SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                             SECURITIES ACT OF 1934

          FOR THE TRANSITION PERIOD FROM _______________ TO ___________

                         COMMISSION FILE NUMBER 0-25406

                     TECHNICAL CHEMICALS AND PRODUCTS, INC.
             (Exact name of registrant as specified in its charter)

     Florida                                                65-0308922
     (State or jurisdiction of                              (I.R.S. Employer
     incorporation or organization)                         Identification No.)

     3341 S.W. 15th Street, Pompano Beach, Florida          33069
     (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (954) 979-0400

           Securities Registered Pursuant to Section 12(b) of the Act:

     Title of each class                                    Name of exchange
                                                            on which registered
     None                                                   None

        Securities registered pursuant to 12(g) of the Act: Common Stock,
                                 $.001 par value

     Indicate  by check mark  whether the  registrant  (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  twelve  months  (or such  shorter  period  that the
registrant 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 disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

         The aggregate market value of Common Stock held by non-affiliates as of
March 24, 1998 was approximately  $63,262,811 (based upon the closing sale price
of $10.875 per share on the Nasdaq National Market on March 24, 1998).

     As of March 24, 1998, 10,015,036 shares of the Registrant's $.001 par value
Common  Stock  were  outstanding.   

                       Documents Incorporated By Reference

     The  Registrant's  Definitive  Proxy  Statement  related to the 1998 Annual
Shareholder's  Meeting is  incorporated  by  reference in Part III to the extent
provided in Items 10, 11, 12 and 13 hereof.

                      EXHIBIT INDEX IS LOCATED ON PAGE 63  

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                                      INDEX

Description                                                          Page Number

                                     PART I

Item 1.   Business ........................................................... 4

        Strategy ............................................................. 5
                           
        Non-Invasive Glucose Monitoring ...................................... 6
                                                              
        Cholesterol Monitoring ............................................... 8

        HealthCheck(TM).......................................................10
                                        
        Other Medical Diagnostic Products ....................................11
                                                  
        Diagnostic Product Portfolio..........................................16
                                               
        Transdermal Drug Delivery Systems ....................................18
                                                 
        Transdermal Drug Delivery Product Portfolio...........................21
                                                 
        Biochemical Manufacturing.............................................21
                                       
        Product Research and Development......................................21
                                                 
        Manufacturing and Materials ..........................................22
                                           
        Patents, Trademarks and Technologies..................................22
                                                      
        Competition...........................................................23

        Marketing and Sales...................................................24
                                      
        Employees ............................................................24
                           
        Year 2000.............................................................25
                            
        Governmental Regulation...............................................25
                                         
        Product Liability Insurance...........................................26
                                              
        Executive Officers of the Company.................................... 26
                                                 

Item 2.   Properties..........................................................26

Item 3.   Legal Proceedings...................................................27

Item 4.   Submission Of Matters To A Vote Of Security Holders ................27
                                                             

                                     PART II

Item 5.   Market For Registrant's Common Equity And Related
          Stockholder Matters ................................................28

Item 6.   Selected Financial Data.............................................29

Item 7.   Management's Discussion And Analysis Of Financial Condition
          And Results Of Operations...........................................30

        General ..............................................................30
                         
        Results Of Operations ................................................34
                                       
        Year Ended December 31, 1997 Compared
        To Year Ended December 31, 1996 ......................................34
                                                
        Year Ended December 31, 1996 Compared
        To Year Ended December 31, 1995 ......................................35
                                                 
        Liquidity And Capital Resources.......................................35

                                    Page - 2
<PAGE>
                                                 

Item 8.   Financial Statements And Supplemental Data .........................37
                                                     
        Report Of Independent Certified Public Accountants ...................38
                                                                
        Consolidated Balance Sheets...........................................39
                                             
        Consolidated Statements Of Operations.................................40
                        
        Consolidated Statements Of Shareholders' Equity.......................41
                                                                 
        Consolidated Statements Of Cash Flows ................................42
                                                      
        Notes To Consolidated Financial Statements ...........................44
                                                          
Item 9.  Changes In And Disagreements With Accountants On
         Accounting And Financial Disclosure .................................56
                                                      
                                    PART III

Item 10.  Directors And Officers Of The Registrant........................... 56
                                                  
Item 11.  Executive Compensation..............................................59

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management......................................................59

Item 13.  Certain Relationships and Related Transactions......................59
                                                         

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule, And
          Reports On Form 8-K.................................................59

        Schedule II - Valuation and Qualifying Accounts.......................59

        Exhibits Description..................................................60
                                                                
        Signatures............................................................62
                            
        Index to Exhibits.....................................................63
                                  
        Consent of Ernst & Young LLP......................................... 65
                                             

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                                     PART I

Item 1.  BUSINESS

The Company
     TCPI  is in the  midst  of  completing  a  transition.  It was  formerly  a
developmental  company  that  manufactured  and sold a narrow  range of  medical
diagnostic products and specialty chemicals on an Original Equipment Manufacture
("OEM")  basis.  The  Company is now  approaching  its goal of being a designer,
developer,  manufacturer  and global  marketer of a wide range of  point-of-care
medical  diagnostic  products for use at home, in physician  offices,  and other
healthcare  locations with growing  distribution  channels for its products.  In
addition, through its Pharmetrix Division located in Menlo Park, California, the
Company is also focused on the research and development and commercialization of
transdermal and dermal drug delivery systems and skin permeation enhancers. TCPI
also manufactures high purity specialty biochemicals.

     The Company's roots date back more than 29 years. During this time, TCPI or
its founder have developed more than 330 medical  diagnostic and  pharmaceutical
products which have received  marketing  clearance by the United States Food and
Drug  Administration  (the "FDA") --  including  those  related to its  patented
membrane-based technology platform -- and also has manufactured OEM products for
leading  multinational  pharmaceutical  and medical  diagnostic  companies.  The
Company  presently  holds 22 U.S. and 29 foreign  patents,  and has five pending
patent  applications  in the U.S. and more than 30 foreign  patent  applications
pending.

     TCPI  manufactures  and  markets  more  than  47  patented   membrane-based
diagnostic  tests in the U.S.  and  internationally,  26 of which have  received
510(k)  clearance  from the FDA.  In  addition,  the  Company  has over 20 other
diagnostic  and  transdermal  drug  delivery   products  in  various  stages  of
development and governmental  approval.  Foremost in TCPI's product portfolio is
its TD Glucose(TM)  Monitoring System (the "TD Glucose Monitoring System") -- an
innovative  non-invasive  glucose  testing system for  diabetics.  The Company's
diagnostic  products also include tests and screens for cholesterol  monitoring,
pregnancy,  ovulation timing,  urinary glucose levels,  urinary tract infection,
skin cancer,  deteriorating vision, infectious diseases, drugs of abuse, cardiac
markers and certain types of cancer.  TCPI's  transdermal drug delivery products
focus on hormone replacement therapy,  cardiovascular disease, smoking addiction
and other areas.

     The  Company's  products  are  distributed  worldwide  under OEM  marketing
relationships with multinational  pharmaceutical and diagnostic  companies,  and
also are directly  marketed for  over-the-counter  use by consumers.  In the OEM
sector,  most of TCPI's  tests were sold  through the  Company's  alliance  with
Boehringer   Mannheim.   This   alliance  also  extends  to  the  marketing  and
distribution  of certain other  products,  including its Serum Dilution  Reagent
(hCG Test) and its One Step LH Ovulation  Tests.  In February  1998, the Company
established  a new  agreement to supply  finished and packaged  family  planning
products directly to Boehringer Mannheim distributors.  This replaced an earlier
worldwide  marketing  and  distribution  agreement  where the  Company's  family
planning   products   utilizing  TCPI's  technology  were  packaged  in  Europe.
Over-the-counter  products  are marketed to consumers in the U.S. and Canada for
at-home use under TCPI's proprietary  HealthCheck(TM) and private-label  brands.
These  over-the-counter  products are sold in pharmacies,  supermarkets and mass
merchandise  retail  stores.  The  HealthCheck  line  consists of 14 testing and
screening   products  for  cholesterol,   diabetes,   urinary  tract  infection,
pregnancy,  ovulation, skin cancer,  deteriorating vision and a series of health
journals.  Since market introduction in the second quarter of 1997, more than 38
chain and independent  pharmacies  have placed orders for HealthCheck  products,
providing the Company with more than 30% market penetration of the approximately
60,000  pharmacies  in the United  States.  TCPI  distributes  its private label
family  planning  products  to  approximately  20  leading  drug,  discount  and
supermarket  chains and  catalog  retailers.  In total,  the  Company's  at-home
diagnostics  products are available through such leading  pharmacies as Walgreen
Drug Stores, Eckerd Corp.,  CVS-Revco,  Rite Aid, Thrifty Payless,  Thrift Drug,
Phar-Mor,  Genovese  Drug Stores,  Longs Drug Stores,  Smiths Food & Drug,  Osco
Drug, Sav-On Stores, Snyder Drug, Kinney Drugs, Harco Drug; leading supermarkets
such as Kroger,  Thriftway  Foods,  Seaway Foods and Ukrop's Super Markets;  and
leading drug wholesale  distributors  McKesson Corp.,  AmeriSource Health Corp.,
Bindley Western Industries,  Bergen Brunswig Drug Company,  Neuman Distributors,
KinRay,  Allou  Distributors,  and F.  Dohman  Co.;  and are  featured  in Amway
Corporation's  Personal Shopper catalog.  In 1997, sales of the Company's family
planning  products to Boehringer  Mannheim and CVS were each greater than 10% of
TCPI's total product sales.

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     Statements regarding future products, future prospects,  business plans and
strategies,  future revenues and revenue  sources,  future liquidity and capital
resources,  health care market  directions,  future  acceptance of the Company's
products,  possible recommendations of health care professionals or governmental
agencies  regarding use of diagnostic  products,  possible growth in markets for
at-home diagnostic testing, as well as other statements contained in this report
that  address  activities,  events or  developments  that the  Company  expects,
believes or anticipates will or may occur in the future,  and similar statements
are forward looking statements.  These statements are based upon assumptions and
analyses made by the Company in light of current conditions, future developments
and other factors the Company believes are appropriate in the circumstances,  or
information  obtained  from  third  parties  and  are  subject  to a  number  of
assumptions, risks and uncertainties. Readers are cautioned that forward-looking
statements  are not  guarantees of future  performance  and that actual  results
might differ materially from those suggested or projected in the forward-looking
statements.  Some of the factors that may cause actual  future  events to differ
from those predicted or assumed  include:  future  advances in technologies  and
medicine;  the  uncertainties of health care reform;  risks related to the early
stage of the Company's  existence and its products'  development;  the Company's
ability to execute on its business  plans;  the Company's  dependence on outside
parties such as its key customers and alliance partners;  competition from major
pharmaceutical,   medical  and  diagnostic  companies;   risks  and  expense  of
government  regulation  and  affects  of  changes  in  regulation;  the  limited
experience of the Company in manufacturing and marketing products; uncertainties
connected with product liability  exposure and insurance;  risks associated with
growth  and  expansion;  risks  associated  with  obtaining  patents  and  other
protections on intellectual property; uncertainties in availability of expansion
capital in the future and other  risks  associated  with  capital  markets.  The
Company may determine to discontinue  or delay the  development of any or all of
its products under development at any time.

STRATEGY

     TCPI's  objective is to continue to build a fully  integrated  research and
development,  manufacturing,  marketing and distribution organization capable of
providing the medical  diagnostic  and drug delivery  markets with products that
offer accuracy,  efficacy, ease of use and reduced costs. In order to accomplish
this objective, the Company has developed the following strategy:

     PROVIDE ACCURATE,  EASY TO USE AND COST EFFECTIVE PRODUCTS. The Company has
developed  and is  continuing  to develop and market  accurate,  easy to use and
cost-effective   medical  diagnostic  products  that  provide   disease-specific
information to health care providers and patients.  In addition,  the Company is
developing  transdermal drug delivery products that are intended to offer a high
degree of efficacy,  convenience  and  economy.  The Company  believes  that its
business  approach is consistent  with current trends to reduce the overall cost
of health care by providing high quality,  value-added health care products that
offer an improved  benefit to cost ratio over competitive  products,  where they
exist.

     PROVIDE  A BROAD  RANGE OF  PRODUCTS.  The  Company  has  developed  and is
continuing  to  develop  and  market a broad  range of  medical  diagnostic  and
transdermal  drug  delivery  products.  The Company  believes that a diversified
product base can increase potential business opportunities,  provide a stream of
new  product  introductions  over  time and  reduce  the risks  associated  with
reliance on a single product or technology.

     FOCUS  ON  LARGE  MARKET   OPPORTUNITIES.   The  Company  concentrates  its
development  efforts on large  existing  markets in which the  Company  believes
there could be significant  demand for its products.  Industry  estimates of the
Company's  target  markets in 1997 were:  glucose  monitoring -- $2 - $3 billion
worldwide;  cholesterol  monitoring in the U.S. has potential annual revenues of
$250 million; worldwide sales of family planning products in 1995 were in excess
of $550 million; and transdermal patch products are over $2.5 billion worldwide.

                                    Page - 5
<PAGE>

     ENTER INTO  STRATEGIC  ALLIANCES.  Although  TCPI intends to expand  direct
distribution  of certain of its medical  diagnostic  products,  the Company also
intends to enter into  strategic  alliances  with  large  multinational  medical
diagnostic and pharmaceutical companies for the marketing of many of its medical
diagnostic  products.   Because  these  companies  have  significantly   greater
financial,  marketing  and other  resources  than the Company,  they are able to
market TCPI's products  through a broader range of distribution  channels.  With
respect to the development and  commercialization  of the Company's  transdermal
and  skin  permeation  products,  TCPI's  strategy  is to enter  into  strategic
alliances  with third parties that can, in some cases,  fund all or a portion of
product  development costs,  participate in clinical testing,  obtain regulatory
approvals  and market the  product.  In an effort to exercise  control  over the
quality of its products and capture a larger portion of the revenues  therefrom,
the Company will seek to retain manufacturing rights to products developed under
such strategic  alliances.  In some cases,  the Company will fund development of
products  requiring an Abbreviated New Drug  Application  ("ANDA")  approval and
which  can  be  sold   over-the-counter   through  the  Company's   wholly-owned
subsidiary, Health-Mark Diagnostics, L.L.C.
        
     EXPAND  DIRECT  DISTRIBUTION.  The  Company  intends to  continue to expand
direct  distribution  of its  medical  diagnostic  products in order to generate
greater  revenues and profit margins from sales of these products.  TCPI entered
the  over-the-counter  market in 1996 when it began  directly  distributing  its
private label  pregnancy and ovulation  tests to drug,  discount and supermarket
chains in the U.S. and Canada. This strategy continued in 1997, when the Company
launched  HealthCheck,  its  own  over-the-counter  medical  diagnostic  testing
products,  to  chain  and  independent  pharmacies,  supermarkets  and  discount
retailers.

     The Company's  most  significant  products in various stages of development
include:

NON-INVASIVE GLUCOSE MONITORING

     THE PRODUCT.  TCPI has completed development of its non-invasive TD Glucose
Monitoring  System  for  diabetics  to test their  glucose  levels  without  the
discomfort  and  inconvenience  associated  with  available  finger  stick blood
glucose monitoring systems.

     The TD Glucose Monitoring System is completely non-invasive,  non-toxic and
safe. It uses a dermal transport system in the form of patch designed to provide
diabetics  with a painless,  bloodless,  easy to use and rapid method to monitor
their glucose levels. TCPI's non-invasive monitoring system combines proprietary
patent-pending transdermal technology with the Company's patented membrane-based
diagnostic  technology.  Together,  these  technologies  access the interstitial
fluid (the "ISF") present in the outer layer of skin,  draw glucose from the ISF
into the patch  where it makes  contact  with the  membrane  causing a  chemical
reaction and color change of the  membrane.  This is  accomplished  while the TD
Glucose Patch has been in place on the forearm for approximately five minutes. A
small electronic  reflectance meter, equipped with special optics, is held up to
the patch where it detects the  membrane  color  change and  provides an instant
glucose reading. The single-use patch is then removed and easily disposed of.

     During the past three years, the Company has conducted pre-clinical testing
of its TD Glucose  Monitoring  System, the results of which have correlated with
finger  stick  blood  glucose   monitoring  tests,   reinforcing  the  technical
feasibility of TCPI's non-invasive product. The Company is presently involved in
its registration studies to obtain required correlation data between ISF glucose
and venous  blood  glucose  and expects  these  activities  to be  substantially
completed  during the first half of 1998.  The  registration  studies  are being
conducted at several undisclosed large diabetic clinics under the supervision of
independent investigators. During these studies, the Company anticipates testing
the  glucose  level of  approximately  3,000  people with  diabetes  with its TD
Glucose  Monitoring  System and obtaining venous blood samples from each patient
for corresponding  laboratory  analysis.  The purpose of collecting  correlation
data is to attempt  to develop  algorithms,  or complex  mathematical  formulas,
which could allow the TD Glucose meter to display  glucose levels  equivalent to
venous blood glucose. There can be no assurance the registration and correlation
studies will be successful  or produce data suitable for  submission to the FDA.

                                    Page - 6
<PAGE>

     Upon completion of the  registration  studies,  the Company will submit its
clinical  data to the FDA for review as soon as  possible  thereafter.  Based on
discussions  with the FDA and prior acceptance of TCPI's protocol to conduct its
Clinical Trials, which was acknowledged without review, the Company believes its
TD Glucose  Monitoring  System is eligible for the  expedited  510(k)  clearance
process.  There can be no  assurances  that the FDA will consider the TD Glucose
Monitoring  System  for  510(k)  clearance,   expedited  or  otherwise,   or  if
considered, that the TD Glucose Monitoring System will receive 510(k) clearance.

     BLOOD GLUCOSE MONITORING MARKET. Diabetes is a chronic disease in which the
body does not produce the protein insulin.  Insulin permits  metabolized  sugar,
starches  and other food energy  (glucose)  to transfer via osmosis from the ISF
into the cells. Without insulin, the cells are unable to receive nutrition.  ISF
is an extra-cellular  fluid that is prevalent throughout the body, including the
skin.  Scientific  research  indicates that ISF glucose levels correlate closely
with blood  glucose  levels.  At present,  there is no cure for diabetes and the
exact cause is unknown,  although such factors as heredity,  obesity and lack of
exercise appear to play roles.  Type I (or juvenile)  diabetes,  the most severe
form of the disease, comprises approximately 10% of diabetes cases in the United
States and requires daily  treatment  with insulin to sustain life.  Type II (or
adult onset)  diabetes  comprises the other 90% of diabetes  cases in the United
States and is usually  managed by diet and exercise,  but may require  treatment
with insulin or other medication.

     Diabetes is the fourth  leading  cause of death by disease in the U.S. with
about 625,000 new cases  diagnosed each year.  Medical costs in the U.S. for the
treatment of diabetes and diabetes  related  conditions are  approximately  $100
billion  annually.  Worldwide  there are in excess of 110  million  people  with
diabetes - of which  approximately  16 million  are in the United  States -- and
only 18 million regularly monitor their glucose levels. The worldwide market for
finger stick glucose  monitoring  products is presently $2 - $3 billion per year
and is projected to reach the $5 billion mark by the year 2000.

     According to the American  Diabetes  Association  (the "ADA"),  people with
Type I diabetes must have daily  treatment with insulin to control blood glucose
levels.  A person's blood glucose level will vary  depending upon diet,  insulin
availability,  exercise, stress and illness. Blood glucose testing several times
a day enables  people with  diabetes to better  manage their  disease by keeping
their blood glucose levels in a narrow range.  This may be accomplished  through
diet,  physical  activity  and  insulin  dosage.  Prior to the  availability  of
self-monitoring  blood glucose  systems,  people with  diabetes  relied on urine
glucose  testing to monitor  their status and make  appropriate  adjustments  to
their  treatment.  Because glucose appears in the urine only after a significant
period of elevated blood  glucose,  urine tests are inadequate for tight control
of blood glucose.  Patients were also able to obtain an occasional blood glucose
test after  referral by a health care provider to a clinical  laboratory.  These
tests were ordered  infrequently,  usually as part of a physician  office visit,
and  results  were   typically  not  available  for  immediate   discussion  and
intervention.

     Beginning  in the late  1970's,  the  availability  of finger  stick  blood
glucose  monitoring  systems  that  provided  fast and  accurate  blood  glucose
measurements  gave  people  with  diabetes  a tool to manage  the  disease  more
effectively and to improve the quality of care. Since that time, worldwide sales
of self-monitoring blood glucose systems have increased dramatically.  According
to industry sources,  the worldwide market for blood glucose monitoring products
in 1995 was over $1.5  billion.  In the  United  States,  the  market  for blood
glucose  monitoring  products  grew from  approximately  $570 million in 1991 to
approximately $1.5 billion in 1997.

     In July 1993, The New England Journal of Medicine  published the results of
the Diabetes  Control and  Complications  Trial (the "DCCT"),  a major nine-year
clinical  trial  sponsored  by the  National  Institutes  of Health (the "NIH").
Participants  in the DCCT were  assigned  to either  intensive  or  conventional
therapy groups.  Conventional therapy involved testing four times a day, with at
least three injections of insulin and making  appropriate  modifications to diet
and exercise while  injecting  insulin in accordance  with blood glucose levels.
Each therapy group contained people with no significant complications as well as
people with mild  complications.  The study  demonstrated that maintaining blood
glucose levels as close as possible to normal reduces by  approximately  60% the
risk for development and progression of certain diabetes complications. Although
the DCCT  included  only people

                                    Page - 7
<PAGE>

with Type I diabetes,  the ADA has stated that there is no reason to believe the
effects of better control of blood glucose levels would not apply to people with
Type II diabetes. The results of the study were so compelling that the study was
terminated,  earlier than planned,  because those conducting the study felt that
to  continue  conventional  treatment  for the control  group would  deprive its
participants  of the  benefits of the study's  findings.  Because the  intensive
therapy that the DCCT study  recommends  involves  testing at least four times a
day, the Company  believes that DCCT will increase  awareness  among people with
diabetes  of the  benefits  of  frequent  testing  and will be a key  factor  in
changing   diabetes   management  in  the  coming  decade.   Moreover,   various
publications  related to diabetes have recommended  testing six to eight times a
day.  Based on  various  studies,  including  a survey by the NIH,  the  Company
believes that people with diabetes,  on average, test their blood glucose levels
less than once per day. The Company believes that such patient non-compliance is
due,  in  part,  to the  pain  and  inconvenience  associated  with  the  use of
conventional  finger  stick blood  glucose  monitoring  systems.  The TD Glucose
System has been  designed by the  Company to address the need for a  convenient,
blood-free, pain-free self-monitoring blood glucose system.

