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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                  FORM 10-KSB
 
(MARK ONE)
 
  /X/    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
                    FOR THE FISCAL YEAR ENDED MARCH 31, 1998
 
  / /    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
      FOR THE TRANSITION PERIOD FROM ________________ TO ________________.
 
                        COMMISSION FILE NUMBER 000-21141
                           --------------------------
 
                                PHARMAPRINT INC.
 
          (Name of small business issuer as specified in its charter)
 
<TABLE>
<S>                                       <C>
               DELAWARE                                 33-0640125
   (State or other jurisdiction of         (I.R.S. employer identification no.)
    incorporation or organization)
 
  4 PARK PLAZA, SUITE 1900, IRVINE,                       92614
              CALIFORNIA
   (Address of principal executive                      (Zip code)
               offices)
</TABLE>
 
         ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 794-7778
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.001
                              PAR VALUE PER SHARE
                           --------------------------
 
    Indicate by check mark whether the Issuer: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/  No / /
 
    Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of the Issuer's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. / /
 
    Issuer's revenues for its most recent fiscal year were $0.
 
    Based upon the closing price of $11.25 per share of Common Stock as reported
on the NASDAQ Stock Market on June 12, 1998, the aggregate market value of the
Issuer's voting stock held by non-affiliates was $80,891,000. Solely for
purposes of this computation, the Issuer's directors and executive officers have
been deemed to be affiliates. Such treatment is not intended to be, and should
not construed to be, an admission of the Issuer or such directors and executive
officers that any of such persons are "affiliates", as that term is defined
under the Securities Act of 1934, as amended.
 
    There were 13,651,589 issued and outstanding shares of the Issuer's Common
Stock, $.001 par value par share at June 12, 1998.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
    Portions of the Issuer's Proxy Statement relating to its Annual Meeting of
Stockholders to be held September 8, 1998, are incorporated by reference in Part
III of this Report on Form 10-KSB.
 
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<PAGE>
                                PHARMAPRINT INC.
                               TABLE OF CONTENTS
 
<TABLE>
<S>         <C>                                                                           <C>
COVER PAGE..............................................................................          i
TABLE OF CONTENTS.......................................................................         ii
PART I
  Item 1.   Description of Business.....................................................          1
  Item 2.   Properties..................................................................         15
  Item 3.   Legal Proceedings...........................................................         15
  Item 4.   Submission of Matters to a Vote of Security Holders.........................         15
            Executive Officers of PharmaPrint Inc.......................................         15
PART II
  Item 5.   Market for PharmaPrint Inc. Common Stock and Related Stockholder Matters....         17
  Item 6.   Management's Plan of Operation..............................................         17
  Item 7.   Financial Statements........................................................         20
  Item 8.   Change In and Disagreements With Accountants on Accounting and Financial
              Disclosure................................................................         36
PART III
  Item 9.   Directors, Executive Officers, Promoters and Control Persons of PharmaPrint
              Inc.; Compliance with Section 16(a) of the Exchange Act...................         36
  Item 10.  Executive Compensation......................................................         36
  Item 11.  Security Ownership of Certain Beneficial Owners and Management..............         36
  Item 12.  Certain Relationships and Related Transactions..............................         36
  Item 13.  Exhibits and Reports on Form 8-K............................................         37
  SIGNATURES............................................................................         39
</TABLE>
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
    This report contains "forward-looking" statements. The Company is including
this statement for the express purpose of availing itself of protections of the
safe harbor provided by the Private Securities Litigation Reform Act of 1995
with respect to all such forward-looking statements. Examples of forward-looking
statements include, but are not limited to: (a) projections of revenues, capital
expenditures, growth, prospects, dividends, capital structure and other
financial matters; (b) statements of plans and objectives of the Company or its
management or Board of Directors; (c) statements of future economic performance;
(d) statements of assumptions underlying other statements and statements about
the Company and its business relating to the future; and (e) any statements
using the words "anticipate," "expect," "may," "project," "intend" or similar
expressions.
 
    The Company's ability to predict projected results or the effect of certain
events on the Company's operating results is inherently uncertain. Therefore,
the Company wishes to caution each reader of this report to carefully consider
the following factors and certain other factors discussed herein and in the
Company's Registration Statement on Form SB-2 (Registration No. 333-41129), any
or all of which have in the past and could in the future affect the ability of
the Company to achieve its anticipated results and could cause actual results to
differ materially than those discussed herein: ability to obtain and enforce
patents, dependence on third parties, uncertainties related to the
PharmaPrint-TM- Process, government regulation and uncertainty of product
approvals, ability to commercialize and market products, results of research and
development and clinical and toxicology studies, technological advances by third
parties and competition, cost and availability of botanical extracts, future
capital needs of the Company, history of operating losses, dependence upon key
personnel, uncertainty regarding health care reimbursement and reform, limited
manufacturing and marketing experience, control by existing stockholders and
general economic and business conditions.
 
    PHARMAPRINT-TM- IS A TRADEMARK OF THE COMPANY AND
CENTRUM-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF AMERICAN HOME
PRODUCTS CORPORATION ("AHP"). THIS REPORT ON FORM 10-KSB ALSO INCLUDES
TRADEMARKS OF COMPANIES OTHER THAN THE COMPANY AND AHP.
 
                                       ii
<PAGE>
                                     PART I
 
ITEM 1.  DESCRIPTION OF BUSINESS
 
INTRODUCTION
 
    PharmaPrint Inc. (the "Company" or "PharmaPrint"), a development stage
company, was originally incorporated in the State of California in September
1994. In October 1997, the Company changed its state incorporation from
California to Delaware. The Company was formed in order to complete the
development of and commercialize the research initiated by Dr. Tasneem A.
Khwaja, a founder and significant stockholder of the Company, over a 20 year
period at the University of Southern California ("USC") School of Medicine.
 
OVERVIEW
 
    PharmaPrint uses its proprietary development and manufacturing process
technologies (the "PharmaPrint-TM- Process") to develop high quality dietary
supplements and pharmaceuticals from botanical sources. The Company believes
that its PharmaPrint-TM- Process technology represents a new pardigm in the
development of therapeutic products from botanical sources. Unlike the
traditional drug development process of identifying, isolating and synthesizing
single bioactive molecules from plant and other sources, the Company's core
technologies were developed based on empirical data that suggests that the
health benefits and safe usage of certain plant-derived therapeutics might be
the result of the natural combination of multiple molecules found in the plant
extract and that single molecules, in isolation, may not replicate the natural
plant's effectiveness. The PharmaPrint-TM- Process technology enables the
Company to identify, quantify and standardize the bioactives within plant
sources that are believed to provide therapeutic benefits and produce products
having consistent batch-to-batch quantities and ratios of these bioactives.
 
    The Company is applying a dual commercialization strategy with its
PharmaPrint-TM- Process technology. The first application of the PharmaPrint-TM-
Process is for the development of high quality, herbal dietary supplements. In
the United States, dietary supplements are considered food products under the
Dietary Supplement Health and Education Act of 1994 ("DSHEA") and, as such, are
not regulated as drugs by the United States Food and Drug Administration (the
"FDA") and do not require FDA approval prior to commercialization. The Company
has commenced development of 12 of the most commonly used dietary supplements
(derived from agnus castus, bilberry, black cohosh, echinacea, garlic, ginger,
ginkgo biloba, ginseng, milk thistle, saw palmetto, St. John's wort and
valerian.)
 
    In October 1997, the Company entered into several agreements with American
Home Products Corporation ("AHP") whereby the Company will apply the
PharmaPrint-TM- Process to produce a line of high quality dietary supplement
products (the "AHP Products") to be marketed in the U.S., Canada and Mexico
exclusively by AHP under its Centrum-Registered Trademark- brand name. Pursuant
to the terms of the agreements, AHP paid to the Company $2.5 million in an
up-front licensing fee and is required to pay an additional fee of $500,000 upon
each of (i) the issuance of a patent containing claims covering the
PharmaPrint-TM- Process and (ii) receipt and acceptance by AHP of the initial
AHP Products in sufficient time to permit AHP to meet its proposed product
launch date. Additionally, AHP has agreed to spend annually at least the lessor
of $20 million or an amount equal to 50% of net sales of the AHP Products in
advertising and other marketing expenditures during the two years following
shipment by AHP of commercial quantities of the first AHP Product. AHP has also
agreed to purchase the AHP Products under a Supply Agreement at specified
prices. In addition, if the Company succeeds in securing a patent containing a
claim or claims comprising the PharmaPrint-TM- Process applied generally or on a
product-by-product basis, AHP will pay royalties to the Company on net sales of
such patented AHP Products of 4% in the first year and 6% thereafter. AHP plans
to commence marketing six of the Company's dietary supplement products under
development in 1998. AHP and the Company will examine from time to time the
opportunity to increase or modify this product line.
 
                                       1
<PAGE>
    The second application of the PharmaPrint-TM- Process is the development of
FDA-approvable pharmaceuticals from natural plant sources. PharmaPrint is
focusing its pharmaceutical development efforts initially on certain plants and
plant extracts that have shown indications of clinical effectiveness in treating
a variety of diseases and physical conditions. Although these multi-molecule,
plant-derived products are widely sold in many European countries on a
prescription or over-the-counter ("OTC") basis, they currently are available
only as dietary supplements in the United States. The Company believes that
these products have not been approved as pharmaceuticals under FDA guidelines
primarily due to the difficulties of identifying the bioactives and
manufacturing the compounds to FDA standards.
 
    PharmaPrint believes that the PharmaPrint-TM- Process will, for the first
time, make it feasible to develop multi-molecule, plant-derived drug candidates
with sufficient quality and consistency of bioactives to potentially qualify for
FDA approval. Because of the well-documented history of safe usage of products
derived from the same plant sources as the Company's drug candidates, the
Company believes that, in certain cases, the FDA may allow the Company to
commence clinical trials at the Phase II stage while concurrently performing
toxicology studies. The Company received such FDA clearance for its initial
pharmaceutical product candidate, PPRT-321. The Company also plans to use its
United States clinical data to apply for regulatory approvals to market its
products in the prescription and OTC markets in Europe and other international
markets.
 
    In September 1997, the Company commenced Phase II clinical trials in four
medical centers in the United States for PPRT-321, a saw palmetto-derived drug
that is being developed for the treatment of symptoms associated with benign
prostatic hyperplasia ("BPH"). In 1998, the Company intends to file an
investigational new drug ("IND") application for PPRT-152, its anti-depressant
drug candidate derived from St. John's wort. In addition, the Company is
applying the PharmaPrint-TM- Process to the development of pharmaceutical
versions of four other plant-derived drug candidates that have long histories of
human use and indications of effectiveness: ginkgo biloba (to treat cognitive
disorders), valerian (to treat insomnia), black cohosh (to reduce certain
post-menopausal symptoms) and agnus castus (to reduce pre-menstrual symptoms).
 
    The Company is in discussions with several major pharmaceutical companies
for the development and distribution of the Company's potential pharmaceutical
products, including AHP, to whom the Company has granted an option through
mid-1998 to develop with the Company potential FDA regulated pharmaceutical
products, including those for sale in the OTC market.
 
HERBAL MEDICINES
 
    Herbal medicines are multi-molecule compositions extracted or otherwise
derived from plants. Herbal products have been used for centuries throughout the
world to treat a variety of diseases and physical conditions. In recent years,
health consciousness and the increasing popularity of "all natural" products
have contributed to a growth in public interest in herbal therapies.
 
    In many European countries, such as Germany, France and Italy, treatment
with multi-molecule, plant-derived medicines is well established, regulated by
governmental authorities and is often reimbursed by health insurance plans.
According to an independent consultant, in 1997 approximately $7.5 billion was
spent in Europe for multi-molecule, plant-derived prescription and OTC products.
The leading herbal medicines in Europe include ginseng, which according to an
independent consultant, accounted for approximately $200 million in sales in
1997, and St. John's wort, which accounted for approximately $250 million in
sales last year and outsells Prozac in Germany four to one.
 
    Dietary supplements are categorized as food products under DSHEA, and as
such, are not approved by the FDA prior to marketing. According to NUTRITION
BUSINESS JOURNAL, in 1997 approximately $3.6 billion was spent in the United
States for non-prescription, herbal products, with sales having increased
approximately 20% a year in the last few years. These products are now commonly
sold in drugstores, supermarkets, convenience stores and discount department
stores. A recent nationwide survey conducted by
 
                                       2
<PAGE>
PREVENTION magazine found that one-third of American adults surveyed use herbs
to treat various conditions such as insomnia, premenstrual syndrome, depression,
menopause, allergies and colds. The same survey found that two-thirds of adults
thought herbal remedies are just as safe or safer than traditional drugs and 53%
said herbal remedies are at least as effective as traditional drugs.
 
PHARMAPRINT-TM- PROCESS
 
    The PharmaPrint-TM- Process technology is a multi-faceted proprietary
process that combines drug screening capabilities with biologically-driven
fractionation. The PharmaPrint-TM- Process enables the Company to identify,
quantify and standardize the bioactive molecules within plant sources that are
believed to provide therapeutic or other health benefits. This allows the
Company to produce dietary supplements and pharmaceuticals with consistent
batch-to-batch quantities and ratios of these bioactives.
 
    The PharmaPrint-TM- Process begins by developing a detailed profile of the
active components of a potential product based upon an extensive review of
available bioassays and clinical data from previous studies. The Company also
analyzes, on the basis of current medical knowledge, the relationship between
the active components and the targeted disease. The potential product is
screened in a series of relevant bioassays to analyze the relationship between
its aggregate bioactivity and clinically relevant endpoints.
 
    A sample of the botanical is then separated using conventional chemical
separation techniques into groups of fractions selected for their potential
biological activity or contribution to biological activity. The bioactivity of
each fraction is determined through an iterative application of a series of
selected bioassays. This process of biologically-driven fractionation enables
the Company to identify the components having the desired bioactivity as well as
the components that are less active or essentially inactive. The bioactivity of
individual components is compared to the bioactivity of the aggregate compound
and correlated with clinically relevant endpoints.
 
