NOVA TECHNOLOGIES INC /DE, SB-2/A, 1996-07-08

NOVA TECHNOLOGIES INC /DE
SB-2/A, 1996-07-08
MISCELLANEOUS FURNITURE & FIXTURES

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<PAGE>

As filed with the Securities and Exchange Commission on July 8, 1996

REGISTRATION NO. 33-00364

---------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------

AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
NOVA TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>

<S> <C> <C>
DELAWARE 2599 11-2674603
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification Number)
Code Number)
</TABLE>

89 CABOT COURT, UNIT L
HAUPPAUGE, NEW YORK 11788
(516) 434-8811
(Address and telephone number of principal executive offices)

89 CABOT COURT, UNIT L
HAUPPAUGE, NEW YORK 11788
(516) 434-8811
(Address of principal place of business or intended principal place of business)

STEPHEN M. FISHER

PRESIDENT
89 CABOT COURT, UNIT L
HAUPPAUGE, NEW YORK 11788
(516) 434-8811
(Name, address, and telephone number of agent for service)

Copy to:
DAVID P. TUTTLE, ESQ.
WHITMAN BREED ABBOTT & MORGAN
100 FIELD POINT ROAD
GREENWICH, CT 06830
(203) 862-2396

Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE

PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 900,901 $ $ $1,009.55
$.01 per share
- --------------------------------------------------------------------------------
</TABLE>

(1) Based on the average of the bid and asked prices for the Common Stock on
July __, 1996 on the OTC Bulletin Board pursuant to Rule 457(c).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>

NOVA TECHNOLOGIES, INC.

900,901 Shares of Common Stock

This Prospectus relates to 900,901 shares of Common Stock, $.01 par
value (the "Common Stock") of Nova Technologies, Inc. (the "Company") which may
be offered from time to time by any or all of the Selling Stockholders named
herein (the "Selling Stockholders"). See "Selling Stockholders." The Company
will not receive any proceeds from the sale of shares offered hereby. The
Company estimates that the expenses of this offering will be approximately
$_______, all of which will be paid by the Company.

The Company is not aware of any underwriting arrangements with respect to
the offer and sale by the Selling Stockholders of the Common Stock. The Company
has been advised by the Selling Stockholders that they or their successors may
sell all or a portion of the shares offered hereby from time to time on the OTC
Bulletin Board, in privately negotiated transactions, or otherwise, including
sales through or directly to a broker or brokers. Sales will be at prices and
terms then prevailing or at prices related to the then current market prices or
at negotiated prices. In connection with any sales, any broker or dealer
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act of 1933. See "Plan of Distribution."

The Common Stock is traded on the OTC Bulletin Board under the symbol
"NOTL." On July 1, 1996, the bid and asked prices of the Common Stock, as
reported by the OTC Bulletin Board, were $3.00 and $4.00, respectively. The
market for the Common Stock must be considered limited and there can be no
assurance that a meaningful trading market will develop. Furthermore, prices
quoted may not represent the true value of the Common Stock.

A Securities and Exchange Commission (the "S.E.C.") rule imposes additional
sales practice requirements on broker-dealers who sell certain low priced "penny
stocks" to persons other than established customers and institutional accredited
investors. For transactions covered by this rule, the broker-dealer must make a
special suitability determination of the purchaser and have received the
purchaser's written consent to the transaction prior to the sale. Since the
Common Stock currently is deemed to be "penny stock", an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to market
value of the securities offered hereby.

_____________________________

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" AT PAGE 7.
______________________________

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

The date of this Prospectus is July __, 1996
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in or incorporated by reference into this Prospectus.

THE COMPANY

Nova Technologies, Inc. ("Nova" or the "Company"), a publicly traded (NASD,
NOTL) company, was founded in 1984 to create a methodology of providing for the
unassisted transfer of bedridden patients. Nova's objective is to become a fully
integrated design, engineering, manufacturing and marketing company addressing a
niche market in the medical equipment and supply field. On June 14, 1996, Nova,
through its wholly-owned subsidiary, Vivax Medical Corp. a newly formed Delaware
corporation ("Vivax"), acquired all of the outstanding capital stock of Comed
Systems, Inc., a New Hampshire corporation ("Comed"). Vivax will continue the
business of Comed as a distributor of specialized beds, support surfaces and
related equipment in the greater Boston area. On and after June 14, 1996, the
term the "Company" shall include both Nova and Vivax unless otherwise
specifically provided or the context otherwise requires.

The Company's engineering and technical staff has developed a patient
transfer system (Novabed(R)) to be marketed to the rapidly growing long-term
care market. The Nova patient transfer system, with the push of a button on a
hand held pendant can automatically, comfortably, and safely transfer a
bedridden patient from a lying position in a hospital type bed to a seated
position in a wheel chair or commode and transfer the patient back into the bed.
A wheelchair backrest must be manually inserted in order to separate the
wheelchair from the bed. The system consists of a unique hospital-type bed, a
companion wheelchair, accessories, and is designed to be operated by one
attendant or, under certain circumstances, by the patient unassisted. At present
the Company is not aware of any similar products on the market. The Company has
been issued 18 patents related to the transfer system and bed sore prevention
and has received United States Food and Drug Administration ("FDA") approval to
market the product.

The Novabed(R) provides elderly and disabled persons and their care givers
with an alternative to manual lifting or conventional hydraulic lifting devices.
Such devices are difficult to use and often require special safety precautions.
The Company believes its system can significantly help the bedridden to be
comfortably and safely cared for in their own homes. The patient transfer system
has demonstrated how it may also partially reduce or eliminate transfer related
injuries to both staff and patients. Use of Nova's system by institutions can
improve patient care and mobility, provide therapeutic benefits, and reduce
costs associated with transfer-related labor requirements and injuries. In
addition, Novabed(R) can provide a means for many non-ambulatory patients to be
cared for in the home, thereby enabling early release from the hospital. In the
private home setting, Nova's unique transfer system can significantly delay
institutional care, thus saving the high cost of nursing home care and enhancing
quality of life.

The potential users of the patient transfer system include: the severely
physically handicapped; disease related bedridden persons; trauma and stroke
victims; post surgical and orthopedic rehabilitation patients; and the elderly
disabled. Purchasers of the system can be divided into three segments:
hospitals; nursing homes and related care facilities; and the home care market,
a rapidly growing segment in the industry.

The Company's strategy is to establish, through clinical trials, medical
efficacy conditions for the product, determine and establish cost benefit, and
demonstrate how the patient transfer system greatly improves quality of life.
The Novabed(R) has undergone clinical evaluation in an institutional and home
care setting. The Company is focusing its marketing on hospitals, rehabilitation
units and nursing homes in order to develop a strong referral base for the large
home healthcare market. Concurrent with this effort the Company is developing a
program to seek reimbursement authorization by Medicare, Medicaid and other
third party payors. See "Business - Beta Site and Field Trials" and "Business -
Third Party Reimbursement."

Nova commenced field trials of the Novabed with the installation of a
prototype in a nursing home in November 1992 and a prototype in a private home
in February 1993. In 1993 the Company commenced tooling for and production of
its first lot of 40 units for commercial sale. The first sales of these units
were recorded in June 1994. Since the commencement of production in 1993, the
Company has produced 70 Novabeds(R), of which 56 have been sold and shipped and
8 have been used for field trials and testing. The remaining 6 units are held
in inventory for shipment in July 1996. An additional 23 units are currently
being assembled for commercial sale.

Until recently, Nova relied almost exclusively on distributors with industry
experience with specialty beds to sell product to the institutional as well as
the home healthcare markets. The Company has entered into seven exclusive
distribution agreements to date covering seven regional territories in the
United States.

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<PAGE>

The regions combined cover approximately 25% of the U.S. population. As a result
of the Company's recent acquisition of Comed, one of the Company's former
distributors, the Company now has in-house distribution capability in the
greater Boston area. In the future the Company plans to grow its own sales force
for distribution to the institutional markets and to continue to work with Home
Medical Equipment dealers ("HME"), Durable Medical Equipment dealers ("DME"),
distributors, and home healthcare agencies in selling to the institutional and
home healthcare markets. See "Business - Marketing and Distribution."

In September 1995, pursuant to a series of inter-related transactions (the
"1995 Financing"), the Company (i) sold 900,901 shares of Common Stock for an
aggregate of $1,000,000, (ii) entered into a Grant Agreement with the City of
Bristol, Connecticut providing, under certain conditions, for a grant in the
amount of $100,000, (iii) entered into a Financing Agreement with Connecticut
Innovations Incorporated ("CII"), a State of Connecticut agency to borrow
$750,000 in four staged installments, (iv) entered into a Loan Agreement with
People's Bank ("People's Bank"), providing for a $1,000,000 revolving credit
facility (v) entered into a Loan Agreement with Connecticut Development
Authority ("CDA"), a State of Connecticut agency providing for advances up to
$100,000 for the purchase of new or used equipment and (vi) entered into an
Assistance Agreement with the Department of Economic and Community Development
("DECD"), a State of Connecticut agency providing for a loan in an amount not to
exceed $200,000 for the purchase of capital equipment. In September 1995, the
Company also sold 126,667 shares of restricted Common Stock for $190,000 to two
of its distributors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources."

On June 14, 1996, Nova, through its wholly-owned subsidiary Vivax, acquired
from Douglas and Donna Drew all the outstanding capital stock of Comed, a
distributor of specialized beds, support surfaces and related equipment in the
greater Boston area, and Comed was merged into Vivax. Of the aggregate purchase
price of $3,000,000, $1,500,000 was paid in the form of 600,000 shares of Common
Stock (using a value of $2.50/share per the Agreement) and the remaining
$1,500,000 consisted of two $750,000 promissory notes bearing interest of 8% of
Vivax which are guaranteed by Nova. One promissory note is payable on June 14,
1997, and the second promissory note is payable over a period of three years
commencing in 1998, with the amount of the installments of principal being
dependent on the future results of operations of the acquired business. Payment
of the promissory notes is secured by separate security agreements of Vivax and
Nova covering, respectively, inventory and equipment of Vivax, and certain
technology of Nova.

The specialized bed, support surfaces and related equipment distributed by
Vivax include the Novabed(R), air therapy beds, air therapy mattresses,
enclosure beds, low air loss beds, obese beds, mattress replacement systems and
mattress overlay systems. These beds and surfaces are used for the treatment of
pressure wounds, burns and trauma and the control of pain. Vivax distributes
its products to hospitals, nursing homes and related care facilities and to the
home care market. Historically, approximately 95% of Vivax's operating revenues
have been derived from the rental, rather than the sale of specialty beds.
Rental arrangements typically provide for ongoing service of the beds by Vivax.
Most institutions rent specialty beds from Vivax on a daily basis while most of
Vivax's home care customers rent specialty beds on a monthly or longer basis.
As of June 1996, Vivax was renting specialty beds to approximately 60
institutions and approximately 90 home care customers.

Nova was incorporated in Delaware in January 1984. Comed, now known as
Vivax, was incorporated in Florida in 1989, reincorporated in New Hampshire in
1996 and merged into Vivax, a Delaware corporation in June, 1996. The Company's
principal executive offices are located at 89 Cabot Court, Unit L, Hauppauge,
New York 11788, telephone number (516) 434-8811.

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<PAGE>

THE OFFERING
<S> <C>
COMMON STOCK OFFERED . . . . . . . . 900,901 shares to be sold by certain Selling Stockholders.

COMMON STOCK OUTSTANDING(1) . . . . . 6,411,183 shares as of July 1, 1996.
OTC BULLETIN BOARD SYMBOL . . . . . . NOTL
USE OF PROCEEDS . . . . . . . . . . . The Company will not receive any proceeds from the sale of shares
offered hereby.
RISK FACTORS . . . . . . . . . . . . An investment in the Common Stock involves a high degree of risk.
Prospective investors should review carefully and
consider the factors described in "Risk Factors."
</TABLE>

_________________

(1) Unless otherwise indicated, all references in this Prospectus to per share
data and number of shares outstanding exclude 435,017 shares of Common Stock
issuable upon the exercise of outstanding options and 1,858,654 shares of Common
Stock issuable upon exercise of outstanding warrants.

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<PAGE>

SUMMARY FINANCIAL INFORMATION

The following tables set forth for the periods indicated selected financial
information for Nova, Comed and for the combined companies on a pro forma
basis.

NOVA TECHNOLOGIES, INC.
<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS DATA:
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)

<S> <C> <C> <C> <C>
Net Sales ......................................................... $ 233,278 $ 220,368 $ 119,882 $ 82,553
----------- ----------- ---------- ----------
Costs and expenses:
Cost of sales..................................................... 558,262 697,901 171,229 302,706
Research and development expenses................................. 400,202 297,780 67,286 81,619
General, administrative, marketing and consulting expenses........ 421,573 506,124 126,189 152,126
----------- ----------- ---------- ----------
Total costs and expenses......................................... 1,380,037 1,501,805 364,704 536,451
----------- ----------- ---------- ----------
(Loss) from operations before other income and (expenses).......... (1,146,759) (1,281,437) (244,822) (453,898)
Other income and (expenses):
Interest and other income......................................... 5,197 13,201 1,530 24,054
Interest expense and other........................................ (69,575) (33,972) (554) (27,831)
----------- ----------- ---------- ----------
Net Loss........................................................... $(1,211,137) $(1,302,208) $ (243,846) $ (457,675)
=========== =========== =========== ==========
Net loss per share (1)............................................. $(.31) $(.27) $(.06) $(.08)
=========== =========== ========== ==========
Weighted average number of common shares outstanding (1)........... 3,964,598 4,783,050 4,355,533 5,796,016
=========== =========== ========== ==========
- ---------------------------------------------------
</TABLE>
(1) Net loss per share has been computed based on the weighted average number of
shares outstanding during each year. No effect has been given to outstanding
options and warrants as the effect would be antidilutive.
<TABLE>
<CAPTION>

BALANCE SHEET DATA:

DECEMBER 31, MARCH 31, 1996
---------------------- --------------
1994 1995 (UNAUDITED)
---------------------- --------------
<S> <C> <C> <C>
Current Assets.............. $ 372,737 $ 935,154 $ 920,134
Working Capital............. 160,515 552,048 511,989
Total Assets................ 542,119 1,396,193 1,423,408
Total Liabilities........... 1,244,121 811,987 1,226,082
Stockholders' Equity (deficiency) (702,002) 584,206 197,326

</TABLE>

COMED SYSTEMS, INC.

STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>

NINE MONTHS
YEAR ENDED ENDED
MAY 31, FEBRUARY 29,
1995 1996
------------ -------------
<S> <C> <C>

Net revenues.................................. $1,758,000 $1,702,000
---------- ----------
Cost of net revenues.......................... 903,000 881,000
Selling, general and administrative expenses.. 521,000 506,000
Provision for doubtful accounts............... 39,000 30,000
---------- ----------
1,463,000 1,417,000
---------- ----------
Operating income......................... 295,000 285,000
---------- ----------
</TABLE>

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<PAGE>

<TABLE>

<S> <C> <C>
Interest income............................... 4,000 6,000
Interest (expense)............................ (75,000) (64,000)
Gain (loss) on sale of assets................. (2,000) 19,000
---------- ----------
Total.................................... (73,000) (39,000)
---------- ----------
Income before income taxes.................... 222,000 246,000
Income tax expense............................ 93,000 94,000
---------- ----------
NET INCOME.................................... $ 129,000 $ 152,000
========== ==========
</TABLE>

BALANCE SHEET DATA:
FEBRUARY 29, 1996
-----------------

Current Assets................................ $ 457,000
Working Capital (Deficiency).................. (45,000)
Total Assets.................................. 900,000
Total Liabilities............................. 564,000
Stockholder's Equity.......................... 336,000

NOVA TECHNOLOGIES, INC. AND SUBSIDIARY
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:
YEAR ENDED
DECEMBER 31, 1995
(PRO FORMA UNAUDITED)
----------------------
<S> <C>

Net sales..................................... $2,462,000
----------
Cost of sales................................. 2,044,000
Research and development expenses............. 297,000
Selling, general and administrative expenses.. 1,113,000
----------
Operating income (loss)....................... (992,000)
Interest and other (income)................... (22,000)
Interest expense.............................. 245,000
(Gain) on sale of assets...................... (19,000)
----------
NET (LOSS).................................... ($1,196,000)
============
(Loss) per share.............................. ($0.22)
============
Weighted average shares outstanding........... 5,383,000
============

</TABLE>

BALANCE SHEET DATA:
MARCH 31, 1996
(PRO FORMA UNAUDITED)
---------------------

Current Assets....................... $1,377,000
Working Capital...................... 467,000
Total Assets......................... 4,687,000
Total Liabilities.................... 3,290,000
Stockholder's Equity................. 1,387,000

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<PAGE>

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. In analyzing such an investment, the following factors, among others,
should be read and considered carefully in conjunction with the detailed
information set forth elsewhere herein, furnished as an exhibit hereto or
incorporated by reference.

Untested Nature of Business. The Company, which began operations in July
1984, is subject to all the risks inherent in the creation of a new business
enterprise. The Company has limited experience in commercial exploitation with
respect to its patient transfer system, having heretofore concentrated its
efforts primarily upon research and development, patent applications, FDA
approval and field trials of prototypes. Commencing in the Fall of 1993, the
Company shifted its focus to marketing and production. Since that time the
Company has entered into seven exclusive distribution agreements, produced an
initial lot of 40 units, commenced sale of such 40 systems in June 1994,
commenced production of an additional 50 systems in 1995 and acquired the
business of Comed, one of its former distributors in June 1996. However, there
can be no assurance that the Company's efforts will ever result in the
development of a commercially viable product, cost-effective manufacturing of
such product, or a profitable business.

Accumulated Losses Since Inception; Financial Condition; Anticipated Future
Losses. From January 23, 1984 (inception) through December 31, 1995, the Company
has experienced net losses in each fiscal period, aggregating $9,321,592. The
Company incurred net losses of $1,211,137 and $1,302,208 for the years ended
December 31, 1994 and December 31, 1995, respectively, and a net loss of
$457,675 for the three months ended March 31, 1996. The Company's working
capital requirements have been met from funds provided by management and other
investors, the proceeds of a 1992 public offering and the proceeds of the 1995
Financing. The Company expects to incur additional future losses of
approximately $2.0 million with respect to its Novabed(R) business prior to
achieving operating profitability, if ever, as it undertakes continuing
development of its patient transfer system and the start-up of marketing and
production operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources."

Auditor's "Going Concern" Explanatory Paragraph. The Company has received
reports on its financial statements from its independent auditors which include
an explanatory paragraph indicating that substantial doubt exists about the
ability of the Company to continue as a going concern. The factors referenced
by the auditors include the Company's recurring operating losses and the need
for additional financing for commercial exploitation of its product. The
Company estimates that it will need to obtain additional equity contributions
of at least $2,750,000 to finance its operations over the 12 month period
following June 30, 1996. These estimates are generated from an internally
prepared business plan. The Company has begun to seek additional capital and
has retained TimeCapital Securities Corporation ("TimeCapital") as its exclusive
agent to assist the Company in raising $1,000,000 by July 19, 1996 through the
sale of Common Stock at a price of $2.00 per share in a private placement. The
Company has also entered into an agreement with TimeCapital for it to act as the
Company's exclusive agent to assist in arranging for one or more qualified
broker-dealers to serve as the underwriter(s) on behalf of the Company in
connection with a public offering of Common Stock. See "Certain Transactions."
The Company also has verbal agreements with three finders, one of whom is
Arlindo Jorge a director of the Company, pursuant to which it will pay a
commission of 10% of the proceeds of private placement sales obtained by the
finders. There can be no assurance that the Company's estimates will prove to
be accurate, that the Company will be able to raise such additional capital or
that the Company's existing distributors will fulfill their purchase
commitments. See "Business - Marketing and Distribution." If such
contingencies are not realized, the Company would have to drastically reduce its
staff and curtail manufacturing operations which may result in a default under
and acceleration of the Company's loan obligations and, ultimately, bankruptcy
and/or the discontinuance of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Liquidity and Capital
Resources."

Insufficient Financing; Uncertain Financing Sources. The acquisition of the
business of Comed, the net proceeds of $888,280 in equity capital and, subject
to certain conditions, $1,150,000 in loan and grant availability from the 1995
Financing are presently estimated to satisfy the Company's cash needs through
July or August 1996. The Company anticipates that this financing will not be
sufficient to carry out its current business plan. The Company anticipates that
it will require approximately $2.75 million of additional financing to finance
its operations over the 12 month period following June, 1996, including the
payment of a $750,000 note of Vivax due June 14, 1997 incurred in connection
with the acquisition of Comed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources."
As of the date hereof, the Company has secured no commitments in this
regard

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<PAGE>

and no assurances can be given as to either the magnitude or terms of such
financing or the availability or commercial reasonability of any such future
financing. The absence of additional financing may have a material adverse
effect on the Company's achievement of commercial production and its ultimate
profitability and may, after the proceeds of the 1995 Financing have been
expended hinder the Company's ability to operate efficiently and to deliver
product in a timely manner. Specifically, if the Company does not obtain the
necessary additional financing it will not be able to produce sufficient product
to satisfy the minimum purchase requirements of its distributors. Failure by the
Company to produce sufficient product to satisfy its obligations to its
distributors would constitute a default under the Company's distribution
agreements which may subject the Company to claims for damages and may allow the
distributors to terminate such agreements.

Failure to Satisfy Requirements of Existing Financings; Prepayment Penalty.
The Company's loan with People's Bank requires that it satisfy certain financial
covenants at the end of each quarter. The Company believes that it is currently
in compliance with these covenants. However, such covenants become more
stringent for the quarter ending December 31, 1996. Failure to satisfy any of
these financial covenants constitutes a default under the People's Bank
financing which allows People's Bank to terminate its obligation to provide
financing to the Company and to accelerate all loans outstanding to the Company.
A default under the People's Bank financing also constitutes a default under the
Company's other financing arrangements. The Company anticipates that it will
require approximately $2.75 million of additional financing to finance its
operations over the 12 month period following June, 1996 and to comply with the
financial covenants contained in the People's Bank loan agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources."

Several of the Company's existing financing arrangements require either (i),
subject to certain exceptions, that the Company base fifty percent of its
officers and a majority of its employees in Connecticut and conduct a majority
of its operations, including subcontracting operations in Connecticut, except in
the case where no Connecticut subcontractor is able to produce the products or
provide the services called for in the subcontract on commercially reasonable
terms, or (ii) that the Company otherwise maintain its operations in Connecticut
(the "Connecticut Presence Requirement"). If the Connecticut Presence
Requirement is violated, such lenders may require the Company to re-pay such
financing and to pay such lenders substantial pre-payment charges. The Company
is currently in compliance with these Connecticut Presence Requirements and does
not believe that continued compliance will have a material adverse effect on the
Company. The CII loan agreement contains a mandatory prepayment provision in
the event the Company fails to satisfy the Connecticut Presence Requirement, the
Company sells Common Stock for its own account in an underwritten public
offering or there is a change in control of the Company or its assets. This
provision includes a prepayment penalty in an amount equal to the greater of (i)
an amount sufficient to provide a rate of return of 25% compounded annually or
(ii) the excess of the market price of the Common Stock underlying the warrant
granted to CII over the exercise price of such warrant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources."

The Company's existing financing arrangements are secured by some or all of
the Company's assets, including its patents. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Liquidity and Capital
Resources."

Dependence on Distributors; Failure of Distributors or Company to Perform.
For the year ended December 31, 1995, all of the Company's net sales were made
to its distributors. The Company's distributors have agreed to purchase a
minimum number of units from the Company over specified periods of up to 31
months from June 1, 1996, which includes approximately 184 units during
calendar 1996. During the period January 1, 1996 to June 1, 1996, the Company
sold 16 units, all of which were purchased by the Company's distributors. As of
July 1, 1996, the Company had unfilled orders for 2 Novabeds(R) and 3 chairs.
The distributors have not ordered a pro rata portion of their 1996 minimums.
The obligations of such distributors are not supported by financial or
performance guaranties. In the event any distributor is unable to achieve sales
equivalent to its minimum purchase requirement, either due to its failure to
adequately market the Novabed(R) or the inadequacy of the demand for the
Novabed(R), the Company will be relying on the financial strength of such
distributor to purchase their designated minimum to be held in inventory by the
distributor. While the Company believes that these distributors are financially
sound, no

-8-
<PAGE>

assurance can be given that such distributors will satisfy their
obligations to the Company. If these distributors fail to perform their
obligations, the Company will not realize this anticipated revenue and may have
to discontinue operations unless it can develop alternative distribution
arrangements for its products. See "Business - Marketing and Distribution."

Due to the Company's lack of sufficient working capital and the Company's
focus on arranging, negotiating and consummating the 1995 Financing and
relocating its assembly operations from New York to Connecticut, in 1995 the
Company was unable to produce sufficient product to satisfy its distributors'
minimum purchase requirements. The Company and the two distributors who were
unable to receive their minimum purchase requirements in 1995 agreed to extend
the period for selling and purchasing the minimum requirements for 1995 and
thereafter by one year. In 1995, the Company decided to alter the way the
Novabeds(R) are produced. Through the first quarter of 1995, the Company
produced a number of the components of the Novabed(R) in-house. The Company is
now subcontracting this work. As a result, the Company will be able to produce
Novabeds(R) with less capital for tooling and equipment. However, the Company
estimates that it will require approximately $2.75 million of additional
financing to finance its operations over the 12 month period following June,
1996. If the Company does not obtain the necessary additional financing it may
not be able to produce sufficient product to satisfy the minimum purchase
requirements of its distributors. Failure by the Company to produce sufficient
product to satisfy its obligations to its distributors would constitute a
default under the Company's distribution agreements which may subject the
Company to claims for damages and may allow the distributors to terminate such
agreements.

Dependence Upon Key Personnel. The success of the Company will be largely
dependent upon the efforts of Paul DiMatteo, its Chairman of the Board and
founder, Stephen M. Fisher, President, Samuel N. Paul, Senior Vice President -
Operations, and Douglas Drew, Senior Vice President - Marketing and Sales, each
of whom has an employment agreement with the Company. The loss of the services
of anyone of them may have a materially adverse effect on the Company's present
and proposed business and future prospects. The Company has obtained a key-man
insurance policy on the life of each of Messrs. DiMatteo, Fisher and Paul in the
amount of $500,000.

Limited Marketing Staff and Marketing Experience. The Company has undertaken
limited marketing efforts to date with respect to its patient transfer system.
Such marketing activity has been initially limited to the efforts of one of the
Company's four executive officers. Such officer, however, has had no prior
experience in the marketing of any health care products. The Company recently
hired Douglas Drew, the founder, President and a significant shareholder of
Comed, as its Vice President of Marketing and Sales.

No Significant Manufacturing Capacity or Experience. The basic bed and
certain other standardized components which comprise integral elements of the
Company's patient transfer system are manufactured by non-affiliated persons.
In the past, the Company manufactured the remaining ancillary components of its
patient transfer system and assembled the system. The Company, however, has
undertaken limited manufacturing and assembly activities to date, having
completed the assembly of its initial lot of 40 units in June 1994, and started
another lot of 50 units in 1995. Recently, the Company decided to subcontract
the manufacture of these ancillary components in order to minimize capital
requirements. See "Business - Manufacturing."

Uncertain Patent Protection. The Company has been issued 18 United States
patents related to its patient transfer system and bed sore prevention. Three
additional patent applications, relating to transfer system design and
associated products, are pending. The Company has also filed a total of 22
patent protection applications in five European countries, Japan and Canada and
plans to file additional applications in both the United States and other
countries. The Company believes that patent protection will be of material
importance to its growth potential. No assurance can be given that additional
patents will be issued or, if so issued, that the scope of protection afforded
thereby or by the Company's current patents will be adequate to protect the
Company from competition. Further, no assurance can be given as to the
availability to the Company of adequate financial resources to contest any
possible patent infringement by others.

Competition. The health care industry in general, and the markets for
patient transfer devices, hospital and home care beds and support surfaces and
related equipment, and wheelchairs in particular, are highly competitive.
Although the Company is unaware of a competitive product performing all of the
same functions as those of the Company's patient transfer system, other products
perform some of those same functions. Virtually all of the products which may be
competitive with the Company's patient transfer system are being manufactured
and/or marketed by concerns which have substantially greater financial
resources, stronger sales forces and dealer networks, and greater manufacturing
capacities and industry experience than the Company. Further, the Company
expects that the anticipated sales or rental price of its patient transfer
system will be comparably priced to other specialty bed products, such as air-
therapy beds, but will be substantially higher than prices for standard hospital
beds. The

-9-
<PAGE>

Company believes its Novabed(R) will initially compete on the basis of
product features and performance. The Company's Vivax business also competes
with concerns which have substantially greater resources and stronger sales
forces. Vivax faces competition from manufacturers who distribute similar
products directly in the greater Boston area and independent distributors of
similar products in this market. Vivax is also facing increased competition
from less costly and less sophisticated devices which have gained market
acceptance and are being mass marketed. As a result of this increased
competition, product pricing has eroded and service demands have increased
despite the substantial increase in the population of patients using products of
the type distributed by Vivax. No assurances can be given that the Company will
be able to compete successfully in any of its prospective markets, or that
companies with substantially greater resources than the Company have not
developed or are not in the process of developing superior patient transfer
technology and products.

Failure to Obtain, or Reduction of Government and Third-Party Payor
Reimbursement. Third-party payors, such as Medicare, Medicaid, and private
insurance companies, reimburse many durable medical equipment purchases and
rentals. A conventional home care hospital-type bed and a conventional
wheelchair as stand-alone units are presently reimbursed at the rate of 80% of
cost as determined by the third-party payor. The Company has not yet attempted
to obtain advance approval of third-party reimbursement for its Novabed(R) so
that no assurances can be given that an adequate level of third-party
reimbursement, or any reimbursement at all, will be available to customers for
its patient transfer system. The Company has made a presentation to the Health
Care Financing Administration ("HCFA") in anticipation of submitting an
application for a new procedure code for the Novabed(R). HCFA has assigned
analysts to the Novabed(R) and will assist the Company in preparing the
application for the procedure code. A specific new procedure code is required
prior to Medicare approval but is not required in order to obtain reimbursement
from private insurers or Medicaid reimbursement. The Company will also seek
reimbursement authorization from other governmental sources such as Medicaid and
from third-party payors such as private insurance carriers. In connection
therewith, the Company may be required to present clinical data to demonstrate
that its technology is not experimental and that its patient transfer system is
both safe and efficacious. In addition, the Company may be required to
demonstrate that its patient transfer system is valuable and therapeutically
beneficial to the patient and is not a luxury item. Although the Company
believes that the cost of its patient transfer system will eventually be
reimbursed at meaningful levels under each of, respectively, Medicare, Medicaid
and private insurance programs, it can give no assurances to that effect, nor as
to the length of time which may elapse prior to a determination of permissible
reimbursement by the various persons that administer these programs throughout
the country. In particular, applications for new procedure codes currently take
approximately a year for processing, with no assurance that any such application
will be approved or will not take a substantially longer period of time. Denial
of such application will preclude Medicare reimbursement specifically for the
Novabed(R). Failure to obtain favorable determinations concerning reimbursement
willhave a material adverse effect on the Company's ability to compete on price
and are likely to result in a material adverse effect on sales of the Novabed(R)
and on the Company's financial performance. See "Business - Third-Party
Reimbursement."

Approximately 21% and 24%, respectively, of Vivax's (Comed) revenues for the
year ended May 31, 1995 and the nine months ended February 29, 1996 were derived
from Medicare. Reimbursement can be influenced by the financial instability of
private third-party payors and the budget pressure of and cost shifting by
governmental payors. In January and April 1996, respectively, Medicare Part B
reimbursement (which relates to home care patients) of specialty beds was
reduced by 20% and the criteria for determining eligibility of patients for
reimbursement for specialized beds were made materially more stringent.
Approximately 15% of Vivax's (Comed) revenues is currently derived from Medicare
Part B reimbursement. These developments will have a materially adverse effect
on future sales of the Company. In addition, the Company believes that the
Medicare Part A reimbursement system for nursing home patients is likely to be
modified. It is anticipated that the new system will move away from current
cost-based reimbursement towards a managed care model with block awards to fewer
regional administrators who will rely on fewer suppliers. The impact of any
such changes is difficult to determine. Medicare Part A reimbursement currently
represents less than 10% of Vivax's (Comed) revenues. However, any reduction in
coverage or reimbursement rates will have a material adverse effect on the
Company's results of operations. See "Business - Third-Party Reimbursement."

Potential Product Liability. The Company may become subject to product
liability claims in connection with the use of its patient transfer system. The
Company presently maintains product liability insurance of $6 million. There can
be no assurance that any loss will be covered by such insurance, that such
coverage will continue to be available on commercially reasonable terms or that
the extent of coverage will be sufficient to cover any potential liability.

