<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM S-8

                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
 
                        MEDICAL DEVICE TECHNOLOGIES, INC.
               (exact name of registrant specified in its charter)


                                      Utah
                             -----------------------
         (State or other jurisdiction of incorporation or organization)

                                   58-1475517
                             ---------------------
                      (IRS Employer Identification Number)
                               


       9171 Towne Centre Drive - Suite 355 - San Diego, California - 92122
                    (Address of principal executive offices)

                          1997 STOCK COMPENSATION PLAN
                            (Full title of the plan)

                    M. Lee Hulsebus, Chief Executive Officer
                        Medical Device Technologies, Inc.
        9171 Towne Centre Drive - Suite 355 - San Diego, California 92122
                     (Name and address of agent for service)

                                 (619) 455-7127
          (Telephone number, including area code, of agent for service)

<TABLE>
                         CALCULATION OF REGISTRATION FEE
<CAPTION>
------------------------ ------------------ --------------------------- ------------------------- ---------------------
  Title of Securities      Amount to be          Proposed Maximum           Proposed Maximum           Amount of
   to be Registered         Registered            Offering Price        Aggregate Offering Price    Registration Fee
                                                    Per Share
------------------------ ------------------ --------------------------- ------------------------- ---------------------
<S>                      <C>                 <C>                           <C>                      <C>    
     Common Stock             750,000                 $ 0.66                    $495,000                $150.00

------------------------ ------------------ --------------------------- ------------------------- ---------------------
</TABLE>

Notes:

     1. If plan  interests  are being  registered,  include  the  following:  In
addition,  pursuant  to Rule  416(c)  under  the  Securities  Act of 1933,  this
registration  statement also covers an  indeterminate  amount of interests to be
offered or sold pursuant to the employee benefit plan(s) and described herein.

     2. Specific details  relating to the fee calculation  shall be furnished in
notes to the table,  including references to provisions of Rule 457 relied upon,
if the basis of the  calculation is not otherwise  evident from the  information
presented in the table.


<PAGE>

                                   PROSPECTUS

     Up to 750,000 Shares of Common Stock Received by Employees and  Consultants
Under the 1997 Stock Compensation Plan by means of this Prospectus.

     This  Prospectus  accompanies  offers by the Company to its  employees  and
consultants  of shares of common  stock,  par value $.15 per share (the  "Common
Stock"),  received  through  the  Company's  1997 Stock  Compensation  Plan,  as
amended, (the "Stock Plan"). The Company's principal offices are located at 9171
Towne  Centre  Drive,  Suite  355,  San  Diego,   California  92122,   telephone
619/455-7127.

     Shareholders   of  Medical  Device   Technologies,   Inc.  (the  "Company")
reoffering  or reselling  their  shares will do so through the  over-the-counter
market or through  NASDAQ,  if the  Company's  common stock is then included for
quotation on NASDAQ.  Selling shareholders,  if control persons, are required to
sell their shares in accordance  with the volume  limitations  of Rule 144 under
the Securities Act of 1933, which restricts sales by each selling shareholder in
any  three-month  period to the  greater of 1% of the total  outstanding  common
stock (or as of the date  hereof,  approximately  68,980  shares) or the average
weekly  trading  volume of the  Company's  common stock during the four calendar
weeks  immediately  preceding such sale. It is expected that brokers and dealers
effecting such  transactions  will be paid the normal and customary  commissions
for market transactions.

     THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION,  NOR HAS THE  COMMISSION  PASSED ON THE  ACCURACY  OR
ADEQUACY OF THE  PROSPECTUS.  ANY  REPRESENTATION  TO THE CONTRARY IS A CRIMINAL
OFFENSE.

                     INFORMATION WITH RESPECT TO THE COMPANY

     This Prospectus incorporates the following documents and each such document
shall be a part of this Prospectus.

1. The Company's Annual Report on Form 10-KSB as amended for the fiscal year 
ended December 31, 1995.

2. The Company's current Report on Form 8-K dated January 15, 1996.

3. The Company's current Report on Form 8-K dated January 24, 1996.

4. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.

5. The Company's Prospectus dated June 24, 1996.

6. The Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 1996.

7. The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1996.

8. The Company's 1997 Stock Compensation Plan.

9. All other reports filed by the Company pursuant to Sections 13(a),
13(c),  14 or 15(d) of the  Securities  Exchange  Act of 1934 since  
January 10, 1997.

                The date of this Prospectus is January 10, 1997.

<PAGE>
<TABLE>

                        TABLE OF CONTENTS OF PROSPECTUS
<CAPTION>

                                                       PAGE
                                                       ----
<S>                                                    <C> 
THE COMPANY                                            3

STOCK PLAN INFORMATION                                 5

BUSINESS OF THE COMPANY                                6
 
RISK FACTORS                                           14
 
MANAGEMENT                                             30
 
VOTING SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT                                  35
 
LEGAL PROCEEDINGS                                      36
 
INDEMNIFICATION                                        36

</TABLE>
 

                                     -2-

<PAGE>

     Copies of any of the foregoing  documents may be obtained,  without  charge
upon the oral or  written  request  of any  person to the  Company at 9171 Towne
Centre Drive, Suite 355, San Diego,  California 92122,  telephone  619/455-7127,
fax 619/455-7295.

                                   THE COMPANY

     The Company  was  incorporated  on February 6, 1980,  under the laws of the
State of Utah,  initially under the name of Gold Probe,  Inc. In September 1981,
the Company and the Hailey Oil Company, Inc. a Mississippi corporation,  entered
into an Agreement and Plan of Reorganization whereby the Company acquired Hailey
Oil Company, Inc. and exchanged 4,500,000 shares of its Common Stock for all the
issued and outstanding shares of Hailey Oil Company,  Inc. Also, pursuant to the
reorganization,  in January 1982 the Company  changed its name to Hailey  Energy
Corporation,  effected a one(1) for five (5) reverse  split of its Common Stock,
and decreased its authorized  number of shares to  25,000,000.  In October 1986,
the number of authorized shares of the company was increased to 100,000,000.  In
November,  1990, the company effected a one (1) for thirty (30) reverse split of
its Common  Stock and  increased  the par value of its Common Stock to $0.15 per
share.  In November  1992,  the Company  changed  its name from  "Hailey  Energy
Corporation"  to  "Cytoprobe  Corporation."  The  number  of  authorized  shares
(100,000,000)  remained  unchanged.  In January 1994, the Company effected a one
(1) for six  (6)  reverse  split  of its  Common  Stock.  The par  value  of the
company's  Common Stock remained at $0.15 per share and the number of authorized
shares remained unchanged.  In May 1995, the company changed its name to Medical
Device  Technologies,  Inc. to reflect the company's  broadening base of medical
products.  In June 1996 the company effected a one (1) for two (2) reverse split
of its Common  Stock.  The par value of the Company's  Common Stock  remained at
$0.15 per share and the number of authorized shares remained unchanged.

     The Company is subject to the informational  requirements of the Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act") and,  in  accordance
therewith,  files  reports,  proxy  statements  and other  information  with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other  information  filed with the Commission can be inspected and copied at
the  public  reference  facilities  of the  Commission  at 450 Fifth  Street NW,
Washington,  DC 20549.  The  Company's  Common  Stock is traded in the  National
Association  of Securities  Dealers  Automated  Quotation  ("NASDAQ")  under the
symbol "MEDD." The Company's  publicly  traded  preferred  stock,  6% Cumulative
Convertible  Series A Preferred  Stock, par value $.01 per share (the "Preferred
Stock")  and the  Company's  redeemable  common  stock  purchase  warrants  (the
"Redeemable  Warrants")  are traded  under the  symbols,  "MEDDP"  and  "MEDDW",
respectively.

     The Company has filed with the Commission a Registration  Statement on Form
S-8 (the "Registration  Statement") under the Securities Act of 1933, as amended
(the "Act"),  with respect to an  aggregate of 750,000  shares of the  Company's
Common Stock, all of which will be issued to employees and/or consultants of the
Company  pursuant to the Stock  Plan.  This  Prospectus,  which is Part I of the
Registration Statement,  omits certain information contained in the Registration
Statement. For further information with respect to the Company and the shares of
the  Common  Stock  offered  by  this  Prospectus,  reference  is  made  to  the
Registration  Statement,  including  the exhibits  thereof.  Statements  in this
Prospectus as to any document are not  necessarily  complete and, where any such
document  is an exhibit to the  Registration  Statement  or is  incorporated  by
reference  herein,  each such  statement  is  qualified  in all  respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full  statement  of the  provisions  thereof.  A copy of the  Registration
Statement,  with  exhibits,  may be  obtained  from the  Commission's  office in
Washington, DC (at the above address) upon payment of the fees prescribed by the
rules and  regulations of the Commission,  or examined there without charge.  


                                      -3-

<PAGE>

     No person has been  authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus and, if given
or made, such  information or  representation  must not be relied upon as having
been authorized by the Company.  Neither the delivery of this Prospectus nor any
distribution  of the shares of the common stock  issuable under the terms of the
Plan shall, under any circumstances,  create any implication that there has been
no change in the affairs of the Company since the date hereof.

     The  Company's  principal  offices are located at 9171 Towne Centre  Drive,
Suite 355, San Diego, California 92122, telephone 619/455-7127.

     THIS  PROSPECTUS  DOES NOT  CONSTITUTE  AN OFFER TO SELL  SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.


                                      -4-

<PAGE>


                             STOCK PLAN INFORMATION

     The 1997 Stock  Compensation  Plan was established by the Company effective
on January  10,  1997 to provide the  Company  flexibility  and to conserve  the
Company's   cash   resources   in   compensating   certain  of  its   technical,
administrative  and professional  employees and consultants.  Issuance of shares
under the Stock Plan is restricted to persons and firms who are  closely-related
to the Company and who provide  services  in  connection  with the  development,
production  of the  Company's  products  or  otherwise  in  connection  with its
business. The Stock Plan authorizes the Company to issue up to 750,000 shares of
the Company's  Common  Stock.  Shares must be issued only for bona fide services
and may not be issued under the Stock Plan contingent on services to be rendered
in the  future  or for  services  in  connection  with  the  offer  and  sale of
securities in a capital-raising transaction.  Shares are awarded under the Stock
Plan pursuant to individually  negotiated  compensation  contracts as determined
and/or  approved by the Stock Plan  Committee (the  "Committee").  The Committee
must be comprised of two or more of the Company's Directors appointed thereto by
the Company's  Board of  Directors.  Committee  members need not be  independent
Directors.  Messrs. M. Lee Hulsebus and Thomas E. Glasgow presently serve on the
Committee.  Eligible participants include directors,  employees and non-employee
consultants and advisors. The Company intends to award up to 10,000 shares under
the Stock Plan to each of its six directors to compensate them for their service
on the Company's Board of Directors during 1997. Subject to the restriction that
shares may not be awarded under the Stock Plan to persons owning beneficially or
of record ten percent (10%) or more of the  Company's  then  outstanding  Common
Stock or who would own such  amount of shares as a result of an award  under the
Stock Plan, there is no limit as to the number of shares which may be awarded to
a single participant.  The Company anticipates that a substantial portion of the
Shares to be  issued  under the  Stock  Plan will be issued as  compensation  to
technical  consultants  and advisors to the Company who provide  development and
clinical  services  to the Company in the  development  and testing of the Fluid
Alarm System (FAS),  formerly the Personal Alarm System (PAS), the Cell Recovery
System (CRS), and the  Intracranial  Pressure  Monitoring  System (ICP) devices.
Shares may be  awarded  under the Stock Plan until  January  1999.  The  Company
anticipates  all 750,000 shares under the Stock Plan will be awarded during 1997
and 1998.  No shares  under the 1997 Stock  Compensation  Plan have been  issued
before the date of this Prospectus.

     The Stock Plan does not  require  restrictions  on the  transferability  of
shares issued thereunder.  However, such shares may be restricted as a condition
to  their  issuance  where  the  Board  of  Directors  deems  such  restrictions
appropriate.  The Stock Plan is not subject to the  Employee  Retirement  Income
Securities  Act of 1974  ("ERISA").  Shares  awarded  under the  Stock  Plan are
intended to be fully taxable to the recipient as earned income.


                                      -5-

<PAGE>

                             BUSINESS OF THE COMPANY

     Effective as of January 1, 1994,  the Company has been engaged full time in
identifying, developing and bringing to market medical devices which the Company
believes are innovative,  represent  improvements over existing products, or are
responsive to a presently  unfulfilled  need in the  marketplace.  The Company's
strategy  consists  of: (i)  identifying  patented  technologies  in the medical
device field that it believes  have  potential  commercial  viability  but still
require refinement and regulatory clearance,  (ii) providing the necessary funds
to develop and obtain the  requisite  regulatory  clearance of such  products in
exchange for the acquisition, license for some other right to commercialize such
technologies, and (iii) attempt to commercialize or sublicense such technologies
by entering into agreements with one or more entities for clinical  development,
manufacturing and marketing of such products. Through this strategy, the Company
believes  that it can play a role in bridging  the gap between  viable  patented
technologies and their commercialization. Pursuant to this strategy, the company
has identified and acquired three licenses to develop products,  the Fluid Alarm
System (FAS) formerly the Personal Alarm System (PAS),  the Cell Recovery System
(CRS) and the Intracranial  Pressure  Monitoring  System (ICP), all of which the
company believes have commercial  viability.  The primary focus of the Company's
activities for the  foreseeable  future will be the marketing of the FAS and the
CRS and completing the regulatory and development process relative to the ICP so
that the  Company  can also bring this  product  to  market.  Nevertheless,  the
Company also receives  opportunities from time to time to license other patented
technologies  in the medical device field.  Depending on the specific device and
other circumstances,  such as the Company's then current financial and operating
situation, the company may pro-actively attempt, on a limited basis, to identify
and license additional patented technologies in the medical device field.


                                       -6-
<PAGE>


The Company's Products

The Fluid Alarm System

     The Fluid Alarm System is a device that monitors the integrity of infection
control  barriers,  such as  surgical  gloves  and  gowns  worn  during  medical
procedures. The FAS is designed to provide notification of fluid contact between
the health care  professional  and patient and thus decrease the  probability of
transmission of fluid-borne  infectious agents,  such as Human  Immunodeficiency
Virus  ("HIV"),  the virus  that  causes  Acquired  Immune  Deficiency  Syndrome
("AIDS"),  Hepatitis B and C viruses, and Staphylococcus  ("Staph"). The Company
received  FDA  clearance  to market  its Fluid  Alarm  System in  August,  1995,
although it did not commence  production  and  marketing of the product until it
received the necessary funds to do so upon the closing of a private placement of
short term notes in January,  1996.  The  Company  believes  that fluid  contact
between  health care  professionals  and patients  occurs not only when barriers
such as latex surgical  gloves and gowns are breached by tearing or puncture but
also when such barriers are fluid-saturated.  Further, the Company believes that
all  latex  surgical  gloves,  at some  point in time,  become  fluid-saturated,
potentially permitting microorganisms contained in bodily fluids to pass between
the health care professionals and the patients.  See "Risk Factors-No  Assurance
of Market for FAS Device" and "Business of the Company-Potential  Market for the
FAS Device."

     Hospital  regulations  as well  as  good  medical  practice  requires  that
defective  or  compromised  barriers  be replaced  as quickly as  feasible.  The
immediate  awareness of fluid contact between the health care  professional  and
patient is designed to decrease the  probability of  transmission of fluid-borne
infectious  agents.  Defective or  fluid-saturated  gloves represent a potential
danger for both the worker and the patient.  Regulations promulgated by the U.S.
Government's  Occupational Safety and Health  Administration  ("OSHA") require a
user of  sterile  barriers  to be aware of the  status of his or her  protective
barriers at all times during a surgical procedure.  The user of sterile barriers
is  required  to  change  any  portion  of those  barriers  when  they have been
compromised. The Company believes that the FAS provides users with a high degree
of accuracy and reliability in becoming aware of compromised  infection barriers
such as latex surgical gloves.

     Presently health care professionals  rely on visual  observations or "feel"
to determine whether the protective  barriers have been compromised.  While this
approach may be effective  for  punctures or tears,  it is not reliable when the
integrity of  protective  barriers  are  breached  due to  unnoticed  defects or
fluid-saturation.  In the case of surgeons'  latex gloves,  which are frequently
covered with blood and are sweaty inside,  visual  observation and inspection is
difficult and  unreliable.  Thus, the Company  believes that its FAS device will
enable health care professionals to immediately  recognize with a high degree of
accuracy when a protective barrier has been compromised.

     The FAS is designed to be worn  similar to a pager,  and provides two types
of immediate  warnings in order to indicate either  fluid-saturation  or a small
hole  or a  tear  in a  health  care  worker's  glove.  The  FAS  consists  of a
battery-powered  electronic pager-like device that is simultaneously tethered to
the  patient  and the  health  care  professional  that  can  sense  the flow of
extremely  small  electrical  currents  when a fluid contact is made between the
patient and the health  care  professional.  When the FAS senses a current  flow
characteristic  of a tear,  major puncture or fluid  saturation,  the FAS device
generates a  continuous  5-second  vibration.  Alternatively,  when current flow
characteristic of a small puncture or partial fluid saturation is detected,  the
FAS device will vibrate in brief intermittent bursts.

     The  Company  presently  intends  to  sell  the  FAS  for  $500.00  each to
distributors, who in turn may resell or lease the FAS device to end users.

                                       -7-
<PAGE>

Potential Market for the FAS Device

     The Company  believes  that the  potential  market for the FAS includes all
hospitals,  physicians'  offices,  dental offices,  emergency  rooms,  and other
medical facilities. Given the limited resources of the Company, initial strategy
will be to focus  on  those  markets  where  the  need for the FAS is  greatest.
Consequently, the Company will initially introduce the FAS to hospital operating
rooms and out-patient  surgical centers.  Further,  the Company believes that it
needs to convince  the  medical  community  of the  unreliability  of  infection
control barriers such as latex surgical  gloves,  particularly in the absence of
obvious breaches of the gloves' integrity before it can effect substantial sales
of the FAS  device.  The  Company  has  conducted  studies  with  respect to the
fluid-saturation of latex surgical gloves and the subsequent  infection that may
occur from the resulting exchange of bodily fluids. In addition,  the Company is
also seeking the  endorsement of or a mandate from either the Center for Disease
Control  in  Atlanta,  Georgia  (the  "CDC") or OSHA that a device  like the FAS
should be used in  connection  with all  surgical and other  medical  procedures
where the possibility exists for fluid contact between health care professionals
and  patients.  There is no assurance  that the Company will be able to convince
the medical  community  of the need for a device like the FAS whether or not the
CDC or OSHA  endorses  or  mandates  such a  device,  of which  there  can be no
assurance,  and thus,  there can be no assurance  that a market will develop for
the FAS device. See "Risk Factors-No Assurance of Market for FAS Device."

License Agreement

The Company obtained the rights to the FAS effective June 1, 1994, pursuant to a
license  agreement  ("PAS License  Agreement")  with Robert Lee Thompson,  d/b/a
Thompson  Medical,  whereby Mr.  Thompson  granted to the Company the  exclusive
worldwide  license to  manufacture,  use, sell or otherwise  dispose of the FAS.
Pursuant to an Addendum to License  Agreement  dated  September  19,  1996,  the
Company  made a one time  payment to Mr.  Thompson of  Eighty-One  Thousand  One
Hundred  Eighty-Seven  dollars and Fifty Cents ($81,187.50) as full and complete
settlement  of all past and future  royalties.  The PAS  License  Agreement  was
extended for an additional  year so that the License  Agreement now expires June
1, 2005.  In May 1995,  the  Company  also  entered  into an  exclusive  license
agreement with Dietmar P. Rabussay,  Ph.D., a consultant to the Company, for the
Signal Modulation Barrier Monitor (the "SMBM"), which is a component part of the
FAS device.  Pursuant to this license  agreement the Company is obligated to pay
royalties  equal to 1% of the average retail sales price on the net sales of all
FAS devices.  The invention disclosure as well as the patent application for the
SMBM have been filed with the Patent and Trademark  Office and the Company filed
a patent application for the SMBM during the fourth quarter of 1996.


                                       -8-

<PAGE>

The Cell Recovery System

The Company's Cell Recovery  System is a cell  "brushing"  and retrieval  system
using an automated  brush for the  collection of specimen  cells from an organ's
internal surface for diagnostic purposes,  primarily (but not limited to) cancer
detection. Presently, in order to obtain diagnostically significant tissue cells
from an organ's  internal  surface an excisional  biopsy is necessary,  i.e. the
patient must check into a hospital for a $5,000 - $7,000 procedure that requires
general  anesthesia  and the  endoscopic  surgical  removal  of tissue  from the
patient's  internal  organ.  In  contrast,  the  CRS  device  is a  non-surgical
procedure  that  can  be  performed  on  an  outpatient  basis  without  general
anesthesia, although local anesthesia is required.

     The first  application  for the CRS device is intended to be to the urology
market.  Currently,  the  preliminary  test  for  bladder  cancer  is to  test a
patient's  urine  sample,  which has a very high  incidence of producing  "false
negatives."  As a  consequence,  in most  instances  where there are  persistent
symptoms,  physicians  who receive a negative  result  from a urine  sample when
testing for bladder  cancer will then  conduct a visual,  in-office  examination
using a  cystoscope,  which  is a  catheter-type  instrument.  Even if a  visual
examination  with the  cystoscope  does not reveal  cancer polyps on the bladder
wall,  the  physician  may then require an  excisional  biopsy to test if cancer
cells are present in suspect  areas.  The Company  believes  that its CRS device
provides a reliable  alternative,  and complement to,  today's  standard  biopsy
procedure  and will be the first  automated  brush  system able to  successfully
retrieve  cell  samples.  Although  products  that  utilize  a  manual,  but not
automated, brushing technique for obtaining organ cells are currently available,
the Company  believes that there is no automated  device that  accomplishes  the
same tasks the CRS is  designed  to perform.  Manual  brushing  is awkward  and,
unlike the CRS,  does not include a system by which the cells that are "brushed"
off the wall of the internal organ are simultaneously and selectively retrieved.
As an  alternative  to a  biopsy,  the  CRS  device,  which  can be  used  in an
outpatient  (office)  setting,  is  intended  to save  time,  and also  give the
physician  an option  that does not  include  the  increased  expense of general
anesthesia and an overnight stay in the hospital, thus representing reduced cost
and  risk  to the  patient.  Accordingly,  as the  CRS  automated  brushing  and
retrieval system is  significantly  less expensive than excisional  biopsy.  The
Company also believes that the CRS procedure is reimbursable, although there can
be no  such  assurances.  See  "Risk  Factors-Health  Care  Reform  and  Related
Measures;  Uncertainty of Product Pricing and  Reimbursement." In addition,  the
CRS can  also be used  for the  follow-up  care  that  bladder  cancer  patients
require.


                                       -9-
<PAGE>

     The Company  received  marketing  clearance from the FDA for the CRS device
for use in the urology market in March,  1996. The Company intends to launch the
CRS in 1997.  Prior to the  market  launch of the CRS,  the  Company  intends to
complete certain clinical trials for a follow-up 510(k) submission to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder cancer,  and at the same time commence  manufacturing
for the system's instrumentation and disposables. There can be no assurance that
the Company  will  receive  510(k)  clearance  from the FDA for such  additional
claims or that the FDA will not  require  the  Company  to  submit a  pre-market
approval  application for such claims which would  substantially delay marketing
clearance. There can also be no assurance that the Company will be successful in
establishing   volume   manufacturing  of  the  system's   instrumentation   and
disposables.

     The Company has not  presently  determined  the price of or manner in which
the CRS device will be marketed and sold.

Potential Market for the CRS Device

     The Company  believes that in order to successfully  market the CRS device,
the Company will have to establish the device's  capabilities  in assisting with
the  detection  of  certain  urological   diseases,   such  as  bladder  cancer,
particularly in comparison to current cell sampling methods.  In order to do so,
the Company has received commitments to begin clinical studies of the CRS from a
leading urologist and a leading pathologist. The Company has also contacted five
other leading  urologists  and companies who each have  expressed an interest in
completing clinical studies of the CRS. Furthermore,  the Company also presently
intends to begin the testing and FDA clearance process for other applications of
the technologies  underlying the CRS device.  No assurance can be given that the
Company will be successful in obtaining FDA clearance or approval for such other
applications.  The Company  believes that the  technologies  underlying  the CRS
device can readily be applied to, and adapted for, other  diagnostic  procedures
with relatively minor modifications. Specifically, the Company believes that the
technologies  underlying  the  CRS  will be  applicable  to a  large  number  of
diagnostic  procedures  amenable  to  endoscopy,   such  as  bronchoscopy  (lung
examination),   laparoscopy   (abdominal  and  pelvic  organ   examination)  and
gastro-intestinal endoscopy.

License Agreement

     The Company entered in August 1992 into an exclusive license agreement,  as
amended,  (the "CRS License Agreement") with Robert Langdon,  Nancy Bush and Max
K. Willscher,  M.D. for the exclusive  worldwide rights to develop,  manufacture
and market the CRS and any other device based upon the  underlying  patent.  The
CRS' License  Agreement is for a term equal to the currently  remaining  life of
the patent relating to the CRS, which is approximately 13 years.

     On August 7, 1996,  the  company  entered  into an  Agreement  with  Robert
Langdon to  purchase  his 50%  ownership  interests  in the CRS for a payment of
Three Hundred Thousand Dollars ($300,000). Furthermore, the Company is obligated
to pay to Ms. Bush and the estate of Dr.  Willscher a royalty equal to 5% of the
average  retail  sales price on all net sales,  subject to $100,000  minimum per
year. In addition,  with respect to calendar years 1994 and 1995, the Company is
obligated  to  pay  $100,000  in  20  equal  quarterly  installments  of  $5,000
commencing  January 1, 1997.  Through  December  31,  1996 the  Company has paid
$600,000 and issued  227,966 shares of Common Stock pursuant to the original CRS
License  Agreement.  The Company can terminate the CRS License Agreement with 90
days written notice, at which time all of the Company's patent rights in the CRS
device will cease.


                                      -10-

<PAGE>

The Intracranial Pressure Monitoring System

     The Intracranial Pressure Monitoring System is a device that non-invasively
monitors  pressure  inside  the human  skull.  Increased  intracranial  pressure
generally  results from either fluid  build-up,  or swelling or abnormal  tissue
growth of the brain,  thereby cutting off blood flow to the brain,  resulting in
increased  risk of cell death.  This cell death results in brain damage,  and in
severe cases, can cause patient death. Presently, intracranial pressure can only
be determined  by  surgically  drilling a hole into or removing a section of the
skull and  inserting a catheter  pressure  transducer  to measure the  pressure.
Thereafter,  if a high level of  intracranial  pressure  is found to be present,
then the same surgical drilling procedure is often used in an attempt to relieve
the  pressure.  Due to the  invasive  nature of such a  procedure,  the  current
practice of drilling a hole in or removing a section of the skull is  considered
risky and expensive, and cannot be used for routine monitoring and examinations.
The Company believes that the ICP, when developed,  can be a valuable diagnostic
tool and will  greatly  assist  health  care  professionals  in  assessing  when
surgical drilling is necessary to relieve intracranial pressure.

