AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
July 23 2001 Registration No.:333-62226

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Amendment No. 1 to
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SCIENCE DYNAMICS CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

----------------------------------------------------------
Delaware 3661 22-2011859
(State or jurisdiction (Primary standard (I.R.S. Employer
of incorporation) industrial Identification Number)
classification
code number)

1919 Springdale Road, Cherry Hill, New Jersey, 08003
(856) 424-0068
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS)

Joy C. Hartman, President
1919 Springdale Road, Cherry Hill, New Jersey, 08003
(856) 424-0068
(ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

Copies to:

Gregory Sichenzia, Esq.
Thomas A. Rose, Esq.
Sichenzia, Ross, Friedman & Ference LLP
135 W. 50th Street
New York, New York 10020
Phone (212) 664-1200, Fax (212) 664-7329

Approximate date of proposed sale to the public: From time to time as
the selling shareholders may decide.

If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]

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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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 the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.

Calculation of Registration Fee
- ------------------------------------------------------------------------------
Title of each Amount of Proposed Maximum Proposed Maximum Amount of
Class of shares to be Offering price Aggregate Offering Registration
securities to Registered per Share Price (1) Fee
be registered
- ------------------------------------------------------------------------------
Common stock, 2,941,176 $0.81 (1) $ 2,382,353 (1) $596
par value
$.01 per
share
- ------------------------------------------------------------------------------
Common stock, 872,727 $0.81 $706,909 $177
par value $.01
per share
issuable upon
exercise of
warrants
- ------------------------------------------------------------------------------
Total 3,813,903 $773

1. Based on the closing bid price of the common stock on June 1, 2001.

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 the
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

Prospectus

SCIENCE DYNAMICS CORPORATION

3,813,903 shares of common shares

Up to 3,813,903 shares of our common stock are being offered by the
security holders named in this prospectus. We will not receive
any of the proceeds from the sale of common stock by the security
holders. However, we may receive amounts upon exercise of
outstanding warrants.

Our common stock is traded in the Nasdaq SmallCap Market under the
symbol "SIDY". On July 20, 2001 the closing price of our common
stock was $.25 per share as reported on Nasdaq.

Please see "Risk Factors" beginning on page 5 to read about factors
you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

The date of this prospectus is __________, 2001

TABLE OF CONTENTS

Prospectus Summary 3
Summary Financial Data 4
Risk Factors 5
The Offering 8
Use of Proceeds 10
Dividend Policy 11
Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Business 18
Management 26
Certain Transactions 30
Principal Security Holders 32
Description of Securities 33
Selling Shareholder 35
Plan of Distribution 36
Legal Matters 37
Experts 37
How to Get More Information 38
Financial Statements F-1

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PROSPECTUS SUMMARY

You should read the following summary together with more detailed
information and our combined financial statements and the notes to
those statements appearing elsewhere in this prospectus.

Our Business

Science Dynamics Corporation has developed, designed and marketed a
variety of hardware oriented, telecommunications equipment over the
past 23 years. We primarily develop and market hardware and software
products and applications for the telecommunications industry that use
third party hardware.

Today we focus on three primary product lines:

- Commander Inmate Telephone Control System - originally designed in
1986, this system provides timing and call control for collect
phone calls made by inmates from U.S. correctional institutions.

- Integrator Series of IP Gateways - commonly referred to as Voice
over Internet Protocol or IP Telephony. IP Telephony refers to
communication services - voice, facsimile, and/or voice messaging
applications - that are transported via the Internet, rather than
the traditional telephone network.

- VFX-250S Video over Frame Relay device - a hardware based device
designed to upgrade Frame Relay Networks to handle video
conferencing applications in addition to their traditional data
requirements. The VFX establishes the first ever means of
transporting continuous data bit streams over Frame Relay.
Frame Relay is a packet switching protocol. Data packets
referred to as "frames" are routed to different destinations
dependant on header (address) information.

Our Offices

Our executive offices are located at 1919 Springdale Road, Cherry
Hill, New Jersey, 08003, our telephone number is (856) 424-0068; and
our web site can be accessed at www.scidyn.com. Information
contained in our web site is not part of this prospectus.

The Offering Summary
- ----------------------------------------------------------------------------
Total shares of common stock
outstanding as of May 31, 2001 17,657,901
- ----------------------------------------------------------------------------
Common stock offered for sale by Up to 3,813,903 shares, assuming
the selling shareholders the issuance of all of the
shares registered in connection
with the convertible notes and
exercise of all warrants by the
selling shareholders.
- ----------------------------------------------------------------------------
Use of Proceeds We will not receive any of the
proceeds of the shares offered by
the selling shareholder. Any
proceeds we receive from our
sales of common stock upon the
exercise of warrants will be used
for working capital and other
general corporate purposes.
- ----------------------------------------------------------------------------
Nasdaq Symbol "SIDY"
- ----------------------------------------------------------------------------

- -3-

Summary Financial Data

You should read the following summary financial data together with the
section of this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our
financial statements and notes thereto included elsewhere in this
prospectus.

Year Ended Three Months Ended
December 31, March 31,

2000 1999 2001 2000
---- ---- ---- ----
Statement of operations
data:

Revenues $5,269,377 $2,347,984 $194,113 $1,443,482

Cost of revenues 1,891,484 1,330,886 136,847 572,042

Gross margin 3,377,893 1,017,098 57,266 871,440

Selling, general and
administrative 4,747,424 3,059,765 1,321,739 860,973

Income from
operations (1,369,531) (2,042,667) (1,264,473) 10,467

Interest expense,
net of interest
income 30,269 (12,219) 4,638 2,898

Total other
expenses 30,269 (12,219) 4,638 2,898

Net (loss) (1,339,262) (2,054,886) (1,259,835) 13,365

Basic and diluted
earnings (loss) per
share $(0.08) $(0.12) $(0.07) $ -

Shares used in basic and
diluted earnings
(loss) per share 17,549,993 16,777,070 17,783,710 16,777,070

As of As of
December March
31, 2000 31,2001
---------- ----------

Balance sheet data:

Total working capital
(deficit) $ 1,142,948 $ (70,527)

Total assets $ 3,008,152 $ 1,814,401

Total liabilities $ 662,890 $ 728,974

Total stockholders'
equity $ 2,345,262 $ 1,085,427

- -4-

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors before investing
in our common stock.

We have a history of losses which may continue, requiring us to seek
additional sources of capital which may not be available, requiring us
to curtail or cease operations.

We incurred net losses of $1,339,262 for the year ended December 31,
2000 and $2,054,886 for the year ended December 31, 1999. For the
three months ended March 31, 2001, we incurred a net loss of
$1,259,835. We cannot assure you that we can achieve or sustain
profitability on a quarterly or annual basis in the future. If
revenues grow more slowly than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, we will
continue to incur losses. In addition, we may require additional
funds to sustain and expand our sales and marketing activities,
research and development, and our strategic alliances, particularly if
a well-financed competitor emerges or if there is a rapid
technological shift in the telecommunications industry. There can be
no assurance that financing will be available in amounts or on terms
acceptable to us, if at all. The inability to obtain sufficient funds
from operations or external sources would require us to curtail or
cease operations.

We operate in highly competitive markets and may not be able to
compete effectively, which could result in additional losses.

Our products are sold in several different markets, and our
competition varies greatly by product line. We compete directly
against several other suppliers of inmate call processing systems.
Some of these competitors' systems have features which our inmate call
processing system does not have. In the Video-Over-Frame market, we
compete not only with other companies, but also with products which
use a different technology to accomplish the function of our product.
Our Internet products compete in a marketplace that is populated by
larger companies who have significantly more resources for
development, marketing and deployment. We may not be able to compete
successfully against current or future competitors, and competitive
pressures could significantly harm us, resulting in more significant
financial losses.

We depend on a limited number of suppliers for certain parts, the loss
of which could result in production delays and additional expenses.

Although most of the parts used in our products are available from a
number of different suppliers on an off-the-shelf basis, however,
certain parts are available from only one supplier. If this supplier
does not deliver a part, another supplier would have to be found.
The substitute part may require a hardware or software change in the
unit in order to provide satisfactory performance, adding costs and
delays.

A customer which accounted for 83% of our sales in 2000 was placed
into receivership and future sales to this customer are unlikely.
Another customer accounting for 15% of our 2000 sales will also
discontinue purchases. It is common that a very small number of
customers will account for a high percentage of our revenue, therefore
the loss of a major customer would significantly decrease our revenues
and increase our losses.

A small number of customers account for a significant portion of our
revenue. If we lose existing customers and do not replace them with
new customers, our revenue will decrease and may not be sufficient to
cover our costs. During 2000, two customers accounted for 83% and 15%
of total sales. During 1999, three customers and their operating
subsidiaries accounted for 64%, 10% and 10% of total sales. The
customer accounting for 83% of total 2000 sales was Cascadent
Communications, with whom we had a supply agreement. Our former
president, chief executive officer and chairman of the board, Alan

- -5-

Bashforth, became president of Cascadent subsequent to his service as
an officer of Science Dynamics. Mr. Bashforth continues to serve as a
member of our board of directors. The agreement was terminated on
January 4, 2001, upon receiving notice that Cascadent was placed into
receivership. In a letter dated June 25, 2001, the Cascadent
receiver advised that it was not possible to achieve a sale of
Cascadent's business on a going concern basis. The letter also stated
that it appears that there will be insufficient funds available for a
liquidator to be appointed in this matter. BellSouth Communications,
which accounted for 15% of our sales in 2000, recently announced that
it was withdrawing from the public phone market, so future sales to
BellSouth are unlikely.

The loss of such major customers severely impacts our operations.
Although we actively seek new customers, the recent losses have
resulted in significant financial losses. If we are unable to attract
and maintain a new customer base, we will be required to continue to
curtail or cease operations.

Changes in government telecommunications regulations could reduce
demand for our products, resulting in reduced revenues.

For our Integrator product lines, our customers are subject to
varying degrees of domestic and foreign, federal, state, and local
regulation. Regulatory actions have affected, and are likely to
continue to affect, both our customers and us. Regulatory actions may
cause changes in the manner in which our customers or we conduct
business. The products that we develop must comply with standards
established by the Federal Communications Commission and other
international standards bodies. A change in these standards requiring
a modification of our products could result in additional
unanticipated expenses and a delay in the delivery of our products.

If our products and services fail to perform or perform improperly,
revenues and results of operations could be adversely affected and we
could be subject to legal action to recover losses incurred by our
customers.

Products as complex as ours may contain undetected errors or "bugs",
which result in product failures or security breaches or otherwise
fail to perform in accordance with customer expectations. Any failure
of our systems could result in a claim for substantial damages against
us, regardless of our responsibility for the failure. Although we
maintain general liability insurance, including coverage for errors
and omissions, there can be no assurance that our existing coverage
will continue to be available on reasonable terms or will be available
in amounts sufficient to cover one or more large claims, or that the
insurer will not disclaim coverage as to any future claim. The
occurrence of errors could result in loss of data to us or our
customers which could cause a loss of revenue, failure to achieve
acceptance, diversion of development resources, injury to our
reputation, or damages to our efforts to build brand awareness, any of
which could have a material adverse affect on our market share,
revenues and, in turn, our operating results.

Changes in technology and our ability to enhance our existing
products, including research and development, will require technical
and financial resources, the unavailability of which may hinder sales
of our products and result in decreased revenues.

The markets for our products, especially the telecommunications
industry, change rapidly because of technological innovation, changes
in customer requirements, declining prices, and evolving industry
standards, among other factors. To be competitive, we must develop and
introduce product enhancements and new products, which increase our
customers' and our ability to increase market share in the corrections
industry. New products and new technology often render existing
information services or technology infrastructure obsolete,
excessively costly, or otherwise unmarketable. As a result, our
success depends on our ability to timely innovate and integrate new

- -6-

technologies into our current products and services and to develop new
products. In addition, as the telecommunications networks are
modernized and evolve from analog-based to digital-based systems,
certain features offered by us may diminish in value. Moreover,
regulatory actions affecting the telecommunications industry may
require significant upgrades to our current technology or may render
our service offerings obsolete or commercially unattractive. We cannot
guarantee that we will have sufficient technical, managerial or
financial resources to develop or acquire new technology or to
introduce new services or products that would meet our customers needs
in a timely manner.

We have been advised by The Nasdaq Stock Market that we fail to meet
its continued listing criteria; the loss of our Nasdaq listing could
negatively impact the price of our common stock and make it more
difficult to dispose of.

On May 24, 2001, we were notified by The Nasdaq Stock Market that we
were not in compliance with the net tangible asset requirement for
continued listing on Nasdaq. On June 15, 2001, we submitted a
comprehensive business plan, based on financial projections, pursuant
to which we intended to regain compliance with the listing
requirements. We do not anticipate receiving a response from Nasdaq
for a period of 30 to 60 days from the date we submitted the plan. On
June 29, 2001, we received a subsequent letter from Nasdaq notifying
us that since the bid price of our common stock had fallen below $1.00
per share, our common stock would be delisted from Nasdaq on September
27, 2001, unless the price increased above $1.00 prior to that time.

Although we are trying to address these issues with Nasdaq, if we
fail to comply with the continued listing requirements, our common
stock will be delisted from Nasdaq and will commence trading on the
over-the-counter electronic bulletin board. In addition, in the
absence of at least $5,000,000 of net tangible assets, trading in our
common stock would become subject to Rule 15c2-6 under the Securities
Exchange Act of 1934. Under such rule, broker's who recommend such
securities to persons other than established customers and accredited
investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a
transaction prior to sale. The effect of the foregoing would be to
make the purchase and sale of our common stock more difficult and
would likely depress the price of the stock.

If we are required for any reason to repay the $1,200,000 of
convertible debentures we issued in May 2001, we would be required to
deplete our working capital, if available, or raise additional funds.
Our failure to repay the convertible notes, if required, could result
in legal action against us which could require the sale of substantial
assets.

In May 2001, we issued $1,200,000 principal amount of convertible
debentures. The convertible debentures are due and payable, with 8%
interest, in May 2003, unless sooner converted into shares of our
common stock. In addition, any event of default as described in the
convertible notes could require the early repayment of the convertible
notes, including a premium of 30% of the outstanding principal balance
of the note at the time of the default. We anticipate that the full
amount of the convertible notes, together with accrued interest, will
be converted into shares of our common stock, in accordance with the
terms of the convertible notes. If we are required to repay the
convertible notes, we would be required to use our limited working
capital and raise additional funds. If we were unable to repay the
notes when required, the note holders could commence legal action
against us to recover the amounts due which ultimately could require
the disposition of some or all of our assets. Any such action would
require us to curtail or cease operations.

The continuously adjustable conversion price feature of our $1,200,000
principal amount convertible notes may encourage the note holders to
make short sales of our common stock, which could have a depressive
effect on the price of our common stock and could require us to issue
a substantially greater number of shares.