     The  Company  believes  that growth in demand for  self-administered  blood
glucose  monitoring  products  will also be driven by the trend  toward  greater
patient  involvement in personal health management.  Many chronic conditions may
be managed more cost  effectively in the home.  The Company  believes that these
benefits are  consistent  with recent  initiatives,  particularly  in the United
States,  to control  overall  health care  expenditures.  It is  estimated  that
expenditures  in the  United  States  for costs  associated  with  diabetes  are
approximately $132 billion annually. The Company believes that a compelling case
can be made that increased expenditures for preventive care, which would include
more frequent  testing,  can lead to reduced  expenditures  for care relating to
complications.

     EXISTING  SELF-MONITORING BLOOD GLUCOSE SYSTEMS. At present,  blood glucose
levels are generally measured by first obtaining a blood sample using the finger
stick  method.  This method  requires  the user to prick a finger with a lancet,
draw a drop of blood and place the blood on a chemically-treated disposable test
strip.  After a specified amount of time has elapsed,  the blood, in most cases,
must be blotted or wiped off and then,  after an  additional  amount of time has
elapsed,  the blood glucose level is read by visually comparing the color of the
test strip to that of a color chart.

     An alternative method requires the use of a blood glucose monitoring meter.
This system also  requires the user to prick a finger,  draw a drop of blood and
place the blood on a test strip similar to the strip  described  above.  In this
case,  the test strip is then placed in a meter  containing a light source and a
digital read-out device.  This reflectance  meter measures the color of the test
strip at two or more wavelengths,  thereby  determining and displaying the blood
glucose level. A variation of the conventional  reflectance  meter approach uses
test  strips  which,  rather  than  producing  a color  change,  produce a small
electric  current.  The amount of current  produced  is a function  of the blood
glucose level.

     With either method,  adequate  control of blood glucose  levels  requires a
finger stick each time a sample is taken. This is often an unpleasant experience
for the user, especially for children.  Depending upon the relative dexterity of
the  user,  the meter  process  generally  takes at least  two to four  minutes.
Moreover, the ongoing costs of repeated finger stick testing, including the cost
of test strips,  lancets, swabs,  antiseptics,  test solutions and other related
materials,  are  significant to the average user.  Another  significant  problem
associated with these invasive finger stick methods is the requirement to safely
dispose  of lancets  and bloody  test  strips  and swabs.  Finally,  any type of
invasive procedure entails some risk of infection.

CHOLESTEROL MONITORING

     THE PRODUCTS.  TCPI plans to introduce  several  cholesterol  screening and
monitoring products in 1998 that can be used by healthcare professionals as well
as patients at home.  Consumers will be able to screen for total cholesterol and
HDL (good)  cholesterol with (i) the HealthCheck  visual-read  Total Cholesterol
Test  Strips  and (ii)  visual-read  HDL  Cholesterol  Test  Strips.  Healthcare
professionals  will have the option of using the  visual  products  for  initial
screening or using (iii) a quantitative  system  consisting of a hand-held meter
and  strips  for  Total  and HDL  Cholesterol.  The  HealthCheck  Total  and HDL
Cholesterol   Test  Strips  utilize  the  Company's   patented  and  proprietary

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<PAGE>

membrane-based  technology  and produce a color reaction in response to Total or
HDL cholesterol using a small, unmeasured drop of blood.

     Typically, a lancet is used to collect a drop of blood from a finger and is
placed on the Test Strip.  During the approximate  three-minute  reaction time a
blue-green  color is  produced  on the  strip.  The shade of color  produced  is
related to the amount of Total or HDL cholesterol in the blood. The kit includes
2 strips, lancets, alcohol wipes and a corresponding color chart.

     With the meter-read  versions of the Total and HDL Cholesterol Test Strips,
a hand held,  battery  operated  Meter  measures  the final color and provides a
quantitative  digital  readout  of the  result.  The System  will offer  several
advantages  over the leading finger stick  cholesterol  monitoring  system which
include (i) the cost to the  physician  will be less than $2 per test,  which is
significantly  below  present  reimbursement  amounts,  (ii)  at  less  than  25
microliters, it will require less blood, thereby permitting the use of a smaller
lancet that clinical trials demonstrated was less painful; (iii) results in less
than three minutes;  (iv) the acquisition cost of the meter, expected to be less
than $150, is very favorable to comparable  products that cost up to $1,500; (v)
the  system  will  be  as  accurate  as  measurements  preformed  in a  clinical
laboratory;  and (vi)  initially  expected  to be the  only  System  which  also
measures HDL (good) cholesterol.

     The Company's Total and HDL Cholesterol  System overcomes the disadvantages
of  laboratory  testing by offering the health care provider and patient a quick
and easy-to-use  method of testing for  cholesterol in the  physician's  office,
clinic,  pharmacy or other location.  With an immediate  result,  the healthcare
provider is able to counsel the patient  and begin  treatment,  eliminating  the
need for a follow up visit.  The Company's test  eliminates the costs and delays
associated with utilizing laboratories, including those associated with specimen
collection,  preservation,  transportation,  processing  and reporting  results.
Clinical  trials  comparing the HealthCheck  System to  conventional  laboratory
testing  demonstrated  reproducibility  with a coefficient  of variation of less
than 5%. This means that tests done on the same blood at different  times and/or
at different  laboratories  correlate within 95% of each other. This coefficient
is within the range  recommended by the NIH, the National  Committee on Clinical
Laboratory Standards and the College of American Pathologists. The Company views
physician  offices,  clinics,  patient  bedsides,   emergency  rooms  and  other
point-of-care  sites,  as  well  as  the  consumer  retail  market  for  at-home
self-tests, as the primary markets for this product.

     In  April  1997,   the  Company   introduced   its   HealthCheck   line  of
over-the-counter  testing and  screening  products for at-home use by consumers,
which included its visually read  CholestoChek(TM)  Total cholesterol  screening
test. TCPI expects to complete the clinical and regulatory  actions necessary to
have its  visually  read HDL  Cholesterol  Test  Strips  and its  Total  and HDL
Cholesterol  Meter  products  enter the  respective  consumer  and  professional
marketplaces  later this year. In February 1998, the Company suspended  domestic
retail sales and voluntarily  recalled its  over-the-counter  CholestoChek Total
cholesterol   screening  test.  However,   the  CholestoChek  Total  cholesterol
monitoring  test  remains  available  to the  professional  sector.  This action
stemmed  from  advice  from the FDA  about  regulatory  clearance.  In  1988,  a
predecessor  company of TCPI was granted 510(k)  regulatory  clearance to market
its Total cholesterol  testing product.  The Company believed that the clearance
was for both  professional  and  over-the-counter  use.  As a  reformulated  and
updated Total  cholesterol test was already in clinical trials -- and a separate
HDL  cholesterol  test already in  development -- TCPI elected to take voluntary
action to resolve this regulatory  issue. This procedural matter relates only to
this particular  product.  There is no material financial impact on the Company,
nor does this affect any of TCPI's  other  products  already on the market or in
various stages of development.

     MARKETING.  The Company has held discussions with one international medical
diagnostic and pharmaceutical  company, and has been approached by several other
such  companies,  regarding  a  possible  collaboration  in  the  marketing  and
distribution of the HealthCheck  Total/HDL  Cholesterol Meter and strips.  There
can be no assurance, however, that a definitive arrangement will be reached with
any such companies.

     CHOLESTEROL  MONITORING  MARKET. In response to evidence linking high total
cholesterol levels to heart disease,  the NIH launched the National  Cholesterol
Education Program (the "NCEP"),  a nationwide effort to reduce the prevalence of

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<PAGE>

high blood  cholesterol.  In 1988, the NCEP issued guidelines for the testing of
all adults over 20 years of age for high blood  cholesterol,  and more extensive
lipid monitoring and treatment for those found to be in high risk categories. In
1991,  testing  guidelines were expanded to include children over the age of two
with a family history of high blood cholesterol or coronary heart disease.

     Starting in 1987, when an NIH expert panel in a draft statement recommended
that the HDL  measurement  be added to the total  cholesterol  measurement  when
evaluating coronary heart disease risk in healthy individuals,  and that a lipid
profile, consisting of total cholesterol, HDL cholesterol and triglycerides,  be
conducted  under certain  circumstances,  including the diagnosis of individuals
who have increased total cholesterol levels, or individuals with desirable total
cholesterol  levels  who have two or more  other  coronary  heart  disease  risk
factors.  Three lipid profiles,  each to be conducted one week apart,  were also
recommended  prior to initiating drug or dietary therapy for patients with lipid
disorders. Following the NCEP and the NIH guidelines, individuals with desirable
total cholesterol  levels should have their cholesterol tested every five years;
individuals with borderline high total cholesterol should have a lipid screening
repeated annually; and, as noted above, those with high total cholesterol should
have at least three lipid profiles conducted to confirm their values and to help
their physician decide what therapy,  if any, should be instituted.  Individuals
receiving  diet or drug  therapy  would be  expected to be tested at least every
three  months to track the  effectiveness  of the therapy.  While early  federal
initiatives focused on males and coronary disease,  recent initiatives emphasize
the incidence of coronary artery disease in women.

     According to industry  research  conducted by Frost and Sullivan,  the U.S.
market  for  home  cholesterol  testing  products,  which  is  currently  in the
introductory  stage  of  market  development,  has  potential  revenues  of $250
million. Coronary Artery Disease (CAD) is still the number one cause of death in
the U.S. The disease is typically  asymptomatic with the first indicator being a
heart attack. Routine cholesterol screening can identify individuals at risk.

     EXISTING CHOLESTEROL MONITORING SYSTEMS.  Cholesterol and lipoprotein tests
are  generally  performed  in the  laboratory  using  blood  samples  taken from
patients  in a hospital on an  outpatient  basis or in a doctor's  office.  Most
testing is done using highly automated  equipment and enzymatic  chemistry.  The
typical price for such a test when  performed by a laboratory  may be as high as
$40 or more, however,  the laboratory may offer a panel of tests (lipid profile)
for  the  same  amount,  thereby  reducing  the  cost  per  test  performed.  In
comparison,  the cost to the physician for the Company's product is less than $2
per test. The main disadvantage of the existing systems is the lack of immediate
results.  There  are  currently  several  point-of-care  cholesterol  monitoring
systems  that  are  either  more  expensive,  lack  accuracy,  or  have  a  high
acquisition cost.

HEALTHCHECK(TM)

     In order to  capitalize  on the growth in the  market for  over-the-counter
medical  diagnostic  products,  in 1997, the Company introduced its family of at
home medical  diagnostic  testing  products to drug,  discount  and  supermarket
chains under its HealthCheck brand name.
   
     The HealthCheck line consists of 14 at-home testing and screening  products
for cholesterol,  diabetes, urinary tract infection,  pregnancy, ovulation, skin
cancer,  deteriorating  vision  and a  series  of  health  journals  for  use by
consumers. The Company has distinguished HealthCheck from other similar products
by its  packaging  and labeling and by selling its  products  primarily  through
colorful  "HealthCheck  Center"  point-of-sale  displays.  Each display  holds a
variety of medical diagnostic test products.  Launched during the second quarter
of 1997,  more than 38 chain and  independent  pharmacies have placed orders for
HealthCheck  products --  providing  the Company  with  greater  than 30% market
penetration of the  approximately  60,000  pharmacies in the United States since
initial  market  introduction.   Industry  sources  estimate  that  the  at-home
diagnostic  marketplace  in the U.S. was more than $1.23  billion in 1996 and is
projected to exceed $3 billion by the year 2002.

     The  Company  believes  that  simple-to-use  products  with the  ability to
perform  accurate,  quantitative  tests without an  instrument  will continue to
create new market opportunities for home health screening and monitoring. One of
the Company's approaches for competing in this market is to produce improvements
to existing products at-home and other  point-of-care  testing,  where possible.

                                   Page - 10
<PAGE>

Growth in the medical diagnostic test market is being experienced as health care
providers and third party payors recognize that regular  diagnostic  testing can
result in  earlier  detection  of  disease,  more  accurate  diagnosis  and more
effective treatment as individuals become more involved with their own health.

     The Company's  strategy is to capitalize on the initial  success created by
the   HealthCheck   product   launch  to   further   expand   domestically   and
internationally.  This will be  achieved  by greater  penetration  of the retail
pharmacy, supermarket, mass merchandise and drug wholesale distribution channels
with  a  comprehensive  family  of  at-home  testing  products  displayed  in  a
centralized diagnostic center that offers cost effective pricing to the consumer
and higher than average profit margin for the retailer.

     At present,  the Company's  HealthCheck  products have been ordered by such
leading pharmacies as Walgreen Drug Stores, Eckerd Corp.,  CVS/Revco,  Rite Aid,
Thrift Drug, Phar-Mor,  Genovese Drug Stores,  Longs Drug Stores,  Smiths Food &
Drug, Osco Drug, Sav-On Stores,  Snyder Drug, Kinney Drugs,  Harco Drug; leading
supermarkets  such as Kroger,  Thriftway  Foods,  Seaway Foods and Ukrop's Super
Markets;  and leading drug wholesale  distributors  McKesson Corp.,  AmeriSource
Health Corp., Bergen Brunswig Drug Company,  Bindley Western Industries,  Neuman
Distributors, KinRay, Allou Distributors, and F. Dohman Co., among others.

     The   successful   launch  of  the  Company's   HealthCheck   products  was
accomplished  using internal  sales efforts and a network of independent  broker
organizations,  each with geographic responsibility for the chains headquartered
in their respective territories to create awareness of this product line as well
as  generate  initial and  reorder  sales.  Trade  advertising  and  promotional
initiatives  were  employed  to support  these sales  activities.  In the fourth
quarter  of 1997,  consumers  were  introduced  to the  HealthCheck  brand via a
six-week  national  radio  advertising  campaign in which 300 radio  commercials
aired on top-rated  nationally  syndicated  programs  such as the Rush  Limbaugh
Show,  Dr. Dean Edell Show,  Dr. Laura  Schlessinger  Show,  Gary Burbank  Show,
Michael Reagan Show, Bob Grant Show, Dr. Joyce Browne Show,  Country  Heartlines
and One-On-One  Sports.  These commercials were expected to reach  approximately
175  million  adults age 35 and  older.  The  Company  expects  to  continue  to
implement  various  consumer  and trade  marketing  programs  and  direct  sales
initiatives.

OTHER MEDICAL DIAGNOSTIC AND RELATED PRODUCTS

     OVERVIEW. The Company has developed in vitro medical diagnostic tests which
measure clinically  significant  substances using bodily fluids,  usually blood,
urine or saliva.  These  tests are termed in vitro  because  they are  performed
outside the human body as opposed to in vivo tests, which are performed directly
on  or  within  the  human  body.   The  Company's   patented  and   proprietary
membrane-based  technology is  particularly  well suited for the  development of
accurate  economical and rapid in vitro diagnostic tests. This technology allows
a  test  to  automatically   eliminate   interfering   substances,   concentrate
components,   sequentially   perform  selected  chemical  steps  and  accurately
determine sample sizes, all without user involvement.
        
     The market for in vitro diagnostic testing has experienced rapid growth due
to  growing  public  awareness  of health  and  safety  issues;  recognition  by
physicians  that  regular  diagnostic  testing can result in earlier  detection,
diagnosis and effective treatment;  increased alcohol and drug related screening
by employers;  and the  introduction of  cost-effective  and accurate  products.
According  to  industry  sources,  the  total  worldwide  market  for  in  vitro
diagnostic  testing  products  was  approximately  $15.3  billion  in  1995  and
estimated to exceed $21 billion by the year 2000.

     Point-of-care  diagnostic  testing  provides  a  fast,  cost-effective  and
accurate alternative to conventional clinical laboratory testing. Currently, the
majority  of  diagnostic  testing  is done  in  centralized  laboratories  which
involves  skilled  technicians  who must  measure and  process a  specimen,  add
reagents and use  sophisticated  instruments  to read and  calculate the results
(which  are  typically  not  available  for  24  to  72  hours).   In  contrast,
point-of-care testing in clinics, physician offices, homes, patient bedsides and
emergency rooms permits the user to obtain quantitative results,  usually within
minutes,   thus   allowing  for  immediate   interpretation   of  test  results.
Point-of-care  testing  also  eliminates  the  time  and  cost  associated  with
utilizing remotely located  laboratories.  The Company expects the point-of-care

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<PAGE>

diagnostic   testing   industry  to  continue  to  grow,   creating  new  market
opportunities for the Company.

     PRODUCTS.  The Company's  existing  medical  diagnostic  products and those
currently under development generally fall within the following categories:

     GLUCOSE  MONITORING.  In addition to the  Company's  TD Glucose  Monitoring
System,  TCPI has received  510(k)  clearance of its One Step Blood Glucose Test
Strip for visual monitoring.  This product is a conventional  finger stick test,
the results of which are available to be read visually  against a patented color
chart within one minute of  administering  the test.  The Company  believes that
there are many  applications for this device in  underdeveloped  and third world
countries where government  insurance or  reimbursement  is  non-existent.  This
system can also be used with the  Company's  One Step Blood  Glucose  Meter.  In
addition,  the  Company's  One Step Urine  Glucose  Test Strip is already on the
market among the HealthCheck family of at-home diagnostic products available for
consumer use. See "Business -  Non-Invasive  Transdermal  Glucose  Monitoring --
Blood Glucose Monitoring Market" for information  regarding the potential market
for blood glucose monitoring products.

     FAMILY  PLANNING.  The  Company  currently  distributes  several  One  Step
Pregnancy  and One Step  Ovulation  Tests.  These  products are sold as finished
shelf packages in the OEM marketplace to major multinational  pharmaceutical and
diagnostic  companies as well as under the Company's  HealthCheck  brand and PDQ
label.  The  Company  also sells its  pregnancy  tests  under  approximately  64
different private labels -- which include retail distribution by the Company and
under contracts with major pharmaceutical and diagnostic companies. According to
industry sources,  worldwide sales of pregnancy and ovulation tests in 1995 were
approximately $550 million and $40 million, respectively.

     The  Company's  pregnancy and ovulation  tests are  characterized  by their
accuracy and ease of use. The strip  format of these  tests,  which  provide the
same  sensitivity  as a  radioimmunoassay  ("RIA")  test,  are immersed in urine
providing a distinct  visual  reaction.  The slide  format of these tests is for
large  volume  clinics and  require  the  addition of four drops of urine to the
device. The One Step Pregnancy Midstream Wand requires only a momentary dip into
urine or may be conveniently  held under the urine stream. In February 1997, the
Company  announced  the market  introduction  of its new One  Step-One  MinuteTM
pregnancy test. This product provides  consumers with an easy to ready result in
one minute which is three times faster than most  competing and national  brands
promise,  and results are greater than 99 percent accurate in laboratory  tests.
All tests  have  built-in  controls  to insure  functionality  and may be easily
disposed of, or allowed to dry to provide a permanent record of results.

     The Company has had a non-exclusive  worldwide  marketing and  distribution
agreement with Boehringer  Mannheim for its family planning  diagnostic products
since  1992.  In February  1998,  the Company  announced  a new  agreement  with
Boehringer  Mannheim for more than $5 million per year of the Company's finished
and  packaged  family  planning  products,  which will be  directly  supplied to
Boehringer  Mannheim  distributors.  During  1997,  the  Company's  wholly-owned
subsidiary,  Health-Mark Diagnostics, L.L.C., continued to market and distribute
the Company's  private label family  planning  products in the United States and
Canada  to  drug,   discount  and  supermarket  chains.  It  also  launched  the
HealthCheck version of the Company's pregnancy and ovulation tests.

     DRUGS OF ABUSE  SCREENING.  The Company has developed  diagnostic tests for
the screening of various  drugs of abuse.  The products are initial drug screens
that  use the  Company's  membrane-based  strip  immunoassay  format  technology
designed  to detect the  presence  of a  particular  drug or a  metabolite  of a
particular drug being tested for in either human urine or in saliva. The Company
is also  developing a single strip that can be used to screen for multiple drugs
from one  sample.  The results of these tests are  available  within  minutes of
administering the test and eliminate the need for the taking of a urine or blood
sample and delivering the sample to a laboratory for analysis.

     The  Company's  drug  screening  tests meet the  criteria  specified by the
National  Institute on Drug Abuse (the "NIDA") for initial screening of drugs of
abuse.  They are  designed to detect the  presence  or absence of the  substance
being  screened at or above the NIDA  prescribed  minimum  quantity for positive
responses to initial drug screening.  No special training is required to perform
the Company's drug screening tests. These tests operate automatically  requiring

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<PAGE>
no reagents, other substances or additional equipment. The tests provide on-site
results  within five  minutes and the used  products  can be disposed of without
special handling.  The Company believes that the use of its drug screening tests
may be helpful in narrowing the scope of situations in which  significantly more
expensive  laboratory  tests  are  used by  quickly  eliminating  negative  test
results, thereby further reducing costs for the testing entity.

     The Company has an exclusive  agreement with Boehringer  Mannheim Argentina
("BMRA") for  marketing  and  distribution  in Latin  America of TCPI's drugs of
abuse  screening  products,  as well as its  diagnostic  products for infectious
diseases and certain types of cancer.

     INFECTIOUS  DISEASE  SCREENING.  The Company has  developed  the  following
products for the screening of infectious diseases:

     HUMAN  IMMUNODEFICIENCY  VIRUS (HIV).  The Company has  developed a simple,
accurate,  rapid,  convenient  and easy to read  screening  test  for the  Human
Immunodeficiency Virus ("HIV"), the causative agent of Acquired Immunodeficiency
Disease   Syndrome   ("AIDS").   The   Company   intends  to  market  this  test
internationally  until such time as favorable regulatory clearance is likely for
marketing in the U.S. of a point-of-care  and/or at-home  screening test of this
type.  The  Company's  RapidTest HIV(TM) Screen is included in an agreement with
Boehringer  Mannheim Argentina to market and distribute certain of the Company's
diagnostic products for infectious  diseases,  drugs of abuse and certain cancer
screens  throughout Latin America.  Industry sources currently  indicate that 21
million people  worldwide have tested positive for HIV and about 7,500 new cases
are  diagnosed  each day. In addition,  approximately  300 million HIV tests are
performed  annually  worldwide with more than one-third of them occurring in the
U.S. alone.