     The ICP's non-invasive system utilizes a process of imparting a small known
force on the  surface of the skull and sensing  resulting  low  frequency  (0 to
approximately  100 Hz.) wave signals at different  points on the skull  surface.
The characteristics of the resulting wave signals are a function of the pressure
within  the  skull  and  change  when the  intracranial  pressure  increases  or
decreases.  The Company  presently  anticipates that it will  commercialize  two
distinct  versions  of the ICP  device.  The first  generation  ICP device  will
measure  changes in the direction and rate of change in  intracranial  pressure.
The second  generation ICP device,  which will  effectively be an upgrade of the
software  used  in the  first  generation,  will be able  to  assess  ranges  of
intracranial  pressure  levels as well.  The  Company  believes  non-overlapping
markets  exist for each  generation  of the device.  The ICP system makes use of
proprietary   wave   form   analysis    software    originally    developed   by
Scientific-Atlanta,  Inc.,  and now  assigned  to Global  Associates,  Ltd.  The
Company  originally  entered into a teaming  agreement with  Scientific-Atlanta,
Inc., which was  subsequently  assigned to Global  Associates,  Ltd. The teaming
agreement is more fully described below.


                                      -11-

<PAGE>


Potential Market for the ICP Device

     The  Company  believes  that the  potential  market  for both the first and
second  generation ICP device is primarily  hospitals that perform  intracranial
procedures.  Management  believes that the initial users of the first generation
ICP will be neurosurgeons in connection with diagnostic  procedures.  Management
believes that the second  generation ICP will be used not only by  neurosurgeons
but also by emergency room  personnel for patients who have suffered  traumas to
the head,  as well as by  physicians  to monitor  and  record  the  intracranial
pressure of individuals as a standard diagnostic procedure, similar to measuring
an  individual's  blood  pressure.  Clinical  testing  with respect to the first
generation  ICP is  currently  ongoing  and is  estimated  to be finished in the
second  quarter  of 1997.  The  Company  presently  intends  to make  its  first
submission  to the FDA in  1997.  It has not  been  established  if the  initial
submission will take the form of a 510(k) or a PMA.  Contemporaneously,  in 1997
the Company  intends to continue  clinical trials as required to gain sufficient
data for the second generation ICP which the Company presently  anticipates will
be concluded by the end of 1997.  The Company  believes that there is no product
or system  presently  on the  market  or under  development  which  has  similar
technological advantages as those of the ICP device.

License Arrangements

     The  Company's  majority-owned  subsidiary,  the ICP  Corporation,  has the
exclusive  right to the ICP.  The ICP  Corporation  entered into an agreement in
January,  1993  with  Medys,  Inc.,  a New  Hampshire  corporation  (the  "Medys
Agreement"),  whereby  the ICP  Corporation  obtained  the right to acquire  the
worldwide, exclusive, nontransferable license to develop, manufacture and market
the ICP  until  the year  2009,  which is when the  patent  relating  to the ICP
expires.  Under  the  terms  of the  Medys  Agreement,  the ICP  Corporation  is
obligated to pay Medys,  Inc.  royalties  equal to 10% of the net sales proceeds
from the ICP with a minimum  payment of $90,000 due for the year ended  December
31, 1996 and $200,000 for all  subsequent  years through the life of the patent.
With respect to the royalties due for the year ended December 31, 1996,  $15,000
was prepaid on December 31, 1995. Further, under the Medys Agreement the Company
is  responsible  for clinical  testing of the ICP and obtaining all required FDA
and other required  regulatory  clearances.  The Company can terminate the Medys
Agreement with 90 days written notice at which time all of the Company's  patent
rights in the ICP device will cease.

     In addition to the Medys  Agreement  that the Company has entered into with
respect to the ICP, the Company  also entered into an agreement  with respect to
the ICP device on November  23,  1992 with  Hampton  Morgan  Holdings,  S.A.,  a
Panamanian company ("Hampton Morgan"),  which was controlled by a shareholder of
the Company  (the  "Hampton  Morgan  Agreement").  The  Company  had  previously
retained the consulting services of Hampton Morgan in June of 1992 in connection
with the CRS device. The Hampton Morgan Agreement provided,  among other things,
for (i) a payment of 83,334 shares of Common Stock to Hampton Morgan as a finder
of the ICP device,  (ii)  royalties to Hampton Morgan equal to 8% of gross sales
of the ICP,  and (iii)  the  issuance  of  1,000,000  shares of Common  Stock to
Hampton  Morgan  upon the Company  achieving  gross  sales of  $10,000,000  with
respect to the ICP. The Company  issued the 83,334 shares to Hampton Morgan as a
finder in 1992,  but the Company,  on the advice of counsel,  believes  that the
balance of the Hampton  Morgan  Agreement  is not  enforceable  because  Hampton
Morgan has failed to make  certain  required  payments to the Company  under the
Hampton Morgan Agreement.  Consequently,  the Company does not intend to pay the
8% royalty or 1,000,000  shares of Common Stock to Hampton Morgan.  In the event
that the Company is incorrect and has to pay some or all of the royalty payments
and/or  shares of Common  Stock to  Hampton  Morgan  under  the  Hampton  Morgan
Agreement,   it  would  have  a  material   adverse   effect  on  the  potential
profitability of the ICP and could have a material adverse effect on the Company
as a whole.


                                      -12-

<PAGE>


Global Associates, Ltd. Agreement

     In  February  1993,  the  Company  entered  into a teaming  agreement  (the
"Teaming  Agreement")  with  Scientific-Atlanta,  Inc.("S-A")  who  subsequently
assigned the agreement to Global  Associates,  Ltd.  ("Global") in July 1996, as
the result of the sale of a division  by S-A to  Global,  to provide  equipment,
technical  expertise and experience  directly  related to the computer  software
which  provides the  signal/data  processing  and modal  analysis  techniques in
developing the ICP. Under the Teaming Agreement, the Company is obligated to use
Global exclusively as its supplier for signal/data processing and modal analysis
techniques,  equipment  and  software  for the first twelve (12) months after it
commences  sales of the ICP and thereafter only if Global's prices are as low as
those offered by any other third party.  The Teaming  Agreement is for a term of
the earlier of five years or a date of two years following initial product sale,
unless sooner terminated.


                                      -13-
<PAGE>

RISK FACTORS

     Development  Stage  Company;  History  of  Operating  Losses;   Accumulated
Deficit; Uncertainty of Future Profitability

     The Company was  exclusively  engaged in oil and gas activities  until June
1992, when it entered into its first license agreement and commenced its current
operations in the medical device business. The Company subsequently entered into
two additional  licenses for medical  devices and in April of 1994  discontinued
entirely  its  oil  and  gas  operations.  The  Company  commenced  the  limited
manufacture  and marketing of its first medical  device,  the Fluid Alarm System
(FAS),  formerly  called the  Personal  Alarm  System  (PAS),  in January  1996,
although to date, the Company has not yet realized  significant sales of the FAS
device. The Company is currently  developing its other two medical devices,  the
Cell  Recovery  System (CRS) and the  Intracranial  Pressure  Monitoring  System
(ICP).  Consequently,  the Company is still a  development  stage  company  with
respect to the medical device  business.  At September 30, 1996,  partially as a
result  of  its  unsuccessful  oil  and  gas  activities,  the  Company  had  an
accumulated deficit of $16,292,117. The Company expects losses to continue until
such  time as it can bring  its  medical  devices  successfully  to  market  and
generate  sufficient  operating  revenues.  Although  the Company has  commenced
marketing the Fluid Alarm System,  the Company needs to find a marketing partner
for the FAS and to conduct additional development activities with respect to its
other products,  which include clinical  testing and establishing  manufacturing
with respect to the Cell Recovery System,  and substantial  clinical testing and
obtaining  regulatory  clearance  with  respect  to  the  Intracranial  Pressure
Monitoring System.  Although the Company received FDA marketing clearance of the
Company's  second  device,  the CRS, on March 20, 1996,  the Company  intends to
complete  certain  clinical  trials  for a  follow-up  submission  to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder  cancer.  There can be no assurance  that the Company
will receive 510(k)  clearance from the FDA for such  additional  claims or that
the FDA will not require the Company to submit a pre-market approval application
for such claims which would  substantially  delay  marketing  clearance for such
additional  claims.  There also can be no  assurance  that the  Company  will be
successful in establishing  manufacturing  of the system's  instrumentation  and
disposables.   The  Company's  third  device,   the  ICP,  is  still  undergoing
development  with  respect  to the  first  generation  ICP  device;  trials in a
clinical setting, to be followed shortly by multi-site clinicals are expected to
start on this  device  in 1997.  It is  currently  anticipated  that  additional
clinical  trials for the second  generation  ICP will not begin  until  later in
1997.  The  Company's  intent to establish  volume  manufacturing  and undertake
clinical testing with respect to the CRS and the extensive  clinical testing and
regulatory  clearance  still  required  with respect to the ICP,  together  with
projected  general and  administrative  expenses and projected  marketing  costs
related to the FAS and launch of the CRS, are  expected to result in  continuing
losses  until such time as the Company  achieves  significant  sales from one or
more of its products.  The Company's  ability to achieve  profitability  depends
upon its ability to successfully  market the FAS and to develop and successfully
market the CRS and ICP, of which there can be no  assurance.  In  addition,  the
Company  will  continue  to seek to  license  additional  medical  products  for
development and commercialization,  although there can be no assurances that the
Company will be able to identify any additional  products that it deems suitable
for development and commercialization, or that if it does identify such products
that any of them will be successfully developed and commercialized.


                                      -14-

<PAGE>

Auditors' Going Concern Report

     The Company's  independent  certified  accountants' report on the Company's
financial   statements  for  the  year  ended  December  31,  1995  includes  an
explanatory  paragraph  that the  Company's  recurring  losses from  operations,
negative  working capital (at that time),  and limited  capital  resources raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

Need for Additional Financing; Possible Issuance of Additional Securities:
Future Dilution

     The Company's cash  requirements are significant.  The Company  completed a
public  offering  of  6%  Cumulative   Convertible   Series  A  Preferred  Stock
("Preferred  Stock") and redeemable common stock purchase warrants  ("Redeemable
Warrants") in June 1996 and had  $3,773,379  in cash at September 30, 1996.  The
Company presently anticipates continued spending on research and development and
for working capital  purposes during 1997. The Company may,  however,  encounter
unexpected  costs  and  working  capital  requirements  in  connection  with the
implementation  of its business plan and as a  consequence,  require  additional
financing  to  continue  to effect its  business  plan.  Based on the  Company's
current  plans,   management   believes  that  the  current  cash  position  and
anticipated  revenues  from the FAS device  will be  sufficient  to sustain  the
Company until the second half of 1997. There can be no assurances, however, that
prior to the  expiration  of such period or  thereafter  that the  Company  will
generate  sufficient  revenues  from  sales of the FAS  device or the CRS device
(which it anticipates to commence  marketing in the first half of 1997), or that
the Company will not  encounter  unexpected  costs such that the Company will be
required to seek additional  financing.  The Company has no current arrangements
with respect to such additional financing and there can be no assurance that any
such additional financing can be obtained on terms acceptable to the Company, or
at all.  Failure by the  Company to obtain  additional  financing  either from a
public or private  offering  of its  securities,  a strategic  joint  venture or
partnership,  or otherwise, would have a material adverse effect on the Company.
Further,  in the event that the Company obtains any additional  financing,  such
financing will most likely have a dilutive  effect on the holders of the Company
securities.


                                      -15-
<PAGE>

Uncertainty of Product Development; Corporate Inexperience

     Development of the Company's  medical devices will be subject to all of the
risks associated with new product development generally, including unanticipated
delays, expenses, technical problems, or other difficulties that could result in
abandonment  or  substantial  change in the  proposed  commercialization  of the
Company's  medical  devices.  Given the  uncertainties  inherent  in new product
development  generally,  and  the  Company's  inexperience  in the  business  of
commercializing  medical  devices,  there can be no assurances  that the Company
will be successful in developing its products.  Investors should be aware of the
potential   problems,   delays  and  difficulties   often   encountered  by  any
inexperienced  company. As a consequence,  problems may arise that may be beyond
the experience or control of management and accordingly, the Company's prospects
must be considered in light of the risks,  expenses and difficulties  frequently
encountered  by  development  stage  companies  in  the  establishment  of a new
business in a highly competitive and highly regulated  industry.  The Company in
1996  commenced  the  marketing of one of its  products,  the FAS, and it is not
currently  possible to predict the demand and market  acceptance  for the FAS or
any of the Company's other products. Accordingly, there can be no assurance that
the Company's development and  commercialization  activities will be successful,
that the Company will  receive FDA  clearance  for any of its other  products or
their advances, or that any of the Company's devices will be commercially viable
and  successfully  marketed,  or that the Company will ever achieve  significant
levels of revenue or profits, if any.


                                      -16-
<PAGE>

Dependence on Third Party Manufacturing; Limited Marketing Capabilities

     The Company has no current manufacturing capabilities and will not have any
such  capabilities  for the foreseeable  future.  As a consequence,  the Company
relies on third parties to manufacture its products. The Company must be able to
effect the manufacture of its Fluid Alarm System,  and any other devices that it
will seek to  commercialize,  in sufficient  quantities and at acceptable costs.
Further, the Company and third-party  manufacturers will need to comply with FDA
and  other  regulatory   requirements  in  connection  with  its   manufacturing
activities and facilities,  including FDA Good  Manufacturing  Practices ("GMP")
regulations.  In anticipation of higher volume manufacturing  requirements,  the
Company  entered  into an  agreement  with a second  third  party  manufacturer,
effective as of December 15, 1996,  for the  manufacture of the FAS. The Company
believes this manufacturer  satisfies the FDA's GMP regulations,  however, there
can be no  assurance  that  the  manufacturer  will  continue  to  satisfy  such
regulations.  Further,  the Company  presently  anticipates  that it will engage
other third party  manufacturers  in connection  with the manufacture of the CRS
and ICP devices.  There can be no assurance that such other manufacturers can be
identified  on  commercially  acceptable  terms,  or at all,  or that such other
manufacturers,  if  identified,  will be adequate  for the  Company's  long-term
needs,  or that they can meet all relevant  regulatory  requirements.  Moreover,
there can be no  assurance  that the  Company's  manufacture  of  products  on a
limited scale basis means that the Company can effect the successful  transition
to  commercial,   large-scale  production.   Finally,   changes  in  methods  of
manufacture, including commercial scale-up, can, among other things, require the
performance of new clinical studies under certain circumstances.

     The Company  currently has a limited sales and marketing staff and does not
presently  intend to  establish  its own sales  force.  The Company is presently
seeking to engage major corporate  distributors of medical devices to effect the
sale of its FAS device,  although there can be no assurance that it will be able
to do so. As a consequence,  the Company's  current marketing and sales strategy
will substantially rely on unaffiliated third parties to effect the sales of its
products.  There can be no  assurance  that the Company  will be able to rely on
unaffiliated third parties to successfully  effect sales of its products or that
the Company will not have to incur significant  additional  expenditures,  which
may include the employment of sales personnel,  in order to successfully  effect
the sales of its products.


                                      -17-
<PAGE>

No Assurance of Market for the FAS Device; Need for Certain Minimum FAS Sales

     Although the Company commenced the marketing of the FAS device in the first
half of 1996, to date the Company has not effected any significant  sales of the
FAS device.  The Company currently  believes that before the FAS will experience
any significant  sales, the Company will have to convince the medical  community
of the  potential  unreliability  of infection  control  barriers  such as latex
surgical gloves,  particularly in the absence of obvious breaches,  punctures or
tears of the gloves and saturation.  In order for the FAS to be successful,  the
Company must  demonstrate  that fluid contact between health care  professionals
and patients occurs as a routine matter as a result of the "fluid-saturation" of
latex surgical gloves even when such gloves have not been punctured or torn.

     The  Company  also needs to  demonstrate,  from tests it has  performed  on
surgical  gloves,  that when  fluid  contact  does  occur  between  health  care
professionals  and  patients  as  a  result  of  fluid-saturated  but  otherwise
non-damaged latex gloves, that pathogens (which are disease producing organisms)
are  transmitted  between the health care  professional  and the  patient,  thus
resulting in a health risk to both parties.  There can be no assurance  that the
Company will be able to convince the medical  community of the need for a device
like the FAS and  consequently,  there can be no  assurance  that a market  will
develop for the FAS device. The failure of the Company to establish a market for
the FAS  device  and effect  significant  sales of the FAS  device  would have a
material adverse effect on the Company.  Further,  in the event that the Company
does not effect certain minimum sales of the FAS device in 1997 the Company will
require  additional  capital in order to sustain  itself for the latter  part of
1997 and the future. See "Risk Factors "Need for Additional Financing;  Possible
Issuance of Securities; Future Dilution"


                                      -18-
<PAGE>

No Assurance of Market for the CRS Device

The Company  received  marketing  clearance  for the CRS device with  respect to
urological  procedures  on March 20,  1996.  Nevertheless,  the Company will not
commence  marketing the CRS until the first half of 1997 so that the Company can
complete certain clinical trials for a follow-up 510(k) submission to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder  cancer.  There can be no assurance  that the Company
will receive 510(k)  clearance from the FDA for such  additional  claims or that
the FDA will not  require the Company to submit a  pre-market  approval  ("PMA")
application for such claims that would substantially delay marketing  clearance.
Although  there can be no assurance  that the Company will be able to do so, the
Company also intends to commence  manufacturing of the system's  instrumentation
and disposables  prior to a scheduled  marketing  launch of the CRS. The Company
currently  believes that before the CRS will  experience any  significant  sales
that the  device's  capabilities  in  assisting  with the  detection  of certain
diseases,  such as bladder  cancer,  particularly  in comparison to current cell
sampling  methods,  will have to be established.  There can be no assurance that
the Company  will be able to  establish  to the medical  community  that the CRS
device is more  effective in assisting  in the  detection of bladder  cancer and
consequently,  there can be no assurance  that a market will develop for the CRS
device relative to the detection of bladder cancer.  Further,  since the Company
has not yet  commenced  adaptation  of the CRS device for any other  procedures,
there can be no assurance  that there will be a market for any other  procedures
for which the Company  may  attempt to adopt the CRS device.  The failure of the
Company to establish a market for the CRS device and effect significant sales of
the CRS device in the urological  field or any other field could have a material
adverse  effect on the Company.  See  "Business  of the Company - The  Company's
Products-the Cell Recovery System - Potential Market for the CRS device."


                                      -19-
<PAGE>

No Assurance of Identification, Acquisition or Commercialization of
Additional Technologies

     From time to time, if the Company's resources allow, the Company intends to
explore the acquisition  and subsequent  development  and  commercialization  of
additional  patented  technologies in the medical device field.  There can be no
assurance,  however,  that the Company will be able to identify  any  additional
technologies and, even if suitable technologies are identified,  there can be no
assurance that the Company will have sufficient funds to commercialize  any such
technologies or that any such technologies will ultimately be viable.

Government Regulations

     The Company's  medical device products are subject to extensive  government
regulations in the United States and in other countries.  In order to clinically
test,  produce,  and market its  devices,  the  Company  must  satisfy  numerous
mandatory  procedures,  regulations,  and safety standards established by the US
Food and Drug Administration  (FDA), and comparable state and foreign regulatory
agencies.  Typically, such standards require that the products be cleared by the
government  agency as safe and effective  for their  intended use prior to being
marketed for human  applications.  The  clearance  process is expensive and time
consuming.  Other than with respect to the Company's  Fluid Alarm System and the
Cell Recovery System,  no assurance can be given that clearances will be granted
for any  expanded  claims  for the CRS or for the  sale of the ICP or any  other
future  products,  if any, or that the length of time for clearance  will not be
extensive, or that the cost of attempting to obtain any such clearances will not
be prohibitive.

     The FDA employs a rigorous system of regulations and requirements governing
the clearance processes of medical devices,  requiring,  among other things, the
presentation of substantial evidence,  including clinical studies,  establishing
the safety and efficacy of new medical devices.  The principal  methods by which
FDA  clearance  is  obtained  are a PMA,  which  is for  products  that  are not
comparable  to  any  other  product  in  the  market,  or  filing  a  pre-market
notification  under Section 510(k) of the Federal Food, Drug and Cosmetic Act (a
"510(k)")  which is for products  that are similar to products that have already
received FDA clearance.  Although both methods may require  clinical  testing of
the  products  in  question  under an approved  protocol  because PMA  clearance
relates to more unique  products,  the PMA  procedure  is more  complex and time
consuming.  Applicants  under the 510(k)  procedure must prove that the products
for which  clearance is sought are  substantially  equivalent to products on the
market prior to the Medical  Device  Amendments  of 1976,  or products  approved
thereafter pursuant to the 510(k). The review period for a 510(k) application is
approximately  one  hundred  fifty  (150)  days  from  the  date of  filing  the
application,  although there can be no assurance that the review period will not
extend beyond such a period.


                                      -20-
<PAGE>


     Under the PMA procedure,  the applicant is required to conduct  substantial
clinical testing to determine the safety,  efficacy and potential hazards of the
product.  The review period under a PMA  application is one hundred eighty (180)
days from the date of filing,  and the application is not  automatically  deemed
cleared if not rejected during that period. The preparation of a PMA application
is  significantly  more complex,  expensive and time  consuming  than the 510(k)
procedure.  Further,  the FDA can  request  additional  information,  which  can
prolong the clearance process.

     In order to  conduct  human  clinical  studies  for any  medical  procedure
proposed for the Company's products the Company could also be required to obtain
an  Investigational  Device  Exemption  ("IDE") from the FDA which would further
increase the time before potential FDA clearance. In order to obtain an IDE, the
Company  would be  required  to submit an  application  to the FDA,  including a
complete  description of the product,  and detailed medical protocols that would
be used to evaluate the product. In the event an application were found to be in
order, an IDE would ordinarily be granted promptly thereafter.

     The Company  may be  required  to use the PMA process for the  Intracranial
Pressure  Monitoring  System or for  expanded  claims for the CRS in order to be
granted FDA clearance.  The clearance process can take from a minimum of six (6)
months  to  several  or more  years,  and  there  can be no  assurance  that FDA
clearance will be granted for the commercial sale of the  Intracranial  Pressure
Monitoring System or expanded claims for the CRS device.

     The FDA also imposes various  requirements on manufacturers  and sellers of
medical  devices  under  its  jurisdiction,  such  as  labeling,   manufacturing
practices,  record-keeping and reporting requirements.  The FDA may also require
post-market  testing and  surveillance  programs to monitor a product's  effect.
There can be no assurance  that the  appropriate  clearance from the FDA will be
obtained,  that the process to obtain  such  clearance  will not be  excessively
expensive or lengthy,  or that the Company will have sufficient  funds to pursue
such  clearances.  Moreover,  failure to  receive  requisite  clearance  for the
Company's  products or processes would prevent the Company from  commercializing
its  products  as  intended,  and would  have a material  adverse  effect on the
business of the Company.

     Even after regulatory clearance is obtained, any such clearance may include
significant  limitations on indicated uses. Further,  regulatory  clearances are
subject to continued review,  and later discovery of previously unknown problems
may result in restrictions with respect to a particular product or manufacturer,
including withdrawal of the product from the market, or sanctions or fines being
imposed on the Company.

     Distribution  of the Company's  products in countries other than the United
States  may be  subject  to  regulation  in  those  countries.  There  can be no
assurance  that the Company  will be able to obtain the  approvals  necessary to
market its medical devices outside of the United States.


                                      -21-

<PAGE>

Potential for Increased Royalties with Respect to the ICP Device

     In  addition to the license  agreements  that the Company has entered  into
with respect to the ICP, the Company also entered into an agreement with respect
to the ICP device on November 23, 1992 with  Hampton  Morgan  Holdings,  S.A., a
Panamanian company ("Hampton Morgan"),  which was controlled by a shareholder of
the Company  (the  "Hampton  Morgan  Agreement").  The  Company  had  previously
retained the consulting services of Hampton Morgan in June of 1992 in connection
with the CRS device. The Hampton Morgan Agreement provided,  among other things,
for (i) a payment of 83,334 shares of Common Stock to Hampton Morgan as a finder
of the ICP device,  (ii)  royalties to Hampton Morgan equal to 8% of gross sales
of the ICP,  and (iii)  the  issuance  of  1,000,000  shares of Common  Stock to
Hampton  Morgan  upon the Company  achieving  gross  sales of  $10,000,000  with
respect to the ICP. The Company  issued the 83,334 shares to Hampton Morgan as a
finder in 1992,  but the Company,  on the advice of counsel,  believes  that the
balance of the Hampton  Morgan  Agreement  is not  enforceable  because  Hampton
Morgan has failed to make  certain  required  payments to the Company  under the
Hampton Morgan Agreement.  Consequently,  the Company does not intend to pay the
8% royalty or 1,000,000  shares of Common Stock to Hampton Morgan.  In the event
that the Company is incorrect and has to pay some or all of the royalty payments
and/or  shares of Common  Stock to  Hampton  Morgan  under  the  Hampton  Morgan
Agreement,   it  would  have  a  material   adverse   effect  on  the  potential
profitability of the ICP and could have a material adverse effect on the Company
as a whole. See "Business of the Company - The Intracranial  Pressure Monitoring
System - License Arrangements"

Patents and Intellectual Property Rights

     The Company has entered into exclusive  license  agreements with respect to
each of the patents  underlying the Company's  first three  products:  the Fluid
Alarm System; the Cell Recovery System; and the Intracranial Pressure Monitoring
System. There can be no assurance,  however,  that such patents will provide the
Company with significant protection from competitors. Patent protection relative
to medical  devices is  generally  uncertain,  and  involves  complex  legal and
factual questions. To date, there has emerged no consistent policy regarding the
breadth of claims  allowed in connection  with the patent  protection of medical
devices.  Furthermore,  legislation is being  considered  which,  in the future,
might prevent the patenting or enforcement of a patent covering certain surgical
or medical procedures.  Accordingly,  there can be no assurance that any patents
licensed by the Company will afford protection against  competitors with similar
technologies.  Finally, there can be no assurance that the Company will have the
financial resources necessary to enforce its patent rights.


                                      -22-
<PAGE>

     Even though the Company has been licensed under patents, under the terms of
the  Company's  license  agreements,  the Company is  responsible  for defending
against  charges  of  infringement  of  third  party  patents  by the  Company's
products.  Challenges  may be  instituted  by third  parties as to the validity,
enforceability  and  infringement  of the  patents.  Further,  the  cost  of the
litigation  to defend any  challenge  to the  Company's  licensed  patents or to
uphold the validity and enforceability and prevent infringement of the Company's
licensed patents could be substantial.

     The Company may be required to obtain  additional  licenses  from others to
continue to refine, develop,  manufacture, and market new products. There can be
no  assurance  that the  Company  will be able to obtain  any such  licenses  on
commercially  reasonable  terms or at all or that the rights granted pursuant to
any licenses will be valid and enforceable.