The convertible notes which we issued in May 2001 are convertible
into shares of our common stock at a 15% discount to the trading price
of the common stock either prior to the issuance of the notes or prior
to the conversion, whichever is lower. The conversion feature may
encourage the note holders to make short sales of the common stock
prior to their conversions. Such sales could significantly depress
the price of the common stock, allowing the note holders to convert
into a substantially larger number of shares of common stock. For
instance, if the price of our common stock was $.40 per share, we
would be obligated to issue 3,529,411 shares. If the price of our
common stock fell to $.10, we would be obligated to issue 14,117,647
shares. Our obligation to issue shares upon conversion is essentially
limitless.

- -7-

Our commitments to issue additional common stock may dilute the value
of your stockholdings, adversely affect the market price of our common
stock and impair our ability to raise capital.

We currently have outstanding commitments in the form of
convertible notes and warrants to issue a substantial number of new
shares of our common stock. The shares subject to these issuance
commitments are included in this prospectus and thus will be freely
tradable. Furthermore, the number of shares issuable upon conversion
of these securities is subject to adjustment, depending on the market
price of our common stock. To the extent that the price of our common
stock decreases, we will be required to issue additional shares upon
conversion. There is essentially no limit to the number of shares
that we may be required to issue. An increase in the number of shares
of our common stock that will become available for sale in the public
market may adversely affect the market price of our common stock and,
as a result, could impair our ability to raise additional capital
through the sale of our equity securities or convertible securities.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-
looking statements are not historical facts, but rather are based on
our current expectations, estimates and projections about our
industry, our beliefs and assumptions. Words including "may," "could,"
"would," "will," "anticipates," "expects," "intends," "plans,"
"projects," "believes," "seeks," "estimates" and similar expressions
are intended to identify forward-looking statements. These statements
are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our
control, are difficult to predict and could cause actual results to
differ materially from those expressed or forecasted in the forward-
looking statements. These risks and uncertainties are described in
"Risk Factors" and elsewhere in this prospectus.

We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of
this prospectus. We are not obligated to update these statements or
publicly release the result of any revisions to them to reflect events
or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.

THE OFFERING

In this prospectus, we are registering 2,941,176 shares of common
stock underlying $1,200,000 of 8% convertible debentures, due May 22,
2003, issued to three investors pursuant to a Subscription Agreement
dated May 22, 2001. Interest only payments are due quarterly
commencing September 30, 2001, and the principal is due in one lump
sum on May 22, 2003, or upon certain events of default.

The conversion price for the convertible debentures is the lesser
of 85% of the average of the three lowest closing prices for the
common stock for the 30 trading days prior to but not including May
22, 2001, or 85% percent of the average of the three lowest closing
prices for the common stock for the 30 trading days prior to but not
including the conversion date. The maximum number of shares of common
stock that any subscriber or group of affiliated subscribers may own
after conversion at any given time is 4.99%. The number of shares of
common stock issuable upon conversion of the convertible debentures is

- -8-

1,470,588, based on a conversion price of $0.816 per share. We are
required to register 200% of this amount, for a total of 2,941,176
shares. The actual conversion price will depend on the market price
of our common stock prior to the conversion. In addition, 872,727
shares underlying warrants are being registered. These warrants,
which expire May 22, 2006, have an exercise price of $1.4339 per
share.

The parties have made mutually agreeable standard representations
and warranties. We have also entered into certain covenants including,
but not limited to, the following:

- we may not redeem the convertible debentures without the consent of
the holder;
- we will pay to certain finders a cash fee of 8% of the principal
amount of the convertible debentures for location of the
financings; and
- we have agreed to incur certain penalties for untimely delivery of
the shares.

Upon any event of default, including the failure to register or
deliver shares of common stock in a timely manner upon conversion, the
note holders can require us to immediately pay a sum equal to 130% of
the unconverted principal amount of the notes, together with accrued
but unpaid interest.

Because our common stock is listed on The Nasdaq SmallCap Market, we
are subject to Nasdaq's corporate governance rules, including Rule
4350, which provides that an issuer must obtain stockholder approval
for the sale or issuance of common stock (or securities convertible
into common stock) equal to 20% or more of the common stock outstanding
before the issuance which are issued below market price. The
consummation of the foregoing financing may result in an issuance of
greater than 20% of our common stock, depending on the actual number of
shares issued upon conversion of the convertible notes. The investors
have contractually agreed with us that we shall not be obligated to
issue more than 19.9% of our common stock upon conversion of the
debentures and exercise of the warrants. We have also agreed to file a
proxy statement and hold a shareholders meeting to seek approval from
our sharesholders to issue more than 20% of our common stock to the
investors, if required. If we do not receive shareholder approval, we
will be required to repay the balance of the convertible notes in cash.

- -9-

USE OF PROCEEDS

We will not receive any proceeds from the resale of shares of
common stock by the selling stockholders. However, we will receive
the sale price of any common stock we sell to the selling stockholders
upon exercise of the warrants. We expect to use the proceeds of any
such sales for general working capital purposes.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on The Nasdaq SmallCap Market (Symbol:
SIDY). On May , 2001, we were notified by The Nasdaq Stock Market
that we were not in compliance with the net tangible asset requirement
for continued listing on Nasdaq. On June 15, 2001, we submitted a
comprehensive business plan, based on financial projections, pursuant
to which we intended to regain compliance with the listing
requirements. We do not anticipate receiving a response from Nasdaq
for a period of 30 to 60 days from the date we submitted the plan. On
June 29, 2001, we received a subsequent letter from Nasdaq notifying
us that since the bid price of our common stock had fallen below $1.00
per share, our common stock would be delisted from Nasdaq on September
27, 2001, unless the price increased above $1.00 prior to that time.

The following table shows for the periods indicated the high and low
bid quotations for our common stock as reported by one of our market
makers. These quotations are believed to represent inter-dealer
quotations without adjustment for retail mark-up, mark-down or
commissions, and may not represent actual transactions.

HIGH BID LOW BID
-------- -------

FISCAL 1999
First Quarter $ 0.75 $0.44
Second Quarter $ 0.88 $0.71
Third Quarter $ 1.21 $0.92
Fourth Quarter $ 4.85 $2.50

FISCAL 2000
First Quarter $19.92 $9.92
Second Quarter $13.58 $7.60
Third Quarter $10.83 $7.40
Fourth Quarter $ 6.90 $3.00

FISCAL 2001
First Quarter $ 1.96 $1.24

- -10-

As of March 31, 2001, there were approximately 350 holders of record of
our 17,657,901 outstanding shares of common stock. However, we believe
that there are more than 850 shareholders because of stock held in
street name by various broker-dealers.

DIVIDEND POLICY

We have never declared or paid any cash or stock dividends on our
capital stock. We presently intend to reinvest earnings to fund the
development and expansion of our business and, therefore, do not
anticipate paying cash dividends on our common stock in the foreseeable
future. The declaration of dividends will be at the discretion of our
board of directors and will depend upon our earnings, capital
requirements and financial position, general economic conditions and
other pertinent factors.

- -11-

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of the financial
condition and results of operations should be read in conjunction with
our financial statements and the accompanying notes appearing elsewhere
in this prospectus. In addition to historical information, this
management discussion and analysis of financial condition and results of
operations contain forward-looking statements. Our actual results could
differ materially from those anticipated in the forward-looking
statements as a result of factors, including those set forth under "Risk
Factors" and in other parts of this prospectus.

Overview

In 1998, management made a strategic decision to divert most of our
development efforts towards the IP system. Advances in public and
private IP-based networks now enable businesses to use the Internet
Protocol to by-pass the Public Switched Telephone Network for national
and international long distance voice, fax, and video communications.

We continue to gain knowledge and experience in enhancing the
development of the system for IP Telephony. We have revised our
development and implementation of the products according to the
direction of the marketplace. Management believes that the penetration
of the IP Telephony market along with renewed interest and development
in the Commander II call control series will provide significant growth
potential.

During the year, we changed the size and structure of our sales force.
The sales team has increased from two UK based sales people in 1999 to a
10-person team (8 in the US and 2 in the UK) led by our new Vice
President of Sales and Marketing. This team was fully in place by
October 2000. Given typical sales lead times and the current state of
the Telco market, we do not anticipate significant revenues to be
generated by the new team until the second half of 2001.

Our net sales results for the year ended December 31, 2000 were
$5,269,377, an increase of $2,921,393 from sales of $2,347,984 for the
year ended December 31, 1999. Our revenue in 2000 was predominantly
derived from the Integrator Product Line. The results were largely due
to the beginning of the deployment of the Cascadent supply agreement
during 2000. This agreement provided $4,370,520 in revenue for the year
2000. This agreement was terminated upon our receipt of official word
that Cascadent was placed into receivership. Our former president,
chief executive officer and chairman of the board, Alan Bashforth,
became president of Cascadent subsequent to his service as an officer of
Science Dynamics. Mr. Bashforth continues to serve as a member of our
board of directors.

The strategy for 2001 is to generate sales revenue from the IP system
via the efforts of our expanded sales team and to reinvigorate the
Commander I and II product lines, as well as, to exploit the VFX-250S
product. Although the sales of the VFX-250S did not reach the
anticipated level, the market awareness of the functionality and quality
of the product has been recognized. The sales for this product, while
immaterial to total revenues, have been primarily in South America, with
future sales opportunities generating from China and Russia. All sales
made outside of the United States are denominated in US dollars, so
currency fluctuations are not a factor.

We are continuously exploring new niche opportunities, introducing new
product offerings and marketing and sales initiatives to increase market
share and value for our customers. The focus of our strategy included
providing the core technology needed to deliver a broad range of
telephony services; targeting key growth markets worldwide; promoting
strategic relationships between our customers; delivering added value
through customer support and services; and continuing to actively pursue
business alliance candidates that complement or support our core
competencies.

- -12-

RESULTS OF OPERATIONS
- ---------------------

The following table sets forth income and certain expense items as a
percentage of total revenue and the change in dollar amounts of such
items compared to the previous fiscal year:

For the Years Ending December 31,
2000 1999
---- ----

Sales $5,269,377 $2,347,984

Net Loss $(1,339,262) $(2,054,886)

Net Loss Per Share $(0.08) $(0.12)

OPERATING EXPENSES PERCENT OF SALES
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----

Cost of Goods Sold $1,891,484 $1,330,886 35.9% 56.7%

Research & Development 1,141,656 1,331,521 21.7% 56.7%

Selling, General & Admin 3,605,768 1,728,244 68.4% 73.6%

Total Operating Costs
and Expenses $6,638,908 $4,390,651 126.0% 187.0%

Sales for the fiscal year ended December 31, 2000 were $5,269,377
compared to sales of $2,347,984 in the 1999 fiscal year. The sales
revenue consists of sales primarily of our Integrator and Commander
products, as well as revenue generated from the maintenance and support
of those products. The primary factor that affected the increased sales
performance was initiation of the roll out of the Cascadent supply
agreement, which provided $4,370,520 of sales for the year. In the
fourth quarter, at the request of Cascadent, we did not supply any
further products to them. The unanticipated lack of revenue from
Cascadent led to a loss of $1,693,774 in the fourth quarter of 2000. We
committed our resources to the continual research and development of the
IP Telephony Integrator gateway product. Management believes the
effect of this strategy, as well as, the introduction of IP technology
to its existing Commander call control product will provide changes in
the composition of our customer base resulting in sales growth, customer
advantage, and ultimately increased shareholder value.

Sales of our Integrator product in 2000 were $4,380,520 or 83% of total
revenue compared to zero in 1999, as the product was introduced in 2000.
Sales of the Commander product in 2000 were $507,989 or 10% of total
revenue compared to $1,024,098 or 44% of total revenue in 1999, this
decrease was due to decreased sales to BellSouth during 2000 and our
emphasis on promoting our Voice over internet protocol solutions. Sales
of our VFX product in 2000 were $116,235 or 2.2% of total revenue
compared to $360,024 or 15% of total revenue in 1999. This decrease is
due to an unusually large sale of $250,000 in 1999 to a Brazilian
company.

Maintenance and support is billed hourly at varying rates per hour
depending on the expertise of the technician required to resolve the
issue. In addition, any equipment needed to resolve a problem is also
billed to the client. There were no maintenance contracts in place
during 2000 or 1999, nor is maintenance and support included in our
software license. Maintenance revenues for 2000 and 1999 were $58,046
and $138,282, respectively. Equipment sales related to maintenance for
2000 and 1999 were $41,407 and $399,752, respectively.

- -13-

Cost of Goods Sold decreased 20.8% as a percentage of sales from a
56.7% for the year ended December 1999 to 35.9% for the year ended
December 2000. This decrease is related to the difference in the sales
mix in the year 2000, with higher margin Integrator gateway sales
replacing lower margin Commander call control sales.

Research and Development expenses decreased from $1,331,521 in 1999 to
$1,141,656 in 2000, a decrease of $189,865. Research and development
expenses consist of payroll and related expenses for research and
development personnel, costs related to systems infrastructure and
expenses for testing facilities and equipment. The dollar decreases in
research and development expenses were attributable to an increase and
reallocation of the number of research and development personnel and
expenses related to establishing a new testing facility during 1999. We
believe that the research and development activities are crucial to
maintaining a competitive edge in the rapid growth of the
telecommunications marketplace. We expect to continue to make
substantial investments in the research and development team to maintain
a highly skilled force of design engineers for new product development,
the key to the future.

Selling, general and administration expenses decreased 68.4% as a
percentage of sales in 2000 to $3,605,768 as compared to 1,728,244 or
73.6% as a percentage of sales in 1999. Sales and marketing expenses
consist primarily of compensation and related costs for sales personnel,
marketing personnel, sales commissions, marketing programs, public
relations, promotional materials, travel expenses and trade show exhibit
expenses. This decrease on a percentage basis is due to the significant
increase in sales during 2000. The actual dollar increase of $1,877,524
is attributed to the addition of eight sales and marketing personnel
along with increased trade show and advertising activity during 2000. We
expect to incur substantial expenditures related to sales and marketing
activities, the recruitment of additional sales and marketing personnel,
and the expansion of our domestic and international distribution
channels.

Bad debts for the year were $151,559. As a result of the Cascadent
issue, we wrote off $100,159 in receivables, the receiver recently
informed us that it is unlikely that we will recover any of this amount.
We also reserved an amount of $51,400 against a receivable due from a
sub-tenant, Pro-Circuits, Inc. Science Dynamics has recently entered
into a payment agreement with the sub-tenant and believe that the amount
is probable of collection. There were no bad debt write offs in 1999.

Three Months ended March 31, 2001 (unaudited) compared to the Three
Months ended March 31, 2000 (unaudited).

The following table summarizes the basic results of operations for the
periods indicated in the Consolidated Statement of Operations.

