<PAGE>

                       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, 1996

                                       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:
                                Name of exchange
                     Title of each class 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 18, 1997 was approximately  $49,044,303 (based upon the closing sale price
of $8 5/8 per share on the Nasdaq National Market on March 18, 1997).

     As of March 18, 1997,  9,974,162 shares of the Registrant's $.001 par value
Common Stock were outstanding. Documents Incorporated By Reference None

                      EXHIBIT INDEX IS LOCATED ON PAGE 61

                                       1

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                                      INDEX

Description                                                        Page Number

                                     PART I

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

         Strategy............................................................ 5
         Non-Invasive Transdermal Glucose Monitoring ........................ 6
         Cholesterol Monitoring ............................................. 8
         Other Medical Diagnostic Products ..................................10
         Diagnostic Product Portfolio .......................................16
         HealthCheck Home Health Product Portfolio ..........................17
         Transdermal Drug Delivery Systems ..................................19
         Drug Delivery Product Portfolio ....................................22
         Biochemical Manufacturing ..........................................22
         Product Research and Development ...................................23
         Manufacturing and Materials ........................................23
         Patents, Trademarks and Technologies ...............................23
         Competition ........................................................25
         Marketing and Sales ................................................25
         Employees ..........................................................26
         Governmental Regulation ............................................26
         Product Liability Insurance ........................................27
         Executive Officers of the Company...................................27

Item 2.           Properties ................................................28

Item 3.           Legal Proceedings .........................................28

Item 4.           Submission Of Matters To A Vote Of Security Holders .......28

                                     Part II

Item 5.           Market For Registrant's Common Equity And Related
                  Stockholder Matters .......................................29
Item 6.           Selected Financial Data ...................................30
Item 7.           Management's Discussion And Analysis Of Financial Condition
                  And Results Of Operations .................................31
         General.............................................................31
         Results Of Operations ..............................................32
         Liquidity And Capital Resources ....................................33
      

                                 2
<PAGE>

                                      INDEX
                                    (Cont'd.)

Item 8.           Financial Statements And Supplemental Data .................35
         Report Of Independent Certified Public Accountants ..................36
         Consolidated Balance Sheets .........................................37
         Consolidated Statements Of Operations ...............................38
         Consolidated Statements Of Shareholders' Equity .....................39
         Consolidated Statements Of Cash Flows ...............................40
         Notes To Consolidated Financial Statements ..........................41

Item 9.           Changes In And Disagreements With Accountants On
                  Accounting And Financial Disclosure ........................55
    
                                     Part III

Item 10. Directors And Officers Of The Registrant ............................55

                                      Part IV

Item 14. Exhibits, Financial Statement Schedule, And
                  Reports On Form 8-K ........................................58

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

         Signatures ..........................................................60

         Index to Exhibits....................................................61

         Consent of Ernst & Young LLP.........................................62

         Financial Data Schedule..............................................63
 
                                      3
<PAGE>

                                     PART I

Item 1. BUSINESS

     TCPI 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.  The Company's medical
diagnostic   products  employ  its  patented  and   proprietary   membrane-based
technology.  TCPI is also  engaged in the  research  and  development  of its TD
Glucose Monitoring System, a non-invasive glucose testing process for diabetics.
In  addition to its  ongoing  diagnostics  business,  the  Company,  through its
Pharmetrix  Division  located in Menlo  Park,  California,  is  involved  in the
research,  development  and  commercialization  of transdermal  and mucosal drug
delivery systems and skin permeation enhancer.  The Company currently owns 19 US
patents and 27 foreign patents,  and has four pending US patent applications and
38 pending foreign patent applications.

     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.  Certain
products described herein are the registered and/or trademarked  property of the
Company. See "Business - Patents, Trademarks and Technologies."

     Overall,  the  Company or its founder  has  developed  over 330 FDA cleared
medical  diagnostic and drug products.  In 1996, the Company sold  approximately
5.4  million  pregnancy  tests,  representing  about 11% of the  estimated  50.5
million  tests sold  worldwide.  A shift in the mix of products sold toward more
accurate and expensive new technology resulted in higher year-over-year sales on
lower unit volume. In 1995, the Company sold approximately six million pregnancy
tests,  representing  more  than 12% of  approximately  49  million  tests  sold
worldwide.  Most of these tests were sold through the  Company's  alliance  with
Boehringer   Mannheim.   This   alliance  also  extends  to  the  marketing  and
distribution  of certain of the Company's  other  products,  including its Serum
Dilution  Reagent  (hCG Test) and its One Step LH Ovulation  Tests.  The Company
also markets its products under its proprietary brand name, PDQ, and distributes
approximately  53 private  label  products with drug,  discount and  supermarket
chains such as CVS, Thrifty Payless,  Thrift Drug, Woolworth,  Fedco, Long's and
Smith's  Food & Drug.  In 1996,  the  Company  captured  more  than  20%  market
penetration  of the US private label segment of at-home  pregnancy test kits for
consumers,  according to a report  published by Town-Oller  and  Associates.  In
addition,  the  Company's One Step hCG Pregnancy  Midstream  Wand,  One Step hCG
Pregnancy  Test Slide and One Step LH Ovulation Test Strip are featured for sale
in Amway Corporation's 1996 personal shoppers' catalogue.

     The Company's most significant  products under  development  include its TD
Glucose System,  its One Step CholestoCheck  System,  certain additional medical
diagnostic  testing  products and several  transdermal and mucosal drug delivery
systems. See "Business - Non-Invasive Transdermal Glucose Monitoring," "Business
-  Cholesterol  Monitoring,"  "Business - Other Medical  Diagnostic  and Related
Products" and "Business - Transdermal Drug Delivery Systems."

     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,

                                       4

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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.

STRATEGY

     The  Company's  objective  is 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 and mucosal drug delivery products which are intended to
offer a high degree of efficacy,  convenience and economy.  The Company believes
that by providing high quality,  value-added health care products which offer an
improved benefit to cost ratio over existing  competitive  products its business
approach is consistent  with current trends to reduce the overall cost of health
care.

     PROVIDE  A BROAD  RANGE OF  PRODUCTS.  The  Company  has  developed  and is
continuing  to develop and market a broad range of medical  diagnostic  and 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 1996 were:  glucose  monitoring,  over $1.8 billion
worldwide;  cholesterol  monitoring,  over 1.3 billion tests performed  annually
worldwide;   family  planning  products,   over  $0.6  billion  worldwide;   and
transdermal patch products, over $1.5 billion worldwide.

     ENTER INTO  STRATEGIC  ALLIANCES.  Although  the Company  intends to expand
direct distribution of certain of its medical diagnostic  products,  the Company
intends to enter into  strategic  alliances  with  large  international  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 the Company's products through a broader range of distribution  channels.
The Company's strategy with respect to the development and  commercialization of
its  transdermal,  mucosal  and,  skin  permeation  products  is to  enter  into
strategic  alliances with third parties that can, in some cases,  fund 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 ANDA approval and which can be sold through the Company's
Health-Mark Diagnostics, L.L.C. subsidiary.

                                       5
<PAGE>

     EXPAND DIRECT  DISTRIBUTION.  In the past, the Company's medical diagnostic
products had been primarily  distributed through strategic  alliances.  In 1996,
however,  the  Company  directly  distributed  its  private  label  One Step hCG
Pregnancy  Midstream  Wand and Slide and One Step LH Ovulation  Test Strip under
more than 53 different  brands to drug,  discount and  supermarket  chains.  The
Company intends to expand direct distribution of its medical diagnostic products
in order to retain a greater  percentage  of  revenues  generated  from sales of
these   products.   For  example,   in  1997,  the  Company   launched  its  own
over-the-counter  medical  diagnostic  testing  devices  to drug,  discount  and
supermarket  chains  under  its  HealthCheck  brand  name,   utilizing  colorful
point-of-sale  displays  that  contain  both the  Company's  products and health
information  journals.  See "Business - HealthCheck Home Health Screens - Health
Test Center."

NON-INVASIVE TRANSDERMAL GLUCOSE MONITORING

     THE PRODUCT.  The Company is developing a non-invasive  transdermal glucose
monitoring  system,  a  prototype  version  of a glucose  monitoring  system for
diabetics which uses disposable  transdermal  patch  technology and a monitoring
reflectance  meter to test  blood  glucose  levels.  The TD  Glucose  System  is
intended to overcome the discomfort and potential for infection associated with
available finger stick blood glucose monitoring systems.

     TCPI's TD Glucose System employs proprietary transdermal interstitial fluid
("ISF") sampling technologies  developed by the Company. ISF is an extracellular
fluid  that is  prevalent  throughout  the body,  including  the skin.  Research
indicates that ISF glucose levels  correlate  closely with blood glucose levels.
The TD Glucose Patch can be used almost anywhere on the body. After five minutes
on the skin  surface,  a tab is removed from the TD Glucose  Patch and the blood
glucose  measurement  is obtained by placing the TD Glucose Meter on the area of
the patch where the tab was removed.

     The Company has  conducted  early stage  clinical  trials of its TD Glucose
System,  the  results  of  which  correlate  with  finger  stick  blood  glucose
monitoring  tests  currently on the market,  thereby  reinforcing  the technical
feasibility  of the  Company's  product.  Subject to  completion  of  production
quality  TD  Glucose  Patches  and  meters,  the  Company  expects to begin full
clinical  trials of its TD Glucose  System  during  1997.  Although  preliminary
discussions  with the FDA indicate  that this  product  should be eligible for a
rapid 510(k) review, there can be no assurance that the FDA will consider the TD
Glucose  System  for 510(k)  clearance  or, if  considered,  that the TD Glucose
System will receive 510(k) clearance upon submission of the 510(k)  notification
application.

     The Company expects that the battery operated TD Glucose Meter will sell on
the retail market for approximately $100. The single-use,  disposable TD Glucose
Patch is designed to be easily  handled by the patient with little  manipulation
during the  measurement  and  sampling  process.  The TD  Glucose  Patch will be
approximately the size of a 5-cent coin and will be packaged in a pouch that can
also serve as a means for  disposal  of the used patch.  The Company  expects to
market a box of 50 glucose test  patches at a retail price of $40 to $50.  These
expected sale prices are competitive with conventional  blood glucose monitoring
systems currently on the market.

     MARKETING.    Several   large   international    medical   diagnostic   and
pharmaceutical  companies  have  expressed  preliminary  interest  in a possible
collaboration in the distribution and marketing of the TD Glucose System.  There
can be no assurance, however, that a definitive arrangement will be reached with
any such companies.

     BLOOD GLUCOSE MONITORING MARKET.  Diabetes is a chronic,  life-threatening
disease  for which  there is no known cure.  It is the fourth  leading  cause of
death by  disease  in the United  States.  Over 14 million  people in the United
States (1 in 20) have  diabetes  and more than  625,000 new cases are  diagnosed
each year.  It is  estimated  that there are at least 110  million  people  with
diabetes worldwide.  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.

                                       6
<PAGE>

     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  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.

                                       7

<PAGE>


     The  Company  believes  that  growth in demand  for  self-monitoring  blood
glucose  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 PRODUCT.  TCPI has  developed a  point-of-care  cholesterol  monitoring
system which can be used by physicians,  laboratories  and patients at home. The
One Step  CholestoCheck  System is comprised of: (i) visual and  meter-read  One
Step Total Cholesterol Test Strips used for measuring total cholesterol  levels;
(ii)  visual  and  meter-read  One Step HDL  Cholesterol  Test  Strips  used for
measuring HDL cholesterol;  and (iii) the hand-held CholestoCheck Meter used for
reading the meter-read versions of these test strips with greater accuracy.  The
One Step Cholesterol Test Strips utilize the Company's  patented and proprietary
membrane-based  technology  and produce a color reaction in response to Total or
HDL cholesterol, using a small unmeasured drop of blood.

     The  One  Step  CholestoCheck   System  is  a  point-of-care  finger  stick
cholesterol  monitoring system.  Typically a blood sample is taken using a small
finger lancet and placed on the One Step  Cholesterol  Test Strip.  The One Step
Cholesterol Test Strip then rapidly provides a visually  measurable color change
in response to either the total or HDL (good cholesterol) cholesterol present in
the blood. With the meter-read versions of the One Step Cholesterol Test Strips,
the CholestoCheck Meter provides a digital readout of the cholesterol level.