     The Company's  RapidTest HIV Screen is a  membrane-based  solid phase assay
that can provide a permanent  on-site result in approximately  five minutes with
serum, plasma, or saliva. The results of a clinical trial evaluation using human
serum and comparing the Company's RapidTest HIV Screen to enzyme immunoassay and
western blot were published in 1995 in the  proceedings of the American  Society
for  Microbiology.  This study  reported that the RapidTest HIV Screen  provided
100% sensitivity, 98.07% specificity, 95.13% positive predicative value and 100%
negative  predicative  value in a total of 499 serum samples.  The RapidTest HIV
Screen was also  evaluated  and met the  criteria  of  efficacy  required by the
Program for  Appropriate  Technology in Health of the World Health  Organization
(the "WHO").  Using plasma,  this evaluation provided a 99.5% sensitivity rating
and a 99.3%  specificity on a total of 457 specimens.  A separate clinical trial
evaluation using human saliva,  collected in the Company's new Sani SalTM saliva
collector,   and  comparing  the  Company's   RapidTest  HIV  Screen  to  enzyme
immunoassay  and western blot was concluded in March 1997.  This study  reported
that the RapidTest HIV Screen provided 100% sensitivity and  specificity.  There
were no false positives or false negatives.  The predicative  positive value was
100% in a total of 1,316  saliva  samples.  The  RapidTest  HIV  Screen was also
evaluated  and  met  the  criteria  of  efficacy  required  by the  Program  for
Appropriate Technology in Health of the WHO.

     HEPATITIS.  The Company  has  developed a  qualitative  screening  test for
Hepatitis B that can be used with either a serum or saliva sample.  More than 50
million  hepatitis  tests are done each year, with the greatest number being for
Hepatitis B.  According to industry  sources,  an estimated  400 million  people
worldwide have been infected with Hepatitis B, including as many as 1.25 million
chronically  infected  Americans.  The incidence  rate in the U.S. is as high as
320,000 new infections per year. The estimated  global  healthcare and workplace
impact of Hepatitis B is approximately $700 million per year.

     A  correlation  study was  conducted  against a  reference  RIA test  which
indicated  that the Company's  Hepatitis B screening  test had a sensitivity  of
100%,  specificity  of 99.4% and a  correlation  of 99.6% to the  reference  RIA
assay.  The Company's  Hepatitis B screening test was also evaluated and met the
criteria of  efficacy  required  by the WHO.  The Company  expects to market its
Hepatitis B screening test outside of the United States.

     STREP A AND  STREP B. The  Company's  One Step  Strep  Screens  incorporate
immunoassay  reagents that contain highly  specific and sensitive  antibodies to
detect the  presence  of the A  beta-hemolytic  Streptococcus  ("Strep A") and B
beta-hemolytic  Streptococcus  ("Strep B") antigen,  respectively.  Using a swab

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<PAGE>

sample,  these tests can  accurately  detect the  presence of Strep A or Strep B
within five to 15 minutes.  Traditional methods of detecting Strep A and Strep B
typically  require  24 to 48  hour  culturing  of  swab  specimens.  Each of the
Company's  Strep  screens is a  presumptive  test,  which  allows for  immediate
counseling  and  treatment  of infected  patients,  and is  intended  for use in
physician offices, hospital laboratories and clinics. The Company recently began
distribution of its new Strep A screening product through a major pharmaceutical
and diagnostics  company for placement in the physician office  marketplace.  In
addition,  TCPI  expects  that its Strep A  screening  test will be added to the
Company's products  currently  available for distribution under the new February
1998  marketing and  distribution  agreement  with  Boehringer  Mannheim.  See -
"Business - Other Medical Diagnostic and Related Products - Family Planning".

     CHLAMYDIA.  The Company's One Step Chlamydia Screen detects the presence of
Chlamydia   trachomatous   directly  from   endocervical  or  endourethral  swab
specimens.  It is a presumptive test, which allows for immediate  counseling and
treatment of infected  patients,  but which may also be  confirmed  through more
extensive microbiological testing, and is intended for use in physician offices,
hospital  laboratories  and  clinics.  Chlamydia  is the  most  common  sexually
transmitted  disease  caused  by  a  bacteria.   Approximately  50  million  new
infections occur annually worldwide, including about four million new infections
annually in the United  States.  Industry  sources  estimate  that the worldwide
Chlamydia  testing market is approximately  $46 million per year, with about 45%
from testing in the U.S.

     HELICOBACTER  PYLORI. The Company has developed a membrane-based strip test
for Helicobacter pylori ("H. pylori") that qualitatively  determines  antibodies
to H.  pylori in human  serum,  plasma or whole  blood.  H.  pylori is a stomach
bacterium  which is believed to cause,  among other  things,  peptic  ulcers and
gastric  disorders.  It is  believed  that  between  20%  and  40% of the  adult
population  in the U.S.  harbors H. pylori.  Infection is also  associated  with
increasing  age and H. pylori is thought to be present in over 60% of  Americans
over the age of 65.

     CARDIAC  TROPONIN I AND  MYOGLOBIN.  Coronary  events result in 1.5 million
reported  cases of acute  myocardial  infarction  ("MI")  annually in the United
States,  accounting for approximately 500,000 deaths.  Currently diagnosing a MI
in the  field has  carried a high  life-and-death  risk  during  the rush to the
hospital.  The Company has  developed  a test that can be  performed  during the
transport of the patient to the Emergency Room, allowing  appropriate  treatment
to be initiated  much earlier than in the past.  Advancement in the treatment of
MI has  increased  the 30-day  survival  rate to  approximately  90% today.  The
Company's  sensitive  immunoassay  of the  cardiac  isoform of Troponin I (cTnI)
provides an effective cardiac specific serum marker for MI.

     In addition,  Myoglobin  tests have been  successfully  used in conjunction
with CK-MB and with  Troponin I  immunoassays  to both confirm and exclude MI in
patients being admitted to a hospital with chest pains and non-diagnostic  ECGs.
Myoglobin's  role in the  diagnosis  of MI is  becoming  better  defined and the
Company  believes  that its simple  and rapid  assay will  further  enhance  the
usefulness of the Troponin I test.

     LUPUS.  Systemic  Lupus  Erythematosus  (Lupus) is a chronic,  often  fatal
disease,  manifested by inflammation of multiple organs, including joints, skin,
kidneys,  heart,  blood,  blood  vessels and the brain.  There are more than 2.5
million  diagnosed  Lupus suffers in the United States and 3.5 million in Europe
who might benefit from a simple, daily, inexpensive diagnostic test for Lupus.

     In  1996,  the  Company  signed a  definitive  15-year  agreement  with the
University  of  Kansas  to  use  the  university's  patented  synthetic  antigen
technology for identifying Lupus to develop a point-of-care  diagnostic test for
the disease.  The Company has been granted the exclusive,  worldwide license for
this  technology  and has  developed a rapid,  one-step  test to identify  Lupus
antibodies present in the urine of individuals with the disease. This technology
currently has two U.S. patents issued.

     Among the potential  benefits of this  prospective  test would be to assist
physicians in identifying  Lupus,  which has been difficult because symptoms are
similar  to  other  diseases,  such as  arthritis.  The  test  could  also  help
physicians  identify  periods of remission and active  inflammation,  facilitate
appropriate therapy exactly when needed,  minimize debilitating drug therapy and
improve the quality of life for Lupus patients.

                                   Page - 14
<PAGE>


     SALIVA  SAMPLE  COLLECTOR.   The  Company's  Sani  Sal(TM)Saliva  Collector
provides  a  saliva  sample  which  contains  low  molecular-weight   compounds,
hormones,  enzymes and proteins in levels that are  representative  of levels at
which they are present in serum or plasma.

     The  Sani Sal  Saliva  Collector is  intended  for use with  certain of the
Company's  drugs of abuse and infectious  disease  screening  tests.  The target
market  for the  Sani Sal  Saliva  Collector  will be  physician  offices,  life
insurance  companies,  community outreach  programs,  immigration  centers,  the
military,  customs,  foreign  governments  and  correctional  institutions.  See
"Business -  Litigation"  for a  description  of a lawsuit  brought  against the
Company regarding its saliva collection technology.

     CANCER  SCREENING.  The Company is developing  the  following  products for
cancer screening:
        
     PROSTATE-SPECIFIC ANTIGEN ("PSA"). The Company has developed a One Step PSA
Test and is currently  undergoing  clinical trials in preparation for submission
of this product to the FDA for Pre-Market Approval ("PMA").

     ALPHAFETOPROTEIN  ("AFP").  The  Company's One Step  Alphafetoprotein  Test
offers  a  rapid  method  of  screening,   diagnosing  and  monitoring   primary
hepatocellular (liver) carcinoma and non-seminomatous testicular cancer.

     FECAL OCCULT BLOOD.  The Company's One Step Fecal Occult Blood Test(R) is a
rapid,  convenient,  touch free and odorless  qualitative sandwich dye conjugate
immunoassay for the determination of human hemoglobin in feces.

     The  following  table  sets forth  information  relating  to the  Company's
existing  diagnostic  products and those currently under  development.  The data
included  in this  table is  qualified  in its  entirety  to the  more  detailed
information relating thereto included elsewhere in this report.



                                   Page - 15
<PAGE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                     PRODUCT                           MARKET
                                                                                     STATUS                            SECTOR
                                                                 ------------------------------------------  -----------------------
                                                                 ------------------------------------------  -----------------------
                   DIAGNOSTIC PRODUCT PORTFOLIO                  In        Pre-               Regul- On       O-T-C   O-T-C    OEM
                                                                 Develop-  Clinical  Clinical atory  The      Health  Private
                                                                 ment      Stage     Trials   Clear- Market   Check   Label
                                                                                              ance       
<S>                                                                                                          <C>   
-----------------------------------------------------------------------------------------------------------  -----------------------

GLUCOSE MONITORING:
-----------------------------------------------------------------------------------------------------------  -----------------------
TD Glucose(TM) Monitoring System                                   o          o                                                  X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Whole Blood Glucose Test Strip(TM)                        o          o        o       o       o       X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Whole Blood Glucose Meter                                 o          o        o                                         X
-----------------------------------------------------------------------------------------------------------  -----------------------
Uri-Test(TM)Glucose Test Strip                                     o          o        o       o       o       X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------

CHOLESTEROL MONITORING:
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Cholesterol Meter                                         o          o                                X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Total Cholesterol Strip (meter)                           o          o                                X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step HDL Cholesterol Strip (meter)                             o          o                                X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
Total Cholesterol Test Kit (visual/professional)                   o          o        o       o       o
-----------------------------------------------------------------------------------------------------------  -----------------------

AT HOME SCREENING AND MONITORING TESTS:
-----------------------------------------------------------------------------------------------------------  -----------------------
Total Cholesterol Test  Kit  (visual)                              o          o        o                       X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
HDL Cholesterol Test Kit (visual)                                  o          o                                X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
Uri-Test(TM)Urinary Tract Infection Test Kit                       o          o        o       o       o       X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
Uri-Test(TM)Diabetes Test Kit                                      o          o        o       o       o       X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
Uri-Test(TM)Protein Test Kit                                       o          o        o       o               X                 X
-----------------------------------------------------------------------------------------------------------  -----------------------
HealthCheck(TM)Vision Screening Test                               o          o        o       o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------
HealthCheck(TM)Skin Growth Monitoring System                       o          o        o       o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------

FERTILITY TESTING PRODUCTS:
-----------------------------------------------------------------------------------------------------------  -----------------------
Pregnancy Test: Midstream Wand                                     o          o        o       o       o       X       X         X
-----------------------------------------------------------------------------------------------------------  -----------------------
Pregnancy Test: Midstream Wand Double-Pack                         o          o        o       o       o       X       X         X
-----------------------------------------------------------------------------------------------------------  -----------------------
Pregnancy Value Pack: hCG Test Strip Double-Pack                   o          o        o       o       o       X       X         X
-----------------------------------------------------------------------------------------------------------  -----------------------
Ovulation Predictor Test Kit                                       o          o        o       o       o       X       X         X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step One Minute(TM)Pregnancy Test: Midstream Wand              o          o        o       o       o       X       X
-----------------------------------------------------------------------------------------------------------  -----------------------
Ovulation Midstream Wand                                           o          o        o       o               X       X         X
-----------------------------------------------------------------------------------------------------------  -----------------------
Pregnancy test strips, vial configurations                         o          o        o       o       o                         X
-----------------------------------------------------------------------------------------------------------  -----------------------
</TABLE>

                                   Page - 16
<PAGE>
<TABLE>
<S>                                                                                                          <C>   
-----------------------------------------------------------------------------------------------------------  -----------------------

PERSONAL HEALTH JOURNALS:
-----------------------------------------------------------------------------------------------------------  -----------------------
Men's Journal                                                      o          o        o        o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------
Woman's Journal                                                    o          o        o        o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------
Senior's Journal                                                   o          o        o        o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------
My Pregnancy Journal                                               o          o        o        o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------
All About Me Children's Journal                                    o          o        o        o       o       X
-----------------------------------------------------------------------------------------------------------  -----------------------

DRUGS OF ABUSE SCREENING:
-----------------------------------------------------------------------------------------------------------  ----------------------
One Step Cocaine Test Strip(TM)                                    o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Opiate Test Strip(TM)                                     o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Amphetamine Test Strip(TM)**                              o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Methamphetamine Test Strip(TM)                            o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Phencyclidine (PCP) Test Strip(TM)**                      o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Benzodiazepine Test Strip(TM)**                           o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Canabinoids (THC) Test Strip(TM)                          o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Methadone Test Strip(TM)**                                o          o        o                                         X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Barbiturates Test Strip(TM)                               o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
Drugs of Abuse Panel Tests: (2,4,6 test panels)                    o          o        o                                         X
-----------------------------------------------------------------------------------------------------------  -----------------------

INFECTIOUS DISEASE SCREENING:
-----------------------------------------------------------------------------------------------------------  -----------------------
RapidTest HIV(TM)Screen  **                                        o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
RapidTest HBsAg(TM)Screen (Hepatitis B) **                         o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Strep A(TM)Screen                                         o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Strep B(TM)Screen                                         o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
RapidTest Chlamydia(TM)Screen  **                                  o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
RapidTest H. pylori(TM)Screen                                      o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------

SALIVA SAMPLE COLLECTOR:
-----------------------------------------------------------------------------------------------------------  -----------------------
Sani-Sal(TM) Saliva Collector                                      o          o        o                                         X
-----------------------------------------------------------------------------------------------------------  -----------------------

CARDIAC MARKERS:
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Cardiac Troponin I Test                                   o          o                                                  X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Myoglobin                                                 o                                                             X
-----------------------------------------------------------------------------------------------------------  -----------------------

CANCER SCREENS:
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step PSA Test **                                               o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Alphafetoprotein Test  **                                 o          o                                                  X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step LE Test (Lupus)                                           o                                                             X
-----------------------------------------------------------------------------------------------------------  -----------------------
One Step Fecal Occult Blood Test(R)                                o          o        o        o               X
-----------------------------------------------------------------------------------------------------------  -----------------------

URINALYSIS:
-----------------------------------------------------------------------------------------------------------  -----------------------
Routine Urine Screening                                            o          o        o        o       o                        X
-----------------------------------------------------------------------------------------------------------  -----------------------
Urine Specialty Product                                            o                                                             X
-----------------------------------------------------------------------------------------------------------  -----------------------
<FN>
** Products for Export Only
</FN>
</TABLE>

                                   
<PAGE>

TRANSDERMAL DRUG DELIVERY SYSTEMS

     The Company's  Pharmetrix Division is engaged in the research,  development
and  commercialization  of transdermal drug delivery systems and skin permeation
technology  for its own  portfolio  of  products  and on a  contract  basis  for
pharmaceutical and cosmeceutical companies. TCPI's portfolio of transdermal drug
delivery systems is presently focused on products indicated for the treatment of
hormone replacement, cardiovascular disease, smoking addiction, pain management,
and various cosmeceuticals applications.  Distribution of these transdermal drug
delivery  systems  includes direct marketing by TCPI as branded or private label
products  or  through  OEM  marketing  and  distribution  agreements  with major
multi-national pharmaceutical companies.

     Transdermal  drug  delivery  systems  allow for the  controlled  release of
certain drugs directly into the  bloodstream  through the skin.  Skin permeation
enhancers  modify  penetration  characteristics  of  the  skin  to  allow  for a
significant  increase in the transport of drugs through the skin. The advantages
of such systems over conventional drug administration include enhanced efficacy,
increased  safety,  greater  convenience and improved  patient  compliance.  The
worldwide  transdermal  drug  delivery  market  has grown  substantially  and is
currently  estimated to be more than $2.5 billion in 1996,  with the U.S. market
accounting for approximately 40 percent.

     TRANSDERMAL TECHNOLOGY. Pharmetrix has developed proprietary techniques and
manufacturing processes for adhesive and polymer, matrix, multi-laminate, liquid
reservoir and  combination  patch  technologies.  The Company's  technical staff
works with a wide range of enhancer systems,  including patented  oxazolidinones
penetration  enhancers to increase the skin permeability of individual drugs and
bioactive materials as required.

     The Company is using this technology to develop  transdermal  drug delivery
products  which offer one or more of the  following  advantages:  (i)  increased
efficacy and  efficiency  of the  therapeutic  agents  involved;  (ii)  improved
bio-availability  profiles;  (iii)  reduced  costs;  and (iv)  delivery of novel
molecules through the skin for additional therapeutic indications.

     TCPI's  transdermal and skin  permeation  products are in various stages of
development.  While results of certain  preliminary  clinical and/or  laboratory
studies  have  indicated  the  efficacy of the  Company's  transdermal  and skin
permeation   technologies,   before  any  of  the  Company's   products  can  be
commercially   marketed,   significant  additional  testing  will  be  necessary
(including  laboratory  tests on animals and  humans) and results  must be filed
with the FDA and/or similar  regulatory  agencies in other  countries where such
products  may be  sold.  The  process  of  developing  individual  products  and
obtaining FDA or foreign regulatory clearance could take up to several years for
each product.  There can be no assurance  that  development of any such products
will be completed or that FDA clearance will be secured.

     Pharmetrix  also provides  contract  services to sponsoring  pharmaceutical
companies   seeking   development   and/or   commercialization   of  transdermal
technologies,   including  research  feasibility  assessments,  skin  permeation
studies, formulation development,  clinical manufacturing and clinical supplies,
process development and contract manufacturing.  Product development begins with
customized feasibility studies that assess medical and client needs, proprietary
positioning  and product  definitions.  Pharmetrix has  developed,  patented and
licensed  transdermal  systems  to  treat  conditions  such as  drug  addiction,
hormonal deficiencies,  cardiovascular diseases,  glaucoma, memory loss, chronic
pain,  allergies  and  incontinence.  The Company has  previously  entered  into
agreements for contract  development services or is currently involved with such
major multinational  companies as Revlon Research Center, Inc. (skin permeation)
and Taiho Pharmaceutical Co., Ltd. (urinary  incontinence).  The Company is also
in   discussions   with   selected   companies   concerning   the   development,
commercialization  and  distribution  of  several  of the  products  in its  own
portfolio.  There  can be no  assurance  that  definitive  arrangements  will be
reached with any of these companies.

     PLANNED PRODUCT DEVELOPMENT.  The Company's development approach is focused
on achieving  innovative  solutions to specific  drug  delivery  problems.  TCPI
presently intends to concentrate on the development of transdermal  products for
the treatment of the following conditions or diseases:

                                   Page - 18
<PAGE>
     SMOKING ADDICTION.  It is well recognized that tobacco smoking is among the
leading cause of preventable  disease and death.  Industry sources estimate that
in 1991,  approximately  26% of adults in the U.S.  smoked tobacco  products and
that there were more than 434,000  smoking-related  deaths --  accounting  for a
mortality rate of more than one in every six deaths. The health risks of smoking
and non-smokers' growing intolerance of being exposed to secondary smoke are all
increasing  the demand  for  effective  methods to aid  smokers to give up their
habit. The current worldwide market for transdermal  smoking cessation  products
is more than $600 million in annual sales.

     Studies have shown that 80% to 90% of smokers want to stop smoking and have
tried at least once to do so. Of those,  70%  relapsed  during  the first  three
months.  The main  focus of  treatment  in  recent  years  has been  transdermal
nicotine  patches.  In 1991 and 1992, the FDA approved four nicotine patches for
sale by other companies. Those four products are now available in most developed
countries throughout the world.

     The Company has entered into and completed a  development  contract for one
of the first generation  nicotine patches currently on the market.  TCPI intends
to manufacture and commercialize a second generation  nicotine patch through its
Health-Mark  Diagnostics subsidiary under both the HealthCheck brand and private
label  identity in the  over-the-counter  market  segment.  The Company has also
developed  and patented a unique  smoking  cessation  approach  that  combines a
transdermal  patch  together with a rapidly  dissolving  lozenge which  contains
nicotine.  The lozenge is used to stem acute  withdrawal  spasms while the patch
delivers a lower maintenance dose of nicotine.  The Company has held preliminary
distribution discussions with major drug chains and mass merchandisers.

     HORMONE  REPLACEMENT FOR MENOPAUSAL  SYMPTOMS/OSTEOPOROSIS.  The Company is
developing three hormone replacement  transdermal drug delivery systems; one for
delivery of estradiol,  another for delivery of a  combination  of estradiol and
progesterone; and the third for delivery of testosterone.  With the aging of the
population  over the next  several  decades,  conditions  and  diseases  such as
menopause and osteoporosis,  which may benefit from hormone replacement therapy,
will become  significantly more prevalent.  It has been estimated that there are
approximately 90 million  post-menopausal women worldwide and that this group is
one of the fastest  growing  demographic  segments.  By the year 2000,  there is
expected  to be  approximately  43  million  women in the  menopausal  age range
(50-59) in Europe and 16 million in the U.S.  Industry sources estimate that the
1995 worldwide  market for estrogen and  combination  transdermal  drug delivery
systems was approximately $350 million.

     CARDIOVASCULAR  DISEASE.  Angina  pectoris  is a  condition  caused  by the
temporary  inability of the coronary arteries to supply a sufficient quantity of
oxygenated blood to the heart muscle. An angina attack is accompanied by steady,
severe pain and intense pressure in the region of the heart.  Angina attacks may
be relieved by the  administration  of  nitroglycerin  or  isosorbide  dinitrate
("ISDN"),  known  coronary  vasodilators,  which increase the flow of oxygenated
blood to the heart. The American Heart Association estimates that angina affects
over three million people in the United States.

