FORM 20-F/A



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

           [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
           for the transition period from ____________ to ____________

                           Commission File No. 0-17788

                          Healthcare Technologies Ltd.
                          ----------------------------
              (Exact name of registrant as specified in its charter
               and translation of Registrant's Name into English)

                                     ISRAEL
                                     ------
                 (Jurisdiction of incorporation or organization)

              3 Habosem Street, Kiryat Minrav, Ashdod, Israel 77610
              -----------------------------------------------------
                    (Address of principal executive offices)

               Securities registered or to be registered pursuant to
                           Section 12(b) of the Act:
                                      None

 Securities registered or to be registered pursuant to Section 12(g) of the Act:

                  Ordinary Shares, NIS 0.04 par value per share
                  ---------------------------------------------
                                (Title of Class)

        Securities for which there is a reporting obligation pursuant
                          to Section 15(d) of the Act:
                                      None

<Page>

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:


     As of December 31, 2002, the registrant had outstanding 7,643,727 Ordinary
Shares, NIS 0.04 nominal value per share. 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 which financial statement item the Registrant has
elected to follow:

     Item 17.          Item 18.  X
             -------            ----

                                       ii
<Page>

     In addition to historical information, this annual report on Form 20-F
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements. Factors that might cause such difference include, but are not
limited to, those discussed in Item 3. "Key Information - D. Risk Factors" and
Item 5. "Operating and Financial Review and Prospects." Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's analysis as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review any disclosure of risks and
uncertainties contained in other documents that the Company files from time to
time with the Securities and Exchange Commission.

                                  INTRODUCTION

     This Annual Report on Form 20-F (the "Annual Report" or "Report") is being
filed by Healthcare Technologies Ltd., an Israeli corporation ("Healthcare" or
the "Company").

     The Company specializes in the development, manufacture and marketing of
clinical diagnostic test kits and provides services and tools to diagnostic and
biotech research professionals in laboratory and point of care sites in Israel
and worldwide. The Company is also engaged in the production and marketing of
molecular biology based gene screening tools for the detection of certain
gene-associated disorders in humans, including prenatal testing for diseases
such as cystic fibrosis, gaucher and other diseases and testing for
predisposition to diseases such as breast, ovarian and colon cancer, thrombosis
and certain cardiovascular diseases.

     In addition, the Company through its holdings in Procognia (UK) Ltd. has
been involved in the design of glycobiology-based tools for drug discovery and
development and bioinformatics.

     The Company's principal stockholder is Gamida for Life B.V. ("Gamida"),
which owned approximately 51% of the Company's issued and outstanding shares as
of the date of this report.

     The Company operates as a holding company with four main active direct
subsidiaries (and one additional indirect subsidiary), which together comprise
the Healthcare group of companies. Unless the context indicates otherwise, the
term "Company" as used herein refers to Healthcare and its subsidiaries.

<Page>

     A schematic presentation of the Company and its interests (as of June 20,
2003) appears below:

               [See Exhibit 99.4 -- Chart of Healthcare Companies]

     The Company's business activities are organized into four main functional
groups: research and development; manufacturing and marketing worldwide of
diagnostic tools; marketing and distribution to biotechnology researchers in
Israel; and marketing and distribution to clinical diagnostic laboratories in
Israel.

     The Company's research, development and manufacturing activities have been
conducted primarily by Savyon, a leader in the serological diagnosis of
chlamydial infections. Savyon has developed and manufactured immunoassays for
the diagnosis of infectious diseases, especially sophisticated microplate-based
enzyme immunoassays.

     An immunoassay is an analytical test that uses antibodies to detect the
presence of a target compound in a sample matrix such as blood, urine or saliva.
A serological test utilizes blood as the sample matrix. Antibodies are proteins
made by cells within the body as part of the immune response to invasion by
antigens, which are foreign substances like bacteria and viruses such as
chlamydia. An antibody physically binds only to the substance that elicited its
production. This characteristic of specific binding makes antibodies useful
tools for detecting substances in sample matrices. The Company's
microplate-based enzyme immunoassays are automated tests that utilize
enzyme-based color changes to demonstrate the presence of the target antigen in
the sample.

     Savyon focuses on specific segments of the clinical diagnostic markets and
is positioned to identify ideas and turn them into marketable products. Savyon
provides in vitro diagnostic kits and related products to laboratory
professionals and other point of care locations in Israel and worldwide. An in
vitro diagnostic kit is a test that is performed outside of the subject's body
on a test sample from the subject such as blood. In addition, Savyon markets
kits for the diagnosis of certain infectious diseases in the over-the-counter
market in the United States. As a product developer, Savyon holds proprietary
rights to certain products in the in vitro diagnostics healthcare field.

     On December 31, 2002, the Company and Pronto entered into an agreement with
Dr. Martin Lee to establish Savyon 2003, a newly organized Israeli company, to
acquire Savyon's clinical laboratory diagnostics business. The Company and Dr.
Lee each own fifty percent of Savyon 2003, and Dr. Lee has been appointed as its
chief executive officer. In January 2003, Savyon changed its name to "Pronto
Diagnostics Ltd." and Savyon 2003

                                       2
<Page>

changed its name to "Savyon Diagnostics Ltd." In order to avoid confusion in
this report, we will continue to refer to Pronto and Savyon 2003 collectively as
"Savyon", except where the transaction with Dr. Lee is described. See Item 4 -
"Recent Developments."

     Savyon has also been engaged in the production and marketing of molecular
biology based gene screening tools for the detection of certain gene-associated
disorders in humans using Pronto(TM), a molecular biology based technology for
genetic screening and testing of certain human genetic disorders, including
prenatal testing for diseases such as cystic fibrosis, gaucher and other
diseases that are prevalent in the Jewish population, and testing for
predisposition to diseases such as breast, ovarian and colon cancer, thrombosis
and certain cardiovascular diseases.

     The Company's marketing and sales activities in Israel are conducted by
Danyel in the field of biotech research, and by the Gamidor Group (as defined
below) in the fields of clinical diagnostic laboratories and laboratories in
general. The Company's sales and marketing activities worldwide (other than in
Israel) are conducted by Savyon.

     Danyel conducts the Company's marketing and sales activities to
biotechnology researchers in Israel in the genomics field and also in the fields
of proteomics and proteins separation, where sequencing, microarray and other
technologies are employed. Danyel also imports and distributes a range of
specialized instruments, reagents and radioactively labeled compounds for
academic and biomedical research laboratories as well as consumable products in
the fields of cell culture, molecular biology and immunology, including
analytical and laboratory systems such as spectrophotometers and fluorometers,
designed to read the results of specific types of tests and electrophoresis
equipment used to separate materials according to their movement in
electromagnetic fields.

     The Gamidor Group consists of Gamida-Gen-Marketing, which wholly owns
Gamidor Diagnostics. The Gamidor Group conducts the Company's marketing and
sales activities with respect to systems, chemicals, reagents and services for
clinical diagnostic laboratories throughout Israel and also provides doctors'
offices with near-patient testing systems.

                                     PART I

Item 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

       Not Applicable.

Item 2.   OFFER STATISTICS AND EXPECTED TIMETABLE

       Not Applicable

Item 3.   KEY INFORMATION

       Not Applicable.

          A.   SELECTED FINANCIAL DATA

     The following selected consolidated financial data for the five years ended
December 31, 2002 are derived from the Consolidated Financial Statements of the
Company which have been prepared in conformity with generally accepted
accounting principles in Israel, which differ in certain respects from those
followed in the United States (see Note 19 to the Consolidated Financial
Statements). The data appearing below for the five years ended December 31, 2002
should be read in conjunction with the financial statements, related notes and
other financial information included elsewhere in this Report.

                                       3
<Page>

          INCOME STATEMENT DATA:

          CONSOLIDATED STATEMENT OF OPERATIONS
          (in thousands of U.S. Dollars except loss per share)


<Table>
<Caption>
                                                         2002          2001           2000         1999          1998
                                                         ----          ----           ----         ----          ----
<S>                                                    <C>           <C>            <C>          <C>           <C>
Sales                                                  16,676        16,013         15,456       16,583        18,562
Cost of Sales                                          10,386         9,984         10,006       10,286        11,937
                                                      -------         -----         ------       ------        ------
Gross Profit                                            6,290         6,029          5,450        6,297         6,625
Research and development costs, net                       912         3,164          1,408          855           725
Selling and marketing expenses                          3,161         3,167          2,755        3,300         3,440
General and administrative expenses                     2,475         3,966          2,669        2,268         3,378
Amortization of goodwill                                  471           246            196          196           324
Impairment of property and equipment                        -             -              -            -           190
                                                      -------       -------        -------      -------        ------
Operating Earnings (Loss)                                (729)       (4,514)        (1,578)        (322)       (1,432)
Financial income (expenses), net                         (491)         (311)           129          156          (619)
Other income (expenses), net                            1,482           896            754           36          (655)
                                                        -----           ---           ----      -------        ------
Earnings (Loss) before taxes                              262        (3,929)          (695)        (130)       (2,706)
Taxes on income                                             -             -              -            -            93
                                                      -------       -------        -------      -------        ------
Earnings (Loss) after taxes on income                     262        (3,929)          (695)        (130)       (2,799)
Minority interest in losses (earnings) of
   consolidated subsidiaries                              206           916            204          (61)          119
                                                          ---           ---        -------      --------       ------
Net Earnings (Loss) for year                              468        (3,013)          (491)        (191)       (2,680)
                                                    ===================================================================

Net Earnings (Loss) per NIS 1 par value of
   shares (*)                                            1.53        (12.6)          (2.64)       (1.03)       (14.55)
                                                    ===================================================================

Weighted average number of shares and
   Equivalents outstanding (in thousands) (*)           7,644         5,977          4,644        4,627         4,596
                                                    ===================================================================

Net loss for year according to U.S. GAAP
   (See Note 1)                                        (1,827)       (6,046)        (2,045)        (654)       (3,143)
                                                    ===================================================================

Net loss per share according to U.S. GAAP (*)           (0.24)        (1.02)         (0.45)       (0.14)        (0.69)
                                                    ===================================================================
</Table>

(*) All share and per share amounts have been restated to retroactively reflect
    the share consolidation.

Note 1: Effect of material differences between Israeli GAAP and U.S. GAAP

                                       4
<Page>

<Table>
<Caption>
                                                                     Fiscal Year Ended December 31,
                                                  =====================================================================
                                                    2002          2001          2000         1999          1998
                                                  =====================================================================
<S>                                               <C>           <C>           <C>          <C>           <C>
Net income (loss) as reported according to
Israeli GAAP                                         468        (3,013)         (491)        (191)       (2,680)
                                                  =====================================================================
Impairment of goodwill                                                                                   (1,594)
Income from sale of production line in
subsidiary                                            -             -             -            -          1,280
Income from sale of production line in
jointly controlled entity                             -             -             -            -             70
Amortization of goodwill and technology             (387)       (1,046)         (463)        (463)         (463)
Compensation expenses                                (40)         (113)          (72)          -             -
Minority interest in losses of Procognia            (206)         (971)         (214)          -             -
Capital gain from decrease in holdings in
Procognia                                         (1,349)           -             -            -             -
Compensation expenses related to
conversion of convertible debentures                (313)           -             -            -             -
Other income (expenses)                               -           (903)         (805)                       244
                                                  ---------------------------------------------------------------------
Net loss according to U.S. GAAP                   (1,827)       (6,046)       (2,045)      (654)         (3,143)
-----------------------------------------------------------------------------------------------------------------------
</Table>

                                       5
<Page>

          BALANCE SHEET DATA:
          (in thousands of U.S. Dollars)

<Table>
<Caption>
                                                       2002           2001           2000        1999           1998
                                                       ----           ----           ----        ----           ----
<S>                                                  <C>            <C>            <C>         <C>            <C>
Working capital                                       1,870            655          2,821       2,362          2,775
Total assets                                         10,565         12,485         15,609      14,261         14,740
Short-term credit including current maturities          849          1,160          1,837         700          1,278
Long-term liabilities, not including current            337          1,226            670       1,123            972
   maturities
Shareholders equity                                   4,246          3,779          6,355       6,810          7,005
Shareholders' equity according to U.S. GAAP           2,829          4,483          8,230      10,167         10,825
   (See Note 2)
</Table>

Note 2: Effect of material differences between Israeli GAAP and U.S. GAAP on the
        shareholders' equity

<Table>
<Caption>
                                                           Fiscal Year Ended December 31,
                                                           ------------------------------
                                                           2002       2001          2000         1999          1998
                                                           ----       ----          ----         ----          ----
     <S>                                                 <C>        <C>           <C>          <C>           <C>
     Shareholders' equity according to Israeli GAAP)     (4,246)    (3,779)       (6,355)      (6,810)       (7,005)
     Goodwill and technology                             (3,344)    (3,597)       (2,894)      (3,357)       (3,820)
     Deferred capital gain                                -          -            (903)         -             -
     Investment in Procognia                              4,761      -             -            -             -
     Minority interest                                    -          -            (555)         -             -
     Convertible debentures                               -            416         -            -             -
     Preferred shares in a subsidiary                     -          2,477         2,477        -             -
     Shareholders' equity according to U.S. GAAP)        (2,829)    (4,483)       (8,230)      (10,167)     (10,825)
</Table>

          B.   CAPITALIZATION AND INDEBTEDNESS

               Not Applicable.

          C.   REASON FOR THE OFFER AND USE OF PROCEEDS

               Not Applicable.

          D.   RISK FACTORS

     An investment in the Company's securities involves a high degree of risk.
Prospective investors should carefully consider the risks and uncertainties
described below and the other information in this report before deciding whether
to invest in the Company's ordinary shares. Additional risks and uncertainties
not presently known to the Company or that the Company currently deems
immaterial may also impair the Company's business operations. If any of the
following risks actually occur, the Company's business, financial condition and
operating results could be materially adversely affected. In

<Page>

such case, the trading price of the Company's ordinary shares could decline and
investors may lose part or all of their investments.

                     RISKS RELATED TO THE COMPANY'S BUSINESS

     THE COMPANY HAS SUSTAINED OPERATING LOSSES IN THE PAST, HAS AN ACCUMULATED
     DEFICIT AND MAY NOT GENERATE PROFITS FROM OPERATIONS IN THE FUTURE.

     For the year ended December 31, 2002, although the Company had net income
of $468 thousand, it had operating losses of approximately $729 thousand. For
the two fiscal years ended December 31, 2001, the Company had net losses of
approximately $3 million and $491 thousand, respectively.

     Such losses resulted principally from:

     -    expenses associated with the research, development, patenting and
          testing of the Company's products and technologies of approximately
          $912 thousand in fiscal 2002, $3.2 million in fiscal 2001 and $1.4
          million in fiscal 2000; and

     -    amortization of goodwill of approximately $471 thousand in fiscal
          2002, $246 thousand in fiscal 2001and $196 thousand in fiscal 2000.

     The Company may incur significant operating losses in the future as it
continues its research and development efforts, expands its marketing, sales and
distribution activities, develops strategies for competing with other
manufacturers, and scales up its research and development and manufacturing
capabilities. There can be no assurance that the Company will be able to
generate profits from operations in the future. As of December 31, 2002, the
Company's accumulated deficit was approximately $12 million.

     IF THE COMPANY CANNOT MAINTAIN ADEQUATE OPERATING CAPITAL, ITS BUSINESS
WILL SUFFER.

     At December 31, 2002, the Company had working capital of $ 1.9 million,
including cash of $1.1 million. The Company anticipates that these funds,
together with funds from operations, will be sufficient to meet its anticipated
cash requirements for 2003. For the fiscal year ended December 31, 2002, the
Company used net cash flows in operations of $251 thousand. Although the Company
currently believes that it will generate positive cash flow from operations in
fiscal 2003, it is possible that it will not succeed in doing so.

     Additional sources of liquidity for the Company in 2003 following the
Savyon transaction described under "Item 4 - Recent Developments" and thereafter
are the $1.2 million loaned by Dr. Lee. Moreover, the remaining $0.7 million of
the $1.9 million purchase price for Savyon's clinical diagnostics business are
to be paid to Pronto by Savyon 2003 in 35 consecutive monthly installments of
$20 thousand each.

     On a longer term basis, the Company's operations may not provide sufficient
internally generated cash flows to meet its projected requirements. The
Company's ability to continue to finance its operations, including the research,
development and introduction of new products and technologies, will depend on
its ability to achieve profitability by improving sales and margins, its ability
to reduce cash outflows and, if necessary, its ability to obtain other sources
of funding sufficient to support its operations. There can be no assurance that
such funding will be available on satisfactory terms or at all.

     Other than as described in Item 4. "Information on the Company -- A.
History and Development of the Company -- Recent Developments" below, the
Company has not yet explored whether any additional sources of capital will be
available. To the extent, if any, that the Company is able to obtain equity
capital from other sources, the issuance of more ordinary shares may dilute the
economic interests and will dilute the voting interests of current shareholders.
To the extent, if any, that the Company is able to obtain debt financing, the
terms of such financing may be expensive and may subject it to covenants that
materially restrict it.

                                     - 7 -
<Page>

     THE SUCCESS OF COMPETITIVE PRODUCTS COULD HAVE AN ADVERSE EFFECT ON THE
COMPANY'S BUSINESS.

     The medical products industry, including the medical diagnostic testing
industry, is rapidly evolving and intensely competitive and the Company's
customers have a wide variety of products and technologies from which to choose.

     Danyel Biotech's principal competitors in the distribution of reagents and
systems to the biotechnology market in Israel include: Biorad Israel, Ornat,
Agentek and Sigma Israel in the field of chromatography; Pharmatec (Tecan) and
Lumitron (Packard) in the field of advanced laboratory instrumentation
(fluorometers, counters); DeGroot, Geter and Baktalab in the field of
bio-plastics; and Eldan (NEN), Ornat and Sigma Israel in the field of molecular
biology and radiochemical products. Although the Company is not aware of any
published industry market share statistics, it estimates, based upon its
knowledge of the industry, that in fiscal 2002 Danyel accounted for a
significant portion of the Israeli distribution market for chromatography
products, bio-plastics and advanced laboratory instrumentation and a lesser
portion of the Israeli market for Danyel's other products.

     The Gamidor Group's principal competitors in the distribution of reagents
and systems to clinical laboratories in Israel include: Ilex (Abbott) and Dover
(J&J) for hematology products; Dyn Diagnostics (Roche) and Pharmtop (Sorin) for
immunology products; Ilex (Vitek) and Pharmtop (Sorin) for microbiology
products; Travenol (Nequas) for quality control products; and Dyn Diagnostics
(Roche) and Medtechnica (Olympus) for clinical chemistry products. Although the
Company is not aware of any published industry market share statistics, it
estimates, based upon its knowledge of the industry, that in fiscal 2002, the
Gamidor Group accounted for a significant portion of the Israeli hematology
products market and a lesser portion of the Israeli market for the Group's other
products.

     Savyon's serology test kits for chlamydia compete with serology tests
produced by companies such as Hitachi (Japan), Medac (Germany), Orgenics
(Israel), MRL (USA) and LabSystems (Finland). Savyon's SeroMP (microplasma
pneumoniae) products compete in the field of serology testing with products
produced by companies such as Fujirebio in Japan. The Company believes that
Savyon is a leader in the serological diagnosis of chlamydial infections. This
belief is based on a study conducted by Froste & Salive, which indicated that
Savyon supplied approximately 30% of the worldwide market for serology based
chlamydia diagnostic kits in 1999. The belief is further based on the fact that
the Company's sales in the worldwide serology based chlamydia market since 1999
have remained stable at approximately $2.4 million, $2.7 million and $2.5
million in 2000, 2001 and 2002 respectively and, to the best of Savyon's
knowledge from both current sales figures and a network of over 60 worldwide
distributors, the worldwide serology based chlamydia market has not undergone
any material changes since 1999, thereby leaving Savyon's market share
relatively unchanged. Savyon's remaining kits represent a much smaller portion
of the overall market for such products.

     The success of any competing alternative products to those the Company
provides could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company believes that its
competitors include companies that have substantially greater financial
capabilities for product development and marketing than it does and can
therefore market their products or procedures to the medical community in a more
effective manner. There is also a risk that the Company's competitors may
succeed in developing safer or more effective products that could render its
products obsolete or noncompetitive.

                                     - 8 -
<Page>

     THE COMPANY'S PATENTS MAY NOT PROTECT ITS PRODUCTS FROM COMPETITION.

     In the genetic field, the Company has six granted patents that it utilizes
in producing its products and four pending patent applications. The patents are
registered for methods of single nucleotide primer extension and kits therefor
of quick screening and identification of specific DNA sequences by single
nucleotide primer extension and kits therefore and of characterizing GC-rich
nucleic acid sequences. These methods relate to the Company's ProntoTM genetic
test products line. Three of the granted patents are registered in Israel, two
granted patents are registered in the United States and one granted patent is
registered in Europe (national phase). All of them expire during 2012 to 2014.
In addition, the Company has patent applications pending for these methods in
the USA, Japan, Canada (two pending applications).

     In the serologic field, the Company has four pending patent applications
regarding chlamydia trachomatis, specific peptides and their use in diagnostic
assays. These patents are used in the production of the Company's Sero CT
diagnostic test kit products. Three of the pending patent applications are
registered in the United States, Europe and Japan respectively and one patent
application is in an International Procedure (PCT).

     In both the genetic field and the serologic field, the Company has certain
other granted patents and applications for patents that are not utilized by it
for its products, will probably not be used in the future and, therefore, will
not be renewed.

     Although several patents have been issued to the Company, there can be no
assurance that any additional patents will be issued to the Company, or that any
patents that are issued to it will provide it with meaningful patent protection.
In addition, there can be no assurance that others will not successfully
challenge the validity or enforceability of any patent issued to the Company.
The costs required to uphold the validity and prevent infringement of any patent
issued to the Company could be substantial, and it might not have the resources
available to defend its patent rights.

     The risks and uncertainties that the Company faces with respect to its
patents and other proprietary rights include the following:

     -    the pending patent applications that the Company has filed or to which
          it has exclusive rights may not result in issued patents or may take
          longer than it expects to result in issued patents;

     -    the claims of any patents which are issued may be more limited than
          those in the Company's patent applications as filed and may not
          provide meaningful protection;

     -    the Company may not be able to develop additional proprietary
          technologies that are patentable;

     -    the patents licensed or issued to the Company may not provide a
          competitive advantage;

     -    other companies may challenge patents licensed or issued to the
          Company;

     -    patents issued to other companies may substantially impair the
          Company's ability to conduct its business;

     -    other companies may independently develop similar or alternative
          technologies or duplicate the Company's technologies;

     -    other companies may design around technologies the Company has
          licensed or developed; and

     -    certain countries such as the People's Republic of China, in which the
          Company may seek to sell its patented products in the future, may not
          protect its patent rights to the same extent as the United States and
          Israel.

     THE VALUE OF THE COMPANY'S PROPRIETARY TECHNOLOGY AND KNOW-HOW MAY DEPEND
     ON ITS ABILITY TO PROTECT TRADE SECRETS.

     The Company relies on trade secret protection for its confidential and
proprietary technology and know-how. The Company currently protects such
technology and know-how as trade secrets. The Company protects its trade secrets
through recognized practices, including access control, confidentiality
agreements with employees, consultants, collaborators and customers, and other
security measures. These confidentiality agreements may be breached, however,
and the Company may not have adequate remedies for any such breach. In addition,
the Company's trade secrets may otherwise become known to or be independently
developed by competitors.

                                     - 9 -
<Page>

     THE COMPANY MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES
     AND MAY BECOME INVOLVED IN EXPENSIVE INTELLECTUAL PROPERTY LITIGATION.

     The intellectual property rights of diagnostic and biotechnology companies,
including the Company, are generally uncertain and involve complex legal,
scientific and factual questions. The Company's success in these fields may
depend, in part, on its ability to operate without infringing on the
intellectual property rights of others and to prevent others from infringing on
the Company's intellectual property rights.

     Although the Company is not currently involved in any litigation related to
its patents or intellectual property, the Company may become party to patent
litigation or proceedings at the U.S. Patent and Trademark Office or a foreign
patent office to determine the Company's patent rights with respect to third
parties. Interference proceedings in the U.S. Patent and Trademark Office or
opposition proceedings in a foreign patent office may be necessary to establish
which party was the first to discover such intellectual property. The Company
may become involved in patent litigation against third parties to enforce the
Company's patent rights, to invalidate patents held by such third parties, or to
defend against such claims. The cost to the Company of any patent litigation or
similar proceeding could be substantial, and it may absorb significant
management time. If infringement litigation against the Company is resolved
unfavorably to the Company, it may be enjoined from manufacturing or selling
certain of its products or services without a license from a third party. The
Company may not be able to obtain such a license on commercially acceptable
terms, or at all.

     IF A PRODUCT THE COMPANY SELLS RESULTS IN INJURY TO A USER, THE COMPANY
     COULD BE SUBJECT TO PRODUCT LIABILITY EXPOSURE.

     The Company sells diagnostic products, which may involve product liability
risk. While the Company carries product liability insurance, there can be no
certainty that its coverage will be adequate to protect the Company against
future liability claims. In addition, product liability insurance is expensive
and there can be no certainty that this insurance will be available to the
Company in the future on terms satisfactory to it, if at all. A successful
product liability claim or series of claims brought against the Company in
excess of its insurance coverage could have a material adverse effect on its
business, financial condition and results of operations. The Company maintains
product liability coverage in the maximum amount of $2 million per case up to a
sum of $4 million per annum.

     IF THE COMPANY DOES NOT RECEIVE CERTAIN REGULATORY APPROVALS, IT WILL NOT
BE PERMITTED TO SELL ITS PRODUCTS.

     Certain of the products that the Company develops cannot be sold until the
U.S. Federal Drug Administration ("FDA") and corresponding regulatory
authorities of other jurisdictions approve the products for medical use. This
means that:

     -    the  Company  will  incur the  expense  and delay  inherent  in
          seeking FDA approval of new products;

     -    a product that is approved may be subject to restrictions on use;

     -    the FDA can recall or withdraw approval of a product if problems
          arise; and

     -    the Company will face similar regulatory issues in other countries,
          including countries of the European Union.

     The Company is currently seeking European Union marking approval for one
serological test kit and it intends to apply for European Union marketing
approval for four serological test kits. The Company currently anticipates
receiving marketing approvals for all of Savyon's products by the end of fiscal
2003, of which there can be no assurance.

     Currently, the Company does not have any pending applications for approvals
by the FDA.

     THE PRICE AND SALES OF THE COMPANY'S PRODUCTS MAY BE LIMITED BY HEALTH
INSURANCE COVERAGE AND GOVERNMENT REGULATION.

     The Company's success in selling its products may depend in part on the
extent to which health insurance companies, health maintenance organizations and
government health administration authorities, such as Medicare and Medicaid,
will reimburse end users for the cost of the products the Company provides. For
example, in Israel, in which the Company makes approximately 80% of its sales,
the reimbursement rates of third party health care reimbursement organizations
range widely from 100% of certain products such as the hematology kits: PT
Innovin, PTT Calcium and PTT Actin FS to nothing for other products such as the
genetic kits: Gaucher 6MUT 24T or Bloom/Fanconi 48T. Although customers are
required to pay the full price of the products regardless of whether or not they
are reimbursed for such costs,

                                     - 10 -
<Page>

the lack of reimbursement may reduce the demand for the Company's products.
There can be no assurance that adequate health insurance, health maintenance
organization and government coverage will be available to permit the Company's
products to be sold at prices high enough for it to generate a profit. In
certain countries, pricing or profitability of health care products is subject
to government control. In the United States, there have been a number of federal
and state proposals to implement similar government controls, and new proposals
are likely to be made in the future.

     THE COMPANY'S BUSINESS COULD BE ADVERSELY AFFECTED IF IT LOSES THE SERVICES
     OF THE KEY PERSONNEL UPON WHOM IT DEPENDS.

     The Company depends upon the efforts of its chairman, Mr. Daniel Kropf, and
of other senior executives, including Mr. Moshe Reuveni, Mr. Yacob Ofer, Mr.
Luly Gurevich and Dr. Martin Lee. Mr. Kropf does not have an employment
agreement. The Company's agreement for Mr. Reuveni's services is from January 1,
2003 and thereafter, subject to termination with three months' prior written
notice served by either party. Mr. Ofer has an employment agreement which may be
terminated upon six months prior written notice by either party. Mr. Gurevich
has an employment agreement which terminates in December 2003. Dr. Lee's
employment agreement with Savyon 2003 is subject to termination in the event
that he ceases to be a substantial shareholder of Savyon 2003 and under certain
other circumstances. Except for Dr. Lee, these executives are not covered by key
man life insurance policies.

     The Company also depends upon its research and development personnel.
Although the Company has been successful in attracting and retaining key
management and technical personnel in the past and is not aware that any such
personnel plan to leave the Company in the near future, the loss of any such key
personnel and the inability to successfully recruit and retain additional highly
skilled and experienced management and technical personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.

     THE COMPANY IS DEPENDENT UPON INDEPENDENT SALES AGENTS, DISTRIBUTORS AND
     DEALERS.

     The Company markets and sells its products in part through networks of
independent sales agents, distributors and dealers in certain countries. As a
result, in fiscal 2001 and 2002, approximately 22% and 21% respectively of the
Company's revenues were derived from the sales efforts of these sales agents,
distributors and dealers.

     Sales to the Company's distributors in France, BMD -- Biomedical
Diagnostics, and Germany, Hain Lifescience GMBH, accounted for approximately 4%
and 6%, respectively of the Company's annual sales in 2001 and 2002. The Company
has written distribution agreements with BMD and Hain that grants these
companies the exclusive right to distribute the Company's products in France and
Germany respectively for a period of one year, subject to automatic renewals
unless the Company or the distributor elects not to continue in either case.
These agreements do not require the distributors to purchase any minimum amounts
of the Company's products.

     The Company also relies on its distributors to assist the Company in
obtaining reimbursement and regulatory approvals in certain international
markets. There can be no assurance that the Company's sales agents, distributors
and dealers, some of which operate relatively small businesses, have the
financial stability to assure their continuing presence in their markets. The
inability of a sales agent, distributor or dealer to perform its obligations, or
the cessation of business by a sales agent, distributor or dealer, could
materially adversely affect the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be able
to engage or retain qualified sales agents, distributors or dealers in each
territory that it targets. The failure to engage or retain such sales agents,
distributors or dealers in these territories would have a material adverse
effect on the Company's business, financial condition and results of operations.

     A SIGNIFICANT PERCENTAGE OF TWO OF THE COMPANY'S SUBSIDIARIES' PRODUCTS ARE
     DEPENDENT ON CERTAIN PRINCIPAL SUPPLIERS

     During 2001 and 2002, purchases from one of Danyel's suppliers, Amersham
Pharmacia Biotech AB ("Amersham"), accounted for 24% and 26% respectively, of
the Company's annual cost of sales. In addition, during 2001 and 2002, purchases
from one of the Gamidor Group's suppliers, Dade Behring, accounted for 12% and
13% respectively of the Company's annual cost of sales. A failure of such
suppliers to continue to supply products to the Company will adversely affect
its business and financial results.

     In general, Danyel's agreement with Amersham appoints Danyel as the
exclusive distributor in Israel and certain related areas for Amersham's
products and services in the field of applied genomics, cell biology and
separation, subject to Danyel meeting certain minimum sales requirements. The
agreement has an initial five year term ending December 31, 2003,

                                     - 11 -
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and is subject to automatic renewal for successive three year periods unless
either party elects to terminate the agreement upon not less than 12 months'
notice prior to the expiration of the current term. No such termination notice
has been give by either party. The Agreement may be terminated by Amersham for,
among other reasons Danyel's failure to meet the minimum sales requirements.

     Effective as of January 2002, Amersham assigned its rights and obligations
under the agreement to a third party subdistributor which has entered into an
agreement with Danyel pursuant to which the subdistributor has agreed to honor
Amersham's obligations to Danyel under the agreement for so long as the
subdistributor continues to serve as such for Amersham.

     In general, Gamidor's agreement with Dade Behring appoints Gamidor as the
exclusive distributor in Israel and certain related areas for certain of Dade
Behring's diagnostic products, subject to Gamidor meeting certain minimum sales
requirements. The agreement has an initial four year term ending October 31,
2003 and has been renewed for a further term ending October 31, 2006. The
agreement may be terminated by Dade Behring if, among other reasons, Gamidor
fails to meet the minimum sales requirements.

     In addition, certain other products distributed by the Company are obtained
from a limited group of suppliers. The Company has no written agreements with
some of these suppliers. The Company's reliance on a limited group of suppliers
involves several risks, including a potential inability to obtain adequate
supplies of certain products and reduced control over pricing and timely
delivery of products. Although the Company believes that additional sources of
supply are available, should one or more of such suppliers be unable to meet the
Company's needs, there can be no assurance that supplies will be available on
terms acceptable to the Company, or at all, and there can be no assurance as to
the extent of delays which may be caused upon replacing such suppliers. An
inability to obtain or significant delay in obtaining such products could have a
material adverse effect on the Company.