                                       8
<PAGE>

     The One Step CholestoCheck  System will offer the following advantages over
the leading finger stick cholesterol  monitoring  system: (i) at 25 microliters,
it will  require  significantly  less  blood,  thereby  permitting  the use of a
smaller lancet which the Company  believes makes the test less painful;  (ii) it
will produce  results in less than three minutes,  instead of  approximately  20
minutes;  and (iii) at a wholesale cost of about $2.00 per test, it will be much
less  expensive.  In addition to providing all of these  advantages,  TCPI's One
Step CholestoCheck System will be as accurate as laboratory testing methods.

     The Company's One Step CholestoCheck  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
or other location. 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. In
addition,  the Company has  conducted  clinical  trials  comparing  the One Step
CholestoCheck System to conventional laboratory testing. The results demonstrate
a  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.

     The Company has  obtained  510(k)  clearance  from the FDA for the visually
read version of its One Step Total  Cholesterol Test Strip.  This test strip has
also  received a waiver  under  CLIA.  The Company  expects to conduct  clinical
trials of its One Step HDL Cholesterol Test Strips and its  CholestoCheck  Meter
prior to  submitting  its 510(k)  application  for these  products.  The Company
expects to submit a 510(k)  application  for its One Step  CholestoCheck  System
during the second half of 1997.

     MARKETING.  The  Company  has  received  a  written  proposal  from a major
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 its One Step  CholestoCheck  System.  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
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 in 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.  Since the inception of
the NCEP, the market for cholesterol and other lipid tests has experienced world
wide  growth of 14% per year.  Since this  initial  study was done,  it has been
reconfirmed and stands as the official NIH position.

     The North  American  cholesterol  test  market is by far the largest in the
world,  representing  more than 67% of the market.  In 1997, it is expected that
the  American  market will grow to sales of $17.0  million and is  projected  to
reach $21.0 million with nearly 2.1 billion tests being performed in 1999.

                                       9
<PAGE>

     Diagnostic testing of blood disorders has traditionally been performed in a
centralized  clinical  laboratory  where  large  numbers  of blood  samples  are
processed in batches and test results are seldom  returned to physicians in less
than 24 hours.  Physicians,  patients and reimbursement  policies of third party
payors  have  created  demand  for  bringing  laboratory  testing  closer to the
point-of-care.  Point-of-care  testing is desired because it permits the medical
practitioner to provide immediate feedback to the patient.  The Company believes
that a valid  argument 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.  The NCEP data indicates that
more  than  50% of the  adult  population  in the  United  States  has  high  or
borderline high total cholesterol.

     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  is $25 or more,
although  Medicare  reimbursement  normally pays only about $12. There currently
exists one  point-of-care  cholesterol  monitoring  system  that:  (i)  requires
approximately  200 microliters of blood;  (ii) produces results in approximately
20 minutes; and (iii) costs approximately $10 to $12 per test.

OTHER MEDICAL DIAGNOSTIC AND RELATED PRODUCTS

     OVERVIEW. The type of medical diagnostic tests developed by the Company are
referred to as in vitro tests which measure  clinically  significant  substances
using bodily fluids,  usually blood,  urine or saliva.  These medical diagnostic
tests are termed in vitro  because  they are  performed  outside  the human body
(usually in a test-tube in a  laboratory),  in contrast 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.  For
example,  using  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.
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  and it is estimated
that  as  many  as  15  billion  samples  are  processed   through   centralized
laboratories  versus  only  two  billion  samples  that  are  channeled  through
decentralized  testing methods.  Laboratory testing 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). By 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. Because of its
advantages, the Company expects the point-of-care diagnostic testing industry to
continue to grow, creating new market opportunities for the Company.

     According  to industry  sources,  the total  worldwide  market for in vitro
diagnostic  testing  products grew from $3.5 billion in 1980 to $16.0 billion in
1995.

                                       10
<PAGE>

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

     OTHER  GLUCOSE  MONITORING  PRODUCTS.   The  Company  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 the Company's 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 will also be available
for use with the  Company's  One Step Blood  Glucose  Meter.  In  addition,  the
Company has  received a 510(k)  clearance  for its One Step Urine  Glucose  Test
Strip. The Company is in ongoing  discussions  regarding private label marketing
arrangements for both professional and over-the-counter  sale of these products.
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 hCG
Pregnancy and One Step LH Ovulation Tests.  These products are sold in component
parts for  assembly by  customers,  and as  finished  shelf  packages  under the
Company's PDQ label, HealthCheck brand and under more than 53 private labels.

     The Company's  One Step hCG  Pregnancy and One Step LH Ovulation  Tests are
characterized  by their  ease of use and  accuracy.  The  strip  format of these
tests,  which provide the same sensitivity as a  radioimmunoassay  ("RIA") test,
are  immersed  in urine  for up to five  minutes  providing  a  distinct  visual
reaction.  The slide  format of these  tests are for large  volume  clinics  and
require  the  addition  of four drops of urine to the  device.  The One Step hCG
Pregnancy  Midstream  Wand  requires  only a momentary  dip into urine or may be
conveniently  held under the urine stream.  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 a  non-exclusive  worldwide  marketing  and  distribution
agreement with Boehringer Mannheim for its family planning diagnostic  products.
During   1995-1996,   the   Company's   wholly-owned   subsidiary,   Health-Mark
Diagnostics,  L.L.C.,  began to  market  and  distribute  the  Company's  family
planning  products  in the  United  States  and  Canada  to drug,  discount  and
supermarket chains.

     According to industry  sources,  worldwide sales of pregnancy and ovulation
tests in 1995 were approximately $550 million and $40 million, respectively.

     DRUGS OF ABUSE  SCREENING.  The Company is  developing  medical  diagnostic
tests for the screening of various drugs of abuse. The products are initial drug
screens that use a strip immunoassay format 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 using the  Company's  Sani-Sal  Saliva  Collector.  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:   cocaine,   opiates,   barbiturates,   amphetamines,   canabinoids   and
phencyclidine  ("PCP"). 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.  If conclusive  quantitative
verification  of the presence and precise  quantity of the drug is required,  as
would  be the case in  certain  medical  uses of the  tests,  standard  industry
procedure requires the performance of additional tests by a quantitative  method
such as gas  chromatography/mass  spectroscopy  analysis.  The  Company  is also
developing a single strip that can be used to screen for multiple drugs from one
sample.

                                       11
<PAGE>

     To  date,  the  Company's  drugs  of  abuse  tests  for  cocaine,  opiates,
methamphetamine,  and canabinoids have received 510(k) clearance utilizing urine
samples.  Two other tests for amphetamine and  barbiturates  have been submitted
for 510(k) clearance  utilizing urine samples.  Tests for  phencyclidine  (PCP),
benzodiazepine and methadone are presently in clinical trials.  Obtaining 510(k)
clearance will allow the Company's tests to be used in clinical laboratories and
by other medical professionals.

     No special  training is required to perform the  Company's  drug  screening
tests. These tests operate automatically requiring 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.

     Currently, drug screening tests, including those to be sold by the Company,
are used for  employment  screening  and by: law  enforcement  and  correctional
institutions;  security  companies and safety  conscious  industries,  including
transportation and public utilities;  insurance companies;  educational systems;
government agencies,  including the United States Departments of Defense, Energy
and Justice; the equine industry; and athletic and drug rehabilitation programs.
According to industry  sources,  US companies lose an estimated $100 billion per
year  due to  problems  such as  inefficiency,  theft,  absenteeism  and  higher
insurance rates associated with drug abuse.

     The company has an exclusive  marketing  and  distribution  agreement  with
Boehringer  Mannheim for its 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 and is developing
the following products for the screening of infectious diseases:

     HUMAN  IMMUNODEFICIENCY  VIRUS (HIV). The Company has developed a screening
test for the  Human  Immunodeficiency  Virus  ("HIV"),  the  causative  agent of
Acquired Immunodeficiency Disease Syndrome ("AIDS").

     Although  point-of-care  testing could possibly promote AIDS prevention and
save lives,  the FDA to date has not approved any tests for screening or on-site
testing.  As such,  the Company  intends to market this  product  outside of the
United States.

     The Company's  RapidTest HIV Screen is a  membrane-based  solid phase assay
which uses only three  reagents  and can provide a permanent  on-site  result in
five to 10 minutes with serum,  plasma,  or saliva using the Company's  Sani-Sal
Saliva Collector. A positive sample produces a distinct red spot on the membrane
while a negative sample does not.

     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.
The results of this study  indicated 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 and a
99.3% specificity on a total of 457 specimens. The Company expects to market the
components  of its RapidTest HIV Screen  outside of the United  States,  and has
included  this  product  in  a  recently  completed   exclusive  agreement  with
Boehringer  Mannheim to market and distribute the Company's  diagnostic products
for infectious  diseases,  drugs of abuse and certain cancer screens  throughout
Latin America. Industry sources indicate that more than 33 million HIV tests are
performed annually worldwide.

                                       12
<PAGE>

     HEPATITIS. The Company has developed a qualitative screening strip test for
Hepatitis  B surface  antigen  ("HBsAg")  that can be used  with  either a serum
sample  or  a  saliva  sample  collected  with  the  Company's  Sani-Sal  Saliva
Collector.  About 48  million  hepatitis  tests  are done  each  year,  with the
greatest  number being for HBsAg.  A correlation  study was conducted  against a
reference RIA test which indicated that the Company's RapidTest HBsAg Screen had
a sensitivity  of 100%,  specificity  of 99.4% and a correlation of 99.6% to the
reference RIA assay.  The Company's  RapidTest  HBsAg was also evaluated and met
the criteria of efficacy  required by the WHO. The Company expects to market the
components of its RapidTest HBsAg Screen outside of the United States, and is in
ongoing  discussions  regarding  private label marketing  arrangements  for both
professional and over-the-counter sales of its RapidTest HBsAg Screen. There can
be no assurance,  however,  that  definitive  arrangements  will be reached as a
result of these  discussions.  According to industry  sources,  the US hepatitis
testing market in 1995 was approximately $210 million.

     STREP A. The Company's One Step Strep A Screen is an immunoassay  detection
system that screens for the presence of A beta-hemolytic  Streptococcus  ("Strep
A"). Using a swab sample, the test can accurately detect the presence of Strep A
within five to 15 minutes.  It 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  test  system
incorporates  immunoassay  reagents that contain  highly  specific and sensitive
antibodies reactive to the Streptococcal antigen.

     Strep A is typically  associated with  infections of the upper  respiratory
tract and skin of humans,  with children usually  suffering the highest level of
occurrence.  Illnesses such as  tonsillitis,  pharyngitis,  impetigo and scarlet
fever are associated with the presence of Strep A. Because serious complications
such as rheumatic fever may develop, it is necessary to set up a rapid detection
protocol for early  identification and implementation of treatment.  Traditional
methods of detecting Strep A require 24 to 48 hour culturing of swab specimens.

     CHLAMYDIA.  The  Company's  One Step  Chlamydia  Screen  is an  immunoassay
detection  system  that  screens  for 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.
Between 60 to 70 million new cases occur  annually  worldwide,  including  about
four million new infections annually in the United States. Among sexually active
young  adolescents,  approximately  14% of girls and 8% of boys are  affected by
Chlamydia.  Resistance  is not  achieved by  infection,  so repeat cases are not
uncommon.  Up to 70% of the  women and as many as 30% of the men  infected  with
Chlamydia are  asymptomatic.  Because these  individuals are not aware that they
are  infected,  they  transmit the  infection to their sexual  partners.  A high
percentage of asymptomatic women have tubal pregnancies,  infertility and pelvic
inflammatory  disease  ("PID").  An estimated 40% to 75% of women who have three
episodes of PID become infertile.  Industry sources estimate that  approximately
15 million Chlamydia tests are performed each year.

     HELICOBACTER  PYLORI. The Company has developed a membrane-based strip test
for    Helicobacter    pylori   ("H.    pylori")    that    utilizes   a   rapid
immunochromatographic  assay to qualitatively  determine 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 United
States 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.   Advancement  in  the
treatment of MI have increased the 30-day survival rate from  approximately  75%
in 1970 to 90% today.

     Cardiospecificity  has long been the focus of the search for an efficacious
biochemical  marker  for MI and  with  the  advent  of the  Company's  sensitive
immunoassay  of the  cardiac  isoform of Troponin I (cTnI),  a cardiac  specific
serum marker has been found.  Several studies confirm that cTnI is elevated very
early in cardiac  injury and suggest that it has equal  sensitivity  and greater
specificity  than  both  CK-MB  and  cardiac  Troponin  T  (cTnT)  in  detecting
myocardial injury.