     Notwithstanding the Company's exclusive license with respect to the patents
underlying  the FAS, CRS and ICP, there can be no assurance that others will not
independently  develop similar  technologies,  or design around the patents.  If
others are able to design  around the patents,  the  Company's  business will be
materially  adversely affected.  Further, the Company will have very limited, if
any,  protection of its proprietary rights in those  jurisdictions  where it has
not effected any patent  filings or where it fails to obtain  patent  protection
despite filing therefor.

     Even though the patents underlying the Company's three medical devices have
been issued by the United States Patent and Trademark Office,  challenges may be
instituted  by  third  parties  as to the  validity  and  enforceability  of the
patents.  The Company is not presently  aware of any  challenges to the patents.
Similarly,  the Company  may also have to  institute  legal  actions in order to
protect  infringement  of the  patents  by  third  parties  The  Company  is not
presently aware of any such infringements. The costs of litigation or settlement
in  connection  with the defense of any third party  challenges  relative to the
validity and enforceability of its patents and/or to prevent any infringement of
the patents by third  parties,  which  pursuant to the license  agreements  with
respect to the patents are the Company's  responsibility,  could be substantial.
Moreover, in the event that the Company was unsuccessful in any such litigation,
the Company could be materially adversely affected.

     In  addition to relying on patent  protection  for its  products,  of which
there is no  assurance,  the Company will also attempt to protect its  products,
processes  and  proprietary  rights  by  relying  on trade  secret  laws and non
disclosure  and  confidentiality  agreements,  as  well as  exclusive  licensing
arrangements  with  persons  who have  access to its  proprietary  materials  or
processes,  or who have  licensing  or research  arrangements  exclusive  to the
Company.  Despite these protections,  no assurance can be given that others will
not  independently  develop or obtain access to such materials or processes,  or
that the Company's  competitive position will not be adversely affected thereby.
To the extent members of the Company's Scientific Advisory Board have consulting
arrangements with, or are employed by, a competitor of the Company, such members
might  encounter  certain  conflicts  of  interest,  and the  Company  could  be
materially  adversely  affected by the disclosure of the Company's  confidential
information by such Scientific Advisors. See "Business of the Company."


                                      -23-
<PAGE>

Restatement of Amortization of Patent License Agreements

     Effective  as of the fourth  quarter of the fiscal year ended  December 31,
1995, the Company  changed its method of amortizing its license  agreements from
commencement  of product  shipment to the  estimated  useful life of the license
agreement,  which is ten years. As a consequence,  the combined stated values of
the  Company's  patent  agreements  at December  31, 1993,  1994 and 1995,  were
reduced by 11.9%, 18.6% and 28.2%, respectively, of their combined stated values
prior to the reduction.  Also, as a result of this reduction,  the Company's net
losses for the years ended  December 31, 1993,  1994 and 1995 (as  restated) and
its  cumulative  net loss for the period from June 1, 1992 to December  31, 1995
(as restated) increased by 10.9%, 6.9%, 7.6% and 7.7%, respectively.

     The Company  will  continue to monitor  the markets for its  products,  the
emergence of competitive  products and technologies and associated  events,  and
will adjust the lives of its patent licenses accordingly. As a consequence,  the
Company may deem it necessary or appropriate to make additional  adjustments the
results of which may  include  further  reductions  in the stated  values of the
Company's patent license agreements.

Competition; Product Obsolescence

     The medical device industry is intensely competitive, particularly in terms
of price,  quality and marketing.  Most of the Company's  competitors are better
established  and have  substantially  greater  financial,  marketing  and  other
resources than the Company. Further, most of the Company's competitors have been
in  existence  for a  substantially  longer  period  of time  and may be  better
established  in those  markets  where the Company  intends to sell its  devices.
Although the Company is not presently aware of any competitor that  commercially
manufactures  and  sells  any  medical  devices  with  the  same   technological
advantages as those the Company  presently intends to sell, the Company is aware
that several  technologies similar to the Fluid Alarm System are being developed
and  tested.  Due to the  Company's  relative  lack  of  experience,  financial,
marketing and other resources there can be no assurance that the Company will be
able to market this device successfully,  or develop and market any of its other
medical devices, or compete in the medical device industry in general.

     Moreover,  competitors may develop and successfully  commercialize  medical
devices  that  directly or  indirectly  accomplish  what the  Company's  medical
devices are designed to accomplish in a superior  and/or less expensive  manner.
As a  consequence,  such  competing  medical  devices  may render the  Company's
medical devices  obsolete.  There can be no assurance  that,  either prior to or
after the Company has developed,  commercialized and marketed any of its medical
devices  that such devices  will not be rendered  obsolete by competing  medical
devices.


                                      -24-
<PAGE>

Health Care Reform and Related Measures; Uncertainty of Product Pricing and
Reimbursement

     The levels of revenue and  profitability of sales of medical devices may be
affected by the  continuing  efforts of  governmental  and third party payers to
contain  or reduce  the  costs of  health  care  through  various  means and the
initiatives  of  third  party  payers  with  respect  to  the   availability  of
reimbursement. For example, in certain foreign markets, pricing or profitability
of medical devices is subject to government  control. In the United States there
have been,  and the Company  expects that there will continue to be, a number of
federal and state proposals to implement similar governmental control.  Although
the Company cannot predict what  legislative  reforms may be proposed or adopted
or what actions  federal,  state or private  payers for health care products may
take in  response  to any health  care  reform  proposals  or  legislation,  the
existence and pendency of such proposals could have a material adverse effect on
the Company in general.  Whether a medical procedure is subject to reimbursement
from third party  payers  impacts  upon the  likelihood  that a medical  product
associated  with such a procedure  will be  purchased.  Third  party  payers are
increasingly  challenging  the prices charged for medical  products.  Two of the
Company's three products, the CRS and the ICP involve a medical procedure. There
can be no assurance that any of the Company's  products,  or the procedures that
accompany the CRS and ICP, will be reimbursable. To the extent any or all of the
Company's medical products,  and any accompanying  medical  procedures,  are not
reimbursable by third party payers the Company's ability to sell its products on
a  competitive  basis will be  adversely  affected,  which could have a material
adverse effect on the Company.


Dependence On Key Personnel

     The  Company's  success  will depend to a large  extent upon its ability to
retain Mr. M. Lee  Hulsebus,  its Chief  Executive  Officer and  Chairman of the
Board.  In  August  1994,  the  Company  entered  into an  exclusive  employment
agreement  with Mr.  Hulsebus  and  subsequently  obtained  a term "key man life
insurance  policy" in the amount of $1,000,000  with respect to Mr.  Hulsebus of
which the Company is the sole beneficiary in the event of his death. The loss or
unavailability  of the services of Mr.  Hulsebus  would have a material  adverse
effect on the business and operations of the Company. See "Management Employment
Agreements."


                                      -25-

<PAGE>

Need for Additional Personnel

     In the  event  that  the  Company  receives  FDA  clearances  for  expanded
diagnostic  claims  with  respect to the Cell  Recovery  System or  Intracranial
Pressure  Monitoring  System, or there is significant  commercial demand for the
Fluid Alarm System or Cell Recovery System as currently  cleared by the FDA, the
Company  will need to hire  additional  administrative  and sales and  marketing
personnel.  These demands are expected to require the addition of new management
personnel and the  development  of additional  expertise by existing  management
personnel.  There can be no assurance  that the Company will be able to hire and
retain the  additional  personnel  that it will require.  Failure to do so could
have a material adverse effect on the Company.

Continued NASDAQ SmallCap Listing

     The  Company' s Common  Stock is  presently  listed on the NASDAQ  SmallCap
Market.  The National  Association  of Securities  Dealers  Automated  Quotation
System has established  certain  standards for the initial listing and continued
listing of a security on the NASDAQ SmallCap  Market and is currently  reviewing
additional  and  more  stringent  listing  maintenance  standards.  The  current
maintenance  standards  require,  among other things,  that an issuer have total
assets of at least  $2,000,000,  capital and surplus of at least  $1,000,000,  a
minimum  bid price for the listed  securities  of $1.00 per share,  and that the
minimum  market  value  of the  "public  float"  be at least  $1,000,000.  It is
anticipated  that upon  consummation of this offering the Company's Common Stock
will  continue  to be listed on the NASDAQ  SmallCap  Market.  As of January 6,,
1997, the closing bid price of the Company's Common Stock was $0.75.  Therefore,
there can be no assurance  that the Company will continue to satisfy the minimum
price  per  share  or other  current  or  proposed  standards  required  for the
continued  NASDAQ  SmallCap Market listing of its Common Stock. If the Company's
Common Stock were excluded from the NASDAQ SmallCap  Market it would  materially
adversely  affect the price and  liquidity of the Common  Stock,  as well as the
Company's  Preferred  Stock and the Redeemable  Warrants.  In the event that the
Company  is  unable  to  satisfy  the  NASDAQ  SmallCap   Market's   maintenance
requirements,  it  is  anticipated  that  trading  would  be  conducted  in  the
over-the-counter  market National Quotations Bureau ("NQB") "pink sheets" or the
OTC's Electronic  Bulletin Board. As a consequence,  trading with respect to the
Company's  Common Stock would be subject to the  so-called  "penny stock" rules.
Unless an exception is  available,  the penny stock rules  require,  among other
things, delivery to a prospective purchaser,  prior to any transaction involving
a penny stock, of a disclosure schedule explaining the penny stock rules and the
risks  associated  therewith.  If the Company's  Common Stock was subject to the
regulations on penny stocks,  the market liquidity for the Common Stock would be
severely  affected  limiting  the ability of  broker/dealers  to sell the Common
Stock in the public  market.  There is no  assurance  trading  in the  Company's
securities will not be subject to these or new or other  regulations  that would
materially adversely affect the market for such securities.


                                      -26-

<PAGE>

Volatility of the Company's Common Stock Price

     The market price of the Company's Common Stock has experienced  significant
volatility.  Various factors and events,  including announcements by the Company
or  its  competitors  concerning  patents,   proprietary  rights,  technological
innovations  or new  commercial  products,  as well as public  concern about the
safety of  medical  devices in  general,  may have a  significant  impact on the
Company's business and the price of the Company's Common Stock.

No Dividends With Respect to Common Stock

     The  Company  has not paid any cash  dividends  with  respect to its Common
Stock,  and it is unlikely  that  Company  will pay any  dividends on its Common
Stock in the  foreseeable  future.  The Company is required pay a 6% cumulative,
semi-annual  dividend  with respect to its  Preferred  Stock in shares of Common
Stock.  Earnings,  if any,  that the Company may realize will be retained in the
business for further development and expansion.

Product Liability and Insurance

     The Company's business could, in the future, expose it to product liability
claims for  personal  injury or death.  Such risks are  inherent in the testing,
manufacturing  and marketing of its products and services.  Although the Company
has product liability  insurance,  there can be no assurance that such insurance
will provide adequate coverage against potential  liabilities or that it will be
able to maintain or, if need be, increase such coverage.

Potential Adverse Effect of Redemption of Redeemable Warrants

     The  exercise  of the  Company's  Redeemable  Warrants  and the sale of the
underlying  shares of Common Stock (or even the  potential  of such  exercise or
sale)  may  have a  depressive  effect  on the  market  price  of the  Company's
securities. The exercise of such warrants also may have a dilutive effect on the
interest  of  investors  in Common  Stock.  Moreover,  the terms  upon which the
Company  will be able to  obtain  additional  equity  capital  may be  adversely
affected  because the  holders of the  outstanding  warrants  can be expected to
exercise them, to the extent they are able to, at a time when the Company would,
in all likelihood,  be able to obtain any needed capital on terms more favorable
to the Company than those provided in the warrants. As a result of the Company's
Redeemable Warrants being outstanding,  the Company may be deprived of favorable
opportunities to obtain additional equity capital,  if it should then be needed,
for its business.  It is also possible that, as long as the Redeemable  Warrants
(initially  exercisable at $3.75 per redeemable  warrant) and the  underwriter's
warrants remain outstanding,  their existence might limit increases in the price
of the Common Stock.


                                      -27-

<PAGE>

Anti-Takeover Provisions; Poison Pill Issuance of Other Preferred Stock;
Utah Anti-Takeover Provisions

     The Company's  Articles of Incorporation,  as amended,  and By-Laws contain
provisions  that may make the  acquisition of control of the Company by means of
tender offer,  over-the-counter  market  purchases,  a proxy fight or otherwise,
more difficult.  This could prevent security holders from realizing a premium on
their  securities of the Company.  The Company also adopted a staggered Board of
Directors at its most recent annual meeting of shareholders,  which is a further
impediment to a change in control.  The Company has adopted a so-called  "poison
pill."  Specifically,  the poison pill  significantly  increases  the cost to an
unwanted  party to acquire  control of the company upon the  acquisition by such
unwanted suitor of 15% of the outstanding voting power of the Company.

     In  addition,  the  Board of  Directors  may  issue  one or more  series of
preferred stock other than the Company's recently-issued Preferred Stock without
any action on the part of the shareholders of the Company,  the existence and/or
terms of which may  adversely  affect the rights of holders of the Common Stock.
In addition,  the issuance of any such additional preferred stock may be used as
an  "anti-takeover"  device without further action on part of the  shareholders.
Issuance of additional  preferred  stock,  which may be  accomplished  through a
public  offering  or  a  private  placement  to  parties  favorable  to  current
management,  may  dilute  the  voting  power  holders  of  Common  Stock and the
Company's  recently-issued  preferred stock (such as by issuing  preferred stock
with super voting  rights and may render more  difficult  the removal of current
management, even if such removal may be in the shareholders' best interests. See
Part II, Item 4 - "Description of Securities - Other Preferred Stock" and "Share
Purchase Plan".

     The Company is subject to the provisions of Sections 61-6-1 through 61-6-12
of the Utah Control Share  Acquisition Act, an anti-takeover  statute.  Sections
61-6-1 through 61-6-12  effectively  provide that in the event a person acquires
ownership or the power to effect, directly or indirectly, the exercise of 20% or
more of the voting power of a Utah  corporation in connection  with the election
of  directors,  then such  person  shall only be  entitled to vote to the extent
expressly  agreed  to  by  the  majority  of  the  other   shareholders  of  the
corporation.  Accordingly, potential acquirers of the Company may be discouraged
from attempting to effect acquisitions the Company's voting securities,  thereby
possibly depriving holders of the Company's securities of certain  opportunities
to sell or otherwise dispose of such securities at above-market prices.


                                      -28-
<PAGE>

Litigation

     The Company is not currently involved in any litigation.

Arbitrary Determination of Terms of Company's Preferred Stock

     There  can be no  assurance  that  the  public  market  for  the  Company's
Preferred Stock will be sustained.  The terms of the Preferred  Stock,  although
related to the market  price of the Common  Stock on the date of the offering in
June 1996, were arbitrarily  determined by negotiations  between the Company and
the underwriter of that offering and do not necessarily bear any relationship to
the Company's assets,  book values,  revenues or other  established  criteria of
value, and should not be considered  indicative of the actual relative values of
the  Preferred  Stock and the  Common  Stock.  The  1,343,500  preferred  shares
outstanding at December 31, 1996 will convert in accordance with their terms, by
July 24,  1997,  or earlier at the holder's  choice,  into  5,374,000  shares of
common stock.  Such conversion would increase the Common Stock  outstanding from
6,897,963  shares   outstanding  at  December  31,  1996  to  12,271,963  shares
outstanding.

Shares Eligible for Future Sale

     Of the 6,897,963  shares of Common Stock  outstanding at December 31, 1996,
shares of Common Stock are  "restricted  securities"  as that term is defined by
Rule 144 of the  Securities  Act, of which are currently  eligible for resale in
compliance  with Rule 144 of the  Securities  Act. Of these  shares:  52,253 are
owned by current  officers and directors of the Company who have agreed with the
underwriter  of the June 1996 public  offering  not to  directly  or  indirectly
offer, sell, transfer or otherwise encumber or dispose of any of such shares for
a period of thirteen  (13) months after June 24, 1996.  In addition,  holders of
247,500  shares of the  Preferred  Stock and 247,500  Redeemable  Warrants  have
agreed with the underwriter of the June 1996 public offering not to, directly or
indirectly,  offer, sell, transfer or otherwise encumber any of these securities
for thirteen  (13) months  after June 24,  1996.  The Company has also issued an
aggregate of 1,007,180  warrants,  subject to  adjustment,  which shall vest and
become  exercisable  from time to time. Of these  non-public  warrants,  631,801
subject to  adjustment,  are owned by officers and  directors of the Company who
have  agreed  with the  underwriter  of the June 1996  public  offering  not to,
directly or indirectly, offer, sell, transfer or otherwise encumber any of these
securities,  or the  underlying  Common  Stock into which these  securities  are
exercisable,  for thirteen  (13) months  after June 24, 1996.  Rule 144 provides
that, in general, a person holding restricted securities for a period of two (2)
years may, every three (3) months thereafter,  sell in brokerage transactions an
amount of shares  which does not exceed the greater of one  percent  (1%) of the
Company's  then-outstanding Common Stock or the average weekly trading volume of
the Common Stock during the four (4) calendar  weeks  immediately  prior to such
sale.  Rule 144 also permits,  under certain  circumstances,  the sale of shares
without any  quantity  limitations  by a person who is not an  affiliate  of the
Company and was not an  affiliate  at any time during the ninety (90) day period
immediately  prior to such sale,  and who has satisfied a three (3) year holding
period.  Of  the  1,602,421  shares  of  restricted  Common  Stock  outstanding,
including  officers and directors,  approximately  632,490 shares have been held
for more than two (2) years and are currently  eligible for sale under Rule 144.
Sales of the Company's  Common Stock by  shareholders  under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock. See "Shares
Eligible for Future  Sale,"  "Management"  - Management  Employment  Agreements;
Consulting Agreements," "Option Plans," and "Description of Securities".


                                      -29-
<PAGE>

                                   MANAGEMENT

Executive Officers and Directors

     The Directors and Executive  Officers and their ages,  positions  held with
the Company, length of time in such positions,  and term of office are set forth
below:
<TABLE>
<CAPTION>

Name and Age      Current Position           Director Since   Officer Since
------------      ----------------           --------------   -------------
<S>                <C>                       <C>               <C>
M. Lee Hulsebus   Chairman of the Board,     11/11/94         8/31/94
Age 57            Chief Executive Officer,
                  President

Stephen W. Kenney Vice President, Sales                       1/23/95
Age 46            and Marketing

Edward C. Hall    Chief Financial Officer                     3/15/96
Age 55            and Secretary

Richard E. Sloan  Vice President, New                         3/15/96
Age 47            Business Development

Don L. Arnwine    Director                    3/6/95
Age 64

Arthur E. Bradley Director                   9/26/86
Age 63

William A. Clarke Director                   6/27/96
Age 58

Thomas E. Glasgow Director                  11/11/94
Age 43

Scott A. Weisman  Director                    8/1/96
Age 41
</TABLE>

                                      -30-
<PAGE>


Business Background

     M. Lee  Hulsebus.  Mr.  Hulsebus  has been in the health  care field for 29
years.  Until he joined the Company in August,  1994,  he was the  President and
owner of his own health care  consulting  firm.  From 1990 to 1992, Mr. Hulsebus
served as  President  and Chief  Operating  Officer of Sports  Support,  Inc., a
sports medicine company. Briefly in 1993, Mr. Hulsebus served as Chief Executive
Officer of InCoMed  Corporation,  then a small California based medical products
company.  From 1988  until  1990,  he  served as  Medical  Group  President  for
Teleflex,  Inc.  For 22 years  prior to  that,  Mr.  Hulsebus  was  employed  by
Becton-Dickinson  & Co. and C.R. Bard, Inc., both of which are leading companies
in the  health  care  industry.  Mr.  Hulsebus  has  served in the  capacity  of
President/Chief  Executive  Officer for the past 15 years.  

     Edward C. Hall. Mr. Hall has been the Company's  Secretary since April 1996
and its Chief  Financial  Officer since March 15, 1996. Mr. Hall has also been a
financial  consultant  to the Company  since March 1995.  From 1994  through the
present, Mr. Hall was a consultant to high technology companies in the San Diego
area where he acted as an  interim  chief  financial  officer  and has  provided
financial  turnaround  consulting  services to a wide variety of high technology
and other  companies in California  and the Southwest.  His experience  includes
positions and  assignments for medical,  pharmaceutical,  broadband and wireless
communications,  specialty and mail order retailing, and aerospace manufacturing
firms.

     Stephen W. Kenney. Prior to joining the Company, Mr. Kenney served as Chief
Operating  Officer of Cardio Vista, a medical products company  headquartered in
Southern  California.  Prior to  joining  Cardio  Vista in 1993,  he  served  as
Chairman and Chief Executive Officer of AMBIS,  Inc. a research  instrumentation
company based in San Diego,  California, a company he originally joined in 1989.
From 1987 to 1989,  Mr.  Kenney served as Vice  President,  Sales & Marketing of
Division,  Inc., also  headquartered in San Diego.  Prior to that Mr. Kenney had
held various management positions with IVAC Corporation (San Diego) and American
Hospital Supply.

     Richard  E.  Sloan.  Mr.  Sloan has been  Vice  President  of New  Business
Development  since March 1996.  Mr. Sloan was also a  consultant  to the Company
from August 1995 to March 1996. From March, 1995 to July, 1995, Mr. Sloan served
as Chief Financial  Officer of WorldWide  Products,  Inc., a private Los Angeles
based development and marketing firm that distributes pharmaceutical products to
plastic surgeons and dermatologists.  Prior thereto,  from March, 1992 to March,
1995  he  served  as  corporate  marketing  director  and  general  manager  for
Industrial  Products  of UniFET  Incorporated,  a private  company  based in San
Diego,  California involved in the development of sensor-based medical products.
From December,  1989 through March,  1992, Mr. Sloan managed his own mergers and
acquisition business with First Pacific Group,  located in Carlsbad,  California
which provided investment and financial services to privately-held  companies in
southern California.


                                      -31-
<PAGE>
 
     Don L.  Arnwine.  Since 1988,  Mr.  Arnwine has been  President  of Arnwine
Associates  of Irving,  Texas,  a company  he  founded  to  provide  specialized
advisory  services to the health care  industry.  Mr. Arnwine served as Chairman
and Chief  Executive  Officer  from 1985 until 1988 of  Voluntary  Hospitals  of
America  (VHA),  a company he joined in 1982.  Prior to joining VHA, Mr. Arnwine
served as  President  and Chief  Executive  Officer of  Charleston  Area Medical
Center, a 1000-bed  regional facility care center in the State of West Virginia.
Mr. Arnwine holds a B.S. degree in Business Administration from Oklahoma Central
State University and a Masters degree in Hospital  Management from  Northwestern
University.

     Arthur E.  Bradley,  DDS. Dr.  Bradley has been a practicing  dentist since
1961.  Dr.  Bradley  has  been  involved  for his  own  account  in real  estate
investments  for twenty years and has been active in oil and gas investments for
fifteen  years.  Dr.  Bradley  graduated  from the  University of Mississippi at
Hattiesburg and obtained his degree in Dentistry from Loyola  University  Dental
School.

     William A. Clarke.  Since 1967, Mr. Clarke has held various  positions with
Johnson & Johnson, Inc. a public medical products company. Most recently,  since
1995, Mr. Clarke has served as a consultant to Johnson & Johnson,  Inc. Prior to
that time, from 1986 through 1995, Mr. Clarke was president of Johnson & Johnson
Medical, Inc. a subsidiary of Johnson & Johnson,  Inc., with approximately 6,000
employees.
 
     Thomas E. Glasgow.  From April,  1992 to the present,  Mr. Glasgow has been
President and co-owner of Integrated Trade Systems ("ITS"), a Chicago,  Illinois
company.  Mr.  Glasgow  and  another  individual  purchased  ITS from its parent
company in 1992.  ITS is a  logistics  management  company  specializing  in the
development and marketing of import and export document generation systems. From
1989 through 1991, Mr.  Glasgow was a partner with Wharton  Resource Group and a
consultant with ITS.  Wharton Resource Group is a strategic  management  company
specializing  in the  development  of  early  stage  companies.  Prior  to these
activities,  he was a director with Federal Express  Corporation for 11 years in
various senior management capacities.

     Scott A. Weisman.  Mr. Weisman has been Senior Managing Director - Director
of Investment  Bank,  Josephthal  Lyon & Ross  Incorporated  since 1993.  Before
joining Josephthal Lyon & Ross  Incorporated,  he was a partner at Kelley Drye &
Warren  specializing in securities law. He began his career at Parker,  Chapin &
Flattau in 1980.  Mr.  Weisman  has a Juris  Doctor from Albany Law School and a
B.A. degree from Syracuse University.


                                      -32-

<PAGE>

Employment Agreements

     In August,  1994,  the company  entered  into an  exclusive  four year term
employment  with Mr.  M. Lee  Hulsebus.  Under  his  employment  agreement,  Mr.
Hulsebus is to service as the Company's  Chief  Executive  Officer and receive a
base salary of $162,000  per annum.  He is also  entitled to receive one hundred
twenty-five  thousand  (125,000) shares of the Company's Common Stock at the end
of two years of continuous  satisfactory employment by the company. In addition,
Mr.  Hulsebus   received  100,000  common  stock  purchase  warrants  which  are
exercisable  over a five (5) year  period  ending  August 31,  1999 at $2.00 per
share.

     In addition,  in 1994, the Company entered into a severance  agreement with
Mr. Hulsebus. The severance agreement provides,  among other things, that in the
event a change in control of the Company occurs or Mr. Hulsebus is involuntarily
terminated,  suffers a  disability  while  employed by the Company or dies while
employed by the  Company,  then Mr.  Hulsebus  is  entitled  to receive  certain
benefits  from  the  Company.  Such  benefits  may  include  some  or all of the
following:  an amount based on Mr.  Hulsebus' base salary as provided for in Mr.
Hulsebus' employment agreement;  an amount based on the bonus paid or payable to
Mr. Hulsebus as provided for in Mr. Hulsebus' employment agreement; the right to
received Common Stock that shall vest immediately; and the right to exercise any
warrants or stock options held by or granted to Mr. Hulsebus under Mr. Hulsebus'
employment  agreement  or any stock  option plan of the Company or both,  health
insurance and disability  insurance.  Mr. Hulsebus will not receive any benefits
if Mr.  Hulsebus  voluntarily  terminates his employment with the Company or the
Company terminates Mr. Hulsebus "for cause",  which is defined as the conviction
of Mr. Hulsebus after appeal of a felony.

     On August 2, 1996,  the Board of  Directors  extended  the  Employment  and
Severance  Agreement(s)  with Mr. Hulsebus for an additional one (1) year period
or until August 31, 1999.

     In March 1996,  the Company  terminated  the services of its executive vice
president,  B. Roland  Freasier,  Jr. The  Company  entered  into a  termination
agreement  with Mr.  Freasier  which  terminated  his  existing  employment  and
severance agreements,  and also provided for mutual general releases.  Under the
termination agreement, Mr. Freasier is entitled to receive 100,000 shares of the
Company's  Common  Stock on August 31,  1996 and 75,000  common  stock  purchase
warrants,  which  expire on August 31,  1999 and are  exercisable  at a price of
$2.00 per share,  after the  earlier of August 31, 1996 or the  completion  of a
public  offering of the Company's  securities.  The  termination  agreement also
provides for Mr. Freasier to receive 29 monthly payments of $10,000,  commencing
on April 1, 1996 and ending August 31, 1998,  and 37,500  common stock  purchase
warrants which are exercisable, from August 31, 1998 through August 31, 2001, at
a price of $.80 per share.