Vivax may become subject to product liability claims in connection with the
use of the products it distributes. Vivax presently maintains errors and
omissions insurance with limits of $1 million per occurrence and $5 million per
year. There can be no assurance that any loss will be covered by such
insurance, that such coverage will continue to be available on commercially
reasonable terms or that the extent of coverage will be sufficient to cover any
potential liability. In addition, in accordance with industry practice, the
manufacturers of the products Vivax sells maintain product liability insurance
and otherwise indemnify it

-10-
<PAGE>

against any product liability claims. There can be no assurance that any
product liability claims will be covered by Vivax's manufacturers' product
liability insurance, indemnified by such manufacturers, or if indemnified that
such manufacturers will have the ability to pay any such claims.

Limited Market for Common Stock. The Common Stock is quoted and traded on
the OTC Bulletin Board. The market for the Common Stock must be considered
limited and there can be no assurance that a meaningful trading market will
develop. Furthermore, prices quoted may not represent the true value of the
Common Stock.

Reduced Liquidity Attendant to Penny Stock Status. S.E.C. rules impose
additional sales practice requirements on broker-dealers who recommend certain
low priced "penny stocks" to persons other than established customers and
institutional accredited investors. For transactions covered by these rules,
the broker-dealer must make a determination that based on the purchaser's
financial situation, investment experience and investment objectives, an
investment in penny stocks is suitable for such purchaser and that such
purchaser (or his independent advisor) is capable of evaluating the risks of
transactions in penny stocks. The broker-dealer must also provide a prospective
purchaser of penny stocks with certain disclosure materials and obtain the
purchaser's written consent to the transaction prior to the sale. Since the
Common Stock currently is deemed to be "penny stock", an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of the securities offered hereby. An exemption from "penny stock" status
will be available, however, as to the Common Stock if and when the market price
therefor exceeds $5.00 per share, the Company's net tangible assets exceed
$2,000,000 or the Company has average revenue of at least $6,000,000 over the
preceding three years. See "Market For Common Stock and Dividend Policy."

Control by Management Stockholders. It is less likely that the market price
of the Company's Common Stock will reflect a premium for control if at some
future date the Company were to become the target of a takeover attempt or
subject to a contest for control since approximately 36% of the Company's Common
Stock is owned by the executive officers and directors of the Company.

Effect of Outstanding Options and Warrants. The Company has outstanding
options and warrants to acquire an aggregate of 2,293,671 shares of Common
Stock. To the extent that all, or a substantial portion, of such options and
warrants are exercised, they will decrease the percentage ownership of the
Company by the persons who invest hereunder. The holders of such options and
warrants may be expected to exercise them at a time when the Company would be
able to obtain needed capital by a new offering of securities on terms more
favorable than those provided for by such options and warrants. The possibility
of the sale of all the shares of Common Stock issuable upon exercise of the
options and warrants may adversely affect the market price of the securities
offered.

Shares Eligible for Future Sale. Actual sales or the prospect of sales of
Common Stock under Rule 144 or otherwise in the future may have a depressive
effect upon the price of the Common Stock or any market that may develop, and
also render difficult the sale of the Company's securities purchased by
investors in this offering. The sale or other transfer or disposition of
1,730,405 of the currently outstanding shares of Common Stock is restricted by
the Securities Act of 1933, as amended (the "Securities Act"). In the future,
these shares may only be sold in compliance with Rule 144, promulgated under the
Securities Act, by the availability of an exemption from registration under the
Securities Act or by their registration thereunder. As of January 1, 1996,
126,750 of these shares of Common Stock would have been eligible for sale under
Rule 144. During the period commencing January 1, 1996 and ending December 31,
1996, an additional 987,738 of such shares will become eligible for sale under
Rule 144. The balance of such shares will become eligible for sale pursuant to
Rule 144 upon the expiration of their respective two-year holding periods. In
addition, most of the current holders of outstanding Common Stock, options and
warrants have "piggy-back" registration rights with respect to their securities
should certain conditions be satisfied. Further, the Company intends to file a
registration statement covering the 330,000 shares of Common Stock reserved for
issuance, and the 435,017 shares of Common Stock issued under its stock option
plans after the completion of this offering.

Ability to Pay Dividends. The Company has not paid dividends, and does not
intend to pay any dividends in the foreseeable future, since earnings, if any,
are expected to be retained for use in the development and expansion of the
Company's business. The Company's financing arrangements restrict the payment
of dividends.

-11-
<PAGE>

MARKET FOR COMMON STOCK AND DIVIDEND POLICY

The initial public offering of the Common Stock of the Company was made in
1992. Since that time, the Company's Common Stock has been traded only on a
limited basis in the over-the counter market. The following table sets forth
the quarterly high bid and low bid prices as reported on the OTC Bulletin Board.
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>

PERIOD HIGH BID LOW BID
- ------ -------- -------
<S> <C> <C>

Quarter ended
March 31, 1994 $2 1/2 $2
June 30, 1994 3 2
September 30, 1994 2 1/4 2
December 31, 1994 2 1 3/4

March 31, 1995 2 2
June 30, 1995 2 2
September 30, 1995 2 3/4 2
December 31, 1995 2 3/4 2 1/2

March 31, 1996 2 3/4 2 1/4
June 30, 1996 3 5/8 2 1/4
</TABLE>

At July 1, 1996, the bid and asked prices for the Company's Common Stock as
so reported were $ 3.00 and $4.00 respectively. On that date, the Company had
approximately 370 holders of record of its Common Stock.

The Company has outstanding options and warrants to purchase 435,017 shares
and 1,858,654 shares, respectively, of Common Stock. The Company also has
outstanding 1,730,405 shares of Common Stock the sale or other transfer or
disposition of which is restricted by the Securities Act. In the future, these
shares may only be sold in compliance with Rule 144, promulgated under the
Securities Act, by the availability of an exemption from registration under the
Securities Act or by their registration thereunder. As of January 1, 1996,
126,750 of these shares of Common Stock would have been eligible for sale under
Rule 144. During the period commencing January 1, 1996 and ending December 31,
1996, an additional 987,738 of such shares will become eligible for sale under
Rule 144. The balance of such shares will become eligible for sale pursuant to
Rule 144 upon the expiration of their respective two-year holding periods. In
addition, most of the current holders of outstanding Common Stock, options and
warrants have "piggy-back" registration rights with respect to their securities
should certain conditions be satisfied. Further, the Company intends to file a
registration statement covering the 330,000 shares of Common Stock reserved for
issuance, and the 435,017 shares of Common Stock issued under its stock option
plans after the completion of this offering. Sales of outstanding Common Stock
pursuant to Rule 144 or otherwise could materially affect the trading price of
the Company's Common Stock. See "Risk Factors - Shares Eligible for Future
Sale."

S.E.C. rules impose additional sales practice requirements on broker-dealers
who recommend certain low priced "penny stocks" to persons other than
established customers and institutional accredited investors. For transactions
covered by these rules, the broker-dealer must make a determination that based
on the purchaser's financial situation, investment experience and investment
objectives, an investment in penny stocks is suitable for such purchaser and
that such purchaser (or his independent advisor) is capable of evaluating the
risks of transactions in penny stocks. The broker-dealer must also provide a
prospective purchaser of penny stocks with certain disclosure materials and
obtain the purchaser's written consent to the transaction prior to the sale.
The Common Stock currently is deemed to be "penny stock." Since broker-dealers
must create an extensive paper trail to sell penny stocks, many investors are
not qualified to purchase penny stocks and classification as a penny stock often
carries negative connotations, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of the securities
offered hereby. An exemption from "penny stock" status will be available,
however, as to the Common Stock if and when the market price therefor exceeds
$5.00 per share, the Company's net tangible assets exceed $2,000,000 or the
Company has average revenue of at least $6,000,000 over the preceding three
years.

The Company has not paid, and does not anticipate paying in the foreseeable
future, dividends on the Common Stock. The Company's financing arrangements
impose various restrictions on the payment of dividends.

-12-
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996.

Long-Term Debt............................................ $ 817,937
----------
Common Stock; $.01 par value;
14,000,000 shares authorized;
5,798,483 shares issued and outstanding.............. 57,985
Additional paid-in capital................................ 9,918,608
Deficit................................................... (9,779,267)
-----------
Total stockholders' equity................................ 197,326
-----------

Total Capitalization...................................... 1,015,263
==========

SELECTED FINANCIAL DATA

The selected balance sheet data presented below for Nova as of December 31,
1994 and 1995 and selected financial data for the statements of operations for
the years ended December 31, 1994 and 1995 are derived from financial statements
included elsewhere in this Prospectus, which have been audited by Richard A.
Eisner & Company, LLP, independent auditors, as set forth in their report also
included elsewhere herein. The selected balance sheet data presented below for
Nova as of March 31, 1995 and 1996 and selected financial data for the
statements of operations for the three months ended March 31, 1995 and 1996 are
derived from unaudited financial statements (included elsewhere in this
Prospectus) which, in the opinion of the Company, reflect all adjustments,
consisting of normal recurring adjustments for a fair presentation of the
financial position and the results of operations for those periods. The
following information should be read in conjunction with such financial
statements and related notes thereto and management's discussion and
analysis.

NOVA TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS DATA:
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)

Other income and (expenses):
Interest and other income......................................... 5,197 13,201 1,530 24,054
Interest expense and other........................................ (69,575) (33,972) (554) (27,831)
----------- ----------- ---------- ----------
Net Loss........................................................... $(1,211,137) $(1,302,208) $ (243,846) $ (457,675)
=========== =========== =========== ==========
Net loss per share (1)............................................. $(.31) $(.27) $(.06) $(.08)
=========== =========== ========== ==========
Weighted average number of common shares outstanding (1)........... 3,964,598 4,783,050 4,355,533 5,796,016
=========== =========== ========== ==========
- ---------------------------------------------------
</TABLE>
(1) Net loss per share has been computed based on the weighted average number of
shares outstanding during each year. No effect has been given to outstanding
options and warrants as the effect would be antidilutive.

BALANCE SHEET DATA:
DECEMBER 31, MARCH 31, 1996
1994 1995 (UNAUDITED)
<S> <C> <C> <C>

</TABLE>
-13-
<PAGE>

<TABLE>

<S> <C> <C> <C>
Current Assets.............. $ 372,737 $ 935,154 $ 920,134
Working Capital............. 160,515 552,048 511,989
Total Assets................ 542,119 1,396,193 1,423,408
Total Liabilities........... 1,244,121 811,987 1,226,082
Stockholders' Equity (deficiency) (702,002) 584,206 197,326

</TABLE>

The selected balance sheet data presented below for Comed as of February 29,
1996 and selected financial data for the statements of operations for
the year ended May 31, 1995 and the nine months ended February 29, 1996 are
derived from financial statements included elsewhere in this Prospectus, which
have been audited by Richard A. Eisner & Company, LLP, independent auditors, as
set forth in their report also included elsewhere herein. The following
information should be read in conjunction with such financial statements and
related notes thereto.

COMED SYSTEMS, INC.

STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>

NINE MONTHS
YEAR ENDED ENDED
MAY 31, FEBRUARY 29,
1995 1996
------------ -------------
<S> <C> <C>

</TABLE>

-14-
<PAGE>

<TABLE>

<S> <C> <C>
Provision for doubtful accounts............... 39,000 30,000
---------- ----------
1,463,000 1,417,000
---------- ----------
Operating income......................... 295,000 285,000
---------- ----------
Interest income............................... 4,000 6,000
Interest (expense)............................ (75,000) (64,000)
Gain (loss) on sale of assets................. (2,000) 19,000
---------- ----------
Total.................................... (73,000) (39,000)
---------- ----------
Income before income taxes.................... 222,000 246,000
Income tax expense............................ 93,000 94,000
---------- ----------
NET INCOME.................................... $ 129,000 $ 152,000
========== ==========

</TABLE>

BALANCE SHEET DATA:
FEBRUARY 29, 1996
-----------------

Current Assets................................ $ 457,000
Working Capital............................... (45,000)
Total Assets.................................. 900,000
Total Liabilities............................. 564,000
Stockholder's Equity.......................... 336,000

The selected balance sheet data presented below for Nova as of March 31,
1996 and selected financial data for the statements of operations for the year
ended December 31, 1995 are derived from pro forma unaudited condensed financial
statements reflecting the acquisition of Comed (included elsewhere in this
Prospectus) which, in the opinion of the Company, reflect all pro forma
adjustments, for a fair presentation of the pro forma financial position and the
pro forma results of operations for those periods. The following information
should be read in conjunction with such pro forma financial statements and
related notes thereto.

NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:
YEAR ENDED
DECEMBER 31, 1995
(PRO FORMA UNAUDITED)
----------------------
<S> <C>

</TABLE>

BALANCE SHEET DATA:

MARCH 31, 1996
(PRO FORMA UNAUDITED)
---------------------

Current Assets....................... $1,377,000
Working Capital...................... 467,000

-15-
<PAGE>

Total Assets......................... 4,687,000
Total Liabilities.................... 3,290,000
Shareholder Equity................... 1,397,000

-16-
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
GENERAL - NOVA

The Company, from its inception on January 23, 1984 through the fiscal year
ended December 31, 1994 had been engaged primarily in research and development
of its Novabed(R) patient transfer system and in raising capital to design and
develop a marketable product. The Company had been classified as a development
stage enterprise since substantially all of its efforts were devoted to research
and development and to establishing a new business and there were no significant
revenues. In 1994, the Company began taking orders for Novabed(R) units and in
June 1994, the Company shipped the first order of Novabed(R) units since its
inception and recorded sales of $233,000 in the year ended December 31, 1994.
The Company is now manufacturing its second lot of Novabed(R) units and is
incorporating certain design changes based on suggestions from its distributors.

Since January 1, 1995, the Company is no longer classified as a development
stage enterprise. As of March 31, 1996, it had entered into seven
distributorship agreements providing for the sale and shipment of Novabeds(R) to
each distributor and the granting of an exclusive sales territory to each
distributor. See "Business - Marketing and Distribution."

In 1994, the three distributors then under contract with the Company ordered
and were shipped an aggregate of 20 Novabeds(R) which exceeded their aggregate
minimum purchase requirements by 5 units. In 1995, the Company sold and shipped
13 Novabeds(R) and 8 wheelchairs to its six distributors, most of which were
shipped in the first quarter. This sales decrease resulted from the Company's
lack of sufficient working capital and the Company's focus on arranging,
negotiating and consummating the 1995 Financing and relocating its assembly
operations from New York to Connecticut. As a result, in 1995 the Company was
unable to produce sufficient product to satisfy its distributors' minimum
purchase requirements. The Company and the two distributors who were unable to
receive their minimum purchase requirements in 1995 agreed to extend the period
for selling and purchasing the minimum requirements for 1995 and thereafter by
one year.

In 1995, the Company decided to alter the way the Novabeds(R) are produced.
Through the first quarter of 1995, the Company produced a number of the
components of the Novabed(R) in-house. The Company is now subcontracting allof
this work, primarily to subcontractors in Connecticut, and is conducting
assembly operations. As a result, the Company will be able to produce
Novabeds(R) with less capital for tooling and equipment. The Connecticut
Presence Requirement (See "Risk Factors - Failure to Satisfy Requirements of
Existing Financings; Prepayment Penalty") contained in several of the Company's
financing agreements requires that the Company conduct a majority of its
operations in Connecticut. Only the Company's agreements with CII also require
that the Company conduct a majority of its subcontracting operations in
Connecticut. However, the CII agreements provide for an exception in the event
no Connecticut subcontractor is able to produce the products or provide the
services on commercially reasonable terms. Accordingly, the Company's
subcontracts must be fulfilled in Connecticut or pursuant to such exception.
The Company does not believe that the Connecticut Presence Requirement will have
a material impact on the Company even in light of its new subcontracting policy.

The Company's distributors have agreed to purchase a minimum number of units
from the Company over specified periods of up to 31 months from June 1, 1996,
which includes approximately 184 units during 1996. During the period January
1, 1996 to July 1, 1996, the Company shipped 19 units, all of which were
purchased by the Company's distributors. As of July 1, 1996, the Company had
unfilled orders for 2 units and 3 wheelchairs. The distributors have not
ordered a pro rata portion of their 1996 minimums. See "Risk Factors -
Dependence on Distributors; Failure of Distributors or Company to Perform."

GENERAL - VIVAX

Comed Systems Inc. (now Vivax) was incorporated in December 1989 and began
its operation in mid 1991 to distribute specialized beds and support surfaces in
eastern New England. These devices are utilized to manage the treatment and
prevention of pressure wounds, burns, trauma and pain control. The initial
distribution of these products was to the acute and acute rehab facilities. The
initial products being distributed were manufactured by Health Products of
Houston, Texas. The company later distributed products manufactured by Sunrise
Medical, Cardio System, Huntleigh, Creative Medical and Nova Technologies, Inc.
The company would purchase the products which ranged in price from $3,000 to
$25,000. The device would then be rented on a daily basis to the facility. The
initial financing was provided by a loan from an officer and a SBA backed loan
for $500,000 through the Hampton Coop Bank. The SBA loan was paid in full in
January 1995 and the loan to the officer was paid in full in May 1996.

-17-
<PAGE>

RESULTS OF OPERATIONS - NOVA

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995.

In the three months ended March 31, 1996 the Company recorded sales of
$83,000 and incurred a net loss of $458,000 ($.08 per share) compared to sales
of $120,000 and a net loss, as adjusted, of $244,000 ($.06 per share) in the
three months ended March 31, 1995.

In the quarter ended March 31, 1996 the Company's cost of sales exceeded its
sales and the Company sustained a gross loss of $220,000 compared to a gross
loss of $51,000 in the quarter ended March 31, 1995. In September 1995, the
Company opened its new 28,000 square foot manufacturing facility in conjunction
with the completion of an equity and debt financing package (the "1995
Financing"). The new manufacturing facility was necessary to enable the Company
to meet its manufacturing requirements and sales objectives despite the
Company's new policy of subcontracting the manufacture of more of the components
that go into a Novabed(R). Manufacturing overhead in the first quarter
increased $135,000 from $91,000 in 1995 to $226,000 in 1996. Initially,
production levels at the new facility have not been high enough to absorb the
additional manufacturing overhead incurred in the new facility. As production
and sales levels increase the Company expects gross losses to diminish and
thereafter rising gross profits, although no assurance can be given that the
Company will be able to achieve such satisfactory production and sales levels.

Research and development expenses increased $15,000 from $67,000 (as
adjusted for salary accruals) in the first quarter of 1995 to $82,000 in the
comparable 1996 quarter. The increase is attributable to a $5,000 increase in
an officer's salary rate for the quarter and increased wages devoted to research
and development efforts in the first quarter of 1996.

General, administrative, marketing and consulting expenses increased $26,000
from $126,000 (as adjusted for salary accruals) in the first quarter of 1995 to
$152,000 in the comparable 1996 quarter. The increase is attributable to an
$11,000 increase in an officer's salary rate for the quarter and an increase of
approximately $16,000 in legal and accounting expenses.

Interest expense increased $27,000 from $1,000 in 1995 to $28,000 in 1996,
of which $18,000 is attributable to interest expense and amortization of
financing costs in connection with the 1995 Financing. In addition, in the
first quarter of 1996 two officers, who earned interest aggregating $9,000 on
debt due them, waived the accrual of interest on debt due them in the comparable
1995 quarter.

The Company's agreements with its distributors generally provide for a fixed
purchase price for Novabeds(R) for an initial period that expires June 30, 1997.
The Company's agreement with one of its distributors provides for a fixed price
through December 31, 1998. If inflation, component parts pricing or other
conditions result in an increase in the cost of producing Novabeds(R), the
Company will not be able to pass along such increased costs to its distributors.
The Company does not expect that these fixed price provisions will have a
material impact on the Company.

As a result of common stock sales in 1995 the weighted average number of
common shares used in computing loss per share increased from 4,355,533 at March
31, 1995 to 5,796,016 at March 31, 1996.

Fiscal Year 1996 Compared to Fiscal Year 1995.

In the year ended December 31, 1995 the Company recorded sales of $220,000
and incurred a net loss of $1,302,000 ($.27 per share) compared to sales of
$233,000 and a net loss of $1,211,000 ($.31 per share) in the year ended
December 31, 1994.

In the year ended December 31, 1995 the Company's cost of sales exceeded its
sales and the Company sustained a gross loss of $478,000 compared to a gross
loss of $325,000 in the year ended December 31, 1994. In 1995 and 1994,
unfavorable manufacturing variances from the Company's standard cost to
manufacture were primarily responsible for the gross loss. A substantial
portion of the excessive variance in both years was due to low quantities
produced, changes in product design and manufacturing methods and the fact that
the units produced were part of the Company's initial production run. As a
result, the number of units produced was insufficient to absorb manufacturing
overhead and direct labor efficiency was less than it would be if the Company
were operating at greater levels of production. In addition, in September 1995
the Company opened its new 28,000 square foot manufacturing facility and
incurred start up expenses of approximately $50,000 which were charged to cost
of sales.

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<PAGE>

Research and development expenses declined $102,000 from $400,000 in 1994 to
$298,000 in 1995. Payroll and payroll-related expenses declined $62,000 due to
fewer employees devoted to research and development. Patent development costs
declined $21,000. In prior years, patent development costs were charged to
expense as incurred. In 1995, the Company began capitalizing patent costs and
will amortize these costs over the remaining lives of the related patents. The
amount capitalized in 1995 was $37,000 and amortization of new patents received
in 1995 aggregated $1,000.

General, administrative, marketing and consulting expenses increased $84,000
from $422,000 in 1994 to $506,000 in 1995. An increase in payroll and payroll-
related expenses ($50,000) is attributable to the hiring of a Senior Vice
President at the end of May 1994, who is devoting most of his energies to
marketing and to raising capital. The President's salary increased $14,000 from
$78,000 in 1994 to $92,000 in 1995. In 1995, the President waived payment of
$75,750 earned in 1994 and $39,000 earned in 1995 and the aggregate amount of
$114,750 was charged to expense and credited to additional paid-in capital.
Increases in office salaries, travel and entertainment, patent maintenance fees,
insurance and professional fees were offset by a reduction in consulting fees.

Interest expense declined $36,000 from $70,000 in 1994 to $34,000 in 1995.
At January 1, 1995, two officers/stockholders forgave repayment of debt due them
by the Company aggregating $762,851 and also waived the accrual of interest on
notes payable due them for the first half of 1995. The reduction in interest on
the debt that was forgiven and the waiver of interest due for the first half of
1995 resulted in interest expense savings of $51,000. Interest expense and
amortization of deferred finance costs and debt discount on new financing offset
this expense reduction by $15,000.

As a result of common stock sales and the exercise of warrants the weighted
average number of common shares used in computing loss per share increased from
3,964,598 at December 31, 1994 to 4,783,050 at December 31, 1995.

RESULTS OF OPERATIONS - VIVAX

Nine months ended February 28, 1996 compared to twelve months ended May 31,
1995.

In the nine months ended February 28, 1996, Vivax recorded sales of
$1,702,000 compared to sales for the year ended May 31, 1995 of $1,758,000.
The pro rata increase in sales was the result of growth in the nursing home and
home care business as a result of aggressive marketing to and working with acute
care discharge planners.

For the nine months ended February 28, 1996, Vivax earned a pretax profit of
$246,000 and a net income of $152,000 as compared to a pretax profit of $222,000
and a net income of $129,000 for the year ended May 31, 1995. The pro rata
increase in earnings is attributable to higher sales during the period.

Vivax anticipates that sales and earnings in the period March 1, 1996
through May 31, 1996 will be commensurate with the prior nine month period.

For the nine month period ended February 28, 1996, net cash used in
financing activities was $492,000. Also during the nine months the President
received a salary and bonus of $290,000, additional benefit of $36,000 and
interest of $61,000.

The Company anticipates that in the next year its traditional sales in the
acute care and rehab market will remain consistent, there will be growth in the
private insurance and nursing home business and that the home care business will
stabilize. A substantial increase in new business in the nursing home is
expected due to the introduction of and increased marketing effort on the
Novabed(R).

Vivax expects increased profits in the next twelve months due to an increase
in sales, better management of assets, and reduced interest cost. As the sales
increase, there will be a need for additional rental equipment, which will be
financed from operations.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES - NOVA

During the first quarter of 1996 the Company used net cash in operating
activities aggregating $601,000 compared to $186,000 in the prior year's first
quarter. The increase in funds used in operating activities is attributable to
the increase in net loss and to increases in inventory, accounts receivable and
other assets as the Company began utilizing funds received in the 1995
Financing. The Company purchased equipment and capitalized certain tooling
costs aggregating $10,000 compared to $5,000 in the prior year. In the first
quarter of 1996 the Company received proceeds of $400,000 from borrowing under
the 1995 Financing.

During 1995 the Company used net cash in operating activities aggregating
$1,210,000 compared to $791,000 in the prior year. The increase in funds used
in operating activities is primarily attributable to increases in inventory,
accounts receivable and other assets as the Company began to utilize the funds
received in the 1995 Financing. The Company purchased equipment and capitalized
certain tooling costs aggregating $73,000 compared to $28,000 in the prior year
and provided cash from financing activities of $1,667,000 compared to $851,000
in 1994. In 1995, proceeds from the sale of Common Stock net of issuance costs
aggregated $1,525,000, proceeds from borrowings net of deferred financing costs
aggregated $42,000 and the Company received $100,000 from the exercise of
warrants.

The Company, since its inception through December 31, 1993 has utilized the
issuance of shares of Common Stock as a source of working capital to pay for
rent, compensation, professional fees and to repay debt. During this period,
the Company issued approximately 457,000 shares of Common Stock to pay such
liabilities, aggregating approximately $837,000. In 1994, the Company issued
15,632 shares in payment of rent and professional fees aggregating $25,093. In
1995, the Company did not issue any common stock in payment of any of its
liabilities.

From January 1, 1995 through August 31, 1995, the Company sold approximately
394,000 shares of Common Stock in private placement sales, from which it derived
net proceeds of approximately $545,000. In January 1995 the Company received
$99,600 from the purchase of 73,752 shares of Common Stock by holders of
warrants issued in 1990 with an exercise price of $3.00 per share and an
expiration date of December 31, 1994, which expiration was extended to January
20, 1995 at a revised exercise price of $1.35 per share. The remaining warrants
to purchase 77,391 shares of Common Stock on the same terms were not exercised
and were permitted to lapse. In May 1996, the Company sold 10,000 shares of
Common Stock at $2.00 per share.

The ongoing need for working capital has in the past hindered the Company's
ability to operate in an efficient manner and to produce sufficient product.
During the Company's search for additional capital, it has attempted to
alleviate this problem by obtaining waivers of payment or deferring certain
salaries, extending repayment dates on officers' loans, reducing exercise prices
and extending exercise dates of expiring warrants and by selling restricted
shares of Common Stock in private placement sales.

As of September 5, 1995, the Company negotiated an equity and debt financing
package (the "1995 Financing") consisting of the following:

1. $888,280 in net proceeds after finder's fees and expenses, from the sale
of 900,901 shares of Common Stock at a price of $1.11 per share.

2. $1,000,000 loan facility from People's Bank under a two-year revolving
line of credit collateralized by a first lien on accounts receivable and
inventory and a cash collateral account. Nova is required to maintain an
amount equal to the estimated annual debt service on the outstanding
People's Bank loan in such cash collateral account. This loan bears
interest at People's Bank prime rate plus 1.50%. Advances shall not
exceed 80% of eligible accounts receivable plus 50% of eligible inventory.
Eligible accounts receivable and eligible inventory only include accounts
receivable and inventory related to Nova's Connecticut facility and do not
include accounts receivable and inventory of Vivax. Although, People's
had no obligation to advance funds until the $100,000 loan from the CDA
and the $200,000 loan from the DECD had been fully funded, People's Bank
agreed to waive such conditions because the Company temporarily deferred
the purchase of capital equipment to be purchased with the CDA and DECD
loans. The Company borrowed $250,000 in May and estimates that as of June
__, 1996 it had approximately 100,000 of availability under the People's
Bank facility.

3. $750,000 loan from CII maturing on September 5, 2001. The loan bears
interest at 10% and is collateralized by all of the Company's assets,
including a first lien on its intellectual property, a third lien behind
People's Bank and three of the Company's distributors on accounts
receivable and inventory and a first lien on all other assets.

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<PAGE>

Interest only is payable semi-annually commencing on the earlier of (i)
September 5, 1998 or (ii) the date the Company declares any dividend or
repurchases any of its outstanding stock. The loan was funded upon
achievement of certain milestones and advances of $100,000, $250,000,
$150,000 and $250,000 were received by the Company on September 5, 1995,
January 26, 1996, March 26, 1996 and June 14, 1996. The final milestone
was modified on June 7, 1996. In connection with this loan, CII received
warrants to purchase up to 300,000 shares of Common Stock at $1.11 per
share. Such warrants vest pro rata as the CII loan is advanced.

4. $100,000 loan from CDA for the purchase of capital equipment, maturing on
September 1, 2002. This loan bears interest at 7.94% and is
collateralized by a first lien on the equipment to be purchased with the
proceeds. The loan is payable in equal monthly installments of principal
and interest commencing October 1, 1998 in an amount sufficient to fully
amortize the loan over its remaining term. If the Company's full time
employment in Connecticut is less than 67 jobs after February 1, 1998,
then the Company must prepay $1,500 of the loan for each job below such
number and the interest rate will be adjusted upward based on a sliding
scale which increases based on the number of jobs below such employment
target. CDA also received warrants to purchase 45,000 shares of Common
Stock at $2.50 per share in exchange for a guarantee securing the People's
loan up to a maximum of $400,000.

5. $200,000 loan from DECD for the purchase of capital equipment, maturing
ten years from the date of the first advance. This loan bears interest at
5% and is collateralized by a first lien on the equipment to be purchased
with the proceeds.

6. $100,000 grant from the town of Bristol, Connecticut to help the Company
relocate its primary manufacturing operations to Bristol, of which $50,000
was paid in October 1995 and $50,000 will be paid upon achievement by the
Company of certain employment levels at its Bristol facility.

7. Warrants to purchase an aggregate of 60,000 shares, collectively, of
Common Stock at a price of $2.50 per share and a security interest in the
Company's accounts receivable and inventory (which lien is subordinate to
the lien of People's Bank) were given to three of the Company's
distributors, one of whom is Comed, in exchange for their agreeing to
issue letters of credit securing the People's loan up to a maximum of
$600,000. The Company and two of the distributors also entered into an
agreement allowing such distributors to purchase, and allowing the Company
to require such distributors to purchase, under certain circumstances an
aggregate of up to 126,667 shares of restricted Common Stock at a price of
$1.50 per share. The call was exercised by the distributors in September
1995, and the Company received proceeds of $100,000 in 1995, $50,000 in
January 1996 and $40,000 in March 1996. Pursuant to the financing
agreement with People's, the proceeds received from the distributors
reduced their obligation to maintain letters of credit and are being held
in a restricted cash account for the benefit of People's Bank. Pursuant
to the put/call agreement, the number of warrants issued to the
distributors was reduced by 19,000. The remaining warrants to purchase an
aggregate of 41,000 shares of Common Stock remain outstanding.

The various creditors involved in the 1995 Financing, the Company, Charles
F. Chubb and Paul DiMatteo have entered into agreements (the "Intercreditor
Agreements") which, among other things, clarify the priority of each creditor's
lien on assets of the Company, limit the ability of the creditors to transfer
their financing interests in the Company or amend their financing documents
without obtaining the consent of CII and People's Bank and establish
restrictions and priorities with respect to payments and exercise of remedies.
These liens do not relate to assets of Vivax. A lien on all of the assets of
Vivax was granted as security for the Acquisition Debt. See "Recent
Developments."

As of May 29, 1996, the Company had borrowed $250,000 under the revolving
line of credit but had not received any funds under the equipment loans,
although it plans to begin to borrow from these sources in 1996. Legal fees and
commitment fees (excluding the value of warrants) in connection with the 1995
Financing were approximately $90,000. At March 31, 1996 the Company had a net
worth of $197,000, working capital of $512,000, including unrestricted cash of
$274,000, accounts receivable of $115,000 and inventory aggregating $483,000.
At March 31, 1995, the Company had a net worth of $50,000, working capital of
$140,000, including cash of $97,000, accounts receivable of $13,000 and
inventory aggregating $171,000. The Company

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<PAGE>

has expended less than $40,000 to purchase furniture and equipment for its new
manufacturing facility in Bristol, Connecticut. Manufacturing operations
commenced in November and at March 31, 1996 the Company employed 11 workers in
this facility, including assemblers, welders, supervisors, a purchasing agent
and an administrative assistant. The Company is reviewing plans to purchase
additional manufacturing equipment and has accelerated manufacturing levels in
order to begin shipping meaningful quantities of Novabed(R) units. The Company
has no material commitments for capital equipment expenditures. The Company is
planning to seek additional distributors and accelerate product engineering
research and development.

