<PAGE>

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

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the fiscal year ended March 31, 2004

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ___________ to _____________

Commission File No.  1-12362

                                 LIFEPOINT, INC.
             (Exact Name of Registrant as Specified in Its charter)

             DELAWARE                                           33-0539168
 (STATE OR OTHER JURISDICTION OF                              (IRS EMPLOYER
  INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

      1205 SOUTH DUPONT STREET
        ONTARIO, CALIFORNIA                                        91761
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)

        Registrant's telephone number including area code: (909) 418-3000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
             Effective April 19, 2000, Common Stock, $.001 par value

           SECURITIES REGISTERED PURSUANT TO SECTION 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 12 months (or for 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]

Indicate by check mark whether Registrant is an accelerated filer (as defined in
Rule 12B-2 of the Act). Yes [ ] No [X].

The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Registrant was approximately $10,578,540 (based on the
closing price of Registrant's Common Stock on the American Stock Exchange at
September 30, 2003, or $0.42 per share).

As of June 20, 2004, there were 60,881,706 shares of the Registrant's Common
Stock outstanding.


<PAGE>

PART I
ITEM 1.  BUSINESS

Safe Harbor Statement under the Private Litigation Reform Act of 1995

         With the exception of historical information, the matters discussed in
this Annual Report on Form 10-K include certain forward-looking statements that
involve risks and uncertainties. As a result, the actual results realized by
LifePoint, Inc. ("LifePoint" or the "Company") could differ materially from the
statements made herein. Factors that could affect results are discussed more
fully in the sections entitled "Forward-Looking Statements" and "Risk Factors"
in this Item 1 and elsewhere in this Report. Although forward-looking statements
help to provide more complete information about LifePoint, stockholders of
LifePoint, as well as prospective investors, are cautioned not to place undue
reliance on forward-looking statements made in this Report.

GENERAL OVERVIEW

         LifePoint is a medical technology company that develops, manufactures
and markets the LifePoint(R) IMPACT(R) TEST SYSTEM - a rapid diagnostic testing
and screening device for use in workplace, home health care, ambulance, pharmacy
and law enforcement settings. LifePoint's patented and proprietary technologies
for the use of saliva as a non-invasive, blood-comparable test specimen, used in
conjunction with the flow immunosensor technology licensed from the United
States Navy (the "USN"), has allowed LifePoint to develop and market a broadly
applicable, non-invasive, rapid, on-site diagnostic test system.

BUSINESS SUMMARY

         On February 26, 2002, the Company released the IMPACT Test System for
sale to the international and domestic forensic markets. The IMPACT Test System
is a proprietary test system that generates almost immediate, diagnostic results
for a broad variety of substances by non-invasively testing saliva, including
alcohol and the following commonly used drugs of abuse: cocaine, opiates (such
as heroin and morphine), phencyclidine (PCP), amphetamine (including
methamphetamine and ecstasy), and tetrahydrocannabinol (THC, marijuana)
(collectively the "Drugs of Abuse").

         The Company is initially marketing the product in the United States in
markets not regulated by the Food and Drug Administration (the "FDA"), such as
law enforcement and criminal justice testing, and in Europe and certain Asian
countries where no FDA clearance is required. The Company will only be able to
commence marketing of the product in the United States FDA regulated markets,
such as medical markets, when FDA clearance is obtained. The Company anticipates
such clearance to occur within the next six to eight months. Usually, FDA 510(k)
clearance takes approximately 100 days (based on the current experience of other
companies at the FDA) after completion of submissions. The Company has begun the
submission process with the FDA and intends to apply for a total of at least
nine separate FDA clearances; six submissions have been initiated to date. There
can be no assurance as to when and if the Company will complete its submissions
to the FDA, as to when and if the FDA will give its clearance and as to when and
if marketing in either medical or other regulated markets will commence.
Management recognizes that, although FDA clearance is not generally required for
use of drug testing for non-medical purposes, such as law enforcement agencies'
testing or international markets, FDA clearance of the product may assist the
Company's marketing in the United States to such customers. See the sections
"Governmental Regulation" and "Marketing and Distribution" under this caption
"Business."

         Management anticipates that the Company's saliva based drugs of abuse
and alcohol test will become evidential in the law enforcement market. However,
management expects that the Company's tests may be performed on a non-evidential
basis in some portions of the industrial marketplace where confirmation testing
is required by regulation. If a drug of abuse is detected in the initial test,
in some markets, the sample may need to be forwarded to a laboratory, where a
confirmatory analysis will be performed. Usually gas chromatography/mass
spectrometry ("GC/MS") is employed for the confirmatory test. On February 25,
2002, the Company reported that it established a relationship with Quest
Diagnostics, a leader in employee testing in the United States, to perform GC/MS
confirmation testing on saliva samples when requested by some of the IMPACT Test
System customers. This relationship enables the Company to provide a quick,
low-cost, easy to implement laboratory secondary/confirmation testing service on
saliva samples that have been collected automatically and non-invasively by the

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IMPACT Test System. Quest Diagnostics has developed new protocols and procedures
to provide confirmation testing at the low levels of sensitivity required from a
saliva sample using the LifePoint Saliva Collection Device. This capability
provides LifePoint's customers with the ability to meet the requirements for
testing federally regulated safety-sensitive employees.

         The Company's marketing analysis has indicated a greater market
potential for a saliva-based test for drugs of abuse and alcohol via a
completely automated, integrated transportable instrument, which generates a
lab-quality result, by law enforcement agencies, occupational health clinics,
hospitals and other medical facilities than for a urine sample, tested either at
a laboratory or on-site. However, the use of this product in other potential
markets that are testing for recent drug use (over the last two to five days) or
"lifestyle testing," such as pre-employment testing, may be somewhat limited
with the Company's initial product. See the section "Competition" under this
caption "Business."

PRODUCTS

IMPACT TEST SYSTEM - INSTRUMENT
-------------------------------

         The IMPACT Test System is, to the Company's knowledge, the first
saliva-based, on-site drug and alcohol testing system that delivers
simultaneous, blood-comparable results for drugs of abuse and quantitative
results for alcohol within minutes. The product and its technologies provide the
advantages of non-invasive sample collection, accuracy, speed, and convenience.
Using saliva as the specimen, which contains many of the same molecules as
plasma, the IMPACT Test System produces objective, numeric results with the
biological relevancy and accuracy of blood, serum or plasma.

         The Company believes that the IMPACT Test System's unique effectiveness
begins with flow immunosensor technology, which is licensed from the USN. The
flow immunosensor technology, a kinetic immunoassay, is simple, rapid, and often
as sensitive as laboratory-based immunoassays. Up to ten assays can be performed
in a single test panel on a single specimen with results within five minutes.
Most importantly, the flow immunosensor technology can produce semi-quantitative
results. Other on-site testing methods, such as lateral flow membrane
technology, are not nearly as sensitive or rapid. More importantly, they can
only provide "yes/no" qualitative results - even when an instrument reader is
used.

         The Company believes that the IMPACT Test System's effectiveness lies
in its combination of high sensitivity chemistry and fluorescence detection
technologies. With the IMPACT Test System, sample collection, processing, test
analysis and interpretation are integrated seamlessly. Saliva is automatically
collected via aspiration with a vacuum device similar to that used in dentistry.
The sample is measured as it is collected, and the collection occurs in less
than a minute, much faster and more accurately than if performed by an
absorbent-based collection device. The saliva flows into a disposable cassette
that provides up to ten tests in a panel format. This proprietary collection
method and integrated sample processing virtually eliminate the possibilities of
adulteration or substitution, sample mix-up, and user contact with specimen.

         The IMPACT TEST SYSTEM provides the following advantages:

         Tests for five or six drugs of abuse and alcohol simultaneously;
         Delivers numeric "blood-comparable", lab-quality results;
         Provides rapid collection and results within minutes;
         Reduces chain-of-custody issues associated with laboratory transport;
         Complete automation minimizes training and operator error;
         On-site testing eliminates transportation of donors and/or samples

         On the other hand, the IMPACT Test System using saliva may not be as
attractive as devices using urine to perform pre-employment testing in the
industrial market. See the section "Competition" under this caption "Business"
elsewhere in this Report.

         The small desktop instrument automatically manages all functions
related to collecting the sample and running the test panel including:

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<PAGE>

         Ensures adequate sample collection
         Automatic quality check of instrument systems to ensure proper function
         Automatic quality control
         Automatic sample processing and analysis
         Delivers and stores electronic and hard-copy test results
         Laboratory quality test results
         Automatic result interpretation
         User definable breakpoints

         The Company plans the development of a portable test system that will
enable law enforcement officers to carry the device in all vehicles and will
allow for on scene diagnostics by EMTs and paramedics.

SALIVA TEST MODULES
-------------------

         The Saliva Test Modules ("STM") are designed to work with the IMPACT
Test System to test for a variety of molecules. Each STM consists of the
mouthpiece, tubing and test cassette. The initial STM's test for alcohol and the
following commonly used drugs of abuse in the United States: marijuana, cocaine,
amphetamines/methamphetamines, opiates (heroin), PCP and benzodiazepines.
Additionally, the Company is developing tests for tricyclic antidepressants,
barbiturates and ecstasy.

SALIVA COLLECTION DEVICE AND CARRIER
------------------------------------

         Designed to work with the IMPACT Test System, this device allows
customers to collect an additional sample of saliva for confirmation testing in
those settings where a second specimen collection or confirmation test is
requested or, in the case of federally regulated safety sensitive employees,
required. The carrier is a reusable device into which the collection device is
placed. The collection device contains a mouthpiece, tubing and a tamper proof
storage container that will preserve the sample and allow for easy transport.

QUALITY CHECK
-------------

         Quality Check is a single use liquid control material for use in system
evaluation and control testing. The material developed in house, but
manufactured by an outside vendor, replicates a saliva sample with a positive or
negative drug test. Each Quality Check product contains one positive and one
negative control sample.

PATENTS AND TECHNOLOGY

         Copies of the agreements and any amendments thereto hereinafter
mentioned in the first two subsections are filed (by incorporation by reference)
as exhibits to this Report and are incorporated herein by this reference.

LICENSE AGREEMENTS
------------------

         In April 1999, the Company and the USN completed negotiations for an
expansion of the ten-year license agreement (the "License Agreement") originally
granted to the Company's then parent Substance Abuse Technologies, Inc. ("SAT")
in 1992 and transferred to the Company in 1997. The original License Agreement
covered the exclusive use by the Company of the USN's technology (U.S. Patent
No. 5,183,740, "Flow Immunosensor Method and Apparatus," issued on February 2,
1993) for testing saliva for drugs of abuse. The new terms expand the
field-of-use from drugs of abuse and anabolic steroids on urine samples to
include all possible diagnostic uses for saliva. In addition, the royalty rate
was reduced to 3% on the technology-related portion of the disposable cassette
sales and 1% on instrument sales from the previous 10% on all LifePoint product
sales. The minimum royalty payment was reduced to $50,000 in 2001 and $100,000 a
year thereafter versus the previous $100,000 per year. The License Agreement may
be terminated by the USN in the event the Company files bankruptcy or is forced
into receivership, willfully misstates or omits material information, or fails
to market the technology. Either party may terminate the agreement upon mutual
consent. Termination of the Licensing Agreement for the USN patent would end the
Company's rights to develop products under the patent. Termination of the
license would require the Company to make changes to its products that could
further delay marketing thereof.

                                       3


<PAGE>

         The Company is further developing the USN-developed technology for
application in its own proprietary test system.

CRDA
----

         On April 16, 1992, SAT entered into a 12-month cooperative research
agreement ("CRDA") with the Naval Research Laboratory section of the USN (the
"NRL") to further develop the licensed technology of the "Flow Immunosensor".

         Pursuant to an agreement dated as of January 1, 1993 by and between SAT
and the Company, SAT assigned to the Company all of its rights under the CRDA.
The purpose of the CRDA was to develop the prototype instruments based on the
Flow Immunosensor Method and Apparatus Technology. Pursuant to the CRDA, each
party retains title to any patent obtained by such party in the performance of
work under the CRDA. The NRL had the right of first election to file a patent
application in the United States on joint inventions made in the performance of
work under the CRDA. The Company, as assignee, had the right of first election
to file a patent application on such joint inventions in all other countries.

         Pursuant to an amendment dated May 1993 to the CRDA, the NRL waived
such right of first election with respect to the lyophilization process for the
freeze-drying of immunoassay chemicals, provided that SAT filed an approved
patent application on such process within three months from the date of
execution of the amendment. The approved patent application was filed on July
16, 1993 and issued as U.S. Patent No. 5,354,654 "Lyophilized Ligand-Receptor
Complexes for Assays and Sensors" on October 11, 1994. SAT assigned the patent
to the Company in January 1993.

OTHER PATENTS
-------------

         In addition to the above, the Company has rights under the following
patents:

                  U.S. Patent No. 6,022,326, "Device and Method for Automatic
                  Collection of Whole Saliva issued on February 8, 2000. This
                  patent includes 32 claims covering a broad range of approaches
                  to the automatic, non-invasive collection of saliva for both
                  immediate testing or later use in a laboratory.

                  U.S. Patent No. 6,391,261, "Device for Detecting Analytes
                  Related to Sample Ph" issued on May 21, 2002, for providing
                  blood equivalent results by simultaneously testing the pH
                  level in saliva while testing saliva for levels of various
                  components.

                  U.S. Patent No. 6,472,228 "Composition and methods for
                  synthesis of novel tracers for detecting amphetamine and
                  methamphetamine in samples" issued on October 29, 2002, for
                  the synthesis of novel components whose use not only improves
                  the performance of the flow immunosensor technology, but also
                  decreases the cost at which new tests can be developed.

                  U.S. Patent No. 6,686,209 "Novel Reagents Used In An
                  Immunoassay For Tetrahydrocannabinoids" issued on February 2,
                  2004, for the synthesis of novel cannabinol-based tracers
                  suitable for use in immunoassays for the detection of
                  marijuana or its derivatives in biological fluids, allows for
                  the use of structurally similar THC analogs rather than the
                  parent drug molecule which decreases the cost of
                  manufacturing.

                                       4


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         In addition, the Company has the following patent applications pending:

                  On August 8, 2000, the Company filed a patent application that
                  includes 33 claims for detecting the presence and
                  concentration of analytes while simultaneously preventing
                  analyte adsorption to solid materials used in the assay.

                  On December 5, 2001, the Company filed a large omnibus
                  provisional patent application entitled, "Tester for Automated
                  Identification of Analytes in Bodily Fluids". This device and
                  methods patent application describes 15 novel inventions and
                  has been broken down in to the following applications:

                           o        Alcohol Detection Assembly
                           o        Rotary valve with Compliant Lining
                           o        Automated Plunger-based Sample/Buffer Mixing
                                    Assembly
                           o        Hydrophobic/Hydrophilic Sample Collection
                                    Tip
                           o        Method for Accurately Mixing Sample Buffer
                                    Solutions
                           o        Immunoassay Chemistry Cassette Barcode for
                                    Accurately Mixing Sample and Buffer
                                    Solutions
                           o        Integral Sample Collection Tip
                           o        Flow Immunoassay Assembly with Rotary Valve
                           o        Tester for Automated Identification of
                                    Analytes in Bodily Fluids
                           o        Plunger-based Flow Immunoassay Assembly
                           o        Method of Manufacturing a Self-sealing
                                    Assembly
                           o        Drug and Alcohol Assay Assembly
                           o        Flow Immunoassay Assembly with Multiple Flow
                                    Channels
                           o        Flow Immunoassay Scanning Assembly
                           o        Orthogonal Read Assembly

         The expiration date of the USN patent is February 23, 2010. The terms
of the other patents are 17 years from the respective dates of issuance, subject
to renewal. The Company is not certain whether and when any pending patents may
issue.

         The patent position of technology firms is highly uncertain and
involves complex legal and factual questions. Competitors have filed
applications for, and in some instances have been issued, patents and may obtain
additional patents and other proprietary rights relating to products or
processes, such as the Company's proposed immunosensor technology, which may be
competitive with those of the Company. The Company does not currently know the
scope and validity of these patents. Management is not aware of any patents
covering an immunosensor technology similar to that used by the Company's.

         Companies that have or may obtain patents relating to products or
processes competitive with those of the Company could bring legal actions
against the Company claiming damages and seeking to enjoin it from
manufacturing, licensing and marketing the affected product. To date, no claims
have been made against the Company for infringement of any patents. However,
marketing of the Company's products has just recently begun and claims, if any,
would not likely be asserted until after market introduction of such products.
If such a claim was to be made, its defense could be costly and the Company's
business could be adversely affected, even if the Company were to prevail. No
assurance can be given that the Company would be able to prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms.

         Process patents have certain disadvantages when compared with product
patents. It is more difficult to detect and prove infringement of process
patents because it is sometimes impossible to ascertain the method by which any
product has been produced. In addition, the value to the Company of receiving a
process patent may be reduced if products that can be derived from such
processes have been patented by others. The patents owned by, or licensed to,
the Company include both process patents and product patents.

         The Company maintains a policy of seeking patent protection in the
United States and other countries in connection with certain elements of its
technology when it believes that such protection will benefit the Company.

                                       5


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Patent applications have been filed in Canada, certain European countries and
certain Asian countries including Japan. As the Company submits patent
applications to the United States, management files the patents internationally
within the following year.

         The patent laws of foreign countries may differ from those of the
United States as to the patentability of the Company's products and processes.
Accordingly, the degree of protection afforded by foreign patents, if issued,
may be different from protection afforded under associated United States
patents. There can be no assurance that patents will be obtained either in the
United States or in foreign jurisdictions with respect to the Company's
inventions or that, if issued, the patents will be of substantial protection or
commercial benefit to the Company.

         Certain inventions of the Company may prove to be unpatentable or the
Company may conclude that it would be more advisable to retain a patentable
invention as a trade secret. In either case, the Company would have to rely on
trade secrets, proprietary know how and continuing technological innovation to
develop and maintain its competitive position. All key employees and consultants
of the Company have executed, and vendors and manufacturers will be required to
execute, agreements to maintain the confidentiality of the Company's proprietary
information to which they have access. There can be no assurance that these
confidentiality agreements will be honored or will be effective. Manufacturers,
project sponsors and consultants may be engaged in competing research projects
outside the scope of their agreements with the Company. There can be no
assurance that such sponsors and consultants will not develop similar or
superior technology independently. To the extent that such persons apply
technical information independently developed by them to projects undertaken by
the Company, disputes may arise as to the proprietary rights to such
information.

RESEARCH AND DEVELOPMENT

         The Company maintains a 10,000 square-foot research and development
facility in Rancho Cucamonga, California. The core competencies of the Company
include engineering development capabilities, including expertise in optics,
electronics, mechanical engineering and software development, and the Company
has a fully equipped machine shop. Additionally, the core competencies for the
chemistry group include expertise in organic chemistry, flow immunosensor
technology, immunoassays, saliva physiology, alcohol and toxicology and the
ability to develop long-lived production formulas.

         The Company will continue to add enhancements and improvements to its
product over time. The recent efforts by the development group have been to
focus on design for manufacturability, which should increase the reliability of
the product during manufacturing and in the customer's hands, as well as
decreasing the product cost of goods - both materials and labor and on
engineering improvements and retrofitting of the products in the field.
Additionally, there is a significant effort to increase the menu of tests
available, so that the product will be usable by customers in additional market
segments.

MANUFACTURING

         LifePoint leases a 32,000-square foot building that houses its
corporate headquarters and includes 22,000-square feet of manufacturing space.
The Company manufactures the disposable cassettes, but plans to use an outside
manufacturer for final assembly of the current instrument, after the initial
scale-up of production. The transfer of the final assembly of the current
instrument to the OEM manufacturer is expected to occur during the quarter
ending March 31, 2005, at the earliest.

         For the disposable cassette and mouthpiece, detailed manufacturing
requirements for the initial 24 months have been defined and scale-up plans are
being executed. The Company has developed and is implementing a detailed cost
reduction plan that includes utilizing multi-cavity molds and, longer term, full
automation. The Company has established volume-derived milestones at which point
automation is added in order to increase capacity to meet customer demand. The
Company has already completed the first phase of its scale-up plan, and is ready
to initiate the second, semi-automation, when specific volume-derived milestones
are reached. There can be no assurance that the Company's automation of its
manufacturing process will significantly reduce its costs.

         LifePoint's instrument production involves snap in place, low cost
assembly operations to construct, test and certify the finished instrument
system. The system has been designed as a series of pre-assembled and pre-tested

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modular sub-assemblies. Assemblies would include modules for optics and
detection, mechanical cassette handling, fluid flow, and modules for I/O. All
printed circuit boards (PCBs) are outsourced. LifePoint's interim instrument
manufacturing consists of assembly, certification, packaging and labeling of the
instrument system.

         For medical markets in the United States, the Company is required in
its manufacturing facility to follow the Code of Federal Regulations, Title 21,
Part 820, Quality System Regulation (QSR) as prescribed by the FDA and will
ultimately want to become ISO 9001 certified. See the section "Government
Regulation" under this caption "Business." The Company believes that its plant
is QSR compliant; however, there can be no assurance that the Company can cause
its prospective third party manufacturers to comply with QSR. The Company's
future dependence on third parties for the manufacture and supply of product
components could have a material adverse effect on the Company's profit margins
and its ability to deliver its products on a timely and competitive basis.

MARKET AND OPPORTUNITY

         The drugs of abuse and alcohol testing market is a multi-billion dollar
global market opportunity. The Company estimates the worldwide sales opportunity
for the first three markets for its initial product, including the next two
therapeutic drug-monitoring products, to be over $3.5 billion. There can be no
assurance as to the portion of this market opportunity that the Company will
attain. This is especially so because the Company's marketing program has just
begun and is focused on only one of its three initial target markets.

         The simultaneous detection of drugs of abuse and alcohol in a
simple-to-perform, rapid format is of significant importance in industrial
(workplace), law enforcement and emergency department markets. Saliva as a
sample choice is preferred over urine because it reflects the blood-comparable
or "under the influence" of a substance and, because it can be observed as it is
collected, it is much more difficult for it to be adulterated (tampered with/
falsified). The traditional urine sample, which can be easily adulterated,
indicates recent drug use over the previous two to five days and does not
necessarily reflect a current status.

         The demand for current status testing is clearly defined in the three
key target markets. First, substance abuse in the industrial market has become
so significant that as of 1997, 66% of the United States Fortune 1000 companies
had drug/alcohol testing policies in place. In addition, the United States
Department of Transportation requires testing of all employees in
safety-sensitive positions (for example, airlines and trucking.) The Company
believes that there is a need to improve the effectiveness and reduce the cost
of these programs. Second, a very high need was identified in the law
enforcement market. Driving under the influence of drugs is as big a problem as
drunk driving in the United States. Yet law enforcement agencies do not
currently have the ability to objectively test for drugs quickly and easily.
Third, up to 50% of all emergency department visits implicate drug and/or
alcohol use; however, less than 13% of hospitals in the United States can
provide useful, rapid and on-site information to physicians treating unconscious
patients where drugs and/or alcohol are suspected. Fourth, the international
markets for law enforcement agencies and medical emergency departments are
similar to those in the United States, while the workplace market is in its
infancy, creating a significant market opportunity with a first-to-market
system.

         Additional markets for the IMPACT Test System include substance abuse
treatment and prevention programs, sports (professional, college and high
school), the military, and the emerging school testing programs.

         Other major medical market opportunities include rapid diagnostic
testing, therapeutic drug monitoring, and wellness testing and screening.

         There can be no assurance that the potential markets for the Company's
products described above will be as large as estimated or as to what degree the
Company will be able to penetrate such markets.

MARKETING AND DISTRIBUTION

         The Company initiated marketing programs including lobbying and
pre-marketing efforts to hasten acceptance of the product by the respective
markets several years ago. The lobbying efforts continue internationally,
nationally, and within individual states. The Company's sales managers in the
law enforcement market have established marketing trials and pilot studies, and
are now expanding those sites to establish a geographically and market disperse
based of established users for drugged driver testing and use in drug courts. In

                                       7


<PAGE>

the industrial/workplace market, sales managers have also established marketing
trails and pilot sites, and are now expanding those sites. Additionally, efforts
have been initiated to establish distribution and partners within this market.
The marketing staff developed a marketing communications plan including
participation in trade shows, presentation of technical papers, and
participation in lobbying efforts to facilitate the rapid market acceptance of
the IMPACT Test System. Customer service and technical service policies and
procedures have been established to support the quality customer relationships
the Company desires.

         In the industrial workplace market in the United States, the Company
will utilize multiple distribution strategies. For large employers that
currently perform on-site testing, or which, with the introduction of the IMPACT
Test System, will now consider implementing on-site testing, the Company will
use a direct key account sales strategy. The same approach will be used for
large service providers. For smaller service providers and companies, health and
safety distributors will be used.

         In the law enforcement market in the United States, the Company will
sell direct to the customer. The Company has already identified numerous well
respected, early adaptor police agencies that are interested in the IMPACT Test
System, which will become the basis of an established customer base that can
serve as references for other interested agencies. A similar approach is being
used in the drug court system.

         The emergency medical market in the United States will be the focus of
the Company's direct sales effort. Less than 1,000 hospitals perform more than
80% of the drug testing done on overdose patients. More importantly, it is most
likely that products that will be developed for the IMPACT Test System will be
used in medical markets, and this focus will help the Company leverage both its
research and development efforts, as well as its sales and marketing efforts.
The Company will develop its own direct sales department for medical marketing.

         The IMPACT Test System is undergoing governmental evaluations in
several countries, pending delivery of additional STMs. It is expected that
these studies will be published when completed, and be the basis of buying
decisions. The scheduled evaluations include: Switzerland (Ministry of
Interior), Austria (Ministry of Defense), Australia (Victoria Police), United
Kingdom (DOT), Spain (Ministry of the Interior) and Hong Kong (Police Forensic
Lab).

