount of $65,625 for the year ending
     June 30, 1999.

     b) 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 Note 8 of Notes to Consolidated Financial Statements for further
     information. The principal amount of the note at June 30, 1999 and 1998 was
     $177,601 for Mr. Sagi and Mr. Civelli. Interest expense for the year ended
     June 30, 1999, 1998 and 1997 was $17,760, $14,208 and $14,208, for Mr. Sagi
     and Mr. Civelli. As of June 30, 1999 and 1998 accrued interest in the
     amount of $28,416 and $10,856 was due Mr. Sagi and Mr. Civelli.

     c) On November 16, 1998 the Company sold 150,000 shares of the Company's
     common stock to a Director of the Company and an officer of the Company.
     The Company received $100,000 net proceeds from the sale.

     d) 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 production equipment needed for its production centers. The
     Company sublets warehouse space to Zigmed for $1,667 per month and received
     $20,000 as rental income from Zigmed for the years ended June 30, 1999 and
     1998. The Company has also contracted with Zigmed for the production of the
     BreastCare(TM) sensors prior to the full scale production by the Company
     abroad. Zigmed provided material, labor and product testing services of
     $42,109 and $74,028 for the years ended June 30, 1999 and 1998. The Company
     owes Zigmed approximately $17,000 and $ -0- as of June 30, 1999 and 1998
     for labor. See Note 13 of Notes to Consolidated Financial Statements for
     further information.

13.  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.


                                      F-25
<PAGE>


                      SCANTEK MEDICAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  COMMITMENTS AND CONTINGENCIES (Continued)

     Future minimum lease payments for operating leases are as follows:

           Years Ending June 30,
           ---------------------

              2000                                       $104,000
              2001                                           --
              2002                                          - -
              2003                                           --
           Thereafter                                        --
                                                         --------
                                                         $104,000
                                                         ========

     RENT EXPENSE

     Rent expense for the years ended June 30, 1999, 1998 and 1997 was
     approximately $86,000, $68,000 and $43,000, respectively.

     EMPLOYMENT AGREEMENTS

     The Company has entered into employment contracts in principle 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 intends to construct strategic regional production centers
     throughout the world to manufacture, assemble and market the BreastCare(TM)
     device. The Company has entered into an amended agreement with Zigmed
     pursuant to which Zigmed will manufacture the 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. As of June 30, 1999, the Company has advanced Zigmed
     $921,179. See Note 4 of Notes to Consolidated Financial Statements.


                                      F-26

<PAGE>


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

        None.


                                    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,
positions and officers within the Company 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.             66                 President, Chairman of
                                                       the Board, and Chief
                                                       Executive Officer

Patricia B. Furness                 52                 Vice President,
Corporate Secretary                                    and Director

Kenneth Courey                      62                 Director

Maurice Siegel, Ph.D.               69                 Vice President of
                                                       Research and
                                                       Development and Director

Louis Gottlieb                      71                 Vice President of
                                                       Corporate Development

Carlo Civelli                       50                 Vice President of
                                                       Finance International

Paul Nelson                         67                 Director


                                       34
<PAGE>


     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.


                                       35
<PAGE>


     KENNETH COUREY, joined the Company's Board of Directors in July 1998. Mr.
Courey is the founder of QualCare Preferred Providers of New Jersey, Inc., and
is presently serving as the Chairman of the Board of Directors of such company.
From 1984-1996 he was President and Chief Executive Officer of St. Francis Life
Care Corporation, from 1984-1994 he was President and Chief Executive Officer of
SSM Health Care Ministry Corporation, and from 1970-1992 he was President of St.
Clare's Riverside Medical Center. Presently, Mr. Courey is also a member of the
Board of Directors of Health Care Insurance Company and C.S.R.A., a
senior-housing management and development company, and one of the directors on
the Advisory Board for Carnegie State Bank. Mr. Courey received a Bachelor of
Arts Degree in Political Science from St. Ambrose College, Davenport, Iowa in
1959 and Master of Arts Degree in Hospital and Health Administration from State
University of Iowa, Iowa City, Iowa in 1962.