                                       13
<PAGE>

     Currently  diagnosing  a MI in the field has carried a high  life-and-death
risk during the rush to the hospital.  The problem is that  symptoms  associated
with heart attacks,  i.e., chest pain,  clammy skin and labored  breathing,  are
also symptoms for many other ailments, such as stomach problems and lesser heart
problems.  Paramedics say that one of the best features of the Company's test is
that it can be performed  during the  transport of the patient to the  Emergency
Room and appropriate treatment initiated much earlier than in the past.

     Myoglobin tests have been  successfully  used in conjunction with CK-MB and
with cTnI immunoassays to both confirm and exclude MI in patients being admitted
to a hospital with chest pains and  non-diagnostic  ECGs.  Myoglobin levels also
are reported to correlate with the size of the infarct and to predict successful
revascularization  following reperfusion therapy. As a result,  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 cTnI 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.

     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.

     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  University of Kansas has  developed an antibody  found in the
system of Lupus patients. 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 US patents issued.

     SALIVA SAMPLE COLLECTOR. The Company's Sani-Sal 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 to be used with certain of the
Company's drugs of abuse and infectious disease screening tests. Clinical trials
have been completed for use of the Sani-Sal Saliva  Collector with the Company's
drugs of abuse  screens and clinical  trials are ongoing for use of the Sani-Sal
Saliva  Collector  with the Company's  infectious  disease  screens.  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").  The One Step PSA
Test consists of a chromatographic  absorbent device and a unique combination of
monoclonal antibodies used to selectively detect PSA in test samples with a high
degree  of  sensitivity.  The test  uses a small  finger  stick  drop of  blood,
provides results in five minutes and detects levels of PSA as low as 5 ng/ml.
                                       14
<PAGE>

     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. AFP is
normally  produced during fetal and neonatal  development by the liver, yolk sac
and  gastrointestinal  tract.  After birth,  serum AFP  concentration  decreases
rapidly. Elevation of serum AFP to an abnormally high level occurs in connection
with several malignant diseases,  including primary hepatocellular carcinoma and
non-seminomatous testicular cancer. Serum AFP elevation is also reported in some
patients  with  cirrhosis  and  hepatitis.  The Company is currently  undergoing
clinical  trials in  preparation  for  submission of this product to the FDA for
Pre-Market Approval ("PMA").

     FECAL OCCULT  BLOOD.  The  Company's  One Step Fecal Occult Blood Test is a
rapid,  convenient,  touch free and odorless  qualitative sandwich dye conjugate
immunoassay for the  determination  of human  hemoglobin in feces. The Company's
One Step Fecal Occult Blood Test detects lower levels of fecal occult blood than
the  standard  guaiac  tests by  employing  an  immunospecific,  double-sandwich
capture method.  Positive results appear to be more specific to human hemoglobin
and are easier to interpret than the results of guaiac methods.

     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.

                                       15
<PAGE>
<TABLE>
<CAPTION>

                                              DIAGNOSTIC PRODUCT PORTFOLIO

                   PRODUCT                                  STATUS (1)                           MARKETING STRATEGY
---------------------------------------------- -------------------------------------- ------------------------------------------
<S>                                           <C>                                    <C>
GLUCOSE MONITORING:
TD GlucoseTM System                            Clinical trials in 1997                Ongoing discussions (2)
One Step Whole Blood Glucose Test StripTM      510 (k) cleared (3)                    Ongoing discussions (4)
One Step Blood Glucose Meter                   Production enginnering started         Ongoing discussions (4)
                                               1Q97(3)
Uri-TestTM Glucose Test Strip                  510 (k) cleared                        Health-Mark Diagnostics

CHOLESTEROL MONITORING:
CholestoChekTM  Total Cholesterol Test Strip   510 (k) cleared (5)                    Health-Mark Diagnostics
CholestoChekTM HDL Cholesterol Test Strip      Clinical trials in 1997 (5)            Ongoing discussions (2)
CholestoChekTM  Meter                          Clinical prototype completed (5)       Ongoing discussions (2)

FAMILY PLANNING:
hCG Pregnancy One Step(R) Test Slide           510 (k) cleared                        Boehringer Mannheim; Health-Mark (6)
hCG Pregnancy One Step(R) Midstream Wand       510 (k) cleared                        Boehringer Mannheim; Health-Mark (6)
hCG Pregnancy One Step(R) Test Strip           510 (k) cleared                        Boehringer Mannheim; Health-Mark (6)
One Step LH Test Strip(R) (Ovulation)          510 (k) cleared                        Boehringer Mannheim; Health-Mark (6)
Serum Dilution Reagent (hCG Test)              510 (k) cleared                        Boehringer Mannheim; Health-Mark (6)

DRUGS OF ABUSE SCREENING:
One Step Cocaine Test StripTM                  510 (k) cleared                        Boehringer Mannheim Argentina (8)
One Step Opiate Test StripTM                   510 (k) cleared                        Boehringer Mannheim Argentina (8)
One Step Amphetamine Test StripTM              510 (k) application filed              Boehringer Mannheim Argentina (7) (8)
One Step Methamphetamine Test StripTM          510 (k) cleared                        Boehringer Mannheim Argentina (8)
One Step Phencyclidine (PCP) Test StripTM      Clinical trials                        Boehringer Mannheim Argentina (7) (8)
One Step Benzodiazepine Test StripTM           Clinical trials                        Boehringer Mannheim Argentina (7) (8)
One Step Canabinoids (THC) Test StripTM        510 (k) cleared                        Boehringer Mannheim Argentina (8)
One Step Methadone Test StripTM                Clinical trials                        Boehringer Mannheim Argentina (7) (8)
One Step Barbiturates Test StripTM             510 (k) application filed              Boehringer Mannheim Argentina (7) (8)

INFECTIOUS DISEASE SCREENING:
RapidTest HIVTM Screen                         WHO criteria met (8)                   Boehringer Mannheim Argentina  (8)
RapidTest HBsAgTM Screen (Hepatitis)           WHO criteria met (8)                   Boehringer Mannheim Argentina  (8)
One Step Strep BTM Screen                      Clinical trials                        Boehringer Mannheim Argentina  (8)
One Step Strep ATM Screen                      510 (k) cleared                        Boehringer Mannheim Argentina  (8)
RapidTest ChlamydiaTM Screen                   Clinical trials                        Boehringer Mannheim Argentina  (8)
RapidTest H. pyloriTM Screen                   Preclinicals completed                 Boehringer Mannheim Argentina  (8)

SALIVA SAMPLE COLLECTOR:
Sani-SalTM Saliva Collector                    In development (9)                     To be offered with drugs of abuse and
                                                                                      infectious disease screens

CARDIAC MARKERS:
One Step Cardiac Troponin I Test (cTnI)        Clinical trials in 1997                Will seek marketing partner
One Step Myoglobin                             In development                         Will seek marketing partner

CANCER SCREENS:
One Step PSA Test                              Clinical trials (PMA) (10)             Boehringer Mannheim Argentina  (8)
One Step Alphafetoprotein Test                 Clinical trials (PMA) (10)             Boehringer Mannheim Argentina  (8)
One Step LE Test (Lupus)                       In Development                         Will seek marketing partner
FecOne Step al Occult Blood Test(R)            Clinical trials                        Boehringer Mannheim Argentina  (8)
<FN>
_____________________
(1)  Except where noted, preclinicals and clinical trials refer to FDA's rapid 510 (k) clearance process.
(2)  The Company has been approached by, and is in ongoing discussions with, several major international  diagnostic and
     pharmaceutical    companies regarding a possible collaboration for the marketing and distribution  of this product.
(3)  The One Step Blood Glucose Test Strip has received 510 (k) clearance  for visual monitoring.  Pending completion of
     clinical trials for the One Step Blood Glucose Meter,  the Company will submit  a  510 (k)  application for its One
     Step Blood Glucose Monitoring System.
(4)  The Company is in ongoing  discussions  regarding  private label marketing  arrangements for both  professional and
     over-the-counter sales of  this product.
(5)  The One Step Total Cholesterol Test Strip has received 510 (k) clearance for visual  monitoring. Pending completion
     of clinical trials for the CholestoCheck  meter and the One  Step  HDL Cholesterol  Test  Strip,   the Company will
     submit a 510 (k) application for its One Step CholestoCheck System.
(6)  Boehringer  Mannheim is the non-exclusive  worldwide  marketing  distributor of this product and Health-Mark is the
     exclusive US over-the-counter marketing distributor of this product.
(7)  At this time, the Company  cannot market this test in the United States,  however it will market outside the United
     States.
(8)  Boehringer Mannheim is the exclusive marketing  distributor of this product in South America,  Central America, and
     certain Caribbean nations. At this time, the Company cannot market this test in the United States.
(9)  Clinical  trials have been completed for use of this product with certain of the Company's  drugs of abuse screens;
     clinical trials are ongoing for use of this product with the Company's infectious disease screens.
(10) The Company  intends to sell this test only  outside of the United  States  until such time as it is able to obtain
     FDA approval.
</FN>
</TABLE>
                                       16
<PAGE>

HealthCheck Home Health Screens - Health Test Center.

     In order to  capitalize  on the growth in the  market for  over-the-counter
medical  diagnostic  products,  the  Company  intends  to market  certain of its
over-the-counter  medical  diagnostic  testing  devices  to drug,  discount  and
supermarket  chains  under the  Company's  HealthCheck  name.  HealthCheck  will
include both  diagnostic  tests and  companion  products.  The Company  plans to
distinguish  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  will hold a variety of medical
diagnostic test products, as well as health information journals. FDA permission
is required to market most medical  diagnostic  products in the HealthCheck line
for over-the-counter sales.

     The  Company  believes  that  simple-to-use  products  with the  ability to
perform  accurate,  quantitative  tests  without an  instrument  will 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 for at-home and other point-of-care testing, where possible.

     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  diagnoses and more
effective treatment as individuals become more involved with their own health.
<TABLE>
<CAPTION>

                                      HEALTHCHECKTM HOME HEALTH PRODUCT PORTFOLIO

           PRODUCT                     INDICATIONS                STATUS               MARKETING STRATEGY
------------------------------- -------------------------- --------------------- -------------------------------
HEALTHCHECK HOME HEALTH SCREENING AND MONITORING PRODUCTS :

<S>                            <C>                        <C>                   <C>
HOME SCREENING TESTS:
CholestoCheckTM Total           Screening test for         510 (k) cleared       Health-Mark Diagnostics
Cholesterol Test  Kit           elevated Total
(Visual)                        Cholesterol
CholestoCheckTM   HDL           Screening test for         Clinical trials       Health-Mark Diagnostics
Cholesterol Test Kit (Visual)   elevated HDL Cholesterol
Uri-TestTM Urinary Tract        Urinary tract and/or       510 (k) cleared       Health-Mark Diagnostics
Infection (UTI) Test Kit        bladder infections noted
                                by presence of nitrite
                                in urine
Uri-TestTM Diabetes Test Kit    Screening test for         510 (k) cleared       Health-Mark Diagnostics
                                glucose in urine
Uri-TestTM Protein Test Kit     Screening test for         510 (k) application   Health-Mark Diagnostics
                                detection of protein in    filed
                                urine indicating kidney
                                infection
</TABLE>
<TABLE>
<CAPTION>

REPRODUCTIVE HOME TESTS FOR WOMEN:
<S>                            <C>                        <C>                   <C>

HealthCheckTM Pregnancy Test    Detection of pregnancy     510 (k) cleared       Health-Mark Diagnostics
Kit: Midstream Wand
HealthCheckTM Pregnancy Test    Detection of pregnancy     510 (k) cleared       Health-Mark Diagnostics
Kit: Midstream Wand
Double-Pack
HealthCheckTM Pregnancy Value:  Detection of pregnancy     510 (k) cleared       Health-Mark Diagnostics
Pack.  hCG Test Strip
Double-Pack
HealthCheckTM  Ovulation        Ovulation predictor        510 (k) cleared       Health-Mark Diagnostics
Predictor Test Kit

FAMILY MONITORING KITS
HealthCheckTM Vision Screening  Blurry vision monitor      Clear to market       Health-Mark Diagnostics
Test                            for near and far vision
HealthCheckTM Skin Growth       Skin growths and moles     Clear to market       Health-Mark Diagnostics
Monitoring System               are warning  signs of
                                skin cancer

</TABLE>
                                       17
<PAGE>
<TABLE>
<CAPTION>

PERSONAL HEALTH JOURNALS:
<S>                          <C>                                  <C>               <C>

Men's Journal                 Educational information and          Clear to          Health-Mark Diagnostics
                              organizer for  medical,              market
                              prescription, and insurance
                              information
Woman's Journal               Educational information and          Clear to          Health-Mark Diagnostics
                              organizer organizer for  medical,    market
                              prescription, and insurance
                              information
Senior's Journal              Educational information and          Clear to          Health-Mark Diagnostics
                              organizer organizer for  medical,    market
                              prescription,  insurance
                              information, and living will
"My Pregnancy Journal"        Guide to prenatal care for           Clear to          Health-Mark Diagnostics
                              pregnant women                       market

"All About Me" Children's     Record of a child's growth and       Clear to          Health-Mark Diagnostics
Journal                       development for parents              market

</TABLE>
                                       18
<PAGE>


TRANSDERMAL DRUG DELIVERY SYSTEMS

     The Company's  Pharmetrix Division is engaged in the research,  development
and commercialization of transdermal drug delivery systems based on patented and
proprietary  multi-laminate adhesive matrix and skin permeation technology.  The
Company is using this technology to develop  transdermal drug delivery  products
which offer one or more of the  following  advantages:  increased  efficacy  and
efficiency  of  the  therapeutic  agents  involved;   increased  bioavailability
profiles;  reduced  costs;  and  delivery of larger  molecules  through the skin
thereby increasing the types of drugs that can be transdermally  delivered.  All
of the Company's  transdermal,  mucosal and skin permeation  products are in the
early  stages of  development.  While  results of certain  preliminary  clinical
and/or  laboratory   studies  have  indicated  the  efficacy  of  the  Company's
transdermal,  mucosal  and skin  permeation  technologies,  before any  products
developed by the Company 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  government  clearance  could take up to
several  years  for  each  product.  However,  there  can be no  assurance  that
development of any such products will be completed or that FDA clearance will be
secured.