    The botanical is also analyzed using conventional chemistry to determine the
quantity of each component present and the result of this quantitative analysis
are combined with the bioactivity profiles of the various components to develop
chemical and bioactivity specifications. This results in a composition that has
precise chemical and bioactivity profile that is the compound's "pharmaprint."
The PharmaPrint-TM- Process itself does not assure efficacy, against clinical
indications, of the Company's products and claims of efficacy may be made only
after successful clinical trials, which will not be conducted with respect to
the Company's dietary supplement products.
 
    Once a compound's pharmaprint has been established, the Company tests
successive batches for conformity to that pharmaprint. Various batches of raw
plant material for the same compound can vary significantly in composition and
bioactivity so, if necessary, the Company may conform the raw plant material to
the pharmaprint through the addition of various fractions or selective batch
mixing. However, raw plant material that is significantly outside the
pharmprint's quantitative and biactivity ranges is rejected. Product batches
manufactured to the specifications for that compound should have consistent
bioactive compositions and potencies. Accordingly, the Company believes that
compounds produced through the PharmaPrint-TM- Process, unlike previously
available versions of botanicals, can be expected to deliver consistent
pharmacological results and, in the case of pharmaceuticals, to qualify for
potential FDA approval.
 
    While the Company has successfully applied the PharmaPrint-TM- Process to
produce multi-molecule compounds with batch-to-batch consistency in test
production and for development purposes, it has only recently commenced
commercial-scale production. Accordingly, there is a risk that the Company will
encounter unexpected difficulties in applying the PharmaPrint-TM- Process to
consistently manufacture on a commercial-scale. Such difficulties could slow
production or increase the Company's costs.
 
    The Company has filed with the United States Patent and Trademark Office
(the "PTO") applications for a broad process patent covering a method for making
high quality botanicals that incorporates the steps
 
                                       3
<PAGE>
that make up the PharmaPrint-TM- Process, as well as additional patent
applications covering the application of this method to the manufacture of 11
specific botanical compositions. However, there can be no assurance that the
Company will receive any patents comprising the PharmaPrint-TM- Process or any
products it intends to commercialize. See "Intellectual Property."
 
BUSINESS STRATEGY
 
    The Company has used the PharmaPrint-TM- Process as a platform technology to
develop and produce multi-molecule, botanical-derived products for sale in the
dietary supplement market and is applying the PharmaPrint-TM- Process for
botanical pharmaceutical candidates that require approval from the FDA. The
Company believes that its PharmaPrint-TM- Process will enable it to make claims
of bioactivity and potency that cannot be made about existing botanical
products.
 
    The Company has applied its PharmaPrint-TM- Process to develop high quality
dietary supplements. The Company believes that the PharmaPrint-TM- Process has
enabled it to manufacture dietary supplement products with standardized
compositions and amounts of bioactives that will have a competitive advantage
over currently available products, which vary widely in terms of composition.
 
    The Company is also applying its PharmaPrint-TM- Process to the development
of pharmaceuticals derived from botanical products that are documented in
medical literature as having long histories of safe use and have demonstrated
indications of efficacy. The Company believes that the PharmaPrint-TM- Process
will enable it to produce multi-molecule, plant-derived compounds that, for the
first time, will have sufficient consistency of composition and potency to
qualify for clinical testing and potential FDA approval as a pharmaceutical. The
Company intends to pursue a regulatory strategy whereby it will seek to begin
its clinical trials at the Phase II stage, while concurrently performing
toxicology studies.
 
    The Company expects to commercialize its products through collaborative
arrangements in the United States and Europe. In the United States, the
Company's dietary supplement products will be distributed through AHP. The
Company intends to use the data from its United States clinical trials to seek
approval to market its products in Europe, particularly in Germany, France and
Italy, where both prescription and OTC botanical therapeutics are widely used.
 
    While the Company is developing dietary supplements and pharmaceutical
products from the same plant sources, the products will differ in several
important respects. Because of differing regulatory requirements, the Company
expects that the products will have different formulations and that the
advertising and labeling of its pharmaceuticals will include approved claims to
treat or prevent a disease or condition while its dietary supplements must be
marketed without such claims. Additionally, consumers should typically be
entitled to insurance reimbursement for the cost of the Company's pharmaceutical
products while such reimbursement will not likely be available for its dietary
supplement products.
 
DIETARY SUPPLEMENTS BUSINESS
 
    The Company is applying its PharmaPrint-TM- Process technology to the
development of high quality herbal dietary supplements. The Company has
commenced development of 12 of the most commonly used dietary supplements
(derived from agnus castus, bilberry, black cohosh, echinacea, garlic, ginger,
ginkgo biloba, ginseng, milk thistle, saw palmetto, St. John's wort and
valerian).
 
    PharmaPrint's testing has indicated that different manufacturers' versions
of currently marketed dietary supplements vary widely in terms of product
composition and bioactive molecules and some contain no bioactives. The variance
in bioactive molecules creates differing levels of benefit to the consumer. The
Company believes that because the PharmaPrint-TM- Process provides for a
standardization of the bioactive composition of the dietary supplement,
consumers should have greater confidence in its products. The Company intends to
include on each product a label containing the significant bioactive molecules
present in the supplement.
 
                                       4
<PAGE>
    In October 1997, the Company entered into several agreements with AHP (the
"AHP Agreements") whereby the Company will apply its PharmaPrint-TM- Process to
produce high quality dietary supplement products to be marketed in the U.S.,
Canada and Mexico exclusively by AHP under its Centrum-Registered Trademark-
brand name. AHP has the right to expand its territory to any other countries at
any time within three years of the launch of the AHP Products. Pursuant to the
terms of the agreements, in 1998 AHP will commence marketing six of the
Company's products under development, and will examine additional product
candidates from time to time in order to increase or modify its product line. In
exchange for rights to market the Company's products under the
Centrum-Registered Trademark- brand name, AHP paid to the Company $2.5 million
in licensing fees and is required to pay additional fees of $500,000 upon each
of (i) the issuance of a patent containing claims covering the PharmaPrint-TM-
Process and (ii) receipt and acceptance by AHP of the initial AHP Products in
sufficient time to permit AHP to meet its proposed product launch date.
Additionally, AHP has agreed, during the two years following shipment by AHP of
commercial quantities of the first AHP Product, to spend annually at least the
lesser of $20 million or an amount equal to 50% of net sales of the AHP Products
in advertising and other marketing expenditures and AHP is obligated to devote
to the AHP Products the efforts and resources it normally uses to market
non-prescription products of its own discovery and of similar market potential
at a similar stage of product life. If AHP fails to meet this monetary
commitment (and does not otherwise breach its obligations under the AHP
Agreement), the Company's sole remedy is to sell dietary supplements under a
national and regional brand through one third party. PharmaPrint will
manufacture all of the AHP Products and sell such products to AHP under a Supply
Agreement at specified prices. In addition, if the Company succeeds in securing
a patent containing a claim or claims comprising the PharmaPrint-TM- Process
applied generally or on a product-by-product basis, AHP will pay royalties to
the Company on net sales of such patented AHP Products of 4% in the first year
and 6% thereafter. The prices at which the AHP Products will be offered to
consumers will be determined by AHP, although the Company expects that such
prices will be competitive with the prices of other dietary supplement products
derived from the same botanical sources.
 
    AHP is a publicly traded pharmaceutical and consumer products company. For
the fiscal year ended December 31, 1997, AHP had sales of approximately $14.2
billion, of which the Centrum-Registered Trademark- product line contributed
approximately $357 million. The Company considers AHP an ideal marketing partner
due to their recognized leadership position in the consumer products dietary
supplements area. Additionally, the Company believes that its dietary supplement
products will achieve accelerated market penetration due to the recognition of
the Centrum-Registered Trademark- brand name.
 
    The AHP Agreements restrict sales by the Company of certain herbal products
developed using the PharmaPrint-TM- Process other than through AHP, and the
Company is relying upon sales of such products to AHP and, through AHP, to
consumers, under the AHP Agreements, as its only sources of product revenues in
the near future. AHP has informed the Company that it intends to market the AHP
Products under its Centrum-Registered Trademark- brand name, either as
Centrum-Registered Trademark--branded products or with a separate brand identity
associated with Centrum-Registered Trademark-. Prior to the initial launch date
of the first AHP Product, the AHP Agreements are terminable by AHP in its sole
discretion upon thirty days notice. Subsequent to such launch date, AHP can
terminate the AHP Agreements with respect to specific products in its sole
discretion with one year's notice. AHP could elect to terminate the AHP
Agreements for many reasons, including shifts in its strategic focus, poor
market reaction to Centrum-Registered Trademark--branded dietary supplements,
lack of patent protection for the PharmaPrint-TM- Process or a determination to
pursue alternative methods of producing dietary supplements. If the AHP
Agreements are terminated in whole or part, the Company may not be able to enter
into comparable agreements for the distribution and sale of its products or
establish its own marketing and sales force to market potential products and
such events could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
                                       5
<PAGE>
PHARMACEUTICAL BUSINESS
 
    Although botanicals are source material for many single chemical entity
pharmaceuticals available in the U.S. market, the Company does not believe that
any multi-molecule plant extract has ever received approval by the FDA to be
marketed as a pharmaceutical. While formal FDA guidelines for these plant
extracts have not yet been issued, the FDA has allowed clinical trials to be
commenced for certain botanical compounds, including the Company's Phase II
study on PPRT-321 (its saw palmetto-derived drug candidate). At Drug Information
Association meetings in 1997, FDA officials provided participants informal
guidance as to certain requirements for the testing of botanical
pharmaceuticals, particularly those with well-documented histories of safe use.
 
    The Company has and will continue to incorporate this informal guidance, as
well as its experience with the FDA in the development of PPRT-321, into its
regulatory strategy to begin clinical trials at the Phase II stage, while
performing concurrent toxicology studies. While the historical human safety data
for each drug candidate will be evaluated by the FDA on an individual basis,
drug candidates for which the FDA permits the sponsor to proceed directly to
Phase II clinical trials will have the potential for more rapid approval with
accompanying cost savings as compared to traditional drugs for which historical
safety data is not as extensive. Based upon an investigational new drug (an
"IND") application that documented the extensive historical safety of saw
palmetto, the FDA permitted the Company to proceed directly to Phase II clinical
studies for PPRT-321, while concurrently conducting toxicology studies.
 
    The Company selects its drug candidates based on an extensive review of
available scientific and clinical literature to determine whether a particular
candidate has a history of safety and demonstrated indications of efficacy.
While the clinical trials described in such literature, including the clinical
trials described below, have not been conducted to FDA parameters and may not
have used standardized products or had the well defined end points or protocols,
controls and procedures typical of FDA reviewed clinical trials, the Company
believes that these trials and, in particular, the safety data from such
studies, provide a useful starting point for examining potential drug
candidates. The Company also analyzes the targeted indication to evaluate
whether recognizable end points to study are available and whether the
indication is appropriate for treatment with a prescription or OTC product. In
addition, the Company assesses the potential market for such product by
evaluating the number of individuals afflicted with the specific disease or
physical condition and the potential for product sales.
 
    The Company intends to develop its drug candidates in collaboration with
other companies. The Company is currently in discussions with several
pharmaceutical companies regarding the joint development of its botanical
pharmaceuticals. The application of the PharmaPrint-TM- Process to a potential
drug candidate and the preparation of an IND for such drug should typically take
six to 12 months. The particular drug candidates that the Company will focus its
attention on at any given time are dependent upon many factors, including the
interest of the Company's partners or potential partners and the Company's
available resources. The price at which any of the Company's pharmaceutical
products that are approved by the FDA for sale will be sold will be determined
by the Company and any of its partners at such time based upon, among other
things, market factors and the costs incurred to develop and manufacture such
products.
 
                                       6
<PAGE>
CURRENT PHARMACEUTICAL PRODUCT CANDIDATES
 
    The following table sets forth the Company's current pharmaceutical product
candidates, the plant source of each, the indication each is currently
anticipated to address and the status of the development process:
 
<TABLE>
<CAPTION>
  PRODUCT      PLANT SOURCE         ANTICIPATED INDICATION                    STATUS
-----------  -----------------  ------------------------------  ----------------------------------
<S>          <C>                <C>                             <C>
PPRT-321       Saw palmetto              BPH symptoms                        Phase II
PPRT-152      St. John's wort           Antidepressant                   IND preparation
PPRT-424       Ginkgo biloba         Cognitive disorders         PharmaPrint-TM- Process Complete
PPRT-211         Valerian                  Insomnia              PharmaPrint-TM- Process Complete
PPRT-195       Black cohosh        Post-menopausal symptoms      Applying PharmaPrint-TM- Process
PPRT-550       Agnus castus         Pre-menstrual symptoms       Applying PharmaPrint-TM- Process
</TABLE>
 
    PPRT-321 (SAW PALMETTO)
 
    The Company is currently developing a pharmaceutical product derived from
the SERENOA REPENS plant, more commonly known as saw palmetto. Saw palmetto has
been used to treat the symptoms associated with BPH, a non-cancerous enlargement
of the innermost part of the prostate. BPH frequently results in a gradual
squeezing of the part of the urethra that runs through the prostate and an
inability to completely empty the bladder. This causes patients to experience a
frequent urge to urinate and a burning sensation or similar discomfort during
urination.
 
    Most males will eventually suffer from BPH. The incidence of BPH for men in
their fifties is 50% and rises to 80% by the age of 80. Worldwide there are
approximately 118 million men over the age of 50. In the United States, an
estimated 30 million men aged 50 and over have enlarged prostates, and about
one-half of this population will visit a urologist for the relief of their
symptoms. The general aging of the population and increasing life expectancies
are anticipated to contribute to the continued growth in the number of BPH
sufferers.
 
    Currently, three drugs are approved by the FDA to treat the symptoms of BPH:
Proscar (sold by Merck & Co.), Hytrin (sold by Abbott Laboratories) and Cardura
(sold by Pfizer), with estimated combined sales of $1.6 billion in 1997. Proscar
is designed to treat BPH by shrinking the prostate, while Hytrin and Cardura are
alpha blockers, which treat BPH by relaxing the muscles in the prostate and
bladder neck to relieve urethral obstruction.
 