     Transdermal  drug  delivery  systems  have  become  a widely  used  form of
nitroglycerin  and ISDN delivery  because they avoid the  limitations of orally,
sublingually  and topically  administered  forms as well as help prevent  angina
attacks by reliably  providing  continuous  therapeutic levels of these drugs in
the bloodstream.  Transdermal  nitroglycerin  delivery systems, which were first
introduced  commercially in 1982, are currently  marketed by several  companies.
Industry sources estimate that the worldwide transdermal nitroglycerin market in
1995 was approximately $400 million.

     URINARY  INCONTINENCE.  With the aging of the general  population  over the
next several years,  the urinary  incontinence  treatment  market is expected to
grow substantially. Industry sources estimate that the number of people over the
age of 65 in the United  States is expected to rise from 31.6 million in 1990 to
35 million in 2000. Current treatment for urinary  incontinence  requires two to
four daily doses of continence drugs, a regimen  particularly  difficult for the
elderly. A transdermal drug delivery system under development by the Company has
the  potential  to simplify the dosage  regimen and provide a visual  indication
that the patient has taken the medication.

                                   Page - 19
<PAGE>
     PAIN MANAGEMENT.  Traditionally  narcotic analgesics have been the mainstay
for the treatment of moderate to sever pain, however, their addictive potential,
development  of tolerance and  respiratory  depressant  side effects often limit
their use for continuous or  intermittent  chronic  administration.  Many of the
approved narcotic analgesics are injected with multi-daily dosing regimens.  The
analgesic  market is large and there are  opportunities  for improved  analgesic
agents and additional controlled release dosage forms for their administration.

     Ketorolac  tromethamine  is a non-narcotic  analgesic  agent having similar
potency to morphine  without  the  life-threatening  side effect  profile of the
narcotic analgesics,  and offers an alternative to the use of narcotic analgesic
agents and  belongs  to the class of  nonsterodial  anti-inflammatory  analgesic
drugs (NSAID).

     The Company's  Pharmetrix  Division has developed  transdermal  therapeutic
system  designs for delivery of Ketorolac  for use in  management of moderate to
severe  pain.  Two U.S.  patents  have been issued  which  provide  coverage for
transdermal  delivery of Ketorolac  from  several  transdermal  delivery  system
designs. In addition, the Company is currently investigating other transdermally
delivered drugs active in pain management.

     The  following  table  sets forth  information  relating  to the  Company's
transdermal drug delivery products under development.  The data included in this
table is  qualified in its entirety to the more  detailed  information  relating
thereto included elsewhere in this report.

                                   Page - 20
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 PRODUCT                              MARKET
                                                                                  STATUS                              SECTOR
                                                              -------------------------------------------- -------------------------
                                                              -------------------------------------------- -------------------------
          TRANSDERMAL DRUG DELIVERY PRODUCT PORTFOLIO           In        Pre-               Regul- On       O-T-C   O-T-C    OEM
                                                                Develop-  Clinical  Clinical atory  The      Health  Private
                                                                ment      Stage     Trials   Clear- Market   Check   Label
                                                                                             ance       

<S>                                                                                                        <C>

---------------------------------------------------------------------------------------------------------- -------------------------
HORMONE REPLACEMENT / OSTEOPOROSIS:
---------------------------------------------------------------------------------------------------------- -------------------------
Estradiol                                                         o         o         o                                         X
---------------------------------------------------------------------------------------------------------- -------------------------
Estradiol / Progestin                                             o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------
Testosterone                                                      o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------

CARDIOVASCULAR DISEASE:
---------------------------------------------------------------------------------------------------------- -------------------------
Nitroglycerin                                                     o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------
Isosorbide Dinitrate (ISDN)                                       o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------

SMOKING CESSATION:
---------------------------------------------------------------------------------------------------------- -------------------------
Nicotine                                                          o         o         o                         X               X
---------------------------------------------------------------------------------------------------------- -------------------------
Nicotine Lozenge                                                  o         o
---------------------------------------------------------------------------------------------------------- -------------------------

OTHER:
---------------------------------------------------------------------------------------------------------- -------------------------
Bup-4 Incontinence *                                              o         o         o                                         X
---------------------------------------------------------------------------------------------------------- -------------------------
Ketorolac                                                         o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------
Vitamin C/E Patch                                                 o         o         o                                  X      X
---------------------------------------------------------------------------------------------------------- -------------------------
Pain Patch                                                        o         o                                                   X
---------------------------------------------------------------------------------------------------------- -------------------------
Physostigmine                                                     o                                                             X
---------------------------------------------------------------------------------------------------------- -------------------------

SKIN PERMEATION ENHANCER:
---------------------------------------------------------------------------------------------------------- -------------------------
SR-38                                                                                                 o                         X
------------------------------------------------------------------------------------------------------------------------------------
<FN>
*  Undergoing clinical evaluation in Japan
</FN>
</TABLE>
 
BIOCHEMICAL MANUFACTURING

     The Company  currently  manufactures  the  specialty  chemical Tris and its
analogues, a biological buffer having numerous applications in the manufacturing
of pharmaceutical, cosmetic, diagnostic and other products. Although the Company
is capable of manufacturing  other biochemical  products,  it does not intend to
broaden its product  line at this time.  The Company  does,  however,  intend to
continue manufacturing and selling Tris.

PRODUCT RESEARCH AND DEVELOPMENT

     The  Company's  products are in various  stages of  commercialization,  and
include those that are already on the market and others that are in development,
in the pre-clinical stage, and seeking regulatory clearance. See the "Diagnostic
Product  Portfolio" and the "Transdermal  Drug Delivery  Portfolio." The Company
conducts an active research and development program to strengthen

                                   Page - 21
<PAGE>

and broaden its existing  products and to develop new products and systems.  The
Company's development strategy is to identify products and systems which are, or
are expected to be, needed by a significant number of potential customers in the
Company's  markets  and  to  allocate  a  greater  share  of  its  research  and
development resources to areas with the highest potential for future benefits to
the Company.  In addition,  the Company seeks to develop  specific  applications
related to its present technology.

MANUFACTURING AND MATERIALS

     During  1997,  the  Company   significantly   expanded  its   manufacturing
capabilities and expects to continue to do so in 1998 in order to further reduce
its dependence on third party contractors.  With respect to those components the
Company  does  not  yet  manufacture   in-house,  it  has  identified  alternate
manufacturing  sources,  however, a change in manufacturers  without appropriate
lead time could  result in a material  delay in the  delivery  of the  Company's
products and may subject the Company to less favorable price terms.  The Company
is  devoting  a major  portion of its  manufacturing  to the  production  of new
products.

     The  Company  purchases,  pursuant  to  written  agreements  with  its  key
suppliers,  the materials used to manufacture its products from single suppliers
to obtain the most favorable price and delivery terms.  Although the Company has
identified an alternate supply source with respect to each of such materials,  a
change in the  supplier of these  materials  without the  appropriate  lead time
could result in a material  delay in the  delivery of products to the  Company's
customers.  There can be no assurance  that the Company  would not be subject to
less favorable price and delivery terms as a result of changing suppliers.

PATENTS, TRADEMARKS AND TECHNOLOGIES

     PATENTS.  The Company currently has 22 U.S. patents and 29 foreign patents,
and has five pending U.S. patent  applications  and more than 30 pending foreign
patent applications.

     The Company's President and Chief Executive Officer, Mr. Jack Aronowitz, is
the legal  owner and a  co-inventor  of  certain  key  patents  utilized  by the
Company,  and he has  licensed to the Company the right to utilize the  patents.
The license  agreement  between Mr.  Aronowitz and the Company provides that any
patents, products, inventions, devices or other items developed by Mr. Aronowitz
during  the term of the  license  agreement  (other  than  those  based upon the
patents  licensed  pursuant  to the license  agreement)  in the field of medical
diagnostics,  pharmaceuticals,  transdermal testing,  transdermal drug delivery,
medical  chemistry  or  medical  biochemistry,  medical  device or  health  care
products are the property of the Company. See "Certain Relationships and Related
Transactions."

     Although  the  Company  has  obtained  patents in the U.S.  with  regard to
aspects of its membrane-based  technology and specific applications thereof, the
Company does not have European  patents which correspond to certain of such U.S.
patents.  To the best of the Company's  knowledge,  however,  its membrane-based
technology  does not  infringe  the  patent  of any third  party in the U.S.  or
Europe.  The  Company is  seeking,  and  intends  to  continue  to seek,  patent
protection where appropriate for improvements to its membrane-based technology.

     The Company requires its key employees, consultants and advisors to execute
a  confidentiality  and  assignment of  proprietary  rights  agreement  upon the
commencement  of an  employment or a consulting  relationship  with the Company.
These agreements  generally provide that all inventions,  ideas and improvements
made or conceived by the individual  arising out of the employment or consulting
relationship  shall  be the  exclusive  property  of the  Company  and  that all
information  related  thereto  shall be kept  confidential  and not disclosed to
third  parties  except  by  consent  of  the  Company  or  in  other   specified
circumstances.  There can be no assurance,  however,  that these agreements will
provide effective  protection for the Company's  proprietary  information in the
event of unauthorized use or disclosure of such information.

     The  Company's  success  will depend,  in part,  on its ability to protect,
obtain or license patents,  protect trade secrets and operate without infringing
the proprietary  rights of others.  See "Business - Litigation." There can be no
assurance,  however,  that existing patent  applications will mature into issued
patents,  that the Company will be able to obtain additional licenses to patents
of  others,  or that the  Company  will be able to  develop  its own  patentable
technologies.  Further, there can be no assurance that any patents issued to the
Company will provide it with competitive advantages or will not be challenged by
others, or if challenged, will be held valid, or that the patents of others will

                                   Page - 22
<PAGE>

not have an  adverse  effect  on the  ability  of the  Company  to  conduct  its
business. In addition,  there is no assurance that the Company's current patents
or  any  patents  issued  in  the  future  will  prevent  other  companies  from
independently developing similar or functionally equivalent products.

     TRADEMARKS.  The following  represents  the Company's  products  which have
received registered and/or trademark authority

TCPI REGISTERED TRADEMARKS

hCG Pregnancy One Step(R)
Pregnancy One Step(R)
Pregnancy One Step Test Strip(R)
One Step LH Test Strip(R)
One Step Whole Blood Cholesterol Test Strip(R)
Health Test Center(R)
One Step Fecal Occult Blood Test(R)
Soft-E-Touch(R)

TCPI TRADEMARKS

TD Glucose(TM)
HealthCheck(TM)
CholestoCheck(TM)
One Step Drugs of Abuse Test Strip - Cannabinoids  (THC)(TM)
One Step Drugs of Abuse Test Strip - Amphetamine(TM)
One Step Drugs of Abuse Test Strip - Methamphetamine(TM)
One Step Drugs of Abuse Test Strip - Opiates(TM) 
One Step Drugs of Abuse Test Strip - Benzodiazepine(TM)  
One Step Drugs of Abuse Test Strip - Barbiturate(TM) 
One Step Drugs of Abuse Test Strip - Phencyclidine  (PCP) (TM) 
One Step Drugs of Abuse Test Strip - Methadone(TM) 
One Step-One Minute Pregnancy Test*
RapidTest HIV(TM) 
RapidTest  Chlamydia  Screen(TM) 
RapidTest HBsAg Screen(TM) 
One Step Strep A Screen(TM)  
One Step Strep B Screen(TM)  
One Step H.  pylori  Screen(TM)  
Sani Sal(TM)

* Trademark Application Submitted

COMPETITION

     Competition in the  development and marketing of medical  diagnostic  tests
and transdermal drug delivery products is intense and expected to increase.  The
Company's  competitors include companies that have developed products similar in
design  and  capability  to those of the  Company as well as  suppliers  of such
products,  including  hospitals and laboratories.  Many of the Company's current
and potential  competitors have significantly  greater technical,  financial and
marketing resources than the Company. There can be no assurance that the Company
will  have  the   financial   resources,   technical   expertise  or  marketing,
distribution  or support  capabilities  to compete  successfully  in the future.
There can be no assurance that the Company's  products will be competitive  with
existing or future products of competitors.

                                   Page - 23
<PAGE>


     The Company  believes that  competition  in the sale of medical  diagnostic
tests is based  primarily  upon the following  factors:  accuracy and precision,
speed of response,  ease of use and cost.  Although the Company believes that it
competes  favorably  in  each  of  these  categories,   many  of  the  Company's
competitors in this market have  significantly  greater resources and experience
than the Company and there can be no assurance  that the Company will be able to
compete favorably.

     The Company believes that its transdermal drug delivery  products will have
to compete on the basis of safety,  efficacy,  patient compliance,  reduced side
effects,  product appearance and comfort, price, and, in certain cases, scope of
patent  rights.  There can be no assurance  that the Company  will  successfully
develop  technologies  and products that are more  effective or affordable  than
those  being  developed  by its  competitors.  In  addition,  one or more of the
Company's  competitors  may achieve patent  protection,  regulatory  approval or
commercialization  earlier than the Company. The first transdermal drug delivery
product  introduced  in a  particular  area  may  gain a  competitive  advantage
relative to other entrants to the market.

MARKETING AND SALES

     To date,  the Company's  medical  diagnostic  products have been  primarily
distributed  through  strategic  alliances.  To a lesser  extent,  the Company's
medical diagnostic  products have been distributed by the Company directly under
the Company's  proprietary brand name and under private label  arrangements with
drug, discount and supermarket chains such as CVS, Thrifty Payless, Thrift Drug,
Woolworth,  Fedco,  Long's and Smith's  Food & Drug.  The  Company has  expanded
direct  distribution of its diagnostic  products as evidenced by the creation of
the  HealthCheck  line of products and the Health Test Center.  The Company also
intends to enter into  strategic  alliances  with  major  international  medical
diagnostic  and  pharmaceutical  companies  for  the  marketing  of  many of its
diagnostic  products.  These  companies have  significantly  greater  financial,
marketing and other  resources  than the Company,  and will therefore be able to
market  the  Company's  products  more  effectively  through  a wider  range  of
distribution channels to a larger market.

     The Company's strategy with respect to development and commercialization of
its transdermal and mucosal drug delivery and skin permeation  enhancer products
have two significant  components (i) identify and bring to market those products
which   are   candidates   for  the  ANDA   process,   and  which  can  be  sold
over-the-counter as HealthCheck products and (ii) enter into strategic alliances
with third parties that can fund a portion of product  development costs, market
the  product  and,  in some cases,  participate  in clinical  testing and obtain
regulatory  approvals.  In an effort to exercise control over the quality of its
products  and capture a larger  portion of the revenues  therefrom,  the Company
will seek to retain  manufacturing  rights to its products  developed under such
strategic alliances.

     Since  1992,   Boehringer  Mannheim  has  had  an  exclusive  agreement  to
distribute  the Company's One Step hCG  Pregnancy  Test Strip,  its One Step hCG
Midstream Wand and its One Step LH Ovulation Test Strip products  worldwide.  In
February 1998, the Company  announced a new agreement with  Boehringer  Mannheim
for more than $5 million per year of the Company's  finished and packaged family
planning  products,  which will be  directly  supplied  to  Boehringer  Mannheim
distributors.  In March 1997,  the Company signed  another  exclusive  marketing
agreement with Boehringer  Mannheim Argentina to market a minimum of $50 million
of its new diagnostic products for infectious  diseases,  drugs of abuse testing
and cancer  screening  throughout  Latin America  during the next  10-years.  In
addition, the Company is engaged in ongoing discussions with Boehringer Mannheim
to identify  other  potential  product  additions  to this  agreement.  In 1997,
Boehringer  Mannheim Group was acquired by Roche Holdings AG, one of the leading
global pharmaceutical companies.

EMPLOYEES

     As of December  31,  1997,  the Company  employed 62  full-time  employees,
including   19   involved   in  research   and   development,   12  involved  in
administration,  23 in operations,  and 8 in marketing and sales. To temporarily
expand its capabilities for larger assembly and packaging projects,  the Company
also hires part time  employees.  The Company has no  collective  bargaining  or

                                   Page - 24
<PAGE>

similar agreement with its employees, but does have an employment agreement with
its  President.   See  "Note  7  to  the  accompanying   Consolidated  Financial
Statements."  Although management does not anticipate any difficulty in locating
and engaging  employees to meet the Company's  expansion plans,  there can be no
assurance that the Company will be successful in doing so.

YEAR 2000

     During 1997, the Company added to its existing  computer  capabilities  and
began   installation  of  new  computer  systems  and  programs  to  accommodate
anticipated future growth of TCPI's business and internal operations. Due to the
recent  nature  of  any  computer-related  additions,  as  well  as  preliminary
discussions  with certain vendors and customers,  the Company  believes the Year
2000 computer issue will not have a material impact on its business,  operations
or financial condition.

GOVERNMENTAL REGULATION

     OVERVIEW.  The  development,  manufacture  and  marketing of drug  delivery
systems and medical diagnostic products are subject to regulation by the FDA and
other federal,  state and local entities.  These entities regulate,  among other
things,  research and  development  activities  and the testing,  manufacturing,
packaging,  labeling,  distribution,  storage  and  marketing  of the  Company's
products.  Sales of the Company's products outside the United States are subject
to  comparable  regulatory  requirements.  These  requirements  vary widely from
country to country.

     MEDICAL DIAGNOSTIC PRODUCTS.  FDA permission to market and distribute a new
medical  diagnostic  product  can be  obtained  in one of two ways.  If a new or
significantly  modified  product is  "substantially  equivalent"  to an existing
legally marketed product,  the new product can be commercially  introduced after
submission  of a  510(k)  notification  to the FDA,  and  after  the  subsequent
clearance by the FDA. Less significant  modifications to existing  products that
do not significantly affect the product's safety or effectiveness can be made by
the Company without a 510(k)  notification.  A company that manufactures devices
subject to 510(k)  clearance  must also comply  with  device good  manufacturing
practices  ("CGMP")  and will be subject to periodic  inspections  by the FDA to
confirm compliance.

     The second,  more stringent  approval process applies to a new product that
is not  substantially  equivalent to an existing product.  A premarket  approval
application  ("PMA")  will be  required  for this  type of  product.  The  steps
required in the PMA process generally  include:  (i) preclinical  studies;  (ii)
clinical   trials  in  compliance   with  testing   protocols   approved  by  an
Institutional Review Board ("IRB") for the participating  research  institution;
(iii) data from clinical trials sufficient to establish safety and effectiveness
of the device for its intended use; (iv) submission to the FDA of an application
that  contains,  among other  things,  the results of  clinical  trials,  a full
description  of the  product  and  its  components,  a full  description  of the
methods,  facilities and controls used for manufacturing and proposed  labeling;
and (v)  review  and  approval  of the PMA by the FDA  before  the device may be
shipped or sold  commercially.  Finally,  the manufacturing site for the product
subject to either  510(k) or PMA  clearance  must operate  using device CGMP and
pass a FDA inspection before product commercialization.

     A device  requiring a PMA that has not been  cleared for  marketing  in the
United  States,  or one  that is not  substantially  equivalent  to a  currently
marketed device,  may be exported to a foreign country for sale,  subject to the
laws of such foreign jurisdictions.

     DRUG  DELIVERY  PRODUCTS.  The  process  required  by the FDA before a drug
delivery  system may be  marketed  in the United  States  depends on whether the
pharmaceutical  compound  has existing  clearance  for use in other dosage forms
(e.g., oral solution, tablet). If the drug is a new chemical entity that has not
been cleared, then the process includes:  (i) preclinical  laboratory and animal
tests; (ii) the filing of an Investigational  New Drug Application  ("IND") with
the FDA requesting  authorization to conduct clinical trials; (iii) adequate and
well-controlled  human  clinical  trials to establish the safety and efficacy of
the  drug  for its  intended  use;  (iv)  submission  to the  FDA of a New  Drug
Application  ("NDA");  and (v) FDA review and  clearance of the NDA. If the drug
has been previously cleared, then the sponsor of a generic form of the same drug
may obtain approval by submitting an Abbreviated New Drug  Application  ("ANDA")
that  demonstrates that the two products are  bioequivalent.  In addition to the

                                   Page - 25
<PAGE>

foregoing,  the FDA  requires  proof  that the  drug  delivery  system  delivers
sufficient  quantities  of the drug to the  bloodstream  to produce  the desired
therapeutic result.

     Under the Drug Price  Competition and Patent Term  Restoration Act of 1984,
an NDA sponsor may be granted market  exclusivity for a period of time following
FDA approval,  regardless of the patent status of the product,  for certain drug
products (e.g., new chemical entities). This marketing exclusivity would prevent
a third party from  obtaining  FDA  clearance  for a similar or  identical  drug
through the ANDA process.  There can be no assurances,  however, that any of the
Company's products will be afforded market exclusivity.

     In  addition  to  obtaining  FDA  clearance  for each  drug  product,  each
manufacturing  establishment  of new drugs must  receive  clearance  by the FDA.
Among the conditions for such approval is the  requirement  that the prospective
manufacturer's quality control and manufacturing procedures conform to the FDA's
current drug CGMP regulations.  Drug  manufacturers are also subject to periodic
CGMP.  Finally,  in order to export  unapproved  drug  products  from the United
States for commercial or clinical use, prior FDA export clearance is required.

     The process of completing  clinical testing and obtaining FDA clearance for
device or drug  products  is likely  to take a number of years and  require  the
expenditure of substantial resources. The FDA may deny a clearance if applicable
regulatory  criteria  are  not  satisfied  or may  require  additional  clinical
testing. Even if such data are submitted, the FDA may ultimately decide that the
submission does not satisfy the criteria for clearance.  Product  clearances may
be withdrawn if compliance  with  regulatory  standards is not  maintained or if
problems occur after the product reaches the market. The FDA may require testing
and  surveillance  programs  to monitor  the effect of  products  that have been
commercialized,  and it has the power to prevent or limit  further  marketing of
the product based on the results of these post-marketing programs.

     There can be no assurance  that problems will not arise that could delay or
prevent the  commercialization of the Company's products, or that the FDA, state
and  foreign  regulatory  agencies  will be  satisfied  with the  results of the
clinical trials and approve the marketing of any products.