     The Company plans to utilize distributors and/or partners for sales and
service of its products in the international markets. The distributors the
Company has elected to work with have knowledge of their respective markets and
local rules and regulations. The following firms have entered into distribution
agreements with the Company:

         o        Medical Europe Diagnostic of Madrid, Spain, a newly
                  established business by Medical Greystoke and Instituto de
                  Tratamiento y Analisis de las Dependencias (INSTAD), also of
                  Madrid, Spain, will focus solely on the distribution of the
                  IMPACT Test System to all market segments within Spain.
         o        A & B Analytical Instruments of Taipei, Taiwan will represent
                  LifePoint in China. A&B's customer base is extensive as a
                  result of their distribution relationship with PerkinElmer,
                  Inc., a leading provider of scientific instruments,
                  consumables and services to the pharmaceutical, biomedical,
                  and environmental testing markets worldwide.
         o        PT Professtama of Jakarta, Indonesia will market LifePoint
                  products to all market segments in Indonesia.
         o        Getz Bros, Hong Kong, a subsidiary of the Marman Group,
                  represents LifePoint in Hong Kong, Singapore and Macau
         o        Sarandeeb Trading, Saudi Arabia will market LifePoint products
                  to all market segments within Saudi Arabia.

         In addition, the Company is in final negotiations with distributors
from the following countries and markets:

         o        A distributor from Australia, which will be the exclusive
                  distributor to the law enforcement markets throughout
                  Australia.
         o        A distributor from Germany, which will be the distributor to
                  all markets in Germany, Switzerland and Austria.
         o        A distributor from France, which will be the distributor to
                  all markets in France.
         o        A distributor from Northern Europe, which will be the
                  distributor to all markets in Northern Europe and the United
                  Kingdom.
         o        A distributor from Italy, which will be the distributor to all
                  markets in Italy, Portugal, Turkey and Greece.

                                       8


<PAGE>

         There can be no assurance as to when or if these other distributors
will be engaged.

RECURRING REVENUE SALES MODEL

         Management believes that LifePoint's revenues will be driven by sale of
its disposable cassettes. A small cassette (approximately 3"x5"x1") is designed
to accommodate a variety of immunoassay and chemistry analytes for all
simultaneous testing requirements. A collection tip and sample tubing is
connected to the cassette, which contains all the reagents for up to ten assays.
The entire disposable is called the Saliva Test Module (STM). Once the
instruments are installed, the STM sales are expected to provide a continued,
high margin revenue source for the Company based on the number of tests
performed by its end user customers. However, there can be no assurance as to
the amount of the revenues the Company will derive from this source.

GOVERNMENT REGULATION

         The Company's diagnostic products are subject to certain government
regulation in the United States and other countries for use in some markets.

         The FDA regulates the introduction, manufacturing, labeling, record
keeping and advertising for all medical devices in the United States. There are
two principal methods by which FDA clearance may be obtained to market medical
device products such as the Company's proposed screening and diagnostic test
kits: 1) Pre-market Approval (PMA) and 2) Pre-market Notification (510(k)).
PMA's represent the highest level of regulatory scrutiny applied to medical
devices. Most medical devices, however, receive pre-market review through the
510(k) process. Applicants under the 510(k) procedure must prove that the device
for which clearance is sought is "substantially equivalent" to devices on the
market prior to the Medical Device Amendments of 1976 or devices cleared
thereafter pursuant to the 510(k) procedure. In some cases, data from clinical
studies must be included in the 510(k) application. The Company's clinical
studies have been designed to show the correlation of the IMPACT Test System
results for testing drugs and alcohol in saliva to currently approved FDA
products that test for drugs and alcohol in saliva by a laboratory with
discrepancies reconciled by an analytical confirmation method. The review period
for a 510(k) application is supposed to be 90 days from the date of filing the
application. The FDA is currently taking approximately days of review time and
120 days average total elapsed time (including "on-hold" time) to clearance
according to FDA year 2000 Annual Report (CDRH). Management believes that, based
on discussions with the FDA, the Company's product will be reviewed under the
510(k) protocol and that it will take approximately 100 days for clearance. The
Company initiated filing six submissions with the FDA, with the first 510(k)
submission filed in early May 2002, however, the Company's temporary loss of
funding and subsequent cash shortage put the FDA submission process on hold for
a period of time during the cash-constrained period. The Company responded to
clarification questions from the FDA in December 2003, in April 2004 in response
to additional inquiries from the FDA received in March 2004, and again in June
2004 in response to a letter from the FDA in June 2004. . The FDA may have
additional questions. There can be no assurance that any of the Company's
proposed products will ever obtain the necessary FDA or foreign regulatory
clearances for commercialization.

         In addition, the United States Department of Health and Human Services,
on February 28, 1992, issued regulations intended to implement the Clinical
Laboratory Improvement Amendments of 1988. These Amendments are commonly
referred to as CLIA. These regulations were to become effective September 1,
1992. The proposed regulations would require that all test sites performing
workplace drug testing, including on-site testing, follow CLIA guidelines for
operator training and quality control, similar to those used by laboratories. On
August 28, 1992, the Department announced that the application of the statute to
workplace testing would not go into effect on September 1, 1992 because of
comments made on the final regulations. If the regulations are not adopted,
on-site drug testing in the workplace will continue to be exempt from the
statute. Recently, the Department again confirmed its intention not to adopt the
CLIA regulations in the workplace. However, if the regulations are adopted,
workplace testing would then be subject to the same requirements as currently
required for on-site testing in the medical markets. The Company is in the
process of completing studies that it believes will produce data that
demonstrates that its product provides the same results when used by technical
personnel as it does when used by non-technical personnel. If the Company

                                       9


<PAGE>

demonstrates in its FDA submission that its product delivers similar accuracy
from these two user groups, this demonstration should exempt the IMPACT Test
System from CLIA regulation in the medical market and, if the statute is ever
applied, in the workplace market. If the Company cannot obtain a waiver from
CLIA, the costs of running the IMPACT Test System could be higher for potential
customers. The Company cannot give any assurance that the Department of Health
and Human Services or the FDA will agree to waive the IMPACT Test System from
CLIA regulation.

         In December 2003, the FDA published draft guidance for drugs of abuse
screening tests for use in the workplace, schools, sports, insurance testing,
home use and other non-medical environments. In this document the FDA announced
its intention to be consistent in its regulation of drugs of abuse screening
tests used in the home, workplace, insurance, sports settings, insurance and
other non-medical environments. The FDA would, however, continue to defer
oversight for law enforcement applications. Should the FDA adopt such
regulations, despite the Company's efforts and those of others to dissuade the
FDA from doing so, such regulations may delay the start of marketing to the
industrial market in the United States until the Company complies. However, in
anticipation of such adoption, the Company has collected the additional field
data which management believes, based on discussions with the FDA, this agency
would require to approve the Company's entry into the industrial market in the
United States, and has filed a submission. The Company will seek this clearance
from the FDA simultaneously with seeking its approval of use of its product for
medical purposes.

         The U. S. Government regulates those industries, such as the airline
pilots (FAA), nuclear power plants (NRC), and trucking (DOT), that have a high
number safety-sensitive jobs. These industries do have specific regulations as
to when and how employees must be tested for drugs and alcohol. The Substance
Abuse and Mental Health Services Administration (SAMHSA) generally oversees the
development and implementation of substance abuse programs in the workplace for
these federally regulated safety-sensitive workers. Generally, FAA, NRC, and DOT
follow SAMHSA guidelines for substance abuse testing guidelines. In April 2004,
SAMHSA published revised draft guidelines for the use of saliva in these
programs. Once the public comment period is completed, it is expected that final
guidelines would be published in the Federal register later this year. SAMHSA,
however, does not currently regulate products and/or services.

         The National Highway Traffic Safety Administration (NHTSA) publishes a
"Conforming Products" list of products approved for use with alcohol testing
regulations. The alcohol portion of the IMPACT Test System will require NHTSA
approval. This approval process for the alcohol test takes approximately 2-3
months.

         There can be no assurance that the FDA or any foreign governmental
agency will grant approval for the sale of the Company's products for routine
screening and diagnostic applications or that the length of time the approval
process will require will not be extensive.

         The Company does not believe that federal, state and local provisions
which have been enacted or adopted regulating the discharge of material into the
environment, or otherwise relating to the protection of the environment, will
have any material effect upon its capital expenditures, potential earnings and
competitive position.

COMPETITION

         The Company will compete with many companies of varying size that
already exist or may be founded in the future. The majority of the current tests
available use either urine or blood as a specimen to test for drugs of abuse or
use breath or saliva to test for alcohol.

         Based on its knowledge of the marketplace, management believes that
there are no products currently available that both test simultaneously for
drugs of abuse and alcohol and provide sensitive, lab-quality, blood-comparable,
"under the influence" information for drugs of abuse on-site. Drug testing is
primarily done on urine, both in a central lab or on-site, with limited testing
being done on blood in a central lab. Recently, saliva-based, lateral-flow
membrane, on-site drug tests have been introduced.

         Four companies, Avitar, Inc. ("Avitar"), OraSure Technologies, Inc.
("OraSure"), Varian, Inc. ("Varian"), formerly known as AnSys, Brannan Medical
("Brannan") and Cozart Bioscience Ltd. ("Cozart"), market oral screening drugs
of abuse devices. The type of technology used by these companies is called
lateral flow membrane technology, which is the process by which a specimen flows

                                       10


<PAGE>

across a treated test strip (membrane) and which produces colored test result on
a portion of the test strip. Home pregnancy tests are a good example of lateral
flow membrane technology. This type of test is less sensitive than the flow
immunosensor technology and cannot provide quantifiable results, but only
qualitative, yes/no answers. LifePoint believes this type of technology is not
sensitive enough to detect certain drugs at levels that are found in saliva.
Additionally, on-site tests that are not instrument-based and rely on a
subjective result reading are not generally legally admissible or defensible.

         In December 2000, the European Union funded ROSITA Project found, in a
study across eight countries, that the lateral flow membrane tests shared the
following disadvantages:

         o        Many lab positive test results did not test positive with the
                  membrane test (lack of sensitivity);
         o        The test results were very difficult to interpret (Some
                  manufacturers have or are developing a reader to try to
                  address this limitation);
         o        There was high risk of specimen mix-up because the collection
                  and testing were separate tasks;
         o        Sample collection, absorption onto a pad device, was difficult
                  and took a great deal of time, with a potential for sample
                  contamination of the collector; and
         o        Overall the present devices are not satisfactory in terms of
                  ease and duration of use, sensitivity and reliability.

         One or more other companies may have a similar saliva sample testing
product under development, although the technology they are using is believed to
be similar to those mentioned above, lateral flow membrane technology, and,
accordingly, very different from that of the Company with its flow immunosensor
technology. There can be no assurance that other competitors will not begin to
offer an on-site saliva-based testing product in the future. In addition, there
can be no assurance that Avitar, Varian, Brannan, Cozart, or OraSure will not
modify their products to meet the Company's criticism described in this and the
preceding paragraph.

         Existing testing for the presence of drugs of abuse and alcohol include
traditional centralized laboratory testing services and on-site testing
products.

         Although management is not aware of any current competitors with
respect to simultaneous testing for drugs of abuse and alcohol in saliva,
management anticipates that the Company will face competition from at least
eight major companies that provide urine substance abuse testing products: (1)
OnTrak by Varian, formerly sold by Roche Diagnostics, (2) clone enzyme donor
immunoassay (CEDIA) manufactured by Microgenics Corporation; (3)
enzyme-multiplied immunoassay technique (EMIT) manufactured and distributed by
Syva Company, a division of Dade International, Inc.; (4) a fluorescence
polarization immunoassay (FPIA) manufactured by Abbott Laboratories, Inc.
("Abbott"); (5) radioimmunoassay (RIA) manufactured and distributed by
Diagnostic Products Corp. ("DPC") and others; (6) thin layer chromatography
(TLC) manufactured and distributed by Varian, formerly sold by Toxi-lab, and (7)
other immunoassay tests provided by eScreen, Inc. (eScreen), Princeton Biotech,
Inc. ("Princeton") and BioSite Inc. ("BioSite"). All of these companies (i.e.,
Roche, Syva, Abbott, Varian, Editek, Princeton and BioSite) have substantially
greater financial resources available to them than does the Company to develop
and to market their products.

         Alcohol testing has usually been done on breath at a laboratory
collection site, with some testing being done on blood. Recent usage has begun
with manual on-site saliva-based, qualitative and semi-quantitative alcohol
tests. As with drug tests, all on-site tests that are not instrument-based and
rely on a subjective read of results are generally not legally defensible.

         The Company's marketing analysis has indicated a greater market
potential for a saliva sample portable testing instrument for drugs of abuse by
law enforcement agencies, occupational health clinics, hospitals and other
medical facilities than for a urine sample instrument. That is because the
Company's IMPACT Test System is intended to test whether the person is currently
under the influence of drugs of abuse or alcohol. In addition, saliva collection
is observable by the person administering the test, unlike urine testing.
Accordingly, the use of saliva has been shown to eliminate the recent problems
due to alteration and substitution of urine specimen testing for drugs.
Depending on the substance being used, differences in the individual being
tested and dose and time differences, "currently" in the Company's product
indicates drug use from minutes after the drug was taken to generally 18 to 24
hours after drug use.

                                       11


<PAGE>

         Urine testing, on the other hand, provides information on drug use from
about six to eight hours after the drug was taken to generally between two to
five days post drug use. For pre-employment testing, employers have historically
wanted the longer window of detection provided by urine testing, or even hair
testing. Accordingly, the current results of the IMPACT Test System may not be
as attractive to employers for use in pre-employment testing. The Company's
current product may, thus, have limited appeal for such use.

         The following table compares the IMPACT Test System with other current
testing methods available for both drug and alcohol testing.

<TABLE>
<CAPTION>
<S>     <C>
     -------------------------------------------------------------------------------------------------------------
                                 Other
                                On-Site    On-Site
        Testing    The IMPACT    Saliva     Urine    Breath    Lab-Based    Lab-Based   Laboratory
         Method    Test System  Products   Products  Alcohol  Saliva Test   Urine Test     Blood     Sweat   Hair
     -------------------------------------------------------------------------------------------------------------
      Simultaneous
        Drug and        X                                                                    X
        Alcohol
        Testing

     -------------------------------------------------------------------------------------------------------------
       Observable
       Collection       X          X                    X         X                          X                 X

     -------------------------------------------------------------------------------------------------------------
       Automatic
        Measured        X                               X
       Collection

     -------------------------------------------------------------------------------------------------------------
     Collection in
     Under 1 Minute     X                               X

     -------------------------------------------------------------------------------------------------------------
      No Specimen
        Handling        X                               X

     -------------------------------------------------------------------------------------------------------------
       Completely
      Automated &       X                               X
       Integrated

     -------------------------------------------------------------------------------------------------------------
       Results in
        Minutes         X                               X

     -------------------------------------------------------------------------------------------------------------
     On-Site Result
                        X          X         X          X
     -------------------------------------------------------------------------------------------------------------
      Lab-Quality
      Sensitivity       X                               X         X           X              X         X       X

     -------------------------------------------------------------------------------------------------------------
     Numeric Result
                        X                               X         X           X              X         X       X
     -------------------------------------------------------------------------------------------------------------
      Customizable
     Breakpoint or      X                               X         X           X              X         X       X
     Interpretative
         Level
     -------------------------------------------------------------------------------------------------------------
</TABLE>

EMPLOYEES

         As of May 31, 2004, the Company had 52 full time employees, 1 part time
employee, and 10 consultants. Of these 63 persons, 21 were directly involved in
research and development programs, 30 were in production/manufacturing and 12 in
sales, marketing and administration.

         On January 29, 2003, with the withdrawal of a $7.5 million credit line
by an investor, the Company took immediate steps to conserve cash. In addition
to a significant reduction in employees who were furloughed immediately, the
senior managers took a 25% pay reduction, the middle managers a 20% pay
reduction, and the remainder of the employees a 10% pay reduction and, effective
March 21, 2003, CEO Linda Masterson elected to defer salary for additional cash
conservation.

                                       12


<PAGE>

         Subsequent additional terminations and furloughs have been effected on
March 21, April 8, and May 19, 2003. Additionally, there have been no pay
increases for senior management since September 2000. See, however, the section
"Board Compensation Committee Report on Executive Compensation" in Item 11 to
this Report.

WEBSITE ADDRESS

         The Company's website address is www.LifePointInc.com. On the site,
free of charge, the Company makes available its annual report on Form 10-K
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to these reports as soon as reasonably practicable after filing, by providing a
hyperlink to the SEC's website directly to such reports.

FORWARD-LOOKING STATEMENTS

         Some of the information in this Report may contain forward-looking
statements. These statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward looking" information. When considering these forward-looking
statements, a stockholder or potential investor in LifePoint should keep in mind
the risk factors and other cautionary statements in this Report. These
forward-looking statements could involve known and unknown risks, uncertainties
and other factors that might materially alter the actual results suggested by
the statements. In other words, although forward-looking statements may help to
provide complete information about future prospects, the Company's performance
may be quite different from what the forward-looking statements imply. The
forward-looking statements are made as of the date of this Report and LifePoint
undertakes no duty to update these statements.

RISK FACTORS

         The following is a discussion of certain significant risk factors that
could potentially affect the Company's financial condition, performance and
prospects.

THE COMPANY WILL HAVE A NEED FOR SIGNIFICANT AMOUNT OF MONEY IN THE FUTURE AND
THERE IS NO GUARANTEE THAT IT WILL BE ABLE TO OBTAIN THE AMOUNTS IT NEEDS.

         During the past fiscal year, the Company was able to complete an
offering of Series D preferred stock, which provided sufficient funds to meet
the near-term needs. However, if the business goals are not met, including
certain sales revenues, the Company may need to raise additional funds in the
future.

         As discussed, the Company has operated at a loss, and expects that to
continue for some time in the future. The Company's plans for continuing product
refinement and development further develop the distribution network and
manufacturing capacity will involve substantial costs. The extent of these costs
will depend on many factors, including some of the following:

         o        The progress and breadth of additional product development;
         o        The costs involved with manufacturing scale-up and
                  manufacturing capacity,
         o        Timing and product trial acceptance by customers and
                  distributors, all of which directly influence cost and product
                  sales;
         o        The costs involved in completing the regulatory process to get
                  the Company's products approved, including the number, size,
                  and timing of necessary clinical trials;
         o        The costs involved in patenting our technologies and defending
                  them;
         o        The cost of manufacturing and distributing the IMPACT Test
                  System; and
         o        Competition for the Company's products and the Company's
                  ability, and that of its distributors, to commercialize its
                  product.

         In the past, the Company has raised funds by public and private sale of
its stock, and the Company is likely to do this in the future to raise needed
funds. Sale of the Company's stock to new private or public investors usually
results in existing stockholders becoming "diluted". The greater the number of

                                       13


<PAGE>

shares sold, the greater the dilution. A high degree of dilution can make it
difficult for the price of the Company's stock to rise rapidly, among other
things. Dilution also lessens a stockholder's voting power.

         The Company cannot assure you that it will be able to raise sufficient
capital needed to fund operations, or that it will be able to raise capital
under terms that are favorable to the Company.

OPERATIONAL LOSSES ARE EXPECTED TO CONTINUE AT LEAST ANOTHER FIVE QUARTERS
FOLLOWING THE QUARTER ENDED MARCH 31, 2004.

         From the date the Company was incorporated on October 8, 1992 through
March 31, 2004, the Company has incurred net losses of $73,289,137. In February
2002, the Company launched marketing of the IMPACT Test System, its first
product, to the international law enforcement market, one of three initial
worldwide target markets. There was no governmental approval required as a
prerequisite to market to these potential users of the Company's product.
However, as indicated elsewhere in this section "Risk Factors," there are
certain legal challenges that the Company must overcome to make its product
fully acceptable in this market.

         For the Company to market its product in the United States to hospitals
and other medical facilities (including medical emergency rooms), which are
another of the three initial worldwide target markets, the Company must first
obtain clearance from the FDA for its product. The Company has filed 510(k)
submissions to the FDA for the IMPACT Test System and the NIDA-5 drugs of abuse
in the fall of 2002. Although the applications were delayed because the Company
could not provide additional data requested by the FDA on a timely basis due to
the lack of funding and personnel, the Company has responded to the FDA in
December 2003, April 2004 and June 2004.

         The Company's other initial target market is the industrial market -
companies that currently test employees for drugs and alcohol. In November 2000,
the FDA announced its intention to be consistent in its regulation of drugs of
abuse screening tests used in the home, work place, insurance and sports
settings. The FDA published draft guidance for public comment in April 2004.
Should the FDA enforce such regulations, despite the Company's efforts and those
of others to dissuade the FDA from doing so, such regulations might delay the
start of marketing to the industrial market in the United States until the
Company complies. However, in anticipation of such adoption, the Company has
been collecting the additional field data which management believes, based on
discussions with the FDA, and the draft guidelines, this agency would require to
approve the Company's entry into the industrial market in the United States. The
Company will seek this clearance from the FDA simultaneously with seeking its
approval of use of its product for medical purposes. In addition, the Company
has commenced efforts to market its product to law enforcement agencies and
medical users in Europe and Australia prior to obtaining FDA approval for use in
the United States. This program could offset any loss in early revenues due to
the delay, if it occurs, in the Company's marketing to the industrial market in
the United States.

         The Company may not meet the schedule described in the preceding two
paragraphs, both as to its additional market launches and making its submissions
to the FDA. In addition, the FDA or a foreign government may not grant clearance
for the sale of the Company's product for routine screening and/or diagnostic
operations. Furthermore, the clearance process may take longer than projected.
Even if the Company does meet its schedule and although the Company has
generated revenues, profitability cannot be predicted.

THE COMPANY WILL BE INCREASING THE DEMANDS ON ITS LIMITED RESOURCES AS IT
TRANSITIONS EFFORTS FROM RESEARCH AND DEVELOPMENT TO PRODUCTION AND SALES.

         The Company currently has limited financial and personnel resources.
The Company has begun to transition from a research and development focused
organization to a production and sales organization. To successfully manage this
transition, it will be required to grow the size and scope of operations,
maintain and enhance financial and accounting systems and controls, hire and
integrate new personnel and manage expanded operations. There can be no
assurance that the Company will be able to identify, hire and train qualified
individuals as the Company transitions and expands. The failure to manage these
changes successfully could have a material adverse effect on the quality of its
products and technology, the ability to retain customers and key personnel and
on operating results and financial condition.

                                       14


<PAGE>

TRANSITION TO AN OPERATIONAL COMPANY MAY STRAIN MANAGERIAL, OPERATIONAL AND
FINANCIAL RESOURCES.

         The Company expects to encounter the risks and difficulties frequently
encountered by companies that have recently made a transition from research and
development activities to commercial production and marketing. The Company has
set forth below certain of these risks and difficulties in this section "Risk
Factors." As an example, the transition from a development stage company to a
commercial company may strain managerial, operational and financial resources.
If the Company's product achieves market acceptance, then the Company will need
to increase the number of employees, significantly increase manufacturing
capability and enhance operating systems and practices. The Company can give no
assurances that it will be able to effectively do so or otherwise manage future
growth.

THE IMPACT TEST SYSTEM MAY HAVE A LENGTHY SALES CYCLE IN SOME MARKETS AND
CUSTOMERS MAY DECIDE TO CANCEL OR CHANGE THEIR PRODUCT PLANS, WHICH COULD CAUSE
THE COMPANY TO LOSE ANTICIPATED SALES.

         Based on the early stages of product sales and the new technology
represented by the Company's product, customers test and evaluate the product
extensively prior to ordering the product. In some markets, customers may need
three to six months or longer to test and evaluate the product prior to
ordering. Due to this lengthy sales cycle at some customers, the Company has and
may continue to experience delays from the time it increases its operating
expenses and its investments in inventory until the time that revenues are
generated for these products. It is possible that the Company may never generate
any revenues from these products after incurring such expenditures. The delays
inherent in the lengthy sales cycle in some markets increase the risk that a
customer will decide to cancel or change its product plans. Such a cancellation
or change in plans by a customer could cause the Company to lose sales that had
previously been anticipated. In addition, the Company's business, financial
condition and results of operations could be materially and adversely affected
if significant customers curtail, reduces or delay orders.

THROUGH THE EARLY STAGES OF PRODUCT RELEASE, THE COMPANY'S AVERAGE PRODUCT
CYCLES HAVE TENDED TO BE SHORT AND, AS A RESULT, IT MAY HOLD EXCESS OR OBSOLETE
INVENTORY WHICH COULD ADVERSELY AFFECT ITS OPERATING RESULTS.

         While the Company's sales cycles in its initial markets have been long,
average product life cycles have been short as a result of the rapidly changing
product designs made based on customer feedback. As a result, the resources
devoted to product sales and marketing may not generate material revenues, and
from time to time, the Company may need to write off excess and obsolete
inventory. If the Company incurs significant marketing and inventory expenses in
the future that are not recoverable, and the Company is not able to compensate
for those expenses, the operating results could be adversely affected. In
addition, if products are sold at reduced prices in anticipation of cost
reductions and the Company still has higher cost products in inventory,
operating results would be harmed.

UNEXPECTED PROBLEMS AS TO HOW THE COMPANY'S PRODUCT FUNCTIONS CAN DELAY RECEIPT
OF REVENUES AND COULD ADVERSELY IMPACT THE COMPANY'S ABILITY TO CONTINUE AS A
GOING CONCERN.

         The Company experienced delays in marketing its product because of
unanticipated performance problems that had arisen first in the Company's
testing in its research and development facility and later at market trial and
customer sites. Accordingly, when a product performance problem surfaced, the
Company had no choice except to make product improvements and modifications. The
Company also had to delay completion of the field-testing necessary to furnish
the data for some of the FDA submissions, and with it, to delay completion of
the FDA submission.

         By delaying the time of product production, these product problems
delayed receipt of revenues. They also increased the Company's need for
additional financing. Any future delays in obtaining revenues will increase the
Company's need for additional financing. And with the past delays, and future
delays, if any, in receiving revenues, the Company's opportunity to achieve
profitability was, and will be, also delayed and could potentially adversely
impact the Company's ability to continue as a going concern.

         Attention is also directed to the possible delays at the FDA described
in this section "Risk Factors."

                                       15


<PAGE>

THE COMPANY WILL FACE COMPETITION FROM NEW AND EXISTING DIAGNOSTIC TEST SYSTEMS.