    Numerous clinical studies have been performed using saw palmetto. An example
of one such study, performed between October 1990 and May 1991, included 1,334
males from 323 urology practices and outpatient clinics in Germany. Four outcome
parameters were measured and included residual urine volume, urine frequency,
night time urine frequency and difficulty or pain in urination ("dysuria"). The
results of this trial showed statistically significant improvements in all of
the aforementioned outcome parameters. Residual urine volume, on average,
dropped 30.0% after four weeks of treatment and 50.0% after twelve weeks.
Forty-six percent of the patients who had pathologically elevated residual
volumes at the start of treatment normalized over the observation period.
Average urine frequency was reduced by 30.0% in comparison with the starting
level after four weeks and 37.0% after 12 weeks. At the start of the treatment,
only 12.2% of the patients reported no night time urine frequency, or only once
per night, compared with 61.0% at the end of the treatment. Finally, dysuria
symptoms decreased from 22.2% of the patients at the beginning of treatment to
1.0% of patients at the end of the treatment. Less than 1.0% of the subjects
reported any side effects.
 
                                       7
<PAGE>
    Another study, conducted in 87 urology centers in nine European countries
from April 1993 through June 1994, compared the efficacy of a saw palmetto based
extract (Permixon) with finasteride (Proscar) in 1,098 men. Six outcome
parameters were measured and included the International Prostate Symptom Score
("IPSS"), quality of life, peak urinary flow rate, residual urine volume,
prostate size and Prostate Specific Antigen ("PSA"). Both Permixon and
finasteride decreased the IPSS (-37% and -39%, respectively), improved quality
of life (by 38% and 41%) and increased peak urinary flow rate (+25% and +30%).
Finasteride markedly decreased prostate volume (-18%) and serum PSA levels
(-41%), while Permixon improved symptoms with little effect on volume (-6%) and
no change in serum PSA levels. Finally, patients that received finasteride
experienced a statistically significant deterioration in a sexual function score
compared to those that received Permixon.
 
    The Company has applied its PharmaPrint-TM- Process to develop a
standardized version of PPRT-321 and in July 1997 filed an IND application with
the FDA to begin clinical trials. Based upon an IND application that documented
the extensive historical safety of saw palmetto, the FDA permitted the Company
to proceed directly to Phase II clinical studies for PPRT-321, while
concurrently conducting toxicology studies. The objective of the trial is to
identify the most efficacious of three doses of PPRT-321. The clinical trial,
which is double-blinded, randomized and placebo controlled, involves 56 patients
and is being conducted in four medical centers in the United States. The primary
efficacy variables for the trial are peak urinary flow rate and the American
Urological Association Symptom Index score. The Company is currently in the
process of providing patients varying doses of PPRT-321 and expects results to
be available in 1998. Additionally, concurrent with its Phase II studies, the
Company has commenced toxicology testing.
 
    PPRT-152 (ST. JOHN'S WORT)
 
    The Company is developing a pharmaceutical candidate derived from HYPERICUM
PERFORATUM, more commonly known as St. John's wort. St. John's wort has been
used in Europe to treat mild to moderate depression. While mild to moderate
depression is estimated to affect approximately 18 million people in the United
States, St. John's wort has not been approved under United States law to be
marketed to treat such condition.
 
    Among the most widely prescribed antidepressants in the United States are
Prozac (Eli Lilly), Zoloft (Pfizer) and Paxil (SmithKline Beecham). The total
worldwide annual sales for the top selling antidepressants are approximately
$5.5 billion.
 
    The Company has reviewed many clinical studies of St. John's wort and found
that almost all reports concluded that St. John's wort helped to improve
patients with mild to moderate depression. A 1994 German study of 3,250 patients
with primarily mild to moderate depression was conducted with patients receiving
4 weeks of treatment with 900 mg of HYPERICUM extract. Outcome measures included
the Depression Scale of Von Zerssen ("D-S") and medical and patient assessment
of treatment success. The mean D-S score was reduced from 23.2 to 11.8 following
treatment. At the end of treatment, 79.0% of patients were either improved or
symptom-free by self-assessment, and 82.0% were either improved or symptom-free
as assessed by a physician. Furthermore, as evidence of HYPERICUM'S excellent
tolerability, only 79, or 2.4%, of patients reported adverse effects, which
included gastrointestinal irritation, allergic reaction, fatigue and
restlessness.
 
    In a comparative study between a St. John's wort extract (Jarsin 300) and
imipramine, conducted from October 1992 to May 1993 as a randomized double-blind
study in 20 centers, 135 patients with varying degrees of depression were
evaluated. The main assessment criteria for this trial were the Hamilton
Depression Scale ("HAMD"), the D-S and the Clinical Global Impressions ("CGI").
In both treatment groups, a parallel reduction of the HAMD was observed (56.4%
for Jarsin 300 and 44.8% for imipramine) and a reduction in the transformed D-S
point values (31.3% for Jarsin 300 and 25.1% for imipramine) was also observed.
Patients using Jarsin 300 appeared to benefit from greater changes in severity
of illness, a
 
                                       8
<PAGE>
measurement criterion of CGI, than did patients using imipramine: 81.8% of
patients were classified as having improved on Jarsin 300 against 62.5% of
patients on imipramine. Undesired side effects were reported in 11.9% of
patients on Jarsin 300 versus 16.2% of patients using imipramine.
 
    The Company has applied its PharmaPrint-TM- Process to develop a
standardized version of PPRT-152 and anticipates filing an IND application in
1998. If the planned application is allowed, the Company expects to proceed
directly into Phase II clinical trials and perform toxicology studies shortly
thereafter.
 
    PPRT-424 (GINKGO BILOBA)
 
    PPRT-424, the Company's ginkgo biloba derived pharmaceutical candidate, has
been developed for the treatment of a range of cognitive disorders. The Company
believes there are very few products currently available to treat these
indications.
 
    Several clinical studies have been performed to evaluate the effect of
GINKGO BILOBA extract on cognitive performance. In one such study performed in
the United States, as reported in October 1997 in the JOURNAL OF THE AMERICAN
MEDICAL ASSOCIATION, EGb 761, a GINKGO BILOBA extract, was evaluated in a
52-week, randomized, double-blind, placebo-controlled multicenter clinical study
of 202 mildly to severely demented patients age 45 years or older with
Alzheimer's disease or multi-infarct dementia, without other significant medical
conditions. Patients were randomly assigned to receive EGb (120mg/day) or
placebo. Primary outcome measures were: Alzheimer's Disease Assessment
Scale--Cognitive subscale ("ADAS-- Cog"), Geriatric Global Impression of Change
("GERRI") and Clinical Global Impression of Change ("CGIC"). At 52 weeks,
statistically significant improvements were observed in the ADAS--Cog and GERRI
for the patients treated with EGb: 27% achieved at least a 4-point improvement
on the ADAS-- Cog compared with 14% of patients taking placebo. Thirty-seven
percent of patients treated with EGb improved on the GERRI, as opposed to 23%
taking placebo. No significant difference was observed between treatment groups
in the CGIC. No significant difference was observed between groups in the number
of patients reporting adverse events or in the severity of events.
 
    The Company has applied its PharmaPrint-TM- Process to develop a
standardized version of PPRT-424. The Company will, in the future, make a
determination as to whether and during what time-frame it will pursue further
drug development activities, based upon, among other things, the interest of the
Company's partners and potential partners and its available resources. Unless
and until the Company receives marketing approval from the FDA as a drug, it may
not market its ginkgo biloba derived products through claims for, or with
intended uses in, the treatment or prevention of disease, including cognitive
disorders.
 
    PPRT-211 (VALERIAN)
 
    PPRT-211, the Company's VALERIAN derived pharmaceutical candidate has been
developed for the treatment of insomnia. Approximately 50 million Americans
experience a significant sleep problem each year and approximately 60% of such
people have a chronic sleep disorder. The top selling sleep aid products
accounted for approximately $700 million of sales in 1996 and include Ambien
(G.D. Searle), Stilnox (Synthelabo) and Imovane (Rhone Poulenc Rhorer).
 
    Several clinical studies have been performed in Europe to evaluate the
effect of valerian on sleep disorders, specifically sleep latency and sleep
quality. In one study, reported in 1982, the effect of a valerian extract on
subjective sleep measures was studied in 128 healthy volunteers. Each subject
received both valerian and placebo. The samples were taken by the volunteers in
random order on non-consecutive nights. A statistically significant reduction in
sleep latency (time taken to fall asleep), as well as improvement in sleep
quality was reported with valerian compared with placebo. Marked effects of
valerian were observed among older people and those who considered themselves to
be habitually poor or irregular sleepers, in whom 49% and 43%, respectively,
reported reduced sleep latency with valerian. No adverse effects were reported.
 
                                       9
<PAGE>
    The Company has applied its PharmaPrint-TM- Process to develop a
standardized version of PPRT-211. The Company will, in the future, make a
determination as to whether and during what time-frame it will pursue further
drug development activities, based upon, among other things, the interest of the
Company's partners and potential partners and its available resources. Unless
and until the Company receives marketing approval from the FDA as a drug, it may
not market its valerian derived products through claims for, or with intended
uses in, the treatment or prevention of disease, including insomnia.
 
    PPRT-195 (BLACK COHOSH)
 
    PPRT-195, the Company's BLACK COHOSH derived pharmaceutical candidate is
under development to reduce post-menopausal symptoms. In women, cessation of
ovarian function is associated with various somatic and emotional disorders that
are summarized as "menopausal symptoms." The most characteristic and frequent
symptom is "hot flashes," which are experienced by approximately 78% of
menopausal women. About 50% of the women suffer from emotional disorders such as
depression, nervousness, irritability and insomnia. Approximately 40 million
women in the United States are currently in menopause. Of this population,
approximately 15%-25% will seek out hormone replacement therapy ("HRT"). The
top-selling HRT products accounted for approximately $1.5 billion in worldwide
sales in 1997 and include Premarin (AHP) and Estraderm (Novartis). The Company
is currently applying the PharmaPrint-TM- Process to develop a standardized
version of PPRT-195. The Company will, in the future, make a determination as to
whether and during what time-frame it will pursue further drug development
activities, based upon, among other things, the interest of the Company's
partners and potential partners and its available resources. Unless and until
the Company receives marketing approval from the FDA as a drug, it may not
market its black cohosh derived products through claims for, or with intended
uses in the treatment or prevention of disease, including post-menopausal
symptoms.
 
    PPRT-550 (AGNUS CASTUS)
 
    PPRT-550, the Company's AGNUS CASTUS derived pharmaceutical candidate, is
under development to treat symptoms of pre-menstrual syndrome ("PMS").
Approximately 85% of menstruating women in the United States experience symptoms
of PMS on a consistent basis, including cramps, irritability, depression, water
retention and fatigue. While there are no current prescription products
available in the United States to treat symptoms of PMS, ibuprofen-based OTC
products such as Advil, Motrin and Excedrin are typically used to address such
symptoms. The Company is currently applying the PharmaPrint-TM- Process to
develop a standardized version of PPRT-550. The Company will, in the future,
make a determination as to whether and during what time-frame it will pursue
further drug development activities, based upon, among other things, the
interest of the Company's partners and potential partners and its available
resources. Unless and until the Company receives marketing approval from the FDA
as a drug, it may not market its agnus castus derived products through claims
for, or with intended uses in, the treatment or prevention of disease, including
symptoms associated with pre-menstrual syndrome.
 
    ADDITIONAL PHARMACEUTICAL CANDIDATES
 
    From time to time, the Company expects to evaluate additional botanical
products for development as pharmaceutical products. In June 1997, the Company
completed Phase I clinical trials for its test-case, mistletoe-derived
pharmaceutical product intended to treat immunosuppression related to HIV and
cancer. Because this product is administered by injection and because the
Company believes that the FDA is more likely to approve in a shorter time frame
herbal products intended to treat non-life threatening diseases, the Company is
focusing its near-term drug development efforts on PPRT-321, PPRT-152 and the
other candidates described above.
 
                                       10
<PAGE>
COMPETITION
 
    The pharmaceutical and biotechnology industries are subject to intense
competition and rapid technological change. The Company believes that
industry-wide interest in the PharmaPrint-TM- Process and resulting products
will accelerate as the technology becomes more widely recognized and that
competitors may commit additional resources to develop technologies and products
that compete with those of the Company. Competitors of the Company in the United
States and abroad are numerous, and include, among others, pharmaceutical,
consumer products, herbal products, biotechnology and chemical companies, as
well as universities and other research organizations. There can be no assurance
that these competitors will not succeed in developing technologies and products
that are more effective than any that have been or may be developed by the
Company or that would render the Company's technology and products obsolete and
noncompetitive. In addition, if the Company is not successful in obtaining
patent protection for its technology and products, competitors may be able to
replicate its products.
 
    Many of the Company's potential competitors have substantially greater
capital resources, research and development staffs and facilities than the
Company and significantly greater experience than the Company in conducting
toxicology testing and human clinical trials on new pharmaceutical products, in
obtaining FDA and other regulatory approvals of products and in manufacturing
and marketing pharmaceutical products. Accordingly, a certain number of the
Company's competitors may succeed in obtaining regulatory approval for products
more rapidly or effectively than the Company. Moreover, there can be no
assurance that the Company will have sufficient resources to undertake the
continuing research and development necessary to remain competitive.
 
GOVERNMENT REGULATION
 
    To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to
particular statutory and regulatory provisions currently in effect. Any change
in applicable laws or regulation may have a material adverse effect on the
business, financial condition and results of operations of the Company. Dietary
supplements are categorized as food and are regulated by the FDA pursuant to the
Federal Food, Drug and Cosmetics Act, as amended by, inter alia, DSHEA. DSHEA:
(i) defines dietary supplements; (ii) permits "structure/function" statements,
under certain conditions; and (iii) permits under certain conditions the use of
published literature in connection with the sale of herbal products. Dietary
supplements do not require approval by FDA prior to marketing but are
nevertheless subject to various regulatory requirements concerning their
composition, permissible claims (including substantiation of any claims)
manufacturing procedures approval and other elements. DSHEA prohibits marketing
dietary supplements through claims for, or with intended uses in, the treatment
or prevention of disease. The FDA has issued regulations to implement certain
labeling requirements of DSHEA.
 