Three Months Ended
March 31,
2001 2000
---- ----
Sales 194,113 1,443,482
Net (Loss)/Income (1,259,835) 13,365
Net (Loss)/Income Per Share $(0.07) $ 0.00

- -14-

OPERATING EXPENSES PERCENT OF SALES

2001 2000 2001 2000
---- ---- ---- ----

Cost of Goods Sold 136,847 572,042 70% 39.6%

Research & Development 420,522 255,707 217% 17.8%

Sales, General & Admin 901,217 605,266 464% 41.9%

Total Operating Costs
and Expenses $1,458,586 $1,433,015 751% 993%

Sales for the three month period ended March 31, 2001, were $194,113 a
decrease of $1,249,369 from sales of $1,443,482 for the three month
period ended March 31, 2000. Our revenue in 2000 was predominantly
derived from the Integrator Product Line. The results were due to the
beginning of the deployment of the Cascadent supply agreement during
2000. This agreement was terminated during the first quarter of 2001
upon SciDyn receiving official notification that Cascadent was placed
into receivership. The loss of this contract is directly related to the
decrease in sales for the first quarter, moreover, we expect the loss of
this contract to negatively effect the second quarter of 2001 as well.
Our former president, chief executive officer and chairman of the board,
Alan Bashforth, became president of Cascadent subsequent to his service
as an officer of Science Dynamics. Mr. Bashforth continues to serve as
a member of our board of directors.

Cost of Goods sold decreased to $136,847 in the first three months of
2001, from $572,042 in the corresponding three-month period of 2000.
The decrease in the cost of goods sold was directly related to the
decrease in sales revenue. The percentage increase of cost of good sold
as a percentage of sales was due to the change in mix of sales between
the quarters with high margin integrater equipment sales in 2000
compared to lower margin VFX and contract labor sales in 2001.

Research & Development expenses increased to $420,522 in the first
three months of 2001 as compared to $255,707 in the comparable three-
month period of 2000. The increase in research and development expenses
during the first three months of 2001 is related to continued work on
adding additional functionality to our product mix, specifically
introducing VoIP to our Commander II series. We believe our success will
depend, in part, on our ability to develop and introduce new products
and enhancements to our existing products. We continue to work on
expanding our engineering team and intend to continue to make,
significant investments in research and development.

- -15-

Sales, General & Administrative expenses increased to $901,217 in the
first three months of 2001, compared to $605,266 in the corresponding
period of 2000. The increase is related to the addition of sales and
administrative staff during the second half of 2000. We increased our
sales and marketing department from two people in the first quarter of
2000 to ten in the first quarter of 2001. The major directive is to
initiate and promote a full-scale sales and marketing program to bring
the company above the radar screen to promote awareness and recognition
of SciDyn in the marketplace. We expect to incur substantial
expenditures related to sales and marketing activities, the recruitment
of additional sales and marketing personnel and the expansion of our
domestic and international distribution channels.

LIQUIDITY & CAPITAL RESOURCES

Net cash used for operating activities for the years ended December 31,
2000 and 1999 was $628,040 and $874,925 respectively. The use of cash
in operating activities in 2000 resulted primarily from the net loss of
$1,339,262 and a decrease in accounts payable of $163,207, offset by
decreases in accounts receivable of $54,846, inventory of $273,416, and
other assets of $108,413.

Net cash used in investing activities was $704,246 in 2000 and $123,555
in 1999. The increase in cash used for investing activities in 2000 was
primarily attributable to capital expenditures for the purchase of
computers and software for development of our current and new products
and for leasehold improvements. We expect to increase its capital
expenditures to maximize development efforts of our new products and
applications as necessary. We had no significant commitments as of
December 31, 2000 for capital expenditures.

Net cash provided by financing activities was $2,009,134 for the year
ended December 31, 2000. This amount is related to the sale of 200,650
common shares at $8.50 per share which netted $1,570,149, the finders
fee from this transaction included the issuance of 13,115 warrants to
purchase common shares. The remaining increase in financing activities
of $438,985 was related to the exercise of stock options by our
employees, the sale of net operating losses, offset by the payment on
the capitalized lease.

Cash and cash equivalents decreased to $208,126 for the period ended
March 31, 2001 from $1,351,641 at December 31, 2000. Net cash used for
operating activities was $1,056,267 during the three-month period ended
March 31, 2001 compared to $533,576 in the corresponding period of 2000.
Net cash used for operating activities reflects the net loss marginally
offset by non cash items and an increase in accrued expenses.

Cash used in investing activities was $69,247 for the three-month
period ended March 31, 2001 compared to $158,256 in the corresponding
period of 2000. The outlay reflects the continual investment in
computer related equipment to further development efforts.

Cash used in financing activities in the three-month period ended March
31, 2001, amounted to $18,001 which represented payments on capital
lease obligations. This compares to $153,907 in cash provided by
financing activities in the previous period which was raised through the
issuance on Common Stock pursuant to our employee stock option plan.

We used $1,143,515 in cash during the first quarter of 2001, absent
significant sales in the near term it is anticipated that we will need
to raise additional funds in the approximate amount of $1,000,000 in the
August 2001 timeframe in order to maintain our operations at the current
levels. In order to preserve cash, we have reduced the number of
employees from 37 to 29 since June 2001.

In May 2001, we issued $1,200,000 principal amount of convertible
debentures. The convertible debentures are due and payable, with 8%
interest, in May 2003, unless sooner converted into shares of our common
stock. Interest only payments are due quarterly commencing September
30, 2001, and the principal is due in one lump sum on May 22, 2003, or
upon certain events of default. Assuming none of the convertible notes
are converted, our quarterly interest payment would equal $24,000, as
compared with interest payments of $12,219 during the quarter ended

- -16-

March 31, 2001. We anticipate that the full amount of the convertible
notes, together with accrued interest, will be converted into shares of
our common stock, in accordance with the terms of the convertible notes.
If we are required to repay the convertible notes, we would be required
to use our limited working capital and raise additional funds. If we
were unable to repay the notes when required, the note holders could
commence legal action against us to recover the amounts due which
ultimately could require the disposition of some or all of our assets.
Any such action would require us to curtail or cease operations.

Although we have no material commitments for capital expenditures,
management anticipates a substantial increase in the need for working
capital and capital expenditures consistent with our anticipated growth
plan. By means of the growth plan, we seek to retain the services of
persons who are now employees and consultants, to secure and retain the
services of new employees and/or consultants as needed and to provide
incentives for such persons to exert maximum efforts for the success of
Science Dynamics. The amounts and timing of these expenditures will vary
depending on a number of factors, including the amount of cash generated
by our operations, competitive and technological developments and the
rate of growth of our business.

- -17-

BUSINESS

Overview

We develop and market hardware and software for telephone companies and
other telecommunications companies. Our products include devices and
software for processing telephone calls on the traditional and still
prominent telephone networks. We also have developed and are marketing
devices and software for voice and video communications using the
Internet.

Corporate Background

We were incorporated in the State of Delaware in May 1973 and started
business in July 1977 under the name Science Dynamics Corporation.
Recently we have been using the trade name SciDyn.

Products

Integrator Series of IP Gateways

We develop software and use other companies' hardware to provide
equipment that delivers simultaneous transmission of voice, fax and data
over the Internet. This is commonly referred to in our industry as
voice over Internet protocol or IP Telephony. IP Telephony refers to
communication services - voice, facsimile, and voice messaging
applications - that are transported via the Internet, rather than the
traditional telephone network. The basic steps involved in originating
an Internet telephone call are conversion of the analog signal to
digital format and compression and translation of the signal into
Internet protocol packets for transmission over the Internet. The
process is reversed at the receiving end.

Packet vs. Circuit switching.

To understand the difference between circuit switching and packet
switching, think of a highway between two cities. Traditional telephone
technology would use an entire lane of the highway for one car for the
duration of its trip. Packet switching technologies, like IP
Telephony, fill all of the lanes with lines of cars in each lane. IP
simply makes much more efficient use of the transmission path.

Circuit switching technology uses traditional telephone networks
inefficiently when it opens and maintains a dedicated line for every
call, regardless of the density of the information being transmitted.
The result is wasted bandwidth, as the end-to-end connection remains in
place even during those moments when no actual information is being
transmitted. IP packet technology breaks the information down into
pieces, places them into electronic packets and then fills the pipe with
these packets of information. The packets not only fill the pipe, but
are also directed along the way by routers that read the address
information. They direct each packet along the fastest route to the
destination, where all of the pieces of information are reassembled,
ready for receipt by fax, computer or listener. All of this takes
place in only a fraction of a second.

Using our technology to simultaneously transmit voice, fax and data,
our customers should be able to more efficiently and cost effectively
use the available capacity of their networks.

Our product offers service providers an opportunity to generate new
revenue and enhance their competitive position by offering their
customers personalized, enhanced services and features. Our Integrator
IP Gateways are based on our proprietary BubbleLINK(R) software that
permits our customers to add new product and service features without
extensive product cost or development time.

Our primary customer to date has been Cascadent Communications. This
company was placed in receivership after completing purchases of
$4,370,520 pursuant to its contract with us. Our former president,
chief executive officer and chairman of the board, Alan Bashforth,
became president of Cascadent subsequent to his service as an officer of
Science Dynamics. Mr. Bashforth continues to serve as a member of our
board of directors. Additional potential customers include: service
providers, system integrators, resellers and enterprises. Service
provider customers include traditional local, international and
wholesale long distance telecommunication companies, as well as next

- -18-

generation service providers, including Internet service providers,
application service providers and others employing Internet-based
business models. Traditional telecommunication service providers and
next generation service providers are addressing business challenges and
service demands that result from a worldwide movement towards
deregulation of telecommunications markets, a trend that has been
reinforced by a mandate from the World Trade Organization.

Market Forces Driving Growth of IP Communications

Growth of the Internet

The Internet is a very large global data network that has experienced
most of its growth within the last five years. The Internet is largely a
separate network from the traditional circuit-switched telephone
network.

The volume of data traffic now exceeds the volume of voice calls, and
is growing at a faster pace. The physical infrastructure of the Internet
has expanded dramatically to accommodate rapid growth in data traffic
over the Internet around the world, and such growth is expected to
continue.

Deregulation

Deregulation of communications markets around the world has been a
driving force in the adoption of IP Telephony. Regulatory barriers that
restricted service providers to a particular geography and regulated
rates and service offerings are disappearing. New competitive service
providers are entering the market, challenging incumbent monopolies and
offering voice services where none existed before. The flexibility and
cost-effectiveness of IP Telephony networks, compared to circuit
switched technology, are particularly important in an increasingly
deregulated and competitive market environment. Once competitors enter
new markets and deploy IP Telephony-based networks, the incumbent
service providers frequently upgrade their network to include IP
Telephony technology so that they can compete with the new entrants.

Technological and quality improvements in IP Telephony

Developments in IP Telephony technology have significantly bridged the
voice quality gap between the circuit-switched system and IP Telephony
systems. Today a voice call placed over an IP Telephony network can
sound virtually indistinguishable from the same call made over the
traditional telephone system.

Cost savings opportunities

Voice over IP offers service providers cost savings and operational
efficiencies relative to circuit switched networks:

Efficiencies of a shared network. The Internet was initially developed
as a data network that is separate from and parallel to the circuit-
switched traditional voice network. Each network--the Internet and the
circuit-switched network--has its own dedicated equipment. Each network
has operational support systems built around it (provisioning,
installation, etc.) and personnel that manage and maintain those
systems.

The unification, also called convergence, of these two networks by
moving voice traffic from the circuit-switched network onto this
Internet data network will enable service providers to share traffic,
equipment and operational support systems rather than maintaining
completely separate networks dedicated to their own applications of
voice or data.

- -19-

Efficiency of IP transport. When calls are routed over the Internet,
the calls are compressed. Advanced speech compression technology can
compress a call to consume as little as 10% of the network capacity that
an uncompressed circuit-switched call would take up. Because the call
takes up less space, it allows for more efficient use of the data
network.

Savings on international settlement charges. When phone calls travel
between countries over the circuit-switched network, there is usually a
per-minute settlement charge placed on each call. The originating phone
company pays the terminating phone company this settlement charge, which
can be in excess of $.20 per minute, depending on the countries
exchanging traffic. In most places, Internet traffic is generally
excluded from these per minute settlement charges. When phone calls are
sent over the Internet, they become Internet data like any other
Internet traffic and are, therefore, not subject to these settlement
charges. This reduces the cost of transporting a phone call over the
Internet and provides a financial incentive for international
telecommunications service providers to route their phone traffic over
the Internet. The circuit switched settlement charges are dropping
internationally and are expected to decline over time.

Market outlook - size and growth

Telecommunication industry analysts predict strong industry growth for
the IP Telephony market. Synergy Research Group, a telecommunications
market analyst, stated in their first quarter, 2001 report, that "the
market while still small, is beginning to take off. A recent study
shows the market grew from $34.1 million in 1999 to $268.0 million in
2000, but it was still just a tiny piece of the $20 billion traditional
phone system market."

The Net-based phone market will eat into the traditional voice
equipment market within five years, growing to $532 million this year
and $3.8 billion by 2005, according to the Synergy report.

Cisco and 3Com, which entered the market in 1998 by acquiring start-up
companies, have captured most of the revenue, with Cisco leading the way
with 40 percent, followed by 3Com with 15 percent, according to the
Synergy market research report. With rapid growth expected in the
market, telecommunications equipment makers that have built the
traditional phone systems, called PBXs, can't ignore the Net-based phone
systems, the Synergy analysts say. Lucent Technologies' spinoff
Avaya, Nortel Networks, Alcatel and others initially entered the market
by creating hybrid technologies that combined internet technology with
traditional voice products. Now they are in various stages of
releasing Net-based phone systems according to the analysts. For
example, Avaya began selling its Net phone system in late November,
"Clearly, this is something Alcatel, Nortel and Siemens (and others)
have to pay attention to because phone system are a significant cash cow
for their business," said Synergy Founder and Principal Analyst Jeremy
Duke.

Benefits of Our IP Telephony Solution

Total solution

We offer a suite of IP Telephony products that allow service providers
to offer services to consumers and to small, medium and large business
customers. Our products can support small or large networks; local or
long distance networks; and limited or extensive features. We provide a
consistent and flexible set of solutions to enable the processing of
calls and centralized network management functions.

New revenue streams for service providers

Our flexible, customized client-server software allows our customers to
quickly design and deliver new features and services to their customers.
In a deregulated telecommunications marketplace these services can
provide sources of revenue to the next generation communications service
providers.

- -20-

Distributed architecture

Our software is comprised of distinct units that can be spread across a
network. Compared to a circuit-switched network, a network using our
product may be modified quickly to accommodate new features, support new
protocols or handle new end-user devices, such as IP telephones, as they
become widely-used or available.

