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                       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, 2000

                                       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
                                                -------

                                   TCPI, 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.)

  3333 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. [ X ]

         The aggregate market value of Common Stock held by non-affiliates as of
March 20, 2001 was approximately $3,346,657 (based upon the closing sale price
of $0.044 per share on the NASD OTC Bulletin Board on March 20, 2001).

         As of March 20, 2001, 80,640,911 shares of the Registrant's $.001 par
value Common Stock were outstanding.

                       EXHIBIT INDEX IS LOCATED ON PAGE 67

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<PAGE>


                                      INDEX
<TABLE>
<CAPTION>

Description                                                                                    Page Number
-----------                                                                                    -----------
<S>     <C>                                                                                       <C>
                                     PART I

ITEM 1.  Business .........................................................................        4
         Our Business .....................................................................        4
         Our Product Portfolio ............................................................        4
         Strategic Direction ..............................................................        6
         Key Products .....................................................................        7
                Non-Invasive Glucose Monitoring ...........................................        7
                Cholesterol Home Screening Tests ..........................................        8
                MicroGlucose Glucose Monitoring System ....................................       10
                HealthCheck(R)Home Diagnostic Products ....................................       11
                Cholesterol Monitoring System For Professional Use ........................       11
         Biochemical Manufacturing ........................................................       13
         Product Research and Development .................................................       13
         Manufacturing and Materials ......................................................       13
         Patents, Trademarks and Technologies .............................................       14
         Competition ......................................................................       15
         Employees ........................................................................       16
         Governmental Regulation ..........................................................       16
         Product Liability Insurance ......................................................       18

ITEM 2.  Properties .......................................................................       18

ITEM 3.  Legal Proceedings ................................................................       18

ITEM 4.  Submission of Matters to a Vote of Security Holders ..............................       22

                                     PART II

ITEM 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters ..............................................................       23

ITEM 6.  Selected Financial Data ..........................................................       24

ITEM 7.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations .....................................................       25
         Year Ended December 31, 2000 Compared
            to Year Ended December 31, 1999 ...............................................       25
         Year Ended December 31, 1999 Compared
            to Year Ended December 31, 1998 ...............................................       26
         Financial Condition ..............................................................       27
         Liquidity and Capital Resources ..................................................       28
         Forward Looking Statements .......................................................       31
         Risk Factors And Other Disclosures ...............................................       32
                Operating Losses ..........................................................       32
                Need For Additional Capital To Continue Operations ........................       32
                Need For Additional Authorized Shares Of Common Stock To
                   Raise Additional Capital Necessary To Implement Business
                   Plan ...................................................................       32
                Changes In Securities And Use Of Proceeds .................................       33
</TABLE>


                                        2

<PAGE>

                                      INDEX
<TABLE>
<CAPTION>

Description                                                                                    Page Number
-----------                                                                                    -----------
<S>     <C>                                                                                       <C>
                Impact Of Sale Of Material Amounts Of Common Stock ........................       34
                Change In Board Of Directors And Management ...............................       34
                Acquisition Of Certain Business Assets Of Roche Diagnostics ...............       34
                Suspension Of Clinical Trials For A Principal Product Under
                   Development ............................................................       35
                Delisting Of Common Stock .................................................       35
                Judgements From Pending Litigation Could Adversely Affect
                  Financial Condition .....................................................       36
                Environmental Matters .....................................................       36
                Impact Of Inflation .......................................................       37
                Dependence On Key Personnel ...............................................       37

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risks ......................       37

ITEM 8.  Financial Statements And Supplementary Data ......................................       37
         Report of Independent Certified Public Accountants ...............................       38
         Consolidated Balance Sheets ......................................................       39
         Consolidated Statements of Operations ............................................       40
         Consolidated Statements of Redeemable Preferred Stock
           and Common Stockholders' Equity ................................................       41
         Consolidated Statements of Cash Flows ............................................       43
         Notes to Consolidated Financial Statements .......................................       45

ITEM 9.  Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure ............................................       61

                                    PART III

ITEM 10. Directors and Officers of the Registrant .........................................       62

ITEM 11. Executive Compensation ...........................................................       62

ITEM 12. Security Ownership of Certain Beneficial Owners
           And Management .................................................................       62

ITEM 13. Certain Relationships and Related Transactions ...................................       62

                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ..................       62
         Schedule II - Valuation and Qualifying Accounts ..................................       62
         Exhibits Description .............................................................       63
         Signatures .......................................................................       66
         Index to Exhibits ................................................................       67
         Consent of Ernst & Young LLP .....................................................       69
</TABLE>


                                       3
<PAGE>


                                     PART I

ITEM 1.  BUSINESS

Our Business

         We market point-of-care medical diagnostic products for use at home, in
physician offices, and other healthcare locations and distribute them worldwide
through multiple channels under our HealthCheck(R) brand as well as original
equipment manufacturer ("OEM") and private label programs. We also market our
patented SR-38(TM) skin permeation enhancer and own a patent-protected,
proprietary portfolio of transdermal and dermal drug delivery technologies. In
addition, we manufacture high purity specialty biochemicals.

         We market in the U.S. and internationally medical diagnostic testing
products that utilize membrane-based technology. Diagnostic products sold in the
United States have received 510(k) marketing clearance from the United States
Food and Drug Administration. The balance of our diagnostic products are from
time-to-time in various stages of development, clinical and regulatory review in
the U.S. and overseas, or intended for export outside the U.S. Our patented
SR-38 skin permeation enhancer is marketed under an exclusive worldwide license
with trademark rights to LVMH-Moet Hennessy Louis Vuitton, Inc. ("LVMH") for
cosmetic use. We also own a portfolio of development-stage, transdermal/dermal
technologies in the areas of smoking addiction reduction, hormone replacement
therapy, and cardiovascular disease, as well as other skin permeation enhancers.
We presently hold 26 U.S. and foreign patents, and have 61 domestic and foreign
patent applications pending.

Our Product Portfolio

         We currently market various over-the-counter ("OTC") and
professional-use medical diagnostic products under our HealthCheck brand and on
a private label and OEM basis. These products utilize rapid testing procedures
to detect and/or quantify substances in urine or blood. We also market and have
available various skin permeation enhancer formulations for pharmacological use.
Our product portfolio presently includes:

          -    family planning (pregnancy detection and ovulation timing)
          -    cholesterol monitoring and detection of diabetes, urinary tract
               infection and kidney and bladder disease, skin cancer and
               deteriorating vision
          -    drugs of abuse
          -    SR-38 and other skin permeation enhancers

         We also have certain key diagnostic products in various stages of
development that include:

          -    our noninvasive TD Glucose(TM) Monitoring System for diabetics
          -    our new Total Cholesterol Home Screening Test(TM)and HDL
               Cholesterol Home Screening Test(TM) for OTC use
          -    our new MicroGlucose(TM) Meter and Test strips for OTC and
               professional use glucose monitoring
          -    our new TriMeter(TM) Monitoring System for professional use Total
               and HDL Cholesterol monitoring

         We market diagnostic products worldwide through multiple distribution
channels that include:

          -    OEM marketing relationships with multinational pharmaceutical and
               diagnostic companies for product use on a professional and/or OTC
               basis

          -    our proprietary HealthCheck and private-label brands for OTC
               consumer use

          -    Internet sales via our Web site at www.health-check.com and
               www.tcpi.net.

                                       4

<PAGE>

ITEM 1.  BUSINESS (Continued)

         In the OEM sector, a significant portion of our business relates to our
patented SR-38 skin permeation enhancer program with LVMH. Another large
component of the OEM sector includes our family planning products for pregnancy
and ovulation that are marketed by Roche Diagnostics GmbH ("Roche Diagnostics")
of Mannheim, Germany for international distribution under their EVATEST(R)
(pregnancy), EVAPLAN(R) (ovulation) and other similar trademarks. We are
presently involved in the planned acquisition of these business assets in
certain countries from Roche Diagnostics as outlined below, and have assumed
responsibility for the marketing and distribution of these products in Europe.
The OEM sector also includes marketing of our screening tests for drugs of abuse
and infectious diseases by other OEM customers for distribution in the U.S.
and/or international markets based on regulatory clearance. In addition, in
1999, we opened our sales and marketing office in Milan, Italy to expand
international distribution of our OEM, OTC and private label diagnostic products
outside of North America. International sales of our diagnostic products are
ongoing. Product marketing and/or registration with local health officials are
underway in a number of foreign countries.

         Our HealthCheck and private-label diagnostic products are currently
available on an OTC basis in more than 26,000 pharmacies, supermarkets and mass
merchandise retail stores throughout the United States and Canada as well as
community pharmacies that are supplied directly by leading drug wholesale
distributors. We private label our family planning products for approximately 14
drug, discount and supermarket chains.

The Roche Diagnostics Transaction

         On May 20, 2000, our wholly owned Cayman Islands subsidiary, TCPI
Holdings, Ltd. ("TCPI Holdings"), entered into a business and asset purchase
agreement with Roche Diagnostics to acquire certain trademarks, distribution
rights and business assets of the worldwide OTC pregnancy and ovulation testing
business carried on by Roche Diagnostics. We agreed to guarantee TCPI Holdings'
performance under the asset purchase agreement. The trademarks include
EVATEST(R), EVAPLAN(R), EVENT-TEST(R), DIAGNOSIS(R) and related goodwill. The
majority of the assets we intended to acquire are located in South America with
the balance in Europe. We made a down payment of $500,000 upon signing of the
asset purchase agreement. The acquisition of assets from Roche Diagnostics had
been contingent on us obtaining sufficient funds to make the remaining payments
due under the contract. We did not make the second and third payments due under
the asset purchase agreement. Roche Diagnostics has decided to continue to
operate this business in Argentina and Uruguay. We have, however, with the
concurrence of Roche Diagnostics, taken over the marketing of the products in
Germany, Italy, Spain and Switzerland through an independent distributor that is
well established in these markets; and are in continuing discussions with Roche
Diagnostics concerning the acquisition of its assets in those countries. The
down payment of $500,000 we made in May 2000 will be applied to the purchase of
these assets.

         Further, our obligation, which also existed before we entered into the
asset purchase agreement, to indemnify Roche Diagnostics in connection with
patent infringement claims, including the litigation with Unilever, survives the
termination of the asset purchase agreement. In addition, while Roche
Diagnostics presently continues to market our products, it may in the future
sell the assets to one of our competitors, who may decide not to sell our
products, which would result in a material decrease in revenues, thereby
adversely affecting our operating results. Presently, however, Roche Diagnostics
has indicated to us it intends to continue to own and operate this business.

         In 2000, approximately 71% of our total product sales were to
international customers. Sales to LVMH accounted for approximately 46% of
product sales; Roche Diagnostics accounted for approximately 16% of product
sales; and CVS Distribution, Inc. (CVS Drug Stores) accounted for approximately
16% of product sales.

         Our executive offices are located at 3333 S.W. 15th Street, Pompano
Beach, Florida 33069, and our telephone number is (954) 979-0400.

                                       5

<PAGE>

ITEM 1.  BUSINESS (Continued)

Strategic Direction

Diagnostic Products:

         Our core strategic objective is to continue to develop, manufacture and
market a range of OTC and professional use point-of-care medical diagnostic
products for distribution through multiple channels on a global basis. In doing
so, we intend to provide medical diagnostic products that offer accuracy,
efficacy, ease of use and reduced costs. In order to accomplish this objective,
we have developed the following strategy:

     -    We have developed and plan to continue to develop and market medical
          diagnostic products that we believe are accurate, easy to use and
          cost-effective, and provide disease-specific information to health
          care providers and patients. We believe that our business approach is
          consistent with current trends to reduce the overall cost of health
          care by providing high quality, value-added products that offer an
          improved benefit-to-cost ratio over competitive products, where they
          exist.

     -    We have developed and plan to continue to develop and market a range
          of medical diagnostic products that we believe represent a diversified
          product base that could increase potential business opportunities,
          provide new product introductions over time and reduce the risks
          associated with reliance on a single product or technology.

     -    We concentrate our development efforts on large existing markets where
          we believe there could be significant demand for our products. For
          example, industry estimates project the worldwide finger-stick blood
          glucose monitoring market to be approximately $4 to $5 billion
          annually.

     -    We plan to expand distribution for our medical diagnostic products and
          also enter into strategic alliances with pharmaceutical and medical
          diagnostic companies as well as independent distributors for the
          distribution and marketing of certain of our diagnostic products. We
          believe that these companies will have significantly greater
          financial, marketing and other resources than us such that they will
          be able to market our products through a broader range of distribution
          channels.

     -    We plan to continue to expand direct and indirect distribution of our
          OTC HealthCheck and private-label family planning products as well as
          OEM and private-label distribution of our diagnostic testing and
          screening products for drugs of abuse throughout North America and
          certain international markets.

         There can be no assurance that we will be able to successfully develop
and market new products on a profitable basis or at all; or that we will be able
to successfully negotiate strategic alliances or licensing agreements, or that
the terms of any such alliances or licensing agreements will be more favorable
to us than the terms that we could otherwise obtain.

Transdermal Technologies:

         We anticipate that the ongoing commercialization of our skin permeation
enhancers will continue. In June 1999, we closed our transdermal/dermal research
and development facility in California. As a result, the strategic direction
related to our portfolio of transdermal/dermal drug delivery technology will
advance only with third party involvement to fund final product development,
conduct clinical testing and obtain regulatory approvals, and market the
product(s); or license or divest the technology or related patents.

         There can be no assurance that we will be able to successfully
negotiate strategic alliances or licensing agreements with third parties on
favorable terms or at all, or that we will be able to successfully divest the
technology or related patents.

                                       6

<PAGE>


ITEM 1.  BUSINESS (Continued)

Key Products

1.  Noninvasive Glucose Monitoring

         The Product:

         We are developing our noninvasive TD Glucose(TM) Monitoring System that
         is intended to be a painless, bloodless and easy to use method for
         diabetics to monitor their glucose levels without the discomfort and
         inconvenience associated with available finger stick blood glucose
         monitoring systems. However, we have suspended clinical trial efforts
         regarding this product and returned to the development stage to further
         refine the optical TD Glucose meters. At this time, we do not have
         sufficient funds to continue development of this product without an
         infusion of additional capital or other source of funds.

         Our TD Glucose Monitoring System incorporates a small skin patch and
         electronic meter to monitor glucose levels. After the patch has been
         placed on the forearm for five minutes, a small electronic meter is
         held up to the patch and produces a glucose reading. The single-use
         patch is then removed and disposed.

         Our TD Glucose Monitoring System is nontoxic and safe. It combines
         proprietary, patent-pending transdermal technology with membrane-based
         diagnostic technology. The alliance of these technologies permits
         dermal glucose to be transported into the patch where it causes a
         chemical reaction and color change in the membrane. Special optics in
         an electronic meter detects the color change and provides a glucose
         reading.

         The retail price of our TD Glucose Monitoring System will be determined
         in conjunction with our future strategic partner(s) responsible for
         distribution and marketing, and is expected to be competitive with
         currently available finger-stick blood glucose monitoring systems.

         We anticipate that our first-generation noninvasive glucose monitoring
         technology will be available by prescription only. The physician would
         determine whether to calibrate the TD Glucose Meter to the individual
         diabetic patient or utilize universal algorithms such that individual
         calibration would not be necessary.

         Clinical Trials:

         Clinical trials on the TD Glucose Monitoring System ended in January
         2000. Since that time we have focused on further refinements of the
         optical TD Glucose meters that we believe are necessary to achieve
         greater precision before initiating expanded clinical trials that are
         required to obtain FDA consideration of this device. The optical meters
         measure the color produced on the membrane in the noninvasive patch in
         response to the level of glucose present. We cannot submit the TD
         Glucose Monitoring System to the FDA for clearance until we conduct
         clinical trials and, at present, we cannot determine when clinical
         trials will resume. Accordingly, we cannot provide assurance that (1)
         we will be able to make the refinements necessary for us to resume
         clinical trials, (2) we will not experience further significant delays
         and/or expenses in completing development, conducting clinical trials
         or obtaining regulatory clearance for this product in the U.S. or other
         countries, (3) that clinical trials will be successful or produce data
         suitable for submission to the FDA, (4) that the TD Glucose Monitoring
         System will be able to obtain the necessary FDA marketing clearance
         pursuant to the diagnostic regulatory guidelines under Section 510(k)
         or Pre-Market Approval ("PMA") (see - Item 1. Business, Governmental
         Regulation), or (5) that there will not be products on the market that
         are technologically equal to or superior to the TD Glucose Monitoring
         System.

         Limited Comparison Study Data:

         In August 1998, the first algorithms (complex mathematical formulas)
         used to calibrate the TD Glucose Meter to the individual patient were
         developed and comparison study data were presented at the 1998 European
         Association for the Study of Diabetes conference in Barcelona, Spain.
         Subsequent data from a clinical study at the Washington University
         School of Medicine were presented at a Symposium at the American
         Diabetes

                                       7

<PAGE>

ITEM 1.  BUSINESS (Continued)

         Association annual meeting held in June 1999 and at the 17th
         International Diabetes Federation Congress in November 2000. In these
         studies the TD Glucose Monitoring System demonstrated a high degree of
         correlation with current finger stick technology.

         Marketing:

         We intend to pursue strategic partnerships with pharmaceutical and
         diagnostic companies for global and/or regional marketing and
         distribution rights for our TD Glucose Monitoring System. The typical
         structure of such licensing agreements in the pharmaceutical,
         biotechnology and medical technology environment is milestone driven
         whereby both parties define major and minor development events and an
         associated payment for achieving each threshold. Such agreements may
         also include provisions for royalty payments based on sales and
         transfer pricing of finished goods, among other terms and conditions.
         There can be no assurance that we will be successful in locating
         strategic partners or executing licensing agreements, or that the terms
         and conditions of such agreements will be favorable to us.

         Manufacturing:

         We intend to manufacture TD Glucose Meters and TD Glucose Patches and
         sell these finished goods to our strategic partner(s) for their
         distribution on a global and/or regional basis, respectively. However,
         the potential also exists that any strategic partner(s) may elect to
         directly or indirectly control manufacturing of the TD Glucose Meters
         and/or TD Glucose Patches. With respect to self-manufacturing, we have
         undertaken the following:

         -    During 1998, we established Technical Electronics Corporation, a
              joint venture company 80% owned by us, to manufacture certain of
              our electronic devices. Through an affiliate of this joint venture
              partner, we have access to manufacturing capabilities in China.

         -    During 1999, we commenced the engineering phase of the
              manufacturing scale-up process to commercially produce TD Glucose
              patches. These activities are ongoing and include the design of
              high-speed, state-of-the-art machinery to conduct the complex
              manufacture and automatic packaging of TD Glucose patches.

         Advancement of the manufacturing scale-up process by us or our future
         strategic partner(s) is contingent upon our success related to current
         and future refinements to the TD Glucose Monitoring System,
         establishment of a strategic partnership(s), and any clinical and/or
         regulatory requirements associated with the TD Glucose Monitoring
         System, and our ability to successfully fund development of this
         product. In addition, there can be no assurance that the engineering or
         manufacturing scale-up process for the TD Glucose Patches and/or TD
         Glucose Meters will be successful or that finished products will be
         produced in sufficient quality or quantity, or on a timely or
         cost-effective basis.

2.       Cholesterol Home Screening Tests

         The Products:

         We have developed cholesterol screening tests for at-home use by
         consumers to determine their total cholesterol and HDL (good)
         cholesterol levels using samples of whole blood obtained by the finger
         stick method. These products are presently being marketed by
         independent distributors in several international countries utilizing a
         prior version of these tests. For the U.S. and other overseas markets,
         we have developed home cholesterol screening tests that will utilize
         our new visually read test strips for Total cholesterol and HDL
         cholesterol and incorporate our revised results color chart.

                                       8

<PAGE>


ITEM 1.  BUSINESS (Continued)

         The test strips use membrane-based technology designed to produce an
         end-point color reaction in the membrane in proportion to the amount of
         total or HDL cholesterol present in the blood sample. A color chart
         included with each kit is then used to check results. Upon the
         successful completion of clinical trials and receipt of regulatory
         approval, we anticipate these products will be available for sale on an
         OTC basis under our HealthCheck brand and/or private label programs.

         To perform these OTC screening tests, a lancet is used to prick the
         fingertip and apply a drop of blood to the test strip. After three (3)
         minutes, the user visually matches the blue-green color appearing on
         the reverse side of the strip with the best corresponding color block
         printed on a color chart provided with the test kit. Each color block
         is associated with a numerical value that corresponds to a unique range
         of total cholesterol or HDL cholesterol concentrations. Interpretation
         of the test strip color with the best corresponding color block will be
         conducted according to National Cholesterol Education Program ("NCEP")
         guidelines. Based on current NCEP guidelines, test results (in mg/dL
         units) are divided into the following diagnostic categories:

                  Total Cholesterol            HDL Cholesterol
                  -----------------            ---------------
                  Desirable:  Less Than 200    Desirable: Greater Than 35
                  Borderline:  200-240
                  High:  Greater Than 240

         Clinical/Regulatory Status:

         For our new U.S. format OTC total cholesterol home screening test, we
         have completed modification of the results color-chart and pre-clinical
         trials, and are moving ahead to perform pivotal clinical trials to
         collect the data necessary for a 510(k) submission to the FDA seeking
         OTC marketing clearance. Previously, we submitted a prior version of
         this product to the FDA and reported in March 2000 that it did not
         obtain OTC marketing clearance. We have retained the services of an
         independent consultant to assist us through the clinical trial and FDA
         submission process for this product. Upon completion of the required
         clinical work, we plan to file a submission to the FDA. Such clinical
         trials will conform to the FDA Guidance for 510(k)s on Cholesterol
         Tests and, based on the results, we anticipate requesting clearance to
         market this product as a home screening test. There can be no assurance
         that clinical trials for our OTC total cholesterol home screening test
         will be successful or produce data suitable for a 510(k) submission to
         the FDA, or that this product will receive marketing clearance on a
         timely basis, or at all.