                                      -33-

<PAGE>

     In  January  1995,  the  Company  entered  into  an  exclusive   three-year
employment  agreement  with Mr. Stephen W. Kenney under which his is to serve as
the Company's Vice President of Marketing and Sales.  Mr. Kenney receives a base
salary of $110,000  per annum.  He is also  entitled to receive  fifty  thousand
(50,000) shares of the Company's Common Stock on August 31, 1996 and is entitled
to receive  warrants to purchase  thirty-seven  thousand  five hundred  (37,500)
shares of the  Company's  Common  Stock at $2.00  per  share.  One-third  of the
warrants were issued in January,  1996, and one-third  (1/3) of the warrants are
to be issued on each of January 4, 1997 and 1998.  The warrants are  exercisable
for a period of five years from the date of issuance.

     In March 1996, the Company entered into an exclusive  employment  agreement
with Mr.  Richard  E. Sloan  under  which he is to serve as the  Company's  Vice
President  of New  Business  Development.  Mr.  Sloan  receives a base salary of
$108,000 per annum. He is also entitled to receive twenty-five thousand (25,000)
shares of the Company's  Common  Stock;  12,500 shares of Common Stock will vest
each on March 15, 1997 and the  remaining  12,500  shares will vest on March 15,
1998.  In  addition,  Mr.  Sloan is  entitled  to receive  warrants  to purchase
thirty-seven thousand five hundred (37,500) shares of the Company's Common Stock
at $.80 per share. One-quarter (1/4) of the warrants are to be issued on each of
March 15, 1997,  1998,  1999 and 2000. The warrants are exercisable for a period
of five years from the date of issuance.

     In  March  1996,  the  Company  entered  into  a  non-exclusive  employment
agreement  with Mr.  Edward C. Hall under which he is to serve as the  Company's
Chief  Financial  Officer.  Mr. Hall receives a base salary of $60,000 per annum
based upon a three day work  week.  In the event that Mr.  Hall's  services  are
required  by the  Company  in excess of three days per week,  Mr.  Hall is to be
compensated  at the same rate as when he was a consultant  to the Company,  $600
per day.  Mr. Hall is also  entitled to receive  twelve  thousand  five  hundred
(12,500) shares of the Company's Common Stock; 6,250 shares of Common Stock will
vest on March 15,  1997 and the  remaining  6,250  shares will best on March 15,
1998.  In  addition,  Mr.  Hall is  entitled  to receive  warrants  to  purchase
twenty-five  thousand  (25,000) shares of the Company's Common Stock at $.80 per
share.  One-quarter  (1/4) of the warrants are to be issued on each of March 15,
1997,  1998,  1999 and 2000. The warrants are  exercisable  for a period of five
years from the date of issuance.

     Under each of their contracts, Messrs. Hulsebus, Kenney, Sloan and Hall may
receive bonuses or other  additional  compensation  consisting of cash, stock or
stock  purchase  rights as may be  determined  from time to time by the Board of
Directors.

     There  are  no  family  relationships  among  any  Directors  or  executive
officers.


                                      -34-

<PAGE>

                      VOTING SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of December 31, 1996,
by each person or entity who is known to the Company to be the beneficial  owner
of more than 5% of the Company's Common Stock, the beneficial  ownership by each
Director and the beneficial ownership of all Directors and Officers as a group:
<TABLE>
<CAPTION>

                                       Amount and Nature of      Percent
Name & Address                        Beneficial Ownership(1)   of Class(1)
--------------                        -----------------------   -----------
 <S>                                     <C>                      <C>
M. Lee Hulsebus                                418,363(2)       3.31%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122
 
Edward C. Hall                                   6,913(4)       *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122

Stephen W. Kenney                              100,500(5)       *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Richard E. Sloan                                7,365(4)        *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122

Don L. Arnwine                                 48,046(6)        *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Arthur E. Bradley, DDS                         56,725           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

William A. Clarke                               1,875           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Thomas E. Glasgow                             220,283(7)        1.78%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Scott A. Weisman                                1,250           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122
</TABLE>
                                             ---------          ------
All officers and directors as a group         861,320            6.65%
(9 persons)


                                      -35-
<PAGE>

     (1) The shares of Common  Stock owned by each  person or by the group,  and
the shares  included in the total number of shares of Common Stock  outstanding,
have been adjusted in accordance  with Rule 13d-3 under the Securities  Exchange
Act of 1934,  as  amended,  to reflect the  ownership  of shares  issuable  upon
conversion of outstanding  6% Cumulative  Convertible  Series A Preferred  Stock
which vote as to their common equivalents (5,374,000 common shares) and exercise
of options,  warrants or other common stock  equivalents  which are  exercisable
within 60 days. As provided in such Rule, such shares issuable to any holder are
deemed  outstanding  for the purpose of  calculating  such  holder's  beneficial
ownership but not any other holder's beneficial ownership.

     (2)  Includes  250,000  warrants  exercisable  at $.80 per share to acquire
250,000  shares of Common Stock and 100,000  warrants  exercisable  at $2.00 per
share to acquire 100,000 shares of Common Stock

     (3) Holding  represent less than 1% of the Company's issued and outstanding
Common Stock.

     (4) Includes 5,000 warrants exercisable at $0.80 per share to acquire 5,000
shares of Common Stock.

     (5)  Includes  70,000  warrants  exercisable  at $0.80 per share to acquire
70,000 shares of Common Stock and 25,000 warrants exercisable at $2.00 per share
to acquire 25,000 shares of Common Stock.

     (6) Includes 3,125 warrants exercisable at $1.20 per share to acquire 3,125
shares of Common  Stock and  9,921  warrants  exercisable  at $1.26 per share to
acquire 9,921 shares of Common Stock.

     (7)  Includes  12,500  warrants  exercisable  at $2.00 per share to acquire
12,500  shares  of  Common  Stock  and  79,380  warrants,  60,0000  of which are
exercisable  at $1.26 per share to  acquire  60,000  shares of Common  Stock and
19,380 of which are  exercisable  at $1.29 per share to acquire 19,380 shares of
Common Stock.

     There are no  arrangements  known to the Company  which may at a subsequent
date result in a change in control of the Company.

                                LEGAL PROCEEDINGS

     There are no legal  proceedings to which the Company is a party which could
have a material adverse effect on the Company.
 
                                 INDEMNIFICATION

     The Company has obtained officers' and directors'  liability insurance that
provides  for a  maximum  of  $2,000,000  of  coverage,  subject  to a  $100,000
corporate reimbursement per occurrence payable by the Company. Any payments made
by the Company under an  indemnification  agreement which are not covered by the
insurance policy may have an adverse impact on the Company's earnings.
 

                                       -36-

<PAGE>

                                     PART II

                           INFORMATION REQUIRED IN THE
                             REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

Registrant incorporates the following documents by reference in this
Registration Statement:

     (a) Registrant's  Annual Report on Form 10-KSB,  as amemded,  filed for the
year ended December 31, 1995,

     (b) The Company's current Report on Form 8-K dated January 15, 1996,

     (c) The Company's current Report on Form 8-K dated January 24, 1996,

     (d)  Registrant's  Quarterly  Report on Form 10-QSB for the  quarter  ended
March 31, 1996,

     (e) Prospectus dated June 24, 1996,
 
     (f) The  Company's  Quarterly  Report on Form 10-QSB for the quarter  ended
June 30, 1996,
 
     (g) The  Company's  Quarterly  Report on Form 10-QSB for the quarter  ended
September 30, 1996,

     (h)  All  other  documents  filed  by  Registrant  after  the  date of this
Registration  Statement  under  Section  13(a),  13(c),  14  and  15(d)  of  the
Securities  Exchange  Act of  1934,  prior  to the  filing  of a  post-effective
amendment  to this  Registration  Statement  which  deregisters  the  securities
covered hereunder which remain unsold.

Item 4. Description of Securities

     The Company is  authorized to issue  750,000  shares of Common  Stock,  par
value $0.15 per share, of which 6,897,963  shares were issued and outstanding as
of December 31, 1996.

     The  Company  is also  authorized  to  issue  up to  10,000,000  shares  of
Preferred Stock, as of December 31, 1996, the Company had outstanding  1,343,500
shares of 6% Cumulative Convertible Series A Preferred Stock. Each share of this
Preferred Stock converts into four shares of Common Stock at $1.25 per share.


<PAGE>

         Common Stock

     Each share of Common Stock is entitled to one vote,  either in person or by
proxy,  on all matters that may be voted upon by the owners thereof at a meeting
of the shareholders,  including the election of directors. The holders of Common
Stock (i) have equal,  ratable rights to dividends from funds legally  available
therefor,  when,  as and if declared by the Board of  Directors  of the Company;
(ii) are entitled to share ratably in all of the assets of the Company available
for  distribution  to holders of Common Stock upon  liquidation,  dissolution or
winding  up of the  affairs  of the  Company;  (iii) do not have  preemptive  or
redemption   provisions  applicable  thereto;  and  (iv)  are  entitled  to  one
noncumulative  vote per share on all matters on which  shareholders  may vote at
all meetings of shareholders.

     All shares of Common Stock issued and  outstanding  are, and those  offered
hereby,  when  issued,  will be fully paid and  nonassessable,  with no personal
liability attaching to the ownership thereof.

         6% Cumulative Convertible Series A Preferred Stock

     On June 24,  1996,  the  Company  completed  a public  offering of 1,500,00
shares of 6% Cumulative Convertible Series A Preferred Stock, par value $.10 per
share (the "Preferred Stock"). The designations,  rights,  powers,  preferences,
qualifications  and  limitations  of which  are set  forth in a  Certificate  of
Amendment (the  "Certificate of Amendment") filed with the Secretary of State of
the State of Utah amending the Company's  Articles of  Incorporation,  a form of
which was filed as an exhibit to the Registration  Statement associated with the
public offering of the Preferred Stock on June 24, 1996. In addition,  concurent
with the offering, 247,500 shares of Preferred Stock were issued one-for-one, to
holders of Series I Preferred  Stock issued in association  with short term debt
of the Company which was repaid with the offering proceeds.  Further,  in August
1996,  the  underwriter  of  the  June  1996  public   offering   exercised  its
overallotment  options  under the  offering to purchase  an  additional  100,000
shares of Preferred Stock.

     The  following  is a summary  of the  terms of the  Preferred  Stock.  This
summary is not intended to be complete  and is subject to, and  qualified in its
entirety by, reference to the Certificate of Amendment.

                                Part II - Page 2

<PAGE>

     Dividends.  The holders of the Preferred  Stock are entitled to receive if,
when and as declared by the Board of Directors  out of funds  legally  available
therefor,  cumulative  dividends,  payable solely in Common Stock the rate of 6%
per annum of the liquidation  value (the  "Liquidation  Value") of the Preferred
Stock. The dividend is payable  semi-annually on June 30 and December 31 of each
year,  although the first  dividend  was paid as of August 31,  1996.  Dividends
shall be paid to the  holders of record as of a date,  not more than thirty (30)
days  prior to the  dividend  payment  date,  as may be  fixed  by the  Board of
Directors (the "Dividend Declaration Date"). Dividends accrue from the first day
of the  semi-annual  period in which such  dividend  may be payable  except with
respect to the first  semi-annual  dividend  which shall accrue from the date of
issuance of the Preferred  Stock.  Each holder of Preferred  Stock shall receive
such  number of shares of Common  Stock  equal to the  quotient of (i) 6% of the
Liquidation  Value of the  Preferred  Stock divided by (ii) the average ten (10)
day moving average  closing bid price of the Common Stock during the thirty (30)
trading days immediately prior to Dividend Declaration Date (the "Stock Dividend
Price");  provided,  however,  that in no event shall the Stock  Dividend  Price
exceed $3.00 per share or be less than $1.20 per share.

     No dividends may be paid on any shares of capital  stock ranking  junior to
the  Preferred  Stock unless and until all declared but unpaid  dividends on the
Preferred Stock have been declared and paid in full.

     Right to Convert.  Each share of  Preferred  Stock is  convertible,  at the
option of the holder,  at any time  commencing on October 22, 1996 (the "Initial
Conversion Date").  Each share of Preferred Stock will convertible into four (4)
shares of Common  Stock  (the  "Conversion  Ratio"),  subject to  adjustment  in
certain  circumstances.  The conversion  price of the Common Stock issuable upon
conversion of the Preferred Stock $1.25 (the "Conversion  Price"),  which is the
quotient of the Liquidation Preference divided by the Conversion Ratio.

     Automatic Conversion.  Unless earlier converted,  all outstanding shares of
Preferred  Stock will be converted  into Common Stock  without any action by the
holders thereof, on July 24, 1997 (the "Automatic Conversion Date"). All accrued
but unpaid Common Stock dividends shall be paid upon the conversion.

     Procedure for Conversion. To convert Preferred Stock into Common Stock, the
holder  thereof  must  surrender  the  certificate  therefor  to the  Company' s
transfer agent with a conversion notice appropriately completed and signed. Such
notice is not required if the conversion is automatic.  The transfer agent will,
as soon as  practicable  thereafter,  issue a  certificate  for the  appropriate
number of shares of Common  Stock.  Conversion  will be deemed to have been made
upon the surrender of the  certificate  for the shares of Preferred  Stock to be
converted.  If the conversion would result in the issuance of a fractional share
of Common Stock, the Company will, in lieu of issuing a fractional share,  round
up to the nearest whole share.

                                Part II - Page 3

<PAGE>

     Adjustment of Conversion  Ratio.  The number of shares of Common Stock into
which the Preferred Stock is convertible is subject to adjustment in addition to
the  adjustments  set  forth  above,  upon the  occurrence  of  certain  events,
including stock dividends, stock splits, combinations or reclassifications on or
of the Common Stock or a merger of the Company with or into another  entity,  or
sale of all or substantially all of the assets of the Company.  The Company will
notify holders of Preferred Stock of such adjustments.

     Voting Rights.  Each holder of shares of Preferred Stock is entitled to the
number of votes  equal to the  number of shares of Common  Stock into which such
holder's  shares of Preferred  Stock could be converted at the time of the vote,
will have voting  rights equal to the voting  rights of such number of shares of
Common  Stock  voting  together  with the Common  Stock as a single class on all
matters submitted to the holders of Common Stock and shall be entitled to notice
of any  shareholders'  meeting.  Any fractional voting rights resulting from the
above formula (after aggregating all shares of Common Stock into which shares of
Preferred Stock held by a single holder are converted) will be disregarded.

     Liquidation  Preference.  The  holders  of  shares of  Preferred  Stock are
entitled to receive, in the event of any liquidation,  dissolution or winding up
of the Company, whether voluntary or involuntary, out of or to the extent of the
net assets of the Company legally  available for such  distribution,  before any
distributions  are made with  respect to any Common  Stock or any stock  ranking
junior to the  Preferred  Stock,  $5.00 per share  plus any  accrued  but unpaid
dividends (the  "Liquidation  Preference" ). After payment of the full amount of
the Liquidation Preference, the holders of shares of Preferred Stock will not be
entitled  to any  further  participation  in any  distribution  of assets by the
Company.

     Upon any such  liquidation,  dissolution  or winding up, such  preferential
amounts with respect to the Preferred Stock and any class or series ranking on a
parity with the  Preferred  Stock if not paid in full shall be  distributed  pro
rata in  accordance  with the  aggregate  preferential  amounts of the Preferred
Stock and such other  classes or series of stock,  if any. So long as any shares
of Preferred Stock are issued and  outstanding,  the Company shall not issue any
securities with rights, preferences or provisions senior to the Preferred Stock.

     Restrictions  and  Limitations.  Shares of Preferred  Stock acquired by the
Company by reason of purchase,  conversion,  redemption  or  otherwise  shall be
retired and shall  become  authorized  but unissued  shares of Preferred  Stock,
which may be reissued as part of a new series of Preferred  Stock  created under
the Company's Articles of Incorporation.

                                Part II - Page 4

<PAGE>

         Other Preferred Stock

     As of the date hereof,  there are no shares of  preferred  stock other than
the Preferred  Stock.  The Company's  Articles of  Incorporation  authorizes the
issuance of "blank check"  preferred stock in one or more classes or series with
such  designations,  rights,  preferences and  restrictions as may be determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
may, without prior  shareholder  approval,  issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
relative  voting power or other rights of the holders of the Preferred  Stock or
the Common Stock. Preferred stock could be used, under certain circumstances, as
a method of  discouraging,  delaying  or  preventing  a change in control of the
Company.  Although the Company has no present intention of issuing any shares of
preferred stock, there can be no assurance that it will not do so in the future.
If the Company issues preferred stock,  such issuance may have a dilutive effect
upon the common  shareholders,  and the  purchasers  of the  securities  offered
hereby.

         Share Purchase Plan

     The Company has adopted a share  purchase  plan,  the  principal  terms and
conditions of which are set forth below.

     The  Rights.  Each  holder  of a share of Common  Stock has the right  (the
"Right")  to purchase  one-fiftieth  (1/50) of share of the  Company's  Series I
Preferred  Stock (which is  unrelated to the Series I Preferred  Stock issued to
the Selling  Shareholders  in the June 24, 1996 public  offering).  The Series I
Preferred  Stock will be a new series of the Company's  Preferred Stock designed
so that each one-fiftieth  (1/50) of a share is substantially  identical (except
as to voting  rights,  due to  restrictions  thereon  contained in the Company's
Articles of Incorporation) to a share of Common Stock.

     Exercise Price. The exercise price of the Rights (the "Exercise  Price") is
$10.00 per share.  The Exercise  Price was  established by the Board based on an
estimate of the reasonable  long-term value of the Common Stock over the life of
the  Rights.  The Rights have  customary  anti-dilution  provisions  whereby the
Exercise Price and the number of shares of Series I Preferred Stock which may be
purchased will be adjusted to reflect share issuances  and/or  reclassifications
by reason of certain  transactions  including  stock  splits,  stock  dividends,
recapitalizations  and  reorganizations  in which  the  Company  may  engage  or
participate.

     How the Rights May be Exercised.  As issued, the Rights are represented by,
and will trade with and only with,  the Common Stock and are not  represented by
separate certificates. However, the Rights will be represented by separate Right
Certificates,  trade  separately  from the  shares  of Common  Stock and  become
exercisable  at the  Exercise  Price  starting  ten (10) days  after:  (i) it is
publicly  announced  that any person(s)  (other than a Continuing  Director,  as
hereinafter  defined below, an Officer of the Company appointed to such position
with the approval of a majority of the Continuing  Directors then in office,  or
any affiliate or associate of the  foregoing)  has, after the Plan is announced,
acquired beneficial ownership of voting stock representing fifteen percent (15%)
or more of the outstanding voting power of the Company (a "15% Shareholder"), or
(ii) any  person(s)  commences  a tender or  exchange  offer for such  number of
shares  of  Common  Stock  that  would  result  in such  person  becoming  a 15%
Shareholder

                                Part II - Page 5

<PAGE>


     "Flip-ln''  Provision.  Under the Plan, if at any time, any person or group
becomes a 15% Shareholder (other than a Continuing  Director,  an Officer of the
Company  appointed  to such  position  with the  approval  of a majority  of the
Continuing  Directors  then in  office  or any  affiliate  or  associate  of the
foregoing),  the Rights will "flip-in" and give the holder  thereof,  other than
any 15% Shareholder and its transferees the right to buy, for $10.00,  shares of
Common Stock with a market value of $20.00 (i.e.,  purchase the Company's Common
Stock at a 50% discount from its market price).  Notwithstanding  the foregoing,
the Rights will not become  immediately  exercisable or "flip-in" under the plan
if the continuing  Directors  determine that the fifteen percent (15%) threshold
has been  inadvertently  crossed  and the 15%  Shareholder  agrees to reduce its
ownership below 15% within 20 business days and remains below that level for one
year.

     The  ''Flip-Over"  Provision.  If,  after the Rights are  exercisable,  any
merger or  consolidation  occurs in which the  Company's  Common  Stock does not
remain outstanding, each Right will be converted into the right to purchase, for
the $10.00  Exercise  Price,  the common stock of the acquiror  company having a
market value of $20.00  (i.e.,  purchase  such stock at a 50% discount  from the
market price).

     Continuing  Directors.  The  Plan  defines  a  Continuing  Director  as the
Directors of the Company who are  Directors on the date  hereof,  and  Directors
appointed or elected upon the recommendation of the Continuing Directors then in
office but not including nominees of a person triggering either of the "flip-in"
or "flip-over" provisions, described above.

     Exchange  of the  Rights.  At any  time  following  the  triggering  of the
"flip-in"  provision,  the  Continuing  Directors may exchange the Rights (other
than those Rights which have become void, as described  above,  for Common Stock
(or  equivalents) at an exchange ratio of one (1) share of Common Stock for each
Right (subject to adjustment).

     Redemption  of the Rights.  The Rights may be  redeemed  by the  Continuing
Directors of the Company $.01 each (payable in cash or  securities)  at any time
before there is a 15% Shareholder who has trigger "flip-in" provision.

     Amendment of the Rights.  The Plan and any Rights issued under the plan can
be amended  by the  Continuing  Directors  prior to the time any person or group
becomes a 15% Shareholder (with the exceptions as set forth above).  Thereafter,
the  Continuing  Directors  can  amend  the  Plan  or the  Rights  to  eliminate
ambiguities  or to  provide  additional  benefits  to the  holders of the Rights
(other than any such holder).

     Term of  Rights.  The  Rights  have a ten (10)  year  term,  unless  sooner
redeemed or terminated.


                                Part II - Page 6

<PAGE>

Item 5.  Interest of Named Experts and Counsel

     None

Item 6.           Indemnification of Officers and Directors

     Registrant's  Articles  of  Incorporation  and Bylaws and the Utah  General
Corporation Law provide for  indemnification  of directors and officers  against
certain  liabilities.  In general,  officers  and  directors of  Registrant  are
indemnified against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted  in  good  faith,  and are not  deemed  to be  liable  to  Registrant  for
negligence or misconduct in the performance of their duties.

Item 7.  Exemption from Registration Claimed

     None. No securities  issued before the effective date of this  Registration
Statement will be reoffered or resold pursuant to this Registration Statement

Item 8.           Exhibits

3.1 Articles of Incorporation of Registrant, as amended.(1)
3.2 Bylaws(1)
3.3 Certificate of Amendment to Articles of Incorporation of Registrant dated
    May 18, l995. (2)
3.4 Certificate of Amendment to Articles of Incorporation of Registrant dated
    December 1, l995.(2)
5.  Opinion of Zukerman Gore & Brandeis, LLP regarding legality of shares being
    issued.
10. 1997 Stock Compensation Plan.
24. Consent of Zukerman Gore & Brandeis, LLP. See Exhibit 5.
___________________________________________________

(1)      Incorporated by reference from Form S-1, File No. 0-012365
(2)      Incorporated by reference from Form 8-K dated January 15, 1996.


Item 9.  Undertakings

         The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post- effective amendment to this Registration Statement:

     (i)  To  include  any  prospectus  required  by  Section  10(a)(3)  of  the
Securities Act of 1933;

     (ii) To reflect in the  prospectus  any facts or events  arising  after the
effective date of the Registration  Statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental change in the information set forth in the Registration Statement;

     (iii) To  include  any  material  information  with  respect to the plan of
distribution  not  previously  disclosed  in the  Registration  Statement or any
material change to such  information in the  Registration  Statement,  including
(but not limited to) any addition or election of a managing underwriter.

     Provided however, that paragraphs (i) and (ii) above shall not apply if the
information  required  to be  included in a  post-effective  amendment  by those
paragraphs  is  contained  in periodic  reports  filed with or  furnished to the
Commission  by  Registration  pursuant  to Section  13 or  Section  15(d) of the
Securities  Exchange  Act of 1934 that are  incorporated  by  reference  in this
Registration Statement.

                                Part II - Page 7

<PAGE>

     (2) That, for the purpose of determining any liability under the Securities
Act of 1933,  each  such  post-effective  amendment  shall be deemed to be a new
Registration  Statement to the securities  offered therein,  and the offering of
such securities offered at that time shall be deemed to be the initial bona fide
offering thereof.

     (3) To remove from registration by means of a post-effective  amendment any
of the securities being registered which remain unsold at the termination of the
offering.

     The  undersigned   Registrant  hereby  undertakes  that,  for  purposes  of
determining  any  liability  under the  Securities  Act of 1933,  each filing of
Registrant's  annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable,  each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration  Statement  relating
to the securities  offered therein,  and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors,  officers and controlling  persons of the
Registrant pursuant to the foregoing  provisions,  or otherwise,  the Registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore,  unenforceable. In the event that a claim for indemnification against
such  liabilities  (other than the payment by the  Registrant in the  successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling  person in connection with the securities being  registered,  the
Registrant  will,  unless in the  opinion of its  counsel  that  matter has been
settled by controlling precedent,  submit to a court of appropriate jurisdiction
the questions  whether such  indemnification  by it is against  public policy as
expressed  in the Act and will be  governed  by the final  adjudication  of such
issue.


                                Part II - Page 8
<PAGE>
 
                        POWER OF ATTORNEY AND SIGNATURES



     Pursuant to the  requirements  of the  Securities  Act of 1933,  Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-8 and has  duly  caused  this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of San Diego, State of California,  on this 10th day of
January, 1997.

                         MEDICAL DEVICE TECHNOLOGIES, INC.


                         By: /s/ M. Lee Hulsebus
                         -----------------------
                         Chief Executive Officer


     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date indicated.  Each of the  undersigned  hereby appoints
M. LEE  HULSEBUS  and  EDWARD  C. HALL  or  either  one  of  them  as is  lawful
attorney-in-fact with full power of substitution,  severally,  to execute in the
name and on behalf of each such person  individually and in each capacity stated
below,  one or more  amendments  (including  post-effective  amendments)  to the
Registration   Statement,   which  amendments  may  make  such  changes  in  the
Registration Statement, as the attorney-in-fact acting deems appropriate, and to
file any such  amendment of the  Registration  Statement with the Securities and
Exchange Commission.