     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.


                                       36
<PAGE>


     CARLO CIVELLI, has served as Vice President of Finance International since
March 7, 1995. Since 1980, Mr. Civelli has owned Clarion Finance, A.G., a Swiss
corporation which he founded. From 1969 to 1971, Mr. Civelli was an Assistant
Vice-President with New Province Securities in Zurich, Switzerland. From 1971 to
1978, he served as Vice President of a European NYSE brokerage firm. From 1978
to 1980, Mr. Civelli was a free-lance investment advisor. Mr. Civelli is a
graduate of the College of the Swiss Mercantile Society, London.

     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, 1999.

ITEM 10. EXECUTIVE COMPENSATION

     The following sets forth, for the fiscal years ended June 30, 1999, 1998
and 1997, the annual and long-term compensation paid or accrued of the Company's
named officers.


                              SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                  Long-Term
                                                            Compensation Awards
                                                     -------------------------------
                           Annual Compensation         Securities
Name and              -----------------------------    Underlying
Principal Position    Year   Salary   Bonus   Other  Options/SARs (#)    Compensation
------------------    ----  --------  ------  -----  ----------------    ------------

<S>                   <C>   <C>       <C>       <C>     <C>              <C>
Zsigmond L. Sagi      1999  $190,000  $37,500   $--     2,847,900           $--
President, Chairman   1998   190,000    --       --       300,000            --
of the Board, Chief   1997   190,000    --       --       484,827            --
Executive Officer

Patricia Furness      1999    90,000   28,125    --     1,427,127            --
Vice President and    1998    90,000             --       150,000            --
Secretary             1997    75,000             --       385,851            --
</TABLE>

                                         37
<PAGE>


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 December 1998, the Company issued 200,000 and 150,000 shares of the
Company's common stock to Mr. Sagi and Ms. Furness for deferring their current
year salaries.

     The following table contains information regarding the grant of stock
options during the year ended June 30, 1999 to the named Executive Officers.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                                                                 Potential Realizable
                                                                                   Value at Assumed
                       Number of   Percent of Total                              Annual Rates of Stock
                      Securities     Options/SARs                                 Price Appreciation
                      Underlying     Granted to     Exercise or                   For Option Term (3)
                     Options/SARs     Employees     Base Price     Expiration     -------------------
Name                  Granted (#)      in 1999        ($/sh.)         Date        5% ($)    10% ($)
----                  -----------  ---------------  ----------     ----------   ----------  ----------
<S>                    <C>              <C>          <C>           <C>
Zsigmond L. Sagi (1)   2,847,900        63.9%         $.21875      05/14/2004   $1,059,062  $1,139,160
Patricia Furness (2)   1,427,127        32.0%         $.21875      05/14/2004      530,713     570,851

----------

</TABLE>

(1) On August 14, 1996 the Company issued 484,827 options to purchase the
Company's common stock to Mr. Sagi for deferring salaries. These options were
subsequently canceled on May 14, 1999


                                       38
<PAGE>


and re-issued for 2,847,900 options to purchase the Company's common stock for
the conversion of accrued salaries to April 30, 1999.

(2) On August 14, 1996, the Company issued 345,851 options to purchase the
Company's common stock to Ms. Furness for deferring salaries. These options were
subsequently canceled on May 14, 1999 and re-issued for 1,427,127 options to
purchase the Company's common stock for the conversion of accrued salaries to
April 30, 1999.

(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 option exercised
by the Named Officers during the year ended June 30, 1999 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, 1999. Also reported are the values
for "in-the-money" options, which represent the positive spread between the
exercise price of existing options and $.5625, the closing sale price of the
Company's common stock on June 30, 1999.