Voice quality

Calls over our product generally have sound quality that is
indistinguishable from the sound quality of calls over the traditional
network. In addition, our product enables the simultaneous transmission
of voice, fax and data traffic, by using standard compression and echo
cancellation technologies.

Sales and Marketing

During the last two years, we have significantly increased our sales
and marketing staff, launched new web initiatives and implemented a
complete sales automation process. This has increased our efficiency
and effectiveness to evaluate opportunities generated from web
inquiries, trade shows, press releases, and partner relationships. Our
intent is to diversify our customer base, thereby limiting the business
risk of only having several key customers.

Research and Development

The majority of the research and development activities are conducted
at our facility using our array of telephony resources and the technical
expertise of its engineering staff. We have fourteen employees
currently engaged in engineering and research and development. We plan
to devote a substantial portion of our resources to research and
development and to continue utilizing subcontractors to enhance our
engineering staff.

During 2000 and 1999, we spent $1,141,656 and $1,331,521 on research
and development. We anticipate that an increase in future research and
development expenditures will be necessary to remain competitive in the
rapidly changing telecommunications industry. We intend to utilize
other companies to accelerate the development of new product offerings,
although we have no specific plans to do so as of the date hereof.

The Voice Enabled Commander, Voice over IP technology on the Call
Control Platform which we announced January 22, 2001, was developed
internally. There have been no sales generated to date.

Commander Inmate Telephone Control System (ITCS)

We develop software and use other companies' hardware to provide
specialized call processing equipment to the corrections industry. Our
corrections products were originally designed in 1986 to provide timing
and call control for collect phone calls made by inmates from U.S.
correctional institutions. We sell our product through relationships
with telecommunications companies or telecommunication service
providers. Our primary customer to date has been BellSouth Public
Communications. BellSouth is in the process of phasing out its
correctional telephone systems, and we do not expect additional sales to
this customer. Additional potential customers include: AT&T, Verizon
(including GTE), Qwest (including US West), Sprint, WorldCom and other
companies that provide telecommunications services to the corrections
industry. It is our intent to replace BellSouth and to increase the
number of customers using our products. We intend to do this through
increased relationship management efforts and by offering flexible
business arrangements including transaction based fees and revenue
sharing. Our products can be used at the smallest local correctional
facility or the largest state or federal correctional facility.

- -21-

Calls from inmates of federal, state, and local correctional facilities
comprise an important segment of the public communications market.
Inmates typically may only place calls for a limited duration, which
generates a high volume of calls per phone, and generally may only place
collect calls. Consequently, the inmate calling market is an attractive
segment of the corrections industry to other telecommunications service
providers and to us. Specialized call processing within the corrections
industry requires the development of advanced capabilities such as fraud
control of outgoing calls and flexible call rating systems. We sell a
product specifically designed for this industry. However, since we
design our products to meet other commonplace industry requirements,
with what we believe to be minimal modifications, they can also be used
for other industries.

According to the U.S. Bureau of Justice Statistics as of December 1999

- 6.3 million adults were under some form of correctional supervision

- approximately 4.25 million adults were under parole or probation
sanction

- there were approximately 2.5 million inmates in state and federal and
local prisons

- from 1990 to 1999 the number of inmates increased by an average of
6.0 percent annually

- there are approximately 4,500 correctional facilities in the U.S.

The inmate calling market presents unique and substantial challenges to
the telecommunications service provider. Correctional authorities
generally favor telecommunications service providers who can manage the
inmate phone systems themselves, maintain consistent service and easily
process new inmates into the systems. Correctional authorities generally
require control features that limit the length of calls, limit the time
of day calls are made, and restrict the ability of inmates to make
harassing or unapproved telephone calls. The telecommunications service
provider must be able to customize the call control features by
facility, cellblock, telephone and, in some cases, each inmate. One of
the unique challenges is to prevent the fraudulent bypassing of these
controls through three-way calling. Inmates attempt to bypass
traditional control features by calling an accomplice at an approved
number and having the accomplice use three-way calling to conference a
non-allowed party. Through this method, inmates have been known to
harass and intimidate people such as witnesses, whose numbers would
otherwise be blocked, and to call merchants to conduct fraudulent
activities.

Correctional authorities generally select telecommunications service
providers on the basis of services and features provided and on the
level of commissions paid to the facilities. Competition is intense
among the telecommunications service providers and this has led to
commission payments to correctional facilities at very high levels. In
addition, to win new contracts and renew existing contracts,
telecommunications service providers must differentiate their services
from those of the competition. We are willing to customize our product
and give our customers an advantage to win new contracts and renew
existing ones. Correctional authorities recognize the benefits of
outsourcing to telecommunications service providers that provide leading
edge technology that can assist their goal of improving efficiency in
operations.

Our Commander II product can handle thousands of lines and thousands of
call transactions per hour to provide correctional facility officials
with effective tools to manage and control inmate telephone calls using
the Commander system software.

- -22-

The Commander I products are designed for the small to mid sized
municipal and county correctional facilities requiring control for up to
40 inmate telephone lines. The Commander I base system provides
telephone control for four lines and can be expanded in four line
increments. This modular design provides a cost effective solution with
an abundance of inmate phone control features.

The Commander product line provides dialing instructions, call
announcement and acceptance messages and error prompts in multiple
languages. A flexible inmate account option allows for management of
inmate personal identification numbers. System control features
applicable to each inmate telephone such as call blocking, call timers,
system reports, alarm parameters and real-time display of activity allow
for expanded control. The product may be configured to have one inmate
phone for every one outbound telephone line or can be configured to
concentrate multiple inmate phones to one outbound telephone line. This
line concentration allows for cost savings in the provisioning of the
number of inmate telephone lines.

The Commander I and II call control systems can be configured using one
or more AdminManager workstations. The AdminManager provides real-time
administration of the Commander through an Ethernet Local Area Network
(LAN) or a Wide Area Network (WAN).

Materials and Principal Suppliers

Our Integrator product lines use our proprietary BubbleLINK(R)
software. We use a combination of industry standard computer telephony
hardware including commercial grade personal computer technology,
telephone voice cards, the Windows NT operating system, and our
Integrator software.

Our primary effort is the software design of products, limited hardware
design and system integration of purchased products. We purchase
equipment then integrate our custom software. We try to purchase
equipment for use in our products by establishing relationships with
industry leaders in the networking, telecom, and personal computer
industry.

We selected Natural Microsystems as the hardware vendor for the
telephony voice card used in our products. We chose Natural
Microsystems for its technical expertise, high level of service and
worldwide support. Natural Microsystems is the sole source supplier for
certain circuit boards we use, however, we do not have any formal supply
agreement with them.

We selected Crystal Group, Inc. as the hardware integration source for
our IP Telephony gateways. By integrating our software with Crystal
Group's hardware platform, we believe based upon past performance that
the two companies should be capable of a high level of service and
support to telecommunications companies worldwide.

Our Commander product lines are built on our proprietary BubbleLINK(R)
software. We use a combination of industry standard computer telephony
hardware including commercial grade personal computer technology,
telephone voice cards, and the Windows NT operating system, and our
Integrator software.

Recent Developments

Our VOIP technology is now available on the Commander Inmate Telephone
Control System. This enhancement reduces the number of inmate
telephone lines that are required to operate an inmate calling system.
It does this by compressing the telephone call into data packets,
thereby eliminating the need for traditional phone lines from the
facility. This new enhancement allows our customers to aggregate all of
the telephone calls from multiple locations to a central location,
therefore reducing the amount of individual phone lines needed at each
facility. This may give our customers the potential to reduce per
minute charges incurred to terminate phone calls and possibly increase
their profitability.

- -23-

Patents

Our product line also includes our patented three-way call detection
and prevention technology that prevents inmates from bypassing control
features through three-way calling.

Competition

Our market is new, rapidly evolving, highly competitive and fragmented,
and we expect competition to intensify in the future. We believe that
the main competitive factors in our market are product quality,
features, cost and customer relationships. We believe a critical
component to success in this market is the ability to establish and
maintain strong customer relationships with a wide variety of service
providers around the world and to facilitate relationships between those
service providers increasing the geographic coverage of their services.

Our current principal competitors include large networking equipment
manufacturers, such as Cisco Systems, Inc.; large telecommunications
equipment manufacturers, such as Lucent Inc. and Nortel Networks
Corporation; and IP telephony technology companies, such as Clarent
Corporation and VocalTec Communications, Ltd. We also expect new
competitors to emerge. Many of our competitors are substantially larger
than we are and have significantly greater financial, sales and
marketing, technical, manufacturing and other resources, and more
established distribution channels and stronger relationships with
service providers. These competitors may be able to respond more rapidly
to new or emerging technologies and changes in customer requirements or
devote greater resources to the development, promotion and sale of their
products than we can. In addition, they may be able to compete more
effectively because they will be able to add IP telephony features to
their existing equipment or bundle these features as part of a broader
solution. Furthermore, we believe some of our competitors may offer
aggressive sales terms, including financing alternatives, which we might
not be able to match. These competitors may enter our existing or future
markets with solutions that may be less expensive, provide higher
performance or additional features or be introduced earlier than our
solutions. Given the market opportunity, we also expect that other
companies may enter our market with better products and technologies. If
any technology that is competing with ours is more reliable or faster or
less expensive or has other advantages over our technology, then the
demand for our products and services could decrease.

We expect our competitors to continue to improve the performance of
their current products and introduce new products or new technologies.
Successful new product introductions or enhancements by our competitors
could reduce the sales or market acceptance of our products and
services, perpetuate intense price competition or make our products
obsolete. To be competitive, we must continue to invest significant
resources in research and development, sales and marketing and customer
support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive.

Increased competition is likely to result in price reductions,
reduced gross margins and loss of market share. Our failure to compete
successfully against current or future competitors could seriously harm
our business, financial condition and results of operations.

We estimate our current market share at approximately 3% of the total
equipment market for inmate collect calling from U.S. Federal, State and
County adult facilities. The largest competitor in the market is a
publicly traded company, T Netix Inc., which has approximately a 30%
market share. Other competitors include Evercom Inc., Global TelLink (a
wholly owned subsidiary of Schlumberger Technologies, Inc.), Radical
System Solutions, Omniphone, Value Added Communications and Panda
Systems.

- -24-

Customers

During 2000, two customers accounted for 83% and 15% of total sales.
During 1999, three customers and their operating subsidiaries accounted
for 64%, 10% and 10% of total sales. The customer accounting for 83% of
total 2000 sales was Cascadent Communications, with whom we had a supply
agreement. Our former president, chief executive officer and chairman
of the board, Alan Bashforth, became president of Cascadent subsequent
to his service as an officer of Science Dynamics. Mr. Bashforth
continues to serve as a member of our board of directors. The agreement
was terminated on January 4, 2001, upon receiving notice that Cascadent
was placed into receivership. In a letter dated June 25, 2001, the
Cascadent receiver advised that it was not possible to achieve a sale of
Cascadent's business as a going concern. The letter also stated that it
appears that there will be insufficient funds available for a liquidator
to be appointed in this matter. BellSouth Communications, which
accounted for 15% of our sales in 2000, recently announced that it was
withdrawing from the public phone market, so future sales to BellSouth
are unlikely.

With the introduction of the new product lines and the expansion of the
sales team from two to 10 people, we anticipate less reliance on any
single customer or market in the future.

Employees

As of July 1, 2001, we employed 29 persons on a full time basis. We
supplement full-time employees with subcontractors and part- time
individuals, according to our workload requirements.

Facilities

Pursuant to a ten year lease commencing May 1, 1995, we lease a 50,000
square foot freestanding masonry building in an industrial park in
Cherry Hill, New Jersey, utilized for office space and testing of our
products and other corporate activities. In the latter part of 1998, we
subleased 25,645 square feet of the building to a printed circuit board
manufacturer. Such sublease is currently in default, and we have engaged
legal counsel who has filed a complaint to evict such tenant. The
tenant is currently in negotiations with us to cure the default and
reinstate the sublease. We also lease a small office space in Crawley,
United Kingdom, on a month to month basis.

Legal Proceedings

We have been named as a defendant in a lawsuit brought on March 5,
2001, by prisoners of correctional institutions in which our Commander
systems have been installed. The lawsuit, which seeks unspecified
damages, is entitled Mildred Fair, et al., v. Sprint Payphone Services,
Inc.,et al., U.S. District Court, District of South Carolina,
Greenville Division, Docket No.: CA No. 6:01-626-20. This is a class
action lawsuit brought against numerous defendants, including a number
of telephone companies. We believe that we have adequate defenses
against such lawsuit, and given the nature of our involvement with the
transactions set forth in the complaint, we do not believe the lawsuit
to be material.
Except for the foregoing, we are not a party to any litigation and no
action against us has been threatened or is known to be contemplated by
any governmental agency or subdivision or any other entity.

MANAGEMENT

The following table sets forth certain information regarding our
directors and executive officers as of July 12, 2001.

Name Age Position with the Company and term served
---- --- -----------------------------------------

Sheldon Hofferman 56 Chairman of the Board since
November 30, 2000 and Director
since September 17, 1997

Joy C. Hartman 52 President and Chief Executive
Officer since January 28, 2000,
and Director since May 7, 1991

Kenneth P. Ray 67 Director since May, 1990

Alan C. Bashforth 51 Director since November 7, 1996

John Innes 68 Director since October 12, 2000

L. Michael Hone 51 Director since October 12, 2000

Louis Padulo 64 Director since January 17, 2001

Robert O'Connor 39 Vice President of Finance and
Administration since May 15, 2000

Joseph Giegerich 34 Vice President of Sales and
Marketing since October 10, 2000

Thomas Spadaro 40 Vice President of Technology
since December 12, 2000

Directors are elected at the annual meeting of shareholders for a
period of one year. Directors appointed to fill vacancies or to
increase the number of board members serve until the next annual
meeting.

Sheldon, C. Hofferman has been an Attorney and Private Investor
since 1971. Mr. Hofferman graduated from the University of
Pennsylvania in 1966 and Temple University Law School in 1971. He was
in private law practice in Washington, D.C., specializing in
communications law, from 1971 to 1974. He served as Senior Trial
Attorney for the Federal Trade Commission from 1974 to 1983, and re-
entered private law practice thereafter. Mr. Hofferman has also
served as General Partner of Golden Phoenix Limited Partnership, an
investment concern, since 1983.

Joy C. Hartman became President and Chief Executive Officer in
January 2000, and continues to serve as Assistant Secretary and
Treasurer. Ms. Hartman joined us in January 1982. In addition to
holding these positions, other positions she has held with us include
CFO, Treasurer, Corporate Secretary, and Executive Vice President. Her
prior experiences included TeleSciences, Inc., and Peat Marwick
Mitchell. Ms. Hartman is a graduate of The Wharton School of Business
of the University of Pennsylvania. She is a member of the Financial
Executives Institute, the National Association of Corporate Directors,
and the American Society of Corporate Secretaries.