         The Company has begun to compete with many companies of varying size
that already exist or may be founded in the future. Substantially all of their
current tests available either use urine or blood samples as a specimen to test
for drugs of abuse or use breath, saliva, or blood samples to test for alcohol.
In addition, the Company recognizes that other products performing on-site
testing for drugs in blood or saliva may be developed and introduced into the
market in the future.

         Four companies, Avitar, Inc. ("Avitar"), OraSure Technologies, Inc.
("OraSure"), Varian, Inc. ("Varian"), formerly known as AnSys, Brannan Medical
("Brannan") and Cozart Bioscience Ltd. ("Cozart"), market oral screening drugs
of abuse devices. The type of technology used by these companies is called
lateral flow membrane technology, which is the process by which a specimen flows
across a treated test strip (membrane) and which produces colored test result on
a portion of the test strip. Home pregnancy tests are a good example of lateral
flow membrane technology. This type of test is less sensitive than the flow
immunosensor technology and cannot provide quantifiable results, but only
qualitative, yes/no answers. While the Company believes this type of technology
is not sensitive enough to detect certain drugs at levels that are found in
saliva, it recognizes that other products performing on-site testing for drugs
in blood or saliva may be developed and introduced into the market in the
future.

         The Company also faces as competitors BioSite Diagnostics Inc., Syva
Company (a division of Dade International Inc.), Varian Inc. and at least five
other major diagnostic and/or pharmaceutical companies. All of these competitors
currently use urine as the specimen for on-site drug testing. Almost all of
these prospective competitors have substantially greater financial resources
than the Company has to develop and market their products.

         With respect to breath testing for the presence of alcohol, the Company
will compete with CMI, Inc., Intoximeters, Inc., Draeger Safety, Inc., and other
small manufacturers.

         Furthermore, because of the time frame it has taken the Company to
bring its product to market, the Company's competition may have developed name
recognition among customers that will handicap future marketing efforts.

FAILURE TO COMPLY WITH THE SUBSTANTIAL GOVERNMENTAL REGULATION TO WHICH THE
COMPANY IS SUBJECT MAY ADVERSELY AFFECT ITS BUSINESS.

         The Company cannot market its saliva-based testing device to hospitals
and other medical facilities unless it has obtained FDA approval. Additionally,
the FDA announced its intention to regulate marketing to the industrial market
in the United States. If the FDA determines to regulate the industrial market in
the United States, this will further delay the receipt of revenues by us in this
market. If the Company cannot obtain a waiver from CLIA regulation, the cost of
running the IMPACT TEST SYSTEM in FDA regulated markets could be higher for
potential customers. There can be no assurance that the Company will obtain a
waiver from CLIA regulation or FDA approval on a timely basis, if at all. If the
Company does not obtain such waiver and approvals, its business will be
adversely affected.

THE COMPANY MAY NOT BE ABLE TO EXPAND MANUFACTURING OPERATIONS ADEQUATELY OR AS
QUICKLY AS REQUIRED TO MEET EXPECTED ORDERS.

         The Company first began its manufacturing process in January 2001.
However, the Company has not as yet made any significant deliveries of its
product. Accordingly, it has not as yet demonstrated the ability to manufacture
its product at the capacity necessary to support expected commercial sales. In
addition, the Company may not be able to manufacture cost effectively on a large
scale.

         The Company expects to conduct all manufacturing of the Saliva Test
Module's (STM) at its own facility. In addition, the Company intends to continue
to assemble the IMPACT Test System for at least another six to nine months or
more. If the Company's facility or the equipment in its facility is
significantly damaged or destroyed, the Company may not be able to quickly
restore manufacturing capacity. The Company plans to engage an outside
manufacturer of instruments to final assemble the current instrument in
conjunction with its own in-house assembly. The Company's current timetable for

                                       16


<PAGE>

transfer of some of the final assembly of the current instrument is during the
quarter ending March 31, 2005. The Company could, accordingly, turn over
instrument assembly to a number of qualified outside instrument assembly
suppliers in the event of such problems at the Company's facility. Accordingly,
any capable electronics manufacturer would have the capability to produce this
type of equipment. The Company has identified several potential electronic
manufacturers as potential alternatives to its initial outside supplier should
it so require. However, the STM is a proprietary device developed by the Company
and, accordingly the Company is not currently aware of any alternative
manufacturer for the STM.

LEGAL PRECEDENT HAS NOT YET BEEN ESTABLISHED FOR UPHOLDING THE RESULTS OF
LIFEPOINT'S DIAGNOSTIC TEST SYSTEM.

         The legal precedents for performing drug and alcohol testing in both
law enforcement and the industrial workplace have been well established. Blood
and urine testing are the currently accepted standard samples for drugs. Blood,
breath and saliva are the currently accepted standard samples for alcohol.
However, several saliva-based drug tests are beginning to be used. The Company
believes that its product meets the legal standards for admission as scientific
evidence in court. The Company anticipates that the papers it has presented over
this past year and the papers that it will publish from its field evaluations
currently being completed will enable it to meet this requirement prior to the
first legal challenge to its product. However, the Company cannot give assurance
that its technology will be admissible in court and accepted by the market.

         State laws are being revised on an ongoing basis to allow law
enforcement officers to use saliva as a specimen for testing for drivers under
the influence of drugs or alcohol. Currently, saliva and other bodily substance
testing for DUI testing with consent is permitted in all states. However, such
testing will be subject to a variety of factors. Saliva or other bodily
substances for DUI testing for drugs or alcohol is specifically permitted in 24
states, but specifically excluded in only six. Additional efforts will be needed
to change the laws in these states which have not adopted saliva as a test
specimen for DUI testing. The Company cannot give assurance as to when and if
this legislation will be adopted in the other states.

         Lastly, the National Highway and Traffic Safety Administration must
approve alcohol test products for Department of Transportation use, either as a
screening method or an evidentiary method. The Company believes that its product
meets the requirements of an evidentiary product. However, because the Company
has not yet submitted its product for approval, it cannot guarantee acceptance
by this governmental agency.

THE COMPANY'S EFFORTS TO LEGALLY PROTECT ITS PRODUCT MAY NOT BE SUCCESSFUL.

         The Company will be dependent on its patents and trade secret law to
legally protect the uniqueness of its testing product. However, if the Company
institutes legal action against those companies that it believes may have
improperly used its technology, the Company may find itself in long and costly
litigation. This result would increase costs of operations and thus adversely
affect the Company's results of operations.

         In addition, should it be successfully claimed that the Company has
infringed on the technology of another company, the Company may not be able to
obtain permission to use those rights on commercially reasonable terms.
Moreover, in such event a company could bring legal action and the Company may
find itself in long and costly litigation.

THE COMPANY MAY BE SUED FOR PRODUCT LIABILITY RESULTING FROM THE USE OF ITS
DIAGNOSTIC PRODUCT.

         The Company may be held liable if the IMPACT Test System causes injury
of any type. The Company has obtained product liability insurance to cover this
potential liability. The Company believes that the amount of its current
coverage is adequate for the potential risks in these areas. However, assuming a
judgment is obtained against the Company, its insurance may not cover the
potential liabilities. The Company's policy limits may be exceeded. If the
Company is required at a later date to increase the coverage, the Company may
obtain the desired coverage, but only at a higher cost.

                                       17


<PAGE>

THE COMPANY'S INCREASING EFFORTS TO MARKET PRODUCTS OUTSIDE THE UNITED STATES
MAY BE AFFECTED BY REGULATORY, CULTURAL OR OTHER RESTRAINTS.

         The Company has commenced efforts to market its product through
         distributors in countries outside the United States, starting with
         certain of the Western European and Asian countries. In addition to
         economic and political issues, it may encounter a number of factors
         that can slow or impede its international sales, or substantially
         increase the costs of international sales, including the following:

o        The Company does not believe that its compliance with the current
         regulations for marketing its product in European countries will be a
         problem. However, new regulations (including customs regulations) can
         be adopted by these countries which may slow, limit or prevent the
         marketing the Company's product. In addition, other countries in which
         the Company attempts, through distributors, to market its product may
         require compliance with regulations different from those of the Western
         European market.

o        Cultural and political differences may make it difficult to effectively
         obtain market acceptances in particular countries.

o        Although the Company's distribution agreements provide for payment in
         U.S. dollars, exchange rates, currency fluctuations, tariffs and other
         barriers and extended payment terms could affect its distributors'
         ability to perform and, accordingly, impact the Company's revenues.

o        Although the Company made an effort to satisfy themselves as to the
         credit-worthiness of its distributors, the credit-worthiness of the
         foreign entities to which they sell may be less certain and their
         accounts receivable collections may be more difficult.

THE FOLLOWING RISK FACTORS RELATE TO OWNERSHIP OF OUR CAPITAL STOCK:

THE COMPANY DOES NOT ANTICIPATE PAYING DIVIDENDS ON COMMON STOCK IN THE
FORESEEABLE FUTURE.

         The Company intends to retain future earnings, if any, to fund its
operations and expand its business. In addition, the expected continuing
operational losses and the Series C and Series D preferred stock will limit
legally the Company's ability to pay dividends on its common stock. Accordingly,
the Company does not anticipate paying cash dividends on shares of its common
stock in the foreseeable future.

                                       18


<PAGE>

THE COMPANY'S BOARD'S RIGHT TO AUTHORIZE ADDITIONAL SHARES OF PREFERRED STOCK
COULD ADVERSELY IMPACT THE RIGHTS OF HOLDERS OF ITS COMMON STOCK.

         The Company's board of directors currently has the right, with respect
to the 2,385,000 shares of preferred stock not designated as the Company's
Series C or Series D preferred stock, to authorize the issuance of one or more
additional series of its preferred stock with such voting, dividend and other
rights as its directors determine. Such action can be taken by the Company's
board without the approval of the holders of its common stock. The sole
limitation is that the rights of the holders of any new series of preferred
stock must be junior to those of the holders of the Series D, followed by the
Series C preferred stock with respect to dividends, upon redemption and upon
liquidation. Accordingly, the holders of any new series of preferred stock could
be granted voting rights that reduce the voting power of the holders of common
stock. For example, the preferred holders could be granted the right to vote on
a merger as a separate class even if the merger would not have an adverse effect
on their rights. This right, if granted, would give them a veto with respect to
any merger proposal. Or they could be granted 20 votes per share while voting as
a single class with the holders of the common stock, thereby diluting the voting
power of the holders of common stock. In addition, the holders of any new series
of preferred stock could be given the option to be redeemed in cash in the event
of a merger. This would make an acquisition of the Company less attractive to a
potential acquirer. Thus, the board could authorize the issuance of shares of
the new series of preferred stock in order to defeat a proposal for the
acquisition of the Company which a majority of the Company's then holders of
common stock otherwise favor.

THE COMPANY'S CERTIFICATE OF INCORPORATION CONTAINS CERTAIN ANTI-TAKEOVER
PROVISIONS, WHICH COULD FRUSTRATE A TAKEOVER ATTEMPT AND LIMIT YOUR ABILITY TO
REALIZE ANY CHANGE OF CONTROL PREMIUM ON SHARES OF ITS COMMON STOCK.

         There are two provisions in the Company's certificate of incorporation
or bylaws which could be used by the Company as an anti-takeover device. Its
certificate of incorporation provides for a classified board -- one third of its
directors to be elected each year. Accordingly, at least two successive annual
elections will ordinarily be required to replace a majority of the directors in
order to effect a change in management. Thus, the classification of the
directors may frustrate a takeover attempt which a majority of its then holders
of the Company's common stock otherwise favor.

         In addition, the Company is obligated to comply with the procedures of
Section 203 of the Delaware corporate statute, which may discourage certain
potential acquirers which are unwilling to comply with its provisions. Section
203 prohibits the Company from entering into a business combination (for
example, a merger or consolidation or sale of assets of the corporation having
an aggregate market value equal to 10% or more of all of the Company's assets)
for a period of three years after a stockholder becomes an "interested
stockholder." An interested stockholder is defined as being the owner of 15% or
more of the outstanding voting shares of the corporation. There are exceptions
to its applicability including the Company's board of directors approving either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder. At a minimum the Company believes such
statutory requirements may require the potential acquirer to negotiate the terms
with its directors.

ITEM 2.  PROPERTIES

         The Company maintains its principal executive offices and manufacturing
space in Ontario, California and laboratory facilities in Rancho Cucamonga,
California. The corporate offices and manufacturing facility, which consist of
approximately 32,000 square feet, is leased at $226,000 per year pursuant to a
lease that expires July 31, 2005. The Company may elect to terminate the lease
at the end of four years and has the right to two two-year renewal options. The
laboratory facility, which consists of approximately 10,000 square feet, is
leased at $72,000 per year pursuant to a lease that expires July 31, 2005. The
Company can exercise an option to renew prior to June 30, 2005 to extend the
lease for a period of two years so as to be consistent with the term of the
lease of its corporate offices and manufacturing facility.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is subject to lawsuits in the ordinary course of business
and is currently subject to lawsuits filed by various vendors for non-payment of
amounts allegedly owed. In the opinion of management, such claims, if disposed
of unfavorably, would not have a material adverse effect on the accompanying
financial statements of the Company.

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

         The Company held its 2003 annual meeting of stockholders on January 14,
2004. The results of such meeting were reported in the Company's quarterly
report on Form 10-Q for the fiscal quarter ended December 31, 2003 and are
incorporated herein by reference.

                                       19


<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
         AND ISSUER PURCHASES OF EQUITY SECURITIES.

         From June 25, 1998 to April 18, 2000, the Common Stock was reported on
the OTC Bulletin Board of the National Securities Dealers, Inc. under the symbol
"LFPT." On April 19, 2000, the Common Stock began trading on The American Stock
Exchange ("AMEX") and the symbol was changed to "LFP." The quarterly high and
low closing sales prices as quoted by the AMEX for the fiscal years ended March
31, 2004 and March 31, 2003 are as follows:

<TABLE>
<CAPTION>
                                                  FISCAL 2004               FISCAL 2003
                  QUARTER ENDED               HIGH         LOW          HIGH         LOW
                  -------------               ----         ---          ----         ---
<S>                                           <C>          <C>          <C>          <C>
                  June 30,                    $0.51        $0.32        $3.98        $2.41
                  September 30,                0.50         0.33         2.73         1.60
                  December 31,                 0.72         0.37         2.20         1.25
                  March 31,                    0.51         0.36         1.73         0.39
</TABLE>

HOLDERS

         As of March 31, 2004, there were approximately 426 holders of record of
the Company's Common Stock and, based upon requests for copies in connection
with the 2003 Annual Meeting of Stockholders, the Company believes that there
are approximately 8,300 beneficial owners of its Common Stock.

DIVIDENDS

         The Board of Directors has not declared any dividends on the Common
Stock and, in view of the continuing losses experienced by the Company, the
prohibitions of the Series C Convertible Preferred Stock, $.001 par value, the
Series D Convertible Preferred Stock, $.001 par value, and the Company's cash
requirements, the Board has no current intention to pay any such dividends.

RECENT SALES OF UNREGISTERED SECURITIES

         There were no securities sold during the fiscal year ended March 31,
2004 not previously reported on Form 10-Q, which were not registered under the
Securities Act of 1933, as amended (the "Securities Act"). See Note 5 -
Stockholder's Equity for information on the sales of securities not registered
under the Securities Act that have occurred over the past three years.

                                       20


<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

<TABLE>
<CAPTION>
                                                                          Number of securities
                                                                           remaining available
                                                                           for future issuance
                                 Number of                                    under equity
                              securities to be                             compensation plans
                                issued upon        Weighted-average      (excluding securities
                                exercise of        exercise price of        to be issued upon
                                outstanding           outstanding              exercise of
                             options, warrants     options, warrants      outstanding options,
      Plan Category              and rights            and rights         warrants and rights)
--------------------------  --------------------  ---------------------  -----------------------
<S>                                   <C>                   <C>                       <C>
Equity compensation
plans approved by
stockholders                          5,807,442             $ 0.96                    7,345,817

Equity compensation
plans not approved by
stockholders                         32,738,521             $ 0.73                           --
                            --------------------  ---------------------  -----------------------

Total                                38,545,963             $ 0.77                    7,345,817
                            ====================  =====================  =======================
</TABLE>

The plans not approved by stockholders include the following:

(A)      A common stock purchase warrant expiring April 15, 2004 to purchase
         30,000 shares at $1.97 per share issued in connection with a consulting
         agreement for public relations services.

(B)      A common stock purchase warrant expiring October 9, 2006, to purchase
         500,000 shares at $1.72 per share, becoming exercisable only upon the
         achievement by the Company of a specified performance goal. The warrant
         was granted to Linda H. Masterson, the President and Chief Executive
         Officer of the Company.

(C)      A common stock purchase warrant, expiring October 9, 2006 to purchase
         250,000 shares at $1.72 per share, becoming exercisable only upon the
         achievement by the Company of a specified performance goal. The warrant
         was granted to Thomas J. Foley, Senior Vice President, a former
         employee and officer of the Company.

(D)      A common stock purchase warrant expiring August 25, 2005 to purchase
         44,025 shares at $4.77 per share issued in connection with a commercial
         leasing agreement.

(E)      A common stock purchase warrant expiring September 6, 2006 to purchase
         250,000 shares at $4.17 per share issued in connection with a
         consulting agreement to secure product strategic partners for the
         Company.

(F)      Common stock purchase warrants expiring August 8, 2006 held by 11
         holders to purchase an aggregate of 150,000 shares at $3.50 per share
         issued in connection with a consulting agreement for investor relations
         and financial services.

(G)      A common stock purchase warrant expiring January 29, 2007 to purchase
         500,000 shares at $3.25 per share issued in connection with a
         short-term financing arrangement.

(H)      A common stock purchase warrant expiring November 11, 2007 to purchase
         1,500,000 shares at $3.00 per share issued in connection with a
         long-term financing arrangement.

                                       21


<PAGE>

(I)      Common stock purchase warrants expiring December 12, 2007 to purchase
         an aggregate of 24,000 shares at $1.65 per share issued in connection
         with a consulting agreement for manufacturing and operational services.

(J)      A common stock purchase warrant expiring February 18, 2008 to purchase
         920,000 shares at $0.50 per share issued in connection with a
         short-term financing arrangement.

(K)      A common stock purchase warrant expiring September 20, 2008 to purchase
         18,078,192 shares at $0.50 per share issued in connection with a debt
         conversion arrangement.

(L)      A common stock purchase warrant expiring September 20, 2008 to purchase
         10,292,304 shares at $0.50 per share issued in connection with a debt
         conversion arrangement.

(M)      A common stock purchase warrant expiring February 18, 2008 to purchase
         200,000 shares at $0.50 per share issued in connection with a
         short-term financing arrangement.

                                       22


<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following tables set forth selected financial data of LifePoint for
the five fiscal years ended March 31, 2004, 2003, 2002, 2001 and 2000. The
selected financial data are derived from the financial statements of LifePoint.
This selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements, related notes and other financial information included
herein.

<TABLE>
<CAPTION>
                                                                              Years Ended March 31,
                                                    2004              2003             2002              2001              2000
                                               -------------     -------------     -------------     -------------     -------------
<S>                                            <C>               <C>               <C>               <C>               <C>
Selected statement of operations data:
Net revenues                                   $    (18,500)     $     48,713      $    135,980      $         --      $         --
Costs and expenses
Cost of goods sold                                   52,858         1,317,189           623,242                --                --
Research and development                          4,156,256         9,791,049         7,906,325         5,422,893         2,543,192
Selling expenses                                    671,434         1,955,531         1,895,839           752,061           218,484
General and administrative expenses               2,596,180         2,671,170         2,494,421         1,412,696         1,304,277
                                               -------------     -------------     -------------     -------------     -------------
   Total costs and expenses from operations       7,476,728        15,734,939        12,919,827         7,587,650         4,065,953
                                               -------------     -------------     -------------     -------------     -------------
Loss from operations                             (7,495,228)      (15,686,226)      (12,783,847)       (7,587,650)       (4,065,953)
Interest income (expense) net                       482,385          (380,962)          186,883           425,121           116,169
                                               -------------     -------------     -------------     -------------     -------------
         Net Loss                              $ (7,012,843)     $(16,067,188)     $(12,596,964)     $ (7,162,529)     $ (3,949,784)

Less registration effectiveness fee                      --           981,551                --                --                --
Less accrued preferred dividends and
  conversion cost                                 8,218,754         1,369,862           995,837                --           547,246
                                               -------------     -------------     -------------     -------------     -------------
Loss applicable to common stockholders         $(15,231,597)     $(18,418,601)     $(13,592,801)     $ (7,162,529)     $ (4,497,030)
                                               =============     =============     =============     =============     =============

  Weighted average common shares
    outstanding
       - basic and diluted                       42,295,501        35,827,837        31,747,342        30,491,519        15,251,400
                                               =============     =============     =============     =============     =============
  Basic and diluted net loss per
    common share                               $      (0.36)     $      (0.51)     $      (0.43)     $      (0.23)     $      (0.29)
                                               =============     =============     =============     =============     =============
</TABLE>

<TABLE>
<CAPTION>
                                                                              As of March 31,
                                                   2004             2003            2002            2001            2000
                                               ------------    ------------     ------------    ------------    ------------
<S>                                            <C>             <C>              <C>             <C>             <C>
Selected Balance Sheet Data:
Working Capital (Deficit)                      $ 4,029,237     $(1,567,353)     $ 1,603,980     $ 4,874,305     $ 8,784,488
                                               ============    ============     ============    ============    ============
Total Assets                                   $ 8,809,171     $ 5,908,210      $ 7,579,246     $ 9,066,130     $ 8,784,488
                                               ============    ============     ============    ============    ============
Long Term Debt                                 $   151,734     $ 1,620,250      $   320,271     $   641,560     $   104,955
                                               ============    ============     ============    ============    ============
Stockholders' Equity (Deficit)                 $ 6,355,002     $   (68,907)     $ 4,211,898     $ 6,690,112     $ 9,174,672
                                               ============    ============     ============    ============    ============
</TABLE>

                                                             23


<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

         Until December 31, 2001, the Company had been a development stage
enterprise with no revenue history. Until recently, the Company has devoted
substantially all of its resources to research and development and has
experienced an ongoing deficiency in working capital. The Company has
transitioned to commencing its manufacturing operations to meet the anticipated
market demand. There can be no assurance as to when the Company will achieve
profitability, if at all. The Company increased its cash and cash equivalents
from $75,588 at March 31, 2003 to $3,710,761 at March 31, 2004.

         Prior to December 31, 2001, the Company had not produced any revenues
as a result of its being a development stage company. The Company has been
dependent on the net proceeds derived from seven private placements pursuant to
Regulation D under the Securities Act to fund its operations. The succeeding
three paragraphs describe the private placements in fiscal years 2002, 2003 and
2004.

         In June 2001, the Company closed an initial round of a Series C
Convertible Preferred Stock ("Series C Preferred Stock") and in September 2001,
closed the final round of the private placement. The Company realized
$13,787,060 in gross proceeds (less $1,258,955 in costs related to the private
placement) from the sale of 393.916 units each unit consisting of 1,000 shares
of the Series C Preferred Stock and a Common Stock purchase warrant to purchase
10,000 shares of the Common Stock. The Company had previously realized
$3,000,000 in gross proceeds from the sale of 75,000 shares of the then
designated Series B Preferred Stock. However, the $3,000,000 purchase price for
these shares was applied to purchase units of the Series C Preferred Stock and
the shares of Series B Preferred Stock were cancelled and the related common
stock purchase warrants surrendered.

         On April 2, 2002, the Company sold 272 units, at $37,500 per unit, to
eight accredited investors. Each unit consisted of 10,000 shares of the Common
Stock and a common stock purchase warrant expiring April 1, 2007 to purchase
2,000 shares of the Common Stock at $4.50 per share. The Company realized
$10,200,000 in gross proceeds from the private placement. The Series C Preferred
Stock has a mandatory conversion on June 20, 2004.

         On September 22, 2003, the Company closed a $13 million private
placement of Series D Convertible Preferred Stock ("Series D Preferred Stock")
and warrants to purchase Common Stock ("Warrants"). On July 14, 2003, at the
first closing (the "First Closing") of the private placement, the Company issued
2,218 shares of Series D Preferred Stock convertible into 7,392,594 shares of
Common Stock of the Company and Warrants to purchase 14,785,188 shares of Common
Stock of the Company to various investors (the "Investors"). On September 22,
2003, at the second closing (the "Second Closing") of the private placement, the
Company issued an additional 6,533 shares of Series D Preferred Stock
convertible into 21,774,489 shares of Common Stock of the Company and Warrants
to purchase 43,548,978 shares of Common Stock of the Company to the Investors.
Additionally, at the Second Closing, the holders of the Company's secured
indebtedness converted their secured indebtedness into 4,256 shares of Series D
Preferred Stock convertible into 14,185,248 shares of Common Stock of the
Company and Warrants to purchase 28,370,496 shares of Common Stock of the
Company.

         The Series D Preferred Stock has an aggregate stated value of $1,000
per share and is entitled to a quarterly dividend at a rate of 6% per annum,
payable in stock or cash at the Company's option. The Series D Preferred Stock
is entitled to a liquidation preference over the Company's Common Stock and
Series C Preferred Stock upon a liquidation, dissolution, or winding up of the
Company. The Series D Preferred Stock is convertible at the option of the holder
into Common Stock at a conversion price of $0.30 per share, subject to certain
anti-dilution adjustments (including full-ratchet adjustment upon any issuance
of equity securities at a price less than the conversion price of the Series D
Preferred Stock, subject to certain exceptions). Following the second
anniversary of the closing, the Company has the right to force conversion of all
of the shares of Series D Preferred Stock provided that a registration statement
covering the underlying shares of Common Stock is in effect and the 20-day
volume weighted average price of the Company's Common Stock is at least 200% of
the conversion price.

         The Company is required to redeem any shares of Series D Preferred
Stock that remain outstanding on the third anniversary of the closing, at its
option, in either (i) cash equal to the face amount of the Series D Preferred
Stock plus the amount of accrued dividends, or (ii) shares of Common Stock equal
to 90% of the 90-day volume weighted average price of the Common Stock ending on
the date prior to such third anniversary.