The financing arrangements with CDA and DECD, both of which are
instrumentalities of the State of Connecticut, provide that the Company must
prepay such loans together with a prepayment penalty equal to 7.5% of the loans
and the guaranty if the Company physically transfers the operations of its
business located in Connecticut outside of Connecticut within 10 years.

The CII loan agreement requires, with certain exceptions, that the Company
maintain a "Connecticut presence" by basing at least 50% of its officers in
Connecticut, basing a majority of its employees in Connecticut and conducting
the majority of its operations in Connecticut. The Company is currently in
compliance with this requirement. The CII loan agreement contains a mandatory
prepayment provision in the event the Company ceases to maintain a Connecticut
presence, the Company sells Common Stock for its own account in an underwritten
public offering or there is a change in control of the Company or its assets.
This provision includes a prepayment penalty in an amount equal to the greater
of (i) an amount sufficient to provide a rate of return of 25% compounded
annually or (ii) the excess of the market price of the Common Stock underlying
the warrant granted to CII over the exercise price of such warrant. The grant
from the City of Bristol must be repaid if prior to August 8, 2005, the Company
relocates 60% of the equipment or employees of its manufacturing operations
outside of Bristol or the Company defaults in payment of property taxes due to
Bristol. The Company has treated the $50,000 grant paid by the Town of Bristol
as a grant award, to be recorded as income at a later date, if applicable. In
order to comply with these requirements, the Company established its
manufacturing facility in Bristol, Connecticut. See "Business - Manufacturing."

The Company's loan agreement with People's Bank requires that the Company
satisfy at the end of each quarter certain financial covenants as set forth
below:
<TABLE>
<CAPTION>

END OF EACH QUARTER DURING END OF EACH QUARTER DURING THE
THE PERIOD ENDING SEPTEMBER PERIOD COMMENCING OCTOBER 1,
30, 1996 1996 AND THEREAFTER
--------------------------- ------------------------------
<S> <C> <C>
Minimum Working Capital $ 500,000 $ 700,000
Minimum Current Ratio 1.50 to 1.00 1.75 to 1.00
Minimum Capital Funds $ 700,000 $1,300,000
Maximum Unsubordinated Debt Ratio 2.00 to 1.00 2.50 to 1.00
</TABLE>

For purposes of the agreement, "Working Capital" is defined as current assets
minus current liabilities, "Current Ratio" is defined as current assets divided
by current liabilities, "Capital Funds" is defined as the sum of tangible net
worth plus subordinated debt minus the sum of intangible assets plus loans to
officers, directors, employees and affiliates, and "Unsubordinated Debt Ratio"
is defined as total unsubordinated debt divided by total capital funds. The
Company believes that it is currently in compliance with these covenants.
However, such covenants become more stringent for the quarter ending December
31, 1996. Failure to satisfy any of these financial covenants constitutes a
default under the People's Bank financing which allows People's Bank to
terminate its obligation to provide financing to the Company and to accelerate
all loans outstanding to the Company. A default under the People's Bank
financing also constitutes a default under the Company's other financing
arrangements. The Company anticipates that it will require approximately $2.75
million of additional financing, $1 million by June 30, 1996 and an additional
$1.75 million

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<PAGE>

by December 31, 1996, to finance its operations over the 12 month period
following June, 1996 and to comply with the financial covenants contained in the
People's Bank loan agreement.

The Company intends to continue to explore strategic alliances or mergers
in addition to the Comed acquisition as a means of improving the Company's cash
flow and capital. In this regard, the Company is engaged in preliminary
discussions with several distributors of medical products regarding a potential
business combination. The Company cannot state that any of these transactions
is probable because no agreement in principle with respect to transaction price
and all other material terms has been reached. In addition, any such
transaction is likely to be subject to the Company obtaining additional
financing and ongoing due diligence. There can be no assurance that any such
transaction will be consummated.

The Company has received reports on its financial statements from its
independent auditors which include an explanatory paragraph indicating that
substantial doubt exists about the ability of the Company to continue as a going
concern. The factors referenced by the auditors include the Company's recurring
operating losses and the need for additional financing for commercial
exploitation of its product. The Company estimates that it will need to obtain
an additional equity contributions of at least $2,750,000 to finance its
operations over the 12 month period following June, 1996. These estimates are
generated from an internally prepared business plan. The Company has begun to
seek additional capital and has retained TimeCapital Securities Corporation
("TimeCapital") as its exclusive agent to assist the Company in raising
$1,000,000 by July 19, 1996 through the sale of Common Stock at a price of $2.00
per share in a private placement. The Company has also entered into an
agreement with TimeCapital for it to act as the Company's exclusive agent to
assist in arranging for one or more qualified broker-dealers to serve as the
underwriter(s) on behalf of the Company in connection with a public offering of
Common Stock. See "Certain Transactions." The Company also has verbal
agreements with three finders, one of whom is Arlindo Jorge a director of the
Company, pursuant to which it will pay a commission of 10% of the proceeds of
private placement sales obtained by the finders. There can be no assurance that
the Company's estimates will prove to be accurate, that the Company will be able
to raise such additional capital or that the Company's existing distributors
will fulfill their minimum purchases. See "Business - Marketing and
Distribution." If such contingencies are not realized, the Company would have
to drastically reduce its staff and curtail manufacturing operations which may
result in a default under and acceleration of the Company's loan obligations
and, ultimately, bankruptcy and/or the discontinuance of operations.

LIQUIDITY AND CAPITAL RESOURCES - VIVAX

Since the Inception of the company through February 29, 1996, ongoing
working capital has been provided by daily cash flow. Some automobile loans
have utilized Ford Motor Credit Company as a source of financing and capital
purchases have been financed from SBA backed bank borrowing, loans from
shareholders and loans from related parties.

In connection with the acquisition of Comed, Vivax issued two promissory
notes of $750,000 each to Douglas and Donna Drew which are guaranteed by Nova.
The first note bears interest at the rate of 8%, requires monthly interest
payments and is due on June 14, 1997. The second note bears interest at 8%,
requires quarterly interest payments and matures on January 1, 2001. Principal
payments are due quarterly 60 days following each of the first three calendar
quarters and 110 days following the fourth calendar quarter, commencing with the
calender quarter ending December 31, 1997, in an amount equal to the lesser of
(i) $37,500 or (ii) 25% of the operating income of Vivax during the prior
calendar quarter. Both notes are secured by a second lien on the accounts
receivable and inventory of Vivax and a second lien on Nova's intellectual
property.

In connection with the 1995 Financing, Vivax posted an irrevocable letter of
credit to People's Bank on behalf of Nova for $200,000 which expires on November
5, 1997. Vivax's obligation to reimburse the bank which posted the letter of
credit is secured by a first lien on Vivax's accounts receivable and inventory.
Nova's obligation to reimburse Vivax is secured by a second lien on Nova's
accounts receivable and inventory.

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As of February 29, 1996, the company has $237,000 in long term debt, of
which $197,000 was to the officers and related parties, which paid in full in
May 1996. Vivax also had outstanding as of February 29, 1996, two notes payable
of approximately $14,000 and $13,000 incurred in connection with the purchase
of, and secured by, certain motor vehicles. This debt bears interest at
approximately 11% and is payable in monthly installments of principal and
interest through February 1997 with respect to the $14,000 principal amount and
through April 1998 with respect to the $13,000 amount.

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BUSINESS

INTRODUCTION

Nova.

The inability to get out of bed or get to the bathroom without requiring
physical assistance, or experiencing considerable discomfort, can make a
bedridden person feel confined, dependent and depressed. The use of manual
transfer procedures can be demeaning to the bedfast person and may cause a
significant loss of dignity. Such procedures can cause injury to patients and
their aides.

The absence of adequate transfer devices for home use and the stress of
physical lifting often cause families to seek institutional care for a disabled
relative. Such a decision can take an extraordinary emotional toll on all
involved. In addition, the high cost of nursing homes often results in the
depletion of a family's financial resources. Transfer-related activities of
hospital and nursing home personnel constitute a significant portion of the work
day and are considered to be a major cause of injury to patients and staff.
Further, prolonged immobility in bed has negative effects on a bedridden
person's bodily functions and health and is the primary cause of bedsores.

Mr. DiMatteo began the research and development program for the Company's
patient transfer system in 1974 while employed as President of Dynell
Electronics Corporation ("Dynell"). At that time, he applied for and was granted
several patents. The program was continued during Mr. DiMatteo's tenure as
President of Robotic Vision Systems, Inc. ("RVSI"). At Dynell and RVSI, a
prototype was developed in an attempt to achieve an effective system. In 1989,
the Company acquired RVSI's transfer bed technology and patents at a cost of
approximately $25,000. See "Patents" and "Management".

Vivax.

Vivax commenced operations in 1991 under the name Comed as a distributor of
specialized beds, support surfaces and related equipment in the greater Boston
area. The specialized bed, support surfaces and related equipment distributed
by Vivax include the Novabed(R), air therapy beds, air therapy mattresses,
enclosure beds, low air beds, obese beds, mattress replacement systems and
mattress overlay systems. These beds and surfaces are used for the treatment of
pressure wounds, burns and trauma and the control of pain. Vivax distributes
its products to hospitals, nursing homes and related care facilities and to the
home care market. Historically, approximately 95% of Vivax's operating revenues
have been derived from the rental, rather than the sale of specialty beds.
Rental arrangements typically provide for ongoing service of the beds by Vivax.
Most institutions rent specialty beds from Vivax on a daily basis while most of
Vivax's home care customers rent specialty beds on a monthly or longer basis.
As of June 1996, Vivax was renting specialty beds to approximately 60
institutions and approximately 90 home care customers.

PATIENT MANAGEMENT SYSTEM

The Company's modular Novabed(R) Patient Management System, consists of a
specialized hospital type bed and companion wheelchair which allows the patient
to be gently and automatically moved from the bed into the wheelchair and back
again. The patient lies on a moveable bed sheet which smoothly moves the
patient toward the head or foot end of the bed. The companion wheelchair is
positioned at the foot of the bed. When an operating key is depressed on the
hand-held pendent, a movable leg and foot rest on the wheelchair moves into
place. The patient is then transferred by a conveyer sheet to the foot of the
bed, with the feet and legs sliding onto the elevated leg rest. The mattress is
then raised to lift the patient to a sitting position as the leg and foot rest
moves the legs forward and down to their normal position. When the wheelchair
backrest is manually inserted, a release lever can then release the wheelchair
from the bed. A patient may be moved from the wheelchair back into the bed by
reversing this process.

The Company's Patient Management System, with the tilt table option, can
also transfer a patient from the bed to a standing position or from a standing
position back to the bed. This feature, which is scheduled to be introduced in
the fourth quarter of 1996, will allow the Novabed(R) to be used as a tilt table
for angular positioning which is beneficial for certain hospital and
rehabilitation applications, such as treatment for burns and recovery from
spinal fusion, total hip replacement and other orthopedic procedures.

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<PAGE>

An Obese Patient Model for transferring patients up to 450 lbs. is complete.
An additional important feature is the Novabed(R) equipped with an air therapy
mattress for the prevention or cure of decubitus ulcers (bed sores). Both the
Obese Model and the air therapy option have been shipped to customers and have
been placed in service. The Company anticipates that its Obese Model will
account for more than half of its sales in the proximate future.

The Company has completed and is manufacturing its first production model.
This model uses a production hospital type bed which is modified to provide
transfer capability. The Company's "Standard" Patient Management System is of
modular construction and therefore can be taken apart for easy transport and
installation in a location. The Company is marketing the Novabed(R) for use in
both homes and institutions, including rehabilitation units and hospitals.
Additional features and optional equipment of the Novabed(R) include:

. Patient Positioning: In additional to the normal tilt functions of a
standard hospital bed, by pressing push buttons in sequence, the patient
can be repositioned (moved upward toward the head of the bed) in a
Novabed(R).

. Toilet Access: The wheelchair seat can be replaced by a commode seat,
and the wheelchair can be located over a home or institutional toilet, or
used with a chamber pot.

. Contour positioning: Height adjustment, upper body positioning, leg
and knee positioning.

. Air therapy mattress for bedsore prevention: The conventional mattress
is replaced with a special mattress providing air-support therapy for the
healing and prevention of bedsores.

In addition to patient transfer, the Company believes that the following
benefits may be derived from its patient transfer system:

Therapeutic Benefits: Frequent or timely movement of a patient to a sitting
or vertical position is extremely important for postoperative recuperation and
for preventing deterioration of the cardiovascular, skeletal, muscular, and
respiratory systems, the skin, and for the patient's overall physical and
psychological well being. Lack of motion can cause pneumonia, accelerated
osteoporosis, blood clots and bedsores, among other serious disorders.

Pain Management: Reduction of pain during repositioning or transfer caused
by, or associated with certain physical or pathological conditions such as
severe burns, postoperative care, multiple trauma, arthritis and advanced
cancer.

Labor Saving Device: Reduction of staffing required to transfer patients,
particularly heavy patients. Reduction of the menial tasks of nursing has the
potential of enhancing the quality of nursing care and helping reduce the
current shortage of nurses.

Reduction of Injuries to Patient and Attendant: There is a high incidence
of back injury associated with patient transfer, which may cause attendants to
lose time on the job, and contribute to the cost of workers compensation
insurance. The Company's transfer system may reduce the incidence of such
injuries.

VIVAX

Vivax does not have any exclusive or other contractual arrangements with the
manufacturers and suppliers of the products it distributes. Accordingly, Vivax
relies on the relationships it has developed with such manufacturers and
suppliers, its established distribution relationships, its service performance
and its reputation to attract and retain suppliers of product. Historically,
Vivax has relied on approximately 4 major suppliers and 2-3 lesser suppliers.
Vivax purchases the products it distributes at the prevailing dealer price.

Vivax also does not have any exclusive arrangements with any of its
customers. Accordingly, Vivax must compete on the basis of price and service
performance.

The Company owns approximately 420 beds, approximately 60% of which are
currently being rented.

PROSPECTIVE MARKETS

Patient Population

-26-
<PAGE>

The Novabed(R) is designed to assist patients, and has proven to be of
particular benefit for obese patients, who require assistance in transferring in
or out of a bed or chair. Persons who are bedfast or chair-fast generally come
from the following groups:

Elderly

According to statistics compiled by the United States Bureau of the Census,
in 1995 there were 33.4 million Americans age 65 or older and by 2000 this age
group is expected to increase to 34.3 million with approximately 6.6 million
elderly persons in the United Sates requiring long-term care.

Persons Severely Handicapped by Medical Conditions or Trauma

The Company believes that many persons who are severely disabled due to
muscular dystrophy and related neuromuscular disorders, including amyotrophic
lateral sclerosis (Lou Gehrig's disease), cerebral palsy, stroke or severe
traumatic spinal cord injury can benefit from the Novabed(R).

Based on input from the Company's distributors, the Company's own beta-site
testing and limited sales to date, the Company believes that potential users of
its patient transfer system fall primarily into three categories:

(1) Hospitals and Rehabilitation Centers

The Company believes that its patient transfer system may provide needed
therapeutic benefits and may be particularly useful in such hospital service
areas as those used for post-operative care, rehabilitation, long-term care,
chronic disease, orthopedic care and cancer care. The Company considers
hospitals to be important potential customers. It believes that successful
clinical trials in hospitals are important in seeking medical acceptance and
that follow-on sales to hospitals will then spread the product's reputation and
produce referrals by hospital discharge planners and physicians for the home
care and nursing home markets. The Company has conducted beta site and field
trials in non-hospital settings and the Company's distributors are compiling
information with respect to utilization in the hospital setting. The Company
believes that hospitals which purchase its patient transfer system may be better
able to utilize staff, reduce patient transfer staff requirements, reduce
workers' compensation claims and reduce staff transfer-related injuries.

(2) Nursing Homes

The Company believes that many residents in nursing homes require assistance
in using the toilet or are chair fast or bedfast. The Company believes that
nursing homes which purchase its patient transfer system may be better able to
utilize staff, improve quality of care given and reduce patient and staff
transfer-related injuries.

(3) Home Care Market

The Company believes that there are many adults residing at home who need
assistance in getting in or out of a bed or a chair. The Company also believes
that one of the reasons that some persons are moved from private homes to
nursing homes is that their spouse or other caregiver cannot effectively and
easily move the person between a bed and a commode or wheelchair with other
currently available transfer devices.

Nursing home costs are often financially devastating to the patient and
family. Many nursing home residents who were not initially indigent require
governmental assistance after exhausting their resources on nursing home care.

The Company believes that its transfer system would enable many patients to
be cared for at a lower per diem cost at home by a family member combined with
periodic visits by a nurse or home health care aide. The Company believes that
with a growing and relatively affluent elderly population, home care is
potentially its largest segment and that many home care families and patients
will have strong emotional or financial incentives to use its transfer system to
avoid or defer entry to a nursing home.

MARKETING AND DISTRIBUTION

Nova initially engaged, for select regions, distributors with experience in
the specialty bed market. These distributors in turn sell or rent direct to
institutions, to other dealers, and home healthcare service providers. In
addition, the Company recently acquired one of its distributors, Comed, which
has been engaged in the distribution of specialized beds and support surfaces
and

-27-
<PAGE>

equipment in the greater Boston area since 1991. As a result, the Company
now has in-house marketing and distribution capabilities in the greater Boston
market.

The Company has entered into seven distributorship agreements providing
for the sale and shipment of Novabed(R)s to each distributor and the granting of
an exclusive sales territory to each distributor. In 1994, the three
distributors then under contract with the Company ordered and were shipped an
aggregate of 20 Novabeds(R) which exceeded their aggregate minimum purchase
requirements by 5 units. In 1995, the Company sold and shipped 13 Novabeds(R)
and 8 wheelchairs to its six distributors, most of which were shipped in the
first quarter. This sales decrease resulted from the Company's focus on
arranging, negotiating and consummating the 1995 Financing and relocating its
assembly operations from New York to Connecticut and the Company's lack of
sufficient working capital. As a result, in 1995 the Company was unable to
produce sufficient product to satisfy its distributors' minimum purchase
requirements of 38 Novabeds(R). The Company and the two distributors who were
unable to receive their minimum purchase requirements in 1995 agreed to extend
the period for selling and purchasing the minimum requirements for 1995 and
thereafter by one year and agreed that all prior purchases would count toward
their 1996 minimum purchase requirement.

To date, the Company has generally encouraged the placement of and accepted
orders for product as it envisioned that product would be available shortly.
The Company's distributors generally have not placed firm orders until the
Company has indicated that product is or will be available. The following table
sets forth the number of Novabeds(R) ordered and delivered in each month of 1996
to date:

NOVABED(R) ORDERS RECEIVED NOVABED(R) ORDERS SHIPPED
-------------------------- -------------------------

January 1996 2 -
February 1996 3 2
March 1996 2 3
April 1996 9 2
May 1996 5 9
June 1996 2 3

The Company's distributors have agreed to purchase a minimum number of units
from the Company over specified periods of up to 31 months from June 1, 1996,
which includes approximately 184 units during 1996. During the period January
1, 1996 to July 1, 1996, the Company shipped 19 units, all of which were
purchased by the Company's distributors. As of July 1, 1996, the Company had
unfilled orders for 2 units and 3 wheelchairs from a private hospital. The
distributors have not ordered a pro rata portion of their 1996 minimums. See
"Risk Factors - Dependence on Distributors; Failure of Distributors or Company
to Perform."

Each distributor's purchase price is fixed for the period of the initial
purchase commitment. In addition to being required to satisfy a minimum
purchase commitment during an initial period, each distributor is required to
maintain certain annual purchase levels and to distribute such purchases
throughout the year to retain exclusive rights to sell in his territory. The
obligations of such distributors are not supported by financial or performance
guaranties. In the event any distributor is unable to achieve sales equivalent
to its minimum purchase requirement, either due to its failure to adequately
market the Novabed(R) or the inadequacy of the demand for the Novabed(R), the
Company will be relying on the financial strength of such distributor to
purchase the required minimum to be held in inventory by the distributor. While
the Company believes that these distributors are financially sound, no assurance
can be given that such distributors will satisfy their obligations to the
Company. No assurance can be given that the Company will be able to obtain
sufficient capital to meet its obligations under these agreements to supply the
number of units required. The Company estimates that it will need to obtain an
additional equity contribution of approximately $2.75 million to finance its
operations through June 1997. See "Risk Factors - Auditor's "Going Concern"
Explanatory Paragraph." If the Company does not obtain the necessary additional
financing it may not be able to produce sufficient product to satisfy the
minimum purchase requirements of its distributors. Failure by the Company to
produce sufficient product to satisfy its obligations to its distributors would
constitute a default under the Company's distribution agreements which may
subject the Company to claims for damages and may allow the distributors to
terminate such agreements.

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<PAGE>

For the year ended December 31, 1995, sales aggregating approximately 87% of
the Company's net sales were made to the following distributors:
<TABLE>
<CAPTION>

<S> <C> <C>
Advanced Therapeutics, Inc. - $ 64,596 (29%)
Comed Systems, Inc. - $ 60,956 (28%)
Concept Medical, Inc. - $ 36,194 (16%)
Recovercare, Inc. - $ 30,405 (14%)
</TABLE>

The names and exclusive territories of all the distributors are as follows:

NAME OF DISTRIBUTOR TERRITORY
- ------------------- ---------
<S> <C>
James J. Brooksbank (Medco Equipment, Inc.)* Minnesota
Innovative Medical Systems, Inc. Missouri, Kansas, Arkansas and part of Illinois
Advanced Therapeutics, Inc. Parts of Michigan and Wisconsin
Recovercare, Inc. Parts of New Jersey, Pennsylvania, Delaware
Stat Medical, Inc. Washington
Concept Medical Corporation Parts of Florida
JCM Capital Corp. New York

</TABLE>

* Medco Equipment, Inc. is an affiliate of James J. Brooksbank.

The Company is required to train the distributors' service personnel
and generally to fill orders within 180 days, although the Company's agreement
with one of its distributors requires that orders be filed within 30 days. The
distributors are required to service the product they sell in a high quality
manner to avoid loss of their right to market the Novabed(R).

The Company feels that working initially with distributors is the most
expeditious way to generate early sales, lower the Company's working capital
requirements by receiving prepayment on required product purchases and reduce
the initial cost to market the Novabed(R). Five of the Company's agreements
with its distributors require that 50% of the purchase price be paid upon
acceptance by the Company of an order and four of the Company's agreements with
its distributors require that the balance of the purchase price be paid within
10 days after delivery of the product. One of the Company's distributors is not
required to make a prepayment, another distributor is only required to make a
25% prepayment and three of the distributors either have the right to pay the
unpaid balance of the purchase price within 30 days of delivery or no payment
period is specified. If the Company enforces these payment arrangements,
partial payment upon order and accelerated payment upon delivery arrangements
will improve the Company's cash flow and reduce its working capital
requirements. In the past, the Company has waived these payment provisions
under certain circumstances and may do so in the future. The Company recognizes
revenue at the time of shipment of product.

The Company's ability to satisfy its production requirements will
depend upon the Company's ability to obtain additional capital and/or financing.
See "Risk Factors - Dependence on Distributors; Failure of Distributors to
Perform." The Company's agreement with one of its distributors provides that
such distributor shall not be required to meet its minimum purchase requirements
during any period that the Company is not able to satisfy such requirements and
extends the term of such agreement by one month for every month of delay for
each order placed by the distributor.

Four of the Company's distributors own in the aggregate 818,784 shares
of the Company's Common Stock. Advanced Therapeutics, Inc. and Innovative
Medical Systems, Inc. acquired 66,667 and 60,000 shares, respectively, at a cash
price of $1.50 per share pursuant to the exercise in September 1995 of certain
call option rights granted to them by the Company in connection with the 1995
Financing. See item 7 under "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources." JCM
Capital purchased 450,450 shares of common stock from the Company at a cash
price of $1.11 per share as part of the private placement that constituted part
of the September 1995 Financing. James J. Brooksbank acquired the following
shares as part of private placement transactions:

DATE PURCHASED NUMBER OF SHARES CASH PRICE/SHARE
- ---------------- ---------------- ----------------
<S> <C> <C>

</TABLE>

-29-
<PAGE>

5/91 6,667 $1.50
2/15/94 50,000 1.00
3/17/94 85,000 1.00
4/17/94 100,000 1.00
-------

241,667
========

</TABLE>

The option exercise price of $1.50 per share was negotiated by the Company with
Advanced and Innovative. The private placement price of $1.11 per share paid by
JCM Capital was negotiated by the Company with TimeCapital, the private
placement agent and is the same price paid by the other participants in such
private placement. The private placement prices paid by James J. Brooksbank
were established by the Company and made available to all interested and
qualified investors.

Because of the Company's desire to grow its business and its concern
that its existing distributors may not be able to fully satisfy their purchase
commitments over the agreed upon time frames, the Company is currently seeking
additional agreements with potential distributors, durable medical equipment
dealers or other organizations which have access to disabled persons who are
candidates for the Novabed(R) Patient Transfer System. The Company may also
consider entering into a license agreement or a joint venture agreement or
merger with a strategic partner. The Company also plans to retain the rights to
distribute its products and to set up its own regional distribution systems,
which it intends to do in the greater Boston market through its acquisition of
Comed. Nova intends to employ a direct sales force to sell to hospitals, nursing
homes, and other health care institutions. Sales to the home healthcare market
will be made through home medical equipment (HME) and durable medical equipment
dealers (DME), and home healthcare agencies. Nova will cooperate with these
dealers to install and service the product through the dealer network.

In addition, the Company will also investigate a rental program,
provided that sufficient capital to finance the rental inventory can be
obtained. Equipment rentals to institutions would be handled directly by the
Company. For the home care market Nova would maintain ownership of the product
and would work with dealers where the dealer acts as a commissioned sales and
collection agent on equipment rental to the home.

The marketing operations of the Company are currently carried out by
one of the Company's executive officers assisted by service personnel. The
Company plans to hire additional marketing, sales and service personnel in the
near future.

The Company presently warrants the material and workmanship of its
patient transfer systems for a period of one year from the date of their sale.
The Company has fulfilled its warranty obligations in connection with its
initial production lot and retrofitted these units to correct design
deficiencies, improve reliability and incorporate product enhancements.

BETA SITE AND FIELD TRIALS

Nova commenced its beta-site program in November 1992. The first unit
was installed for a clinical field trial in a full service skilled nursing home
in Connecticut. The nursing home uses the patient transfer system primarily for
stroke patients. Novabed(R) has been in service continually since installation
where it has performed very well with the service and nursing staff on the
designated floor able to quickly learn to operate the product. The nursing home
estimates that 25% of their current patients could use the patient transfer
system. They have purchased an additional Novabed(R) and intend to try to
purchase other units.

In February 1993, a second unit was placed in a private home of a
patient recommended by the Multiple Sclerosis Society. The patient, who lives
with her husband and daughter in a suburban home, is very debilitated. She has a
live-in home care attendant during the week. The family reports that the patient
often experiences severe pain after being seated in a chair or lying in bed for
as short a time as a half hour. This condition mandates frequent transfers to
and from the bed, averaging 10 to 20 times a day. Prior to the installation of
the Novabed(R) such frequent transfers placed an enormous, round-the clock,
burden on the home care attendant and the family. The family reports that on two
occasions, because of Novabed(R), the patient's doctor approved keeping the
patient at home during a required change in drug administration regimen instead
of requiring a normal 7 to 8 day hospitalization period.

Several minor changes in design were the result of feedback from these
trials and from considering the special needs of a nursing home. These changes
were implemented in the initial production run prior to sale of units to
distributors. Design change suggestions have come from current distributors who
have been using the production model. Certain of these changes have been
incorporated in the current production lot of 50 units.

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<PAGE>

FOREIGN MARKETS

Once the Company has successfully marketed its patient transfer system
in the domestic market, the Company plans to seek license or joint venture
agreements with foreign manufacturing or trading companies in Canada, Europe and
Japan. The Company, however, is not presently engaged in any license or joint
venture negotiations.

THIRD-PARTY REIMBURSEMENT

The market for medical devices is materially affected by the extent to
which the purchase price or rental cost will be reimbursed by third-party
payors, such as Medicare, Medicaid and private insurance. This is particularly
true with home care. Sales of capital equipment, such as the Novabed(R) and the
other specialized beds sold or rented by Vivax, to institutions such as
hospitals and rehabilitation facilities are not directly reimbursed by Medicare
but are indirectly reimbursed through an overhead allocation.

In the home care equipment market, third-party reimbursement issues
center around whether the patient transfer system will be a covered item, the
level of reimbursement available, and for which medical indications
reimbursement will be available. In the absence of a national Medicare coverage
determination, the local contractors that administer the Medicare program can,
within certain guidelines, make their own coverage decisions. Favorable
coverage determinations for durable medical equipment are made in those
situations where a review concludes that the product is safe (FDA approval
required), the product is durable, medical efficacy can be established, and the
patient qualifies as needing the product for medical reasons.

The Company has made a presentation to the Health Care Financing
Administration ("HCFA") in anticipation of submitting an application for a new
procedure code for the Novabed(R). HCFA has assigned analysts to the Novabed(R)
and will assist the Company in preparing the application for the procedure code.
A specific new procedure code is required prior to Medicare approval.

To obtain a new procedure code, the Company will be required to
demonstrate that its patient transfer system is valuable and medically
beneficial to the home care patient and that it is not merely a luxury item. To
obtain data to support this position, the Company intends to sponsor a study of
home care patients who have each purchased, rented or been supplied with its
patient transfer system, and who could benefit from its use, e.g. by improved
health, reduced home care cost or postponing or avoiding entry into a nursing
home. The Company anticipates that such a study, expected to be performed over a
six month period will involve the establishment of appropriate protocols, the
assembly and documentation of study data and its presentation to HCFA personnel.
The Company believes that it may take a year or more, subsequent to the
completion of the study, to obtain a new procedure code for its transfer system,
and there is no assurance that it will succeed in these regards. Because of the
uncertainty that it can obtain a new procedure code and a reimbursement level
which is a major percentage of the sale or rental price of the equipment (e.g.
80%), the Company has assumed in its planning that a new procedure code will not
be granted. It believes, although there can be no assurance given, that in view
of the number of persons at home who need assistance in getting in and out of a
bed or chair, there will be sufficient demand for the Company's patient transfer
system to achieve commercial viability absent any reimbursement.

The agreement with one of the Company's distributors requires that the
Company apply for third party home care, hospital and nursing home reimbursement
approval for Medicare and New York State Medicaid no later than April 30, 1997
and that if such approvals are not obtained within one year of the date of
application that such distributor's minimum order quantity shall be reduced by
50% until such approval is obtained.

Approximately 21% and 24%, respectively, of Vivax's revenues for the
year ended May 31, 1995 and the nine months ended February 29, 1996 were derived
from Medicare. Reimbursement can be influenced by the financial instability of
private third-party payors and the budget pressure of and cost shifting by
governmental payors. In January and April 1996, respectively, Medicare Part B
reimbursement (which relates to home care patients) of specialty beds was
reduced by 20% and the criteria for determining eligibility of patients for
reimbursement for specialized beds were made materially more stringent.
Approximately 15% of Vivax's revenues is currently derived from Medicare Part B
reimbursement. These developments will have a materially adverse effect on
future sales of the Company. In addition, the Company believes that the
Medicare Part A reimbursement system for nursing home patients is likely to be
modified. It is anticipated that the new system will move away from current
cost-based reimbursement towards a managed care model with block awards to fewer
regional administrators who will rely on fewer suppliers. The impact of any
such changes is difficult to determine. Medicare Part A reimbursement currently
represents less than 10% of Vivax's revenues. However, any reduction in
coverage or reimbursement rates will have a material adverse effect on the
Company's results of operations. See "Business - Third-Party
Reimbursement."

-31-
<PAGE>

The Company has added an air-therapy mattress as an option to the
Novabed(R). There are procedure codes and policies established for the use of
support surfaces for the prevention of decubitus ulcers. The distributors who
rent the Novabed(R) to their customers assist these customers in obtaining
Medicare reimbursement for the Novabed(R) outfitted with the air therapy
mattress.

In addition, the Company's operations are subject to federal, state
and local regulations with respect to environmental and safety matters. The
Company has obtained Eastern Testing Laboratories approval relating to certain
safety aspects of its Novabed(R). The cost of compliance with such laws and
regulations, in the Company's opinion, have not materially affected its
operations.

RESEARCH AND DEVELOPMENT

During the years ended December 31, 1994 and 1995, the Company
expended approximately $771,000 and $298,000, respectively on research and
development activities. The objective of the Company's research and development
program has been to complete development of its patient transfer system,
achieve manufacturing efficiencies to make it commercially acceptable, improve
its reliability and maintainability and to develop additional patient transfer
capabilities to improve the applicability and appeal of Novabed(R). The Company
has also developed a pre-production model of a powered wheelchair which is
compatible with Novabed(R).