     Transdermal  drug  delivery  can  be  compared  to  continuous,  controlled
intravenous  delivery of a drug using the skin as a port of entry  instead of an
intravenous needle. Although the skin is only a few millimeters thick, its outer
layer,  the  stratum  corneum,  serves as a highly  protective  barrier  against
physical, chemical and bacterial penetration. This barrier primarily consists of
dead skin cells bound together by certain fatty (lipid) materials.  Only a small
number of drugs that are effective in the body in very low concentrations and/or
have particular physical properties have been successfully delivered through the
skin in therapeutic quantities.  The development of transdermal systems that can
deliver a variety of drugs through the skin in  therapeutic  quantities may have
one or more important medical benefits  including:  controlled drug release at a
steady rate over a long period of time; elimination of the costs associated with
frequent physician visits (usually related to testing of the blood levels of the
administered drug);  administration of lower doses of certain drugs (because the
drugs do not  initially  pass  through  the  liver,  where  extensive  metabolic
breakdown of certain drugs may occur); and ease of use for the patient.

     Several  major  international  pharmaceutical  companies  have entered into
agreements  with the Company for the  development  and/or  commercialization  of
certain of its  transdermal  and  mucosal  technologies:  Pharmacia  AB (smoking
addiction);   Revlon  Research  Center,   Inc.  (skin  permeation);   and  Taiho
Pharmaceutical  Co.,  Ltd.  (urinary  incontinence).  The  Company  is  also  in
discussions  concerning  the  development  and  commercialization  of estradiol,
nicotine and nitroglycerin  transdermal products with selected companies.  There
can be no assurance,  however, that definitive arrangements will be reached with
any of these companies.

     PLANNED PRODUCT  DEVELOPMENT.  The Company presently intends to concentrate
on the  development of  transdermal  products for the treatment of the following
conditions or diseases:

     HORMONE  REPLACEMENT FOR MENOPAUSAL  SYMPTOMS/OSTEOPOROSIS.  The Company is
developing two hormone  replacement  transdermal drug delivery systems,  one for
delivery of estradiol and the other for delivery of a  combination  of estradiol
and progesterone. With the aging of the population over the nextseveral 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.  Estimates  indicate that  osteoporosis,  a  progressive  thinning and
weakening of the bones,  accounts  for 1.8 million bone  fractures in the United
States  each  year.   According   to  the  National   Osteoporosis   Foundation,
approximately  75 million people  worldwide,  and 25 to 30 million in the United
States, have osteoporosis. It is estimated that the direct and indirect costs of
osteoporosis-related bone fractures in the United States are between $10 and $20
billion  annually.  The incidence of  osteoporosis  is expected to double in the
next 25 to 35  years  due to the  continued  aging of the  population.  Industry
sources  estimate that the 1995  worldwide  market for estrogen and  combination
transdermal drug delivery systems was approximately $350 million.

                                       19
<PAGE>

     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.

     Nitroglycerin and ISDN are available in several  conventional  dosage forms
including  sublingual tablets and other oral and topical  formulations.  Many of
these dosage forms have certain  limitations.  For example,  orally administered
nitroglycerin or ISDN involve extensive  first-pass liver metabolism to inactive
metabolites.  Sublingually  administered  nitroglycerin,  often  used for  acute
angina attacks,  goes directly into the bloodstream,  but due to its short serum
half-life,  dosing must be repeated every five minutes until  symptoms  subside.
Lastly,  topical  ointments are available  which deliver  nitroglycerin  or ISDN
through the skin and directly  into the  bloodstream,  but these  ointments  are
messy and difficult to dose  accurately.  Transdermal drug delivery systems have
become a widely used form of nitroglycerin  and ISDN delivery because they avoid
these  limitations  and  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.

     SMOKING ADDICTION.  Industry sources estimate that in 1991 26% of adults in
the United  States  smoked  tobacco  products,  and it is well  recognized  that
tobacco smoking is the leading cause of preventable  disease and death. In 1991,
there were more than 434,000  smoking-related  deaths in the US 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.

     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.  The Company
has the rights to  manufacture a nicotine patch from this  development  contract
and has currently  initiated a project to complete a second generation  nicotine
patch in 1997. The Company intends to manufacture and commercialize this product
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 held  preliminary  distribution  discussions with major drug chains and mass
merchandisers.

     Industry sources estimate that the worldwide market for transdermal smoking
cessation products was approximately $245 million in 1994.

     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 incontinence 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.

     The Company has entered into an agreement  with Taiho  Pharmaceutical  Co.,
Ltd. for the development and possible future  commercialization of a transdermal
drug delivery system for the treatment of urinary incontinence.  Under the terms
of the  agreement  the Company  will receive a license  fee,  development  fees,
milestone payments and royalty fees on final product sales.

                                       20
<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
introduction  of  fentanyl  transdermal  therapeutic  system  is an  improvement
compared to the injectable form of the drug since it provides for constant blood
levels  resulting  in an improved  safety  profile for the drug,  however,  this
product also has the typical addictive potential and adverse side effect profile
of the  narcotic  analgesics.  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  several  transdermal
therapeutic  system  designs for delivery of Ketorolac  for use in management of
moderate to severe pain. Proprietary technology for liquid reservoir-type, solid
state  reservoir-type,  and  adhesive  matrix-type  prototype  patches have been
developed.  These systems employ proprietary  excipients for enhancement of skin
permeation.  Initial pre-clinical  irritation studies have been completed on all
patch  designs  which are  suitable  for further  clinical  development.  Two US
patents have been issued which provide broad coverage for  transdermal  delivery
of Ketorolac from several transdermal  delivery system designs.  The key aspects
of  the  technology   include   cosmetic   elegance  and  convenience  of  daily
administration,  which offer an  opportunity  for  improved  patient  compliance
compared to multiple daily  injections or multiple oral dosing which is required
for the current products on the market.

                                       21
<PAGE>
<TABLE>
<CAPTION>


         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.

                                            DRUG DELIVERY PRODUCT PORTFOLIO

          PRODUCT                           INDICATIONS                        STATUS            MARKETING STRATEGY
----------------------------- ---------------------------------------- ----------------------- ------------------------
TRANSDERMAL DRUG DELIVERY SYSTEMS:

HORMONE REPLACEMENT / OSTEOPOROSIS:
<S>                          <C>                                      <C>                     <C>
Estradiol                     Estrogen replacement                     Phase I clinicals       Available for
                                                                       completed (1)           licensing.   Seeking
                                                                                               marketing partner
Estradiol / Progestin         Hormone replacement and contraception    Preclinicals            Available for
                                                                                               licensing.  Seeking
                                                                                               marketing partner
Testosterone                  Hormone replacement                      Preclinicals            Seeking development &
                                                                                               marketing partner

CARDIOVASCULAR DISEASE:
Nitroglycerin                 Angina                                   Preclinicals            Available for
                                                                                               licensing.
                                                                                               Definitive Development
                                                                                               & Marketing Agreement
                                                                                               for Asia in prepartion.
Isosorbide Dinitrate (ISDN)   Angina                                   Phase I clinicals       Available for
                                                                       completed               licensing.  Seeking
                                                                                               marketing partner

SMOKING ADDICTION:
Nicotine                      Smoking cessation                        Phase I clinicals       Royalty agreement with
                                                                       completed               Pharmacia.
                                                                                               Available for
                                                                                               licensing.   Seeking
                                                                                               marketing partner.
                                                                                               ANDA being prepared
                                                                                               for addition to
                                                                                               HealthCheck line as a
                                                                                               generic.

OTHER:
Bup-4 Incontinence            Urinary Incontinence                     Preclinicals            Agreement with Taiho
                                                                                               Pharmaceutical Co.,
                                                                                               Ltd.
Ketorolac                     Analgesia                                Preclinicals            Available for licensing
                                                                                               Seeking marketing
                                                                                               partner

SKIN PERMEATION ENHANCER:
SR-38                         Skin permeation enhancer                 Samples available for   Available for
                                                                       formulation             licensing.  Seeking
                                                                       development             marketing partners

</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.

                                       22
<PAGE>

PRODUCT RESEARCH AND DEVELOPMENT

     Most of the Company's  products are in various  stages of  development  and
have not yet been  commercialized.  The Company  conducts an active research and
development  program to  strengthen  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  1996,  the  Company   significantly   expanded  its   manufacturing
capabilities and expects to continue to do so in 1997 in order to further reduce
its dependence on third party contractors,  which manufactured a majority of the
Company's  products  in 1996.  Although  the Company  has  identified  alternate
manufacturing  sources, a change in manufacturers  without appropriate lead time
could result in a material  delay in the delivery of the Company's  products and
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 owns 19 US patents and 27 foreign patents,
and has four  pending  US patent  applications  and 38  pending  foreign  patent
applications.

     Mr. 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 United States 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
US 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 United States
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 each of 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.

                                       23
<PAGE>

     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
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 GlucoseTM
HealthCheckTM
CholestoCheckTM
Uri-TestTM
Pregnancy One StepTM
One Step Pregnancy StripTM
Pregnancy One Step Test Strip For Urine And SerumTM
One Step Whole Blood Glucose Test StripTM
One Step Cholesterol Test StripTM
One Step HDL Cholesterol Test StripTM
One Step Drugs of Abuse Test Strip - CocaineTM
One Step Drugs of Abuse Test Strip - Canabinoids (THC) TM
One Step Drugs of Abuse Test Strip - AmphetamineTM
One Step Drugs of Abuse Test Strip - MethamphetamineTM
One Step Drugs of Abuse Test Strip - OpiatesTM
One Step Drugs of Abuse Test Strip - BenzodiazepineTM
One Step Drugs of Abuse Test Strip - BarbiturateTM
One Step Drugs of Abuse Test Strip - Phencyclidine (PCP) TM
One Step Drugs of Abuse Test Strip - MethadoneTM
RapidTest HIV TM
RapidTest Chlamydia ScreenTM
RapidTest HBsAg ScreenTM
One Step Strep A ScreenTM
One Step Strep B ScreenTM
One Step H. pylori ScreenTM
Sani Sal TM

                                       24
<PAGE>


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.

     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 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
two significant components (a) identify and bring to market those products which
are candidates  for the ANDA process,  and can go  over-the-counter  for sale as
HealthCheck products,  and (b) 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.

                                       25
<PAGE>

     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
March 1997,  the Company  signed  another  exclusive  marketing  agreement  with
Boehringer  Mannheim  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.  Boehringer  Mannheim  is the
largest diagnostic distribution company in Latin America.

EMPLOYEES

     As of December  31,  1996,  the Company  employed 54  full-time  employees,
including   17   involved   in  research   and   development,   12  involved  in
administration,  20 in  production  and  maintenance  and five 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 similar agreement with its employees,  but does have an
employment  agreement  with  its  President.  See  "Note  9 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.

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 the PMA must  operate  using  device CGMP and pass an FDA  Inspection
before product commercialization. A company that manufactures devices subject to
510(k)  clearance  must also  comply  with  device  GMP and will be  subject  to
periodic inspections by the FDA to confirm compliance.