               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>

                                           Value
                                         Realized
                                       (Market Price   Number of Securities                    Value of
                                        on Exercise    Underlying Unexercised             Unexercised In-The-Money
                       Common Shares     Date Less    Options/SARs at Year End (#)        Options/SARs at Year-End ($)
                        Acquired on      Exercise     ----------------------------        -----------------------------
Name                    Exercise (#)     Price)($)    Exercisable    Unexercisable         Exercisable    Unexercisable
-----                  -------------   -------------  ------------   -------------         -----------    -------------
<S>                     <C>               <C>          <C>               <C>                 <C>               <C>
Zsigmond L. Sagi        3,147,900         --           3,147,900         --                  982,716           --

Patricia Furness        1,617,127         --           1,617,127         --                  499,950           --

</TABLE>

                                       39
<PAGE>


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.

--------------------------------------------------------------------------------
TITLE OF CLASS         NAME & ADDRESS          AMOUNT &               PERCENT OF
                       OF BENEFICIAL           NATURE OF              CLASS
                       OWNER                   BENEFICIAL
                                               OWNER
--------------------------------------------------------------------------------
Common Stock           Zsigmond L.             8,292,467              39.08%
                       Sagi
                       19 Lockley              (2), (3), (4),
                       Court                   (5)
                       Mountain
                       Lakes, NJ
                       07046

Common Stock           361                     2,121,250              11.74%
                       Acquisition
                       Corp.
                       885 W. Georgia          (6)
                       St. Suite 1200
                       Vancouver, BC
                       Canada V6L 3E8

Common Stock           Patricia B.             2,644,127              13.43%
                       Furness
                       25 Beechway             (7), (8), (9)
                       Road
                       Mountain
                       Lakes, NJ
                       07046


                                       40
<PAGE>


--------------------------------------------------------------------------------
TITLE OF CLASS         NAME & ADDRESS          AMOUNT &               PERCENT OF
                       OF BENEFICIAL           NATURE OF              CLASS
                       OWNER                   BENEFICIAL
                                               OWNER
--------------------------------------------------------------------------------

Common Stock           Carlo Civelli           942,500                5.2%
                       19 Lockley
                       Court                   (12), (13),
                       Mountain                (14)
                       Lakes, NJ
                       07046

Common Stock           Kenneth M.              150,000                .8%
                       Courey
                       6 Farmstead Rd
                       Denville, NJ
                       07834

Common Stock           Louis Gottlieb          643,750                2.2%
                       20 N. Central
                       Avenue                  (15) (16)
                       Valley Stream,
                       NY 11580

Common Stock           Paul Nelson             139,500                .7%
                       69 Lookout
                       Road                    (10)
                       Mountain
                       Lakes, NJ
                       07046

Common Stock           Maurice L.              64,000                 .3%
                       Siegel
                       560 W. 43rd             (11)
                       Street
                       New York, NY
                       10036

Common Stock           All Directors           12,916,344             55.84%
                       & Officers as
                       a Group
                       (consisting of
                       8 persons)
----------

(1) There were 18,070,200 shares of Common Stock outstanding as of September 15,
1999.

(2) Includes 200,000 shares of the Company's Common Stock issued to Mr. Sagi for
deferring current year salary.

(3) Includes 2,847,900 shares issuable to Mr. Sagi upon the exercise of options
granted on May 14, 1999 for the conversion of accrued salary to April 30, 1999
and 300,000 shares issuable to


                                       41
<PAGE>


Mr. Sagi upon the exercise of options granted in January, 1998.

(4) Includes 535,785 shares received upon the dissolution of SMC Corp. (See
"Certain Relationships and Related Transactions").

(5) 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.

(6) Includes 621,250 shares of the Company's Common Stock which 361 Acquisition
Corp. received as part of the 361 Acquisition Agreement. (See "Certain
Relationships and Related Transactions").

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

(8) Includes 150,000 shares of the Company's Common Stock issued to Ms. Furness
for deferring current year salary.

(9) Includes 1,427,127 shares issuable to Ms. Furness upon the exercise of
options granted on May 14, 1999 for the conversion of accrued salary to April
30, 1999, 40,000 shares issuable to Ms. Furness upon the exercise of options
granted in August, 1996 and 150,000 shares issuable to Ms. Furness upon the
exercise of options granted in January, 1998.