     SALES TO ONE CUSTOMER ACCOUNT FOR A SIGNIFICANT PORTION OF THE COMPANY'S
     SALES AND THE LOSS OF THIS CUSTOMER COULD HAVE A MATERIAL ADVERSE AFFECT ON
     THE COMPANY'S BUSINESS AND FINANCIAL RESULTS

     Sales to the Maccabi Sick Fund ("Maccabi") in Israel accounted for 7% of
the Company's annual sales during 2001, and 6% of such sales in 2002. The
Company has a number of written agreements with Maccabi covering different
products. Under these agreements, the Company has undertaken to charge Maccabi a
fixed price for various products over a period of three to five years, provided
that Maccabi purchases certain minimum quantities of such products from the
Company. These agreements may be terminated by Maccabi at any time upon 30 days
written notice to the Company. In addition, the Company has agreed to supply
Maccabi with certain laboratory instrumentation on which the Company's products
are used, which becomes the property of Maccabi at the end of a three or five
year period so long as Maccabi has purchased the applicable minimum amount of
products during this period.

     THE COMPANY MAY NEED STRATEGIC PARTNERS TO BE SUCCESSFUL.

     The Company anticipates that it may be necessary to enter into arrangements
with corporate partners, licensees or others, in order to efficiently market,
sell and distribute its products. These strategic partners may also be called
upon to assist in the support of the Company's products, including participation
in certain product development functions. As a result, the Company's success may
be dependent in part upon the efforts of these third parties. There can be no
assurance that the Company will be able to negotiate additional acceptable
arrangements with strategic partners or that the Company will realize any
meaningful revenues pursuant to these arrangements.

     USE OF GENOMIC INFORMATION TO DEVELOP OR COMMERCIALIZE PRODUCTS IS
     UNPROVEN.

     The development of new treatment and the diagnosis of disease based on
genomic information is unproven. The business strategy of Savyon is based in
part on the assumption that identifying and characterizing genes and sequencing
select human genes and the genomes of select pathogens may help scientists to
better understand complex disease processes and develop treatment for these
diseases. There is limited understanding of the roles of genes in diseases. Few
therapeutic vaccine or diagnostic products based on genomic information have
been developed or commercialized. If Savyon fails to identify genes useful for
the discovery and development of such products, or if strategic partners are
unable to use the genomic information that Savyon provides to them to develop
such products, Savyon's current and potential customers in the field may lose
confidence in its products and the Company's business may suffer as a result.

                                     - 12 -
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     THE GENOMICS INDUSTRY IS INTENSELY COMPETITIVE AND EVOLVING.

     There is intense competition among entities attempting to sequence segments
of the human genome to identify genes associated with specific diseases and to
develop products and services based on these discoveries. Savyon has developed a
patented molecular biology- based technology that enables the mass screening of
genetic materials for mutations. Based on this technology, Savyon has developed
over 15 diagnostic kits for carrier screening, pre-natal diagnosis, and
predisposition screening of mutation carriers for a variety of genetic defects.

     Savyon's competitors in the field of genetic diagnostic tests have
developed competing technologies for the screening of genetic materials for
mutations. These competitors include many large and medium sized multi-national
corporations, including Innogenetics, Third Wave Technologies, Myriad Genetics,
Affymetrix, Orchid BioSciences and Roche. Savyon's indirect competitors in this
field include numerous small scale laboratories. Although the Company is not
aware of any published industry market share statistics, the Company estimates,
based upon its knowledge of the industry, that Savyon's market share in this
field represents a very small portion of the total market other than the Israeli
market for genetic predisposition tests for gaucher and cystic fibrosis, for
which Savyon does have a significant share of the market.

     Many of Savyon's competitors have substantially greater capital resources,
sequencing capabilities, research and developmental staffs, facilities,
manufacturing and marketing experience, distribution channels and human
resources than it. These competitors may discover, characterize or develop
important genes, treatment targets or leads, treatment discovery technologies or
treatments before Savyon or its customers or which are more effective than those
developed by Savyon or its customers, or may obtain regulatory approvals of
their treatments more rapidly than Savyon's customers do, or may develop
techniques for genomic-based treatment discovery that are superior to those
Savyon is developing and render its technologies non-competitive or obsolete
even before they generate revenue, any of which could have a material adverse
effect on any of the Company's similar programs. Moreover, these competitors may
obtain patent protection or other intellectual property rights that would limit
Savyon's rights or the Company's customers' ability to use the Company's
products to commercialize therapeutic, diagnostic or vaccine products.

     Savyon faces rapid technological change in the genomics-based diagnostic
industry. This could result in the development of technologies by others for use
in diagnostics and pharmacogenetics, which will be superior to Savyon's existing
or future technologies.

     FUTURE ACQUISITIONS MAY ABSORB SIGNIFICANT RESOURCES AND MAY BE
     UNSUCCESSFUL.

     As part of the Company's strategy, it may pursue acquisitions, investments
and other relationships and alliances. Acquisitions may involve significant cash
expenditures, debt incurrence, additional operating losses, dilutive issuances
of equity securities, and expenses that could have a material adverse effect on
the Company's financial condition and results of operations. For example, to the
extent that the Company elects to pay the purchase price for such acquisitions
in ordinary shares, the issuance of additional shares will be dilutive to the
Company's shareholders. Acquisitions involve numerous other risks, including:

     -    difficulties integrating acquired technologies and personnel into the
          Company's business;

     -    diversion of management from daily operations;

     -    inability to obtain required financing on favorable terms;

     -    entering new markets in which the Company has little or no previous
          experience;

     -    potential loss of key employees or customers of acquired companies;

     -    assumption of the liabilities and exposure to unforeseen liabilities
          of acquired companies; and

     -    amortization of the intangible assets of the acquired companies.

     It may be difficult for the Company to complete these types of transactions
quickly and to integrate the businesses efficiently into its current business.
Any acquisitions or investments by the Company may ultimately have a negative
impact on its business and financial condition.

                                     - 13 -
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                     RISKS RELATING TO OPERATIONS IN ISRAEL

     THE COMPANY HAS IMPORTANT FACILITIES AND RESOURCES LOCATED IN ISRAEL, WHICH
     HAS HISTORICALLY EXPERIENCED MILITARY AND POLITICAL UNREST.

     The Company is incorporated under the laws of the State of Israel. The
Company's principal research and development and manufacturing facilities are
located in Israel and approximately 80% of the Company's revenues are derived
from sales made in Israel. As a result, the Company is directly influenced by
the political, economic and military conditions affecting Israel. Any major
hostilities involving Israel, or the interruption or curtailment of trade
between Israel and its present trading partners, could significantly harm the
Company's business, operating results and financial condition.

     Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and, since
September 2000, involving the Palestinian population, and a state of hostility,
varying in degree and intensity, has led to security and economic problems for
Israel and companies based in Israel. Acts of random terrorism periodically
occur which could affect the Company's operations or personnel. In addition,
Israel, Israeli-based companies and companies doing business with Israel, have
been the subject of an economic boycott by members of the Arab League and
certain other predominantly Muslim countries since Israel's establishment.
Although Israel has entered into various agreements with certain Arab countries
and the Palestinian Authority, and various declarations have been signed in
connection with efforts to resolve some of the economic and political problems
in the Middle East, the Company cannot predict whether or in what manner these
problems will be resolved. Also, since the end of September 2000, there has been
a marked increase in the level of terrorism in Israel, which has significantly
damaged both the Israeli economy and levels of foreign and local investment.

     In addition, certain of the Company's officers and employees are currently
obligated to perform annual reserve duty in the Israel Defense Forces and are
subject to being called up for active military duty at any time. All Israeli
male citizens who have served in the army are subject to an obligation to
perform reserve duty until they are between 45 and 54 years old, depending upon
the nature of their military service. The Company has operated effectively under
these requirements since its inception. The Company cannot predict the effect of
such obligations in the future, however.

     EXCHANGE RATE FLUCTUATIONS AND INFLATION IN ISRAEL COULD ADVERSELY IMPACT
     THE COMPANY'S FINANCIAL RESULTS.

     Exchange rate fluctuations and inflation in Israel could adversely impact
the Company's financial results. During the calendar years 2000, 2001 and 2002,
the annual rate of inflation was approximately 0%, 1.4% and 6.5% respectively,
while the NIS was devalued (appreciated) against the U.S. Dollar by
approximately -(2.7)%, 9.3% and 7.3% respectively. Consequently, during the
calendar years 2000, 2001 and 2002, the annual rate of inflation as adjusted for
devaluation (appreciation) was approximately (2.7)%, 10.7% and 13.8%
respectively.

     A substantial part of the Company's third party product distribution
activities are conducted by its subsidiaries, the Gamidor Group and Danyel. The
Gamidor Group's and Danyel's sales are quoted in NIS; however, their selling
prices are based upon a price list which is quoted in the suppliers' original
currencies, mainly Euros and U.S. Dollars. The price is then converted into NIS
at the relevant exchange rate on the date of sale to the customer. This enables
the Gamidor Group and Danyel to reduce exposure to losses from devaluations of
the NIS in relation to such foreign currencies. The Gamidor Group's and Danyel's
accounts receivables are, however, quoted in non-linked NIS and, consequently,
inflation in Israel would have the effect of increasing their financial
expenses.

     In addition, the Gamidor Group's and Danyel's accounts payable are mainly
quoted in such foreign currencies and, consequently, any excess of a devaluation
rate in the NIS in relation to such currencies over the inflation rate in Israel
would have the effect of increasing the Company's financial expenses. Because
the exchange rates between the NIS and the Yen, Euro, Swiss Franc and U.S.
Dollar fluctuate continuously, exchange rate fluctuations and especially larger
periodic devaluations have an impact on the Company's profitability and
period-to-period comparisons of the Company's results in U.S. Dollars.

     The Company's consolidated results of operations are, therefore, affected
by several interrelated factors, including the rate of inflation in Israel, the
devaluation of the NIS in relation to the primary foreign currencies relevant to
the Company, including the U.S. Dollar the devaluation of relevant foreign
currencies in relation to the U.S. Dollar and, the extent to which the Company
holds assets and liabilities in foreign currencies. Similarly, the relationship
between the Company's monetary assets and liabilities in U.S. Dollars and NIS
and whether these are linked to foreign currencies or price indices also affect
financial results.

                                     - 14 -
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     PROVISIONS OF ISRAELI LAW MAY DELAY, PREVENT OR MAKE DIFFICULT AN
     ACQUISITION OF THE COMPANY, WHICH COULD PREVENT A CHANGE OF CONTROL AND
     THEREFORE DEPRESS THE PRICE OF THE COMPANY'S SHARES.

     Certain provisions of Israeli corporate and tax law may have the effect of
delaying, preventing or making more difficult a merger or other acquisition of
the Company. The new Israeli Companies Law, which governs Israeli corporations,
does not contain provisions that deal specifically with a merger that allows for
the elimination of minority shareholders. Various provisions that deal with
"arrangements" between a company and its shareholders have been used, however,
to effect squeeze-out mergers. These generally require that the merger be
approved by at least 75 percent of the shareholders present and voting on the
proposed merger, at a shareholders' meeting that has been called on at least 21
days' advance notice. In addition to shareholder approval, court approval of the
merger may be required, which entails further delay and the need to obtain a
discretionary approval. Moreover, a merger may not be completed unless at least
70 days have passed from the time that the requisite approvals of the merger by
each of the merging entities have been filed with the Israeli Registrar of
Companies. Alternatively, the acquirer can cause minority shareholders to sell
their shares if it acquires at least 90 percent of all outstanding shares
(excluding shares held by the acquirer prior to the acquisition) and none of the
minority shareholders successfully seeks to block the acquisition in court.

     The new Israeli Companies Law also provides that an acquisition of shares
in a public company must be made by means of a tender offer if, as a result of
the acquisition, the purchaser would become a 25% shareholder of the company.
This rule does not apply if there is already another 25% shareholder of the
company. Similarly, the new Israeli Companies Law provides that an acquisition
of shares in a public company must be made by means of a tender offer if, as a
result of the acquisition, the purchaser would become a 45% shareholder of the
company. Here too there is an exception, if someone else is already a 50%
shareholder of the company. These rules do not apply if the acquisition is made
by way of a merger as opposed to a tender offer. Regulations promulgated under
the Companies Law provide that these tender offer requirements do not apply to
companies whose shares are listed for trading outside Israel if, according to
the law of the country in which the shares are traded, including the rules and
regulations of the stock exchange on which the shares are traded, there is
either a limitation on acquisition of any level of control of the company, or
the acquisition of any level of control requires the purchaser to do so by means
of a tender offer to the public. However, under the Companies Law, if following
any acquisition of shares the acquirer holds 90% or more of the company's shares
or of a class of shares, the acquisition must be made by means of a tender offer
for all of the target company's shares or all the shares of the class, as
applicable. An acquirer who wishes to eliminate all minority shareholders must
do so by way of a tender offer and acquire 95% of all shares not held by or for
the benefit of the acquirer prior to the acquisition. If, however, the tender
offer to acquire 95% is not successful, the acquirer may not acquire shares
tendered if, by doing so, the acquirer would own more than 90% of the shares of
the target company.

     Finally, Israeli tax law treats certain acquisitions, particularly
share-for-share swaps between an Israeli company and a non-Israeli company, less
favorably than United States tax law. Israeli tax law may, for instance, subject
a shareholder who exchanges his shares in Healthcare for shares in a non-Israeli
corporation to immediate taxation.

                 RISKS RELATED TO THE COMPANY'S ORDINARY SHARES

     THE COMPANY'S SHARES PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH
     COULD RESULT IN SUBSTANTIAL LOSSES FOR INDIVIDUAL SHAREHOLDERS.

     The market price of the Company's ordinary shares ranged between a high
sales price of $0.68 and a low sales price of $0.20 during 2002 and may continue
to be highly volatile and subject to wide fluctuations in response to factors
including the following, some of which are beyond the Company's control:

     -    actual or anticipated variations in the Company's quarterly operating
          results;

     -    announcements of technological innovations or new products or services
          or new pricing practices by the Company or its competitors;

     -    changes in United States and other countries' government regulations
          relating to approval of the Company's products;

     -    results of regulatory inspections;

     -    the status of patents and proprietary rights relevant to the Company's
          products that are developed by the Company or its competitors;

     -    increased market share penetration by the Company's competitors;

                                     - 15 -
<Page>

     -    announcements by the Company or its competitors of significant
          acquisitions, strategic partnerships, joint ventures or capital
          commitments;

     -    additions or departures of key personnel; and

     -    sales of additional ordinary shares.

     In addition, the stock market in general, and stocks of medical technology
companies in particular, have from time to time experienced extreme price and
volume fluctuations. This volatility is often unrelated or disproportionate to
the operating performance of these companies. These broad market fluctuations
may adversely affect the market price of the Company's ordinary shares,
regardless of the Company's actual operating performance.

     AN INVESTOR SHOULD NOT RELY ON AN INVESTMENT IN THE COMPANY IF SUCH
     INVESTOR REQUIRES DIVIDEND INCOME; THE ONLY RETURN THAT SUCH INVESTOR MAY
     RECEIVE MAY COME FROM THE APPRECIATION, IF ANY, IN THE VALUE OF THE
     COMPANY'S ORDINARY SHARES.

     The Company has not paid cash dividends on its ordinary shares in the past
and has no plans to pay such dividends in the future. However, the Company does
not rule out the possibility of paying such dividends in the future in the
appropriate circumstances. An investor should not rely on an investment in the
Company if such investor requires dividend income; the only return that such
investor may receive may come from the appreciation, if any, in the value of the
Company's ordinary shares. In determining whether to pay dividends, the
Company's board of directors will consider many factors, including its earnings,
capital requirements and financial condition. In addition, under Israeli law,
the Company may only pay cash dividends in any fiscal year from its profits, if
any, as calculated under Israeli law.

     CONTROLLING SHAREHOLDERS CAN LIMIT SHAREHOLDERS' ABILITY TO INFLUENCE THE
     OUTCOME OF MATTERS REQUIRING SHAREHOLDER APPROVAL AND COULD DISCOURAGE
     POTENTIAL ACQUISITIONS OF THE COMPANY'S BUSINESS BY THIRD PARTIES; PLEDGE
     OF SHARES.

     Gamida, the Company's principal shareholder, holds 3,891,259 shares or
approximately 51% of the Company's voting securities. As a result, Gamida has a
controlling interest over all matters, excluding related party transactions
requiring approval by shareholders, including the election or removal of
directors and the approval of mergers or other business combination
transactions.

     In May and June 2002, Gamida pledged its shares in the Company to United
Mizrahi Bank as security for a loan from the Bank to Gamida. In general, the
pledge agreement grants Gamida the right to direct the voting of the pledged
shares, except to the extent that the Bank determines in its reasonable
discretion that a matter to be voted on would impair the value of the pledged
shares. Upon the occurrence of a default, the Bank has the right to dispose of
the shares, subject to complying with the terms of the pledge agreement.

     THE SALE OF RESTRICTED SHARES COULD CAUSE THE MARKET PRICE OF THE COMPANY'S
     ORDINARY SHARES TO DROP SIGNIFICANTLY.

     Most of the ordinary shares beneficially owned by the Company's management
and directors and their affiliates, aggregating approximately 5 million shares,
are restricted securities under federal law. They may be sold, but are subject
to certain volume and other restrictions. The Company cannot estimate the number
of these shares that may be sold in the future or the effect that their sale may
have on the market price of the ordinary shares. However, it could drop
significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them, even if the Company's
business is doing well.

     The Company has agreed to register for resale by Gamida the 3,891,259
ordinary shares owned by it. This registration will also cover resales of these
securities by United Mizrahi Bank in the event that the Bank exercises its right
to dispose of these shares following a default by Gamida on its loan. Once the
registration statement is effective, these shares may be resold without the
volume restriction to which they are currently subject.

                                     - 16 -
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     THE MARKET PRICE OF THE COMPANY'S SHARES COULD DECLINE IF IT DOES NOT MEET
     THE REQUIREMENTS FOR CONTINUED LISTING ON NASDAQ.

     The Company's ordinary shares are traded on the NASDAQ SmallCap Market,
which has adopted rules that establish criteria for initial and continued
listing of securities. The Company currently meets the criteria for continued
listing of its securities on the NASDAQ SmallCap Market. If the Company's
ordinary shares are delisted from the NASDAQ SmallCap Market, trading in its
ordinary shares could be conducted on an electronic bulletin board established
for securities that do not meet the NASDAQ listing requirements. If the
Company's ordinary shares were delisted from the NASDAQ SmallCap Market, it
would be subject to the so-called penny stock rules that impose restrictive
sales practice requirements on broker-dealers who sell those securities.
Consequently, de-listing, if it occurred, could affect the ability of
shareholders to sell their ordinary shares in the secondary market. The
restrictions applicable to shares that are de-listed, as well as the lack of
liquidity for shares that are traded on an electronic bulletin board, may
adversely affect the market price of such shares. For information concerning the
recent trading history of the Company's ordinary shares, see Item 9. "The Offer
and Listing - A. Offer and Listing Details".

Item 4.   INFORMATION ON THE COMPANY

          A.   HISTORY AND DEVELOPMENT OF THE COMPANY

GENERAL

     The Company is an Israeli public company that is subject to the Israeli
Companies Law, 1999 (the "Companies Law") and the Israeli Companies Ordinance -
1983 ("the Companies Ordinance").

     The Company's principal executive offices are located at 3 Habosem Street,
Kiryat Minrav, Ashdod 77610, Israel (tel. no. 011-972-8856-2920).

IMPORTANT EVENTS IN THE DEVELOPMENT OF THE COMPANY'S BUSINESS

     The Company was incorporated in May 1988 under the name "Istec Healthcare
Technologies Ltd." and changed its name to "Healthcare Technologies Ltd." in
December 1988.

     In March 1989, the Company completed an initial public offering of ordinary
shares and share purchase warrants in the United States and listed its
securities on the NASDAQ SmallCap Market.

     In April 1991, the Company acquired Diatech Diagnostica Inc., a Delaware
Corporation ("DDI"), and its wholly-owned Israeli subsidiary, Diatech
Diagnostica Ltd. ("Diatech Israel"), a medical diagnostic kits manufacturer.

     In October 1991, the Company consolidated the operations of Diatech Israel
with those of the Company's subsidiary Savyon.

     In March 1993, the Company established a 51% indirectly-owned Israeli
subsidiary, Savyon Yaron Diagnostics Marketing Ltd. ("Savyon Yaron"), in order
to distribute medical diagnostic products produced by the Company and by other
manufacturers. The Company's 51% interest was issued to Savyon, the other 49% of
the shares being held by Yaron Chemicals Ltd. Savyon transferred its entire 51%
shareholding to Gamidor Diagnostics for nil consideration in October 2000. Then,
in July 2001, Gamidor Diagnostics acquired the whole of Yaron Chemicals Ltd.'s
49% interest, again for nil consideration. Gamidor Diagnostics has since
undertaken the business of Savyon Yaron, which as a result has become a dormant
company.

     In June 1993, the Company acquired Immunotech Corp. ("Immunotech"), a
privately-owned medical diagnostic kits manufacturer located in Boston,
Massachusetts. The Company subsequently changed the corporate name of Immunotech
to Diatech Diagnostics Inc. ("Diatech Inc.").

     In January 1995, the Company acquired 50% of Gamidor Limited, a United
Kingdom company ("Gamidor UK") engaged in the distribution and marketing of
medical diagnostic products and laboratory systems and equipment. The remaining
shares of Gamidor UK were owned by Gamida Trading Limited (formerly Eryphile
Trading Ltd.), an affiliate of Gamida.

                                     - 17 -
<Page>

     In April 1997, the Company acquired Gamida-Gen Marketing (1979) Ltd. (at
the time of acquisition known as Gamidor Ltd.), an Israeli private company
engaged in providing products and services to clinical laboratories and in the
molecular biology field in Israel.

     Effective February 1998, the Company completed a one-for-four share
consolidation of its ordinary shares.

     In June 1998, the Company sold the majority of Diatech Inc.'s medical
diagnostic product lines to an Irish company and subsequently discontinued
Diatech Inc.'s operations. Diatech Inc. was dissolved effective December 31,
1998.

     In December 1998, the Company transferred all of its shares of Gamidor UK
to the Company's principal shareholder Gamida and acquired one half of Gamidor
UK's remaining shareholding in Gamidor Diagnostics Limited ("Gamidor Diagnostics
UK"), formerly one of Gamidor UK's wholly-owned subsidiaries, but by that time
owned as to 52% by an unaffiliated third party (the "Purchaser"). Such
shareholding was subject to put and call options in favour of the Company and
the Purchaser respectively, and the Purchaser has since exercised such call
options in full.

     In January 1999, the Company established Danyel, an Israeli company engaged
in the marketing and distribution to biotechnology researchers in Israel of
products in the fields of applied genomics and cell biology and separation. As
part of the establishment process, the Company sold fixed assets and inventory
to Danyel for a purchase price of approximately $125 thousand, which represents
the book value of the assets transferred as of January 1, 1999. The Company had
no capital expenditures in the establishment of Danyel. The Company owns 80% of
Danyel and the balance is owned by its general manager (through a company under
his control).

     As of December 1999, the assets of Diatech Israel were transferred and
assigned to Savyon, whereby Savyon acquired and assumed all the current
undertakings, services and assets of Diatech Israel and approved a share sale
and assignment agreement between DDI and the Company whereby DDI transferred its
holding in Diatech Israel to the Company. The Company's board simultaneously
approved the liquidation of DDI, due to its effectively being an inactive
company.

     In January 2001, the Company acquired all of the issued and outstanding
shares of GamidaGen Ltd. ("GamidaGen"), formerly controlled by Gamida (see Item
7 below), in consideration for the issuance of 1,000,000 of the Company's
ordinary shares to the shareholders of GamidaGen. GamidaGen's aggregate
outstanding debts to third parties (including banks) amounted to approximately
$0.7 million, in addition to approximately $0.3 million owed to the Company. As
part of the acquisition the Company agreed, subject to certain conditions, which
have not yet materialized, to guarantee $275,000 of GamidaGen's obligations to
an Israeli bank included in the above sum of third party debts.

     The Company transferred all of the GamidaGen shares to Savyon. The purpose
of this transfer was to consolidate the operations of the two companies in order
to achieve operating efficiencies by combining the facilities and the
administrative, sales and research and development personnel of the two
companies. Both companies legally merged as of December 31, 2001, such merger
still being subject to the approval of the Israeli tax authorities and Companies
Registrar (see above - "Introduction").

     During October 2001, following the approval of the Company's annual meeting
of shareholders, the Company issued 2,000,000 additional ordinary shares to
Gamida by means of a private placement. The proceeds amounted to $1.58 million.

In 2002, the Company filed a registration statement in the United States to
register shares held by Gamida, as part of the pledge to the United Mizrahi bank
(see above - "D. Risk factors - Risks Related To The Company's Ordinary Shares")
as well as shares issued to the remaining shareholders of Gamida Gen. For
additional information concerning important events in the development of the
Company's business, see Item 7. "Major Shareholders and Related Party
Transactions - B. Related Party and Inter-Company Transactions."

RECENT DEVELOPMENTS

     PROCOGNIA FINANCING

     In January 2000, the Company established Procognia (Israel) (formerly known
as Glycodata) with an initial investment of $600,000, and subsequently
transferred the Company's glycobiology research and development project into

                                     - 18 -
<Page>

Procognia (Israel). During the second half of 2000, Procognia (Israel) effected
a private placement of its equity securities to unaffiliated third party
investors, raising an aggregate of $2,500,000, payable in installments, for
approximately 28.14% of the share capital of Procognia (Israel) (allotted as
2,500,000 preferred shares). At the end of 2001, the third party investors
granted convertible loans amounting to $2 million.

In April 2002, Procognia Israel secured $14.3 million in a second round of
financing, of which $1.25 million was through the conversion of existing
shareholders' loans. $0.75 million of this financing was used to repay further
such shareholders' loans. For the purposes of this financing, a newly organized
company registered in England, Procognia Ltd., acquired 100% ownership of
Procognia (Israel), in consideration for which the Company, as well as another
existing Procognia (Israel) shareholder, received ordinary shares of Procognia
in exchange for their Procognia (Israel) shares, while the subsequent investors
received preferred shares carrying certain dividend and liquidation preferences
and veto rights. Following the April 2002 financing, various funds managed by
Apax Partners Europe became the principal shareholders of Procognia owning in
the aggregate approximately 37% of Procognia's share capital.

During December 2002, Procognia entered into an agreement to acquire another
company, Sense Proteomic Ltd., in a share exchange transaction. In connection
with this acquisition, Procognia completed a $4 million round of financing from
certain of its shareholders other than Healthcare. Following the completion of
these transactions, the Company's ownership interest in Procognia decreased from
14.4% to 11.5%, on a fully diluted basis. Healthcare has the right to nominate
one of Procognia's seven directors.

As a result of such financing of Procognia, Healthcare recorded a capital gain
for the second quarter of fiscal 2002 of approximately $1.4 million.

ESTABLISHMENT OF SAVYON 2003

     On December 31, 2002, the Company and Pronto entered into an agreement with
Dr. Martin Lee, to establish Savyon Diagnostic Products (2003) Ltd. or "Savyon
2003", a newly organized Israeli company, for acquiring Pronto's clinical
laboratory diagnostics business for a purchase price of approximately $1.9
million. In January 2003, Savyon changed its name to "Pronto Diagnostics Ltd."
and Savyon 2003 changed its name to "Savyon Diagnostics Ltd." Pronto continues
to own and operate its clinical laboratory genetic diagnostics business.

     The Company and Dr. Lee respectively own fifty percent of the newly
organized company. Each of them has the right to appoint three members of the
board of directors of this company. Dr. Lee is the chief executive officer and
Mr. Daniel Kropf is the chairman of the board.

     The purchase price is payable as follows: $770,000 was paid during January
2003, $430,000 was paid on April 15, 2003 and the remaining $700,000 is being
paid in 35 monthly installments of $20,000 each.

     In connection with the transaction, Dr. Lee agreed to loan Savyon 2003 $1.2
million to be used to pay a portion of the $1.9 million purchase price to
Pronto. These funds were in fact loaned to Savyon 2003 by Dr. Lee and have been
received by Savyon in partial payment of such purchase price. The loan bears an
interest rate of libor plus 1.75% and has no fixed repayment date. Dr. Lee was
not a related party at the time of the transaction and therefore the Company has
consequently treated the loan as a net cash flow from financial operations.

     The purchase agreement provides for certain buy and sell provisions, rights
of first refusal and co-sale rights with respect to the shares of the new
company. The agreement also provides that the new company will provide certain
manufacturing services to the Company.

     Effective as of January 1, 2003, the results of Savyon 2003 are included in
the Company's consolidated financial statements on a proportionate consolidation
basis. The excess of the purchase price over the book value of the assets and
knowhow that were transferred to Savyon 2003 amounted to approximately $268
thousand and was recorded as additional paid in capital.

                                     - 19 -
<Page>

PRINCIPAL CAPITAL EXPENDITURES AND DIVESTITURES

The following is a table of the Company's principal capital expenditures for the
last three years.

<Table>
<Caption>
                          in thousands of U.S. Dollars
                          ----------------------------
                                          2002            2001             2000
                                          ----            ----             ----
<S>                                        <C>             <C>            <C>
Fixed Assets                               840             834              989
Patents, know-how, trademarks               38              40              131
                                          ----            ----            -----
Total                                      840             834            1,120
                                          ====            ====            =====
</Table>

     For information concerning material acquisitions and divestitures of
business interests by the Company since the beginning of fiscal 2000, see Item
4. "Information On The Company - A. History and Development of the Company -
Recent Developments" and Item 7. "Major Shareholders and Related Party
Transactions".

          B.   BUSINESS OVERVIEW

GENERAL

     The Company specializes in the development, manufacture and marketing of
clinical diagnostic test kits and provides services and tools to diagnostic and
biotech research professionals in laboratory and point of care sites in Israel
and worldwide. The Company is also engaged in the production and marketing of
molecular biology based gene screening tools for the detection of certain
gene-associated disorders in humans, including prenatal testing for diseases
such as cystic fibrosis, gaucher and other diseases that are prevalent in the
Jewish population, and testing for predisposition to diseases such as breast,
ovarian and colon cancer, thrombosis and certain cardiovascular diseases.

     In addition, through the Company's investment in Procognia (Israel), the
Company has been involved in the design of glycobiology-based tools for
treatment discovery and development and bioinformatics.

     The Company distributes its own products as well as products from other
manufacturers, including some of the leading in vitro diagnostics and scientific
companies in the world (such as Dade- Behring and Amersham), which enhances the
Company's international commercial contacts and access to marketing know-how and
expertise. The Company also believes it is well placed in Israel's scientific
community, particularly in the biotechnology sector, which allows for
opportunities to participate in investment and scientific cooperation with
others seeking commercial implementations for their technological achievements.

     By being both a developer and distributor of products, the Company believes
it is well situated to gain an understanding of the needs of the market. The
Company further believes that this position also creates opportunities for
strategic partnerships in marketing and joint manufacturing. The Company remains
focused on streamlining and consolidating its business operations in Israel.

     As a result of its vertical integration, the Company is able to develop new
products based on market needs identified by the Company's in-field sales force,
test the release of new products in Israel and internationally, commercially
manufacture such products in highly regulated production facilities and then
market the products worldwide using its international network of distributors.
The Company believes that this approach makes it attractive to third parties in
need of diagnostic test marketing and distribution, as well as to third parties
in need of contract research and development and/or manufacturing services.

     On December 31, 2002, the Company and Pronto entered into an agreement with
Dr. Martin Lee to establish Savyon 2003, a newly organized Israeli company, to
acquire Pronto's clinical laboratory diagnostics business. The Company and Dr.
Lee each own fifty percent of Savyon 2003, and Dr. Lee has been appointed as its
chief executive officer. In January 2003, Savyon changed its name to "Pronto
Diagnostics Ltd." and Savyon 2003 changed its name to "Savyon Diagnostics Ltd."
See Item 4 - "Information on the Company --A. History and Development of the
Company--Recent Developments."

                                     - 20 -
<Page>


MANUFACTURING - SAVYON - www.savyondiagnostics.com



     The manufacturing activities of the Company are primarily conducted by
Savyon.