         Marketing:

         Upon receipt of FDA marketing clearance, we expect these OTC screening
         test kits will be sold in pharmacies under our HealthCheck brand in the
         U.S. and internationally as well as under private label and OEM
         programs. We also intend to sell these products online directly to
         consumers over our Web site. We anticipate these products will be
         available in Total cholesterol, HDL cholesterol, and combination
         package formats with supplies for two screening tests.

         About Cholesterol And Cholesterol Monitoring:

         In response to evidence linking high total cholesterol levels to heart
         disease, the National Institutes of Health ("NIH") launched the
         National Cholesterol Education Program ("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.

                                       9

<PAGE>

ITEM 1.  BUSINESS (Continued)

         According to industry research conducted by Frost and Sullivan, the
         U.S. market for all cholesterol testing is approximately $250 million
         per year. Coronary Artery Disease ("CAD") is still the number one cause
         of death in the U.S. The disease is typically asymptomatic with the
         first indicator being a heart attack. Routine cholesterol screening can
         identify individuals at risk.

         Cholesterol and lipoprotein tests are generally performed in the
         laboratory using blood samples taken from patients in a hospital or on
         an outpatient basis in a doctor's office. Most testing uses highly
         automated equipment and enzymatic chemistry. The main disadvantage of
         these systems is the lack of immediate results. We believe home testing
         for cholesterol is currently in the introductory stage of market
         development. There are currently several OTC total cholesterol home
         screening tests on the market that have higher acquisition costs or
         require longer times to obtain results than our products. Based on the
         technology employed by our products and that we are the manufacturer of
         these products, we believe our OTC cholesterol home screening tests
         will offer us certain competitive advantages. There can be no assurance
         that upon completion of clinical trials and receipt of marketing
         clearance for our OTC home cholesterol screening tests there will not
         be products on the market that are technologically equal to or superior
         than our products, that we can competitively price our products or be
         able to capture any portion of the home cholesterol screening market.

3.  MicroGlucose(TM) Glucose Monitoring System

         The Product:

         We are developing a monitoring system for at-home and professional use
         by diabetic patients to determine their glucose level using a sample of
         whole blood obtained by the finger stick method. Our MicroGlucose(TM)
         system is a quantitative device that utilizes an electronic meter and
         test strips for the analytical measurement of glucose. Our MicroGlucose
         meter is approximately a palm-sized optical reflectance meter that is
         used in conjunction with our test strips that are specific to the
         glucose analyte. The test strips use membrane-based technology designed
         to produce an end-point color reaction that is proportional to the
         amount glucose present in the whole blood sample.

         To perform a glucose test using the MicroGlucose system, the diabetic
         inserts the test strip into the meter, uses a lancet to prick their
         fingertip and applies a drop of whole blood to the test strip. The
         meter will automatically display the test result. We anticipate that
         the amount of whole blood required to produce a test result, the amount
         of time each reading will take to display, and the amount of memory to
         store prior glucose determinations for the MicroGlucose system will be
         competitive with currently available blood glucose meters.

         Clinical/Regulatory Status:

         Our MicroGlucose system is currently in the development phase.
         Successful development, clinical evaluation and regulatory approval
         would be required before our MicroGlucose system can be commercially
         manufactured and marketed. There can be no assurance that development
         of our MicroGlucose system will be completed on a timely basis, or at
         all, or that clinical trials for our MicroGlucose system will be
         successful or produce data suitable for a 510(k) submission to the FDA,
         or that this product will receive marketing clearance on a timely
         basis, or at all.

         Marketing:

         We intend to manufacture the test strips for our MicroGlucose
         monitoring system and anticipate entering into a strategic
         partnership(s) for distribution and marketing of these finished goods
         on a global and/or regional basis. The potential also exists for us to
         directly market our MicroGlucose system on a branded, private label or
         OEM basis. There can be no assurance that we will be successful in our
         manufacturing efforts or in locating strategic partners or executing
         licensing agreements, or that the terms and conditions of such
         agreements will be favorable to us. Further, there can be no assurance
         that there will not be products on the market that are technologically
         equal to or superior to the MicroGlucose system.

                                       10

<PAGE>

ITEM 1.  BUSINESS (Continued)

4.  HealthCheck(R)And Private Label Home Diagnostic Products

         We manufacture and market our proprietary HealthCheck brand of at-home
         medical diagnostic testing and screening products to chain drug stores
         and community pharmacies, supermarkets and mass merchandise retail
         stores and drug wholesale distributors in the U.S. and internationally.
         We also market these products online through our Web site at
         www.health-check.com. In addition, we market our family planning
         pregnancy and ovulation testing products, as well as certain of our
         home screening tests, on a private label basis to approximately 14
         chain drug stores and community pharmacies, supermarkets, mass
         merchandise retail stores and drug wholesale distributors in the U.S.
         and Canada.

         Our HealthCheck product line consists of home testing kits for
         pregnancy and ovulation; home screening tests for diabetes, urinary
         tract infection, kidney and bladder disease, and cholesterol;
         monitoring kits for skin cancer and deteriorating vision; and a series
         of health journals for use by consumers.

         Our HealthCheck products are presently being sold at approximately
         26,000 chain drug stores and community pharmacies, supermarkets and
         mass merchandise retail stores and drug wholesale distributors in the
         U.S. and Canada. In addition, international sales and/or product
         registration are being conducted in foreign countries under the
         direction of independent distributors responsible for such activities.

         Marketing:

         Our current strategy for the HealthCheck brand includes ongoing
         domestic expansion through greater penetration of the retail pharmacy,
         supermarket, mass merchandise and drug wholesale distribution channels
         as well as establishing international distribution for our home testing
         products that offer cost-effective pricing to the consumer.

         We believe that simple-to-use products with the ability to perform
         accurate, quantitative tests without an instrument will continue to
         create new market opportunities for home health screening and
         monitoring. One of our strategies for competing in this market is to
         produce improvements over existing at-home and other point-of-care
         testing products, where possible. According to industry studies, growth
         in the at home diagnostic testing market is being experienced as health
         care providers and third party payers recognize that regular diagnostic
         testing can result in earlier detection of medical conditions and
         diseases, more accurate diagnosis and more effective treatment as
         individuals become more involved with their own health. In addition,
         home testing for a variety of health conditions is becoming
         increasingly accepted and understood by consumers much like home
         pregnancy testing was 10 to 15 years ago. There can be no assurance
         that we will be successful in our manufacturing or marketing efforts
         related to our home diagnostic testing and screening products in the
         U.S or international markets. Further, there can be no assurance that
         there will not be products on the market that are technologically equal
         to or superior to our home diagnostic testing and screening products.

5.  Cholesterol Monitoring System For Professional Use

         The Product:

         We are developing analytical monitoring products for professional use
         in doctors' offices, clinics, and other healthcare settings to rapidly
         determine total and HDL (good) cholesterol and glucose levels using
         samples of whole blood obtained by the finger stick method. Our new
         TriMeter(TM) system is a quantitative device that utilizes an
         electronic meter and test strips for analytical measurement of Total
         cholesterol, HDL cholesterol and glucose. We may also consider
         developing a smaller version of the TriMeter system for patients to use
         at home on a prescription basis. In addition, healthcare professionals
         will also have the option of using our visually read cholesterol tests
         for initial screening.

                                       11

<PAGE>


ITEM 1.  BUSINESS (Continued)

         Our TriMeter system is expected to be approximately a palm-sized
         optical reflectance meter that will be used in conjunction with test
         strips that are specific to each of the analytes. The test strips will
         use membrane-based technology designed to produce an end-point color
         reaction in the membrane in proportion to the amount of Total
         cholesterol, HDL cholesterol or glucose present in the respective blood
         sample.

         To perform these monitoring tests using the TriMeter, the operator will
         insert the desired test strip into the meter and select the
         corresponding test from the TriMeter test menu, use a lancet to prick
         the fingertip of the patient and apply a drop of whole blood to the
         test strip. Within approximately 1 to 3 minutes, the meter will
         automatically display the test result as expressed in mg/dL
         concentration units. Only one test can be performed at a time. The
         meter is expected to have on-board data storage capabilities and
         require only one daily calibration using the color calibration strips
         provided.

         Interpretation of the total and HDL cholesterol test strips will be
         conducted according to National Cholesterol Education Program ("NCEP")
         guidelines. Based on current NCEP guidelines, test results (in mg/dL
         units) are divided into the following diagnostic categories:

                  Total Cholesterol               HDL Cholesterol
                  -----------------               ---------------

                  Desirable:  Less Than 200       Desirable:  Greater Than 35
                  Borderline:  200-240
                  High:  Greater Than 240

         Interpretation of the glucose test strip will be conducted according to
         the most recent guidance document issued by the FDA.

         Clinical/Regulatory Status:

         Upon successful development, clinical evaluation and regulatory
         approval would be required before our TriMeter system can be
         commercially manufactured and marketed. There can be no assurance that
         development of our TriMeter system will be completed on a timely basis,
         or at all, or that clinical trials for our TriMeter system will be
         successful or produce data suitable for a 510(k) submission to the FDA,
         or that this product will receive marketing clearance on a timely
         basis, or at all.

         Marketing:

         Our TriMeter monitoring system is designed to provide a quantitative
         digital readout of the total and HDL cholesterol and glucose value. We
         believe that the TriMeter system may overcome the disadvantages of
         laboratory testing by offering the healthcare provider and patient a
         quick and easy-to-use method of testing for cholesterol and/or glucose
         in the physician's office, clinic, pharmacy or other location. With a
         real-time result, the healthcare provider is able to counsel the
         patient and begin immediate treatment, eliminating the need for a
         follow-up visit. Such disadvantages of laboratory testing include the
         costs and delays associated with utilizing laboratories, including
         those associated with specimen collection, preservation,
         transportation, processing and reporting results.

         We intend to manufacture the TriMeter device and related test strips
         monitoring system and anticipate entering into a strategic
         partnership(s) for distribution and marketing of these finished goods
         on a global and/or regional basis, respectively. However, the potential
         also exists that our strategic partner(s) may elect to directly or
         indirectly control manufacturing of the TriMeter. The potential also
         exists for us to directly market the TriMeter on a branded, private
         label or OEM basis. There can be no assurance that we will be
         successful in our manufacturing efforts or in locating strategic
         partners or executing licensing agreements, or that the terms and
         conditions of such agreements will be favorable to us. Further, there
         can be no assurance that there will not be products on the market that
         are technologically equal to or superior to the TriMeter.

                                       12

<PAGE>

ITEM 1.  BUSINESS (Continued)

Biochemical Manufacturing

         We also currently manufacture the specialty chemical Tris and its
analogs, a biological buffer having numerous applications in the manufacturing
of pharmaceutical, cosmetic, diagnostic and other products. Although we are
capable of manufacturing other biochemical products, we do not intend to broaden
our product line at this time. We do, however, intend to continue manufacturing
and selling Tris.

Product Research and Development

         Our diagnostic products are in various stages of commercialization and
include products that are already on the market and from time to time in
development, clinical evaluation and regulatory review seeking marketing
clearance. We conduct research and development ("R&D") to attempt to strengthen
and broaden our existing products, develop specific applications related to our
present technology, and develop new products and systems. Our development
strategy includes the identification of diagnostic products and systems that are
expected to be needed by a significant number of potential customers, and to
allocate a greater share of our R&D resources to areas with the highest
potential for commercial success. The total amount spent for R&D activities is
identified in the statement of operations in the accompanying consolidated
financial statements.

         Our transdermal and dermal drug delivery technologies are presently in
the pre-clinical stage of development. We anticipate that advancement of any or
all of these technologies will occur only with third party involvement to fund
final product development, conduct clinical testing and obtain regulatory
approvals, manufacture, and market the product(s); or license or divest the
technology or related patents. We closed our transdermal and dermal research and
development facility in California in June 1999 and ceased operations of
internal and customer-sponsored research and development projects. Contract
revenue for such customer-sponsored R&D projects was $0, $147,000, and $151,000
for the years ended December 31, 2000, 1999, and 1998, respectively.

Further, due to our limited resources, we may be unable to complete the
development of all of our planned products and may only be able to complete the
development of those products that we believe have the greatest potential for
commercial success. There can be no assurance; however, that the products
selected for development by us or that have received regulatory approval and are
introduced into the market will, in fact, achieve any degree of commercial
success.

Manufacturing and Materials

         During 2000, we consolidated a portion of our manufacturing and
warehouse facilities as well as general office space to reduce costs and achieve
greater operating efficiency. Our products use materials and components that are
manufactured in-house and obtained from outside suppliers where such combination
varies from product to product. Our diagnostic testing products incorporate
membrane-based technology that serves as a platform upon which the chemical
treatment and processing is modified to accommodate the test specifications and
medical indication of the finished product. We anticipate devoting a major
portion of our manufacturing capabilities to the production of new products.

We are subject to the problems facing product manufacturers generally,
including, without limitation, delays in receiving raw materials, rising prices
for materials and the need to obtain and maintain equipment and avoid down time
resulting from equipment failures. To be successful, we must manufacture our
products in commercial quantities in compliance with regulatory requirements and
at acceptable costs. Production of these products, especially in commercial
quantities, will create technical and financial challenges for us and we cannot
assure you that manufacturing or quality control problems will not arise.

                                       13

<PAGE>

ITEM 1.  BUSINESS (Continued)

Patents, Trademarks and Technologies

         We hold 26 U.S. and foreign patents, and have 61 domestic and foreign
patent applications pending. We are presently seeking, and intend to continue to
seek, patent protection where appropriate for our technology. However, if we are
unable to secure adequate patent protection for our technologies, then we may
not be able to compete effectively. With respect to such patents, we cannot
assure you:

       -      as to the degree or adequacy of protection any patents or patent
              applications may or will afford;

       -      that our competitors will not independently develop or patent
              technologies that are substantially equivalent or superior to our
              technology;

       -      that existing patent applications will mature into issued patents,
              or that the claims allowed under any patents will be sufficiently
              broad to protect our technology; or

       -      that any patents issued to us will provide us 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 our ability to conduct our business.

       -      In addition, we rely on a combination of proprietary rights in
              various unpatented technologies, know-how, trade secrets,
              trademarks and employee and third-party nondisclosure agreements
              to protect our proprietary rights. The steps taken to protect our
              rights may not be adequate to prevent misappropriation of our
              technology or to preclude competitors from developing products
              with features similar to our products.

         We require our 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 us. Such
agreements generally provide that all inventions, ideas and improvements made or
conceived by the individual arising out of their employment or consulting
relationship with us shall be our exclusive property, and that all related
information shall be kept confidential and not disclosed to third parties,
except upon our consent or in other specified circumstances. There can be no
assurance that these agreements will provide effective protection for our
proprietary information in the event of unauthorized use or disclosure of such
information.

         Our success will depend, in part, on our ability to protect, obtain or
license patents, protect trade secrets and operate without infringing the
proprietary rights of others (see - Item 3. Legal Proceedings.) There can be no
assurance that existing patent applications will mature into issued patents,
that we will be able to obtain additional licenses to patents of others, or that
we will be able to develop our own patentable technologies. Further, there can
be no assurance that any patents issued to us will provide competitive
advantages or that the ownership or validity of such patents 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 our ability to conduct our
business. In addition, there is no assurance that our current patents or any
patents issued in the future will prevent other companies from independently
developing similar or functionally equivalent products.

         A family limited partnership controlled by our former Chairman is the
legal owner of three patents that we have licensed. We are presently in
litigation with our former Chairman who is seeking to rescind the license
agreement for technology and for other matters. He has filed suit against us,
our directors, and our general counsel alleging that we breached fiduciary
duties to him in connection with his ceasing to be employed by us as an employee
and officer, and that we breached a letter of intent regarding his termination
of employment. He is also seeking to rescind the license agreement he signed
pursuant to which he licensed patents to us. Further, he has asserted that the
license agreement includes our TD Glucose technology. An unfavorable outcome of
this litigation would have a material adverse impact on us, including possibly
our inability to sell our TD Glucose Monitoring System if its development is
completed successfully. We are vigorously defending this lawsuit and believe it
is without merit (see - Item 3. Legal Proceedings.)

                                       14

<PAGE>

ITEM 1.  BUSINESS (Continued)

         In addition, since 1994, we and six other parties have been involved in
a patent opposition action in the European Patent Office in Munich, Germany,
against European Patent No. 291,194 (the "European Patent") presently owned by
Unilever N.V. Collectively, the parties opposed the patent in its entirety on
the grounds that it lacked novelty and inventiveness. While numerous proceedings
have transpired to date, this matter is presently unresolved. A majority of our
sales in Europe relate to products covered by the patents that are the subject
of various pending legal actions. Consequently, a loss in this litigation may
have a material adverse effect on our results of operations and financial
condition (see - Item 3. Legal Proceedings.)

         The following represents our registered trademarks:
<TABLE>
<CAPTION>
<S>                                                        <C>             <C>

        CholestoCheck(R)                                                   One Step Drug Scan(TM)
        hCG Pregnancy One Step(R)                                          TD Glucose(TM)
        HealthCheck(R)                                                     One Step-One Minute Pregnancy Test(TM)
        Health Test Center(R)                                              One Step H. pylori Screen(TM)
        Pregnancy One Step(R)                                              One Step Strep A Screen(TM)
        Pregnancy One Step Test Strip(R)                                   One Step Strep B Screen(TM)
        One Step Fecal Occult Blood Test(R)                                RapidTest HIV(TM)
        One Step LH Test Strip(R)                                          RapidTest Chlamydia Screen(TM)
        One Step HDL Cholesterol Test Strip(R)                             RapidTest HBsAg Screen(TM)
        One Step Whole Blood Cholesterol Test Strip(R)                     Sani Sal(TM)
        One Step Drugs of Abuse Test Strip - Cocaine(R)                    ScanGuard(TM)
        One Step Drugs of Abuse Test Strip - Opiate(R)                     SR-38(TM)
        One Step Drugs of Abuse Test Strip - Amphetamine(TM)               We're Bringing Healthcare Home(TM)
        One Step Drugs of Abuse Test Strip - Benzodiazepine(TM)            TriMeter(TM)
        One Step Drugs of Abuse Test Strip - Barbiturate(TM)
        One Step Drugs of Abuse Test Strip - Cannabinoids (THC) (TM)
        One Step Drugs of Abuse Test Strip - Methadone(TM)
        One Step Drugs of Abuse Test Strip - Methamphetamine(TM)
        One Step Drugs of Abuse Test Strip - Phencyclidine (PCP) (TM)
</TABLE>

Competition

         A large number of companies develop and commercialize products
incorporating diagnostic and drug delivery systems. Competitors include major
pharmaceutical, medical diagnostic and chemical companies, many of which have
considerably greater financial, technical, clinical and marketing strength than
us. These companies may improve existing products more efficiently than us or
may design and develop new diagnostic and transdermal drug delivery products
that the marketplace accepts more than our products, our products under
development or our technologies. Further, the markets in which we compete and
intend to compete are undergoing, and we expect to continue to undergo, rapid
and significant technological change. We expect competition to intensify as
technological advances in these fields are made.

         Several of our competitors have developed or may develop products that
are similar in design and capability to our existing products or products under
development. We further anticipate that our competitors will develop and market
additional products for similar applications. Our transdermal technology is
competitive with drugs marketed not only in similar drug delivery systems, but
also in traditional dosage forms such as oral administration, bolus injection
and continuous infusion. New drugs, new therapeutic approaches or future
developments in alternative drug delivery technologies, such as time-release
capsules, liposomes and implants, may provide therapeutic or cost advantages
over the drug delivery systems in our technology portfolio.

         We expect that our primary competitors in the glucose monitoring
industry will be companies that currently market "finger stick" method products,
where patients obtain their blood by sticking their finger with a lancet. These
companies have established products and distribution channels. In addition, a
number of companies are developing.

                                       15

<PAGE>

ITEM 1.  BUSINESS (Continued)

products using technology which is different than that under development by us,
but that are also intended to permit less painful or painless glucose
monitoring. These technologies include infrared spectroscopy, and a variety of
methods (including, in one case, transdermal technology) to extract interstitial
fluid and measure the glucose concentration in that fluid. In addition, a number
of companies have developed or are seeking to develop new drugs to treat
diabetes that could reduce demand for glucose monitoring systems. Further, many
of our competitors and potential competitors have substantially greater
resources, research and development staffs, capabilities and facilities than we
do for developing, manufacturing and marketing glucose monitoring devices.
Competition within the glucose monitoring industry could adversely affect our
business and also result in price reductions for glucose monitoring devices such
that we may not be able to sell the TD Glucose Monitoring System at a price
level adequate for us to realize a return on our investment. We cannot assure
you that we will have the resources, technical expertise or marketing,
distribution or support capabilities to compete successfully in the future or
that we will successfully develop technologies and products that are more
effective or affordable than those being developed by our competitors. Further,
we cannot assure you that developments by our competitors will not be more
accepted in the marketplace than our products, including the TD Glucose
Monitoring System, or will not render our products or technologies obsolete or
noncompetitive. In addition, our competitors may achieve patent protection,
regulatory approval or commercialization earlier than us and gain competitive
advantages relative to us.

Employees

         At present, we have 45 full-time employees involved in research and
development, administration, operations, and marketing and sales. This amount
compares to 49 full-time employees involved in these functional areas a year
ago. We also hire part-time employees to temporarily expand our capabilities for
larger assembly and packaging projects. We have no collective bargaining or
similar agreement with our employees. We have employment agreements with our
President and Chief Executive Officer; our Vice President of Finance and Chief
Financial Officer; our Vice President and General Counsel; and our Vice
President of Sales and Marketing. Although we do not anticipate any difficulty
in locating and engaging employees to meet our plans, there can be no assurance
that we will be successful in doing so.

Governmental Regulation

         The development, manufacture and marketing of medical diagnostic
products and drug delivery systems 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 our products. Sales
of our products outside the United States are subject to regulatory requirements
that vary 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 may 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 may be made 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 is 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: (1) preclinical studies;
(2) clinical trials in compliance with testing protocols approved by an
Institutional Review Board ("IRB") for the participating research institution;
(3) data from clinical trials sufficient to establish safety and effectiveness
of the device for its intended use; (4) submission to the FDA of an application
that contains, among other things, the results of clinical trials, a full
description of the product

                                       16

<PAGE>

ITEM 1.  BUSINESS (Continued)

and its components, a full description of the methods, facilities and controls
used for manufacturing and proposed labeling; and (5) 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 PMA approval must operate
using CGMP.