MANUFACTURING

In the fourth quarter of 1995, the Company moved most of its
manufacturing and assembly operations into an approximately 27,750 square foot
facility in Bristol, Connecticut. This move consisted of relocating certain
equipment from Hauppauge, New York, which was accomplished at an immaterial
cost. The Company's New York facility is adequate for the manufacture of only
about 150 beds per year. The New York facility will continue to phase out its
manufacturing operations as the Connecticut facility continues to be developed
and ultimately the New York facility will be used primarily for research and
development and corporate offices.

Nova purchases off-the-shelf components such as hospital beds, motors,
actuators and mattresses, as well as special items such as seat cushions,
commode seats and certain electronic and manufactured parts. In the past, the
Company manufactured other remaining parts and components in-house. This
manufacturing was fairly limited and has been virtually eliminated in favor of
subcontracting this work. The Company intends to add in-house manufacturing
capabilities only when such efforts will result in cost savings and when it has
adequate capital. The Novabed(R) is then assembled and tested in accordance
with defined quality control procedures. Assembly includes welding and
electrical wiring. It is anticipated that with capital expenditures of
approximately $400,000 the Company will be able to manufacture in-house many of
the components of the Novabed(R) that are not standard, commercially available
parts, and thereby reduce its costs of production. The Company's Connecticut
facility has a production capacity of approximately 1,500 Novabeds(R) per year.
The Company currently has 11 employees at its Connecticut facility and plans to
hire more as production requirements increase.

The Company has selected a particular model of a hospital-type home
care bed for incorporation into its patient transfer system. This model is
currently being produced in large quantities. Although there can be no
assurances, the Company believes that this model will continue to be available
at reasonable prices for the proximate future. The Company has an agreement
with Omni Manufacturing, Inc., its primary supplier of the above-referenced
hospital-type bed to furnish the Company with up to 800 beds at a capped price
per bed for the two year period ending February 28, 1997. The Company, in the
alternative, may obtain such beds from other sources or undertake to manufacture
them in house, or modify its product design to use a different manufacturer's
bed, which are available from a number of alternative sources. See "Risk Factors
- - No Significant Manufacturing Capacity or Experience".

PATENTS AND TRADEMARKS

The Company has been issued 18 United States patents related to its
patient transfer system and bed sore prevention. These patents expire
commencing in 2005 through 2014. Three additional patent applications relating
to transfer system design and associated products are pending. The Company has
also filed a total of 22 patent protection applications in five European
countries, Japan, and Canada and plans to file additional applications in both
the United States and other countries.

The Company believes that patent protection will be of material
importance to its growth potential. In addition to patents and patent
applications covering the principles of its transfer system, the Company has
applied for patents on alternative

-32-
<PAGE>

approaches and methods which it does not currently plan to utilize but which it
believes are material to its patent protection strategy. The Company has spent
over $560,000 to date on patent-related expenses and believes that it will
obtain protection for the approaches it is attempting to patent. Effective as of
January 1, 1995, the Company's policy is to capitalize legal fees for new
processes and to write these costs off over the remaining life of any patent,
when received or to write them off as soon as a patent application is rejected.

No assurance can be given that additional patents will be issued, or
if so issued, that the scope of protection afforded thereby or by the Company's
current patents will be adequate to protect the Company from competition.
Further, no assurance can be given as to the availability to the Company of
adequate financial resources to contest any possible patent infringement by
others.

In 1994, the Company registered the trademark "NOVABED" for use with
its product.

GOVERNMENT REGULATION

The Company's patient transfer system is a "medical device" subject to
regulation by the United States Food and Drug Administration (the "FDA"). As in
the case with other medical devices, manufacture of such systems are subject to
certain "good manufacturing practices" promulgated by the FDA and the Company
is subject thereto with regard to the manufacture of its patient transfer
systems. The Company believes that it is in compliance with such regulations.
The Company received pre-market 510(k) approval for Novabed(R) from the FDA in
October 1987. Since the date of such approval the Company has made a number of
modifications to the Novabed(R). Such modifications generally comprise cost
efficiencies and operational improvements. The Company believes that these
modifications individually and in the aggregate, do not significantly affect
the safety or effectiveness of the Novabed(R) as described in its original
510(k) application to the FDA. The Company is in the process of preparing a
510(k) application for its new products and expects that the application will be
submitted by September 1996. The application will also update the current
version of the Novabed(R). The Company anticipates that the approval process
will take approximately six (6) months after application is made.

Vivax, like other Medicare providers, is subject to governmental
audits of its Medicare reimbursement claims. As a provider of services under
the Medicare programs, Vivax is also subject to the Medicare fraud and abuse
laws.

COMPETITION

The market for hospital beds, and to some degree, wheelchairs,
transfer devices and patient lifts, is dominated by several large companies of
which Everest & Jennings International Ltd., Hill-Rom Company Inc. (a subsidiary
of Hillenbrand Industries, Inc.), Invacare Corporation, Sunrise Medical Inc. and
Stryker Corporation are among the largest. Other smaller companies such as
Trans-Aid Corp., Midmark Corp., Medical Laboratory Auto Inc. and American
Medical Systems are also engaged in the marketing of transfer and patient lift
devices. Virtually all of the Company's competitors have substantially greater
financial, manufacturing and marketing resources than the Company.

Optimum pricing of Novabed(R) rental and sales units is difficult
since the Company believes that nothing in the current marketplace provides the
features and benefits of its patient transfer system. The Company's standard
model for home care use is being offered for sale to distributors at
approximately $11,500 and for rental by the distributor at approximately $75 per
day. The Company's Obese Model is offered for sale to distributors at
approximately $13,500 and for rental by the distributor at approximately $100
per day. The Company may test various pricing strategies as new sales and
service areas are opened. By way of comparison, other specialty bed products
such as air-therapy beds are comparably priced while standard hospital beds may
cost substantially less.

The Company believes that it will be able to initially compete on the
basis of product features and performance, particularly with regard to transfer
mobility between bed and wheelchair/commode. Although the Company believes that
it will be difficult, expensive and time consuming for another concern to
develop a product similar to the Company's patient transfer system without
infringing on the Company's patents, it is possible that a concern could do so.
No assurance can be given, however, that companies with substantially greater
resources than the Company have not developed or are not in the process of
developing patient transfer technology and products which would be competitive
with the Company's patient transfer system in terms of product features,
performance and price.

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<PAGE>

Third-party payors, such as Medicare, Medicaid, and private insurance
companies, reimburse many durable medical equipment purchases and rentals. A
conventional home care hospital-type bed and a conventional wheelchair as stand-
alone units are presently reimbursed at the rate of 80% of cost. The Company at
this time does not have advance approval of third-party reimbursement and no
assurances can be given that an adequate level of third-party reimbursement, or
any reimbursement at all, will be available to customers for its patient
transfer system. Failure to obtain favorable determinations concerning
reimbursement may have a material adverse effect on the Company's competitive
position. Although the Company has been able to effect sales and to sign up
distributors for minimum purchase commitments without any direct third-party
reimbursement, the ability of the Company to achieve adequate sales to become
profitable will be adversely affected if direct third party reimbursement for
the Company's products is not obtained.

Vivax faces competition from manufacturers who distribute similar
products directly in the greater Boston area and independent distributors of
similar products in this market. Vivax is also facing increased competition
from less costly and less sophisticated devices which have gained market
acceptance and are being mass marketed. As a result of this increased
competition, product pricing has eroded and service demands have increased
despite the substantial increase in the population of patients using products of
the type distributed by Vivax.

EMPLOYEES

At the end of June 1996 the Company had twenty-two full-time
employees, including four executive officers, working for Nova and thirteen
full-time employees devoted to the Vivax business. The Company also employs
part-time technicians, when needed. The Company anticipates hiring additional
manufacturing personnel as necessary to meet production requirements.

APPROVALS AND CERTIFICATIONS

The patient transfer system has been tested and examined by ETL
Testing Laboratories, Inc. and found to comply with the applicable requirements
of the Standard for Personal Care and Health Care Applications - UL1431, for
Motor Driven Appliances - UL73, and the Standard for Medical and Dental
Equipment - UL544.

FACILITIES

The Company leases 7,500 square feet of space in Hauppauge, New York
which is used for corporate offices, administration, manufacturing, warehousing
and research and development. The lease, which provides for a monthly rental of
$4,375, expires September 30, 1996. The Company is obligated to pay its
proportionate share of the landlord's real estate taxes and increases in the
landlord's common area maintenance charges. If the lease is not continued, the
Company anticipates no substantial business disruption in securing alternative
or expanded facilities.

The Company leases approximately 27,750 square feet of space in
Bristol, Connecticut which is used for fabricating, assembly, shipping,
warehousing and administration. The lease, which provides for a monthly rental
of $11,563 is for a term of five years commencing September 1, 1995 and ending
August 31, 2000. The Company is required to pay its proportionate share of the
landlord's real estate taxes, insurance and common area maintenance charges. The
Company has an option to renew the lease for an additional five years and also
has the right to lease an additional 2,250 square feet of the building.

Vivax leases approximately 6,500 square feet of space in Seabrook, New
Hampshire which is used for corporate offices and warehousing. The lease
provides for a monthly rental of $3,500 and expires on November 30, 1998. The
landlord is the Drew Family Trust, the settlors of which are Douglas and Donna
Drew, the owners of all of the outstanding stock of Comed prior to its
acquisition by Nova. The Company believes that the terms of the lease are no
less favorable to the Company than would be obtainable in an arms length
transaction.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following sets forth information regarding the directors and
executive officers of the Company.

NAME AGE POSITION
- ---- --- --------
<S> <C> <C>

Paul DiMatteo 68 Chairman of the Board

Stephen Fisher 49 President, Chief Executive Officer,
Chief Financial Officer, Assistant Secretary,
Treasurer and Director

Charles F. Chubb 76 Senior Vice President, Secretary and Director

Samuel N. Paul 57 Senior Vice President and Director

Douglas Drew 51 Senior Vice President and Director

Harold J. Lash 64 Controller

Jay M. Haft 60 Director

Arlindo Jorge 72 Director

Robert Segnini 53 Director

</TABLE>

Mr. Chubb has indicated his intention to retire in the near future.
The Company is in discussions with Mr. Chubb to retain him as a part-time
consultant after he retires.

PAUL DIMATTEO, the founder and principal stockholder of the Company,
has been the Company's Chairman since its inception in January 1984 and was
President and Chief Executive Officer from the Company's inception until June
__, 1996 when he resigned and became Director of Research and Development. From
December 1977 until the beginning of the Company's active operations in July
1984, Mr. DiMatteo was Chairman of the Board and President of Robotic Vision
Systems, Inc., ("RVSI"). From June 1960 until its merger in December 1977 with
United Technologies Corporation ("United"), he was Chairman of the Board and
President of Dynell Electronics Corporation ("Dynell"), of which Mr. DiMatteo
was a co-founder. The merger of Dynell with United in December 1977 resulted in
a spin-off company called Solid Photography, Inc., which later changed its name
to RVSI. For his inventions in three-dimensional vision, Mr. DiMatteo was cited
by Technology magazine as one of 100 persons responsible for important technical
advances during 1981. Mr. DiMatteo holds a Bachelor of Science degree in
Electrical Engineering from the University of Rhode Island and is listed as the
inventor or co-inventor on 70 patents and patents pending.

CHARLES F. CHUBB has served as Senior Vice President and a Director of
the Company from 1985, as Treasurer from 1985 to March 1996 and as Secretary
from December 1994. From 1962 to 1978, he was Senior Vice President for
Research and Development at Dynell. After the merger in 1977 of Dynell and
United, he served as Manager of Shipboard Technology until joining the Company
in February 1985. Mr. Chubb holds degrees from Princeton University,
Massachusetts Institute of Technology and Polytechnic University and is listed
as the inventor or co-inventor on 20 patents and patents pending.

STEPHEN FISHER became President and Chief Executive Officer of the
Company as of June 18, 1996, on which date he ceased to serve as Senior Vice
President, a position he assumed in June 1994. Mr. Fisher has served the
Company as a Director since June 1994, as Assistant Secretary from December 1994
and as Chief Financial Officer and Treasurer from March 1996. From May 1992 to
May 1994 he served as an officer and director of Aztech Corp., which acted as a
consultant to the Company during such period. From 1985 to 1992 Mr. Fisher held
various positions including President and Director of Memry Corporation, a
developer and manufacturer of new products. Prior thereto, he was President of
Materials

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<PAGE>

Systems, Ltd., an engineering and management consulting firm. He was
an INCRA Fellow at Carnegie-Mellon University and was an Assistant Professor and
conducted research at West Virginia Institute of Technology and Virginia
Polytechnic Institute.

SAMUEL N. PAUL has served the Company as Senior Vice President since
September 1995 and as a Director since December 1995. From February 1992 to May
1994 he was President, Chief Operating Officer and Director of Industrial Health
Care Company, a provider of occupational health services. From October 1990 to
January 1992 he was Manager of International Sales and Marketing for Colt's
Manufacturing Company, a manufacturer of firearms. From May 1988 to October 1990
he was a Vice President and Director of Shared Technologies, Inc., a provider of
leased communication equipment. Mr. Paul is President and part owner of
Meadowbrook, a skilled nursing facility located in Connecticut. Mr. Paul holds a
Bachelor of Science degree in Mechanical Engineering from the University of New
Hampshire.

DOUGLAS DREW became a Senior Vice President and a director of the
Company on June 14, 1996 when the acquisition of Comed was consummated. From
1989 to June 1996, he was President, a Director and a substantial stockholder of
Comed, a company that he founded. Prior to the founding of Comed, Mr. Drew was
Director of North American Sales for Concept, Inc. and prior to that Director of
Sales and Marketing for Richards Medical.

HAROLD J. LASH has served the Company as Controller since March 1992.
From 1989 to 1991 he was Chief Financial Officer of Pen-Tab Industries Inc., a
privately-held manufacturer of stationery and school supplies. From 1976 to 1988
he was Vice President-Finance and a Director of Aileen, Inc., a publicly-held
apparel manufacturer and retailer. Mr. Lash is a Certified Public Accountant.

JAY M. HAFT, a Director of the Company since July 1985 has served as
Chief Executive Officer and Co-Chairman of the Board of Directors of Noise
Cancellation Technologies, Inc., a developer of noise cancellation technology
and products ("NCT"), since November 1994. He also served as President of NCT
from November 1994 to July 1995. Since January 1994, Mr. Haft has been of
counsel to the law firm of Parker Duryee Rosoff & Haft, the Company's counsel.
He has been a practicing lawyer since 1959 and received his law degree from Yale
Law School. Mr. Haft also serves as a Director of Extech Inc., RVSI, CAS Medical
Systems, Inc., Viragen Inc. and Oryx Technology Inc., all of which are publicly-
owned concerns.

ARLINDO JORGE has been a Director of Syncor Industries, Inc. since
1972 and, until June 30, 1991, when he retired, had been Executive Vice
President of such concern as well as President of Syncor Services, Inc., which
provides sales and administrative services to Syncor Industries, Inc. Prior
thereto, he was an engineering manager in the Radiation Division of the Sperry
Gyroscope Company. Mr. Jorge holds a Bachelor of Science degree from the
University of Massachusetts and a Master's degree in Electrical Engineering
from the University of Michigan. He has been a Director of the Company since
September 1988.

ROBERT SEGNINI, has been employed by the State University of New York
at Stonybrook as Director of Physical Laboratories in the Department of Physics
since 1990. From July 1986 through December 1989, Mr. Segnini was employed by
the Company as its Vice President of Operations. Prior to joining the Company,
he was a Vice President and a Director of RVSI. In February 1986, Mr. Segnini
left RVSI to establish Robotic Automation, Inc., an engineering and consulting
company specializing in the field of factory automation. Mr. Segnini holds an
Associate's degree in Electrical Engineering from the City University of New
York and is listed as the co-inventor on seven patents and patents pending in
the health care field. He has been a Director of the Company since July 1986.

The term of each director extends until the next annual meeting of
stockholders of the Company and until his successor is duly elected and
qualified. The term of each officer of the Company extends until the first
meeting of the Board of Directors following such next annual meeting, and until
his successor is duly elected and qualified.

EXECUTIVE OFFICER COMPENSATION

The following table sets forth information with respect to the
compensation for services rendered in all capacities to the Company during its
fiscal years ended December 31, 1995, 1994 and 1993 by its Chief Executive
Officer. No executive officer's compensation exceeded $100,000 during the
Company's fiscal year ended December 31, 1995.

SUMMARY COMPENSATION TABLE

LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------- -------------
<S> <C> <C> <C>
</TABLE>

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<PAGE>

SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) OPTIONS (#)
- --------------------------------------- ---- ------------ ------------
<S> <C> <C> <C>
Paul DiMatteo-Chief Executive Officer 1995 $92,000 (1) ---
1994 $78,000 (2) ---
1993 $78,000 (2) ---
</TABLE>

(1) $39,000 was waived and will not be paid; $2,250 has been paid; $50,750 was
deferred.
(2) $75,750 was deferred, then waived in 1995 and will not be paid; $2,250 has
been paid.
(3) $75,750 was deferred, then waived in 1995 and will not be paid; $2,250 has
been paid.

DIRECTOR COMPENSATION

Non-employee directors are entitled to receive $200 for each Board of
Directors or committee meeting attended and $50 for participation at a telephone
meeting or execution of a consent in lieu of a meeting.

EMPLOYMENT AGREEMENTS

In 1984 and 1985, respectively, the Company entered into employment
agreements with Messrs. DiMatteo and Chubb, each of which provides for a
minimum annual compensation of $78,000, which was increased on September 1, 1995
to $120,000 and $100,000, respectively. The agreement with Mr. DiMatteo, as
amended(the "Old DiMatteo Employment Agreement"), terminated as of June 18, 1996
when Nova and Mr. DiMatteo entered into a new agreement. The agreement with Mr.
Chubb is cancellable by either the Company or Mr. Chubb on 60 days notice. Mr.
DiMatteo has waived payment of salaries due under the Old DiMatteo Employment
Agreement for the period January 1, 1989 through June 30, 1995 (aggregating
approximately $507,000) and Mr. Chubb has waived payment of salaries due under
his employment agreement for the period January 1, 1989 through March 31, 1995
(aggregating approximately $487,000). In addition, Mr. DiMatteo has agreed to
defer until April 1997, payment of the balance of compensation due under the Old
DiMatteo Employment Agreement for the period July 1, 1995 through December 31,
1995 (an aggregate of $50,750) and Mr. Chubb has agreed to defer until April
1997, payment of the balance of compensation due under his employment agreement
for 1995 (an aggregate of $17,333). From July 1, 1995 to December 31, 1995 such
deferred balances have accrued interest thereon at the rate of 6.5% per
annum.

As of June 18, 1996, the Company and Paul DiMatteo entered into a new
three year Employment Agreement. The Employment Agreement automatically renews
for an additional two years unless Nova gives six months prior notice or Mr.
DiMatteo gives two months prior notice. Mr. DiMatteo resigned as Chief Executive
Officer and President of the Company and assumed the position of Director of
Research and Development. Mr. DiMatteo will continue to serve as Chairman of the
Board of Directors until his successor is elected and qualified.

The Agreement provides for (1) an annual salary of $120,000 adjusted
upward annually based on the percentage increase of the Consumer Price Index
(the "CPI"), (2) the right to participate in any annual performance bonus
program, (3) five weeks vacation and up to one month of unpaid vacation in 1996
and two months in each year after 1996, (4) life insurance coverage equal to the
greater of the ratio of coverage to base salary offered generally to other
executive officers or, in the event the Company is not required to maintain life
insurance pursuant its agreement with People's Bank, $250,000, (5) full pay for
up to nine months in the event of absence from work due to sickness or
disability, (6) a Novabed free of charge (including service) for use by him or
his wife during any period of disability, (7) full pay for the balance of the
initial three year term in the event of termination without cause (the
"Severance Payments"), and (8) the right to participate immediately in any
pension or other employee benefit plan on terms comparable to those available to
other executive officers with credit for all purposes for all prior service to
Nova. In the event Mr. DiMatteo elects not to participate in any such pension
plan, he is entitled to an annual pension of $66,000 adjusted annually based on
the CPI until his death (the "Personal Pension"). The Personal Pension shall not
be due during any period that Mr. DiMatteo is receiving Severance Payments,
shall be suspended with interest accruing at 6.5% during any period of time that
the Company is in default, or if any payment of such pension would result in a
default, of any agreement relating to borrowed money (other than trade credit),
shall be suspended in the same proportion as any voluntary reduction of salary
of the other executive officers of the Company with such suspended portion
accruing interest at 6.5% per annum and payable when such salary reduction is
reversed and shall terminate when Mr. DiMatteo could have, in a practical manner
and without any reasonable doubt, received $3 million from the sale of his
equity in the Company.

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<PAGE>

The Employment Agreement requires that the Company (i) fund research
and development at a minimum of $350,000 per year exclusive of payroll taxes and
employee fringe benefits adjusted annually by the CPI and (ii) maintain its
current Hauppauge facility or a substitute facility of at least 3,000 square
feet devoted exclusively to research and development which shall not be located
beyond a ten mile radius of Dix Hills, New York. The Board of Directors retains
complete discretion with respect to all aspects of the Company's research and
development efforts. However, in the event any reduction in funding or other
Board directive materially limits or terminates the research and development
operations in Long Island, then such action shall be deemed to constitute an
"involuntary termination" entitling Mr. DiMatteo to the Severance Payments. The
funding for the research and development operations may be reduced and same
shall not constitute an involuntary termination in the event of financial
hardship as evidenced by a reduction of greater than 20% in salary of all of the
executive officers of the Company.

The Employment Agreement requires that the Company use commercially
reasonable efforts to attempt to cause Mr. DiMatteo's guarantee of obligations
of the Company to the CDA to be terminated and to release his subordination
agreement for the benefit of People's Bank. The Agreement requires that during
its term and for one year thereafter Mr. DiMatteo not engage in any competing
business.

In May 1994, the Company entered into an employment agreement with
Stephen Fisher, engaging him as Senior Vice President at a salary of $96,000 per
annum, of which $36,000 per annum was to be deferred for at least one year (but
not more than two years), and of which $60,000 per annum is payable in cash as
earned. In 1995, Mr. Fisher was paid $96,617, including $15,617 in deferred
compensation earned in 1994. At December 31, 1995, Mr. Fisher is owed deferred
compensation aggregating $18,000. The agreement also provides for Mr. Fisher to
receive a ten-year stock option to purchase 150,000 shares of the Company's
common stock at an exercise price of $2.75 per share. The employment agreement
provided for incentive compensation in the event Mr. Fisher obtained certain
financing for the Company. No such financing was obtained and no incentive
compensation was earned or paid and the term for such payment has elapsed. The
agreement with Mr. Fisher is cancellable by Mr. Fisher on 30 days notice, and by
the Company at its discretion subject to the payment of six months salary as
severance.

In September 1995, the Company entered into a three-year employment
agreement with Samuel N. Paul, engaging him as Senior Vice President at a salary
of $96,000 per annum. The agreement provides for Mr. Paul to receive a stock
option to purchase 150,000 shares of the Company's common stock at an exercise
price of $2.61 per share, which expires on December 31, 2004. The agreement also
provides for Mr. Paul to receive a seven-year warrant to purchase 30,000 shares
of the Company's common stock at an exercise price of $2.61 per share. The
agreement with Mr. Paul provides for severance payments of six months, nine
months and twelve months salary if Mr. Paul is terminated without cause in the
first, second or third year, respectively, of his agreement.

On June 14, 1996, the Company entered into a three-year employment
agreement with Douglas Drew, engaging him as Chief Marketing and Sales Officer
of Nova and Chief Operating Officer of Vivax at a salary of $112,800 per annum.
The agreement provides for continued payment of Mr. Drew's base salary for one
year in the event of his death, disability or termination without cause.

STOCK OPTION PLANS

The Company's 1994 Stock Option Plan (the "Plan") was adopted by the
Board of Directors on November 1, 1994 and approved by the Company's
stockholders on December 14, 1994. The Plan provides for (i) the granting to
employees of stock options intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
or (ii) the granting to employees and directors of non-statutory stock options
not intended to qualify as "incentive stock options". The Plan expires on
October 31, 2004 and is administered by a committee of the Board of Directors
which is empowered to select the optionees and determine, subject to the
provisions of the Plans, among other items, (i) the number of shares subject to
each option, (ii) the time at which the option becomes exercisable, (iii) the
exercise price, and (iv) the duration of the option. The exercise price for
incentive stock options granted under the Plan may not be less than 100% of the
fair market value of the shares as of the date of grant (110% for options
granted to a participant who owns shares possessing more than 10% of the voting
rights of the Company's outstanding capital stock). The exercise price for non-
statutory options granted under the Plan is determined by the committee of the
Board of Directors at its absolute discretion. The maximum number of shares of
Common Stock which may be issued pursuant to options granted under the plan
shall not exceed Five Hundred Thousand (500,000) shares.

In the year ended December 31, 1995, Mr. Haft, (a director of the
Company) was granted stock options to purchase 10,000 shares of Common Stock at
$3.13 per share through December 31, 2002 under the Plan and Mr. Paul (an
executive

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<PAGE>

officer and a director of the Company) was granted stock options to purchase
150,000 shares of Common Stock at $2.61 per share through December 31, 2004
under the Plan.

As of December 31, 1995, options to purchase an aggregate of 162,000
shares at exercise prices ranging from $2.61 to $3.13 per share and expiring at
various dates through December 31, 2004 were outstanding under the Plan. Such
options included (i) those held by Mr. Haft to purchase 10,000 shares at $3.13
per share through December 31, 2002 and (ii) those held by Mr. Paul to purchase
150,000 shares at $2.61 per share through December 31, 2004.

As of December 31, 1995, under the 1985 Incentive Stock Option Plan
(the "ISO Plan") and under the 1985 General Stock Option Plan (the "GSO Plan"
and collectively with the ISO Plan, the "Plans") (both Plans terminated on
February 19,1995 and from which options may no longer be granted), options to
purchase an aggregate of 265,017 shares at prices ranging from $1.50 to $4.75
per share and expiring at various dates through May 23, 2004 were outstanding
under the Plans. Such options included (i) those held by Mr. Haft to purchase
6,667 shares at $3.37 per share through December 31, 1999 (expiration date
extended from December 31, 1995) and 5,333 shares at $2.75 per share through
December 31, 1999 pursuant to the GSO Plan, (ii) those held by Mr. Segnini to
purchase 6,667 shares at $3.37 per share through December 31, 1999 (expiration
date extended from December 31, 1995) and 5,333 shares at $2.75 per share
through December 31, 1999 pursuant to the GSO Plan, (iii) those held by Mr.
Jorge to purchase 6,667 shares at $3.00 per share through December 1, 1998 and
6,667 shares at $3.37 per share through December 31, 1999 (expiration date
extended from December 31, 1995) and 5,333 shares at $2.75 per share through
December 31, 1999 pursuant to the GSO Plan, (iv) those held by Mr. Fisher to
purchase 150,000 shares at $2.75 per share through May 23, 2004 pursuant to the
ISO Plan.

No executive officer or director exercised any stock options in the
year ended December 31, 1995.

The Plan is open to participation by full-time employees, including
officers of the Company or of any subsidiary of the Company, as well as by non-
employee Directors of, or consultants to the Company or any subsidiary of the
Company. At April 1, 1996 there were approximately 22 employees (including four
officers) of the Company eligible to participate in the 1994 Plan.

CERTAIN TRANSACTIONS

On December 31, 1993, the balance of outstanding 11% notes payable to
Mr. DiMatteo by the Company aggregated $159,669. The balance of the note plus
accrued interest was due on October 31, 1993 and was not paid by the Company.
Mr. DiMatteo agreed to defer repayment to him of the note plus interest thereon.
In consideration thereof, the remaining principal balance of the note plus
unpaid accrued at December 31, 1993 was combined into a new note aggregating
$202,009 and payable in full at April 1, 1995. No payments were made to Mr.
DiMatteo in 1994 and as of January 1, 1995 Mr. DiMatteo agreed to forgive
payment of principal aggregating $32,009 resulting in a new principal balance
of $170,000 due Mr. DiMatteo by the Company. In addition, accrued interest on
the note aggregating $22,221 was forgiven. The maturity date of the note has
been rescheduled to April 1, 1997 and the accrual of interest thereon commenced
on July 1, 1995.

Unpaid accrued interest in the amount of $5,360 was owed to Mr. Chubb
on notes payable whose principal balance had been fully paid up in August 1993.
In 1993, Mr. Chubb agreed to defer repayment to him of the accrued interest. In
consideration thereof, a new note was been given to him in the amount of $5,360,
accruing interest at 11% per annum, and payable on demand. No payments were made
to Mr. Chubb during 1994 and at December 31, 1994, the amount owed to Mr. Chubb
including accrued interest aggregated $5,953. On January 1, 1995, Mr. Chubb
waived repayment of the note and the accrued interest thereon.

In October and November 1993, Messrs. DiMatteo and Chubb provided
loans to the Company of $70,000 and $35,000, respectively, with interest payable
at the rate of 12% per annum and maturing in October and November 1996 or on the
officers demand, at any date after April 1, 1995, whichever is earlier.
Subsequent thereto, the demand date was extended several times. The lenders may
select repayment in cash or in the form of three-year warrants (at an exchange
rate of $1 per warrant). Such warrants would permit the lenders to purchase the
Company's Common Stock at an exercise price of $1.50 per share. No payments were
made to Messrs. DiMatteo and Chubb during 1995 and as of January 1, 1995 Messrs.
DiMatteo and Chubb agreed to forgive accrued interest aggregating $9,792 and
$4,899, respectively. At December 31, 1995 the amounts owed to Messrs. DiMatteo
and Chubb aggregated $74,234 and $37,117, respectively. The maturity date of
these loans has been extended to January 2, 1997, the demand option has been
discontinued and the accrual of interest thereon commenced on July 1, 1995.

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<PAGE>

The above referenced notes issued to Messrs. DiMatteo and Chubb by the
Company are subordinated to the obligations of the Company under the People's
Bank and CII loans. However, by agreement dated as of March 26, 1996, People's
Bank consented to the payment of the Company of principal in the aggregate
amount of $123,082 due from the Company to Messrs. DiMatteo and Chubb pursuant
to such notes. The Company and Messrs. DiMatteo and Chubb agreed to subordinate
to the payment of the Company's obligations to People's Bank an equal amount of
deferred compensation accrued during the period June 1, 1995 through March 31,
1996.

Arlindo Jorge, a director of the Company received commissions for
acting as a finder in connection with the sale of Common Stock in private
placement transactions. These commissions aggregated $2,000 for the period
January 1, 1996 through May 31, 1996, $11,905 in 1995, and $24,300 in 1994.

In connection with its loan from CII in September 1996, the Company
entered into an Officers' Agreement with CII, Paul DiMatteo, Stephen Fisher and
Samuel Paul. Pursuant to this Agreement, Messrs. Fisher and Paul agreed that so
long as the Company owes any obligations to CII or CII owns any equity
securities of the Company they will not sell more than 20% of the equity
securities of the Company then owned by them. Mr. DiMatteo agreed that so long
as the Company owes any obligations to CII he will not sell more than 40% of the
equity securities of the Company then owned by him within the first 2 years from
the date of the Agreement or more than 60% of such securities with the first 3
years from such date. Such officers also agreed to continue to serve the
Company in their current capacities and not to sell more than 50% of their
equity securities of the Company without allowing CII to participate in such
sale pro rata.

In September 1995, Paul DiMatteo guaranteed (the "DiMatteo Guaranty")
20% of the amount payable by CDA to People's under a guaranty by CDA securing
People's loan to the Company up to a maximum of $400,000 (the "CDA Guaranty").
The DiMatteo Guaranty is payable in full at any time after the CDA has paid
People's $80,000 under the CDA Guaranty and is limited to a maximum amount of
$80,000.

In September 1995, three of the Company's distributors, i.e. Advanced
Therapeutics, Inc.("Advanced"), Comed and Innovative Medical Systems, Inc.
("Innovative"), each agreed to provide an irrevocable letter of credit in the
amount of $200,000 for an aggregate of $600,000, which letters of credit could
be drawn down upon the Company's failure to make when due any payment due
People's. The Company issued each of these distributors a warrant to purchase
20,000 shares of Common Stock at $2.50 per share and granted them a security
interest in the Company's accounts receivable and inventory, which lien is
subordinate to the lien of People's Bank and subject to the Intercreditor
Agreements described at "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital Resources." The
Company entered into a Stock Put and Call Agreement with Advanced and Innovative
granting them the right to purchase 66,667 and 60,000 shares, respectively of
Common Stock at $1.50 per share together with a reduction in the number of
shares purchasable pursuant to such warrants in exchange for reducing the amount
of their outstanding letters of credit. Pursuant to such Stock Put and Call
Agreements, Advanced purchased 66,667 shares of Common Stock for an aggregate
price of $100,000 and its obligation to post an irrevocable letter of credit was
reduced to $100,000 and its warrant was reduced to the right to purchase 10,000
shares of Common Stock, and Innovative purchased 60,000 shares for an aggregate
price of $90,000 and its obligation to post an irrevocable letter of credit was
reduced to $110,000 and its warrant was reduced to the right to purchase 11,000
shares of Common Stock. Pursuant to the financing agreements with People's
Bank, the $190,000 paid by Advanced and Innovative for Common Stock is being
held in a restricted cash account for the benefit of People's Bank. Advanced,
Innovative and Comed have fulfilled their obligations to post such letters of
credit for the benefit of People's Bank.