         Each share of Series D Preferred Stock is generally entitled to vote
together with the Common Stock on an as-converted basis. In addition, one of the
investors in the Series D Preferred Stock private placement is entitled to

                                       24


<PAGE>

appoint a representative to attend the Company's Board of Directors meetings in
a non-voting observer capacity.

         Upon any change of control, the holders of the Series D Preferred Stock
may require the Company to redeem their shares for cash at a redemption price
equal to the greater of (i) the fair market value of such Series D Preferred
Stock and (ii) the liquidation preference for the Series D Preferred Stock. For
a three-year period following the closing, each holder of Series D Preferred
Stock has a right to purchase its pro rata portion of any securities the Company
may offer in a privately negotiated transaction, subject to certain exceptions.

         The purchasers of the Series D Preferred Stock also received Warrants
exercisable for an aggregate of 91,543,345 shares of Common Stock (including a
warrant exercisable for 4,838,683 shares of Common Stock issued to the placement
agent for the offering, Roth Capital Partners) at an initial exercise price of
$0.50 per share, subject to certain non-price based anti-dilution adjustments.
If the Warrants are exercised with cash to the Company before July 24, 2004,
however, the exercise price will be $0.30 per share, subject to certain
non-price based anti-dilution adjustments. The Warrants issued on the First
Closing expire on July 13, 2008 and the Warrants issued at the Second Closing
expire on September 21, 2008.

         Management believes that the net proceeds from the offerings, together
with the liquidity provided by certain other sources of funds, will not be
sufficient to fund the Company's operations over the next twelve months. There
can be no assurance that management's estimate as to costs and timing will be
correct. Since there are no assurances that the Company will be successful in
raising the additional necessary capital, our auditors have indicated a going
concern and the Company will require additional funding.

OPERATING CASH FLOWS

         Net cash used for operations during fiscal 2004 amounted to $6,972,000
as compared to $14,711,000 and $11,989,000 in fiscal 2003 and 2002,
respectively. The cash used by operating activities in fiscal 2004 decreased by
$7,739,000 from fiscal 2003, which was the result of lower operating expenses
and headcount as the Company re-organized following the elimination of the
Company's critical funding and the ability to draw on a $7,500,000 debt facility
on January 29, 2003 (See "Note 4 - Debt" for a full discussion of these events).
In addition, $1,985,000 in cash was used to reduce the outstanding payable
balances. Net cash used by operating activities in fiscal 2003 increased by
$2,722,000 from fiscal 2002, which was the result of increased staffing, related
expenses associated with the commercialization of the IMPACT Test System
including product redesign and rework, delays in bringing the product to market
and subsequent inventory write downs.

INVESTING CASH FLOWS

         During fiscal 2004, 2003 and 2002, net cash used by investing
activities was $142,000, $789,000 and $888,000, respectively. The $647,000
decrease in cash used in fiscal 2004 over fiscal 2003 was directly related to
fewer purchases of research and development equipment. The $99,000 decrease in
cash used in fiscal 2003 over fiscal 2002 was directly related to fewer patents
and trademarks costs in fiscal 2003.

FINANCING CASH FLOWS

         Net cash provided by financing activities amounted to $10,749,000
during fiscal 2004 primarily related to the Series D Preferred private placement
of common stock with net proceeds of $8,421,000. In addition, $1,662,000 in
proceeds were provided by the exercise of warrants.

         Net cash provided by financing activities amounted to $12,591,000
during fiscal 2003 primarily related to the private placement of common stock
with net proceeds of $9,420,000 and proceeds of a convertible debt offering of
$2,500,000. An additional $652,000 was received from the exercise of stock
options and warrants.

                                       25


<PAGE>

         Net cash provided by financing activities amounted to $9,634,000 during
fiscal 2002 primarily related to the sixth private placement of 393,916 shares
of the Company's Series C Preferred Stock with net proceeds of $12,528,000,
representing $9,528,000 of new investments and $3,000,000 of Series B Preferred
Stock converted into Series C Preferred Stock. An additional $814,000 was
received from the exercise of stock options and warrants.

<TABLE>
TABLE OF CONTRACTUAL OBLIGATIONS
<CAPTION>

                Contractual Obligations                                             Payments due by period
-----------------------------------------------------------   ----------------------------------------------------------------
                                                                              Less than                             More than
                                                                  Total        1 year        1-3 years  3-5 years    5 years
                                                                  -----        ------        ---------  ---------    -------
<S>                                                           <C>            <C>            <C>           <C>         <C>
Long-Term Debt Obligations                                    $  246,090     $  134,356     $  111,734      --          --
Capital Lease Obligations                                        485,000        445,000         40,000      --          --
Operating Lease Obligations                                      391,000        298,000         93,000      --          --
Purchase Obligations                                                  --             --             --      --          --
Other Long-Term Liabilities Reflected on the Registrant's             --             --
Balance Sheet under GAAP                                              --             --             --      --          --
                            Total                             $1,122,090     $  877,356     $  244,734    $ --        $ --
</TABLE>

RESULTS OF OPERATIONS

FISCAL 2004 VS. FISCAL 2003

         During fiscal 2004 the Company recorded a $19,000 reversal on revenues
due to inability to support customer use of the product during the cash
constrained period. During the fourth quarter of the fiscal year, the Company
completed the initial phase of the re-start plans for product launch of the
enhanced IMPACT Test System. As adopted in fiscal 2003, the Company has elected
to record revenue only when related cash has been collected. The Company
recognized $53,000 for cost of goods sold which reflected the adjustment to raw
materials at year-end as compared to $1,317,000 for increasing the reserves and
warranty costs during fiscal 2003. A common theme throughout all the operating
groups for fiscal year 2004 was the impact that the furlough had during the
first half of the year and its effect on each segment, as the Company completed
its replacement financing to fund operations. During fiscal 2004 the Company
incurred $4,156,000 in research and development costs, $2,596,000 in general and
administrative expenses and $671,000 in selling expenses, as compared with
$9,791,000, $2,671,000 and $1,956,000, respectively, during fiscal 2003. The
decrease of $5,635,000, or 58%, in research and development expenditures in
fiscal 2004 primarily related to the reduced salary charges related to the
reduction in the Company's workforce during the year and the transfer of the
product from product development to manufacturing. General and administrative
expenses decreased $75,000, or 3%, during fiscal 2004 as the Company had fewer
administrative personnel over the course of the year. Selling expenses decreased
$1,285,000, or 66%, during fiscal 2004 due to fewer sales and marketing staff
members in addition to lower travel and marketing expenses. Depreciation and
amortization during fiscal 2004 were $689,000 as compared to $638,000 for fiscal
2003. Interest expense for fiscal 2004 was $304,000 while interest income was
$23,000, as compared to $458,000 and $77,000, respectively, for fiscal 2003.

FISCAL 2003 VS. FISCAL 2002

         During fiscal 2003 the Company recognized initial revenues of $49,000
from the sales of IMPACT Test Systems and Saliva Test Modules. While the Company
believes it has met the criteria of SAB 101, due to delays in receiving payments
on some of the Company's initial product shipments, the Company has elected to
record revenue related to shipments made during the year ended March 31, 2003
only to the extent the related cash has been collected. The Company recognized
$1,317,000 of cost of sales for the year ended March 31, 2003 which includes
costs related to the warranty repair or replacement of IMPACT Test Systems
already in the field and units being used for field evaluation, contingent sales
(inventory being evaluated for purchase) and internal use, and a reserve of
$747,000 for inventories which may be in excess of current requirements. During
fiscal 2002, the Company recognized revenues of $136,000, and cost of sales of
$623,000, including an adjustment of $350,000 for excess inventory. During
fiscal 2003, the Company incurred $9,791,000 in research and development costs,
$2,671,000 in general and administrative expenses and an additional $1,956,000

                                       26


<PAGE>

in selling expenses, as compared with $7,906,000, $2,494,000 and $1,896,000,
respectively, during fiscal 2002. The increase of $1,885,000, or 24%, in
research and development expenditures in 2003 primarily related to increased
expenses due to transfer of product to manufacturing, a write down of inventory
to offset modifications made to existing IMPACT Test Systems and write off of
parts changed due to design modifications. General and administrative expenses
increased $177,000, or 7%, primarily as a result of costs associated with the
transfer to new corporate counsel with resulting fees from both law firms during
the transfer period. Depreciation and amortization during fiscal 2003 were
$638,000 as compared to $522,000 for fiscal 2002. Selling expenses increased
$60,000, or 3%, as a result of increased staffing and focus on marketing the
IMPACT Test System. Interest expense for fiscal 2003 was $458,000, including
$201,000 in non-cash interest expense related to the amortization of debt
discount, while interest income was $77,000, as compared to $168,000 and
$355,000, respectively, for fiscal 2002.

INFLATION

         The Company believes that inflation has not had a material effect on
its results of operations.

 CRITICAL ACCOUNTING POLICIES

         The Company's accounting policies are more fully described in Note 1 of
 Notes to the Financial Statements. As disclosed in Note 1 of Notes to the
 Financial Statements, the preparation of financial statements in conformity
 with accounting principles generally accepted in the United States requires
 management to make estimates and assumptions about future events that affect
 the amounts reported in the financial statements and accompanying notes. Future
 events and their effects cannot be determined with absolute certainty.
 Therefore, the determination of estimates requires the exercise of judgment.
 Actual results inevitably will differ from those estimates, and such
 differences may be material to the financial statements.

         A critical accounting policy is defined as one that has both a material
impact on the Company's financial condition and results of operations and
requires the Company to make difficult, complex and subjective judgments, often
as a result of the need to make estimates about matters that are inherently
uncertain. The Company believes the following critical accounting policies
involve significant judgements and estimates that are used in the preparation of
the Company's financial statements.

INVENTORY

         Inventories are priced at the lower of cost or market using standard
costs, which approximate actual costs on a first-in, first-out (FIFO) basis. The
Company maintains a perpetual inventory system and continuously record the
quantity on-hand and standard cost for each product, including purchased
components, subassemblies and finished goods. The Company maintains the
integrity of perpetual inventory records through periodic physical counts of
quantities on hand. Finished goods are reported as inventories until the point
of transfer to the customer. Generally, title transfer is documented in the
terms of sale.

         Standard costs are generally re-assessed at least annually and reflect
achievable acquisition costs, generally the most recent vendor contract prices
for purchased parts, currently obtainable assembly and test labor, and overhead
for internally manufactured products. Manufacturing labor and overhead costs are
attributed to individual product standard costs at a level planned to absorb
spending at average utilization volumes.

         The Company maintains an allowance against inventory for the potential
future obsolescence or excess inventory that is based on the Company's estimate
of future sales. A substantial decrease in expected demand for the Company's
products, or decreases in the Company's selling prices could lead to excess or
overvalued inventories and could require the Company to substantially increase
its allowance for excess inventory. If future customer demand or market
conditions are less favorable than our projections, additional inventory
write-downs may be required, and would be reflected in cost of sales in the
period the revision is made.

                                       27


<PAGE>

REVENUE RECOGNITION

         The majority of the Company's revenue is from sales of the IMPACT Test
System. The Company recognizes revenue in the period in which cash payments are
received for products shipped, title transferred and acceptance and other
criteria are met in accordance with the Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements. While the Company believes it has met the criteria of SAB 101, due
to delays in receiving payments on some of the Company's initial shipments of
products, the Company elected, during the quarter ended December 31, 2002, to
begin recording revenue related to shipments only to the extent the related cash
has been collected, based on the guidance provided in SAB 101, as amended by SAB
104. During the year ended March 31, 2004, the Company had $66,000 in product
shipments to customers that are subject to customer evaluations and acceptance.
These product shipments are included in finished goods inventory at cost.

WARRANTY AND RETURNS

         Typically, marketing and selling diagnostic instruments includes
providing parts and service warranty to customers as part of the overall price
of the product. The Company provides standard warranties for the systems that
run generally for a period of twelve months from system acceptance. The Company
does not provide warranties on sales of its cassette products as these items are
perishable. Actual warranty expenses are incurred on a system-by-system basis.
Because historical activity is minimal, the Company must rely on present
information for a determination of future costs.

         The Company does not typically accept the return of either its
instrument products or its disposable cassettes and therefore does not maintain
a reserve. However, at the Company's discretion, it may allow for returns as
dictated by the market, product enhancements, or any other business factor that
may arise and the costs associated with these products would be expensed as a
period cost in the month incurred.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not Applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Please see Item 14 of this Report for financial statements and
supplementary data.

ITEM 9.  CHANGES IN ACCOUNTANTS AND ACCOUNTING AND FINANCIAL DISCLOSURE

         On July 8, 2003, the Company was notified by its independent auditors,
Ernst & Young, LLP, that they would not stand for re-election after completion
of the current audit for the year ended March 31, 2003. The reports of Ernst &
Young, LLP on the Company's financial statements for the prior two fiscal years
did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles
except for the inclusion of an explanatory paragraph which was included in their
report for the year ended March 31, 2003 related to the uncertainty of the
Company's ability to continue as a going concern. Additionally, Ernst & Young
LLP's management letter related to their audit of the March 31, 2003 financial
statements contained certain comments regarding material weaknesses noted. These
particular comments related to the Company's internal controls in its accounting
and financial reporting and related resources. The Company agreed to the
inclusion of the explanatory language and the material weaknesses, which
management believes has been properly resolved subsequent to March 31, 2003.

         In connection with the audits of the Company's financial statements for
each of the two fiscal years ended March 31, 2003, and in the subsequent interim
period, there were no disagreements with Ernst & Young, LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst &
Young, LLP would have caused Ernst & Young, LLP to make reference to the matter
in their report. The Company has authorized Ernst & Young to respond fully and
without limitation to any inquiries of a successor independent audit firm to be
retained by the Company. The Company approved Singer Lewak Greenbaum & Goldstein
LLP as the successor firm beginning with the quarter ended June 30, 2003.

                                       28


<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

         The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms and that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

         As required by SEC Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the fiscal year
covered by this report. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective at the reasonable assurance level.

         There has been no change in the Company's internal controls over
financial reporting during the Company's most recent fiscal year that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.

                                       29


<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

DIRECTORS AND EXECUTIVE OFFICERS

         The following table contains certain information relating to the
directors and executive officers of the Company as of May 31, 2004:

         NAME                       AGE      POSITION

         Stan Yakatan               61       Chairman of the Board
         Linda H. Masterson         53       President, Chief Executive Officer
                                             and Director
         Craig S. Montesanti        44       Chief Accounting Officer, Vice
                                             President Finance, Secretary
         Nuno Brandolini            50       Director
         William A. Cavendish       52       Director
         Peter S. Gold              79       Director
         M. Richard Wadley          60       Director

         The Company has a classified Board. Each director of the Company is
elected to serve until the third Annual Meeting of Stockholders following his or
her election or until his or her successor is elected and shall have qualified.
Each officer of the Company is elected by the Board of Directors to serve at the
discretion of the Board.

         The last Annual Meeting of Stockholders was held on January 14, 2004.

BUSINESS EXPERIENCE

         Stan Yakatan was elected as a director of the Company on June 16, 2000,
and Chairman of the Board on September 20, 2003. During the past ten years, he
has dedicated his career to helping establish new companies in conjunction with
venture capital firms throughout the world on a project assignment basis,
particularly in medical device, biotechnology, biopharmaceutical and
hi-technology companies. Mr. Yakatan also has extensive experience in sales,
marketing and business development and as a senior manager in a variety of
diagnostic, biotechnology and pharmaceutical companies. From May 1999 to date,
he has been serving as the Chairman, President and Chief Executive Officer of
Katan Associates which furnishes advisory services to its clients on strategic
planning, marketing, business development and other matters and assists its
clients in obtaining financing. Since July 1994, he has served as a consultant
to Medical Science Partners, an international healthcare venture fund, and a
member of the investment committee of BioCapital, also a healthcare venture
fund. From May 1996 to May 1999, he served as the Chairman, President and Chief
Executive Officer of Quantum Biotechnologies, which develops products to the
research products molecular biology market. From September 1994 to December
1995, he served as the President and Chief Executive Officer of CryoSurge, a
medical device development stage company. From July 1969 to July 1994, he
advanced from a sales representative to managerial positions to executive
officerships with Sandoz, Inc., New England Nuclear, E.I. Dupont de Nemours &
Co., ICN Pharmaceuticals Inc., New Brunswick Scientific, Inc., Unisyn
Technologies, Inc., Proteine Performance and Cystar, Inc. Mr. Yakatan received
his MBA from the Wharton School of Business of the University of Pennsylvania.

         Linda H. Masterson has over 30 years' industry experience, over 20
years' experience in marketing, sales and business development in the medical
diagnostics, healthcare and biotechnology fields, and extensive experience as a
senior manager. On May 31, 1996, she was elected a director of the Company and,
on July 31, 1996, the President and the Chief Operating Officer of the Company.
On May 23, 1997, she became the Chief Executive Officer of the Company (formally
designated as such on May 26, 1997). On June 16, 2000, she was elected as
Chairman of the Board of the Company, until September 20, 2003, when the
Chairman and CEO positions were separated. Until May 13, 1996 when she became an
employee of the then parent of the Company, she was employed as the Executive
Vice President of Cholestech, Inc., a start-up diagnostic company, for which she
developed and restructured that company's business strategy. In November 1993,
Ms. Masterson founded Masterson & Associates, a company of which she was the
President and owner until she joined Cholestech, Inc. in May 1994, which was

                                       30


<PAGE>

engaged in the business of providing advice to start-up companies, including the
preparation of technology and market assessments and the preparation of
strategic business plans for biotech, medical device, pharmaceutical and
software applications companies. From April 1992 to November 1993, Ms. Masterson
was employed as the Vice President of Marketing and Sales of BioStar, Inc., a
start-up biotech company focused on the commercialization of a new detection
technology applicable to both immunoassay and hybridization based systems. From
1989 to 1992, she was employed as the Senior Vice President of Marketing, Sales
and Business Development by Gen-Probe, Inc., a specialized genetic probe
biotechnology company focused on infectious diseases, cancer and therapeutics.
Prior to 1989, Ms. Masterson was employed for 12 years in various domestic and
international marketing and sales positions at Johnson & Johnson, Inc., Baxter
International Inc. and Warner-Lambert Company. Ms. Masterson has a B.S. in
Medical Technology from the University of Rhode Island and an M.S. in
Microbiology/ Biochemistry from the University of Maryland and attended the
Executive Advanced Management Program at the Wharton School of Business at the
University of Pennsylvania.

         Craig Montesanti has over 20 years experience in both public and
private companies in a variety of finance and accounting positions, including
several medical companies, and proven expertise in start-up and rapid growth
environments. Mr. Montesanti was elected as Chief Accounting Officer, Secretary
and Treasurer of LifePoint on January 14, 2004. From 2001, he was most recently
the Vice President of Finance and Administration with Puroflow, Inc., a publicly
traded manufacturer of filtration products that was recently acquired. Prior to
Puroflow, Mr. Montesanti was Director of Finance and responsible for all
financial operations at Aspen Marketing Group, a privately held provider of
offline and online marketing services. Prior to Aspen Marketing Group, Mr.
Montesanti held a variety of senior finance and accounting positions at VitalCom
(GE Medical Systems Information Tech) and Trikon Tech, both publicly traded
organizations, and started his career at Ioptex Research, Inc., a manufacturer
of medical devices. Mr. Montesanti has an MBA from Pepperdine University and a
B.S. in Business Management/Accounting from California State Polytechnic
University.

         Nuno Brandolini was elected as a director of the Company on September
20, 2003. Mr. Brandolini has served as Chairman and Chief Executive Officer of
Scorpion Holdings, Inc. since 1995. Prior to forming Scorpion Holdings, Mr.
Brandolini served as Managing Director of Rosecliff, Inc., a leveraged buyout
fund co-founded by Mr. Brandolini in 1993. Before joining Rosecliff, Mr.
Brandolini was a Vice President at Salomon Brothers, Inc. where he was an
investment banker involved in mergers and acquisitions in the Financial
Entrepreneurial Group. Mr. Brandolini has also worked for Lazard Freres in New
York and was President of the Baltheus Group, a merchant banking firm, and
Executive Vice President of Logic Capital Corp., a venture capital firm. Mr.
Brandolini was awarded a law degree by the University of Paris and received a
M.B.A. from the Wharton School of Business of the University of Pennsylvania. He
currently serves on the Board of Cheniere Energy (AMEX).

         William A. Cavendish was elected as a director of the Company on
January 14, 2004. Mr. Cavendish is an international pharmaceutical executive
with extensive senior management experience in world class U.S. and
international companies. He also has broad based public and private company
board of directors' experience. Mr. Cavendish is currently the President of
Healthcap LLC, a company which performs advisory services for business
development, venture capital and direct investment in small and medium size
life-science companies. He is also the CEO and a director of Unihart Biotech
Pharma NV, a drug discovery and development company focusing on virology and
oncology. Until 2002, Mr. Cavendish was head of Pharmacia CHC International, a
division of Pharmacia Corporation, and responsible for Pharmacia's consumer
healthcare and nutritional business outside of North America. From 1977 until
2001, Mr. Cavendish held positions of increasing responsibility within American
Home Products Corporation (now Wyeth Corporation), culminating with a senior
management position in Whitehall International Inc., a division of American Home
Products. Mr. Cavendish has a MS in Economics from the University of Rome and an
MBA from Columbia University.

         Peter S. Gold was elected as a director of the Company on December 5,
1997. He retired in 1988 as Chairman and Chief Executive Officer of Price
Pfister, Inc., the largest manufacturer of faucets in the world. Mr. Gold did a
leveraged buyout and purchased the company in 1983; he subsequently took the
company public in 1987; and sold the company in 1988. Price Pfister is now owned
by Black & Decker. Mr. Gold is a Director Emeritus of The Home Depot, Inc. and
has major investments in commercial real estate in various parts of the United
States. Mr. Gold is Chairman of the Board of Trustees of Pitzer College
(Claremont College), Claremont, CA, and a member of the Board of Trustees of the
City of Hope. Mr. Gold received a Doctor of Humane Letters from Pitzer College,
Claremont, CA, and received a law degree at Southwestern University, Los
Angeles, CA.

                                       31


<PAGE>

         M. Richard Wadley was elected as a director of the Company on December
5, 2003. Mr. Wadley is a proven CEO with over 25 years of successful general
management and P&L experience with world-class Fortune 500 companies, as well as
smaller entrepreneurial enterprises. He also has broad based public and private
company Board of Directors experience. Mr. Wadley is currently the CEO of the
Bayshore Group, a management and marketing consulting group focusing on building
businesses through effective strategic planning, marketing and operational
improvements, merger, acquisition, divestiture, and equity capital generation.
From 1993 to 1999, Mr. Wadley was the Chairman and Chief Executive Officer of
T-Chem Products, Inc., a leading private label cleaning products company serving
major retailers in the Western U.S., and from 1988 until 1991, President and CEO
of Alta-Dena Certified Dairy Inc, a $150 million regional agricultural business.
Prior to 1988, Mr. Wadley was General Manager of Tambrands, Inc., and held
positions of increasing importance in marketing for Hallmark Cards and Proctor &
Gamble Co. He currently serves on the boards of private companies Legacy
Interactive Inc. and Funosophy Inc. Mr. Wadley has a B.S. in Business Management
from Brigham Young University and an MBA from Northwestern University.

AUDIT COMMITTEE FINANCIAL EXPERT

         All members of the Audit Committee meet AMEX's audit committee
financial sophistication requirements. The Company does not have an "audit
committee financial expert" (as defined in the rules and regulations of the
Securities and Exchange Commission) serving on the Audit Committee, but the
Company believes that the background and financial sophistication of its members
are sufficient to fulfill the duties of the Audit Committee.

FAMILY RELATIONSHIPS

None

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely on a review of Forms 3, 4 and 5 furnished to LifePoint
under Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the fiscal year ended March 31,
2004, LifePoint is not aware of any director, executive officer or beneficial
owner of 10% of its common stock who failed to file on a timely basis, as
disclosed in such forms, reports required by Section 16(a) of the Exchange Act
during the fiscal year ended March 31, 2004.

         As of March 31, 2004, St. Cloud Investments, Ltd., General Conference
Corporation of the Seventh-day Adventists and Jonathan Pallin were the only
beneficial owners of 10% or more of the Common Stock known to the Company. Both
investors have advised LifePoint that they have made timely filings with respect
to its transactions in fiscal 2004.

CODE OF BUSINESS CONDUCT AND ETHICS

         In June 2004, the Company established a Code of Business Conduct and
Ethics to help its officers, directors and employees comply with the law and
maintain the highest standards of ethical conduct. The Code of Business Conduct
and Ethics contains general guidelines for conducting the business of the
Company consistent with the highest standards of business ethics, and is
intended to qualify as a "code of ethics" within the meaning of Section 406 of
the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. All of the
Company's officers, directors and employees must carry out their duties in
accordance with the policies set forth in the Code of Business Conduct and
Ethics and with applicable laws and regulations. A copy of the Code of Business
Conduct and Ethics can be accessed on the Internet via the Company's website at
www.lifepoint.com. The Company intends to post any amendments to, and waivers
from, the Code of Business Conduct and Ethics to the Company's website at
www.lifepoint.com within five days following the date of such amendment or
waiver.

                                       32


<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table provides certain summary information concerning
compensation paid or accrued by the Company during fiscal 2004 and the fiscal
years ended March 31, 2003 ("fiscal 2003") and 2002 ("fiscal 2002") to the sole
person who served as the Chief Executive Officer during fiscal 2004 and to the
other executive officers who served during fiscal 2004.