         A device requiring a PMA that has not been cleared for marketing in the
United States, or one that is not substantially equivalent to a currently
marketed device, may be exported to a foreign country for sale, subject to the
laws of such foreign jurisdictions and obtaining from the FDA the appropriate
export certificates: (a) Certificate To Foreign Government, commonly known as
Certificates of Free Sale and Certificates of Export, and/or (b) Certificates of
Exportability.

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: (1) preclinical laboratory and animal tests; (2) the filing of an
Investigational New Drug Application ("IND") with the FDA requesting
authorization to conduct clinical trials; (3) adequate and well-controlled human
clinical trials to establish the safety and efficacy of the drug for its
intended use; (4) submission to the FDA of a New Drug Application ("NDA"); and
(5) 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 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 assurance, however,
that any of our transdermal or dermal drug delivery technologies would 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 audits. Finally, in order to export unapproved drug products from the
United States for commercial or clinical use, prior FDA export clearance is
required.

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

         There can be no assurance that problems will not arise that could delay
or prevent FDA clearance or approval of, or the commercialization of our
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. In the event we receive the necessary regulatory approvals, there
can be no assurance that unforeseen problems will not occur in product
manufacturing and commercial scale-up or marketing or product distribution,
which could significantly delay the commercialization of such products, or
prevent market introduction entirely.

                                       17

<PAGE>

ITEM 1.  BUSINESS (Continued)

Product Liability Insurance

         Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing, marketing and sale of medical diagnostic
and drug delivery products. Although we carry 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 us.

ITEM 2.  PROPERTIES

         We currently lease approximately 33,000 square feet of space for our
corporate headquarters, general office, research and development, manufacturing,
and warehouse facilities in a building located at 3333 S.W. 15th Street, Pompano
Beach, Florida 33069. The present lease expires in 2003 and we currently pay
approximately $28,000 per month in rent, including sales tax and maintenance
fees. The rent is adjusted annually based upon changes in the U.S. Consumer
Price Index. The lease also requires us to pay real estate taxes, insurance and
certain costs for maintaining the premises. We believe that suitable premises
are readily available on acceptable terms should the present premises become
unavailable for any reason.

ITEM 3.  LEGAL PROCEEDINGS

         We are subject to claims and suits arising in the ordinary course of
business. At this time, except as otherwise indicated, it is not possible to
estimate the final outcome of these legal matters or the ultimate loss or gain
except as otherwise stated, if any, related to these lawsuits, or if any such
loss will have a material adverse effect on our results of operations or
financial position, except as otherwise stated. For the year ended December 31,
2000 our litigation expenses decreased by 13% from the prior year. Despite this
improvement, we incurred significant litigation expenses in 2000 and 1999 that
resulted in a substantial consumption of our cash reserves.

         Settlement Of Litigation With The Americare Companies And Joseph P.
D'Angelo. On February 5, 2001, we settled a patent infringement lawsuit related
to our noninvasive TD Glucose Monitoring System as well as all other litigation
between us and Americare Health Scan, Inc., its subsidiaries, affiliates and Dr.
Joseph P. D'Angelo. The parties agreed to dismiss the various lawsuits and
related counterclaims and have entered into mutual releases of all claims
relating to the respective legal matters. Further, none of the parties admits
any wrongdoing related to claims in the various lawsuits and associated
counterclaims. In connection with this settlement and a judgement previously
entered pursuant to this litigation, we recorded litigation expense in the
amount of $500,000 of which $112,000 remains unpaid and is accrued in the
financial statements as of December 31, 2000. The settlement relates to the
following cases: Americare Diagnostics, Inc., et al. v. Technical Chemicals and
Products, Inc., et al., 97-3654-CIV-HUCK (S.D. Fla.); Joseph P. D'Angelo, et al.
v. Technical Chemicals and Products, Inc., Case No. 95-011256(09); Americare
Health Scan, Inc., et al. v. Technical Chemicals and Products, Inc., et al.,
Case No. 99-010726 CACE 18); Technical Chemicals and Products, Inc., et al. v.
Joseph P. D'Angelo, et al., Case No. 99-1862-CIV-HUCK (S.D. Fla.) and Technical
Chemicals and Products, Inc., et al. v. Joseph P. D'Angelo, et al., Case No.
00-12159 CACE 08.

         Dismissal Of Shareholder Class Action. During November 1998 through
January 1999, several lawsuits were filed in the United States District Court
for the Southern District of Florida - Case No. 98-7334-CIV-DIMITROULEAS -
against us and our former Chairman on behalf of various shareholders alleging
violations of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule
10b-5 promulgated thereunder. In general, plaintiffs allege that we and our
former Chairman made untrue and misleading statements in our public disclosure
documents and in certain press releases, articles and reports. The disclosures
relate primarily to the development, clinical testing and viability of our TD
Glucose Monitoring System. The plaintiffs sought certification as a class on an
unspecified amount of damages, interest, costs and attorneys' fees. On April 19,
1999, an Amended Consolidated Class Action Complaint was served upon us. On June
18, 1999, we filed a motion to dismiss the Amended Consolidated Class Action
Complaint. On July 3, 2000, the court dismissed all claims against us and our
former Chairman, but granted plaintiffs leave to amend their complaint on or
before July 24, 2000. On July 24, 2000, plaintiffs filed a second amended
complaint.

                                       18

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS (Continued)

On August 25, 2000, we filed a motion to dismiss the second amended complaint.
On March 20, 2001, the Court issued a Final Order of Dismissal, dismissing with
prejudice the second amended complaint. The Plaintiffs have until April 3, 2001
to seek reconsideration of the Dismissal Order or until April 19, 2001 to appeal
the Dismissal Order to the Eleventh Circuit Court of Appeal. We believe the
allegations lack merit and plan to vigorously contest any motion for
reconsideration or an appeal. At this time, we cannot reasonably estimate the
ultimate loss, if any, related to these claims and therefore we have not
recorded an accrual for loss as of December 31, 2000.

         We maintain Directors and Officer's Liability Insurance. However, we
cannot assure you that this insurance coverage will be adequate to fund the
costs of a settlement, an award, if any, or attorneys' fees. Demands have been
made upon us that far exceed the amount of this coverage. Our articles of
incorporation provide for indemnification, to the fullest extent permitted by
law, of any person made party to an action by reason of the fact that such
person is an officer and/or director of us.

         Home Diagnostics Litigation. In November 1993, we and our former
Chairman filed suit against Home Diagnostics, Inc. ("HDI"), for patent
infringement, among other claims, in the United States District Court for the
Southern District of Florida - Case No. 93-CIV-6999-DAVIS. The patents-in-suit
are U.S. Patent Nos. 4,744,192 (the "'192 Patent") and 4,877,580 (the "'580
Patent").

         On September 3, 1996, the court entered judgment against us and our
former Chairman after a bench trial that was held in September 1995. On April 9,
1998, the U.S. Court of Appeals for the Federal Circuit affirmed in part and
reversed in part the lower court's decision and remanded the case to the
district court for further proceedings, including for a determination whether
our former Chairman owned the patents-in-suit at the time we commenced the
action and whether HDI infringed the '192 Patent. The appellate court found
infringement of the '580 Patent and remanded to the district court for a
determination whether the '580 Patent was within the scope of certain licensing
agreements between TechniMed Corporation, a prior assignee of the
patents-in-suit, and HDI.

         On remand, the district court denied a request by us and our former
Chairman to reopen the trial record and directed the parties to submit, based on
the existing record, proposed findings of fact and conclusions of law on the
issues that were remanded. The parties submitted proposed findings of fact and
conclusions of law, and on March 20, 2000, the court heard argument by the
parties' counsel on certain issues on remand. On May 1, 2000, the court issued
certain findings of fact and conclusions of law, finding that (i) our former
Chairman owned the patents-in-suit at the time the suit was commenced, and (ii)
HDI did not infringe the '192 patent. We are awaiting a ruling on the remaining
issues on remand, in particular, those relating to the '580 patent.

         Hooper Litigation. On August 27, 1999, the U.S. District Court for the
Northern District of California - Case No. C-97-00525CAL - confirmed an
arbitration award against us in favor of Hooper & Associates, Inc. for $197,807.
Gary Hooper was the president and chief operating officer of Pharma Patch, PLC.
We acquired certain assets of Pharma Patch, PLC in November 1995. The
arbitration award found that Mr. Hooper was entitled to that amount under an
employment agreement between Mr. Hooper and Pharma Patch, PLC. At this time, a
bond has been posted in this matter to stay enforcement of the judgment which
Hooper & Associates is seeking to enforce in Florida (Technical Chemicals and
Products, Inc. v. Hooper & Associates, Broward County Circuit Court - Case No.
019847.)

     We have filed a suit against Mr. Hooper in the United States District Court
for the Southern District of Florida - Case No. 99-7452 CIV-MOORE, which claims
that Mr. Hooper perpetrated a fraud on us by making fraudulent representations
to us in connection with our acquisition of certain assets of the co-defendants
Pharma Patch, PLC and PP Holdings, LTD. As a result, enforcement of the
arbitration award has been stayed by a Florida court. On July 5, 2000, the state
court continued the stay of enforcement of the award during the pendency of our
claims against Mr. Hooper and Hooper & Associates, Inc. in the federal action.
We recorded an accrual for loss equal in the amount of $197,807 as of December
31, 2000. On March 7, 2001, Hooper & Associates filed a motion to dismiss our
complaint. We are preparing our response to this motion.

                                       19

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS (Continued)

         Judgment In Hazardous Waste Lawsuit. On January 31, 2000, the United
States District Court for the Southern District of Florida - Case No.
98-6201-CIV - entered a judgment against us and our former Chairman, in
connection with a lawsuit brought by the United States of America on behalf of
the Environmental Protection Agency under the Comprehensive Environmental
Response Compensation and Liability Act of 1983, relating to the clean-up of a
facility that during 1985 through 1992 contained alleged hazardous substances.
We occupied this facility during part of 1992. The judgment holds the
defendants, jointly and severally, liable for $401,177, representing their share
of site clean-up costs, plus post-judgment interest as allowed by law. On
October 6, 2000, we reached a settlement with the United States in the amount of
$650,000 payable over a 21-month period beginning in October 2000 with the first
payment due within 30 days of the formal settlement agreement and quarterly
payments made thereafter on the balance plus interest at the rate of 5.3% per
year. Under the terms of this agreement, we made our first payment of $112,963
on October 13, 2000. Subsequently, we entered into a modification of our
Settlement Agreement with the United States whereby the second quarterly payment
will be due on April 16, 2001 and additional payments made quarterly thereafter.
Our amended and restated articles of incorporation provide for indemnification
under certain circumstances, to the fullest extent permitted by law, of persons
made party to an action by reason of the fact that such person is an officer
and/or director of us. We recorded an accrual for loss equal to $650,000 as of
March 31, 2000. We are seeking full contribution from our former Chairman for
the total amount of the judgment.

         On January 24, 2001, we filed a claim in the United States District
Court Southern District of Florida Case No. 01-6090-CIV - for full contribution
and declaratory judgment against our former Chairman. This action seeks to hold
our former Chairman fully liable for the judgment and subsequent settlement
entered into by us with the EPA in the amount of approximately $650,000 as
described above under the caption "Judgment in Hazardous Waste Lawsuit." We are
also seeking an order from the court of our nonliability to our former Chairman
for contribution or indemnity. We assert that our former Chairman is 100%
responsible for this judgment as it was his conduct prior to our incorporation
in January of 1992 that resulted in the judgment against us and our former
Chairman.

         Unilever Patent Litigation. In 1994, we and six other parties initiated
an opposition action in the European Patent Office in Munich, Germany, against
European Patent No. 291,194 (the "European Patent"), presently owned by Unilever
N.V. In European Opposition Case No. T0681/98, we and the other parties opposed
the patent in its entirety on the grounds that it lacked novelty and
inventiveness.

         In March 1998, the European Patent Office Opposition Board found in
favor of Unilever, and we and five of the other parties filed an appeal. Upon
substantial appellate oral proceedings held on January 26-27, 2000 and numerous
auxiliary requests, the Opposition Board maintained the European Patent, as
amended. However, this ruling is subject to adaptation of the specifications
contained in the amended patent and approval by the Opposition Board. Unilever
is presently awaiting invitation from the Opposition Board to submit its
proposed adaptations to the specification of the European Patent, after which we
and the other parties intend to vigorously contest such action.

         On January 26, 2000, we, Roche Diagnostics GmbH, a German company,
Roche Diagnostics S.p.A., an Italian company, and Hestia Pharma GmbH, a German
distributor wholly-owned by Roche Diagnostics, filed a declaratory judgment
action relating to Italy and Germany in the District Court of Torino, Italy. We
asked the court to find that (1) the European Patent granted to Unilever is
invalid, and (2) the EVATEST(R) product manufactured, distributed and sold by us
and the other plaintiffs do not infringe the European Patent (the "Italian
Action"). We supply the EVATEST(R) test devices to these Roche entities.

         On February 3, 2000, Unilever filed a patent infringement action in the
Administrative Court of Munich, Germany against Hestia Pharma GmbH and four of
its officers alleging infringement of the European Patent that is the subject of
the Italian Action. On April 27, 2000, Unilever amended its complaint to allege
infringement of European Patent Application No. 93108764.7. In this action,
Unilever has asked that Hestia Pharma GmbH refrain from commercializing, using,
importing or possessing analytical test devices that comprise features of
Unilever's patent claims.

                                       20

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS (Continued)

         On April 20, 2000, Unilever filed a patent infringement action in the
Administrative Court of Munich, Germany against us and Roche Diagnostics GmbH
(together with the February 3, 2000 action, the "German Actions") alleging
infringement of the patent involved in the Italian Action and European Patent
Application No. 93108764.7. In this action, Unilever has asked that we and Roche
Diagnostics GmbH refrain from offering, having offered, commercializing, having
commercialized, using, having used, importing, having imported or possessing
analytical test devices that fall under the claims of Unilever's patent and
patent application. We have until March 29, 2001 to file our answer with an oral
hearing scheduled for May 3, 2001.

         We have agreed to indemnify Roche Diagnostics and its affiliates and
their respective officers against all damages, back royalties, costs, attorneys'
fees and the like arising from or related to any and all patent infringement
actions. Management intends to vigorously prosecute our claims against the
Unilever patent in the Italian Action and vigorously defend the claims asserted
by Unilever in the German Actions. We have, as the supplier of these products,
previously provided the same indemnity to Roche Diagnostics. A majority of our
diagnostic sales in Europe relate to products covered by the patents that are
the subject of the Italian Action and the German Actions. Consequently, a loss
in this litigation may have a material adverse effect on our results of
operations and financial condition.

         Litigation With Former Chairman And Certain Family Limited
Partnerships. On September 12, 2000, our board of directors voted to terminate
the employment of Jack L. Aronowitz pursuant to the termination without cause
provision of his employment agreement dated September 27, 1996 ("Employment
Agreement"). Simultaneously, the board voted to remove Mr. Aronowitz as our
Chairman, President and Chief Technical Officer. On December 20, 2000, Mr.
Aronowitz resigned as a director of our Company. He presently owns or controls
less than 5% of our outstanding shares of common stock.

         On September 13, 2000, we and our former Chairman executed a letter of
intent that provided, among other things, that his signature on the letter of
intent was deemed his resignation and retirement as our Chairman, President, and
Chief Technical Officer. In addition, the letter of intent was subject to the
execution of a definitive agreement as to the terms and conditions of our former
Chairman's separation from us, which was to be signed by no later than September
20, 2000. No such definitive agreement was entered into by September 20, 2000.

         Subsequent to the execution of the letter of intent, our former
Chairman made certain demands on us that were beyond the scope of the letter of
intent; including a demand that payments be made to him related to our
noninvasive TD Glucose Monitoring System and other technology. We rejected these
demands.

         On October 19, 2000, we were served with a Summons and Complaint in an
action commenced by our former Chairman in the Circuit Court of the 17th
Judicial Circuit in and for Broward County, Florida - Case No. 00017365. The
named defendants are us, our directors (with the exclusion of our former
Chairman) and our general counsel. On November 13, 2000, our former Chairman
amended the complaint to assert claims for indemnification of certain litigation
in which he is named as a party. We believe the claims contained in this
complaint, as amended, are without merit and will vigorously defend ourselves in
this lawsuit. An unfavorable outcome of this litigation would have a material
adverse impact on us, including possible inability to sell our TD Glucose
Monitoring System. Our former Chairman is seeking unspecified damages. We are
preparing a response to the complaint.

         The 13 counts in Mr. Aronowitz' Complaint are (1) rescission of a
Cancellation and Exclusive License Agreement dated January 31, 1996 ("License
Agreement"), (2) breach of contract with respect to the Letter of Intent, (3)
anticipatory breach of contract with respect to the License Agreement and a
previous license agreement, (4) breach of the duty of good faith and fair
dealing, which Mr. Aronowitz claims is owed to him, with respect to the Letter
of Intent and the License Agreement (5) alleged fraud in the inducement in the
signing by Mr. Aronowitz of the Letter of Intent and License Agreement, (6)
fraud in the inducement against the individual directors and officer defendants
as in count 5, (7) promissory estoppel against the Company, (8) promissory
estoppel against the individual directors and officer defendants, (9) unjust
enrichment against the Company, (10) tortious interference with contract against
the individual directors and officer defendants, (11) breach of fiduciary duty
against the individual directors and officer defendants, (12) Florida Racketeer
Influenced and Corrupt Organizations Act count against the individual directors
and officer defendants and (13) common law conspiracy against the individual
directors and officer defendants.

                                       21

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS (Continued)

         On November 13, 2000, we commenced an action in the United States
District Court, Southern District of Florida - Case No. 00-7675-CIV - against a
family limited partnership which is the current licensor of the cancellation and
exclusive license agreement ("License Agreement") executed on January 31, 1996
by our former Chairman. Our former Chairman is a limited partner of one of the
defendants. The action includes our claims (1) for a declaratory judgment that
the licensor has no right, title or interest, in and to the technology of our TD
Glucose Monitoring System and any patents that mature from related patent
applications, and that the licensor has no rights to receive royalty payments on
the sale or license by us of such technology, and (2) that the License Agreement
terminates on the expiration dates of each of the licensed patents. In addition
to the above claims, we are seeking our attorneys' fees.

         On December 15, 2000, we commenced an action in the Superior Court of
the State of Delaware in and for New Castle County - against the Aronowitz
Delaware 2 Family Limited Partnership, a Delaware limited partnership and
successor to the maker of a negotiable promissory note dated August 28, 1998 in
the amount $750,000. Our former Chairman is a limited partner in the defendant
family partnership and the guarantor of the note. The action was commenced after
a scheduled payment on the loan was not made by the family limited partnership,
and the principal amount of the loan was accelerated. We are seeking the balance
due on the loan, approximately $628,000 as of March 1, 2001, together with
attorneys' fees. On March 1, 2001, we filed an action against our former
Chairman, individually, in the Circuit Court of the 17th Judicial Circuit in and
for Broward County, Florida, Case No. 01003764-04 on his personal obligation
guaranteeing the note. The net amount due our former Chairman under the
termination without cause provision of his Employment Agreement (after
deductions for taxes) as well as any other amounts due our former Chairman from
us are being applied periodically to the reduction of our former Chairman's
Guaranty obligation to us.

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

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




                                       22

<PAGE>

                                     PART II

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

         Since December 8, 2000, our Common Stock has been traded on the NASD
OTC Bulletin Board ("OTCBB") under the symbol TCPI. Our Common Stock was
previously listed on the Nasdaq National Market System under the symbol TCPI.
The following table sets forth the range of high and low sale prices for our
Common Stock for the periods indicated, as reported by Nasdaq and the OTCBB,
respectively.

                                                             Sale Prices
                                                       ----------------------
                                                       High               Low
                                                       ----               ---
           Fiscal Year 1999
          Quarter Ended March 31, 1999 .............  $ 2.250           $ 1.063
          Quarter Ended June 30, 1999 ..............  $ 1.438           $ 1.063
          Quarter Ended September 30, 1999 .........  $ 1.500           $ 0.719
          Quarter Ended December 31, 1999 ..........  $ 1.750           $ 0.281

          Fiscal Year 2000
          Quarter Ended March 31, 2000 .............  $ 4.063           $ 0.469
          Quarter Ended June 30, 2000 ..............  $ 1.438           $ 0.688
          Quarter Ended September 30, 2000 .........  $ 1.094           $ 0.500
          Quarter Ended December 31, 2000 ..........  $ 0.594           $ 0.035

          Fiscal Year 2001

          Quarter Ended March 31, 2001
            (to March 20, 2001)                       $ 0.170           $ 0.031

         At present, we have approximately 238 holders of record of our Common
Stock and estimate there are approximately 11,000 beneficial owners of our
Common Stock. We have not paid cash dividends in the past and do not intend to
pay cash dividends in the near future.

                                       23

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data should be read in conjunction
with the consolidated financial statements and the notes thereto included
elsewhere in this report. The statement of operations data for the years ended
December 31, 2000, 1999, and 1998, respectively, and the balance sheet data at
December 31, 2000 and 1999, respectively, are derived from the audited
consolidated financial statements included elsewhere in this report and should
be read in conjunction with those consolidated financial statements and the
notes thereto.