PRODUCT LIABILITY INSURANCE

     The Company's  business  exposes it to potential  product  liability  risks
which are inherent in the testing, manufacturing,  marketing and sale of medical
diagnostic  and drug delivery  products.  Although the Company  carries  product
liability insurance,  there can be no assurance that claims exceeding the policy
limit may not be made,  potentially  causing a  material  adverse  effect on the
Company.

EXECUTIVE OFFICERS OF THE COMPANY

See Item 10 - "Directors and Executive Officers of the Registrant."


Item 2.  PROPERTIES

     The Company leases approximately 40,000 square feet of space, including its
corporate headquarters, general office, manufacturing, and warehouse space, in a
building  located at 3341 S.W. 15th Street,  Pompano Beach,  Florida 33069.  The
Company also maintains  approximately 6,500 square feet of additional  warehouse
space in Pompano  Beach,  Florida.  The lease  expires  in 1999 and the  Company
currently pays approximately  $19,000 per month in rent, including sales tax and
maintenance  fees. The rent is adjusted  annually based upon changes in the U.S.
Consumer  Price  Index.  The lease also  requires the Company to pay real estate
taxes,  insurance and certain  costs for  maintaining  the premises.  Management
believes that suitable premises are readily available on acceptable terms should
the present premises become unavailable for any reason.

     The Company also leases a 25,000  square foot  custom-designed  facility in
Menlo Park, California that includes office space,  fully-equipped  laboratories
for transdermal drug delivery research and production  capabilities.  This lease

                                   Page - 26
<PAGE>

expires in June 1999 and the Company  currently pays  approximately  $28,000 per
month in rent under the lease.

Item 3. LEGAL PROCEEDINGS

     The Company has been named in a lawsuit which alleges  misappropriation  of
trade secrets,  confidential information and intellectual property related to an
HIV saliva test kit. The plaintiffs seek injunctive  relief and monetary damages
in excess of $15,000. Management believes, after consultation with counsel, that
each of the allegations  included in the lawsuit is without merit,  and plans to
contest each of the allegations  vigorously.  This lawsuit is in its preliminary
stages and discovery has not been completed. At this time, it is not possible to
estimate the ultimate loss, if any, related to this lawsuit.

     In  addition  to the  above,  the  Company  is  subject to claims and suits
arising in the ordinary  course of business.  In the opinion of management,  the
ultimate resolution of such pending legal proceedings, including those described
above,  will not have a  material  adverse  effect on the  Company's  results of
operations or financial position.


Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter  was  submitted  during the  fourth  quarter  of the fiscal  year
covered by this report to a vote of security holders,  through the submission of
proxies or otherwise.


                                   Page - 27
<PAGE>
                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded in the  over-the-counter  market under
the symbol TCPI and is included for quotation on the Nasdaq National Market. The
following  table sets forth the range of high and low sale prices for the Common
Stock for the periods indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>

                                                                                     Sale Prices

                                                                                High              Low
                  Fiscal Year 1996
<S>               <C>                                                           <C>            <C>

                  Quarter Ended March 31, 1996 ................................ $ 22 3/8       $ 13 1/4
                                             
                  Quarter Ended June 30, 1996  ................................ $ 20 1/4       $   9 5/8
                                             
                  Quarter Ended September 30, 1996 ............................ $ 14 5/        $   7 1/8
                                                   
                  Quarter Ended December 31, 1996  ............................ $ 11 3/4       $   6 3/4
</TABLE>
<TABLE>
<CAPTION>
                                                 

                  Fiscal Year 1997
<S>               <C>                                                           <C>            <C>    

                  Quarter Ended March 31, 1997   .............................. $ 10 7/8       $   7 3/4
                                               
                  Quarter Ended June 30, 1997   ............................... $ 12 1/8       $   7
                                              
                  Quarter Ended September 30, 1997 ............................ $ 16 5/        $   8 1/2
                                                   
                  Quarter Ended December 31, 1997 ............................. $ 19 3/8       $ 10 3/4
                                                  
</TABLE>
<TABLE>
<CAPTION>
                  Fiscal Year 1998
<S>               <C>                                                           <C>            <C>

 
                  Quarter Ended March 31, 1998 (to March 24, 1998)............. $ 13 3/4       $   8
 </TABLE>
                                                                 

     There  were  approximately  128  holders  of record  of Common  Stock as of
January 15, 1998. In addition,  the Company  estimates  there are  approximately
2,500  beneficial  owners of its Common  Stock.  The  Company  has not paid cash
dividends in the past.

                                   Page - 28
<PAGE>
Item 6.  SELECTED FINANCIAL DATA

     The following  selected  financial data should be read in conjunction  with
the  financial  statements  and the notes  thereto  included  elsewhere  in this
report.  The statement of operations data for the years ended December 31, 1997,
1996 and 1995,  respectively,  and the balance  sheet data at December 31, 1997,
and 1996,  respectively,  are  derived  from the  audited  financial  statements
included  elsewhere in this report and should be read in conjunction  with those
financial statements and the notes thereto.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
(Amounts in thousands, except share data)
                                                                                 DECEMBER 31,
                                                           ---------------------------------------------------------
                                                           1997         1996         1995          1994         1993
                                                           ----         ----         ----          ----         ----
<S>                                                    <C>         <C>          <C>           <C>          <C>      
Gross product sales...............................     $   6,240   $    5,727   $    4,712    $    3,013   $    1,784
Net sales.........................................         6,194        5,568        4,188         3,013        1,784
Gross profit......................................         2,777        1,862          936         1,037          757
R&D contract revenue..............................           423        1,280            -             -            -
Selling, general and administrative expense ......         6,575        4,079        1,807           666          682
Research and development expense .................         2,726        1,767          435            73            3
Depreciation and amortization(2) .................         1,742        1,670          219            22            -
(Loss) Income from operations ....................        (7,843)      (4,374)      (1,525)          276           72
Net (Loss) Income(1) .............................        (4,489)      (2,550)      (1,274)          156           59
Basic and diluted net (loss) income per common
share(1) .........................................     $    (.45)  $     (.27)  $     (.18)   $      .04   $      .01
Weighted average common shares outstanding .......      9,992,066   9,290,476    7,069,507     4,295,116    4,066,666
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
(Amounts in thousands)
                                                                                 DECEMBER 31,
                                                                     --------------------------------------
                                                                        1997         1996          1995
                                                                        ----         ----          ----
<S>                                                                  <C>         <C>          <C>         
Cash, cash equivalents and investments available
for sale ..........................................                  $  7,337    $   13,300   $    1,777
Working capital ...................................                     9,401        15,348       (2,979)
Total assets ......................................                    33,597        37,526       22,610
Total current liabilities .........................                     2,069         1,660        6,452
Total stockholders' equity ........................                    31,358        35,694       16,154
<FN>
Notes:
(1)  For the years ended December 31, 1994, 1993, the Company was operated as an
     S Corporation under the applicable provisions of the Internal Revenue Code,
     and  accordingly,  the Company's  taxable  income was taxed directly at the
     shareholder level. The net income and earnings per common share amounts for
     the years ended December 31, 1995, 1994, 1993,  assume that the Company was
     subject to federal and state income taxes and taxed as a C  Corporation  in
     each of these three years at the tax rates in effect for these periods. See
     - Notes 1 and 6 to the accompanying Consolidated Financial Statements.

(2)  For the year ended December 31, 1993,  depreciation  and  amortization  was
     included in selling, general and administrative.
</FN>
</TABLE>

                                   Page - 29
<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

GENERAL

     The Company is in the midst of completing a transition. TCPI was formerly a
developmental  company  that  manufactured  and sold a narrow  range of  medical
diagnostic  products  and  specialty  chemicals  on an OEM  basis.  TCPI  is now
approaching  its goal of being a designer,  developer,  manufacturer  and global
marketer of a wide range of point-of-care medical diagnostic products for use at
home,  in  physician  offices,  and  other  healthcare  locations  with  growing
distribution  channels for its  products.  In addition,  through its  Pharmetrix
Division located in Menlo Park,  California,  the Company is also focused on the
research and  development and  commercialization  of transdermal and dermal drug
delivery  systems and skin permeation  enhancers.  TCPI also  manufactures  high
purity specialty biochemicals.

     TCPI  currently  manufactures  and  markets  more  than  47  membrane-based
diagnostic  tests in the  United  States and  internationally,  26 of which have
received 510(k) clearance from the FDA. The Company's products include tests and
screens for  pregnancy,  ovulation  timing,  cholesterol  levels,  blood glucose
levels,  infectious  diseases,  drugs of abuse and certain  types of cancer.  In
addition, the Company has over 20 other diagnostic and transdermal drug delivery
products in various stages of development and governmental approval.

     The  Company's  products  are  distributed  worldwide  under OEM  marketing
relationships with multinational  pharmaceutical and diagnostic  companies,  and
also are directly marketed for  over-the-counter  use by consumers.  The Company
expects to continue  developing its medical diagnostic  products  internally and
also  intends  to  enter  into  strategic  alliances  with  major  international
diagnostic and  pharmaceutical  companies for the marketing and  distribution of
certain of its products.  With respect to the development and  commercialization
of its  transdermal  drug delivery  systems and skin permeation  enhancers,  the
Company  intends to enter into strategic  alliances with third parties that may,
in some cases, fund a portion of the product  development costs,  participate in
clinical testing, obtain regulatory approvals and market the product.

     During the past year, the Company has engaged in the following activities:

TD GLUCOSE MONITORING SYSTEM

             -TCPI continues  to commit significant resources to the development
              and commercialization of its innovative  non-invasive  transdermal
              glucose   monitoring   system.   Development  of  the  TD  Glucose
              Monitoring  System  has  been  completed  and the  clinical  trial
              process  began  during the fourth  quarter  of 1997.  The  Company
              expects these clinical  activities to be  substantially  completed
              during the first half of 1998. The registration  studies are being
              conducted at several  undisclosed large diabetic clinics under the
              supervision  of independent  investigators.  During these studies,
              the Company anticipates testing the glucose level of approximately
              3,000 people with diabetes with its TD Glucose  Monitoring  System
              and   obtaining   venous  blood  samples  from  each  patient  for
              corresponding  laboratory  analysis.  The  purpose  of  collecting
              correlation data is to attempt to develop  algorithms,  or complex
              mathematical  formulas,  which could allow the TD Glucose meter to
              display  glucose levels  equivalent to venous blood glucose.  Upon
              completion of the  registration  studies,  the Company will submit
              its  clinical  data  to the  FDA for  review  as soon as  possible
              thereafter.  There  can  be  no  assurance  the  registration  and
              correlation  studies will be  successful  or produce data suitable
              for submission to the FDA.  Based on discussions  with the FDA and
              prior  acceptance  of TCPI's  protocol  to  conduct  its  Clinical
              Trials,   which  was  acknowledged  without  review,  the  Company
              believes  its TD Glucose  Monitoring  System is  eligible  for the
              expedited  510(k)  clearance  process.  There can be no assurances
              that the FDA will  consider the TD Glucose  Monitoring  System for
              510(k)  clearance  or, if it is  considered,  that the TD  Glucose
              Monitoring System will receive 510(k) clearance.


                                   Page - 30
<PAGE>
             -In June 1997, the Company  announced the involvement of SmithKline
              Beecham in  becoming  its  worldwide  marketing  partner  for this
              important  product.   The  companies  entered  into  an  exclusive
              agreement  that granted  SmithKline  Beecham a six month period to
              further  evaluate  the TD Glucose  Monitoring  System  technology,
              conduct due  diligence,  perform  market  studies and  negotiate a
              definitive licensing agreement. Terms of the agreement included an
              up-front  payment  to  TCPI  as well  as the  mutual  exchange  of
              technical and marketing information related to this product. These
              negotiations were ongoing and, in the event such terms were unable
              to be reached,  TCPI was  prepared to move  forward  with  several
              other potential marketing partners.

             -On January 30 1998, the SmithKline Beecham  product assessment and
              option agreement related to TCPI's non-invasive glucose monitoring
              system  lapsed and was not  extended by either  party.  SmithKline
              Beecham  executives  characterized  the  action as "a  fundamental
              change in the strategic intent for consumer diagnostic  products."
              As a result,  the Company  immediately  resumed  discussions  with
              companies it was in  discussions  with prior to and  approached by
              during and subsequent to the option period.

             -Also in February 1998, TCPI and Daiichi  Pharmaceutical  Co.  Ltd.
              announced   a  letter  of  intent   related  to   marketing   and
              distribution  rights of the TD Glucose Monitoring System in Japan
              and Taiwan.  Completion  of a  definitive  $10 million  licensing
              agreement is expected to be finalized in about 180 days.

      HEALTHCHECK

             -During 1997, the Company  launched its  HealthCheck  brand of   at
              home diagnostic  products for consumers.  The line consists  of 14
              accurate  and easy  to use  over-the-counter  tests and  screening
              products  for  cholesterol,  diabetes,  urinary  tract  infection,
              pregnancy,  ovulation,  skin  cancer and deteriorating  vision, as
              well as a series of  health  journals  specifically  designed  for
              women, men, seniors, children and pregnant women.

             -Since market  introduction  in  the second  quarter of 1997,  more
              than 38 chain and  independent  pharmacies  have placed orders for
              HealthCheck  products,  providing  the Company  with more than 30%
              market  penetration of the approximately  60,000 pharmacies in the
              United  States.  In  total,  the  Company's  at-home   diagnostics
              products  are  available  through such (i) leading  pharmacies  as
              Walgreen Drug Stores,  Eckerd Corp.,  CVS-Revco,  Thrifty Payless,
              Thrift Drug,  Phar-Mor,  Genovese Drug Stores,  Longs Drug Stores,
              Smiths Food & Drug, Osco Drug, Sav-On Stores,  Snyder Drug, Kinney
              Drugs,  Harco  Drug;  (ii)  leading  supermarkets  such as Kroger,
              Thriftway Foods, Seaway Foods and Ukrop's Super Markets; and (iii)
              leading drug wholesale  distributors  McKesson Corp.,  AmeriSource
              Health Corp.,  Bindley  Western  Industries,  Bergen Brunswig Drug
              Company, Neuman Distributors,  KinRay, Allou Distributors,  and F.
              Dohman Co.

             -In September  1997,  TCPI  kicked-off a  six-week  national  radio
              advertising  campaign to introduce  consumers  to the  HealthCheck
              brand.  During  this  campaign,  a total of 300 radio  commercials
              aired on such top-rated nationally syndicated programs such as the
              Rush Limbaugh Show,  Dr. Dean Edell Show,  Dr. Laura  Schlessinger
              Show, Gary Burbank Show,  Michael Reagan Show, Bob Grant Show, Dr.
              Joyce Browne Show, Country Heartlines and One-On-One Sports. These
              commercials  were  expected  to reach  approximately  175  million
              adults age 35 and older.

      OTHER PRODUCTS

             -The  Company  has  had a  non-exclusive  worldwide  marketing  and
              distribution  agreement  with  Boehringer  Mannheim for its family
              planning  diagnostic  products  since 1992. In February  1998, the
              Company  announced a new agreement  with  Boehringer  Mannheim for
              more  than $5  million  per  year of the  Company's  finished  and

                                   Page - 31
<PAGE>
              packaged family planning products, which will be supplied directly
              to Boehringer Mannheim distributors.

             -In January 1997, the  Company entered into a multi-phase agreement
              with Taiho  Pharmaceutical Co., Ltd. to develop a rapid,  one-step
              whole blood antigen  diagnostic test to monitor the  effectiveness
              of Taiho's new  anti-cancer  drug. The Company  expects to receive
              milestone  payments from Taiho during the 12-18 month  development
              period   as  each   phase  is   completed.   In   addition,   upon
              commercialization,  if elected by Taiho,  TCPI  retains  exclusive
              manufacturing rights to the product.

             -In March 1997,  TCPI announced  an exclusive  marketing  agreement
              with Boehringer  Mannheim  Argentina SACIeI ("BMRA") to distribute
              more than $50 million of the Company's new diagnostic products for
              infectious diseases,  drugs of abuse and cancer screens throughout
              Latin America over the next 10 years.  However, the acquisition of
              Boehringer  Mannheim Group by Roche Holding AG served to defer the
              ordering and  shipment of these  products  into 1998.  The Company
              recently  shipped its first sample of infectious  disease  testing
              products  for  governmental  approval  to BMRA.  Discussions  with
              executives of BMRA to outline product  distribution plans in South
              America are ongoing.

             -In  April  1997,  the  Company   introduced  its  visually    read
              CholestoChek Total cholesterol  screening test for at-home  use by
              consumers as part of the HealthCheck  family  of  products.   TCPI
              expects to complete the clinical and regulatory actions  necessary
              to have its  visually  read HDL  Cholesterol  Test Strips  and its
              Total and HDL  Cholesterol  Meter  products  enter  the respective
              consumer  and  professional  marketplaces  later  this   year.  In
              February 1998, the Company  suspended  domestic  retail  sales and
              voluntarily recalled its CholestoChek Total cholesterol  screening
              test. However, the CholestoChek Total  cholesterol monitoring test
              remains available to the professional  sector. This action stemmed
              from advice from the FDA about  regulatory  clearance.  In 1988, a
              predecessor   company  of  TCPI   was  granted  510(k)  regulatory
              clearance to  market its Total  cholesterol  testing product.  The
              Company believed  that the clearance was for both professional and
              over-the-counter   use.  As  a  reformulated  and   updated  Total
              cholesterol test was already in  clinical trials -- and a separate
              HDL  cholesterol  test already  in  development -- TCPI elected to
              take  voluntary  action  to  resolve   this  regulatory  issue and
              maintain its good standing with the FDA.  This  procedural  matter
              relates only  to this  particular  product.  There was no material
              financial  impact  on the  Company,  nor did  this  affect  any of
              TCPI's other products  already on  the market or in various stages
              of development.

       RESEARCH AND DEVELOPMENT

             -The Company  conducts an active research  and development  program
              to strengthen and broaden its existing products and to develop new
              products and systems that utilize specific applications related to
              its  patented  and  proprietary   membrane-based  technology.  The
              present   diagnostic  focus  includes  products  for  glucose  and
              cholesterol monitoring, at home tests and screens for cholesterol,
              diabetes,  urinary tract infection,  pregnancy and ovulation, skin
              cancer  and  deteriorating  vision,  as well as  drugs  of  abuse,
              infectious  diseases,  cardiac  markers,  cancer  and  urinalysis.
              TCPI's  products are in various stages of  commercialization,  and
              include  those that are  already on the market and others that are
              in development,  in the pre-clinical stage, and seeking regulatory
              clearance. See the "Diagnostic Product Portfolio."

             -The Company is continuing development  of several transdermal drug
              delivery products at its Pharmetrix  Division based in Menlo Park,
              California  and is actively  working on the  commercialization  of
              several products by completing the  development,  and planning for
              manufacturing, marketing and distribution. In addition, Pharmetrix
              has been asked to prepare feasibility studies on behalf of several
              clients to evaluate  the  applicability  of its  transdermal  drug
              delivery   technology   with   various   compounds.   The  present
              transdermal  drug  delivery  focus  includes  systems  related  to
              hormone  replacement  therapy,   cardiovascular  disease,  smoking
              cessation and skin  permeation  enhancers,  among others.  See the
              "Transdermal Drug Delivery Portfolio."

                                   Page - 32
<PAGE>


      MANUFACTURING SCALE-UP

             -Over the past year, the Company's  facilities  located  in Florida
              have been  expanded to  accommodate  full-scale  manufacturing  of
              medical diagnostic products. This expansion has included:

                   -Acquisition of major production  equipment for manufacturing
                    of the products
                   -Re-tooling  and  refurbishing of  equipment to significantly
                    increase   its   capacity  
                   -Purchase  and installation of  custom  high-speed  packaging
                    equipment
                   -Expansion of sales and  marketing,  production and warehouse
                    facilities to accommodate the in-house manufacturing program
                   -Additions to the Florida research and development facilities
                    and  professional  staff  to  increase  product  development
                    capabilities  -- including  the  addition of Jeffrey  Bolts,
                    Ph.D. as Director of Quality Assurance

      KEY ADDITION TO THE BOARD OF DIRECTORS AND MANAGEMENT

             -In  February  1998,   the   Board  of  Directors   nominated  Noel
              Buterbaugh to serve as a member of TCPI's Board. His nomination is
              subject  to  shareholder  approval  and  will  be  voted  upon  in
              connection to the upcoming Annual Shareholder's  Meeting scheduled
              for May 22, 1998.  Mr.  Buterbaugh  is presently the President and
              Chief  Executive  Officer  of  BioWhittaker, Inc., a subsidiary of
              Cambrex  Corporation (AMEX: CMB),  which  acquired    BioWhittaker
              in 1997. Prior  to  the acquisition, he  was  President  and Chief
              Executive  Officer of BioWhittaker,  Inc. (NYSE: BWI) from 1992 to
              1997 and President and Chief  Operating  Officer since 1991.  From
              1979 to 1991, he was President of Whittaker  Bioproducts,  Inc., a
              subsidiary  of  Whattaker  Corporation,   which  was  spun-off  to
              shareholders  in 1991.  From 1958 to 1979, he held numerous senior
              management   positions   in  sales  and   marketing   and  product
              manufacturing with Microbiological Associates, Inc., a Division of
              Whittaker Corporation.

             -In October  1997,  Stephen J.  Dresnick,  MD,  FACEP,  joined  the
              Company's  Board  of  Directors.  He is the Vice  Chairman  of FPA
              Medical Management,  Inc. (Nasdaq: FPAM) which is expected to have
              revenues in excess of $1 billion in 1997.  Dr.  Dresnick  has more
              than 25 years of  experience  in the medical  sector and executive
              management   and  brings  to  the  TCPI   Board   well-established
              relationships with the scientific and financial communities. Prior
              to a merger with FPA Medical  Management in 1996, he was President
              and Chief  Executive  Officer  of  Sterling  Healthcare  Group,  a
              publicly-held  hospital emergency  department  contract management
              and primary care physician practice management  company,  which he
              founded in 1987.

             -In February  1997,  Colin A. Morris joined TCPI as  Vice President
              of Transdermal  Manufacturing.  He has operating  responsibilities
              for TCPI's  portfolio of  transdermal  drug delivery  products and
              related contract services activities at the Company's  transdermal
              R&D facility in Menlo Park, California, operated by its Pharmetrix
              Division.   In   addition,   Mr.   Morris   participates   in  the
              manufacturing,  engineering  and  commercialization  phases of the
              Company's TD Glucose  Monitoring  System.  He is a  specialist  in
              commercializing  new  products,  new  facility  development,   and
              preparations   for  FDA  process  and  facility   approvals   with
              experience covering scale up, process validation,  facility design
              and  construction,  staffing  and  systems  development  for  such
              companies as Johnson & Johnson, Rhone-Poulenc Rorer, Sterling Drug
              and Noven Pharmaceuticals.