On September 5, 1995, the Company paid a finder's fee to Merolla &
Bogar, LLC. in the amount of $60,000, in connection with the sale of 900,901
shares of Common Stock for $1,000,000, pursuant to a consulting agreement
engaging Mr. C. R. Merolla, upon consummation of the sale, as a financial
consultant to the Board of Directors at a fee of $3,000 per quarter, payable in
Common Stock at $1.11 per share for the first year and at the average bid price
for the Common Stock for the preceding month for the next two years and in cash,
or at Mr. Merolla's option in Common Stock at such average bid price the last
two years.

In August 1995, the Company entered into an agreement with TimeCapital
Securities Corporation ("TimeCapital") which became effective upon the
consummation of the sale by the Company of 900,901 shares of its Common Stock in
September 1995. The agreement gives TimeCapital for a period of 15 days after
notice from Nova (i) the exclusive right to present to the Company a written
proposal with respect to any financing sought by the Company and (ii) a right of
first refusal to effect any offering of more than $50,000 of the Company's
securities on terms as favorable as those offered to Nova in writing by
reputable investment bankers. The agreement expires in September 2000 and Nova
has the right to terminate by paying TimeCapital $100,000.

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<PAGE>

In April 1996, the Company entered into an agreement (the "Placement
Agreement") with TimeCapital for TimeCapital to act as the Company's exclusive
agent to assist the Company in raising $1,000,000 by July 19, 1996 through the
sale of Common Stock at a price per share to be mutually agreed upon in a
private placement. The majority of such shares will be entitled to one demand
registration on or after January 1, 1997 and to piggyback registration. If a
transaction is consummated during the term of the agreement or within 12 months
after the term if such transaction is with a party introduced to Nova or
contacted by TimeCapital during the term, TimeCapital will receive a cash
placement fee of 10% of the money raised and warrants to purchase Common Stock
equal to 5% of the shares of Common Stock sold in the private placement. The
warrants will have an exercise price of $2.00 per share and will expire 5 years
from the closing of the placement. The Company also agreed to pay TimeCapital's
reasonable expenses in an amount not to exceed $10,000. Nova has the right to
terminate the exclusive agency if $250,000 has not been raised by July 19,
1996.

Also in April 1996, the Company entered into an agreement with
TimeCapital for it to act as the Company's exclusive agent for a period of one
year to assist in arranging for one or more qualified broker-dealers to serve as
the underwriter(s) on behalf of the Company in a public offering of Common Stock
anticipated to produce gross proceeds in the $5-$10 million range. If a
transaction is consummated during the term or within 18 months after the term if
such transaction is with a party introduced to Nova or contacted by TimeCapital
during the term, TimeCapital will receive a fee of 10% of the gross proceeds.
Such fee is payable in cash or Common Stock (valued at market if such shares are
registered or 75% of market if unregistered) or in any combination thereof as
determined by TimeCapital. The Company also agreed to pay TimeCapital's
reasonable expenses in an amount not to exceed $10,000. Nova has the right to
terminate this agreement by paying TimeCapital $100,000 in cash or issuing to it
100,000 shares of Common Stock with a deemed value of $2.00 per share or in any
combination thereof as determined by TimeCapital (the "Buy-Out Price"). Nova
may terminate this Agreement without payment of the Buy-Out Price if Nova does
not receive at least $1,000,000 from the placement of its securities by July 19,
1996.

On January 24, 1996, the Company entered into a Distributorship
Agreement with JCM Capital Corporation giving JCM Capital the exclusive right to
distribute Nova's products in the State of New York. Other terms and conditions
are similar to the Company's other distributorship agreements. On such date,
the Company and JCM Capital also entered into an agreement providing JCM Capital
with a nine month option to enter into a distributorship agreement for the
States of Ohio, California, Arizona and Georgia on terms substantially similar
to other current distribution agreements. In September 1995, the Company sold
450,450 shares of Common Stock to JCM Capital at a cash price of $1.11 per share
as part of the private placement that constituted part of the 1995
Financing.

On May 23, 1994, the Company signed an employment agreement with
Stephen Fisher and retained him as a Senior Vice President. See "Executive
Compensation - Employment Agreements." Prior thereto, Mr. Fisher was the
President of Aztech Corporation ("Aztech"). Aztech was engaged by the Company
for the period April 27, 1992 through May 22, 1994 as a consultant for the
Company to assist it in developing a marketing plan, drafting a business plan
and raising capital. For its services, Aztech was paid the sum of $3,000 per
month plus 1,000 shares of the Company's Common Stock per month.

On June 14, 1996 and as of June 18, 1996, respectively, the Company
entered into an employment agreement with Douglas Drew and a new employment
agreement with Paul DiMatteo. See "Executive Compensation - Employment
Agreements."

In May, 1994, in connection with the cancellation of certain stock
options, the Company issued to Charles Chubb a warrant to purchase 172,599
shares of Common Stock at $2.75 per share, expiring December 31, 1999.

In September 1995, the Company issued to Samuel N. Paul a warrant to
purchase 30,000 shares of Common Stock at $2.61 per share, expiring September 4,
2002 for financial consulting.

In June 1995, Paul DiMatteo, and Charles Chubb, executive officers of
the Company and Jay Haft, a director of the Company, were issued seven-year
warrants to purchase 180,000, 120,000, and 6,667 shares, respectively, of Common
Stock at $2.75 per share.

Pursuant to his employment agreement, in May 1994, the Company issued
to Stephen Fisher, an executive officer and director, an option pursuant to its
ISO Plan to purchase 150,000 shares of Common Stock at $2.75 per share, expiring
May 23, 2004.

-41-
<PAGE>

Pursuant to his employment agreement which became effective in
September 1995, the Company issued to Samuel N. Paul, an executive officer and
director an option pursuant to its 1994 Stock Option Plan (the "Plan") to
purchase 150,000 shares of Common Stock at $2.61 per share, expiring December
31, 2004.

In October 1995, Jay Haft, a director of the Company, was granted an
option pursuant to the Plan to purchase 10,000 shares of Common Stock at $3.13
per share through December 31, 2002.

The following directors were issued the following options to purchase
Common Stock pursuant to the Company's GSO Plan:

DIRECTOR DATE OF GRANT # OF SHARES PRICE EXPIRATION DATE
-------- ------------- ----------- ----- ------------------
<S> <C> <C> <C> <C>

Jay Haft 12/06/91 6,667 $3.37 December 31, 1999*
05/23/94 5,333 $2.75 December 31, 1999
Robert Segnini 12/06/91 6,667 $3.37 December 31, 1999*
05/23/94 5,333 $2.75 December 31, 1999
Arlindo Jorge 12/06/91 6,667 $3.37 December 31, 1999*
05/23/94 5,333 $2.75 December 31, 1999

</TABLE>
* Extended from December 31, 1995 in June 1994.

On April 18, 1996, the Board of Directors of the Company authorized
the issuance to each of Jay Haft, Robert Segnini, Arlindo Jorge and Charles
Chubb a warrant to purchase 20,000 shares of Common Stock at $2.75 per share,
expiring April 18, 2003.

Vivax leases its New Hampshire facility from the Drew Family Trust,
the settlors of which are Douglas and Donna Drew, the owners of all of the
outstanding stock of Comed prior to its acquisition by Nova. See "Business -
Facilities."

-42-
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of June 19, 1996, the number and
percentage of shares of Common Stock held by (i) all persons who, to the
knowledge of the Company, are the beneficial owners of more than five percent
(5%) of the Company's outstanding Common Stock; (ii) each director and executive
officer of the Company; and (iii) all executive officers and directors of the
Company as a group:

<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP (1) PERCENT OF BENEFICIAL OWNERSHIP
---------------------- ------------- -------------------------------
BEFORE AFTER
OFFERING OFFERING
------------ ------------
<S> <C> <C> <C>

Paul DiMatteo 1,081,616(2) 16.3% 16.3%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

Charles F. Chubb 427,724(3) 6.3% 6.3%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

Stephen Lowenstein 508,400(4) 7.6% 7.6%
c/o Jos. H. Lowenstein Sons, Inc.
420 Morgan Avenue
Brooklyn, NY 11222

JCM Capital Corp. 450,450 7.0% 0%
555 Broadhollow Road
Melville, NY 11747

Stephen M. Fisher 100,692(5) 1.5% 1.5%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

Harold J. Lash 28,327(6) 0.4% 0.4%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

Samuel N. Paul 30,000(7) 0.5% 0.5%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

Jay M. Haft 87,000(8) 1.3% 1.3%
c/o Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, NY 10017

</TABLE>

-43-
<PAGE>

<TABLE>

<S> <C> <C> <C>
Arlindo Jorge 200,499(9) 3.1% 3.1%
33 Robinson Avenue
Glen Cove, NY 11742

Robert Segnini 44,745(10) 0.7% 0.7%
19 Shawmont Lane
Stonybrook, NY 11790

Douglas & Donna Drew 620,000(11) 9.4% 9.4%
c/o Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, NY 11788

All executive officers and 2,620,603(12) 35.7% 35.7%
directors as a group (9 persons)
</TABLE>
_____________________
(1) Effect has been given to shares issuable upon exercise of stock options or
warrants outstanding on and exercisable within 60 days of June 19, 1996.
Except as otherwise indicated, the persons named herein have sole voting and
dispositive power with respect to the shares beneficially owned.
(2) Includes 94,675 shares held of record by members of Mr. DiMatteo's immediate
family, including 43,212 shares issuable upon exercise of outstanding
options and warrants, held of record by Mr. DiMatteo's son, as to all of
which Mr. DiMatteo disclaims beneficial ownership, and 180,000 shares
issuable upon exercise of outstanding warrants.
(3) Includes 6,000 shares held by Mr. Chubb's wife as to which shares Mr. Chubb
disclaims beneficial ownership, and 330,932 shares issuable upon exercise of
outstanding warrants.
(4) Includes 4,200 shares and 4,200 shares issuable upon exercise of outstanding
warrants, both of which are held by Mr. Lowenstein's wife and children, as
to all of which Mr. Lowenstein disclaims beneficial ownership, and 300,000
shares issuable upon exercise of outstanding warrants.
(5) Includes 100,000 shares issuable upon exercise of outstanding stock options
and 692 shares owned by Aztech Corporation, a company controlled by Mr.
Fisher.
(6) Includes 27,327 shares issuable upon exercise of outstanding options and
warrants.
(7) Includes 30,000 shares issuable upon exercise of outstanding warrants.
(8) Includes 33,333 shares held by Venture Capital Associates, Ltd., of which
Cerhaft, Inc. ("Cerhaft") is the sole general partner. Mr. Haft is an
officer and director of Cerhaft. Also includes 26,667 shares issuable upon
exercise of outstanding options and 22,000 shares issuable upon exercise of
outstanding warrants.
(9) Includes 15,000 shares held by Mr. Jorge's wife as to which shares Mr. Jorge
disclaims beneficial ownership, and 18,667 shares issuable upon exercise of
outstanding options and 53,943 shares issuable upon exercise of outstanding
warrants. Also includes 30,000 shares held in Mr. Jorge's Individual
Retirement Account.
(10) Includes 12,000 shares issuable upon exercise of outstanding options and
20,000 shares issuable upon exercise of outstanding warrants.
(11) Includes 20,000 shares issuable upon exercise of outstanding warrants.
(12) Includes 884,748 shares issuable upon exercise of outstanding warrants and
options owned by such executive officers and directors.

-44-
<PAGE>

SELLING STOCKHOLDERS

The following table shows for each of the Selling Stockholders (i) the number
of shares of Common Stock beneficially owned by each of them as of April 1,
1996, (ii) the number of shares of Common Stock covered by this Prospectus, and
(iii) the number and the percentage of ownership if all shares of Common Stock
covered by this Prospectus were sold.
<TABLE>
<CAPTION>

NUMBER OF NUMBER OF
NUMBER OF SHARES SHARES
SHARES COVERED OWNED
SELLING BENEFICIALLY BY THIS AFTER PERCENTAGE
STOCKHOLDER OWNED PROSPECTUS OFFERING OF CLASS
- -------------------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C>

Field Family Trust 225,225 225,225 0 0
JCM Capital Corp. 450,450 450,450 0 0
Kirsch, Jodi 22,522 22,522 0 0
Kula, Adam 22,523 22,523 0 0
Kula, Albert 45,046 45,046 0 0
Kula, Robert 45,045 45,045 0 0
Tower, Leonard 63,090 63,090 0 0
Zeman, Barry T. & Angela 13,500 13,500 0 0
Zeman, Joshua & Barry T. 13,500 13,500 0 0
-------

TOTALS 900,901
=======
</TABLE>

To the best of the Company's knowledge, none of the Selling Stockholders has
had any material relationship with the Company or any of its affiliates within
the past three years except for their purchase of the Common Stock offered
hereby and except for JCM Capital Corp. ("JCM"). The Selling Stockholders
acquired the Common Stock in a private placement as part of the 1995 Financing
described above at "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources." The Selling
Stockholders' shares are being registered pursuant to the exercise of demand
registration rights received in connection with the purchase of such shares.
JCM has entered into an agreement to distribute the Company's products in New
York on substantially the same terms as the Company's other distributor
agreements and holds an option to become the Company's exclusive distributor in
Ohio, California, Arizona and Georgia.

PLAN OF DISTRIBUTION

The shares may be sold by the Selling Stockholders, or by pledgees, donees,
transferees or other successors-in-interest. Such sales may be made on the OTC
Bulletin Board, in privately negotiated transactions, or otherwise, at market
prices or at negotiated prices. The shares may be sold by one or more of the
following methods: (a) a block trade in which the broker or dealer so engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal in order to consummate the transaction; (b) purchase
by a broker or dealer as principal, and the resale by such broker or dealer for
its account pursuant to this Prospectus, including resale to another broker or
dealer; or (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers. In effecting sales, brokers or dealers engaged by
the Selling Stockholders may arrange for other brokers or dealers to
participate. Any such brokers or dealers may receive commissions or discounts
from the Selling Stockholders in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended. Any gain realized by such a broker or dealer on the
sale of shares which it purchases as a principal may be deemed to be
compensation to the broker or dealer in addition to any commissions paid to the
broker by the Selling Stockholders.

The Company will not receive any portion of the proceeds of the shares sold
by the Selling Stockholders. There is no assurance that any of the Selling
Stockholders will sell any or all of the shares of Common Stock covered by this
Prospectus.

The Selling Stockholders have advised the Company that during the time they
are engaged in distribution of Common Stock covered by this Prospectus, they
will comply with Rules 10b-5 and 10b-6 under the Exchange Act, and pursuant
thereto: (i) will not engage in any stabilization activity in connection with
the Company's securities; (ii) will furnish each broker through which Common
Stock covered by this Prospectus may be offered the number of copies of this
Prospectus which are required by each broker; and (iii) will not bid for or
purchase any securities of the Company or attempt to induce any person to
purchase any of the Company's securities other than as permitted under the
Exchange Act. Selling Stockholders who may be an "affiliated purchaser" of the
Company as defined in Rule 10b-6 have been further advised that pursuant to
Exchange Act Release 34-23611

-45-
<PAGE>

(September 11, 1986), they must coordinate their sales under this Prospectus
with each other and the Company for purposes of Rule 10b-6.

DESCRIPTION OF SECURITIES

The Company's authorized capital stock consists of 14,000,000 shares of
Common Stock, $.01 par value per share, and 1,750,000 shares of Preferred Stock,
$2.25 par value per share.

COMMON STOCK

Holders of shares of Common Stock do not have the right to cumulate their
votes in the election of directors and, accordingly, holders who control more
than 50% of the outstanding voting power can elect all of the directors of the
Company. The shares of Common Stock carry no preemptive or other subscription
rights and there are no redemption provisions applicable thereto. In the event
of liquidation, dissolution or winding-up of the Company, the holders of all
shares of Common Stock are entitled to share ratably in all the assets of the
Company available for distribution to the holders of its Common Stock.

At June 19, 1996, there were 6,411,183 shares of Common Stock issued and
outstanding, held of record by approximately 370 persons.

PREFERRED STOCK

The Board of Directors is authorized to issue all undesignated shares of
Preferred Stock in series and to determine the number, designation, preferences,
relative rights and limitations of the shares of each series.

Among the determinations which the Board of Directors is authorized to make
for each of the shares of Preferred Stock are (a) the number of shares in the
series and the designation thereof; (b) the dividend rate and whether dividends
would be cumulative; (c) the price and other terms of any redemption; (d) the
extent of liquidation rights; (e) whether a sinking fund would be created with
respect to the shares and the terms of any such fund; (f) whether there would
be conversion rights into shares of Common Stock or other shares of Preferred
Stock and the terms of any such conversion; and (g) whether, and the extent
to which there would be voting rights, which might include the rights to elect a
specified number of directors if dividends on the series were not paid for a
specified period of time. The rights of the holders of shares of Preferred
Stock may include priorities over the holders of shares of Common Stock. For
example, in almost all cases, holders of shares of Preferred Stock of a
particular series are entitled to dividends in preference to holders of shares
of Common Stock. In addition, holders of shares of Preferred Stock of a
particular series generally are entitled to a priority over holders of Common
Stock in the distribution of assets available to all stockholders of the Company
upon any liquidation, dissolution and winding up of the Company. Further,
holders of shares of Preferred Stock of a particular series may be given voting
rights on a share-for-share basis with holders of shares of Common Stock and in
certain events may be given greater voting rights or voting rights exercisable
as a separate class. There are no shares of Preferred Stock outstanding.

Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock or the issuance of rights to
purchase such shares may have the effect of delaying, deferring or preventing a
change in control of the Company or an unsolicited acquisition proposal.

REDEEMABLE WARRANTS

The Company issued 500,000 redeemable common stock purchase warrants (the
"Redeemable Warrants") as part of its Initial Public Offering in February 1992
pursuant to a Warrant Agreement (the "Warrant Agreement") between the Company
and the American Stock Transfer & Trust Company (the "Warrant Agent"). Each
Redeemable Warrant is in registered form and is saleable, assignable, and
conveyable, and entitles the registered holder to purchase one share of Common
Stock at an exercise price of $4.00 per share through March 31, 1997.

The Company has the right to redeem all, or any portion, of the Redeemable
Warrants at any time at a price of $.05 per Redeemable Warrant if the average of
the closing bid and asked prices of the Common Stock equals or exceeds $11.00
per share during any consecutive 10-day trading period and notice of redemption
is given no later than 20 days after the expiration of such 10-day trading
period. The Company has authorized and reserved for issuance 500,000 shares of
Common Stock purchasable upon exercise of the Redeemable Warrants. Such shares
of Common Stock, when issued, shall be fully paid and non-assessable.

-46-
<PAGE>

The exercise price and the number of shares of Common Stock to be obtained
upon exercise of the Redeemable Warrants are subject to adjustment in the event
of a stock dividend or of a split of the Common Stock, or in the event of a
reorganization or recapitalization of the Company or of the merger or
consolidation of the Company, all as more fully set forth in the Warrant
Agreement.

Fractional shares will not be issued upon exercise of the Redeemable
Warrants and, in lieu thereof, a cash adjustment based on the market price of
the Common Stock on the date of exercise will be made. The Redeemable Warrants
do not confer upon the holder any voting or preemptive rights, or any other
rights of a stockholder of the Company unless the Warrants have been exercised.

A Redeemable Warrant may be exercised upon the surrender of a duly completed
certificate prior to its expiration at the office of the Warrant Agent,
accompanied by cash or certified or office bank check payable to the order of
the Warrant Agent for the exercise price.

The Act requires that the Redeemable Warrants cannot be exercised unless at
the time of such exercise the Company shall then have a current effective
registration statement under the Act with respect to the shares of Common Stock
issuable upon exercise of the Redeemable Warrants. Similar requirements are
also imposed by certain state securities regulatory authorities. The Company
has not endeavored to keep such a registration statement current because the
exercise price of the Redeemable Warrants has exceeded, and continues to exceed
the bid price for the Company's Common Stock as reported on the OTC Bulletin
Board. No holder of the Redeemable Warrants has attempted to exercise them.

Once the offering contemplated hereby has been completed, the Company
intends to endeavor to have declared effective, and to maintain in effect a
registration statement registering the Common Stock underlying the Redeemable
Warrants in order to permit future exercises of such Warrants.

The above summary does not purport to be complete. The Warrant Agreement,
containing all of the terms and conditions applicable to the Warrants, has been
incorporated as an exhibit to the Registration Statement of which this
Prospectus is a part.

TRANSFER AND WARRANT AGENT

The transfer agent for the Warrants is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.

REPORTS TO STOCKHOLDERS

The Company will furnish to stockholders, after the close of each fiscal
year, an Annual Report which will contain audited financial statements. In
addition, the Company may furnish unaudited quarterly reports to stockholders
for the first three quarters of each fiscal year.

SHARES ELIGIBLE FOR FUTURE SALE

In general, Rule, 144, promulgated under the Act, permits a stockholder of
the Company who has beneficially owned restricted shares of Common Stock for a
period of at least two years to sell without registration, within any three
month period, such number of shares not exceeding the greater of 1% of the then
outstanding shares, or, if the shares are quoted on NASDAQ, the average weekly
trading volume during the four calendar weeks preceding such sale, assuming
compliance by the Company with certain public information requirements of Rule
144. Furthermore, if the restricted shares are held for a period of at least
three years by a person not affiliated with the Company (in general, a person
who is not a director, executive officer or principal stockholder of the Company
during the three month period prior to resale), such restricted shares can be
sold without limitation as to volume or manner of sale.

As of April 1, 1996, 5,801,183 shares of Common Stock were outstanding of
which 1,730,405 shares are "restricted" securities, as such term is defined
under the Act. As of January 1, 1996, 126,750 of these shares of Common Stock
would have been eligible for sale under Rule 144. During the period commencing
January 1, 1996 and ending December 31, 1996, an additional 987,738 of such
shares will become eligible for sale under Rule 144. The balance of such shares
will become eligible for sale pursuant to Rule 144 upon the expiration of their
respective two-year holding periods. In addition, certain of the current
holders of outstanding Common Stock, options and warrants have "piggy-back"
registration rights with respect to their securities

-47-
<PAGE>

should certain conditions be satisfied. In addition, the Company intends to file
a registration statement covering the 338,000 shares of Common Stock reserved
for issuance, and the 427,017 shares of Common Stock issued under its stock
option plans after the completion of this offering. Further, once the offering
contemplated hereby has been completed, the Company intends to endeavor to have
declared effective, and to maintain in effect a registration statement
registering the 500,000 shares of Common Stock underlying the Redeemable
Warrants in order to permit future exercises of such Warrants.

-48-
<PAGE>

LEGAL PROCEEDINGS

There are no material legal proceedings which are currently pending or, to
the Company's knowledge, contemplated against the Company or to which it is a
party.

LEGAL MATTERS

Matters relating to the legality of the issuance of the shares of Common
Stock offered hereby are being passed upon for the Company by Whitman Breed
Abbott & Morgan, 100 Field Point Road, Greenwich, Connecticut 06830.

EXPERTS

The financial statements of the Company at December 31, 1995 and for each of
the years in the two-year period ended December 31, 1995 included in this
Prospectus and Registration Statement have been audited by Richard A. Eisner &
Company, LLP independent auditors, as set forth in their report with respect
thereto, and are included in reliance upon such report given upon the authority
of such firm as experts in auditing and accounting. Such report includes an
uncertainty regarding the Company's ability to continue as a going concern.

The financial statements of Vivax (Comed) at February 29, 1996 and for the
nine months ended February 29, 1996 and the year ended May 31, 1995 included in
this Prospectus and Registration Statement have been audited by Richard A.
Eisner & Company, LLP independent auditors, as set forth in their report with
respect thereto, and are included in reliance upon such report given upon the
authority of such firm as experts in auditing and accounting.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

The Certificate of Incorporation of the Company provides with respect to the
indemnification of directors and officers that the Company shall indemnify to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law, as amended from time to time, each person that such Section grants the
Company the power to indemnify and that such indemnification shall not be deemed
exclusive of any other rights to which such persons may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
The Certificate of Incorporation of the Company also provides that no director
shall be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to the Company or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law or (4) for any transaction from which the director derived an
improper personal benefit.

Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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.

-49-
<PAGE>

AVAILABLE INFORMATION

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 "S.E.C."). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the S.E.C. at 450 Fifth Street N.W.
(Room 1024), Judiciary Plaza, Washington, D.C. 20549; as well as at the Regional
Offices of the S.E.C. located at Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661; and Seven World Trade Center (13th
Floor), New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the S.E.C. at 450 Fifth Street N.W., Washington,
D.C. 20549 at prescribed rates.

The Company has filed with the S.E.C. in Washington, D.C., a Registration
Statement on Form SB-2 under the Securities Act of 1933 (the "Act"), as amended,
with respect to the Common Stock offered hereby (the "Registration Statement").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the S.E.C.. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits and financial statements and
schedules, if any, filed therewith or incorporated therein by reference.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement or incorporated therein by reference, each statement
being qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, may be inspected without charge at the S.E.C.'s
principal office in Washington, D.C., and copies of any and all parts thereof
may be obtained from such office after payment of the fees prescribed by the
S.E.C..

-50-
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
PRO FORMA:

NOVA TECHNOLOGIES, INC.

Pro Forma Unaudited Condensed Balance Sheet as of March 31, 1996 F-3

Notes to Pro Forma Unaudited Condensed Balance Sheet. . . . . F-5

Pro Forma Unaudited Condensed Statements of Operations for the
Year Ended December 31, 1995 and for the Three Months Ended
March 31, 1996. . . . . . . . . . . . . . . . . . . . . . . F-6

Pro Forma Unaudited Condensed Statement of Operations for the
Year Ended December 31, 1995. . . . . . . . . . . . . . . . F-7

Notes to Pro Forma Unaudited Condensed Statement of Operations
for the Year Ended December 31, 1995. . . . . . . . . . . . F-8

Pro Forma Unaudited Condensed Statement of Operations for the
Three Months Ended March 31, 1996 . . . . . . . . . . . . . F-9

Notes to Pro Forma Unaudited Condensed Statement of Operations
for the Three Months Ended March 31, 1996 . . . . . . . . . F-10

HISTORICAL:

NOVA TECHNOLOGIES, INC.

Report of Independent Auditors. . . . . . . . . . . . . . . . F-11

Balance Sheets as at December 31, 1995 and December 31, 1994. F-12

Statements of Operations for the Years Ended December 31, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . . . F-13

Statements of Changes in Stockholders' Equity (Deficiency) for
the Years Ended December 31, 1995 and December 31, 1994 . . F-14

Statements of Cash Flows for the Years Ended December 31, 1995
and December 31, 1994. . . . . . . . . . . . . . . . . . . . F-15

Notes to Financial Statements . . . . . . . . . . . . . . . . F-16

NOVA TECHNOLOGIES, INC.

Condensed Balanced Sheets (Unaudited) as at March 31, 1996 . . . F-30

Condensed Statements of Operations (Unaudited) for the Three Months Ended
March 31, 1996 and March 31, 1995 F-31

Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 1996
and March 31, 1995 F-32

Notes to Condensed Financial Statements (Unaudited) F-33

</TABLE>

F-1
<PAGE>

Page
COMED SYSTEMS, INC.

Report of Independent Auditors. . . . . . . . . . . . . . . F-38

Balance Sheet as at February 29, 1996 . . . . . . . . . . . F-39

Statements of Operations for the Nine Months Ended February
29, 1996 and the Year Ended May 31, 1995. . . . . . . . . F-40

Statements of Changes in Stockholders' Equity for the Year
Ended May 31, 1995 and the Nine Months Ended February 29,
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . F-41

Statements of Cash Flows for the Nine Months Ended February
29, 1996 and the Year Ended May 31, 1995. . . . . . . . . F-42

Notes to Financial Statements . . . . . . . . . . . . . . . F-43

F-2
<PAGE>

NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1996

The following pro forma condensed balance sheet reflects the acquisition of
Comed Systems, Inc. ("Comed"). The Company obtained 100 percent of Comed in
exchange for 600,000 shares of its common stock and the issuance of $1,500,000
in notes bearing interest at 8%. The acquisition in May 1996 is accounted for as
a purchase, and for pro forma presentation purposes as if the acquisition had
occurred on March 31, 1996. In the opinion of management of Nova Technologies,
Inc. all adjustments necessary to present fairly such pro forma condensed
balance sheet have been made.

The pro forma unaudited condensed balance sheet should be read in
conjunction with the notes thereto, the financial statements of the Company and
Comed and the related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" each included
elsewhere in the Prospectus. The pro forma condensed balance sheet is not
necessarily indicative of what the actual financial position would have been had
the transaction occurred at March 31, 1996, nor does it purport to represent the
future financial position of the Company.

F-3
<PAGE>

NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
MARCH 31, 1996

<TABLE>
<CAPTION>
Nova Comed Pro forma
Technologies, Inc. Systems, Inc. Adjustments Pro forma
------------------ ------------- ----------- ---------
March 31, 1996 February 29, 1996
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $274,000 $15,000 $289,000
Inventories 483,000 18,000 501,000
Accounts receivable 115,000 374,000 489,000
Prepaid expenses and other current assets 48,000 50,000 98,000
---------- -------- ----------

Total current assets 920,000 457,000 1,377,000

Restricted cash 190,000 0 190,000
Rental equipment, less accumulated depreciation
of $1,186,000 0 365,000 $500,000 (A) 865,000
Equipment and leasehold improvements 129,000 67,000 196,000
Deposits and other assets 184,000 11,000 195,000
Goodwill 0 0 1,864,000 (A) 1,864,000
---------- -------- ---------- ----------

TOTAL $1,423,000 $900,000 $2,364,000 $4,687,000
========== ======== ========== ==========

LIABILITIES
Current liabilities:
Current portion of long-term debt $0 $228,000 228,000
Accounts payable, accrued expenses and other
current liabilities 292,000 274,000 566,000
Notes payable--officers 116,000 0 116,000
---------- -------- ----------

Total current liabilities 408,000 502,000 910,000

Note payable--other (net of deferred debt discount 436,000 0 436,000
of 75,000)
Long-term debt (less current portion) 0 9,000 1,500,000 (A) 1,509,000
Note payable--officers 183,000 0 183,000
Deferred officers' compensation (including accrued 134,000 0 134,000
interest of $2,000)
Other liabilities 65,000 53,000 118,000
---------- -------- ---------- ----------

Total liabilities 1,226,000 564,000 1,500,000 3,290,000
---------- -------- ---------- ----------

Common stock 58,000 1,000 5,000 (A) 64,000
Additional paid-in capital 9,918,000 0 1,194,000 (A) 11,112,000
Retained earnings (deficit) (9,779,000) 335,000 (335,000) (A) (9,779,000)
---------- -------- ---------- ----------

Total stockholders' equity 197,000 336,000 864,000 1,397,000
---------- -------- ---------- ----------

TOTAL $1,423,000 $900,000 $2,364,000 $4,687,000
========== ======== ========== ==========
</TABLE>

F-4
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED BALANCE SHEET

(A) To reflect the acquisition of Comed Systems, Inc. as of March 31, 1996 as
follows:

Net book value of assets acquired $ 336,000
Adjustment to record estimated fair
value of rental equipment acquired 500,000
Excess of purchase price over net
assets acquired 1,864,000
----------

$2,700,000
==========

Common stock - 600,000 shares
valued at $2 per share $1,200,000
Promissory notes - interest at 8% 1,500,000
----------

$2,700,000
==========

F-5
<PAGE>

NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED
STATEMENTS OF OPERATIONS

For the Year Ended December 31, 1995
and For the Three Months Ended March 31, 1996

The following pro forma condensed statements of operations reflect the
acquisition of Comed at the beginning of the period presented. In the opinion of
management of Nova Technologies, Inc. all adjustments necessary to present
fairly such pro forma condensed statements of operations have been made.

The pro forma unaudited condensed statements of operations should be read
in conjunction with the notes thereto, the financial statements of the Company
and Comed and the related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" each included
elsewhere in this Prospectus. The pro forma condensed statements of operation
are not necessarily indicative of what the actual results of operations would
have been had the transaction occurred at the beginning of the period presented
nor does it purport to represent the results of future operations of the
Company.