<TABLE>
<CAPTION>
Statement of Operations Data:

(Amounts in thousands, except share data)                                       YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------------------------------------
                                                          2000            1999            1998             1997         1996
                                                          ----            ----            ----             ----          ----
<S>                                                  <C>             <C>               <C>                <C>          <C>
Net sales ........................................   $      7,462    $      5,432      $    5,442         $ 6,194      $ 5,568
Gross profit .....................................          2,672           1,826           2,388           2,777        1,862
Research and development contract revenue ........            200             470             585             423        1,280
Operating expenses:
   Selling, general and administrative, including
       litigation expenses .......................          8,696          10,226           8,809           6,575        4,079
   Research and development ......................            802           1,724           2,787           2,726        1,767
   Depreciation and amortization .................          1,737           1,927           1,860           1,742        1,670
Loss from operations .............................         (8,363)        (11,581)        (10,483)         (7,843)      (4,374)
Loss before income taxes .........................         (8,974)        (11,199)         (9,827)         (7,126)      (4,053)
Income tax (expense) benefit .....................             --          (4,140)             --           2,637        1,503
Net loss .........................................         (8,974)        (15,339)         (9,827)         (4,489)      (2,550)
Accrued dividends and accretion to redemption
   value of redeemable convertible preferred stock           (177)         (2,917)         (1,030)             --           --
Net loss attributed to common stockholders .......         (9,151)        (18,256)        (10,857)         (4,489)     $(2,550)
Basic and diluted net loss per common share ......   $      (0.31)   $      (1.64)     $    (1.09)        $  (.45)     $  (.27)
Weighted average number of common shares
   outstanding ...................................     29,575,611      11,122,414       9,996,951       9,992,066    9,290,476

<CAPTION>

Balance Sheet Data:
(Amounts in thousands)
                                                                                      DECEMBER 31,
                                                     --------------------------------------------------------------------------
                                                          2000            1999            1998             1997          1996
                                                          ----            ----            ----             ----          ----
<S>                                                  <C>             <C>               <C>                <C>          <C>
Cash, cash equivalents and investments               $    481        $      3,987      $   10,255         $  7,337     $13,300
Total assets ....................................      20,855              23,588          36,369           33,597      37,526
Total current liabilities .......................       4,839               2,348             713            2,069       1,660
Working capital (deficit) .......................        (876)              6,010          14,743            9,401      15,348
Redeemable preferred stock ......................         639              12,457          13,131               --          --
Total common stockholders' equity ...............      13,728               7,971          22,356           31,358      35,694
</TABLE>

                                       24

<PAGE>

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

Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
---------------------------------------------------------------------

         For the year ended December 31, 2000, our operations experienced higher
product sales and lower losses than in the prior year. Our net sales for the
year ended December 31, 2000 rose by more than 37% while our net loss
attributable to common stockholders declined by 50% reflecting our first
year-over-year advancement in product sales since 1997 and reduction of our net
loss from the prior year since 1995.

         Our net sales for the year ended December 31, 2000 increased by 37% to
$7.5 million from $5.4 million a year earlier. This increase was achieved
primarily as a result of higher product sales of our patented SR-38 skin
permeation enhancer to LVMH-Moet Hennessy Louis Vuitton, Inc. under a multi-year
licensing agreement entered into during 1999. In addition, sales of our
specialty chemical biological buffers increased by approximately 29% while OTC
sales of our branded HealthCheck home testing and screening products held
constant from the prior year. These advances were offset by a decline in
international OEM sales and domestic private label sales of our OTC family
planning (pregnancy and ovulation) testing products, as well as lower sales of
professional-use drug of abuse, infectious disease and urine screening tests.
However, we experienced a reversal of a two-year down trend in sales through
these channels due to management's proactive efforts supporting its
international distributors. This caused the gap in sales to narrow substantially
starting in the second half of 2000. Sales were only 5% less in the third
quarter of 2000 than the same quarter a year earlier and were approximately 40%
greater in the fourth quarter of 2000 than the same quarter a year earlier.

         Our gross profit from product sales increased by 46.3% to $2.7 million
in 2000 as compared to $1.8 million in 1999. Our gross profit as a percent of
net sales rose to 36% in 2000 from 34% in 1999 due to substantially higher
product sales achieved and a change in product mix during the year ended
December 31, 2000.

         Our operating expenses for the year ended December 31, 2000 declined by
approximately 19% to $11.2 million as compared to $13.9 million in the prior
year. The mix of selling, general and administrative; litigation; and research
and development expenses are as follows:

    -   Our selling, general and administrative (SG&A) expenses declined nearly
        16% in 2000 to $6.3 million from SG&A expenses of $7.5 million incurred
        in 1999. Sales and marketing expenses were reduced by 42% through
        greater reliance upon distributors and tighter control of expenses. Net
        of accrued severance expense, ongoing company-wide cost reduction
        programs contributed a 10% drop in G&A expenses.

    -   Our litigation expenses for the year ended December 31, 2000 decreased
        by 13% to $2.3 million from $2.7 million incurred in the prior year.
        Litigation expense for the year 2000 is comprised of approximately $1.5
        million in legal fees and approximately $850,000 in settlement costs
        accrued as of December 31, 2000 related to the resolution of certain
        legal matters during the past year. Such settlement costs include an
        accrual of $500,000 associated with the recent settlement of all
        litigation between us and Americare Health Scan, Inc., its subsidiaries,
        affiliates and Dr. Joseph P. D'Angelo.

    -   During the past year, our research and development ("R&D") efforts
        focused primarily on the continued development of our TD Glucose
        monitoring technology as well as development of our cholesterol testing
        products and new MicroGlucose Meter and Test strips for OTC and
        professional use glucose monitoring. Our total R&D expenses declined to
        $802,000 in 2000 from $1.7 million recorded in 1999. This decrease
        reflects the closure of our California facility in mid-1999, which
        accounted for approximately $937,000 of the total expense in 1999. Net
        of this decrease, our R&D expenses for key products in development
        increased by 2% from a year ago.

                                       25

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Results of Operations (Continued)

         We did not have a provision for income taxes for the year ended
December 31, 2000 as compared to $4.1 million reflected a year earlier. The
provision for income taxes for the year ended December 31, 1999 was attributable
to providing a valuation allowance for our net deferred tax assets.

         Our net loss attributable to common stockholders for the year ended
December 31, 2000 was significantly reduced by 50% to $9.2 from a net loss
attributable to common stockholders of $18.3 million reported a year ago. This
improvement was due to a combination of lower operating expenses, an increase in
gross profit on higher product sales, absence of a provision for income taxes,
and substantially lower accrued dividends and accretion to redemption value
related to our 1998 funding that involved the issuance of redeemable convertible
preferred stock.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
---------------------------------------------------------------------

         Our net sales for both 1999 and 1998 were approximately $5.4 million.
During 1999, we experienced an increase in sales from our HealthCheck at-home
diagnostic testing and screening products of approximately $62,000, as well as
our SR-38 skin permeation enhancer under a licensing agreement with LVMH Moet
Hennessy Louis Vuitton, Inc., which was entered into during the year ended
December 31, 1999. In addition, we experienced an increase in sales of our
specialty chemical biological buffers of approximately $76,000. However, these
gains were offset by lower dollar volume of sales in 1999, as compared to 1998,
of our OEM drug of abuse and infectious disease screening products of
approximately $478,000 and by an increase in the sales allowance of
approximately $309,000 in 1999 related to our market penetration of the retail
pharmacy market. The decrease in sales of our OEM drug of abuse and infectious
disease screening products was due to lower demand and the timing of large
customer orders.

         Our gross profit from product sales for the year ended December 31,
1999 declined to $1.8 million in 1999 as compared to $2.4 million in 1998. Gross
profit as a percent of net sales declined to 34% in 1999 as compared to 44% in
1998. The decline was primarily a result of a write-down of the value of certain
of our inventory due to product obsolescence and higher sales allowances as
discussed above.

         Our operating expenses for the year ended December 31, 1999 increased
by approximately 3% to $13.9 million as compared to $13.5 million in the prior
year. The mix of selling, general and administrative; litigation; and research
and development expenses are as follows:

     -    Selling, general and administrative (SG&A) expenses declined slightly
          in 1999 to $7.5 million from SG&A expenses of $7.7 million incurred in
          1998. This decrease was due to company wide cost reduction programs.

     -    Litigation expenses for the year ended December 31, 1999 increased to
          $2.7 million from $1.1 million incurred in the prior year. This
          substantial increase was primarily due to the status and timing of the
          ongoing defense of certain legal matters that involved greater
          discovery and other activities during 1999 as compared to a year
          earlier. Additionally, the 1999 expenses included an accrual of
          $500,000 to reflect management's estimate of an expected loss related
          to the resolution of certain litigation.

     -    During the past year, our R&D efforts focused primarily on the
          continued development of our TD Glucose monitoring technology as well
          as development of our cholesterol testing products. Additionally, R&D
          activities related to transdermal drug delivery technologies were
          suspended due to the closing of the California facility. The result
          was a reduction of R&D expenses to $1.7 million from $2.8 million in
          the prior year.

                                       26

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

         Our net loss for the year ended December 31, 1999 increased to $15.3
million from a net loss of $9.8 million in 1998. Excluding the effect of the
non-cash, $4.1 million increase in the deferred tax asset valuation allowance,
our net loss increased to $11.2 million in 1999 from $9.8 million in 1998. The
increase in the valuation allowance was necessary because at December 31, 1999,
management no longer believed that the tax planning strategies, which were the
basis for the net deferred tax assets at December 31, 1998, were feasible or
prudent in light of the further accumulation of operating losses, the continued
increase in the magnitude of the operating losses, and the resulting decrease in
liquid assets to fund future operations.

         We had a net loss attributable to common stockholders of $18.3 million
in 1999 as compared to a net loss attributable to common stockholders of $10.9
million in 1998. This difference was largely the result of the increase in the
deferred tax asset valuation allowance as well as the accrued dividend and
accretion to redemption value of $2.9 million related to the 1998 issuance of
redeemable convertible preferred stock. The full amount of the accretion to
redemption value has been recognized.

Financial Condition

         We had cash and cash equivalents of $481,000 at December 31, 2000, as
compared to cash and cash equivalents and investments of $4.0 million at
December 31, 1999. We had total current assets of $4.0 million and total current
liabilities of $4.8 million at December 31, 2000. We had total common
stockholders' equity of $13.7 million at December 31, 2000. This compares to
total current assets of $8.4 million and total current liabilities of $2.3 at
December 31, 1999 as well as total common stockholders' equity of $8.0 million
at December 31, 1999.

         As discussed above, at December 31, 2000 our total current liabilities
exceeded our total current assets resulting in a working capital deficiency of
$876,000. This compares to $6.0 million in working capital at December 31, 1999.
These decreases in current assets and working capital were due primarily to our
use of cash to fund operations. We require working capital to meet our immediate
needs and plan to utilize financing activities to purchase production equipment,
conduct clinical trials and regulatory submissions relating to the our key
products in development for glucose and cholesterol monitoring, develop new
diagnostic products, invest in marketing activities, and continue our day-to-day
business. If we are unable to successfully obtain funds under our present
investment agreements or obtain additional capital from other sources on
satisfactory terms, we may not be able to continue our operations at the same
level, or at all.

The Swartz Transaction

         On May 3, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC ("Swartz"). Under the Swartz investment agreement, also
referred to as an equity line, we have the option to sell, or "put," up to $25
million of our common stock to Swartz, subject to a formula based on stock price
and trading volume, over a three year period beginning on November 3, 2000. In
addition, we issued to Swartz a warrant to purchase 312,500 shares of our common
stock at a price of $1.9063 per share, subject to adjustment, and a warrant to
purchase 312,500 shares of our common stock at a price of $0.9375, subject to
adjustment. We may issue additional warrants to Swartz under the terms of the
Swartz investment agreement. Due to market conditions contained in the agreement
related to trading price and volume of our stock, there can be no assurance that
we will be able to sell stock in sufficient amounts or at all, to satisfy our
financial needs. For information concerning sales of our common stock to Swartz,
see - Other Disclosure: Changes In Securities And Use Of Proceeds contained
elsewhere in this Management's Discussion And Analysis Of Financial Condition
And Results Of Operations.

                                       27

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Financial Condition (Continued)

The May Davis Transactions

         On August 28, 2000, we entered into a securities purchase agreement
with investors arranged through The May Davis Group, Inc., ("May Davis") as
placement agent. Under this agreement, we sold to the investors $1,599,993 of
our 6% convertible debentures that mature at various dates between August 28,
2005 through November 23, 2005. The debentures became convertible into shares of
our common stock at any time after 120 days from closing at the lesser of $1.05
per share or 80% of the average closing bid prices of our common stock during
the 5 trading days immediately preceding the conversion. The earliest date for
conversion of these debentures was December 26, 2000. As of March 1, 2001, the
investors have converted $1,138,515 of debentures resulting in $461,478
convertible debentures outstanding. In connection with the issuance of the 6%
convertible debentures to the investors, we also issued warrants to the
investors to purchase 639,997 shares of our common stock. Such issuance is equal
to 20% of the number of shares of our common stock that would have been issuable
upon conversion of the convertible debentures as of the respective closing
dates. The warrants have an exercise price of $1.50 and a term of five years.
For information concerning the conversion of debentures, see - Other Disclosure:
Changes In Securities And Use Of Proceeds contained elsewhere in this
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations.

         On September 5, 2000, we entered into a credit line agreement with GMF
Holdings, Inc. ("GMF Holdings") arranged through May Davis, as placement agent.
Under the GMF credit line agreement, we have the option to sell, or "put," up to
$10 million of our 6% convertible debentures to GMF, subject to a formula based
on stock price and trading volume, over a three year period beginning on
December 22, 2000. Upon such sale or "put", the debentures are immediately
convertible into shares of our common stock at the lesser of $1.40 per share or
90% of the lowest closing bid price of our common stock during the 20 trading
days immediately preceding the conversion. For information concerning the
conversion of debentures, see - Other Disclosure: Changes In Securities And Use
Of Proceeds contained elsewhere in this Management's Discussion And Analysis Of
Financial Condition And Results Of Operations.

         In providing us with the convertible debenture transaction and credit
line, compensation to May Davis is linked to both transactions. May Davis
received cash compensation equal to 10% of the principal amount of convertible
debentures issued under the securities purchase agreement and a five-year
warrant to purchase 2,000,000 shares of our common stock at $1.50 per share. In
connection with this transaction, we also issued to Butler Gonzalez LLP a
five-year warrant to purchase 10,000 shares of our common stock at $1.50 per
share. We have the right to force conversion of the May Davis warrant if the
closing price of our common stock is $3.00 or higher for ten consecutive trading
days. Upon exercise of the warrants held by the debenture holders and May Davis,
we would receive additional capital. Additionally, in consideration for closing
the convertible debenture transaction and arranging the credit line, we issued
to affiliates of May Davis 750,000 shares of our common stock.

         For a complete description of the Swartz and May Davis funding
transactions, see our Registration Statements on Form S-2, and amendments
thereto, as filed with the SEC.

Liquidity And Capital Resources

         Net cash used in operating activities was $3.9 million for the year
ended December 31, 2000 as compared to $6.0 million for the year ended December
31, 1999. This improvement is primarily due to a reduction in our net loss and
tighter management of our cash resources that resulted in higher accounts
payable.

         Net cash provided by investing activities, net of a $500,000 down
payment to Roche Diagnostics related to our planned acquisition of certain
assets, held relatively constant over the past two years and was $1.7 million
for the year ended December 31, 2000 as compared to $2.3 million for the year
ended December 31, 1999.

                                       28

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Liquidity And Capital Resources (Continued)

         Net cash provided by financing activities increased to $1.2 million for
the year ended December 31, 2000 from $10,000 for the year ended December 31,
1999 due to proceeds from the issuance of convertible debentures.

         While our net loss for the year ended December 31, 2000 was reduced
from the net loss in the prior year, we have experienced sustained significant
operating losses in 2000 and 1999 that have resulted in substantial consumption
of our cash reserves. We dedicate a majority of our research, development and
engineering activities to the development of new products. As a result, we are
not generating sufficient revenue from the sales of our existing products to
cover the expenses associated with the development of new products. In addition,
we expect to continue to incur losses and have negative cash flow for the
immediate future. Based on our current rate of losses and cash flow, we will not
be able to continue our operations unless we secure additional financing and
reduce our operating losses by reducing expenses and/or increasing sales of our
products, or sell assets. We cannot assure you that the sales of certain of our
products under development will ever commence or that we will generate
significant revenues or achieve profitability.

         In order to support anticipated growth and new product development, we
expect to incur significant operating expenses and capital expenditures in the
future. We expect to continue to have significant cash requirements in the near
future, primarily as a result of the following:

          1.   increased research and development associated with the Total
               Cholesterol Home Screening Test as well as the TD Glucose
               Monitoring System and the commercialization and conducting of
               clinical trials of all products requiring domestic or foreign
               regulatory approval;

          2.   expansion of direct distribution of medical diagnostic products
               related to the national roll-out of our HealthCheck(R)brand, our
               international business and our private label business;

          3.   completion of our cholesterol monitoring system under
               development, which physicians, laboratories, as well as patients
               at home can use; and

          4.   costs associated with our manufacturing facilities.

         The future level of R&D expenditures will depend on, among other
things, our financial position, the outcome of clinical testing of products
under development (including the TD Glucose Monitoring System and Total and HDL
cholesterol monitoring products), delays or changes in government required
testing and approval procedures, technological and competitive developments and
strategic marketing decisions.

         We have entered into investment agreements with Swartz and May Davis,
and achieved effective registration with the Securities and Exchange Commission.
These transactions are subject to certain terms and market conditions related to
trading price and volume as well as the availability of sufficient authorized
and unissued common stock. However, the dilutive effect of prior funding
transactions has nearly exhausted our present number of authorized shares of
common stock and placed us in a position of being unable to proceed with funding
opportunities to provide working capital necessary to implement our business
plan. In order for us to proceed in raising additional capital, our Board of
Directors has unanimously adopted, subject to shareholder approval, a proposal
to amend our Amended and Restated Articles of Incorporation and in doing so
increasing the number of authorized common shares to 250,000,000. Approval of
this Charter Amendment requires the affirmative vote of 60% of the outstanding
shares eligible to vote at the Annual Meeting of Stockholders being held on
April 30, 2001. We believe this will provide us with an adequate number of
shares to support the funding of our operations for the next two years.

                                       29

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Liquidity And Capital Resources (Continued)

         If we are unable to successfully obtain funds under these investment
agreements due to unfavorable market conditions, lack of authorized common
stock, maintain the effectiveness of our current registration statements, issue
common or preferred stock or sell debentures or otherwise obtain additional
capital from other sources on satisfactory terms, or significantly reduce our
operating losses, we would have to consider selling some or all of our
technologies, reduce or terminate completely our research and development
activities, or reduce or discontinue some or all of our operations, or apply for
protection from our creditors under the federal bankruptcy laws.

         In addition, as described below, we have pending judgments against us
in various legal proceedings, some of which are currently secured by bonds
collateralized by existing working capital. Satisfying all or a significant
portion of these judgments on a basis faster than we presently anticipate would
further exacerbate our severe liquidity condition.

         Our long-term ability to meet our liquidity requirements and to
continue operations will depend on the following:

         1.   our ability to raise additional capital, including our ability to
              draw down money under the Swartz equity line or the GMF credit
              line through the use of available authorized common stock;

         2.   our ability to complete the acquisition of and successfully
              operate the pregnancy and ovulation business assets we are
              acquiring from Roche Diagnostics;

         3.   the successful completion of clinical trials and receipt of
              governmental approvals to begin manufacturing and selling our new
              products; and

         4.   our ability to sell our new products at a profit.

         Our future working capital and capital expenditure requirements may
vary materially from those now planned depending on numerous factors, including:

         1.   the outcome of clinical testing of products under development
              (including the TD Glucose Monitoring System and Total and HDL
              cholesterol monitoring products), delays or changes in government
              required testing and clearance or approval procedures and our
              ability to receive FDA clearance or approval for the marketing of
              our products under development;

         2.   the focus and direction of our research and development programs,
              including competitive and technological advances that may require
              us to modify the design of our products under development;

         3.   our ability to successfully resolve pending litigation;

         4.   manufacturing costs for our current and future products;

         5.   our marketing and distribution strategy;

         6.   future strategic alliances and relationships with marketing
              partners; and

         7.   costs associated with completing our planned acquisition of
              certain assets of Roche Diagnostics.

                                       30
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Forward Looking Statements

         This Form 10-K contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Statements of our intentions, beliefs, expectations or
predictions for the future, denoted by the words "believes," "expects," "may,"
"will," "should," "seeks," "pro forma," "anticipates," "intends" and similar
expressions are forward-looking statements that reflect our current views about
future events and are subject to risks, uncertainties and assumptions.
Specifically, this prospectus and the documents incorporated into this
prospectus contain forward-looking statements regarding:

         -    our ability to obtain sufficient liquidity and capital to fund
              our operations and to complete acquisitions, including
              authorization by stockholders of additional common stock;

         -    delays in product development;

         -    our ability to satisfactorily perform clinical trials
              demonstrating efficacy of our products under development;

         -    the probability and timing of obtaining FDA clearance or approval
              of our products under development;

         -    our ability to successfully develop and market new products on a
              profitable basis or at all;

         -    the ability to complete the design, construction and
              manufacturing scale-up of our products on a timely basis within
              budget parameters;

         -    future advances in technology and medicine by others that may
              render our products obsolete;

         -    competition from other pharmaceutical, medical and diagnostic
              companies;

         -    risks and expense of government regulation and effects of changes
              in regulation (including risks associated with obtaining
              requisite domestic and foreign governmental approvals for our
              products, manufacturing equipment or related facilities);

         -    uncertainties connected with product liability exposure and
              insurance;

         -    risks associated with obtaining and maintaining patents and other
              protections on intellectual property and patents obtained by
              others that may adversely affect us; and

         -    results of litigation pending against us and the costs of
              defending ourselves and prosecuting claims against others in such
              litigation.

         We wish to caution readers that these forward-looking statements are
not guarantees of future performance and involve risks and uncertainties. Actual
events or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the risk factors and other matters contained in this prospectus
generally. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements included in this document.

                                       31

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures

Operating Losses

         We have experienced sustained significant operating losses that have
resulted in substantial consumption of our cash reserves. We dedicate a majority
of our research, development and engineering activities to the development of
new products. As a result, we are not generating sufficient revenue from the
sales of our existing products to cover the expenses associated with the
development of new products. In 2000 and 1999, we had a net loss attributable to
common stockholders of $9.2 million and $18.3 million, respectively. While we
experienced a substantial improvement in our net loss attributable to common
stockholders in 2000, we expect to continue to incur losses and have negative
cash flow for the immediate future. Based on the above status with respect to
losses and cash flow, we will not be able to continue our operations unless we
secure additional financing, reduce our operating losses, reduce expenses,
increase sales of our products, or sell assets. We cannot assure you that the
sales of our existing products and/or certain of our products under development
will ever commence or that we will generate significant revenues or achieve
profitability.