             -In August 1997,  Robert G.  Bachkosky  joined the Company  as Vice
              President of Marketing  and Business  Development.  He directs the
              global  marketing  programs  for  TCPI's  expanding  portfolio  of
              diagnostic    products   used   by   consumers   and    healthcare
              professionals.  Mr. Bachkosky has more than 20 years of experience
              in sales and  marketing  of  medical  diagnostic,  scientific  and
              general  healthcare  products.  During the past 12 years,  he held
              various   senior  level   positions   with   Boehringer   Mannheim
              Corporation  in  Indianapolis,  Indiana,  and  most  recently  was
              responsible for market  development of "Point of Care" products to

                                   Page - 33
<PAGE>

              Latin America and Canada.  His  additional  healthcare  experience
              includes Cordis Laboratories,  Curtin Matheson Scientific, and the
              Greater Southeast Community Hospital in Washington, D.C.

             -In January  1998,  Gregory J.  Candelmo has joined the Company  as
              Vice  President of Sales.  He directs the domestic  sales programs
              for  TCPI's  diagnostic  testing  products  and  transdermal  drug
              delivery  systems used by consumers and healthcare  professionals.
              Mr.  Candelmo  has more than 12 years  sales and sales  management
              experience in medical diagnostics and scientific instruments which
              includes  Director of Sales and Marketing for GDS Diagnostics,  as
              well  as  various  sales  management   positions  with  Boehringer
              Mannheim  Corporation  from 1991 to 1997 that included  Diagnostic
              Systems  Director  of Sales,  Lab  Diagnostics  Regional  Business
              Manager,  AccuData  System  Product  and  Marketing  Manager,  and
              Diabetes Care Division Regional Sales Manager.  He also held sales
              management  and field sales  positions  with Behring  Diagnostics,
              Cooper Biomedical/Technicon Instruments, and Proctor and Gamble.

RESULTS OF OPERATIONS

         Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
        
     Due to the timing of the FDA clearance process and the expenses incurred in
the manufacturing  scale-up for the Company's products, the Company's results of
operations vary from period to period.

     PRODUCT  SALES.  The Company's  net product sales  increased by 11% to $6.2
million in 1997 from $5.6 million in 1996.  This increase  resulted  principally
from the successful launch of the Company's HealthCheck at-home diagnostic tests
and  screening  products as well as higher  sales of its  private  label and OEM
family planning  products.  Also contributing to this growth was sales of TCPI's
new diagnostic  products for infectious  diseases and drugs of abuse, as well as
several other products.  The gain in net sales would have been even greater were
it not for the deferral into 1998 of approximately  $3.5 million in sales of new
diagnostic products in Latin American which were previously anticipated to begin
in 1997.

     GROSS PROFIT. The Company's gross profit on product sales increased by $915
thousand to $2.8  million in 1997 from $1.9  million in 1996.  Gross profit as a
percent of net sales increased to 45% in 1997 from 33% in 1996. The increase was
principally due to a change in product mix, including the market introduction of
the  HealthCheck  family of at home diagnostic  tests and screening  products in
addition to increased in-house  manufacturing and achieving various economies of
scale-up.

     SELLING,  GENERAL AND  ADMINISTRATIVE.  Selling general and  administrative
(SG&A)  expenses  increased  substantially  in 1997 as  compared  to 1996.  This
increase was primarily due to the planned  implementation of strategic marketing
programs,  including the successful  launch of the HealthCheck  product line and
introduction  of various new products.  The Company  continues to hire operating
personnel  for the scale-up of in-house  manufacturing.  In  addition,  facility
expansion  conducted  in  1997  resulted  in  further  growth  of the  Company's
manufacturing, laboratory, warehouse, and office space in Pompano Beach, Florida
to  approximately  40,000  square feet as compared to 33,000  square feet a year
earlier.  The Company's  SG&A  expenses,  increased to $6.6 million in 1997 from
$4.1 million in 1996.

     RESEARCH  AND  DEVELOPMENT.  The Company  continued  to advance its various
diagnostic  testing  products and  transdermal  drug  delivery  systems  through
development  towards  commercialization.  The  Company's  investment  in R&D has
contributed  to the  development  of several new products with  sizeable  market
potential,  including its TD Glucose Monitoring System, HealthCheck family of at
home diagnostics, and visual and meter-read Total and HDL cholesterol monitoring
products,  infectious  diseases  and drugs of abuse,  as well as  several  other
products. The Company's R&D expenses increased to $2.7 million in 1997 from $1.8
million in 1996.

                                   Page - 34
<PAGE>

     NET LOSS.  The  Company  posted a net loss of $4.5  million in 1997,  which
increased  from a net loss in 1996 of $2.6 million  primarily as a result of the
planned scale-up of manufacturing, ongoing investment in personnel, research and
development and facility expansion.

         Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
         
     Due to the timing of the FDA clearance process and the expenses incurred in
the manufacturing  scale-up for the Company's products, the Company's results of
operations vary from period to period.

     The  Company  acquired  the assets of its  Pharmetrix  Division in November
1995. The results of operations reflect 12-months of Pharmetrix expenses in 1996
and two months in 1995. Therefore,  the results of operations for the year ended
December 31, 1996 are not directly comparable to 1995 results of operations.

     PRODUCT SALES.  The Company's net product sales increased by  approximately
33% to $5.6 million in 1996 from $4.2 million in 1995.  This  increase  resulted
principally  from higher sales of the Company's  private  label Family  Planning
products  in the  United  States  and  increased  foreign  sales  of  diagnostic
products.  In addition,  since 1994, sales of the Company's  products and to its
largest customer, Boehringer Mannheim, have increased by more than 18%.

     GROSS PROFIT.  The Company's gross profit increased by  approximately  $900
thousand to $1.9 million in 1996 from $936  thousand in 1995.  Gross profit as a
percent of net sales increased to 33% in 1996 from 22% in 1995. The increase was
principally due to improvement in product mix. As a wholly-owned subsidiary, the
array of Health-Mark  Diagnostic,  L.L.C. products have a positive impact to the
consolidated  gross profit  return.  The gross profit  return also improved as a
result  of  bringing  product  manufacturing   in-house  and  achieving  various
economies of scale-up.

     SELLING,  GENERAL AND  ADMINISTRATIVE.  Selling general and  administrative
(SG&A) expenses increased substantially in 1996 as compared to 1995, principally
due to the acquisition of the Pharmetrix  Division.  SG&A expenses were impacted
by the  hiring  of  additional  laboratory,  manufacturing,  and  administrative
personnel  to support the growth in sales,  manufacturing  scale-up and facility
expansion.  The Company's SG&A expenses,  increased to $4.1 million in 1996 from
$1.8 million in 1995.

     RESEARCH AND DEVELOPMENT.  The greatest impact on the increase in operating
expenses was higher research and development (R&D) expenses  associated with the
Pharmetrix  Division.  The Company's  investment in R&D has  contributed  to the
development  of  several  new  products,  such  as its TD  Glucose  System.  The
Company's  R&D expenses  increased to $1.8 million in 1996 from $435 thousand in
1995.

     NET LOSS.  The  Company  posted a net loss of $2.6  million  in 1996  which
increased from a net loss of $1.4 million in 1995 as a result of the integration
of  the   Pharmetrix   Division,   investment   in  research  and   development,
manufacturing scale-up and facility expansion.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 1997,  cash, cash  equivalents  and investments  totaled
$7.3  million.  The  Company  had  current  assets of $11.5  million and working
capital of $9.4  million.  Shareholders'  Equity at December  31, 1997 was $31.4
million.

     The Company plans to earmark  funds to (i) increase its R&D budget  related
to the  completion and  commercialization  of the Company's  products  currently
under  development,  including its non-invasive  transdermal  glucose monitoring
system (TD Glucose Monitoring  System),  its One Step CholestoCheck  System, and
various  transdermal drug delivery products and skin permeation  enhancer,  (ii)
expand direct  distribution  of medical  diagnostic  products,  (iii)  introduce
direct distribution of its cholesterol monitoring system (One Step CholestoCheck
System),  (iv) hire  additional  personnel,  and (v) expand its  facilities  and

                                   Page - 35
<PAGE>

revenue generating  manufacturing  equipment. For additional information related
to the Company's cash flow  activities,  See - "Consolidated  Statements of Cash
Flow."

     The Company's future long-term capital expenditure requirements will depend
on the following factors: (i) the time required to obtain regulatory  approvals;
(ii) the progress of the Company's research and development  program;  and (iii)
the  ability of the Company to develop  additional  marketing  and  distribution
alliances.  The Company  anticipates  that it will  continue to incur net losses
until such time, if any, as the Company is able to generate  sufficient revenues
from product sales to offset expenses related to its growth.

     Management  believes  that,  during  1997,  the  impact  of  inflation  was
immaterial to the Company's results of operations.

     The Company's future working capital and capital  expenditure  requirements
may vary materially from those planned depending on numerous factors,  including
additional  manufacturing  scale-up  costs for the Company's  current and future
products,  the focus and  direction of the  Company's  research and  development
programs,  competitive and technological  advances,  future  relationships  with
strategic  partners,  the FDA regulatory process and the Company's marketing and
distribution  strategy.  If the Company's  growth exceeds its plans,  additional
working capital may be needed.

                                   Page - 36
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following  Consolidated Financial Statements and supplementary data for
the Company are attached and incorporated into Item 7.

                          INDEX TO FINANCIAL STATEMENTS

             Technical Chemicals and Products, Inc. and Subsidiaries

                        Consolidated Financial Statements


                  Years ended December 31, 1997, 1996 and 1995


                                    Contents

Report of Independent Certified Public Accountants...........................F-1

Audited Consolidated Financial Statements

Consolidated Balance Sheets..................................................F-2
Consolidated Statements of Operations........................................F-3
Consolidated Statements of Stockholders' Equity..............................F-4
Consolidated Statements of Cash Flows........................................F-5
Notes to Consolidated Financial Statements...................................F-7


                                   Page - 37
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Technical Chemicals and Products, Inc.

     We have audited the accompanying  consolidated  balance sheets of Technical
Chemicals and Products,  Inc. and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations,  stockholders' equity and
cash flows for each of the three years in the period  ended  December  31, 1997.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a).  These financial  statements and schedule are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position of Technical
Chemicals and Products, Inc. and subsidiaries at December 31, 1997 and 1996, and
the consolidated  results of their operations and their cash flows for the three
years in the  period  ended  December  31,  1997 in  conformity  with  generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.


                                                 /s/ Ernst & Young LLP

Miami, Florida
February 10, 1998


                                       F-1

                                   Page - 38
<PAGE>


<TABLE>
<CAPTION>

             Technical Chemicals and Products, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                    (Amounts in thousands, except share data)
                                                                                           December 31
                                                                                ------------------------------------
                                                                                      1997              1996
                                                                                ------------------------------------
Assets
<S>                                                                                  <C>              <C>    
Current assets:
   Cash and cash equivalents                                                          $  3,316         $  1,607
   Investments                                                                           4,021           11,693
   Accounts receivable, net                                                              2,055            2,178
   Inventory                                                                             1,852            1,039
   Other                                                                                   226              491
                                                                                ------------------------------------
Total current assets                                                                    11,470           17,008
                                                                                ------------------------------------
Property and equipment, net                                                              2,831            2,709
Patents and trademarks, net                                                             12,912           13,887
Goodwill, net                                                                            2,151            2,328
Deferred tax asset, net                                                                  4,140            1,503
Other assets                                                                                93               91
                                                                                ====================================
Total assets                                                                           $33,597          $37,526
                                                                                ====================================

Liabilities and stockholders' equity 
Current liabilities:
   Accounts payable                                                                   $  1,729         $  1,458
   Accrued expenses                                                                        340              202
                                                                                ------------------------------------
Total current liabilities                                                                2,069            1,660
                                                                                ------------------------------------
Other liabilities                                                                          170              172
Commitments and contingencies
Stockholders' equity:
   Preferred stock, $.001 par value:
     Authorized shares--25,000,000;
     No issued and outstanding shares                                                        -                - 
   Common stock, $.001 par value:
     Authorized shares--100,000,000;
     Issued and outstanding shares--10,015,036 in 1997
       and 9,938,634 in 1996                                                                10               10
   Additional paid-in capital                                                           39,807           39,608
   Accumulated deficit                                                                  (8,459)          (3,924)
                                                                                ------------------------------------
Total stockholders' equity                                                              31,358           35,694
                                                                                ------------------------------------
Total liabilities and stockholders' equity                                             $33,597          $37,526
                                                                                ====================================

<FN>
See accompanying notes.



</FN>
</TABLE>
                                      F-2

                                   Page - 39
<PAGE>
<TABLE>
<CAPTION>
             Technical Chemicals and Products, Inc. and Subsidiaries

                      Consolidated Statements of Operations

                    (Amounts in thousands, except share data)
                                                                                Year ended December 31
                                                                 ------------------------------------------------------
                                                                          1997              1996             1995
                                                                 ------------------------------------------------------
<S>                                                              <C>               <C>               <C>
Gross product sales                                                $       6,240     $       5,727     $       4,712
Returns and allowances                                                        46               159               524
                                                                 ------------------------------------------------------
Net product sales                                                          6,194             5,568             4,188
Cost of product sales                                                      3,417             3,706             3,252
                                                                 ------------------------------------------------------
                                                                                   
Gross profit                                                               2,777             1,862               936

R&D contract revenue                                                         423             1,280                 -

Operating expenses:
   Selling, general and administrative                                     6,575             4,079             1,807
   Research and development                                                2,726             1,767               435
   Depreciation and amortization                                           1,742             1,670               219
                                                                 ------------------------------------------------------
                                                                          11,043             7,516             2,461
                                                                 ------------------------------------------------------
                                                                                  
Loss from operations                                                      (7,843)           (4,374)           (1,525)
Other income (expense):
   Interest income                                                           731               529               164
   Interest expense                                                          (14)             (208)              (72)
                                                                 ------------------------------------------------------
Loss before income tax benefit and extraordinary item                     (7,126)           (4,053)           (1,433)
Income tax benefit                                                         2,637             1,503                 -
                                                                 ------------------------------------------------------
Loss before extraordinary item                                            (4,489)           (2,550)           (1,433)
Extraordinary item - loss on early extinguishment of debt                      -                 -                61
                                                                 ======================================================
Net loss                                                         $        (4,489)  $        (2,550)  $        (1,494)
                                                                 ======================================================
Basic and diluted loss per common share:
   Before extraordinary item                                     $          (.45)  $          (.27)  $          (.20)
   Extraordinary loss                                                          -                 -              (.01)
                                                                 ======================================================
Basic and diluted net loss per common share                      $          (.45)  $          (.27)  $          (.21)
                                                                 ======================================================

Weighted average number of common shares outstanding                   9,992,066         9,290,476         7,069,507
                                                                 ======================================================
Unaudited pro forma information:
   Loss before income taxes and extraordinary item                                                   $        (1,433)
Income tax benefit:
   Current                                                                                                       214
   Deferred                                                                                                        6
                                                                                                     ------------------
                                                                                                                 220
                                                                                                     ------------------
Loss before extraordinary item                                                                                (1,213)
Extraordinary item - loss on early extinguishment of debt                                                         61
                                                                                                     ==================
Net loss                                                                                             $        (1,274)
                                                                                                     ==================

Basic and diluted loss per common share:
   Before extraordinary item                                                                         $          (.17)
   Extraordinary loss                                                                                           (.01)
                                                                                                     ------------------
Basic and diluted net loss per common share                                                          $          (.18)
                                                                                                     ==================
<FN>
See accompanying notes.
</FN>
</TABLE>
                                      F-3

                                   Page - 40
<PAGE>
<TABLE>
<CAPTION>


             Technical Chemicals and Products, Inc. and Subsidiaries

                 Consolidated Statements of Stockholders' Equity

                    (Amounts in thousands, except share data)
                                                                                        
                                           Common Stock                                    Retained
                                ------------------------------------                       Earnings
                                    Number of                          Additional        (Accumulated
                                      Shares           Amount       Paid-In Capital        Deficit)           Total
                                -----------------------------------------------------------------------------------------
<S>                                  <C>                  <C>            <C>                <C>             <C>
Balance at January 1, 1995            4,611,666           $  5           $     217          $    310        $     532
   Shares issued, net of
     costs of $1,006                  2,570,000              2               3,832                 -            3,834
   Distributions paid                         -              -                   -              (269)            (269)
   Shares issued for
     acquisition of certain
     assets of Pharma Patch
     Public Limited Company             886,214              1              13,434                 -           13,435
   Shares issued upon
     exercise of options                 50,000              -                 100                 -              100
   Net loss                                   -              -                   -            (1,494)          (1,494)
   Adjustment for unrealized
     gains on investments                     -              -                   -                15               15
                                -----------------------------------------------------------------------------------------
Balance at December 31, 1995          8,117,880              8              17,583            (1,438)          16,153
Shares issued, net of costs
   of $1,103                          1,600,000              2              21,225                 -           21,227
Shares issued upon exercise
   of options and warrants              190,754              -                 380                 -              380
Shares issued in connection
   with acquisition of
   Health-Mark                           15,000              -                 195                 -              195
Shares issued in lieu of rent            15,000              -                 225                 -              225
Net loss                                      -              -                   -            (2,550)          (2,550)
Adjustment for unrealized
   gains on investments                       -              -                   -                64               64
                                -----------------------------------------------------------------------------------------
Balance at December 31, 1996          9,938,634             10              39,608            (3,924)          35,694
Shares issued upon exercise
   of warrants                           76,402              -                 199                 -              199
Net loss                                      -              -                   -            (4,489)          (4,489)
Adjustment for unrealized
   losses on investments                      -              -                   -               (46)             (46)
                                =========================================================================================
Balance at December 31, 1997         10,015,036            $10             $39,807           $(8,459)         $31,358
                                =========================================================================================

<FN>
See accompanying notes.
</FN>
</TABLE>
                                      F-4

                                   Page - 41
<PAGE>
<TABLE>
<CAPTION>


             Technical Chemicals and Products, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                             (Amounts in thousands)
                                                                              Year ended December 31
                                                              ------------------------------------------------------
                                                                    1997             1996               1995
                                                              ------------------------------------------------------
<S>                                                                  <C>               <C>              <C>
Operating activities
Net loss                                                             $(4,489)          $(2,550)         $(1,494)
Adjustments to reconcile net loss to net cash used by
   operating activities:
     Depreciation                                                        399               354               92
     Amortization                                                      1,343             1,316              127
     Deferred income taxes                                            (2,637)           (1,503)               -
     Loss on extinguishment of debt                                        -                 -               61
     Minority interest in subsidiary                                       -                 -                4
     Changes in operating assets and liabilities,
      net of acquisitions:
       Accounts receivable                                               123            (1,339)            (172)
       Inventory                                                        (812)             (491)            (162)
       Other current assets                                              264                94             (104)
       Accounts payable and accrued expenses                             409               472              376
                                                              -------------------------------------------------------
Net cash used by operating activities                                 (5,400)           (3,647)          (1,272)

Investing activities
Purchase of property and equipment                                      (697)           (1,273)            (112)
Deposit on equipment                                                       -                 -              (79)
(Increase) decrease in other assets                                       (4)               45               58
Cash paid for acquisition of certain assets of Pharma
   Patch Public Limited Company                                            -                 -             (286)
Purchase of investments                                               (2,000)          (11,618)          (2,101)
Proceeds from sale of investments                                      9,626             1,100            1,005
Investment in patents and intangible assets                              (15)               (9)             (20)
Payments to affiliates                                                     -                 -              (30)
                                                              ------------------------------------------------------
Net cash provided by (used in) investing activities                    6,910           (11,755)          (1,565)

Financing activities
Net proceeds from issuance of common stock                                 -             21,227           3,834
Proceeds from stock options or warrants exercised                        199                380             100
Repayment of notes                                                         -             (5,189)              -
Repayment of notes payable to related parties                              -                (75)              -
Payments on notes payable to stockholders                                  -                  -            (280)
Payments on note payable to majority stockholder                           -                  -            (100)
Stockholder distributions                                                  -                  -            (269)
                                                              ------------------------------------------------------
Net cash provided by financing activities                                199             16,343           3,285
                                                              ------------------------------------------------------
Net increase in cash and cash equivalents                              1,709                941             448
Cash and cash equivalents at beginning of year                         1,607                666             218
                                                              ------------------------------------------------------
Cash and cash equivalents at end of year                               3,316              1,607             666
                                                              ======================================================
</TABLE>

                                   Page - 42
<PAGE>
<TABLE>
<CAPTION>

Supplemental disclosure of cash activities
<S>                                                                 <C>               <C>             <C>
Cash paid during the year for interest                              $     14          $     208       $       8
                                                              ======================================================

<FN>
Supplemental disclosure of non-cash activities

See Notes 2, 7, and 10 for certain non-cash investing and financing activities.

</FN>
See accompanying notes.
</TABLE>
                                      F-6

                                   Page - 43
<PAGE>

             Technical Chemicals and Products, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                        December 31, 1997, 1996, and 1995


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

     Technical  Chemicals and Products,  Inc. and subsidiaries  (the Company) is
principally engaged in the design,  development,  manufacture and marketing of a
wide range of medical diagnostic  products for use in physician offices, at home
and at other point of care locations throughout the world. The Company's medical
diagnostic   products  employ  its  patented  and   proprietary   membrane-based
technology.  In  addition to its ongoing  diagnostics  business,  the Company is
involved in the research,  development and  commercialization of transdermal and
mucosal drug delivery systems and skin permeation enhancers.

Basis Of Consolidation

     The accompanying  consolidated  financial  statements  include  Health-Mark
Diagnostic,   L.L.C.  (Health-Mark)  and  Health  Test,  Inc.,  which  are  both
wholly-owned  subsidiaries.  Significant intercompany  transactions and accounts
have been eliminated.

Cash And Cash Equivalents

     The Company  considers  all highly  liquid  investments  purchased  with an
original  maturity of three months or less to be cash  equivalents.  Deposits in
banks may  exceed the  amount of  insurance  provided  on such  deposits.  These
deposits may be redeemed  upon demand and,  therefore,  bear minimal  risk.  The
Company  has not  experienced  any  losses  on its  deposits  of cash  and  cash
equivalents.