SIGNATURE                TITLE                              DATE


                             
/s/M. Lee Hulsebus       Chief Executive Officer,           January 10, 1997
                         President and Chairman
                               
/s/Edward C. Hall        Chief Financial                    January 10, 1997
                         Officer/Secretary
                                                     
/s/Don L. Arnwine        Director                           January 10, 1997
                                                      
/s/Arthur E. Bradley     Director                           January 10, 1997
                                                        
/s/William A. Clarke     Director                           January 10, 1997
                                                       
/s/Thomas E. Glasgow     Director                           January 10, 1997
                                                         
/s/Scott A. Weisman      Director                           January 10, 1997


<PAGE>

                                  EXHIBIT INDEX

EXHIBIT           DESCRIPTION

5                 Opinion and Consent of Zukerman Gore & Brandeis, LLP

10                1997 Stock Compensation Plan

24                Consent of Zukerman Gore & Brandeis, LLP (See Exhibit 5)
[{"type": "S-8", "sequence": "1", "description": "FORM S-8", "secsgml_size_bytes": 133379}]
{"company-data": {"conformed-name": "MEDICAL DEVICE TECHNOLOGIES INC", "cik": "0000723906", "assigned-sic": "3845", "irs-number": "581475517", "state-of-incorporation": "UT", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-19579", "film-number": "97504353"}, "business-address": {"street1": "9171 TOWNE CENTRE DR STE 430", "city": "SAN DIEGO", "state": "CA", "zip": "92122", "phone": "6194557127"}, "mail-address": {"street1": "9191 TOWNE CENTRE DRIVE SUITE 430", "city": "SAN DIEGO", "state": "CA", "zip": "92122"}, "former-company": [{"former-conformed-name": "CYTOPROBE CORP", "date-changed": "19930929"}, {"former-conformed-name": "HAILEY ENERGY CORP", "date-changed": "19920703"}]}
SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM S-8

                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
 
                        MEDICAL DEVICE TECHNOLOGIES, INC.
               (exact name of registrant specified in its charter)

                                      Utah
                             -----------------------
         (State or other jurisdiction of incorporation or organization)

                                   58-1475517
                             ---------------------
                      (IRS Employer Identification Number)
                               

       9171 Towne Centre Drive - Suite 355 - San Diego, California - 92122
                    (Address of principal executive offices)

                          1997 STOCK COMPENSATION PLAN
                            (Full title of the plan)

                    M. Lee Hulsebus, Chief Executive Officer
                        Medical Device Technologies, Inc.
        9171 Towne Centre Drive - Suite 355 - San Diego, California 92122
                     (Name and address of agent for service)

                                 (619) 455-7127
          (Telephone number, including area code, of agent for service)

                         CALCULATION OF REGISTRATION FEE
------------------------ ------------------ --------------------------- ------------------------- ---------------------
  Title of Securities      Amount to be          Proposed Maximum           Proposed Maximum           Amount of
   to be Registered         Registered            Offering Price        Aggregate Offering Price    Registration Fee
                                                    Per Share
------------------------ ------------------ --------------------------- ------------------------- ---------------------
Common Stock             750,000                 $ 0.66                    $495,000                $150.00

------------------------ ------------------ --------------------------- ------------------------- ---------------------
Notes:

     1. If plan  interests  are being  registered,  include  the  following:  In
addition,  pursuant  to Rule  416(c)  under  the  Securities  Act of 1933,  this
registration  statement also covers an  indeterminate  amount of interests to be
offered or sold pursuant to the employee benefit plan(s) and described herein.

     2. Specific details  relating to the fee calculation  shall be furnished in
notes to the table,  including references to provisions of Rule 457 relied upon,
if the basis of the  calculation is not otherwise  evident from the  information
presented in the table.
PROSPECTUS

     Up to 750,000 Shares of Common Stock Received by Employees and  Consultants
Under the 1997 Stock Compensation Plan by means of this Prospectus.

     This  Prospectus  accompanies  offers by the Company to its  employees  and
consultants  of shares of common  stock,  par value $.15 per share (the  "Common
Stock"),  received  through  the  Company's  1997 Stock  Compensation  Plan,  as
amended, (the "Stock Plan"). The Company's principal offices are located at 9171
Towne  Centre  Drive,  Suite  355,  San  Diego,   California  92122,   telephone
619/455-7127.

     Shareholders   of  Medical  Device   Technologies,   Inc.  (the  "Company")
reoffering  or reselling  their  shares will do so through the  over-the-counter
market or through  NASDAQ,  if the  Company's  common stock is then included for
quotation on NASDAQ.  Selling shareholders,  if control persons, are required to
sell their shares in accordance  with the volume  limitations  of Rule 144 under
the Securities Act of 1933, which restricts sales by each selling shareholder in
any  three-month  period to the  greater of 1% of the total  outstanding  common
stock (or as of the date  hereof,  approximately  68,980  shares) or the average
weekly  trading  volume of the  Company's  common stock during the four calendar
weeks  immediately  preceding such sale. It is expected that brokers and dealers
effecting such  transactions  will be paid the normal and customary  commissions
for market transactions.

     THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED BY THE SECURITIES
AND  EXCHANGE  COMMISSION,  NOR HAS THE  COMMISSION  PASSED ON THE  ACCURACY  OR
ADEQUACY OF THE  PROSPECTUS.  ANY  REPRESENTATION  TO THE CONTRARY IS A CRIMINAL
OFFENSE.

                     INFORMATION WITH RESPECT TO THE COMPANY

     This Prospectus incorporates the following documents and each such document
shall be a part of this Prospectus.

1. The Company's Annual Report on Form 10-KSB as amended for the fiscal year 
ended December 31, 1995.

2. The Company's current Report on Form 8-K dated January 15, 1996.

3. The Company's current Report on Form 8-K dated January 24, 1996.

4. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.

5. The Company's Prospectus dated June 24, 1996.

6. The Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 1996.

7. The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1996.

8. The Company's 1997 Stock Compensation Plan.

9. All other reports filed by the Company pursuant to Sections 13(a),
13(c),  14 or 15(d) of the  Securities  Exchange  Act of 1934 since  
January 10, 1997.

                The date of this Prospectus is January 10, 1997.
TABLE OF CONTENTS OF PROSPECTUS
PAGE
                                                       ----
THE COMPANY                                            3

STOCK PLAN INFORMATION                                 5

BUSINESS OF THE COMPANY                                6
 
RISK FACTORS                                           14
 
MANAGEMENT                                             30
 
VOTING SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT                                  35
 
LEGAL PROCEEDINGS                                      36
 
INDEMNIFICATION                                        36
-2-
Copies of any of the foregoing  documents may be obtained,  without  charge
upon the oral or  written  request  of any  person to the  Company at 9171 Towne
Centre Drive, Suite 355, San Diego,  California 92122,  telephone  619/455-7127,
fax 619/455-7295.

                                   THE COMPANY

     The Company  was  incorporated  on February 6, 1980,  under the laws of the
State of Utah,  initially under the name of Gold Probe,  Inc. In September 1981,
the Company and the Hailey Oil Company, Inc. a Mississippi corporation,  entered
into an Agreement and Plan of Reorganization whereby the Company acquired Hailey
Oil Company, Inc. and exchanged 4,500,000 shares of its Common Stock for all the
issued and outstanding shares of Hailey Oil Company,  Inc. Also, pursuant to the
reorganization,  in January 1982 the Company  changed its name to Hailey  Energy
Corporation,  effected a one(1) for five (5) reverse  split of its Common Stock,
and decreased its authorized  number of shares to  25,000,000.  In October 1986,
the number of authorized shares of the company was increased to 100,000,000.  In
November,  1990, the company effected a one (1) for thirty (30) reverse split of
its Common  Stock and  increased  the par value of its Common Stock to $0.15 per
share.  In November  1992,  the Company  changed  its name from  "Hailey  Energy
Corporation"  to  "Cytoprobe  Corporation."  The  number  of  authorized  shares
(100,000,000)  remained  unchanged.  In January 1994, the Company effected a one
(1) for six  (6)  reverse  split  of its  Common  Stock.  The par  value  of the
company's  Common Stock remained at $0.15 per share and the number of authorized
shares remained unchanged.  In May 1995, the company changed its name to Medical
Device  Technologies,  Inc. to reflect the company's  broadening base of medical
products.  In June 1996 the company effected a one (1) for two (2) reverse split
of its Common  Stock.  The par value of the Company's  Common Stock  remained at
$0.15 per share and the number of authorized shares remained unchanged.

     The Company is subject to the informational  requirements of the Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act") and,  in  accordance
therewith,  files  reports,  proxy  statements  and other  information  with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other  information  filed with the Commission can be inspected and copied at
the  public  reference  facilities  of the  Commission  at 450 Fifth  Street NW,
Washington,  DC 20549.  The  Company's  Common  Stock is traded in the  National
Association  of Securities  Dealers  Automated  Quotation  ("NASDAQ")  under the
symbol "MEDD." The Company's  publicly  traded  preferred  stock,  6% Cumulative
Convertible  Series A Preferred  Stock, par value $.01 per share (the "Preferred
Stock")  and the  Company's  redeemable  common  stock  purchase  warrants  (the
"Redeemable  Warrants")  are traded  under the  symbols,  "MEDDP"  and  "MEDDW",
respectively.

     The Company has filed with the Commission a Registration  Statement on Form
S-8 (the "Registration  Statement") under the Securities Act of 1933, as amended
(the "Act"),  with respect to an  aggregate of 750,000  shares of the  Company's
Common Stock, all of which will be issued to employees and/or consultants of the
Company  pursuant to the Stock  Plan.  This  Prospectus,  which is Part I of the
Registration Statement,  omits certain information contained in the Registration
Statement. For further information with respect to the Company and the shares of
the  Common  Stock  offered  by  this  Prospectus,  reference  is  made  to  the
Registration  Statement,  including  the exhibits  thereof.  Statements  in this
Prospectus as to any document are not  necessarily  complete and, where any such
document  is an exhibit to the  Registration  Statement  or is  incorporated  by
reference  herein,  each such  statement  is  qualified  in all  respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full  statement  of the  provisions  thereof.  A copy of the  Registration
Statement,  with  exhibits,  may be  obtained  from the  Commission's  office in
Washington, DC (at the above address) upon payment of the fees prescribed by the
rules and  regulations of the Commission,  or examined there without charge.  

                                      -3-
No person has been  authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus and, if given
or made, such  information or  representation  must not be relied upon as having
been authorized by the Company.  Neither the delivery of this Prospectus nor any
distribution  of the shares of the common stock  issuable under the terms of the
Plan shall, under any circumstances,  create any implication that there has been
no change in the affairs of the Company since the date hereof.

     The  Company's  principal  offices are located at 9171 Towne Centre  Drive,
Suite 355, San Diego, California 92122, telephone 619/455-7127.

     THIS  PROSPECTUS  DOES NOT  CONSTITUTE  AN OFFER TO SELL  SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.

                                      -4-
STOCK PLAN INFORMATION

     The 1997 Stock  Compensation  Plan was established by the Company effective
on January  10,  1997 to provide the  Company  flexibility  and to conserve  the
Company's   cash   resources   in   compensating   certain  of  its   technical,
administrative  and professional  employees and consultants.  Issuance of shares
under the Stock Plan is restricted to persons and firms who are  closely-related
to the Company and who provide  services  in  connection  with the  development,
production  of the  Company's  products  or  otherwise  in  connection  with its
business. The Stock Plan authorizes the Company to issue up to 750,000 shares of
the Company's  Common  Stock.  Shares must be issued only for bona fide services
and may not be issued under the Stock Plan contingent on services to be rendered
in the  future  or for  services  in  connection  with  the  offer  and  sale of
securities in a capital-raising transaction.  Shares are awarded under the Stock
Plan pursuant to individually  negotiated  compensation  contracts as determined
and/or  approved by the Stock Plan  Committee (the  "Committee").  The Committee
must be comprised of two or more of the Company's Directors appointed thereto by
the Company's  Board of  Directors.  Committee  members need not be  independent
Directors.  Messrs. M. Lee Hulsebus and Thomas E. Glasgow presently serve on the
Committee.  Eligible participants include directors,  employees and non-employee
consultants and advisors. The Company intends to award up to 10,000 shares under
the Stock Plan to each of its six directors to compensate them for their service
on the Company's Board of Directors during 1997. Subject to the restriction that
shares may not be awarded under the Stock Plan to persons owning beneficially or
of record ten percent (10%) or more of the  Company's  then  outstanding  Common
Stock or who would own such  amount of shares as a result of an award  under the
Stock Plan, there is no limit as to the number of shares which may be awarded to
a single participant.  The Company anticipates that a substantial portion of the
Shares to be  issued  under the  Stock  Plan will be issued as  compensation  to
technical  consultants  and advisors to the Company who provide  development and
clinical  services  to the Company in the  development  and testing of the Fluid
Alarm System (FAS),  formerly the Personal Alarm System (PAS), the Cell Recovery
System (CRS), and the  Intracranial  Pressure  Monitoring  System (ICP) devices.
Shares may be  awarded  under the Stock Plan until  January  1999.  The  Company
anticipates  all 750,000 shares under the Stock Plan will be awarded during 1997
and 1998.  No shares  under the 1997 Stock  Compensation  Plan have been  issued
before the date of this Prospectus.

     The Stock Plan does not  require  restrictions  on the  transferability  of
shares issued thereunder.  However, such shares may be restricted as a condition
to  their  issuance  where  the  Board  of  Directors  deems  such  restrictions
appropriate.  The Stock Plan is not subject to the  Employee  Retirement  Income
Securities  Act of 1974  ("ERISA").  Shares  awarded  under the  Stock  Plan are
intended to be fully taxable to the recipient as earned income.

                                      -5-
BUSINESS OF THE COMPANY

     Effective as of January 1, 1994,  the Company has been engaged full time in
identifying, developing and bringing to market medical devices which the Company
believes are innovative,  represent  improvements over existing products, or are
responsive to a presently  unfulfilled  need in the  marketplace.  The Company's
strategy  consists  of: (i)  identifying  patented  technologies  in the medical
device field that it believes  have  potential  commercial  viability  but still
require refinement and regulatory clearance,  (ii) providing the necessary funds
to develop and obtain the  requisite  regulatory  clearance of such  products in
exchange for the acquisition, license for some other right to commercialize such
technologies, and (iii) attempt to commercialize or sublicense such technologies
by entering into agreements with one or more entities for clinical  development,
manufacturing and marketing of such products. Through this strategy, the Company
believes  that it can play a role in bridging  the gap between  viable  patented
technologies and their commercialization. Pursuant to this strategy, the company
has identified and acquired three licenses to develop products,  the Fluid Alarm
System (FAS) formerly the Personal Alarm System (PAS),  the Cell Recovery System
(CRS) and the Intracranial  Pressure  Monitoring  System (ICP), all of which the
company believes have commercial  viability.  The primary focus of the Company's
activities for the  foreseeable  future will be the marketing of the FAS and the
CRS and completing the regulatory and development process relative to the ICP so
that the  Company  can also bring this  product  to  market.  Nevertheless,  the
Company also receives  opportunities from time to time to license other patented
technologies  in the medical device field.  Depending on the specific device and
other circumstances,  such as the Company's then current financial and operating
situation, the company may pro-actively attempt, on a limited basis, to identify
and license additional patented technologies in the medical device field.

                                       -6-
The Company's Products

The Fluid Alarm System

     The Fluid Alarm System is a device that monitors the integrity of infection
control  barriers,  such as  surgical  gloves  and  gowns  worn  during  medical
procedures. The FAS is designed to provide notification of fluid contact between
the health care  professional  and patient and thus decrease the  probability of
transmission of fluid-borne  infectious agents,  such as Human  Immunodeficiency
Virus  ("HIV"),  the virus  that  causes  Acquired  Immune  Deficiency  Syndrome
("AIDS"),  Hepatitis B and C viruses, and Staphylococcus  ("Staph"). The Company
received  FDA  clearance  to market  its Fluid  Alarm  System in  August,  1995,
although it did not commence  production  and  marketing of the product until it
received the necessary funds to do so upon the closing of a private placement of
short term notes in January,  1996.  The  Company  believes  that fluid  contact
between  health care  professionals  and patients  occurs not only when barriers
such as latex surgical  gloves and gowns are breached by tearing or puncture but
also when such barriers are fluid-saturated.  Further, the Company believes that
all  latex  surgical  gloves,  at some  point in time,  become  fluid-saturated,
potentially permitting microorganisms contained in bodily fluids to pass between
the health care professionals and the patients.  See "Risk Factors-No  Assurance
of Market for FAS Device" and "Business of the Company-Potential  Market for the
FAS Device."

     Hospital  regulations  as well  as  good  medical  practice  requires  that
defective  or  compromised  barriers  be replaced  as quickly as  feasible.  The
immediate  awareness of fluid contact between the health care  professional  and
patient is designed to decrease the  probability of  transmission of fluid-borne
infectious  agents.  Defective or  fluid-saturated  gloves represent a potential
danger for both the worker and the patient.  Regulations promulgated by the U.S.
Government's  Occupational Safety and Health  Administration  ("OSHA") require a
user of  sterile  barriers  to be aware of the  status of his or her  protective
barriers at all times during a surgical procedure.  The user of sterile barriers
is  required  to  change  any  portion  of those  barriers  when  they have been
compromised. The Company believes that the FAS provides users with a high degree
of accuracy and reliability in becoming aware of compromised  infection barriers
such as latex surgical gloves.

     Presently health care professionals  rely on visual  observations or "feel"
to determine whether the protective  barriers have been compromised.  While this
approach may be effective  for  punctures or tears,  it is not reliable when the
integrity of  protective  barriers  are  breached  due to  unnoticed  defects or
fluid-saturation.  In the case of surgeons'  latex gloves,  which are frequently
covered with blood and are sweaty inside,  visual  observation and inspection is
difficult and  unreliable.  Thus, the Company  believes that its FAS device will
enable health care professionals to immediately  recognize with a high degree of
accuracy when a protective barrier has been compromised.

     The FAS is designed to be worn  similar to a pager,  and provides two types
of immediate  warnings in order to indicate either  fluid-saturation  or a small
hole  or a  tear  in a  health  care  worker's  glove.  The  FAS  consists  of a
battery-powered  electronic pager-like device that is simultaneously tethered to
the  patient  and the  health  care  professional  that  can  sense  the flow of
extremely  small  electrical  currents  when a fluid contact is made between the
patient and the health  care  professional.  When the FAS senses a current  flow
characteristic  of a tear,  major puncture or fluid  saturation,  the FAS device
generates a  continuous  5-second  vibration.  Alternatively,  when current flow
characteristic of a small puncture or partial fluid saturation is detected,  the
FAS device will vibrate in brief intermittent bursts.

     The  Company  presently  intends  to  sell  the  FAS  for  $500.00  each to
distributors, who in turn may resell or lease the FAS device to end users.

                                       -7-
Potential Market for the FAS Device

     The Company  believes  that the  potential  market for the FAS includes all
hospitals,  physicians'  offices,  dental offices,  emergency  rooms,  and other
medical facilities. Given the limited resources of the Company, initial strategy
will be to focus  on  those  markets  where  the  need for the FAS is  greatest.
Consequently, the Company will initially introduce the FAS to hospital operating
rooms and out-patient  surgical centers.  Further,  the Company believes that it
needs to convince  the  medical  community  of the  unreliability  of  infection
control barriers such as latex surgical  gloves,  particularly in the absence of
obvious breaches of the gloves' integrity before it can effect substantial sales
of the FAS  device.  The  Company  has  conducted  studies  with  respect to the
fluid-saturation of latex surgical gloves and the subsequent  infection that may
occur from the resulting exchange of bodily fluids. In addition,  the Company is
also seeking the  endorsement of or a mandate from either the Center for Disease
Control  in  Atlanta,  Georgia  (the  "CDC") or OSHA that a device  like the FAS
should be used in  connection  with all  surgical and other  medical  procedures
where the possibility exists for fluid contact between health care professionals
and  patients.  There is no assurance  that the Company will be able to convince
the medical  community  of the need for a device like the FAS whether or not the
CDC or OSHA  endorses  or  mandates  such a  device,  of which  there  can be no
assurance,  and thus,  there can be no assurance  that a market will develop for
the FAS device. See "Risk Factors-No Assurance of Market for FAS Device."

License Agreement

The Company obtained the rights to the FAS effective June 1, 1994, pursuant to a
license  agreement  ("PAS License  Agreement")  with Robert Lee Thompson,  d/b/a
Thompson  Medical,  whereby Mr.  Thompson  granted to the Company the  exclusive
worldwide  license to  manufacture,  use, sell or otherwise  dispose of the FAS.
Pursuant to an Addendum to License  Agreement  dated  September  19,  1996,  the
Company  made a one time  payment to Mr.  Thompson of  Eighty-One  Thousand  One
Hundred  Eighty-Seven  dollars and Fifty Cents ($81,187.50) as full and complete
settlement  of all past and future  royalties.  The PAS  License  Agreement  was
extended for an additional  year so that the License  Agreement now expires June
1, 2005.  In May 1995,  the  Company  also  entered  into an  exclusive  license
agreement with Dietmar P. Rabussay,  Ph.D., a consultant to the Company, for the
Signal Modulation Barrier Monitor (the "SMBM"), which is a component part of the
FAS device.  Pursuant to this license  agreement the Company is obligated to pay
royalties  equal to 1% of the average retail sales price on the net sales of all
FAS devices.  The invention disclosure as well as the patent application for the
SMBM have been filed with the Patent and Trademark  Office and the Company filed
a patent application for the SMBM during the fourth quarter of 1996.

                                       -8-
The Cell Recovery System

The Company's Cell Recovery  System is a cell  "brushing"  and retrieval  system
using an automated  brush for the  collection of specimen  cells from an organ's
internal surface for diagnostic purposes,  primarily (but not limited to) cancer
detection. Presently, in order to obtain diagnostically significant tissue cells
from an organ's  internal  surface an excisional  biopsy is necessary,  i.e. the
patient must check into a hospital for a $5,000 - $7,000 procedure that requires
general  anesthesia  and the  endoscopic  surgical  removal  of tissue  from the
patient's  internal  organ.  In  contrast,  the  CRS  device  is a  non-surgical
procedure  that  can  be  performed  on  an  outpatient  basis  without  general
anesthesia, although local anesthesia is required.

     The first  application  for the CRS device is intended to be to the urology
market.  Currently,  the  preliminary  test  for  bladder  cancer  is to  test a
patient's  urine  sample,  which has a very high  incidence of producing  "false
negatives."  As a  consequence,  in most  instances  where there are  persistent
symptoms,  physicians  who receive a negative  result  from a urine  sample when
testing for bladder  cancer will then  conduct a visual,  in-office  examination
using a  cystoscope,  which  is a  catheter-type  instrument.  Even if a  visual
examination  with the  cystoscope  does not reveal  cancer polyps on the bladder
wall,  the  physician  may then require an  excisional  biopsy to test if cancer
cells are present in suspect  areas.  The Company  believes  that its CRS device
provides a reliable  alternative,  and complement to,  today's  standard  biopsy
procedure  and will be the first  automated  brush  system able to  successfully
retrieve  cell  samples.  Although  products  that  utilize  a  manual,  but not
automated, brushing technique for obtaining organ cells are currently available,
the Company  believes that there is no automated  device that  accomplishes  the
same tasks the CRS is  designed  to perform.  Manual  brushing  is awkward  and,
unlike the CRS,  does not include a system by which the cells that are "brushed"
off the wall of the internal organ are simultaneously and selectively retrieved.
As an  alternative  to a  biopsy,  the  CRS  device,  which  can be  used  in an
outpatient  (office)  setting,  is  intended  to save  time,  and also  give the
physician  an option  that does not  include  the  increased  expense of general
anesthesia and an overnight stay in the hospital, thus representing reduced cost
and  risk  to the  patient.  Accordingly,  as the  CRS  automated  brushing  and
retrieval system is  significantly  less expensive than excisional  biopsy.  The
Company also believes that the CRS procedure is reimbursable, although there can
be no  such  assurances.  See  "Risk  Factors-Health  Care  Reform  and  Related
Measures;  Uncertainty of Product Pricing and  Reimbursement." In addition,  the
CRS can  also be used  for the  follow-up  care  that  bladder  cancer  patients
require.

                                       -9-
The Company  received  marketing  clearance from the FDA for the CRS device
for use in the urology market in March,  1996. The Company intends to launch the
CRS in 1997.  Prior to the  market  launch of the CRS,  the  Company  intends to
complete certain clinical trials for a follow-up 510(k) submission to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder cancer,  and at the same time commence  manufacturing
for the system's instrumentation and disposables. There can be no assurance that
the Company  will  receive  510(k)  clearance  from the FDA for such  additional
claims or that the FDA will not  require  the  Company  to  submit a  pre-market
approval  application for such claims which would  substantially delay marketing
clearance. There can also be no assurance that the Company will be successful in
establishing   volume   manufacturing  of  the  system's   instrumentation   and
disposables.

     The Company has not  presently  determined  the price of or manner in which
the CRS device will be marketed and sold.

Potential Market for the CRS Device

     The Company  believes that in order to successfully  market the CRS device,
the Company will have to establish the device's  capabilities  in assisting with
the  detection  of  certain  urological   diseases,   such  as  bladder  cancer,
particularly in comparison to current cell sampling methods.  In order to do so,
the Company has received commitments to begin clinical studies of the CRS from a
leading urologist and a leading pathologist. The Company has also contacted five
other leading  urologists  and companies who each have  expressed an interest in
completing clinical studies of the CRS. Furthermore,  the Company also presently
intends to begin the testing and FDA clearance process for other applications of
the technologies  underlying the CRS device.  No assurance can be given that the
Company will be successful in obtaining FDA clearance or approval for such other
applications.  The Company  believes that the  technologies  underlying  the CRS
device can readily be applied to, and adapted for, other  diagnostic  procedures
with relatively minor modifications. Specifically, the Company believes that the
technologies  underlying  the  CRS  will be  applicable  to a  large  number  of
diagnostic  procedures  amenable  to  endoscopy,   such  as  bronchoscopy  (lung
examination),   laparoscopy   (abdominal  and  pelvic  organ   examination)  and
gastro-intestinal endoscopy.

License Agreement

     The Company entered in August 1992 into an exclusive license agreement,  as
amended,  (the "CRS License Agreement") with Robert Langdon,  Nancy Bush and Max
K. Willscher,  M.D. for the exclusive  worldwide rights to develop,  manufacture
and market the CRS and any other device based upon the  underlying  patent.  The
CRS' License  Agreement is for a term equal to the currently  remaining  life of
the patent relating to the CRS, which is approximately 13 years.

     On August 7, 1996,  the  company  entered  into an  Agreement  with  Robert
Langdon to  purchase  his 50%  ownership  interests  in the CRS for a payment of
Three Hundred Thousand Dollars ($300,000). Furthermore, the Company is obligated
to pay to Ms. Bush and the estate of Dr.  Willscher a royalty equal to 5% of the
average  retail  sales price on all net sales,  subject to $100,000  minimum per
year. In addition,  with respect to calendar years 1994 and 1995, the Company is
obligated  to  pay  $100,000  in  20  equal  quarterly  installments  of  $5,000
commencing  January 1, 1997.  Through  December  31,  1996 the  Company has paid
$600,000 and issued  227,966 shares of Common Stock pursuant to the original CRS
License  Agreement.  The Company can terminate the CRS License Agreement with 90
days written notice, at which time all of the Company's patent rights in the CRS
device will cease.

