The Company has retained MedicSense, Ltd., an Israel based consulting firm, to serve as
its clinical and regulatory affairs consultant. Upon evaluation of the Company’s first rehabilitation
device, the Orthodynamic Rehabilitator, MedicSense presented the Company with a comprehensive
regulatory plan for gaining acceptance of the device in the US and EU markets.

According to MedicSense, in the US the device will be in a generic category of Class 1 exempted devices
and characterized as ‘Powered Exercise Equipment’ (Product Code BXB and regulation number
890.5380) within the physical medicine medical specialty. As such, the Company will not be required to
complete a pre-market notification application nor obtain FDA clearance before marketing the device in
the US.

The second generation Rehabilitator that is being designed for use at home with remote supervision via
phone connection and modem, will require FCC approval as it is will contain telecommunications
components.

Although the Company will not be required to conduct clinical trials to obtain FDA approval to market
its OR, nevertheless it intends to conduct a sufficient number of Phase 1 and fuller clinical trials at a
number of medical institutions and rehabilitation centers in order to assist it in finalizing the optimal
design of the device, obtain the medical community’s approval of the device, create marketing
opportunities and protect itself as much as practicable from potential liability arising from any future
claims relating to the devices. These trials will take several months and up to a year during 2004 to
complete depending upon the parameters selected to be tested by the clinicians for the trials, the number
of subjects participating in the same and the duration of such trials.  

In the EU, the Company will require a CE mark according to the Medical Device Directive 93/42/EEC
(MMD). MedicSense believes the OR’s classification will be ‘Class 11a’ as it is a device that exchanges
energy with the patient in a therapeutic manner and is used to diagnose or monitor medical conditions.
This classification will allow the Company to choose from a number of conformity assessment
procedures.

The regulatory plan prepared by MedicSense also details safety requirements and specifications for
electrical equipment, the development, documentation, testing and validation of software included in
medical devices which are of concern to both FDA and CE officials, electromagnetic compatibility
(EMC), bio-compatibility and environmental issues and product specification issues.
Regulatory