<TABLE>
<CAPTION>
                                                                    LONG-TERM COMPENSATION AWARDS
                                                                    -----------------------------
                                            ANNUAL COMPENSATION     RESTRICTED  SECURITIES   LTIP
                               FISCAL       -------------------       STOCK     UNDERLYING   PAYOUTS       ALL OTHER
NAME AND PRINCIPAL POSITION    YEAR       SALARY($)    BONUS($)     AWARDS($)   OPTIONS(#)   ($)           COMPENSATION
---------------------------    -----      ----------   ---------    ----------  -----------  -----------   ------------
<S>                            <C>           <C>        <C>         <C>         <C>            <C>           <C>
Linda H. Masterson,            2004          $171,398   $    --     $56,781     1,470,000      $    --       $    --
  Chief Executive Officer      2003          $168,218   $    --     $    --       120,000      $    --       $60,000(6)
  And President (1) (5)        2002          $167,164   $    --     $    --       142,840      $    --       $    --

Craig Montesanti (4)           2004           $32,063   $    --     $    --       475,000      $    --       $    --
  Vice President of Finance,
   Chief Accounting Officer

Donald Rutherford              2004          $132,449   $    --     $    --            --      $    --       $    --
  Chief Financial Officer (3)


Thomas J. Foley                2004          $118,272   $    --     $    --            --      $    --       $    --
  Senior Vice President,       2003          $132,081   $    --     $    --        60,000      $    --       $    --
   Research and Develop-       2002          $130,974   $    --     $    --        77,895      $    --       $    --
   ment(2) (5)
</TABLE>

--------------------

(1)      Ms. Masterson was elected the President of the Company effective August
         1, 1996 and designated as its Chief Executive Officer on May 26, 1997.

(2)      Dr. Foley was elected as Vice President, Research and Development
         effective March 9, 1998 and his title was changed by the Board to
         Senior Vice President, Research and Development on March 12, 1999. He
         retired as an employee and officer of LifePoint on January 1, 2004, but
         continues to work at LifePoint more than 50% of the time as a
         consultant.

(3)      Mr. Rutherford was elected as an interim Chief Financial Officer on May
         23, 2003 and terminated his employment on February 29, 2004.

(4)      Ms. Montesanti was elected Vice President of Finance and Chief
         Accounting Officer on December 22, 2003.

(5)      Ms. Masterson and Dr. Foley were subject to a 25% salary reduction for
         the period October 1, 2001 through March 31, 2002 and again from
         February 1, 2003 through July 2003. Ms. Masterson took no salary from
         March 21, 2003 through July 2003.

(6)      Ms. Masterson received $60,000 for her relocation to Southern
         California.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

         On August 14, 1997, the Board of Directors adopted, subject to
stockholder approval, the 1997 Stock Plan providing for the granting of options
to purchase up to 1,000,000 shares of Common Stock to employees (including
officers) and persons who also serve as directors and consultants of the
Company. On June 5, 1998, the Board increased the number of shares subject to
the 1997 Option Plan to 2,000,000, again subject to stockholder approval.
Stockholder approval was given on August 13, 1998. The options may either be
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), to be granted to employees or nonqualified
stock options to be granted to employees, directors or consultants. On June 16,
2000, the Board of Directors adopted, and, on August 25, 2000, the stockholders
approved, the Company's 2000 Stock Option Plan (the "2000 Option Plan") which

                                       33


<PAGE>

would permit the granting of options to purchase an aggregate of 2,000,000
shares of Common Stock on terms substantially similar to those of the 1997
Option Plan. On September 20, 2003, the Board of Directors adapted, and on
January 14, 2004, the Stockholders approved, the Company's 2003 Incentive Award
Plan (the "2003 Option Plan") which would permit the granting of options to
purchase an aggregate of 10,000,000 shares of Common Stock on terms
substantially similar to those of the 2000 Option Plan.

         As of March 31, 2004, options to purchase an aggregate of 5,807,442
shares of the Common Stock granted to employees including officers, directors
and consultants were outstanding. As of such date, options to purchase an
aggregate of 851,741 shares of the Common Stock had been exercised and options
to purchase an aggregate of 775,078 shares of the Common Stock were then
exercisable. Options granted to date under both Option Plans have generally
become exercisable as to one-quarter of the shares subject thereto on the first
anniversary date of the date of grant and as to 1/36th of the remaining shares
on such calendar day each month thereafter for a period of 36 months. Certain
options will become exercisable upon the achievement of certain goals related to
corporate performance and not that of the optionee. The exercise price per share
for incentive stock options under the Code may not be less than 100% of the fair
market value per share of the Common Stock on the date of grant. For
nonqualified stock options, the exercise price per share may not be less than
85% of such fair market value. No option may have a term in excess of ten years.

         The Company has not granted any options to consultants other than to
the two current members of its Scientific Advisory Board and the nine members of
its Substance Abuse Advisory Board, each receiving an option to purchase 10,000
shares. The Company will grant a similar option to any future member of the
Advisory Boards. For information on as to options granted to non-employee,
non-consultant directors, see the section "Compensation of Directors" under this
caption "Executive Compensation."

         The Company has never granted any stock appreciation rights.

         The following table contains information concerning the grant of
options to the Chief Executive Officer of the Company and other named executive
officers whose compensation for fiscal 2004 is reported in the Summary
Compensation Table under this caption "Executive Compensation."

<TABLE>
<CAPTION>
                               Individual Grants                                    Potential Realizable
                                          Percentage of                           Value at Assumed Annual
                           Number of      Total Options                             Rates of Stock Price
                          Securities        Granted to     Exercise               Appreciation for Option
                          Underlying       Employees in     or Base                       Term (3)
                            Options           Fiscal         Price    Expiration --------------------------
Name                      Granted (#)         2004(1)      ($/Sh) (2)    Date         5% ($)       10% ($)
-------------------     --------------    -------------   ----------- ---------- ---------------------------
<S>     <C>
Linda H. Masterson         1,470,000          34.1%          $0.37     3/22/14        $27,195      $54,390

Craig Montesanti             475,000          11.0%          $0.37     3/22/14         $8,788      $17,575

Don Rutherford                 -                -              -          -              -            -

Thomas J. Foley                -                -              -          -              -            -
</TABLE>

-------------------

(1)      Based upon options to purchase an aggregate of 4,315,800 shares of
         Common Stock granted in fiscal 2004.

(2)      The exercise price was equal to 100% of the fair market value of the
         Common Stock at the date of grant as determined by the Compensation
         Committee at the time of grant.

(3)      The potential realizable value is calculated based upon the term of the
         option at the time of grant (ten years). Stock price appreciation of
         five percent and ten percent is assumed pursuant to rules promulgated
         by the Securities and Exchange Commission and does not represent the
         Company's prediction of the stock price performance.

                                       34


<PAGE>

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

         Options to purchase 0 shares of the Common Stock were exercised by
employees, during fiscal 2004.

         As indicated in the preceding section, the Company has never granted
any stock appreciation rights.

         The following table shows the fiscal year-end option values for the
Chief Executive Officer of the Company and the other named executive officers
whose compensation for fiscal 2004 is reported in the Summary Compensation Table
under this caption "Executive Compensation".

<TABLE>
<CAPTION>
                                                                  Number of Securities        Value of Unexercised
                                  Shares                         Underlying Unexercised      In-The-Money Options At
                                Acquired on       Value        Options At Fiscal Year-End    Fiscal Year End ($) (1)
Name                           Exercise (#)    Realized ($)   (#)Exercisable/Unexercisable   Exercisable/Unexercisable
----------------------------   -------------  --------------  ----------------------------  --------------------------
<S>     <C>
Linda H. Masterson                   --        $        --          284,840/1,632,492                 $0/$0

Craig Montesanti                     --        $        --             0/475,000                      $0/$0

Don Rutherford                       --        $        --                --                            --

Thomas J. Foley                      --        $        --                --                            --
</TABLE>

-----------------

(1)      The market value of the options on March 31, 2004 is based on the
         closing sale price of $0.37 per share on that date.

OTHER COMPENSATION

         The Company currently has no pension plan in effect and has in effect
no restricted stock plan, no stock appreciation rights nor any other long-term
incentive plan under which grants or allocations may be made in the fiscal 2004
or thereafter.

COMPENSATION OF DIRECTORS

         On March 5, 2004, the Board of Directors modified the compensation
arrangements previously adopted on December 13, 2002 and modified on September
20, 2003 for outside directors. In consideration of the services to be performed
as a director of the Company, each director who is not an employee of the
Company, or any subsidiary of the Company (if hereafter created), or is not a
consultant to the Company, or, when incorporated, any subsidiary of the Company,
and who is not paid a fee on a monthly basis, shall receive as compensation in
lieu of cash compensation; (1) each new non-employee director will receive an
initial grant of options to purchase 100,000 shares of the Corporation's Common
Stock upon election to the Board and thereafter will receive an annual grant of
25,000 options for continued service on the Board, (2) each non-employee
Committee chairman shall receive an annual grant of 10,000 stock options,
granted at the beginning of each calendar year, (3) each non-employee Committee
member shall receive an annual grant of 5,000 stock options for such service.
The initial grant shall be on the day of his or her first election as a director
of the Company, whether by the Board or the stockholders, and thereafter on the
anniversary day of such first election. The stock option grants for committee
service shall be made at the beginning of each calendar year. The exercise price
of each option or stock option shall be the Fair Market Value as determined
pursuant to the 2003 Option Plan or the 2000 Option Plan on the respective date
of the grant, or if not a business day, on the preceding day on which the Common
Stock was traded. Each option will expire ten years from its date of grant and
will become exercisable as to one third of the shares of the Common Stock on the
first anniversary of the date of grant and 1/24th of the remaining shares of the
Common Stock on the same date each month thereafter for a period of 24 months,
with any odd amount being exercisable in the 24th month. (4) Additionally, for
each scheduled meeting attended in person, $1,500 would be paid to each director

                                       35


<PAGE>

plus normal and usual travel expenses. (5) Since the Chairman of the Board
spends 2-3 days per month working with the Company, the Chairman will now
receive a stipend of $3,000 per month for that time.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

         The Company's executive officer compensation program is administered
and reviewed by the Compensation Committee of the Board of Directors consisting
of directors (currently three) who are neither officers nor employees of the
Company and who have no other interlocks with the Company. The Compensation
Committee currently consists of Messrs. Nuno Brandolini, William A. Cavendish
and M. Richard Wadley, with Mr. Brandolini serving as its Chairperson. Messrs.
Brandolini, Cavendish and Wadley were appointed to the Compensation Committee by
the Board on January 14, 2004. Appointments to the Compensation Committee are
reviewed on an annual basis.

POLICY AND MISSION

         The Compensation Committee has determined that the compensation program
for the Company's executive officers should not only be adequate to attract,
motivate and retain competent personnel, but should also - to the extent
feasible - be related to the short-term and long-term objectives of the Company.
Because the Company had continued to derive little revenues from products or
services through fiscal year ended March 31, 2004 ("fiscal 2004"), the
Compensation Committee has not been able to relate executive compensation to the
financial performance of the Company in terms of an officer's contribution to
profitability.

         The Compensation Committee strongly believes that equity ownership by
executive officers provides incentives to build stockholder value and aligns the
interests of executive officers with those of the stockholders. The Committee
provides such incentives through stock option grants and occasionally through
grants of warrants. During the past years when cash was required to fund the
Company's development program, the use of stock incentives was particularly
important. This will continue to be an important consideration until the
Company's cash flow from operations is positive, and profitability is attained,
on a regular basis.

         In seeking to determine base salary and other compensation for
executive officers, primarily its chief executive officer, the Compensation
Committee has relied on data in surveys by Radford Associates relating to
compensation paid in comparable companies. During the fiscal year ended March
31, 2000, the Company also relied on data furnished by an executive compensation
expert. The Compensation Committee intends in the future to rely on independent
surveys of compensation data.

         Although the Compensation Committee, prior to March 23, 2001, has not
used performance goals as the basis for determining monetary compensation, it
has used the achievement of operational objectives by the Company as the basis
for determining the exercisablity of certain warrants and options. On March 23,
2001, the Compensation Committee adopted the LifePoint, Inc. Management Bonus
Plan (the "Bonus Plan") pursuant to which officers can earn cash compensation
equal to a percentage of their base salary based on the achievement of goals
during the prior fiscal year, commencing with fiscal 2002. At least one of a
participant's annual goals must relate to the Company's overall performance,
while the others may relate to his or her area of specific responsibility. The
Bonus Plan reserves the right of the Compensation Committee to defer payment of
the cash bonuses if the members are concerned about the liquidity of the Company
or any delay in its achieving profitability. The Compensation Committee, in
adopting the Bonus Plan, believed that this new incentive was necessary for the
attraction, motivation and retention of key personnel in view of what
competitors offer. The Compensation Committee remains of the opinion that the
Bonus Plan is necessary for competitive reasons even without achievement of the
revenues and profitability when initially projected and that its reserve power
will enable the Committee to protect stockholders' interests should the
Company's financial position at the end of any fiscal year so require. The
Compensation Committee has exercised its right to defer payment of bonuses for
fiscal 2003 during fiscal 2004 due to the financial constraints of the Company.

         The Compensation Committee, on the anniversary date of the initial
grant, reviews the grants of options to optionees, including executive officers,
in accordance with an approved formula for future grants and an evaluation of
the optionee's performance in the prior year. Although the Compensation
Committee receives a report as to any annual increases in an executive officer's
base salary (the initial salary having been approved by the Board of Directors
or the Compensation Committee), the Compensation Committee currently (under the
Company's Grants of Authority) only approves increases raising an annual base
salary to $150,000 or more. Currently, only the Chief Executive Officer, the

                                       36


<PAGE>

Chief Accounting Officer and the Senior Vice President, Research and Development
requires approval of her or his salary. The Chief Executive Officer approves the
increases for the other executive officers provided that the base salary, after
the increase, is below $150,000.

         Because of the delay in bringing the Company's product to market, no
employee in the Company has received a salary increase from September 2000,
until March 2004. However, since there had been no salary increases within the
last three years, and salary decreases twice during the past two years, most
long-term employees salaries were well below standards in the industry and those
of new employees; therefore, a salary increase for long-term employees was
approved in March 2004.

CHIEF EXECUTIVE OFFICER'S COMPENSATION IN 2004

         As indicated above, the Compensation Committee has based its salary and
option awards to the Chief Executive Officer based on its review of independent
survey data for comparable companies and its evaluation of her performance, as
well as taking into consideration the cash requirements of the Company. Despite
the Committee's unanimous approval of her performance, in determining on June
14, 2002 that her base salary should be increased to $207,500 for the balance of
fiscal 2003 and until the Compensation Committee otherwise authorizes, the
Compensation Committee elected to delay the implementation of the salary
increase until March 2004, when salary increases were implemented for all
employees. The Compensation Committee made its determination on a similar basis
as it previously did in 2000 and 2002. Since March 21, 2003 until September 2003
when a financing was completed, the Chief Executive Officer voluntarily deferred
her compensation. The Compensation Committee believes that, as the Company's
revenues begin to grow and ultimately as profitability is achieved, the Chief
Executive Officer's compensation will be evaluated on a basis more typical to
chief executive officers in an operational company.

         The Chief Executive Officer has been granted warrants, participates in
the option plans of the Company and participates in the Bonus Plan.

OTHER OFFICER'S COMPENSATION IN 2004

         As indicated above, the Compensation Committee has, in granting options
to executive officers followed its previously approved guidelines. As also
previously indicated, the Company's Grants of Authority have not required the
Committee's approval of increases in annual base salary (subject to the $150,000
maximum) except as to two executive officers in addition to the Chief Executive
Officer. Approval of initial base salary has been based on an evaluation of
competitive salaries. All current executive officers have been eligible to
participate, commencing with fiscal 2002, in the Bonus Plan.

BOARD ACTION

         The directors who are not members of the Compensation Committee receive
copies of minutes of the meetings of the Compensation Committee so that they are
aware of its actions. The other Board members who are not executive officers
have not elected to have the Board reconsider any action of the Compensation
Committee.

         Submitted by the Compensation Committee on June 20, 2004.

                                                 Nuno Brandolini, Chairman
                                                 William A. Cavendish
                                                 M. Richard Wadley

                                       37


<PAGE>

INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS

         During fiscal 2004, Roger G. Stoll, Peter S. Gold, Paul Sandler and
Nuno Brandolini, William A. Cavendish and M. Richard Wadley, who replaced
Messrs. Gold, Stoll and Sandler respectively, served as members of the Board's
Compensation Committee, with Mr. Gold then Mr. Brandolini serving as
Chairperson. None of the foregoing is, or ever was, an officer or employee of
the Company. In addition, none of the foregoing had any relationship with the
Company requiring disclosure under any paragraph of Item 404 of Regulation S-K
under the Securities Act and Exchange Act. No executive officer of the Company
serves on the compensation committee or board of directors of any other entity.

                                       38


<PAGE>

PERFORMANCE GRAPH

              The following performance graph were prepared on the basis of a
comparison with companies on The Nasdaq Stock Market because no comparable data
was available with respect to companies on the AMEX on which the Common Stock is
listed. Since its inception, the Company has not paid any dividends to the
holders of the Common Stock.


                COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
                              PERFORMANCE GRAPH FOR
                                LIFEPOINT, INC.


                              [GRAPH APPEARS HERE]



                                       39


<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

BENEFICIAL OWNERSHIP

         The following table sets forth, as of March 31, 2004, certain
information with respect to (1) any person known to us who or which beneficially
owned more than 5% of the Common Stock, (2) each director of the Company, (3)
the Chief Executive Officer and (3) all directors and executive officers as a
group. Each beneficial owner who is a natural person has advised us that he or
she has sole voting and investment power as to the shares of the Common Stock,
except that, until a common stock purchase warrant or an option is exercised, or
a share of preferred stock is converted, there is no voting right.

<TABLE>
<CAPTION>
                                                                             PERCENTAGE OF
                                                   NUMBER OF SHARES OF       COMMON STOCK
                                                      COMMON STOCK           BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER               BENEFICIALLY OWNED         OWNED (1)
-----------------------------------------------   ----------------------     -------------
<S>                                                    <C>                       <C>
St. Cloud Investments, Ltd.                            46,724,092 (2)            45.5%
2525 Michigan Avenue, Suite A5
Santa Monica, CA  90404

General Conference Corporation of
Seventh-day Adventists                                 36,314,471 (3)            41.5%
12501 Old Columbia Pike
Silver Spring, MD  20804-6600

Jonathan J. Pallin                                     19,712,304 (4)            26.9%
722 Starlight Heights Drive
La Canada, CA  91011

Linda Masterson                                         2,355,854 (5)             4.1%
1205 South Dupont Street
Ontario, CA 91761

Peter S. Gold                                             950,157 (6)             1.7%
1205 South Dupont Street
Ontario, CA 91761

Nuno Brandolini (8)                                       334,034 (7)              nil
1107 Broadway, Ste: 1300
New York, NY 10010

Stan Yakatan (10)                                          38,126 (9)              nil
1205 South Dupont Street
Ontario, CA 91761

William Cavendish(11)                                               -              nil
1205 South Dupont Street
Ontario, CA 91761
</TABLE>

                                               40


<PAGE>

<TABLE>
<CAPTION>
                                                                                  PERCENTAGE OF
                                                        NUMBER OF SHARES             COMMON
                                                        OF COMMON STOCK               STOCK
                                                          BENEFICIALLY             BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER                         OWNED                  OWNED (1)
--------------------------------------------------------------------------------------------------
<S>                                                      <C>                           <C>
M. Richard Wadley(11)                                                 -                nil
1205 South Dupont Street
Ontario, CA 91761

Craig Montesanti(12)                                                  -                nil
1205 South Dupont Street
Ontario, CA 91761

All directors and executive                              3,678,171 (13)               6.3%
Officers as a group (7 persons)
</TABLE>

1.       The percentages computed in this column of the table are based upon
         56,881,659 shares of the Common Stock which were outstanding on March
         31, 2004. Effect is given, pursuant to Rule 13d-3(1)(i) under the
         Exchange Act, to shares issuable upon the exercise of common stock
         purchase warrants and options currently exercisable or exercisable
         within 60 days of March 31, 2004 and to the shares issuable upon the
         conversion of shares of the Company's Series C Preferred Stock, $.001
         par value (the "Series C Preferred Stock") and shares of the Company's
         Series D Preferred Stock, $.001 par value (the "Series D Preferred
         Stock"), all of which shares are currently convertible.

2.       The shares of the Common Stock reported in the table include (a)
         19,690,931 shares issuable upon the exercise by this holder and its
         affiliates at $0.50 per share of a common stock purchase warrants
         expiring June 19, 2006 and July 13, 2008; (b) 625,000 shares issuable
         upon the exercise by this holder and its affiliates at $3.00 per share
         of a common stock purchase warrant expiring March 13, 2005; (c)
         15,545,753 shares issuable upon the conversion of 35,095 shares of the
         Series C Preferred Stock; (d) 9,905,897 shares issuable upon the
         conversion of 2,879 shares of the Series D Preferred Stock.

3.       The shares of the Common Stock reported in the table include (a)
         19,294,868 shares issuable upon the exercise by this holder and its
         affiliate at $0.50 per share of a common stock purchase warrants
         expiring November 11, 2007 and September 20, 2008; (b) 580,579 shares
         issuable upon the conversion of 28,571 shares of the Series C Preferred
         Stock; (c) 9,322,548 shares issuable upon the conversion of 2,712
         shares of the Series D Preferred Stock; (d) 333,424 shares issuable
         upon the exercise as $3.00 per share of a common stock purchase warrant
         expiring June 19, 2006; (e) 500,000 shares issuable upon the exercise
         at $3.25 per share of a common stock purchase warrant expiring January
         29, 2007; (f) 548,324 shares issuable upon the exercise at $3.00 per
         share of a common stock purchase warrant expiring February 28, 2005,
         June 19, 2006 and March 30.

4.       The shares of the Common Stock reported in the table include (a)
         11,212,304 shares issuable upon the exercise at $.50 per share of a
         common stock purchase warrants expiring February 18, 2008 and September
         20, 2008; (b) 5,300,000 shares issuable upon the conversion of 1,544
         shares of the Series D Preferred Stock.

5.       The shares of the Common Stock reported in this table as being
         beneficially owned by Ms. Masterson are held, or, following exercise,
         will be held by Robert P. Masterson and Linda H. Masterson, Trustees of
         Masterson Family Trust, dated September 23, 2000 and include (a) 6,992
         shares issuable upon the exercise at $.50 per share of an option
         expiring June 29, 2008; (b) 57,500 shares issuable upon the exercise at
         $1.67 per share of an option expiring October 9, 2009; (c) 102,500
         shares issuable upon the exercise at $6.00 per share of an option
         expiring October 19, 2010 (d) 80,348 shares issuable upon the exercise
         at $3.17 per share of two options each expiring December 6, 2011 and
         (e) 37,500 shares issuable upon the exercise at $1.65 per share of an
         option expiring December 12, 2012.

                                       41


<PAGE>

6.       A director of the Company and include (a) 15,000 shares issuable upon
         the exercise at $1.81 per share of an option expiring April 15, 2009;
         (b) 9,792 shares issuable upon the exercise at $3.22 per share of an
         option expiring April 15, 2010; (c) 7,292 shares issuable upon the
         exercise at $4.09 per share of an option expiring April 15, 2012 and
         (d) 13,281 shares issuable upon the exercise at $1.65 per share of an
         option expiring December 12, 2012.

7.       The shares of the Common Stock reported in the table include (a)
         103,323 shares issuable upon the exercise by this holder and its
         affiliate at $0.50 per share of a common stock purchase warrants
         expiring July 13, 2008 and September 20, 2008; (b) 109,656 shares
         issuable upon the conversion of 875 shares of the Series C Preferred
         Stock; (c) 10,211 shares issuable upon the exercise as $0.50 per share
         of a common stock purchase warrant expiring June 19, 2006 and (d)
         105,094 shares issuable upon the conversion of 16 shares of Series D
         Preferred Stock.

8.       A director of the Company, Mr. Brandolini is the beneficial holder of
         50% of the Scorpion Acquisition LLC holdings.

9.       The shares of the Common Stock reported include (a) 14,063 shares
         issuable upon the exercise at $6.56 per share of an option expiring
         June 15, 2010; (b) 6,875 shares issuable upon the exercise at $3.48 per
         share of an option expiring June 14, 2011; (c) 4,375 shares issuable
         upon the exercise at $2.41 per share of an option expiring June 13,
         2012 and (d) 12,813 shares issuable upon the exercise at $1.65 per
         share of an option expiring December 12, 2012.

10.      The Chairman of the Board of the Company.

11.      A director of the Company.

12.      The Chief Accounting Officer, Secretary and Treasurer of the Company.

13.      The shares of the Common Stock reported in the table include (a) those
         issuable upon the exercise of the common stock purchase warrants and
         the options described in Notes (3), (5), (6), (7) and (9) to the table;
         (b) 15,000 shares issuable to an executive officer upon his exercise at
         $1.81 per share of an option expiring April 15, 2008; (c) 9,792 shares
         issuable to the same executive officer upon his exercise at $3.22 per
         share of an option expiring April 15, 2010; (d) 7,292 shares issuable
         to the same executive officer upon his exercise at $4.09 per share of
         an option expiring April 15, 2012; (e) 13,281 shares issuable to the
         same executive officer upon his exercise at $1.65 per share of an
         option expiring December 12, 2012; (f) 14,063 shares issuable to an
         executive officer upon his exercise at $6.56 per share of an option
         expiring June 15, 2010; (g) 6,875 shares issuable to the same executive
         officer upon his exercise at $3.48 per share of an option expiring June
         14, 2011; (h) 4,375 shares issuable to the same executive officer upon
         his exercise at $2.41 per share of an option expiring June 13, 2012;
         (i) 12,813 shares issuable to the same executive officer upon his
         exercise at $1.65 per share of an option expiring December 12, 2012;
         (j) 103,323 shares issuable upon the exercise by an executive officer
         at $0.50 per share of a common stock purchase warrants expiring July
         13, 2008 and September 20, 2008; (k) 109,656 shares issuable to the
         same executive officer upon the conversion of 875 shares of the Series
         C Preferred Stock; (l) 10,211 shares issuable to the same executive
         officer upon the exercise as $0.50 per share of a common stock purchase
         warrant expiring June 19, 2006 and (m) 105,094 shares issuable to the
         same executive officer upon the conversion of 16 shares of Series D
         Preferred Stock. (n) 6,992 shares issuable to another executive officer
         upon her exercise at $0.50 per share of an option expiring June 29,
         2008; (o) 57,500 shares issuable to the same executive officer upon her
         exercise at $1.67 per share of an option expiring October 9, 2009; (p)
         102,500 shares issuable to the same executive officer upon her exercise
         at $6.00 per share of an option expiring October 19, 2010; (q) 80,348
         shares issuable to the same executive officer upon her exercise at
         $3.17 per share of two options each expiring December 6, 2011 and (r)
         37,500 shares issuable to the same executive officer upon her exercise
         at $1.65 per share of an option expiring December 12, 2012.