Investments

     Investments are carried at fair market value based on quoted market prices,
with  resulting  unrealized  holding  gains and  losses  reported  as a separate
component of  stockholders'  equity.  Realized  gains and losses and declines in
value judged to be  other-than-temporary  are included in other income. Interest
and  dividends  on  investments  are  included in interest  income.  The cost of
investments sold is based on the specific identification method.

Inventory

     Inventory, consisting of raw materials, work in process and finished goods,
is valued at the lower of cost (computed on the first-in,  first-out  method) or
market.

Property And Equipment

     Property and equipment is stated at cost.  Depreciation  is computed  using
the  straight-line  method over the estimated useful lives of the assets,  which
range from five to seven years.  The cost of maintenance  and repairs is charged
to operations as incurred.  Significant renewals and betterments are capitalized
and depreciated over their estimated useful lives.

                                       F-7

                                   Page - 44
<PAGE>

Intangible Assets

     Purchased  patents and  trademarks  are amortized  using the  straight-line
method  over a  composite  life of 15 years  based on the shorter of their legal
life or estimated  useful life of the individual  patents and trademarks,  which
range from 11 to 17 years.  Goodwill is amortized using the straight-line method
over 15  years.  The  realizability  of  patents,  trademarks  and  goodwill  is
evaluated  periodically as events or circumstances indicate a possible inability
to recover their carrying  amount.  At this time,  the Company  believes that no
significant  impairment  of these  intangible  assets has  occurred  and that no
reduction of the estimated useful lives is warranted.

Revenue Recognition

     Revenues  are  recognized  when a product is shipped.  Product  returns are
permitted  only in limited  circumstances  and are  estimated  and  reflected as
adjustments to current period sales.

Research And Development

     Research and  development  is expensed as incurred.  Payments  received for
research and development arrangements are recognized as R & D contract revenue.

Advertising Costs

     Advertising  costs are charged to  operations  when the  advertising  first
takes  place.   Advertising  costs  charged  to  operations  were  approximately
$449,000,  $21,000,  and $9,000 for the years ended December 31, 1997,  1996 and
1995, respectively.

Income Taxes

     Prior to  February  2, 1995,  the  Company  had elected to be taxed as an S
corporation  pursuant to the provisions of the Internal Revenue Code. Under this
election,  the operating  results of the Company were reported in the income tax
returns of the stockholders.  Upon the completion of the initial public offering
effective  February 2, 1995,  the Company  became  subject to  corporate  income
taxes.

Accounting For Stock Based Compensation

     The Company  grants stock options for a fixed number of shares to employees
primarily  with an  exercise  price equal to the fair value of the shares on the
date of grant.  The Company accounts for these stock option grants in accordance
with  Accounting  Principles  Board (APB) Opinion No. 25,  Accounting  for Stock
Issued to Employees,  and  accordingly,  generally  recognizes  no  compensation
expense  for  stock  options  granted  at fair  value.  The  Company  recognizes
compensation  expense for stock options granted with an exercise price below the
fair value of the shares on the date of grant.
                                     
                                      F-8

                                   Page - 45
<PAGE>

     Under the Company's stock option plans, the Company may grant stock options
for a  fixed  number  of  shares  to  independent  consultants  and  contractors
primarily with an exercise price equal to the fair market value of the shares on
the date of grant.  The Company accounts for these stock option grants using the
fair value method of Financial  Accounting  Standards Board (FASB)  Statement of
Accounting  Standards (SFAS) No. 123,  Accounting for Stock-Based  Compensation.
The fair value of these  options is estimated at the date of grant using a stock
option pricing model and recognized as compensation cost.


Net Loss Per Share

     Basic and diluted net loss per share,  including that which is presented on
a pro forma basis,  is calculated  using the weighted  average  number of common
shares outstanding during the respective  periods.  Common stock equivalents are
not included in the  computation of net loss and pro forma net loss per share in
1997 and 1996 as their effect is antidilutive.

     In February  1997, the FASB issued SFAS No. 128,  Earnings per Share.  SFAS
No. 128,  which applies to entities with publicly held common stock,  simplifies
and replaces the standards for computing earnings per share previously  required
in APB  Opinion  No. 15,  Earnings  per  Share,  and makes  them  comparable  to
international  earnings  per share  standards.  SFAS No.  128 is  effective  for
financial  statements  issued for periods  ending after  December 15, 1997.  The
adoption of the provisions of SFAS No. 128 did not have a material impact on the
calculation  of  earnings  per  share  due to  the  antidilutive  effect  of the
Company's common stock equivalents.

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  consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

Accounting Changes

     In 1997,  the FASB  issued SFAS No. 130,  Reporting  Comprehensive  Income,
which establishes  standards for reporting  comprehensive  income,  and SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information,  which
requires  certain  financial  information  to be  disclosed  for each  operating
segment.  The Company will adopt these statements  during 1998, and they are not
expected to have a material effect on the financial statements.

                                   Page - 46
<PAGE>

2. Acquisitions

     On November 15, 1995, the Company  purchased certain assets of Pharma Patch
Public  Limited  Company  (Pharma  Patch),  an  Ireland  corporation,  including
substantially  all of the assets of its  wholly-owned  subsidiary,  PP Holdings,
Inc. (PPH), a California corporation  (collectively referred to as the Purchased
Assets).  The  Purchased  Assets  consisted of accounts  receivable of $207,917,
property and equipment of $1,624,330 and intangible  assets of $16,801,641.  The
Company (i) issued an aggregate of 886,214  shares of its common stock valued at
$13,435,000; (ii) assumed responsibility for an approximate $5,000,000 debt owed
to Flora,  Inc. (Flora) by issuing  promissory notes in the aggregate  principal
amount of  $5,188,888,  and (iii) paid  $10,000 in cash.  The  Company  incurred
acquisition costs of $275,945 which are included in intangible assets.

     The  acquisition of the Purchased  Assets,  described  above,  was recorded
pursuant to the purchase  method of  accounting  and,  therefore,  the operating
results related to the Purchased Assets are included in the Company's  operating
results beginning November 15, 1995. The Purchased Assets are presently utilized
principally in research and development activities.

     The following  summarized unaudited pro forma results of operations for the
year ended  December 31, 1995 assume the  acquisition  of the  Purchased  Assets
occurred as of the  beginning  of the year.  These pro forma  results  have been
prepared for  comparative  purposes  only and do not purport to be indicative of
the results of operations which actually would have resulted had the combination
been in effect on the date  indicated,  or which may  result in the  future  (in
thousands, except per share amounts).

<TABLE>
<CAPTION>

                                                                                            Pro forma
                                                                                               1995
                                                                                        -------------------
                                                                                           (Unaudited)
<S>                                                                                            <C>

         Net sales                                                                             $ 4,578
                                                                                        ===================

         Loss before extraordinary item                                                        $(5,799)
         Extraordinary loss                                                                         61
                                                                                        -------------------
         Net loss                                                                              $(5,860)
                                                                                        ===================
         Loss per common share:
            Before extraordinary item                                                          $  (.73)
            Extraordinary loss                                                                    (.01)
                                                                                        -------------------
         Net loss per common share                                                             $  (.74)
                                                                                        ===================
</TABLE>

3. Estimated Fair Value Of Financial Instruments

     The  carrying  value  of cash  and  cash  equivalents,  investments,  trade
accounts  receivable and  short-term  borrowings  reflected in the  consolidated
financial  statements  approximate market value. The market value of investments
is determined  based upon quoted prices for the same or similar  securities (See
Note 5). Management  believes that the other financial  instruments  approximate
market  value  because  they were entered into during the current year and there
have been no significant  changes in their status that would affect their market
value.

                                   Page - 47
<PAGE>

4. Details Of Balance Sheet

     Details of selected  balance  sheet  accounts at December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>
                                                                             1997              1996
                                                                       ------------------------------------
<S>                                                                           <C>              <C>    
         Accounts receivable
            Accounts receivable                                               $ 2,073          $ 2,196
            Allowance for doubtful accounts                                       (18)             (18)
                                                                       ------------------------------------
                                                                              $ 2,055          $ 2,178
                                                                       ====================================

         Inventories
            Raw materials and supplies                                        $ 1,144          $   578
            Work in process                                                       185               50
            Finished goods                                                        523              411
                                                                       ------------------------------------
                                                                              $ 1,852          $ 1,039
                                                                       ====================================

         Property and equipment
            Furniture, fixtures and equipment                                 $ 2,849          $ 2,194
            Real property                                                         217              217
            Leasehold improvements                                                904              863
                                                                       ------------------------------------
                                                                                3,970            3,274
            Accumulated depreciation                                           (1,139)            (565)
                                                                       ------------------------------------
                                                                              $ 2,831          $ 2,709
                                                                       ====================================
                  
         Patents and trademarks
            Patents and trademarks                                            $15,025          $15,008
            Accumulated amortization                                           (2,113)          (1,121)
                                                                       ------------------------------------
                                                                              $12,912          $13,887
                                                                       ====================================

         Goodwill
            Goodwill                                                          $ 2,494          $ 2,494
            Accumulated amortization                                             (343)            (166)
                                                                       ------------------------------------
                                                                              $ 2,151          $ 2,328
                                                                       ====================================
</TABLE>
                                      F-11
                                   Page - 48
<PAGE>

5. Investments

     Investments consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                            Gross 
                                                                        Unrealized               Fair
         December 31, 1997                                     Cost         Gains                Value
                                                     ------------------------------------------------------
<S>                                                          <C>               <C>             <C>    

         U.S. Government agency bonds                        $  2,998          $19             $  3,017
         U.S. Corporate bond                                      990           14                1,004
                                                     ------------------------------------------------------
                                                             $  3,988          $33             $  4,021
                                                     ======================================================

         December 31, 1996

         U.S. Corporate bonds                                $  7,618          $72             $  7,690
         U.S. Government agency bonds                           3,996            7                4,003
                                                     ------------------------------------------------------
                                                             $ 11,614          $79             $ 11,693
                                                     ======================================================
</TABLE>
     The contractual maturity of investments at December 31, 1997, is as follows
(in thousands):
<TABLE>
<CAPTION>

                                                                                                 Fair
                                                                                Cost             Value
                                                                       ------------------------------------
<S>      <C>                                                                   <C>              <C>   
         Due between one year and five years                                   $1,988           $2,000
         Due after five years                                                   2,000            2,021
                                                                       ------------------------------------
                                                                               $3,988           $4,021
                                                                       ====================================
</TABLE>
6. Income Taxes

Historical

     As discussed  in Note 1, the Company  became  subject to  corporate  income
taxes  concurrent with the February 2, 1995 public  offering.  For all reporting
periods prior to that date, the Company elected S Corporation status and was not
subject to income taxes.

     The Company  accounts for income taxes under SFAS No. 109,  Accounting  for
Income Taxes.  Deferred income tax assets and  liabilities are determined  based
upon  differences  between  financial  reporting  and tax  basis of  assets  and
liabilities  and are measured  using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

                                      F-12
                                   Page - 49
<PAGE>

     The  components  of the income tax benefit for the years ended  December 31
are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                               1997              1996
                                                                       ------------------------------------
  
<S>      <C>                                                              <C>              <C>       
         Current                                                          $        -       $        -
         Deferred                                                             (2,637)          (1,503)
                                                                       ------------------------------------
         Total                                                               $(2,637)         $(1,503)
                                                                       ====================================
</TABLE>
     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets (liabilities) as of December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>

                                                                               1997              1996
                                                                       ------------------------------------
<S>      <C>                                                                   <C>              <C>   
         Net operating losses                                                  $4,800           $1,936
         Depreciation and amortization                                            (79)             133
         Other                                                                     (8)               7
                                                                       ------------------------------------
         Net deferred tax assets                                                4,713            2,076
         Valuation allowance                                                     (573)            (573)
                                                                       ------------------------------------
         Net deferred taxes                                                    $4,140           $1,503
                                                                       ====================================
</TABLE>

     SFAS 109  requires a valuation  allowance to reduce the deferred tax assets
reported  if,  based on the weight of the  evidence,  it is more likely than not
that some portion or all of the deferred tax assets will not be realized.  After
consideration  of all the evidence,  both  positive and negative,  including tax
planning  strategies are prudent and feasible that the Company would  implement,
management has determined that an approximately  $573,000 valuation allowance at
December 31, 1997 and 1996 is necessary to reduce the deferred tax assets to the
amount that will more likely than not be realized.  At December  31,  1997,  the
Company  has  available  net  operating  loss   carryforwards  of  approximately
$12,562,000, which expire in the years 2010 through 2012.

     The  reconciliation  of the expected income tax expense for the years ended
December 31 computed on loss before income taxes at federal  statutory  rates is
as follows:
<TABLE>
<CAPTION>
                                                             1997              1996               1995
                                                       --------------------------------------------------------

<S>      <C>                                                <C>              <C>               <C>     
         Tax at federal statutory rate                      (34.00)%         (34.00)%          (34.00)%
         State and local income taxes, net of federal
            tax benefit                                      (4.19)           (4.88)            (5.83)
         Nondeductible items                                   .15             1.50                 -
         Change in valuation allowance                           -                -             38.85
         Other                                                1.04              .30              1.48
                                                       --------------------------------------------------------
         Total                                              (37.00)%         (37.08)%            0.5%
                                                       ========================================================
</TABLE>

                                   Page - 50
<PAGE>

Pro Forma

     The pro forma tax provision  for the year ended  December 31, 1995 reflects
the benefit for a portion of the net operating loss that could have been carried
back to prior years based on pro forma provisions in those years.

     The unaudited pro forma income tax credit differed from the amount computed
by applying  the federal  statutory  rate of 34% to loss before  income taxes as
follows:
<TABLE>
<CAPTION>

                                                                             1995
                                                                       ------------------

<S>      <C>                                                                <C>     
         Tax at federal statutory rate                                      (34.00)%
         State and local income taxes, net of federal tax benefit            (5.83)
         Change in valuation allowance                                       24.03
         Other                                                                1.06
                                                                       ------------------
                                                                            (14.74)%
                                                                       ==================
</TABLE>

7. Related Party Transactions

     The Company and its founding major stockholder are parties to an exclusive,
worldwide  license  agreement dated January 31, 1996 (License  Agreement)  under
which the Company  has the right to  manufacture,  promote,  market and sell all
medical,  pharmaceutical  and health care  products  and devices  created by the
major stockholder on or before the date of the License  Agreement  (Technology).
The License Agreement is for a term of twenty years with automatic  renewals and
requires  annual  fees  equal to the  greater of (i) 3% of net  collected  sales
revenues  from  products  based upon the  Technology  or (ii)  $10,000,  with an
aggregate maximum  limitation of $10,000,000.  The License Agreement replaces an
earlier  license  agreement with similar  provisions.  During 1997 and 1996, the
major  stockholder  earned  approximately  $148,000 and $114,000,  respectively,
pursuant to the License  Agreement.  The major stockholder  waived all licensing
fees due him for the year ended December 31, 1995.

     The Company and its major stockholder entered into an employment  agreement
effective  January 16, 1996,  amending an employment  agreement dated January 1,
1993, under which the major stockholder  serves as president.  The terms provide
for a salary of $125,000 per year for the first five years beginning  January 1,
1993 (with 5% per year raises) as annual base compensation, plus an annual bonus
equal to at least 5% of the  consolidated  pretax income of the Company.  During
1997, 1996 and 1995, the president received salaries of approximately  $152,000,
$145,000 and $138,000, respectively.

     In connection  with the  amendment of the  employment  agreement  described
above,  the Company issued its major  stockholder an option to purchase  500,000
shares of common stock at an exercise price of $15 per share.

                                      F-14
                                   Page - 51
<PAGE>

8. Significant Customer

A  significant  part of the  Company's  business is dependent  upon one European
     customer.  During the years ended  December 31, 1997,  1996 and 1995,  this
customer  accounted for approximately  $3,084,000,  $3,099,000 and $2,971,000 of
sales, respectively.  As of December 31, 1997 and 1996, accounts receivable from
this customer were approximately $1,265,000 and $1,079,000, respectively.

9. Commitments And Contingencies

Leases

     The Company leases its operating facilities under operating leases expiring
in June and October  1999.  Rent expense  under  operating  leases for the years
ended December 31, 1997, 1996 and 1995 was approximately $618,000,  $582,000 and
$180,000, respectively.

     At December 31, 1997,  future minimum  rentals,  subject to  cost-of-living
adjustments, are approximately as follows (in thousands):
<TABLE>
<CAPTION>

<S>      <C>                                             <C> 
         1998                                            $569
         1999                                             359
                                                   ------------------
                                                         $928
                                                   ==================
</TABLE>

Litigation

     The Company has been named in a lawsuit which alleges  misappropriation  of
trade secrets,  confidential information and intellectual property related to an
HIV saliva test kit. The plaintiffs seek injunctive  relief and monetary damages
in excess of $15,000. Management believes, after consultation with counsel, that
each of the allegations  included in the lawsuit is without merit,  and plans to
contest each of the allegations  vigorously.  This lawsuit is in its preliminary
stages and discovery has not been completed. At this time, it is not possible to
estimate the ultimate loss, if any, related to this lawsuit.

     In  addition  to the  above,  the  Company  is  subject to claims and suits
arising in the ordinary  course of business.  In the opinion of management,  the
ultimate resolution of such pending legal proceedings, including those described
above,  will not have a  material  adverse  effect on the  Company's  results of
operations or financial position.
                                      F-15
                                   Page - 52
<PAGE>

10. Stockholders' Equity

     In January  1996,  the Company  adopted  Amended and  Restated  Articles of
Incorporation   and  Amended  and   Restated   Bylaws  which   include   certain
anti-takeover  provisions.  In  addition,  the  Company  adopted  a  Stockholder
Protection Agreement (the Rights Amendment). Pursuant to the terms of the Rights
Agreement,  preferred  stock purchase  rights  (Rights) were  distributed,  as a
dividend,  to stockholders of record as of the date the Company entered into the
Rights Agreement,  at a rate of one Right for each share of the Company's common
stock held on the record date.

     In March  1996,  the  Company  adopted  Amended  and  Restated  Articles of
Incorporation  increasing  the  authorized  capital  stock  of  the  Company  to
125,000,000 shares (one hundred million  (100,000,000)  common, par value $.001,
and twenty-five million (25,000,000) preferred, par value of $.001).

     During 1996,  the Company  issued  15,000 shares of common stock in lieu of
rent for a warehouse facility. The agreement guarantees a minimum stock price of
$15 per share at the end of the three year lease;  otherwise,  additional shares
will be issued to provide $225,000 of compensation for the three year lease. The
fair value of the common stock issued was recorded as an other current asset and
amortized over the lease term.

     In January  1996,  Pharma Patch was granted a two-year  warrant to purchase
100,000  shares of the  Company's  common stock at an exercise  price of $15 per
share, in exchange for certain  concessions  regarding the Company's 1996 public
offering.

     In August 1994, the Company  consummated a private  placement of securities
issuing  420,000  shares of its common  stock for  $280,000  and notes  totaling
$280,000  at 9% annual  interest.  The notes  were paid  during  the year  ended
December 31, 1995.  Remaining deferred loan costs of approximately  $61,000 were
written off as an extraordinary loss on early extinguishment of debt.

     In conjunction  with the 1995 initial public  offering,  the Company issued
220,000 warrants with an exercise price of $2.60 and a term of four years to the
representative  of the underwriters.  As of December 31, 1997,  181,156 warrants
were  exercised and 38,844 were  outstanding  which expire in February 2000. The
fair market  value of the  warrants  was recorded as a reduction of the proceeds
from the issuance of common stock.

     During 1995, the Company's  Board of Directors  approved a distribution  of
approximately $269,000 to stockholders, of which approximately $257,000 was paid
to the majority stockholder.

     During 1996, the Company amended its Incentive Stock Option Plan (the Plan)
under  which  800,000  shares  of common  stock are  reserved  for  issuance  to
employees of the Company.  The exercise  price of any stock option granted under
the Plan to an eligible employee must be at least equal to the fair market value
of the shares on the date of the grant.  Under the Amended Plan  options  expire
seven years from the date of the grant, but the vesting period is discretionary.
The  vesting  period for  15,000 of the  options  outstanding  under the Plan at
December  31,  1997 is five years from the date of grant.  The  remaining  2,500
options vest three years from the date of grant.

                                      F-16
                                   Page - 53
<PAGE>

     The  following  table  summarizes  information  relative  to the  Company's
options granted under the Plan:
<TABLE>
<CAPTION>
                                                                                                         
                                                                                         Weighted Average
                                                                            Shares        Excerise Price
                                                                       ------------------------------------

<S>        <C>                                                                 <C>            <C> 
           Outstanding at January 1, 1996                                           -         $  -
           Granted                                                             12,500           15
                                                                       ------------------------------------

           Outstanding at December 31, 1996                                    12,500           15
           Granted                                                              5,000           15
                                                                       ------------------------------------

           Outstanding at December 31, 1997                                    17,500          $15
                                                                       ====================================

           Exercisable at December 31, 1997                                         -         $  -
                                                                       ====================================
</TABLE>

                                   Page - 54
<PAGE>

     The Company has also granted  options (not under the Plan) as incentives to
new employees and independent  contractors  who have performed  services for the
Company.  The following table summarizes  information  relative to the Company's
options not issued under the Plan:

<TABLE>
<CAPTION>
                                                                                         
                                                                                          Weighted Average
                                                                            Shares        Exercise Price
                                                                       ------------------------------------

<S>      <C>                                                                 <C>             <C>   
         Outstanding at January 1, 1995                                       116,000        $ 3.37
         Granted                                                               40,000          7.85
         Exercised                                                            (50,000)         2.00
                                                                       ------------------------------------

         Outstanding at December 31, 1995                                     106,000          3.74
         Granted                                                              732,000         14.65
         Exercised                                                            (86,000)         1.25
                                                                       ------------------------------------

         Outstanding at December 31, 1996                                     752,000         14.65
         Granted                                                              161,500          9.67
         Canceled                                                             (54,000)        15.00
                                                                       ------------------------------------

         Outstanding at December 31, 1997                                     859,500        $13.69
                                                                       ====================================

         Exercisable at December 31, 1997                                     642,498        $14.23
                                                                       ====================================

         Weighted-average fair value of options granted during 1997          $   4.80
                                                                       ==================

</TABLE>

     Options not issued  under the  Company's  stock  option plan are subject to
various vesting  provisions and have  expiration  terms ranging from five to ten
years.