Kenneth P. Ray has been President of DelRay, Inc., an active
telecommunications consulting firm, for more than the past five
years. From 1964 to 1987, he was associated with ITT in various
responsible positions and in 1976 became Vice President of ITT
Telecommunications, with responsibility for engineering, marketing and
sales departments. In 1981, he became Vice President and Director of
Operations for the Transmission Division of ITT Space Communications.
In January 1987, ITT's telecommunications group was acquired by
Alcatel and Mr. Ray became Vice President of Marketing and Development
for Alcatel Network Systems. From 1988 to 1991, he was Vice President
for Technology and Business Development for Alcatel North America, a
telecommunications company. Mr. Ray received a BSEE from Polytechnic
Institute of New York in 1954 and a Masters in Economics from North
Carolina State University in 1970.

- -26-

Alan C. Bashforth, President and Chief Executive Officer of SciDyn
until January 2000, relinquished those positions and served as
Chairman of the Board until November 15, 2000. He was President of
Cascadent Communications, a major customer of SciDyn until December
15, 2000. Previously he was President of Innovative Communications
Technology, LTD. (ICT), a data communications company, located in
Jersey, Channel Islands, until the acquisition of the intellectual
property of ICT by us in November 1996. Prior experience included
ownership of the CSL Group of companies from its inception in 1975.
CSL is a Communications and Computer engineering group and employed
over 100 people in 1992 when Mr. Bashforth sold the company. From
1970 to 1975, Mr. Bashforth was employed by Automaten CI, LTD., an
office equipment and telecommunications company, in various
engineering and sales positions leading to the position of General
Manager. Mr. Bashforth was educated in electronic engineering at Mid
Herts Polytechnic College in England and holds a Higher National
Diploma in Electronic Engineering. Mr. Bashforth also serves as a
Director of Satellite Media Services Ltd.

John Innes, has been Chairman since December 1997 of ACHP, a company
started to meet the need of electronic banking/funds transfer
marketing and processing. From 1994 through December 1997, he was
engaged in his own practice as an attorney, investor and consultant.
He has 30 years of experience managing, reorganizing, and financing
public and private companies. Since 1971, he has been an attorney,
consultant and investor in companies in various industries including
investment banking, media, aviation, waste management and electronic
commerce. From 1992 to 1994, Mr. Innes was Chairman of Commonwealth
Associates, a New York based investment-banking firm. Mr. Innes
served as Vice-Chairman of Wheeling-Pittsburgh Steel Corporation;
Managing Director of Sabre Insurance Company Limited from 1986 - 1991;
he also served as General Counsel of Gulfstream Aerospace Corporation
from 1976 - 1986. Mr. Innes graduated from Williams College and from
Temple University Law School.

L. Michael Hone, was the President and Chief Executive Officer of
Centennial Technologies, Inc., a publicly traded company, from August
1997 through June 2001. Previously, he was Chairman and Chief Executive
Officer of PSC, Inc., a publicly held manufacturer of hand-held and
fixed-position laser-based bar code scanners, scan engines and other
scanning products from 1992 to 1997. Mr. Hone also served as Director
of Rochester Healthcare Information Group, Inc., a company principally
engaged in providing data processing management to the healthcare
industry. Mr. Hone served as Director of the Association for the
Blind and Visually Impaired, Inc., which is principally engaged in
assisting the blind and visually impaired to achieve vocational and
social independence. Mr. Hone was previously Chairman of AIM USA and
AIM International. Mr. Hone is a named inventor on six United States
patents. He attended Ohio State University where he majored in
Business.

Louis Padulo, a President Emeritus of University City Science Center
in Philadelphia Pennsylvania since 1997, served as President and Chief
Executive Officer of the non-profit consortium of leading universities
and organizations, between 1991 and 1996. Previously, he served as
President of the University of Alabama in Huntsville and has held a
number of administrative and faculty positions with Boston University,
Stanford University, Morehouse College, Massachusetts Institute of
Technology, and the University of Tokyo among others. Additionally,
Mr. Padulo possesses extensive industry and consulting experience, and
has held and continues to hold a number of board and directorship
positions with both public and private organizations. Mr. Padulo
received a Bachelor of Science degree from Fairleigh Dickinson
University, a Master of Science degree in Electrical Engineering from
Stanford University, and a Ph.D. from the Georgia Institute of
Technology.

- -27-

Robert O'Connor came to us from PricewaterhouseCoopers, L.L.P in
Philadelphia, PA, where he served from January 1998 to May 2000, as a
manager of middle market advisory services. From May 1996 to June
1997, he served as controller of Optic Image Software Corporation.
Mr. O'Connor served as vice president of finance and administration at
AW Computer Systems from May 1993 to September 1996. Mr. O'Connor
received his MBA from Rutgers-Graduate School of Management, BS from
Kean University in Union, NJ, and he is a Certified Public Accountant.

Joseph Giegerich has more than 11 years of product marketing, product
introduction, and marketing strategy experience in the
telecommunications field, specializing in advanced and emerging
technologies. He has been involved in new business development,
including two startups, an acquisition, and a successful IPO. Most
recently from November 1999 to September 2000, he served as Vice
President of Sales for iFace.com, a telecommunications equipment
provider specializing in Internet and Computer Telephony applications.
Previously, from May 1998 to November 1999, he served as Director of
Key Accounts with Philips Speech Processing, a division of Philips
Electronics NA, where he directly managed $40 million in strategic
channel relationships for Philips core speech technology. He was one
of the original founders November 1991 to April 1998, of Voice Systems
Technology (VST), a company offering network-based enhanced service
platforms and pre-paid wireless applications. VST was subsequently
sold to Boston Communications Group and went public shortly after.
Earlier in his career, he built and launched a successful voice
messaging service bureau. He earned a degree from Rutgers University
in Economics, with a minor in Computer Science.

Thomas Spadaro, who has been with Science Dynamics for the past 18
years, manages the development and design of all major product
offerings for us. Presently, his main task is to develop solutions
that facilitate the transition from a circuit-switched network to a
digital, packet-based communications environment. Among the projects
he has spearheaded since joining SciDyn in 1983 are the Integrator
Series of IP gateways, the Call Control System for correctional
facilities and the VFX-250S Video over Frame Relay Access Device. He
previously served as our Director of Engineering.

Board of Directors Committees and Other Information

All directors hold office until the next annual meeting of
shareholders and until their successors have been duly elected and
qualified. Officers are elected by and serve at the discretion of the
Board of Directors. There are no family relationships among our
directors or officers. The Board of Directors currently has an Audit
Committee and a Compensation Committee. The Audit Committee oversees
the actions taken by our independent auditors and reviews our internal
financial and accounting controls and policies. The Compensation
Committee is responsible for determining salaries, incentives and
other forms of compensation for our officers, employees and
consultants and administers our incentive compensation and benefit
plans.

Directors' Compensation

We do not compensate members of our Board of Directors for their
services. We reimburse non-employee Directors for their reasonable
expenses incurred in attending meetings of our Board.

- -28-

Executive Compensation

The following table sets forth the total compensation paid to our
president and other executive officers whose compensation during any
of the past three years exceeded $100,000.

SUMMARY COMPENSATION TABLE

Annual Compensation Long term compensation
----------------------- --------------------------
Name and Year Salary Bonus Other Awards All
Principal ($) ($) Annual Restrict- Options/ LTIP Other
Position Compen- ed Stock SARs(#) Pay- Compensa-
sation ($) Award(s)($) outs($) tion ($)
- ---------- ---- ------ ----- ---------- --------- ---------- ------ --------

Joy C.Hartman, 2000 161,185 -0- 1,666 -0- 100,000 -0- -0-
President and 1999 113,237 -0- -0- -0- 10,000 -0- -0-
CEO (1) 1998 111,000 -0- 5,632 -0- -0- -0- -0-

1 Ms. Hartman was appointed our President and CEO in January 2000.

Option Grants in Fiscal 2000

The following table shows information regarding stock options granted to
our executive officers during the fiscal year ended December 31, 2000

Name and Position No. of Securities % of Total Options Exercise Expiration
Underlying Granted to Employees price Date
Options Granted in Fiscal Year
- --------------------------------------------------------------------------------------

Joy C. Hartman
President and CEO
100,000 24.5% $5.00 1/5/2010

Robert C. O'Connor,
Vice President of
Finance and
Administration,
Chief Financial
Officer 20,000 4.9% $7.625 8/2/2010

Thomas Spadaro,
Vice President of
Technology
25,000 6.1% $7.625 6/5/2010

Joseph Geigerich,
Vice President Sales
and Marketing
60,000 14.7% $1.87 10/16/2010

Stock Options Exercised During Fiscal Year

None of our executive officers or directors exercised stock options or
stock appreciation rights during the fiscal year ended December 31,
2000.

- -29-

Fiscal Year-end Option Values

The following table shows information regarding the value of
unexercised options held by executive officers as of December 31, 2000:

Number of Securities Value of Unexercised
Underlying In-The-Money Options (1)
Unexercised Options
- ------------------------------------------------------------------------------------
Name & Position Exerciseable Unexerciseable Exerciseable Unexerciseable
- ------------------------------------------------------------------------------------

Joy Hartman, President
and CEO 155,000 - $8,469 -

Joseph Giegerich, Vice
President - Sales and
Marketing 60,000 60,000 - -

Thomas R. Spadaro,
Vice President -
Technology 56,200 - $5,167 -

Robert O'Connor, Vice
President - Finance
and Administration,
Chief Financial
Officer 20,000 - - -
____________

____________
(1) Value of unexercised options is based on the closing bid price of our
common stock on the Nasdaq SmallCap Market on December 31, 2000,
minus the exercise price.

- -29-

Employment Contracts

We have an employment agreement with Joy C. Hartman, our President, CEO
and a Director. The employment agreement contains change in control
provisions that would entitle her to receive up to 2.99 times the annual
salary if there is a change in control of our company (as defined) and a
subsequent termination of employment. The maximum contingent liability
under this agreement in such event is approximately $523,250.

1992 Stock Option Plan

Our 1992 incentive stock option plan, as filed with our registration
statement on Form S-8 with the Securities and Exchange Commission on
June 5, 1992, reserved 290,950 common shares for issuance; on March 22,
2000, we filed a post-effective amendment to increase the shares reserved
for issuance to 1,378,950, of which 873,250 common shares are underlying
outstanding stock option grants and 505,700 common shares remain
available for future stock awards.

RELATED PARTY TRANSACTIONS

In February 2000, we entered into an agreement for consulting services
with Alan Bashforth. The consulting services primarily related to
identifying, evaluating, and recommending business strategies for us.
This agreement expired on April 30, 2001 and was not renewed. Mr.
Bashforth received an aggregate of $150,000 pursuant to the agreement.

On February 11, 2000, we entered into a supply agreement with Cascadent
Communications (formerly @IPbell Inc.). Pursuant to the terms of the
agreement, Cascadent agreed to purchase $4,180,800 of our Integrator
gateway products. Cascadent also expressed its intent, in the agreement,
to purchase either directly, or through a third party vendor, additional
equipment amounting to approximately $13,000,000. During the course of
the agreement, we sold $4,370,146 of our Integrator gateway product

- -30-

under the agreement. The agreement was terminated on January 4,
2001, upon receiving notice that Cascadent was placed into receivership.
In a letter dated June 25, 2001, the Cascadent receiver advised that it
was not possible to achieve a sale of Cascadent's business as a going
concern. The letter also stated that it appears that there will be
insufficient funds available for a liquidator to be appointed in this
matter. We have outstanding invoices in the amount of $100,159, but
presently have no expectations that such amounts will be recovered. The
pricing of the products sold and the terms and conditions of sale were no
more favorable than those provided to unrelated parties. Our former
President, Chief Executive Officer and Chairman of the Board, Alan
Bashforth, became President of Cascadent subsequent to his service as an
officer of Science Dynamics. Mr. Bashforth continues to serve as a
member of our Board of Directors.

We believe, based upon our experience in the industry, that the terms of
the foregoing agreements were no more favorable than those which could
have been obtained from unaffiliated third parties.

- -31-

PRINCIPAL SECURITY HOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock, as of the date of this prospectus. The
information in this table provides the ownership information for:

- each person known by us to be the beneficial owner of more than
5% of our common stock;

- each of our directors and director nominees;

- each of our executive officers; and

- our executive officers, directors and director nominees as a
group.

Beneficial ownership has been determined in accordance with the rules
and regulations of the Securities and Exchange Commission and includes
voting or investment power with respect to the shares. Unless otherwise
indicated, the persons named in the table have sole voting and investment
power with respect to the number of shares indicated as beneficially
owned by them. The number of shares of common stock outstanding used in
calculating the percentage ownership for each person listed below
includes shares of common stock underlying options or warrants held by
the person that are exercisable within 60 days of the date of this
prospectus. Common stock beneficially owned and percentage ownership are
based on 17,657,901 shares outstanding before this offering and
21,471,804 shares to be outstanding after the completion of this
offering.

Percentage of Common Stock
Beneficially Owned
- ---------------------------------------------------------------------------------------------
Name, Address and Title of Number of Shares
Beneficial Owner Beneficially Owned Before Offering After Offering
- ---------------------------------------------------------------------------------------------

Sheldon C. Hofferman,
Chairman (1)
PO Box 350
Fairfax Station, VA 22039 2,619,921 14.84% 12.20%

Alan C. Bashforth, Director (2)
Le Virage
La Route de Sainte Marie,
St. Mary, Jersey, UK
JE3 3DB 1,520,000 8.61% 7.08%

Edwin S. Marks, 5% owner
135 East 57th Street
27th Floor
New York, New York 10022 1,129,000 6.39% 5.26%

Charles Bresler, 5% owner
401 M Street SW
Washington, DC 1,322,666 7.49% 6.16%

Joy C. Hartman, President,
CEO (3)
27 Hogan Way
Moorestown, NJ 08057 215,185 1.22% 1.00%

Kenneth P. Ray, Director (4)
909 Darfield Drive
Raleigh, NC 27615 46,300 0.26% 0.22%

Joseph Giegerich, Vice
President Sales & Marketing
46 Longbridge Dr.
Mount Laurel, NJ 08054 25,000 0.14% 0.12%

- -32-

Thomas Spadaro (5)
Vice President of
Engineering
41 Fountain Blvd
Burlington, NJ 08016 82,455 0.47% 0.38%

Robert O'Connor (6)
Vice President of Finance
and Administration
53 Sorrel Run
Mt. Laurel, NJ 08054 20,000 0.11% 0.09%

All executive officers,
directors, and director
nominees as a group
(7 persons) 6,980,527 39.53% 32.51%

______________
(1) The total includes 2,619,921 shares owned by Golden Phoenix, LP., of
which Mr. Hofferman is General Partner.