F-6
<PAGE>

NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
Nova Comed Pro forma
Technologies, Inc. Systems, Inc. Adjustments Pro forma
------------------ ------------- ----------- ---------
December 31, 1995 February 29,1996
<S> <C> <C> <C> <C>
Net sales $ 220,000 $2,242,000 $2,462,000

Cost of sales 698,000 1,246,000 $ 100,000 (C) 2,044,000

Research and development expenses 297,000 0 297,000

Selling, general and administrative expenses 506,000 816,000 (302,000) (B) 1,113,000
93,000 (D)
---------- ---------- --------- ----------
Operating income (loss) (1,281,000) 180,000 109,000 (992,000)

Interest and other income 13,000 9,000 22,000

Interest expense 34,000 91,000 120,000 (A) 245,000

Gain on sale of assets 0 19,000 19,000
---------- ---------- -------- ----------

Income (loss) before income taxes (1,302,000) 117,000 (11,000) (1,196,000)

Income tax expense 0 52,000 (52,000) (E) 0
---------- ---------- --------- ----------

NET INCOME (LOSS) ($1,302,000) $65,000 $41,000 ($1,196,000)
========== ========== ========= ==========

(Loss) per share ($0.22)
==========

Weighted average shares outstanding 4,783,000 600,000 (F) 5,383,000
========== ========= ==========
</TABLE>

F-7
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

(A) To reflect interest expense assuming that the promissory notes for
$1,500,000 at 8% per annum have been issued at the beginning of the year.

(B) To reflect the officers' salaries at the amount in the new employment
agreement.

(D) To reflect amortization of goodwill over 20 years.

(E) To adjust income taxes.

(F) To reflect the issuance of common stock for the acquisition of Comed.

F-8
<PAGE>
<TABLE>
NOVA TECHNOLOGIES, INC.
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996

<CAPTION>
Nova Comed Pro forma
Technologies, Inc. Systems, Inc. Adjustments Pro forma
------------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 83,000 $499,000 $582,000

Cost of sales 303,000 217,000 $ 25,000 (C) 545,000

Research and development expenses 82,000 82,000

Selling, general and administrative expenses 152,000 398,000 (200,000) (B) 373,000
23,000 (D)
-------- -------- ------------- --------
Operating (loss) (454,000) (116,000) 152,000 (418,000)

Interest and other income 24,000 2,000 26,000

Interest expense 28,000 15,000 30,000 (A) 73,000
-------- -------- -------- --------
NET LOSS ($458,000) ($129,000) $122,000 ($465,000)
======== ======== ======== ========
(Loss) per share ($0.07)
-----
Weighted average shares outstanding 5,796,000 600,000 (E) 6,396,000
========= ======= =========
</TABLE>

F-9
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996

(A) To reflect interest expense assuming that the promissory notes for
$1,500,000 at 8% per annum have been issued at the beginning of the year.

(B) To reflect the officers' salaries at the amount in the new employment
agreement.

(D) To reflect amortization of goodwill over 20 years.

(E) To reflect the issuance of common stock for the acquisition of Comed.

F-10
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Nova Technologies, Inc.
Hauppauge, New York

We have audited the accompanying balance sheets of Nova Technologies, Inc. as
at December 31, 1995 and December 31, 1994, and the related statements of
operations, changes in stockholders' equity (deficiency), and cash flows for
each of the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Nova Technologies, Inc. as at
December 31, 1995 and December 31, 1994, and the results of its operations and
its cash flows for each of the years then ended in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced recurring operating losses and
will require additional financing for the commercial exploitation of its patient
transfer system. These factors raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Richard A. Eisner & Company, LLP

New York, New York
February 12, 1996

With respect to the last paragraph
of Note 9[a]
March 26, 1996

With respect to Note 1
April 26, 1996

F-11
<PAGE>

NOVA TECHNOLOGIES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-------------------------
A S S E T S 1995 1994
----------- ------------ -----------
(Note 9)
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2)..................... $ 485,819 $ 102,245
Inventories (Notes 2 and 3)............................ 332,995 206,106
Accounts receivable.................................... 45,155 12,870
Prepaid expenses and other current assets.............. 71,185 51,516
----------- -----------
Total current assets............................ 935,154 372,737

Restricted cash (Note 9[b])............................... 100,000
Subscription receivable (Note 9[b])....................... 90,000
Equipment and leasehold improvements (net of accumulated
depreciation and amortization of $226,576 in 1995 and
$138,200 in 1994) (Note 2)............................. 136,256 152,925
Deposits and other assets................................. 64,931 16,457
Deferred financing costs (Note 9)......................... 69,852
----------- -----------
T O T A L....................................... $ 1,396,193 $ 542,119
=========== ===========

L I A B I L I T I E S
---------------------

Current Liabilities:
Accounts payable and accrued expenses.................. $ 277,430 $ 136,273
Customer prepayments................................... 18,909 51,972
Notes payable - officers (Notes 4)..................... 5,360
Deferred officers' compensation (including accrued
interest of $684 in 1995) (Note 10[a])............... 86,767 18,617
----------- -----------
Total current liabilities....................... 383,106 212,222

Notes payable - other (net of deferred debt discount of
$15,111) (Note 9[a])................................... 88,102
Notes payable - officers (including accrued interest of
$15,779 in 1995 and $36,917 in 1994) (Note 4).......... 290,779 343,926
Deferred officers' compensation (including accrued
interest of $69,523 in 1994) (Note 10[a]).............. 687,973
Grant award (Note 9[e])................................... 50,000
----------- -----------
Total liabilities............................... 811,987 1,244,121
----------- -----------
Commitments (Note 10)

STOCKHOLDERS' EQUITY (DEFICIENCY)
-----------------------------------
(Note 1)

Preferred stock (Note 6)..................................
Common stock - $.01 par value; 14,000,000 shares
authorized; 5,791,083 and 4,295,365 shares issued and
outstanding, respectively.............................. 57,911 42,954
Additional paid-in capital................................ 9,847,887 7,274,428
Deficit................................................... (9,321,592) (8,019,384)
----------- -----------
Total stockholders' equity (deficiency)......... 584,206 (702,002)
----------- -----------
T O T A L....................................... $ 1,396,193 $ 542,119
=========== ===========
</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-12
<PAGE>

NOVA TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1995 1994
----------- -----------

<S> <C> <C>
Net sales................................... $ 220,368 $ 233,278
----------- -----------

Costs and expenses:

Cost of sales............................ 697,901 558,262

Research and development expenses........ 297,780 400,202

General, administrative and consulting
expenses............................... 506,124 421,573
----------- -----------

Total costs and expenses.......... 1,501,805 1,380,037
----------- -----------

(Loss) from operations before other income
and (expenses)........................... (1,281,437) (1,146,759)

Other income and (expenses):

Interest and other income................ 13,201 5,197

Interest expense and other............... (33,972) (69,575)
----------- -----------

NET LOSS.................................... $(1,302,208) $(1,211,137)
=========== ===========

Net loss per share (Note 2)................. $(.27) $(.31)
=========== ===========

Weighted average number of common shares
outstanding (Note 2)..................... 4,783,050 3,964,598
=========== ===========
</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-13
<PAGE>

NOVA TECHNOLOGIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

<TABLE>
<CAPTION>
Common Shares
Outstanding
------------------ Additional
Number of Paid-in
Shares Amount Capital Deficit
--------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Balance - December 31, 1993....................................... 3,474,963 $34,750 $6,343,418 $(6,808,247)

Year ended December 31, 1994:
Common stock issued to landlord for rent....................... 10,940 109 10,831

Common stock issued for cash................................... 804,770 8,048 936,607

Costs incurred in connection with issuance of common stock..... (93,465)

Common stock issued for professional services rendered......... 4,692 47 14,106

Value assigned to warrants given to employees.................. 62,931

Net loss for the year ended December 31, 1994.................. (1,211,137)
--------- ------- ---------- -----------

Balance - December 31, 1994....................................... 4,295,365 42,954 7,274,428 (8,019,384)

Year ended December 31, 1995:
Exercise of warrants........................................... 73,752 737 98,828

Common stock issued for cash................................... 1,361,966 13,620 1,677,977

Costs incurred in connection with issuance of common stock..... (166,778)

Value assigned to warrants given in connection with financing
(Note 9)..................................................... 28,000

Subscription receivable from distributor....................... 60,000 600 89,400

Value assigned to warrants given to employees.................. 24,681

Waiver of prior years deferred compensation and forgiveness
of debt to officers.......................................... 762,851

Waiver of deferred compensation to officers - current
year......................................................... 58,500

Net loss for the year ended December 31, 1995.................. (1,302,208)
--------- ------- ---------- -----------

BALANCE - DECEMBER 31, 1995....................................... 5,791,083 $57,911 $9,847,887 $(9,321,592)
========= ======= ========== ===========

</TABLE>

Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-14
<PAGE>

NOVA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Year Ended December 31,
--------------------------
1995 1994
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net loss.................................................................. $(1,302,208) $(1,211,137)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization........................................... 90,344 76,800
Value assigned to warrants given to employees of the Company............ 24,681 62,931
Increase in grant award................................................. 50,000
Waiver of deferred compensation......................................... 58,500
Common stock issued in lieu of cash payment to landlord for rent........ 10,940
Common stock issued for professional services rendered.................. 14,153
Changes in operating assets and liabilities:
(Increase) in inventories............................................. (126,889) (11,519)
(Increase) in accounts receivable, prepaid expenses and other assets.. (100,428) (37,577)
(Increase) in restricted cash......................................... (100,000)
Increase in accounts payable and accrued expenses..................... 108,686 65,412
Increase in deferred officers' compensation........................... 67,466 172,367
Increase in accrued interest payable.................................. 19,676 67,012
----------- -----------
Net cash (used in) operating activities............................ (1,210,172) (790,618)
----------- -----------

Cash flows from investing activities:
Purchase of equipment and capitalized tooling costs....................... (72,786) (27,723)
----------- -----------

Cash flows from financing activities:
Proceeds from notes payable............................................... 200,000
Proceeds from sale of common stock........................................ 1,691,597 944,655
Issuance costs incurred in sale of common stock........................... (166,778) (93,465)
Proceeds from exercise of warrants........................................ 99,565
Repayment of notes payable................................................ (100,000)
Deferred financing costs.................................................. (57,852)
----------- -----------
Net cash provided by financing activities.......................... 1,666,532 851,190
----------- -----------

INCREASE IN CASH AND CASH EQUIVALENTS........................................ 383,574 32,849

Cash and cash equivalents at beginning of year............................... 102,245 69,396
----------- -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR..................................... $ 485,819 $ 102,245
=========== ===========

Supplemental disclosures of cash flow information:
Interest paid............................................................. $ 3,575 $ 1,451
Noncash transactions:
Forgiveness of debt owed to officers.................................... 762,851
Subscription receivable................................................. 90,000
Value of warrants given in connection with financing.................... 28,000

</TABLE>
Attention is directed to the foregoing accountants' report
and to the accompanying notes to financial statements.

F-15
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 1) - The Company:
- ----------------------

Nova Technologies, Inc. (the "Company") developed and manufactures an advanced
patient transfer system. The Company, which was in the development stage prior
to 1995, is manufacturing, marketing and selling its patient transfer systems
and therefore is no longer in the development stage.

The Company has experienced significant losses since inception. In order to
achieve profitable operations, the Company will have to reach levels of
manufacturing and sales, sufficient to cover its operating expenses. In this
regard management's plans are to obtain additional financing through equity
offerings or debt financings, a strategic alliance or joint venture arrangement.
In April 1996, the Company entered into an agreement with a placement agent to
pursue a private placement of at least 250,000 shares of its common stock. There
is no assurance that such financing or that a strategic alliance or joint
venture arrangement will be consummated on terms acceptable to the Company.
There is no assurance that the Company can establish profitable operations.

(NOTE 2) - Summary of Significant Accounting Policies:
- -----------------------------------------------------

[a] Inventories:
-----------

Inventories are stated at the lower of cost (first-in, first-out) or market.
In estimating the net realizable value of inventories, management considers
technological obsolescence as a factor, based on industry trends and
developments.

[b] Equipment and leasehold improvements:
------------------------------------

Equipment (which includes internally constructed tooling of $51,000 in 1995
and $88,000 in 1994) is recorded at cost and depreciated on the straight-line
method over their estimated useful lives of 3 to 5 years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset.

[c] Cash flow statement:
-------------------

For purposes of reporting cash flows, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.

(continued)

F-16
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 2) - Summary of Significant Accounting Policies: (continued)
- -----------------------------------------------------

[d] Net loss per share:
------------------

Net loss per share has been computed based on the weighted average number of
shares outstanding during each year.

[e] Rent expense:
------------

The Company for financial accounting purposes, spreads scheduled rent
holidays over the term of the lease on a straight-line basis.

[f] Revenue recognition:
-------------------

Revenues are recognized at the time of the shipment of patient transfer
systems.

[g] Use of estimates:
----------------

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

[h] Nonmonetary transactions:
------------------------

The Company's policy is to record the issuance of common shares for services
or to satisfy other obligations at the fair value of the common shares issued.

[i] Recently issued accounting standards:
------------------------------------

The Company has not elected to adopt early the provisions of two recently
issued accounting standards regarding impairments of long-lived assets ("FAS
121") and stock based compensation ("FAS 123"). FAS 121 requires entities to
review long-lived assets and certain identifiable intangibles to be held and
used, for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. FAS 123 establishes a fair
value based method of accounting for stock-based compensation plans. The
Company has not determined the potential impact, if any, of the adoption of
these standards on its financial position or results of operations.

(Continued)
F-17
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 2) - Summary of Significant Accounting Policies: (continued)
- -----------------------------------------------------

[j] Deferred financing costs:
------------------------

The Company amortizes the deferred financing costs of any financings, over
the period in which the obligation matures.

[k] Warranty obligations:
--------------------

The Company provides a warranty on the sale of its products for a period of
one year. To date warranty obligations have been insignificant.

[l] Patent costs:
------------

The Company, which was in the development stage prior to 1995, expensed
patent costs during that stage as incurred since recovery of capitalized patent
costs was not reasonably determinable. Subsequently, patent costs are being
capitalized and amortized over 17 years.

The Company estimates undiscounted future cash flows from products which are
covered by these patents. An impairment in the patent would be recognized if
those estimated future cash flows were less than the amortized costs.

[m] Reclassifications:
-----------------

Certain reclassifications have been made to the 1994 financial statements to
be comparable to the 1995 financial statements.

(NOTE 3) - Inventories:
- ----------------------

Inventories comprise the following:
<TABLE>
<CAPTION>

December 31,
------------------
1995 1994
-------- --------
<S> <C> <C>

Raw materials.... $115,907 $ 23,130

Work in process.. 167,714 82,639

Finished goods... 49,374 100,337
-------- --------
T o t a l. . $332,995 $206,106
======== ========
</TABLE>

F-18
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 4) - Notes Payable - Officers:
- -----------------------------------

At December 31, 1995 the notes payable to officers, who are also stockholders,
as amended, bear interest at 11% and 12% per annum. The 11% and 12% notes
(aggregating $170,000 and $105,000, respectively) are payable on January 2,
1997. At the officers' discretion the notes can be repaid in cash or they may
elect to receive one three-year warrant in exchange for each dollar of debt, to
purchase the Company's common stock at $1.50 per share. The notes are
subordinated to the borrowings under the People's Bank and Connecticut
Innovations, Incorporated loan facilities (see Notes 9[a] and [b]). The notes
payable to the officers previously aggregated $312,369 and were due in 1996. Of
this amount, $37,369 of principal and $36,917 of interest was forgiven in 1995
(see Note 5).

(NOTE 5) - Waiver of Deferred Compensation and Forgiveness of Debt:
- ------------------------------------------------------------------

During 1995 two officers, who are also stockholders, agreed to waive the
payment of their prior year's deferred compensation, and to forgive the
repayment of certain notes payable and all accrued interest due to them as of
January 1, 1995. The waiver and forgiveness by these officers, aggregating
$762,851 was recorded as a contribution to additional paid-in capital and
calculated as follows:

Waiver of compensation owed . . . . . . . . . . . . . $618,450
Forgiveness of notes payable. . . . . . . . . . . . . 37,369
Forgiveness of accrued interest . . . . . . . . . . . 107,032

These same officers have agreed to waive the payment of a portion of their 1995
salaries in an amount aggregating $58,500, with a corresponding offset to
additional paid-in capital.

(NOTE 6) - Redeemable Convertible Preferred Stock:
- -------------------------------------------------

The Company has 1,750,000 shares of preferred stock authorized; of which
500,000 shares have been designated as Series A Convertible Preferred Stock.

F-19
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 7) - Income Taxes:
- -----------------------

At December 31, 1995, the Company has approximate net operating loss and
research and development credit carryforwards, for income tax purposes, expiring
as follows:
<TABLE>
<CAPTION>

Net Research and
Operating Development
Expiration Losses Credits
- ------------ ---------- ------------
<S> <C> <C>

2000...... $ 121,000 $ 5,000
2001...... 536,000 25,000
2002...... 899,000 44,000
2003...... 802,000 21,000
2004...... 826,000 9,000
2005...... 234,000 12,000
2006...... 327,000 12,000
2007...... 771,000 29,000
2008...... 910,000 36,000
2009...... 940,000 35,000
2010...... 1,171,000 -
---------- --------
$7,537,000 $228,000
========== ========
</TABLE>

The Company's expected tax benefit rate of 34% has been reduced to zero due to
its nonutilization of its net operating loss. The provision for income tax
benefit and increase in valuation allowance thereon for the years ended December
31, 1995 and December 31, 1994 were $398,000 and $343,000, respectively.

The Company has a deferred tax asset of $2,335,000 resulting principally from
its net operating loss and research and development credit carryforwards which
have been fully reserved due to recurring operating losses and uncertainty about
future operating results.

Pursuant to the Internal Revenue Code, future utilization of past losses or
credits are subject to certain limitations based on changes in ownership of the
Company's stock. In addition, pursuant to the Tax Reform Act of 1986, the
Company's annual utilization of such limited net operating loss and tax credit
carryforwards will be further limited to a 90 percent reduction of its tax
liability as a result of the corporate alternative minimum tax.

F-20
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 8) - Stock Warrants and Options:
- -------------------------------------

The exercise price for warrants and options issued in connection with services
rendered by nonemployees or financing arrangements is determined by negotiations
between the Company and the third party. Generally, warrants and options are
issued to employees with an exercise price of not less than the quoted market
price of the stock. If the Company issues options and warrants to employees at
less than the quoted market price, a compensation charge is recorded for the
difference between the exercise price and the quoted market price.

[a] Common stock warrants:
---------------------

The Company has outstanding warrants for the purchase of its common stock as
follows:

<TABLE>
<CAPTION>
Number of
Exercise Price Expiration Date Shares
--------------- --------------------- ---------
<S> <C> <C> <C>

Conversion of notes payable
and sale of common stock $3.00 December 31, 1997 (4) 33,943
Extension of note payable $2.25 March 14, 1997 18,333
Sale of common stock $3.00 December 31, 1997 (4) 6,667
Sale of common stock $4.50 December 31, 1997 (4) 31,333
Sale of units (1) March 31, 1997 500,000
Consulting agreement $2.00 February 4, 1997 100,000
Sale of common stock $7.09 (2) November 21, 1996 100,000
Services rendered $4.00 (3) March 30, 1996 5,500
Replacement of stock options $2.75 (5) December 31, 1999 172,599
Services rendered $1.50 (6) September 30, 1997 54,991
Services rendered $1.50 (6) December 31, 1997 7,941
---------
Warrants outstanding -
December 31, 1994 1,031,307

Services rendered $1.50 (6) March 30, 1998 9,141
Services rendered $1.50 (6) June 29, 1998 8,840
Services rendered $1.50 (6) September 29, 1998 6,699
Issued to officers $2.75 (7) December 31, 2002 300,000
Consulting agreement $2.61 (8) September 4, 2002 30,000
Connecticut financing $2.50 (9) September 1, 1997 33,750
Connecticut financing $1.11 (9) September 1, 2001 300,000
Connecticut financing $2.50 (9) September 1, 2002 11,250
Connecticut financing $2.50 (9) September 5, 1996 41,000
Other $2.75 December 31, 2002 6,667
---------
Warrants outstanding -
December 31, 1995 1,778,654
=========
</TABLE>
(1) May be redeemed by the Company at any time on 30 days prior written
notice at a price of $.05 per warrant if the average of the closing bid and
asked prices of the common stock equals or exceeds $11.00 per share during any
consecutive 10 day trading period and notice of redemption is given no later
than 20 days after the expiration of such 10 day trading period. In 1994 the
exercise price was reduced to $4.00 per share and the expiration date was
extended to March 31, 1997.

(continued)
F-21
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 8) - Stock Warrants and Options: (continued)
- -------------------------------------

[a] Common stock warrants: (continued)
---------------------

(2) In connection with the public offering which occurred in February 1992,
the Company sold to the underwriter, at a nominal amount, warrants exercisable
over a three-year period commencing November 1993, to purchase 50,000 units at
$7.09 per unit, each unit consisting of one share of common stock and one
redeemable warrant.

(3) In 1994 the Company issued a warrant to purchase 5,500 shares of common
stock at an exercise price of $4.00 per share, expiring March 30, 1996, as
compensation, which it valued at $5,500.

(4) Warrants previously issued with an expiration date of December 31, 1994.

(5) In connection with the cancellation of certain stock options the Company
in 1994 granted a warrant to purchase 172,599 shares of common stock exercisable
at $2.75, which expires at December 31, 1999.

(6) The Company issued warrants to purchase 87,612 shares of common stock
(62,932 in 1994 and 24,680 in 1995) at an exercise price of $1.50 per share,
expiring at various dates through September 29, 1998, which is valued at $88,000
($63,000 in 1994 and $25,000 in 1995), in exchange for services rendered.

(7) The Company granted to two officers, who are also stockholders, warrants
to purchase 300,000 shares of common stock at an exercise price of $2.75 per
share, expiring December 31, 2002. The exercise price exceeded the market price
on the date of grant.

(8) The Company issued a warrant to purchase 30,000 shares of common stock
at an exercise price of $2.61 per share, expiring September 4, 2002 for
financial consulting, which it valued at $7,000.

(9) In connection with the various financing agreements entered into in
September 1995, the Company issued warrants to purchase up to 386,000 shares of
common stock at exercise prices of $1.11 and $2.50 per share expiring at various
dates through September 1, 2002. The exercisable portion of such warrants have
been valued at $21,000 (see Note 9). The value of such warrants is measured at
the time they become exercisable.

(continued)
F-22
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 8) - Stock Warrants and Options: (continued)
- -------------------------------------

[b] Stock option plans:
------------------

The Company's 1985 incentive and general (nonstatutory) stock option plans as
amended, provided for the granting of options to purchase up to 500,000 shares
of its common stock to eligible employees and nonemployee directors. Both plans
expired in February 1995.

The Company's 1994 stock option plan (the "Plan") provides for the granting
to employees and directors of both incentive and nonstatutory stock options.
Pursuant to the Plan 500,000 shares of the Company's common stock have been
reserved for granting at prices and for periods determined by the Company's
Board of Directors. The Plan expires on October 31, 2004 and at December 31,
1994 no stock options had been issued under the Plan.

Stock options outstanding under these plans are as follows:

<TABLE>
<CAPTION>
Nonstatutory Incentive
------------ ---------
<S> <C> <C>

Outstanding at December 31, 1993
($1.50 - $4.75 per share)........ 100,935 207,499
Granted ($2.25 - $2.75 per share). 15,999 152,500
Cancelled........................... (57,600) (132,899)
------- --------

Outstanding at December 31, 1994
($1.50 - $4.75 per share)........ 59,334 227,100
Granted ($2.13 - $3.13 per share). 10,000 158,000
Cancelled........................... (16,667) (10,750)
------- --------

Outstanding at December 31, 1995
($1.50 - $4.75 per share)........ 52,667 374,350
======= ========
</TABLE>

At December 31, 1995 all of the nonstatutory stock options and 99,084 of the
incentive stock options were exercisable.

As at December 31, 1995, options for the purchase of 338,000 shares were
available for future grant.

F-23
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 9) - Financing Agreements:
- -------------------------------

In September 1995, pursuant to a series of interdependent transactions, the
Company sold 900,901 shares of its common stock for an aggregate of $1,000,000
in a private placement, received a grant commitment from the city of Bristol,
Connecticut of up to $100,000 and received loan commitments to borrow in the
aggregate of up to $2,050,000 from a bank and from various agencies and public
authorities of the state of Connecticut in connection with moving its
manufacturing facilities to Bristol, Connecticut. The loan commitments are as
follows:

[a] The Company entered into a financing agreement with Connecticut
Innovations, Incorporated ("CII") to borrow up to $750,000 in four stages based
on the achievement of certain milestones at an interest rate of 10% per annum.
Interest only is payable semi-annually commencing on the earlier of (i)
September 5, 1998 or (ii) the date the Company declares any dividends or
repurchases any of its outstanding stock. Principal is due on September 5,
2001, collateralized by the assets of the Company, including patents, which
security interest except for patents, is subordinated to the security interest
of the Company's lending bank. As of December 31, 1995, the Company was
eligible and has borrowed $100,000 under this facility. The Company granted CII
a warrant to purchase 300,000 shares of common stock at an exercise price of
$1.11 per share, expiring on September 1, 2001. The warrant becomes exercisable
on a pro rata basis, as the Company achieves its milestones and makes additional
borrowings under the facility. As of December 31, 1995, 40,000 of such warrants
are exercisable and have been valued at $16,000. As the Company borrows
additional amounts and more warrants become exercisable, those warrants will
then be valued at the time of such borrowings.

The exercise price of the warrant is subject to downward adjustment if any
sales of common stock are made at less than $1.11 per share. The warrant may be
exercised on a "cashless basis", whereby the Company must pay to the
warrantholder an amount equal to the difference between the warrant exercise
price and the fair market value of the underlying stock.

The agreement contains provisions that provide for repayment of borrowings
under the facility in the event of 1) an underwritten public offering, 2) a
change of control of the Company, as defined and 3) failure to maintain a
Connecticut presence, as defined. The agreement also provides for a prepayment
premium in the amount of the greater of 1) return on borrowings recalculated at
25% per annum or 2) the difference between the warrant exercise price (or the
underlying common stock if the warrant has been exercised) of the exercisable
warrants and the market price of the common stock. Any payments representing
the prepayment premium will be charged to expense when incurred.

(continued)
F-24
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 9) - Financing Agreements: (continued)
- -------------------------------

In January 1996 and March 1996, the Company borrowed $250,000 and $150,000,
respectively, under the second and third stages of the financing agreement. The
final $250,000 milestone requires 100 percent of the Company's direct labor
force to work in Connecticut, 75 percent of all manufacturing operations to be
located in Connecticut, 3 medical outcome studies to have been completed and
that the Company employ at least 3 sales and service staff, including an
insurance reimbursement specialist. The Company believes that it will receive
the final stage of funding in mid-year 1996.

[b] The Company entered into a loan agreement with People's Bank ("Peoples")
providing for a $1,000,000 revolving credit facility expiring on September 5,
1997 at an interest rate of prime plus 1 1/2%. Borrowings available under the
facility are limited to 80% of eligible accounts receivable and 50% of eligible
inventory and are collateralized by the Company's accounts receivable and
inventory. At December 31, 1995 no borrowings were made under this loan
agreement.

The facility contains restrictive covenants that limit capital expenditures
and other financial and ratio requirements with respect to working capital,
equity and unsubordinated debt. The facility also requires funds to be held in
escrow as a Debt Service Reserve, as defined in the agreement. The agreement
also restricts the payment of dividends.

The Connecticut Development Authority ("CDA") has guaranteed repayment of 40%
of the outstanding balance of the loan. The Company's president has guaranteed
repayment of 20% (up to $80,000) of any amounts paid by CDA to Peoples under
their guarantee. In addition, three of the Company's product distributors (the
"LOC Corporations") each agreed to provide an irrevocable letter of credit in
the amount of $200,000 for an aggregate of $600,000, which letters of credit can
be drawn down upon the failure of the Company to make when due any payment to
Peoples. In exchange for issuing these letters of credit, the Company issued
each of the LOC Corporations a warrant to purchase up to 20,000 shares (60,000
in the aggregate) of the Company's common stock at an exercise price of $2.50
per share.

Pursuant to a put/call agreement with two of the LOC Corporations, the
Company had the right to require the two LOC Corporations to purchase an
aggregate of 126,667 shares of common stock (or the LOC corporations had the
right to call the Company to issue its common stock) at $1.50 per share for
total proceeds of $190,000. The call was exercised by the LOC Corporations in
September 1995, and the Company received proceeds of $100,000 in 1995, $50,000
in January 1996. Pursuant to the financing agreement with Peoples, the proceeds
received from the LOC Corporations reduce their outstanding letters of credit in
that amount and the funds are to be
(continued)

F-25
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 9) - Financing Agreements: (continued)
- -------------------------------

[b] (continued)

held in a restricted cash account by the Company. Under the put/call agreement,
the number of warrants issued to the LOC Corporations was reduced by 19,000.
The remaining warrants to purchase an aggregate of 41,000 shares of common stock
have been valued at $1,400.

[c] The Company entered into a loan agreement with CDA providing for a line of
credit of up to $100,000 until September 4, 1996 for 80% of the purchase price
of new or used equipment, bearing interest at the rate of 7.94%. The loan is
repayable in 48 equal monthly installments commencing October 1, 1998 and is
collateralized by all the equipment financed. The Company granted CDA warrants
to purchase an aggregate of 45,000 shares of common stock at an exercise price
of $2.50 per share. The warrants were valued at $3,600. At December 31, 1995
no borrowings were made under this loan agreement.

[d] The Company entered into an Assistance Agreement, which was approved
November 30, 1995 with the Department of Economic and Community Development
("DECD"), providing for a loan to the Company in an amount not to exceed
$200,000 for funding the relocation of the Company's factory (as defined
therein) at an interest rate of 5% per annum. The principal and interest of the
loan is due in 84 equal monthly payments commencing on the third anniversary of
the advancement date, and is collateralized by certain machinery and equipment.
At December 31, 1995 no borrowings were made under the Assistance Agreement.

[e] The Company entered into a Grant Agreement, dated August 8, 1995 with the
city of Bristol, Connecticut, providing, under certain conditions, for a grant
in an amount up to $100,000 ($50,000 was received in October 1995 and the
balance is to be received on the achievement of certain employment levels). If
the Company relocates its equipment or employees of its manufacturing facilities
outside the city of Bristol prior to August 8, 2005, the Company will be
obligated to immediately repay the grant.

(NOTE 10) - Commitments:
- -----------------------

[a] Employment agreements:
---------------------

At December 31, 1995, the Company has employment agreements with its
president and three other officers. The agreement with the president expires on
September 30, 1996. One agreement is cancellable by either party on 60-days
notice and the other two agreements are cancellable by the Company with six
months notice. Aggregate annual salaries pursuant to all the agreements
aggregate $412,000.

(continued)

F-26
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 10) - Commitments: (continued)
- -----------------------

[a] Employment agreements: (continued)
---------------------

During the year ended December 31, 1995 the president of the Company and one
of its officers, both of whom are stockholders, waived payment of their deferred
salaries (along with accrued interest thereon at 6% per annum) due to them under
their employment agreements for the period January 1, 1991 through December 31,
1994 (see Note 5) and $58,500 for the year ended December 31, 1995. As at
December 31, 1995, the Company owed its president and two of its officers
approximately $86,000 in deferred compensation.

[b] Lease of premises:
-----------------

The Company entered into a five-year lease which commenced in September 1995
for office, warehousing and manufacturing space in Bristol, Connecticut.

The terms of the lease provide for the first two months rent to be paid in
the fifth year of the lease. Rental expense is recognized by the Company on a
straight-line basis over the life of the lease.

Minimum annual rental payments required are as follows:

Year Ending
December 31,
------------

1996. . . . . . . . . . . . $138,750
1997. . . . . . . . . . . . 138,750
1998. . . . . . . . . . . . 138,750
1999. . . . . . . . . . . . 146,458
2000. . . . . . . . . . . . 107,917
--------

T o t a l . . . . $670,625
========

The terms of the lease include escalation clauses for increases in real
estate taxes. The Company also has the option to extend this lease for an
additional five-year period at an adjusted rent based on certain cost of living
adjustments.

Additional premises are leased on a month-to-month basis at $4,375 per month
plus real estate taxes. Beginning January 1, 1994 and until May 31, 1994, the
Company's landlord agreed to accept shares of the Company's common stock at a
value of $1.00 per share in lieu of payment for approximately one-half of the
monthly obligation.

Total rent expense aggregated $125,000 and $68,000 for the years ended
December 31, 1995 and 1994, respectively (see Note 2[e]).

(continued)

F-27
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 10) - Commitments: (continued)
- -----------------------

[c] Commission agreements:
---------------------

The Company has agreements with three finders pursuant to which it will pay a
commission of 10% of the proceeds of any financing obtained by these finders.

[d] Consulting agreement:
--------------------

In 1995, the Company entered into a five-year consulting agreement with a
financial consultant. In year one of the agreement, the Company is required to
make quarterly payments of 2,700 shares of common stock. In years two and three
of the agreement, the Company is required to make quarterly payments of $3,000,
payable in common stock. In years four and five, the Company is required to
make quarterly payments of $3,000, payable in cash or common stock at the
discretion of the consultant. Shares used to pay for the services rendered by
the consultant will be valued based on their fair value when issued.