     The Company believes that Savyon is a leader in the serological diagnosis
of chlamydial infections. This belief is based on study conducted by Froste &
Salive, which indicated that Savyon supplied approximately 30% of the worldwide
market for serology based chlamydia diagnostic kits in 1999." The belief is
further based on the fact that the Company's sales in the worldwide serology
based chlamydia market since 1999 have remained stable at approximately $2.4
million, $2.7 million and $2.5 million in 2000, 2001 and 2002, respectively, and
to the best of Savyon's knowledge from both current sales figures and a network
of over 60 worldwide distributors, the worldwide serology based chlamydia market
has not undergone any material changes since 1999, thereby leaving Savyon's
market share relatively unchanged. Savyon also manufactures immunoassays for the
diagnosis of infectious diseases, especially sophisticated microplate-based
enzyme immunoassays. Savyon focuses on specific segments of the clinical
diagnostics market and is positioned to identify ideas and turn them into
marketable products. Savyon provides quality diagnostic tools to laboratory
professionals and point of care locations in Israel and worldwide. In addition,
Savyon markets kits for the diagnosis of certain infectious diseases in the
over-the-counter market in the United States. As a product developer, Savyon
holds proprietary rights to certain products in the in vitro diagnostics
healthcare field. Savyon manufactures sophisticated immunoassays for antibodies
detection of certain pathogens of sexually transmitted diseases (STD),
particularly for the serological diagnosis of chlamydial infections, and
respiratory tract infections (RTI) and sophisticated devices for the detection
of urinary tract infections (UTI). Savyon operates under the quality standards
of ISO 9001 and EN 46001 and currently produces its diagnostic kits for the
detection of certain sexually transmitted diseases and other infectious diseases
at its Ashdod facility and purchases packaging and reagents for its kits from
outside suppliers. Savyon has not experienced any difficulty in obtaining
supplies to date, there being many available suppliers including chemical
companies for reagents and antibodies and for other supplies.

     During the past three fiscal years, the main categories of products
manufactured by Savyon have been medical diagnostic kits and related products.
Savyon's current products include enzyme linked immunosorbent assay (ELISA) test
kits, micro-immunofluorescence techniques (MIF), immuno peroxidase assays (IPA),
Uriscreen(TM) - a rapid screening tool for over-the-counter and point of care
testing, and rapid tests for the diagnosis of certain infectious diseases. As
established above, Savyon believes it is a market leader in the sero-diagnosis
of chlamydial infections. Savyon's products are used by medical laboratories,
physicians, other healthcare providers and research laboratories worldwide.

     Following the acquisition of GamidaGen in January 2001, Savyon has also
been engaged in the production and marketing of molecular biology based gene
screening tools for the detection of certain gene-associated disorders in humans
(some cancers, thrombosis, cystic fibrosis and certain other diseases),
facilitating early diagnosis, treatment or medical intervention. GamidaGen
developed Pronto(TM), a molecular biology based technology for the detection of
single nucleotide polymorphisms (SNPs) that is currently used for genetic
screening and testing of certain human genetic disorders.

SAVYON - DIAGNOSTIC TECHNOLOGY AND PRODUCTS

     The following is a summary description of the technologies underlying the
diagnostic products currently manufactured by Savyon.

     Savyon's diagnostic kits are designed for the simple and accurate conduct
of a range of diagnostic tests utilizing enzyme immunoassay (EIA) and
micro-immunofluoresence techniques and rapid tests. Immunoassays are diagnostic
techniques which detect the presence or absence of a specific disease by
measuring the amount of a specific antibody (indirect tests) or antigen (direct
tests) in a patient's blood sample or other body fluids through the introduction
of a specific antigen or antibody into the sample. The manufactured tests are
highly sensitive and highly specific.

     The immune systems of humans and animals respond to an antigen (a foreign
substance such as a virus or bacterium) by producing antibodies that react to
and bind with specific antigens. The EIA technique uses the linking of enzymes
to antibodies or antigens to create measurable color reaction marking the
presence of specific antibodies or antigens. EIAs may be classified into various
categories based upon methodological difference.

     In general, EIAs require reagents to be mixed in discrete steps and, at
some point during the assay, involve a physical separation of antibody bound
from excess enzyme reagent. Several technologies exist for this separation step.

                                     - 21 -
<Page>

     The three principal types of antibodies for certain specific infections
are: IgM - which appears mainly the first time the body is infected by the
infective agent, very close to the onset of the disease, and persists for a
limited period of time varying from one infection to another; IgG - which
appears and remains in the bloodstream even after the disease disappears; and
IgA - which appears in both blood and body secretions and generally persists as
long as the infective agent remains and disappears shortly after the pathogen
leaves.

     Savyon manufactures highly specific immunoassays, SeroCT(TM), SeroCP(TM)
and SeroCP Quant, that are utilized for the detection of antibodies specific to
chlamydia. Chlamydia is an intracellular bacterium that causes acute and chronic
respiratory and sexually transmitted diseases in mammalian and avian species.
There are four types of chlamydia: C. trachomatis, C. pneumoniac, C. psittaci
and C. pecorum. Chlamydia trachomatis is one of the most common causes of
sexually transmitted diseases in the world. It is mostly asymptomatic and
therefore difficult to diagnose. This pathogen requires accurate diagnosis and
specific treatment with antibiotics. Its related complications, which may occur
if it is improperly diagnosed and consequently mistreated, include trachoma,
pelvic inflammatory disease, mechanical infertility (adhesions of the fallopian
tubes) and respiratory disorders or eye infections to the newborn of infected
mothers. Chlamydia is a major cause of pneumonia and it is also associated with
upper and lower respiratory tract infection.

     Savyon also manufactures SeroFIA(TM) Chlamydia IgG, IgA and IgM diagnostic
kits, which are based on the MIF assay methodology. This method uses a U.V.
fluorescence microscope for the detection of "fluorescence staining" of glass
slides fixed with chlamydia particles onto which the human antiserum to be
tested is applied, followed by a specific fluorescent probe. This assay
methodology is considered to be the gold standard in chlamydia serology. The MIF
technique allows for differential determination of chlamydia pneumoniae,
trachomatis and psittaci antibodies in human serum.

     Savyon also markets a panel of SeroHSV kits, which include the
SeroHSV1(TM), SeroHSV2(TM), SeroHSV(TM) IgG and SeroHSV(TM) IgM diagnostic kits.
Such panel includes ELISA based assays designed to enable the detection of
antibodies to the herpes simplex virus (HSV), a widely spread pathogen
associated with a variety of diseases (SeroHSV(TM) IgG, SeroHSV(TM) IgM). Such
panel also includes highly specific self-confirmatory assays designed to enable
semi-quantitative determination of antibodies of HSV type 1 (SeroHSV1(TM)) also
known as herpes labialis, associated with "cold sores", and antibodies of HSV
type 2 (SeroHSV2(TM)) commonly known as herpes genitalis.

     In addition, Savyon manufactures SeroMP(TM) IgG, IgM & IgA diagnostic kits
for the serological diagnosis of mycoplasma pneumoniae infections, one of the
leading causes of atypical pneumonia. The test kits are based on M. pneumoniae
membrane proteins and improve the diagnostic value of M. pneumoniae infection
(more specifically, identification of the phase of disease) by enabling the
specific detection and differential determination of the M. pneumoniae IgG, IgM
and IgA antibodies. The test kits further provide semi-quantitative results for
easier interpretation and follow up.

     SeroPertussis(TM) is a product line launched during the year 2001. Whooping
cough (pertussis) is a highly contagious bacterial respiratory tract infection
associated with bordetella pertussis bacilli. Pertussis is an endemic disease,
but epidemics occur every 3 - 5 years. In the USA, 5000 - 7000 cases are
reported each year. The incidence of pertussis has been greatly reduced by mass
vaccination; however, even in countries with high vaccination coverage, the
disease is re-merging. Worldwide, nearly 50 million cases of pertussis are
diagnosed annually and about 350,000 people die of the disease.

     In order to improve the diagnostic value of bordetella pertussis infection,
Savyon has developed the SeroPertussis(TM) IgA/IgM and IgG kits. The kits
utilize specifically enriched fraction as antigens, allowing sensitive detection
of IgA and/or IgM antibodies and the semi-quantitative determination of IgG
antibodies to bordetella pertussis, thus enabling immune response follow-up of
patients and determination of their immune status.

     Savyon also markets the Quickstripe(TM) product line, which is produced by
other manufacturers. The QuickStripe(TM) tests are rapid, quantitative one-step
systems based on immuno-chromatographic technology. QuickStripe (TM) tests
consist of a compact cassette-like plastic card which includes the components
required to run the test, including a built-in procedural control to enable
accurate results. QuickStripe(TM) tests are easy to use, require no
instrumentation or procedures other than adding the sample to be tested to the
kit and are therefore particularly suitable for use in physicians' offices,
hospital emergency rooms and urgent cases. QuickStripe(TM) test results are
usually obtained within less then an hour, and generally provide a
"positive/negative" result.

     In addition, Savyon manufactures and markets a rapid test for the detection
of HIV 1 & 2 antibodies in serum or plasma based on the AIDS virus protein,
produced by genetic engineering technology.

                                     - 22 -
<Page>

     Savyon also manufactures Uriscreen(TM), a test kit for the rapid screening
of urinary tract infections which is an easy-to-use, inexpensive and highly
sensitive test that can be carried out in a few minutes. The Uriscreen(TM) is
based upon a catalase-based enzyme test which allows for rapid screening as
compared with the traditional culture-based tests involving waiting periods of
24-48 hours.

Savyon developed and manufactured the Diaslide(R) for the culturing of bacteria
from urine and identification of urinary tract infections (UTIs). In September
2002, Savyon sold the Diaslide manufacturing line for a purchase price of
approximately $300,000 and recorded a capital gain of approximately $83,000 from
this sale.

     The following charts summarize Savyon's principal commercial diagnostic
products:

--------------------------------------------------------------------------------
                      SEXUALLY TRANSMITTED DISEASES (STDs)
--------------------------------------------------------------------------------
PRODUCT                                  DESCRIPTION
--------------------------------------------------------------------------------
SeroCT(TM) IgG, IgA     A peptide based enzyme-linked immunosorbent assay for
                        the specific detection of IgG or IgA antibodies species
                        specific to chlamydia trachomatis in human serum.
--------------------------------------------------------------------------------
SeroFIA(TM)             An immunofluorescence assay for the detection of IgG or
Chlamydia  IgG,         IgM or IgA antibodies specific to C. trachomatis,
IgM, IgA                C. pneumoniae and C. psittaci in human serum.
--------------------------------------------------------------------------------
SeroELISA(TM)           An enzyme-linked immunosorbent assay for the detection
Chlamydia IgG,          of IgG or IgA or True IgM antibodies specific to
IgA, TRUE-IgM           chlamydia.
--------------------------------------------------------------------------------
SeroHSV(TM) IgG         An enzyme-linked immunosorbent assay for the
                        semi-quantitative determination of specific IgG
                        antibodies to herpes simplex virus type 1 and/or 2 in
                        human serum.
--------------------------------------------------------------------------------
SeroHSV(TM) IgM         An enzyme-linked immunosorbent assay for the
                        qualitative detection of specific IgM antibodies to
                        herpes simplex virus type 1 or 2 in human serum.
--------------------------------------------------------------------------------
SeroHSV1(TM)            A competition based enzyme-linked immunosorbent assay
                        for the qualitative detection of specific antibodies
                        to herpes simplex virus type 1 in human serum.
--------------------------------------------------------------------------------
SeroHSV2(TM)            A competition based enzyme-linked immunosorbent assay
                        for the qualitative detection of specific antibodies
                        to herpes simplex virus type 2 in human serum.
--------------------------------------------------------------------------------
HIVSav 1&2 Rapid        A rapid test for the qualitative detection of antibodies
SeroTest(TM)            to human immunodeficiency virus (HIV) 1&2 in human serum
                        or plasma.
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                       RESPIRATORY TRACT INFECTIONS (RTIs)
--------------------------------------------------------------------------------
PRODUCT                                  DESCRIPTION
--------------------------------------------------------------------------------
SeroCP(TM)              An enzyme-linked immunosorbent assay for the
IgG,IgM,IgA             qualitative detection of IgG or IgM or IgA antibodies
                        specific to C. pneumoniae in human serum.

                                     - 23 -
<Page>

--------------------------------------------------------------------------------
                       RESPIRATORY TRACT INFECTIONS (RTIs)
--------------------------------------------------------------------------------
PRODUCT                                  DESCRIPTION
--------------------------------------------------------------------------------
SeroCP Quant IgG,       An enzyme-linked immunosorbent assay for the
IgA                     semi-quantitative determination of IgG or IgA antibodies
                        specific to C. pneumoniae in human serum.
--------------------------------------------------------------------------------
SeroMP(TM) IgG,         An enzyme-linked immunosorbent assay for
IgM, IgA                the detection of IgG or IgM or IgA antibodies specific
                        to mycoplasma pneumoniae in human serum.
--------------------------------------------------------------------------------
SeroPertussis(TM)       An enzyme-linked immunosorbent assay for the
IgA/IgM, IgG            semi-quantitative detection of IgG antibodies and
                        IgA/IgM antibodies specific to bordetella pertussis in
                        human serum.
--------------------------------------------------------------------------------
SeroFIA(TM)             An immunofluorescence assay for the detection of IgG or
Chlamydia IgG,          IgA or IgM antibodies specific to C. pneumoniae,
IgM, IgA *              C. trachomatis and C. psittaci in human serum.
--------------------------------------------------------------------------------
SeroELISA(TM)           An enzyme-linked immunosorbent assay for the detection
Chlamydia               of IgG or IgA or True IgM  antibodies specific to
IgG, IgA, TRUE-IgM *    chlamydia.
--------------------------------------------------------------------------------

     *    Savyon's SeroFIA(TM) Chlamydia and SeroELISA(TM) Chlamydia kits may
be used for the diagnosis of both STDs as well as for the diagnosis of RTIs.


--------------------------------------------------------------------------------
                         URINARY TRACT INFECTIONS (UTIS)
--------------------------------------------------------------------------------
PRODUCT                                 DESCRIPTION
--------------------------------------------------------------------------------
URISCREEN(TM)           A rapid UTI screening test for bacteria and the presence
                        of somatic cells in human urine.
--------------------------------------------------------------------------------

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


--------------------------------------------------------------------------------
                                 QUICKSTRIPE(TM)
--------------------------------------------------------------------------------
PRODUCT                                    DESCRIPTION
--------------------------------------------------------------------------------
Strep A                 A rapid, visual assay for the detection of
                        streptococcal Group A antigen from throat swabs.
--------------------------------------------------------------------------------
Hepatitis B             A rapid, visual assay for the detection of hepatitis
                        B surface antigen (HbsAg) in human serum. hepatitis B
                        affects the liver, can be fatal and is transmitted
                        either through sexual contact or by infected blood.
--------------------------------------------------------------------------------
Chlamydia Ag            A rapid, visual assay for the detection of chlamydia
                        trachomatis antigen in endocervical, urethral, or male
                        urine specimens.
--------------------------------------------------------------------------------
Hcg                     A rapid, visual assay for the detection of human
                        chorionic gonadotropin (hCG) in human serum or urine (a
                        pregnancy testing kit).
--------------------------------------------------------------------------------
H. Pylori               A rapid, two-step assay for the detection of
                        antibodies to helicobacter pylori (a bacterium
                        correlated with the development of stomach ulcers and
                        stomach cancer) in human serum, plasma or whole blood.
--------------------------------------------------------------------------------

                                     - 24 -
<Page>

--------------------------------------------------------------------------------
                                 QUICKSTRIPE(TM)
--------------------------------------------------------------------------------
PRODUCT                                    DESCRIPTION
--------------------------------------------------------------------------------
Dengue IgG              A rapid, visual assay for the detection of IgG
                        antibodies to dengue in human serum, plasma or whole
                        blood.
--------------------------------------------------------------------------------
PregnanStick(TM)        A rapid, visual assay for the detection of human
                        chorionic gonadotropin (hCG) in human serum or urine (a
                        pregnancy testing kit).
--------------------------------------------------------------------------------

SAVYON - TECHNOLOGY AND PRODUCTS FOR GENETIC SCREENING AND TESTING

     The proprietary ProntoTM technology for the rapid detection of point
mutations and SNPs in DNA sequences is an accurate, user friendly, ELISA-based
technology, suitable for medium and large scale screening. This molecular
biology based technology enables the mass screening of genetic material for
mutations, and has applications in many fields, including human healthcare,
pharmacogenomics research and agriculture. Based on this technology, Savyon has
developed over 15 diagnostic kits for carrier-screening, pre-natal diagnosis,
and a selection of genetic pre-disposition to certain diseases.

     For carrier-screening and pre-natal testing, Savyon has developed a panel
of kits that test for the most common disease-associated genes in Israel's
diverse population (e.g. cystic fibrosis, Canavan, gaucher, Bloom syndrome and
Fanconi anemia). Such kits are used in many genetic testing centers in Israel
for identifying prospective parents who may be carriers of mutations in genes
associated with these diseases. Savyon has further developed a kit that tests
for genes associated with cystic fibrosis, in order to address the needs of
different European populations by testing different mutations in the same
disease-associated gene in people from varying ethnic backgrounds.


     Savyon has developed pre-disposition tests for certain diseases. Among
these is a three-kit panel which tests for mutations in genes associated with
pre-disposition to thrombosis, namely Factor V Leiden ("Factor V"), which is the
most common hereditary blood coagulation disorder in the United States, the
prothrombin ("Factor II") mutation 20210A, which is a major risk factor for
venous thrombosis and certain arterial thrombotic conditions and the
methylenetetrahydrofolate reductase mutation 677C>T ("MTHFR") (The sales of
these products in certain territories is currently subject to the completion of
negotiations with third parties for certain intellectual property rights).
People with even one copy of the mutated Factor II or Factor V gene may have an
increased likelihood of thrombotic events. Such likelihood may be increased
further in smokers, women taking birth-control pills and people who undergo
major operations; thus, awareness of the existence of these mutations promotes
preventive therapy. Savyon has developed other tests associated with
pre-disposition to other diseases such as hemochromatosis (iron overload),
screening kits for familial mediterranean fever, breast and ovarian cancer and
colorectal cancer and a genotyping kit for Apo E (a gene correlated with
pre-disposition to Alzheimer's disease).


     Savyon's products in this field are intended for clinical laboratories
carrying out diagnosis of a variety of genetic defects and, in particular, for
Israeli, Arab, Jewish and ethnic European populations. In addition, Savyon's
products are used in clinical laboratories performing pre-disposition testing
(thrombosis, hemochromatosis, certain cancers and several other diseases and
conditions).

     The following charts summarize Savyon's principal commercial products for
genetic screening and testing:

--------------------------------------------------------------------------------
                    CARRIER SCREENING AND PRE-NATAL DIAGNOSIS
--------------------------------------------------------------------------------
PRODUCT                          ASSOCIATED DISEASE GENE
--------------------------------------------------------------------------------
Gaucher          Gaucher (glucocerebrosidase)
--------------------------------------------------------------------------------
FMF              Familial Mediterranean Fever (Pyrin)
--------------------------------------------------------------------------------

                                     - 25 -
<Page>

--------------------------------------------------------------------------------
                    CARRIER SCREENING AND PRE-NATAL DIAGNOSIS
--------------------------------------------------------------------------------
PRODUCT                               ASSOCIATED DISEASE GENE
--------------------------------------------------------------------------------
Canavan                 Canavan (Aspartoacylase)
--------------------------------------------------------------------------------
Bloom/Fanconi           Bloom's syndrome (BLM); Fanconi Anemia C (FACC)
--------------------------------------------------------------------------------
CF Basic; CF Open; CF   Cystic Fibrosis (CFTR)
Euro 1
--------------------------------------------------------------------------------
FD                      Familial Dysautonomia (IKBKAP)
--------------------------------------------------------------------------------
2 GeneScreen            Mucolipidosis type IV (ML IV), Niemann-Pick types A+B
--------------------------------------------------------------------------------
4 GeneScreen            Canavan, BLM, FACC, FD
--------------------------------------------------------------------------------
Tay Sachs               Tay Sachs (hexosaminidase)
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                       GENETIC PRE-DISPOSITION TO DISEASE
--------------------------------------------------------------------------------
PRODUCT                               ASSOCIATED DISEASE GENE
--------------------------------------------------------------------------------
Brca                    Pre-disposition to breast cancer and ovarian cancer
                        (Brca1, Brca2)
--------------------------------------------------------------------------------
ApoE                    Hyper-cholesterolemia (Apolipoprotein E)
--------------------------------------------------------------------------------
APC                     Pre-disposition to colorectal cancer
--------------------------------------------------------------------------------
ThromboRisk(TM)         Increased risk of thrombosis (Factor V, Factor II,
                        MTHFR)
--------------------------------------------------------------------------------
Factor V                Increased risk of thrombosis
--------------------------------------------------------------------------------
MTHFR                   Increased risk of thrombosis
--------------------------------------------------------------------------------
Factor II /             Increased risk of thrombosis
Prothrombin
--------------------------------------------------------------------------------
Hemochromatosis         Hemochromatosis\ iron overload (HFE)
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                                 DNA EXTRACTION
--------------------------------------------------------------------------------
PRODUCT                                 USAGE
--------------------------------------------------------------------------------
DNA extraction kit      Rapid DNA extraction for use in diagnostics and research
(from human whole       laboratories
 blood)
--------------------------------------------------------------------------------

     In February 2002, Savyon and ProChon Biotech Ltd. ("ProChon"), the
developer of fibroblast growth-factor FGFR

                                     - 26 -
<Page>

based therapeutics, entered into a collaboration agreement for the development
and commercialization of a genetic kit, - FibroTest(TM), for the diagnosis of
mutations associated with forms of bladder cancer. These mutations, prevalent in
inherited skeletal disorders, have been linked to tumor progression and
prognosis in several types of cancer, including bladder carcinoma, cervical and
colorectal carcinomas and multiple myeloma. Under the agreement, Savyon is
responsible for prototype kit development and for manufacturing, while Prochon
will undertake clinical development and have exclusive worldwide rights for the
commercialization of the kit. During 2003, the prototype kit will undergo a
clinical evaluation in an Israeli hospital.

     Savyon is developing with Aferrix Ltd. the FeRisk(TM) test, a novel assay
for non-transferring bound iron. FeRisk(TM) is intended to become a standard in
the screening, diagnosis and follow-up of hereditary hemochromatosis patients,
as well as others who suffer from iron overload.

RESEARCH AND DEVELOPMENTS -SAVYON AND PROCOGNIA

     The Company is engaged in certain research and development activities as
detailed below.

     Savyon's research and development activities include certain new projects
in the serological diagnosis field.


     During 2002, Savyon's research and development expenditures decreased by
55% as compared to 2001, primarily as a result of the completion of certain
research and development projects as well as certain personnel reductions.
Following the completion of the Savyon 2003 transaction at the end of 2002,
Savyon recruited additional personnel to work on its ongoing research and
development projects and believes that it has adequate resources to conduct such
research and development activities. In 2002, Savyon also implemented a
comprehensive cutback aimed at increasing the efficiency of Savyon's management,
production, quality control and assurance departments, but the Company does not
believe that this cutback will have an adverse impact on Savyon's ongoing
research and development activities.


     Procognia, in which the Company retains an 11.5% investment, is engaged in
the development of tools for the discovery and development of
glyco-molecule-based treatments using innovative and integrated platform
technologies, which involve biochips, glycobiology, chemistry, algorithms,
software and databases.

PATENTS

     The Company's policy generally is to secure patent and design protection
for significant aspects of its products and technologies, as well as contractual
obligations - including confidentiality and proprietary rights undertakings -
with employees and distributors. There can be no assurance as to the degree of
protection these measures may or will afford.

     The Company is actively involved in research and has secured or is seeking
patent and trademark protection for various aspects of its developments.

     In the genetic field, the Company has six granted patents that it utilizes
in producing its products and four pending patent applications. The patents are
registered for methods of single nucleotide primer extension and kits therefor
of quick screening and identification of specific DNA sequences by single
nucleotide primer extension and kits therefor and of characterizing GC-rich
nucleic acid sequences. These methods relate to the Company's ProntoTM genetic
test products line. Three of the granted patents are registered in Israel , two
granted patents are registered in the United States and one granted patent is
registered in Europe (national phase). All of them expire during 2012 to 2014.
In addition, the Company has patent applications pending for these methods in
the USA, Japan and Canada (two pending applications).

     In the serologic field, the Company has four pending patent applications
regarding chlamydia trachomatis, specific peptides and their use in diagnostic
assays. These patents are used in the production of the Company's Sero CT
diagnostic test kit products. Three of the pending patent applications are
registered in the United States, Europe and Japan respectively and one patent
application is in an International Procedure (PCT).

     In both the genetic and the serologic fields, the Company has certain other
granted patents and applications for patents that are not utilized by it for its
products, will probably not be used in the future and, therefore, will not be
renewed.

     There can be no assurance that patent applications will result in issued
patents or that patents will not be circumvented or invalidated or that, if
granted, they will provide any material benefit to the Company. The Company may
be adversely affected by the costs of or delays in any litigation which may be
required to protect patents and there can be no assurance that the Company will
ultimately be successful in any such litigation. There can be no assurance as to
the risk of infringing the patent rights of others.

     The Company, directly and/or through certain of its subsidiaries, is also
the exclusive licensee of issued (or applications pending relating to) patents
and designs of certain research institutions and other third parties in Israel
and certain other countries (including under the Patent Cooperation Treaty). The
terms of such licenses are generally

                                     - 27 -
<Page>

non-exclusive, subject to payment of royalties, including minimum annual
royalties. See Item 10. "Additional Information - C. Material Contracts".

     MARKETING AND SALES - GAMIDOR GROUP, DANYEL AND SAVYON

     The Company's marketing and sales activities in Israel are conducted by
the Gamidor Group in the fields of clinical diagnostic laboratories and
laboratories in general and by Danyel in the field of biotech research. The
Company's sales and marketing activities worldwide (other than in Israel) are
conducted by Savyon.

     MARKETING AND SALES IN ISRAEL

     CLINICAL DIAGNOSTICS LABORATORIES - GAMIDOR GROUP - www.gamidor.com

     The Company markets products, chemicals, reagents and systems to clinical
diagnostic laboratories and doctors' offices in Israel through Gamida-Gen
Marketing and Gamidor Diagnostics (collectively the "Gamidor Group").

     The Gamidor Group provides diagnostic systems, accessories, disposables and
services to clinical laboratories, including for example genetic, pathology and
hematology laboratories, as well as near-patient testing devices to doctors'
offices and supplies for industrial laboratories. Its customers generally
consist of technicians and managers of such laboratories, the quality control
departments of industrial firms, the Ministry of Health, administrators in sick
funds (Israeli health insurance organizations), private health care institutions
and the Ministry of Defense.

     The Gamidor Group distributes its products from various sources worldwide.
Among its suppliers are Dade Behring, IRIS, Lab-Interlink, Oxoid, Perkin Elmer
Life Sciences, Pharmacia & Upjohn Diagnostics and Ventana. The Gamidor Group's
relationships with such suppliers are generally based on detailed written
agreements, granting exclusive or non-exclusive distribution rights in Israel,
in most cases subject to the attaining of certain minimum annual performance
levels. Although the terms of some such written agreements have elapsed, the
business relationships with the suppliers concerned are maintained and new
contracts are negotiated for extended periods.

     The Gamidor Group is also exclusively responsible in Israel for making
available to clinical laboratories the external assessment programs of the
College of American Pathologists. It additionally markets software programs for
diagnostic and related educational purposes.

     The Gamidor Group, moreover, distributes certain expensive items of capital
equipment, such as the Microscan instrument of Dade Behring, TOA's Sysmex
coagulation systems (through Dade Behring) and the IRIS automated microscopy
system. The Gamidor Group provides certain customers with such instruments for a
period of three to five years, during which time such customers undertake to
purchase minimum monthly quantities of reagents from the Gamidor Group at prices
which take into account the values of both instruments and reagents. Throughout
such period, the Gamidor Group retains ownership and is entitled to re-possess
such instruments. The terms and conditions of these arrangements are generally
agreed in writing. Since it commenced such arrangements, an aggregate of
approximately 32 instruments have been so provided, mainly to certain public
healthcare institutions and hospitals in Israel. Other than in respect of such
transactions, the Gamidor Group does not normally enter into long-term written
agreements with its customers for supplies of its product lines.

     In addition, the Gamidor Group acts in Israel pursuant to a written
agreement as the sole and exclusive agent and technical support contractor for
the automated laboratory specimen handling systems of Lab-Interlink, Inc., the
successor to Labotix Automation Inc. In this capacity, Gamidor Diagnostics in
2000 entered directly into an undertaking with Labotix's customer, Maccabi
Medical Healthcare Services, to meet certain technical service, support,
training and related obligations provided for on its part in the Turnkey and
Service & Support Agreements made between Labotix and Maccabi in connection with
the first installation in Israel of one such system.


     BIOTECHNOLOGY RESEARCHERS - DANYEL - www.danyel.co.il



     The Company markets instruments, devices, systems, compounds, reagents and
services to biotechnology researchers in Israel through Danyel. Such products
include -

     -    genomic-sequencing - genotyping, single nucleotide polymorphism (SNP)
          analysis and DNA microarray methodologies;

                                     - 28 -
<Page>

     -    proteomics - analytical instruments for taking any step in protein
          purification and characterization processes, such as, columns/media
          for chromatography evaluation software systems for analyzing
          interacting bio-molecules, and, a high throughput 2-D electrophoresis
          workstation including an automated spot picker and a MALDI_TOF mass
          spectrometer;

     -    bio-plast division - disposable devices for immunology, cell culture
          and molecular biology for research laboratories and biotech
          industries;

     -    Danyel Biotech Services (DBS) - DNA sequencing and SNPs analysis

     Danyel also imports and markets a range of specialized instruments,
reagents and radioactively labeled compounds for academic and biomedical
research laboratories, consumable products in the fields of cell culture,
molecular biology and immunology, and analytical and laboratory systems such as
spectrophotometers, fluorometers, electrophoresis equipment and consumables.

     It represents and distributes products manufactured by leading companies
from around the world, including Amersham, BiaCore, Ciphergen, Dynal, Nunc,
Perkin Elmer Life Sciences and Pyrosequencing.

                                     - 29 -
<Page>

     MARKETING AND SALES WORLDWIDE - SAVYON

     Savyon markets its diagnostic products through the Company's subsidiaries,
affiliates and in-house marketing organizations as well as through independent
distributors and, in certain cases, OEM arrangements. Savyon's continuing
strategy has been to utilize the Company's own marketing organization while
relying on independent distributors, which presently account for the majority of
sales of such products.

     Sales of Savyon's diagnostic products in Israel have been made mainly
through the Gamidor Group. Elsewhere, such sales have to date been made mainly
to Germany, France and other Western European countries and to the United
States, primarily through local distributors. Savyon also currently markets
these products through distributors in Australia, Austria, Belgium, Cameroon,
Canada, China, Dominican Republic, Finland, Greece, Italy, Japan, Latvia,
Lithuania, Moldavia, Nigeria, Norway, Peru, the Philippines, Russia, South
Africa, Spain, Switzerland, Taiwan, Thailand, The Netherlands, Turkey and
Venezuela The relationships with Savyon's distributors are, in certain cases,
regulated by written distribution agreements and, in some instances, by
distributorship arrangements which are non-binding on the distributor.

     Under Savyon's distribution agreements, the distributors are generally
granted exclusive or non-exclusive rights to market Savyon's products in limited
territories for specified periods. These agreements usually require minimum
purchase commitments and, in certain cases, are automatically renewable for
additional periods, subject to satisfaction of defined minimum purchase
obligations. Some such agreements also grant the distributor certain rights of
first refusal for additional distribution rights. Distributors are typically
required to undertake confidentiality and proprietary rights protection
obligations. Savyon's distributorships are not normally on a consignment basis.

     Following receipt of clearance from the FDA under Section 510(k) of the
U.S. Food, Drug, and Cosmetic Act (FDCA) for marketing Uriscreen(TM) for
over-the-counter use in the United States, the Company entered into an agreement
dated April 27, 1999 with Carter-Wallace, Inc. ("CW"), pursuant to which CW has
exclusive rights to purchase the Uriscreen(TM) product for sale in the
over-the-counter markets in the United States and Puerto Rico, subject to
certain minimum purchase obligations, which it has fulfilled. Such agreement
also provides CW with a right of first refusal with respect to exclusive
distribution of such product in the entire world (excluding Italy). The
agreement is for a 5-year period, extendable by CW for additional 5-year
periods.

     Savyon's products for genetic screening and testing have been commercially
sold in Israel since January 1997 through Gamidor Diagnostics. Savyon is
currently examining the use of third party distributors for its genetic products
outside of Israel.

     MAJOR SUPPLIERS

     During 2001 and 2002, purchases from one of Danyel's suppliers accounted
for 24% and 26% for each year respectively of Healthcare's annual cost of sales.
In addition, during both 2001 and 2002, purchases from one of the Gamidor
Group's suppliers accounted for 12% and 13% respectively of Healthcare's annual
cost of sales. A failure of such suppliers to continue to supply products to the
Company will adversely affect the Company's business and financial results.