(10) Includes 40,000 shares of the Company's Common Stock issued upon the
exercise of options granted on March 7, 1995 to such director.

(11) Includes 40,000 shares of the Company's Common Stock issuable upon the
exercise of options granted on August 5, 1998 to Mr. Siegel.

(12) Includes 50,000 shares of the Company's Common Stock issued to Mr. Civelli
upon the exercise of options granted on March 7, 1995 and 142,500 shares
issuable upon the exercise of options granted on October 31, 1996.

(13) Includes 750,000 shares received upon the dissolution of SMC Corp.

(14) Does not include the 2,121,250 shares of the Company's Common Stock owned
by 361 Acquisition Corp. Mr. Civelli is the largest stockholder of 361
Acquisition Corp. and controls in excess of fifty (50%) percent of the
outstanding shares.

(15) Includes 40,000 shares of the Company's Common Stock issued upon the
exercise of options granted on August 14, 1996 to Mr. Gottlieb.


                                       42
<PAGE>


(16) Includes 241,250 shares of the Company's Common Stock issued to Louis and
Ruth Gottlieb.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     (a) On December 1, 1998, the Company issued 200,000 and 150,000 shares of
the Company's common stock to Mr. Zsigmond Sagi, the Company's President and
Chief Executive Officer and Ms. Patricia Furness, the Company's Vice
President/Secretary, respectively in consideration for deferring their current
year salaries. In connection with this transaction, the Company recorded
compensation expense in the amount of $65,625 for the year ended June 30, 1999.

     (b) 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 (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
principal payments due September 30, 1999 and interest at prime plus two (2%)
percent. As of June 30, 1999, accrued interest in the amount of $28,416 and
$10,856 was due Mr. Sagi and Mr. Civelli, respectively. The notes have been
extended to December 31, 2000.

     (c) On November 16, 1998, the Company sold 150,000 shares of the Company's
common stock to Kenneth Courey, a Director of the Company and to Louis Gottlieb,
Vice President of Corporate Development; the Company received $100,000 net
proceeds from the sale.

     (d) 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,


                                       43
<PAGE>


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 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, 1999, the Company has advanced Zigmed $921,179.

     (e) 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, 10% at June 30, 1999, and is payable on
December 31, 2000. The principal amount of the note is $939,003 at June 30,
1999. Subsequent to the balance sheet date, Mr. Sagi advanced an additional
$317,000. Interest expense for the year ended June 30, 1999 was $107,317.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

                                                                        Page
                                                                      ----------

     1. Financial Documents:

     Independent Auditors' Report                                        F-1

     Consolidated Balance Sheets, June 30, 1999 and 1998                 F-3

     Consolidated Statements of Operations, Years
       Ended June 30, 1999, 1998 and 1997                                F-4

     Consolidated Statements of Stockholders' Equity,
       Years Ended June 30, 1999, 1998 and 1997                       F-5 - F-6

     Consolidated Statements of Cash Flows, Years
       Ended June 30, 1999, 1998 and 1997                             F-7 - F-8

     Notes to Consolidated Financial Statements                       F-9 - F-26


     2. Financial Statement Schedules:


                                       44
<PAGE>


     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:

         On April 2, 1999, the Company filed a Current Report on Form 8-K,
reporting the following items:

          (i) Item 2. Acquisition or Disposition of Assets

          (ii) Item 7. Exhibits: Settlement Agreement by and Between Scantek
     Medical, Inc. and HumaScan, Inc. dated as of the 11th day of March, 1999.

     (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.

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

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


                                       45
<PAGE>


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

                  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.

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             361 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


                                       46
<PAGE>


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

                  -- 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.

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


                                       47
<PAGE>


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

                  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

10.28             Distribution Agreement with Scantek Medical, Inc. and Nugard
                  HealthCare Ltd. dated July 14, 1999.

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.

27                Financial Data Schedule.

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.


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 12, 1999


                                       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/ KENNETH COUREY
-------------------------------------
Kenneth Courey
Director


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


/s/ MAURICE SIEGEL
-------------------------------------
Maurice Siegel
Director


                                       49