     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 the such foreign jurisdictions.

                                       26
<PAGE>

     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
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 inspections by the FDA to confirm  compliance.  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 approval or
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."

                                       27
<PAGE>

Item 2.           PROPERTIES

     The Company leases approximately 33,000 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  Company  currently  pays  approximately
$16,000 per month in rent, including sales tax and maintenance fees. The rent is
adjusted  annually based upon changes in the US 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 which includes office space,  fully-equipped laboratories
for transdermal drug delivery research and production  capabilities.  This lease
expires in June 1999 and the Company  currently pays  approximately  $26,000 per
month in rent under the lease.


Item 3.           LEGAL PROCEEDINGS

     On August 11, 1995, Joseph D'Angelo et al.  ("D'Angelo")  filed a complaint
in the Circuit Court of Broward  County,  Florida  against the Company,  Jack L.
Aronowitz and certain other parties (the "Lawsuit"). With respect to the Company
and Mr. Aronowitz, the Lawsuit alleges, among other things,  misappropriation of
trade secrets,  confidential information and intellectual property related to an
HIV saliva test kit. The lawsuit seeks injunctive relief and monetary damages in
excess of $15,000.

     Management,  after consultation with its counsel, believes that each of the
allegations  made  against  it in the  Lawsuit  are  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.  See "Business -
Patents,   Trademarks  and  Technologies"  for  information  relating  to  legal
proceedings regarding the Company's patents.


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  holder,  through the submission of
proxies or otherwise.

                                       28
<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 (1)

                                                                                                 High              Low
         Fiscal Year 1995
<S>              <C>                                                                            <C>               <C>

                  Period from February 2, 1995 to March 31, 1995 (2)  . . . . . . .              $ 2 44/64         $  2

                  Quarter Ended June 30, 1995 . . . . . . . . . . . . . . . . . . .              $ 6 5/8           $  2 3/8

                  Quarter Ended September 30, 1995  . . . . . . . . . . . . . . . .              $ 15 1/2          $  6 5/16

                  Quarter Ended December 31, 1995 . . . . . . . . . . . . . . . . .              $ 19 3/4          $  11 3/8

   
</TABLE>
<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 5/8          $  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 (to March 18, 1997) . . . .                       $ 10 7/8          $  8 1/8
<FN>

(1)   The prices set forth  in  this table have  been  retroactively adjusted to 
      give effect  to  a  two-for-one stock split effected  by the Company as of 
      July 31, 1995.

(2)   In  connection  with  the Company's  initial  public offering, the  Common 
      Stock initially was included  for quotation on the  Nasdaq SmallCap Market
      on February 2, 1995.  Prior to  February 2, 1995, there was no established
      public trading market for the Common Stock.
 

     There were  approximately  92 holders of record of Common Stock as of March
18,  1997.  In  addition,  the  Company  estimates  there  are more  than  1,800
beneficial  owners of its Common Stock.  The Company has not paid cash dividends
in the past.

</FN>
</TABLE>



                                       29
<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, 1996,
1995 and 1994,  respectively,  and the balance  sheet data at December 31, 1996,
and 1995,  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>
                                                                    
                                                                                                          PERIOD FROM JANUARY 30,
Statement of Operations Data:                                                                             1992 (Inception) through
                                                                         DECEMBER 31,                     DECEMBER 31, 1992
                                                     ---------------------------------------------------  ------------------------ 
                                                                           ($000)
                                                      1996           1995          1994          1993        1992
                                                      ----           ----          ----          ----        ----
<S>                                                <C>            <C>           <C>          <C>           <C>
Gross sales...............................          $ 7,008        $ 4,712       $ 3,013      $  1,784      $ 2,451

Net sales.................................            6,848          4,188         3,013         1,784        2,451

Gross profit..............................            3,142            936         1,037           757        1,230

Selling, general and administrative.......            4,079          1,807           666           682          889

Research and Development..................            1,766            435            73             3            -

Depreciation and amortization(2)..........            1,671            219            22             -            -

(Loss) Income from operations.............           (4,374)        (1,525)          276            72          341

Net (Loss) Income(1)......................           (2,550)        (1,273)          156            59          214

Net (Loss) Income per common share(1).....          $  (.27)       $  (.18)      $   .04      $    .01      $   .05

Weighted average common shares outstanding
                                                      9,290          7,069         4,295         4,067        4,067
</TABLE>
<TABLE>
<CAPTION>

BALANCE SHEET DATA:
                                                                  DECEMBER 31,
                                                       -------------------------------
                                                                    ($000)
                                                       1996                       1995
                                                       ----                       ----
<S>                                                 <C>                        <C>

Cash, cash equivalents and investments
available for sale .......................           $ 13,300                   $  1,777

Working capital (deficiency)..............             15,348                     (2,979)

Total assets..............................             37,526                     22,610

Short-term notes payable..................              -0-                        5,264

Total liabilities and minority interest...              1,831                      6,456

Total shareholders'equity.................           $ 35,695                   $ 16,154

<FN>

     (1) For the years  ended  December 31, 1994, 1993, the period from January 
         30, 1992 (Inception) through December 31, 1992, 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 and the period from January 30, 1992 (Inception)
         through December 31, 1992, 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 8 to the accompanying Consolidated Financial 
         Statements.

     (2) For the  years  ended  December  31,  1993 and 1992,  depreciation  and
         amortization was included in selling, general and administrative.

</FN>

</TABLE>

                                       30
<PAGE>

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

GENERAL

     TCPI 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.  The Company's medical
diagnostic   products  employ  its  patented  and   proprietary   membrane-based
technology.  TCPI is also  engaged in the  research  and  development  of its TD
Glucose Monitoring System, a non-invasive glucose testing process for diabetics.
In  addition to its  ongoing  diagnostics  business,  the  Company,  through its
Pharmetrix  Division  located in Menlo  Park,  California,  is  involved  in the
research,  development  and  commercialization  of transdermal  and mucosal drug
delivery systems and skin permeation enhancers. The Company currently owns 19 US
patents and 27 foreign patents,  and has four pending US patent applications and
38 pending foreign patent applications.

     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.

     In November  1995,  the Company  purchased  certain  assets of Pharma Patch
Public Limited Company ("Pharma Patch") and  substantially  all of the assets of
its wholly-owned  subsidiary,  PP Holdings, Inc. ("PP Holdings") which included,
without limitation, 11 US patents relating to transdermal drug delivery and skin
permeation  technology,   proprietary  information  and  trade  secrets  related
thereto,  property and equipment and certain  licensing and product  feasibility
agreements  entered into by Pharma  Patch and PP  Holdings.  See - Note 2 of the
accompanying financial statements.

     In 1996, the Company  completed the 100%  acquisition  of its  wholly-owned
subsidiary,  Health-Mark  Diagnostics,  L.L.C., which established the capability
for the  Company to market its  diagnostic  products  in the  private  label and
over-the-counter  market segments.  The Company  currently  markets its products
under its proprietary brand name, PDQ, and distributes  approximately 53 private
label products with drug,  discount and supermarket chains in North America.  In
February 1997, the Company  launched its HealthCheck  brand of  over-the-counter
diagnostic products and health journals for consumers.
 
     In February 1997, the Company officially  launched its HealthCheck brand of
over-the-counter  diagnostic products and health journals.  The HealthCheck line
presently  consists of 14 accurate and easy to use products for consumers  which
include  diagnostic tests and screens for cholesterol,  diabetes,  urinary tract
infection, pregnancy,  ovulation,  deteriorating vision and skin cancer, as well
as a series of health  journals  designed to educate and keep track of important
health  information  for women,  men,  seniors,  children and pregnant women. In
March 1997,  the Company  announced that Eckerd Corp., a 2,700 store drug chain,
placed initial orders for the  HealthCheck  tests for diabetes and  cholesterol.
The  Company  expects  its  ongoing  marketing  efforts  will  result in similar
discussions with other drugstore chains, retailers and discount retailers.

     In March 1997,  the Company  signed an exclusive  marketing  agreement with
Boehringer  Mannheim  to  market a  minimum  of $50  million  of its  diagnostic
products for infectious  diseases,  drugs of abuse testing and cancer  screening
throughout Latin American 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.  Boehringer  Mannheim  is the
largest diagnostic distribution company in Latin America.

                                       31
<PAGE>

     The Company expects to continue  developing its medical diagnostic products
internally,  although it intends to enter into  strategic  alliances  with major
international  diagnostic  and  pharmaceutical  companies  for the marketing and
distribution   of  these   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.

RESULTS OF OPERATIONS

       Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
       ---------------------------------------------------------------------

     The  Company  acquired  the assets of its  Pharmetrix  Division in November
1995.  The results of operations  reflect  12-months of  Pharmetrix  expenses in
1996, two months in 1995 and zero in 1994. Therefore,  the results of operations
for the year ended December 31, 1996 are not directly comparable to 1995 or 1994
results of operations.

     SALES. The Company's net sales increased by approximately 64% to $6,848,382
in 1996 from $4,188,461 in 1995. This increase resulted  principally from higher
sales of the  Company's  private  label Family  Planning  products in the United
States,  increased  foreign sales of diagnostic  products and fees received from
Taiho  Pharmaceutical  Co., Ltd. for the  development of a urinary  incontinence
transdermal  drug delivery  product by the  Company's  Pharmetrix  Division.  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  $2,206,404  to
$3,142,115 in 1996 from $935,711 in 1995. Gross profit as a percent of net sales
increased to 45.9% in 1996 from 22.3% 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
economics of scale.

     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 $4,079,325 in 1996 from
$1,806,910 in 1995.

     RESEARCH AND DEVELOPMENT.  The greatest impact on the increase in operating
expenses were 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 $1,766,590 in 1996 from $434,981 in 1995.

     NET INCOME (LOSS). The Company posted a net loss of $2,550,107 in 1996 from
$1,432,678 in 1995 as a result of the  integration of the  Pharmetrix  Division,
investment  in research  and  development,  manufacturing  scale-up and facility
expansion.

                                       32
<PAGE>


         Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
         ---------------------------------------------------------------------

     SALES.  The Company's net sales  increased 39.0% to $4,188,461 in 1995 from
$3,012,967 in 1994. This increase resulted  principally from the introduction of
the  over-the-counter  One Step hCG Pregnancy Midstream Wand,  production of the
specialty  chemical Tris (hydroxy methyl)  aminomethane  ("Tris") and successful
establishment of the Company's direct distribution of over-the-counter products.
The net sales  gain  included  a charge of  $523,533  related  to the  return of
products for repackaging to meet new customer specifications.  Substantially all
of these returned  products were repackaged and reshipped to the customer during
the first quarter of 1996.

     GROSS PROFIT.  The Company's gross profit decreased $101,250 to $935,711 in
1995 from  $1,036,961 in 1994. The Company's gross profit as a percentage of net
sales  decreased  to 22.3% in 1995 from  34.4% in 1994 as a result  of  start-up
costs related to the resumption of manufacturing of Tris and expenses associated
with increased in-house manufacturing of the Company's products.

     SELLING, GENERAL AND ADMINISTRATIVE.  The Company's SG&A expenses increased
to  $2,025,847  in 1995 from  $688,036 in 1994.  This  increase was  principally
attributable to costs associated with additional marketing,  regulatory, quality
control, laboratory, production and administrative personnel.

     RESEARCH AND DEVELOPMENT.  The Company's R&D expenses increased to $434,981
in 1995 from $73,402 in 1994.  This  increase was  primarily the result of costs
related  to the  operation  of  the  Company's  Pharmetrix  Division  and  costs
associated  with the development of the Company's One Step  Helicobacter  pylori
Screen, its CholestoCheck  Meter, its TD Glucose System and certain of its drugs
of abuse screens.

     NET INCOME (LOSS). The Company experienced a net loss of $1,493,628 in 1995
as compared to net income of  $244,621 in 1994.  The net loss for 1995  resulted
primarily from the factors described above.

     For the year ended  December  31,  1994,  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 at the shareholder  level.
Net Income  (Loss) for 1994 and 1995,  on a pro forma  basis  assuming  that the
Company  had been  subject to federal  and state  income  taxes and taxed as a C
corporation   during  each  of  these  years,   would  have  been  $156,154  and
$(1,273,469), respectively.

LIQUIDITY AND CAPITAL RESOURCES

     In April 1996, the Company completed a secondary public offering and issued
1,600,000 shares of common stock,  raising net proceeds of  approximately  $21.2
million.  Proceeds  from this  offering  enabled  the  Company to  purchase  the
additional research and development  manufacturing  equipment necessary to speed
the  development  and  production of several new products.  In 1995, the Company
completed a $4.4 million  initial  public  offering,  of which net proceeds were
used to expand the Company's  manufacturing facility and to introduce and market
new products.