    The Company's present activities relating to therapeutic pharmaceuticals,
including toxicology testing and clinical trials, are subject to regulation by
the FDA and other governmental authorities in the United States and other
countries. The process of obtaining required regulatory approvals from the FDA
and other authorities often takes many years, is expensive and can vary
substantially based on the type, complexity and novelty of the product. While
the Company believes that it may be able to pursue a less time consuming
development process in the U.S. and certain foreign jurisdictions, the Company
nevertheless will be required to engage in extensive clinical testing in order
to demonstrate the safety and efficacy of its pharmaceutical products for human
use and there can be no assurance of quick approval or any approval. Requests
for additional data, or failure to or delays in obtaining regulatory approvals
by the Company, its collaborators or licensees, would adversely affect the sales
of pharmaceutical products developed by the Company and the Company's ability to
generate pharmaceutical product revenues or royalties.
 
                                       11
<PAGE>
    Development of a pharmaceutical for human use is generally a multi-step
process. In general, animal and IN VITRO testing must establish the potential
safety and efficacy of the experimental product in a given disease. Once a
product has been found to be reasonably safe and potentially efficacious in
animals, suggesting that human testing would be appropriate, an investigational
new drug (an "IND") application is submitted to the FDA. FDA acceptance
typically is granted or denied within 30 days of an IND submission, but may, in
some circumstances, involve substantial delays. Based upon documentation in
medical literature of safe use of botanical products derived from the same
botanical sources as the Company's products, the Company anticipates conducting
concurrently with clinical trials certain development steps that are
traditionally "pre-clinical."
 
    Generally, clinical investigations involve three phases. FDA regulated Phase
I clinical studies are conducted to evaluate the safety of the experimental
product in humans, various routes, dosages and schedules of product
administration, and if possible, to gain early evidence of effectiveness. The
demonstration of therapeutic benefit is not generally required in order to
complete Phase I studies successfully. If acceptable product safety is
demonstrated, Phase II studies are initiated. The FDA has stated in pre-IND
meetings with the Company that it may permit companies to proceed directly to
Phase II clinical studies, while concurrently performing toxicology studies, for
botanical drugs that have demonstrated safety through prior use and has
permitted the Company to proceed directly with Phase II studies for PPRT-321.
Phase II trials are designed to evaluate the safety and effectiveness of the
product in the treatment of a given disease and, typically, are well-controlled,
closely monitored studies conducted on a relatively small number of patients.
The optimal routes, dosages and schedules of administration should be determined
in these studies. When the Phase II trials are successfully completed, Phase III
studies are typically commenced. Phase III studies are expanded, controlled
trials that are intended to gather pivotal information about safety and efficacy
in order to evaluate the overall risk/benefit relationship of the experimental
product and provide an adequate basis for physician labeling. These studies may
also compare the safety and efficacy of the experimental product with currently
available products. It is not possible to estimate the time in which FDA
regulated Phase I, II and III studies will be completed with respect to a given
product, although the time period could be lengthy.
 
    The results of initial toxicology and clinical testing are not necessarily
predictive of results that will be obtained from subsequent or more extensive
toxicology and clinical testing, and there can be no assurance that further
clinical trials or toxicology studies will be successful. Companies in the
pharmaceutical industry have suffered significant setbacks in advanced clinical
trials, even after promising results in earlier trials. Although the FDA has
established a "botanical" committee to provide regulatory guidelines, including
guidelines for approval of herbal medicines as pharmaceuticals, the Company
believes that the FDA has never approved a multi-molecule, herbal
pharmaceutical. Standards approved by the FDA for approval of herbal medicines
that qualify as pharmaceuticals could result in competitive herbal medicines
that are not developed using the PharmaPrint-TM- Process. Also, adverse
governmental regulation that might arise from future legislative or
administrative action cannot be predicted.
 
    Following the successful completion of clinical investigation, the
toxicology and clinical evidence that has been accumulated is submitted to the
FDA as part of a new drug application (a "NDA"). Approval of a NDA is necessary
before a company may market a new drug product. The approval, if any, of a NDA
can take several years and depends upon the time it takes the FDA to review the
submitted data, the FDA's comments on the application and the time required to
provide satisfactory answers or additional data when requested. If regulatory
approval is obtained, such approval may involve limitations and restrictions on
the marketing of the Company's pharmaceutical products. In addition, any
marketed pharmaceutical product and its manufacture are subject to continuous
governmental review and post-market evaluation of approved pharmaceutical
products could result in withdrawal, suspension or limitation of approvals. Any
subsequent discovery of previously unrecognized problems could result in
restrictions on the pharmaceutical product or its manufacture, including
withdrawal of the pharmaceutical product from the market. Failure of the Company
to comply with applicable regulatory requirements can, among other things,
result
 
                                       12
<PAGE>
in fines, suspension of regulatory approvals, pharmaceutical product recalls,
seizure of products, operating restrictions or criminal prosecution.
 
    Continued compliance with current good manufacturing practices ("cGMP") is
required to be eligible to continue to manufacture and market the products once
they are approved. Failure to comply with cGMP regulations, or to comply with
other applicable legal requirements, can lead to federal seizure of violative
products, injunctive actions brought by the federal government, and potential
criminal liability on the part of the Company and of the officers and employees
of the Company who are responsible for the activities that lead to the
violations.
 
    In addition to the regulatory framework for pharmaceutical product
approvals, the Company is and may be subject to regulation under local, state,
federal and foreign law, including requirements regarding occupational safety,
laboratory practices and environmental protection, waste and water disposal, and
hazardous substance control. There can be no assurance that the Company will not
be required to incur significant costs to comply with such regulations as
manufacturing is increased to commercial volumes, or that the operations,
business or assets of the Company will not be materially and adversely affected
by current or future laws, rules, regulations and policies.
 
    The Company cannot predict whether new legislation or regulations governing
the Company's activities will be enacted by legislative bodies or promulgated by
agencies regulating the Company's products, or what the effect of any such
legislation or regulation on the Company's operations would be. There can be no
assurance that new legislation or regulation, including changes to existing laws
or regulations, will not materially adversely affect the business, financial
condition and results of operations of the Company.
 
INTELLECTUAL PROPERTY
 
    The Company's policy is to protect its technology by, among other things,
filing patent applications in the United States and internationally, for
technology that is considered important to the development of its business. The
Company intends to file additional patent applications, when appropriate,
relating to new developments or improvements in its technology and other
specific products that it develops. The Company also relies on trade secrets and
improvements, unpatented know-how and/or continuing technological innovation to
develop and maintain its competitive position.
 
    The Company plans to achieve a competitive advantage as the only provider of
multi-molecule botanical dietary supplements and pharmaceuticals that can market
its products on the basis of consistent composition, the presence of at least
one bioactive and proven bioactivity. This depends upon its ability to obtain a
patent covering the PharmaPrint-TM- Process that is broad enough to prevent
competitors from making such claims. The Company has filed with the PTO
applications for a broad process patent covering a method for making high
quality botanicals that incorporate the steps that make up the PharmaPrint-TM-
Process, as well as additional applications covering the application of this
method to the manufacture of 11 specific botanical compositions. To date, the
Company has not received any patents or notice of allowance of any patent
application for the PharmaPrint-TM- Process or any products it currently intends
to commercialize. A great deal of research and development work has taken place
in botanicals, including efforts focused on single-molecule bioactivity and
analysis of multiple botanical components. The Company believes the
PharmaPrint-TM- Process is unique and patentable because of its focus on
determining high quality botanicals by identifying bioactive components having
activity relevant to clinical indications and establishing manufacturing
standards covering the range of bioactivity of the total of said components, but
it is arguable that prior work on bioactivity relating to the development of
single molecule drugs or multi-molecule chemical composition analysis could
contradict nonobviousness of the Company's invention. The Company has received
several responses from the PTO with respect to its patent portfolio and intends
to continue to vigorously pursue the prosecution of its patent portfolio.
However, there can be no assurance that a patent
 
                                       13
<PAGE>
covering the PharmaPrint-TM- Process or any of the patents covering the specific
botanical compositions will issue.
 
    Many of the processes and much of the know-how of importance to the
Company's technology depend upon the non-patentable skills, knowledge and
experience of its scientific and technical personnel and collaborators. In
addition, certain of the Company's proprietary technology is held by the Company
as trade secrets. The Company's success will depend in part on its ability to
protect such trade secrets. To help protect its rights, the Company employs
various methods, such as requiring all employees, collaborators and significant
consultants and advisors to enter into confidentiality agreements with the
Company. There can be no assurance, however, that these agreements will provide
adequate protection for the Company's trade secrets, know-how or proprietary
information in the event of any unauthorized use or disclosure or that other
companies will not acquire or independently develop information the Company
considers to be proprietary.
 
    The Company's success will depend, in part, on its ability to continue to
obtain patent protection for its technologies and products, to preserve its
trade secrets and to operate without infringing on the proprietary rights of
third parties.
 
OUTSOURCING RELATIONSHIPS
 
    Most of the Company's current research and development activities and a
significant amount of it regulatory activities are performed in conjunction with
various third party laboratories, manufacturing facilities and service
providers. The Company also relies on collaborative arrangements with various
third parties to manufacture, market and distribute its products.
 
RAW MATERIALS
 
    The Company procures the botanical extracts necessary for development of its
dietary supplements and pharmaceutical products primarily from Hauser Inc.,
Indena SpA and Finzelberg. The Company believes that there are numerous
alternative sources throughout the United States, Europe and Asia from which the
Company can obtain these botanical extracts.
 
INSURANCE
 
    The testing, marketing and sale of human health care products entail an
inherent risk of allegations of product liability. Such risks exist in the
conduct of clinical trials and with respect to the distribution and sale of
those products, if any, that receive regulatory approval for commercial sale,
and with respect to products that the Company expects to be sold as dietary
supplements. The Company maintains product liability insurance coverage it
believes to be adequate in amount and coverage. There can be no assurance that
such insurance will continue to be available at acceptable costs or that claims
in excess of the Company's insurance coverage or not covered by the Company's
insurance will be asserted against the Company.
 
EMPLOYEES
 
    As of March 31, 1998, the Company had 24 employees of which 11 are engaged
in research and development activities and 13 are engaged in general and
administrative functions. The Company contracts with external entities for many
of the services it requires, including research and development, regulatory and
manufacturing services.
 
                                       14
<PAGE>
ITEM 2.  PROPERTIES
 
    The Company's headquarters currently occupy approximately 8,800 square feet
in Irvine, California. The Company leases its headquarters facility for
approximately $19,500 per month, pursuant to a lease agreement that expires in
December 1998.
 
ITEM 3.  LEGAL PROCEEDINGS
 
    Other than described below, the Company is not presently involved in any
legal proceeding.
 
    The Company filed an action against Costas Loullis, Ph.D., the Company's
former Group Senior Vice President of Research and Development, in December
1997, in Superior Court in the County of Orange, State of California. The
Company's action alleges, among other things, conversion and misappropriation of
Company property, fraud, breach of fiduciary obligations and related damages
that stems from Dr. Loullis' employment with the Company from September 1996
through October 1997 and the termination of that employment. Dr. Loullis filed a
response and a cross-complaint to the Company's action. The cross-complaint
contains claims for unpaid wages, accrued benefits, stock option rights, breach
of contract, wrongful termination and ownership rights in the Company's pending
patent applications. The Company believes that the claims asserted by Dr.
Loullis have limited merit, if any, and intends to dispute any and all claims
raised by Dr. Loullis vigorously. The Company does not believe this matter
represents a significant risk of material liability to the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of the Company's fiscal year ended March 31, 1998.
 
EXECUTIVE OFFICERS OF PHARMAPRINT INC.
 
    The following table sets forth certain information concerning the executive
officers of the Company as of May 31, 1998:
 
<TABLE>
<CAPTION>
NAME                                            AGE                                 POSITION
------------------------------------------      ---      ---------------------------------------------------------------
<S>                                         <C>          <C>
Elliot P. Friedman(1).....................          44   Chairman of the Board of Directors and Chief Executive Officer
 
Robert J. Burgess.........................          49   President and Chief Operating Officer
 
Tasneem A. Khwaja, Ph.D.(1)...............          63   Chief Scientific Officer and Corporate Secretary
 
Joel Bresser, Ph.D........................          43   Senior Vice President of DSHEA Products
 
Paul Johnston, Ph.D.......................          48   Senior Vice President of Development
 
Michael Tempesta, Ph.D....................          45   Senior Vice President of Research
 
Phillip G. Trad(1)........................          49   Senior Vice President, General Counsel
 
James R. Wodach...........................          36   Senior Vice President and Chief Financial Officer
</TABLE>
 
------------------------
 
(1) Member of the Board of Directors of the Company
 
    ELLIOT P. FRIEDMAN joined the Company as Chief Financial Officer and a
Director in November 1994 and became President and Chief Executive Officer in
October 1995 and Chairman of the Board of Directors in April 1997. From July
1990 to July 1994, Mr. Friedman was co-founder and Chief Executive Officer of
Biotek Solutions, a provider of monoclonal antibody and DNA-based systems used
by pathologists for the diagnosis of cancer. Mr. Friedman received a Science of
Management degree from the Massachusetts Institute of Technology.
 
                                       15
<PAGE>
    ROBERT J. BURGESS joined the Company as Executive Vice President and Chief
Operating Officer in May 1996 and became President and Chief Operating Officer
in April 1997. From April 1995 to April 1996, Mr. Burgess provided full-time
consulting services to the Company. From April 1994 to April 1995, Mr. Burgess
served as Chief Operating Officer of Dimension Memory, Inc. ("Dimension Memory")
a company that trades in computer microchips. From February 1993 to April 1994,
Mr. Burgess served as Chief Executive Officer of J. Micro Trading, an Australian
company that trades in computer microchips. From January 1991 to January 1993,
he was Chief Operating Officer of Integrated Memory Systems, which manufactured
computer memory modules.
 