     MAJOR DISTRIBUTORS

     Sales to the Company's distributor in France, BMD - Biomedical Diagnostics,
and Germany, Hain Lifescience GMBH, accounted for approximately 4% and 6%
respectively of annual sales in fiscal 2001 and 2002. The Company has written
distribution agreements with BMD and Hain that grant these companies the
exclusive right to distribute its products in France and Germany respectively
for a period of one year, subject to automatic renewal unless the Company or the
distributor elects not to continue in either case. These agreements do not
require the distributors to purchase any minimum amounts of the Company's
products.

     MAJOR CUSTOMER

     Sales to the Maccabi Sick Fund in Israel accounted for 7% of the Company's
annual sales in 2001, and for 6% of such sales in 2002. A significant decrease
in the level of the Company's sales to that customer could adversely affect the
Company's business and financial results.

                                     - 30 -
<Page>

COMPETITION

SAVYON

     Competition in the diagnostic products field is intense and the market is
dominated by major diagnostic companies. The market itself is fragmented, in
that there are many products available for testing a large number of diseases,
which are produced by many small and medium sized manufacturers, including
companies with substantially greater financial and other resources than the
Company. Although the Company expects the market for diagnostic testing of
sexually transmitted and infectious diseases to grow, it also expects that
additional companies will enter this field.

     The Company's strategy is to look for high growth niches, to concentrate on
markets not competitively dominated or crowded and to ascertain market needs
before commencing development of new products and technologies. The Company
attempts to compete through its technology, short time-to-market, rapidness of
assay, quality and price.

     In the area of chlamydia Savyon competes with such multi-national companies
in the direct testing field as Abbott (LCR, Ag), Biomerieux, Roche (PCR), Syva
and Unipath, which produce diagnostic products for the detection of chlamydia
antigens. Savyon's serology test kits for chlamydia compete with serology tests
produced by companies such as Medac in Germany, Orgenics in Israel, MRL in the
United States and LabSystems in Finland. Savyon's SeroMP (micoplasma pneumoniae)
products compete in the field of serology testing with products produced by
companies such as Fujirebio in Japan. Although the Company is not aware of any
published industry market share statistics the Company estimates, based upon its
knowledge of the industry, that in fiscal 2002 Savyon accounted for a
significant portion of the worldwide market for serology chlamydia test kits,
with Savyon's remaining kits representing a much smaller portion of the overall
market for such products.

     Savyon's Sero HSV line of products competes with products produced by
companies such as Meridian (USA), MRL (USA) and Dade Behring (Germany).

     The principal competition to Savyon's Uriscreen(TM) products among rapid
screens for the point of care and over-the-counter markets comes from the
"urinary dipsticks"; however, these tend to suffer from poor sensitivity and a
second confirmatory test is often recommended.

     The QuickStripe(TM) products marketed by Savyon compete mainly with
products produced by companies such as Quidel (USA), Sentinal Diagnostics
(Italy), Agen (Australia), SA - Scientific (USA), Oxoid / Unipath (UK), Syntron
(USA) and Veda Lab (France), although there are many others.

     Savyon's HIVSav products are amongst a multitude of technologies and
products characterizing the HIV diagnostics market. The HIVSav, addressing the
needs of emergency rooms, urgent medical care, point of care testing and
doctors' offices, competes with several other rapid tests, such as those of
Abbot Test PAK, Cambridge Biotech, DuPont, Orgenics, EY Lab, Saliva Diagnostics
Systems, Trinity Biotech and others.

     Savyon's competitors in the field of genetic diagnostic tests have
developed competing technologies for the screening of genetic materials for
mutations. These competitors include many large and medium sized multi-national
corporations, including Innogenetics in Belgium and Third Waves Technologies,
Myriad Genetics, Affymetrix, Orchid BioSciences and Roche in the United States.
Savyon's indirect competitors in this field include numerous small scale
laboratories. Although the Company is not aware of any published industry market
share statistics, the Company estimates, based upon its knowledge of the
industry, that Savyon's market share in this field represents a very small
portion of the total market, other than the Israeli market for genetic
predisposition tests for gaucher and cystic fibrosis of which Savyon has a
significant share .

DANYEL

     Danyel Biotech's principal competitors in the distribution of reagents and
systems to the biotechnology market in Israel include: Biorad Israel, Agentek,
Ornat and Sigma Israel in the field of chromatography; Pharmatec (Tecan) and
Lumitron (Packard) in the field of advanced laboratory instrumentation
(fluorometers, counters); DeGroot, Geter and Baktalab in the field of
bio-plastics; and Eldan (NEN), Ornat and Sigma Israel in the field of molecular
biology and radiochemical products. Although the Company is not aware of any
published industry market share statistics, the Company estimates, based upon
its knowledge of the industry, that in fiscal 2002 Danyel accounted for a
significant portion

                                     - 31 -
<Page>

of the Israeli distribution market for chromatography products, bio-plastics and
advanced laboratory instrumentation and a lesser portion of the Israeli market
for Danyel's other products.

GAMIDOR GROUP

     The Gamidor Group's principal competitors in the distribution of reagents
and systems to clinical laboratories in Israel include: Ilex (Abbott) and Dover
(J&J) for hematology products; Dyn Diagnostics (Roche) and Pharmtop (Sorin) for
immunology products; Ilex (Vitek) and Pharmtop (Sorin) for microbiology
products; Travenol (Nequas) for quality control products; and Dyn Diagnostics
(Roche) and Medtechnica (Olympus) for clinical chemistry products. Although the
Company is not aware of any published industry market share statistics, it
estimates, based upon its knowledge of the industry, that in fiscal 2002 the
Gamidor Group accounted for a significant portion of the Israeli hematology
products market and a lesser portion of the Israeli market for the Group's other
products.

MARKET OPPORTUNITIES

     MARKET DEFINITION: In vitro diagnostics (IVD) refers to the detection of
various substances found in body fluids such as whole blood, plasma, serum,
urine or saliva. In vitro, as distinguished from in vivo, refers to tests
performed outside of the body. These are undertaken in a number of different
clinical settings including hospital laboratories, commercial laboratories,
doctors' offices, ambulatory care centers and consumers' homes. Due to its
important role in the diagnosis and treatment of patients, in vitro diagnostic
testing is an integral part of cost efficient, high quality patient care.

     The in vitro diagnostics market is large and essentially mature, with
revenues of over $20 billion. The Company believes that its moderate level of
growth is directly attributable to structural changes within the clinical
laboratory sector. Hospital laboratories are radically restructuring to lower
costs and improve productivity by way of liaison with in vitro diagnostics
manufacturers. They seek integrative technological solutions that automate all
or a significant portion of their testing workloads. The Company anticipates
that the pressure on clinical laboratories to reduce the costs of in vitro
diagnostic testing, coupled with the sluggish state of the market, may result in
a consolidation among in vitro diagnostics suppliers. The company expects the
point of care and over-the-counter diagnostics segments to grow at a higher rate
than the traditional in vitro diagnostics market, however. For further details
as to the Company's current engagement in both areas, see below: "Market
Segmentation -(end-user / product)".

     NEW BUSINESS OPPORTUNITIES: By being both a developer and distributor of
products, the Company believes it is able to gain an understanding of the needs
of the market. The Company further believes that this position also creates the
opportunity for strategic partnerships in marketing and joint manufacturing. As
a result of its vertical integration, the Company is able to develop new
products based on market needs, test the release of the products in Israel and
internationally, and further market the products worldwide. This approach makes
Healthcare attractive to third parties in need of test marketing and
distribution in Israel.

     The following segments of the laboratory, point of care and
over-the-counter markets are areas which the Company believes offer future
market opportunity and are envisaged as growth areas, conforming to current
product lines and technologies of the Company, as well as those under
development.

     MARKET SEGMENTATION (END-USER / PRODUCT): The Company provides diagnostic
tools to laboratory professionals and at point of care sites in Israel and
worldwide. The Company also provides over-the-counter kits for the diagnosis of
certain infectious diseases in the USA. The Company's medical diagnostic kits
for certain sexually transmitted and infectious diseases are sold primarily to
commercial laboratories and hospitals, which use them to perform tests requested
by physicians. The Company's HIVSav kits and QuickStripe(TM) are addressed to
the point of care markets, emergency rooms, urgent medical care and doctors'
offices. While the SeroFIA(TM) Chlamydia kits are generally used by
professionals in reference laboratories, the Company's SeroELISA(TM) Chlamydia,
SeroCT and SeroCP Kits are mainly used by large institutional laboratories
employing automated ELISA processors.

     Furthermore, the Company's Uriscreen(TM) product is well suited to the
rapidly growing doctors' office market, point of care locations and
over-the-counter marketing as well as to use in laboratories and clinics.

GOVERNMENT REGULATIONS

     The FDA in the United States and comparable governmental bodies in certain
other countries and regions (including Europe) impose substantial regulation on
the manufacture of diagnostic and therapeutic products and must approve these
products before they can be marketed. In their evaluation process, the
governmental bodies require lengthy

                                     - 32 -
<Page>

and detailed laboratory and clinical testing procedures and manufacturing data
for many diagnostic and therapeutic products.

     The conduct of both animal and clinical testing is presently covered by
extensive regulations designed to protect research subjects and to ensure the
validity of the test data. Government regulation may impose costly procedures
upon the Company and may delay or prevent the marketing of certain of the
Company's products.

     Failure to obtain, or delays in obtaining, such approvals would prevent or
delay the commercial development of such products and could have a material
adverse effect on the business of the Company. If the FDA and comparable
regulatory bodies of other jurisdictions approve the sale of a product, their
regulations will apply to the manufacturing and marketing of such product,
including product labeling. Regulatory approvals are not required for the
manufacture or marketing of the Company's diagnostic products in Israel. The
Company is not aware of any Israeli obligatory standard applicable to its
diagnostic products, although the Company does not anticipate difficulties in
complying with such a standard should it be found or become applicable.

     The manufacture, distribution and sale of in vitro diagnostics products,
such as the Company's test kits, require compliance with regulations which,
generally, are less difficult to comply with than those covering therapeutic
products. Diagnostic test kits and reagents which are intended for research
purposes only, are labeled and sold as such, and are not used without
confirmation of the diagnosis by another medically established product or
procedure, may be marketed in the United States with minimal regulation by the
FDA. However, the FDA and similar agencies in other countries and regions have
substantial regulations applying to the testing, marketing (including export)
and manufacturing of products to be used for the diagnosis of disease. In the
United States, many diagnostic products may be accepted by the FDA pursuant to a
"510(k)" notification. Such application must contain information which
establishes that the product in question is "substantially equivalent" to
similar diagnostic products already in general use. Failure to obtain acceptance
under the 510(k) application process would require pre-market approval ("PMA"),
a process involving lengthy and detailed laboratory and clinical testing as well
as other costly and time-consuming procedures.

     The Company's products for the point of care market in the United States
may be adversely affected by the Clinical Laboratory Improvement Amendments of
1988, which are intended to insure the quality and reliability of medical
testing and may have the effect of discouraging, or increasing the cost of,
testing in doctors' offices.

     Furthermore, many countries require that, before users will be reimbursed
for the costs of diagnostic and therapeutic products in connection with
applicable health care programs, such products must be approved by a
governmental agency. Failure to obtain, or delays in obtaining, such approvals
would limit the market for the Company's products in those countries, and
consequently delay revenues to the Company.

     Savyon's genetic screening and testing products require FDA approval for
their marketing as in vitro diagnostic products in the United Sates and approval
of comparable governmental bodies for such purposes in certain other countries,
including Europe. Regulatory approvals are not required for the manufacture or
marketing of such products in Israel. The Company has not taken action to obtain
FDA approval for marketing Pronto(TM) products.

     Certain of the Company's diagnostic products have been approved by the Paul
Ehrlich Institute in Germany and by the Agence Du Medicament in France. The
Company has also received FDA approval for marketing certain of those products
in the United States, including approvals pursuant to the Section 510(k)
application process, and is actively pursuing such approvals for additional
products. In September 1998, the Company received clearance from the FDA under
Section 510(k) for marketing its UTI diagnostic product Uriscreen(TM) for
over-the-counter use in the United States. The Company has been informed by its
Japanese distributor that regulatory approval has been received for sales of
certain of the Company's diagnostic products in Japan, and by its Swiss
distributor that the Swiss Federal Office of Public Health has approved the
import into Switzerland of certain of such products. Similar information has
also been provided by the Company's distributors in India, Hungary and the
Philippines.

     Given the high proportion of its sales to countries of the European Union
(EU), the Company has undertaken the necessary steps to comply with the EU
In-Vitro Diagnostic Directive (IVDD). The Company expects all of its kits to be
compliant with the relevant aspects of the EU IVDD by September 2003 and thus to
be able to apply the "CE Mark" to most of its in vitro diagnostics and medical
devices as mandated by the EU.

     Certain of the Company's diagnostic products have also been evaluated by
the World Health Organization, as well as by certain national institutes
(including the Russia AIDS Center and the People's Republic Of China's Ministry
of Health), with satisfactory results.

                                     - 33 -
<Page>

     The following summarizes the principal foreign regulatory approvals that
the Company's products have received:

     CE (EUROPEAN UNION) APPROVAL

        -   SeroCT(TM)IgG, IgA;
        -   SeroHSV(TM)IgG; SeroHSV(TM)IgM; SeroHSV1(TM); SeroHSV2(TM);
        -   SeroFIA(TM)CHLAMYDIA IgG, IgM, IgA;
        -   SeroCP(TM), IgG,IgM,IgA;
        -   SeroCP Quant(TM)IgG, IgA ;
        -   Pronto(TM)FMF,
        -   Pronto(TM)CF Basic,
        -   Pronto(TM)CF Open,
        -   Pronto(TM)CF Euro 1,
        -   Pronto(TM)Brca,
        -   Pronto(TM)ApoE,
        -   Pronto(TM)ThromboRisk(TM);
        -   Pronto(TM)Factor V,
        -   Pronto(TM)MTHFR,
        -   Pronto(TM)Factor II / Prothrombin,
        -   Pronto(TM)Hemochromatosis.

     IN PROCESS OF CE CERTIFICATION

        -   SeroMP(TM)IgG, IgA, IgM (approval is expected to be completed by
            September 2003)

     In addition, the Company intends to file applications for approval of an
additional four serological products, in order to complete the CE marking of
most of its products, which is expected to be completed by December 2003.

     FDA APPROVAL

        -   SeroELISA(TM) Chlamydia IgG, IgA;
        -   SeroMP(TM) IgG, IgM, IgA;
        -   IPAzyme(TM) Chlamydia TRUE IgM, IgG/IgA
        -   URISCREEN(TM);
        -   DIASLIDE(R).

     Currently, there are no pending applications for approvals by the FDA.

     WHO APPROVAL

     HIVSav 1&2 Rapid SeroTest(TM).

     The Company's and certain of its subsidiaries' activities in Israel have
been audited by the Standards Institution of Israel and found to comply with the
Quality Management Standard ISO-9001, in the following sectors: research and
development, manufacture and sales of diagnostics for the detection of various
pathogens (Savyon); supply, service and support of biological products for
research and biotechnology (Gamida-Gen Marketing and Danyel); and biomedical
supply, service and support (Gamidor Diagnostics).

          C.   ORGANIZATIONAL STRUCTURE

     See "Introduction" for a description of the Company's organizational
structure.

                                     - 34 -
<Page>

          D.   PROPERTY, PLANT AND EQUIPMENT

     The Company's principal facilities, including its administrative, research,
manufacturing and marketing facilities, are located mainly at leased premises in
Ashdod, Petach-Tikva and Rehovot in Israel.

     The Ashdod facilities are held by Savyon under the terms of a five-year
lease which commenced on October 1, 1993 and has been extended for an additional
period of five years, pursuant to which Savyon leases approximately 2,800 square
meters of space at an annual rental of approximately $303,000, linked to the
Israeli consumer price index. Savyon's obligations under the terms of this lease
are secured by a bank guarantee of approximately $245,000. These facilities,
which are used by Healthcare for the services rendered to its subsidiaries and
by Savyon and Procognia (Israel) for research and development activities, as
well as for production and marketing of products, have been designed to comply
with Good Manufacturing Practices requirements. The Ashdod site generally
operates on a one-shift basis and there is presently capacity available to
accommodate future growth. The Company believes that its facilities are well
maintained and in good operating condition, and will be adequate for its
operations for the foreseeable future

     Procognia (Israel) sub-leases approximately 934 square meters of floor
space in the Ashdod facilities from Savyon in accordance with its particular
needs and is charged at the rate of $17 per square meter, inclusive of rent,
electricity, municipal taxes, water and maintenance charges. As of January 1,
2002, Healthcare began renting approximately 86 square meters of office space
located in Petach Tikva from Gamida for Life (Israel) Ltd. ("Gamida Israel"), a
company controlled by Gamida, for an annual rental of approximately $19,000,
linked to the Israeli consumer price index, which includes rent and parking
charges.

     The Gamidor Group's principal offices are located at the same location in
Petach Tikva and are leased from Gamida Israel. The Gamidor Group leases
approximately 244 square meters of space for an annual rental of approximately
$55,000, linked to the Israeli consumer price index. Such lease currently
extends until September 2007. In addition, the Gamidor Group leases warehousing
in Petach Tikva of approximately 300 square meters for an annual rental of
approximately $27,000 for a period of 3 years from October 2000. Danyel's
principal offices, including its administrative and technical service laboratory
facilities, are located in the Kiryat Weizman Science Park, Rehovot. Danyel
leases approximately 240 square meters at an annual rental of approximately
$31,000 (linked to the Israeli consumer price index) for a period of five years,
commencing June 1, 2000. In addition, Danyel leases a warehouse of approximately
270 square meters for an annual rental of approximately $21,000 for a period of
three years, commencing July 1, 2000.

                                     - 35 -
<Page>

Item 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The Company and some of its subsidiaries maintain their accounts and
present their financial statements in U.S. Dollars, the currency of the economic
environment in which the Company operates. The results are then translated into
New Israeli Shekels based on the current rate of exchange.

          A.   RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001


    For the year ended December 31, 2002, the Company's sales were
approximately $16.7 million, which represented an increase of approximately 4%
compared to sales of approximately $16.0 million for the year ended December 31,
2001. The growth in sales for the period in relation to fiscal 2001 is mostly
due to increased turnover of Danyel, which experienced an increase in its sales
of laboratory equipment for research purposes amounting to approximately $350
thousand and the Gamidor Group, which experienced a 22% increase in its sales of
genetic products amounting to approximately $400 thousand.



    The gross profit for the year ended December 31, 2002 was approximately
$6.29 million, which represented an increase of approximately 4% compared to the
gross profit of approximately $6.03 million for the year ended December 31,
2001. The increase in the Company's gross profit in fiscal 2002 with respect to
fiscal 2001 primarily reflected a 33% increase in Savyon's gross profit figures
resulting from the successful implementation of a comprehensive cut back aimed
at increasing the efficiency of Savyon's management, production, quality control
and assurance departments. The cut backs involved replacement of Savyon's chief
executive officer and two executives as well as the dismissal of a number of
employees and a reduc tion of space leased by Savyon.



     Research and development costs for the year ended December 31, 2002
decreased by 70% to approximately $0.9 million compared to approximately $3.1
million for the previous year. This decrease was due to both the dilution of the
Company's ownership interest in Procognia to a level of 11.5% by December 2002,
(as a result of several third party financings also discussed above in Item 4.A:
Recent Developments) and a 55% decrease in Savyon's research and development
expenditure as compared to last year, primarily as a result of the completion of
certain research and development projects as well as certain personnel changes
which were implemented prior to the transaction with Savyon 2003.



     Amortization of goodwill was approximately $0.47 million for 2002.

     Selling and general and administrative expenses decreased by approximately
20% in the year 2002 compared to the last year and were approximately $5.6
million compared to approximately $7.13 million in 2001. This decrease is due to
both the dilution of the company's ownership interest in Procognia described
above, which accounted for approximately $1 million in 2001, and the
reorganizational cutbacks in the Company also detailed above.

     As a result of the Company's improved performance during fiscal 2002 in
terms of gross profit, research and development as well as selling and general
and administrative expenses, the operational loss for the period was
approximately $0.7 million as compared to an operating loss of $4.5 million in
2001. This includes approximately $0.7 million of Procognia (Israel)'s expenses,
which ceased to be consolidated with the Company's results during 2002.

     Net financial expenses increased to $490 thousand compared with financial
expenses of approximately $310 thousand for 2001. The increase in the net
financial expenses was due mainly to the devaluation of the Israeli NIS against
the U.S. and European currencies.

     During 2002, Healthcare realized a capital gain of $1.3 million from a
third party investment in Procognia.

     As a result of the foregoing, the Company's net profit for fiscal 2002 was
approximately $468 thousand compared to a net loss of approximately $3.03
million for fiscal 2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

     For the year ended December 31, 2001, the Company's sales were
approximately $16.01 million, which represented an increase of approximately
3.6% compared to sales of approximately $15.46 million for the year ended
December 31, 2000. Sales of Savyon increased by 16% in fiscal 2001 primarily as
a result of the acquisition of Gamida Gen in January 2001. Danyel's sales
increased by 14% in fiscal 2001 primarily as a result of expanding its activity,
while the Gamidor Group's sales were relatively unchanged.

                                     - 36 -
<Page>

     The gross profit for the year ended December 31, 2001 was approximately
$6.03 million, which represented an increase of approximately 11% compared to
the gross profit of approximately $5.45 million for the year ended December 31,
2000. The increase in gross profit in fiscal 2001 reflected a 53% increase in
the Gamidor Group's gross profit as a result of its participation in the
Labotix/Maccabi laboratory automation project, which is described above under
"Item 4.B: Business Overview - Marketing and Sales in Israel". This was
partially offset by an 8% decrease in Danyel's gross profit primarily as a
result of changes within its suppliers. Savyon's gross profit was relatively
unchanged in fiscal 2001.

     Research and development costs for the year ended December 31, 2001
increased by 124% to approximately $3.164 million compared to approximately
$1.41 million for the previous year. This increase reflected a 237% increase in
the research and development costs of Procognia (Israel) in fiscal 2001
following the receipt of third party financing which permitted it to accelerate
its research and development activities and a 52% increase in the research and
development costs of Savyon as a result of its acquisition of Gamida Gen.

     Selling and general and administrative expenses increased by approximately
31% in the year ended December 31, 2001 compared to the year ended December 31,
2000, and were approximately $7.13 million compared to approximately $5.42
million. This increase includes a 104 % increase in the selling, general and
administrative expenses of Savyon, primarily owing to the acquisition of
GamidaGen, and also to an unconsummated corporate reorganization designed to
raise funds for the combined Savyon/GamidaGen business on the Alternative
Investment Market (AIM) in London. In addition, Procognia (Israel)'s general
administrative expenses increased by 163% as a result of an increase in its
activity.

     Amortization of goodwill was approximately $0.24 million in the 2001 fiscal
year.

     The operating loss in the year ended December 31, 2001 was approximately
$4.51 million compared to an operating loss of approximately $1.58 million in
the year ended December 31, 2000. The increase in operating loss in 2001
resulted from the increases in research and development expenses and selling,
general and administrative expenses discussed above.

     Net financial expenses increased to $0.31 million for the year ended
December 31, 2001 compared with an income of approximately $0.13 million for
2000. The increase in the net financial expenses in 2001 compared to 2000 was
due mainly to the devaluation of the Israeli NIS against the U.S. and European
currencies.

     During 2001, Healthcare realized a capital gain of $0.9 million from a
third party investment in Procognia (Israel) that had been accomplished during
the previous year.

     As a result of the foregoing, the Company's net loss for the year 2001 was
approximately $3.01 million compared to a net loss of approximately $0.49
million for the year 2000.

     CRITICAL ACCOUNTING POLICIES

     Management's discussion and analysis of the Company's financial condition
and results of operations are based upon its consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in Israel, which differ in certain respects from those followed in the
United States (see Note 19 to the consolidated financial statements). The
Company's critical accounting policies are described in Note 2 to the Company's
financial statements. The Company reviews the accounting policies applied in
reporting its financial results on a regular basis. The preparation of these
financial statements requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. On an ongoing basis,
the Company evaluates its estimates, including those related to product returns,
accounts receivable, inventories, investments, intangible assets, warranty
obligations, restructuring, contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable in the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Results may differ from these
estimates as a result of actual outcomes being different from those on which the
Company based its assumptions. These estimates and judgments are reviewed by
management on an ongoing basis, and by the board of directors at the end of each
quarter prior to the public release of the Company's financial results. The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of the consolidated
financial statements.

                                     - 37 -
<Page>

     ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The Company maintains allowances in respect of 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 were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances could be required.

     EXCESS AND OBSOLETE INVENTORY

     The Company writes down its excess and obsolete inventory to an extent
equal to the difference between the cost of inventory and the estimated market
value based upon assumptions about future product life-cycles, product demand
and market conditions. If actual product life cycles, product demand and market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

     GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES

     The Company assesses the impairment of goodwill and other identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Some factors the Company considers
important which could trigger an impairment review include the following:

          -    significant underperformance relative to expected historical or
               projected future operating results;

          -    significant changes in the manner of the Company's use of the
               acquired assets or the strategy for its overall business; and

          -    significant negative industry or economic trends.

     When the Company determines that the carrying value of goodwill and other
identified intangibles may not be recoverable based upon the existence of one or
more of the above indicators of impairment, the Company measures any impairment
based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the
Company's current business model. In accordance with SFAS No. 142, "Goodwill and
Other Intangible Assets", the Company will, as from January 1, 2002, under the
U.S. GAAP, cease to amortize goodwill arising from acquisitions completed prior
to July 1, 2001. In lieu of amortization, the Company is required to perform an
initial impairment review of its goodwill in 2002 and an annual impairment
review thereafter.

     If the Company determines through the impairment review process that
goodwill has been impaired, it will record the impairment charge in its
statement of operations. According with accounting principles generally accepted
in Israel, goodwill and other intangible assets will continue to be amortized
over their useful lives, after the impairment review.

     ADDITIONAL RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issues Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146"), which addresses significant issue regarding the recognition,
measurement, and reporting of costs associated with exit and disposal
activities, including restructuring activities. SFAS No. 146 requires that costs
associated with exit or disposal activities be recognized when they are incurred
rather than at the date of a commitment to an exit or disposal plan. SFAS No.
146 is effective for all exit or disposal activities initiated after December
31, 2002. The Company does not expect the adoption of SFAS No. 146 to have a
material impact on its results of operations or financial position.

     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" ("FIN No. 45"). FIN
No. 45 elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees
that it has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. FIN No. 45 does not prescribe a
specific approach for subsequently measuring the guarantor's recognized
liability over the term of the related guarantee. It also incorporates, without
change, the guidance in FASB Interpretation No. 34, "Disclosure of Indirect
Guarantees of Indebtedness of Others," which is being superseded. The disclosure
provisions of FIN No. 45 are effective for financial statements of interim or
annual periods that end after December 15, 2002, and the provisions for initial
recognition and

                                     - 38 -
<Page>

measurement are effective on a prospective basis for guarantees that are issued
or modified after December 31, 2002, irrespective of a guarantor's year-end. The
Company does not expect the adoption of FIN No. 45 to have a material impact on
its results of operations or financial position.

          B.   IMPACT OF INFLATION AND DEVALUATION

PRODUCT DEVELOPMENT AND MARKETING OPERATIONS

     Although a substantial portion of the Company's expenses arising from its
product development and marketing operations is in U.S. Dollars or Dollar
linked, the Dollar cost of such operations of the Company in Israel is
influenced by the extent to which any increase in the rate of inflation in
Israel over the rate of inflation in the United States is offset by a
devaluation of the New Israeli Shekel in relation to the U.S. Dollar. Inflation
in Israel will increase the Company's Dollar cost of such operations and thus
have a negative effect on the profitability to the Company of contracts under
which the Company is to receive payments in U.S. Dollars or other foreign
currencies, unless such inflation is offset by a devaluation of the NIS.

     A devaluation of the NIS in relation to the U.S. Dollar would have the
effect of decreasing the Dollar value of any assets of the Company consisting of
NIS or receivables payable in NIS (unless such receivables were Dollar linked).
Such a devaluation would also have the effect of reducing the Dollar amount of
any liabilities of the Company payable in NIS (unless such payables were Dollar
linked). Conversely, any increase in the value of the NIS in relation to the
U.S. Dollar would have the effect of increasing the Dollar value of any unlinked
NIS assets of the Company and the Dollar amount of any unlinked NIS liabilities
of the Company. Similarly, the Company's gross profit is influenced by the
devaluation of the Euro and NIS, in which a substantial portion of the Company's
sales are made, in relation to the U.S. Dollar.

THIRD PARTY PRODUCT DISTRIBUTION ACTIVITIES

     A substantial part of the Company's third party product distribution
activities is managed by the Gamidor Group and by Danyel. The Gamidor Group's
and Danyel's sales are quoted in NIS; however, their selling prices are based
upon a price list, which is quoted in the suppliers' original currencies, mainly
Euros and U.S. Dollars. The price is then converted into NIS at the relevant
exchange rate on the date of sale to the customer. This enables the Gamidor
Group and Danyel to reduce exposure to losses from devaluations of the NIS in
relation to such foreign currencies. The Gamidor Group's and Danyel's accounts
receivable are, however, quoted in non-linked NIS and, consequently, inflation
in Israel would have the effect of increasing their financial expenses.

     In addition, the Gamidor Group's and Danyel's accounts payable are mainly
quoted in such foreign currencies and, consequently, any excess of a devaluation
rate in the NIS in relation to such currencies over the inflation rate in Israel
would have the effect of increasing the Company's financial expenses. Because
the exchange rates between the NIS and the Yen, Euro, Swiss Franc and U.S.
Dollar fluctuate continuously, exchange rate fluctuations and especially larger
periodic devaluations have an impact on the Company's profitability and
period-to-period comparisons of the Company's results in U.S. Dollars. For
details of changes effected in the Israeli government's monetary policy relating
to the representative rate of exchange of foreign currencies into NIS, see Item
3. "Key Information - D. Risk Factors."

     The Company's consolidated results of operations are, therefore, affected
by several interrelated factors, including the rate of inflation in Israel, the
devaluation of the NIS in relation to the primary foreign currencies relevant to
the Company, the devaluation of relevant foreign currencies in relation to the
U.S. Dollar, the extent to which the Company holds assets and liabilities in
foreign currencies and the export programs of the Israeli government in which
the Company participates. Similarly, the relationship between the Company's
monetary assets and liabilities in U.S. Dollars and NIS and whether these are
linked to a foreign currency or price index also affect financial results.

          C.   LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2002, the Company had working capital of approximately
$1.87 million and shareholders' equity of approximately $4.25 million. During
the year ended December 31, 2002, the cash flows provided by operating
activities were approximately $0.25 million and the Company used approximately $
0.76 million of net cash flows in investing activities. The net cash flows used
in investing activities consisted mainly of purchase of fixed assets.

                                     - 39 -
<Page>

     At December 31, 2002, the Company had short-term credit of approximately
$0.85 million (including current maturities) and long-term liabilities of $0.1
million. The Company believes that revenues from the sale of its medical
diagnostic kit products, revenues from contract manufacturing, contract research
and development and other activities, bank credits and its available cash
resources will provide sufficient funds to meet anticipated cash requirements
for the Company's planned operations over the next twelve months.

     Additional sources of liquidity for the Company in 2003 following the
Savyon transaction described under "Item 4 - Recent Developments" and thereafter
are the $1.2 million invested by Dr. Lee. Moreover, the remaining $0.7 million
of the $1.9 million purchase price for Savyon's clinical diagnostics business
are to be paid to Pronto by Savyon 2003 in 35 consecutive monthly installments
of $20 thousand each.

          D.   RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

     The Company is actively engaged in research and development programs
intended to develop new products, manufacturing processes, systems and
technologies and to enhance existing products and processes. Research and
development is funded by a combination of the Company's own resources, research
and development grants, bank credit and raising money from share issuing. The
Company believes its research and development effort has been an important
factor in establishing and maintaining its competitive position.

     In the genetic field, the Company has six granted patents that it utilizes
in producing its products and four pending patent applications. The patents are
registered for methods of single nucleotide primer extension and kits therefor
of quick screening and identification of specific DNA sequences by single
nucleotide primer extension and kits therefor and of characterizing GC-rich
nucleic acid sequencers. These methods relate to the Company's ProntoTM genetic
test products line. Three of the granted patents are registered in Israel and
two granted patents are registered in the United States and one is registered in
Europe (national phase). All of them expire during 2012 to 2014. In addition,
the Company has patent applications for these methods pending in the USA, Japan
and Canada (two pending applications) .