(2) Shares in the name of Innovative Communications Technology, LTD., a
corporation, controlled by Mr. Bashforth.

(3) The 215,185 shares in Ms. Hartman's name include incentive options,
exercisable within sixty days to acquire 155,000 shares, and 20,000
warrants, and 300 shares owned by Ms. Hartman's children.

(4) The 46,300 shares owned by Mr. Ray include incentive options,
exercisable within sixty days to acquire 30,000 shares.

(5) The 82,455 shares owned by Mr. Spadaro include incentive options,
exercisable within sixty days to acquire 56,200 shares.

(6) The 20,000 shares owned by Mr. O'Connor include incentive options,
exercisable within sixty days to acquire 20,000 shares.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 45,000,000 shares of common
stock, par value $.01 per share.

The description of our securities are summaries of the material
provisions of our securities. For more complete information, you should
read our certificate of incorporation and its amendments.

Common Stock

Holders of our common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the
shares of our common stock entitled to vote in any election of directors
may elect all of the directors standing for election. Holders of our
common stock are entitled to receive dividends ratably, if any, as may be
declared from time to time by our board of directors out of funds legally
available therefore. Upon the liquidation, dissolution or winding up of
us, the holders of our common stock are entitled to receive ratably, our
net assets available after the payment of all liabilities.

- -33-

Holders of our common stock have no preemptive, subscription, redemption
or conversion rights, and there are no redemption or sinking fund
provisions applicable to the common stock. The outstanding shares of our
common stock are, and the shares offered by us in this offering will be,
when issued and paid for, validly issued, duly authorized, fully paid and
nonassessable.

Warrants

On November 7, 1996, we issued warrants to purchase 20,000 shares of our
common stock at an exercise price of $.78125 per share, to Joy C.
Hartman, our President and CEO. The warrant terminates on November 7,
2001 and may be exercised at any time until such date.

Recent Financing

On May 22, 2001, we issued $1,200,000 principal amount of 8% convertible
debentures, due May 22, 2003, to three investors pursuant to a
Subscription Agreement dated May 22, 2001. Interest only payments are
due quarterly commencing September 30, 2001, and the principal is due in
one lump sum on May 22, 2003, or upon certain events of default. The
conversion price for the convertible debentures is the lesser of 85% of
the average of the three lowest closing prices for the common stock for
the 30 trading days prior to but not including May 22, 2001, or 85%
percent of the average of the three lowest closing prices for the common
stock for the 30 trading days prior to but not including the conversion
date. The maximum number of shares of common stock that any subscriber or
group of affiliated subscribers may own after conversion at any given
time is 4.99%. The number of shares of common stock issuable upon
conversion of the convertible debentures is 1,730,103, based on a
conversion price of $0.816 per share. We are required to register 200%
of this amount, for a total of 2,941,176 shares. The actual conversion
price will depend on the market price of our common stock prior to the
conversion. The following table illustrates the effect of a decline in
the market price of our common stock as it relates to the number of
shares we will be required to issue upon conversion:

Stock Shares
Price Issuable
-----------------------------
$.816 1,730,103
$.60 2,352,941
$.40 3,529,411
$.20 7,058,823
$.10 14,117,647

In addition to the convertible debentures, we also issued warrants to
purchase 872,727 shares of common stock. These warrants, which expire
May 22, 2006, have an exercise price of $1.4339 per share.

Transfer Agent

The Transfer Agent and Registrar for the common stock and the warrants
described above is Continental Stock Transfer & Trust Company.

- -34-

SELLING SHAREHOLDERS

The table below sets forth information concerning the resale of the
shares of common stock by the selling stockholders. We will not receive
any proceeds from the resale of the common stock by the selling
stockholders. We will receive proceeds from the exercise of the warrants.
Assuming all the shares registered below are sold by the selling
stockholders, none of the selling stockholders will continue to own any
shares of our common stock.

The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the
number of shares of common stock beneficially owned by each person, the
number of shares of common stock that may be sold in this offering and
the number of shares of common stock each person will own after the
offering, assuming they sell all of the shares offered.

Name Total Shares of Total Shares of Beneficial Percentage of Beneficial Percentage
Common Stock Percentage of Common Stock Ownership Common Stock Ownership of Common
Issuable Upon Common Stock, Included in Before Owned Before After the Stock
Conversion of Assuming Full Prospectus(1) the Offering(2) Offering Offering Owned After
Notes and/or Conversion (3) Offering(3)
Warrants
- -------------------------------------------------------------------------------------------------------------------------

Laurus
Master
Fund, Ltd.
(4)(5)(6) 1,952,763 9.96 3,178,253 927,406 4.99 -- --

The Keshet
Fund, L.P.
(4)(5)(7) 195,276 1.77 317,825 195,276 1.77 -- --

Keshet
L.P.
(4)(5)(7) 195,276 1.77 317,825 195,276 1.77 -- --

The number and percentage of shares beneficially owned is
determined in accordance with Rule 13d-3 of the Securities Exchange Act
of 1934, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rule, beneficial ownership
includes any shares as to which the selling stockholder has sole or
shared voting power or investment power and also any shares which the
selling stockholder has the right to acquire within 60 days. The actual
number of shares of common stock issuable upon the conversion of the
debentures and exercise of the debenture warrants is subject to
adjustment depending on, among other factors, the future market price of
the common stock, and could be materially less or more than the number
estimated in the table.

(1) Includes 200% of the shares issuable on conversion of the
convertible notes, based on the market price of our common stock on
May 23, 2001, as required by our agreement with the selling
shareholders. The number of shares of common stock issuable upon
conversion of the debentures is dependent in part upon the market
price of the common stock prior to a conversion, the actual number
of shares of common stock that will be issued in respect of such
conversions and, consequently, offered for sale under this
registration statement, cannot be determined at this time. As a
result of the contractual agreement not to exceed 4.99% beneficial
ownership, the selling shareholder does not believe it is a control
person as defined in the Securities Exchange Act of 1934 or is
required to file a Schedule 13D.

(2) Represents shares of common stock issuable upon conversion of
debentures of the selling shareholder at an assumed conversion
price of $0.81 per share and/or exercise of warrants of the selling
shareholder at a conversion price of $0.81 per share. However, the
selling shareholder has contractually agreed to restrict its
ability to convert its debentures or exercise its warrants and
receive shares of our common stock such that the number of shares
of common stock held by it and its affiliates after such conversion
or exercise exceed 4.99% of the then issued and outstanding shares
of common stock following such conversion or exercise. This
restriction may not be waived.

- -35-

(3) Assumes that all securities registered will be sold.

(4) The following chart discloses the principal(s) of each selling
securityholder and the person(s) with investment and dispositive
power:

Investment/dispositive
Securityholder Principal authority
- -------------------------------------------------------------------
Laurus Master Fund, Ltd. Eugene Grin Eugene Grin
& David Grin & David Grin

The Keshet Fund, L.P. Abraham Grin John Clark

Keshet L.P. Abraham Grin John Clark

(5) Laurus Master Fund, Ltd., Keshet Fund LP and Keshet LP are under
common control and all shares registered hereunder may be deemed to
be beneficially owned by such control person. All such selling
stockholders may be deemed to be a purchasing group for purposes of
Rule 13d, but are not required to file a Form 13d because of the
limitation of their beneficial ownership to 4.99%, as a group.

(6) Includes 727,273 shares issuable upon exercise of warrants
presently exercisable at a price of $1.4339 per share.

(7) Includes 72,727 shares issuable upon exercise of warrants presently
exercisable at a price of $1.4339 per share.

Plan of Distribution

The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading
facility on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. There is no assurance that
the selling stockholders will sell any or all of the common stock in this
offering. The selling stockholders may use any one or more of the
following methods when selling shares:

- Ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers.

- Block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction.

- An exchange distribution following the rules of the applicable exchange

- Privately negotiated transactions

- Short sales or sales of shares not previously owned by the seller

- A combination of any such methods of sale or any other lawful method
The selling stockholders may also engage in:
- Short selling against the box, which is making a short sale
when the seller already owns the shares.

- -36-

- Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by
the stockholder.

- Pledging shares to their brokers under the margin provisions
of customer agreements. If a selling stockholder defaults on
a margin loan, the broker may, from time to time, offer to
sell the pledged shares.

Broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from selling stockholders in amounts to be
negotiated. If any broker-dealer acts as agent for the purchaser of
shares, the broker-dealer may receive commission from the purchaser in
amounts to be negotiated. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.

The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be considered to be "underwriters"
within the meaning of the Securities Act for such sales. An underwriter
is a person who has purchased shares from an issuer with a view towards
distributing the shares to the public. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of
the shares purchased by them may be considered to be underwriting
commissions or discounts under the Securities Act.

Because the following selling shareholders are deemed
"underwriters" within the meaning of Section 2(11) of the Securities Act,
they will be subject to the prospectus delivery requirements:

Laurus Master Fund, Ltd.
The Keshet Fund, L.P.
Keshet L.P.

We are required to pay all fees and expenses incident to the
registration of the shares in this offering. However, we will not pay any
commissions or any other fees in connection with the resale of the common
stock in this offering. We have agreed to indemnify the selling
shareholders and their officers, directors, employees and agents, and
each person who controls any selling shareholder, in certain
circumstances against certain liabilities, including liabilities arising
under the Securities Act. Each selling shareholder has agreed to
indemnify us and our directors and officers in certain circumstances
against certain liabilities, including liabilities arising under the
Securities Act.

If the selling stockholder notifies us that they have a material
arrangement with a broker-dealer for the resale of the common stock, then
we would be required to amend the registration statement of which this
prospectus is a part, and file a prospectus supplement to describe the
agreements between the selling stockholder and the broker-dealer.

LEGAL MATTERS

Sichenzia, Ross, Friedman & Ference LLP, New York, New York, will pass
upon certain legal matters with respect to the shares of the common stock
offered hereby.

EXPERTS

Peter C. Cosmas, CPA's, independent auditors, have audited, as set forth
in their report thereon appearing elsewhere herein, our financial
statements as of December 31, 2000 and 1999, and for the years then
ended, that appear in this prospectus. The financial statements referred
to above are included in reliance upon the report by the auditors given
upon their authority as experts in accounting and auditing.

- -37-

HOW TO GET MORE INFORMATION

We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the shares to be sold in this
offering. This prospectus does not contain all the information contained
in the registration statement. For further information with respect to
our company and the shares to be sold in this offering, reference is made
to the registration statement and the exhibits and schedules filed with
the registration statement. We have described all material information
for each contract, agreement or other document filed with the
registration statement in this prospectus. However, statements contained
in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. As a result, you
should refer to the copy of the contract, agreement or other document
filed as an exhibit to the registration statement for a complete
description of the matter involved.

You may read and copy all or any portion of the registration statement
or any reports, statements or other information that we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our
SEC filings, including this registration statement, are also available to
you without charge from the SEC Web site, which is located at
http://www.sec.gov.

- -38-

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Accountants dated March 10, 2001 F-2

Consolidated Balance Sheets as of December 31, 2000
and 1999 F-3

Consolidated Statements of Operations, two years
ended December 31, 2000 F-4

Consolidated Statements of Cash Flows, two years
ended December 31, 2000 F-5

Consolidated Statements of Changes in Shareholders'
Equity, two years ended December 31, 2000 F-6

Notes to Consolidated Financial Statements F-7 - F-13

Consolidated Balance Sheets as of March 31, 2001 F-14
unaudited) and December 31, 2000 (audited)

Consolidated Statements of Operations for F-15
three months ended March 31, 2001 (unaudited)
and three months ended March 31, 2000 (unaudited)

Consolidated Statements of Cash Flows for F-16
three months ended March 31, 2001 (unaudited)
and three months ended March 31, 2000 (unaudited)

Notes to Consolidated Financial Statements F-17

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Science Dynamics Corporation

We have audited the accompanying consolidated balance sheets of Science
Dynamics Corporation and subsidiary as of December 31, 2000 and 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 2000 and 1999. 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 consolidated financial statements referred to above
present fairly, in all material resects, the consolidated financial position
of Science Dynamics Corporation and Subsidiary as of December 31, 2000 and
1999 and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.

Peter C. Cosmas Co., CPAs

/s/Peter C. Cosmas Co., CPA's
- -----------------------------

370 Lexington Avenue
Suite 1205
New York, NY 10017

March 10, 2001

- -F2-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999

ASSETS
December 31,
2000 1999
---- ----

Current assets:
Cash and cash equivalents $1,351,641 $ 674,793
Accounts receivable - trade 102,194 157,040
Accounts receivable - other 51,401 63,677
Inventories 87,623 361,039
Other current assets 84,566 50,185
---------- ---------
Total current assets 1,677,425 1,306,734
---------- ---------

Property and equipment, net 1,005,364 260,543
Deferred income taxes - 308,000
Intangible Assets, net of accumulated
amortization of $1,200,000 in 2000 and
$900,000 in 1999. 300,000 600,000
Other assets 25,363 133,776
---------- ---------
Total assets $3,008,152 $2,609,053
========== =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligation $ 57,598 $ -
Accounts payable 358,820 215,409
Accrued expenses 118,059 424,677
---------- ---------
Total current liabilities 534,477 640,086
---------- ---------

Non current portion of capital lease obligation 128,413 -
---------- ---------
Total liabilities 662,890 640,086

Commitments

Shareholders' equity -
Common stock - .01 par value,
45,000,000 shares authorized,
17,783,700 and 17,286,278 issued
17,657,901 and 17,160,478 outstanding
in 2000 and 1999 respectively. 177,837 172,862
Additional paid-in capital 14,266,787 12,556,205
(Deficit) (11,701,529) (10,362,267)
---------- ---------
2,743,095 2,366,800
Common stock held in treasury,
at cost (397,833) (397,833)
---------- ---------
Total shareholders' equity 2,345,262 1,968,967
---------- ---------
Total liabilities and shareholders'
Equity $3,008,152 $2,609,053
========== =========

The accompanying notes are an integral part of these consolidated financial statements.