[e] Arbitration proceeding:
----------------------

In 1993, the Company entered into an agreement for the sale of 1,250,000
units; each unit consisting of one share of common stock of the Company and one
common stock purchase warrant exercisable at $4.00 per share over a period of
three years, for $5,000,000. The Company did not receive any funds and
commenced an arbitration proceeding for breach of contract. In 1995, the
Company determined that the prospective buyers had no significant assets to
pursue and the Company discontinued the proceeding.

(NOTE 11) - Major Customers:
- ---------------------------

For the year ended December 31, 1995, sales to four separate customers $64,596
(29%), $60,956 (28%), $36,194 (16%) and $30,405 (14%) aggregated approximately
87% of the Company's net sales. For the year ended December 31, 1994, sales to
three separate customers $90,195 (39%), $65,852 (28%) and $57,615 (25%)
aggregated approximately 92% of the Company's net sales.

(continued)

F-28
<PAGE>

NOVA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE 12) - Subsequent Events:
- -----------------------------

On January 1, 1996, the Company entered into a distribution agreement for the
sale of its patient transfer systems whereby the distributor has the exclusive
right to sell or lease the systems in specific territories in the state of New
York. Pursuant to the agreement, the distributor is required to order 50 of the
Company's products in the first year, 75 in the second year and 100 in the third
year, subject to the receipt by the Company of 3,000,000 in additional financing
by September 30, 1996. If the financing is not received, the distributor's
minimum order requirements increase to 150, 200 and 200 Nova products,
respectively.

(NOTE 13) - Acquisition of Comed Systems, Inc. [Unaudited]:
- ----------------------------------------------------------

On May 31, 1996, the Company,through a wholly owned acquisition corporation,
acquired all of the outstanding capital stock of Comed Systems, Inc. ("Comed"),
in exchange for the issuance of 600,000 shares of its common stock, and two
$750,000 promissory notes. The notes, which bear interest at 8% per annum, are
guaranteed by the Company. The first note is due in June 1997 and the second
note is due on January 1, 2001 subject to quarterly prepayment installments
commencing December 31, 1997. Such installments are equal to the lesser of
$37,500 or 25 percent of Comed's operating income (as defined).

F-29
<PAGE>

Item 1. Financial Statements.
- -----------------------------

NOVA TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS

(Unaudited) March 31, 1996
---------------
ASSETS

Current assets:
<S> <C>
Cash and cash equivalents......................... $273,954
Inventories....................................... 483,365
Accounts receivable............................... 114,519
Prepaid expenses and other current assets......... 48,296
-----------
Total current assets........................... 920,134

Restricted cash........................................ 190,000
Subscription receivable................................
Equipment and leasehold improvements (net of accumu-
lated depreciation and amortization of $226,670 in
1996 and $226,576 in 1995)......................... 129,268
Deposits and other assets.............................. 121,594
Deferred financing costs............................... 62,412
-----------
TOTAL.......................................... $1,423,408
===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses............. $273,486
Customer prepayments.............................. 18,909
Deferred officers' compensation (including accrued
interest of $684 in 1995).......................
Notes payable-officers............................ 115,750
-----------
Total current liabilities...................... 408,145

Note payable-other (net of deferred debt discount of
$74,776 in 1996 and $15,111 in 1995).............. 435,687
Note payable-officers (including accrued interest of
$23,582 in 1996 and $15,779 in 1995).............. 182,832
Deferred officers' compensation (including accrued
interest of $2,086 in 1996)....................... 134,168
Other liabilities...................................... 15,250
Grant award............................................ 50,000
-----------
Total liabilities............................. 1,226,082
-----------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value; 14,000,000 shares
authorized; 5,798,483 and 5,791,083 shares issued
and outstanding, respectively...................... 57,985
Additional paid-in capital............................. 9,918,608
Deficit................................................ (9,779,267)
-----------
Total stockholders' equity .................... 197,326
-----------
TOTAL $1,423,408
===========

</TABLE>

The attached notes are made a part hereof.

F-30
<PAGE>

NOVA TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

Three months ended
March 31,
-----------------------
1996 1995 *
----------- -----------
Net sales.......................................... $82,553 $119,882
Cost of sales...................................... 302,706 171,229
----------- -----------
Gross (loss)....................................... (220,153) (51,347)
----------- -----------

Research and development expense................... 81,619 67,286
General, administrative, marketing
and consulting expenses.......................... 152,126 126,189
----------- -----------

Total expenses..................................... (233,745) (193,475)
----------- -----------

(Loss) from operations............................. (453,898) (244,822)

Interest and other income.......................... 24,054 1,530
Interest expense................................... (27,831) (554)
----------- -----------

NET LOSS.................................. ($457,675) ($243,846)
========================

Net loss per share................................. ($0.08) ($0.06)
====== ======

Weighted average number of common
shares used in computing loss
per share........................................ 5,796,016 4,355,533
========= =========

The attached notes are made a part hereof.

* As Adjusted

F-31

<PAGE>

<TABLE>
<CAPTION>
NOVA TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited) Three months ended
March 31,
-----------------------
1996 1995 *
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... ($457,675) ($243,846)
Adjustments to reconcile net loss to net cash ---------- -----------
(used in) operating activities:
Depreciation and amortization.......................... 27,740 20,319
Value assigned to warrants given to employees.......... 9,142
Common stock issued for professional services rendered. 8,214
Changes in operating assets and liabilities:
(Increase) decrease in inventories.................... (150,370) 34,952
(Increase) in accounts receivable, prepaid expenses
and other assets..................................... (103,138) (17,524)
(Increase) in restricted cash......................... (90,000)
Decrease in subscription receivable................... 90,000
Increase (decrease) in accounts payable and accrued
expenses............................................. 11,305 (36,917)
Increase in deferred officers' compensation........... 46,000 48,000
Increase in accrued interest payable.................. 16,455
-----------------------
Net cash (used in) operating activities............. (601,469) (185,874)
-----------------------
Cash flows from investing activities:
Purchase of equipment and capitalized tooling costs..... (10,396) (4,978)
-----------------------
Cash flows from financing activities:
Proceeds from notes payable............................. 400,000
Proceeds from sale of common stock...................... 95,100
Issuance costs incurred in sale of common stock......... (9,510)
Proceeds from exercise of warrants...................... 99,565
-----------------------
Net cash provided by financing activities........... 400,000 185,155
-----------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... (211,865) (5,697)
Cash and cash equivalents at beginning of period......... 485,819 102,245
-----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............... $273,954 $96,548
=======================
Supplemental disclosure of cash flow information-
Forgiveness of debt owed to officers.................. $762,852
Value of warrants given in connection with financing.. $62,800

</TABLE>

The attached notes are made a part hereof.

* As Adjusted

F-32
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996

(UNAUDITED)

(NOTE A):
- ---------
The accompanying unaudited financial statements represent condensed
financial data and, therefore, do not include all footnote disclosures required
to be included in financial statements prepared in conformity with generally
accepted accounting principles.

(NOTE B):
- ---------
(1) In management's opinion, all necessary adjustments (consisting only
of normal recurring adjustments) have been made in order to present fairly the
results for the interim periods.

(2) The results of operations for three months ended March 31, 1996 are
not necessarily indicative of the results of operations for the year ending
December 31, 1996.

(3) From inception through December 31, 1994, the Company reported
results as a development stage enterprise. Since January 1, 1995, the Company
is no longer classified as a development stage enterprise.

(NOTE C):
- ---------
Net loss per share is based on the weighted average number of shares
outstanding during each period. No effect has been given to outstanding options
and warrants as the effect would be antidilutive.

(NOTE D):
- ---------
Inventories are stated at the lower of cost (first-in, first-out) or
market.

(NOTE E):
- ---------
In September 1995, pursuant to a series of interdependent transactions,
the Company sold 900,901 shares of its common stock for an aggregate of
$1,000,000 in a private placement, received a grant commitment from the city of
Bristol, Connecticut of up to $100,000 and received loan commitments to borrow
in the aggregate of up to $2,050,000 from a bank and various agencies and public
authorities of the state of Connecticut in connection with moving its
manufacturing facilities to Bristol, Connecticut. The loan commitments are as
follows:

F-33

<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996

(UNAUDITED)

(a) The Company entered into a financing agreement with Connecticut
Innovations, Incorporated ("CII") to borrow up to $750,000 in four stages based
on the achievement of certain milestones at an interest rate of 10% per annum.
Principal is due on September 5, 2001, collateralized by the assets of the
Company, including patents, which security interest except for patents, is
subordinated to the security interest of the Company's lending bank. As of March
31, 1996, the Company borrowed $500,000 under this facility. The Company granted
CII a warrant to purchase 300,000 shares of common stock at an exercise price of
$1.11 per share, expiring on September 1, 2001. The warrant becomes exercisable
on a pro rata basis, as the Company achieves its March 31, 1996, 200,000 of such
warrants are exercisable and have been valued at $78,800.

(b) The Company entered into a loan agreement with People's Bank
("Peoples") providing for a $1,000,000 revolving credit facility expiring on
September 5, 1997 at an interest rate of prime plus 1 1/2%. Borrowings available
under the facility are limited to 80% of eligible accounts receivable and 50% of
eligible inventory and are collateralized by the Company's accounts receivable
and inventory. At March 31, 1996 no borrowings were made under this loan
agreement.

This facility contains restrictive covenants that limit capital
expenditure and other financial and ratio requirements with respect to working
capital, equity and unsubordinated debt. The facility restricts the payment of
dividends and also requires funds to be held in escrow as a Debt Service
Reserve, as defined in the agreement.

The Connecticut Development Authority ("CDA") has guaranteed repayment
of 40% of the outstanding balance of the loan. The Company's president has
guaranteed repayment of 20% (up to $80,000) of any amounts paid by CDA to
Peoples under their guarantee. In addition, three of the Company's product
distributors (the "LOC Corporations") each agreed to provide an irrevocable
letter of credit in the amount of $200,000 for an aggregate of $600,000, which
letters of credit can be drawn down upon the failure of the Company to make when
due any payment to Peoples. In exchange for issuing these letters of credit,
the Company issued each of the LOC Corporations a warrant to purchase up to
20,000 shares (60,000 in the aggregate) of the Company's common stock at an
exercise price of $2.50 per share.

Pursuant to a put/call agreement with two of the LOC Corporations, the
Company had the right to require the two LOC

F-34
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Corporations to purchase an aggregate of 126,667 shares of common stock (or the
LOC Corporations had the right to call the Company to issue its common stock) at
$1.50 per share for total proceeds of $190,000. The Company received proceeds of
$190,000 during the period December 1995 through March 1996. Pursuant to the
financing agreement with Peoples, the proceeds received from the LOC
Corporations reduce their outstanding letters of credit in that amount and the
funds are to be held in a restricted cash account by the Company and the number
of shares that could be purchased by LOC Corporations under the warrants was
reduced by 19,000.

(c) The Company entered into a loan agreement with CDA providing for
a line of credit of up to $100,000 until September 4, 1996 for 80% of the
purchase price of new or used equipment, bearing interest at the rate of 7.94%.
The loan is repayable in 48 equal monthly installments commencing October 1,
1998 and is collateralized by all the equipment purchased with the proceeds. The
Company granted CDA warrants to purchase an aggregate 45,000 shares of common
stock at an exercise price of $2.50 per share. At March 31, 1996 no borrowings
were made under this loan agreement.

(d) The Company entered into an Assistance Agreement, which was
approved November 30, 1995 with the Department of Economic and Community
Development ("DECD") providing for a loan to the Company in an amount not to
exceed $200,000 for funding the relocation of the Company's factory (as defined
therein) at an interest rate of 5% per annum. The principal and interest of the
loan is due in 84 equal monthly payments commencing on the third anniversary of
the advancement date, and is collateralized by certain machinery and equipment.
At March 31, 1996 no borrowings were made under the Assistance Agreement.

(e) The Company entered into a Grant Agreement, dated August 8, 1995
with the city of Bristol, Connecticut ("Bristol"), providing, under certain
conditions, for a grant in an amount up to $100,000 ($50,000 was received in
October 1995 and the balance is to be received on the achievement of certain
employment levels). If the Company relocates 60% of its equipment or employees
of its manufacturing facilities outside Bristol prior to August 8, 2005, the
Company will be obligated to immediately repay the grant.

(NOTE F):
- ---------
At March 31, 1996 the notes payable to officers, as amended, bear
interest at 11% and 12% per annum. The 11% and 12% notes (aggregating $170,000
and $105,000), respectively are payable on April 1, 1997.

F-35
<PAGE>

NOVA TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996

(UNAUDITED)

The notes are subordinated to the borrowings under the People's Bank ("Peoples")
and Connecticut Innovations, Incorporated ("CII") loan facilities. The officers
received permission from Peoples and CII to substitute deferred compensation
aggregating $115,750 due them at March 31, 1996 for an equal amount of
subordinated notes payable and in April, a payment of $115,750 was made to the
officers reducing the amount owed to them under the notes payable.

(NOTE G):
- ---------
Two officers have agreed to defer until April 1, 1997 payment of
salaries due them aggregating $16,332. Two officers have agreed to defer until
April 1, 1997 payment of interest on deferred compensation due them aggregating
$2,086. Three directors have agreed to defer payment of accrued director's fees
until April 1, 1997 aggregating $15,250.

(NOTES H):
- ----------
In the beginning of May 1996, the Company borrowed $200,000 under its
revolving line of credit.

F-36
<PAGE>

COMED SYSTEMS, INC.

FINANCIAL STATEMENTS

FEBRUARY 29, 1996

F-37
<PAGE>

[LETTERHEAD OF RICHARD A. EISNER & COMPANY, LLP]

RAE
===

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Comed Systems, Inc.

We have audited the accompanying balance sheet of Comed Systems, Inc. as at
February 29, 1996 and the related statements of operations, changes in
stockholders' equity and cash flows for the nine months ended February 29, 1996
and the year ended May 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Comed Systems, Inc. at
February 29, 1996, and the results of its operations and its cash flows for the
nine months ended February 29, 1996 and the year ended May 31, 1995, in
conformity with generally accepted accounting principles.

/s/ Richard A. Eisner & Company, LLP

New York, New York
May 17, 1996

With respect to Note G
May 30, 1996

F-38
<PAGE>

COMED SYSTEMS, INC.

BALANCE SHEET

FEBRUARY 29, 1996

<TABLE>
<CAPTION>
A S S E T S
-----------

Current assets:
<S> <C>
Cash............................................................. $ 15,000

Accounts receivable, trade - net (Notes C and H)................. 374,000

Inventories (Note B[2]).......................................... 18,000

Prepaid expenses................................................. 16,000

Deferred taxes (Note I).......................................... 34,000
--------

Total current assets...................................... 457,000

Rental equipment, less accumulated
depreciation of $1,186,000 (Note B[3])........................... 365,000

Furniture and equipment - net (Notes B[4] and D).................... 67,000

Other assets........................................................ 11,000
--------

T O T A L................................................. $900,000
========

L I A B I L I T I E S
---------------------
Current liabilities:

Current portion of long-term debt (Notes E and G)................ $228,000

Accounts payable and accrued expenses............................ 74,000

Income taxes payable (Note I).................................... 200,000
--------

Total current liabilities................................. 502,000
--------

Long-term debt (less current portion)............................... 9,000

Deferred taxes (Note I)............................................. 53,000
--------

Total liabilities......................................... 564,000
--------

Commitments (Note F)

STOCKHOLDERS' EQUITY
--------------------

Common stock, no par value; 100 shares authorized,
issued and outstanding........................................... 1,000

Accumulated earnings................................................ 335,000
--------

Total stockholders' equity................................ 336,000
--------

T O T A L................................................. $900,000
========
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-39
<PAGE>

COMED SYSTEMS, INC.

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

Nine Months
Ended Year Ended
February 29, May 31,
1996 1995
------------- -----------
<S> <C> <C>
Net revenues......................................... $1,702,000 $1,758,000
---------- ----------

Cost of net revenues................................. 881,000 903,000

Selling, general and administrative expenses ........ 506,000 521,000

Provision for doubtful accounts...................... 30,000 39,000
---------- ----------

1,417,000 1,463,000
---------- ----------

Operating income........................... 285,000 295,000
---------- ----------

Interest income...................................... 6,000 4,000

Interest (expense)................................... (64,000) (75,000)

Gain (loss) on sale of assets........................ 19,000 (2,000)
---------- ----------

Total...................................... (39,000) (73,000)
---------- ----------

Income before income taxes........................... 246,000 222,000

Income tax expense................................... 94,000 93,000
---------- ----------

NET INCOME........................................... $ 152,000 $ 129,000
========== ==========

</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-40
<PAGE>

COMED SYSTEMS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Stock
--------------
Number
of Accumulated
Shares Amount Earnings Total
------ ------ ----------- --------
<S> <C> <C> <C> <C>
Balance - May 31, 1994.................... 100 $1,000 $ 54,000 $ 55,000

Net income................................ 129,000 129,000
--- ------- -------- --------

Balance - May 31, 1995.................... 100 1,000 183,000 184,000

Net income for the nine
months ended
February 29, 1996...................... 152,000 152,000
--- ------- -------- --------

BALANCE - FEBRUARY 29, 1996............... 100 $1,000 $335,000 $336,000
=== ======= ======== ========
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-41
<PAGE>

COMED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Nine Months
Ended Year Ended
February 29, May 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 152,000 $ 129,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense........................... 464,000 433,000
Deferred taxes................................. (106,000) 93,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable,
trade - net............................... (164,000) 110,000
(Increase) decrease in prepaid expenses..... (4,000) 5,000
(Increase) decrease in other assets......... (7,000) 1,000
Increase (decrease) in accounts payable and
accrued expenses.......................... (143,000) 61,000
Increase in income taxes payable............ 200,000
--------- ---------

Net cash provided by operating activities. 392,000 832,000
--------- ---------

Cash flows from investing activities:
Acquisition of rental equipment.................... (10,000) (700,000)
Disposition of rental equipment.................... 52,000 7,000
Acquisition of property and equipment.............. (20,000) (53,000)
--------- ---------

Net cash provided by (used in) investing
activities.............................. 22,000 (746,000)
--------- ---------

Cash flows from financing activities:
Proceeds from bank borrowings...................... 100,000 139,000
Principal repayment from bank borrowings........... (212,000) (101,000)
Proceeds from stockholder's and related parties'
loans............................................. 530,000
Principal repayment from stockholder's and related
parties' loans................................... (380,000) (615,000)
--------- ---------

Net cash (used in) financing activities... (492,000) (47,000)
--------- ---------

NET INCREASE (DECREASE) IN CASH....................... (78,000) 39,000

Cash - beginning of period............................ 93,000 54,000
--------- ---------

CASH - END OF PERIOD.................................. $ 15,000 $ 93,000
========= =========

</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-42
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE A) - Organization:
- -----------------------

The Company was incorporated in December 1989 in the State of Florida.
Subsequent to February 29, 1996, the Company reincorporated under the laws of
the State of New Hampshire.

The Company operates a home health care business which sells and rents durable
medical equipment to hospitals, nursing homes and individuals in the
northeastern United States.

(NOTE B) - Significant Accounting Policies:
- ------------------------------------------

Significant accounting policies in the preparation of the financial statements
are as follows:

[1] Revenue recognition:
-------------------

Revenues are recognized when services are rendered and related products are
provided to patients and are recorded at amounts estimated to be received under
reimbursement arrangements with the medical facility or third party payors,
including private insurers, and Medicare.

[2] Inventories:
-----------

Inventories are stated at the lower of cost (first-in, first-out) or market
and consist primarily of medical supplies sold directly to patients for use in
their homes.

[3] Rental equipment:
----------------

Rental equipment consists of medical equipment rented to patients for use in
their homes and hospitals and is stated at cost. Depreciation is provided using
the straight-line method over the useful life of the equipment which is stated
at three years.

[4] Furniture and equipment:
-----------------------

Furniture and equipment are stated at cost. The Company computed
depreciation using the straight-line method over the useful lives of the assets
acquired which is estimated at three years.

F-43
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE B) - Significant Accounting Policies: (continued)
- ------------------------------------------

[5] Management estimates:
--------------------

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

[6] Recently issued accounting standards:
------------------------------------

The Company has not elected to adopt early the provisions of a recently
issued accounting standard regarding impairments of long-lived assets ("FAS
121"). FAS 121 requires entities to review long-lived assets and certain
identifiable intangibles to be held and used, for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has not determined the potential impact, if any, of
the adoption of the above standard on its financial position or results of
operations.

(NOTE C) - Accounts Receivable:
- ------------------------------

The accounts receivable includes an allowance for doubtful accounts of $86,000
at February 29, 1996.

(NOTE D) - Furniture and Equipment:
- ----------------------------------

As of February 29, 1996, furniture and equipment consist of the following:

Furniture and fixtures. . . . . . . . . $ 63,000
Vehicles. . . . . . . . . . . . . . . . 116,000
--------

179,000

Less accumulated depreciation . . . . . 112,000
--------

$ 67,000
========

F-44
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE E) - Long-Term Debt:
- -------------------------

As of February 29, 1996 long-term debt consists of the following:

<TABLE>
<S> <C>
Ford Credit Corp. payable in monthly
installments of $1,141, including
interest at 10.9% per annum, due
February 1997 (1).................... $ 14,000

Ford Credit Corp. payable in monthly
installments of $502, including
interest at 10.5% per annum, due
April 1998 (1)....................... 13,000

CCC Leasing, Inc. payable in monthly
installments of $6,479, including
interest at 18% per annum, due
January 1997 (Note G).............. 60,000

Note payable to stockholder (Note G).. 150,000
--------

T o t a l................... 237,000

Less current portion.................. 228,000
--------

$ 9,000
========
</TABLE>
(1) Collateralized by vehicles.

(NOTE F) - Commitments:
- ----------------------

[1] Letter of credit:
----------------

The Company has an irrevocable letter of credit to People's Bank on behalf of
Nova Technologies, Inc. ("Nova") for $200,000 which expires on November 5, 1997.
The letter of credit is collateralized by accounts receivable and inventory. In
exchange for the letter of credit, the Company received a warrant to purchase up
to 20,000 shares of Nova's common stock at an exercise price of $2.50 per share.
The warrant expires on September 5, 1996.

F-45
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE F) - Commitments: (continued)
- ----------------------

[2] Lease agreements:
----------------

The Company entered into a lease agreement with a related party for
corporate offices and warehouse space which commenced on December 1, 1995, and
runs for a period of three years. The lease may be extended for additional
consecutive periods of one year. Minimum annual rentals are as follows:

Twelve Months
Ending
February 29,
-------------

1997 . . . . . . . . . . . . $ 42,000
1998 . . . . . . . . . . . . 42,000
1999 . . . . . . . . . . . . 31,000
--------

T o t a l . . . . . . $115,000
========

Rent expense amounted to approximately $25,000 for the nine months ended
February 29, 1996 and $36,000 for the year ended May 31, 1995.

(NOTE G) - Related Party Transactions:
- -------------------------------------

On December 1, 1994, the Company borrowed approximately $130,000 from CCC
Leasing, Inc., a company owned by relatives of the principal stockholders. The
note, which is payable in 24 equal monthly installments beginning January 15,
1995, bears interest at 18% per annum. As of February 29, 1996, $60,000 of the
note remained unpaid. As of May 30, 1996 the note was fully repaid (Note E).

During the year ended May 31, 1995, the Company entered into a separate
promissory note, payable to one of the stockholders. The note is for $450,000,
with interest at 18% per annum due monthly and the principal due May 31, 1998.
As of February 29, 1996, only $150,000 of the note remained unpaid. As of May
30, 1996, the note was repaid (Note E).

F-46
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE H) - Concentration of Risk:
- --------------------------------

Revenues from principal sources were as follows:

<TABLE>
<CAPTION>
Nine Months
Ended
February 29, Year Ended
1996 May 31, 1995
------------ ------------
<S> <C> <C>
Hospitals............... 57% 75%

Medicare................ 24 21

Private insurance and
other nongovernment
agencies............. 19 4
--- ---

T o t a l............... 100% 100%
=== ===
</TABLE>

Reimbursements can be influenced by the financial instability of private
third-party payors and the budget pressures and cost shifting by governmental
payors. A reduction in coverage or reimbursement rates by third-party payors
could have a material adverse effect on the Company's results of operations.

The Company, like other Medicare providers, is subject to governmental audits
of its Medicare reimbursement claims. As a provider of services, under the
Medicare programs, the Company is also subject to the Medicare fraud and abuse
laws.

As of February 29, 1996, the percentage of accounts receivable is as follows:

Hospitals. . . . . . . . . . . 60%

Medicare . . . . . . . . . . . 32

Private insurers and other
nongovernment sources . . . 8
---

T o t a l. . . . . . 100%
===

F-47
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE I) - Income Taxes:
- -----------------------

The components of the provision for taxes on income are as follows:
<TABLE>
<CAPTION>

Nine Months
Ended
February 29, Year Ended
1996 May 31, 1995
------------- -------------
<S> <C> <C>

Current:
Federal............................................ $170,000
State.............................................. 30,000

Deferred:
Federal............................................ (90,000) $79,000
State.............................................. (16,000) 14,000
-------- -------

T o t a l...................................... $ 94,000 $93,000
======== =======

A reconciliation between the Company's effective rate and the
U.S. Federal income tax rate is as follows:

Nine Months
Ended
February 29, Year Ended
1996 May 31, 1995
----------- ------------

Statutory rate...................................... 34.0% 34.0%
State income tax, net of
federal tax benefit................................ 6.0 6.0
Other............................................... (2.0) 2.0
---- ----
38.0% 42.0%
==== ====
</TABLE>

The deferred tax liability at February 29, 1996 is as follows:

Fixed assets. . . . . . . . . $ 53,000

Accounts receivable . . . . . (34,000)
--------

$ 19,000
========

Deferred tax expense results from temporary differences in the recognition
of expenses for tax and financial reporting purposes. The principal sources of
these differences were depreciation and allowance for doubtful accounts.

F-48
<PAGE>

COMED SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(NOTE J) - Simplified Employee Pension Plan:
- -------------------------------------------

The Company established a Simplified Employee Pension Plan (the "Plan")
covering eligible employees who meet certain minimum age and service
requirements. Contributions to the Plan are to be determined annually at the
discretion of management. Contributions made to the Plan for the nine months
ended February 29, 1996 and the year ended May 31, 1995 were $22,500 and
$22,500, respectively.

(NOTE K) - Prior Period Adjustment:
- ----------------------------------

Accumulated earnings at May 31, 1994 has been adjusted to reflect
capitalization of certain fixed assets previously expensed. The effect of this
adjustment is to increase net income for the year ended May 31, 1994 and
retained earnings by approximately $132,000 at May 31, 1994.

F-49
<PAGE>

================================================================================
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON
IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD
BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

UNTIL ______, 1996 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

___________________________________________

TABLE OF CONTENTS
Page
----

Prospectus Summary........................................... 2
Risk Factors................................................. 7
Market For Common Stock and Dividend Policy.................. 12
Capitalization............................................... 13
Selected Financial Data...................................... 13
Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................... 17
Business..................................................... 25
Management................................................... 35
Certain Transactions......................................... 39
Principal Stockholders....................................... 43
Selling Stockholders......................................... 45
Plan of Distribution......................................... 45
Description of Securities.................................... 46
Legal Proceedings............................................ 49
Legal Matters................................................ 49
Experts...................................................... 49
Indemnification for Securities Act Liabilities............... 49
Available Information........................................ 50
Index to Financial Statements................................ F-1

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

NOVA TECHNOLOGIES, INC.
COMMON STOCK
____________________________________

PROSPECTUS
_____________________________________

July __, 1996

================================================================================
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Certificate of Incorporation of Nova Technologies, Inc. (the
"Registrant") provides with respect to the indemnification of directors and
officers that the Registrant shall indemnify to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from time to
time, each person that such Section grants the Registrant the power to indemnify
and that such indemnification shall not be deemed exclusive of any other rights
to which such persons may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. The Certificate of
Incorporation of the Registrant also provides that no director shall be liable
to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (1) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law or (4) for any transaction from which the director derived an
improper personal benefit.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection with
the offering described in this Registration Statement. None of such expenses
will be paid by Selling Stockholders.

<TABLE>

- --------------------------------------------------------------------------------
<S> <C>

Registration Fee Under Securities Act of 1933 $1,009.55

Photocopying/Printing Expenses $ 200.00

Accounting Fees and Expenses $

Legal Fees and Expenses $

Blue Sky Fees and Expenses (including related legal fees) $

Miscellaneous $ 300.00

TOTAL $
- --------------------------------------------------------------------------------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth information relating to all securities of the
Company which were sold by it during the past three years and which were not
registered under the Securities Act of 1933, as amended (the "Act").

1. During the period February through May 1994, the Company issued 10,940
shares of Common Stock, valued at $10,940 per share to First Island
Partners L.P., the landlord for the Company's Hauppauge, New York
facility, in payment of a portion of its rent.

2. During the period from December 1993, through April 1994, the Company
sold 653,000 shares of Common Stock at a price of $1.00 per share to
the individuals named below. A commission of 10% was paid by the
Company in connection with each of these sales to one or more of
Arlindo Jorge and Barry Goldstein.

Fermon, Charles M.
Schneider, August E.
Glaws, Walter
Sami, Sherif
Eder, Leonard J.

II-1

<PAGE>

Rieger, Fred Jr.
Shapiro, Daniel
Teller, Sandy
Groginsky, Paula & Stuart
Fermon, Charles M.
Brooksbank, James J.
Helkowski, Barbara
Schmitz, John R.
Helkowski, Barbara
Brooksbank, James J.
Cohen, Edward J. & Arlette
Fermon, Charles M.
Stevenson, Richard C. & Inez I.
Brooksbank, James J.
La Torre, Susan
Russo, Robert & Michelle
Gordon, Robert & Sandra
Aquila, Santo
La Torre, Michael P.
La Torre, Michael J.
Lehrman, Sol & Shirley
Helkowski, Barbara
Slaughter, June
Reisman, Theodore
Ferman, Charles
Griffin, E.
Adinolfi, J & F
Lijoi, Bruno Trustee
Scherer, Howard & Rita
Jacklin, Honey Ruth Trustee
Kowalczik, Douglas J.
Shapiro, David

3. During the period from May 1994, through August 1995, the Company sold
744,920 shares of Common Stock at a price of $1.50 per share to the
individuals named below. A commission of 10% was paid by the Company
in connection with each of these sales to one or more of Arlindo
Jorge, Barry Goldstein and Jeremy Wiesen.

Melchior, Timothy
Bariahtaris, Connie & Arthur
Cabble, Steven & Donna
Cohen, Wayne Jay
Shapiro, Eric
Melchior, Timothy
Thonsen, William J.
Kowalczik, Douglas
Groginsky, Paula & Stuart
Shapiro, Daniel
Sussman, Gerald & Dorothy
Kaller, Jerold & Joyce
Schaffner, Charles E.
Navarro, Vincent & Sheila
Rexroad, Susan & Fred
Rieger, Fred Trustee
Rusnack Pension Plan
Melchior, Timothy
Kowalczik, Douglas J.

II-2

<PAGE>

Dean Witter Cust FBO Arlindo Jorge
Maher, John
Mathews, James F. & Teresa
Mathews, Rosemary
Kowalczik, Douglas
Grazia, Albert W.
Shapiro, Ira Jay
Mathews, Rosemary
Kowalczik, Douglas J.
Hartman, David
Howfam, Inc.
Kowalczik, Douglas J.
Wiesen, Jeremy
Loscalzo, Michael A.
Eder, Lenoard
Rieger, Fred R.
Mattern, Lynne R.
Rusnack, Theodore
Wiltsie, Thomas R.
Wild, Walter
Melchior, Timothy
Ziegler, Gordon S. Jr.
Sami, Sherif F.
Wiesen, Jeremy
Shapiro, Daniel
Fyman, Philip
Cohen, Wayne
Schoen, Bruce
Fermon, Charles
Backer, Jeffrey & Susan
Di Matteo, Elizabeth C.
Sami, Sherif F.
Lepkowsky, Calvin & Irene
Shapiro, Daniel
Gordon, Robert & Sandra
Helkowski, Barbara
Helkowski, Barbara
Horowitz, Stephen E.
Cohen, Wayne
Cohen, Michael & Marlene
Melchior, Timothy
Edwards, Ellen & Philip
Dori, Isaac & Judith
Lonergan, Michael R.
Adib, Banu
Republic Bank FBO David Hartman
Maher, John
Duane, Winifred A.
Republic Bank FBO David Hartman
Navarro, Sheila
Rexroad, Susan & Fred
Abrams, Scott D.
Rauch, Willard E.
Oblas, Robert
Melchior, Timothy

II-3
<PAGE>

Slaughter, June
Arca, Bill
Nash, Gary & Rhoda
Rosenheim, Paul
Lefcourt, Richard B.
Hartman, David
Genovese, Gregory P.
Shapiro, Daniel
Viviani, Joseph C.
Melchior, Timothy
Madden, Elizabeth D.
Smith Barney Custodian for Louis Di Mateo
Sondes, Sharon
Bonheim, Paul
Grazia, Albert
Rieger, Fred Jr.
Shapiro, Ira Jay
Webster, Jerry
Helkowski, Barbara
Cohen, Michael & Marlene
Harker, Edward
Albert, Charles
Chubb, Charles
Melchior, Timothy
Helkowski, Barbara
Reisman, Theodore
Groginsky, Stuart
Navarro, Vincent
Suozzi, Joseph A.