    TASNEEM A. KHWAJA, Ph.D. is founder of the Company and has served as
Secretary of the Company since its inception in 1994 and Chief Scientific
Officer since October 1995. From September 1994 to April 1997, Dr. Khwaja served
as Chairman of the Board of Directors and from November 1994 to October 1995
served as President and Chief Executive Officer of the Company. Dr. Khwaja has
been an Associate Professor of Pathology at the USC School of Medicine since
1973. Dr. Khwaja received a Ph.D. in Organic Chemistry and Chemistry of Nucleic
Acids from Cambridge University.
 
    JOEL BRESSER, Ph.D. joined the Company as Senior Vice President of DSHEA
Products in October 1997. From October 1995 to October 1997, Dr. Bresser was the
founder and owner of Intellihance, Inc., a consulting company that provides
strategic, marketing and technical services to healthcare and biotechnology
companies. From January 1989 to October 1995, Dr. Bresser served in various
executive capacities at Aprogenex, Inc. including President and Chief Executive
Officer from April 1992 to October 1995. Dr. Bresser received a Ph.D. in
Molecular Biology from Rice University.
 
    PAUL JOHNSTON, Ph.D. joined the Company as Vice President of Development in
March 1997, and became Senior Vice President of Development in January 1998.
From February 1995 to March 1997, Dr. Johnston was an independent consultant to
a number of biotechnology start-up companies. From July 1993 to February 1995,
Dr. Johnston served as the Vice President of the Product Development Division of
NeXstar Pharmaceuticals, Inc., from September 1990 to July 1993, he was Senior
Director of Pharmaceutical Development of Amylin Pharmaceutical, Inc. and prior
to that held senior positions at Molecular Devices Corporation and Genentech
Incorporated. Dr. Johnston received a Ph.D. in Biochemistry from Brandeis
University.
 
    MICHAEL TEMPESTA, Ph.D. joined the Company as Senior Vice President of
Research in March 1997. From February 1995 to February 1997, Dr. Tempesta was
the Chief Scientific Officer of Larex, Inc., a biotechnology company. From 1990
to 1994, Dr. Tempesta served as Chief Scientific Officer and in various
executive positions at Shaman Pharmaceuticals, Inc. Dr. Tempesta received his
Ph.D. in Organic Chemistry from the University of Arizona.
 
    PHILLIP G. TRAD has been a Director of the Company since November 1995 and
Senior Vice President and General Counsel since November 1997. From 1988 to
November 1997, Mr. Trad operated his own law practice in California. Mr. Trad
has more than 17 years of experience in general, civil and commercial
litigation.
 
    JAMES R. WODACH, CPA joined the Company as Senior Vice President and Chief
Financial Officer in December 1996. From April 1996 to December 1996, Mr. Wodach
was Director of Finance for Paragon Biomedical, Inc. From October 1995 to April
1996, he was an independent consultant. From April 1994 to October 1995, Mr.
Wodach was Senior Vice President of Finance, from April 1993 to April 1994
Senior Vice President and Chief Financial Officer, from July 1992 to April 1993
Vice President of Finance, and from November 1989 to July 1992, Controller for
Regency Health Services, Inc.
 
                                       16
<PAGE>
                                    PART II
 
ITEM 5.  MARKET FOR PHARMAPRINT INC. COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS
 
    The Company's Common Stock has been traded on The National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") National Market under
the symbol "PPRT" since the Company's initial public offering in August 1996.
The following table sets forth the range of high and low sales prices per share
for the Common Stock, as reported by NASDAQ for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997                                                      HIGH        LOW
---------------------------------------------------------------------------  ---------  ---------
<S>                                                                          <C>        <C>
Fourth Quarter.............................................................  $    5.50  $   3.875
Third Quarter..............................................................  $    5.50  $    4.50
Second Quarter (from August 16, 1996)......................................  $    6.50  $   4.625
 
<CAPTION>
 
YEAR ENDED MARCH 31, 1998
---------------------------------------------------------------------------
<S>                                                                          <C>        <C>
Fourth Quarter.............................................................  $   12.75  $   8.125
Third Quarter..............................................................  $   18.13  $    8.25
Second Quarter.............................................................  $   14.50  $    6.00
First Quarter..............................................................  $    7.62  $    4.00
<CAPTION>
 
YEAR ENDED MARCH 31, 1999                                                      HIGH        LOW
---------------------------------------------------------------------------  ---------  ---------
<S>                                                                          <C>        <C>
First Quarter (through June 12, 1998)......................................  $   14.00  $   10.00
</TABLE>
 
    As of June 12, 1998, shares of the Company's Common Stock were held of
record by approximately 121 stockholders and beneficially owned by approximately
1,889 stockholders.
 
    The Company has not declared or paid any cash dividends on its Common Stock
since its inception and does not currently intend to declare or pay any
dividends in the foreseeable future.
 
ITEM 6:  MANAGEMENT'S PLAN OF OPERATION
 
OVERVIEW
 
    PharmaPrint uses its PharmaPrint-TM- Process technology to develop high
quality dietary supplement and pharmaceutical products from botanical sources.
The Company believes that its PharmaPrint-TM- Process technology represents a
new paradigm in the development of therapeutic products from botanical sources.
Unlike the traditional drug development process of identifying, isolating and
synthesizing single bioactive molecules from plant and other sources, the
Company's core technologies were developed based on empirical data that suggests
that the health benefits and safe usage of certain plant-derived therapeutics
might be the result of the natural combination of multiple molecules found in
the plant extract and that single molecules, in isolation, may not replicate the
natural plant's effectiveness. The PharmaPrint-TM- Process technology enables
the Company to identify and quantify the bioactives within plant sources that
are believed to provide therapeutic or other health benefits and produce dietary
supplements and pharmaceuticals having consistent batch-to-batch quantities of
these bioactives.
 
    Since its inception in 1994, the Company has engaged primarily in research
and development activities and intends to continue research, development and
testing of its proprietary technologies and dietary supplement and
pharmaceutical products. The Company has not received any royalties or revenues
from product sales.
 
    In October 1997, the Company entered into the AHP Agreements whereby the
Company will apply its PharmaPrint-TM- Process to produce a line of high quality
dietary supplement products to be marketed in the U.S., Canada and Mexico
exclusively by AHP under the Centrum-Registered Trademark- brand name. In
exchange for the exclusive right to use the PharmaPrint-TM- Process in the
production of dietary supplements, AHP paid the Company $2,500,000 million as an
up-front licensing fee and is required to pay additional fees of $500,000
 
                                       17
<PAGE>
upon each of (i) the issuance of a patent containing claims covering the
PharmaPrint-TM- Process and (ii) receipt and acceptance of the initial AHP
Products in sufficient time to permit AHP to meet its proposed product launch
date. AHP has agreed, in the first two years following shipment by AHP of
commercial quantities of the first AHP Product, to spend annually at least the
lessor of $20 million or an amount equal to 50% of net sales of the AHP Products
in advertising and other marketing expenditures. AHP has also agreed to purchase
the AHP Products from the Company under a Supply Agreement at specified prices.
In addition, if the Company succeeds in securing a patent containing a claim or
claims comprising the PharmaPrint-TM- Process applied generally or on a
product-by product basis, AHP will pay royalties to the Company on net sales of
such patented AHP products of 4% in the first year and 6% thereafter. AHP plans
to commence marketing six of the Company's dietary supplement products under
development in 1998. AHP and the Company will examine from time to time the
opportunity to increase or modify this product line.
 
    The Company is also developing pharmaceuticals from natural plant sources
for the purpose of seeking FDA approval. Products derived from the same
botanical sources as those used in the Company's product development programs
historically have been widely used as medicines and dietary supplements. Because
of the well-documented history of safe usage of dietary supplements derived from
the same plant source as the Company's drug candidates, the Company believes
that, in certain cases, the FDA may allow the Company, or its prospective
partners, to commence clinical trials at the Phase II stage, while concurrently
performing toxicology studies. The Company has received such FDA permission for
its initial pharmaceutical candidate, PPRT-321. The Company anticipates filing
investigational new drug ("IND") applications for at least two other drug
candidates within the next 12 months. As a result of these anticipated filings,
and the clinical development program for PPRT-321, the Company believes that its
research and development expenses for its pharmaceutical candidates will
substantially increase over the next 12 months.
 
    The Company incurred approximately $2,980,000 and $9,785,000 of research and
development expenses relating to its dietary supplement and pharmaceutical
product candidates for the years ended March 31, 1997 and 1998, respectively.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Company has financed its operations primarily through the sale of equity
securities. From inception (September 15, 1994) through May 1996, the Company
had raised an aggregate net amount of approximately $2,100,000 through private
sales of equity securities. In August 1996, the Company completed an initial
public offering of 3,000,000 shares of its common stock at $5.00 per share,
raising net proceeds of approximately $12.7 million. In February 1998, the
Company completed a public offering of 2,587,500 shares of its common stock at
$10.50 per share. The net proceeds from this public offering were approximately
$24.4 million.
 
    During the year ended March 31, 1998, the Company increased its staff of
full-time employees and consultants from 12 to 24. The Company expects to
continue to significantly increase its staffing levels in the next 12 months.
 
    In November 1997, the Company entered into a $20 million purchase commitment
with a vendor to purchase raw materials to be used for three herbal products and
to provide processing services for an additional herbal product over the next
three years. All of the aforementioned products were anticipated to be used by
the Company to meet its obligations under the AHP Agreements. Subsequently, the
Company determined that one of the raw materials to be supplied by the vendor
did not meet its specifications and that another raw material contained a
certain fungicide. The Company's supplier has agreed to take back the raw
materials that did not meet specifications, however, the supplier has not
admitted any problems with the raw materials. The Company has since sourced each
of these raw materials from different suppliers. However, due to the
uncertainties surrounding the quality of the raw materials
 
                                       18
<PAGE>
discussed above, the Company is unable to determine whether it will be required
to fulfill its $20 million purchase commitment in the future. The Company does
not presently have any material commitments for capital expenditures.
 
    The Company has incurred net operating losses since its inception and
expects substantial net operating losses in the near term as it continues its
research and development efforts. The Company will incur additional net
operating losses until such time as product or service sales can generate
sufficient revenue to fund continuing operations. The Company's ability to
generate revenues is dependent upon many factors, including its ability to
develop, introduce and market products and obtain regulatory approvals.
 
    While the Company has not had any revenue to date, the Company believes that
its current capital resources and the proceeds of its recently completed public
offering will enable it to maintain its current and planned operations for at
least the next 15 months. However, no assurance can be given that there will be
no change in the Company's operations that would consume available resources
more rapidly than anticipated. The Company will need substantial funds to
support its long-term pharmaceutical product development programs. Currently,
the Company has no established bank financing arrangement. The amount and type
of the Company's future capital requirements will depend on many factors,
including, without limitation, the progress of the Company's research, drug
discovery and development programs, the progress and results of toxicology
studies and clinical trials, the timing and costs involved in obtaining
regulatory approvals, the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, competing
technological and market developments, changes in the Company's existing
research relationships, the ability of the Company to establish collaborative
arrangements, the initiation of commercialization activities, the purchase of
capital equipment and the availability of other financing. To the extent that
the Company's capital resources, including the net proceeds from its recently
completed public offering, are insufficient to meet its operating requirements,
the Company will seek additional funds through equity or debt financings,
collaborative or other arrangements with corporate partners, licensees and
others. The Company has no current arrangements with respect to, or sources of,
such additional financing, and the Company does not anticipate that existing
stockholders will provide any portion of the Company's future financing
requirements. Any additional financings may have the effect of substantially
diluting the Company's book value per share and the ownership percentage of the
Company's then existing stockholders. Additionally, no assurance can be given
that additional financing will be available when needed or upon terms acceptable
to the Company. If adequate funds are not available, the Company may be required
to delay or terminate expenditures for certain or all of its programs or to
license to third parties the rights to commercialize products or technologies
that the Company would otherwise seek to develop itself, any of which could have
a materially adverse effect on the business, financial condition or results of
operations of the Company.
 
    At March 31, 1998, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $27.2 million; such
carryforwards expire in various years through 2013.
 
YEAR 2000
 
    The Company is currently addressing a universal situation commonly referred
to as the "Year 2000 Problem." The Year 2000 Problem relates to the inability of
certain computer software programs to properly recognize and process
date-sensitive information relative to the year 2000 and beyond. During the year
ended March 31, 1998, the Company developed a plan to devote the necessary
resources to identify and modify systems impacted by the Year 2000 Problem, or
implement new systems to become year 2000 compliant in a timely manner. The cost
of executing this plan is not expected to have a material impact on the
Company's results of operations or financial condition. In addition, the Company
has contacted its major suppliers and vendors to ensure their awareness of the
Year 2000 problem. If the Company, its suppliers or vendors are unable to
resolve issues related to the Year 2000 Problem on a timely basis, it could have
a material adverse effect on the financial condition or results of operations of
the Company.
 