Need For Additional Capital To Continue Operations

         To continue operations, we must obtain sufficient funds from the Swartz
equity line agreement and the GMF credit line agreement. However, the future
market price and volume of trading of our common stock limits the rate at which
we can obtain money under the Swartz equity and GMF credit line agreements.
Further, we may be unable to satisfy the conditions contained in the Swartz
equity and GMF credit line agreements, which would result in our inability to
draw down money on a timely basis, or at all. If the price of our common stock
declines, or trading volume in our common stock is low, we will be unable to
obtain sufficient funds to meet our liquidity needs. We do not at this time have
any other sources of financing, or commitments for financing, in place to
satisfy our liquidity needs.

Need For Additional Authorized Shares Of Common Stock To Raise Additional
Capital Necessary To Implement Business Plan

         We have entered into investment agreements with Swartz and May Davis,
and achieved effective registration with the Securities and Exchange Commission.
These transactions are subject to certain terms and market conditions related to
trading price and volume as well as the availability of sufficient authorized
and unissued common stock. However, the dilutive effect of prior funding
transactions has nearly exhausted our present number of authorized shares of
common stock and placed us in a position of being unable to proceed with funding
opportunities to provide working capital necessary to implement our business
plan. In order for us to proceed in raising additional capital, our Board of
Directors has unanimously adopted, subject to shareholder approval, a proposal
to amend our Amended and Restated Articles of Incorporation and in doing so
increasing the number of authorized common shares to 250,000,000. Approval of
this Charter Amendment requires the affirmative vote of 60% of the outstanding
shares eligible to vote at the Annual Meeting of Stockholders being held on
April 30, 2001. We believe this will provide us with an adequate number of
shares to support the funding of our operations for the next two years.

         If we are unable to successfully obtain funds under these investment
agreements due to unfavorable market conditions, maintain the effectiveness of
our current registration statements, issue common or preferred stock or sell
debentures or otherwise obtain additional capital from other sources on
satisfactory terms, or significantly reduce our operating losses, we would have
to consider selling some or all of our technologies, reduce or terminate
completely our research and development activities, or reduce or discontinue
some or all of our operations, or apply for protection from our creditors under
the federal bankruptcy laws.

                                       32

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures (Continued)

Changes In Securities And Use Of Proceeds

         In 1998, we issued 15,000 shares of our Series A Redeemable Convertible
Preferred Stock (the "Preferred Stock"). We have no shares of our Preferred
Stock presently outstanding. The investor converted all 15,000 shares of
Preferred Stock into 39,800,473 shares of our common stock as of February 6,
2001. The Preferred Stock was convertible into our common stock at an exchange
ratio based on the market price of our common stock. No preferred stock is
currently outstanding. For additional information related to this Preferred
Stock transaction, see our Annual Reports on Form 10-K for the years ended
December 31, 1999 and 1998, respectively, and our Report on Form 8-K filed on
May 21, 1998.

         On May 3, 2000, we entered into an equity line investment agreement
with Swartz under which we have the option to sell or "put" up to $25 million of
our common stock to Swartz, subject to a formula based on stock price and
trading volume, over a three year period beginning on November 3, 2000. We also
issued to Swartz warrants to purchase our Common Stock at prices ranging from
$0.9375 to $1.9063 per share, subject to adjustment. As of December 31, 2000, we
did not sell any stock to Swartz pursuant to this agreement. As of March 20,
2001, we issued a "put" to Swartz for 4,000,000 shares of our common stock
pursuant to this agreement. Upon completion of this transaction, management
expects to receive approximately $150,000 in proceeds. Based on the terms of our
equity line investment agreement with Swartz and the trading price of our common
stock at the time we issued the "put", the parties executed a wavier and
agreement to redefine and set the minimum share price and trigger price of the
"put". With respect to any future sale or "put" transactions, we may be required
to execute a wavier and agreement to redefine and set the minimum share price
and trigger price of the "put" if the trading price of our common stock at such
time does not meet the terms of our equity line investment agreement with
Swartz.

         On September 5, 2000, we entered into a credit line agreement with GMF
Holdings, arranged through May Davis, under which we have the option to sell or
"put" up to $10 million of our 6% convertible debentures to GMF, subject to a
formula based on stock price and trading volume, over a three year period
beginning on December 22, 2000. As of December 31, 2000, we did not sell any
convertible debentures to GMF Holdings pursuant to this agreement. To date we
have not sold any convertible debentures to GMF Holdings pursuant to this
agreement.

         For a complete description of the Swartz and GMF Holdings funding
transactions, see our Registration Statements on Form S-2, and amendments
thereto, as filed with the SEC.

         In connection with the May Davis securities purchase agreement, we sold
to investors $1,599,993 of our 6% convertible debentures that mature at various
dates between August 28, 2005 through November 23, 2005. The debentures became
convertible into shares of our common stock at any time after 120 days from
closing at the lesser of $1.05 per share or 80% of the average closing bid
prices of our common stock during the 5 trading days immediately preceding the
conversion. The earliest date for conversion of these debentures was December
26, 2000. In connection with the issuance of the 6% convertible debentures to
the investors, we also issued warrants to the investors to purchase 639,997
shares of our common stock. Such issuance is equal to 20% of the number of
shares of our common stock that would have been issuable upon conversion of the
convertible debentures as of the respective closing dates. The warrants have an
exercise price of $1.50 and a term of five years.

         As of December 31, 2000, the full amount of convertible debentures
issued to investors were outstanding and could have been convertible into
45,325,580 shares of common stock. To date, the investors have converted
debentures into 25,984,670 shares of Common Stock, and presently have $461,478
of convertible debentures outstanding. Based upon the terms of the convertible
debentures, as of March 1, 2001 the outstanding convertible debentures would be
convertible into 11,097,824 shares of Common Stock. For additional information
related to this transaction, see our Registration Statement on Form S-2 as filed
with the SEC.

                                       33

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures (Continued)

Impact Of Sale Of Material Amounts Of Common Stock

         If and when we exercise our put rights and sell shares of our common
stock to Swartz and convertible debentures to GMF, if and to the extent that
Swartz sells and GMF converts the debentures and sells the common stock, our
common stock price may decrease due to the additional shares in the market.
Also, if the investors listed in the securities purchase agreement convert their
debentures and sell the common stock, our common stock price may further
decrease. If the price of our common stock decreases, and if we decide to
exercise our right to put shares to Swartz, we must issue more shares of our
common stock for any given dollar amount invested by Swartz. Also, if our common
stock price decreases, we must issue more shares of our common stock upon
conversion of the convertible debentures we may sell to GMF and the convertible
debentures held by the investors listed in the securities purchase agreement.
This may encourage short sales, which could place further downward pressure on
the price of our common stock.

         If and when we issue shares to Swartz upon exercise of our put rights,
it will be at a price equal to the lesser of the market price for each share of
our common stock minus $0.10 or 92% of the market price for each share of our
common stock. If and when we issue shares to GMF upon conversion of the
convertible debentures that we have a right to "put" to GMF, the conversion
price of the debentures will be equal to the lesser of $1.40 or 90% of the
market price for each share of our common stock. Accordingly, the exercise of
our put rights may result in substantial dilution to the interests of the other
holders of our common stock. Depending on the price per share of our common
stock during the three year period of the Swartz investment agreement and the
GMF credit line agreement, we may need to register additional shares for resale
or seek an amendment to our articles of incorporation, to access the full amount
of financing available. Registering additional shares could have a further
dilutive effect on the value of our common stock. If we are unable to register
the additional shares of common stock, we may experience delays in, or be unable
to, access some of the $25 million available from Swartz and the $10 million
available from GMF under our put rights.

Change In Board Of Directors And Management

         Effective September 12, 2000, our board of directors elected Martin
Gurkin, Ph.D. as Chairman of the Board, succeeding Jack L. Aronowitz. The Board
appointed Elliott Block, Ph.D., our Chief Executive Officer, to also become our
President. Mr. Aronowitz ceased to be employed by us on September 12, 2000 and
resigned as a Director effective December 20, 2000. As described in more detail
under "Item 3. Legal Proceedings," Mr. Aronowitz sued us in relation to his
separation from employment and a license agreement he signed with us. We believe
that this lawsuit is without merit and we intend to contest these allegations
vigorously. In this regard, on December 15, 2000, we commenced an action in the
Superior Court of the State of Delaware in and for New Castle County against a
family limited partnership of our former Chairman that is the maker of a
negotiable promissory note dated August 28, 1998 in the amount of $750,000 for
which our former Chairman is the guarantor. On March 1, 2001, we filed an action
against our former Chairman, individually, in the Circuit Court, 17th Judicial
District, in and for Broward County, Florida -Case No. 01003764-04 - in
connection with his personal guaranty of the promissory note. The action was
commenced after a scheduled payment on the loan was not made by the family
limited partnership, and the principal amount of the loan was accelerated. We
are seeking the balance due on the loan, approximately $628,000 as of March 1,
2001, together with attorneys' fees. The net amount due our former Chairman
under the termination without cause provision of his Employment Agreement (after
deductions for taxes) as well as any other amounts due our former Chairman from
us are being applied periodically to the reduction of our former Chairman's
Guaranty obligation to us.

Acquisition Of Certain Business Assets Of Roche Diagnostics

         On May 20, 2000, we entered into a business and asset purchase
agreement with Roche Diagnostics to acquire certain trademarks, distribution
rights and business assets of the worldwide OTC pregnancy and ovulation testing

                                       34

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures (Continued)

Acquisition Of Certain Business Assets Of Roche Diagnostics (Continued)

business carried on by Roche Diagnostics. The trademarks include EVATEST(R),
EVAPLAN(R), EVENT-TEST(R), DIAGNOSIS(R) and related goodwill. The majority of
the assets we intended to acquire are located in South America with the balance
in Europe. We made a down payment of $500,000 upon signing of the asset purchase
agreement. The acquisition of assets from Roche Diagnostics had been contingent
on us obtaining sufficient funds to make the remaining payments due under the
contract. We did not make the second and third payments due under the asset
purchase agreement. Roche Diagnostics has decided to continue to operate this
business in Argentina and Uruguay. We have, however, with the concurrence of
Roche Diagnostics, taken over the marketing of the products in Germany, Italy,
Spain and Switzerland through an independent distributor that is well
established in these markets; and are in continuing discussions with Roche
Diagnostics concerning the acquisition of its assets in those countries. The
down payment of $500,000 we made in May 2000 will be applied to the purchase of
these assets. The failure to complete this acquisition will have little effect
on our financial condition.

         Further, our obligation, which also existed before we entered into the
asset purchase agreement, to indemnify Roche Diagnostics in connection with
patent infringement claims, including the litigation with Unilever, survives the
termination of the asset purchase agreement. In addition, while Roche
Diagnostics presently continues to market our products, it may in the future
sell the assets to one of our competitors, who may decide not to sell our
products, which would result in a material decrease in revenues, thereby
adversely affecting our operating results. Presently, however, Roche Diagnostics
has indicated to us it intends to continue to own and operate this business.

Suspension Of Clinical Trials For A Principal Product Under Development

         We are developing our noninvasive TD Glucose Monitoring System that is
intended to be a painless, bloodless and easy to use method for diabetics to
monitor their glucose levels without the discomfort and inconvenience associated
with available finger stick blood glucose monitoring systems. However, we have
suspended clinical trial efforts regarding this product and returned to the
development stage to further refine the optical TD Glucose meters. At this time,
we do not have sufficient funds to continue development of this product without
an infusion of additional capital or other source of funds. Since the suspension
of clinical trials, we have focused on further refinements of the optical TD
Glucose meters that we believe are necessary to achieve greater precision before
initiating expanded clinical trials that are required to obtain FDA
consideration of this device. The optical meters measure the color produced on
the membrane in the noninvasive patch in response to the level of glucose
present. We cannot determine when clinical trials will resume. Accordingly, we
cannot assure you that we will be able to obtain the necessary FDA clearance for
the TD Glucose Monitoring System or that we will not experience further
significant delays and/or expenses in obtaining clearance for this product.
Further, we cannot assure you that we will be able to make the refinements
necessary for us to resume clinical trials, nor can we assure you that the delay
in the development of this product will not have an adverse effect upon our
ability to raise additional capital.

Delisting Of Common Stock

         Effective on December 8, 2000, our common stock was delisted from the
Nasdaq National Market and began trading on the OTC Bulletin Board under the
same symbol "TCPI". We were delisted for not maintaining Nasdaq's $1.00 per
share minimum bid price. Independent of the delisting from the Nasdaq National
Market, we expect to remain a reporting company under the Securities and
Exchange Commission rules.

         Delisting of our common stock may have an adverse impact on the market
price and liquidity of our securities, and has subjected our stock to the "penny
stock rules" contained in Section 15(g) of the Securities Exchange Act of 1934
and the rules promulgated thereunder. In addition, our Subscription Agreement
with Swartz provides that our right to deliver a put notice and the obligation
of Swartz to purchase put shares is conditioned on our common stock

                                       35

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures (Continued)

Delisting Of Common Stock (Continued)

being listed for and trading on the Nasdaq National Market, the Nasdaq SmallCap
Market, the OTC Bulletin Board, the American Stock Exchange, or the New York
Stock Exchange. Similarly, our Credit Line agreement with the MDG provides that
our right to deliver a put notice and the obligation of MDG to purchase our 6%
convertible debentures is conditioned on our Common Stock being listed for and
trading on the Nasdaq National Market, the Nasdaq SmallCap Market, the OTC
Bulletin Board, the American Stock Exchange, or the New York Stock Exchange. Our
inability to put shares to Swartz or sell our 6% convertible debentures to MDG
to raise capital (and may be required to make non-usage payments to Swartz),
would likely have a material adverse impact on our liquidity and financial
position, including our ability to continue research and development and
commercialization efforts. For additional information about the Swartz
Subscription Agreement see the exhibits to our Form 10-Q for the quarter ended
March 31, 2000. For additional information about the MDG Investment Agreement
see the exhibits to Amendment Number 2 of our Registration Statement of Form S-2
as filed with the Securities and Exchange Commission on October 18, 2000.

Judgments From Pending Litigation Could Adversely Affect Financial Condition

         As discussed under Item 3 - Legal Proceedings, we are the subject of
pending litigation. The cost of prosecuting and defending these actions or the
cost of a settlement or award of damages, if any, could have a material adverse
effect on our business, prospects, results of operations or financial condition.
Further, we have pending judgments against us in various legal proceedings, one
of which is currently secured by a bond collateralized by existing working
capital. Satisfying all or a significant portion of these judgments on a basis
faster than we presently anticipate would further exacerbate our severe
liquidity condition. We maintain directors' and officers' liability insurance.
However, we cannot assure you that this insurance coverage will cover all claims
or be adequate to fund the costs of an award, if any, or attorneys' fees.
Demands have been made upon us that far exceed the amount of this coverage.

Environmental Matters

         We are subject to various laws and governmental regulations concerning
environmental matters as well as safety and health of our employees in the U.S.
and other countries. The U.S federal environmental legislation having particular
impact on us includes the Toxic Substances Control Act; the Resource
Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Safe
Drinking Water Act; and the Comprehensive Environmental Response, Compensation
and Liability Act (also know as Superfund). We are also subject to regulation by
the Occupational Safety and Health Administration (OSHA) concerning employee
safety and health matters. The U.S. Environmental Protection Agency (EPA), OSHA,
and other federal agencies have authority to promulgate regulations that have
impact on our operations.

         In addition to these federal activities, various states have been
delegated certain authority under the aforementioned federal statutes. Many
states and local governments have adopted environmental and employee safety and
health laws and regulations, some of which are similar to federal requirements.
State and federal authorities may seek fines and penalties for violations of
these laws and regulations. We believe our operations are presently in
compliance with such laws and regulations.

         In October 2000, we entered into a settlement agreement with the United
States in connection with a lawsuit brought on behalf of the EPA and subsequent
judgement against us and our former Chairman under the Comprehensive
Environmental Response Compensation and Liability Act of 1983 related to the
clean-up of a facility that during 1985 through 1992 contained alleged hazardous
substances. We occupied that facility during part of 1992. However, we are
presently in litigation with our former Chairman related to this and other
matters and are seeking full contribution from him for the total amount of the
$650,000 judgment (see Item 3 - Litigation.)

                                       36

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Continued)

Risk Factors And Other Disclosures (Continued)

Impact of Inflation

         Although inflation has slowed in recent years, it is still a factor in
our economy and we continue to seek ways to mitigate its impact. The medical
technology and healthcare industries are labor intensive. Wages and other
expenses increase especially during periods of inflation and when shortages in
the marketplace occur. In addition, suppliers pass along rising costs to us in
the form of higher prices. We have, to date, offset increases in our operating
costs by increasing prices for our products. We have also implemented cost
control measures to curb increases in our operating costs and expenses. We
cannot predict our ability to cover or offset future cost increases.

Dependence On Key Personnel

         Due to the specialized, technical nature of our business, we are highly
dependent upon our ability to retain our current personnel including, but not
limited to, our senior management. In addition, our ability to effectively
pursue our business strategy will depend upon, among other factors, our ability
to successfully recruit and retain additional highly skilled and experienced
managerial, marketing, engineering and technical personnel. In some cases, the
market for these skilled employees is highly competitive, which makes it
difficult to attract and retain key employees. We cannot assure you that we will
be able to retain or recruit such personnel, and the inability to do so could
materially and adversely affect our business, financial condition and results of
operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         At December 31, 2000, we had only cash and cash equivalents and no
investments. However, as of December 31, 2000, the full amount of $1,599,993 of
our 6% convertible debentures issued to investors were outstanding. Such
debentures are convertible into common shares based on the market price of our
common shares at the time of conversion. As a result, a 10% decrease in the
market price of our common shares would increase the number of shares issuable
upon conversion by approximately 11%. Conversely, an increase in the market
price of our common shares of 10% would decrease the shares issuable by
approximately 9%.

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 CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                           TCPI, Inc. and Subsidiaries
                        Consolidated Financial Statements
                                December 31, 2000

                                    Contents

Report of Independent Certified Public Accountants ......................   38
Audited Consolidated Financial Statements
   Consolidated Balance Sheets ..........................................   39
   Consolidated Statements of Operations ................................   40
   Consolidated Statements of Redeemable Preferred Stock
       and Common Stockholders' Equity ..................................   41
   Consolidated Statements of Cash Flows ................................   43
   Notes to Consolidated Financial Statements ...........................   45





                                       37

<PAGE>


               Report of Independent Certified Public Accountants



Board of Directors
TCPI, Inc.

We have audited the accompanying consolidated balance sheets of TCPI, Inc. and
subsidiaries (the Company) as of December 31, 2000 and 1999, and the related
consolidated statements of operations, redeemable preferred stock and common
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 TCPI, Inc. and
subsidiaries at December 31, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States. 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.

The accompanying consolidated financial statements have been prepared assuming
that TCPI, Inc. and subsidiaries will continue as a going concern. As more fully
described in Note 1, the Company has incurred recurring operating losses and has
continued to experience negative cash flows from operations. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding these matters are also described in Note
1. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.



                                                 /s/ ERNST & YOUNG LLP


Miami, Florida
February 13, 2001, except for the
sixth paragraph of Note 9 as to
which the date is March 20, 2001



                                       38
<PAGE>


                           TCPI, Inc. and Subsidiaries
                           Consolidated Balance Sheets

                    (Amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                       ---------------------------
                                                                                          2000              1999
                                                                                        --------          --------
<S>                                                                                     <C>               <C>
Assets
Current assets:
   Cash and cash equivalents                                                            $    481          $  1,447
   Investments                                                                                --             2,540
   Accounts receivable, net                                                                1,188             1,163
   Inventory                                                                               1,737             2,036
   Due from related parties                                                                  281               686
   Other                                                                                     276               486
                                                                                        --------          --------
Total current assets                                                                       3,963             8,358
Property and equipment, net                                                                1,732             2,096
Patents and trademarks, net                                                               10,392            11,256
Goodwill, net                                                                              1,635             1,807
Asset purchase deposit                                                                       500                --
Deferred financing costs, net                                                              2,245                --
Due from related party, long-term                                                            357                --
Other assets                                                                                  31                71
                                                                                        --------          --------
Total assets                                                                            $ 20,855          $ 23,588
                                                                                        ========          ========
Liabilities, redeemable preferred stock and common stockholders' equity
Current liabilities:
   Accounts payable                                                                     $  3,288          $    988
   Accrued expenses                                                                        1,551             1,360
                                                                                        --------          --------
Total current liabilities                                                                  4,839             2,348
Deferred revenue                                                                              --               812
Other liabilities                                                                            327                --
Convertible debentures                                                                     1,322                --
Redeemable preferred stock, $.001 par value:
     Authorized shares -- 25,000,000; 550 and 11,350 shares of
        Series A 6% cumulative convertible issued and outstanding
        at 12/31/00 and 12/31/99, respectively                                               639            12,457
Commitments and contingencies
Stockholders' Equity:
   Common stock, $.001 par value:
     Authorized shares--100,000,000;
        Issued and outstanding shares--35,729,525 and
        14,541,544 at 12/31/00 and 12/31/99, respectively                                     36                15
   Additional paid-in capital                                                             56,324            41,638
   Accumulated deficit                                                                   (42,632)          (33,682)
                                                                                        --------          --------
Total common stockholders' equity                                                         13,728             7,971
                                                                                        --------          --------
Total liabilities, redeemable preferred stock and common
   stockholders' equity                                                                 $ 20,855          $ 23,588
                                                                                        ========          ========
</TABLE>

See accompanying notes.