     The Company has elected to follow  Accounting  Principles Board Opinion No.
25,   Accounting   for  Stock   Issued  to   Employees   (APB  25)  and  related
interpretations  in  accounting  for its  employee  stock  options  because,  as
discussed below,  the alternative fair value accounting  provided for under FASB
Statement No. 123,  Accounting for  Stock-Based  Compensation  (Statement  123),
requires  use of option  valuation  models  that were not  developed  for use in
valuing employee stock options.  Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

     Pro forma  information  regarding  net  income  and  earnings  per share is
required  by  Statement  123,  and has been  determined  as if the  Company  had
accounted for its employee stock options under the fair value method required by
Statement  123.  The fair value for these  options was  estimated at the date of
grant   using   Black-Scholes   option   pricing   model   with  the   following
weighted-average  assumptions  for 1997 and  1996:  risk-free  interest  rate of
6.11%;  volatility  factors of the expected market price of the Company's common
stock of .701; and a  weighted-average  expected life of the option ranging from
three to five years.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating  the fair value of traded  options.  Because the  Company's  employee
stock options have characteristics  significantly different from those of traded
options, and because subjective input assumptions can materially affect the fair
value estimate,  in management's opinion, the existing models do not necessarily
provide a  reliable  single  measure  of the fair  value of its  employee  stock
options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma information follows (amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                              1997             1996              1995
                                                     ------------------------------------------------------

<S>        <C>                                              <C>               <C>              <C>     
           Pro forma net loss                               $(4,876)          $(2,819)         $(1,735)
           Pro forma loss per share                            (.49)             (.30)            (.24)
</TABLE>

     The weighted-average remaining contractual life of options is 7.6 years.

     Shares of common stock  reserved  for future  issuance at December 31, 1997
     are as follows:
<TABLE>
<CAPTION>

<S>      <C>                                                                  <C>      
         Options                                                              1,659,500
         Warrants                                                               138,844
                                                                       ------------------
                                                                              1,798,344
                                                                       ==================
</TABLE>

                                   Page - 55
<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None.


                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Executive officers of the Company are elected by the Board of Directors
to hold office until their  successors  have been chosen and  qualified or until
earlier  resignation  or removal.  Set forth below are the names,  positions and
ages of the Company's executive officers and directors as of December 31, 1997.
<TABLE>
<CAPTION>

Name                                                 Age     Position

<S>                                                   <C>    <C> 
Jack L. Aronowitz(1)(3) .....................         57     President,  Chief  Executive  Officer and  Chairman of the Board
                                                             of Directors

Martin Gurkin, Ph.D..........................         65     Senior Vice President, Chief Operating Officer and Director

Kathryn R. Harrigan, M.B.A., D.B.A.(1)(2)(3)          46     Director

Stephen J. Dresnick, M.D., FACEP(2)(3)......          47     Director

Clayton Rautbord(1)(2)(3)....................         70     Director

Stuart R. Streger, C.P.A. ...................         46     Vice President of Finance and Chief Financial Officer

Colin A. Morris..............................         57     Vice President,  Transdermal  Manufacturing  and Chief Operating
                                                             Officer of the Pharmetrix Division

Robert G. Backosky...........................         44     Vice President of Marketing

Gregory J. Candelmo..........................         36     Vice President of Sales
<FN>

----------------------------------------
(1)  Member of the Company's Audit Committee
(2)  Member of the Company's Compensation and Stock Option Committee
(3)  Member of the Company's Board Organization and Governance Committee
</FN>
</TABLE>
     JACK L.  ARONOWITZ,  the founder of the  Company,  has been  President  and
Chairman  of the Board of  Directors  since  January  1992 and  Chief  Executive
Officer since January 1996. Prior to founding the Company,  Mr. Aronowitz served
as Executive Vice  President,  Technical  Director and Director of Operations of
TechniMed  Corporation  from May 1985 to  October  1991  and as  President  from
January 1983 to April 1985.  TechniMed was engaged in the medical diagnostic and
biochemical  businesses.  Mr. Aronowitz has been involved in the development and
commercialization  of  medical  diagnostic  products  for  over  35  years.  Mr.
Aronowitz is the President of the Florida Institute of Chemists.

                                   Page - 56
<PAGE>

     MARTIN  GURKIN,  Ph.D.  has been Senior  Vice  President,  Chief  Operating
Officer and a Director of the Company since  January 1996.  Prior to joining the
Company, Dr. Gurkin served as Vice President of ISCO, Inc., a company engaged in
the manufacture of scientific analytical  instrumentation,  from October 1989 to
December 1995.  Prior to joining ISCO,  Inc., Dr. Gurkin was employed in various
capacities for over 17 years by E. M. Science (an affiliate of E. Merck KGAA), a
company engaged in the manufacturing of laboratory  reagents and  chromatography
supplies.

     KATHRYN R.  HARRIGAN,  M.B.A.,  D.B.A.,  has been a Director of the Company
since 1996. Ms. Harrigan has been a professor at Columbia  Business School since
1981 and was named the Henry L.  Kravis  Professor  of  Business  Leadership  at
Columbia Business School in 1993. Since 1994,  Professor  Harrigan has served on
the Board of Directors of Cambrex  Corporation (AMEX: CMB), a company engaged in
the international  specialty chemicals business. She is also a Director of Johns
Manville Corp. (NYSE: JM), an international  building and filtration company, as
well as a Director or advisor of various other privately-held companies.

     STEPHEN J. DRESNICK,  M.D., FACEP, has been a Director of the Company since
1997. Dr.  Dresnick is Vice Chairman of FPA Medical  Management,  Inc.  (Nasdaq:
FPAM).  Prior to a merger with FPA Medical  Management in 1996, Dr. Dresnick was
President and Chief  Executive  Officer of Sterling  Healthcare  Group,  Inc., a
publicly-held hospital emergency department contract management and primary care
physician  practice  management  company,  which he founded in 1987. He has more
than 25 years of experience in the medical  sector and executive  management and
brings to the TCPI Board well-established  relationships with the scientific and
financial  communities.  In addition  to serving on the FPA  Medical  Management
Board of Directors,  he also is a director of Embassy Acquisition Corp. (Nasdaq:
MBCA)  as well  as a  director  or  trustee  for  various  other  privately-held
healthcare related organizations.

     CLAYTON L.  RAUTBORD has been a Director of the Company  since August 1996.
Mr. Rautbord is presently the Secretary and Treasurer of Wenk Aviation Insurance
Corporation.  From  1980-1989,  he  was  the  founder  and  President  of  Photo
Con-X-Ion, Inc., a manufacturer of photographic chemicals, and was the President
and CEO of APECO, a company listed on the NYSE, from 1963-1974. Mr. Rautbord has
previously served on the boards of Ozark Airlines, Metropolitan Bank of Chicago,
Amalgamated Bank of Chicago,  and Euclid Equipment  Company of Long Island,  New
York. In addition to TCPI's Board of Directors,  Mr. Rautbord also serves on the
Board of Directors of Albany Bank and Trust Company in Chicago.

     STUART R.  STREGER,  C.P.A.  has been Vice  President  and Chief  Financial
Officer of the Company  since April 1996.  Prior to joining  TCPI,  Mr.  Streger
served as Chief Financial  Officer of Carfel,  Inc., an auto parts  manufacturer
and  after-market  distribution  company from September 1994 to March 1996. From
August 1993 to September  1994, he was Chief  Financial  Officer of Chick Master
International,  a global manufacturer and distributor of poultry equipment. From
August 1980 to August 1993,  Mr.  Streger was Chief  Financial  Officer of Rosco
Laboratories,  Inc., a worldwide  distributor and manufacturer of television and
film  production  products.  From 1973 to 1977,  Mr.  Streger was  employed as a
senior auditor and served in many other  capacities  with the accounting firm of
KPMG Peat Marwick LLP.

     COLIN A. MORRIS has been Vice President of Transdermal  Manufacturing since
February  1997.  He has  operating  responsibilities  for  TCPI's  portfolio  of
transdermal drug delivery  products and related contract  services,  and directs
all  activities  at the  Company's  R & D facility  in Menlo  Park,  California,
operated by its Pharmetrix Division. In addition,  Mr. Morris is involved in the
ongoing  development  of the  Company's  TD  Glucose  Monitoring  System.  Prior
thereto, the transitioned Noven Pharmaceuticals(Nasdaq: NOVN), which operates of
one of the most advanced  transdermal R & D and manufacturing  facilities in the
world, from the development stage to global  commercialization as Vice President
of Operations and later as Vice President of Corporate Planning. Mr. Morris also
has held  senior-level  positions  with  Rhone-Poulenc  Rorer,  Inc.  as  Senior
Director  of World  Wide  Engineering,  Director  of  Process  Engineering  with
Sterling Drug,  Inc., and  international  and domestic  positions with Johnson &
Johnson.

                                   Page - 57
<PAGE>

     ROBERT G.  BACHKOSKY  joined the Company as Vice President of Marketing and
Business  Development in August 1997. Mr. Bachkosky directs the global marketing
programs for TCPI's expanding portfolio of diagnostic products used by consumers
and healthcare  professionals.  He has more than 20 years of experience in sales
and marketing of medical diagnostic, scientific and general healthcare products.
During the past 12 years, Mr. Bachkosky held various senior level positions with
Boehringer-Mannheim Corporation in Indianapolis,  Indiana, and most recently was
responsible for market  development of "Point of Care" products to Latin America
and Canada. His additional  healthcare  experience includes Cordis Laboratories,
Curtin Matheson Scientific, and employment as a Medical Technologist for Greater
Southeast Community Hospital in Washington, D.C.

     GREGORY J.  CANDELMO is the  Company's  Vice  President of Sales.  Prior to
joining TCPI in 1998, he was North American  Director of Sales and Marketing for
GDS Diagnostics.  Previously,  he was with Boehringer-Mannheim  Corporation from
1991 to 1997 where he served in various sales management positions that included
Diagnostic Systems Director of Sales, Lab Diagnostics Regional Business Manager,
AccuData  System  Product and  Marketing  Manager,  and Diabetes  Care  Division
Regional Sales Manager.  Mr. Candelmo also held sales management and field sales
positions with Behring  Diagnostics,  CooperBiomedical/Techicon  Instruments and
Proctor and Gamble.

     There is no family  relationship  between any executive officer or director
of the Company.


                                   Page - 58
<PAGE>

Item 11.          EXECUTIVE COMPENSATION
Item 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT
Item 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required  by  Items  11,  12  and 13 is  incorporated  by
reference  from  the  Company's  definitive  proxy  statement  to  be  filed  in
connection  with the Company's  Annual Meeting of Shareholders to be held during
1998.


                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K

         A.       The following documents are filed as part of the report:

                  (1) The Financial  Statements filed as part of this report are
                  listed  separately  in  the  index  to  Financial   Statements
                  beginning on page F-1 of this report.

                  (2) Financial Statement Schedules.




                      TECHNICAL CHEMICALS & PRODUCTS, INC.
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                    12/31/97
<TABLE>
<CAPTION>

                                        Balance at Beginning of     Additions Charged to        Balance at End of
             Description                         Period                     Cost                     Period
----------------------------------------------------------------------------------------------------------------------

Year Ended December 31, 1997:
<S>                                            <C>                                                  <C>     
Allowance for doubtful accounts                $  18,000                     -                      $  18,000
Tax Valuation Allowance                          572,801                     -                        572,801
                                        ------------------------------------------------------------------------------
Total                                          $ 590,801                     -                      $ 590,801
                                        ==============================================================================


Year Ended December 31, 1996:
Allowance for doubtful accounts                $  18,000                     -                      $  18,000
Tax Valuation Allowance                          572,801                     -                        572,801
                                        ------------------------------------------------------------------------------
Total                                          $ 590,801                     -                      $ 590,801
                                        ==============================================================================


Year Ended December 31, 1995:
Allowance for doubtful accounts                $  10,000               $   8,000                    $  18,000
Tax Valuation Allowance                                -                 572,801                      572,801
                                        ------------------------------------------------------------------------------
Total                                          $  10,000               $ 580,801                    $ 590,801
                                        ==============================================================================
</TABLE>

     All other  Financial  Statements and schedules not listed have been omitted
since  the  required  information  is  included  in the  Consolidated  Financial
Statements or the Notes thereto, or is not applicable, material or required.

                                   Page - 59
<PAGE>

                  (3)  Exhibits.

Exhibit                               Exhibit Description
Number
2.           *          Asset Purchase Agreement among Pharma Patch Public 
                        Limited Company, PP Holdings,  Inc. and the    Company.
3.1          *****      Amended and Restated Articles of Incorporation of the 
                        Company.
3.2          *****      Amended and Restated Bylaws of the Company.
4.1          *****      See Exhibits 3.3 and 3.4 for provisions of the Amended
                        and Restated  Articles of Incorporation and the Amended
                        and  Restated  Bylaws of the Company defining the rights
                        of holders of Common Stock of the Company.
4.2          ***        Form of Common Stock Certificate of the Company.
10.1         *****      Employment  Agreement  between Jack L.  Aronowitz and
                        the Company dated  December 31, 1992, as
                        amended.
10.2         *****      Amended and Restated 1992 Incentive Stock Option Plan.
10.3                    *****   Cancellation  and  Exclusive  License  Agreement
                        between Jack Aronowitz and the Company dated January 31,
                        1996.
10.4         *****      Stock  Option  Agreement  between the Company and Martin
                        Gurkin,Stuart R. Streger, Colin Morris, Kathryn Harrigan
                        Clayton Rautbord and Stephen Dresnick.
10.5         **         Lease-Pompano Beach, Florida.
10.5.1       *****      Business Lease Extension-Pompano Beach, Florida.
10.5.2       *****      Main Lease-Menlo Park, California; Sublease-Menlo Park.
10.5.3       *****      Assignment and Assumption of Sublease and Landlord's 
                        Consent Thereto  between Menlo Business Park,  Patrician
                        Associates,  Inc., Flora, Inc., Pharma Patch PLC and
                        Technical Chemicals and Products, Inc.dated November 15,
                        1995.
10.6         **         Health-Mark Diagnostics, Inc. Shareholders Agreement 
                        dated March 7, 1994.
10.7         ****       Stock Option Agreement with Cleve Laird dated July 29,
                        1994.
10.8         ***        Warrant Agreement between the Company and Jack L.
                        Aronowitz.
10.9         *****      Supplemental  Agreement by and between  Pharma Patch
                        Public  Limited  Company and PP Holdings,
                        Inc. dated January 16, 1996.
10.10        **         Agreement between the Company and Equity Communications
                        dated January 6, 1995.
10.11        *****      Letter Agreement between the Company and Redstone
                        Securities, Inc. dated January 15, 1996.
10.12        *****      Letter Agreement between the Company and Ira Weingarten
                        dated January 15, 1996.
10.13        *****      Letter Agreement with Flora, Inc.dated February 5, 1996.
10.14        ******     Employment Agreement between the Company and Martin 
                        Gurkin dated January 1996.
10.15        ******     Stock Option Agreement with Martin Gurkin dated November
                        1996.
21           *****      Subsidiaries of the Company.
23           Filed      Consent of Ernst & Young LLP.
             Herewith

                                   Page - 60
<PAGE>

27           Filed      Financial Data Schedule (EDGAR Filing)
             Herewith
99.1         **         Licenses, Permits and Approvals-Federal.
99.2         **         Licenses, Permits and Approvals-State.
99.3         **         Licenses, Permits and Approvals-County.
99.4         **         FDA Product List.
99.5         **         United States Patents.
99.7         ******     Pharmetrix Division of TCPI Patents.
99.8         ******     Pharmetrix Division of TCPI Licenses, Permits and 
                        Approvals.
99.6         **         Canadian Patents.

             *          Incorporated  by  reference  to the  exhibit of the same
                        number  in the  Company's Form 8-K filed on November 29,
                        1995.
             **         Incorporated by reference  to exhibit of the same number
                        in  Registration  Statement on Form
                        SB-2 filed on October 28, 1994 (No. 33-85756).
             ***        Incorporated  by  reference  to  exhibit  of  the  same
                        number in Amendment  No.4 to  the Registration Statement
                        on Form S-1 filed April 23, 1996 (No. 333-1272).
             ****       Incorporated  by reference to exhibit of the same number
                        in  Amendment  No. 1 to  Registration Statement on Form
                        SB-2 filed on January 13, 1995 (No. 33-85756).
             *****      Incorporated  by  reference  to exhibit of same  number
                        filed in the  Company's  Registration
                        Statement  on  Form  S-1  on  February 12, 1996
                        (No. 333-1272).
             ******     Incorporated by reference to exhibit of the same  number
                        filed in  Amendment  No. 2 to the Company's Registration
                        Statement on Form S-1 on March 20, 1996.

          B.            No reports on Form 8-K have  been filed  by  the Company
                        during the last quarter of 1997.

                                   Page - 61
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         TECHNICAL CHEMICALS AND PRODUCTS, INC.


                                     BY:      /SIGNED/
                                              Jack L. Aronowitz
                                              President, Chief Executive Officer
                                              and Chairman of the Board

                                              Date:    March 24, 1998

     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.


Signature                               Title                        Date


/SIGNED/                        President, Chief Executive        March 24, 1998
Jack L. Aronowitz               Officer and Chairman of the   
                                Board (Principal Executive
                                Officer)

/SIGNED/                        Senior Vice President, Chief      March 24, 1998
Martin Gurkin                   Operating Officer and Director


/SIGNED/                        Vice President, Chief Financial   March 24, 1998
Stuart R. Streger               Officer (Principal Financial
                                Officer and Principal Accounting
                                Officer)

/SIGNED/                        Director                          March 24, 1998
Kathryn R. Harrigan



/SIGNED/                        Director                          March 24, 1998
Stephen J.Dresnick,M.D.,FACEP



/SIGNED/                        Director                          March 24, 1998
Clayton Rautbord

                                   Page - 62
<PAGE>
  
Exhibit                                Index to Exhibit
Number                               
2.           *          Asset Purchase Agreement among Pharma Patch Public 
                        Limited Company, PP Holdings,  Inc. and the
                        Company.
3.1          *****      Amended and Restated Articles of Incorporation of the
                        Company.
3.2          *****      Amended and Restated Bylaws of the Company.
4.1          *****      See Exhibits 3.3 and 3.4 for provisions of the Amended 
                        and Restated  Articles of Incorporation
                        and the Amended and  Restated  Bylaws of the Company 
                        defining the rights of holders of Common Stock of the
                        Company.
4.2          ***        Form of Common Stock Certificate of the Company.
10.1         *****      Employment  Agreement  between Jack L.  Aronowitz and
                        the Company dated  December 31, 1992, as amended.
10.2         *****      Amended and Restated 1992 Incentive Stock Option Plan.
10.3         *****      Cancellation  and  Exclusive  License  Agreement
                        between Jack Aronowitz and the Company dated January 31,
                        1996.
10.4         *****      Stock  Option  Agreement between the  Company and Martin
                        Gurkin,  Stuart R.  Streger,  Colin Morris, Kathryn
                        Harrigan, Clayton Rautbord and Stephen Dresnick.
10.5         **         Lease-Pompano Beach, Florida.
10.5.1       *****      Business Lease Extension-Pompano Beach, Florida.
10.5.2       *****      Main Lease-Menlo Park, California; Sublease-Menlo Park.
10.5.3       *****      Assignment and Assumption of Sublease and Landlord's  
                        Consent Thereto  between Menlo Business Park,  Patrician
                        Associates,  Inc., Flora, Inc., Pharma Patch PLC and
                        Technical Chemicals and Products, Inc.dated November 15,
                        1995.
10.6         **         Health-Mark Diagnostics, Inc. Shareholders Agreement
                        dated March 7, 1994.
10.7         ****       Stock Option Agreement with Cleve Laird dated July 29,
                        1994.
10.8         ***        Warrant Agreement between the Company and Jack L.
                        Aronowitz.
10.9         *****      Supplemental  Agreement by and between  Pharma Patch
                        Public  Limited  Company and PP Holdings,
                        Inc. dated January 16, 1996.
10.10        **         Agreement between the Company and Equity Communications
                        dated January 6, 1995.
10.11        *****      Letter Agreement between the Company and Redstone
                        Securities, Inc. dated January 15, 1996.
10.12        *****      Letter Agreement between the Company and Ira Weingarten
                        dated January 15, 1996.
10.13        *****      Letter Agreement with Flora,Inc. dated February 5, 1996.
10.14        ******     Employment Agreement between the Company and Martin 
                        Gurkin dated January 1996.
10.15        ******     Stock Option Agreement with Martin Gurkin dated November
                        1996.
21           *****      Subsidiaries of the Company.
23           Filed      Consent of Ernst & Young LLP.
             Herewith

                                   Page - 63
<PAGE>

27           Filed      Financial Data Schedule (EDGAR Filing)
             Herewith
99.1         **         Licenses, Permits and Approvals-Federal.
99.2         **         Licenses, Permits and Approvals-State.
99.3         **         Licenses, Permits and Approvals-County.
99.4         **         FDA Product List.
99.5         **         United States Patents.
99.7         ******     Pharmetrix Division of TCPI Patents.
99.8         ******     Pharmetrix Division of TCPI Licenses, Permits and 
                        Approvals.
99.6         **         Canadian Patents.

             *          Incorporated  by  reference  to the  exhibit of the same
                        number  in the  Company's  Form 8-K
                        filed on November 29, 1995.
             **         Incorporated  by  reference  to exhibit of the same
                        number in  Registration  Statement on Form
                        SB-2 filed on October 28, 1994 (No. 33-85756).
             ***        Incorporated  by  reference  to  exhibit  of  the  same
                        number  in  Amendment  No.  4 to  the Registration
                        Statement on Form S-1 filed April 23, 1996(No. 333-1272)
             ****       Incorporated  by reference to exhibit of the same number
                        in  Amendment  No. 1 to  Registration Statement on Form 
                        SB-2 filed on January 13, 1995 (No. 33-85756).
             *****      Incorporated  by  reference  to exhibit of same  number
                        filed in the  Company's  Registration Statement on Form 
                        S-1 on February 12, 1996 (No. 333-1272).
             ******     Incorporated  by  reference  to exhibit of the same  
                        number  filed in  Amendment  No. 2 to the Company's 
                        Registration Statement on Form S-1 on March 20, 1996.


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