4. In 1993 and 1994, the Company issued 12,000 and 12,692 shares,
respectively, of Common Stock to Aztech Corp., a company controlled by
Stephen Fisher, an executive officer of the Company, in consideration
of consulting services.

5. In January 1995, the Company issued 73,752 shares of Common Stock
pursuant to the exercise of outstanding warrants to the individuals
named below. The warrants were issued in 1990 with an exercise price
of $3.00 per share and an expiration date of December 31, 1994. In
1994, the exercise price of these warrants was reduced to $1.35 per
share and the expiration date was extended to January 20, 1995.

Eder, Leonard
Rieger Jr., Fred
Rieger, Helene
Rusnack, Theodore
Wiltsie, Thomas
Wild, Walter
Ziegler, Gordon
Sami, Sherif

6. In May, 1994, in connection with the cancellation of certain stock
options, the Company issued to Charles Chubb a warrant to purchase
172,599 shares of Common Stock at $2.75 per share, expiring December
31, 1999.

II-4
<PAGE>

7. In exchange for services rendered, the Company issued to Harold J.
Lash, Paul C. DiMatteo, John Gilden and Steven Kay, employees of the
Company, in 1994 and 1995 warrants to purchase 62,932 and 24,680
shares, respectively, of Common Stock at an exercise price of $1.50
per share, expiring at various dates through September 29, 1998.

8. In September 1995, the Company issued to Samuel N. Paul a warrant to
purchase 30,000 shares of Common Stock at $2.61 per share, expiring
September 4, 2002 for financial consulting.

9. In June 1995, Paul DiMatteo, and Charles Chubb, executive officers of
the Company and Jay Haft, a director of the Company, were issued
seven-year warrants to purchase 180,000, 120,000, and 6,667 shares,
respectively, of Common Stock at $2.75 per share.

10. In September 1995, the Company sold 900,901 shares of Common Stock at
a price of $1.11 per share to the persons named as Selling
Stockholders herein. The Company paid a commission of $60,000 to
Merolla & Bogar LLC and $40,000 to TimeCapital Securities
Corporation.

11. In September 1995, the Company issued to Connecticut Innovations
Incorporated warrants to purchase 300,000 shares of Common Stock at
$1.11 per share, expiring September 1, 2001 in connection with its
loan agreement with the Company.

12. In September 1995, the Company issued to Connecticut Development
Authority warrants to purchase 33,750 and 11,250 shares of Common
Stock at $2.50 per share, expiring September 1, 1997 and September 1,
2002, respectively, in connection with its loan agreement with the
Company and its guarantee of the Company's loan agreement with
People's Bank.

13. In September 1995, the Company issued to each of Advanced
Therapeutics, Inc. ("Advanced"), Comed Systems, Inc. ("Comed") and
Innovative Medical Systems, Inc. ("Innovative"), distributors of the
Company, a warrant to purchase 20,000 shares of Common Stock at $2.50
per share, expiring the day after such distributor's obligations to
People's Bank expire, in connection with each such distributor posting
a $200,000 letter of credit as security for the Company's loan
facility with People's Bank. Also in September 1995, the Company
entered into a Stock Put and Call Agreement with Advanced and
Innovative. Pursuant to such agreements, in September 1995, the
Company sold 66,667 and 60,000 shares, respectively, of its Common
Stock to Advanced and Innovative at $1.50 per share. The proceeds of
such sales are held in a restricted account and the letter of credit
posted by each of Advanced and Innovative as security for the
Company's loan facility with People's Bank was reduced by the amount
of such proceeds. In addition, Advanced's warrant was reduced to the
right to purchase 10,000 shares of Common Stock and Innovative's
warrant was reduced to the right to purchase 11,000 shares of Common
Stock.

14. Merolla & Bogar LLC was issued 5400 and 2700 shares of Common Stock in
January and March 1996, representing payment of its $12,000 annual fee
for the period September 1995 through May 1996 at $1.11 per share
pursuant to a consulting agreement with the Company.

15. Pursuant to his employment agreement, in May 1994, the Company issued
to Stephen Fisher, an executive officer and director, an option
pursuant to its ISO Plan to purchase 150,000 shares of Common Stock at
$2.75 per share, expiring May 23, 2004.

16. Pursuant to his employment agreement which became effective in
September 1995, the Company issued to Samuel N. Paul, an executive
officer and director an option pursuant to its 1994 Stock Option Plan
(the "Plan") to purchase 150,000 shares of Common Stock at $2.61 per
share, expiring December 31, 2004.

17. In October 1995, Jay Haft, a director of the Company, was granted an
option pursuant to the Plan to purchase 10,000 shares of Common Stock
at $3.13 per share through December 31, 2002.

II-5
<PAGE>

18. In October 1995, an employee of the Company, was granted an option
pursuant to the Plan to purchase 2,000 shares of Common Stock at $3.13
per share, expiring October 9, 2002.

19. In March 1996, John Maher and John O'Brien were each issued 1,000
shares of Common Stock as finder's fees in connection with certain
private placement sales of Common Stock.

20. The following directors were issued the following options to purchase
Common Stock pursuant to the Company's GSO Plan:
<TABLE>
<CAPTION>

DIRECTOR DATE OF GRANT # OF SHARES PRICE EXPIRATION DATE
- -------------------- ------------- ----------- ----- ------------------
<S> <C> <C> <C> <C>

21. Fred Rieger, Jr. purchased 10,000 shares of Common Stock in May 1996
at $2.00 per share. Arlindo Jorge received a commission of 10%.

Exemption from registration under the Act is claimed for the sales of
securities referred to above in reliance upon the exemption afforded by Sections
3(b) or 4(2) of the Act. Each certificate evidencing such securities bears an
appropriate restrictive legend and "stop transfer" orders are maintained on the
Company's stock transfer records thereagainst. Other than as noted above, none
of these sales involved the payment of finder's fees or sales commissions. A
subscription agreement indicating that the securities sold were unregistered
restricted securities was signed by each purchaser. Such subscription
agreements included representations that the purchasers were accredited
investors, that they were purchasing the securities for investment and not with
a view to distribution, and that they received the Company's filings pursuant to
the Exchange Act. No general solicitation or general advertising was conducted
by the Company or any of its representatives in connection with the sales of
securities referred to above.

22. In October 1993, each of Peter C. Glaws, Nell L. Zandberg, Charles T.
Glaws, Walter R. Glaws, and Anna Davenport, purchased 350 shares of
Common Stock at a price of $3.00 per share pursuant to the exercise of
warrants issued in 1990. Exemption from registration under the Act is
claimed for such sales in reliance upon the exemption afforded by
Sections 3(b) or 4(2) of the Act. Each certificate evidencing such
securities bears an appropriate restrictive legend and "stop transfer"
orders are maintained on the Company's stock transfer records
thereagainst. None of these sales involved the payment of finder's
fees or sales commissions.

II-6
<PAGE>

ITEM 27. EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

3.1 Certificate of Incorporation, as amended(1)

3.2 By-Laws(1)

4.1 See Exhibit 3.1 and 3.2

4.2 Form of certificate evidencing shares of Common Stock(1)

4.3 Form of certificate evidencing Redeemable Common Stock
Purchase Warrant(1)

4.4 Form of Warrant Agreement between the Company and Euro-
Atlantic Securities, Inc.(1)

4.5 Form of Redeemable Warrant Agreement between the
Company and American Stock Transfer & Trust Company
as warrant agent(1)

5 Opinion of Whitman Breed Abbott & Morgan(8)

10.1 1985 General Stock Option Plan(1)

10.2 1985 Incentive Stock Option Plan(1)

10.3 Employment Agreement, dated as of June 18, 1996
between the Company and Paul DiMatteo(8)

10.4 Employment Agreement, dated February 22, 1985, and
amendments thereto, between the Company and
Charles Chubb(1)

10.5 Promissory Notes of the Company in the principal amounts of
$40,000, $20,000, $20,000 $30,000 and $120,000, dated
December 18, 1987, December 31, 1987, April 29, 1988,
May 26, 1988 and June 15, 1989, respectively, and
amendments thereto, payable to Paul DiMatteo and the
related Security Agreement, dated June 15, 1989(1)

10.6 Agreement and Restated Stock Purchase Agreement, dated
December 31, 1986, between the Company, Transitions Two,
Limited Partnership, Nadfa Ltd., Paul DiMatteo and Venture
Capital Associates, Ltd(1)

10.7 Lease Agreement, dated March 7, 1986, and amendments
thereto, between the Company and First Island Partners,
L.P. (the "Lease Agreement")(1)

10.8 Amendment to Lease Agreement, dated February 29, 1992,
between the Company and First Island Partners, L.P.(3)

II-7
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

10.9 Form of Warrant Agreement between the Company and
various persons(1)

10.10 Extension of Lease Agreement, dated May 5, 1992, between
the Company and First Island Partners, L.P.(4)

10.11 Extension of Lease Agreement, dated July 15, 1992, between
the Company and First Island Partners, L.P.(4)

10.12 Amendment of Lease Agreement, dated September 9, 1992,
between the Company and First Island Partners, L.P.(4)

10.13 Extension of Lease Agreement, dated March 23, 1993 between
the Company and First Island Partners, L.P.(5)

10.14 Amendment to Lease Agreement, dated June 25, 1993 between
the Company and First Island Partners, L.P.(5)

10.15 Promissory Notes of the Company in the principal amounts
of $15,000, $15,000 and $5,000 dated October 19, 1993,
November 5, 1993 and November 23, 1993, respectively,
payable to Charles Chubb and the related Security
Agreements, dated October 19, 1993, November 5, 1993
and November 23, 1993(5)

10. 16 Promissory Notes of the Company in the principal amounts
of $30,000, $30,000 and $10,000, dated October 19, 1993,
November 5, 1993 and November 23, 1993, respectively,
payable to Paul DiMatteo and the related Security Agreements,
dated October 19, 1993, November 5, 1993
and November 23, 1993(5)

10.17 1994 Stock Option Plan(6)

10.18 Employment Agreement, dated May 23, 1994 between the
Company and Stephen M. Fisher(6)

10.19 Amendment to Lease Agreement, dated January 13,
1994 between the Company and First Island Partners,
L.P.(6)

10.20 Employment Agreement, dated August 10, 1995
between the Company and Samuel N. Paul(7)

10.21 Lease Agreement, dated August 25, 1995 between
the Company and Industrial Builders & Realty
Company together with amendments thereto dated
September 5, 1995 and September 6, 1995(7)

II-8
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

10.22 Consulting and Related Agreements, dated
August 24, 1995 between the Company and
Merolla & Bogar, LLC(7)

10.23 Distributorship Agreement, dated February 24, 1994
between the Company and James J. Brooksbank(7)

10.24 Employment Agreement, dated June 14, 1996,
between the Company and Douglas Drew(8)

10.25 Distributorship Agreement, dated June 20, 1994, between
the Company and Innovative Medical Systems, Inc.(7)

10.26 Distributorship Agreement, dated January 24, 1995, between
the Company and Advanced Therapeutics, Inc.(7)

10.27 Distributorship Agreement, dated February 15, 1995, between
the Company and Recovercare, Inc.(7)

10.28 Distributorship Agreement, dated March 24, 1995, between
the Company and Stat Medical, Inc.(7)

10.29 Distributorship Agreement, dated March 17, 1995, between
the Company and Concept Medical Corporation(7)

10.30 Distributorship Agreement dated January 1, 1996, between
the Company and JCM Capital Corp.(7)

10.31 Agreement, dated August 24, 1995, between the Company
and JCM Capital Corp. to enter into a distributorship agreement,
together with an amendment thereto dated January 24,
1996(7)

10.32 Agreement, dated November 1, 1994, between the
Company and Omni Manufacturing, Inc.(7)

10.33 Financing Agreement, dated September 5, 1995, between
the Company and Connecticut Innovations, Incorporated
("CII")(2)

10.34 Senior Note, dated September 5, 1995, by the
Company in favor of CII(2)

10.35 Security Agreement, dated September 5, 1995, between
the Company and CII(2)

10.36 Collateral Assignment and Grant of License, dated
September 5, 1995, between the Company and CII(2)

10.37 Stock Subscription Warrant, dated September 5, 1995, by
the Company in favor of CII(2)

II-9
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

10.38 Warrant Put Agreement, dated September 5, 1995, between
the Company and CII(2)

10.39 Officers' Agreement, dated September 5, 1995, among the
Company, CII, Paul DiMatteo, Stephen Fisher and Samuel
Paul(2)

10.40 Subordination Agreement, dated September 5, 1995, among
the Company, CII, Paul DiMatteo and Charles Chubb(2)

10.41 Loan Agreement, dated September 5, 1995, between the
Company and People's Bank(2)

10.42 Revolving Credit Note, dated September 5, 1995, by
the Company in favor of People's Bank(2)

10.43 Security Agreement, dated September 5, 1995, between
the Company and People's Bank(2)

10.44 Guarantee Agreement, dated September 5, 1995,
between Connecticut Development Authority and
People's Bank and agreed to by the Company(2)

10.45 Guaranty, dated September 5, 1995, by Paul DiMatteo
for the benefit of Connecticut Development
Authority(2)

10.46 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Advanced
Therapeutics Inc.(2)

10.47 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Innovative
Medical Systems, Inc.(2)

10.48 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Comed
Systems, Inc.(2)

10.49 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Advanced Therapeutics, Inc.(2)

10.50 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Innovative Medical Systems, Inc.(2)

10.51 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Comed Systems, Inc.(2)

II-10
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

10.52 Loan Agreement, dated September 5, 1995, between
the Company and Connecticut Development Authority(2)

10.53 Promissory Note, dated September 5, 1995, by the Company
in favor of Connecticut Development Authority(2)

10.54 Security Agreement, dated September 5, 1995, between
the Company and Connecticut Development Authority(2)

10.55 Stock Subscription Warrant, dated September 5, 1995,
between the Company and Connecticut Development
Authority(2)

10.56 Assistance Agreement, approved November 30, 1995,
between the Company and the State of Connecticut, acting
by the Department of Economic and Community Development(2)

10.57 Promissory Note, dated October 6, 1995, by the Company
in favor of the State of Connecticut, acting by the
Department of Economic and Community Development(2)

10.58 Intercreditor and Subordination Agreement, dated September
5, 1995, among the Company, People's Bank, CII, Connecticut
Development Authority, Comed Systems, Inc., Innovative
Medical Systems, Inc., Advanced Therapeutics, Inc., Charles
F. Chubb and Paul DiMatteo(7)

10.59 Intercreditor Agreement, dated November __, 1995, among
the Company, People's Bank, CII and Department of Economic
and Community Development(7)

10.60 Stock Put and Call Agreement, dated September 5, 1995,
between the Company and Innovative Medical Systems, Inc.(7)

10.61 Stock Put and Call Agreement, dated September 5, 1995,
between the Company and Advanced Therapeutic, Inc.(7)

10.62 Agreement dated August 25, 1995, between the Company and
TimeCapital Securities Corporation(9)

10.63 Amendment No. 1 to Loan Agreement, dated as of December
31, 1995, between the Company and People's Bank(9)

10.64 Amendment No. 2 to Loan Agreement, dated as of April __,
1996, between the Company and People's Bank(9)

10.65 Agreement, dated April 26, 1996, between the Company
and TimeCapital Securities Corporation(9)

10.66 Amendment to Distributorship Agreement,
effective as of October 17, 1995, between the
Company and Innovative Medical Systems, Inc.(9)

II-11
<PAGE>

10.67 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Concept Medical Corporation(9)

10.68 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Advanced Therapeutics Inc.(9)

10.69 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Recovercare, Inc.(9)

10.70 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Stat Medical, Inc.(9)

10.71 Amendment to Distributorship Agreement, dated
as of May 6, 1996, between the Company and
JCM Capital Corp.(9)

10.72 Consent and Subordination Agreement, dated as of
March 26, 1996, among the Company, Charles F. Chubb,
Paul DiMatteo and People's Bank(9)

10.73 Stock Purchase Agreement, dated as of May 31, 1996, among
the Company, Vivax, Douglas Drew and Donna Drew(8)

10.74 Non-Competition Agreement, dated as of June 14, 1996,
between the Company and Douglas Drew(8)

10.75 Agreement dated June 28, 1996, between the Company
and TimeCapital Securities Corporation*

23.1 Consent of Whitman Breed Abbott & Morgan(9)

23.2 Consent of Richard A. Eisner & Company, LLP*

_______________________________________

(1) Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (File No. 33-42880).
(2) Incorporated by reference to the exhibits to the Company's Current Report
on Form 8-KSB dated December 27, 1995.
(3) Incorporated by reference to the exhibits to the Company's fiscal 1991 Form
10-K.
(4) Incorporated by reference to the exhibits to the Company's fiscal 1992 Form
10-KSB.
(5) Incorporated by reference to the exhibits to the Company's fiscal 1993 Form
10-KSB.
(6) Incorporated by reference to the exhibits to the Company's fiscal 1994 Form
10-KSB.
(7) Incorporated by reference to the exhibits to the Company's fiscal 1995 Form
10-KSB.

(8) Incorporated by reference to the exhibits to the Company's Form 8-KSB filed
June 27, 1996.
(9) Previously filed.
* Filed herewith.

II-12
<PAGE>

ITEM 28. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes:

(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time the S.E.C. declared it effective.

(2) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement for the securities offered in the
Registration Statement, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of those securities.

Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions in Item 15 hereof, 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 of expenses
incurred or paid by a director, officer or controlling person of 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, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of 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.

II-13
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Hauppauge, New York on the 5th day of July, 1996.

NOVA TECHNOLOGIES, INC.

By:/s/ Stephen M. Fisher
---------------------------------------
Stephen M. Fisher
President, Chief Executive
Officer, Treasurer, Assistant Secretary
and Director (Principal Executive Officer
and Principal Financial Officer)

In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

Paul DiMatteo* Chairman of the Board July 5, 1996
--------------
Paul DiMatteo

Charles F. Chubb* Senior Vice President, July 5, 1996
----------------- Secretary and Director
Charles F. Chubb

Samuel N. Paul* Senior Vice President and Director July 5, 1996
-----------------
Samuel N. Paul

/s/ Douglas Drew Senior Vice President and Director July 5, 1996
------------------
Douglas Drew

Harold J. Lash* Controller (Principal Accounting Officer) July 5, 1996
------------------
Harold J. Lash

Jay M. Haft* Director July 5, 1996
------------------

Arlindo Jorge* Director July 5, 1996
------------------
Arlindo Jorge

Robert Segnini* Director July 5, 1996
------------------
Robert Segnini

* By: /s/ Stephen M. Fisher
----------------------------------------
Stephen M. Fisher
Attorney-in-Fact
<PAGE>

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

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

EXHIBITS

REGISTRATION STATEMENT

AMENDMENT NO. 2

FORM SB-2

UNDER
THE SECURITIES ACT OF 1933

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

NOVA TECHNOLOGIES, INC.

================================================================================
<PAGE>

NOVA TECHNOLOGIES, INC. FORM SB-2
FILE NO. 33-00364
INDEX TO EXHIBITS
<TABLE>
<CAPTION>

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- --------- -------------------------------------------------------- -------------
<S> <C> <C>

3.1 Certificate of Incorporation, as amended(1) N.A.

3.2 By-Laws(1) N.A.

4.1 See Exhibit 3.1 and 3.2 N.A.

4.2 Form of certificate evidencing shares of Common Stock(1) N.A.

4.3 Form of certificate evidencing Redeemable Common Stock N.A.
Purchase Warrant(1)

4.4 Form of Warrant Agreement between the Company and Euro- N.A.
Atlantic Securities, Inc.(1)

4.5 Form of Redeemable Warrant Agreement between the N.A.
Company and American Stock Transfer & Trust Company
as warrant agent(1)

5 Opinion of Whitman Breed Abbott & Morgan(8) N.A.

10.1 1985 General Stock Option Plan(1) N.A.

10.2 1985 Incentive Stock Option Plan(1) N.A.

10.3 Employment Agreement, dated as of June 18, 1996
between the Company and Paul DiMatteo(8) N.A.

10.4 Employment Agreement, dated February 22, 1985, and
amendments thereto, between the Company and
Charles Chubb(1) N.A.

</TABLE>

(i)
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------

10.7 Lease Agreement, dated March 7, 1986, and amendments
thereto, between the Company and First Island Partners,
L.P. (the "Lease Agreement")(1) N.A.

10.8 Amendment to Lease Agreement, dated February 29, 1992,
between the Company and First Island Partners, L.P.(3) N.A.

10.9 Form of Warrant Agreement between the Company and
various persons(1) N.A.

10.10 Extension of Lease Agreement, dated May 5, 1992, between
the Company and First Island Partners, L.P.(4) N.A.

10.11 Extension of Lease Agreement, dated July 15, 1992, between
the Company and First Island Partners, L.P.(4) N.A.

10.12 Amendment of Lease Agreement, dated September 9, 1992,
between the Company and First Island Partners, L.P.(4) N.A.

10.13 Extension of Lease Agreement, dated March 23, 1993 between
the Company and First Island Partners, L.P.(5) N.A.

10.14 Amendment to Lease Agreement, dated June 25, 1993 between
the Company and First Island Partners, L.P.(5) N.A.

10.16 Promissory Notes of the Company in the principal amounts
of $30,000, $30,000 and $10,000, dated October 19, 1993,
November 5, 1993 and November 23, 1993, respectively,
payable to Paul DiMatteo and the related Security
Agreements, dated October 19, 1993, November 5, 1993
and November 23, 1993(5) N.A.

10.17 1994 Stock Option Plan(6) N.A.

10.18 Employment Agreement, dated May 23, 1994 between the
Company and Stephen M. Fisher(6) N.A.

(ii)
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------

10.19 Amendment to Lease Agreement, dated January 13,
1994 between the Company and First Island Partners,
L.P.(6) N.A.

10.20 Employment Agreement, dated August 10, 1995
between the Company and Samuel N. Paul(7) N.A.

10.21 Lease Agreement, dated August 25, 1995 between
the Company and Industrial Builders & Realty
Company together with amendments thereto dated
September 5, 1995 and September 6, 1995(7) N.A.

10.22 Consulting and Related Agreements, dated
August 24, 1995 between the Company and
Merolla & Bogar, LLC(7) N.A.

10.23 Distributorship Agreement, dated February 24, 1994
between the Company and James J. Brooksbank(7) N.A.

10.24 Employment Agreement, dated June 14, 1996,
between the Company and Douglas Drew(8) N.A.

10.25 Distributorship Agreement, dated June 20, 1994, between
the Company and Innovative Medical Systems, Inc.(7) N.A.

10.26 Distributorship Agreement, dated January 24, 1995, between
the Company and Advanced Therapeutics, Inc.(7) N.A.

10.27 Distributorship Agreement, dated February 15, 1995, between
the Company and Recovercare, Inc.(7) N.A.

10.28 Distributorship Agreement, dated March 24, 1995, between
the Company and Stat Medical, Inc.(7) N.A.

10.29 Distributorship Agreement, dated March 17, 1995, between
the Company and Concept Medical Corporation(7) N.A.

10.30 Distributorship Agreement dated January 1, 1996, between
the Company and JCM Capital Corp.(7) N.A.

10.31 Agreement, dated August 24, 1995, between the Company
and JCM Capital Corp. to enter into a distributorship
agreement, together with an amendment thereto dated
January 24, 1996(7) N.A.

(iii)
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------

10.32 Agreement, dated November 1, 1994, between the
Company and Omni Manufacturing, Inc.(7) N.A.

10.33 Financing Agreement, dated September 5, 1995, between
the Company and Connecticut Innovations, Incorporated
("CII")(2) N.A.

10.34 Senior Note, dated September 5, 1995, by the
Company in favor of CII(2) N.A.

10.35 Security Agreement, dated September 5, 1995, between
the Company and CII(2) N.A.

10.36 Collateral Assignment and Grant of License, dated
September 5, 1995, between the Company and CII(2) N.A.

10.37 Stock Subscription Warrant, dated September 5, 1995, by
the Company in favor of CII(2) N.A.

10.38 Warrant Put Agreement, dated September 5, 1995, between
the Company and CII(2) N.A.

10.39 Officers' Agreement, dated September 5, 1995, among the
Company, CII, Paul DiMatteo, Stephen Fisher and Samuel
Paul(2) N.A.

10.40 Subordination Agreement, dated September 5, 1995, among
the Company, CII, Paul DiMatteo and Charles Chubb(2) N.A.

10.41 Loan Agreement, dated September 5, 1995, between the
Company and People's Bank(2) N.A.

10.42 Revolving Credit Note, dated September 5, 1995, by
the Company in favor of People's Bank(2) N.A.

10.43 Security Agreement, dated September 5, 1995, between
the Company and People's Bank(2) N.A.

10.44 Guarantee Agreement, dated September 5, 1995,
between Connecticut Development Authority and
People's Bank and agreed to by the Company(2) N.A.

10.45 Guaranty, dated September 5, 1995, by Paul DiMatteo
for the benefit of Connecticut Development
Authority(2) N.A.

(iv)
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------

10.46 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Advanced
Therapeutics Inc.(2) N.A.

10.47 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Innovative
Medical Systems, Inc.(2) N.A.

10.48 Letter of Credit Agreement, dated September 5, 1995,
among the Company, People's Bank and Comed
Systems, Inc.(2) N.A.

10.49 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Advanced Therapeutics, Inc.(2) N.A.

10.50 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Innovative Medical Systems, Inc.(2) N.A.

10.51 Letter of Credit Reimbursement, Warrant Grant and
Security Agreement, dated September 5, 1995, between
the Company and Comed Systems, Inc.(2) N.A.

10.52 Loan Agreement, dated September 5, 1995, between
the Company and Connecticut Development Authority(2) N.A.

10.53 Promissory Note, dated September 5, 1995, by the
Company in favor of Connecticut Development
Authority(2) N.A.

10.54 Security Agreement, dated September 5, 1995, between
the Company and Connecticut Development Authority(2) N.A.

10.55 Stock Subscription Warrant, dated September 5, 1995,
between the Company and Connecticut Development
Authority(2) N.A.

10.56 Assistance Agreement, approved November 30, 1995,
between the Company and the State of Connecticut,
acting by the Department of Economic and Community
Development(2) N.A.

10.57 Promissory Note, dated October 6, 1995, by the
Company in favor of the State of Connecticut,
acting by the Department of Economic and Community
Development(2) N.A.

(v)
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------

10.58 Intercreditor and Subordination Agreement, dated
September 5, 1995, among the Company, People's Bank, CII,
Connecticut Development Authority, Comed Systems, Inc.,
Innovative Medical Systems, Inc., Advanced
Therapeutics, Inc., Charles
F. Chubb and Paul DiMatteo(7) N.A.

10.59 Intercreditor Agreement, dated November __, 1995, among
the Company, People's Bank, CII and Department
of Economic and Community Development(7) N.A.

10.60 Stock Put and Call Agreement, dated September 5, 1995,
between the Company and Innovative
Medical Systems, Inc.(7) N.A.

10.61 Stock Put and Call Agreement, dated September 5, 1995,
between the Company and Advanced Therapeutic, Inc.(7) N.A.

10.62 Agreement dated August 25, 1995, between the Company and
TimeCapital Securities Corporation(9) N.A.

10.63 Amendment No. 1 to Loan Agreement, dated as of December
31, 1995, between the Company and People's Bank(9) N.A.

10.64 Amendment No. 2 to Loan Agreement, dated as of April __,
1996, between the Company and People's Bank(9) N.A.

10.65 Agreement, dated April 26, 1996, between the Company
and TimeCapital Securities Corporation(9) N.A.

10.66 Amendment to Distributorship Agreement,
effective as of October 17, 1995, between the
Company and Innovative Medical Systems, Inc.(9) N.A.

10.67 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Concept Medical Corporation(9) N.A.

10.68 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Advanced Therapeutics Inc.(9) N.A.

10.69 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Recovercare, Inc.(9) N.A.

(vi)
<PAGE>

10.70 Amendment to Distributorship Agreement, effective as
of October 17, 1995, between the Company and
Stat Medical, Inc.(9) N.A.

10.71 Amendment to Distributorship Agreement, dated
as of May 6, 1996, between the Company and
JCM Capital Corp.(9) N.A.

10.72 Consent and Subordination Agreement, dated as of
March 26, 1996, among the Company, Charles F. Chubb,
Paul DiMatteo and People's Bank(9) N.A.

10.73 Stock Purchase Agreement, dated as of May 31, 1996,
amongthe Company, Vivax, Douglas ) N.A.

10.74 Non-Competition Agreement, dated as of June 14, 1996,
between the Company and Douglas Drew(8)
Drew and Donna Drew(8 N.A.

10.75 Agreement dated June 28, 1996, between the Company
and TimeCapital Securities Corporation* N.A.

23.1 Consent of Whitman Breed Abbott & Morgan(9) N.A.

23.2 Consent of Richard A. Eisner & Company, LLP*
_______________________________________
(1) Incorporated by reference to the exhibits to the Company's
Registration Statement on Form S-1 (File No. 33-42880).
(2) Incorporated by reference to the exhibits to the Company's Current
Report on Form 8-KSB dated December 27, 1995.
(3) Incorporated by reference to the exhibits to the Company's fiscal
1991 Form 10-K.
(4) Incorporated by reference to the exhibits to the Company's fiscal
1992 Form 10-KSB.
(5) Incorporated by reference to the exhibits to the Company's fiscal
1993 Form 10-KSB.
(6) Incorporated by reference to the exhibits to the Company's fiscal
1994 Form 10-KSB.
(7) Incorporated by reference to the exhibits to the Company's fiscal
1995 Form 10-KSB.
(8) Incorporated by reference to the exhibits to the Company's Form 8-KSB
filed June 27, 1996.
(9) Previously filed.
* Filed herewith.

(vii)

<PAGE>

EXHIBIT 10.75

TIMECAPITAL SECURITIES CORPORATION
ONE ROOSEVELT AVENUE
PORT JEFFERSON STATION, NEW YORK 11776
PHONE (516) 331-1400 FAX (516) 331-1407

June 28, 1996

Nova Technologies, Inc.
89 Cabot Court, Unit L
Hauppauge, New York 11788

Attn: Stephen M. Fisher
President

Dear Sirs:

We are parties to two recently executed agreements with respect to our
performing certain investment banking services on behalf of Nova Technologies,
Inc. ("Nova") the agreement dated April 19, 1996 engaging TimeCapital Securities
Corporation ("TimeCapital") as Nova's exclusive, private placement agent (the
"Placement Agreement") and the agreement engaging TimeCapital as Nova's
exclusive agent to arrange for an underwriter (the "Underwriter Agreement").
Both the Placement Agreement and the Underwriter Agreement were amended by
executed agreements dated April 26, 1996 (the "April Amendment") and dated May
21, 1996 (the "May Amendment"), respectively. All of the foregoing are referred
to herein collectively as the "Agreements."

The Agreements contemplated the completion of a private placement of
500,000 shares of Nova's Common Stock at $2.00 per share and provided Nova with
certain rights if such event did not occur within the agreed time. We hereby
agree that the Agreements be and hereby are further amended (i) to further
extend the initial period in which TimeCapital shall have the exclusive right to
effect a private placement of Nova's Capital Stock from June 30, 1996 to and
including July 19, 1996 and (ii) to provide that the proposed transaction may be
modified to such number of shares of Nova Common Stock at such price as the
parties shall agree that shall result in gross proceeds of $1,000,000.
<PAGE>

Please confirm the foregoing amendments by executing the counterpart of
this letter and returning it to TimeCapital.

Very truly yours,

ACCEPTED AND AGREED TO:

TimeCapital Securities Corporation

By: /s/ Richard G. Rohman
_______________________________
Richard G. Rohman
Vice President

ACCEPTED AND AGREED TO:

Nova Technologies, Inc.

By: /s/ Stephen M. Fisher
_______________________________
Stephen M. Fisher
President

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion in this Registration Statement on Form SB-2 of
our report dated February 12, 1996 based on our audits of the financial
statements of Nova Technologies, Inc. and of our report dated May 17, 1996 based
on our audits of the financial statements of Comed Systems, Inc. We also consent
to the reference to our firm under the captions "Selected Financial Data" and
"Experts".

Richard A. Eisner & Company, LLP

New York, New York

July 8, 1996