<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On December 13, 2002, pursuant to its policy of making annual reviews
of each optionee, the Compensation Committee granted, pursuant to the 2000
Option Plan, stock options expiring December 12, 2012 exercisable at $1.65 per
share to: Linda H. Masterson, Chairman of the Board, President, Chief Executive
Officer and director, to purchase 120,000 shares of the Common Stock; Thomas J.
Foley, Senior Vice President, Research and Development, to purchase 60,000
shares of the Common Stock; and to Michele A. Clark, Controller and Chief
Accounting Officer, to purchase 30,000 shares of the Common Stock. These options
become exercisable in accordance with the terms of the 2000 Option Plan (see
"Executive Compensation-Option/SAR Grants in the Last Fiscal Year" elsewhere in
this Report).

         On March 6, 2000 and June 16, 2000, the Compensation Committee
authorized that executive officers who are optionees under the 1997 Stock Option
Plan and the 2000 Option Plan, respectively, or who hold common stock purchase
warrants may exercise an option or a warrant by delivering a promissory note
(the "Note") to the order of the Company providing as follows: (1) principal and
interest on the Note shall become due and payable on the earlier to occur of (a)
the first business day which is 18 months after the date of the Note (which date
of the Note shall be the date of exercise of the option or warrant) or (b) the
shares of the Common Stock securing the Note are sold; (2) payments of principal
and interest shall be secured by a pledge of the shares issued upon the exercise
of the option or warrant; (3) the principal due under the Note shall bear
interest at the rate equal to the amount required to be charged under the Code,
at the date of the Note, so that the interest will not be deemed to be "below
market" under Section 7872 of the Code; (4) the Note may be prepaid at any time
without penalty provided that the net proceeds from any sale of the shares of
the Common Stock so pledged shall be applied as a prepayment; and (5) the Note
shall become due and payable in the event of an Event of Default (as defined in
the Note) which shall occur (a) on the executive officer's failure to pay
principal and interest when due, which default is not cured within 30 days, (b)
if a bankruptcy or similar petition is filed against the executive officer and
not discharged within 60 days, (c) if the executive officer seeks relief under
Title 11 of the United States Code or similar statute or (e) when the executive
officer is unable to pay his or debts as they mature; provided that this method
of exercise may be used by an officer only two times in any fiscal year. The
Transfer Agent for the Common Stock is directed to deliver the certificates
evidencing the shares of the Common Stock issued upon exercise to Robert W.
Berend, then Secretary of the Company and a partner of Wachtel & Masyr, LLP,
then general counsel to the Company, to be held as security for the Company's
loan. In authorizing this procedure to exercise, the Compensation Committee
noted that, if an executive officer was required to sell his or her shares
received upon exercise to meet tax or other obligations, he or she could subject
himself or herself to "short swing" liability under Section 16(b) of the
Exchange Act or violate some "lock-up" provision a future underwriter may impose
on directors and officers of the Company and that permitting this method of
exercise might ease problems under Section 422(d) of the Code relating to
incentive stock options which first become exercisable in a year with a value in
excess of $100,000 having the excess shares losing their incentive stock option
treatment under the Code, thereby subjecting the executive officer to immediate
tax liability. The Compensation Committee also noted that this type of exercise
was permitted to optionees in other public companies.

         On December 15, 2000, the Board of Directors authorized that an
executive officer who has, or will in the future execute, a Note in payment of
the exercise price for an option or warrant may, at his or her election,
surrender to the Company shares of the Common Stock issued upon exercise to
payoff the Note. The number of shares surrendered is determined by taking the
total principal on the Note plus all accrued interest and dividing it by the
Fair Market Value (as defined in the 2000 Option Plan) on the date of surrender.
On December 2, 2002 Linda H. Masterson, Chief Executive Officer, surrendered
424,586 shares to payoff Notes due to the Company totaling $897,500 in principal
and $36,588 in interest. Ms. Masterson has no further Notes due to the Company.
As of March 31, 2004, there were no outstanding Notes due to the Company. Due to
the recent changes enacted under The Sarbanes-Oxley Act of 2002, the Company
will accept no further Notes in favor of the Company from executive officers
covered by the Sarbanes-Oxley Act.

                                       42


<PAGE>

EMPLOYMENT AND SEVERANCE AGREEMENTS

         There are no employment agreements currently in effect in the Company.

         Pursuant to a Severance Agreement dated as of October 27, 1997 (the
"Masterson Severance Agreement") between the Company and Linda H. Masterson, in
the event that Ms. Masterson is terminated without cause (as defined in the
Masterson Severance Agreement), she will be paid severance pay in a lump sum
amount equal to her annual base salary that would have been paid to her had she
not been terminated during the period between the date of termination and
October 27, 2001. On August 1, 2001 the Board of Directors extended Ms.
Masterson's Severance Agreement for five years. On May 23, 2003, the Board of
Directors expanded Ms. Masterson's Severance Agreement to 18 months for a change
in control, and to be consistent with the Severance Agreements established for
the other senior managers as outlined below. On May 23, 2003 the Board of
Directors approved Severance Agreements due to a change of control for Dr.
Foley, senior vice-president of the Company and for four other members of senior
management. Under these agreements, the recipient would be eligible for
continuation of their salary and benefits for periods of from 6 to 12 months
dependant upon their length of service with the Company. In addition, all stock
options would immediately vest and the time period for the exercise of warrants
would be extended to two (2) years, unless the original expiration date of such
Stock Award or Warrants is sooner, subject to the terms of the original
expiration date of such Stock Awards or Warrants.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The Company replaced Ernst & Young LLP as its independent auditor with
Singer Lewak Greenbaum & Goldstein LLP beginning with the fiscal quarter ended
June 30, 2003. The following table presents fees for professional services
rendered by Ernst & Young LLP and Singer Lewak Greenbaum & Goldstein LLP for the
audit of the Company's annual financial statements for the fiscal years ended
March 31, 2004 and March 31, 2003, and fees billed for other services rendered
by Ernst & Young LLP and Singer Lewak Greenbaum & Goldstein LLP during those
periods. Certain amounts for the fiscal year ended March 31, 2003 have been
reclassified to conform to the presentation for the fiscal year ended March 31,
2004.

                                           MARCH 31,         MARCH 31,
                                             2004              2003
                                         -------------    -------------

                  Audit Fees             $    170,651     $    109,755
                  Audit Related Fees           54,841           45,000
                  Tax Fees                      5,350            4,815
                  All Other Fees               32,040            1,750
                                         -------------    -------------
                    Total                $    262,882     $    161,320
                                         =============    =============

         Audit fees include the audit of the Company's annual financial
statements presented in the Company's Annual Report on Form 10-K, reviews of
interim financial statements presented in the Company's Quarterly Reports on
Form 10-Q and accounting, reporting and disclosure consultations related to
those audits. Tax fees include consultations on technical matters. All other
fees include advisory services.

         The Company's Audit Committee has considered whether the provision of
non-audit services is compatible with maintaining the independence of Singer
Lewak Greenbaum & Goldstein LLP, and has concluded that the provision of such
services is compatible with maintaining the independence of the Company's
auditors.

                                       43


<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)   FINANCIAL STATEMENTS:

         The LifePoint financial statements appear in a separate section of this
Annual Report on Form 10-K commencing on the pages referenced below:

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                              <C>
           Report of Independent Auditors                                        F-1
           Balance Sheets as of March 31, 2004 and 2003                          F-3
           Statements of Operations for the years ended March 31, 2004,
                    2003, and 2002                                               F-4
           Statements of Stockholders' Equity (Deficit) for the years
                    ended March 31, 2004, 2003 and 2002                          F-5
           Statements of Cash Flows for the years ended March 31, 2004,
                    2003 and 2002                                                F-7
           Notes to Financial Statements                                         F-9
</TABLE>

    (2)  FINANCIAL STATEMENT SCHEDULES

         Financial Statement Schedules are omitted as they are not required, are
inapplicable, or the information is included in the financial statement or notes
thereon.

(b) REPORTS ON FORM 8-K

         The following Report on Form 8-K was filed during the last quarter of
the period covered by this Form 10-K Report.

         On February 11, 2004, the Company filed a Current Report on Form 8-K
         with the SEC related to the press release, dated February 11, 2004,
         relating to the Company's results for the quarter ended December 31,
         2003.

         On February 12, 2004, the Company filed a Current Report on Form 8-K
         with the SEC related to the Company's Letter to Stockholders, dated
         February 12, 2004, regarding the Company's current status.

                                       44


<PAGE>

(c)  EXHIBITS

         All of the following exhibits designated with a footnote reference are
incorporated herein by reference to a prior registration statement filed under
the Securities Act or a periodic report filed by LifePoint or Substance Abuse
Technologies, Inc. ("SAT") pursuant to Section 13 or 15(d) of the Exchange Act.
If no footnote reference is made, the exhibit is filed with this Report.

 EXHIBIT
  NUMBER                                   EXHIBIT TITLE
------------      --------------------------------------------------------------
3(a)              Copy of Restated Certificate of Incorporation as filed in
                  Delaware on April 29, 1999.(1)

3(a)(1)           Copy of Certificate of Amendment to the Certificate of
                  Incorporation as filed in Delaware on September 1, 2000.(2)

3(a)(2)           Copy of Restated Certificate of Incorporation as filed in
                  Delaware on September 1, 2000(2)

3(a)(3)           Copy of Certificate of Designations as filed in Delaware on
                  March 30, 2001.(3)

3(a)(4)           Copy of Certificate of Designations as filed in Delaware on
                  June 20, 2001.(3)

3(a)(4)           Copy of Restated Certificate of Incorporation as filed in
                  Delaware on January 28, 2002.(4).

3(b)              Copy of By-Laws of LifePoint as adopted on February 26,
                  1999.(1)

3(b)(1)           Copy of By-Laws of LifePoint as effective on September 1, 2000
                  superseding those filed as Exhibit 3(b) hereto.(2)

3(b)(2)           Copy of By-Laws of LifePoint as effective on September 1, 2000
                  superseding those filed as Exhibit 3(b) hereto.

10(a)             Copy of License Agreement dated January 24, 1992 by and
                  between the United States Navy (the "USN") and SAT.
                  (Confidential Treatment Requested for Exhibit.).(5)

10(a)(1)          Copy of Amendment dated March 15, 1994 to License Agreement
                  filed as Exhibit 10(a) hereto.(6)

10(a)(2)          Copy of Amendment dated June 16, 1995 to License Agreement
                  filed as Exhibit 10(a) hereto.(6)

10(a)(3)          Copy of Letter dated May 15, 1995 from the USN to SAT.(6)

10(a)(4)          Copy of Fifth Modification dated November 12, 1997 to License
                  Agreement filed as Exhibit 10(a) hereto.(7)

10(a)(5)          Copy of Partially Exclusive License dated March 12, 1999
                  between LifePoint and the United States of America as
                  represented by the Secretary of the Navy.(1)

10(b)             Copy of Assignment dated as of January 1, 1993 between
                  LifePoint and SAT of Licensing Agreement filed as Exhibit
                  10(a) hereto.(5)

10(b)(1)          Copy of Amended Sublicense Agreement dated September 23, 1993
                  superseding the Assignment filed as Exhibit 10(b) hereto.(6)

10(b)(2)          Copy of Approval dated September 24, 1993 by the USN of
                  Amended Sublicense Agreement filed as Exhibit 10(b) hereto.(6)

10(c)             Copy of Cooperative Research Agreement (the "CRDA Agreement")
                  dated April 16, 1992 by and between Naval Research Laboratory
                  Section, United States Department of the Navy, and SAT.(5)

10(d)             Copy of Lease expiring January 31, 1997 by and between Rancho
                  Cucamonga Business Park (now The Realty Trust) as landlord and
                  SAT as Tenant.(8)

10(d)(1)          Copy of Lease Modification Agreement to Lease filed as Exhibit
                  10(d) hereto.(9)

10(d)(2)          Copy of Sub-Lease Agreement dated as of January 1, 1993 by and
                  between SAT as sub-landlord and LifePoint as subtenant.(5)

10(d)(3)          Copy of Third Amendment dated January 2, 1997 to Lease filed
                  as Exhibit 10(e) hereto.(10)

10(d)(4)          Copy of Fourth Amendment dated November 3, 1997 to Lease filed
                  as Exhibit 10(e) hereto.(7)

10(d)(5)          Copy of Fifth Amendment dated August 18, 1998 to Lease dated
                  March 18, 1991 by and between Rancho Cucamonga Business Park
                  (now The Realty Trust) as landlord and SAT (now LifePoint) as
                  tenant.(11)

                                       45


<PAGE>

 EXHIBIT
  NUMBER                                   EXHIBIT TITLE
------------      --------------------------------------------------------------

10(d)(6)          Copy of Sixth Amendment dated March 31, 1999 to Lease dated
                  March 18, 1991 by and between Rancho Cucamonga Business Park
                  (now The Realty Trust) as landlord and SAT (now LifePoint) as
                  tenant.(1)

10(d)(7)          Copy of Seventh Amendment dated December 18, 2000 to Lease
                  dated March 18, 1991 by and between Rancho Cucamonga Business
                  Park (now The Realty Trust) as landlord and SAT (now
                  LifePoint) as tenant.(12)

10(e)             Copy of LifePoint's 1997 Stock Option Plan.(7)

10(e)(1)          Form of Stock Option Agreement used under Plan filed as
                  Exhibit 10(e).(7)

10(e)(2)          Copy of LifePoint's 2000 Stock Option Plan.(12)

10(e)(3)          Forms of Stock Option Agreement used under Plan filed as
                  Exhibit 10(e)(2).(13)

10(f)             Copy of Severance Agreement dated as of October 27, 1997
                  between LifePoint and Linda H. Masterson.(7)

10(g)             Copy of Agreement dated December 1, 1998 between Burrill and
                  Company and LifePoint.(11)

10(h)             Commercial Pledge and Security Agreement dated June 2, 1999
                  between LifePoint and City National Bank.(13)

10(i)             Lease Agreement dated July 14, 1999 between LifePoint and
                  FirstCorp.(13)

10(j)             Copy of Lease expiring July 31, 2005 by and between Slater
                  Properties as landlord and LifePoint as Tenant.(13)

10(k)             Lease Agreement dated August 28, 2000 between LifePoint and
                  Finova Capital Corporation.(14)

10(l)             Copy of Exclusive Distribution Agreement between LifePoint,
                  Inc and CMI, Inc.(15)

16                Letter from Ernst & Young LLP dated July 14, 2003.(16)

23                Consent of Ernst & Young LLP

23.1              Consent of Singer Lewak Greenbaum & Goldstein LLP

23.2              Consent of Ernst & Young LLP

31                Certification pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

32                Certification pursuant to Section 906 of the Public Company
                  Accounting Reform and Investor Act of 2002.

------------------

(1)      Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
         fiscal year ended March 31, 1999 and incorporated herein by this
         reference.

(2)      Filed as an exhibit to LifePoint's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 2000 and incorporated herein by this
         reference.

(3)      Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
         year ended March 31, 2001 and incorporated herein by this reference.

(4)      Filed as an exhibit to LifePoint's Registration Statement on Form S-3,
         File No. 333-74172, and incorporated herein by this reference.

(5)      Filed as an exhibit to LifePoint's Registration Statement on Form SB-2,
         File No. 33-61786, and incorporated herein by this reference.

(6)      Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
         fiscal year ended March 31, 1996.

                                       46


<PAGE>

(7)      Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
         fiscal year ended March 31, 1998 and incorporated herein by this
         reference.

(8)      Filed as an exhibit to SAT's Annual Report on Form 10-K for the fiscal
         year ended March 31, 1996 and incorporated herein by this reference.

(9)      Filed as an exhibit to LifePoint's Quarterly Report on Form 10-K for
         the quarter ended September 30, 1997 and incorporated herein by this
         reference.

(10)     Filed as an exhibit to SAT's Annual Report on Form 10-K for the fiscal
         year ended March 31, 1997 and incorporated herein by this reference.

(11)     Filed as an exhibit to LifePoint's Quarterly Report on Form 10-Q for
         the quarter ended December 31, 1998 and incorporated herein by this
         reference.

(12)     Filed as an exhibit to LifePoint's proxy statement dated July 26, 2000
         and filed on July 31, 2000 and incorporated herein by this reference.

(13)     Filed as exhibits to LifePoint's Registration Statement on Form S-8,
         File No. 333-50910, and incorporated herein by this reference.

(14)     Filed as an exhibit to LifePoint's Quarterly Report on Form 10-Q for
         the quarter ended December 31, 2000 and incorporated herein by this
         reference.

(15)     Filed as an exhibit to LifePoint's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1999 and incorporated herein by this
         reference.

(16)     Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
         year ended March 31, 2003 and incorporated herein by this reference.

                                       47


<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on June 28, 2004.

                                      LIFEPOINT, INC.
                                      (Registrant)

                                      By: /s/ Linda H. Masterson
                                          -------------------------------------
                                          Linda H. Masterson
                                          PRESIDENT AND CHIEF EXECUTIVE OFFICER

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Company
and in the capacities indicated on June 28, 2004.

Signature                                            Title
---------                                            -----

/s/ Linda H. Masterson              Principal Executive Officer and a Director
---------------------------
Linda H. Masterson


/s/ Craig S. Montesanti             Principal Financial Officer
---------------------------
Craig S. Montesanti


/s/ Nuno Brandolini                 Director
---------------------------
Nuno Brandolini


/s/ William A. Cavendish            Director
---------------------------
William A. Cavendish


/s/ Peter S. Gold                   Director
---------------------------
Peter S. Gold


/s/ M. Richard Wadley               Director
---------------------------
M. Richard Wadley


/s/ Stan Yakatan                    Director
---------------------------
Stan Yakatan

                                       48



<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders of
LifePoint, Inc.

We have audited the accompanying balance sheet of LifePoint, Inc. (the
"Company") as of March 31, 2004, and the related statements of operations,
stockholders' deficit, and cash flows for the year ended March 31, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LifePoint, Inc. at March 31,
2004, and the results of their operations and their cash flows for the year
ended March 31, 2004, in conformity with United States generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, the Company has experienced
recurring losses from operations. In addition, the Company has incurred negative
cash flows from operations and has accumulated a significant deficit on its
balance sheet. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                            /s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
                            ------------------------------------------


Los Angeles, California
June 10, 2004

                                      F-1


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders of
LifePoint, Inc.

We have audited the accompanying balance sheet of LifePoint, Inc. (the
"Company") as of March 31, 2003, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years in the period ended
March 31, 2003 and 2002. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with 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 financial position of LifePoint, Inc. at March 31,
2003, and the results of its operations and its cash flows for the years in the
period ended March 31, 2003 and 2002, in conformity with accounting principles
generally accepted in the United States.


                                      /s/ ERNST & YOUNG LLP
                                      ---------------------

Orange County, California
June 27, 2003

                                      F-2


<PAGE>
<TABLE>
                                            LIFEPOINT, INC.

                                             BALANCE SHEETS
<CAPTION>

                                                                                    MARCH 31,
                                                                        -------------------------------
                                                                            2004               2003
                                                                        -------------     -------------
<S>                                                                     <C>               <C>
ASSETS

Current assets:
  Cash and cash equivalents                                             $  3,710,761      $     75,588
  Accounts receivable, net of allowance of $0 and                             65,650                --
     $120,000 at March 31, 2004 and 2003, respectively
  Inventory, net of reserve of $1,097,000                                  2,309,343         2,376,583
     at March 31, 2004 and 2003, respectively
  Prepaid expenses and other current assets                                  245,918           337,343
                                                                        -------------     -------------
          Total current assets                                             6,331,672         2,789,514
Property and equipment, net                                                1,881,826         2,428,141
Patents and other assets, net                                                595,673           690,555
                                                                        -------------     -------------
                                                                        $  8,809,171      $  5,908,210
                                                                        =============     =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                                      $    976,581      $  2,871,963
  Accrued expenses                                                         1,030,848           683,439
  Notes payable, current portion                                             134,356           388,859
  Notes payable - bank                                                       160,650                --
  Capital lease, short-term                                                       --           412,606
                                                                        -------------     -------------
          Total current liabilities                                        2,302,435         4,356,867
Notes payable, net of current                                                151,734                --
Convertible debt, net of discount                                                 --         1,620,250
                                                                        -------------     -------------
   Total liabilities                                                       2,454,169         5,977,117
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
  Preferred stock, Series C 10% cumulative convertible, $.001                    377               390
    par value, 600,000 shares authorized, 377,434 and 389,791
    shares outstanding at March 31, 2004 and 2003, respectively
  Preferred stock, Series D 10% cumulative convertible, $.001                      9                --
    par value, 15,000 shares authorized, 9,584 and none
    outstanding at March 31, 2004 and 2003, respectively
 Common stock, $.001 par value; 350,000,000 shares                            57,039            37,226
    authorized, 57,037,597 and 37,226,378 shares issued and
    outstanding at March 31, 2004 and 2003, respectively
  Additional paid-in capital                                              78,231,867        57,966,015
  Dividends payable in common stock                                        1,354,847                --
  Notes receivable-key employee                                                   --           (15,000)
  Accumulated deficit                                                    (73,289,137)      (58,057,538)
                                                                        -------------     -------------
           Total stockholders' equity (deficit)                            6,355,002           (68,907)
                                                                        -------------     -------------
                                                                        $  8,809,171      $  5,908,210
                                                                        =============     =============
                                        See Accompanying Notes.

                                                  F-3
</TABLE>


<PAGE>
<TABLE>
                                          LIFEPOINT, INC.

                                     STATEMENTS OF OPERATIONS
<CAPTION>

                                                               YEARS ENDED MARCH 31,
                                                 -------------------------------------------------
                                                      2004              2003              2002
                                                 -------------     -------------     -------------
<S>                                              <C>               <C>               <C>

Net revenues (returns)                           $    (18,500)     $     48,713      $    135,980

Costs and expenses:
  Cost of goods sold                                   52,858         1,317,189           623,242
  Research and development                          4,156,256         9,791,049         7,906,325
  Selling expenses                                    671,434         1,955,531         1,895,839
  General and administrative expenses               2,596,180         2,671,170         2,494,421
                                                 -------------     -------------     -------------
    Total costs and expenses from operations        7,476,728        15,734,939        12,919,827
                                                 -------------     -------------     -------------
Loss from operations                               (7,495,228)      (15,686,226)      (12,783,847)

Interest income                                        23,452            77,069           355,025
Interest expense                                     (304,368)         (458,031)         (168,142)
Discount on settlement of trade payables              763,301                --                --
                                                 -------------     -------------     -------------
   Total other (expense) income                      (482,385)         (380,962)          186,883
                                                 -------------     -------------     -------------
Net loss                                           (7,012,843)      (16,067,188)      (12,596,964)

Less registration effectiveness fee                        --           981,551                --
Less beneficial conversion expense                  6,501,649                --                --
Less accrued preferred dividends                    1,717,105         1,369,862           995,837
                                                 -------------     -------------     -------------
Loss applicable to common stockholders           $(15,231,597)     $(18,418,601)     $(13,592,801)
                                                 =============     =============     =============
Weighted average common shares
  outstanding - basic and diluted                  42,295,501        35,827,837        31,747,342
                                                 =============     =============     =============
Basic and diluted net loss
  per common share                               $      (0.36)     $      (0.51)     $      (0.43)
                                                 =============     =============     =============

                                      See Accompanying Notes.