     As of December 31, 1996, cash and cash equivalents and investments  totaled
$13,300,454.  The Company had current assets of $17,007,959  and working capital
of $15,348,191. Shareholders' Equity at December 31, 1996 was $35,694,621.

     The Company plans to earmark  funds to (a) 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  System),  its One Step  CholestoCheck  System,  and various
transdermal  drug delivery  products and skin  permeation  enhancer,  (b) expand
direct  distribution  of  medical  diagnostic  products,  (c)  introduce  direct
distribution  of its  cholesterol  monitoring  system  (One  Step  CholestoCheck
System),  (d) hire  additional  personnel,  and (e)  expand its  facilities  and
revenue generating  manufacturing  equipment. For additional information related
to the Company's cash flow  activities,  See - "Consolidated  Statements of Cash
Flow."

                                       33
<PAGE>

     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 1996,  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.

                                       34
<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 CHEMICAL AND PRODUCTS, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS

                  Years ended December 31, 1996, 1995 and 1994




                                    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 Shareholders' Equity..........................F-4
Consolidated Statements of Cash Flows....................................F-5
Notes to Consolidated Financial Statements...............................F-6











                                       35
<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, 1996 and 1995,
and the related consolidated statements of operations,  shareholders' equity and
cash flows for each of the three years in the period  ended  December  31, 1996.
Our audits also included the financial statement schedule listed in the Index at
Item 14a. 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, 1996 and 1995, and
the consolidated  results of their operations and their cash flows for the three
years in the  period  ended  December  31,  1996 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 19, 1997




                                       F-1
                                       36
<PAGE>
<TABLE>
<CAPTION>

                                Technical Chemicals and Products, Inc. and Subsidiaries
                                              Consolidated Balance Sheets

                                                                                            December 31
                                                                                      1996              1995
                                                                                ------------------------------------
Assets
<S>                                                                                <C>             <C>
Current assets:
   Cash and cash equivalents                                                        $  1,607,311    $     666,486
   Investments                                                                        11,693,143        1,110,932
   Accounts receivable, net of allowances for doubtful accounts of
     $18,000 in 1996 and 1995                                                          2,177,700          939,263
   Inventory                                                                           1,039,390          548,555
   Other                                                                                 490,415          207,996
                                                                                     -----------------------------
Total current assets                                                                  17,007,959        3,473,232
                                                                                     -----------------------------
Property and equipment, net                                                            2,708,481        1,925,789
Patents and trademarks, net of accumulated amortization of $1,120,786 in
   1996 and $120,244 in 1995                                                          13,887,357       14,878,507

Goodwill, net of accumulated amortization of $165,985 in 1996 and $6,221
   in 1995                                                                             2,327,975        2,195,695
Other assets                                                                           1,594,268          136,521
                                                                                    ==============================
Total assets                                                                         $37,526,040      $22,609,744
                                                                                    ==============================

Liabilities and shareholders' equity
Current liabilities:
   Accounts payable                                                                 $  1,458,101     $  1,002,582
   Accrued expenses                                                                      201,667          185,420
   Notes payable                                                                               -        5,188,888
   Notes payable to related parties                                                            -           75,336
                                                                                     -----------------------------
Total current liabilities                                                              1,659,768        6,452,226
                                                                                     -----------------------------
Other liabilities                                                                        171,651                -

Minority interest in subsidiary                                                                -            3,971
Commitments and contingencies
Shareholders' equity:
   Preferred stock, $.001 par value:
     authorized shares - 25,000,000 in 1996;
     No issued and outstanding shares                                                          -                -
   Common stock, $.001 par value:
     authorized shares - 100,000,000 in 1996 and
        25,000,000 in 1995
     Issued and outstanding shares - 9,938,634 in 1996
       and 8,117,880 in 1995                                                               9,939            8,118
   Additional paid-in capital                                                         39,608,217       17,583,104
   Accumulated deficit                                                                (3,923,535)      (1,437,675)
                                                                                     -----------------------------
Total shareholders' equity                                                            35,694,621       16,153,547
                                                                                     -----------------------------
Total liabilities and shareholders' equity                                          $ 37,526,040      $22,609,744
                                                                                     =============================
<FN>

See accompanying notes.
</FN>
</TABLE>
                                       F-2
                                       37
<PAGE>
<TABLE>
<CAPTION>

                                Technical Chemicals and Products, Inc. and Subsidiaries
                                         Consolidated Statements of Operations

                                                                                Year ended December 31
                                                                        1996              1995             1994
<S>                                                                 <C>               <C>                <C>
Gross sales (including $1,280,000 of research and
   development service revenue in 1996)                               $7,007,641       $ 4,711,994        $3,012,967
Returns and allowances                                                   159,259           523,533                 -
                                                                      ----------------------------------------------
Net sales                                                              6,848,382         4,188,461         3,012,967
Cost of sales                                                          3,706,267         3,252,750         1,976,006
                                                                      ----------------------------------------------
Gross profit                                                           3,142,115           935,711         1,036,961
                                                                      ----------------------------------------------

Operating expenses:
   Selling, general and administrative                                 4,079,325         1,806,910           666,182
   Research and development                                            1,766,590           434,981            73,402
   Depreciation and amortization                                       1,670,529           218,937            21,854
                                                                 ------------------------------------------------------
                                                                       7,516,444         2,460,828           761,438
                                                                 ------------------------------------------------------
(Loss) income from operations                                         (4,374,329)       (1,525,117)          275,523

Other income (expense):
   Interest income                                                       528,741           164,012             1,708
   Interest expense                                                     (207,650)          (71,573)          (32,610)
                                                                 ------------------------------------------------------
(Loss) income before income tax benefit and extraordinary item        (4,053,238)       (1,432,678)          244,621
Income tax benefit                                                     1,503,131                 -                 -
                                                                 ------------------------------------------------------
(Loss) income before extraordinary item                               (2,550,107)       (1,432,678)          244,621
Extraordinary item-loss on early extinguishment of debt                        -            60,950                 -
                                                                 ======================================================
Net (loss) income                                                    $(2,550,107)      $(1,493,628)      $   244,621
                                                                 ======================================================

(Loss) income per common share:
   Before extraordinary item                                          $     (.27)      $      (.20)       $      .06
   Extraordinary loss                                                          -              (.01)       $        -
                                                                 ------------------------------------------------------
Net (loss) income per common share                                    $     (.27)      $       (.21)              .06
                                                                 ======================================================

Weighted average number of common shares outstanding                   9,290,476         7,069,507         4,295,116
                                                                 ======================================================

Unaudited pro forma information:
   (Loss) income before income taxes and extraordinary item                            $(1,432,678)       $  244,621
Income tax (benefit) provision:
   Current                                                                                (213,856)           86,961
   Deferred                                                                                 (6,303)            1,506
                                                                                   ------------------------------------
                                                                                          (220,159)           88,467
                                                                                   ------------------------------------
(Loss) income before extraordinary item                                                 (1,212,519)          156,154
Extraordinary item - loss on early extinguishment of debt                                     60,950                 -
                                                                                   ------------------------------------
Net (loss) income                                                                      $(1,273,469)       $  156,154
                                                                                   ====================================

(Loss) income per common share:
   Before extraordinary item                                                           $      (.17)       $      .04
   Extraordinary loss                                                                         (.01)                -
                                                                                   ------------------------------------
                                                                                   ====================================
Net (loss) income per common share                                                     $      (.18)       $      .04
                                                                                   ====================================
<FN>
See accompanying notes
</FN>
</TABLE>
                                       F-3
                                       38
<PAGE>
<TABLE>
<CAPTION>

                                Technical Chemicals and Products, Inc. and Subsidiaries
                                    Consolidated Statements of Shareholders' Equity



                                           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, 1994            4,066,666         $4,066     $          (2,033)  $      84,024    $      86,057
                                -----------------------------------------------------------------------------------------
   Shares issued, net of
     costs of $60,000                   545,000            546             219,517                 -          220,063
   Net income                                 -              -                   -           244,621          244,621
   Distributions paid                         -              -                   -           (18,200)         (18,200)
                                -----------------------------------------------------------------------------------------
Balance at December 31, 1994          4,611,666          4,612             217,484           310,445          532,541
                                -----------------------------------------------------------------------------------------
   Shares issued, net of
     costs of $1,005,874              2,570,000          2,570           3,831,556                 -        3,834,126
   Distributions paid                         -              -                   -          (268,992)        (268,992)
   Shares issued for
     acquisition of certain
     assets of Pharma Patch
     Public Limited Company             886,214            886          13,434,114                 -       13,435,000
   Shares issued upon
     exercise of options                 50,000             50              99,950                 -          100,000
   Net loss                                   -              -                   -        (1,493,628)      (1,493,628)
   Adjustment for unrealized
     gains on investments                     -              -                   -            14,500           14,500
                                -----------------------------------------------------------------------------------------
Balance at December 31, 1995          8,117,880          8,118          17,583,104        (1,437,675)      16,153,547
                                -----------------------------------------------------------------------------------------
Shares issued, net of costs
   of $1,102,660                      1,600,000          1,600          21,225,473                 -       21,227,073
Shares issued upon exercise
   of  options and warrants             190,754            191             379,670                 -          379,861
Shares issued in connection
   with acquisition of
   Health-Mark                           15,000             15             194,985                 -          195,000
Shares issued in lieu of rent            15,000             15             224,985                 -          225,000
Net loss                                      -              -                   -        (2,550,107)      (2,550,107)
Adjustment for unrealized
   gains on investments                       -              -                   -            64,247           64,247
                                =========================================================================================
Balance at December 31,1996           9,938,634         $9,939         $39,608,217       $(3,923,535)     $35,694,621
                                =========================================================================================
<FN>

See accompanying notes.
</FN>
</TABLE>
                                       F-4
                                       39
<PAGE>
<TABLE>
<CAPTION>

                                Technical Chemicals and Products, Inc. and Subsidiaries
                                         Consolidated Statements of Cash Flows

                                                                             Year ended December 31,
                                                                    1996             1995               1994
                                                              ------------------------------------------------------
<S>                                                               <C>               <C>                 <C>
Operating activities
Net (loss) income                                                  $(2,550,107)      $(1,493,628)        $244,621
Adjustments to reconcile net (loss) income to net cash
   (used) provided by operating activities:
     Depreciation and amortization                                   1,670,529           218,937           21,854
     Issuance of stock for rent                                         37,360                 -                -
     Deferred income taxes                                          (1,503,131)                -                -
     Loss on extinguishment of debt                                          -            60,950                -
     Minority interest in subsidiary                                         -             3,971                -
     Changes in operating assets and liabilities,
       net of acquisition:
       Accounts receivable                                          (1,339,452)         (172,054)        (380,398)
       Inventory                                                      (490,835)         (162,487)        (264,016)
       Other current assets                                             56,420          (103,502)               -
       Accounts payable and accrued expenses                           471,766           376,293          449,080
                                                              ----------------------------------------------------
Net cash (used) provided by operating activities                    (3,647,450)       (1,271,520)          71,141
                                                              ----------------------------------------------------
Investing activities
Purchase of property and equipment                                  (1,272,603)         (111,608)        (177,048)
Deposit on equipment                                                         -           (79,494)               -
Decrease (increase) in other assets                                     45,384            57,576          (26,602)
Cash paid for acquisition of certain assets
   of               Pharma Patch Public Limited Company                      -          (285,945)               -
Purchase of investments                                            (11,617,964)       (2,101,245)               -
Proceeds from sale of investments                                    1,100,000         1,004,813                -
Investment in patents and intangible assets                             (9,392)          (20,404)               -
Payments to affiliates                                                       -           (30,000)               -
                                                              ------------------------------------------------------
Net cash used in investing activities                              (11,754,575)       (1,566,307)        (203,650)
                                                              ------------------------------------------------------
Financing activities
Net proceeds from issuance of common stock                         $21,227,213        $3,834,126         $220,063
Proceeds from issuance of notes payable to shareholders                      -                 -          219,050
Proceeds from stock options exercised                                  379,861           100,000                -
Repayment of notes                                                  (5,188,888)                -                -
Repayment of notes payable to related parties                          (75,336)                -                -
Payments on notes payable to shareholders                                    -          (280,000)               -
Payments on note payable to majority shareholder                             -          (100,000)         (50,000)
Costs related to initial public offering                                     -                 -          (72,330)
Shareholder distributions                                                    -          (268,992)         (18,200)
                                                              ------------------------------------------------------
Net cash provided by financing activities                           16,342,850         3,285,134          298,583
                                                              ------------------------------------------------------
Net increase in cash and cash equivalents                              940,825           447,307          166,074
Cash and cash equivalents at beginning of year                         666,486           219,179           53,168
Cash and cash equivalents at end of year                           $ 1,607,311       $   666,486         $219,242
                                                              ======================================================

Supplemental disclosure of cash activities
Cash paid during the year for interest                             $   207,650       $     7,965         $ 22,110
                                                              ======================================================
<FN>

Supplemental disclosure of non-cash activities

See Notes 2, 7, and 12 for certain non-cash investing and financing activities.