- -F3-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

2000 1999
---- ----

NET SALES $5,269,377 $2,347,984

Operating costs and expenses:

Cost of sales 1,891,484 1,330,886
Research and development 1,141,656 1,331,521
Selling, general
and administrative 3,605,768 1,728,244
---------- ----------

6,638,908 4,390,651
---------- ----------

Operating Loss (1,369,531) (2,042,667)

Other income (expenses):
Interest income 40,647
Interest expense (10,378) (12,219)
---------- ----------

Net Loss $(1,339,262) $(2,054,886)
========== ==========

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

The accompanying notes are an integral part of these consolidated financial statements.
- -F4-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,2000 AND 1999

2000 1999
---- ----

Cash flows from operating activities:
Net Loss $(1,339,262) $(2,054,886)
----------- -----------

Adjustments to reconcile net loss to
net cash used for
operating activities:
Depreciation 159,859 94,101
Amortization of capitalized software - 138,996
Amortization of Intangible assets 300,000 300,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 54,846 109,363
Other receivable 12,276 596,223
Inventories 273,416 117,455
Other current assets (34,381) (3,919)
Other assets 108,413 7,642
Decrease in:
Accounts Payable and
accrued expenses (163,207) (179,900)
----------- -----------

Total adjustments 711,222 1,179,961
----------- -----------

Net cash used for
operating activities (628,040) (874,925)
----------- -----------

Cash flows from investing activities:

Purchase of property and equipment - net (704,246) (123,555)
----------- -----------

Net cash used in investing activities (704,246) (123,555)
----------- -----------

Cash flows from financing activities:
Increase (decrease) in:
Payment on loan payable - (100,000)
Payment on capitalized lease (14,423) -
Proceeds from sale of income tax NOL 308,000 -
Issuance of common stock and warrants 1,715,557 1,741,024
----------- -----------

Net cash provided
by financing activities 2,009,134 1,641,024
----------- -----------

Net increase in
cash and cash equivalents 676,848 642,544

Cash and cash equivalents -
beginning of period 674,793 32,249
----------- -----------

Cash and cash equivalents -
end of period 1,351,641 674,793
=========== ===========

Noncash transactions:
Increase in Capital Lease Obligations $ 200,434 $ -
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.

- -F5-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE TWO YEARS ENDED DECEMBER 31, 2000 AND 1999

Common Stock Additional Treasury
------------ Paid-In --------
Shares Amount Capital (Deficit) Shares Amount
------ ------ ------- --------- ------ ------

Balance
December 31, 1998 15,861,449 $158,614 $ 10,729,429 $ (8,307,381) 125,800 $397,833
---------- -------- ------------ ------------- ------- -------

Exercise of Stock Options 34,800 348 26,984 - - -
Issuance of common stock
net of related expenses 1,218,000 12,180 1,701,512 - - -
Common Stock issued
for patent 172,029 1,720 98,280

Net loss - - - (2,054,886) - -

Balance
December 31, 1999 17,286,278 $172,862 $ 12,556,205 $(10,362,267) 125,800 $397,833
---------- -------- ------------ ------------- ------- -------

Exercise of Stock Options 283,673 2,838 151,069 - - -
Issuance of common stock
net of related expenses 213,749 2,137 1,559,513 - - -

Net loss - - - (1,339,262) - -
---------- -------- ------------ ------------- ------- -------

Balance
December 31, 2000 17,783,700 $177,837 $14,266,787 (11,701,529) 125,800 $397,833
========== ======== ============ ============= ======= =======

The accompanying notes are an integral part of these consolidated financial statements.

- -F6-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 Summary of Significant Accounting Policies:

a. Principles of Consolidation:

The consolidated financial statements include the Company's
wholly owned subsidiary. All intercompany transactions have
been eliminated in consolidation.

b. Organization and Description of Business:

The Company, which was incorporated in May 1973 and
commenced operations in July 1977, is engaged in the
design, development, integration and marketing of advanced
telecommunications products and applications. All the
Company's operations are considered to be in one industry.

c. Use of Estimates:

The preparation of financial statements in conformity with
generally accepted accounting principles require 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 periods. Actual results
could differ from those estimated.

d. Inventories:

Inventories are stated at the lower of cost or market, with
cost determined on a first-in, first-out basis.

e. Property and Equipment:

Property and equipment are stated at cost, depreciation of
property and equipment is computed generally using the
straight-line method based on estimated useful lives of
five years for machinery and equipment and seven years for
furniture and fixtures. Leasehold improvements are
amortized over the life of the related lease or their
estimated useful lives, whichever is shorter, using the
straight-line method. Costs of major additions and
betterment's are capitalized; maintenance and repairs which
do not improve or extend the life of respective assets are
charged to expenses as incurred. When an asset is sold or
otherwise disposed of, the cost of the property and the
related accumulated depreciation is removed from the
respective accounts and any resulting gains or losses are
reflected in income.

f. Cash and Cash Equivalents:

The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents.

- -F7-

g. Income Taxes:

The Company elected to adopt the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting
for Income Taxes", (SFAS No. 109) in 1992. Under SFAS No.
109, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax
basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax
laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable
income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized. Income tax expenses (credit) is the tax payable
(receivable) for the period and the change during the
period in deferred tax assets and liabilities.

h. Revenue Recognition:

Revenue is generally recognized when all significant
contractual obligations have been satisfied and collection
of the resulting receivable is reasonably assured. Revenue
from product sales is recognized at time of delivery and
acceptance and after consideration of all the terms and
conditions of the customers contract. Sales of services
are recognized at time of performance. The Company follows
SOP 97-2, "Software Revenue Recognition," as such the
Company recognizes product revenue upon shipment if a
signed contract exists, the fee is fixed or determinable,
collection of resulting receivables is probable and product
returns are reasonable estimable.

i. Impairment of Long-Lived Assets:

Effective January 1, 1996, the Company adopted SFAS No.
121, "Accounting for the Impairment of long-lived Assets
and for long-lived Assets to be Disposed of." SFAS No. 121
requires the Company to review the recoverability of the
carrying amounts of its long-lived assets whenever events
or changes in circumstances indicate that the carrying
amount of the asset might not be recoverable.

In the event that facts and circumstances indicate that the
carrying amount of long-lived assets may be impaired, an
evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted
cash flows associated with the asset would be compared to
the assets' carrying amount to determine if a write-down to
fair value is required. Fair value may be determined by
reference to discounted future cash flows over the
remaining useful life of the related asset. In 2000, the
Company wrote off the carrying value of one of its patents
in the amount of $89,706.

j. Fair Value Disclosures:
k. Stock Options:

The Company accounts for its stock options in accordance
with the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations. As such, compensation expense
would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise
price. On January 1, 1996, the Company adopted the
disclosure requirements of SFAS No. 123, Accounting for
Stock Based Compensation. Had the company determined
compensation cost based on fair value at the grant date for
stock options under SFAS No. 123 the effect would have been
immaterial.

- -F8-

l) New Accounting Pronouncements:

In June 1998, the Financial Accounting Standards Board
("FASB"), issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and in June 2000 issued
SFAS No. 138, accounting for certain Derivative Instruments
and Certain Hedging Activities, an amendment of SFAS No. 133.
These new standards require companies to record derivative
financial instruments on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses
resulting from changes in the fair value of those derivatives
would be accounted for based on the use of the derivative and
whether the instrument qualified for hedge accounting, as
defined in SFAS 133 and 138. The Company is required to
implement these statements in the first quarter of fiscal
2001. The company has not used derivative instruments and
believes the impact of adoption of this statement will not
have a significant effect on the financial statements.

In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB No. 101"), which
provided guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101
did not impact the Company's revenue recognition policies.

In March 2000, the Financial Accounting Standards Board,
released FASB Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation, an interpretation
of APB Opinion No. 25," which provides clarification of
Opinion No. 25 for certain issues, such as the determination
of who is an employee, the criteria for determining whether a
plan qualifies as a non-compensatory plan, the accounting
consequence of various modifications to the terms of a
previously fixed stock option or award, and the accounting
for an exchange of stock compensation awards in a business
combination. The Company believes that its practices are in
conformity with this guidance, and therefore Interpretation
No. 44 will have no impact on its financial statements.

2 Accounts Receivable:
3 Property and Equipment:

A summary of the major components of property and equipment is as
follows:

2000 1999
---- ----

Computer and software $ 889,923 $189,394
Leasehold improvements 204,150 -
Machinery and equipment 310,146 310,146
Furniture 48,235 48,235

Less accumulated
depreciation (447,090) (287,232)

Totals $1,005,364 $260,543

- -F9-

4 Income Taxes:

In 1992, the Company adopted SFAS No. 109, Accounting for Income taxes.
Under the provision of SFAS No. 109, the Company elected not to restate
prior years due to immateriality. Inc. 1992, the effect of the change
was to decrease the net loss by $308,000 (.10 per share). The deferred
tax asset recognized in the accompanying balance sheet December 31,
1999 was recovered through the sale of New Jersey State net-operating
loss carryovers as permitted by the State in the amount of $308,000.

At this time, the Company does not believe it can reliably predict
profitability for the long-term. Accordingly, the deferred tax asset
applicable to 2000 and 1999 operations has been reduced in its
entirety by the valuation allowance.

As a result of the operating losses for the years ended December 31,
1990 and 1992-2000 the Company has available to offset future taxable
income a net operating loss of $12,722,364 expiring 2005-2020. In
addition, research credits expiring 2005-2014 are available to offset
future taxes.

The components of the provision (credit) for income taxes from
continuing operations is as follows:

2000 1999
---- ----

Deferred
Federal $ - $ -

Current
Federal - -
State - -
----------- ----------
$ - $ -
=========== ==========

Differences between the tax provision computed using the statutory
federal income tax rate and the effective income tax rate on operations
is as follows:

2000 1999
---- ----
Federal
Statutory rate $(455,349) $(698,661)

Research tax
Credits - -

Tax benefit not
Provided due
To valuation
Allowance 455,349 698,661
-------- --------
- -
======== ========

Components of the Company's deferred tax assets and liabilities are as
follows:

December 31,
2000 1999
---- ----
Deferred tax assets:
Tax benefits related
To net operating
Loss carry forwards
And research tax Credits $4,298,635 $3,843,286
---------- ----------

Total deferred tax Asset 4,298,635 3,843,286

Valuation
Allowance for
Deferred tax
Assets 4,298,635 3,843,286
---------- ----------

Net deferred tax Assets $ -0- $ -0-
---------- ----------

- -F10-

5 Commitments:

a Leases

The Company leases their office, sales and manufacturing
facilities and certain vehicles under non-cancelable operating
leases with varying terms. The leases generally provide that the
Company pay the taxes, maintenance and insurance expenses related
to the leased assets. Future minimum lease payments required
under operating leases that have initial or remaining non-
cancelable lease terms in excess of one year, as of December 31,
2000 are as follows:

2001 $193,622
2002 185,483
2003 185,483
2004 183,052
2005 181,836
After 2005 60,612
-------

Total minimum lease payments $990,088
--------

b Employment Agreement:

The Company has an employment agreement with one officer, who is
also a director of the company. The employment agreement contains
change in control provisions that would entitle the officer to
receive up to 2.99 times the annual salary if there is a change in
control in the Company (as defined) and a termination of
employment. The maximum contingent liability under this agreement
in such event is approximately $523,250.

6 Intangible Assets:

On November 7, 1996, the Company acquired "Intellectual Property",
issuing 1,500,000 shares of its common stock. Based on technical
reviews of the property and the business potential of the
technology, the Company valued the "Intellectual Property" at
$1,500,000. The Company began amortizing the property on January
1, 1997 over a period of five years. The amortization for 2000
and 1999 was $300,000 for each year.

7 Stock Options and Warrants:

On November 17, 1999 the Company amended the Incentive Stock
Option Plan, authorizing an additional share increase of 1,088,000
shares.

283,673 shares were exercised in 2000 at a weighted average price
of $.54 and 34,800 shares were exercised in 1999 at a weighted
average price of $.79. The total amount of shares granted and not
exercised at December 31, 2000 amount to 505,700 at exercise
prices ranging from 0.50 to 10.75 per share.

As allowed by FASB No. 123, The Company has elected to continue to
follow Accounting Principles Board (APB) Opinion No. 23,
"Accounting for Stock Issued to Employees" (APB No. 25) in
accounting for its stock option plans. Under APB No. 25, the
Company does not recognize compensation expense on the issuance of
its stock options because the options terms are fixed and the
exercise price equals the market price of the underlying stock on
the grant date.

- -F11-

As required by FASB No. 123, the Company has determined the pro-
forma information as if the Company had accounted for stock
options granted since January 1, 1996, under the fair value method
of FASB No. 123. An option pricing model similar to the Black-
Sholes was used with the following weighted average assumptions
used for grants in the year 2000 and 1999, respectively: expected
volatility of 80 percent; risk free interest rate of 7% and 6%
respectively and expected lives of 5 years. The pro-forma effect
of these options on net earnings was not material. These pro-
forma calculations only include the effect of 1999 and 2000
grants. As such, the impacts are not necessarily indicative of
the effects on reported net income of future years.

8 Major Customers:

During 2000 two customers accounted for 83% and 15% of total
sales. During 1999 three customers and their operating
subsidiaries accounted for 64.63%, 10.31% and 9.71% of total
sales.

9 Earnings (Loss) Per Share:

In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128. "Earnings Per Share" applicable for financial
statements issued for periods ending after December 15, 1997. As
required the Company adopted SFAS No. 128 for the year ended
December 31, 1997 and restated all prior period earnings per share
figures. The Company has presented basic earnings per share.
Basic earnings per share excludes potential dilution and is
calculated by dividing income available to common stockholders by
the weighted average number of outstanding common shares. Diluted
earnings per share incorporates the potential dilutions from all
potentially dilutive securities that would have reduced earnings
per share. Since the potential issuance of additional shares
would reduce loss per share they are considered anti-dilutive and
are excluded from the calculation.

The weighted average number of shares used to compute basic loss
per share was 17,549,993 in 2000 and 16,777,070 in 1999.

10 Related Party Transactions

During 2000, Scidyn began the deployment of the Cascadent Supply
Agreement, this Agreement provided $4,370,520 in revenue for the
year. The Agreement was terminated on January 4, 2001, upon
receiving official word that Cascadent was placed into
receivership. Alan Bashforth, one of Cascadent's principals,
is a member of the Company's Board of Directors.

11 Subsequent Events

In March 2001 the Company entered into a $40,000,000 Equity line
of Credit arrangement with the Alpha Group. Under the terms of
the equity line agreement, the Company will have the right to
sell up to $40 million of its common stock. The Company has sole
discretion, subject to certain volume limitations and conditions,
to draw down upon such funds as its capital needs dictate. The
sale price of the common stock will not exceed ten percent of an
average closing bid price to be calculated at the time of each
sale. In connection with such financing Alpha has been issued
warrants to purchase up to 500,000 shares of the Company's common
stock at exercise prices of $5.00 per share. Additional warrants
to purchase up to 500,000 shares of the Company's common stock at
an exercise price equal to the current bid price will be issued
on a pro rata basis at the time of each sale. The term of the
equity line is for eight months with an automatic one-year
extension if at least ten percent or $4 million is drawn down
during the initial eight-month period.

- -F12-

The equity financing draw downs are subject to a limit of 300
percent of the "Average Daily Trading Volume", defined as the
dollar amount of the average daily trading volume of shares of
the Company's common stock, calculated based upon the average bid
price and average daily trading volume traded over the twenty
trading days preceding multiple put dates. As such, SciDyn's
ability to access these funds in sufficient amounts will be
directly related to the average daily trading volume as defined.
The agreement contains other provisions, which may have the
potential to limit SciDyn's ability to draw down funds. The
agreement can be accessed in its entirety as an exhibit to an 8-K
filing made with the Securities and Exchange Commission.