     In the serologic field, the Company has four pending patent applications
regarding chlamydia trachomatis, specific peptides and their use in diagnostic
assays. These patents are used in the production of the Company's Sero CT
diagnostic test kit products. Three of the pending patent applications are
registered in the United States, Europe and Japan respectively and one patent
application is in an International Procedure (PCT).

     In both the genetic field and the serologic field, the Company has certain
other granted patents and applications for patents that are not utilized by it
for its products, will probably not be used in the future and therefore will not
be renewed.

     The following table shows, for each of the periods indicated, the gross
research and development expenses of the Company:

<Table>
<Caption>
                                                                                    Year ended December 31,
                                                                          -----------------------------------------
                                                                          2002           2001        2000
                                                                          ------------  ----------- ---------------
                                                                                (in thousands of U.S. Dollars)
<S>                                                                       <C>            <C>         <C>
Gross research and development expenses..............................     1,070          3,164       1,408
Portion funded by the European Union's 5th Framework Program
 (FP5) ("The CHEMAG Project" - detailed below)                            158                -           -
                                                                          -------        --------    --------
Net research and development expenses................................     912            3,164       1,408
                                                                          =======        ========    ========
</Table>

RESEARCH AND DEVELOPMENT GRANTS


    OFFICE OF CHIEF SCIENTIST


     Under the Company's research and development agreements with the Office of
the Chief Scientist and pursuant to the Encouragement of Industrial Research and
Development Law, 5744-1984, the Company is required to pay royalties at the rate
of 3%-5% of sales of products developed with funds provided by the Chief
Scientist, up to an amount equal to the

                                     - 40 -
<Page>

Chief Scientist's research and development grants (U.S. Dollar linked and
bearing annual LIBOR interest since 1998) related to such products.

     The terms of these grants prohibit the manufacture outside of Israel or the
transfer of the technology developed pursuant to these grants to any person or
entity without the prior consent of the Research Committee of the Chief
Scientist. There can be no assurance that such consent, if requested, will be
granted.


     To date, the Company has received approximately $4.3 million in grants for
over 20 different projects for the development of serological and genetic
diagnostic kits, of which eight projects have produced commercial products, with
respect to which the Company's contingent obligations (based upon future sales
revenues) are approximately $3.1 million. As at December 31, 2002 the Company
paid the Chief Scientist approximately $1.2 million in royalties at a royalty
rate of 3.5%.



     BIRD-F




     In accordance with an agreement with the BIRD-F, the Company and
International Remote Imaging Systems Inc. ("IRIS") dated March 1994 for a twelve
month project aimed at developing kits for the direct detection of chlamidia in
urine Savyon was obligated to pay royalties to the BIRD-F on sales (or other
commercial exploitation) of any products which are developed as a result of the
research covered by such agreement. As no products have resulted from the
development of technology pursuant to such agreement, no payments are currently
due by the Company under the agreement.




     In accordance with an agreement with the BIRD-F, Savyon and Cygnus
Technologies Inc. (as successor to Diatech Inc.) dated August 1997 for a twelve
month project aimed at developing piezoelectric biosensors for clinical
diagnosis of sexually transmitted diseases, drugs of abuse and cardiac markers
Savyon was obligated to pay royalties to the BIRD-F on sales (or other
commercial exploitation) of any products which are developed as a result of the
research covered by that agreement. As no products have resulted from the
development of technology pursuant to such agreement, no payments are due by the
Company under the agreement.




     In accordance with an agreement with the BIRD-F, Savyon (as successor to
GamidaGen) and Becton Dickinson and Co. ("BD") dated January 2000 for an
eighteen month project aimed at developing integrated gene analysis tools was
obligated to pay royalties to the BIRD-F on sales (or other commercial
exploitation) of any products which are developed as a result of the research
covered by that agreement. The agreement is subject to early termination for
material breach having not been remedied by the party in default within 30 days
after the date of receipt of the notice. As of the date of this report, no
payments are due by the Company under the agreement. Early in 2001, BD decided
to terminate its participation in the BIRD-F funded project and thereafter the
project was terminated. The Company does not currently expect to further develop
and produce products based on the project and thus does not anticipate the
payment of any royalties to the BIRD-F relating to this project. Further, the
Company believes that it has satisfied all of its obligations under the grant
and will not be liable for the repayment of the grant. Based upon communications
with BIRD-F, the Company believes that BIRD-F agrees with this position.



At December 31, 2002, Savyon has a remaining contingent obligation to BIRD-F in
the amount of $ 191 thousand.



     CHEMAG CONSORTIUM




     Savyon is a member of a consortium ("CHEMAG Consortium") engaged in a
research and development project, commenced in September 2001, into "novel
paramagnetic materials, surface activation and nucleic acid modification
chemistries for application in biology, chemistry, health/medicine/diagnostics
and the environment" ("CHEMAG Project"). The CHEMAG Consortium is funded by the
European Union's 5th Framework Program (FP5) with a total budget of (euro)4.9
million. expendable over a three-year period. Savyon's budget for this program
over the three-year period of the CHEMAG Project is (euro)930,249, of which it
is entitled to claim a contribution of one half from the EU through FP5, i.e. a
total contribution not exceeding (euro)465,125. An advance payment of
(euro)186,000 was made to Savyon in October 2001, Savyon expects to receive an
additional(euro)150,000 during 2003 and the remainder during 2004.



     According to the agreement unless agreed upon through mutually satisfactory
licensing agreements the ownership of Savyon's intellectual property rights,
patents, patent applications, registered designs or copyrights may not be used
by any other partner of the consortium. With regards to exploitation of any
intellectual property rights whatsoever, patents, patent applications,
registered designs or copyrights resulting from the performance of the project a
separate contract between the consortium's partners will be made hitherto.
Savyon will be held in default upon breach of any of the obligations imposed by
the consortium as well as bankruptcy.



          E.   TREND INFORMATION


The first quarter financial reports of 2003 demonstrate a balanced
performance with net income of $20 thousand compared to a net loss of $481
thousand for the corresponding period last year and sales approximately 6%
higher than the sales in the first quarter of 2002.



     The Gamidor Group secured an increase of approximately 17% in sales and
orders as well as an increase of approximately 29% in gross profit for the first
quarter of 2003 as compared to the first quarter of 2002. The increase in sales
for the period is mostly due to early orders, which are not expected to effect
the yearly budgeted performance.

     Savyon's net profit for the first quarter of $144 thousand was 14% higher
than budget.

                                     - 41 -
<Page>

     SALES

     The following is a breakdown of the Company's total revenues according to
the main categories of products sold and/or services provided and according to
the principal geographic markets in which the Company competes, for each of the
last three fiscal years.

<Table>
<Caption>
-----------------------------------------------------------------------------------------------------
Geographic Market       Product Category            2002                   2001            2000
-----------------------------------------------------------------------------------------------------
                                                                                     in thousand of
                                                                                       U.S. Dollars
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S>                     <C>                        <C>                    <C>               <C>
Israel                  Reagents and systems         4983                  5,634             4,737
                        for the molecular
                        biology industry
                       ------------------------------------------------------------------------------
                        Reagents and systems         8369                  6,901             6,363
                        for clinical
                        laboratories
                       ------------------------------------------------------------------------------
                        Chemicals and                                        0               851
                        accessories for
                        industrial
                        laboratories
-----------------------------------------------------------------------------------------------------
Sub-total                                          13,352                 12,535            11,951
-----------------------------------------------------------------------------------------------------
Europe                  Serology                    2,475                  2,612             2,415
-----------------------------------------------------------------------------------------------------
                        Genetic products               76                     32                 -
-----------------------------------------------------------------------------------------------------
                        Microbiology                   33                     60                45
-----------------------------------------------------------------------------------------------------
Subtotal                                            2,584                  2,704             2,460
-----------------------------------------------------------------------------------------------------
United States           Serology                       67                    129               232
-----------------------------------------------------------------------------------------------------
                        Microbiology                  158                     72               164
-----------------------------------------------------------------------------------------------------
Sub total                                             225                    201               396
-----------------------------------------------------------------------------------------------------
Other                   Serology                      399                    428               523
-----------------------------------------------------------------------------------------------------
                        Microbiology                  115                    138               126
-----------------------------------------------------------------------------------------------------
                        Genetic products                1                      7
-----------------------------------------------------------------------------------------------------
Subtotal                                              515                    573               649
-----------------------------------------------------------------------------------------------------
Total                                              16,676                 16,013            15,456
-----------------------------------------------------------------------------------------------------
</Table>

          F.   OFF-BALANCE SHEET ARRANGEMENTS
               Not Applicable

          G.   TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

               Not Applicable

                                     - 42 -
<Page>

Item 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

          A.   DIRECTORS AND SENIOR MANAGEMENT

     The executive officers and directors of the Company are as follows:

<Table>
<Caption>
        Name                          Age     Position with the Company
        ---------------------------   ------  ---------------------------------------------------
        <S>                           <C>     <C>
        Daniel Kropf                  55      Chairman of the Board of Directors and Director
                                              (Class D)
        Moshe Reuveni                 47      Chief Executive Officer and Director (Class A)
        Eran Rotem                    35      Chief Financial Officer
        Yacob Ofer                    54      Director (Class D)
        Rolando Eisen                 61      Director (Class C)
        Eliezer Helfan                59      Director (Class C)
        Israel Amir                   61      Director (Class B)
        Ethan Rubinstein              61      Director (Class A)
        Varda Rotter                  56      External Director
</Table>

     Mr. Daniel Kropf has served as Chairman of the board of directors of the
Company since March 1996 and as its Chief Executive Officer from January 2000
until January 2003. Following business school in Italy and training with
American Hospital Supply in the United States, Mr. Kropf entered the businesses
of Laboratori Don Baxter and Eurospital in Trieste, Italy, founded by his late
father and managed by his mother. He later took responsibility for a French
distribution house which forms a part of the Gamida Group of companies, and
chaired the Migada Ltd. medical device manufacturing company. Mr. Kropf is the
Secretary-General of the Centre Europeen Juif d'Information ("CEJI") in
Brussels, is a life-time member of the ADL National Commission in the USA and
chairman of MILA in Jerusalem (Non Violent Communication Center - Israel). He
also serves as Chairman of Education for Life, a non profit foundation based in
Holland. Mr. Kropf was formerly a director, chief executive officer and chairman
of the board of directors of Rosebud Medical Ltd. ("Rosebud") and a member of
the board of directors of certain of the companies in which Rosebud held
investments (Oridion, Bikurofe and AMC). Mr. Kropf is a director of certain of
the Company's subsidiaries (Gamidor Diagnostics, Gamida-Gen Marketing, Savyon
and Danyel) and of various companies in the Gamida Group. Mr. Kropf received his
academic degree in marketing from the School of Industrial Administration of the
University of Turin.

     Mr. Moshe Reuveni was appointed as the Company's Chief Executive Officer in
January 2003. Mr. Reuveni has been a director of the Company since March 1996.
Mr. Reuveni also currently serves as the Managing Director of Gamida MedEquip
Ltd. (a subsidiary of Gamida). Mr. Reuveni served as a director and Chief
Financial Officer of Rosebud Medical Ltd. from March 1996 to January 2000. From
December 1990 to December 1999, he served as General Manager of Gamida for Life
(Israel) Ltd. Mr. Reuveni also currently serves as a director of certain of the
Company's subsidiaries: Savyon, Gamida-Gen Marketing, Gamidor Diagnostics and
Danyel Biotech. Mr. Reuveni is a Certified Public Accountant and received his
B.A. in Accounting and Economics from Tel-Aviv University.


     Mr. Eran Rotem has since May 2002 served as the Company's Chief Financial
Officer ("CFO"). Mr. Rotem was previously a senior manager in Ernst & Young,
Certified Public Accountants, where he served from 1995 until April, 2002. He is
himself a CPA and received his B.A. in Accounting and Finance from the Tel-Aviv
College of Management.


     Mr. Yacob Ofer has served as a director of the Company since March 1996, as
Executive Vice Chairman between April 1996 and May 1997 and as President and
Chief Executive Officer between May 1997 and January 2000. Mr. Ofer served as
the Managing Director of Gamidor Diagnostics from 1985 until May 1997. Since
January 1, 2001, Mr. Ofer has been the Chief Executive Officer of the Gamidor
Group and, since June 1997, a director of Savyon. He is a director of various
companies of the Gamida Group and was formerly a director of Rosebud. Mr. Ofer
received his academic degree in Chemistry from Tel-Aviv University

     Mr. Rolando Eisen has served as a director of the Company since December
1999. Mr. Eisen also serves as a director in the following Israeli companies:
Mercantile Discount Bank Ltd. since 1986, ABJAC Israel Oil and Gas

                                     - 43 -
<Page>

Exploration Ltd. since 1991, Merhav Ltd. since August 1999 and I.D.B. Holdings
Ltd. since December 2000 (as an external director), Koor Industries Ltd. and
Amidar since 2002. Mr. Eisen also serves in various board and/or management
positions with other Israeli Companies and/or business activities. In May 2000,
Mr. Eisen founded Green Market, a grocery chain specializing in home delivery of
high quality fresh products. Mr. Eisen received his B.Sc. in Industrial
Management from the Carnegie Institute of Technology in Pittsburgh and
participated in graduate studies towards a Ph.D. in Applied Mathematics and
Computer Science at the Northwestern University in Evanston, Illinois.

     Mr. Eliezer Helfan has served as a director of the Company since March
1998. Mr. Helfan received his LL.B. in Jurisprudence from the Hebrew University,
Jerusalem, has been a member of the Israeli Bar since 1967 and has been
practicing law in Israel since 1969.

     Mr. Israel Amir has served as a director of the Company since January 2000.
Mr. Amir has also served as an external director in the Israeli public company
Adumim Chemicals Ltd. since February 1998 and as a member of the boards of
directors of several private Israeli companies (A.T & T (Israel), TNS Teleseker
Ltd., Teleseker-Policy Ltd., Superpanel Ltd., Signal Source Research (Israel
1999) Ltd. and Tele-Gal Ltd.). Mr. Amir has been practicing since 1989 as an
independent economic consultant. He received his M.A. in Economics from the
Hebrew University in Jerusalem.

     Professor Ethan Rubinstein has served as a director of the Company from
July 1991 until October 1992 and since February 1993 and thereafter. Professor
Rubinstein also served as a director in Careline Ltd. from January 1990 until
December 1995 and currently serves as a member of the board of Agis Ltd. and of
Meditor Ltd. Professor Rubinstein received his M.D. in Medicine from Basel
University in Switzerland and his LL.B. in Jurisprudence from Tel-Aviv
University.

     Prof. Varda Rotter has since October 2001 been serving as an External
Director of the Company. Prof. Rotter received her B.Sc. and M.Sc. from Bar-Ilan
University in 1969 and 1971 respectively, and a Ph.D. in Cell Biology from the
Weizmann Institute of Science, Rehovot, in 1976. Following post-doctoral
research at the Center for Cancer Research of the Massachusetts Institute of
Technology, she joined the Weizmann Institute's Department of Cell Biology. She
was appointed Associate Professor in 1985 and Full Professor in 1992, and is now
the incumbent of the Norman and Helen Asher Professorial Chair in Cancer
Research at the Institute. Prof. Rotter is a genetic engineer, building
biological bridges in the submicroscopic world of cancer research, focusing on
certain tumor suppressor genes which may be used to obstruct the proliferation
of cancer cells.

SENIOR MANAGEMENT AND EMPLOYEES

SAVYON

     Martin Lee, Ph.D, has served as the president and chief executive officer
of Savyon 2003 since January 1, 2003. He was previously a founder, Chief
Executive Director and Laboratory Director of Great Smokies Diagnostic
Laboratory. Dr. Lee's Ph.D. is in biochemistry and microbiology. His career has
included senior clinical positions at Lakeview and Meadowlands Clinical Lab
Services, Rockland Medilabs, Corning Medical, Coulter Electronics and Pharmacia
Fine Chemicals.

DANYEL

     Mr. Luly Gurevich has, since 1999, served as the General Manager of Danyel.
Prior to this appointment, he was Director of Marketing and subsequently
Director General of Gamida-Gen Marketing. Prior to that, Mr. Gurevich was the
marketing specialist for Dexmor Ltd. He started his career with 6 years'
experience as a technician for Sigma Israel Ltd. (Bio Makor), where he was
involved in protein separation and characterization.

CONSULTANTS AND SERVICE SUPPLIERS

     Mr. Yossi Ginossar has, since November 2000, been serving as the Internal
Auditor of the Company. Mr. Ginossar has been employed by Fahn Kanne Control
Management Ltd., Tel Aviv, as an internal auditing managing partner since 1991.
Prior to that, Mr. Ginossar was employed as senior auditor at Spicer &
Oppenheim, Certified Public Accountants, Chicago, Illinois, and at Kesselman &
Kesselman, Certified Public Accountants, Tel-Aviv. Mr. Ginossar is a CPA in
Israel and a Certified Internal Auditor and Certified Fraud Examiner in the USA.
Mr. Ginossar has a B.A. in Accounting and Economy from the Hebrew University in
Jerusalem.

                                     - 44 -
<Page>

          B.   COMPENSATION


     The aggregate direct compensation paid or accrued on behalf of all
directors and executive officers of the Company as a group during the 2002
fiscal year and in respect of such year was approximately $1,035,000, which
includes expenses and amounts set aside or accrued to provide pension,
retirement or similar benefits (which amounts constitute the Company's entire
obligation towards said directors and executive officers in respect of severance
pay), as well as annual consultancy fees paid to certain directors, amounts
expended by the Company for automobiles made available to its officers
(excluding insurance premiums paid in respect of Directors & Officers' Liability
Insurance). See Item 7. "Major Shareholders and Related Party Transactions - B.
Related Party Transactions."



COMPENSATION OF INDIVIDUAL DIRECTORS

     Included in the aggregate director and officer compensation figure for 2002
set forth above were amounts paid pursuant to the following individual
compensation arrangements:

     MR. DANIEL KROPF. In 2002, the Company reimbursed Gamida Israel for the
services of Mr. Kropf as its active chairman at the rate of $10,000 per month
(plus VAT).

     MR. ISRAEL AMIR. Mr. Israel Amir serves as a director of the Company for
which he received approximately $5,000 per month in consulting fees in 2002.

     For additional information concerning these arrangements, see Item 7,
"Major Shareholders and Related Party Transactions - Related Party and
Inter-Company Transactions."



STOCK OPTIONS

     2000 EMPLOYEE SHARE OPTION PLAN: in July 2000, the shareholders of the
Company approved the Company's 2000 Incentive Share Option Plan (the "2000
Plan") adopted by the Company's board of directors in February 2000, pursuant to
which share options in the Company may be granted to employees, directors and
consultants of the Company or any subsidiary. An aggregate of 500,000 Ordinary
Shares of the Company are reserved for issuance under the 2000 Plan, subject to
certain adjustment. The 2000 Plan is administered by the board of directors or
may be administered by an Option Committee. The Company's board of directors has
appointed the members of the Company's audit committee to also serve as the
Company's Share Option Committee.

     In 2000, the Company issued to each of the following employees, namely
Daphna Heffetz, Orna Pollack and Luly Gurevich, options to purchase 30,000
Ordinary Shares of the Company, each option exercisable during a 60-month period
as of the date of grant, in accordance with the provisions of the 2000 Plan,
into one Ordinary Share of the Company, NIS 0.04 nominal value, at an exercise
price of $1.00, subject to a vesting schedule of three years, 1/3 on each of
March 1, 2001, 2002 and 2003. The options granted to Daphna Heffetz and Orna
Pollack have expired unexercised following their departure from the Company. In
addition, in 2000, the Company granted to each of Professors Ruth Arnon and
Ethan Rubinstein options to purchase 10,000 Ordinary Shares of the Company and
to Mr. Eliezer Helfan options to purchase 20,000 Ordinary Shares of the Company,
each option exercisable during a 60-month period as of the date of grant, in
accordance with the provisions of the 2000 Plan, into one Ordinary Share of the
Company, NIS 0.04 nominal value, at an exercise price of $1.00, subject to a
vesting schedule of three years, 1/3 on each of March 1, 2001, 2002 and 2003.

     In addition, see E. "Share Ownership" below for details of certain
additional options granted by the Company.

          C.   BOARD PRACTICES

TERMS OF OFFICE

     The Company's Articles of Association, as amended, provide for a board of
directors consisting, in addition to the two External Directors to be appointed
and hold office in accordance with the provisions of the Israeli Companies Law,
1999 and any Regulations enacted thereunder, of not less than two nor more than
eight members, classified with respect to the time for which the directors
severally hold office, into up to four classes, each class to include two
directors. Of such four classes, Class A directors were to hold office initially
for a term expiring at the Annual General Meeting of the Company's shareholders
("AGM") convened in the year 1999, Class B directors to hold office initially
for a term expiring at the AGM convened in the year 2000, Class C directors to
hold office initially for a term expiring at the AGM to convene in the year 2001
and Class D directors to hold office initially for a term expiring at the AGM to
convene in the year 2002.

     At each AGM as of and following the AGM convened for the year 1999, the
successors to the class of directors whose term expired at that meeting shall be
elected to hold office for a term expiring at the AGM held in the second year
following the year of their election and until their successors have been duly
elected and qualified. directors whose terms of office have expired may be
re-elected.

     The Articles of Association of the Company provide that any director may,
by written notice to the Company, appoint another person to serve as an
alternate director, subject to the approval of the directors, and may cancel
such appointment. Any person eligible to serve as a director, other than a
serving director and/or alternate director, may act as an

                                     - 45 -
<Page>

alternate, except if the director is unable to attend a meeting of the board of
directors. In the event of a tie vote, under the Articles of Association of the
Company, the Chairman of the board casts the deciding vote.

DIRECTORS' COMPENSATION


     The Company's executive directors are not entitled to receive any separate
compensation in consideration for their services as directors of the Company.
The Company's non-executive directors receive annual fees which amounted to
$4,000 per person in 2002 on account of all services as directors, including
participation in board and audit committee proceedings. The Company's
non-executive directors for the year of 2002 were Mrs. Varda Rotter and Messers
Rolando Eisen, Eliezer Helfan, Eithan Rubinstein and Hillel Dudai.


AUDIT COMMITTEE

     The Companies Law requires that certain transactions, actions and
arrangements be approved as provided for in a company's Articles of Association,
in certain cases, by the audit committee of the company's board of directors,
whose members meet certain criteria of independence as defined in the Companies
Ordinance and by the board of directors itself and in certain circumstances,
shareholder approval is also required. The vote required by the audit committee
and the board of directors for approval of such matters, in each case, is a
majority of the disinterested directors participating in a duly convened
meeting. The Company's audit committee is comprised of Prof. Varda Rotter,
Professor Ethan Rubinstein and Mr. Eliezer Helfan. Due to the recent resignation
of Mr. Hillel Doudai, one of the Company's external directors, who served as a
director for approximately three years, the Company is in the process of naming
a new director in his place and expects to complete the process shortly.

     D.   EMPLOYEES

     As of December 31, 2002, the Company (directly and through its
subsidiaries) employed at its facilities 119 persons, of whom 27 were employed
in production, 8 in research and development and 84 in marketing, administration
and management.

     The Company's employees are generally required to sign a non-disclosure
agreement covering the Company's proprietary information which they may possess
or have access to.

     Certain provisions of the collective bargaining agreements between the
Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of
Economic Organizations (including the Industrialists' Association) are
applicable to the Company's Israeli employees by order of the Israeli Ministry
of Labor. These provisions concern mainly the length of the workday, minimum
daily wages for professional workers, contributions to a pension fund, insurance
for work-related accidents, procedures for dismissing employees, determination
of severance pay and other conditions of employment. The Company generally
provides its employees with benefits and working conditions beyond the required
minimums. Furthermore, under collective bargaining agreements, the wages of some
of the Company's senior employees are partially linked to the Israeli consumer
price index.

     A general practice in Israel, which is followed by the Company, although
not legally required, is the contribution of funds on behalf of its senior
employees to a "Manager's Insurance" fund. This fund provides a combination of
savings plan, insurance and severance pay benefits to the employee, giving the
employee a lump sum payment upon retirement and securing his right to receive
severance pay, if legally entitled, upon termination of employment. The employee
contributes an amount equal to 5% of his wages and the employer contributes an
additional 13.3% to 15.8%. In addition, Israeli law generally requires severance
pay upon the retirement or death of an employee or termination of employment
without due cause. Furthermore, Israeli employees and employers are required to
pay predetermined sums to the National Insurance Institute, which is similar to
the United States Social Security Administration.

          E.   SHARE OWNERSHIP

     As of December 31, 2002, none of the executive officers and directors of
the Company owned individually an amount of ordinary shares equal to or greater
than 1% of the outstanding ordinary shares, other than Mr. Kropf (indirectly, as
controlling shareholder of the parent company of Gamida) and Mr. Eisen. See Item
7. "Major Shareholders and Related Party Transactions - A. Major Shareholders".
The following table sets forth, as of December 31, 2002, the number of options
to acquire ordinary shares owned by each of the directors and officers of the
Company, the exercise prices and termination dates of such options:

                                     - 46 -
<Page>

<Table>
<Caption>
Name                 No. Options                  Exercise Price    Termination Date
----                 -----------                  --------------    ----------------
<S>                  <C>                          <C>               <C>
Yacob Ofer           62,500 granted May 1997.     $1.75             the date on which he
                                                                    ceases to serve on the
                                                                    Company's board of
                                                                    directors *

Eliezer Helfan       20,000                       $1.00             January 2005**

Ethan Rubinstein     10,000                       $1.00             January 2005**

Luli Gurevich        30,000                       $1.00             the date on which he
                                                                    ceases to serve as
                                                                    Danyel's Chief Executive
                                                                    Officer
</Table>

*    all options are vested.

**   subject to a three year vesting schedule: 1/3 on each of March 1, 2001,
     2002 and 2003.

Item 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

          A.   MAJOR SHAREHOLDERS

     The following table sets forth, as of June 20, 2003, the number of ordinary
shares owned by all shareholders known to the Company to own beneficially more
than 5% of the Company's ordinary shares.

<Table>
<Caption>
                                          Number of Ordinary     Percentage of all Ordinary Shares
Name and Address                          Shares NIS 0.04        NIS 0.04 Owned Outstanding (1)
----------------                          ---------------        ------------------------------
<S>                                            <C>               <C>
Gamida for Life B.V. (2)(3)(4)                 3,891,259         51%
Drentestraat 24BG
1083 HK Amsterdam
The Netherlands

Mr. Rolando Eisen (4)                          1,122,317         15%
24 Geiger St.
Tel Aviv, Israel
</Table>

----------
1.   Based on 7,643,727 ordinary shares NIS 0.04 outstanding on June 20, 2003.
     Also see (2) below.

2.   Gamida now based in Amsterdam, is the principal holding company of the
     Gamida Group (formerly the Eryphile Group), which engages in research,
     development, production and distribution of products and services for
     healthcare in various territories, including France, Israel, the United
     Kingdom, Turkey and Bulgaria. As of June 20, 2003, Gamida's share ownership
     has increased by 18% from October 2001, mainly due to a private placement
     (See Item 4. "Information On The Company - A. History and Development of
     the Company - Recent Developments" above). Gamida's entire holdings in the
     Company are held by the Trust Company of United Mizrahi Bank as security
     for a loan advanced to Gamida by the Bank. In general, the pledge agreement
     grants Gamida the right to direct the voting of the pledged shares, except
     to the extent that the Bank determines in its reasonable discretion that a
     matter to be voted on would impair the value of the pledged shares. Upon
     the occurrence of a default, the Bank has the right to dispose of the
     shares, subject to complying with the terms of the pledge agreement.

3.   Mr. Daniel Kropf, who serves as Chairman of the Company's board of
     directors and who served as the Company's Chief Executive Officer from
     January 2000 until January 2003, is the controlling shareholder of the
     parent company of Gamida.

                                     - 47 -
<Page>

4.   Mr. Eisen, a member of the Company's board of directors, acquired the
     shares of Healthcare held by Rosebud Medical Ltd. ("Rosebud") in 2000.
     Pending completion of the formal transfer of such shares to Mr. Eisen,
     Rosebud and Mr. Eisen have executed a letter of agreement, pursuant to
     which all rights attached to such shares, including the right to vote the
     same at shareholders' meetings, have been unconditionally and irrevocably
     transferred and assigned to Mr. Eisen.

     As of June 20, 2003, there were 7,643,727 ordinary shares outstanding owned
by 90 holders of record and approximately 300 beneficial holders. This number
includes 70 holders of record with United States addresses, who own an aggregate
of approximately 2.3 million or 30% of the Company's ordinary shares.

          B.    RELATED PARTY AND INTER-COMPANY TRANSACTIONS

     The following is a description of certain transactions between the Company
and its parent company, its affiliates, its officers, its subsidiaries, and
other matters. The management of the Company believes that the related party
transactions described hereinafter (not inclusive of transactions between the
Company and its wholly-owned subsidiaries or among the subsidiaries) have been
at least as favorable to the Company as it could have negotiated with unrelated
third parties.

                                     - 48 -
<Page>

SERVICES ARRANGEMENTS

     GAMIDA GROUP

     Following approval by the Company's board of directors and audit committee
in November 1999 and March 2000, the Company's shareholders approved the payment
of annual services fees equal to the lower of (i) an aggregate of $120,000 and
(ii) zero point eight percent (0.8%) of the Company's gross consolidated annual
turnover (the "Fees") to Gamida Israel for the services of Mr. Daniel Kropf as
active chairman of the Company's board of directors. The Fees shall be paid on a
monthly basis, plus VAT at the rate legally applicable at the time of payment.
The services and payment of the Fees shall be mutually terminable upon ninety
(90) days' prior written notice by either the Company or Gamida Israel. The Fees
are paid in respect of Mr. Kropf's services commencing as of October 1, 1999.
The fees for the period from October 1999 - January 2003 have been determined at
$10,000 per month, based on (i) an aggregate of $120,000 per annum. No
additional fees were paid in respect of Mr. Kropf's services while acting as
Chief Executive Officer of the Company.

     In addition, the Israeli Companies Law allows the chairman of a company's
board of directors also to serve as its chief executive officer only for a
limited period of up to three years, subject to approval of a meeting of such
company's shareholders, upon a prescribed majority intended to allow
non-affiliates to influence such approval. The necessary approval in Mr. Kropf's
case was granted by the Company's shareholders in July 2000.

     Mr. Reuveni, the Company's newly appointed Chief Executive Officer as of
January 2003 is paid a monthly fee of $5,000.

     Until March, 2002, Gamida Israel provided the Company with financial
management, accounting and book- keeping services for an aggregate annual fee of
$316,000, which had been approved by the Company's board of directors, audit
committee and shareholders meeting. In March 2002, the Company's board of
directors, audit committee and shareholders approved a revision of the foregoing
arrangements, as a result of which the Company with effect from January 2002 is
to provide the Gamida Group as well as itself with the services previously
rendered by Gamida Israel and Gamida Group is to reimburse the Company for its
proportionate share of the expenses of providing such services. Accordingly, the
Company in 2002 received payment amounting to an annual sum of $149,000 from the
Gamida Group for such services.

     Mr. Gareth Keene, who is a director of Gamida, provides legal advice to the
Company and its subsidiaries through Gamida Israel. During 2002, Mr. Keene
provided such legal services at a cost amounting to approximately $52,000.

     YACOB OFER

     The Company and Mr. Yacob Ofer, a member of the Company's board of
directors and until January 2000 the Company's President and Chief Executive
Officer, were parties to an employment agreement dated December 30, 1997 (the
"Employment Agreement"). Pursuant to the Employment Agreement, Mr. Ofer served
as President and Chief Executive Officer of the Company. The Employment
Agreement was terminated effective as of January 2000. With effect from January
2001, Mr. Ofer serves as the Chief Executive Officer of the Gamidor Group in
consideration of a fixed fee with customary social benefits.

     PROFESSOR ETHAN RUBINSTEIN

     Professor Rubinstein served as a scientific advisor to Savyon from
September 1989 for an annual fee of $18,000, such appointment being for a term
of twelve months, but automatically renewable for additional 12-month periods.
The arrangement ceased at the end of December 2000.

     ISRAEL AMIR


     Mr. Amir serves as a director of the Company. He receives approximately $
5,000 (plus value added tax) per month from the Company as consultancy fees,
According to Mr. Amir's arrangement with the Company, he shall continue to
provide services and receive the monthly consulting fees through December 2005,
provided however that either the Company or Mr. Amir may terminate the
arrangement with three months' prior written notice to the other party. Mr. Amir
shall also be entitled to bonus payments in amounts equal to 1 to 2% of the
consideration paid in transactions involving the merger of the Company or its
subsidiaries with another entity, the purchase or sale of all or a substantial
portion of the share capital or assets of the Company or its subsidiaries or the
acquisition by the Company of all or a substantial portion of the share capital
or assets of another entity (a "Transaction") provided (a) Mr. Amir has played
an instrumental role in securing the Transaction (b) the exact amount of the
bonus shall be determined by the Chairman of the board of directors of the
Company, at his discretion; and (c) the actual payment of the bonus shall be
contingent upon approval by the Company's board of directors, and if Mr. Amir is
serving as a director at such time, by he audit committee and the Company's
shareholders also.