See accompanying notes.

</FN>
</TABLE>
                                       F-5
                                       40
<PAGE>


                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

                   Notes to Consolidated Financial Statements

                        December 31, 1996, 1995, and 1994


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.  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)  (see  Note  2)  which  is  a  wholly-owned
subsidiary. Significant intercompany transactions 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,  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.

                                       F-6
                                       41
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


INVENTORY

     Inventory,  consisting of raw materials,  supplies 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.

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 service revenue.



                                       42
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

INCOME TAXES

     Prior to  February  2,  1995,  the  Company  had  elected to be taxed as an
Scorporation  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  shareholders.  Upon the  completion  of the  initial  public
offering  effective  February 2, 1995,  the Company  became subject to corporate
income taxes.

NET (LOSS) INCOME PER SHARE

     Net (loss)  income 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 1996
and 1995 as their effect is antidilutive.

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 amount  reported  in the  consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

2. ACQUISITIONS

     Health-Mark is a wholesale representative company used in marketing certain
of the Company's  products.  In 1994,  the Company  issued 125,000 shares of its
common  stock  to the  Company's  majority  shareholder  for a 50%  interest  in
Health-Mark.  Since 1994, the Company has acquired all of the outstanding common
stock of Health  Mark in a series of  transactions  for total  consideration  of
$53,000 and 15,000  shares of the  Company's  common  stock  valued at $195,000.
Beginning  in  1995,   the  financial   statements  of  Health  Mark  have  been
consolidated into the accompanying  inancial statements.

     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) (see Note 7) 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.


                                       43
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)


2. ACQUISITIONS (Continued)

     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
years ended  December 31, 1995 and 1994 assume the  acquisition of the Purchased
Assets  occurred as of the beginning of the  respective  years.  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 dates  indicated,  or which may result
in the future.

<TABLE>
<CAPTION>
                                                           Pro forma
                                                    1995              1994
                                               ---------------------------------
                                                          (Unaudited)
<S>     <C>                                       <C>              <C>
         Net sales                                 $ 4,577,516      $ 3,012,967
                                                ================================
         Loss before extraordinary item            $(5,799,174)     $(5,534,771)
         Extraordinary loss                             60,950                -
                                                --------------------------------
         Net Loss                                  $(5,860,125)     $(5,534,771)
                                                ================================
         Loss per common share:
            Before extraordinary item              $      (.73)           (1.07)
            Extraordinary loss                            (.01)               -
                                                --------------------------------
         Net loss per common share                 $      (.74)     $     (1.07)
                                                ================================

</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.  Management believes that these
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.


                                       44
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



4. INVENTORY
<TABLE>
<CAPTION>

Inventory at December 31 consists of the following:

                                                               1996              1995
                                                      ------------------------------------
<S>     <C>                                            <C>                 <C>
         Raw materials and supplies                    $   577,719         $377,610
         Work in process                                    50,483                -
         Finished goods                                    411,188          170,945
                                                       ------------------------------------
                                                        $ 1,039,390         $548,555
                                                       ====================================
</TABLE>

5. INVESTMENTS
<TABLE>
<CAPTION>

Investments consist of the following:

                                                                       Gross Unrealized
                                                                             Gains             Fair
         December 31, 1996                                  Cost                              Value
                                                     ------------------------------------------------------
<S>     <C>                                             <C>                  <C>           <C>
         Government bonds                                $  7,618,396         $71,917       $  7,690,313
         Corporate bonds                                    3,996,000           6,830          4,002,830
                                                     ------------------------------------------------------
                                                         $ 11,614,396         $78,747       $ 11,693,143
                                                     ======================================================
         December 31, 1995

         U.S. Corporate bond                             $     96,432         $ 4,580       $    101,012
         U.S. Government agency bond                        1,000,000            9920          1,009,920
                                                     ------------------------------------------------------
                                                         $  1,096,432         $14,500       $  1,110,932
                                                     ======================================================
</TABLE>


The contractual maturity of investments at December 31, 1996, is as follows:

<TABLE>
<CAPTION>
                                                                                               Fair
                                                                             Cost             Value
                                                                       ------------------------------------

<S>     <C>                                                               <C>              <C>
         Due within one year                                               $  5,935,162     $  5,990,310
         Due between one year and five years                                  5,679,234        5,702,83
                                                                       ------------------------------------
                                                                            $11,614,396      $11,693,143
                                                                       ====================================
</TABLE>

                                       45
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>

Property and equipment at December 31 consists of the following:

                                                     1996              1995
                                             -----------------------------------
<S>        <C>                                  <C>              <C>
            Furniture, fixtures and equipment   $2,193,454       $1,261,533
            Real property                          216,793                -
            Leasehold improvements                 863,401          787,302
                                              ----------------------------------
                                                 3,273,648        2,048,835
            Accumulated depreciation              (565,167)        (123,046)
                                              ----------------------------------
                                                $2,708,481       $1,925,789
                                              ==================================
</TABLE>


7. NOTES PAYABLE

     At December 31, 1995,  notes  payable  consisted  of two  promissory  notes
(which  were paid in full during  1996) with an  aggregate  principal  amount of
$5,000,000 payable to Flora (see Note 2), bearing interest at 10% per annum.

8. 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 the year ended
December 31, 1994, the Company elected S corporation  status and was not subject
to income taxes.

     The  Company  accounts  for income  taxes  under FASB  Statement  No.  109,
Accounting  for  Income  Taxes  (SFAS  109).  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.


                                       46
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)


8. INCOME TAXES (Continued)

<TABLE>
<CAPTION>

     The  components of the income tax  provision  (benefit) for the years ended
December 31 are as follows:

                                                     1996               1995
                                             -----------------------------------
<S>     <C>                                  <C>                   <C>
         Current                             $               -     $    (6,303)
         Deferred                                  (1,503,131)           6,303
                                             ===================================
         Total                               $     (1,503,131)               -
                                             ===================================
</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:
<TABLE>
<CAPTION>

                                                   1996           1995
                                             -----------------------------------
<S>     <C>                                  <C>               <C>
         Net operating losses                $1,935,993        $641,663
         Depreciation and amortization          132,955         (72,310)
         Other                                    6,984           3,448
                                             -----------------------------------
         Net deferred tax assets              2,075,932         572,801
         Valuation allowance                   (572,801)       (572,801)
                                             -----------------------------------
         Net deferred taxes                  $1,503,131        $      -
                                             ===================================
</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,  management has
determined that a $572,801 valuation  allowance at December 31, 1996 and 1995 is
necessary  to reduce the deferred tax assets to the amount that will more likely
than not be  realized.  At December  31,  1996,  the Company has  available  net
operating loss  carryforwards of approximately  $4,979,000,  which expire in the
years 2010 and 2011.

     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>

                                                    1996            1995
                                               ------------------------------
<S>     <C>                                      <C>              <C>
         Tax at federal statutory rate           (34.00)%         (34.00)%
         State and local income taxes, net of
           federal tax benefit                    (4.88)           (5.83)
         Nondeductible items                       1.50                -
         Change in valuation allowance                -            38.85
         Other                                      .30             1.48
                                                -----------------------------
         Total                                   (37.08)%           0.5%
                                                =============================
</TABLE>

                                       47
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)


8. INCOME TAXES (Continued)

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  provision  (credit)  differed from the
amounts computed by applying the federal  statutory rate of 34% to income (loss)
before income taxes as follows:
<TABLE>
<CAPTION>

                                                    1995             1994
                                                -------------------------------
<S>     <C>                                       <C>               <C>
         Tax at federal statutory rate            (34.00)%          34.00%
         State and local income taxes,
          net of federal tax benefit
                                                   (5.83)            3.71
         Change in valuation allowance             24.03              .00
         Other                                      1.06            (1.54)
                                                -------------------------------
                                                  (14.74)%          36.17%
                                                ===============================
</TABLE>


9. RELATED PARTY TRANSACTIONS

     The Company and its founding major shareholder 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 shareholder 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  1996,  the major
shareholder  earned  $114,417  pursuant  to the  License  Agreement.  The  major
shareholder  waived all licensing  fees due him for the years ended December 31,
1995 and 1994.

     The Company and its major shareholder entered into an employment  agreement
effective  January 16, 1996,  amending an employment  agreement dated January 1,
1993, under which the major shareholder  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
1996 and 1995,  the  president  received  salaries  of  $144,800  and  $137,813,
respectively.  During 1994, the president  received $36,000 of salary and waived
any additional compensation due him through December 31, 1994.





                                       48
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)

9. RELATED PARTY TRANSACTIONS (Continued)


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

10. SIGNIFICANT CUSTOMER

     A significant part of the Company's business is dependent upon one European
customer. During the years ended December 31, 1996, 1995 and 1994, this customer
accounted for $3,099,125,  $2,971,274 and $2,621,370 of sales, respectively.  As
of December  31, 1996 and 1995,  accounts  receivable  from this  customer  were
$1,078,885 and $471,715, respectively.

11. 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,  1996,  1995 and 1994 was  $582,316,  $179,901 and $87,409,
respectively.

     At December 31, 1996,  future minimum  rentals,  subject to  cost-of-living
adjustments, are approximately as follows:
<TABLE>
<S>     <C>                                             <C>

         1997                                            $   477,500
         1998                                                477,500
         1999                                                301,700
                                                        ----------------
                                                         $ 1,256,700
                                                        ================
</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.

                                       49
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)

11. COMMITMENTS AND CONTINGENCIES (Continued)

FINANCING

     During  1996,  the  Company   entered  into  a  standby  letter  of  credit
arrangement  with a financial  institution.  As of December  31, 1996 no amounts
were outstanding on the letter of credit.

12. SHAREHOLDERS' EQUITY

     In April 1996, the Company completed a secondary public offering and issued
1,600,000  shares  of  common  stock,  raising  net  proceeds  of  approximately
$21,227,000.   During  February,  1995,  the  Company  raised  net  proceeds  of
approximately $3,800,000 and issued 2,570,000 shares of common stock in a public
offering (including 150,000 shares to a public relations firm).

     During 1995, a two-for-one stock split was distributed to shareholders. All
references in the  consolidated  financial  statements to number of shares,  per
share  amounts  and  market  prices  of the  Company's  common  stock  have been
retroactively restated to reflect the effect of the stock split.

     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  Shareholder
Protection Agreement (the Rights Amendment). Pursuant to the terms of the Rights
Agreement,  preferred  stock purchase  rights  (Rights) were  distributed,  as a
dividend,  to shareholders 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.

     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  $60,000 were
written off as an extraordinary loss on early extinguishment of debt.


                                       50
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



12. SHAREHOLDERS' EQUITY (Continued)

     In October 1996,  the Company  entered into an agreement  with a consulting
firm to provide  promotional  services over a minimum of one year. In return for
the services, the Company granted warrants at an exercise price of $13 per share
that vest as the Company's common stock achieves  specified  performance  target
prices as follows:
<TABLE>
<CAPTION>

                                                     Vesting
Number of Options                                    Target Price
------------------------------------------------------------------------
<S>                                                 <C>

60,000                                               None
60,000                                               $20
60,000                                               $25
60,000                                               $30
60,000                                               $35
<FN>

     As of December 31, 1996 none of the warrants had been exercised; 60,000 are
exercisable and expire October 7, 2001.
</FN>
</TABLE>

     In November 1996,  the Company  entered into an agreement with a consulting
firm to provide  promotional  services over a three year term. In return for the
services the Company  granted  50,000  warrants with an exercise price of $8 per
share,  vesting upon the  Company's  common  stock  achieving a $15 target price
before  November 8, 1998 and 50,000  warrants with an exercise  price of $10 per
share,  vesting upon the  Company's  common  stock  achieving a $20 target price
before November 8, 1998. At December 31, 1996 none of these warrants had vested.
The warrants terminate in November 1999.