                                       39
<PAGE>


                           TCPI, Inc. and Subsidiaries
                      Consolidated Statements of Operations

                    (Amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                         Year ended December 31
                                                          ---------------------------------------------------
                                                              2000               1999               1998
                                                          ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>
Net sales                                                 $      7,462       $      5,432       $      5,442
Cost of sales                                                    4,790              3,606              3,054
                                                          ------------       ------------       ------------
Gross profit                                                     2,672              1,826              2,388

Research and development contract revenue                          200                470                585

Operating expenses:
   Selling, general and administrative                           6,355              7,534              7,672
   Litigation                                                    2,341              2,692              1,137
   Research and development                                        802              1,724              2,787
   Depreciation and amortization                                 1,737              1,927              1,860
                                                          ------------       ------------       ------------
                                                                11,235             13,877             13,456
                                                          ------------       ------------       ------------
Loss from operations                                            (8,363)           (11,581)           (10,483)

Other income (expense):
   Interest income                                                  84                397                672
   Interest expense                                               (660)               (15)               (16)
   Other expense                                                   (35)                --                 --
                                                          ------------       ------------       ------------
Loss before income taxes                                        (8,974)           (11,199)            (9,827)

Income tax expense                                                  --             (4,140)                --
                                                          ------------       ------------       ------------
Net loss                                                        (8,974)           (15,339)            (9,827)

Accrued dividends and accretion to redemption
   value of redeemable convertible preferred stock                (177)            (2,917)            (1,030)
                                                          ------------       ------------       ------------

Net loss attributable to common stockholders              $     (9,151)      $    (18,256)      $    (10,857)
                                                          ============       ============       ============
Basic and diluted net loss per common share               $      (0.31)      $      (1.64)      $      (1.09)
                                                          ============       ============       ============
Weighted average number of common shares outstanding        29,575,611         11,122,414          9,996,951
                                                          ============       ============       ============
</TABLE>

See accompanying notes.


                                       40
<PAGE>
<TABLE>
<CAPTION>

                                                 TCPI, Inc. and Subsidiaries
                  Consolidated Statements of Redeemable Preferred Stock and Common Stockholders' Equity
                                          (Amounts in thousands, except share data)


                                              Redeemable
                                            Preferred Stock         Common Stock                                        Total
                                     -----------------------   --------------------     Additional                     Common
                                       Number of                Number of               Paid-In        Accumulated   Stockholders'
                                        Shares        Amount     Shares      Amount     Capital         Decficit        Equity
                                     -----------------------   -----------  --------   -----------    ------------   -----------
<S>                                  <C>       <C>  <C>       <C>            <C>       <C>            <C>            <C>
Balance at January 1, 1998               --    $        --     10,015,036    $   10    $    39,807    $    (8,459)   $    31,358
   Comprehensive loss:
      Net loss                           --             --             --        --             --         (9,827)        (9,827)
      Other Comprehensive
         loss, net of tax -
         unrealized losses on
         investments, net                --             --             --        --             --            (65)           (65)
                                                                                                                     -----------
   Comprehensive loss                    --             --             --        --             --             --         (9,892)
   Issuance of Series A
     preferred stock; net of
     issuance costs of $640          15,000         12,409             --        --          1,091             --          1,091
   Issuance of 150,000
     warrants with Series
     A preferred stock                   --             --             --        --            860             --            860
   Accrued dividends on Series
     A preferred stock                   --            557             --        --           (557)            --           (557)
   Accretion to redemption
     value of Series A preferred
     stock                               --            473             --        --           (473)            --           (473)
   Purchase of common stock              --             --        (87,961)       --           (339)            --           (339)
   Conversion of preferred
     stock to common stock             (300)          (308)        79,241        --            308             --            308
                                    -------    -----------    -----------    ------    -----------    -----------    -----------
Balance at December 31, 1998         14,700         13,131     10,006,316        10         40,697        (18,351)        22,356
   Comprehensive loss:
      Net loss                           --             --             --        --             --        (15,339)       (15,339)
      Other Comprehensive
         loss, net of tax -
         unrealized gains on
         investments, net                --             --             --        --             --              8              8
                                                                                                                     -----------
   Comprehensive loss                    --             --             --        --             --             --        (15,331)
   Accrued dividends on Series
     A preferred stock                   --            799             --        --           (799)            --           (799)
   Accretion to redemption
     value of Series A preferred
     stock                                --          2,118             --        --         (2,118)            --         (2,118)
   Conversion of preferred
     stock to common stock           (3,350)        (3,591)     4,528,228         5          3,586             --          3,591
   Shares issued to directors
     and employees                       --             --          7,000        --             10             --             10
   Issuance of 400,000 warrants
     for services                        --             --             --        --            262             --            262
                                    -------    -----------    -----------    ------    -----------    -----------    -----------
Balance at December 31, 1999         11,350         12,457     14,541,544        15         41,638        (33,682)         7,971
</TABLE>


                            (continued on next page)


                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                          TCPI, Inc. and Subsidiaries
                       Consolidated Statements of Redeemable Preferred Stock and Common Stockholders' Equity (Continued)
                                                   (Amounts in thousands, except share data)


                                              Redeemable
                                            Preferred Stock         Common Stock                                        Total
                                     -----------------------   --------------------     Additional                     Common
                                       Number of                Number of               Paid-In        Accumulated   Stockholders'
                                        Shares        Amount     Shares      Amount     Capital         Decficit        Equity
                                     -----------------------   -----------  --------   -----------    ------------   -----------
<S>                                    <C>        <C>           <C>          <C>          <C>           <C>           <C>
Balance at December 31, 1999            11,350    $   12,457    14,541,544   $       15   $   41,638    $  (33,682)   $    7,971
   Comprehensive loss:
      Net loss                              --            --            --           --           --        (8,974)       (8,974)
      Other Comprehensive
         loss, net of tax -
         unrealized gains on
         investments, net                   --            --            --           --           --            24            24
                                                                                                                      ----------
   Comprehensive loss                       --            --            --           --           --            --        (8,950)
   Accrued dividends on Series
     A preferred stock                      --           177            --           --         (176)           --          (176)
   Conversion of preferred
     stock to common stock             (10,800)      (11,995)   20,266,288           20       11,975            --        11,995
   Shares issued in lieu of rent            --            --       168,673           --          207            --           207
   Shares issued upon exercise
     of options                             --            --         3,020           --            5            --             5
   Shares issued to placement
     agent                                  --            --       750,000            1          296            --           297
   Issuance of 2,635,000
     warrants to placement
     agents                                 --            --            --           --        1,615            --         1,615
   Issuance of 639,997 warrants
     to convertible debenture
     holders                                --            --            --           --          219            --           219
   Beneficial conversion feature
     on convertible debentures              --            --            --           --          545            --           545
                                       -------    ----------   -----------   ----------   ----------    ----------    ----------
Balance at December 31, 2000               550    $      639    35,729,525   $       36   $   56,324    $  (42,632)   $   13,728
                                       =======    ==========   ===========   ==========   ==========    ==========    ==========
</TABLE>

See accompanying notes


                                       42
<PAGE>

                           TCPI, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                             (Amounts in Thousands)
<TABLE>
<CAPTION>
                                                                             Year ended December 31
                                                                   ----------------------------------------
                                                                     2000           1999             1998
                                                                   --------        -------         --------
<S>                                                                <C>             <C>             <C>
Operating activities
Net loss                                                           $ (8,974)       $(15,339)       $ (9,827)
Adjustments to reconcile net loss to net cash used
   in operating activities:
     Income tax expense                                                  --           4,140              --
     Depreciation                                                       532             476             484
     Loss on sales of equipment                                          34              --              --
     Amortization of intangible assets                                1,205           1,451           1,376
     Accretion of beneficial conversion feature on
       convertible debentures                                           545              --              --
     Amortization of deferred financing costs and
       debt discount                                                     50              --              --
     Changes in operating assets and liabilities:
       Accounts receivable                                              (25)            442             450
       Inventory                                                        299             514            (698)
       Other current assets                                             210             (14)             16
       Change in other assets and liabilities                           170            (139)             (9)
       Accounts payable and accrued expenses                          2,896           1,635          (1,356)
       Deferred revenue                                                (812)            812              --
                                                                   --------        --------        --------
Net cash used in operating activities                                (3,870)         (6,022)         (9,564)

Investing activities
Purchases of property and equipment                                    (367)           (328)           (344)
Proceeds from sales of equipment                                        165              --              --
Deposit for asset purchase                                             (500)             --              --
Due from related party                                                   48             150            (836)
Purchases of investments                                               (845)         (6,747)         (5,080)
Proceeds from sales of investments                                    3,409           9,263           3,988
Investment in patents and intangible assets                            (169)            (86)           (294)
                                                                   --------        --------        --------
Net cash provided by (used in) investing activities                   1,741           2,252          (2,566)

Financing activities
Net proceeds from issuance of common stock                               --              10              --
Net proceeds from issuance of redeemable
   preferred stock                                                       --              --          14,360
Payments of deferred financing costs                                   (442)             --              --
Proceeds from issuance of convertible debentures                      1,600              --              --
Proceeds from stock options exercised                                     5              --              --
Purchase of common stock                                                 --              --            (339)
                                                                   --------        --------        --------
Net cash provided by financing activities                             1,163              10          14,021
                                                                   --------        --------        --------
Net (decrease) increase in cash and cash equivalents                   (966)         (3,760)          1,891
Cash and cash equivalents at beginning of year                        1,447           5,207           3,316
                                                                   --------        --------        --------
Cash and cash equivalents at end of year                           $    481        $  1,447        $  5,207
                                                                   ========        ========        ========
</TABLE>
                            (Continued on next page)


                                       43
<PAGE>

                           TCPI, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows (Continued)
                             (Amounts in Thousands)

<TABLE>
<CAPTION>


                                                                             Year ended December 31
                                                                   ----------------------------------------
                                                                     2000           1999             1998
                                                                   --------        -------         --------

<S>                                                                <C>             <C>             <C>
Supplemental information
Cash paid during the year for interest                             $     2         $     15        $     16
                                                                   ========        ========        ========
Significant non-cash transactions
Issuance of warrants for future services                           $    --         $    262        $     --
                                                                   ========        ========        ========
Shares issued in lieu of rent                                      $    207        $     --        $     --
                                                                   ========        ========        ========
Shares issued to placement agent                                   $    297        $     --        $     --
                                                                   ========        ========        ========
Warrants issued to convertible debenture holders                   $    219        $     --        $     --
                                                                   ========        ========        ========
Warrants issued to placement agents                                $  1,615        $     --        $     --
                                                                   ========        ========        ========
</TABLE>

See accompanying notes.


                                       44
<PAGE>


                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 2000

1. Organization

Operations

TCPI, Inc. and subsidiaries (the Company) are 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 other point of care locations
throughout the world. The Company's medical diagnostic products employ its
patented and proprietary membrane-based technology. In addition to its ongoing
diagnostics business, the Company is involved in the commercialization of
transdermal and dermal drug delivery technologies and skin permeation enhancers.

Basis of Presentation

Since inception, the Company has experienced recurring operating losses and
negative cash flows from operations. The Company's operating losses have in
large part been due to insufficient revenues from the Company's current product
portfolio to support its operating costs, including those related to the
development of the Company's future products. In addition, significant costs
were incurred during the three year period ended December 31, 2000 relating to
ongoing litigation involving the Company (refer to Note 9, Commitments and
Contingencies). These conditions raise substantial doubt about the Company's
ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company must raise
additional funds to sustain research and development, provide for future
clinical trials and continue its operations until it is able to generate
sufficient revenue from the sale and/or licensing of its products to support its
operations. The Company plans to obtain required financing through one or more
methods, including increasing the Company's number of authorized shares of
common stock to enable the Company to access its existing equity financing
arrangements, entering into additional equity financing arrangements, and
negotiating additional licensing or collaboration agreements with other
companies. There can be no assurance that the Company will be successful in
accessing or raising such funds on terms acceptable to it, or at all, or that
sufficient additional capital will be raised to fund current operations and
complete commercialization of the Company's current product candidates. The
Company's future success is dependent upon raising additional monies to provide
for the necessary operations of the Company. If the Company is unable to obtain
additional financing, there would be a material adverse effect on the Company's
business, financial position and results of operations. The Company's
continuation as a going concern is dependent on its ability to generate
sufficient cash flows to meet its obligations on a timely basis, to obtain
additional financing as may be required and, ultimately, to attain profitable
operations. The consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from
the outcome of this uncertainty.

2. Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include Health-Mark
Diagnostics, L.L.C. (Health-Mark), TCPI, S.R.L., Healthcheck C.V., TCPI European
Holdings B.V., TCPI Holdings, Limited and Health Test, Inc. Significant
intercompany transactions and accounts have been eliminated.


                                       45
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

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. The Company performs
reviews of the credit worthiness of its depository banks. The Company has not
experienced any losses on its deposits of cash and cash equivalents.

Investments

Investments are deemed by management to be available for sale and, accordingly,
are carried at fair market value based on quoted market prices, with resulting
unrealized holding gains and losses reported as a separate component of other
comprehensive income or loss. Realized gains and losses and declines in value
judged to be other-than-temporary are included in other income. Interest and
dividends on investments are included in interest income. The cost of
investments sold is based on the specific identification method.

Inventory

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

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from five to seven years. Routine maintenance and repairs that do not extend the
life of the assets are charged to expense as incurred and major renovations or
improvements are capitalized.

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 the legal lives or
estimated useful lives 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 Company periodically reviews its intangible assets to assess
recoverability and a charge will be recognized in the consolidated statement of
operations if a permanent impairment is determined to have occurred.
Recoverability of intangibles is determined based on undiscounted future
operating cash flows from the related business unit or activity. The amount of
impairment, if any, would be measured based on discounted future operating cash
flows using a discount rate reflecting the Company's average cost of funds. The
Company does not believe that any impairment has occurred as of December 31,
2000, 1999 and 1998.

Valuation of Long-Lived Assets

Long-lived assets, including intangible assets, are reviewed for potential
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset or group of assets may not be recoverable. When
evaluating groups of assets, management evaluates them at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
groups of assets. If the sum of the undiscounted cash flows is less than the
carrying amount of the assets or group of assets, an impairment loss will be
recognized in the consolidated statement of operations. The impairment loss, if
any, would be measured as the amount by which the carrying amount of the asset
or group of assets exceeds the fair value of the assets. The Company does not
believe that any impairment has occurred as of December 31, 2000, 1999 and 1998.


                                       46
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Revenue Recognition

Revenues are recognized when title or risk of ownership transfers, which is
generally at time of shipment. Product returns are permitted only in limited
circumstances and are estimated and reflected as adjustments to current period
sales.

Payments received in advance of shipment of products are recognized as deferred
revenue in the consolidated balance sheets until the related products are
shipped, the risk of ownership transfers and all contractual obligations have
been met.

Research and development contract revenue is recognized when the Company has
fulfilled its obligations in accordance with the provisions of the contractual
arrangements and collectibility is reasonably assured.

Research and Development Costs

Research and development costs are expensed as incurred. Payments received for
research and development arrangements are recognized as research and development
contract revenue when the services are performed and collectibility is
reasonably assured.

Advertising Costs

Advertising costs included in selling, general and administrative expense are
expensed as incurred, and totaled approximately $67,000, $616,000, and $521,000
for the years ended December 31, 2000, 1999 and 1998, respectively.

Accounting for Stock Based Compensation

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

Under the Company's stock option plans, the Company may grant stock options or
warrants for a fixed number of shares to independent consultants and contractors
primarily with an exercise price equal to the fair market value of the shares on
the date of grant. The Company accounts for these stock option or warrant grants
using the fair value method of Financial Accounting Standards Board (FASB)
Statement of Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation and EITF 96-18, Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.

Dividends and Net Loss Per Common Share

Basic and diluted net loss per common share is calculated using the weighted
average number of common shares outstanding during the respective periods.
Potential common stock relating to options, warrants and convertible preferred
stock is not included in the computation of diluted net loss per common share in
2000, 1999 and 1998 as its effect is antidilutive. At December 31, 2000 and
1999, approximately 67,400,000 and 31,151,000 shares, respectively, of
potentially issuable common stock relating to options, warrants, and convertible
debentures and preferred stock (both estimated based on the current conversion
ratio) were excluded from the calculation of diluted net loss per share, since
their effect is antidilutive. In 2000, 1999 and 1998, net loss per common share
reflects the effect of accrued


                                       47
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

dividends related to the Series A convertible preferred stock and accretion to
the redemption value of the Series A convertible redeemable preferred stock.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between the financial reporting and tax bases 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.

Recent Pronouncements

During 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which, as amended by SFAS No. 137, is effective for
fiscal years beginning after June 15, 2000. This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. As of December 31, 2000, the Company is
not party to any derivative instruments. Therefore, the adoption of SFAS No. 133
will not have a material impact on the Company's financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

3. Estimated Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, investments, trade accounts
receivable and accounts payable reflected in the balance sheets approximate
market value. The market value of investments is determined based upon quoted
prices for the same or similar securities (see Note 5). Management believes that
the other financial instruments approximate market value because they were
entered into during the current year and there have been no significant changes
in their status that would affect their market value. Based on current interest
rates, the fair market value of the Company's convertible debentures
approximates their carrying value at December 31, 2000.

4. Details of Balance Sheet

Details of selected balance sheet accounts at December 31 are as follows (in
thousands):

                                                         2000           1999
                                                      ---------      ---------
         Accounts receivable:
            Accounts receivable                       $   1,313      $   1,481
            Allowance for doubtful accounts                (125)          (318)
                                                      ---------      ---------
                                                      $   1,188      $   1,163
                                                      =========      =========
         Inventories:
            Raw materials and supplies                $  1,367       $   1,807
            Work in process                                 92               4
            Finished goods                                 278             225
                                                      --------       ---------
                                                      $   1,73       $   2,036
                                                      ========       =========



                                       48
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

4. Details of Balance Sheet (Continued)

                                                         2000           1999
                                                      ---------      ---------
         Property and equipment:
            Furniture, fixtures and equipment         $  3,469       $  3,766
            Leasehold improvements                         121            174
                                                      --------       --------
                                                         3,590          3,940
            Accumulated depreciation and amortization   (1,858)        (1,844)
                                                      --------       ---------
                                                      $  1,732       $  2,096
                                                      ========       ========
         Patents and trademarks:
            Patents and trademarks                    $ 15,572       $ 15,403
            Accumulated amortization                    (5,180)        (4,147)
                                                      --------       --------
                                                      $ 10,392       $ 11,256
                                                      ========       ========
         Goodwill:
            Goodwill                                  $  2,494       $  2,494
            Accumulated amortization                      (859)          (687)
                                                      --------       --------
                                                      $  1,635       $  1,807
                                                      ========       ========
         Deferred financing costs:
            Deferred financing costs                  $  2,354       $     --
            Accumulated amortization                      (109)            --
                                                      --------       --------
                                                      $  2,245       $     --
                                                      ========       ========
         Accrued expenses:
            Litigation costs                          $  1,011       $    737
            Rent                                            --            231
            Severance                                      180             --
            Insurance                                       43            126
            Other                                          317            266
                                                       -------       --------
                                                       $ 1,551       $  1,360
                                                        =======      ========

5. Investments

Investments at December 31, 1999 consist of the following (in thousands):

                                                                        Gross
                                                        Unrealized       Fair
                                             Cost         Losses         Value
                                         ---------      ------------   ---------

         U.S. Corporate bond               $  210        $ (1)          $  209
         U.S. Government agency bonds       2,363         (32)           2,331
                                           ------        ----           ------
                                           $2,573        $(33)          $2,540
                                           ======        ====           ======

The Company did not hold any investments at December 31, 2000.


                                       49
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

6. Income Taxes

The components of the income tax expense for the years ended December 31 are as
follows (in thousands):

                                           2000         1999       1998
                                          -------     --------    -------

         Current                          $  --       $   --       $  --
         Deferred                            --        4,140          --
                                          -----       ------       -----
         Total                            $  --       $4,140       $  --
                                          =====       ======       =====

Significant components of the Company's deferred tax assets (liabilities) as of
December 31 are as follows (in thousands):

                                                   2000              1999
                                                  ------           -------

         Net operating losses                     $15,571          $11,870
         Deferred revenue                              --              310
         Litigation accrual                           208              191
         Depreciation and amortization               (183)              30
         Allowance for doubtful accounts               47              121
         Other                                         85              146
                                                  -------           ------
         Net deferred tax asset                    15,728           12,668
         Valuation allowance                      (15,728)         (12,668)
                                                 --------          -------
         Net deferred taxes                      $     --          $    --
                                                 ========          =======

SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, including tax
planning strategies that are prudent and feasible that the Company would
implement, management has determined that a valuation allowance of approximately
$15,728,000 and $12,668,000 at December 31, 2000 and 1999, respectively, is
necessary to reduce the net deferred tax assets to the amount that will more
likely than not be realized. In light of the further accumulation of operating
losses, the continued increase in the magnitude of operating losses and the
resulting decrease in liquid assets to fund future operations at December 31,
1999, management no longer believed that the tax planning strategies, which were
the basis for the net deferred tax assets of $4,140,000 at December 31, 1998,
were feasible or prudent. This resulted in an increase in the valuation
allowance of $4,140,000 in 1999 with a corresponding charge to income tax
expense. The valuation allowance increased by a total of approximately
$3,060,000 and $12,668,000 in 2000 and 1999, respectively.

At December 31, 2000, the Company has available net operating loss carryforwards
of approximately $12,562,000 relating to years prior to 1998, which expire in
the years 2010 through 2012, and net operating loss carryforwards of
approximately $28,816,000 relating to the years ended after December 31, 1998,
which expire in years 2018 through 2020.

The reconciliation of the expected income tax expense with the actual income tax
expense reported for the years ended December 31 computed on loss before income
taxes at federal statutory rates is as follows:


                                       50
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

6. Income Taxes (Continued)

                                                     2000      1999      1998
                                                     ----      ----      ----

         Tax at federal statutory rate              (34.0)%   (34.0)%   (34.0)%
         State and local income taxes, net of
            federal tax benefit                      (3.6)     (4.2)     (4.2)
         Nondeductible items                           .6        .5        .2
         Change in valuation allowance               34.8      74.3      38.4
         Other                                        2.2        .4       (.4)
                                                    -----    ------     -----
         Total                                         --%     37.0%       --%
                                                    =====    ======     =====

7. Related Party Transactions

The Company and its former chairman (Former Chairman) 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 Former Chairman 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
2000, 1999 and 1998, the Former Chairman earned approximately $91,000, $149,000
and $161,000, respectively, pursuant to the License Agreement. During 1999, the
Company advanced the Former Chairman $100,000 under the License Agreement, of
which $40,000 was included in due from related parties in the balance sheet at
December 31,1999 because such amount had not been earned. During 2000, the
Company made no advances to the Former Chairman under the License Agreement.