                                     - 49 -
<Page>

     ELIEZER HELFAN

     Mr. Helfan serves as a director and as a member of the Company's audit
committee. Mr. Helfan has also provided the Company with certain consulting
services. In May 2001, the Company's audit committee and board of directors
approved an aggregate payment of approximately $22,000, mainly in respect of his
services in relation to Savyon's acquisition of GamidaGen.

SUB-LEASE ARRANGEMENTS

     For details of sub-lease arrangements of and with the Company's
subsidiaries, affiliates etc., see Item 2. "Information on the Company - D.
Property, Plant and Equipment."

FINANCING ARRANGEMENTS

     In October 1999, the Company's board of directors approved Savyon's
acceptance of a loan from Bank Leumi Le Israel in an amount in Swiss Francs
equivalent to $190,000 for a period of three years to be repaid in monthly
installments. Savyon transferred such loan to the Gamidor Group, which undertook
to repay the loan directly to the bank and execute a guarantee in favor of the
bank for the sums owed by Savyon within a limit of $190,000, subject to certain
other terms and conditions. The loan was repaid on June 5, 2003. The Company's
board of directors and audit committee have in January 2000 further approved the
granting of certain loans to certain of the Company's subsidiaries in an
aggregate amount of $500,000, which loans were converted into capital notes on
May 31, 2000.

     During October 2001, Gamida invested $1.58 million in return for 2 million
of the Company's ordinary shares. (as detailed in: `Item 4 - History and
Development of the Company')

SALE OF CERTAIN DISTRIBUTION ACTIVITIES OF THE COMPANY

     Following the acquisition of Gamida-Gen Marketing, most of its direct
activities were, from time to time, assigned and transferred to other Healthcare
subsidiaries (Danyel and Gamidor Diagnostics). The remaining activities of
Gamida-Gen Marketing consisted mainly of the distribution of chemicals and
consumable laboratory products. In March 2000, the Company's board of directors
resolved that, in light of the poor results obtained by Gamida-Gen Marketing in
1999 from its remaining business (losses of $0.21 million from sales of
approximately $0.95 million), and having regard to the fact that such remaining
business deviated from the Company's main fields of activity (medical
diagnostics and biotechnology), that business was deemed to constitute a
cumbersome asset which generated losses rather than profit. In view of there
being no skilled management personnel for such business available within the
Healthcare group and since any recruitment of the same was likely to require
substantial investment, the board approved the sale of Gamida-Gen Marketing's
activities to Gamida Biochem Ltd., a subsidiary of Gamida.

ACQUISITION OF GAMIDAGEN

         In January 2001, the Company acquired all of the issued and outstanding
shares of GamidaGen in exchange for the issuance to the GamidaGen shareholders
of an aggregate of 1,000,000 ordinary shares (representing approximately 18% of
the Company's issued and outstanding share capital following such issuance), of
which 500,000 were to be held in escrow for a period of one year from the date
of the transaction to secure certain indemnity undertakings of the GamidaGen
shareholders. In addition, GamidaGen's shareholders waived all claims against
GamidaGen (other than with respect to one of the shareholders' employment
agreement with GamidaGen, and with respect to a guarantee of up to $275,000 of
GamidaGen's debts towards an Israeli commercial bank provided by DMI Investments
B.V., which was to be assumed by Healthcare subject to certain conditions which
have not yet been met.) Savyon waived GamidaGen's debts in respect of services
and rent aggregating approximately $300,000. GamidaGen's aggregate outstanding
debt to third parties (including

                                     - 50 -
<Page>

banks) as of the date of the transaction was approximately $0.7 million, of
which approximately $130,000 constituted debts to Gamida in respect of certain
management and other services rendered.

     The agreement also provided for the registration under the Securities Act
of 1933 of the ordinary shares issued to the GamidaGen shareholders. The Company
has filed a registration statement in the United States to comply with this
requirement, but the registration statement has not yet been declared effective
(as of the date of this report).

     The major shareholder of GamidaGen was Gamida, which owned 88% of
GamidaGen's issued and outstanding share capital (including 15% that Gamida
acquired for $320,000 from certain other shareholders of GamidaGen following the
execution of the acquisition agreement with the Company). The remaining 12% of
GamidaGen was owned by shareholders who were unaffiliated with the Company's
shareholders. In January 2001, the Company transferred all of the GamidaGen
shares to its wholly owned subsidiary, Savyon, in consideration for $750,000.
Such transfer was effected primarily in order to facilitate a focused management
structure and control. The Company legally merged GamidaGen into Savyon as of
December 31, 2001, the merger being subject to the approval of the Israeli tax
authorities and Companies Registrar.

          C.    INTERESTS OF EXPERTS AND COUNSEL

     Not Applicable.

Item 8.   FINANCIAL INFORMATION

          A.    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See Item 19. "Financial Statements and Exhibits" below.

EXPORT SALES

The following table sets forth the total amount of export sales by the Company
in its past three fiscal years and the percentage of export sales in the total
amount of the Company's sales volume:

<Table>
<Caption>
--------------------------------------------------------------------------------
        Year              Export (in millions)         Export as a percentage
--------------------------------------------------------------------------------
        <S>                       <C>                           <C>
        2000                      $3.5                          23%
--------------------------------------------------------------------------------
        2001                      $3.5                          22%
--------------------------------------------------------------------------------
        2002                      $3.3                          20%
--------------------------------------------------------------------------------
</Table>

LEGAL PROCEEDINGS

     The Company is not currently involved in any material legal proceedings and
there are no material legal proceedings pending against it, with the exception
of a legal claim that was filed in February 2003 against the Company and Savyon
in an amount of approximately $166,000, by a former employee concerning
termination of employment. The Company believes that it will not be required to
make any material payment with respect to this claim in excess of the provisions
that have been made in the financial statements.

DIVIDEND POLICY

     The Company has never paid a cash dividend on its ordinary shares. In the
foreseeable future, the Company intends to retain earnings for use in its
business, but does not rule out the possibility of paying cash dividends in the
appropriate circumstances. Future dividend policy will be determined by the
board of directors, and will depend upon the Company's earnings and financial
condition, capital requirements and other relevant factors, including the impact
of the distribution of dividends on the Company's tax liabilities. Declaration
of any final annual cash dividend requires shareholder approval, which may
reduce but not increase such dividend from the amount proposed by the board.

                                     - 51 -
<Page>

          B.   SIGNIFICANT CHANGES

     See Item 5. "Operating and Financial Review and Prospects - E. Trend
Information" above.

Item 9.   THE OFFER AND LISTING

          A.   OFFER AND LISTING DETAILS

     The Company's ordinary shares are traded in the NASDAQ SmallCap Market
under the symbol HCTL, amended from HCTLF effective as of May 28, 1999. The
following table sets forth for the periods indicated the closing representative
high and low sales price quotations of the Company's ordinary shares as reported
by NASDAQ. These quotations are not adjusted for retail mark-up, mark-down or
commissions and do not necessarily represent actual transactions.

     (i)  Annual high and low market prices for the last five fiscal years:

<Table>
<Caption>
                Fiscal Year             High(*)               Low(*)
                -----------             -------               ------
                <S>                      <C>                   <C>
                1998                     2.0000                0.8750
                1999                     1.5000                0.7500
                2000                     3.8438                0.7812
                2001                     1.0300                0.4800
                2002                     0.68                  0.2
</Table>

    (ii)  High and low market prices for each full financial quarter for
the two most recent fiscal years:

<Table>
<Caption>
                                        High (*)              Low (*)
                                        --------              -------
                2001
                ----
                <S>                      <C>                   <C>
                First Quarter            $1.03                 $0.62
                Second Quarter            1.00                  0.62
                Third Quarter             0.90                  0.62
                Fourth Quarter            0.85                  0.48

</Table>

<Table>
                                        High (*)              Low (*)
                                        --------              -------
                2002
                ----
                <S>                      <C>                   <C>
                First Quarter            0.60                  0.42
                Second Quarter           0.68                  0.38
                Third Quarter            0.51                  0.34
                Fourth Quarter           0.67                  0.2
</Table>

                                     - 52 -
<Page>

    (iii) High and low market prices each month for the most recent six months.


<Table>
<Caption>
                Month                   High                  Low
                -----                   ----                  ---
                <S>                     <C>                   <C>
                December, 2002          $0.6                  0.26
                January, 2003            0.54                 0.34
                February, 2003           0.4                  0.25
                March, 2003              0.36                 0.25
                April, 2003              0.55                 0.25
                May, 2003                0.62                 0.34
                June, 2003               0.78                 0.51
</Table>



Item 10.  ADDITIONAL INFORMATION

          A.    SHARE CAPITAL

     Not Applicable

          B.    MEMORANDUM AND ARTICLES OF ASSOCIATION

     PURPOSES

     The Company is an Israeli public company that is subject to the Companies
Law and the Companies Ordinance. Its corporate registry number is 52-003621-1.

     The principal objects and purposes of the Company, as set forth in Section
2 of its Memorandum of Association, are to initiate, promote, advance
investments and to finance such activities in projects involving research and
development in the fields of healthcare, science, technology, life science,
industry, medicine, agriculture and any other field.

     INTERESTED PARTY REQUIREMENTS

     Under the Israeli Companies Law, 1999 ("Companies Law") which, effective as
of February 1, 2000, replaced the Companies Ordinance (New Version), 1983
("Companies Ordinance") (other than certain specific sections), Israeli
companies whose securities are publicly held are required to appoint at least
two external directors (the "External Directors") elected at a General Meeting
of a company's shareholders by a prescribed majority intended to allow
non-affiliates to influence such election. Such companies whose securities are
listed for trade on stock exchanges outside of Israel may, by resolution of the
board of directors (without shareholder approval), deem a director who is
presently serving on such company's board of directors to be an External
Director provided that such director qualifies under certain requirements of the
Companies Law.

     The Companies Law details certain standards for the independence of
External Directors. These directors must be residents of Israel and unaffiliated
with the company on whose board they serve and such company's principals. They
are entitled to obtain all information relating to such company's management and
assets and to receive assistance, in special cases, from outside experts at the
expense of the company. The law imposes an obligation on these directors to
convene a meeting of a company's board of directors upon becoming aware of
matters that suggest infringements of law, neglect of good business practice or
improper conduct.

     An External Director shall be appointed for a period of three consecutive
years and may be re-appointed for one additional three-year period only. Under
the Companies Law, any committee of the board of directors must include at least
one External Director, and the audit committee must include all of the External
Directors.


     In July 2000, the Company's shareholders appointed Mr. Hillel Doudai as an
External Director of the Company. Mr Dudai served for approximately three years
and resigned from the Company's board and audit committee effective May 27, 2003
for personal reasons. Although, the Company has yet to name a replacement, it is
in the process of doing so and expects to name a new external director in his
place shortly.



                                     - 53 -
<Page>

     In October 2001, the Company's shareholders appointed Prof. Varda Rotter in
the same capacity.

     Under the Companies Law, Israeli companies whose securities are publicly
traded are also required to appoint an Internal Auditor in accordance with the
proposal of the audit committee. The role of the Internal Auditor is to examine,
inter alia, whether the Company's actions comply with the law, integrity and
orderly business procedure. In November 2000, Mr. Yossi Ginosar was appointed as
the Company's Internal Auditor.

     As permitted by the Companies Law and the Company's Articles, the Company
has agreed to indemnify and insure its directors and senior officers against
certain liabilities which they may incur in connection with the performance of
their duties. Under the terms of such indemnification provisions, the Company
may, to the extent permitted by law, advance funds for their legal expenses in
connection with such indemnification.

     The Companies Law requires disclosure by an Office Holder to the company in
the event that an Office Holder has a direct or indirect personal interest in
transactions to which the company intends to be a party. An "Office Holder" is
defined in the Companies Law as a director, managing director, chief business
manager, executive vice president, vice president, other manager directly
subordinate to the managing director and any other person assuming the
responsibilities of any of the foregoing positions without regard to such
person's title.

     Approval by the audit committee and/or the board of directors is required
for such matters as: (i) certain transactions to which the company intends to be
a party and in which an Office Holder, a controlling shareholder and/or certain
other parties (including affiliates of the aforementioned) have a direct or
indirect personal interest, (ii) actions or arrangements which could otherwise
be deemed to constitute a breach by an Office Holder of fiduciary duty to the
company, (iii) arrangements with directors as to the term of their service, (iv)
indemnification and/or insurance of Office Holders, and (v) certain transactions
defined in the Companies Law as extraordinary transactions (a transaction which
is not in the ordinary course of business or is not at market conditions, or a
transaction which is likely to have a material impact on the profitability,
property or obligations of the Company).

     Arrangements with directors regarding their service (including their
indemnification and/or insurance), extraordinary transactions between a public
company and controlling shareholders, a private placement to a principal
shareholder (a holder of 5% or more of a company's issued share capital or
voting rights) or due to which a shareholder will become a principal shareholder
and, in certain circumstances, the other matters enumerated above, may also
require shareholder approval.

     Office Holders (including directors) with respect to whom the foregoing
matters are brought for board or audit committee approval are not entitled to be
present during discussions of, nor participate in the vote for approval of such
matters at board and/or audit committee meetings, unless a majority of audit
committee or board members, as the case may be, have a personal interest in such
matter or the matter involves non-extraordinary transactions between the company
and either an Office Holder or a third party in which an Office Holder has a
personal interest. The Companies Law further provides that in the event that a
majority of board members have a personal interest in such a matter, it also
requires shareholder approval.

     DESCRIPTION OF SHARE CAPITAL

     DESCRIPTION OF SHARES. Set forth below is a summary of the material
provisions governing the Company's share capital. This summary is not complete
and should be read together with the Company's Memorandum and Articles of
Association, copies of which have been filed as exhibits to the Annual Report.

     As of December 31, 2002, the Company's authorized share capital consisted
of 40,000,000 ordinary shares, NIS 0.04 nominal value. As of December 31, 2002,
there were 7,643,727 ordinary shares and no preferred shares issued and
outstanding.

     DESCRIPTION OF ORDINARY SHARES. All issued and outstanding ordinary shares
of the Company are duly authorized and validly issued, fully paid and
non-assessable. The ordinary shares do not have preemptive rights. Neither the
Company's Memorandum and Articles of Association nor the laws of the State of
Israel restrict in any way the ownership or voting of ordinary shares by
non-residents of Israel, except with respect to subjects of countries which are
in a state of war with Israel.

                                     - 54 -
<Page>

     DIVIDEND AND LIQUIDATION RIGHTS. Subject to the rights of the holders of
shares with preferential or other special rights that may be authorized, the
holders of ordinary shares are entitled to receive dividends in proportion to
the sums paid up or credited as paid up on account of the nominal value of their
respective holdings of the shares in respect of which the dividend is being paid
(without taking into account the premium paid up on the shares) out of assets
legally available therefore and, in the event of the Company's winding up, to
share ratably in all assets remaining after payment of liabilities in proportion
to the nominal value of their respective holdings of the shares in respect of
which such distribution is being made, subject to applicable law. The board of
directors may declare interim dividends and recommend a final annual dividend
only out of profits and in such amounts as the board of directors may determine.
Declaration of the final annual dividend requires shareholder approval at a
general meeting, which may reduce but not increase such dividend from the amount
recommended by the board of directors.

     In case of a share dividend, holders of shares can receive shares of a
class whether such class existed prior thereto or was created therefor or shares
of the same class that conferred upon the holders the right to receive such
dividend.

     VOTING, SHAREHOLDER MEETINGS AND RESOLUTIONS. Holders of ordinary shares
have one vote for each ordinary share held on all matters submitted to a vote of
shareholders. Such rights may be affected by the future grant of any special
voting rights to the holders of a class of shares with preferential rights. Once
the creation of a class of shares with preference rights has been approved, the
board of directors may issue preferred shares, unless the board is limited from
doing so by the Articles of Association or a contractual provision.

     An annual general meeting must be held once every calendar year at such
time (not more than 15 months after the last preceding annual general meeting)
and at such place, either within or outside the State of Israel, as may be
determined by the board of directors. The quorum required for a general meeting
of shareholders consists of at least two shareholders present in person or by
proxy and holding, or representing, more than one-third of the total voting
rights in the Company on the record date for such meeting. A meeting adjourned
for lack of a quorum may be adjourned to the same day in the next week at the
same time and place, or to such time and place as the board of directors may
determine. At such reconvened meeting, if a quorum is not present within half an
hour from the appointed time, any two shareholders present in person or by proxy
(and not in default under the Articles) will constitute a quorum. Shareholder
resolutions generally will be deemed adopted if approved by the holders of a
majority of the voting power represented at the meeting, in person or by proxy,
and voting thereon. Shareholder resolutions for amending the Company's
Memorandum and/or Articles of Association, including making changes in the
Company's capital structure, approving mergers with or into the Company and/or
the Company's liquidation, will be deemed adopted if approved by the holders of
75% of the voting power represented at the meeting, in person or by proxy,
entitled to vote and voting on the resolution. In addition, the Companies Law
provides for certain extraordinary majorities for the approval of certain
related party transactions, nomination of External Directors, authorizing a
chairman of a company's board of directors to also act as its general manager,
as well as certain arrangements between a company and its shareholders and/or
creditors.

     SHAREHOLDERS' DUTIES. Under the Companies Law, a shareholder has a duty to
act in good faith towards the Company and other shareholders and to refrain from
abusing his power in the company, including, among other things, when voting at
the general meeting of shareholders on the following matters:

          -  any amendment to the Articles of Association;

          -  an increase of the authorized share capital of the Company;

          -  a merger; or

          -  approval of certain acts and transactions which require shareholder
             approval.

     In addition, a shareholder has the general duty to refrain from depriving
other shareholders of their rights. Furthermore, any controlling shareholder,
any shareholder who knows that he possesses the power to determine the outcome
of a shareholder vote and any shareholder who, pursuant to the Articles of
Association, has the power to appoint an office holder is under a duty to act in
fairness towards the company. The Companies Law does not describe the substance
of this duty.

     ANTI-TAKEOVER PROVISIONS UNDER ISRAELI LAW. Under the Companies Law, a
merger is generally required to be approved by the shareholders and board of
directors of each of the merging companies. If the share capital of the company
that will not be the surviving company is divided into different classes of
shares, the approval of each class is also required. The Companies Law provides
that the articles of association of companies, such as the Company, that were
incorporated prior to February 1, 2000 are deemed to include a provision whereby
the approval of a merger requires a majority of three quarters of those present
and voting at a general meeting of shareholders. In addition, a merger can be
completed only after

                                     - 55 -
<Page>

all approvals have been submitted to the Israeli Registrar of Companies and at
least seventy days have passed from the time that a proposal for approval of the
merger was filed with the Registrar.

     The Companies Law provides that an acquisition of shares in a public
company must be made by means of a tender offer if, as a result of the
acquisition the purchaser would become a 25% shareholder of the company. This
rule does not apply if there is already another 25% shareholder of the company.
Similarly, the Companies Law provides that an acquisition of shares in a public
company must be made by means of a tender offer if, as a result of the
acquisition, the purchaser would become a 45% shareholder of the company, unless
someone else already holds 50% of the voting power of the company. These rules
do not apply if the acquisition is made by way of a merger. Regulations
promulgated under the Companies Law provide that these tender offer requirements
do not apply to companies whose shares are listed for trading outside of Israel
if, according to the law in the country in which the shares are traded,
including the rules and regulations of the stock exchange on which the shares
are traded, either:

     -    there is a limitation on acquisition of any level of control of the
          company; or

     -    the acquisition of any level of control requires the purchaser to do
          so by means of a tender offer to the public.

However, under the Companies Law, if following any acquisition of shares the
acquirer holds 90% or more of the company's shares or of a class of shares, the
acquisition must be made by means of a tender offer for all of the target
company's shares or all the shares of the class, as applicable. An acquirer who
wishes to eliminate all minority shareholders must do so by way of a tender
offer and acquire 95% of all shares not held by or for the benefit of the
acquirer prior to the acquisition. If, however, the tender offer to acquire 95%
is not successful, the acquiror may not acquire shares tendered if, by doing so
the acquiror would own more than 90% of the shares of the target company.

     Finally, Israeli tax law treats specified acquisitions, including a
share-for-share swap between an Israeli company and a non-Israeli company, less
favorably than does U.S. tax law. For example, Israeli tax law may subject a
shareholder who exchanges his ordinary shares for shares in a non-Israeli
corporation to immediate taxation, although the tax event can be postponed in
certain cases for 2 to 4 years upon approval of the tax authorities.

     TRANSFER OF SHARES AND NOTICES. Fully paid ordinary shares are issued in
registered form and may be transferred freely, subject to applicable securities
law requirements. Each shareholder of record is entitled to receive at least 21
days' prior notice of shareholders' meetings. For purposes of determining the
shareholders entitled to notice and to vote at such meetings, the board of
directors may fix the record date not exceeding 60 days prior to the date of any
general meeting.

     MODIFICATION OF CLASS RIGHTS. If at any time the share capital is divided
into different classes of shares, the rights attached to any class (unless
otherwise provided by the Company's Articles of Association) may be modified or
abrogated by the Company by a special resolution, subject to the consent in
writing of the holders of the issued shares of the class, or by the adoption of
a special resolution passed at a separate general meeting of the holders of the
shares of such class.

     ACCESS TO INFORMATION. The Company files reports with the Israeli Registrar
of Companies regarding its registered address, its registered capital, its
shareholders and the number of shares held by each, the identity of the
directors and details regarding security interests on its assets. In addition,
Healthcare must file with the Israeli Registrar of Companies its Articles of
Association and a copy of any special resolution adopted by a general meeting of
shareholders. The information filed with the Registrar of Companies is available
to the public. In addition to the information available to the public, the
Company's shareholders are entitled, upon request, to review and receive copies
of all minutes of meetings of the Company's shareholders.

     TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Company's ordinary shares is Continental Stock Transfer & Trust Company.

          C.   MATERIAL CONTRACTS

     The Company, directly and/or through certain of its subsidiaries, is a
licensee of issued (or applications pending relating to) patents and designs
belonging to certain research institutions and other third parties in Israel and
certain other countries. The Company is also a licensee of certain manufacturing
and/or marketing rights relating to technologies and/or products developed by
third parties. The following is a summary description of certain principal
license agreements pursuant to which the Company has been appointed as licensee
of certain rights to certain know-how, as well as certain other material
agreements to which the Company and/or certain of its subsidiaries are party.

                                     - 56 -
<Page>

     SAVYON

     ADVANCED PRODUCTS AGREEMENT: Under an agreement dated October 1983 with
B.G. Negev Technologies and Application Ltd., formerly Advanced Products
Beer-Sheva Ltd. ("Advanced Products") as agent for Ben-Gurion University, the
Company is the exclusive licensee for the know-how regarding enzymatic and
radioimmuno methods for the determination of specific antibodies of the types
IgA, IgG and IgM to certain infectious diseases (which know-how is a substantial
part of the technology underlying the Company's diagnostic kits for certain
infectious diseases), including improvements thereto and the right of first
refusal for innovations.

     The term of the license is at least seven years commencing with the start
of sales of each product produced under the license or, if there be a patent in
any country for the original know-how or any improvement of the know-how, for
the life of the patent. Royalties are payable under the agreement for a period
of at least seven years, commencing with the start of sales of each product
produced under the license or, if there is a patent, for the life of the patent.
Where there is no patent registration, the term of the license may be unlimited.
Royalties range from 7% on annual sales up to $200,000, decreasing to 4% for
annual sales volume exceeding $2,000,000. Although minimum sales quantities are
required to maintain the license, minimum royalties of $25,000 per year may be
paid in lieu thereof. The Agreement has been amended with regard to the
SeroELISA Chlamydia series of products, providing for royalties on sales of such
products at rates varying between 3.5% to 4% of sales until December 31, 2001,
and with respect to the IPAzyme series of products, providing for royalties on
sales of such products, commencing January 1, 1995, at a rate of 4% of sales
until the earlier of June 30, 1998 or the last date of sales of such products.
The agreement requires the consent of the appropriate authorities of the
University to sub-license production rights except to sub-contractors of the
Company. If the Company decides not to market the products utilizing the
know-how, the license will terminate and thereafter the Company will be
restricted from engaging in research or marketing relating to the know-how for a
period of three years. The Company has the right to terminate the agreement at
any time, in which event it would have no further rights to the know-how.

     SAVYON-YISSUM AGREEMENTS On March 20, 1996, the Company entered into an
agreement with Yissum Development Corporation of the Hebrew University in
Jerusalem ("Yissum") for conducting research with respect to Piezoelectric
electrodes for human medical diagnostic applications. Royalties were to be
payable under the agreement at a rate of 4-6% of sales and 38% of sub-license
fees. In addition, the Company agreed to pay Yissum non-refundable minimum
royalties of $12,000 per year, commencing January 1, 1999, which were to
constitute an advance on royalties subsequently becoming due. The agreement
provided that Yissum would retain all proprietary rights to the results of the
relevant research and that the Company would be the exclusive licensee for
utilizing the know-how developed in such research for the development of
products based on that know-how. In January 2002, the Company formally notified
Yissum of its wish to terminate the agreement and to surrender to Yissum all of
its rights and licenses thereunder.

     RAMOT AGREEMENTS: In September 1987, the Company entered into an agreement
with Ramot - University Authority for Applied Research & Industrial Development
Ltd., a company engaged in the commercial exploitation of scientific
developments of Tel-Aviv University ("Ramot"), pursuant to which the Company
undertook to fund research conducted by Ramot on the isolation of bacteria from
liquids.

     According to the agreement, Ramot will retain proprietary rights to the
know-how resulting from the research, and the Company will receive an exclusive
worldwide license for utilizing the know-how and results of the research for the
development, manufacture and marketing of diagnostic products. Royalties are
payable at the rate of 5% or 3% respectively, depending on whether a patent has
been registered or not. Through December 31, 2001, Ramot was entitled to
approximately $25,000 in royalties from the Company with respect to this
agreement, which amount has been paid in full. Through November 15, 2002, Ramot
was entitled to approximately $19,000 in royalties from the Company with respect
to this agreement, which amount has been paid in full. On November 15, 2002,
following the sale of the Diaslide manufacturing line (See Item 4.B: Business
Overview), the Company assigned the Ramot agreement to the purchaser of the
Diaslide manufacturing line.

     WRF AGREEMENT: In accordance with an agreement dated October 26, 1994
between the Company and the Washington Research Foundation ("WRF"), the Company
has been granted a worldwide non-exclusive license to make, have made, market,
distribute and sell products which use certain licensed rights or know-how
relating to diagnostic methods for the detection of chlamydia pneumoniae in a
defined field of use. In accordance with the agreement, the Company paid WRF a
license fee of $30,000, to which an additional $10,000 was, in accordance with
the agreement, added on the anniversary of the agreement date and credited
against future royalties. In addition, the Company undertook to pay,
semi-annually, royalties at a rate of 7% of net sales, and an annual license
administration fee of $3,500. The agreement is for a term of 17 years from its
execution, or until the last remaining patent rights thereunder expire,
whichever is later.

                                     - 57 -
<Page>

Other than termination upon breach and bankruptcy/insolvency, the Company may
terminate the agreement upon 60 days' written notice.


     CHEMAG CONSORTIUM: Savyon is a member of a consortium ("CHEMAG Consortium")
engaged in a research and development project into "novel paramagnetic
materials, surface activation and nucleic acid modification chemistries for
application in biology, chemistry, health/medicine/diagnostics and the
environment" ("CHEMAG Project"). The partners in the CHEMAG Consortium are
Professor Ian Bruce of Greenwich University (UK), Professor Jean-Paul Lellouche
of Bar-Ilan University (Israel), Istituto Zooprofilattico Sperimentale
dell'Umbria e delle Marche (Italy), Nexttec GmbH (Germany), Proligo GmbH
(Germany), Tecna SrL (Italy) and Savyon. The work plan covers three overlapping
areas of materials science and materials chemistry: paramagnetic nano-particles,
surface activation chemistries and novel phosphoramidites for DNA/RNA
modification.




     The CHEMAG Consortium is funded by the EU's 5th Framework Program (FP5)
with a total budget of (euro)4.9 million expendable over a three-year period.
The CHEMAG Project commenced in September 2001. Savyon's budget for this program
over the three-year period of the CHEMAG Project is (euro)930,249, of which it
is entitled to claim a contribution of one half from the EU through FP5, i.e. a
total contribution not exceeding (euro)465,125. An advance payment of
(euro)186,000 was made to Savyon in October 2001, Savyon expects to rerceive an
additional (euro)150,000 during 2003 and the remainder during 2004. According to
the agreement unless agreed upon through mutually satisfactory licensing
agreements the ownership of Savyon's intellectual property rights, patents,
patent applications, registered designs or copyrights may not be used by any
other partner of the consortium. With regards to exploitation of any
intellectual property rights whatsoever, patents, patent applications,
registered designs or copyrights resulting from the performance of the project a
separate contract between the consortium's partners will be made hitherto.
Savyon will be held in default upon breach of any of the obligations imposed by
the consortium as well as bankruptcy.


     PROCHON AGREEMENT: in February 2002, Savyon entered into a collaboration
agreement with ProChon Biotech Ltd. ("ProChon") for the development and
commercialization of a genetic kit for the diagnosis of mutations associated
with forms of bladder cancer. During March 2003, the prototype was completed by
Savyon and currently Prochon is responsible for the clinical evaluation of the
kit, which is estimated to continue for about one year. Savyon is to grant
ProChon an exclusive license for the use of the Pronto(TM) technology in the
worldwide commercialization of the relevant kits, in return for which ProChon is
to pay Savyon 5% royalties ProChon will be entitled to sub-license its rights
upon terms consistent with those of its own license. The agreement will be
subject to early termination for material breach (having not been remedied by
the party in default within 90 days or, in the case of a financial breach, 30
days of receipt of written notice from the other party), but will otherwise
continue for so long as ProChon exercises its license, whether directly or
through its affiliates or sub-licensees.

     HEALTHCARE, SAVYON AND PROCOGNIA

     PROCOGNIA (ISRAEL) SERIES A INVESTMENT: In September 2000, Procognia
(Israel) signed a share purchase agreement with Koor Corporate Venture Capital
I.P. ("Koor") and Israel Discount Capital Markets and Investments Ltd.
("Discount"). Pursuant to such agreement, Koor and Discount undertook, except in
certain circumstances, to purchase convertible debentures of Procognia (Israel)
for $3,000,000 no later than September 10, 2001. According to an agreement
subsequently signed in September 2001, both Koor and Discount (collectively, the
"Series A Investors") invested a sum amounting to $2,000,000 in convertible
debentures. The latter investment was made in four installments and completed in
March 2002.

     PROCOGNIA SERIES B INVESTMENT: Effective April 29, 2002, certain new
investors (the "Series B Investors") have contributed $13.05 million of new
financing to the Procognia business. In addition, $1.25 million of the existing
loans from the Series A Investors have been converted to equity (at a conversion
price representing a 20% discount from the price per share in the Series B
round), while $0.75 million of the new investment has been exployed to clear the
balance of Koor's loan.

     Prior to such new investment, Procognia (Israel) reorganized its corporate
structure by forming a new parent company registered in England, Procognia Ltd.
("Procognia"), pursuant to an agreement whereby all the existing shareholders of
Procognia (Israel) undertook to transfer to Procognia their entire shareholdings
in Procognia (Israel) in consideration of the issue to them of equivalent
shareholdings in Procognia, so that the shareholdings in Procognia immediately
following the reorganization would mirror the shareholdings in Procognia
(Israel) immediately prior to such transaction. Upon completion of the
transaction, Healthcare and another existing Procognia (Israel) shareholder
received

                                     - 58 -
<Page>

ordinary shares in Procognia, whereas the Series A Investors and the
Series B Investors received preferred shares carrying certain dividend and
liquidation preferences and veto rights. After taking account of a new Employee
Share Option Scheme and certain anti-dilution provisions existing in favour of
the Series A Investors, Healthcare's 59% holding in Procognia (Israel) prior to
the transaction was reduced to one of 14.4% in Procognia upon its completion
(all on a fully diluted basis).

     DANYEL

     DANYEL AGREEMENT: Danyel is an 80% owned subsidiary of the Company, the
remaining 20% being owned by Mr. Luly Gurevich, who also provides general
management services to Danyel through a consultancy company under his full
control. The agreement provides Mr. Gurevich with certain rights to require
Healthcare to acquire his shareholdings in Danyel upon termination of his office
as General Manager. The agreement further provides the parties with the right to
appoint a certain number of members to Danyel's board of directors (to consist
of up to 5 members, of which one shall be Mr. Gurevich). In accordance with the
agreement, Mr. Gurevich was formally appointed as Danyel's first General Manager
as of January 1999. The Company acknowledges Mr. Gurevich's entitlement to
specific terms of an employment agreement as of January 1, 1997 (see below). The
agreement also provides Mr. Gurevich with veto rights relating to certain
matters as well as requiring a special majority for the approval of certain
others. The agreement provides for distribution of annual dividends at a rate of
up to 50% of profits, subject to certain conditions. The agreement imposes
certain restrictions on transfer and disposal of shares by the parties,
including rights of first refusal and certain tag-along rights.