                                      -10-
The Intracranial Pressure Monitoring System

     The Intracranial Pressure Monitoring System is a device that non-invasively
monitors  pressure  inside  the human  skull.  Increased  intracranial  pressure
generally  results from either fluid  build-up,  or swelling or abnormal  tissue
growth of the brain,  thereby cutting off blood flow to the brain,  resulting in
increased  risk of cell death.  This cell death results in brain damage,  and in
severe cases, can cause patient death. Presently, intracranial pressure can only
be determined  by  surgically  drilling a hole into or removing a section of the
skull and  inserting a catheter  pressure  transducer  to measure the  pressure.
Thereafter,  if a high level of  intracranial  pressure  is found to be present,
then the same surgical drilling procedure is often used in an attempt to relieve
the  pressure.  Due to the  invasive  nature of such a  procedure,  the  current
practice of drilling a hole in or removing a section of the skull is  considered
risky and expensive, and cannot be used for routine monitoring and examinations.
The Company believes that the ICP, when developed,  can be a valuable diagnostic
tool and will  greatly  assist  health  care  professionals  in  assessing  when
surgical drilling is necessary to relieve intracranial pressure.

     The ICP's non-invasive system utilizes a process of imparting a small known
force on the  surface of the skull and sensing  resulting  low  frequency  (0 to
approximately  100 Hz.) wave signals at different  points on the skull  surface.
The characteristics of the resulting wave signals are a function of the pressure
within  the  skull  and  change  when the  intracranial  pressure  increases  or
decreases.  The Company  presently  anticipates that it will  commercialize  two
distinct  versions  of the ICP  device.  The first  generation  ICP device  will
measure  changes in the direction and rate of change in  intracranial  pressure.
The second  generation ICP device,  which will  effectively be an upgrade of the
software  used  in the  first  generation,  will be able  to  assess  ranges  of
intracranial  pressure  levels as well.  The  Company  believes  non-overlapping
markets  exist for each  generation  of the device.  The ICP system makes use of
proprietary   wave   form   analysis    software    originally    developed   by
Scientific-Atlanta,  Inc.,  and now  assigned  to Global  Associates,  Ltd.  The
Company  originally  entered into a teaming  agreement with  Scientific-Atlanta,
Inc., which was  subsequently  assigned to Global  Associates,  Ltd. The teaming
agreement is more fully described below.

                                      -11-
Potential Market for the ICP Device

     The  Company  believes  that the  potential  market  for both the first and
second  generation ICP device is primarily  hospitals that perform  intracranial
procedures.  Management  believes that the initial users of the first generation
ICP will be neurosurgeons in connection with diagnostic  procedures.  Management
believes that the second  generation ICP will be used not only by  neurosurgeons
but also by emergency room  personnel for patients who have suffered  traumas to
the head,  as well as by  physicians  to monitor  and  record  the  intracranial
pressure of individuals as a standard diagnostic procedure, similar to measuring
an  individual's  blood  pressure.  Clinical  testing  with respect to the first
generation  ICP is  currently  ongoing  and is  estimated  to be finished in the
second  quarter  of 1997.  The  Company  presently  intends  to make  its  first
submission  to the FDA in  1997.  It has not  been  established  if the  initial
submission will take the form of a 510(k) or a PMA.  Contemporaneously,  in 1997
the Company  intends to continue  clinical trials as required to gain sufficient
data for the second generation ICP which the Company presently  anticipates will
be concluded by the end of 1997.  The Company  believes that there is no product
or system  presently  on the  market  or under  development  which  has  similar
technological advantages as those of the ICP device.

License Arrangements

     The  Company's  majority-owned  subsidiary,  the ICP  Corporation,  has the
exclusive  right to the ICP.  The ICP  Corporation  entered into an agreement in
January,  1993  with  Medys,  Inc.,  a New  Hampshire  corporation  (the  "Medys
Agreement"),  whereby  the ICP  Corporation  obtained  the right to acquire  the
worldwide, exclusive, nontransferable license to develop, manufacture and market
the ICP  until  the year  2009,  which is when the  patent  relating  to the ICP
expires.  Under  the  terms  of the  Medys  Agreement,  the ICP  Corporation  is
obligated to pay Medys,  Inc.  royalties  equal to 10% of the net sales proceeds
from the ICP with a minimum  payment of $90,000 due for the year ended  December
31, 1996 and $200,000 for all  subsequent  years through the life of the patent.
With respect to the royalties due for the year ended December 31, 1996,  $15,000
was prepaid on December 31, 1995. Further, under the Medys Agreement the Company
is  responsible  for clinical  testing of the ICP and obtaining all required FDA
and other required  regulatory  clearances.  The Company can terminate the Medys
Agreement with 90 days written notice at which time all of the Company's  patent
rights in the ICP device will cease.

     In addition to the Medys  Agreement  that the Company has entered into with
respect to the ICP, the Company  also entered into an agreement  with respect to
the ICP device on November  23,  1992 with  Hampton  Morgan  Holdings,  S.A.,  a
Panamanian company ("Hampton Morgan"),  which was controlled by a shareholder of
the Company  (the  "Hampton  Morgan  Agreement").  The  Company  had  previously
retained the consulting services of Hampton Morgan in June of 1992 in connection
with the CRS device. The Hampton Morgan Agreement provided,  among other things,
for (i) a payment of 83,334 shares of Common Stock to Hampton Morgan as a finder
of the ICP device,  (ii)  royalties to Hampton Morgan equal to 8% of gross sales
of the ICP,  and (iii)  the  issuance  of  1,000,000  shares of Common  Stock to
Hampton  Morgan  upon the Company  achieving  gross  sales of  $10,000,000  with
respect to the ICP. The Company  issued the 83,334 shares to Hampton Morgan as a
finder in 1992,  but the Company,  on the advice of counsel,  believes  that the
balance of the Hampton  Morgan  Agreement  is not  enforceable  because  Hampton
Morgan has failed to make  certain  required  payments to the Company  under the
Hampton Morgan Agreement.  Consequently,  the Company does not intend to pay the
8% royalty or 1,000,000  shares of Common Stock to Hampton Morgan.  In the event
that the Company is incorrect and has to pay some or all of the royalty payments
and/or  shares of Common  Stock to  Hampton  Morgan  under  the  Hampton  Morgan
Agreement,   it  would  have  a  material   adverse   effect  on  the  potential
profitability of the ICP and could have a material adverse effect on the Company
as a whole.

                                      -12-
Global Associates, Ltd. Agreement

     In  February  1993,  the  Company  entered  into a teaming  agreement  (the
"Teaming  Agreement")  with  Scientific-Atlanta,  Inc.("S-A")  who  subsequently
assigned the agreement to Global  Associates,  Ltd.  ("Global") in July 1996, as
the result of the sale of a division  by S-A to  Global,  to provide  equipment,
technical  expertise and experience  directly  related to the computer  software
which  provides the  signal/data  processing  and modal  analysis  techniques in
developing the ICP. Under the Teaming Agreement, the Company is obligated to use
Global exclusively as its supplier for signal/data processing and modal analysis
techniques,  equipment  and  software  for the first twelve (12) months after it
commences  sales of the ICP and thereafter only if Global's prices are as low as
those offered by any other third party.  The Teaming  Agreement is for a term of
the earlier of five years or a date of two years following initial product sale,
unless sooner terminated.

                                      -13-
RISK FACTORS

     Development  Stage  Company;  History  of  Operating  Losses;   Accumulated
Deficit; Uncertainty of Future Profitability

     The Company was  exclusively  engaged in oil and gas activities  until June
1992, when it entered into its first license agreement and commenced its current
operations in the medical device business. The Company subsequently entered into
two additional  licenses for medical  devices and in April of 1994  discontinued
entirely  its  oil  and  gas  operations.  The  Company  commenced  the  limited
manufacture  and marketing of its first medical  device,  the Fluid Alarm System
(FAS),  formerly  called the  Personal  Alarm  System  (PAS),  in January  1996,
although to date, the Company has not yet realized  significant sales of the FAS
device. The Company is currently  developing its other two medical devices,  the
Cell  Recovery  System (CRS) and the  Intracranial  Pressure  Monitoring  System
(ICP).  Consequently,  the Company is still a  development  stage  company  with
respect to the medical device  business.  At September 30, 1996,  partially as a
result  of  its  unsuccessful  oil  and  gas  activities,  the  Company  had  an
accumulated deficit of $16,292,117. The Company expects losses to continue until
such  time as it can bring  its  medical  devices  successfully  to  market  and
generate  sufficient  operating  revenues.  Although  the Company has  commenced
marketing the Fluid Alarm System,  the Company needs to find a marketing partner
for the FAS and to conduct additional development activities with respect to its
other products,  which include clinical  testing and establishing  manufacturing
with respect to the Cell Recovery System,  and substantial  clinical testing and
obtaining  regulatory  clearance  with  respect  to  the  Intracranial  Pressure
Monitoring System.  Although the Company received FDA marketing clearance of the
Company's  second  device,  the CRS, on March 20, 1996,  the Company  intends to
complete  certain  clinical  trials  for a  follow-up  submission  to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder  cancer.  There can be no assurance  that the Company
will receive 510(k)  clearance from the FDA for such  additional  claims or that
the FDA will not require the Company to submit a pre-market approval application
for such claims which would  substantially  delay  marketing  clearance for such
additional  claims.  There also can be no  assurance  that the  Company  will be
successful in establishing  manufacturing  of the system's  instrumentation  and
disposables.   The  Company's  third  device,   the  ICP,  is  still  undergoing
development  with  respect  to the  first  generation  ICP  device;  trials in a
clinical setting, to be followed shortly by multi-site clinicals are expected to
start on this  device  in 1997.  It is  currently  anticipated  that  additional
clinical  trials for the second  generation  ICP will not begin  until  later in
1997.  The  Company's  intent to establish  volume  manufacturing  and undertake
clinical testing with respect to the CRS and the extensive  clinical testing and
regulatory  clearance  still  required  with respect to the ICP,  together  with
projected  general and  administrative  expenses and projected  marketing  costs
related to the FAS and launch of the CRS, are  expected to result in  continuing
losses  until such time as the Company  achieves  significant  sales from one or
more of its products.  The Company's  ability to achieve  profitability  depends
upon its ability to successfully  market the FAS and to develop and successfully
market the CRS and ICP, of which there can be no  assurance.  In  addition,  the
Company  will  continue  to seek to  license  additional  medical  products  for
development and commercialization,  although there can be no assurances that the
Company will be able to identify any additional  products that it deems suitable
for development and commercialization, or that if it does identify such products
that any of them will be successfully developed and commercialized.

                                      -14-
Auditors' Going Concern Report

     The Company's  independent  certified  accountants' report on the Company's
financial   statements  for  the  year  ended  December  31,  1995  includes  an
explanatory  paragraph  that the  Company's  recurring  losses from  operations,
negative  working capital (at that time),  and limited  capital  resources raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

Need for Additional Financing; Possible Issuance of Additional Securities:
Future Dilution

     The Company's cash  requirements are significant.  The Company  completed a
public  offering  of  6%  Cumulative   Convertible   Series  A  Preferred  Stock
("Preferred  Stock") and redeemable common stock purchase warrants  ("Redeemable
Warrants") in June 1996 and had  $3,773,379  in cash at September 30, 1996.  The
Company presently anticipates continued spending on research and development and
for working capital  purposes during 1997. The Company may,  however,  encounter
unexpected  costs  and  working  capital  requirements  in  connection  with the
implementation  of its business plan and as a  consequence,  require  additional
financing  to  continue  to effect its  business  plan.  Based on the  Company's
current  plans,   management   believes  that  the  current  cash  position  and
anticipated  revenues  from the FAS device  will be  sufficient  to sustain  the
Company until the second half of 1997. There can be no assurances, however, that
prior to the  expiration  of such period or  thereafter  that the  Company  will
generate  sufficient  revenues  from  sales of the FAS  device or the CRS device
(which it anticipates to commence  marketing in the first half of 1997), or that
the Company will not  encounter  unexpected  costs such that the Company will be
required to seek additional  financing.  The Company has no current arrangements
with respect to such additional financing and there can be no assurance that any
such additional financing can be obtained on terms acceptable to the Company, or
at all.  Failure by the  Company to obtain  additional  financing  either from a
public or private  offering  of its  securities,  a strategic  joint  venture or
partnership,  or otherwise, would have a material adverse effect on the Company.
Further,  in the event that the Company obtains any additional  financing,  such
financing will most likely have a dilutive  effect on the holders of the Company
securities.

                                      -15-
Uncertainty of Product Development; Corporate Inexperience

     Development of the Company's  medical devices will be subject to all of the
risks associated with new product development generally, including unanticipated
delays, expenses, technical problems, or other difficulties that could result in
abandonment  or  substantial  change in the  proposed  commercialization  of the
Company's  medical  devices.  Given the  uncertainties  inherent  in new product
development  generally,  and  the  Company's  inexperience  in the  business  of
commercializing  medical  devices,  there can be no assurances  that the Company
will be successful in developing its products.  Investors should be aware of the
potential   problems,   delays  and  difficulties   often   encountered  by  any
inexperienced  company. As a consequence,  problems may arise that may be beyond
the experience or control of management and accordingly, the Company's prospects
must be considered in light of the risks,  expenses and difficulties  frequently
encountered  by  development  stage  companies  in  the  establishment  of a new
business in a highly competitive and highly regulated  industry.  The Company in
1996  commenced  the  marketing of one of its  products,  the FAS, and it is not
currently  possible to predict the demand and market  acceptance  for the FAS or
any of the Company's other products. Accordingly, there can be no assurance that
the Company's development and  commercialization  activities will be successful,
that the Company will  receive FDA  clearance  for any of its other  products or
their advances, or that any of the Company's devices will be commercially viable
and  successfully  marketed,  or that the Company will ever achieve  significant
levels of revenue or profits, if any.

                                      -16-
Dependence on Third Party Manufacturing; Limited Marketing Capabilities

     The Company has no current manufacturing capabilities and will not have any
such  capabilities  for the foreseeable  future.  As a consequence,  the Company
relies on third parties to manufacture its products. The Company must be able to
effect the manufacture of its Fluid Alarm System,  and any other devices that it
will seek to  commercialize,  in sufficient  quantities and at acceptable costs.
Further, the Company and third-party  manufacturers will need to comply with FDA
and  other  regulatory   requirements  in  connection  with  its   manufacturing
activities and facilities,  including FDA Good  Manufacturing  Practices ("GMP")
regulations.  In anticipation of higher volume manufacturing  requirements,  the
Company  entered  into an  agreement  with a second  third  party  manufacturer,
effective as of December 15, 1996,  for the  manufacture of the FAS. The Company
believes this manufacturer  satisfies the FDA's GMP regulations,  however, there
can be no  assurance  that  the  manufacturer  will  continue  to  satisfy  such
regulations.  Further,  the Company  presently  anticipates  that it will engage
other third party  manufacturers  in connection  with the manufacture of the CRS
and ICP devices.  There can be no assurance that such other manufacturers can be
identified  on  commercially  acceptable  terms,  or at all,  or that such other
manufacturers,  if  identified,  will be adequate  for the  Company's  long-term
needs,  or that they can meet all relevant  regulatory  requirements.  Moreover,
there can be no  assurance  that the  Company's  manufacture  of  products  on a
limited scale basis means that the Company can effect the successful  transition
to  commercial,   large-scale  production.   Finally,   changes  in  methods  of
manufacture, including commercial scale-up, can, among other things, require the
performance of new clinical studies under certain circumstances.

     The Company  currently has a limited sales and marketing staff and does not
presently  intend to  establish  its own sales  force.  The Company is presently
seeking to engage major corporate  distributors of medical devices to effect the
sale of its FAS device,  although there can be no assurance that it will be able
to do so. As a consequence,  the Company's  current marketing and sales strategy
will substantially rely on unaffiliated third parties to effect the sales of its
products.  There can be no  assurance  that the Company  will be able to rely on
unaffiliated third parties to successfully  effect sales of its products or that
the Company will not have to incur significant  additional  expenditures,  which
may include the employment of sales personnel,  in order to successfully  effect
the sales of its products.

                                      -17-
No Assurance of Market for the FAS Device; Need for Certain Minimum FAS Sales

     Although the Company commenced the marketing of the FAS device in the first
half of 1996, to date the Company has not effected any significant  sales of the
FAS device.  The Company currently  believes that before the FAS will experience
any significant  sales, the Company will have to convince the medical  community
of the  potential  unreliability  of infection  control  barriers  such as latex
surgical gloves,  particularly in the absence of obvious breaches,  punctures or
tears of the gloves and saturation.  In order for the FAS to be successful,  the
Company must  demonstrate  that fluid contact between health care  professionals
and patients occurs as a routine matter as a result of the "fluid-saturation" of
latex surgical gloves even when such gloves have not been punctured or torn.

     The  Company  also needs to  demonstrate,  from tests it has  performed  on
surgical  gloves,  that when  fluid  contact  does  occur  between  health  care
professionals  and  patients  as  a  result  of  fluid-saturated  but  otherwise
non-damaged latex gloves, that pathogens (which are disease producing organisms)
are  transmitted  between the health care  professional  and the  patient,  thus
resulting in a health risk to both parties.  There can be no assurance  that the
Company will be able to convince the medical  community of the need for a device
like the FAS and  consequently,  there can be no  assurance  that a market  will
develop for the FAS device. The failure of the Company to establish a market for
the FAS  device  and effect  significant  sales of the FAS  device  would have a
material adverse effect on the Company.  Further,  in the event that the Company
does not effect certain minimum sales of the FAS device in 1997 the Company will
require  additional  capital in order to sustain  itself for the latter  part of
1997 and the future. See "Risk Factors "Need for Additional Financing;  Possible
Issuance of Securities; Future Dilution"

                                      -18-
No Assurance of Market for the CRS Device

The Company  received  marketing  clearance  for the CRS device with  respect to
urological  procedures  on March 20,  1996.  Nevertheless,  the Company will not
commence  marketing the CRS until the first half of 1997 so that the Company can
complete certain clinical trials for a follow-up 510(k) submission to the FDA to
establish  that the device  assists  with the  detection  of certain  urological
diseases,  such as bladder  cancer.  There can be no assurance  that the Company
will receive 510(k)  clearance from the FDA for such  additional  claims or that
the FDA will not  require the Company to submit a  pre-market  approval  ("PMA")
application for such claims that would substantially delay marketing  clearance.
Although  there can be no assurance  that the Company will be able to do so, the
Company also intends to commence  manufacturing of the system's  instrumentation
and disposables  prior to a scheduled  marketing  launch of the CRS. The Company
currently  believes that before the CRS will  experience any  significant  sales
that the  device's  capabilities  in  assisting  with the  detection  of certain
diseases,  such as bladder  cancer,  particularly  in comparison to current cell
sampling  methods,  will have to be established.  There can be no assurance that
the Company  will be able to  establish  to the medical  community  that the CRS
device is more  effective in assisting  in the  detection of bladder  cancer and
consequently,  there can be no assurance  that a market will develop for the CRS
device relative to the detection of bladder cancer.  Further,  since the Company
has not yet  commenced  adaptation  of the CRS device for any other  procedures,
there can be no assurance  that there will be a market for any other  procedures
for which the Company  may  attempt to adopt the CRS device.  The failure of the
Company to establish a market for the CRS device and effect significant sales of
the CRS device in the urological  field or any other field could have a material
adverse  effect on the Company.  See  "Business  of the Company - The  Company's
Products-the Cell Recovery System - Potential Market for the CRS device."

                                      -19-
No Assurance of Identification, Acquisition or Commercialization of
Additional Technologies

     From time to time, if the Company's resources allow, the Company intends to
explore the acquisition  and subsequent  development  and  commercialization  of
additional  patented  technologies in the medical device field.  There can be no
assurance,  however,  that the Company will be able to identify  any  additional
technologies and, even if suitable technologies are identified,  there can be no
assurance that the Company will have sufficient funds to commercialize  any such
technologies or that any such technologies will ultimately be viable.

Government Regulations

     The Company's  medical device products are subject to extensive  government
regulations in the United States and in other countries.  In order to clinically
test,  produce,  and market its  devices,  the  Company  must  satisfy  numerous
mandatory  procedures,  regulations,  and safety standards established by the US
Food and Drug Administration  (FDA), and comparable state and foreign regulatory
agencies.  Typically, such standards require that the products be cleared by the
government  agency as safe and effective  for their  intended use prior to being
marketed for human  applications.  The  clearance  process is expensive and time
consuming.  Other than with respect to the Company's  Fluid Alarm System and the
Cell Recovery System,  no assurance can be given that clearances will be granted
for any  expanded  claims  for the CRS or for the  sale of the ICP or any  other
future  products,  if any, or that the length of time for clearance  will not be
extensive, or that the cost of attempting to obtain any such clearances will not
be prohibitive.

     The FDA employs a rigorous system of regulations and requirements governing
the clearance processes of medical devices,  requiring,  among other things, the
presentation of substantial evidence,  including clinical studies,  establishing
the safety and efficacy of new medical devices.  The principal  methods by which
FDA  clearance  is  obtained  are a PMA,  which  is for  products  that  are not
comparable  to  any  other  product  in  the  market,  or  filing  a  pre-market
notification  under Section 510(k) of the Federal Food, Drug and Cosmetic Act (a
"510(k)")  which is for products  that are similar to products that have already
received FDA clearance.  Although both methods may require  clinical  testing of
the  products  in  question  under an approved  protocol  because PMA  clearance
relates to more unique  products,  the PMA  procedure  is more  complex and time
consuming.  Applicants  under the 510(k)  procedure must prove that the products
for which  clearance is sought are  substantially  equivalent to products on the
market prior to the Medical  Device  Amendments  of 1976,  or products  approved
thereafter pursuant to the 510(k). The review period for a 510(k) application is
approximately  one  hundred  fifty  (150)  days  from  the  date of  filing  the
application,  although there can be no assurance that the review period will not
extend beyond such a period.

                                      -20-
Under the PMA procedure,  the applicant is required to conduct  substantial
clinical testing to determine the safety,  efficacy and potential hazards of the
product.  The review period under a PMA  application is one hundred eighty (180)
days from the date of filing,  and the application is not  automatically  deemed
cleared if not rejected during that period. The preparation of a PMA application
is  significantly  more complex,  expensive and time  consuming  than the 510(k)
procedure.  Further,  the FDA can  request  additional  information,  which  can
prolong the clearance process.

     In order to  conduct  human  clinical  studies  for any  medical  procedure
proposed for the Company's products the Company could also be required to obtain
an  Investigational  Device  Exemption  ("IDE") from the FDA which would further
increase the time before potential FDA clearance. In order to obtain an IDE, the
Company  would be  required  to submit an  application  to the FDA,  including a
complete  description of the product,  and detailed medical protocols that would
be used to evaluate the product. In the event an application were found to be in
order, an IDE would ordinarily be granted promptly thereafter.

     The Company  may be  required  to use the PMA process for the  Intracranial
Pressure  Monitoring  System or for  expanded  claims for the CRS in order to be
granted FDA clearance.  The clearance process can take from a minimum of six (6)
months  to  several  or more  years,  and  there  can be no  assurance  that FDA
clearance will be granted for the commercial sale of the  Intracranial  Pressure
Monitoring System or expanded claims for the CRS device.

     The FDA also imposes various  requirements on manufacturers  and sellers of
medical  devices  under  its  jurisdiction,  such  as  labeling,   manufacturing
practices,  record-keeping and reporting requirements.  The FDA may also require
post-market  testing and  surveillance  programs to monitor a product's  effect.
There can be no assurance  that the  appropriate  clearance from the FDA will be
obtained,  that the process to obtain  such  clearance  will not be  excessively
expensive or lengthy,  or that the Company will have sufficient  funds to pursue
such  clearances.  Moreover,  failure to  receive  requisite  clearance  for the
Company's  products or processes would prevent the Company from  commercializing
its  products  as  intended,  and would  have a material  adverse  effect on the
business of the Company.

     Even after regulatory clearance is obtained, any such clearance may include
significant  limitations on indicated uses. Further,  regulatory  clearances are
subject to continued review,  and later discovery of previously unknown problems
may result in restrictions with respect to a particular product or manufacturer,
including withdrawal of the product from the market, or sanctions or fines being
imposed on the Company.

     Distribution  of the Company's  products in countries other than the United
States  may be  subject  to  regulation  in  those  countries.  There  can be no
assurance  that the Company  will be able to obtain the  approvals  necessary to
market its medical devices outside of the United States.

                                      -21-
Potential for Increased Royalties with Respect to the ICP Device

     In  addition to the license  agreements  that the Company has entered  into
with respect to the ICP, the Company also entered into an agreement with respect
to the ICP device on November 23, 1992 with  Hampton  Morgan  Holdings,  S.A., a
Panamanian company ("Hampton Morgan"),  which was controlled by a shareholder of
the Company  (the  "Hampton  Morgan  Agreement").  The  Company  had  previously
retained the consulting services of Hampton Morgan in June of 1992 in connection
with the CRS device. The Hampton Morgan Agreement provided,  among other things,
for (i) a payment of 83,334 shares of Common Stock to Hampton Morgan as a finder
of the ICP device,  (ii)  royalties to Hampton Morgan equal to 8% of gross sales
of the ICP,  and (iii)  the  issuance  of  1,000,000  shares of Common  Stock to
Hampton  Morgan  upon the Company  achieving  gross  sales of  $10,000,000  with
respect to the ICP. The Company  issued the 83,334 shares to Hampton Morgan as a
finder in 1992,  but the Company,  on the advice of counsel,  believes  that the
balance of the Hampton  Morgan  Agreement  is not  enforceable  because  Hampton
Morgan has failed to make  certain  required  payments to the Company  under the
Hampton Morgan Agreement.  Consequently,  the Company does not intend to pay the
8% royalty or 1,000,000  shares of Common Stock to Hampton Morgan.  In the event
that the Company is incorrect and has to pay some or all of the royalty payments
and/or  shares of Common  Stock to  Hampton  Morgan  under  the  Hampton  Morgan
Agreement,   it  would  have  a  material   adverse   effect  on  the  potential
profitability of the ICP and could have a material adverse effect on the Company
as a whole. See "Business of the Company - The Intracranial  Pressure Monitoring
System - License Arrangements"

Patents and Intellectual Property Rights

     The Company has entered into exclusive  license  agreements with respect to
each of the patents  underlying the Company's  first three  products:  the Fluid
Alarm System; the Cell Recovery System; and the Intracranial Pressure Monitoring
System. There can be no assurance,  however,  that such patents will provide the
Company with significant protection from competitors. Patent protection relative
to medical  devices is  generally  uncertain,  and  involves  complex  legal and
factual questions. To date, there has emerged no consistent policy regarding the
breadth of claims  allowed in connection  with the patent  protection of medical
devices.  Furthermore,  legislation is being  considered  which,  in the future,
might prevent the patenting or enforcement of a patent covering certain surgical
or medical procedures.  Accordingly,  there can be no assurance that any patents
licensed by the Company will afford protection against  competitors with similar
technologies.  Finally, there can be no assurance that the Company will have the
financial resources necessary to enforce its patent rights.

                                      -22-
Even though the Company has been licensed under patents, under the terms of
the  Company's  license  agreements,  the Company is  responsible  for defending
against  charges  of  infringement  of  third  party  patents  by the  Company's
products.  Challenges  may be  instituted  by third  parties as to the validity,
enforceability  and  infringement  of the  patents.  Further,  the  cost  of the
litigation  to defend any  challenge  to the  Company's  licensed  patents or to
uphold the validity and enforceability and prevent infringement of the Company's
licensed patents could be substantial.