     In conjunction  with the 1995 initial public  offering,  the Company issued
220,000  warrants with an exercise price of $2.60 to the  representative  of the
underwriters.  All of the  warrants  were  outstanding  as of December 31, 1995.
During  1996,  104,754  warrants  were  exercised  and as of December  31, 1996,
115,246 warrants were outstanding which expire in February 1999.

     During 1995, the Company's  Board of Directors  approved a distribution  of
$268,992  to   shareholders,   of  which  $256,920  was  paid  to  the  majority
shareholder.

     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 all  options  outstanding  at December  31, 1996 is four
years from the date of grant.


                                       51
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



12. SHAREHOLDERS' EQUITY (Continued)

     The  following  table  summarizes  information  relative  to the  Company's
options granted under the Plan:

<TABLE>
<CAPTION>
                                                       Shares     Weighted
                                                                  Average
                                                                  Exercise Price
                                                      --------------------------
<S>       <C>                                         <C>            <C>
           Outstanding at January 1, 1996                   -         $  -
           Granted                                     12,500           15
                                                      --------------------------

           Outstanding at December 31, 1996            12,500         $ 15
                                                      ==========================
           Exercisable at December 31, 1996                 -            -
                                                      ==========================
           Weighted-average fair value of options
             granted during 1996                       $  8.00
                                                     ============
</TABLE>


     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, 1994                    -        $    -
         Granted                                     116,000          3.37
                                                    ----------------------------
         Outstanding at December 31, 1994            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
                                                    ============================
         Exercisable at December 31, 1996            520,000        $14.98
                                                    ============================
         Weighted-average fair value of options
         granted during 1996                           $5.25
                                                    =============
</TABLE>

                                       52
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)



12. SHAREHOLDERS' EQUITY (Continued)

     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  a   Black-Scholes   option   pricing   model  with  the  following
weighted-average  assumptions  for  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 of 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:
<TABLE>
<CAPTION>

                                                     1996              1995

                                                -------------------------------
<S>                                               <C>               <C>
           Pro                                    $(2,818,532)      $(1,734,628)
           Pro forma loss per share                      (.30)             (.24)
<FN>

The weighted-average remaining contractual life of options is 5.9 years.

</FN>
</TABLE>


                                       53
<PAGE>

                     Technical Chemicals and Products, Inc.
                                and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)


12. SHAREHOLDERS' EQUITY (Continued)

     Shares of common stock  reserved  for future  issuance at December 31, 1996
are as follows:
<TABLE>
<S>     <C>                                           <C>

         Options                                      1,552,000
         Warrants                                       515,24
                                                    --------------
                                                      2,067,246
                                                    ==============
</TABLE>
                                       54
<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, 1996.
<TABLE>
<CAPTION>

        Name                                          Age                 Position
<S>                                                   <C>    <C>
Jack L. Aronowitz(1)(2)(3)...................         56     President,  Chief  Executive  Officer  and  Chairman of the
                                                             Board of Directors

Martin Gurkin, Ph.D..........................         64     Senior  Vice  President,   Chief   Operating   Officer  and
                                                             Director

John E. Pippert..............................         64     Senior Vice President, Marketing and Sales

Stuart R. Streger, C.P.A.(1) ................         45     Vice President and Chief Financial Officer

Colin A. Morris..............................         56     Vice  President,   Transdermal   Manufacturing   and  Chief
                                                             Operating Officer of the Pharmetrix Division

Thomas S. Spencer, Ph.D......................         51     Vice President, Pharmetrix Division

Cleve W. Laird, Ph.D.........................         58     Director

Clayton Rautbord(2)(3).......................         69     Director

Kathryn R. Harrigan(1)(2)(3).................         45     Director
<FN>
________________________________________
(1)  Member of the Company's Audit Committee
(2)  Member of the Company's Compensation Committee
(3)  Member of the Company's Stock Option 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.

                                       55
<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.

     CLEVE W. LAIRD,  Ph.D.  was  Executive  Vice  President of the Company from
February  1992 until  December  1996 and a Director of the Company since January
1992.  Since 1986,  Dr. Laird has also served as President  and Chief  Executive
Officer of Drial  Consultants,  Inc.,  a  consulting  and  advisory  firm to the
medical,  pharmaceutical and diagnostic device industries,  to which endeavor he
returned  full-time  during  December  1996.  Dr.  Laird's  health care industry
experience  also  includes  employment  as Director of  Laboratory  Services for
International  Remote Imaging  Systems,  a company  engaged in the  development,
production and sale of medical  instrumentation for urine analysis, from 1981 to
1986, as well as various  assignments with the Clinical  Diagnostics and Medical
Products Division of Union Carbide, from 1977 to 1980.

     JOHN E. PIPPERT has been Senior Vice President,  Marketing and Sales of the
Company  since March 1995.  Prior  thereto,  Mr.  Pippert  served as Director of
Marketing for Western  Biomedical  Enterprises,  Inc., a company  engaged in the
manufacture of medical diagnostic products,  from January 1990 to February 1995.
During that  period,  Mr.  Pippert also served as a senior  consultant  to Drial
Consultants,  Inc. Mr. Pippert was Vice President and Chief Operating Officer of
Clovis  Laboratory  Software,  Inc.  and  Director  of  Marketing  and Sales for
Laboratory Consulting,  Inc., companies engaged in the development of laboratory
computer  software,  from January 1987 to December 1990. Mr. Pippert also worked
in various  capacities for the Medical  Diagnostics  Division of E.I.  Dupont de
Nemours & Co., Inc. from 1972 to 1984.

     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 poduction 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,  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.

     THOMAS  S.  SPENCER,  Ph.D.  has  been a Vice  President  of the  Company's
Pharmetrix  Division  since  November  1995.  Prior to joining the Company,  Dr.
Spencer served as Executive Vice President and Chief Technical Officer of Pharma
Patch from August 1994 to November  1995.  Prior to joining  Pharma  Patch,  Dr.
Spencer was Vice  President of Research and  Development at Cygnus from May 1988
until  January  1994.  While at  Cygnus,  he was in  charge  of a  research  and
development  organization  consisting  of over 90 members,  responsible  for the
commercialization of Cygnus' products.

                                       56
<PAGE>

     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 TrustCompany in Chicago.

     KATHRYN R.  HARRIGAN,  M.B.A.,  Ph.D.,  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,  a  company  engaged  in the
international  specialty chemicals business.  In 1995, Professor Harrigan joined
the Board of Directors of Schuller Corporation,  an international  building and
filtration company.

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

                                       57
<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
1997.

                                     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
                                                    DECEMBER, 31 1996


<TABLE>
<CAPTION>
                             BALANCE AT BEGINNING OF     ADDITIONS CHARGED TO        BALANCE AT END OF
            DESCRIPTION               PERIOD                     COST                      PERIOD
           -------------     -----------------------     --------------------        -----------------       
<S>                               <C>                         <C>                         <C>    
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 boubtful accounts    $     10,000                $   8,000                   $   18,000
Tax Valuation Allowance                     -                    572,801                      572,801
                              ------------------------------------------------------------------------
Total                              $     10,000                $ 580,801                   $  590,801 
                              ========================================================================
Year Ended December 31, 1994;
Allowance for doubtful accounts    $     10,000                      -                     $   10,000
                              ------------------------------------------------------------------------
Total                              $     10,000                      -                     $   10,000
                              ========================================================================
</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.


                  (3) Exhibits

        

                                       58
<PAGE>           

Exhibit                           Exhibit Description
Number
2.           *          Asset Purchase Agreement among Pharma Patch Public
                        Limited Company,  PP Holdings,  Inc. and the Company
3.1          **         Articles of Incorporation of the Company, as amended
3.2          **         By-laws of the Company
3.3          *****      Amended and Restated Articles of Incorporation of the
                        Company
3.4          *****      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
9.           *****      Voting Trust  Agreement by and between  Pharma  Patch
                        Public  Limited  Company and Jack L. Aronowitz dated
                        November 1, 1995
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         *****      Employment Agreement between John Pippert and the
                        Company dated January 31, 1996
10.5         *****      Employment Agreement between Cleve Laird and the
                        Company dated January 31, 1996
10.6         **         Lease-Pompano Beach, Florida
10.6.1       *****      Business Lease Extension-Pompano Beach, Florida
10.6.2       *****      Main Lease-Menlo Park, California; Sublease-Menlo Park
10.6.3       *****      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
10.7         **         Health-Mark Diagnostics, Inc. Shareholders Agreement
                        dated March 7, 1994
10.8         ****       Stock Option Agreement with Cleve Laird
                        dated July 29, 1994
10.9         **         Letter Agreement with John Faro (for stock options)
                        dated August 12, 1994
10.10        ***        Warrant Agreement between the Company and
                        Jack L. Aronowitz
10.11        *****      Supplemental Agreement by and between Pharma Patch
                        Public Limited Company and PP Holdings, Inc.
                        dated January 16, 1996
10.12        *****      Stock Option Agreement with John Pippert
10.13        **         Agreement between Company and Equity Communications
                        dated January 6, 1995
10.14        *****      Letter Agreement between the Company and Redstone
                        Securities, Inc. dated January 15, 1996
10.15        *****      Letter Agreement between the Company and Ira Weingarten
                        dated January 15, 1996
10.16        *****      Letter Agreement with Flora, Inc. dated February 5, 1996
10.17        ******     Employment Agreement between the Company and
                        Martin Gurkin dated January, 1996
10.18        ******     Stock Option Agreement with Martin Gurkin
                        dated November, 1996
21           *****      Subsidiaries of the Company
23           Filed 
             Herewith   Consent of Ernst & Young LLP
27.          Filed    
             Herewith   Financial Data Statement (EDGAR Filing)
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 on 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 1996.

                                  
   
                                       59
<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 25, 1997

     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 25, 1997
Jack L. Aronowitz      Officer and Chairman of the
                       Board (Principal Executive
                       Officer)

/SIGNED/               Senior Vice President, Chief               March 25, 1997
Martin Gurkin          Operating Officer and Director



/SIGNED/               Vice President, Chief Financial            March 25, 1997
Stuart R. Streger      Officer (Principal Financial
                       Officer and Principal Accounting
                       Officer)

/SIGNED/               Director                                   March 25, 1997
Cleve W. Laird, Ph.D.



/SIGNED/               Director                                   March 25, 1997
Kathryn R. Harrigan



/SIGNED/               Director                                   March 25, 1997
Clayton Rautbord

                                       60
<PAGE>

Exhibit                           Index to Exhibit
Number
2.           *          Asset Purchase Agreement among Pharma Patch Public
                        Limited Company,  PP Holdings,  Inc. and the Company
3.1          **         Articles of Incorporation of the Company, as amended
3.2          **         By-laws of the Company
3.3          *****      Amended and Restated Articles of Incorporation of the
                        Company
3.4          *****      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
9.           *****      Voting Trust  Agreement by and between  Pharma  Patch
                        Public  Limited  Company and Jack L. Aronowitz dated
                        November 1, 1995
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         *****      Employment Agreement between John Pippert and the
                        Company dated January 31, 1996
10.5         *****      Employment Agreement between Cleve Laird and the
                        Company dated January 31, 1996
10.6         **         Lease-Pompano Beach, Florida
10.6.1       *****      Business Lease-Extension Pompano Beach, Florida
10.6.2       *****      Main Lease Menlo-Park, California; Sublease-Menlo Park
10.6.3       *****      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
10.7         **         Health-Mark Diagnostics, Inc. Shareholders Agreement
                        dated March 7, 1994
10.8         ****       Stock Option Agreement with Cleve Laird
                        dated July 29, 1994
10.9         **         Letter Agreement with John Faro (for stock options)
                        dated August 12, 1994
10.10        ***        Warrant Agreement between the Company and
                        Jack L. Aronowitz
10.11        *****      Supplemental Agreement by and between Pharma Patch
                        Public Limited Company and PP Holdings, Inc.
                        dated January 16, 1996
10.12        *****      Stock Option Agreement with John Pippert
10.13        **         Agreement between Company and Equity Communications
                        dated January 6, 1995
10.14        *****      Letter Agreement between the Company and Redstone
                        Securities, Inc. dated January 15, 1996
10.15        *****      Letter Agreement between the Company and Ira Weingarten
                        dated January 15, 1996
10.16        *****      Letter Agreement with Flora, Inc. dated February 5, 1996
10.17        ******     Employment Agreement between the Company and
                        Martin Gurkin dated January, 1996
10.18        ******     Stock Option Agreement with Martin Gurkin
                        dated November, 1996
21           *****      Subsidiaries of the Company
23           Filed
             Herewith   Consent of Ernst & Young LLP
27.          Filed
             Herewith   Financial Data Schedule (EDGAR Filing)
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 on 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.
  
                                      61