     The agreement further provides for certain confidentiality and
non-competition provisions. The agreement is to continue in effect for so long
as the Company and its affiliates shall together hold at least 50% of Danyel's
issued share capital and Mr. Gurevich shall continue to be a shareholder, with
certain of the rights terminating upon a certain decrease in either party's
shareholdings

     Mr. Gurevich's employment agreement (later replaced by a services
agreement) includes, in addition to fixed salary and customary social benefits,
entitlement to options to purchase Company shares, as well as to receive 3 - 5%
of Danyel's annual profits. The agreement is for a period of five years
commencing October 1998, terminable earlier by the Company in the event of
failure to meet performance targets, as well as upon certain circumstances of
breach of fiduciary duties, bankruptcy etc. and terminable by Mr. Gurevich upon
6 months' notice.

     Pursuant to an agreement between Mr. Luly Gurevich, Healthcare and
Gamida-Gen Marketing, Gamida-Gen Marketing was entitled to 15% of Danyel's
annual sales turnover, in consideration for marketing and logistics services
provided to Danyel, for a period of 4 years ended December 31, 2002.

          D.   EXCHANGE CONTROLS

     Non-residents of Israel who purchase ordinary shares of the Company
outside of Israel will be able to receive dividends, if such be declared, and
any amounts payable upon the dissolution, liquidation or winding up of the
affairs of the Company, which will be freely repatriable in certain non-Israeli
currencies (including Dollars) at the rate of exchange prevailing at the time of
conversion, pursuant to a general permit issued by the Controller of Foreign
Currency at the Bank of Israel (the "Controller") under the Currency Control
Law, 1978, as amended in May 1998, provided that Israeli income tax has been
paid on such amounts by the holders of such ordinary shares.

     Furthermore, investments and certain other transactions outside Israel by
the Company have in the past required specific approval from the Controller.
Israeli residents, including corporations, have in the past also not been able
to purchase securities outside Israel unless the securities met the requirements
set forth in a general permit issued by the Controller under the Currency
Control Law. Pursuant to a general permit issued by the Controller in May 1998,
certain approvals and permits previously required by or from the Bank of Israel
for investments and certain transactions in foreign currency are no longer
required.

     Neither the Memorandum and Articles of Association of the Company nor the
laws of the State of Israel restrict in any way the ownership or voting of
ordinary shares by non-residents of Israel, except with respect to subjects of
countries which are in a state of war with Israel.

                                     - 59 -
<Page>

          E.   TAXATION

GENERAL CORPORATE TAX STRUCTURE

     Effective January 1, 1996 and thereafter, Israeli companies are generally
subject to Company Tax at a rate of 36% of taxable income. The effective rate
payable by a company in respect of income derived from an "Approved Enterprise"
(as further discussed below) may be considerably less.

CAPITAL GAINS TAX

     Israeli law imposes a Capital Gains Tax on the sale of certain securities
and other capital assets. Israeli Capital Gains Tax applies to non-residents of
Israel when the gain is derived from the sale of an asset located in Israel or
of an asset located outside of Israel which constitutes a right, directly or
indirectly, to an asset located in Israel. The law distinguishes between a "Real
Gain" and an "Inflationary Amount". Real Gain is the excess of the total capital
gain over the Inflationary Amount, computed on the basis of the increase in the
Israeli consumer price index (CPI) (or, at the election of a non-resident of
Israel, the Israeli currency devaluation in relation to the foreign currency
with which the shares were purchased) between the date of purchase and the date
of sale. The Inflationary Amount accumulated until December 31, 1993 is taxed at
a rate of 10% for residents of Israel (reduced to no tax for non-residents if
calculated according to the exchange rate of the foreign currency in which the
asset was purchased instead of the CPI), while the Inflationary Amount
accumulated from and after December 31, 1993 is exempt from any capital gains
tax. Real Gain is added to ordinary income which is taxed at the applicable
ordinary rates for individuals and 36% for corporations. There is currently an
exemption from Israeli Capital Gains Tax for the sale of shares of an
"Industrial Company" or an "Industrial Holding Company", as such terms are
defined under Israeli law, which are listed for trade on a stock exchange or
traded over-the-counter. To the extent the Company qualifies as an Industrial
Company or as an Industrial Holding Company, the above-mentioned exemption,
while applicable, will apply to the sale of its shares under certain
circumstances. The Company currently does not expect to qualify as an Industrial
Company or as an Industrial Holding Company.

TAXATION OF NON-RESIDENTS

     Non-residents of Israel are subject to a graduated income tax on income
derived from sources in Israel. On distributions of dividends other than bonus
shares (stock dividends), income tax at the rate of 25% is withheld at source
(subject to international treaties between Israel and other countries).
Dividends distributed from taxable income accrued during the benefit period of
an Approved Enterprise and attributable to programs designated as such are
taxable at the rate of 15%.

     For this provision to apply, the dividends must be paid within the
seven-year benefit period or within a further twelve-year period thereafter,
unless such dividends are distributed from income of a Foreign Investors'
Company, in which case the period is unlimited. Residents of the United States
generally will have withholding tax in Israel deducted at source.

     Under the Israel-US treaty relating to relief from double taxation (the
"Treaty"), the maximum tax on dividends paid to a holder of ordinary shares who
is a resident of the United States within the meaning of the Treaty and who is
entitled to claim the benefits afforded thereunder (a "Treaty U.S. Resident") is
25%. Dividends derived from income of an Israeli Company from an Approved
Enterprise will generally be subject to a 15% withholding tax. Pursuant to the
Treaty, subject to certain conditions, a Treaty U.S. Resident will not be
subject to Israeli Capital Gains Tax on sale, exchange or disposition of Shares
(unless he holds, directly or indirectly, 10% of the voting power of the Company
during any part of the 12-month period preceding such transaction) if, subject
to Israeli Capital Gains tax, such Treaty U.S. Resident would be permitted under
the Treaty to claim a credit for such taxes against the U.S. income tax imposed
with respect to such sale, exchange or disposition, subject to certain
limitations.

EFFECTIVE CORPORATE TAX RATE

     Savyon is a mixed enterprise - in part qualifying as an "Approved
Enterprise" under the Law for the Encouragement of Capital Investments,
5719-1959, as amended (the "Investment Law"). Savyon is currently the subject of
an assessment of the percentage of enterprise that is "approved" as opposed to
the percentage "unapproved" under the Investment Law. The Investment Law
provides that capital investments in production facilities (or other eligible
facilities) may, upon application to the Israel Investment Center, be designated
as an Approved Enterprise. Each certificate of approval for an Approved
Enterprise relates to a specific investment program delineated both by its
financial scope, including its capital sources and its physical characteristics,
i.e. the equipment to be purchased and utilized pursuant to the

                                     - 60 -
<Page>

program. The tax benefits derived from any such certificate of approval relate
only to taxable profits attributable to the specific program.

     The principal tax benefits under the Investment Law include: (i) reduced
Company Tax rates (25% or less, depending on the percentage of foreign
investment in the Company's share capital, until a tax rate of 10%, rather than
the prevailing Company Tax rate, or, in a "mixed enterprise", a weighted
combination of the various applicable rates) for a period of seven to ten years
commencing with the year in which the Approved Enterprise first generated
taxable income (limited to twelve years from commencement of production or
fourteen years from the date of approval, whichever is earlier); (ii) certain
government grants, or, at the company's election to forgo such grants, an
alternative package of tax benefits (the "Alternative Package") in which the
company's undistributed income derived from an Approved Enterprise will be
exempt from Company Tax for a period of between two and ten years generally
(depending on geographic location), and eligibility for other benefits under the
Investment Law for the remainder of the Benefits Period; (iii) reduced tax rates
on dividends (generally 15%), derived from income of an Approved Enterprise
during the Benefits Period, if paid during the Benefits Period or at any time
during twelve years thereafter (and in the case of dividends distributed from
income of a Foreign Investors' Company, such period is unlimited); and (iv)
charging accelerated depreciation in respect of machinery and equipment used by
the Approved Enterprise.

     Incentives received by a company in accordance with the Investment Law
remain subject to final ratification by the Israel Investment Center, such
ratification being conditional upon fulfillment of all terms of the approved
program. Failure to comply with all such terms may require the return of such
grants and incentives (inclusive of interest as of the date of the grant).

     Savyon's production facilities in Ashdod are being assessed as a hybrid
enterprise, with in part "Approved Enterprise" status under the Investment Law,
entitling Savyon to a tax exemption period of four years. Savyon has elected to
enjoy the "Alternative Package" discussed above, but has not yet fully benefited
from such status, since it has not yet generated taxable income. A final
investment report was filed by Savyon with the Israel Investment Center during
May 1999. Savyon received approval for the investments it had made until 1995
and submitted a request in 2001 for the approval of further investments made
since.

          F.   DIVIDENDS AND PAYING AGENT

     Not Applicable

          G.   STATEMENTS BY EXPERTS

     Not Applicable

          H.   DOCUMENTS ON DISPLAY

     Copies of the documents that the Company has filed or incorporated by
reference as exhibits in this Annual Report may be inspected at the public
reference facilities of the Securities and Exchange Commission at 450 Fifth
Street, N.W. Washington D.C., 20549.

                                     - 61 -
<Page>

          I.   SUBSIDIARY INFORMATION

     Not Applicable.

Item 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those discussed in the forward-looking statements. Market risk to the Company
represents risks related to changes in the value of a financial instrument
caused by fluctuations of interest rates (on carrying interest assets and
liabilities), foreign currency exchange rates (on non-U.S. Dollar denominated
assets and liabilities) and inflation and devaluation.

INTEREST RATE RISK

     At December 31, 2002, the Company had long-term loans payable carrying
fluctuating interest rates in the amount of approximately $223 thousand
(including current maturities). Market risk was estimated as the potential
increase in fair value resulting from a hypothetical 10% increase in the
year-end interest rate. Assuming such increase in the interest rate, the fair
value of the Company's long-term loans would increase by approximately $1,000.

FOREIGN CURRENCY EXCHANGE RISK

     At December 31, 2002, the Company had non U.S. Dollar denominated assets
(i.e. cash and cash equivalents, trade receivables, etc.) in the amount of
approximately $4.3 million and liabilities (i.e. short-term credit, trade
payable, long term loans, etc.) in the amount of approximately $4.4 million.
Market risk was estimated as the potential increase in fair value of net excess
abovementioned liabilities over abovementioned assets resulting from a
hypothetical 10% increase in the year-end Dollar exchange rate. Assuming such
increase in the Dollar exchange rate, the fair value of the Company's net excess
non-U.S. Dollar denominated liabilities over assets would increase by
approximately $10 thousand.

Item 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

     Not Applicable

                                    PART II

Item 13.  DEFAULTS, DIVIDENDS, ARREARAGES AND DELINQUENCIES.

     Not Applicable

Item 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

     Not Applicable

Item 15.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report (the "Evaluation Date"), the
Company's Chief Executive Officer and Chief Financial Officer, carried out an
evaluation of the effectiveness of the Company's "disclosure controls and
procedures" (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934). Based on that evaluation, these officers have

                                     - 62 -
<Page>

concluded that as of the Evaluation Date, the Company's disclosure controls and
procedures were adequate and designed to ensure that material information
relating to the Company and the Company's consolidated subsidiaries would be
made known to them by others within those entities.

CHANGES IN INTERNAL CONTROLS

     There were no significant changes in the Company's internal controls, or to
the Company's knowledge, in other factors that could significantly affect the
Company's disclosure controls and procedures subsequent to the Evaluation Date.

Item 16.  A. AUDIT COMMITTEE FINANCIAL EXPERT

     Not Applicable

          B. CODE OF ETHICS

     Not Applicable

          C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Not Applicable

                                    PART III

Item 17.  FINANCIAL STATEMENTS

     Not applicable.

Item 18.  FINANCIAL STATEMENTS

     Attached. See Item 19(a).

Item 19.  FINANCIAL STATEMENTS AND EXHIBITS

     (a)  Consolidated Financial Statements

                                     - 63 -
<Page>

                HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS


                             AS OF DECEMBER 31, 2002


                                 IN U.S. DOLLARS



                                      INDEX


<Table>
<Caption>
                                                              PAGE
                                                           -----------
<S>                                                          <C>
REPORT OF INDEPENDENT AUDITORS                                  2

CONSOLIDATED BALANCE SHEETS                                   3 - 4

CONSOLIDATED STATEMENTS OF OPERATIONS                           5

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                   6

CONSOLIDATED STATEMENTS OF CASH FLOWS                         7 - 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   10 - 51
</Table>

                                   - - - - - -


                                     - 64 -
<Page>

[ERNST & YOUNG LOGO]

                         REPORT OF INDEPENDENT AUDITORS

                             TO THE SHAREHOLDERS OF

                          HEALTHCARE TECHNOLOGIES LTD.

     We have audited the accompanying consolidated balance sheets of Healthcare
Technologies Ltd. ("the Company") and its subsidiaries as of December 31, 2002
and 2001, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2002. These consolidated 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 and in Israel, including those prescribed by the
Israeli Auditors' Regulations (Auditor's Mode of Performance), 1973. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiaries as of December 31, 2002 and 2001, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in Israel, which differ in certain respects from
those followed in the United States, (see Note 19 to the consolidated financial
statements).


Tel-Aviv, Israel                                      KOST FORER & GABBAY
March 26, 2003                                 A Member of Ernst & Young Global


                                     - 65 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<Table>
<Caption>
                                                                                    DECEMBER 31,
                                                                                --------------------
                                                                                   2002       2001
                                                                                ---------   --------
<S>                                                                             <C>         <C>
     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents (Note 3)                                            $   1,153   $  1,177
  Restricted cash                                                                       -         86
  Trade receivables (net of allowance for doubtful accounts of $ 54 and $ 57
    as of December 31, 2002 and 2001, respectively)                                 4,131      4,468
  Other accounts receivable and prepaid expenses (Note 4)                           1,127        609
  Inventories (Note 5)                                                              1,441      1,795
                                                                                ---------   --------

TOTAL current assets                                                                7,852      8,135
                                                                                ---------   --------

LONG-TERM INVESTMENTS:
  Investment in an affiliate                                                            -     *)   -
  Long-term receivables                                                               240          -
                                                                                ---------   --------

TOTAL long-term investments                                                           240     *)   -
                                                                                ---------   --------

PROPERTY AND EQUIPMENT, NET (Note 6)                                                1,705      2,691
                                                                                ---------   --------

OTHER ASSETS, NET (Note 7)
  Goodwill, net                                                                       373        715
  Technology, net                                                                     166        441
  Other intangible assets, net                                                        229        503
                                                                                ---------   --------

TOTAL other assets                                                                    768      1,659
                                                                                ---------   --------

TOTAL assets                                                                    $  10,565   $ 12,485
                                                                                =========   ========
</Table>

*)   Represents an amount lower than $ 1.

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 66 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

<Table>
<Caption>
                                                                                             DECEMBER 31,
                                                                                        ---------------------
                                                                                           2002        2001
                                                                                        ---------    --------
<S>                                                                                     <C>          <C>
    LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term bank credit (Note 8)                                                       $      58    $    392
  Current maturities of long-term bank loans (Note 10)                                        791         768
  Trade payables                                                                            3,295       3,953
  Other accounts payable and accrued expenses (Note 9)                                      1,838       2,367
                                                                                        ---------    --------

TOTAL current liabilities                                                                   5,982       7,480
                                                                                        ---------    --------

LONG-TERM LIABILITIES:
  Long-term bank loans, net of current maturities (Note 10)                                    91         326
  Convertible debentures in a subsidiary, net (Note 11)                                         -         600
  Accrued severance pay, net                                                                  246         300
                                                                                        ---------    --------

TOTAL long-term liabilities                                                                   337       1,226
                                                                                        ---------    --------

COMMITMENTS AND CONTINGENT LIABILITIES (Note 12)

SHAREHOLDERS' EQUITY (Note 13):
  Share capital:
    Ordinary shares of NIS 0.04 par value - Authorized: 40,000,000 as of December
      31, 2002 and 2001; Issued and Outstanding: 7,643,727 as of December 31, 2002
      and 2001                                                                                 99          99
  Additional paid-in capital                                                               16,266      16,240
  Cumulative foreign currency translation adjustments                                        (118)        (91)
  Accumulated deficit                                                                     (12,001)    (12,469)
                                                                                        ---------    --------

TOTAL shareholders' equity                                                                  4,246       3,779
                                                                                        ---------    --------

                                                                                        $  10,565    $ 12,485
                                                                                        =========    ========
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 67 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31,
                                                                     --------------------------------
                                                                       2002        2001        2000
                                                                     --------    --------    --------
<S>                                                                  <C>         <C>         <C>
Sales (Note 16)                                                      $ 16,676    $ 16,013    $ 15,456
Cost of sales                                                          10,386       9,984      10,006
                                                                     --------    --------    --------

Gross profit                                                            6,290       6,029       5,450
                                                                     --------    --------    --------

Research and development costs, net (Note 15a)                            912       3,164       1,408
Selling and marketing expenses                                          3,161       3,167       2,755
General and administrative expenses                                     2,475       3,966       2,669
Amortization of goodwill                                                  471         246         196
                                                                     --------    --------    --------

                                                                        7,019      10,543       7,028
                                                                     --------    --------    --------

Operating loss                                                           (729)     (4,514)     (1,578)
Financial income (expenses), net (Note 15b)                              (491)       (311)        129
Other income, net (Note 15c)                                            1,482         896         754
                                                                     --------    --------    --------

                                                                          262      (3,929)       (695)
Minority interest in losses of subsidiaries                               206         916         204
                                                                     --------    --------    --------

Net income (loss)                                                    $    468    $ (3,013)   $   (491)
                                                                     ========    ========    ========

Net earnings (loss) per NIS 1 par value of shares (in U.S. dollars)  $   1.53    $  (12.6)   $  (2.64)
                                                                     ========    ========    =========

Weighted average number of shares used in computing basic net
  earnings (loss) per NIS 1 par value of shares (in thousands)          7,644       5,977       4,644
                                                                     ========    ========    ========
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 68 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

<Table>
<Caption>
                                                          NUMBER                          CUMULATIVE
                                                            OF                             FOREIGN
                                                          SHARES              ADDITIONAL   CURRENCY                      TOTAL
                                                           (IN        SHARE    PAID-IN    TRANSLATION   ACCUMULATED   SHAREHOLDERS'
                                                        THOUSANDS)   CAPITAL   CAPITAL    ADJUSTMENTS     DEFICIT        EQUITY
                                                        ----------  --------  ----------  -----------  -------------  ------------

<S>                                                          <C>    <C>       <C>         <C>          <C>            <C>
Balance at January 1, 2000                                   4,644  $     71  $   15,715  $       (11) $      (8,965) $       6,810
Foreign currency translation adjustments                         -         -           -           36              -             36
Net loss                                                         -         -           -            -           (491)          (491)
                                                        ----------  --------  ----------  -----------  -------------  ------------

Balance at December 31, 2000                                 4,644        71      15,715           25         (9,456)        6,355
Issuance of shares, net                                      2,000        18       1,534            -              -         1,552
Issuance of shares in respect of the acquisition of
  Gamida Gen                                                 1,000        10         740            -              -           750
Capital surplus in respect of a transaction between
  the Company and a controlling shareholder, in
  respect of the acquisition of Gamida Gen                       -         -      (1,749)           -              -        (1,749)
Foreign currency translation adjustments                         -         -           -         (116)             -          (116)
Net loss                                                         -         -           -            -         (3,013)       (3,013)
                                                        ----------  --------  ----------  -----------  -------------  ------------

Balance at December 31, 2001                                 7,644        99      16,240          (91)       (12,469)        3,779

Issuance expenses                                                -         -        (108)           -              -          (108)
Capital surplus in respect of sale of operations to
  Savyon                                                         -         -         134            -              -           134
Foreign currency translation adjustments                         -         -           -          (27)             -           (27)
Net income                                                       -         -           -            -            468           468
                                                        ----------  --------  ----------  -----------  -------------  ------------

Balance at December 31, 2002                                 7,644  $     99  $   16,266  $      (118) $     (12,001) $      4,246
                                                        ==========  ========  ==========  ===========  =============  ============

</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 69 -
<Page>

                              HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31,
                                                                    ------------------------------------
                                                                       2002         2001          2000
                                                                    ----------    ---------    ---------
<S>                                                                 <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                 $      468    $  (3,013)   $    (491)
  Adjustments required to reconcile net income (loss) to net cash
  provided by (used in) operating activities (a)                          (217)          34          801
                                                                    ----------    ---------    ---------

Net cash provided by (used in) operating activities                        251       (2,979)         310
                                                                    ----------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of property and equipment                             329          126          486
  Purchase of property and equipment                                      (840)        (834)        (989)
  Investment in other assets                                                 -            -         (131)
  Proceeds from realization of Gamida Diagnostic U.K                        13            -            -
  Realization of investments in Procognia (c)                             (353)           -            -
  Marketable securities, net                                                 -          352         (337)
  Investment in restricted cash                                              -          (86)           -
  Proceeds from withdrawal of restricted cash                               86            -            -
                                                                    ----------    ---------    ---------

Net cash used in investing activities                                     (765)        (442)        (971)
                                                                    ----------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term bank credit, net                                             (333)      (1,200)         592
  Proceeds from long-term bank loans                                       556          463          617
  Principal payment of long-term bank loans                               (606)        (795)        (544)
  Issuance expenses                                                       (108)           -            -
  Proceeds from issuance of shares, net                                      -        1,552            -
  Proceeds from issuance of shares in a subsidiary, net                      -            -        2,470
  Proceeds from issuance of convertible debentures in a
  subsidiary                                                             1,000        1,000            -
                                                                    ----------    ---------    ---------

Net cash provided by financing activities                                  509        1,020        3,135
                                                                    ----------    ---------    ---------

Effect of exchange rate changes on cash and cash equivalents               (19)         (40)          15
                                                                    ----------    ---------    ---------

Increase (decrease) in cash and cash equivalents                           (24)      (2,441)       2,489
Cash and cash equivalents at the beginning of the year                   1,177        3,618        1,129
                                                                    ----------    ---------    ---------

Cash and cash equivalents at the end of the year                    $    1,153    $   1,177    $   3,618
                                                                    ==========    =========    =========
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 70 -
<Page>

                              HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<Table>
<Caption>
                                                                         YEAR ENDED DECEMBER 31,
                                                                      -----------------------------
                                                                       2002       2001       2000
                                                                      -------    -------    -------
<S>                                                                   <C>        <C>        <C>
     (a)  ADJUSTMENTS REQUIRED TO RECONCILE NET INCOME (LOSS) TO
          NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

           Depreciation and amortization                              $ 1,530    $ 1,426    $ 1,451
           Erosion of long-term investments and bank loans, net           (11)         5         39
           Capital loss (gain) on sale of property and equipment          (76)         7         51
           Minority interest in losses of subsidiaries                   (206)      (916)      (204)
           Accrued interest on convertible debentures                      38         16          -
           Accrued severance pay, net                                     (42)       149        (58)
           Capital gain from realization of Gamidor Diagnostics U.K       (13)         -          -
           Gain on marketable securities                                    -         (6)        (9)
           Capital gain from decrease in holdings in Procognia         (1,349)      (903)      (805)
           Decrease (increase) in trade receivables (including
             long-term receivables)                                       310       (351)       531
           Decrease (increase) in other accounts receivable and
               prepaid expenses                                            51         47       (301)
           Decrease (increase) in inventories                              64       (266)       445
           Increase (decrease) in trade payables                         (273)       245       (306)
           Increase (decrease) in other accounts payable and accrued
             expenses                                                    (240)       581        (33)
                                                                      -------    -------    -------

                                                                      $  (217)   $    34    $   801
                                                                      =======    =======    =======

          INVESTMENT IN GAMIDA GEN:
          Net fair value of assets acquired and liabilities assumed
           At the date of acquisition:

           Working capital deficiency, net (excluding cash and cash
             equivalents)                                             $     -    $(1,508)   $     -
           Property and equipment                                           -         22          -
           Technology                                                       -        493          -
           Accrued severance pay                                            -         (6)         -
           Capital surplus in respect of transaction with a
             controlling shareholder                                        -      1,749          -
           Issuance of shares in consideration for the acquisition          -       (750)         -
                                                                      -------    -------    -------

                                                                      $     -    $     -    $     -
                                                                      =======    =======    =======
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                     - 71 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<Table>
<Caption>
                                                                         YEAR ENDED DECEMBER 31,
                                                                      -----------------------------
                                                                       2002       2001       2000
                                                                      -------    -------    -------
<S>                                                                   <C>        <C>        <C>
          REALIZATION OF INVESTMENT IN PROCOGNIA

          Working capital deficiency, net (excluding cash and cash
             equivalents)                                             $  (504)   $     -    $     -
          Property and equipment                                          391          -          -
          Long-term bank loans                                           (145)         -          -
          Minority interest in a subsidiary                               612          -          -
          Convertible debentures in subsidiary                         (2,044)         -          -
          Accrued severance pay                                           (12)         -          -
          Capital gain from decrease in holdings in Procognia           1,349          -          -
                                                                      -------    -------    -------

                                                                      $  (353)   $     -    $     -
                                                                      =======    =======    =======

          SALE OF OPERATIONS TO A JOINTLY CONTROLLED ENTITY

          Working capital deficiency, net (excluding cash)            $  (427)   $     -         $-
          Long-term receivables                                          (240)         -          -
          Property and equipment                                          253          -          -
          Other assets                                                    280          -          -
          Capital surplus in respect of sale of operations to Savyon      134
                                                                      -------    -------    -------

                                                                      $     -    $     -    $     -
                                                                      =======    =======    =======

          SUPPLEMENTAL DISCLOSURE OF CASH FLOWS ACTIVITIES:
           Cash paid during the year for:
            Interest                                                  $   131    $   160    $    28
                                                                      =======    =======    =======
</Table>

The accompanying notes are an integral part of the financial statements.

                                     - 72 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 1:-  BUSINESS AND ORGANIZATION

          a.   General:

               Healthcare Technologies Ltd. ("the Company"), an Israeli
               corporation is a holding company. The Company and its
               subsidiaries (collectively, "the Group"), are engaged in the
               development, manufacturing and marketing of medical diagnostic
               kits and provide service tools and materials to diagnostic and
               biotech research professionals in laboratory and point of care
               sites in Israel and worldwide. The Group is also engaged in the
               research and development, production and marketing of molecular
               biology based gene-screening tools for the detection of certain
               gene-associated disorders in humans. The Group's major sales
               market is the domestic market. As for geographic markets and
               major customers, see Note 16.

               Pronto Diagnostics Ltd. ("Pronto") (formerly: Savyon
               Diagnostics), a wholly-owned subsidiary, is engaged in the
               serology field, and manufactures sophisticated microplate-based
               enzyme immuno assays for detection of antibodies.

               Gamida Gen, a wholly-owned subsidiary of Pronto, is an Israeli
               biotechnology company engaged in research, development and
               marketing of molecular biology-based gene screening tools for the
               detection of certain gene related disorders in humans. Pronto and
               Gamida Gen merged their operations as of December 31, 2001 and
               are currently awaiting the approval for the merger by both the
               Israeli Tax Authorities and the Companies' Registrar. Such merger
               has no accounting implications (see also Note 1e).

               The Company's subsidiaries, Danyel Biotech Ltd. ("Danyel"),
               Gamida Gen Marketing (1979) Ltd. ("Gamida Gen Marketing")
               (formerly - Gamidor) and Gamidor Diagnostic Ltd. ("Gamidor")
               distribute medical diagnostic kits, reagents and chemicals for
               research, industrial and clinical uses.

               The Company's shares are traded on the National Association of
               Securities Dealers' Quotation System ("NASDAQ") in the United
               States.

          b.   Concentration of risks that may have a significant impact on the
               Group are as follows:

               The Group currently buys certain products from a limited group of
               suppliers. Management believes that other suppliers could provide
               similar products on comparable terms. A change in suppliers,
               however, could cause a delay in manufacturing and a possible loss
               of sales, which would adversely affect operating results and
               financial position.

                                     - 73 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 1:-  BUSINESS AND ORGANIZATION (CONT.)

          c.   Investment in Procognia Ltd.:

               In January 2000, the Company established a 98%-owned subsidiary,
               Procognia (Israel) Ltd. ("Procognia"). The Company's Board of
               Directors has approved the transfer of the Company's activities,
               rights, assets and obligations in relation to the Glycobiology
               project, to Procognia. In February 2000, Pronto, Procognia and an
               entrepreneur entered into an agreement, whereby Pronto sold and
               the entrepreneur assigned to Procognia, as of January 1, 2000,
               all of their rights and obligations pertaining to Pronto's assets
               with regard to its research and development activities in the
               area of glycomolecular analysis ("the Project"), as well as such
               party's accounts receivable, contracts, equipment, technology and
               intellectual property relating to the Project. In consideration
               for all rights, assets and obligations transferred and assigned
               to Procognia, the Company undertook to pay Pronto all of its
               accumulated net expenses. In addition, the entrepreneur will
               receive 3% of Procognia's shares, subject to a three-year vesting
               period, commencing June 2000.

               During the year 2000, Procognia effected a private placement of
               its equity securities, raising an aggregate amount of $ 2,477, as
               a result of which the Company's holdings in the share capital of
               Procognia decreased to approximately 70.08%. In addition, the
               investors undertook to purchase, except in certain circumstances,
               convertible debentures for an aggregate amount of $ 2,500 within
               a year (see Note 11). The conversion of the debentures shall
               entitle the investors to additional shares.

               According to Statement No. 68 of the Institute of Certified
               Public Accountants in Israel, gain from issuance of the
               subsidiary's shares to a third party in a development stage
               company, is recorded as a deferred capital gain and amortized
               according to the highest of (i) a three-year period; (ii) the
               Company's interest in the subsidiary's losses.

               As a result of the placement, the Company recorded in 2000 a
               deferred capital gain in the amount of $ 1,708, of which $ 805
               was charged to the statement of operations during 2000 and $ 903
               was charged to the statements of operations during 2001.

               In April 2002, Procognia's parent company, the Company's
               affiliate, issued Preferred B and B1 shares in a private
               placement upon which an amount of approximately $ 14,300 (out of
               which $1,250 related to conversion of convertible debentures) was
               raised. In December 2002, Procognia acquired all of the shares of
               Sense Proteomic Ltd., in a share exchange transaction. In respect
               of this transaction, Procognia completed another financing round,
               in which $ 4,000 was raised. As a result of these transactions,
               the Company's voting rights declined from 70.08% to 11.6% and
               consequently Procognia's financial statements are no longer
               consolidated with those of the Company. As a result of the
               decline in voting rights the Company recorded a capital gain in
               the amount of $ 1,349. The previously accrued losses that relate
               to the share retained by the investor were reversed and the
               carrying amount of the investment in Procognia was reduced to
               zero.

                                     - 74 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 1:-  BUSINESS AND ORGANIZATION (CONT.)

          d.   Sale of certain activities:

               In March 2000, a certain of Gamida Gen Marketing non-core
               activities were transferred to Gamida Biochemicals Ltd., a
               subsidiary of Gamida for Life B.V., a principal shareholder of
               the Company, in consideration for $ 212 and a royalty payment on
               future sales of Gamida Biochemicals at the rate of 2.5% for a
               period of 5 years commencing October 2000.

          e.   Acquisition of Gamida Gen Ltd.:

               On January 17, 2001, the Company acquired all the shares of
               Gamida Gen, in consideration for the issuance of 1,000,000 shares
               of the Company to the shareholders of Gamida Gen, of which
               500,000 shares were held in escrow for a period of one year from
               the transaction date. During 2002, the shares were released from
               escrow. The acquisition cost amounted to $ 750 Gamida for Life
               BV, a principal shareholder of the Company, was also the
               principal shareholder of Gamida Gen.

               As part of the acquisition, the Company agreed, subject to
               certain conditions, which have not yet been materialized, to
               release the former shareholder's guarantee totaling $ 275 to the
               bank.

               The Company transferred all Gamida Gen shares to its wholly-owned
               subsidiary, Pronto.

               Pronto and Gamida Gen merged their operations as of December 31,
               2001 and are currently awaiting the approval for the merger by
               both the Israeli Tax Authorities and the Companies' Registrar.

               The operations of Gamida Gen are included in the consolidated
               financial statements from the date of acquisition.