     The Company may be required to obtain  additional  licenses  from others to
continue to refine, develop,  manufacture, and market new products. There can be
no  assurance  that the  Company  will be able to obtain  any such  licenses  on
commercially  reasonable  terms or at all or that the rights granted pursuant to
any licenses will be valid and enforceable.

     Notwithstanding the Company's exclusive license with respect to the patents
underlying  the FAS, CRS and ICP, there can be no assurance that others will not
independently  develop similar  technologies,  or design around the patents.  If
others are able to design  around the patents,  the  Company's  business will be
materially  adversely affected.  Further, the Company will have very limited, if
any,  protection of its proprietary rights in those  jurisdictions  where it has
not effected any patent  filings or where it fails to obtain  patent  protection
despite filing therefor.

     Even though the patents underlying the Company's three medical devices have
been issued by the United States Patent and Trademark Office,  challenges may be
instituted  by  third  parties  as to the  validity  and  enforceability  of the
patents.  The Company is not presently  aware of any  challenges to the patents.
Similarly,  the Company  may also have to  institute  legal  actions in order to
protect  infringement  of the  patents  by  third  parties  The  Company  is not
presently aware of any such infringements. The costs of litigation or settlement
in  connection  with the defense of any third party  challenges  relative to the
validity and enforceability of its patents and/or to prevent any infringement of
the patents by third  parties,  which  pursuant to the license  agreements  with
respect to the patents are the Company's  responsibility,  could be substantial.
Moreover, in the event that the Company was unsuccessful in any such litigation,
the Company could be materially adversely affected.

     In  addition to relying on patent  protection  for its  products,  of which
there is no  assurance,  the Company will also attempt to protect its  products,
processes  and  proprietary  rights  by  relying  on trade  secret  laws and non
disclosure  and  confidentiality  agreements,  as  well as  exclusive  licensing
arrangements  with  persons  who have  access to its  proprietary  materials  or
processes,  or who have  licensing  or research  arrangements  exclusive  to the
Company.  Despite these protections,  no assurance can be given that others will
not  independently  develop or obtain access to such materials or processes,  or
that the Company's  competitive position will not be adversely affected thereby.
To the extent members of the Company's Scientific Advisory Board have consulting
arrangements with, or are employed by, a competitor of the Company, such members
might  encounter  certain  conflicts  of  interest,  and the  Company  could  be
materially  adversely  affected by the disclosure of the Company's  confidential
information by such Scientific Advisors. See "Business of the Company."

                                      -23-
Restatement of Amortization of Patent License Agreements

     Effective  as of the fourth  quarter of the fiscal year ended  December 31,
1995, the Company  changed its method of amortizing its license  agreements from
commencement  of product  shipment to the  estimated  useful life of the license
agreement,  which is ten years. As a consequence,  the combined stated values of
the  Company's  patent  agreements  at December  31, 1993,  1994 and 1995,  were
reduced by 11.9%, 18.6% and 28.2%, respectively, of their combined stated values
prior to the reduction.  Also, as a result of this reduction,  the Company's net
losses for the years ended  December 31, 1993,  1994 and 1995 (as  restated) and
its  cumulative  net loss for the period from June 1, 1992 to December  31, 1995
(as restated) increased by 10.9%, 6.9%, 7.6% and 7.7%, respectively.

     The Company  will  continue to monitor  the markets for its  products,  the
emergence of competitive  products and technologies and associated  events,  and
will adjust the lives of its patent licenses accordingly. As a consequence,  the
Company may deem it necessary or appropriate to make additional  adjustments the
results of which may  include  further  reductions  in the stated  values of the
Company's patent license agreements.

Competition; Product Obsolescence

     The medical device industry is intensely competitive, particularly in terms
of price,  quality and marketing.  Most of the Company's  competitors are better
established  and have  substantially  greater  financial,  marketing  and  other
resources than the Company. Further, most of the Company's competitors have been
in  existence  for a  substantially  longer  period  of time  and may be  better
established  in those  markets  where the Company  intends to sell its  devices.
Although the Company is not presently aware of any competitor that  commercially
manufactures  and  sells  any  medical  devices  with  the  same   technological
advantages as those the Company  presently intends to sell, the Company is aware
that several  technologies similar to the Fluid Alarm System are being developed
and  tested.  Due to the  Company's  relative  lack  of  experience,  financial,
marketing and other resources there can be no assurance that the Company will be
able to market this device successfully,  or develop and market any of its other
medical devices, or compete in the medical device industry in general.

     Moreover,  competitors may develop and successfully  commercialize  medical
devices  that  directly or  indirectly  accomplish  what the  Company's  medical
devices are designed to accomplish in a superior  and/or less expensive  manner.
As a  consequence,  such  competing  medical  devices  may render the  Company's
medical devices  obsolete.  There can be no assurance  that,  either prior to or
after the Company has developed,  commercialized and marketed any of its medical
devices  that such devices  will not be rendered  obsolete by competing  medical
devices.

                                      -24-
Health Care Reform and Related Measures; Uncertainty of Product Pricing and
Reimbursement

     The levels of revenue and  profitability of sales of medical devices may be
affected by the  continuing  efforts of  governmental  and third party payers to
contain  or reduce  the  costs of  health  care  through  various  means and the
initiatives  of  third  party  payers  with  respect  to  the   availability  of
reimbursement. For example, in certain foreign markets, pricing or profitability
of medical devices is subject to government  control. In the United States there
have been,  and the Company  expects that there will continue to be, a number of
federal and state proposals to implement similar governmental control.  Although
the Company cannot predict what  legislative  reforms may be proposed or adopted
or what actions  federal,  state or private  payers for health care products may
take in  response  to any health  care  reform  proposals  or  legislation,  the
existence and pendency of such proposals could have a material adverse effect on
the Company in general.  Whether a medical procedure is subject to reimbursement
from third party  payers  impacts  upon the  likelihood  that a medical  product
associated  with such a procedure  will be  purchased.  Third  party  payers are
increasingly  challenging  the prices charged for medical  products.  Two of the
Company's three products, the CRS and the ICP involve a medical procedure. There
can be no assurance that any of the Company's  products,  or the procedures that
accompany the CRS and ICP, will be reimbursable. To the extent any or all of the
Company's medical products,  and any accompanying  medical  procedures,  are not
reimbursable by third party payers the Company's ability to sell its products on
a  competitive  basis will be  adversely  affected,  which could have a material
adverse effect on the Company.

Dependence On Key Personnel

     The  Company's  success  will depend to a large  extent upon its ability to
retain Mr. M. Lee  Hulsebus,  its Chief  Executive  Officer and  Chairman of the
Board.  In  August  1994,  the  Company  entered  into an  exclusive  employment
agreement  with Mr.  Hulsebus  and  subsequently  obtained  a term "key man life
insurance  policy" in the amount of $1,000,000  with respect to Mr.  Hulsebus of
which the Company is the sole beneficiary in the event of his death. The loss or
unavailability  of the services of Mr.  Hulsebus  would have a material  adverse
effect on the business and operations of the Company. See "Management Employment
Agreements."

                                      -25-
Need for Additional Personnel

     In the  event  that  the  Company  receives  FDA  clearances  for  expanded
diagnostic  claims  with  respect to the Cell  Recovery  System or  Intracranial
Pressure  Monitoring  System, or there is significant  commercial demand for the
Fluid Alarm System or Cell Recovery System as currently  cleared by the FDA, the
Company  will need to hire  additional  administrative  and sales and  marketing
personnel.  These demands are expected to require the addition of new management
personnel and the  development  of additional  expertise by existing  management
personnel.  There can be no assurance  that the Company will be able to hire and
retain the  additional  personnel  that it will require.  Failure to do so could
have a material adverse effect on the Company.

Continued NASDAQ SmallCap Listing

     The  Company' s Common  Stock is  presently  listed on the NASDAQ  SmallCap
Market.  The National  Association  of Securities  Dealers  Automated  Quotation
System has established  certain  standards for the initial listing and continued
listing of a security on the NASDAQ SmallCap  Market and is currently  reviewing
additional  and  more  stringent  listing  maintenance  standards.  The  current
maintenance  standards  require,  among other things,  that an issuer have total
assets of at least  $2,000,000,  capital and surplus of at least  $1,000,000,  a
minimum  bid price for the listed  securities  of $1.00 per share,  and that the
minimum  market  value  of the  "public  float"  be at least  $1,000,000.  It is
anticipated  that upon  consummation of this offering the Company's Common Stock
will  continue  to be listed on the NASDAQ  SmallCap  Market.  As of January 6,,
1997, the closing bid price of the Company's Common Stock was $0.75.  Therefore,
there can be no assurance  that the Company will continue to satisfy the minimum
price  per  share  or other  current  or  proposed  standards  required  for the
continued  NASDAQ  SmallCap Market listing of its Common Stock. If the Company's
Common Stock were excluded from the NASDAQ SmallCap  Market it would  materially
adversely  affect the price and  liquidity of the Common  Stock,  as well as the
Company's  Preferred  Stock and the Redeemable  Warrants.  In the event that the
Company  is  unable  to  satisfy  the  NASDAQ  SmallCap   Market's   maintenance
requirements,  it  is  anticipated  that  trading  would  be  conducted  in  the
over-the-counter  market National Quotations Bureau ("NQB") "pink sheets" or the
OTC's Electronic  Bulletin Board. As a consequence,  trading with respect to the
Company's  Common Stock would be subject to the  so-called  "penny stock" rules.
Unless an exception is  available,  the penny stock rules  require,  among other
things, delivery to a prospective purchaser,  prior to any transaction involving
a penny stock, of a disclosure schedule explaining the penny stock rules and the
risks  associated  therewith.  If the Company's  Common Stock was subject to the
regulations on penny stocks,  the market liquidity for the Common Stock would be
severely  affected  limiting  the ability of  broker/dealers  to sell the Common
Stock in the public  market.  There is no  assurance  trading  in the  Company's
securities will not be subject to these or new or other  regulations  that would
materially adversely affect the market for such securities.

                                      -26-
Volatility of the Company's Common Stock Price

     The market price of the Company's Common Stock has experienced  significant
volatility.  Various factors and events,  including announcements by the Company
or  its  competitors  concerning  patents,   proprietary  rights,  technological
innovations  or new  commercial  products,  as well as public  concern about the
safety of  medical  devices in  general,  may have a  significant  impact on the
Company's business and the price of the Company's Common Stock.

No Dividends With Respect to Common Stock

     The  Company  has not paid any cash  dividends  with  respect to its Common
Stock,  and it is unlikely  that  Company  will pay any  dividends on its Common
Stock in the  foreseeable  future.  The Company is required pay a 6% cumulative,
semi-annual  dividend  with respect to its  Preferred  Stock in shares of Common
Stock.  Earnings,  if any,  that the Company may realize will be retained in the
business for further development and expansion.

Product Liability and Insurance

     The Company's business could, in the future, expose it to product liability
claims for  personal  injury or death.  Such risks are  inherent in the testing,
manufacturing  and marketing of its products and services.  Although the Company
has product liability  insurance,  there can be no assurance that such insurance
will provide adequate coverage against potential  liabilities or that it will be
able to maintain or, if need be, increase such coverage.

Potential Adverse Effect of Redemption of Redeemable Warrants

     The  exercise  of the  Company's  Redeemable  Warrants  and the sale of the
underlying  shares of Common Stock (or even the  potential  of such  exercise or
sale)  may  have a  depressive  effect  on the  market  price  of the  Company's
securities. The exercise of such warrants also may have a dilutive effect on the
interest  of  investors  in Common  Stock.  Moreover,  the terms  upon which the
Company  will be able to  obtain  additional  equity  capital  may be  adversely
affected  because the  holders of the  outstanding  warrants  can be expected to
exercise them, to the extent they are able to, at a time when the Company would,
in all likelihood,  be able to obtain any needed capital on terms more favorable
to the Company than those provided in the warrants. As a result of the Company's
Redeemable Warrants being outstanding,  the Company may be deprived of favorable
opportunities to obtain additional equity capital,  if it should then be needed,
for its business.  It is also possible that, as long as the Redeemable  Warrants
(initially  exercisable at $3.75 per redeemable  warrant) and the  underwriter's
warrants remain outstanding,  their existence might limit increases in the price
of the Common Stock.

                                      -27-
Anti-Takeover Provisions; Poison Pill Issuance of Other Preferred Stock;
Utah Anti-Takeover Provisions

     The Company's  Articles of Incorporation,  as amended,  and By-Laws contain
provisions  that may make the  acquisition of control of the Company by means of
tender offer,  over-the-counter  market  purchases,  a proxy fight or otherwise,
more difficult.  This could prevent security holders from realizing a premium on
their  securities of the Company.  The Company also adopted a staggered Board of
Directors at its most recent annual meeting of shareholders,  which is a further
impediment to a change in control.  The Company has adopted a so-called  "poison
pill."  Specifically,  the poison pill  significantly  increases  the cost to an
unwanted  party to acquire  control of the company upon the  acquisition by such
unwanted suitor of 15% of the outstanding voting power of the Company.

     In  addition,  the  Board of  Directors  may  issue  one or more  series of
preferred stock other than the Company's recently-issued Preferred Stock without
any action on the part of the shareholders of the Company,  the existence and/or
terms of which may  adversely  affect the rights of holders of the Common Stock.
In addition,  the issuance of any such additional preferred stock may be used as
an  "anti-takeover"  device without further action on part of the  shareholders.
Issuance of additional  preferred  stock,  which may be  accomplished  through a
public  offering  or  a  private  placement  to  parties  favorable  to  current
management,  may  dilute  the  voting  power  holders  of  Common  Stock and the
Company's  recently-issued  preferred stock (such as by issuing  preferred stock
with super voting  rights and may render more  difficult  the removal of current
management, even if such removal may be in the shareholders' best interests. See
Part II, Item 4 - "Description of Securities - Other Preferred Stock" and "Share
Purchase Plan".

     The Company is subject to the provisions of Sections 61-6-1 through 61-6-12
of the Utah Control Share  Acquisition Act, an anti-takeover  statute.  Sections
61-6-1 through 61-6-12  effectively  provide that in the event a person acquires
ownership or the power to effect, directly or indirectly, the exercise of 20% or
more of the voting power of a Utah  corporation in connection  with the election
of  directors,  then such  person  shall only be  entitled to vote to the extent
expressly  agreed  to  by  the  majority  of  the  other   shareholders  of  the
corporation.  Accordingly, potential acquirers of the Company may be discouraged
from attempting to effect acquisitions the Company's voting securities,  thereby
possibly depriving holders of the Company's securities of certain  opportunities
to sell or otherwise dispose of such securities at above-market prices.

                                      -28-
Litigation

     The Company is not currently involved in any litigation.

Arbitrary Determination of Terms of Company's Preferred Stock

     There  can be no  assurance  that  the  public  market  for  the  Company's
Preferred Stock will be sustained.  The terms of the Preferred  Stock,  although
related to the market  price of the Common  Stock on the date of the offering in
June 1996, were arbitrarily  determined by negotiations  between the Company and
the underwriter of that offering and do not necessarily bear any relationship to
the Company's assets,  book values,  revenues or other  established  criteria of
value, and should not be considered  indicative of the actual relative values of
the  Preferred  Stock and the  Common  Stock.  The  1,343,500  preferred  shares
outstanding at December 31, 1996 will convert in accordance with their terms, by
July 24,  1997,  or earlier at the holder's  choice,  into  5,374,000  shares of
common stock.  Such conversion would increase the Common Stock  outstanding from
6,897,963  shares   outstanding  at  December  31,  1996  to  12,271,963  shares
outstanding.

Shares Eligible for Future Sale

     Of the 6,897,963  shares of Common Stock  outstanding at December 31, 1996,
shares of Common Stock are  "restricted  securities"  as that term is defined by
Rule 144 of the  Securities  Act, of which are currently  eligible for resale in
compliance  with Rule 144 of the  Securities  Act. Of these  shares:  52,253 are
owned by current  officers and directors of the Company who have agreed with the
underwriter  of the June 1996 public  offering  not to  directly  or  indirectly
offer, sell, transfer or otherwise encumber or dispose of any of such shares for
a period of thirteen  (13) months after June 24, 1996.  In addition,  holders of
247,500  shares of the  Preferred  Stock and 247,500  Redeemable  Warrants  have
agreed with the underwriter of the June 1996 public offering not to, directly or
indirectly,  offer, sell, transfer or otherwise encumber any of these securities
for thirteen  (13) months  after June 24,  1996.  The Company has also issued an
aggregate of 1,007,180  warrants,  subject to  adjustment,  which shall vest and
become  exercisable  from time to time. Of these  non-public  warrants,  631,801
subject to  adjustment,  are owned by officers and  directors of the Company who
have  agreed  with the  underwriter  of the June 1996  public  offering  not to,
directly or indirectly, offer, sell, transfer or otherwise encumber any of these
securities,  or the  underlying  Common  Stock into which these  securities  are
exercisable,  for thirteen  (13) months  after June 24, 1996.  Rule 144 provides
that, in general, a person holding restricted securities for a period of two (2)
years may, every three (3) months thereafter,  sell in brokerage transactions an
amount of shares  which does not exceed the greater of one  percent  (1%) of the
Company's  then-outstanding Common Stock or the average weekly trading volume of
the Common Stock during the four (4) calendar  weeks  immediately  prior to such
sale.  Rule 144 also permits,  under certain  circumstances,  the sale of shares
without any  quantity  limitations  by a person who is not an  affiliate  of the
Company and was not an  affiliate  at any time during the ninety (90) day period
immediately  prior to such sale,  and who has satisfied a three (3) year holding
period.  Of  the  1,602,421  shares  of  restricted  Common  Stock  outstanding,
including  officers and directors,  approximately  632,490 shares have been held
for more than two (2) years and are currently  eligible for sale under Rule 144.
Sales of the Company's  Common Stock by  shareholders  under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock. See "Shares
Eligible for Future  Sale,"  "Management"  - Management  Employment  Agreements;
Consulting Agreements," "Option Plans," and "Description of Securities".

                                      -29-
MANAGEMENT

Executive Officers and Directors

     The Directors and Executive  Officers and their ages,  positions  held with
the Company, length of time in such positions,  and term of office are set forth
below:
Name and Age      Current Position           Director Since   Officer Since
------------      ----------------           --------------   -------------
M. Lee Hulsebus   Chairman of the Board,     11/11/94         8/31/94
Age 57            Chief Executive Officer,
                  President

Stephen W. Kenney Vice President, Sales                       1/23/95
Age 46            and Marketing

Edward C. Hall    Chief Financial Officer                     3/15/96
Age 55            and Secretary

Richard E. Sloan  Vice President, New                         3/15/96
Age 47            Business Development

Don L. Arnwine    Director                    3/6/95
Age 64

Arthur E. Bradley Director                   9/26/86
Age 63

William A. Clarke Director                   6/27/96
Age 58

Thomas E. Glasgow Director                  11/11/94
Age 43

Scott A. Weisman  Director                    8/1/96
Age 41
-30-
Business Background

     M. Lee  Hulsebus.  Mr.  Hulsebus  has been in the health  care field for 29
years.  Until he joined the Company in August,  1994,  he was the  President and
owner of his own health care  consulting  firm.  From 1990 to 1992, Mr. Hulsebus
served as  President  and Chief  Operating  Officer of Sports  Support,  Inc., a
sports medicine company. Briefly in 1993, Mr. Hulsebus served as Chief Executive
Officer of InCoMed  Corporation,  then a small California based medical products
company.  From 1988  until  1990,  he  served as  Medical  Group  President  for
Teleflex,  Inc.  For 22 years  prior to  that,  Mr.  Hulsebus  was  employed  by
Becton-Dickinson  & Co. and C.R. Bard, Inc., both of which are leading companies
in the  health  care  industry.  Mr.  Hulsebus  has  served in the  capacity  of
President/Chief  Executive  Officer for the past 15 years.  

     Edward C. Hall. Mr. Hall has been the Company's  Secretary since April 1996
and its Chief  Financial  Officer since March 15, 1996. Mr. Hall has also been a
financial  consultant  to the Company  since March 1995.  From 1994  through the
present, Mr. Hall was a consultant to high technology companies in the San Diego
area where he acted as an  interim  chief  financial  officer  and has  provided
financial  turnaround  consulting  services to a wide variety of high technology
and other  companies in California  and the Southwest.  His experience  includes
positions and  assignments for medical,  pharmaceutical,  broadband and wireless
communications,  specialty and mail order retailing, and aerospace manufacturing
firms.

     Stephen W. Kenney. Prior to joining the Company, Mr. Kenney served as Chief
Operating  Officer of Cardio Vista, a medical products company  headquartered in
Southern  California.  Prior to  joining  Cardio  Vista in 1993,  he  served  as
Chairman and Chief Executive Officer of AMBIS,  Inc. a research  instrumentation
company based in San Diego,  California, a company he originally joined in 1989.
From 1987 to 1989,  Mr.  Kenney served as Vice  President,  Sales & Marketing of
Division,  Inc., also  headquartered in San Diego.  Prior to that Mr. Kenney had
held various management positions with IVAC Corporation (San Diego) and American
Hospital Supply.

     Richard  E.  Sloan.  Mr.  Sloan has been  Vice  President  of New  Business
Development  since March 1996.  Mr. Sloan was also a  consultant  to the Company
from August 1995 to March 1996. From March, 1995 to July, 1995, Mr. Sloan served
as Chief Financial  Officer of WorldWide  Products,  Inc., a private Los Angeles
based development and marketing firm that distributes pharmaceutical products to
plastic surgeons and dermatologists.  Prior thereto,  from March, 1992 to March,
1995  he  served  as  corporate  marketing  director  and  general  manager  for
Industrial  Products  of UniFET  Incorporated,  a private  company  based in San
Diego,  California involved in the development of sensor-based medical products.
From December,  1989 through March,  1992, Mr. Sloan managed his own mergers and
acquisition business with First Pacific Group,  located in Carlsbad,  California
which provided investment and financial services to privately-held  companies in
southern California.

                                      -31-
Don L.  Arnwine.  Since 1988,  Mr.  Arnwine has been  President  of Arnwine
Associates  of Irving,  Texas,  a company  he  founded  to  provide  specialized
advisory  services to the health care  industry.  Mr. Arnwine served as Chairman
and Chief  Executive  Officer  from 1985 until 1988 of  Voluntary  Hospitals  of
America  (VHA),  a company he joined in 1982.  Prior to joining VHA, Mr. Arnwine
served as  President  and Chief  Executive  Officer of  Charleston  Area Medical
Center, a 1000-bed  regional facility care center in the State of West Virginia.
Mr. Arnwine holds a B.S. degree in Business Administration from Oklahoma Central
State University and a Masters degree in Hospital  Management from  Northwestern
University.

     Arthur E.  Bradley,  DDS. Dr.  Bradley has been a practicing  dentist since
1961.  Dr.  Bradley  has  been  involved  for his  own  account  in real  estate
investments  for twenty years and has been active in oil and gas investments for
fifteen  years.  Dr.  Bradley  graduated  from the  University of Mississippi at
Hattiesburg and obtained his degree in Dentistry from Loyola  University  Dental
School.

     William A. Clarke.  Since 1967, Mr. Clarke has held various  positions with
Johnson & Johnson, Inc. a public medical products company. Most recently,  since
1995, Mr. Clarke has served as a consultant to Johnson & Johnson,  Inc. Prior to
that time, from 1986 through 1995, Mr. Clarke was president of Johnson & Johnson
Medical, Inc. a subsidiary of Johnson & Johnson,  Inc., with approximately 6,000
employees.
 
     Thomas E. Glasgow.  From April,  1992 to the present,  Mr. Glasgow has been
President and co-owner of Integrated Trade Systems ("ITS"), a Chicago,  Illinois
company.  Mr.  Glasgow  and  another  individual  purchased  ITS from its parent
company in 1992.  ITS is a  logistics  management  company  specializing  in the
development and marketing of import and export document generation systems. From
1989 through 1991, Mr.  Glasgow was a partner with Wharton  Resource Group and a
consultant with ITS.  Wharton Resource Group is a strategic  management  company
specializing  in the  development  of  early  stage  companies.  Prior  to these
activities,  he was a director with Federal Express  Corporation for 11 years in
various senior management capacities.

     Scott A. Weisman.  Mr. Weisman has been Senior Managing Director - Director
of Investment  Bank,  Josephthal  Lyon & Ross  Incorporated  since 1993.  Before
joining Josephthal Lyon & Ross  Incorporated,  he was a partner at Kelley Drye &
Warren  specializing in securities law. He began his career at Parker,  Chapin &
Flattau in 1980.  Mr.  Weisman  has a Juris  Doctor from Albany Law School and a
B.A. degree from Syracuse University.

                                      -32-
Employment Agreements

     In August,  1994,  the company  entered  into an  exclusive  four year term
employment  with Mr.  M. Lee  Hulsebus.  Under  his  employment  agreement,  Mr.
Hulsebus is to service as the Company's  Chief  Executive  Officer and receive a
base salary of $162,000  per annum.  He is also  entitled to receive one hundred
twenty-five  thousand  (125,000) shares of the Company's Common Stock at the end
of two years of continuous  satisfactory employment by the company. In addition,
Mr.  Hulsebus   received  100,000  common  stock  purchase  warrants  which  are
exercisable  over a five (5) year  period  ending  August 31,  1999 at $2.00 per
share.

     In addition,  in 1994, the Company entered into a severance  agreement with
Mr. Hulsebus. The severance agreement provides,  among other things, that in the
event a change in control of the Company occurs or Mr. Hulsebus is involuntarily
terminated,  suffers a  disability  while  employed by the Company or dies while
employed by the  Company,  then Mr.  Hulsebus  is  entitled  to receive  certain
benefits  from  the  Company.  Such  benefits  may  include  some  or all of the
following:  an amount based on Mr.  Hulsebus' base salary as provided for in Mr.
Hulsebus' employment agreement;  an amount based on the bonus paid or payable to
Mr. Hulsebus as provided for in Mr. Hulsebus' employment agreement; the right to
received Common Stock that shall vest immediately; and the right to exercise any
warrants or stock options held by or granted to Mr. Hulsebus under Mr. Hulsebus'
employment  agreement  or any stock  option plan of the Company or both,  health
insurance and disability  insurance.  Mr. Hulsebus will not receive any benefits
if Mr.  Hulsebus  voluntarily  terminates his employment with the Company or the
Company terminates Mr. Hulsebus "for cause",  which is defined as the conviction
of Mr. Hulsebus after appeal of a felony.

     On August 2, 1996,  the Board of  Directors  extended  the  Employment  and
Severance  Agreement(s)  with Mr. Hulsebus for an additional one (1) year period
or until August 31, 1999.