                                       19
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Report of Independent Public Accountants...................................................................          21
 
Consolidated Balance Sheet as of March 31, 1998............................................................          22
 
Consolidated Statements of Operations for the years ended March 31, 1997 and 1998 and the period from
  inception (September 15, 1994) through March 31, 1998....................................................          23
 
Consolidated Statements of Stockholders' Equity for the period from inception (September 15, 1994) through
  March 31, 1998...........................................................................................          24
 
Consolidated Statements of Cash Flows for the years ended March 31, 1997 and 1998 and the period from
  inception (September 15, 1994) through March 31, 1998....................................................          25
 
Notes to Consolidated Financial Statements.................................................................          26
</TABLE>
 
                                       20
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To PharmaPrint Inc. and Subsidiary:
 
    We have audited the accompanying consolidated balance sheet of PharmaPrint
Inc. and Subsidiary (a Delaware corporation in the development stage) as of
March 31, 1998 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended March 31, 1997 and 1998
and for the period from inception (September 15, 1994) to March 31, 1998. 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 respects, the financial position of PharmaPrint
Inc. and Subsidiary as of March 31, 1998 and the results of their operations and
their cash flows for the years ended March 31, 1997 and 1998 and for the period
from inception (September 15, 1994) to March 31, 1998 in conformity with
generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Orange County, California
June 1, 1998
 
                                       21
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
                   CONSOLIDATED BALANCE SHEET--MARCH 31, 1998
<TABLE>
<S>                                                                              <C>
                                           ASSETS
 
CURRENT ASSETS:
  Cash and cash equivalents....................................................  $21,557,916
  Inventories..................................................................    2,183,282
  Other current assets.........................................................      899,724
                                                                                 -----------
    Total current assets.......................................................   24,640,922
FIXED ASSETS...................................................................      354,769
OTHER ASSETS, net of accumulated amortization of $41,465.......................      443,394
                                                                                 -----------
    Total assets...............................................................  $25,439,085
                                                                                 -----------
                                                                                 -----------
 
<CAPTION>
 
                            LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                              <C>
 
CURRENT LIABILITIES:
  Accounts payable.............................................................  $ 4,490,893
  Accrued expenses.............................................................      588,882
  Deferred revenue.............................................................    2,500,000
                                                                                 -----------
    Total current liabilities..................................................    7,579,775
                                                                                 -----------
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value--1,000,000 shares authorized, no shares
    issued or outstanding......................................................      --
  Common stock, $.001 par value--24,000,000 shares authorized, 13,641,184
    shares issued and outstanding..............................................       13,641
  Additional paid-in capital...................................................   49,076,549
  Deferred compensation........................................................      (54,433)
  Deficit accumulated during the development stage.............................  (31,176,447)
                                                                                 -----------
    Total stockholders' equity.................................................   17,859,310
                                                                                 -----------
    Total liabilities and stockholders' equity.................................  $25,439,085
                                                                                 -----------
                                                                                 -----------
</TABLE>
 
The accompanying notes are an integral part of this consolidated balance sheet.
 
                                       22
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                           PERIOD FROM INCEPTION
                                                             YEAR ENDED      YEAR ENDED     (SEPTEMBER 15, 1994)
                                                           MARCH 31, 1997  MARCH 31, 1998  THROUGH MARCH 31, 1998
                                                           --------------  --------------  ----------------------
<S>                                                        <C>             <C>             <C>
REVENUES.................................................   $    --         $    --           $      --
 
EXPENSES:
  Research and development...............................      2,980,064       9,785,206            13,530,604
  General and administrative.............................      2,919,351       4,534,643             8,213,103
  Stock compensation.....................................      5,333,437       3,795,553             9,432,740
                                                           --------------  --------------         ------------
                                                              11,232,852      18,115,402            31,176,447
                                                           --------------  --------------         ------------
 
NET LOSS.................................................   $(11,232,852)   $(18,115,402)     $    (31,176,447)
                                                           --------------  --------------         ------------
                                                           --------------  --------------         ------------
BASIC/DILUTED LOSS PER COMMON SHARE......................   $      (1.15)   $      (1.59)     $          (3.29)
                                                           --------------  --------------         ------------
                                                           --------------  --------------         ------------
BASIC/DILUTED WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING............................................      9,770,575      11,363,130             9,488,810
                                                           --------------  --------------         ------------
                                                           --------------  --------------         ------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       23
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                  COMMON STOCK
                            ------------------------   ADDITIONAL                     STOCK            DEFICIT
                            NUMBER OF                   PAID-IN       DEFERRED     SUBSCRIPTION   ACCUMULATED DURING
                              SHARES       AMOUNT       CAPITAL     COMPENSATION    RECEIVABLE    DEVELOPMENT STAGE       TOTAL
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
<S>                         <C>         <C>           <C>           <C>            <C>            <C>                  <C>
BALANCE, September 15, 1994
  (inception)..............    --       $    --       $    --       $   --          $  --            $  --             $    --
Issuance of common stock at
  $.001 per share to
  officer in November 1994
  for cash and receivable.. 4,265,845          4,100       --           --             (4,000)          --                      100
Issuance of common stock at
  $.004 per share to
  officer in November 1994
  for cash and receivable.. 1,248,540          5,000       --           --             (2,500)          --                    2,500
Issuance of common stock at
  $.001 per share in
  November 1994 for
  receivable...............   104,045            100       --           --               (100)          --                  --
Issuance of common stock at
  $.96 per share in
  December 1994 for cash
  and receivable...........   624,270        600,000       --           --           (200,000)          --                  400,000
Issuance of common stock at
  $.96 per share in March
  1995 for technology
  rights...................   328,563        315,789       --           --             --               --                  315,789
Net loss...................    --            --            --           --             --                (484,008)         (484,008)
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
BALANCE, MARCH 31, 1995.... 6,571,263        924,989       --           --          ( 206,600)           (484,008)          234,381
Fair value of options
  granted (based upon
  estimated fair values of
  common stock of $1.68 to
  $2.40 per share):
  July 1, 1995 (67,629
    options)...............    --            --             48,750      --             --               --                   48,750
  November 1, 1995 (88,438
    options)...............    --            --            127,500      --             --               --                  127,500
  January 1, 1996 (88,438
    options)...............    --            --            127,500      --             --               --                  127,500
  March 22, 1996 (712,708
    options)...............    --            --          1,027,500   (1,027,500)       --               --                  --
Issuance of common stock in
  private placements in
  December 1995 at $2.40
  per share, net of
  expenses.................   618,034      1,314,616       --           --           (100,000)          --                1,214,616
Stock issued for services
  in March 1996............   624,270      1,500,000       --        (1,500,000)       --               --                  --
Fair value of warrants
  issued with notes
  payable..................    --            --             31,250      --             --               --                   31,250
Payments on stock
  subscription
  receivable...............    --            --            --           --            200,000           --                  200,000
Contribution of shares by
  stockholder in March
  1996..................... (1,336,978)      --            --           --             --               --                  --
Net loss...................    --            --            --           --             --              (1,344,185)       (1,344,185)
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
BALANCE, MARCH 31, 1996.... 6,476,589      3,739,605     1,362,500   (2,527,500)     (106,600)         (1,828,193)          639,812
Issuance of common stock in
  private placements in
  April 1996 at $2.40 per
  share, net of expenses
  and repurchased shares...    97,995        185,342       --           --             --               --                  185,342
Payments on stock
  subscription
  receivable...............    --            --            --           --            106,600           --                  106,600
Common stock issued upon
  cancellation of options
  in May 1996..............   712,708      1,712,500      (127,500)     --             --               --                1,585,000
Restricted shares issued
  for services upon
  cancellation of options
  in May 1996..............   712,708      2,984,466    (1,027,500)  (1,956,966)       --               --                  --
Issuance of common stock in
  initial public offering
  in August 1996, net of
  expenses................. 3,000,000     12,704,985       --           --             --               --               12,704,985
Remeasurement of stock
  issued in March 1996.....    --          1,500,000       --        (1,500,000)       --               --                  --
Amortization of deferred
  compensation.............    --            --            --         3,000,000        --               --                3,000,000
Fair value of options
  granted to consultants in
  October 1996.............    --            --            274,433     (174,433)       --               --                  100,000
Fair value of stock
  transferred by a major
  shareholder to third
  parties as compensation
  for services in December
  1996.....................    --            --            648,437      --             --               --                  648,437
Net loss...................    --            --            --           --             --             (11,232,852)      (11,232,852)
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
BALANCE, MARCH 31, 1997.... 11,000,000    22,826,898     1,130,370   (3,158,899)       --             (13,061,045)        7,737,324
Remeasurement of restricted
  shares issued for
  services in May 1996.....    --            579,074       --          (579,074)       --               --                  --
Fair value of options
  granted to consultant in
  June 1996................    --            --            112,013      --             --               --                  112,013
Exercise of stock
  options..................     5,202          5,000       --           --             --               --                    5,000
Conversion to $.001 par
  value stock..............    --        (23,399,966)   23,399,966      --             --               --                  --
Exercise of warrants.......    48,482             48           (48)     --             --               --                  --
Issuance of common stock in
  public offering in
  February 1998, net of
  expenses................. 2,587,500          2,587    24,434,248      --             --               --               24,436,835
Amortization of deferred
  compensation.............    --            --            --         3,683,540        --               --                3,683,540
Net loss...................    --            --            --           --             --             (18,115,402)      (18,115,402)
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
BALANCE, MARCH 31, 1998.... 13,641,184  $     13,641  $ 49,076,549  $   (54,433)    $  --            $(31,176,447)     $ 17,859,310
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
                            ----------  ------------  ------------  ------------   ------------   ------------------   ------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       24
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                 PERIOD FROM
                                                                                             INCEPTION (SEPTEMBER
                                                               YEAR ENDED      YEAR ENDED     15, 1994) THROUGH
                                                             MARCH 31, 1997  MARCH 31, 1998     MARCH 31, 1998
                                                             --------------  --------------  --------------------
<S>                                                          <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.................................................   $(11,232,852)   $(18,115,402)    $    (31,176,447)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization............................          9,188         102,998              120,296
  Amortization of discount on notes payable................         31,250         --                    31,250
  Stock issued for licensing rights........................        --              --                   315,789
  Stock and options issued for services....................      5,333,437       3,795,553            9,432,740
  Changes in assets and liabilities:
  Increase in inventories..................................        --           (2,183,282)          (2,183,282)
  Increase in other current assets.........................       (220,018)       (562,131)            (899,724)
  Increase in other assets.................................        (84,598)       (338,065)            (484,859)
  Decrease in amount due to USC............................       (176,000)        --                 --
  Increase in accounts payable and accrued
    expenses...............................................        973,554       3,985,179            5,079,775
  Increase in deferred revenue.............................        --            2,500,000            2,500,000
                                                             --------------  --------------  --------------------
  Net cash used in operating activities....................     (5,366,039)    (10,815,150)         (17,264,462)
                                                             --------------  --------------  --------------------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of fixed assets.................................       (194,759)       (238,841)            (433,600)
                                                             --------------  --------------  --------------------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock...............     12,984,530      24,441,835           38,949,378
  Proceeds from stock subscription receivable..............        106,600         --                   306,600
  Proceeds from notes payable..............................         20,000         --                   270,000
  Repayment of notes payable...............................       (270,000)        --                  (270,000)
                                                             --------------  --------------  --------------------
  Net cash provided by financing activities................     12,841,130      24,441,835           39,255,978
                                                             --------------  --------------  --------------------
 
NET INCREASE IN CASH AND CASH EQUIVALENTS..................      7,280,332      13,387,844           21,557,916
CASH AND CASH EQUIVALENTS, beginning of
  period...................................................        889,740       8,170,072            --
                                                             --------------  --------------  --------------------
CASH AND CASH EQUIVALENTS, end of period...................   $  8,170,072    $ 21,557,916     $     21,557,916
                                                             --------------  --------------  --------------------
                                                             --------------  --------------  --------------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       25
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. ORGANIZATION, NARRATIVE DISCUSSION OF THE BUSINESS AND RISK FACTORS
 
ORGANIZATION
 
    PharmaPrint Inc. (the "Company" or PharmaPrint"), a development stage
company, was originally incorporated in the State of California in September
1994. In October 1997, the Company's state of incorporation was changed from
California to Delaware. The Company was formed in order to complete the
development of and commercialize the research initiated by Dr. Tasneem A.
Khwaja, a founder and significant stockholder of the Company, over a 20 year
period at the University of Southern California ("USC") School of Medicine.
 
NARRATIVE DESCRIPTION OF THE BUSINESS
 
    PharmaPrint uses its PharmaPrint-TM- Process technology to develop high
quality dietary supplement products and pharmaceuticals from botanical sources.
Unlike the traditional drug development process of identifying and synthesizing
single bioactive molecules from plant sources, the Company's core technologies
were developed based on empirical data that suggests that the health benefits
and safe usage of certain plant-derived therapeutics might be the result of the
natural combination of multiple molecules found in the plant extract and that
single molecules, in isolation, may not replicate the natural plants'
effectiveness. The PharmaPrint-TM- Process technology enables the Company to
identify, quantify and standardize the bioactives within plant sources that are
believed to provide therapeutic benefits and produce dietary supplements and
pharmaceuticals having consistent batch-to-batch quantities and ratios of these
bioactives.
 
    The Company is applying a dual commercialization strategy with its
PharmaPrint-TM-Process technology. The first application of the PharmaPrint-TM-
Process is for the development of high quality, herbal dietary supplements. The
second application of the PharmaPrint-TM- Process is the development of
FDA-approvable pharmaceuticals from natural plant sources. The Company's initial
pharmaceutical product candidate, PPRT-321, a saw palmetto-derived drug that is
being developed for the treatment of symptoms associated with benign prostatic
hyperplasia is currently in Phase II clinical trials. In addition, the Company
has begun development of five additional plant-derived medicines that have long
histories of safe use and indications of efficacy.
 
DEVELOPMENT STAGE COMPANY AND RISK FACTORS
 
    PharmaPrint is a development stage company. Since inception (September 15,
1994), the Company has engaged primarily in research and development activities
and intends to continue research, development and testing of its proprietary
technologies and dietary supplement and pharmaceutical products. The Company has
not received any royalties or revenues from product sales.
 
    The Company has yet to generate revenues and has no assurance of significant
future revenues. There can be no assurance that the Company will receive
royalties from potential sales of its dietary supplements, obtain FDA approval
for its pharmaceutical candidates or be able to further market its
PharmaPrint-TM-Process. The Company is likely to incur substantial and
increasing operating losses as it continues its research and development efforts
and until such time, if ever, as product sales, royalties, and license and
development and other fees can generate sufficient revenue to fund its
continuing operations. The Company's future capital requirements will depend on
many factors, including but not limited to the
 
                                       26
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
1. ORGANIZATION, NARRATIVE DISCUSSION OF THE BUSINESS AND RISK FACTORS
(CONTINUED)
Company's ability to further market its PharmaPrint-TM- Process to third
parties, overall product development costs including the cost of toxicology
testing and clinical trials, the ability to obtain certain patent approvals, the
length of time required to obtain FDA approval, if any, competing technological
and market developments, changes in existing collaborative relationships, sales
and marketing arrangements and the costs of establishing subcontracts for
research and development. The Company believes that its current capital
resources will enable it to maintain its current and planned operations for at
least the next 15 months. However, no assurance can be given that additional
capital, if needed, will be available when required or upon terms acceptable to
the Company.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
PRINCIPLES OF CONSOLIDATION
 
    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary PharmaPrint B.V. All significant intercompany
accounts and transactions have been eliminated in consolidation.
 
USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
CASH AND CASH EQUIVALENTS
 
    For financial reporting purposes, the Company considers all highly liquid
instruments purchased with original maturities of three months or less to be
cash equivalents.
 
INVENTORIES
 
    Inventories are stated at the lower of cost (determined on the first-in,
first-out method) or market. At March 31, 1998 inventories consisted entirely of
purchased raw materials to be used in the production of products under the
American Home Products Corporation ("AHP") agreements.
 
FIXED ASSETS
 
    Fixed assets are stated at cost and consisted of the following at March 31,
1998:
 
<TABLE>
<S>                                                                 <C>
Equipment.........................................................  $ 254,599
Furniture.........................................................    179,001
Less accumulated depreciation.....................................    (78,831)
                                                                    ---------
                                                                    $ 354,769
                                                                    ---------
                                                                    ---------
</TABLE>
 
    Depreciation is provided using the straight-line method over the estimated
useful life for equipment of three years and furniture for five years.
 
                                       27
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER LONG-TERM ASSETS
 
    Organization costs are amortized on a straight-line basis over five years.
Patent costs are amortized on a straight-line basis over 10 years. The Company
periodically evaluates long-term assets for impairment under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121.
 
DEFERRED REVENUE
 
    Deferred revenue represents an up-front licensing fee received from AHP for
products developed by the Company for AHP. Such licensing fee will be recognized
as revenue in the period the fee is earned and at the time that it is no longer
forfeitable. This will occur at the time of the first sale by AHP of the initial
AHP Products. See Note 3.
 
RESEARCH AND DEVELOPMENT COSTS
 
    Research and development costs are charged to expense as incurred.
 
INCOME TAXES
 
    The Company accounts for income taxes using the liability method as
prescribed by SFAS No. 109 "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax basis of assets and liabilities using enacted tax
rules that will be in effect when the differences are expected to reverse.
 
LOSS PER SHARE
 
    During fiscal 1998, the Company adopted SFAS No. 128 "Earnings Per Share."
As required pursuant to SFAS No. 128, basic loss per share is computed based on
the weighted average number of common shares outstanding for the period assuming
no dilution from outstanding stock options and diluted loss per share is
computed assuming dilution from stock options and warrants. Prior period net
loss per share data have been restated for all periods presented. The Company
excluded all outstanding stock options and warrants from the diluted computation
as their effect is antidulutive. See Note 6.
 
STOCK-BASED COMPENSATION
 
    The Company accounts for stock-based compensation in accordance with SFAS
No. 123 "Accounting for Stock-Based Compensation." As permitted under SFAS No.
123, the Company will continue to account for employee and director stock
options in accordance with APB Opinion No. 25 and has made the necessary pro
forma disclosures mandated by SFAS No. 123. Compensation expense related to
stock options granted to others is calculated using the fair market value of the
stock option on the date of grant. See Note 6.
 
CHANGE IN PAR VALUE
 
    In connection with the Company's reincorporation to Delaware, the par value
of the Company's common stock was changed from no par value to $.001 par value.
The change in par value has been
 
                                       28
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recorded as an adjustment to additional paid-in capital and common stock in the
accompanying consolidated statement of stockholders' equity.
 
PENDING ACCOUNTING PRONOUNCEMENTS
 
    In June 1997, the Financial Accounting Standards Board ("FSAB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997, which
established standards for the reporting and display of comprehensive income and
its components in financial statements. Comprehensive income generally
represents all changes in stockholders' equity except those resulting from
investments by and distributions to owners. Currently, no difference exists
between the Company's net loss and its comprehensive net loss.
 
    In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," effective for fiscal years beginning
after December 15, 1997, which established standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report information
about operating segments in interim financial reports. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company will adopt this standard in
the first quarter of fiscal 1999.
 
    In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position No. 98-5 "Pre-Opening Costs". This statement provides
guidance on the financial reporting of start-up costs and organization costs.
The statement is effective for fiscal years beginning after December 15, 1998
and the Company has determined that the effect of adopting this statement will
not have a material effect on the financial condition or results of operations
of the Company.
 
RECLASSIFICATIONS
 
    Certain reclassifications were made to prior period amounts, enabling them
to conform to current period presentation.
 
3. AGREEMENTS
 
AHP AGREEMENTS
 
    In October 1997, the Company entered into several agreements with AHP
whereby AHP will market the Company's dietary supplements under AHP's
Centrum-Registered Trademark- brand name. Pursuant to the terms of the
agreement, AHP paid the Company $2,500,000 in an up-front licensing fee and is
required to pay additional fees of $500,000 upon each of (i) the issuance of a
patent containing claims covering the PharmaPrint-TM- Process and (ii) receipt
and approval by AHP of the initial AHP Products in sufficient time to permit AHP
to meet its proposed launch date. Additionally, AHP has agreed to spend at least
the lesser of $20 million or an amount equal to 50% of net sales of the AHP
Products in advertising and other marketing expenditures during each of the two
years following product launch. AHP has also agreed to purchase the dietary
supplements under a Supply Agreement at specified prices. In addition, if the
company succeeds in securing a patent containing a claim or claims comprising
the PharmaPrint-TM- Process applied generally or on a product-by-product basis
covering the production of one or more of the AHP Products, AHP will pay
royalties to the Company on sales of those products of 4% in the first year and
6% thereafter.
 
                                       29
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. AGREEMENTS (CONTINUED)
USC LICENSE AGREEMENT
 
    In March 1995, the Company entered into a license agreement with USC (the
"USC License Agreement") that granted the Company an exclusive, worldwide
license to: (i) the PharmaPrint-TM- Process; (ii) use certain therapeutic
compounds; and (iii) other related products developed by Dr. Khwaja's laboratory
at USC. USC has also agreed to grant the Company the right to sublicense certain
products and a right of first refusal to obtain a license for any improvements
to certain products developed by USC. The term of the USC License Agreement
began March 1, 1995, and ends on the later of February 28, 2010, or the
expiration of the last issued patent under the USC License Agreement.
 
    In exchange for the license, the Company agreed to pay USC: (i) royalty
payments of 1% of the Company's net sales of pharmaceutical products developed
using the PharmaPrint-TM- Process; (ii) after the first patent issues, an annual
minimum royalty of $15,000, which shall increase by $5,000 annually for the
following two years and be $25,000 annually thereafter; (iii) an annual license
fee of $10,000 payable until a patent issues; and (iv) 328,563 shares of the
Company's common stock valued at $316,000 at the time of the exchange.
 
4. INCOME TAXES
 
    No provision for federal and state income taxes has been recorded as the
Company has incurred net operating losses through March 31, 1998. At March 31,
1998, the Company has net operating loss carryforwards available to offset
future taxable income for federal and state income tax purposes of approximately
$27.2 million; such carry forwards expire in various years through 2013.
Deferred tax assets include these net operating loss carryforwards as well as
certain expenses that are reported for book and tax purposes in different
periods. The Company has provided a valuation allowance to offset all deferred
tax assets due to the uncertainty of realization.
 
    Under the Tax Reform Act of 1986, the amounts of and benefits from the
Company's net operating loss carryforwards are limited due to a cumulative
ownership change that occurred over a three year period. However, based upon
preliminary estimates, management believes that the effect of such limitation,
will not have a material adverse effect on its financial condition or results of
operations.
 
5. COMMITMENTS AND CONTINGENCIES
 
PURCHASE COMMITMENTS
 
    In November 1997, the Company entered into a $20 million purchase commitment
with a vendor to purchase raw materials to be used for three herbal products and
to provide processing services for an additional herbal product over the next
three years. All of the aforementioned products were anticipated to be used by
the Company to meet its obligations under the AHP Agreements. Subsequently, the
Company determined that one of the raw materials to be supplied by the vendor
did not meet its specifications and that another raw material contained a
certain fungicide. The Company has since sourced each of these raw materials
from different suppliers. However, due to the uncertainties surrounding the
quality of the raw materials discussed above, the Company is unable to determine
whether it will be required to fulfill its $20 million purchase commitment in
the future.
 
                                       30
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASE
 
    The Company leases its corporate headquarters under an operating lease that
expires in December 1998. Rent expense for the current and the previous
(expired) office lease was approximately $86,000 and $186,000 for the years
ended March 31, 1997 and 1998, respectively. At March 31, 1998, future minimum
lease payments under the noncancelable operating lease for the year ending March
31, 1999 is $176,000.
 
EMPLOYMENT AGREEMENTS
 
    At March 31, 1998, the Company had employment agreements with its Chief
Executive Officer and its Chief Scientific Officer effective September 1, 1997
and its President effective October 1, 1997. The employment agreements have
three-year terms and provide for annual base salaries in the aggregate of
$642,000, plus certain benefits. The employment agreements provide for 12 months
severance compensation in certain cases of termination, as defined in each
employment agreement.
 
    At March 31, 1998, the Company had employment agreements with six other
officers that provide for base salaries in the aggregate of $980,000. The
employment agreements were effective at various dates throughout the year and
have one-year terms. The employment agreements provide for three months
severance compensation in certain cases of termination, as defined in each
employment agreement.
 
PERSONAL SERVICES AGREEMENT
 
    The Company entered into an agreement (the "Personal Services Agreement")
with Dimension Memory, Inc. ("Dimension") in May 1996. Pursuant to the Personal
Services Agreement, Dimension provided the services of Robert J. Burgess as
Executive Vice President and Chief Operating Officer (May 1996 to March 1997)
and President and Chief Operating Officer (April 1997 to September 1997) of the
Company. In exchange for these services, the Company provided varying levels of
compensation to Dimension and also issued 712,708 shares of its common stock to
Dimension and thus recognized compensation expense of $1,585,000 for the year
ended March 31, 1997.
 
    In December 1996, the Company amended the Personal Services Agreement with
Dimension. The amended agreement provided for the immediate payment by the
Company of all amounts due under the Personal Services Agreement in exchange for
Dimension agreeing to provide additional services to the Company. As a result of
this amended agreement, in December 1996 the Company paid and capitalized an
amount to Dimension of $312,000. On October 1, 1997, the Personal Services
Agreement was deemed satisfied and as a result the Company recognized $190,000
of compensation expense, such amount represented the unamortized amount of the
December 1996 payment.
 
6. SHAREHOLDERS' EQUITY
 
PREFERRED STOCK
 
    The Company's Board of Directors is authorized, subject to applicable law,
to provide for the issuance of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix or alter the rights, preferences, privileges and restrictions,
including voting, conversion, liquidation, dividend and redemption of the shares
of each wholly unissued series and any restrictions thereon, and to increase or
decrease the number of shares of any such series (but not
 
                                       31
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. SHAREHOLDERS' EQUITY (CONTINUED)
below the number of shares of such series then outstanding) without further
action of the shareholders. As of March 31, 1998, the Company has not issued any
of the 1,000,000 shares of authorized preferred stock.
 
COMMON STOCK
 
    Subject to the rights of any Preferred Stock that may be outstanding,
holders of common stock are entitled to receive dividends as determined by the
Company's Board of Directors. Each stockholder is entitled to one vote for each
share of common stock held. The common stock is not entitled to either
preemptive rights or redemption. In the event of liquidation, the holders of
common stock will be entitled to receive on a pro rata basis all of the
remaining net assets of the Company available for distribution.
 
    In July 1996, the Company's Board of Directors approved a 1.04045 for 1
stock split of the Company's common stock. All references in the accompanying
financial statements to the number of shares and per share amounts, unless
otherwise noted, have been restated to reflect the effect of this action.
 
    In August 1996, the Company completed the Initial Offering of 3,000,000
shares of its common stock at $5.00 per share. The net proceeds from the Initial
Offering were approximately $12.7 million.
 
    During the fiscal year ended March 31, 1997, Dr. Khwaja, the Company's then
Chairman and a significant stockholder, agreed to transfer 125,000 shares of his
common stock to third parties. As a result of this transfer, compensation
expense of approximately $648,000 was recorded and included in general and
administrative expense during fiscal 1997.
 
    In May 1997, the Company's Board of Directors approved an increase in the
number of authorized shares of common stock from 19,000,000 to 24,000,000; such
increase was approved by the Company's stockholders in August 1997.
 
    In November 1997, a stockholder exercised his outstanding warrant in a
cashless transaction. As a result, the Company issued 48,482 shares of common
stock.
 
    In February 1998, the Company completed a public offering (the "1998
Offering") of 2,587,500 shares of its common stock at $10.50 per share. The net
proceeds from the 1998 Offering were approximately $24.4 million.
 
PRIVATE PLACEMENT
 
    In December 1995, the Company sold 618,034 shares of its common stock at
$2.40 per share in a private placement. From the sale, the Company received
proceeds of approximately $1,315,000.
 
    During 1996, the Company offered (the "Repurchase Offer") to certain private
placement holders of the Company's common stock two alternatives, either (i) the
right to receive an additional one share of common stock for each share
purchased in certain private placements, thus effectively reducing the price by
half, or (ii) the right to cause the Company to repurchase the shares of common
stock for $5.00 per share (the original purchase price), plus interest from the
date of purchase. By its terms, the Repurchase Offer remained open for 30 days
and terminated on July 3, 1996. The Repurchase Offer resulted in the Company
repurchasing 35,600 shares (pre-split) for $91,000 in cash and the cancellation
of $87,000 of stock subscriptions receivable.
 
                                       32
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6.  SHAREHOLDERS' EQUITY (CONTINUED)
 
    In April 1996, the Company sold 97,995 shares of its common stock at $2.40
per share in a private placement. From the sale, the Company received net
proceeds of approximately $185,000, net of fees and repurchased shares.
 