                                                F-4
</TABLE>


<PAGE>
<TABLE>
                                                          LIFEPOINT, INC.
                                            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                       For the Periods Ending March 31, 2004, 2003, and 2002
<CAPTION>

                                                                                Dividends    Note
                            Preferred              Common           Additional   payable  receivable
                              stock                stock             paid-in       in         key       Accumulated
                         Shares   Amount     Shares      Amount      capital     common    employees      deficit         Total
                         ------   ------     ------      ------      -------    --------  -----------   ------------  ------------
<S>     <C>
Balance at
   March 31, 2001        75,000  $  75     31,516,927   $ 31,517   $ 34,733,520 $     -  $(2,028,864)  $(26,046,136)  $  6,690,112
 Cashless payment
   on officer notes          --      --      (474,906)      (475)    (2,478,533)      -    2,190,552             --       (288,456)
 Exercise of stock
  options                    --      --       430,838        431        443,638       -     (214,188)            --        229,881
 Variable option
  expense                    --      --            --         --         30,655       -           --             --         30,655
 Exercise
  warrants                   --      --       743,460        743      1,443,092       -     (860,000)            --        583,835
 Cancellation of
   Series B
   preferred stock      (75,000)    (75)           --         --     (2,999,925)      -           --             --     (3,000,000)
 Sale of preferred
  stock through
  private placement
  net of $1,258,955
  offering costs        393,916     394            --         --     12,527,711       -           --             --     12,528,105
 Common stock issued
  as payment for
  interest
  on 2nd close of
  Series C preferred
  stock                      --      --        12,185         12         34,718       -           --             --         34,730
 Dividend on Series
  C preferred stock          --      --       303,514        304        995,533       -           --       (995,837)            --
Net loss                     --      --            --         --             --       -           --    (12,596,964)   (12,596,964)
                       ------------------------------------------------------------------------------------------------------------
Balance at
   March 31, 2002       393,916     394    32,532,018     32,532     44,730,409       -     (912,500)   (39,638,937)     4,211,898
 Cashless payment
   on officer notes          --      --      (422,901)      (423)      (924,854)      -      897,500             --        (27,777)
 Exercise of stock
   options                   --      --        15,925         16         25,818       -           --             --         25,834
 Exercise of
   warrants                  --      --       875,289        875        625,267       -           --             --        626,142
 Warrants and
   options issued
   to non-employees          --      --            --         --         90,215       -           --             --         90,215
 Sale of common
   stock through
   private placement
   net of $780,112
   offering costs            --      --     2,720,000      2,720      9,417,168       -           --             --      9,419,888
 Discount on
   convertible debt          --      --            --         --      1,035,000       -           --             --      1,035,000
 Discount on note
   payable                   --      --            --         --        250,000       -           --             --        250,000
 Common stock and
   warrants issued as
   payment of
   registration
   effectiveness fee         --      --       260,232        260      1,348,372       -           --       (981,551)       367,081
 Dividend on Series
   C preferred stock         --      --     1,197,677      1,198      1,368,664       -           --     (1,369,862)            --
 Conversion of
   preferred stock       (4,125)     (4)       48,138         48            (44)      -           --             --             --
Net loss                     --      --            --         --             --       -           --    (16,067,188)   (16,067,188)
                       ------------------------------------------------------------------------------------------------------------
Balance at
   March 31, 2003       389,791     390    37,226,378     37,226     57,966,015       -      (15,000)   (58,057,538)       (68,907)
 Exercise of warrants        --      --     5,539,612      5,540      1,657,635       -           --             --      1,663,175
 Conversion of Series
   C preferred stock    (12,357)    (13)      786,791        787           (799)      -           --             --            (25)
 Beneficial
   conversion feature
   on Series D
   preferred                 --      --            --         --      6,501,649       -           --             --      6,501,649
 Issuance of
   restricted shares
   to personnel              --      --       945,387        945        348,848       -           --             --        349,793
 Issuance of shares
   to vendor for
   services                  --      --        53,890         54         26,891       -           --             --         26,945
 Issuance of shares
   to director
   emeritus                  --      --        50,000         50         18,450       -           --             --         18,500

                                                                F-5
</TABLE>


<PAGE>
<TABLE>
                                                           LIFEPOINT, INC.
                                            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                            For the Period March 31, 2004, 2003, and 2002
<CAPTION>

                                                                                 Dividends    Note
                            Preferred               Common           Additional   payable  receivable
                              stock                 stock             paid-in       in         key      Accumulated
                         Shares    Amount     Shares      Amount      capital     common    employees     deficit       Total
                         ------    ------     ------      ------      -------    --------   ----------  ------------  ----------
<S>     <C>
  Return of stock
    from employee             --    --       (71,987)       (71)       (26,565)          --  15,000            --       (11,636)
  Premium on Series
    C preferred stock
    conversion                --    --        24,880         25             --           --      --            --            25
  Sale of preferred
    stock through
    private placement         --    --            --         --      8,058,316           --      --            --     8,058,316
  Conversion of Series
    D preferred stock      5,328     5    11,408,859     11,409        (11,404)          --      --            --            10
  Conversion of debt
    into shares of
    Series D preferred     4,256     4            --         --      3,320,786           --      --            --     3,320,790
  SEC filing fees             --    --            --         --         (7,928)          --      --            --        (7,928)
  Discount on note
    payable                   --    --            --         --         18,000           --      --            --        18,000
  Beneficial
    conversion expense        --    --            --         --             --           --      --    (6,501,649)   (6,501,649)
  Dividend on Series
    C preferred stock         --    --       828,867        829        348,852      991,002      --    (1,339,896)          787
  Dividend on Series
    D preferred stock         --    --       244,920        245         13,121      363,845      --      (377,211)           --
Net loss                      --    --            --         --             --           --      --    (7,012,843)   (7,012,843)
                        --------------------------------------------------------------------------------------------------------
Balance at
    March 31, 2004      $387,018  $386  $ 57,037,597   $ 57,039   $ 78,231,867   $1,354,847 $    --  $(73,289,137)  $ 6,355,002
                        ========================================================================================================

                                                                F-6
</TABLE>


<PAGE>
<TABLE>
                                              LIFEPOINT, INC.

                                         STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                  For the years ending March 31,
                                                        -------------------------------------------------
                                                            2004               2003              2002
                                                        -------------     -------------     -------------
<S>                                                     <C>               <C>               <C>
OPERATING ACTIVITIES
Net loss                                                $ (7,012,843)     $(16,067,188)     $(12,596,964)
Adjustments to reconcile net loss to net
  cash used by operating activities:
    Depreciation and amortization                            725,092           638,089           521,501
    Amortization of debt discount                            166,000           201,008                --
    Interest paid on Series C funds                               --                --            34,730
    Loan fees on note payable                                416,633                --                --
    Provision for doubtful accounts                               --            49,700            70,000
    Inventory reserve                                             --           746,571           350,000
    Compensation expense                                          --            90,215            30,655
    Changes in operating assets and liabilities:
       Accounts receivable                                   (65,650)           19,287          (138,987)
       Inventory                                              67,240        (1,728,761)       (1,589,987)
       Prepaid expenses and other current assets              91,425          (135,030)           24,150
       Other assets                                           58,402           (39,194)         (104,784)
       Accounts payable                                   (1,985,218)        1,423,212           889,812
       Accrued expenses                                      566,850            90,633           521,140
                                                        -------------     -------------     -------------
Net cash used by operating activities                     (6,972,069)      (14,711,458)      (11,988,734)

INVESTING ACTIVITIES
Purchases of property and equipment                         (142,297)         (728,535)         (727,922)
Capitalization of patent costs                                    --           (60,867)         (159,617)
                                                        -------------     -------------     -------------
Net cash used by investing activities                       (142,297)         (789,402)         (887,539)

FINANCING ACTIVITIES
Sales of common stock                                             --        10,200,000                --
Expenses of common stock offering                                 --          (780,112)               --
Sales of preferred stock                                   9,029,405                --        13,787,060
Expenses of preferred stock offering                        (608,326)               --        (1,258,955)
Cancellation of Series B preferred stock                          --                --        (3,000,000)
Exercise of stock options                                         --            25,834           229,881
Exercise of warrants                                       1,661,884           626,142           583,835
Proceeds from convertible debt                                    --         2,500,000                --
Proceeds from note payable                                   890,650           430,000                --
Payments received on notes receivable from officers               --           (27,777)         (288,456)
Repayment of note through stock surrender                     15,000                --                --
Proceeds from notes payable                                   91,878                --                --
Payments on capital leases                                  (330,952)         (383,003)         (419,622)
                                                        -------------     -------------     -------------
Net cash provided by financing activities                 10,749,539        12,591,084         9,633,743
                                                        -------------     -------------     -------------
Increase/ (decrease) in cash and cash equivalents          3,635,173        (2,909,776)       (3,242,530)
Cash and cash equivalents at beginning of year                75,588         2,985,364         6,227,894
                                                        -------------     -------------     -------------
Cash and cash equivalents at end of year                $  3,710,761      $     75,588      $  2,985,364
                                                        =============     =============     =============

                                          See Accompanying Notes.

                                                    F-7
</TABLE>


<PAGE>
<TABLE>
                                             LIFEPOINT, INC.

                                         STATEMENTS OF CASH FLOWS
                                               (CONTINUED)
<CAPTION>

                                                                     For the years ending March31,
                                                               -----------------------------------------
                                                                   2004          2003           2002
                                                               -----------    -----------    -----------
<S>                                                            <C>            <C>            <C>
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION:
Cash paid for interest                                         $  138,368     $  257,023     $  168,142
                                                               ===========    ===========    ===========
NONCASH FINANCING ACTIVITIES:
  Value of common stock surrendered as
    payment on note                                            $   15,000     $  925,277     $2,479,008
                                                               ===========    ===========    ===========
   Value of common stock options and
     warrants converted to
     common stock in exchange for note                         $      --      $       --     $1,074,188
                                                               ===========    ===========    ===========
  Conversion of accounts payable to
     long-term notes                                           $  255,695     $       --     $       --
                                                               ===========    ===========    ===========
  Value of common stock issued as
     dividends on preferred stock                              $1,717,105     $1,369,862     $  995,837
                                                               ===========    ===========    ===========
   Value of common stock and warrants
     issued as payment of
     registration effectiveness fees                           $       --     $1,348,632     $       --
                                                               ===========    ===========    ===========

                                         See Accompanying Notes.

                                                   F-8
</TABLE>


<PAGE>

                                 LIFEPOINT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2004

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

         LifePoint, Inc. ("LifePoint" or the "Company") has developed,
manufactures and markets the IMPACT TEST SYSTEM - a rapid diagnostic testing and
screening device for use in the workplace, home health care, ambulances,
pharmacies and law enforcement. LifePoint was incorporated on October 8, 1992
under the laws of the State of Delaware as a wholly-owned subsidiary of
Substance Abuse Technologies, Inc. ("SAT"). On October 29, 1997, SAT sold its
controlling stockholder interest in the Company and, on February 25, 1998, the
Company's name was changed to "LifePoint, Inc."

BASIS OF PRESENTATION

         The Company's financial statements included herein have been prepared
on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business for
the foreseeable future.

         The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. However,
during the year ended March 31, 2004, the Company incurred a net loss of
$7,012,873, and it had negative cash flows from operations of $6,972,069. In
addition, the Company had an accumulated deficit of $73,289,137 as of March 31,
2004. These factors raise substantial doubt about the Company's ability to
continue as a going concern.

         The Company realistically expects to be able to obtain any capital
needed for its operations from a variety of possible sources. First, the company
has maintained its cash position over the last two quarters without utilizing
new sources of equity or incurring debt by obtaining a significant number of
early exercises of the Preferred Series D stock warrants. These have provided
$1.7 million in capital to the Company without any further dilution. The Company
expects to obtain additional capital through additional exercises of warrants.
Additionally, the Company expects to be able to establish and use the
traditional commercial capital sources including capital lease lines, working
capital lines, international (a source of revenues) factoring, leases for
customer purchases of IMPACT Test Systems, etc. These will reduce capital
requirements for the Company. Additionally, the Company expects to achieve
significant amounts of sales revenue, which over the year, should significantly
reduce the cash requirements of the Company. Lastly LifePoint has a history of
successful financings, even in the most difficult financial market. Therefore,
if all other sources fail, and the Company needs additional capital, the Company
expects to be able to raise the capital shortfall through equity or debt
financing.

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

CASH AND CASH EQUIVALENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

         LifePoint considers all highly liquid cash investments with an original
maturity of three months or less when purchased to be cash equivalents. The
carrying amount of all cash and cash equivalents approximates fair value because
of the short-term maturity of these instruments.

                                      F-9


<PAGE>

PROPERTY AND EQUIPMENT

         Property and equipment is stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the related assets
that range from 5 to 7 years. Expenditures for maintenance and repairs are
charged to expense as incurred whereas major betterments and renewals are
capitalized. Property and equipment under capital leases are included with
property and equipment and amortization of these assets are included in
depreciation expense.

PATENTS

         The cost of patents is being amortized over their expected useful
lives, generally of 17 years. At March 31, 2004, 2003 and 2002, accumulated
amortization of patents was approximately $74,000, $37,000 and $22,000,
respectively. Additional patent costs incurred during the years ended March 31,
2004, 2003, and 2002 were approximately $0, $61,000 and $160,000, respectively.

IMPAIRMENT OF LONG LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", if
indicators of impairment exist, the Company assesses the recoverability of the
affected long-lived assets by determining whether the carrying value of such
assets can be recovered through the undiscounted future operating cash flows. If
impairment is indicated, the Company measures the amount of such impairment by
comparing the carrying value of the asset to the present value of the expected
future cash flows associated with the use of the asset. While the Company's
current and historical operating and cash flow losses are indicators of
impairment, the Company believes the future cash flows to be received from the
long-lived assets will exceed the assets' carrying value, and accordingly, the
Company has not recognized any impairment losses through March 31, 2004.

RESEARCH AND DEVELOPMENT COSTS

         Research and development costs are expensed as incurred.

RECLASSIFICATIONS

         Certain amounts have been reclassified to conform to the current year
financial statement presentation.

INVENTORIES

         Inventories are priced at the lower of cost or market using the
first-in, first-out (FIFO) method. The Company maintains a reserve for estimated
obsolete or excess inventories that is based on the Company's estimate of future
sales. A substantial decrease in expected demand for the Company's products, or
decreases in the Company's selling prices could lead to excess or overvalued
inventories and could require the Company to substantially increase its
allowance for excess inventories.

REVENUE RECOGNITION

         The majority of the Company's revenue is from sales of the IMPACT Test
System, which launched at the end of fiscal 2002. The Company recognizes revenue
in the period in which cash is received for products shipped, title transferred
and acceptance and other criteria are met in accordance with the Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. While the Company believes it has met the
criteria of SAB 101, due to delays in receiving payments on some of the
Company's initial shipments of products, the Company elected, during the quarter
ended December 31, 2002 and going forward, to record revenue related to
shipments only to the extent the related cash had been collected, as amended by
SAB 104. During the year ended March 31, 2004, the Company had $66,000 in

                                      F-10


<PAGE>

product shipments to customers that are subject to customer evaluations and
acceptance. These product shipments are included in finished goods inventory at
cost and as such have not been recognized in revenue.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The Company records an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers or distribution partners
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

STOCK-BASED COMPENSATION

         The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma disclosures
of net loss as if the fair value methods had been applied in measuring
compensation expense. Under the intrinsic value method, compensation cost for
employee stock awards is recognized as the excess, if any, of the deemed fair
value for financial reporting purposes of the Company's common stock on the date
of grant over the amount an employee must pay to acquire the stock.

         Pro forma information regarding net income is required by SFAS No. 123,
"Accounting for Stock-Based Compensation", and has been determined as if the
Company had accounted for its employee stock options under the fair value method
of SFAS No. 123. The fair value for these options was estimated at the date of
grant using the "Black-Scholes" option pricing model with the following
weighted-average assumptions for the years ended March 31, 2004, 2003 and 2002:
risk-free interest rates ranging from 3% to 6%; dividend yield of 0%; volatility
ranging from 60% to 150% and a weighted-average expected life of the options of
ten years.

         For purposes of adjusted pro forma disclosures, the estimated fair
value of the options is amortized to expense over the vesting period. The
Company's adjusted pro forma information is as follows:

<TABLE>
<CAPTION>
                                                         Years ended March 31,
                                                2004              2003             2002
                                           -------------     -------------     -------------

<S>                                        <C>               <C>               <C>
Loss applicable to common stockholders     $(15,231,597)     $(18,418,601)     $(13,592,801)
Stock-based employee compensation
   expense determined under fair value
   presentation for all options                (615,635)       (1,777,179)       (1,547,995)
                                           -------------     -------------     -------------
Pro forma net loss                         $(15,847,232)     $(20,195,780)     $(15,140,796)
                                           =============     =============     =============
</TABLE>

         Deferred compensation for options granted to non-employees has been
determined in accordance with SFAS No. 123 and Emerging Issues Task Force
("EITF") No. 96-18, "Accounting for Equity Instruments that are Issued to Other
than Employees for Acquiring, or in Conjunction with Selling, Goods or Services"
as the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measured. Deferred charges for
options granted to non-employees are periodically remeasured as the underlying
options vest.

NET LOSS PER COMMON SHARE

         Net loss per common share is based upon the weighted average number of
common shares outstanding during the periods reported. Common stock equivalents
have not been included in this calculation because their inclusion would be
anti-dilutive. As of March 31, 2004, the Company had outstanding 100,731,763
warrants, 5,807,442 options, 28,996,218 common shares equivalent of Series C
Convertible Preferred Stock, 31,943,472 common shares equivalent of Series D
Convertible Preferred Stock and 1,210,048 dividends payable, collectively these
securities would have converted into 168,688,943 shares of common stock.

                                      F-11


<PAGE>

COMPREHENSIVE INCOME

         The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which requires that all components of comprehensive income, including net
income, be reported in the financial statements in the period in which they are
recognized. Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from non-owner
sources. Net income and other comprehensive income, including foreign currency
translation adjustments and unrealized gains and losses on investments, shall be
reported, net of their related tax effect, to arrive at comprehensive income.
Comprehensive loss for the years ended March 31, 2004, 2003 and 2002 did not
differ from net loss.

INCOME TAXES

         LifePoint accounts for income taxes under SFAS No. 109, ACCOUNTING FOR
INCOME TAXES. In accordance with SFAS No. 109, deferred tax assets and
liabilities are established for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. The Company provides a valuation allowance against net deferred tax
assets unless, based upon the available evidence, it is more likely than not
that the deferred tax asset will be realized.

NOTES RECEIVABLE - KEY EMPLOYEES

         Key employee notes receivable represent full recourse notes issued to
the Company by certain members of management in exchange for shares of the
Company's common stock. The sole note outstanding at March 31, 2003, which was
paid off in fiscal 2004, was secured by the underlying shares of the common
stock, bearing interest at 9% and was payable by September 14, 2006. At March
31, 2004 and 2003, notes receivable - key employees totaled $0, and $15,000,
respectively, and is included as a contra-equity item in the accompanying
Statements of Stockholders' Equity (Deficit). Due to the recent changes enacted
under The Sarbanes-Oxley Act of 2002, the Company will accept no further notes
in favor of the Company from executive officers covered by the Sarbanes-Oxley
Act.

RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting and reporting for derivative instruments and hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 149 is effective for derivative instruments and
hedging activities entered into or modified after June 30, 2003, except for
certain forward purchase and sale securities. For these forward purchase and
sale securities, SFAS No. 149 is effective for both new and existing securities
after June 30, 2003. Management does not expect adoption of SFAS No. 149 to have
a material impact on the Company's statements of earnings, financial position,
or cash flows.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with the standard,
financial instruments that embody obligations for the issuer are required to be
classified as liabilities. SFAS No. 150 will be effective for financial
instruments entered into or modified after May 31, 2003 and otherwise will be
effective at the beginning of the first interim period beginning after June 15,
2003. This statement did not have any material impact on the financial
statements.

         In December 2003, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition" (SAB 104). SAB
104 updates portions of the interpretive guidance included in Topic 13 of the
codification of the Staff Accounting Bulletins in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The Company believes it is
following the guidance of SAB 104, and the issuance of SAB 104 did not have a
material impact on the Company's financial position or results of operations.

                                      F-12


<PAGE>

2.       INVENTORY

         Inventory is summarized as follows:

                                        March 31,      March 31,
                                         2004           2003
                                      -----------    -----------
         Raw materials                $3,158,269     $2,210,479
         Work in process                 247,645      1,262,675
                                      -----------    -----------
                                       3,405,914      3,473,154
         Less:  inventory reserve      1,096,571      1,096,571
                                      -----------    -----------
                                      $2,309,343     $2,376,583
                                      ===========    ===========

3.       PROPERTY AND EQUIPMENT

         Property and equipment is summarized as follows:
<TABLE>
<CAPTION>

                                              Estimated       March 31,      March 31,
                                             Useful Lives       2004           2003
                                                             -----------    -----------
<S>                                          <C>             <C>            <C>
         Furniture and fixtures              3 - 7 years     $3,007,848     $2,891,723
         Test equipment                      5 - 7 years        451,940        425,768
         Leasehold improvements              3 - 5 years      1,372,966      1,372,966
                                                             -----------    -----------
                                                              4,832,754      4,690,457
         Less:  accumulated depreciation                      2,950,928      2,262,316
                                                             -----------    -----------
                                                             $1,881,826     $2,428,141
                                                             ===========    ===========
</TABLE>

Depreciation expense for the years ended March 31, 2004, 2003 and 2002 was
$688,612, $622,907 and $516,021 respectively.

4.       DEBT

         On November 12, 2002, the Company entered into a convertible loan
agreement with a current investor to provide additional working capital. The
maximum loan commitment was $10.0 million, which was to have been drawn as
needed over the 30-month life of the agreement, subject to limitations. The
$10.0 million maximum commitment was made up of $2.5 million initially available
and a $7.5 million balance that was to have been available following a
successful due diligence review by the lender. The lender notified the Company
on January 29, 2003 that they were exercising their right not to extend the $7.5
million additional funding. The $2.5 million commitment was advanced to the
Company in November 2002 and bears interest at a sixteen percent (16%) of which
six percent (6%) is due in cash on a quarterly basis and ten percent (10%) in
cash at maturity. On September 23, 2003, concurrent with the second closing of
the Company's private placement of Series D Preferred Stock, the convertible
loan principal, debt discount, and accrued interest totaling $1,935,750 was
converted into 2,712 shares of Series D Preferred Stock. Prior to the
conversion, the Company issued to the lender a warrant with an exercise price of
$3.00 per share and a term of five years to purchase up to 1.5 million shares of
common stock. The loan is collateralized by the assets of the Company. The
estimated fair value of the warrants of $1,035,000 was recorded as debt discount
and was based on the Black-Scholes valuation model with the following
assumptions: dividend yield of 0%; expected volatility of 60%; risk-free
interest rate of 4.5%; and a term of five years. During the years ended March
31, 2004 and 2003, the Company recorded $103,500 and $155,250 respectively, to
interest expense as amortization of debt discount. The Company believes that the
carrying value of this note approximates fair value as the note is at prevailing
market interest rates. In addition to the collateralized interest, the agreement
calls for achievement of certain revenue and expense based milestones by the
Company starting at March 31, 2003 and continuing on a quarterly basis
thereafter. Failure to achieve these milestones could result in the issuance of
additional five year warrants to purchase 25,000 shares of common stock also
with an exercise price of $3.00 per share. At March 31, 2004 the Company had
issued 25,000 warrants as a result of missing certain of the milestones. The
warrants were valued at $8,000 based upon the Black-Scholes valuation model with
the following assumptions: dividend yield of 0.0%; expected volatility of 121%;
risk free interest rate of 3.0% and an expected life of 5 years.

                                      F-13


<PAGE>

         On February 19, 2003, the Company entered into a Note and Warrant
Purchase Agreement with a current investor to provide additional working
capital. The Company borrowed approximately $1,120,000 under the agreement. On
September 23, 2003, concurrent with the second closing of the Series D Preferred
Stock financing, the loan principal, debt discount, and accrued interest and
fees totaling $1,385,040 was converted into 1,544 shares of Series D Preferred
Stock. Borrowings under the loan bore interest at 3% per annum. Prior to the
conversion, the Company issued the lender a warrant with an exercise price of
$3.00 per share and a term of five years to purchase 1,120,000 shares of common
stock. The estimated fair value of the warrants of $286,000 was recorded as debt
discount and was based on the Black-Scholes valuation model with the following
assumptions: dividend yield of 0%; expected volatility of 121%; risk-free
interest rate of 3.0%; and a term of five years. During the years ended March
31, 2004 and 2003, the Company recorded $62,500 and $45,758 to interest expense
as amortization of debt discount.

         On December 30, 2002 the Company entered into a Promissory Note with a
vendor for services rendered to the Company amounting to $162,394. No interest
is due under the terms of the note which is payable though the period ending
January 31, 2005. At March 31, 2004, $88,479 is outstanding under the note. The
note is recorded as a long-term note payable in the balance sheet. In addition,
during the period ending September 30, 2003, the Company reached agreement with
a number of its vendors to extend payment terms on outstanding accounts payable
resulting in an additional $111,734 in long-term notes payable which will mature
over the course of fiscal year 2005.

         On December 18, 2003 the Company secured a loan with its lending
institution for $196,350 for general business purposes. The loan accrues
interest at a rate of 3.25% and is subject to monthly payments of $17,850 until
the maturity date of November 15, 2004. This loan was secured by a time deposit
made by the Company for $196,350 that matures on November 15, 2004.

5.       STOCKHOLDERS' EQUITY

SERIES B PREFERRED STOCK

         On March 29, 2001, the Company sold an aggregate of 75,000 shares of
the Company's Series B 20% Cumulative Convertible Preferred Stock, $.001 par
value (the "Series B Preferred Stock). Each share was entitled to one vote and
was convertible into 10 shares of the Company's common stock. Dividends were
cumulative and payable annually at a rate of $.20 per share in year one, $.24
per share in year two, $.288 per share in year three and $2.40 per share
thereafter. The dividends were payable in shares of Series B Preferred Stock for
the first three years after the date of original issuance and in shares of
common stock thereafter. The Series B Preferred Stock had preference in
liquidation over all other forms of capital stock of the Company at a rate of
$40 per share plus all accrued and unpaid dividends.

         Each holder of the Series B Preferred Stock was granted a common stock
purchase warrant expiring March 28, 2006 to purchase 75,000 shares of common
stock at a price of $5.60 per share. As of June 29, 2001, all shares of the
Series B Preferred Stock had been exchanged for Series C Preferred Stock and the
common stock purchase warrants were replaced with new common stock purchase
warrants.

SERIES C CONVERTIBLE PREFERRED STOCK

         On June 20, 2001, the Company sold, at $35,000 per Unit, to eleven
investors (including three of the purchasers of shares of the Series B Preferred
Stock) an aggregate of 228.007 Units. Each Unit consisted of 1,000 shares of the
newly-designated Series C Convertible Preferred Stock (the "Series C Preferred
Stock") and a common stock purchase warrant expiring June 19, 2006 (the
"Investor Warrant") to purchase 10,000 shares of the Company's common stock at
$3.50 per share.

         Of the 3,000,000 authorized shares of the Company's Preferred Stock,
430,000 shares were designated as the Series C Preferred Stock in order to cover
not only the original sale by the Company, but also subsequent sales during the
90 days after the original issuance on June 20, 2001. On June 29, 2001, an
additional 85.713 Units were exchanged for the Series B Preferred Stock as
described above.

                                      F-14


<PAGE>

         On September 28, 2001, the Company closed on an additional 80.196 Units
at the same purchase price per Unit to sixteen accredited investors in the final
closing of this private placement. As a result, the Company has sold an
aggregate of 393.916 Units for gross proceeds of $13,787,060.

         By agreement dated August 16, 2001, the Company and the investors
unanimously agreed that a holder could convert a share of the Series C Preferred
Stock at an initial conversion price of $3.00 (not $3.50) into 11.67 shares (not
10 shares) of common stock. In addition, the exercise price of the Investor
Warrants was reduced from $3.50 to $3.00 per share. A holder would also receive
11,670 shares, not 10,000 shares, upon exercise of an Investor Warrant included
in a Unit. Furthermore, the provision requiring quarterly resets of the exercise
price of the Investor Warrants based on the market prices for common stock
during the first year was deleted. The changes to the Series C Preferred Stock
were to become effective only if the related certificate of designation
governing the terms and conditions was so amended. This action would have
required the consent or approval of the holders of a majority of the outstanding
shares of common stock. However, the investors agreed, as of November 21, 2001,
to waive the requirement of an amendment to the certificate of designation. They
will instead rely on a contractual commitment by the Company to honor
conversions on the basis set forth above. Such action is permitted by Delaware
law, which governs the Company.