     In March 1996,  the Company  terminated  the services of its executive vice
president,  B. Roland  Freasier,  Jr. The  Company  entered  into a  termination
agreement  with Mr.  Freasier  which  terminated  his  existing  employment  and
severance agreements,  and also provided for mutual general releases.  Under the
termination agreement, Mr. Freasier is entitled to receive 100,000 shares of the
Company's  Common  Stock on August 31,  1996 and 75,000  common  stock  purchase
warrants,  which  expire on August 31,  1999 and are  exercisable  at a price of
$2.00 per share,  after the  earlier of August 31, 1996 or the  completion  of a
public  offering of the Company's  securities.  The  termination  agreement also
provides for Mr. Freasier to receive 29 monthly payments of $10,000,  commencing
on April 1, 1996 and ending August 31, 1998,  and 37,500  common stock  purchase
warrants which are exercisable, from August 31, 1998 through August 31, 2001, at
a price of $.80 per share.

                                      -33-
In  January  1995,  the  Company  entered  into  an  exclusive   three-year
employment  agreement  with Mr. Stephen W. Kenney under which his is to serve as
the Company's Vice President of Marketing and Sales.  Mr. Kenney receives a base
salary of $110,000  per annum.  He is also  entitled to receive  fifty  thousand
(50,000) shares of the Company's Common Stock on August 31, 1996 and is entitled
to receive  warrants to purchase  thirty-seven  thousand  five hundred  (37,500)
shares of the  Company's  Common  Stock at $2.00  per  share.  One-third  of the
warrants were issued in January,  1996, and one-third  (1/3) of the warrants are
to be issued on each of January 4, 1997 and 1998.  The warrants are  exercisable
for a period of five years from the date of issuance.

     In March 1996, the Company entered into an exclusive  employment  agreement
with Mr.  Richard  E. Sloan  under  which he is to serve as the  Company's  Vice
President  of New  Business  Development.  Mr.  Sloan  receives a base salary of
$108,000 per annum. He is also entitled to receive twenty-five thousand (25,000)
shares of the Company's  Common  Stock;  12,500 shares of Common Stock will vest
each on March 15, 1997 and the  remaining  12,500  shares will vest on March 15,
1998.  In  addition,  Mr.  Sloan is  entitled  to receive  warrants  to purchase
thirty-seven thousand five hundred (37,500) shares of the Company's Common Stock
at $.80 per share. One-quarter (1/4) of the warrants are to be issued on each of
March 15, 1997,  1998,  1999 and 2000. The warrants are exercisable for a period
of five years from the date of issuance.

     In  March  1996,  the  Company  entered  into  a  non-exclusive  employment
agreement  with Mr.  Edward C. Hall under which he is to serve as the  Company's
Chief  Financial  Officer.  Mr. Hall receives a base salary of $60,000 per annum
based upon a three day work  week.  In the event that Mr.  Hall's  services  are
required  by the  Company  in excess of three days per week,  Mr.  Hall is to be
compensated  at the same rate as when he was a consultant  to the Company,  $600
per day.  Mr. Hall is also  entitled to receive  twelve  thousand  five  hundred
(12,500) shares of the Company's Common Stock; 6,250 shares of Common Stock will
vest on March 15,  1997 and the  remaining  6,250  shares will best on March 15,
1998.  In  addition,  Mr.  Hall is  entitled  to receive  warrants  to  purchase
twenty-five  thousand  (25,000) shares of the Company's Common Stock at $.80 per
share.  One-quarter  (1/4) of the warrants are to be issued on each of March 15,
1997,  1998,  1999 and 2000. The warrants are  exercisable  for a period of five
years from the date of issuance.

     Under each of their contracts, Messrs. Hulsebus, Kenney, Sloan and Hall may
receive bonuses or other  additional  compensation  consisting of cash, stock or
stock  purchase  rights as may be  determined  from time to time by the Board of
Directors.

     There  are  no  family  relationships  among  any  Directors  or  executive
officers.

                                      -34-
VOTING SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of December 31, 1996,
by each person or entity who is known to the Company to be the beneficial  owner
of more than 5% of the Company's Common Stock, the beneficial  ownership by each
Director and the beneficial ownership of all Directors and Officers as a group:
Amount and Nature of      Percent
Name & Address                        Beneficial Ownership(1)   of Class(1)
--------------                        -----------------------   -----------
M. Lee Hulsebus                                418,363(2)       3.31%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122
 
Edward C. Hall                                   6,913(4)       *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122

Stephen W. Kenney                              100,500(5)       *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Richard E. Sloan                                7,365(4)        *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre, Suite 355
San Diego, CA 92122

Don L. Arnwine                                 48,046(6)        *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Arthur E. Bradley, DDS                         56,725           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

William A. Clarke                               1,875           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Thomas E. Glasgow                             220,283(7)        1.78%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122

Scott A. Weisman                                1,250           *(3)%
c/o Medical Device Technologies, Inc.
9171 Towne Centre Drive, Suite 355
San Diego, CA 92122
---------          ------
All officers and directors as a group         861,320            6.65%
(9 persons)

                                      -35-
(1) The shares of Common  Stock owned by each  person or by the group,  and
the shares  included in the total number of shares of Common Stock  outstanding,
have been adjusted in accordance  with Rule 13d-3 under the Securities  Exchange
Act of 1934,  as  amended,  to reflect the  ownership  of shares  issuable  upon
conversion of outstanding  6% Cumulative  Convertible  Series A Preferred  Stock
which vote as to their common equivalents (5,374,000 common shares) and exercise
of options,  warrants or other common stock  equivalents  which are  exercisable
within 60 days. As provided in such Rule, such shares issuable to any holder are
deemed  outstanding  for the purpose of  calculating  such  holder's  beneficial
ownership but not any other holder's beneficial ownership.

     (2)  Includes  250,000  warrants  exercisable  at $.80 per share to acquire
250,000  shares of Common Stock and 100,000  warrants  exercisable  at $2.00 per
share to acquire 100,000 shares of Common Stock

     (3) Holding  represent less than 1% of the Company's issued and outstanding
Common Stock.

     (4) Includes 5,000 warrants exercisable at $0.80 per share to acquire 5,000
shares of Common Stock.

     (5)  Includes  70,000  warrants  exercisable  at $0.80 per share to acquire
70,000 shares of Common Stock and 25,000 warrants exercisable at $2.00 per share
to acquire 25,000 shares of Common Stock.

     (6) Includes 3,125 warrants exercisable at $1.20 per share to acquire 3,125
shares of Common  Stock and  9,921  warrants  exercisable  at $1.26 per share to
acquire 9,921 shares of Common Stock.

     (7)  Includes  12,500  warrants  exercisable  at $2.00 per share to acquire
12,500  shares  of  Common  Stock  and  79,380  warrants,  60,0000  of which are
exercisable  at $1.26 per share to  acquire  60,000  shares of Common  Stock and
19,380 of which are  exercisable  at $1.29 per share to acquire 19,380 shares of
Common Stock.

     There are no  arrangements  known to the Company  which may at a subsequent
date result in a change in control of the Company.

                                LEGAL PROCEEDINGS

     There are no legal  proceedings to which the Company is a party which could
have a material adverse effect on the Company.
 
                                 INDEMNIFICATION

     The Company has obtained officers' and directors'  liability insurance that
provides  for a  maximum  of  $2,000,000  of  coverage,  subject  to a  $100,000
corporate reimbursement per occurrence payable by the Company. Any payments made
by the Company under an  indemnification  agreement which are not covered by the
insurance policy may have an adverse impact on the Company's earnings.
 

                                       -36-
PART II

                           INFORMATION REQUIRED IN THE
                             REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

Registrant incorporates the following documents by reference in this
Registration Statement:

     (a) Registrant's  Annual Report on Form 10-KSB,  as amemded,  filed for the
year ended December 31, 1995,

     (b) The Company's current Report on Form 8-K dated January 15, 1996,

     (c) The Company's current Report on Form 8-K dated January 24, 1996,

     (d)  Registrant's  Quarterly  Report on Form 10-QSB for the  quarter  ended
March 31, 1996,

     (e) Prospectus dated June 24, 1996,
 
     (f) The  Company's  Quarterly  Report on Form 10-QSB for the quarter  ended
June 30, 1996,
 
     (g) The  Company's  Quarterly  Report on Form 10-QSB for the quarter  ended
September 30, 1996,

     (h)  All  other  documents  filed  by  Registrant  after  the  date of this
Registration  Statement  under  Section  13(a),  13(c),  14  and  15(d)  of  the
Securities  Exchange  Act of  1934,  prior  to the  filing  of a  post-effective
amendment  to this  Registration  Statement  which  deregisters  the  securities
covered hereunder which remain unsold.

Item 4. Description of Securities

     The Company is  authorized to issue  750,000  shares of Common  Stock,  par
value $0.15 per share, of which 6,897,963  shares were issued and outstanding as
of December 31, 1996.

     The  Company  is also  authorized  to  issue  up to  10,000,000  shares  of
Preferred Stock, as of December 31, 1996, the Company had outstanding  1,343,500
shares of 6% Cumulative Convertible Series A Preferred Stock. Each share of this
Preferred Stock converts into four shares of Common Stock at $1.25 per share.
Common Stock

     Each share of Common Stock is entitled to one vote,  either in person or by
proxy,  on all matters that may be voted upon by the owners thereof at a meeting
of the shareholders,  including the election of directors. The holders of Common
Stock (i) have equal,  ratable rights to dividends from funds legally  available
therefor,  when,  as and if declared by the Board of  Directors  of the Company;
(ii) are entitled to share ratably in all of the assets of the Company available
for  distribution  to holders of Common Stock upon  liquidation,  dissolution or
winding  up of the  affairs  of the  Company;  (iii) do not have  preemptive  or
redemption   provisions  applicable  thereto;  and  (iv)  are  entitled  to  one
noncumulative  vote per share on all matters on which  shareholders  may vote at
all meetings of shareholders.

     All shares of Common Stock issued and  outstanding  are, and those  offered
hereby,  when  issued,  will be fully paid and  nonassessable,  with no personal
liability attaching to the ownership thereof.

         6% Cumulative Convertible Series A Preferred Stock

     On June 24,  1996,  the  Company  completed  a public  offering of 1,500,00
shares of 6% Cumulative Convertible Series A Preferred Stock, par value $.10 per
share (the "Preferred Stock"). The designations,  rights,  powers,  preferences,
qualifications  and  limitations  of which  are set  forth in a  Certificate  of
Amendment (the  "Certificate of Amendment") filed with the Secretary of State of
the State of Utah amending the Company's  Articles of  Incorporation,  a form of
which was filed as an exhibit to the Registration  Statement associated with the
public offering of the Preferred Stock on June 24, 1996. In addition,  concurent
with the offering, 247,500 shares of Preferred Stock were issued one-for-one, to
holders of Series I Preferred  Stock issued in association  with short term debt
of the Company which was repaid with the offering proceeds.  Further,  in August
1996,  the  underwriter  of  the  June  1996  public   offering   exercised  its
overallotment  options  under the  offering to purchase  an  additional  100,000
shares of Preferred Stock.

     The  following  is a summary  of the  terms of the  Preferred  Stock.  This
summary is not intended to be complete  and is subject to, and  qualified in its
entirety by, reference to the Certificate of Amendment.

                                Part II - Page 2
Dividends.  The holders of the Preferred  Stock are entitled to receive if,
when and as declared by the Board of Directors  out of funds  legally  available
therefor,  cumulative  dividends,  payable solely in Common Stock the rate of 6%
per annum of the liquidation  value (the  "Liquidation  Value") of the Preferred
Stock. The dividend is payable  semi-annually on June 30 and December 31 of each
year,  although the first  dividend  was paid as of August 31,  1996.  Dividends
shall be paid to the  holders of record as of a date,  not more than thirty (30)
days  prior to the  dividend  payment  date,  as may be  fixed  by the  Board of
Directors (the "Dividend Declaration Date"). Dividends accrue from the first day
of the  semi-annual  period in which such  dividend  may be payable  except with
respect to the first  semi-annual  dividend  which shall accrue from the date of
issuance of the Preferred  Stock.  Each holder of Preferred  Stock shall receive
such  number of shares of Common  Stock  equal to the  quotient of (i) 6% of the
Liquidation  Value of the  Preferred  Stock divided by (ii) the average ten (10)
day moving average  closing bid price of the Common Stock during the thirty (30)
trading days immediately prior to Dividend Declaration Date (the "Stock Dividend
Price");  provided,  however,  that in no event shall the Stock  Dividend  Price
exceed $3.00 per share or be less than $1.20 per share.

     No dividends may be paid on any shares of capital  stock ranking  junior to
the  Preferred  Stock unless and until all declared but unpaid  dividends on the
Preferred Stock have been declared and paid in full.

     Right to Convert.  Each share of  Preferred  Stock is  convertible,  at the
option of the holder,  at any time  commencing on October 22, 1996 (the "Initial
Conversion Date").  Each share of Preferred Stock will convertible into four (4)
shares of Common  Stock  (the  "Conversion  Ratio"),  subject to  adjustment  in
certain  circumstances.  The conversion  price of the Common Stock issuable upon
conversion of the Preferred Stock $1.25 (the "Conversion  Price"),  which is the
quotient of the Liquidation Preference divided by the Conversion Ratio.

     Automatic Conversion.  Unless earlier converted,  all outstanding shares of
Preferred  Stock will be converted  into Common Stock  without any action by the
holders thereof, on July 24, 1997 (the "Automatic Conversion Date"). All accrued
but unpaid Common Stock dividends shall be paid upon the conversion.

     Procedure for Conversion. To convert Preferred Stock into Common Stock, the
holder  thereof  must  surrender  the  certificate  therefor  to the  Company' s
transfer agent with a conversion notice appropriately completed and signed. Such
notice is not required if the conversion is automatic.  The transfer agent will,
as soon as  practicable  thereafter,  issue a  certificate  for the  appropriate
number of shares of Common  Stock.  Conversion  will be deemed to have been made
upon the surrender of the  certificate  for the shares of Preferred  Stock to be
converted.  If the conversion would result in the issuance of a fractional share
of Common Stock, the Company will, in lieu of issuing a fractional share,  round
up to the nearest whole share.

                                Part II - Page 3
Adjustment of Conversion  Ratio.  The number of shares of Common Stock into
which the Preferred Stock is convertible is subject to adjustment in addition to
the  adjustments  set  forth  above,  upon the  occurrence  of  certain  events,
including stock dividends, stock splits, combinations or reclassifications on or
of the Common Stock or a merger of the Company with or into another  entity,  or
sale of all or substantially all of the assets of the Company.  The Company will
notify holders of Preferred Stock of such adjustments.

     Voting Rights.  Each holder of shares of Preferred Stock is entitled to the
number of votes  equal to the  number of shares of Common  Stock into which such
holder's  shares of Preferred  Stock could be converted at the time of the vote,
will have voting  rights equal to the voting  rights of such number of shares of
Common  Stock  voting  together  with the Common  Stock as a single class on all
matters submitted to the holders of Common Stock and shall be entitled to notice
of any  shareholders'  meeting.  Any fractional voting rights resulting from the
above formula (after aggregating all shares of Common Stock into which shares of
Preferred Stock held by a single holder are converted) will be disregarded.

     Liquidation  Preference.  The  holders  of  shares of  Preferred  Stock are
entitled to receive, in the event of any liquidation,  dissolution or winding up
of the Company, whether voluntary or involuntary, out of or to the extent of the
net assets of the Company legally  available for such  distribution,  before any
distributions  are made with  respect to any Common  Stock or any stock  ranking
junior to the  Preferred  Stock,  $5.00 per share  plus any  accrued  but unpaid
dividends (the  "Liquidation  Preference" ). After payment of the full amount of
the Liquidation Preference, the holders of shares of Preferred Stock will not be
entitled  to any  further  participation  in any  distribution  of assets by the
Company.

     Upon any such  liquidation,  dissolution  or winding up, such  preferential
amounts with respect to the Preferred Stock and any class or series ranking on a
parity with the  Preferred  Stock if not paid in full shall be  distributed  pro
rata in  accordance  with the  aggregate  preferential  amounts of the Preferred
Stock and such other  classes or series of stock,  if any. So long as any shares
of Preferred Stock are issued and  outstanding,  the Company shall not issue any
securities with rights, preferences or provisions senior to the Preferred Stock.

     Restrictions  and  Limitations.  Shares of Preferred  Stock acquired by the
Company by reason of purchase,  conversion,  redemption  or  otherwise  shall be
retired and shall  become  authorized  but unissued  shares of Preferred  Stock,
which may be reissued as part of a new series of Preferred  Stock  created under
the Company's Articles of Incorporation.

                                Part II - Page 4
Other Preferred Stock

     As of the date hereof,  there are no shares of  preferred  stock other than
the Preferred  Stock.  The Company's  Articles of  Incorporation  authorizes the
issuance of "blank check"  preferred stock in one or more classes or series with
such  designations,  rights,  preferences and  restrictions as may be determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
may, without prior  shareholder  approval,  issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
relative  voting power or other rights of the holders of the Preferred  Stock or
the Common Stock. Preferred stock could be used, under certain circumstances, as
a method of  discouraging,  delaying  or  preventing  a change in control of the
Company.  Although the Company has no present intention of issuing any shares of
preferred stock, there can be no assurance that it will not do so in the future.
If the Company issues preferred stock,  such issuance may have a dilutive effect
upon the common  shareholders,  and the  purchasers  of the  securities  offered
hereby.

         Share Purchase Plan

     The Company has adopted a share  purchase  plan,  the  principal  terms and
conditions of which are set forth below.

     The  Rights.  Each  holder  of a share of Common  Stock has the right  (the
"Right")  to purchase  one-fiftieth  (1/50) of share of the  Company's  Series I
Preferred  Stock (which is  unrelated to the Series I Preferred  Stock issued to
the Selling  Shareholders  in the June 24, 1996 public  offering).  The Series I
Preferred  Stock will be a new series of the Company's  Preferred Stock designed
so that each one-fiftieth  (1/50) of a share is substantially  identical (except
as to voting  rights,  due to  restrictions  thereon  contained in the Company's
Articles of Incorporation) to a share of Common Stock.

     Exercise Price. The exercise price of the Rights (the "Exercise  Price") is
$10.00 per share.  The Exercise  Price was  established by the Board based on an
estimate of the reasonable  long-term value of the Common Stock over the life of
the  Rights.  The Rights have  customary  anti-dilution  provisions  whereby the
Exercise Price and the number of shares of Series I Preferred Stock which may be
purchased will be adjusted to reflect share issuances  and/or  reclassifications
by reason of certain  transactions  including  stock  splits,  stock  dividends,
recapitalizations  and  reorganizations  in which  the  Company  may  engage  or
participate.

     How the Rights May be Exercised.  As issued, the Rights are represented by,
and will trade with and only with,  the Common Stock and are not  represented by
separate certificates. However, the Rights will be represented by separate Right
Certificates,  trade  separately  from the  shares  of Common  Stock and  become
exercisable  at the  Exercise  Price  starting  ten (10) days  after:  (i) it is
publicly  announced  that any person(s)  (other than a Continuing  Director,  as
hereinafter  defined below, an Officer of the Company appointed to such position
with the approval of a majority of the Continuing  Directors then in office,  or
any affiliate or associate of the  foregoing)  has, after the Plan is announced,
acquired beneficial ownership of voting stock representing fifteen percent (15%)
or more of the outstanding voting power of the Company (a "15% Shareholder"), or
(ii) any  person(s)  commences  a tender or  exchange  offer for such  number of
shares  of  Common  Stock  that  would  result  in such  person  becoming  a 15%
Shareholder

                                Part II - Page 5
"Flip-ln''  Provision.  Under the Plan, if at any time, any person or group
becomes a 15% Shareholder (other than a Continuing  Director,  an Officer of the
Company  appointed  to such  position  with the  approval  of a majority  of the
Continuing  Directors  then in  office  or any  affiliate  or  associate  of the
foregoing),  the Rights will "flip-in" and give the holder  thereof,  other than
any 15% Shareholder and its transferees the right to buy, for $10.00,  shares of
Common Stock with a market value of $20.00 (i.e.,  purchase the Company's Common
Stock at a 50% discount from its market price).  Notwithstanding  the foregoing,
the Rights will not become  immediately  exercisable or "flip-in" under the plan
if the continuing  Directors  determine that the fifteen percent (15%) threshold
has been  inadvertently  crossed  and the 15%  Shareholder  agrees to reduce its
ownership below 15% within 20 business days and remains below that level for one
year.

     The  ''Flip-Over"  Provision.  If,  after the Rights are  exercisable,  any
merger or  consolidation  occurs in which the  Company's  Common  Stock does not
remain outstanding, each Right will be converted into the right to purchase, for
the $10.00  Exercise  Price,  the common stock of the acquiror  company having a
market value of $20.00  (i.e.,  purchase  such stock at a 50% discount  from the
market price).

     Continuing  Directors.  The  Plan  defines  a  Continuing  Director  as the
Directors of the Company who are  Directors on the date  hereof,  and  Directors
appointed or elected upon the recommendation of the Continuing Directors then in
office but not including nominees of a person triggering either of the "flip-in"
or "flip-over" provisions, described above.

     Exchange  of the  Rights.  At any  time  following  the  triggering  of the
"flip-in"  provision,  the  Continuing  Directors may exchange the Rights (other
than those Rights which have become void, as described  above,  for Common Stock
(or  equivalents) at an exchange ratio of one (1) share of Common Stock for each
Right (subject to adjustment).

     Redemption  of the Rights.  The Rights may be  redeemed  by the  Continuing
Directors of the Company $.01 each (payable in cash or  securities)  at any time
before there is a 15% Shareholder who has trigger "flip-in" provision.

     Amendment of the Rights.  The Plan and any Rights issued under the plan can
be amended  by the  Continuing  Directors  prior to the time any person or group
becomes a 15% Shareholder (with the exceptions as set forth above).  Thereafter,
the  Continuing  Directors  can  amend  the  Plan  or the  Rights  to  eliminate
ambiguities  or to  provide  additional  benefits  to the  holders of the Rights
(other than any such holder).

     Term of  Rights.  The  Rights  have a ten (10)  year  term,  unless  sooner
redeemed or terminated.

                                Part II - Page 6
Item 5.  Interest of Named Experts and Counsel

     None

Item 6.           Indemnification of Officers and Directors

     Registrant's  Articles  of  Incorporation  and Bylaws and the Utah  General
Corporation Law provide for  indemnification  of directors and officers  against
certain  liabilities.  In general,  officers  and  directors of  Registrant  are
indemnified against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted  in  good  faith,  and are not  deemed  to be  liable  to  Registrant  for
negligence or misconduct in the performance of their duties.

Item 7.  Exemption from Registration Claimed

     None. No securities  issued before the effective date of this  Registration
Statement will be reoffered or resold pursuant to this Registration Statement

Item 8.           Exhibits

3.1 Articles of Incorporation of Registrant, as amended.(1)
3.2 Bylaws(1)
3.3 Certificate of Amendment to Articles of Incorporation of Registrant dated
    May 18, l995. (2)
3.4 Certificate of Amendment to Articles of Incorporation of Registrant dated
    December 1, l995.(2)
5.  Opinion of Zukerman Gore & Brandeis, LLP regarding legality of shares being
    issued.
10. 1997 Stock Compensation Plan.
24. Consent of Zukerman Gore & Brandeis, LLP. See Exhibit 5.
___________________________________________________

(1)      Incorporated by reference from Form S-1, File No. 0-012365
(2)      Incorporated by reference from Form 8-K dated January 15, 1996.

Item 9.  Undertakings

         The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post- effective amendment to this Registration Statement:

     (i)  To  include  any  prospectus  required  by  Section  10(a)(3)  of  the
Securities Act of 1933;

     (ii) To reflect in the  prospectus  any facts or events  arising  after the
effective date of the Registration  Statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental change in the information set forth in the Registration Statement;

     (iii) To  include  any  material  information  with  respect to the plan of
distribution  not  previously  disclosed  in the  Registration  Statement or any
material change to such  information in the  Registration  Statement,  including
(but not limited to) any addition or election of a managing underwriter.

     Provided however, that paragraphs (i) and (ii) above shall not apply if the
information  required  to be  included in a  post-effective  amendment  by those
paragraphs  is  contained  in periodic  reports  filed with or  furnished to the
Commission  by  Registration  pursuant  to Section  13 or  Section  15(d) of the
Securities  Exchange  Act of 1934 that are  incorporated  by  reference  in this
Registration Statement.

                                Part II - Page 7
(2) That, for the purpose of determining any liability under the Securities
Act of 1933,  each  such  post-effective  amendment  shall be deemed to be a new
Registration  Statement to the securities  offered therein,  and the offering of
such securities offered at that time shall be deemed to be the initial bona fide
offering thereof.

     (3) To remove from registration by means of a post-effective  amendment any
of the securities being registered which remain unsold at the termination of the
offering.

     The  undersigned   Registrant  hereby  undertakes  that,  for  purposes  of
determining  any  liability  under the  Securities  Act of 1933,  each filing of
Registrant's  annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable,  each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration  Statement  relating
to the securities  offered therein,  and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors,  officers and controlling  persons of the
Registrant pursuant to the foregoing  provisions,  or otherwise,  the Registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore,  unenforceable. In the event that a claim for indemnification against
such  liabilities  (other than the payment by the  Registrant in the  successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling  person in connection with the securities being  registered,  the
Registrant  will,  unless in the  opinion of its  counsel  that  matter has been
settled by controlling precedent,  submit to a court of appropriate jurisdiction
the questions  whether such  indemnification  by it is against  public policy as
expressed  in the Act and will be  governed  by the final  adjudication  of such
issue.

                                Part II - Page 8
POWER OF ATTORNEY AND SIGNATURES

     Pursuant to the  requirements  of the  Securities  Act of 1933,  Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-8 and has  duly  caused  this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of San Diego, State of California,  on this 10th day of
January, 1997.

                         MEDICAL DEVICE TECHNOLOGIES, INC.

                         By: /s/ M. Lee Hulsebus
                         -----------------------
                         Chief Executive Officer

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date indicated.  Each of the  undersigned  hereby appoints
M. LEE  HULSEBUS  and  EDWARD  C. HALL  or  either  one  of  them  as is  lawful
attorney-in-fact with full power of substitution,  severally,  to execute in the
name and on behalf of each such person  individually and in each capacity stated
below,  one or more  amendments  (including  post-effective  amendments)  to the
Registration   Statement,   which  amendments  may  make  such  changes  in  the
Registration Statement, as the attorney-in-fact acting deems appropriate, and to
file any such  amendment of the  Registration  Statement with the Securities and
Exchange Commission.

SIGNATURE                TITLE                              DATE

                             
/s/M. Lee Hulsebus       Chief Executive Officer,           January 10, 1997
                         President and Chairman
                               
/s/Edward C. Hall        Chief Financial                    January 10, 1997
                         Officer/Secretary
                                                     
/s/Don L. Arnwine        Director                           January 10, 1997
                                                      
/s/Arthur E. Bradley     Director                           January 10, 1997
                                                        
/s/William A. Clarke     Director                           January 10, 1997
                                                       
/s/Thomas E. Glasgow     Director                           January 10, 1997
                                                         
/s/Scott A. Weisman      Director                           January 10, 1997
EXHIBIT INDEX

EXHIBIT           DESCRIPTION

5                 Opinion and Consent of Zukerman Gore & Brandeis, LLP

10                1997 Stock Compensation Plan

24                Consent of Zukerman Gore & Brandeis, LLP (See Exhibit 5)