1995 STOCK OPTION PLAN
 
    On April 14, 1995, the Company adopted the 1995 Stock Option Plan, as
Amended (the "1995 Plan"), pursuant to which directors, officers, key employees,
consultants, scientific advisors and other personnel working directly with the
Company are eligible to receive stock options as defined in the 1995 Plan. The
1995 Plan is administered by a designated committee (the "Committee") of the
Board of Directors, which is empowered to determine the terms and conditions of
each option, as defined by the 1995 Plan. The Company can grant either
nonqualified or incentive stock options, as defined, under the 1995 Plan that
vest as determined by the Committee. The Company and its stockholders have
approved 2,200,000 shares of common stock available for issuance under the 1995
Plan. The 1995 Plan, unless terminated sooner by the Board of Directors, will
terminate on April 14, 2005.
 
    Option activity from adoption of the 1995 Plan for the years ended March 31,
1997 and 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31, 1997  YEAR ENDED MARCH 31, 1998
                                                             -------------------------  -------------------------
                                                                           WEIGHTED                   WEIGHTED
                                                              OPTIONS    AVERAGE PRICE   OPTIONS    AVERAGE PRICE
                                                             ----------  -------------  ----------  -------------
<S>                                                          <C>         <C>            <C>         <C>
Outstanding at beginning of period.........................     997,097    $    0.96       782,078    $    3.11
  Granted..................................................     409,251    $    5.08     1,148,500    $    7.00
  Exercised................................................      --           --            (5,202)   $    0.96
  Cancelled................................................    (624,270)   $    0.96       (13,872)   $    0.96
  Forfeited................................................      --           --           (22,000)   $    6.97
  Non-plan options incorporated............................      --           --           141,800    $    4.60
                                                             ----------                 ----------
Outstanding at end of period...............................     782,078    $    3.11     2,031,304    $    5.39
                                                             ----------                 ----------
                                                             ----------                 ----------
Exercisable at end of period...............................     577,566    $    2.37     1,440,321    $    4.58
                                                             ----------                 ----------
                                                             ----------                 ----------
</TABLE>
 
    The 2,031,304 options to purchase common stock outstanding at March 31,
1998, have exercise prices between $0.96 and $16.00 and a weighted average
remaining option period of approximately 7.4 years.
 
    During the year ended March 31, 1997, the Company granted to consultants
options to purchase 86,800 shares of common stock at the fair market value on
the date of grant. Of such grants, 10,000 options were granted under the 1995
Plan and vested immediately and 76,800 options were granted outside the 1995
Plan (see below) and vest over two years. In accordance with SFAS No. 123, the
Company recorded compensation expense of approximately $100,000 during fiscal
1997 and $120,000 during fiscal 1998. Additionally, the Company has recorded
approximately $54,000 as deferred compensation relating to the 76,800 options at
March 31, 1998, such amount to be amortized over the remaining six month vesting
period.
 
    During the year ended March 31, 1997, the Company granted options outside of
the 1995 Plan to purchase 141,800 shares of common stock, at the fair market
value on the date of grant. Additionally, the Company's then Chairman of the
Board of Directors and a majority shareholder, granted certain
 
                                       33
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6.  SHAREHOLDERS' EQUITY (CONTINUED)
individuals options to purchase 430,000 shares of his common stock at the fair
market value on the date of grant. All of the aforementioned options are
included in the Company's pro forma calculation (see below) pursuant to SFAS No
123, with the exception of options to purchase 76,800 shares of common stock,
which are recorded as compensation expense as discussed previously.
 
    During the year ended March 31, 1998, the Company granted to a consultant,
options to purchase 30,000 shares of common stock at the fair market value on
the date of grant. All of the options vested during fiscal 1998. The Company
recorded approximately $112,000 of stock compensation expense during the year
ended March 31, 1998.
 
    Had compensation expense been determined under the provisions of SFAS No.
123, the Company's net loss and loss per share would have been as follows:
 
<TABLE>
<CAPTION>
                                              FOR YEARS ENDED          PERIOD FROM INCEPTION
                                       ------------------------------   (SEPTEMBER 15, 1994)
                                       MARCH 31, 1997  MARCH 31, 1998  THROUGH MARCH 31, 1998
                                       --------------  --------------  ----------------------
<S>                                    <C>             <C>             <C>
NET LOSS
  As reported........................   $(11,232,852)   $(18,115,402)     $    (31,176,447)
  Pro forma..........................   $(12,183,608)   $(20,079,365)     $    (33,140,410)
LOSS PER SHARE
  As reported........................   $      (1.15)   $      (1.59)     $          (3.29)
  Pro forma..........................   $      (1.25)   $      (1.77)     $          (3.49)
</TABLE>
 
    The weighted average fair value of options granted was $2.65 and $3.96 for
the years ended March 31, 1997 and 1998, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions used for grants in fiscal years
1997 and 1998, respectively: weighted average risk free interest rates of 5.67%
and 6.36%; expected dividend yields of 0% for each year; expected lives of 4
years and 5 years; and expected volatility of approximately 65% and 58%.
 
SHAREHOLDERS AGREEMENT
 
    The Company entered into a shareholders agreement (the "Shareholders
Agreement") in March 1996, with Elliot P. Friedman, the Company's Chief
Executive Officer, Tasneem Khwaja, the Company's then Chairman, and certain
individuals and entities. Pursuant to the Shareholders Agreement: (i) Dr. Khwaja
contributed 1,336,978 shares of common stock to the Company as a capital
contribution; (ii) the Company issued 624,270 shares of common stock to D-RAM
Industries PTY Ltd. ("D-RAM"), as nominee of Robert J. Burgess for consulting
services; and (iii) the Company granted stock options to purchase 712,708 shares
of common stock at a price of $0.96 per share to Mr. Friedman.
 
    The common stock options granted to Mr. Friedman and the common stock issued
to D-RAM were subject to cancellation if the Company did not raise a minimum
amount of proceeds in the Initial Offering prior to August 16, 1997, as defined.
In addition, the options granted to Mr. Friedman were to be canceled on August
20, 2001, unless prior to that date: (i) the Company received approval of the
FDA for the public sale of any pharmaceutical product; (ii) the Company
consummated a merger or other transaction or the Company sold substantially all
of its assets; (iii) the Company generated net pretax earnings of $0.50 per
share for two consecutive years, as defined; or (iv) certain shares of common
stock of each of
 
                                       34
<PAGE>
                        PHARMAPRINT INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6.  SHAREHOLDERS' EQUITY (CONTINUED)
Mr. Friedman and Dr. Khwaja, the sale of which was restricted until August 14,
2001 pursuant to a lock-up agreement with the underwriter of the Offering, were
released from such lock-up agreement.
 
    In May 1996, the Shareholders' Agreement was revised and the stock options
to purchase 712,708 shares of common stock granted to Mr. Friedman were canceled
and the Company issued 712,708 shares of common stock to Mr. Friedman subject to
the same conditions as the aforementioned options to purchase common stock.
 
    In August 1996, due to the successful completion of the Initial Offering,
the conditions placed upon the common stock issued to D-RAM were met and thus
the Company recorded $3,000,000 of compensation expense in the accompanying
consolidated statement of operations for the year ended March 31, 1997, based
upon the estimated fair market value of the stock at the time the conditions
were met.
 
    In September 1997, the underwriter of the Company's Initial Offering agreed
to release Mr. Friedman from the lock-up agreement discussed above and thereby
accelerated the vesting. Accordingly, the Company recorded approximately
$3,564,000 of stock compensation expense during the fiscal year ended March 31,
1998.
 
WARRANTS
 
    At March 31, 1998, the underwriter of the Initial Offering had a warrant
outstanding for the purchase of 300,000 shares of common stock at a purchase
price of $5.50 per share. The warrant is exercisable through August 2001.
 
    At March 31, 1998, the underwriter of the 1998 Offering had a warrant
outstanding for the purchase of 112,500 shares of common stock at a purchase
price of $12.60. The warrant is exercisable for a period of four years
commencing one year after the effective date of the 1998 Offering.
 
7.  RELATED-PARTY TRANSACTIONS
 
    Advanced Bioresearch Associates ("ABA") is a clinical research organization
that provides FDA strategic consulting and professional services and provides
guidance to the Company in connection with various clinical, scientific and
regulatory matters. ABA has offices in San Diego and San Francisco, California
and Washington, D.C. Mr. Howard R. Asher, a member of the Company's Board of
Directors, is the President and Chief Executive Officer and a controlling
shareholder of ABA. The Company incurred approximately $1,069,000, and
$1,889,000 of research and development expenses relating to the services
provided by ABA for the years ended March 31, 1997 and 1998, respectively. At
March 31, 1998, the Company included in accounts payable approximately $211,000
relating to amounts owed to ABA. Management believes that all amounts paid to
ABA are fair and reasonable and are on terms similar to those available with
non-affiliated parties.
 
    During the years ended March 31, 1997 and 1998, the Company utilized the
services of Mr. Phillip G. Trad, a member of the Company's Board of Directors,
for various legal and business development matters. The Company incurred
approximately $50,000 and $121,000 of general and administrative expenses for
the years ended March 31, 1997 and 1998, respectively relating to the services
provided by Mr. Trad. In November 1997, Mr. Trad became an employee of the
Company.
 
                                       35
<PAGE>
ITEM 8.  CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
    None.
 
                                    PART III
 
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
         PHARMAPRINT INC.; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
    The information regarding executive officers required by Item 9 is furnished
under "Executive Officers of PharmaPrint Inc." in Part I of this Report. The
other information required by Item 9 is hereby incorporated by reference from
the Company's definitive proxy statement relating to its Annual Meeting of
Stockholders to be held on September 8, 1998 (the "Proxy Statement").
 
ITEM 10.  EXECUTIVE COMPENSATION
 
    Information on executive compensation is incorporated herein by reference
from the Registrant's Proxy Statement.
 
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Information on security ownership of certain beneficial owners and
management is incorporated herein by reference from the Registrant's Proxy
Statement.
 
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Information on certain relationships and related transactions is
incorporated herein by reference from the Registrant's Proxy Statement.
 
                                       36
<PAGE>
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.
 
    (a)  Exhibits
 
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<S>    <C>
 2.1(1) Certificate of Ownership and Merger
 3.1(1) Amended and Restated Articles of Incorporation of the Company
 3.2(1) Bylaws of the Company as amended to date
 4.1(2) Form of Common Stock certificate
10.1(3) 1995 Stock Option Plan, as amended, and Form of Incentive Stock Option
         Agreement
10.2(3) Form of Non-Qualified Stock Option Agreement
10.3(4) Elliot P. Friedman Employment Agreement
10.4(4) Tasneem A. Khwaja Employment Agreement
10.5(4) Robert Burgess Employment Agreement
10.6(2) Dimension Memory, Inc. Personal Services Agreement
10.7(5) Amendment No. 1 to Dimension Memory, Inc. Personal Services Agreement
10.8(1) Form of Confidentiality Agreement
10.9(5) Lease dated October 28, 1997 for Company's headquarter facility
10.10(2) License Agreement dated March 1, 1995 between the Company and USC, as
         amended, and related Registration Rights Agreement and Stock Waiver
10.11(1) Second Amendment to USC License Agreement
10.12(2) Shareholders Agreement
10.13(2) Agreement Among Certain Shareholders
10.14(2) Agreement Among Elliot Friedman, Tasneem Khwaja and the Company
10.15(2) Registration Rights Agreement with D-RAM Industries PTY, Ltd.
10.16(2) Registration Rights Agreement with JadiJo, Inc.
10.17(3) Warrant Agreement between the Company and M.H. Meyerson & Co., Inc.
10.18(1) American Home Products License Agreement (U.S.)
10.19(1) American Home Products License Agreement (Foreign)
10.20(1) American Home Products Supply Agreement
10.21(4) Herbal Products Supply Agreement with Hauser, Inc.
10.22(4) Master Service Agreement with Hauser, Inc.
10.23(4) Saw Palmetto Supply Agreement with Hauser, Inc.
10.24(4) Form of Warrant Agreement between the Company and CIBC Oppenheimer Corp.
21.1(6) List of Subsidiaries.
27.1(6) Financial Data Schedule
</TABLE>
 
--------------------------
 
(1) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
    for the six months ended September 30, 1997.
 
(2) Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (No. 333-4912-LA).
 
(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the year ended March 31, 1997.
 
(4) Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (No. 333-41129).
 
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
    for the nine months ended December 31, 1996.
 
(6) Filed herewith.
 
    (b)  There were no reports on Form 8-K filed by the Issuer during the fourth
quarter of the fiscal year ended March 31, 1998
 
                                       37
<PAGE>
    Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
<TABLE>
<S>                             <C>  <C>
                                PHARMAPRINT INC.
 
                                By:            /s/ ELLIOT P. FRIEDMAN
                                     -----------------------------------------
                                                 Elliot P. Friedman
                                       CHAIRMAN OF THE BOARD OF DIRECTORS AND
                                              CHIEF EXECUTIVE OFFICER
Date: June 29, 1998
</TABLE>
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
      NAME AND SIGNATURE                  TITLE                    DATE
------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
                                Chairman of the Board of
    /s/ ELLIOT P. FRIEDMAN        Directors and Chief
------------------------------    Executive Officer            June 29, 1998
      Elliot P. Friedman          (Principal Executive
                                  Officer)
 
                                Senior Vice President and
     /s/ JAMES R. WODACH          Chief Financial Officer
------------------------------    (Principal Accounting        June 29, 1998
       James R. Wodach            Officer)
 
 /s/ TASNEEM A. KHWAJA, PH.D.
------------------------------  Chief Scientific Officer,      June 29, 1998
   Tasneem A. Khwaja, Ph.D.       Secretary, and Director
 
     /s/ PHILLIP G. TRAD        Senior Vice President,
------------------------------    General Counsel, and         June 29, 1998
       Phillip G. Trad            Director
 
   /s/ JOHN H. ABELES, M.D.
------------------------------  Director                       June 29, 1998
     John H. Abeles, M.D.
 
      /s/ LYLE ANDERSON
------------------------------  Director                       June 29, 1998
        Lyle Anderson
 
     /s/ ERINCH R. OZADA
------------------------------  Director                       June 29, 1998
       Erinch R. Ozada
 
    /s/ NATHAN TROUM, M.D.
------------------------------  Director                       June 29, 1998
      Nathan Troum, M.D.
</TABLE>
 
                                       39