During August 1998, the Company's outside directors unanimously approved the
Company's guarantee for a period of up to 90 days of $750,000 of the collateral
obligations of the Former Chairman's family limited partnership (Partnership) to
a brokerage house. Under the terms of the Company's agreement with the
Partnership, the brokerage house called on the Company's guarantee; the
Partnership then executed and delivered to the Company a promissory note
personally guaranteed by the Former Chairman in an amount equal to the amount of
the guarantee. The note had a six month term, was payable on demand, and bore
interest at the rate of interest charged by the brokerage house (7 3/4% at
December 31, 2000). In February 1999, accrued interest was paid and the note was
extended an additional three months. After becoming due on May 26, 1999,
interest was paid and an additional extension of one year was authorized by the
Board of Directors.

On September 12, 2000, the Board of Directors voted to terminate the employment
of the Former Chairman pursuant to the termination without cause provision of
the Former Chairman's employment agreement. Simultaneously, the Board of
Directors voted to remove the Former Chairman as Chairman of the Board of
Directors and President and Chief Technical Officer of the Company.
Subsequently, the Former Chairman resigned as a Director of the Company. On
November 9, 2000, after a scheduled payment on the note was not made and the
principal amount of the loan was accelerated, the Company commenced an action
against the Partnership to collect the balance due on the note. The net amount
due to the Former Chairman, under the termination without cause provision of his
employment agreement as well as any other amounts due to the Former Chairman
from the Company, are being applied as reductions of the outstanding balance of
the promissory note due from the Former Chairman.

The balance of the note is approximately $638,000 and $647,000 at December 31,
2000 and 1999, respectively. As of December 31, 2000, approximately $281,000 of
the balance is included in current assets due from related parties in the
balance sheet based on the Company's projections that such amount will be repaid
or offset during 2001. The remainder of the balance of approximately $357,000 is
included in due from related party, long term. The Company recorded interest
income related to this note of approximately $50,000 and $54,000 for the years
ended December 31, 2000 and 1999, respectively.



                                       51
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

8. Sales and Significant Customers

The Company had a non-exclusive worldwide marketing and distribution agreement
with Boehringer Mannheim Italia (BMI) for its family planning diagnostic
products from 1992 to 1998. Following the acquisition of Boehringer Mannheim by
Roche Holdings AG (Roche), domiciled in Switzerland, the Company established a
new agreement during 1998 with Roche whereby the Company directly supplies its
finished and packaged family planning products to both corporate Roche
distributors and independent distributors around the world. A significant part
of the Company's business is dependent upon Roche. During the years ended
December 31, 2000, 1999 and 1998, Roche accounted for approximately 16%, 31% and
33% of sales, respectively. As of December 31, 2000 and 1999, accounts
receivable from Roche were approximately $4,000 and $143,000, respectively.

During the years ended December 31, 2000, 1999 and 1998, a significant portion
of the Company's business was dependent on one North American customer, CVS
Distribution, Inc. (CVS). During the years ended December 31, 2000, 1999 and
1998, CVS accounted for approximately 16%, 25% and 24%, respectively, of sales.
As of December 31, 2000 and 1999, accounts receivable from CVS were
approximately $196,000 and $253,000, respectively.

During the years ended December 31, 2000 and 1999, a significant portion of the
Company's business was dependent on one international customer, LVMH Moet
Hennessy Louis Vuitton, Inc. (LVMH). During the years ended December 31, 2000
and 1999, LVMH accounted for approximately 46% and 13% of sales. As of December
31, 2000 and 1999, accounts receivable from LVMH were approximately $578,000 and
$709,000, respectively.

Other than the foreign customers noted in the paragraphs above, other foreign
customers collectively accounted for no more than 5% of annual sales. A summary
of the Company's sales by product line is as follows:

                                                    2000     1999     1998
                                                    ----     ----     ----
          Point of care medical diagnostic
            products
                                                     48%      82%      96%
         Skin permeation enhancers                   46       13       --
         Other                                        6        5        4
                                                   ----     ----     ----
                                                    100%     100%     100%
                                                   ====     ====     ====

9. Commitments and Contingencies

Leases

The Company leases its operating facilities under an operating lease expiring in
October 2003. Rent expense under operating leases for the years ended December
31, 2000, 1999 and 1998 was approximately $352,000, $758,000 and $660,000,
respectively.

At December 31, 2000, future minimum rentals, subject to cost-of-living
adjustments, are approximately as follows (in thousands):

         2001                                             $347,000
         2002                                              347,000
         2003                                              297,000
                                                          --------
                                                          $991,000
                                                          ========


                                       52
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

9. Commitments and Contingencies (Continued)

Litigation

In December 1998, a jury returned a verdict against the Company, the Former
Chairman, and other unrelated corporate and individual defendants (the Lawsuit).
In its verdict, the jury found that the Former Chairman had misappropriated
trade secrets and awarded damages of $500,000 against the Former Chairman,
individually. Additionally, the jury found that both the Company and the Former
Chairman intentionally interfered with the plaintiffs' business relationships.
The jury awarded approximately $328,000 in damages against the Company in
connection with the second claim, but awarded no damages against the Former
Chairman, individually, in connection with that claim. In January 1999, a
judgment against the Company and the Former Chairman was entered by the trial
court in accordance with the verdict.

On January 29, 1999, the Company and the Former Chairman filed their appeal to
the Florida Fourth District Court of Appeal in West Palm Beach, Florida. On
March 29, 2000, the court issued its opinion reversing the judgment against the
Former Chairman for misappropriation of trade secrets. However, the appellate
court affirmed the judgment against the Company for tortious interference with a
business relationship.

On February 5, 2001, the Company formally announced that the parties to the
above referenced litigation have dismissed all the various lawsuits and related
counterclaims and have entered into a settlement agreement. In connection with
this settlement and the judgment previously entered described above, the Company
was required to pay a total settlement of $500,000, of which $388,000 was paid
in 2000. At December 31, 2000, the Company has recorded an accrual for loss in
the amount of $112,000 representing the unpaid balance of the $500,000
settlement.

In November 1998, a purported shareholder class action lawsuit was filed against
the Company. Eight additional complaints were subsequently filed in the same
court. These claims were filed on behalf of a purported class of persons who
purchased the Company's stock between November 27, 1995 and October 6, 1998. The
complaints alleged that the Company and certain officers and directors
artificially inflated the Company's stock price by issuing false and misleading
statements concerning the Company's prospects. The claims did not specify the
damages resulting from the alleged conduct. These cases were consolidated in
March 1999. On March 20, 2001, the United States District Court for the Southern
District of Florida issued a Final Order of Dismissal with prejudice of the
plaintiffs' claims. The Plaintiffs have until April 3, 2001 to seek
reconsideration of the dismissal or until April 19, 2001 to appeal the dismissal
order. The Company believes the claims lack merit and plans to contest
vigorously any motion for reconsideration or an appeal. The Company maintains
Directors and Officer's liability insurance, however, there can be no assurance
that such insurance coverage will be adequate to fund the costs of an award, if
any, or attorneys' fees related to these claims. At this time, it is not
possible to estimate the ultimate loss, if any, related to these claims and
therefore no accrual for loss has been recorded at December 31, 2000.

In August 1999, the U.S. District Court for the Northern District of California
confirmed an arbitration award against the Company in favor of Hooper &
Associates, Inc. for approximately $198,000. Gary Hooper was the president and
chief operating officer of Pharma Patch, PLC. The Company acquired certain
assets of Pharma Patch, PLC in November 1995. The arbitration award found that
Mr. Hooper was entitled to that amount pursuant to an employment agreement
between Mr. Hooper and Pharma Patch, PLC. A bond was posted in this matter to
stay enforcement of the judgment. As a result, enforcement of the arbitration
award has been stayed by a Florida court. Separately, the Company is pursuing
certain claims against Mr. Hooper related to other matters. On July 5, 2000, the
state court continued the stay of enforcement of the award during pendency of
the Company's claims against Mr. Hooper and Hooper & Associates, Inc. in the
federal action. During the year ended December 31, 2000, management determined
that payment of this $198,000 judgment is probable and has recorded an accrual
for loss equal to the amount of the arbitration award as of December 31, 2000.


                                       53
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

9. Commitments and Contingencies (continued)

In January 2000, the U. S. District Court for the Southern District of Florida
entered a judgment against the Company and the Former Chairman holding them both
liable, jointly and severally, for approximately $401,000, plus trial expenses
and post-judgment interest. The judgment was the result of a civil cost recovery
action brought against the Company and the Former Chairman by the United States
of America under the Comprehensive Environmental Response, Compensation, and
Liability Act. On October 6, 2000, the Company reached a settlement with the
United States in the amount of $650,000 payable over a 21-month period with the
first payment of approximately $113,000 due on October 13, 2000 and quarterly
payments made thereafter on the balance plus interest at the rate of 5.3% per
annum. The Company entered into a modification of the settlement agreement with
the United States, whereby the second quarterly payment will be due on April 16,
2001 and additional payments made quarterly thereafter. Under the terms of the
agreement, the Company made the first payment on October 13, 2000.

On September 12, 2000, the Board of Directors voted to terminate the employment
of its Former Chairman as Chairman, President, and Chief Technical Officer of
the Company pursuant to the termination without cause provision of the Former
Chairman's employment agreement. On October 19, 2000, the Company was served
with a summons and complaint in an action commenced by the Former Chairman. The
13 counts in the Former Chairman's Complaint are (1) rescission of the License
Agreement, (2) breach of contract with respect to a letter of intent executed on
September 13, 2000 between the Company and the Former Chairman (Letter of
Intent), (3) anticipatory breach of contract with respect to the License
Agreement and a previous license agreement, (4) breach of the duty of good faith
dealing, which the Former Chairman claims is owed to him, with respect to the
Letter of Intent and the License Agreement (5) alleged fraud in the inducement
of the signing by the Former Chairman of the Letter of Intent and License
Agreement, (6) fraud in the inducement against the individual directors and
officers defendants as in count 5, (7) promissory estoppel against the Company,
(8) promissory estoppel against the individual directors and officer defendants,
(9) unjust enrichment against the Company, (10) tortious interference with
contract against the individual directors and officer defendants, (11) breach of
fiduciary duty against the individual directors and officer defendants, (12)
Florida Racketeer Influenced and Corrupt Organizations Act count against the
individual directors and officer defendants and (13) common law conspiracy
against the individual directors and officer defendants. The Company believes
that the claims contained in this complaint are without merit and will
vigorously defend itself in this lawsuit. An unfavorable outcome of this
litigation would have a material adverse impact on the Company, including the
possibility the Company will not be able to sell its TD Glucose Monitoring
technology. At this time, it is not possible to estimate the ultimate loss, if
any, related to the resolution of these matters and therefore no accrual for
loss has been recorded as of December 31, 2000.

The Company and several other unrelated parties including Roche are involved in
patent infringement litigation with a competing company relative to a European
patent. The Company has agreed to indemnify Roche and its affiliates and their
respective officers against all damages, back royalties, costs, attorneys' fees
and the like arising from or related to any and all patent infringement actions.
The Company intends to vigorously defend the claims of the competing company. A
majority of the Company's diagnostic sales in Europe relate to products covered
by patents subject to this action. Consequently, a loss in this litigation may
have a material adverse effect on the Company's results of operations and
financial condition. At this time it is not possible to estimate the ultimate
loss, if any, related to the resolution of these matters and therefore no
accrual for loss has been recorded as of December 31, 2000.

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.


                                       54
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

10. Redeemable Preferred Stock

In May 1998, the Company adopted Amended and Restated Articles of Incorporation
designating 16,200 shares of the authorized preferred stock as Series A
Convertible Preferred Stock (Preferred Stock) with a stated value of $1,000 per
share. The conversion features of the Preferred Stock are described below and
under certain circumstances it is redeemable at the option of the holder.

On May 18, 1998, the Company issued to a single institutional investor 15,000
shares of Preferred Stock and warrants to purchase 150,000 shares of the
Company's common stock and received proceeds of approximately $14,360,000, net
of offering costs of approximately $640,000. The conversion price of the
Preferred Stock was established at 92% of the market price of the common stock
on the conversion date up to a maximum of $11.89 per share, with the possible
exception described in the following paragraph. The warrants are exercisable at
$11.89 per share. The Preferred Stock must be converted and the warrants can be
converted at any time during the five-year period that commenced on May 18,
1998, with the possible exceptions described in the following paragraph. The
Preferred Stock earns dividends at the rate of 6% per year, which accumulate and
increase the redemption value of the Preferred Stock.

If, on the conversion date, the closing price of the common stock is below
$9.51, then the conversion price will be equal to 115% of the market price at
that time. In this situation, the Company has the right, but not an obligation,
to redeem the Preferred Stock for cash in an amount equal to the value of the
common stock on the conversion date which otherwise would have been issued to
the holders of the Preferred Stock. The Company also has the right, but not an
obligation, to convert the Preferred Stock into Convertible Notes Payable (the
Notes) which would modify the conversion terms, bear interest at 10%, and mature
three years from the date of issue. The holder of the Notes can convert them at
any time during the three year period to maturity or can hold them to maturity
and redeem them for a cash payment equal to the principal amount plus accrued
interest. Additionally, if certain mandatory redemption events occur as defined
in the Amended and Restated Articles of Incorporation, the holder of any
outstanding shares of preferred stock has the right to require the Company to
redeem those shares at the stated redemption value.

The financing was arranged by placement agents who received a fee of
approximately $488,000 and a nontransferable option to purchase up to 1,200
shares of Preferred Stock upon the same terms and conditions as the
institutional investor and expiring on December 31, 1998. The placement agents
did not exercise this option.

The Preferred Stock was recorded at approximately $12,409,000, net of the value
of the beneficial conversion feature of approximately $1,731,000, and the value
allocated to the warrants was approximately $860,000, based on their estimated
fair value at the date of issuance. The Preferred Stock was accreted up to the
ultimate redemption value as of December 31, 1999 through periodic charges to
additional paid-in capital. For the year ended December 31, 1999 and 1998, the
Company recorded accretion of approximately $2,118,000 and $473,000,
respectively.

During the years ended December 31, 2000, 1999 and 1998, the institutional
investor converted 10,800; 3,350; and 300 shares, respectively, of preferred
stock and received approximately 20,266,000; 4,528,000; and 79,241 shares,
respectively, of the Company's common stock. Under the terms of the agreement,
the institutional investor can only convert its shares into cash (in lieu of
stock) upon the occurrence of certain significant events. One of the events,
which could trigger such a cash conversion, is the de-listing of the Company's
common stock from the NASDAQ national market. The Company was de-listed during
December 2000, and now trades on the OTC bulletin board. Subsequent to December
31, 2000, the institutional investor converted the remaining 550 shares of
Preferred Stock into 14,926,716 shares of common stock.

11. Common Stockholders' Equity

In May 2000, the Company entered into a subscription agreement with an
institutional investor, acting as placement agent, for the purchase of up to $25
million in common stock under a private equity line. The equity line provides
the Company the ability to issue to the placement agent common stock and
warrants periodically in amounts up to $2


                                       55
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

11. Common Stockholders' Equity (continued)

million per draw, subject to prior effectiveness of a registration statement and
subject to limitations based on certain market conditions. Pricing for each
common stock sale is based on current market prices at the time of each draw of
the equity line. The term of this investment agreement is for a 36-month period
from November 3, 2000, which is the date the registration statement covering the
resale of common stock by the placement agent was declared effective by the
Securities and Exchange Commission. At December 31, 2000, no shares of common
stock have been issued or sold to the placement agent under the investment
agreement.

In connection with the subscription agreement, on April 19, 2000, the Company
issued to the placement agent a warrant to purchase 312,500 shares of the
Company's common stock, exercisable for a period of five years from March 17,
2000 with an initial exercise price equal to $1.9063, which was the lowest
closing bid price for the five trading days before March 17, 2000. On April 19,
2000, the Company issued an additional 312,500 share warrant to the placement
agent from March 17, 2000, with an initial exercise price equal to $0.9375,
which was the lowest closing bid price for the five trading days immediately
before the closing date of May 3, 2000. The Company estimated the fair value of
these warrants to be approximately $1,041,000 using the Black-Scholes option
valuation model. The fair value of the warrants as well as approximately
$252,000 in other direct costs of obtaining the financing, are included as a
component of deferred financing costs in the balance sheet at December 31, 2000
and will be charged against the proceeds of future stock issuances under the
subscription agreement.

During the period from August 28, 2000 through November 22, 2000, the Company
entered into a series of securities purchase agreements with investors arranged
through another unrelated placement agent. Under this agreement, the Company
sold to the investors approximately $1.6 million of the Company's 6% convertible
debentures due on dates ranging from August 28, 2005 to November 22, 2005. The
debentures are convertible into shares of the Company's common stock at any time
after the closing dates, at the lesser of $1.05 per share or 80% of the average
closing bid prices of the Company's common stock during the 5 trading days
immediately preceding the conversion. The net book value of this beneficial
conversion feature was approximately $545,000 which was accreted to interest
expense over the period from issuance to the date of earliest conversion. For
the year ended December 31, 2000, the Company recorded interest expense of
approximately $545,000 related to this accretion. Also, in connection with the
issuance of the convertible debentures to the investors, the Company issued to
the investors warrants to purchase 639,997 shares of the Company's common stock,
which is equal to 20% of the number of shares of the Company's common stock that
would have been issuable upon conversion of the convertible debentures as of the
closing dates. The Company estimated the fair market value of these warrants to
be approximately $218,000 using the Black-Scholes option valuation model. The
Company allocated the portion of the proceeds of the debentures to the warrants
to additional paid in capital based on the relative fair value of the warrants
and the debentures at the time of issuance. The resulting discount of
approximately $219,000 is being amortized over the term of the debentures. The
warrants have an exercise price of $1.50 and a term of three years. Subsequent
to December 31, 2000, the investors converted $1,138,515 of the debentures into
approximately 25,985,000 shares of the Company's common stock.

On September 5, 2000, the Company entered into credit line agreement through the
placement agent. Under the credit line agreement, the Company has the option to
sell up to $10 million of the Company's 6% convertible debentures to the
placement agent, subject to a formula based on stock price and trading volume,
over a three year period beginning December 11, 2000. The debentures are
convertible into shares of the Company's common stock at the lesser of $1.40 per
share or 90% of the lowest closing bid price of the Company's common stock
during the 20 trading days immediately preceding the conversion.

In providing the Company with the convertible debenture transaction and credit
line, the placement agent received cash compensation of $190,000, which was
equal to 12% of the principal amount of convertible debentures issued to date
under the securities purchase agreement and a five-year warrant to purchase
2,010,000 shares of the Company's common stock at $1.50 per share. The Company
has the right to force conversion of the warrant if the closing price of its
common stock is $3.00 or higher for ten consecutive trading days. Upon
conversion of the warrants held by the


                                       56
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

11. Common Stockholders' Equity (continued)

debenture holders and the placement agent, the Company would receive additional
capital. Additionally, in consideration for closing the convertible debenture
transaction and arranging the credit line, the Company issued to the placement
agent 750,000 shares of the Company's common stock with a fair value of
approximately $297,000 on the date of issuance. The Company estimated the fair
market value of the warrants issued to the placement agent to be approximately
$574,000 using the Black-Scholes option valuation model. The fair market value
of the warrants issued to the placement agent, the fair market value of the
Company's common stock issued to the placement agent, and the cash compensation
paid to the placement agent are included as components of deferred financing
costs in the balance sheet and are being amortized over the five year life of
the agreements.

During the year ended December 31, 1999, the Company issued 400,000 warrants to
an investment banking company in exchange for consulting services related to
corporate finance and other financial services matters. The warrants are for a
term of five years and are excercisable into 200,000 shares of common stock if
the warrants have an exercise price of $1.19, are excercisable into 100,000
shares of common stock if the warrants have an exercise price of $2.00, and are
excercisable into 100,000 shares of common stock if the warrants have an
exercise price of $3.00. The warrants and a related deferred expense were
recorded at $262,000, which represents the estimated fair market value of the
warrants at the date of issuance. The deferred expense is being amortized on a
straight-line basis over the three year term of the related consulting
agreement. Selling, general and administrative expense includes approximately
$87,000 and $58,000 related to the amortization of these warrants during the
years ended December 31, 2000 and 1999, respectively.

During 1996, the Company issued 15,000 shares of common stock in lieu of rent
for a warehouse facility. The 15,000 shares of common stock had a fair market
value of $225,000 at the date of issuance, which was amortized to rent expense
on a straight-line basis over the three year term of the lease. During 1999, due
to a decrease in the value of the Company's common stock, an additional
agreement was reached with the lessor whereby the Company agreed to issue
approximately 169,000 additional shares of common stock with a fair market value
of approximately $207,000 at the date of the agreement, and a liability was
recorded for the fair value of the shares to be issued. These shares were issued
in February 2000. The approximately $207,000 of rent expense associated with the
additional agreement was included in rent expense over the remaining term of the
rental agreement, which ended during the year ended December 31, 1999.

In conjunction with the 1995 initial public offering, the Company issued 220,000
warrants with an exercise price of $2.60 and a term of four years to the
representative of the underwriters of the total warrants issued, 181,156 were
exercised and 38,844 were outstanding as of December 31, 1999. The 38,844
remaining outstanding expired in February 2000. The fair market value of the
warrants was recorded as a reduction of the proceeds from the issuance of common
stock.

During 2000, the Company amended its Incentive Stock Option Plan (the Plan) to
reserve 4,000,000 shares of common stock for issuance to employees or outside
directors (Participant) of the Company. The exercise price of any stock option
granted under the Plan to an eligible Participant 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 no later than ten years from the date of the grant, but the
vesting period is discretionary. The vesting periods for the options outstanding
under the Plan at December 31, 2000 range from one to five years from the date
of grant.