         Pursuant to an escrow agreement, unless waived, 50% of the proceeds
from the sale of Series C Preferred Stock and the Investor Warrants were to be
held in escrow pending achievement by the Company of certain milestones. As of
March 22, 2002, the Company confirmed to the escrow agent achievement of the
milestones. Accordingly, all proceeds have been released to the Company and the
investors have received all of their securities held in escrow.

         To assist the Company in bridging the gap between December 31, 2001 and
receiving the escrowed funds, on February 1, 2002, General Conference
Corporation of Seventh-day Adventists, the Company's largest stockholder and one
of the investors with escrowed purchase proceeds and securities, loaned the
Company $1,500,000 with a 5% per annum interest rate. The loan was paid in full
from the first escrow release along with interest of $10,685. The Company also
issued a warrant to the General Conference Corporation to purchase 500,000
shares of common stock at $3.25 per share which expires January 29, 2007.

         On the last date of each of the Company's fiscal quarters, commencing
December 31, 2001, in which shares of the Series C Preferred Stock are
outstanding, the Company is required to redeem all accrued and unpaid dividends
as of such date. Dividends are paid at 10% per year through June 30, 2004 and 5%
per year thereafter. The Company currently elects to pay the dividend by the
issuance of shares of common stock to each holder of the Series C Preferred
Stock. The number of shares of common stock issued is calculated by dividing the
aggregate amount of dividend then due on the shares of the Series C Preferred
Stock by the market price of the common stock on such date. Market price is
calculated as the average closing sales price for the twenty trading days
preceding the close of the quarter. For the year ended March 31, 2004 the
Company paid $1,336,479 through the issuance of 3,338,844 shares of common
stock. For the year ended March 31, 2003 the Company paid $1,369,862 through the
issuance of 1,197,677 shares of common stock.

         As a result of a registration statement for the shares of common stock
issuable upon conversion of the Series C Preferred Stock not being declared
effective by January 2002, the Company became obligated to pay an effectiveness
registration penalty fee. The total fee due to the Series C Preferred Stock
holders was $780,696, of which $367,081 was accrued but unpaid in fiscal 2002;
the balance of $413,615 was recognized in the quarter ended June 30, 2002. The
Company issued a total of 260,232 shares of common stock, with a market value of
$3.00 per share as payment of this fee. In May 2002, the Company issued 191,294
shares of common stock, and an additional 68,938 shares of common stock were
issued in July 2002 to complete payment of the registration penalty fee.

         As of March 31, 2004, there were 377,434 shares of the Series C
Preferred Stock and warrants to purchase an aggregate of 4,597,002 shares of the
common stock outstanding. During the year ended March 31, 2004, five holders
converted 12,357 shares of the Series C Preferred Stock into 786,791 shares of
common stock. The Series C Preferred Stock has a mandatory conversion on June
20, 2004.

                                      F-15


<PAGE>

SERIES D CONVERTIBLE PREFERRED STOCK

         On September 22, 2003, the Company closed a $13 million private
placement of Series D Convertible Preferred Stock ("Series D Preferred Stock")
and warrants to purchase Common Stock ("Warrants"). On July 14, 2003, at the
first closing (the "First Closing") of the private placement, the Company issued
2,218 shares of Series D Preferred Stock convertible into 7,392,594 shares of
Common Stock of the Company and Warrants to purchase 14,785,188 shares of Common
Stock of the Company to various investors (the "Investors"). On September 22,
2003, at the second closing (the "Second Closing") of the private placement, the
Company issued an additional 6,533 shares of Series D Preferred Stock
convertible into 21,774,489 shares of Common Stock of the Company and Warrants
to purchase 43,548,978 shares of Common Stock of the Company to the Investors.
Additionally, at the Second Closing, the holders of the Company's secured
indebtedness converted their secured indebtedness into 4,256 shares of Series D
Preferred Stock convertible into 14,185,248 shares of Common Stock of the
Company and Warrants to purchase 28,370,496 shares of Common Stock of the
Company.

         The Series D Preferred Stock has an aggregate stated value of $1,000
per share and is entitled to a quarterly dividend at a rate of 6% per annum,
generally payable in Common Stock or cash at the Company's option.

         The Series D Preferred Stock is entitled to a liquidation preference
over the Company's Common Stock and Series C Preferred Stock upon a liquidation,
dissolution, or winding up of the Company. The Series D Preferred Stock is
convertible at the option of the holder into Common Stock at a conversion price
of $0.30 per share, subject to certain anti-dilution adjustments (including
full-ratchet adjustment upon any issuance of equity securities at a price less
than the conversion price of the Series D Preferred Stock, subject to certain
exceptions). Following the second anniversary of the closing, the Company has
the right to force conversion of all of the shares of Series D Preferred Stock
provided that a registration statement covering the underlying shares of Common
Stock is in effect and the 20-day volume weighted average price of the Company's
Common Stock is at least 200% of the conversion price and certain other
conditions are met.

         The Company is required to redeem any shares of Series D Preferred
Stock that remain outstanding on the third anniversary of the closing, at its
option, in either (i) cash equal to the face amount of the Series D Preferred
Stock plus the amount of accrued dividends, or (ii) subject to certain
conditions being met, shares of Common Stock equal to the lesser of the then
applicable conversion price or 90% of the 90-day volume weighted average price
of the Common Stock ending on the date prior to such third anniversary. As the
redemption is not required to be paid in cash, the Company has not recorded the
preferred stock as a liability in the accompanying balance sheet.

         Upon any change of control, the holders of the Series D Preferred Stock
may require the Company to redeem their shares for cash at a redemption price
equal to the greater of (i) the fair market value of such Series D Preferred
Stock and (ii) the liquidation preference for the Series D Preferred Stock. For
a three-year period following the closing, each holder of Series D Preferred
Stock has a right to purchase its pro rata portion of any securities the Company
may offer in a privately negotiated transaction, subject to certain exceptions.

         Each share of Series D Preferred Stock is generally entitled to vote
together with the Common Stock on an as-converted basis. In addition, the
Company agreed to allow one of the investors in the Series D Preferred Stock
private placement to appoint a representative to the Company's Board of
Directors, and one of the investors is entitled to appoint a representative to
attend the Company's Board of Directors meetings in a non-voting observer
capacity.

         The purchasers of the Series D Preferred Stock also received Warrants
exercisable for an aggregate of 91,543,345 shares of Common Stock (including a
warrant exercisable for 4,838,683 shares of Common Stock issued to the placement
agent for the offering, Roth Capital Partners) at an initial exercise price of
$0.50 per share, subject to certain non-price based anti-dilution adjustments.
If the Warrants are exercised with cash to the Company prior to July 24, 2004,
however, the exercise price will be $0.30 per share, subject to certain
non-price based anti-dilution adjustments. The Warrants issued at the First
Closing expire on July 13, 2008 and the Warrants issued at the Second Closing
expired on September 21, 2003.

         During the quarter ended September 30, 2003, the Company sold 13,007
shares of the Series D preferred stock for net cash proceeds of $8,058,316 and
conversion of $4.2 million in secured debt. The Company allocated the proceeds

                                      F-16


<PAGE>

of the offering to the warrants and the preferred stock based on their pro-rata
values. At the time of issuance, the effective conversion price of the preferred
stock was less than the fair market value of the common stock which resulted in
a beneficial conversion feature. The calculation resulted in a beneficial
conversion feature value in excess of the calculated value of the preferred
stock. As such, the Company recorded as dividend expense a beneficial conversion
feature upon issuance equal to its original value of $6,501,649.

         Additionally, the Company has accrued cumulative dividends in the
amount of $1,024,198 for the year ended March 31, 2004.

         During the year ended March 31, 2004, holders of 9,584 shares of the
Series D preferred stock converted their preferred stock into 11,408,859 shares
of common stock. Related to the conversion, the Company issued 244,921 shares of
common stock as dividend shares. As of March 31, 2004, there were 9,584 shares
of the Series D Preferred Stock and warrants to purchase an aggregate of
86,003,799 shares of the common stock outstanding.

COMMON STOCK

         On April 2, 2002, the Company sold 272 units, at $37,500 per unit, to
eight accredited investors. Each unit consisted of 10,000 shares of common stock
and a common stock purchase warrant expiring April 1, 2007 to purchase 2,000
shares of the common stock at $4.50 per share. The Company realized $10,200,000
in gross proceeds and incurred $780,112 in expenses related to the private
placement from the sale of the units. In July 2002, the Company issued warrants
to purchase 326,400 shares of common stock as a penalty for not registering the
shares issued in the private placement on time. The warrants were valued at
$567,936 based upon the Black-Scholes valuation model with the following
assumptions: dividend yield of 0.0%; expected volatility of 121%; risk free
interest rate of 3.0% and an expected life of 5 years.

         On January 14, 2004, the Company issued 53,890 shares of common stock
at $0.43 per share to a vendor for restitution of the outstanding balance of
this debt. On March 5, 2004, the Company issued 50,000 shares of common stock at
$0.37 per share to a former Director of the Company for his appointment to the
new position of Director Emeritus. On March 5, 2004, the Company issued 945,387
shares of restricted stock at $0.37 per share to employees and former employees
in recognition of decreased pay and furloughs during 2003, and as an incentive
for continued employment through October 31, 2003.

STOCK OPTION/STOCK ISSUANCE PLAN

         On August 14, 1997, the Board of Directors adopted, subject to
stockholder approval, the Company's 1997 Stock Option Plan (the "1997 Option
Plan") providing for the granting of options to purchase up to 1,000,000 shares
of Common Stock to employees (including officers) and persons who also serve as
directors and consultants of the Company. On June 5, 1998, the Board increased
the number of shares subject to the 1997 Option Plan to 2,000,000, again subject
to stockholder approval. Stockholder approval was given on August 13, 1998. The
options may either be incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") to be granted to
employees or nonqualified stock options to be granted to employees, directors or
consultants. On August 25, 2000, the stockholders approved the Company's 2000
Stock Option Plan that would permit the granting of options to purchase an
aggregate of 2,000,000 shares of the Common Stock on terms substantially similar
to those of the 1997 Option Plan. On January 14, 2004, the stockholders approved
the Company's 2003 Stock Option Plan that would permit the granting of options
to purchase an aggregate of 10,000,000 shares of the Common Stock on terms
substantially similar to those of the 1997 Option Plan.

         As of March 31, 2004, options to purchase an aggregate of 5,807,442
shares of the Common Stock granted to employees including officers, directors
and consultants were outstanding. As of such date, options to purchase an
aggregate of 851,741 shares of the Common Stock had been exercised and options
to purchase an aggregate of 775,078 shares of the Common Stock were then
exercisable. Options granted to date under both Option Plans have generally
become exercisable as to one-quarter of the shares subject thereto on the first
anniversary date of the date of grant and as to 1/36th of the remaining shares
on such calendar day each month thereafter for a period of 36 months. Certain
options will become exercisable upon the achievement of certain goals related to
corporate performance and not that of the optionee. The exercise price per share
for incentive stock options under the Code may not be less than 100% of the fair
market value per share of the Common Stock on the date of grant. For
nonqualified stock options, the exercise price per share may not be less than
85% of such fair market value. No option may have a term in excess of ten years.

                                      F-17


<PAGE>

A summary of the Company's option activity from March 31, 2001 through March 31,
2004 is as follows:

                                                  Stock Options
                                          ----------------------------
                                            Number of      Price Range
                                             Shares         Per Share
                                          -----------   --------------
         Outstanding - March 31, 2001      1,897,988      0.50 - 6.56
           Granted                         1,191,520      2.64 - 4.09
           Exercised                        (430,838)     0.50 - 2.83
           Cancelled                        (503,509)     0.50 - 6.56
                                          -----------   --------------
         Outstanding - March 31, 2002      2,155,161      0.50 - 6.56
           Granted                         1,091,475      0.43 - 3.53
           Exercised                         (15,925)     0.50 - 3.17
           Cancelled                        (923,976)     0.50 - 6.56
                                          -----------   --------------
         Outstanding - March 31, 2003      2,306,735     $0.50 -$6.56
           Granted                         4,481,050      0.37 - 0.56
           Exercised                              --               --
           Cancelled                        (980,343)     0.50 - 6.56
                                          -----------   --------------
         Outstanding - March 31, 2004      5,807,442     $0.37 -$6.56
                                          ===========   ==============

WARRANTS

         A summary of the Company's warrant activity from March 31, 2001 through
March 31, 2004 is as follows.

                                             Number of       Price Range
                                              Shares          Per Share
                                          -------------     ------------
         Outstanding - March 31, 2001        8,286,993      0.50 - 5.60
         Cancelled                            (226,674)     3.00 - 5.60
         Exercised                            (743,460)     1.07 - 3.00
         Granted                             5,972,129      3.00 - 4.17
                                          -------------     ------------
         Outstanding - March 31, 2002       13,288,988      0.50 - 5.60
         Expired                               (11,000)            0.50
         Cancelled                            (100,000)     1.89 - 2.53
         Exercised                            (875,289)     0.50 - 2.41
         Granted                             3,740,900      1.65 - 4.50
                                          -------------     ------------
         Outstanding - March 31, 2003       16,043,599      0.50 - 4.77
         Expired                                    --               --
         Cancelled                            (762,450)     0.50 - 2.41
         Exercised                          (5,539,612)            0.30
         Granted                            90,990,226             0.50
                                          -------------     ------------
         Outstanding - March 31, 2004      100,731,763      0.50 - 4.77
                                          =============     ============

                                      F-18


<PAGE>

         A summary of the status of the stock options and warrants from March
31, 2002 through March 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                                2004                         2003                      2002
                                       ------------------------    -----------------------    ------------------------
                                                       Weighted                   Weighted                   Weighted
                                                        Average    Options         Average    Options         Average
                                       Options and     Exercise      and          Exercise      and          Exercise
                                        Warrants         Price     Warrants         Price     Warrants         Price
                                        --------         -----     --------         -----     --------         -----
<S>                                    <C>             <C>        <C>             <C>        <C>             <C>
Outstanding at beginning of year       18,350,334      $   2.94   15,444,149      $   2.77   10,184,981      $   2.48
Granted                                95,471,276          0.48    4,832,375          3.05    7,163,649          3.12
Canceled                               (1,742,793)         1.78   (1,023,976)         2.86     (730,183)         4.01
Exercised                              (5,539,612)         0.30     (891,214)         0.60   (1,174,298)         1.61
Expired                                        --         --         (11,000)         0.50           --         --
                                     -------------               ------------               ------------

Outstanding at end of year            106,539,205      $   0.88   18,350,334      $   2.94   15,444,149      $   2.77
                                     =============               ============               ============
Options and warrants exercisable
    at year end                       101,506,841      $   0.77   17,080,942      $   2.75   14,164,697      $   2.81
                                     =============               ============               ============
Weighted-average fair value of
   options and warrants granted
   during the year                       $   0.48                $      1.45                   $   2.46
                                     =============               ============               ============
</TABLE>

The weighted average remaining contractual life of options outstanding at March
31, 2004 is 6.3 years.

The following is a further breakdown of the options outstanding as of March 31,
2004:

<TABLE>
<CAPTION>
<S>     <C>
                                         WEIGHTED                                    WEIGHTED
                                         AVERAGE      WEIGHTED                       AVERAGE
                                        REMAINING     AVERAGE                     EXERCISE PRICE
  RANGE OF             OPTIONS            LIFE        EXERCISE      OPTIONS         OF OPTIONS
EXERCISE PRICES      OUTSTANDING        IN YEARS       PRICE      EXERCISABLE       EXERCISABLE
---------------      -----------        --------       -----      -----------       -----------

$0.37 - 1.67          4,949,417           9.49       $   0.47       477,277          $   0.45

$1.81 - 2.41            194,900           8.04       $   2.27       112,911          $   2.25

$2.83 - 3.17            232,875           7.79       $   3.12       115,622          $   3.09

$3.22 - 4.38            177,750           7.07       $   3.59         8,555          $   3.58

$4.81 - 6.56            252,500           6.38       $   5.73        60,713          $   4.81
</TABLE>

                                           F-19


<PAGE>

6.       INCOME TAXES

         The reconciliation of the income tax benefit from continuing operations
to taxes computed at U.S. federal statutory rates is as follows:

                                                            2004          2003
                                                         ---------     ---------
                                                              (in thousands)
         Deferred tax assets:

            Net operating loss carryforward              $ 18,294      $ 20,045
            Reserves and accruals                             731           713
            Depreciation and amortization                      17            13
                                                         ---------     ---------
         Total deferred tax assets                         19,042        20,771
         Valuation allowance for deferred tax assets      (19,042)      (20,771)
                                                         ---------     ---------
         Net deferred tax assets                         $     --      $     --
                                                         =========     =========

         Significant components of the Company's deferred tax assets and
liabilities as of March 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                         YEARS ENDED MARCH 31,
                                                                          2004           2003
                                                                       ----------     ---------
                                                                             (in thousands)
<S>                                                                     <C>           <C>
                Income tax expense at statutory rates                   $ (5,178)     $ (5,463)
                State income taxes, net of federal tax benefit              (205)           --
                Increase of valuation allowance associated with
                   federal deferred tax assets                             2,589         5,402
                Permanent and miscellaneous items                          2,794            61
                                                                       ----------     ---------
                                                                       $      --      $     --
                                                                       ==========     =========
</TABLE>

         At March 31, 2004, the Company has federal and state tax net operating
losses of $59,237,000 and $29,282,000, respectively. Net operating losses begin
to expire in 2008 for federal purposes and 2004 for state purposes. At March 31,
2004, the Company also has Federal credits of $312,000 and California credits of
$282,000. For financial reporting purposes, a valuation allowance has been
recorded to offset the deferred tax assets as it is more likely than not that
some portion or all of the deferred tax assets will not be realized.

         Because of the "change in ownership" provision of the Tax Reform Act of
1987, utilization of the Company's net operating loss carryforwards may be
subject to an annual limitation against taxable income in future periods. As a
result of the annual limitation, a portion of these carryforwards may expire
before ultimately becoming available to reduce future income tax liabilities.

         On September 11, 2002, the Governor of California signed into law new
tax legislation that suspends the use of net operating loss carryforwards into
tax years beginning on or after January 1, 2002 and 2003. Should the Company
have taxable income for the year ending March 31, 2004, it may not look to
California net operating losses generated in prior years to offset taxable
income. This suspension will not apply to tax years beginning in 2004 and
beyond.

                                      F-20


<PAGE>

7.       COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

         LifePoint entered into a lease agreement commencing October 1, 1997,
which was extended by an amendment and will terminate on June 30, 2004, for the
research facilities in Rancho Cucamonga, California. In addition to rent of
$72,000 per year, LifePoint will pay real estate taxes and other occupancy
costs. The Company has an option to renew until June 30, 2005 so as to be
consistent with the term of the lease of its corporate offices and manufacturing
facility described in the next paragraph.

         On April 26, 2000, the Company entered into a lease agreement for its
administrative offices and manufacturing facility commencing May 1, 2000, which
terminates on July 31, 2005. In addition to rent of $226,000 per year, LifePoint
will pay real estate taxes and other occupancy costs. The Company may elect to
terminate the lease at the end of four years and has the right to two two-year
renewal options. The lease also provided for rent abatement in three of the
first twelve months as a tenant improvement allowance in addition to the $30,000
allowance paid by the lessor.

         On August 28, 2000 the Company entered into a lease financing agreement
with Finova Capital Corporation ("Finova") of Scottsdale, Arizona whereby Finova
agreed to provide LifePoint with up to a $3,000,000 lease line for the purchase
of equipment including up to $500,000 of leasehold improvements. At March 31,
2004 and 2003, $1,249,930 had been drawn against the line. Each closing schedule
has been financed for 36 months at a rate equal to the then current three-year
U.S. Treasury Note. At the end of each schedule, LifePoint will have the option
to purchase all (but not less than all) of the equipment at 15% of the original
equipment cost. As of March 31, 2004, the Company owed $485,000 on its lease of
its capital equipment and was in litigation regarding such. The Company has
reached a settlement on the outstanding balances and has negotiated a payment
schedule commencing in July 2004. The Company has recorded $445,000 as an
accrued expense and $40,000 is reflected as a long-term liability.

         The Company leases certain equipment under non-cancelable lease
arrangements. These capital leases expire on various dates through 2004 and may
be renewed for up to 12 months. Furniture, fixtures and equipment includes
assets acquired under capital leases of $1,280,633 and $1,249,930 as of March
31, 2004 and 2003, respectively. Accumulated depreciation for assets under
capital lease was $222,004, $643,743 and $415,952 at March 31, 2004, 2003 and
2002, respectively. Amortization of assets under capital lease is included with
depreciation expense. See Note 3 - Property and Equipment.

Approximate future minimum payments under non-cancelable leases as of March 31,
2004 are as follows:

                                           Capital     Operating
           Years ended March 31,            Leases       Leases
           ---------------------          ---------    ---------

               2005                       $400,000     $298,000
               2006                             --       93,000
                                          ---------    ---------
         Total minimum lease payments      400,000     $391,000

         Amount representing interest           --
                                          ---------
         Present value of net minimum
            lease payments                 400,000
         Less current portion              400,000
                                          ---------
         Long-term portion                $     --
                                          =========

                                      F-21


<PAGE>

SIGNIFICANT CONTRACTS

         Since October 1997, the Company has been the exclusive licensee from
the United States Navy (the "USN") to use the USN's flow immunosensor technology
to test for drugs of abuse and anabolic steroids in urine samples. Prior
thereto, LifePoint was a sublicensee for the same technology under a license
granted by the USN to the then parent of the Company. The license agreement (the
"License Agreement") expires February 23, 2010, when the USN patent expires,
including any reissues, continuation or division thereof.

         In April 1999, the Company and the USN completed negotiations for an
expansion of the License Agreement. The new terms expand the field-of-use from
drugs of abuse and anabolic steroids in urine samples to include all possible
diagnostic uses for saliva and urine. The License Agreement may be terminated by
the USN in the event the Company files bankruptcy or is forced into
receivership, willfully misstates or omits material information, or fails to
market the technology. Either party may terminate the agreement upon mutual
consent. The royalty rate payable to the USN is 3% on the technology-related
portion of the disposable cassette sales and 1% on instrument sales. The minimum
royalty payment of $100,000 for calendar years 2003, 2002 and 2001 was paid.
Minimum annual royalty payments are due each year thereafter.

         On June 4, 2001, the Company and CMI, Inc. ("CMI"), a wholly-owned
subsidiary of the employee-owned MPD Inc. based in Owensboro, Kentucky, entered
into a renewable, three-year agreement establishing CMI as the exclusive
distributor of the IMPACT Test System to the law enforcement market in the
United States and Canada. Fees will be calculated and paid in accordance with
the confidential terms of the agreement. There are no conditions for the Company
to meet other than the delivery of product to receive the fees. CMI has minimum,
confidential, sales requirements for the three-year term of the contract in
order to retain the exclusive marketing rights. CMI will sell, and provide
service and training for, the IMPACT Test System to the law enforcement market,
including, driver testing, corrections, probation and parole, narcotics and drug
courts.

         The three-year term of the agreement did not begin until general
marketing of our IMPACT Test System began on February 26, 2002. CMI will benefit
from volume discounts and, therefore, the Company's margins on products
purchased by CMI may decrease over the term of the contract. In addition, CMI
has guaranteed pricing on the instruments, which may result in much lower
margins once the Company transfers the instrument production to an outside
vendor. The agreement with CMI is automatically renewable unless CMI or the
Company gives notice to the other 180 days prior to the end of the initial term.

         On November 25, 2003, CMI notified the Company that they were
terminating their distribution agreement. The Company believes that this
notification is not valid under the terms of the agreement and on December 30,
2003, the Company demanded a break-up fee from CMI for their desired early
termination of this agreement.

8.       LEGAL MATTERS

         The Company is subject to other lawsuits in the ordinary course of
business and is currently subject to lawsuits filed by various vendors for
non-payment of amounts allegedly owed. In the opinion of management, such
claims, if disposed of unfavorably, would not have a material adverse effect on
the accompanying financial statements of the Company.

                                      F-22


<PAGE>

9.       QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                       First            Second            Third            Fourth
                                      Quarter           Quarter          Quarter           Quarter
                                    ------------     -------------    ------------     --------------
                             2004
----------------------------------
<S>          <C>                   <C>              <C>              <C>              <C>
Net revenues (1)                   $        --      $   (18,500)     $        --      $        --
Cost of goods sold                 $        --      $        --      $        --      $    52,858

Loss from operations               $(1,749,983)     $(1,080,510)     $(1,792,937)     $(2,389,413)

Loss applicable to common
stockholders                       $(2,368,715)     $(7,266,137)     $(2,313,320)     $(3,283,425)

Basic and diluted net loss per
common share                       $     (0.06)     $     (0.19)     $     (0.05)     $     (0.06)

                             2003
----------------------------------
Revenues                           $        --      $   164,335      $    (1,240)     $  (114,382)
Cost of goods sold                 $   256,566      $   775,429      $   238,433      $    46,761

Loss from operations               $(3,228,822)     $(3,940,386)     $(2,848,176)     $(5,668,842)

Loss applicable to common
stockholders                       $(3,999,058)     $(4,290,690)     $(3,247,824)     $(6,881,029)

Basic and diluted net loss per
common share                       $     (0.11)     $     (0.12)     $     (0.09)     $     (0.19)

</TABLE>

(1) Due to delays in receiving payments on some of the Company's initial
shipments of products, during the quarter ended December 31, 2002 and going
forward, the Company elected to record revenue related to shipments only to the
extent the related cash had been collected. Accordingly, in the third and fourth
quarter, adjustments were made to reverse those sales for which cash had not
been collected by the Company.

                                      F-23