Funding under the agreement is also subject to completion of
certain terms and conditions, including the filing of a
registration statement with the Securities and Exchange
Commission. No public offering of the Company's common stock
will be made except by means of a prospectus under an effective
registration statement.

- -F13-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

ASSETS

March 31, December 31,
2001 2000
Unaudited Audited
--------- -------
Current assets:
Cash and cash equivalents $ 208,126 $ 1,351,641
Accounts receivable - trade 92,283 102,194
Accounts receivable - other 64,461 51,401
Inventories 83,467 87,623
Other current assets 103,453 84,566
--------- ----------
Total current assets 551,790 1,677,425
--------- ----------

Property and equipment, net 1,012,248 1,005,364
Intangible Assets, net of accumulated
amortization of $1,275,000 in 2001 and
$1,200,000 in 2000. 225,000 300,000
Other assets 25,363 25,363
--------- ----------
Total assets $1,814,401 $ 3,008,152
========= ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of capital lease obligation $ 61,353 $ 57,598
Accounts payable 354,568 358,820
Accrued expenses 206,396 118,059
--------- ----------
Total current liabilities 622,317 534,477
--------- ----------

Long-term portion of capital lease obligation 106,657 128,413
--------- ----------

Commitments

Shareholders' equity -
Common stock - .01 par value,
45,000,000 shares authorized,
17,783,701 issued and 17,657,901 outstanding
in 2001 and 2000 respectively. 177,837 177,837
Additional paid-in capital 14,266,787 14,266,787
(Deficit) (12,961,364) (11,701,529)
---------- ----------
1,483,260 2,743,095

Common stock held in treasury, at cost (397,833) (397,833)
---------- ----------

Total shareholders' equity 1,085,427 2,345,262
---------- ----------

Total liabilities and shareholders' equity $ 1,814,401 $ 3,008,152
========== ==========

- -F14-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
---------

Three Months Ended March 31,

2001 2000
---- ----

NET SALES $ 194,113 $ 1,443,482
--------- ---------

Operating costs and expenses:

Cost of sales 136,847 572,042

Research and development 420,522 255,707

Selling, general and administrative 901,217 605,266
--------- ---------

1,458,586 1,433,015
--------- ---------

Operating (Loss) / Income (1,264,473) 10,467

Other income/expenses:
Interest income 4,638 2,898
--------- ---------

Net (Loss) / Income (1,259,835) 13,365
========= =========

Net (Loss) / Income per common share
basic and diluted $ (0.07) $ 0.00
========= =========

- -F15-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
---------

Three Months Ended March 31,
2001 2000
---- ----

Cash flows from operating activities:
Net (Loss)/Income $(1,259,835) $ 13,365
----------- ----------

Adjustments to reconcile net (loss)/ income to
net cash used for
operating activities:
Depreciation 62,363 24,509
Amortization of capitalized software 75,000 76,910
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 9,911 (497,164)
Other receivable (13,060) 12,689
Inventories 4,156 134,373
Other current assets (18,887) (25,890)
Increase (decrease) in:
Accounts Payable and
accrued expenses 84,085 (272,368)
----------- ----------

Total adjustments 203,568 (546,940)
----------- ----------
Net cash used for operating activities (1,056,267) (533,576)
----------- ----------

Cash flows from investing activities:

Purchase of property and equipment (69,247) (158,256)
----------- ----------
Net cash used in investing activities (69,247) (158,256)
----------- ----------

Cash flows from financing activities:
Increase (decrease) in
Payment on capitalized leases (18,001) -
Issuance of common stock - 153,907
----------- ----------

Net cash (used in) provided
by financing activities (18,001) 153,907
----------- ----------

Net decrease in
cash and cash equivalents (1,143,515) (537,925)

Cash and cash equivalents -
beginning of period 1,351,641 674,793
----------- ----------

Cash and cash equivalents -
end of period $ 208,126 $ 136,868
=========== ==========

- -F16-

SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
PART I
Item 1. (continued)

Basis of Presentation
---------------------
The unaudited financial statements included in the Form 10-QSB have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation SB. The
financial information furnished herein reflects all adjustments,
which in the opinion of management are necessary for a fair
presentation of the Company's financial position, the results of
operations and the cash flows for the periods presented.

Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed, or omitted, pursuant to
such rules and regulations.

These interim statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000. The Company presumes that users of the interim
financial information herein have read or have access to the audited
financial statements for the preceding fiscal year and that the
adequacy of additional disclosure needed for a fair presentation may
be determined in that context. The results of operations for any
interim period are not necessarily indicative of the results for the
full year.

Income per share
----------------

Per-share data has been computed on the basis of the weighted
average number of shares of common stock outstanding during the
periods.

- -F17-

We have not authorized any dealer, salesperson or
other person to give any information or represent
anything not contained in this prospectus. You must
not rely on any unauthorized information or
representations. This prospectus is an offer to
sell only the shares offered hereby, but only
under circumstances and in jurisdictions where it is
lawful to do so. The information contained in
this prospectus is current only as of its date.
______________

TABLE OF CONTENTS
Page

Prospectus Summary 4
Risk Factors 7
Use of Proceeds 12
Dividend Policy 13
Capitalization 14
Dilution 15
Selected Financial
Information 16
Management's Discussion
and Analysis of
Financial Condition and
Results of Operations 17
Business 21
Management 29
Certain Transactions 36
Principal Security
Holders 37
Description of
Securities 39
Selling Shareholder 40
Plan of Distribution 41
Legal Matters 42
Experts 42
How to Get More
Information 42
Financial Statements 43

______________

Until , 2001, 25 days after the date of this
prospectus, all dealers that buy, sell or trade
these securities, whether or not participating in
this offering, may be required to deliver a
prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.

______________

3,813,903 Shares

Common Stock
______________

______________

Prospectus
______________

Science Dynamics Corporation

, 2001

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION AND LIMITATION OF LIABILITY OF MANAGEMENT

As permitted by the Delaware General Corporation Law,
we have included in our Certificate of Incorporation a
provision to eliminate the personal liability of it's
directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain
exceptions. In addition, our Bylaws require us to (i)
indemnify the officers and directors under certain
circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and (ii)
advance expenses to the officers and directors as incurred in
connection with proceedings against them for which they may be
indemnified. We have entered into indemnification agreements
with the officers and directors containing provisions that
are in some respects broader than the specific
indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the
companies, among other things, to indemnify such officers and
directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable
nature), to advance expenses incurred as a result of any
proceeding against them as to which they may be indemnified,
and to obtain directors' and officers' insurance if
available on reasonable terms. We believe that these charter
provisions and indemnification agreements are necessary to
attract and retain qualified persons as directors and officers.

We understand that the staff of the Securities and
Exchange Commission is of the opinion that statutory, charter
and contractual provisions as are described above have no
effect on claims arising under the federal securities laws.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection
with the sale and distribution of the securities being
registered. All of the amounts shown are estimates except the
Securities and Exchange Commission registration fee.

- ------------------------------------------------------------------
SEC Registration Fee $773
Accounting Fees and Expenses $2,500
Printing and Engraving $2,000
Legal Fees and Expenses $35,000
Blue Sky Fees and Expenses $2,500
Miscellaneous Expenses $2,227
Total $45,000

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following information sets forth certain
information for all securities of the Science Dynamics
Corporation, sold during the past three years without
registration under the Securities Act of 1933 (the "Securities
Act"). The following pertains to each of the transactions:

- There were no underwriters involved in any of the
transactions.

- All of the securities issued were restricted common
stock, and each of the certificates issued was stamped with the
following restrictive legend:
II-1

"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares have
been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement
for these shares under the Securities Act of 1933 or an opinion
of the Company's counsel that registration is not required under
such Act."

- No form of advertising or general solicitation was
utilized in connection with any of the offers or sales of such
securities.

- Redistribution of the common stock was subject to the
provisions of Rule 144 of the Securities Act.

- Each of the offerees either had access to the information
or were furnished with the Registrant's latest Form
10-KSB, Form 10-QSB's for the fiscal periods subsequent to the
end of the fiscal period, and all forms 8-K filed by the
Registrant since the end of the fiscal period.

- Each of the purchasers represented that the purchaser
was acquiring the securities for the purchaser's own account,
for investment only, and not with a view toward the resale,
fractionalization, division or distribution thereof, and further,
the investors each represented that they had no present plans to
enter into any contract, undertaking, agreement, or arrangement
for any such resale, distribution, division or fractionalization
thereof.

In December 1998, we sold 1,200,000 shares of our common stock
for an aggregate consideration of $600,000 to three accredited
investors pursuant to an offering in reliance upon the exemption
provided by Rule 506 of Regulation D of the Securities Act.

In March 1999, we acquired a patent for the "Error Detection
and Correction System for Use with Address Translation Memory
Controller" in exchange for an aggregate of 172,029 shares of
common stock valued at $100,000 issued to three shareholders of
Gorca Memory Systems, Inc. Such shares were issued in reliance
upon Section 4(2) of the Securities Act.

During the period from May 20, 1999 through Dec. 21st 1999
we sold 1,178,000 shares of our common stock for an aggregate
consideration of $1,843,000 to six accredited investors pursuant
to an offering in reliance upon the exemption provided by Rule
506 of Regulation D of the Securities Act.

During the period from May 12, 2000 through July 17, 2000, we
sold 200,650 shares of our common stock for an aggregate
consideration of $1,705,525 to eight accredited investors
pursuant to an offering in reliance upon the exemption provided
by Rule 506 of Regulation D of the Securities Act.

On May 22, 2001, we issued an aggregate of $1,200,000 of
convertible notes and warrants to purchase 872,727 shares of
common stock to three investors. The offering of such securities
was made to accredited investors in reliance upon the exemption
provided by Rule 506 of Regulation D of the Securities Act of
1933.

II-2

ITEM 27. EXHIBITS

3.1(1) The Articles of Incorporation dated 5/23/73, and
amendments dated 10/31/80 and 11/25/80
3.1.1(6) Amendment to Articles of Incorporation dated 5/23/84
3.1.2(6) Amendment to Articles of Incorporation dated 7/13/87
3.1.3(6) Amendment to Articles of Incorporation dated 11/8/96
3.1.4(6) Amendment to Articles of Incorporation dated 12/15/98
3.2(1) By-Laws
5.1(5) Opinion of Sichenzia, Ross, Friedman & Ference LLP
10.01(3) 1992 Incentive Stock Option Plan of the Registrant
10.02(4) Note - Laurus Master Fund, Ltd.
10.03(4) Note - The Keshet Fund, L.P.
10.04(4) Note - Keshet L.P.
10.05(4) Warrant - Laurus Master Fund, Ltd.
10.06(4) Warrant - The Keshet Fund, L.P.
10.07(4) Warrant - Keshet, L.P.
10.08(4) Subscription Agreement re Laurus Funding
10.09(4) Security Agreement re Laurus Funding
10.10(6) Employment Agreement between Registrant and Joy C.
Hartman, President & CEO
10.11(6) Lease Agreement between Registrant and Cherry Hill
Industrial Sites, Inc. dated August 8, 1990
10.12(6) Lease Modification and Extension Agreement between
Registrant and Cherry Hill Industrial Sites, Inc.
dated March 28, 1995
10.13(6) Sublease between Registrant and Pro Circuits, Inc. dated
June 4, 1998
23.1(2) Consent of Peter C. Cosmas, CPA's
23.2(2) Consent of Sichenzia, Ross, Friedman & Ference LLP
(included in Exhibit 5.1)
23.3(2) Consent of Synergy Research Group Inc.
24.1(2) Power of Attorney (see page II-5)

(1) Filed as like-numbered exhibits to Registration Statement,
Form S-18, File Number 33-20687, effective April 21, 1981,
incorporated by reference.
(2) Filed herewith
(3) Incorporated by reference from the Registrant's Quarterly
Report on Form 10-QSB for the three months ended March 31,
1996.
(4) Incorporated by reference from the Registrant's Form 8-K
filed March 15, 2001.
(5) To be filed by amendment
(6) Previously filed herewith.

ITEM 28. UNDERTAKING

A. Undertaking Pursuant to Rule 415

The undersigned Registrant hereby undertakes: (1) To file,
during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i)
to include any prospectus required by Section 10(a)(3)
Securities Act of 1933 (the "Securities Act"); (ii) to reflect
in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was

II-3

registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement; (iii) to include any
material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or
any material change to such information in the
Registration Statement; (2) That, for the purpose of
determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; (3)
To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of this offering.

B. Undertaking In Respect of Indemnification

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities 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 whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.

C. Undertaking Pursuant to Rule 430A

The undersigned Registrant hereby undertakes that: (1) For
purposes of determining any liability under the Securities Act,
the information omitted from the form of the prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Registrant pursuant to 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 it was declared effective. (2) For the
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 relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-4

SIGNATURES

In accordance with the requirements of the Securities
Act of 1933, the registrant certifies that it has reasonable
grounds to believe that it meets all the requirements of filing
on Form SB-2 and authorized this registration statement to be
signed on its behalf by the undersigned, in the City of Cherry
Hill, State of New Jersey, on July 23, 2001.

SCIENCE DYNAMICS CORPORATION

/s/ JOY C. HARTMAN
Joy C. Hartman
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby
constitute and appoint Joy C. Hartman and Robert O'Connor, and
each of them, his true and lawful attorney-in-fact and agent,
each with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments)
to this Registration Statement, or any related registration
statement filed pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary to be
done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or
his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

II-5

In accordance with the requirements of the Securities
Act of 1933, this registration statement was signed by the
following persons in the capacities and on the dates stated.

Signature Title Date
--------- ----- ----

BY: /s/ Sheldon C. Hofferman Chairman of the Board July 23, 2001
------------------------
Sheldon C. Hofferman

BY: /s/ Joy C. Hartman President, CEO July 23, 2001
------------------------
Joy C. Hartman

BY: /s/ Alan C. Bashforth Director July 23, 2001
------------------------
Alan C. Bashforth

BY: /s/Kenneth P. Ray Director July 23, 2001
------------------------
Kenneth P. Ray

BY: /s/ L. Michael Hone Director July 23, 2001
------------------------
L. Michael Hone

BY: /s/ John Innes Director July 23, 2001
------------------------
John Innes

BY: /s/ Louis Padulo Director July 23, 2001
------------------------
Louis Padulo

BY: /s/ Robert O'Connor Vice President of July 23, 2001
------------------------ Finance and
Robert O'Connor Administration and Chief
Financial Officer
(Principal Accounting
Officer)

II-6

INDEX TO EXHIBITS

II-7