                                       57
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

11. Common Stockholders' Equity (continued)

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

                                                                    Weighted
                                                                    Average
                                                      Options    Exercise Price
                                                 -------------- ----------------
         Outstanding at January 1, 1998              249,000        $  11.56
         Granted                                     130,600            7.35
         Canceled                                     (9,600)          12.70
                                                  ----------        --------
         Outstanding at December 31, 1998            370,000           10.04
         Granted                                     518,800            1.14
         Canceled                                   (142,366)           9.66
                                                  ----------        --------
         Outstanding at December 31, 1999            746,434            3.93
         Granted                                     837,500            0.56
         Canceled                                   (186,014)           9.30
         Exercised                                    (3,020)           1.75
                                                  ----------       ---------
         Outstanding at December 31, 2000          1,394,900       $    1.20
                                                  ==========       =========
         Exercisable at December 31, 2000            502,500       $    2.17
                                                  ==========       =========
         Weighted-average fair value of
            options granted under the Plan
            during 2000                           $    0.51
                                                  =========

The Company has also granted options (not under the Plan) as incentives to
executives 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:


                                                                  Weighted
                                                                  Average
                                                  Options      Exercise Price
                                                 --------      --------------
         Outstanding at January 1, 1998           128,000        $  12.89
         Canceled                                 (78,000)          13.01
                                                 --------        --------
         Outstanding at December 31, 1998          50,000           13.00
         Granted                                   25,000            0.44
                                                 --------        --------
         Outstanding at December 31, 1999          75,000            8.81
         Granted                                       --              --
                                                 --------        --------
         Outstanding at December 31, 2000          75,000        $   8.81
                                                =========        ========
         Exercisable at December 31, 2000          58,333        $  11.21
                                                =========        ========
         Weighted-average fair value of
         options (not under the Plan)
         granted during 2000                   $      --
                                                ========

The vesting periods for options outstanding not issued under the Company's stock
option plan at December 31, 2000 range from immediate vesting to vesting three
years from the date of grant with expiration terms ranging from five to ten
years.


                                       58
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

11. Common Stockholders' 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 SFAS 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 loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method required by Statement 123.
The fair value for these options was estimated at the date of grant using
Black-Scholes option pricing model with the following weighted-average
assumptions for 2000 - risk-free interest rate of 5.74%; volatility factors of
the expected market price of the Company's common stock of 1.958; and a
weighted-average expected life of the option ranging from one to five years; for
1999 - risk-free interest rate of 5.52%; volatility factors of the expected
market price of the Company's common stock of 1.020; and a weighted-average
expected life of the option ranging from three to five years; and 1998 -
risk-free interest rate of 6.11%; volatility factors of the expected market
price of the Company's common stock of .701; and a weighted-average expected
life of the option ranging from three to five years. For all years presented the
assumed dividend yield in 0%.

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 is as follows (amounts in thousands, except per share
amounts):

                                                     2000      1999      1998
                                                    -----      ----      ----

         Pro forma net loss                       $(9,514)  $(16,191) $(10,606)
         Accrued dividends on and accretion to
            redemption value of convertible
            preferred stock                          (177)    (2,917)   (1,030)
                                                  -------   --------  --------
         Pro forma net loss attributable to
            common stockholders                   $(9,691)  $(19,108) $(11,636)
                                                   ======   ========  ========
         Pro forma net loss per
            common share                          $ (0.33)  $  (1.72) $  (1.16)
                                                   ======   ========  ========

The weighted-average remaining contractual life of options is 3 years.

Shares of common stock reserved for future issuance at December 31, 2000 are as
follows:

         Options                                   4,075,000
         Warrants                                  4,324,997
                                                  ----------
                                                   8,399,997
                                                  ==========



                                       59
<PAGE>

                           TCPI, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

12. Roche Acquisition

On May 20, 2000, the Company entered into an agreement with Roche to acquire
certain trademarks, distribution rights, and business assets of Roche for a
purchase price of approximately $7 million. The majority of the assets intended
to be acquired are located in South America with the balance in Europe. Upon
signing the agreement, the Company paid Roche a down payment of $500,000, which
is presented as asset purchase deposit in the accompanying December 31, 2000
balance sheet. The Company did not make the second and third payments due under
the asset purchase agreement. As a result of discussions with the Company
relative to the second and third payments which were not made, Roche notified
the Company that it intends to continue to operate the business assets in South
America. The Company has, however, with the concurrence of Roche Diagnostics,
taken over the marketing of the products in Germany, Italy, Spain and
Switzerland through an independent distributor that is well established in these
markets; and is in continuing discussions with Roche Diagnostics concerning the
acquisition of its assets in those countries. Roche has indicated, that the down
payment of $500,000 the Company made in May 2000 will be applied to the purchase
of these assets. The failure to complete this acquisition could have an adverse
effect on the Company's financial condition.

13.  Quarterly Data (Unaudited)

The following is selected quarterly financial data for the years ended December
31, 2000 and 1999.
<TABLE>
<CAPTION>
                                                                    Years ended December 31, 2000 and 1999
                                                                    (in thousands, except per share data)
                                            ---------------- ----------------- ---------------- ----------------- -----------------
                                              1st Quarter      2nd Quarter       3rd Quarter      4th Quarter          Total
                                            ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                             <C>               <C>              <C>               <C>               <C>
                   2000
-------------------------------------------
Net sales                                       $     1,187       $     1,125      $     1,002       $     4,148       $     7,462
Gross profit                                            478               511              427             1,256             2,672
Net loss                                             (2,541)           (2,051)          (2,204)           (2,178)           (8,974)
Net loss attributable to common
   stockholders                                      (2,638)           (2,091)          (2,230)           (2,192)           (9,151)
Basic and diluted net loss
   per share                                    $     (0.11)      $     (0.07)     $     (0.07)      $     (0.07)      $     (0.31)
Weighted average number
   of common shares outstanding                  24,067,260        29,793,240       30,792,916       $33,591,519        29,575,611

                   1999
-------------------------------------------
Net sales                                       $     1,386       $     1,289      $     1,267       $     1,490       $     5,432
Gross profit                                            572               556              517               181             1,826
Net loss                                             (2,476)           (2,268)          (2,799)           (7,796)          (15,339)
Net loss attributable to common
   stockholders                                      (2,875)           (2,664)          (3,129)           (9,588)          (18,256)
Basic and diluted net loss
   per share                                    $     (0.28)      $     (0.25)     $     (0.28)      $     (0.78)      $     (1.64)
Weighted average number
   of common shares outstanding                  10,399,144        10,636,626       11,099,557        12,327,190       $11,122,414

</TABLE>


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

         None.





                                       60
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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 10, 11, 12 and 13 is incorporated by
reference from our definitive proxy statement to be filed in connection with our
Annual Meeting of Shareholders to be held on April 30, 2001.

                                     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 37 of this report.

(2)      Financial Statement Schedules.




                                       61
<PAGE>

                                   TCPI, INC.
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                December 31, 2000
<TABLE>
<CAPTION>
                                                                     Additions
                                                            -------------------------
                                        Balance at           Charged to     Charged to
                                         Beginning of        Costs and    Other Accounts   Deductions -      Balance at End
Description                               Period             Expenses      - Describe       Describe           of Period
---------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>               <C>             <C>             <C>                <C>
Year Ended December 31, 2000:
Allowance for doubtful accounts           $   318,000       $   134,805     $      --       $  328,068(1)      $   124,737
Tax valuation allowance                    12,667,900         3,059,906            --               --          15,727,806
                                          -----------       -----------     ---------       ----------         -----------
Total                                     $12,985,900       $ 3,194,711     $      --       $  328,068(1)      $15,852,543
                                          ===========       ===========     =========       ==========         ===========

Year Ended December 31, 1999:
Allowance for doubtful accounts           $    75,000       $   280,419     $      --       $   37,419(1)      $   318,000
Tax valuation allowance                     4,349,325         8,318,575            --               --          12,667,900
                                          -----------       -----------     ---------       ----------         -----------
Total                                     $ 4,424,325       $ 8,598,994     $      --       $   37,419(1)       12,985,900
                                          ===========       ===========     =========       ==========         ===========

Year Ended December 31, 1998:
Allowance for doubtful accounts           $    18,000       $   198,000     $      --       $  141,000(1)      $    75,000
Tax valuation allowance                       572,801         3,776,524            --               --           4,349,325
                                          -----------       -----------     ---------       ----------         -----------
Total                                     $   590,801       $ 3,974,524     $      --       $  141,000(1)      $ 4,424,325
                                          ===========       ===========     =========       ==========         ===========
</TABLE>

 (1) Uncollected accounts written off, net of recoveries.

         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.






                                       62
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K
         (Continued)

                  (3)      Exhibits

Exhibit
Number       Code                          Description
-------      ----                          -----------
2.1          14         Business and Asset Purchase Agreement dated May 20, 2000
                        between Roche Diagnostics GmbH and TCPI Holdings, Ltd.
2.2          14         Guaranty Agreement dated May 20, 2000 between Roche
                        Diagnostics GmbH and the Company.
3.1          5          Amended and Restated Articles of Incorporation of the
                        Company.
3.2          5           Amended and Restated Bylaws of the Company.
3.3          4          Articles of Amendment to the Articles of Incorporation
                        of the Company.
3.4          15         Articles of Amendment of the Company's Amended and
                        Restated Articles of Incorporation.
4.2          3          Form of Common Stock Certificate of the Company.
4.3          11         Warrant to purchase Common Stock dated April 19, 2000 (1
                        of 2) between the Company and Swartz Private Equity,
                        LLC.
4.4          11         Warrant to purchase Common Stock dated April 19, 2000 (2
                        of 2) between the Company and Swartz Private Equity,
                        LLC.
4.5          11         Warrant between the Company and Swartz Private Equity,
                        LLC.
10.2         5          Amended and Restated 1992 Incentive Stock Option Plan.
10.3         5          Cancellation and Exclusive License Agreement between
                        Jack Aronowitz and the Company dated January 31, 1996.
10.4         5          Stock Option Agreement between the Company and Martin
                        Gurkin, Stuart R. Streger, Colin Morris, Kathryn
                        Harrigan, Clayton Rautbord and Stephen Dresnick.
10.5         15         The Company's 2000 Stock Option Plan.
10.6         2          Lease - Pompano Beach, Florida.
10.6.1       9          Business Lease Extension - Pompano Beach, Florida.
10.8         3          Warrant Agreement between the Company and Jack L.
                        Aronowitz.
10.8.1       1          Amended Employment Agreement dated October 9, 1998
                        between the Company and Jack L. Aronowitz.
10.9         1          Employment Agreement dated October 9, 1998 between the
                        Company and Jay E. Eckhaus.
10.17        7          Employment Agreement dated September 10, 1999 between
                        the Company and Elliott Block, Ph.D.
10.18        8          Employment Agreement dated November 22, 1999 between the
                        Company and Walter V. Usinowicz, Jr.
10.19        11         Employment Agreement dated May 27, 1999 between the
                        Company and Robert M. Morrow.
10.20        13         Investment Agreement dated May 3, 2000 between the
                        Company and Swartz Private Equity, LLC.
10.21        13         Registration of Rights Agreement dated May 3, 2000
                        between the Company and Swartz Private Equity, LLC.


                                       63
<PAGE>

10.22        17         Securities Purchase Agreement dated August 28, 2000.
10.23        17         Form of Warrant to Purchase Common Stock under the
                        Securities Purchase Agreement.
10.24        17         Form of Securities Purchase Agreement Debenture under
                        the Securities Purchase Agreement.
10.25        17         Placement Agency Agreement dated August 28, 2000 between
                        the Company and The May Davis Group, Inc.
10.26        17         Line of Credit Agreement dated September 5, 2000 between
                        the Company and GMF Holdings.
10.27        17         Form of Credit Line Debenture under the Credit Line
                        Agreement.
10.28        17         Registration Rights Agreement dated September 5, 2000.
10.29        17         Placement Agency Agreement dated September 5, 2000
                        between the Company and The May David Group, Inc.
10.30        17         Escrow Agreement dated August 28, 2000 between the
                        Company and First Union.
10.31        17         Escrow Agreement dated September 5, 2000 between the
                        Company and First Union. Filed
21           Herewith   Subsidiaries of the Company.
             Filed
23           Herewith   Consent of Ernst & Young LLP.

             Code        Code Description
             ---         ----------------
             1          Incorporated by reference to the Company's Form 10-Q
                        filed on November 12, 1998.

             2          Incorporated by reference to the Company's Registration
                        Statement on Form SB-2 filed on October 28, 1994 (No.
                        33-85756).
             3          Incorporated by reference to Amendment No. 4 to the
                        Company's Registration Statement on Form S-1 filed on
                        April 23, 1996 (No. 333-1272).
             4          Incorporated by reference to the Company's Form 8-K
                        filed on May 21, 1998.
             5          Incorporated by reference to the Company's Registration
                        Statement on Form S-1 filed on February 12, 1996 (No.
                        333-1272).
             6          Incorporated by reference to Amendment No. 2 to the
                        Company's Registration Statement on Form S-1 filed on
                        March 20, 1996.
             7          Incorporated by reference to the Company's Form 10-Q
                        filed on November 9, 1999.
             8          Incorporated by reference to the Company's Form 8-K
                        filed on December 15, 1999.
             9          Incorporated by reference to the Company's Form 10-K
                        filed on March 30, 2000.
             10         Incorporated by reference to the Company's Form 10-K
                        filed on March 30, 2000.
             11         Incorporated by reference to the Company's Form 10-Q
                        filed on May 16, 2000.
             12         Incorporated by reference to the Company's Proxy
                        Statement on Form 14A filed on May 31, 2000.




                                       64
<PAGE>

             13         Incorporated by reference to the Company's Registration
                        Statement on Form S-2 filed on June 9, 2000.
             14         Incorporated by reference to the Company's Form 8-K
                        filed on June 8, 2000.
             15         Incorporated by reference to the Company's Form 10-Q
                        filed on August 15, 2000.
             16         Incorporated by reference to Amendment No. 1 to the
                        Company's Registration Statement on Form S-2 filed on
                        July 26, 2000.
             17         Incorporated by reference to Amendment No. 2 to the
                        Company's Registration Statement on Form S-2 filed on
                        October 18, 2000.
             18         Incorporated by reference to Amendment No. 3 to the
                        Company's Registration Statement on Form S-2 filed on
                        November 1, 2000.
                  (4)   Current Reports on Form 8-K

                           During the year ended December 31, 2000, we filed the
following Reports on Form 8-K:

                       Current Report on Form 8-K ........... February 18, 2000
                       Current Report on Form 8-K ........... June 8, 2000
                       Current Report on Form 8-K ........... June 30, 2000
                       Current Report on Form 8-K ........... September 14, 2000
                       Current Report on Form 8-K ........... November 30, 2000
                       Current Report on Form 8-K ........... December 6, 2000
                       Current Report on Form 8-K ........... December 11, 2000





                                       65
<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.

                             TCPI, INC.

                             By:  /signed / Elliott Block, Ph.D.
                                  --------------------------------------------
                                 Elliott Block, Ph.D.
                                 President, Chief Executive Officer and Director

                             Date:    March 20, 2001


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                                            Title                                       Date
---------                                            -----                                       ----
<S>                                                  <C>                                         <C>
/signed / Elliott Block, Ph.D.                       President, Chief Executive Officer          March 20, 2001
-------------------------------------                and Director
Elliott Block, Ph.D.                                 (Principal Executive Officer)


/signed / Walter V. Usinowicz, Jr.                   Vice President of Finance and               March 20, 2001
------------------------------------                 Chief Financial Officer
Walter V. Usinowicz, Jr.                             (Principal Financial Officer and
                                                     Principal Accounting Officer)


/signed / Martin Gurkin                              Chairman of the Board                       March 20, 2001
-------------------------------------
Martin Gurkin, Ph.D.


/signed / Noel Buterbaugh                            Director                                    March 20, 2001
------------------------------------
Noel Buterbaugh

/signed / Clayton Rautbord                           Director                                    March 20, 2001
------------------------------------
Clayton Rautbord

/signed / Stanley M. Reimer, Ph.D.                   Director                                    March 20, 2001
------------------------------------
Stanley M. Reimer, Ph.D.

</TABLE>




                                       66
<PAGE>



Exhibit
Number       Code                           Index To Exhibits
------       ----        -------------------------------------------------------

2.1          14         Business and Asset Purchase Agreement dated May 20, 2000
                        between Roche Diagnostics GmbH and TCPI Holdings, Ltd.
2.2          14         Guaranty Agreement dated May 20, 2000 between Roche
                        Diagnostics GmbH and the Company.
3.1          5          Amended and Restated Articles of Incorporation of the
                        Company.
3.2          5          Amended and Restated Bylaws of the Company.
3.3          4          Articles of Amendment to the Articles of Incorporation
                        of the Company.
3.4          15         Articles of Amendment of the Company's Amended and
                        Restated Articles of Incorporation.
4.2          3          Form of Common Stock Certificate of the Company.
4.3          11         Warrant to purchase Common Stock dated April 19, 2000 (1
                        of 2) between the Company and Swartz Private Equity,
                        LLC.

4.4          11         Warrant to purchase Common Stock dated April 19, 2000 (2
                        of 2) between the Company and Swartz Private Equity,
                        LLC. 4.5 11 Warrant between the Company and Swartz
                        Private Equity, LLC.
10.2         5          Amended and Restated 1992 Incentive Stock Option Plan.
10.3         5          Cancellation and Exclusive License Agreement between
                        Jack Aronowitz and the Company dated January 31, 1996.
10.4         5          Stock Option Agreement between the Company and Martin
                        Gurkin, Stuart R. Streger, Colin Morris, Kathryn
                        Harrigan, Clayton Rautbord and Stephen Dresnick.
10.5         15         The Company's 2000 Stock Option Plan.
10.6         2          Lease - Pompano Beach, Florida.
10.6.1       9          Business Lease Extension - Pompano Beach, Florida.
10.8         3          Warrant Agreement between the Company and Jack L.
                        Aronowitz.
10.8.1       1          Amended Employment Agreement dated October 9, 1998
                        between the Company and Jack L. Aronowitz.
10.9         1          Employment Agreement dated October 9, 1998 between the
                        Company and Jay E. Eckhaus.
10.17        7          Employment Agreement dated September 10, 1999 between
                        the Company and Elliott Block, Ph.D.
10.18        8          Employment Agreement dated November 22, 1999 between the
                        Company and Walter V. Usinowicz, Jr.
10.19        11         Employment Agreement dated May 27, 1999 between the
                        Company and Robert M. Morrow.
10.20        13         Investment Agreement dated May 3, 2000 between the
                        Company and Swartz Private Equity, LLC.
10.21        13         Registration of Rights Agreement dated May 3, 2000
                        between the Company and Swartz Private Equity, LLC.
10.22        17         Securities Purchase Agreement dated August 28, 2000.
10.23        17         Form of Warrant to Purchase Common Stock under the
                        Securities Purchase Agreement.


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<PAGE>

10.24        17         Form of Securities Purchase Agreement Debenture under
                        the Securities Purchase Agreement.
10.25        17         Placement Agency Agreement dated August 28, 2000 between
                        the Company and The May Davis Group, Inc.
10.26        17         Line of Credit Agreement dated September 5, 2000 between
                        the Company and GMF Holdings.
10.27        17         Form of Credit Line Debenture under the Credit Line
                        Agreement.
10.28        17         Registration Rights Agreement dated September 5, 2000.
10.29        17         Placement Agency Agreement dated September 5, 2000
                        between the Company and The May David Group, Inc.
10.30        17         Escrow Agreement dated August 28, 2000 between the
                        Company and First Union.
10.31        17         Escrow Agreement dated September 5, 2000 between the
                        Company and First Union.

             Filed
21           Herewith   Subsidiaries of the Company.
             Filed

23           Herewith   Consent of Ernst & Young LLP.

             Code       Code Description
             ----       ----------------
             1          Incorporated by reference to the Company's Form 10-Q
                        filed on November 12, 1998.
             2          Incorporated by reference to the Company's Registration
                        Statement on Form SB-2 filed on October 28, 1994 (No.
                        33-85756).
             3          Incorporated by reference to Amendment No. 4 to the
                        Company's Registration Statement on Form S-1 filed on
                        April 23, 1996 (No. 333-1272).
             4          Incorporated by reference to the Company's Form 8-K
                        filed on May 21, 1998.
             5          Incorporated by reference to the Company's Registration
                        Statement on Form S-1 filed on February 12, 1996 (No.
                        333-1272).
             6          Incorporated by reference to Amendment No. 2 to the
                        Company's Registration Statement on Form S-1 filed on
                        March 20, 1996.
             7          Incorporated by reference to the Company's Form 10-Q
                        filed on November 9, 1999.
             8          Incorporated by reference to the Company's Form 8-K
                        filed on December 15, 1999.
             9          Incorporated by reference to the Company's Form 10-K
                        filed on March 30, 2000.
             10         Incorporated by reference to the Company's Form 10-K
                        filed on March 30, 2000.
             11         Incorporated by reference to the Company's Form 10-Q
                        filed on May 16, 2000.
             12         Incorporated by reference to the Company's Proxy
                        Statement on Form 14A filed on May 31, 2000.
             13         Incorporated by reference to the Company's Registration
                        Statement on Form S-2 filed on June 9, 2000.
             14         Incorporated by reference to the Company's Form 8-K
                        filed on June 8, 2000.
             15         Incorporated by reference to the Company's Form 10-Q
                        filed on August 15, 2000.


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<PAGE>

             16         Incorporated by reference to Amendment No. 1 to the
                        Company's Registration Statement on Form S-2 filed on
                        July 26, 2000.
             17         Incorporated by reference to Amendment No. 2 to the
                        Company's Registration Statement on Form S-2 filed on
                        October 18, 2000.
             18         Incorporated by reference to Amendment No. 3 to the
                        Company's Registration Statement on Form S-2 filed on
                        November 1, 2000.






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