               The transaction was accounted for in accordance with the purchase
               method of accounting. The allocation of the purchase price of
               Gamida Gen acquisition is based on the fair value of the assets
               acquired and liabilities assumed. The excess of the fair value of
               the shares issued over the carrying amount of the investment in
               the amount of $ 2,242, was recorded accordingly:

               1.   The excess of the fair value of the shares issued to the
                    controlling shareholder over the carrying amount of the
                    investment, was charged to additional paid-in capital at the
                    amount of $ 1,749.

               2.   The excess of the investment in Gamida Gen, which was
                    acquired from the other shareholders over the equity upon
                    acquisition, amounted to $ 493, was assigned and recorded as
                    technology and is amortized over 3 years.

                                     - 75 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

NOTE 1:-  BUSINESS AND ORGANIZATION (CONT.)

               The following represent the unaudited pro-forma results of
               operations for the year ended December 31, 2000, assuming that
               the acquisition occurred on January 1, 2000.

<Table>
<Caption>
                                                                                             DECEMBER 31,
                                                                                                2000
                                                                                            -------------
<S>                                                                                         <C>
               Sales                                                                        $      15,692
                                                                                            =============

               Net loss                                                                     $      (1,033)
                                                                                            =============

               Basic and diluted net loss per NIS 1 par value of shares (in U.S. dollars)   $       (0.18)
                                                                                            =============
</Table>

          f.   Acquisition of Savyon Yaron's Diagonistics Marketing Ltd.
               ("Savyon Yaron'") minority:

               Gamidor acquired on July 1, 2001 all the shares of Savyon Yaron
               held by the minority, in consideration for the waiver of the
               guarantee provided by the minority to Savyon Yaron in respect of
               its liabilities. Savyon Yaron ceased its operations in December
               2001. The balance of the minority in the amount of $ 55 was
               recorded as minority interest in losses of subsidiaries in 2001.

          g.   Sale of Gamidor Diagnostics UK:

               In February 2002, the Company sold its investment in Gamidor
               Diagnostics UK for an amount of $13. As a result, the Company
               recorded a capital gain in the amount of $13.

          h.   Establishment of Savyon:

               On December 31, 2002, the Company entered into an agreement with
               the Levin Family LLP. for the establishment of a new jointly
               owned entity, Savyon. At the same date, Savyon purchased from
               Pronto certain assets, inventory, patent rights and know how
               related to the diagnosis of infectious diseases in consideration
               of $ 1,900 to be paid as follows: $ 770 on January 1, 2003, $ 430
               in April 2003 and additional 35 monthly installments of $ 20
               each. In connection with the transaction, the Levin family agreed
               to loan Savyon an amount of $ 1,200 to be used to pay a portion
               of the consideration to Pronto. The terms of the repayment of the
               loan have not yet been determined. According to Israeli GAAP,
               since the transaction was financed with a shareholders loan, the
               assets, inventory, patent rights and know how that were
               transferred to Savyon, were recorded in Savyon's books according
               to their book value as it appeared in Pronto's books prior to the
               sale. The excess of the purchase price over the book value of the
               assets and know-how that were transferred, was recorded as
               additional paid-in capital. In addition, the investment in Savyon
               would be accounted for according to the proportionate
               consolidations method (i.e., 50% of the balances and results of
               Savyon are consolidated in the Company's financial statements).

                                     - 76 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

NOTE 1:-  BUSINESS AND ORGANIZATION (CONT.)

          i.   Definitions:

               The Company       -   Healthcare Technologies Ltd.

               The Group         -   The Company and its subsidiaries.

               Subsidiaries      -   Companies whose accounts are consolidated
                                     with those of the Company.

               Related parties   -   As defined in Opinion 29 of the Institute
                                     of Certified Public Accountants in Israel.
                                     The Group companies transact with
                                     companies, which are related parties in the
                                     ordinary course of business. Balances and
                                     transactions with related parties are
                                     presented in Note 17.

               Controlling       -   As defined in Israeli Securities
               shareholder           Regulations (Presenting Transactions
                                     Between a Company and its Controlling
                                     Shareholder in Financial Statements), 1996.

               Affiliate         -   A company that is presented under the cost
                                     method.


               Consumer          -   The Israeli Consumer Price Index ("CPI")
               Price Index           published by the central Bureau of
                                     Statistics.



               Jointly           -   A company owned by several entities among
               controlled            which there is a contractual agreement for
               entity                joint control, and whose financial
                                     statements are consolidated with those of
                                     the Company, using the proportionate
                                     consolidation method.

               The following is a list of the subsidiaries and the affiliate:

<Table>
<Caption>
                                                                                        PERCENTAGE OF HOLDING AND
                                                                                                OWNERSHIP
                                                                                        -------------------------
               COMPANY                                                                         DECEMBER 31,
                                                                                        -------------------------
                                                                                            2002          2001
                                                                                        ----------     ----------
<S>                                                                                           <C>           <C>
               Pronto Diagnostics Ltd. (formerly: Savyon Diagnostics Ltd.) ("Pronto")          100%           100%
               Danyel Biotech Ltd. ("Danyel") (2)                                               80%            80%
               Gamida Gen Marketing (1979) Ltd. (formerly - Gamidor)                           100%           100%
               Gamidor Diagnostics Ltd. ("Gamidor") (3)                                        100%           100%
               Procognia (Israel) Ltd. ("Procognia") (formerly: Procognia Ltd.)               11.6%         70.08%
               Savyon-Yaron Diagnostics Marketing Ltd. ("Savyon-Yaron") (1)                    100%           100%
               Gamida Gen (4)(5)                                                               100%           100%
               Gamidor Diagnostics Limited ("Gamidor Diagnostics UK")                            -             24%
               Savyon Diagnostics Ltd. ("Savyon")                                               50%             -
</Table>

               (1)  Inactive company since December 2001.
               (2)  The company was established in 1999 together with a
                    shareholder who acts as its manager.
               (3)  A wholly-owned subsidiary of Gamida Gen Marketing Ltd.
               (4)  A wholly-owned subsidiary of Pronto.
               (5)  Merged into Pronto in December 31, 2001.

                                     - 77 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES

          These consolidated financial statements have been prepared in
          conformity with generally accepted accounting principles in Israel,
          which differ in certain respects from those followed in the United
          States, as described in Note 19.

          a.   Use of estimates:

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

          b.   Financial statements in U.S. dollars:

               Since the Company's shares are traded on NASDAQ in the United
               States, the Company elected to adjust its financial statements
               according to the changes in the exchange rate of the U.S. dollar,
               in conformity with Section 29b to Statement No. 36 of the
               Institute of Certified Public Accountants in Israel. Thus, the
               reporting currency of the Company is the U.S. dollar.
               Accordingly, monetary accounts maintained in currencies other
               than the dollar are remeasured to U.S. dollar using the foreign
               exchange rate at balance sheet date. Operational accounts and
               non-monetary balance sheet accounts are measured and recorded at
               the exchange rate in effect at the date of the transaction. The
               effects of foreign currency remeasurement are reported in the
               statements of operations, as financial income or expenses, as
               appropriate.

               Certain subsidiaries of the Company, which operate independently
               of the Company, prepare their financial statements in a
               functional currency other than the U.S. dollar. The functional
               currency of these companies was determined based on their
               economic environment and on the currency in which the majority of
               their sales are made and costs are incurred. The financial
               statements of these companies, whose functional currency is not
               the U.S. dollar, have been translated into U.S. dollars, in
               accordance with Interpretation 8 to Statement 36 of the Institute
               of Certified Public Accountants in Israel. All balance sheet
               accounts have been translated using the exchange rates in effect
               at the balance sheet date. Statement of operations amounts have
               been translated using the exchange rate at the balance sheet
               date.

               The resulting difference between the investment and the
               remeasurement of shareholders' equity, in respect of the said
               companies, and according to changes in the exchange rates of the
               different functional currencies, is carried to a separate item
               among the statement of changes in shareholders' equity,
               "Cumulative foreign currency translation adjustments".

          c.   Principles of consolidation:

               1.   The consolidated financial statements include the accounts
                    of the Company and its subsidiaries. Intercompany
                    transactions and balances have been eliminated upon
                    consolidation.

                                     - 78 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

               2.   Consolidation of financial statements of jointly controlled
                    entities:

                    In accordance with Opinion 57 of the Institute of Certified
                    Public Accountants in Israel, the financial statements of
                    companies that are jointly controlled are included in the
                    Company's consolidated financial statements according to the
                    proportionate consolidation method. That is consolidating
                    50% of the balances and results of Savyon in the Company's
                    financial statements.

          d.   Cash equivalents:

               The Group considers all highly liquid investments originally
               purchased with maturities of three months or less to be cash
               equivalents.

          e.   Restricted cash:

               Restricted cash is primarily invested in highly liquid deposits,
               which are used to secure a bank loan. The deposit is in US dollar
               and bears interest at the rate of 1.9%. The short-term deposit is
               presented at its cost including the accrued interest.

          f.   Marketable securities:

               Marketable securities invested for the short-term are presented
               at market value as of the balance sheet date. Changes in their
               value are reflected in the statement of operations as financial
               income or expenses in accordance with Opinion No. 44 of the
               Institute of Certified Public Accountants in Israel.

          g.   Inventories:

               Inventories are stated at the lower of cost or market value.
               Inventory write-offs are provided to cover risks arising from
               slow-moving items or technological obsolescence. In the years
               ended December 31, 2002, 2001 and 2000 the Group wrote-off
               slow-moving items in the amounts of $ 0, $ 54 and $ 165,
               respectively, which are included in cost of sales.

               Cost is determined as follows:

               -    Raw materials and packaging materials - at average cost.

               -    Finished goods - on the basis of computed manufacturing
                    costs, which include raw materials, labor and direct and
                    indirect manufacturing costs. Purchased goods are stated at
                    the lower of cost or market value.

                                     - 79 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

          h.   Investment in an affiliate:

               The investment in an affiliate in which the Company owns 24% is
               presented at its cost, since the Company is not represented on
               the affiliate's board of directors, as required by Statement No.
               68 of the Institute of Certified Public Accountants in Israel, in
               order to present the investment in the affiliate on the basis of
               the equity method of accounting. In February 2002, the shares
               were sold to a third party for approximately $ 13.

               The investment in Procognia in which the Company holds 11.6% is
               presented at zero (see Note 1c).

          i.   Long-term receivables:

               Long-term receivables are recorded at estimated present values
               determined based on current rates of interest and reported at the
               net amounts in the accompanying financial statements.

          j.   Property and equipment:

               Property and equipment are stated at cost net of accumulated
               depreciation. Depreciation is computed using the straight-line
               method over the estimated useful lives of the assets.

               Annual rates of depreciation are as follows:

<Table>
<Caption>
                                                                                        %
                                                                         -------------------------------
<S>                                                                         <C>
               Laboratory manufacturing and medical equipment                  10 - 33 (mainly 20)
               Office furniture and equipment                                   6 - 33 (mainly 6)
               Motor vehicles                                                           15
               Leasehold improvements                                       Over the term of the lease
</Table>

               The Company and its subsidiaries assess the recoverability of the
               carrying amount of property and equipment and provide for any
               possible impairment loss based upon the fair value of such
               assets.

               As of December 31, 2002 no impairment losses have been
               identified.

          k.   Other assets:

               1.   Goodwill represents the excess of the cost of acquisition in
                    subsidiaries over their carrying value upon acquisition.
                    Goodwill is amortized over a period of 10 years, using the
                    straight-line method.

               2.   Costs incurred for the registration of patents, trademarks
                    and know-how are amortized at an annual rate of 10%. Grants
                    received in respect thereof are deducted from costs.

                                     - 80 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

               3.   Distribution rights are amortized using the straight line
                    method over their useful life, which is 8 years.

               4.   Technology is amortized using the straight line method over
                    its useful life, which is 3 years.

               The carrying value of goodwill, patents, trademarks, know-how,
               technology and distribution rights is periodically reviewed by
               management, based on the expected future undiscounted operating
               cash flows over their remaining amortization period. If this
               review indicates that goodwill, patents, trademarks, know-how and
               distribution rights and technology will not be recoverable, their
               carrying value is reduced to estimated fair value. No impairments
               have been identified as of December 31, 2002.

          l.   Convertible debentures of subsidiaries and affiliates:

               When exercise of convertible debentures of subsidiaries or
               affiliates is deemed probable and a loss in respect of this
               dilution will result to the parent company, a provision for this
               loss is recorded.

          m.   Deferred income taxes:

               Deferred income taxes are computed in respect of temporary
               differences between the amounts included in these financial
               statements, and those to be considered for tax purposes.

               Deferred tax balances are computed at the tax rate that will be
               in effect when those taxes are released to the statement of
               operations.

               Taxes that would apply in the event of the realization of
               investments in subsidiaries have not been taken into account in
               computing the deferred taxes, as it is the Company's intention to
               hold these investments. Similarly, taxes that would apply in the
               event of the distribution of earnings by subsidiaries as
               dividends have not been taken into account in computing deferred
               taxes, since the distribution of dividends does not involve an
               additional tax liability.

          n.   Revenue recognition:


               Revenues are recognized in accordance with Staff Accounting
               Bulletin No. 101, "Revenue Recognition in Financial Statements"
               ("SAB No. 101"), upon delivery of the products when the
               collection of the receivable is probable, persuasive evidence of
               an agreement exists, no significant obligations remain and the
               price is fixed or determinable. The Group follows Statement of
               Financial Accounting Standard No. 48 "Revenue Recognition when
               Right of Return Exists" ("SFAS No. 48"), accordingly, based on
               the Company's management experience, no provisions for returns
               were recorded for the years ended December 31, 2002, 2001 and
               2000.



                                     - 81 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

          o.   Research and development costs:

               Research and development costs, net of participations and grants
               received, are charged to expenses as incurred.

          p.   Royalty-bearing grants

               Royalty-bearing grants from the Government of Israel and The
               Israel-United States Bi-national Industrial Research and
               Development Foundation for funding approved research and
               development projects are recognized at the time the Company is
               entitled to such grants, on the basis of the costs incurred and
               included as a deduction of research and development costs.
               Research and development grants amounted to $ 158, $ 0, and $ 0
               in 2002, 2001 and 2000, respectively. Total royalties paid
               amounted to $ 99, $ 12 and $ 93 in 2002, 2001 and 2000,
               respectively and were recorded as part of the cost of goods.

          q.   Advertising costs:

               Advertising costs are charged to expenses as incurred.
               Advertising expenses for the years ended December 31, 2002, 2001
               and 2000, were approximately $ 22, $ 43 and $ 165, respectively.

          r.   Basic and diluted net loss per share:

               Net loss per share is computed in accordance with Statement 55 of
               the Institute of Certified Public Accountants in Israel, based on
               the weighted average number of Ordinary shares and share
               equivalents outstanding during each period.

               The dilutive effect of options is included in the computation of
               basic net earnings per share only if their exercise is considered
               to be probable, based on the ordinary relationship between the
               market price of the shares issuable upon the exercise or
               conversion of the options, and the discounted present value of
               the future proceeds derived from the exercise of such options.

          s.   Concentrations of credit risk:

               Financial instruments that potentially subject the Group to
               concentrations of credit risk consist principally of cash and
               cash equivalents, restricted cash and long-term trade
               receivables. Cash and cash equivalents and restricted cash are
               deposited in major banks in Israel. Management believes that the
               financial institutions that hold the Group's investments are
               financially sound, and, accordingly, minimal credit risk exists
               with respect to these investments. The Group's trade receivables
               derive mainly from sales to numerous customers in Israel, Europe
               and the United States. The Group has adopted credit policies and
               standards intended to accommodate industry growth and inherent
               risk. Management believes that credit risks are moderated by the
               diversity of its end customers. The Group performs ongoing credit
               evaluations of its customers' financial condition and to date has
               not experienced any material losses. An allowance for doubtful
               accounts is determined with respect to those amounts that the
               Group has determined to be doubtful of collection.

                                     - 82 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

               The Company has no off-balance-sheet concentration of credit risk
               such as foreign exchange contracts, option contracts or other
               foreign hedging arrangements.

          t.   Fair value of financial instruments:

               The following methods and assumptions were used by the Group in
               estimating their fair value disclosures for financial
               instruments:

               The carrying amounts of cash and cash equivalents, restricted
               cash, short-term trade receivables, short-term bank credit and
               trade payables approximate their fair value due to the short-term
               maturity of such instruments.

               The carrying amounts of long-term receivables approximate their
               fair value. The fair value was determined based on current rates
               of interest.

               The carrying amounts of the Group's long-term borrowings and
               convertible debentures in a subsidiary approximate their fair
               value. The fair value was estimated using discounted cash flows
               analyses, based on the Group's incremental borrowing rates for
               similar type of borrowing arrangements.

          u.   Severance pay:

               The liability of the Company and its Israeli subsidiaries for
               severance pay is computed based on the most recent salary of the
               employees multiplied by the number of years of employment as of
               the balance sheet date and is presented on the undiscounted
               basis. The liability is covered by an accrual, amounts deposited
               with severance pay funds, insurance policies and Mivtahim Social
               Insurance Institution Ltd. ("Mivtahim"). The amounts accumulated
               with the insurance company and Mivtahim are not under the
               Company's management control and are, therefore, not reflected in
               the balance sheet. The amounts in the severance pay fund are
               available for withdrawal under the provisions of the Severance
               Pay Law, 1963.

               Severance expenses for the years ended December 31, 2002, 2001
               and 2000 were $ 54, $ 155 and $ 154, respectively.

          v.   Implementation of new accounting standards and their impact on
               the financial statements:

               During October 2001, the Israel Accounting Standards Board
               published Accounting Standard No. 12 with respect to the
               discontinuation of the adjustment of financial statements, and
               Accounting Standard No. 13 with respect to the effect of the
               changes in the exchange rates for foreign currencies. In August
               2002, Accounting Standard No. 14 was published with respect to
               fiscal reporting for interim periods, and in December 2002,
               Accounting Standard No. 17 was published with respect to the
               deferral of the implementation of Accounting Standards No. 12 and
               No. 13 until January 1, 2004. In February 2003, Accounting
               Standard No. 15 was published with respect to the impairment of
               assets.

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

               According to Standards No. 12 and No. 17, which deal with the
               adjustment of financial statements, financial statements will
               discontinue to be adjusted for inflation in Israel commencing
               January 1, 2004. Until December 31, 2003, certain subsidiaries
               will continue to

                                     - 83 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

               prepare adjusted financial statements in conformity with Opinion
               No. 36 of the Institute of Certified Public Accountants in
               Israel. The adjusted amounts included in the financial statements
               as of December 31, 2003, will serve as the starting point for
               nominal financial reporting beginning January 1, 2004.

               In accordance with the provisions of Accounting Standard No. 13
               and No. 17 prescribe principles with respect to the effect of the
               changes in the exchange rates for foreign currency. These
               Standards replaces clarification No. 8 and clarification No. 9 to
               Opinion No. 36 of the Institute of Certified Public Accountants
               in Israel, which are void with the discontinuation of the
               adjustment of financial statements. The Standards deal with the
               translation of transactions in foreign currency and the
               translation of financial statements of foreign operations in
               order to integrate them into the financial statements of the
               reporting company. The translation principles of Accounting
               Standard No. 13 are different from those implemented to date.

               Accounting Standard No. 13 will apply to financial statements for
               periods commencing after December 31, 2003.

               In accordance with the provisions of Accounting Standard No. 13,
               it is possible to continue adjusting the financial statements
               pursuant to the changes in the foreign currency exchange rates in
               accordance with section 29(a) to Opinion No. 36 of the Institute
               of Certified Public Accountants in Israel up until the date on
               which the Accounting Standards Board will publish a new Standard
               regarding this issue. This Standard requires disclosure with
               respect to the reasons for presenting the financial statements in
               foreign currency. In addition, this Standard requires disclosure
               with respect to any change whatsoever in the reporting currency.

               The objective of Accounting Standard No. 14, which deals with
               fiscal reporting for interim periods, is to determine the minimum
               content for financial reporting for interim periods, as well as
               to determine the recognition and measurement principles in
               financial statements for interim periods. In addition, the
               interim financial statements will, for the first time, include
               condensed segmental information similar to the information
               included in the annual financial statements. This Accounting
               Standard, which is based on International Accounting Standard No.
               34, "Financial Reporting for Interim Periods", replaces Opinion
               No. 43 of the Institute of Certified Public Accountants in Israel
               that deals with financial statements for interim periods and
               Opinion No. 60 that deals with the amendment of Opinion No. 43
               with respect to the cancellation of the obligation to include
               information regarding nominal data in financial statements for
               interim periods. This Standard will apply in respect to financial
               statements for periods beginning on or after January 1, 2003.

                                     - 84 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 2:-  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

               Accounting Standard No. 15, which deals with the impairment of
               assets, is based on International Accounting Standard No. 36, and
               prescribes the accounting principles in the case of a
               decline/elimination of the decline, in the value of a company's
               assets, including investments in investees that are not
               subsidiaries, goodwill arising from the acquisition of
               subsidiaries and fair value adjustments. This Standard will apply
               with respect to financial statements for periods commencing on or
               after January 1, 2003.

               The transitional guidelines in the Standard prescribe that losses
               due to an impairment of assets, which derive from the application
               of this Accounting Standard, will be recognized in the pre-tax
               income. The aforesaid will not apply in the case of a loss from
               the impairment of an asset that was not recognized in the past
               only due to the fact that the total undiscounted expected future
               net cash flow exceeds the book value. The latter will be carried
               to the statement of operations under the item "Cumulative effect
               of the change in the accounting principle to the beginning of the
               year".

               Management does not anticipate that the new Standards, as
               discussed above, will have certain effect on its results of
               operations, financial position and cash flows.

NOTE 3:-  CASH AND CASH EQUIVALENTS

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                        -------------------------------
                                                             2002              2001
                                                        -------------     -------------
<S>                                                     <C>               <C>
               Cash                                     $       1,140     $       1,060
               Short-term bank deposits                            13               117
                                                        -------------     -------------

                                                        $       1,153     $       1,177
                                                        =============     =============
</Table>

NOTE 4:-  OTHER ACCOUNTS RECEIVABLE AND PREPAID
          EXPENSES

<Table>
<S>                                                     <C>               <C>
           Grants receivable                            $           -     $           8
           Government authorities                                  68               208
           Employees                                                1                 2
           Prepaid expenses                                       156               135
           Related parties (1)                                    142               212
           Receivable on account of sale of operations
            to Savyon                                             720                 -
           Other                                                   40                44
                                                        -------------     -------------

                                                        $       1,127     $         609
                                                        =============     =============
</Table>

          (1) The balance is linked to CPI and bears annual interest at the rate
              of 4%.

                                     - 85 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 5:-  INVENTORIES

<Table>
                                                                  DECEMBER 31,
                                                        -------------------------------
                                                            2002               2001
                                                        -------------     -------------
<S>                                                     <C>               <C>
                Raw materials and packaging materials   $         196     $         318
                Finished goods                                  1,245             1,477
                                                        -------------     -------------

                                                        $       1,441     $       1,795
                                                        =============     =============
</Table>

NOTE 6:-  PROPERTY AND EQUIPMENT, NET

          a.   Composition of assets and accumulated depreciation, and the
               changes therein during the reported year, are classified as
               follows:

<Table>
<Caption>
                                                         LABORATORY,                       OFFICE
                                                        MANUFACTURING                    FURNITURE
                                                         AND MEDICAL      LEASEHOLD         AND         MOTOR
                                                          EQUIPMENT      IMPROVEMENTS    EQUIPMENT     VEHICLES     TOTAL
                                                       ---------------  -------------   -----------  -----------  -----------
<S>                                                    <C>              <C>             <C>          <C>          <C>
                COST:
                Balance at January 1, 2002             $         5,146  $       1,923   $     1,619  $       631  $     9,319
                Additions during the year                          628             18            62          132          840
                Disposals during the year                         (724)          (828)         (300)        (127)      (1,979)
                Disposals in respect of realization
                  of investment in a subsidiary                   (329)            (6)         (125)           -         (460)
                Translation adjustments                            (27)            (2)           (6)          (4)         (39)
                                                       ---------------  -------------   -----------  -----------  -----------

                Balance at December 31, 2002                     4,694          1,105         1,250          632        7,681
                                                       ---------------  -------------   -----------  -----------  -----------

                ACCUMULATED DEPRECIATION:
                Balance at January 1, 2002                       3,838          1,407         1,168          215        6,628
                Additions during the year                          511            185           132           92          920
                Disposals during the year                         (441)          (715)         (257)         (60)      (1,473)
                Disposals in respect of realization
                  of investment in a subsidiary                    (35)             -          (34)            -          (69)
                Translation adjustments                            (23)            (1)          (4)           (2)         (30)
                                                       ---------------  -------------   -----------  -----------  -----------

                Balance at December 31, 2002                     3,850            876         1,005          245        5,976
                                                       ---------------  -------------   -----------  -----------  -----------

                Depreciated cost at December 31,
                2002                                   $           844  $         229   $       245  $       387  $     1,705
                                                       ===============  =============   ===========  ===========  ===========

                Depreciated cost at December 31,
                2001                                   $         1,308  $         516   $       451  $       416  $     2,691
                                                       ===============  =============   ===========  ===========  ===========
</Table>

                    Depreciation expenses amounted to $ 920, $ 1,007 and $ 1,113
                    for the years ended December 31, 2002, 2001 and 2000,
                    respectively.

               b.   As for charges, see Note 12e.

                                     - 86 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 7:-  OTHER ASSETS, NET

<Table>
<Caption>
                                                                                     PATENTS,
                                                                                     KNOW-HOW
                                                                                       AND      DISTRIBUTION
                                                     GOODWILL        TECHNOLOGY     TRADEMARKS    RIGHTS          TOTAL
                                                  ---------------  -------------   -----------  ------------   -----------
<S>                                               <C>              <C>             <C>          <C>           <C>
           Balance as of January 1, 2002          $           715  $         441   $       372  $       131   $     1,659
           Amortization during the year                      (196)          (275)         (116)         (23)         (610)
           Disposals during the year                         (292)             -          (269)           -          (561)
           Additions in respect of jointly
             controlled entity                                146              -           135            -           281
           Translation adjustments                              -              -             -           (1)           (1)
                                                  ---------------  -------------   -----------  ------------   -----------

           Balance as of December 31, 2002        $           373  $         166   $       122  $       107    $       768
                                                  ===============  =============   ===========  ===========    ===========

           Net of grants from the OCS             $             -  $           -   $        59  $         -    $        59
                                                  ===============  =============   ===========  ===========    ===========
</Table>

          Amortization expenses amounted to $ 610, $ 419 and $ 338 for the years
          ended December 31, 2002, 2001 and 2000, respectively.

NOTE 8:-  SHORT-TERM BANK CREDIT

          Weighted average interest rate of short-term credit in unlinked NIS as
          of December 31, 2002 and 2001 is 10% and 8.4%, respectively.

          The Group has an authorized credit line in the amount of $ 600 as of
          December 31, 2002. For amounts overdrawn in excess of the Group's
          authorized credit line, the Group is subject to an annual average
          interest rate of 11.4% on the outstanding amount.

          As of December 31, 2002, the Group has $ 542 of unutilized credit
          line.

          As for charges, see Note 12e(1).

NOTE 9:-  OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<Table>
<Caption>
                                                        DECEMBER 31,
                                                -----------------------------
                                                   2002          2001
                                                -----------   -----------
<S>                                             <C>           <C>
            Royalties payable                   $       122   $       287
            Employees and payroll accruals              655           835
            Government authorities                       67           104
            Customer advances                           163           175
            Accrued expenses                            272           655
            Related parties (1)                         112           227
            Other                                       447            84
                                                -----------   -----------

                                                $     1,838   $     2,367
                                                ===========   ===========
</Table>

          (1)  The balance is linked to the Israeli CPI and bears annual
               interest at the rate of 4%.

                                     - 87 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS


NOTE 10:- LONG-TERM BANK LOANS

          a. Composed as follows:

<Table>
<Caption>
                                                                                  DECEMBER 31,
                            INTEREST        ---------------------------------------------------------------------------------------
                              RATE                                  2002                                      2001
                     ---------------------- --------------------------------------------  -----------------------------------------
                                                               NIS        IN                              NIS        IN
                                                 IN         LINKED TO   FOREIGN               IN       LINKED TO   FOREIGN
                         2002       2001     U.S. DOLLAR       CPI     CURRENCY   TOTAL   U.S. DOLLAR     CPI     CURRENCY    TOTAL
                      ---------- ----------  ------------   ---------  --------  -------  -----------  ---------  --------   -------
                                %
                      ---------------------
<S>                    <C>        <C>        <C>            <C>        <C>       <C>      <C>           <C>        <C>       <C>
Loans from banks       3.2-6.2    3.5 - 9    $        200   $     659  $     23  $   882  $     467     $   483    $   144   $ 1,094
Less - current
  maturities                                          109         659        23      791        166         480        122       768
                                             ------------   ---------  --------  -------  -----------   -------    -------   -------

                                             $         91   $       -  $      -  $    91  $     301     $     3    $    22   $   326
                                             ============   =========  ========  =======  ===========   =======    =======   =======
</Table>

          b.   Maturities of long-term loans subsequent
               to the balance sheet date are as follows:

<Table>
<S>                                        <C>            <C>        <C>       <C>      <C>           <C>        <C>         <C>
First year (current maturities)            $        109   $     659  $     23  $   791  $     166     $   480    $   122     $   768
                                           ------------   ---------  --------  -------  -----------   -------    -------     -------

Second year                                          91           -         -       91        167           3         22         192
Third year                                            -           -         -        -        134           -          -         134
                                           ------------   ---------  --------  -------  -----------   -------    -------     -------

                                                     91           -         -       91        301           3         22         326
                                           ------------   ---------  --------  -------  -----------   -------    -------     -------

                                           $        200   $     659  $     23  $   882  $     467     $   483  $     144     $ 1,094
                                           ============   =========  ========  =======  ===========   =======    =======     =======
</Table>

                                     - 88 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 11:- CONVERTIBLE DEBENTURES IN A SUBSIDIARY

          In August 2001, one of the shareholders of Procognia purchased a
          convertible debenture in the amount of $ 500, bearing accrued interest
          at an annual rate of 6%. The debenture will be converted automatically
          upon the earlier date of the two: (i) the completion of a financing
          round in Procognia (in which case the conversion price will be 80% of
          the price in the investment round) or, (ii) February 2003 (in which
          case the exercise price will be based on a pre-money valuation of $
          22,500).

          In September 2001, another shareholder of Procognia signed a
          convertible debenture agreement in the amount of $ 2,000. The amount
          shall be received commencing November 1, 2001 in 4 equal installments
          every two months. The debenture bears an annual interest rate of 7%
          and will be repaid at the earlier date of: (i) 10 days following a
          financial round of not less than $ 4,000 or, (ii) January 31, 2003.
          The debenture may be converted into Procognia's shares at Procognia's
          option upon the closing of the next financing round. In the event of
          conversion, each installment shall be converted at the lowest price
          per share paid in the next financing round with discount of 20%-50%
          (average calculation based on the number of installments into the same
          shares of the financing round). As of April 2002, installments in the
          amount of $ 1,500, out of the $ 2,000 were received by Procognia.

          Upon the completion of the financing round in Procognia in April 2002,
          an amount of $ 1,250 was converted into 2,868,080 Preferred B1 shares
          of Procognia, and the remaining amount of $ 750 was repaid.

          Since April 2002, Procognia is no longer a subsidiary of the Company
          (see also Note 1c).

NOTE 12:- COMMITMENTS AND CONTINGENT LIABILITIES

          a.   Royalty commitments:

               1.   Savyon and Pronto are obligated to pay royalties to the
                    Government of Israel through the Office of the Chief
                    Scientist ("OCS"), at rates of 3% to 5% on sales proceeds
                    from products developed by the OCS. The maximum amount of
                    royalties payable to the Government of Israel is limited to
                    100% of the grants received, linked to the dollar and bears
                    interest at the LIBOR rate from 1998. The obligation to pay
                    these royalties is contingent on actual sales of the
                    products and in the absence of such sales no payment is
                    required.

                    Total royalties accrued or paid by Savyon and Pronto
                    amounted to $ 99, $ 125 and $ 93 in 2002, 2001 and 2000,
                    respectively.

                    At December 31, 2002, Savyon and Pronto have remaining
                    contingent obligation to the Government of Israel in the
                    amount of $ 2,473 and $ 597, respectively.

               2.   Savyon is obligated to pay royalties to the Israel-United
                    States Bi-National Industrial Research and Development
                    Foundation ("BIRD-F") and companies related to certain
                    universities in Israel, at rate of 3% to 7% on sales
                    proceeds from products in accordance with the terms of the
                    respective agreement. The maximum amount of royalties
                    payable to BIRD-F is limited to 150% of the grants received
                    linked to the dollar and to the U.S. CPI.

                                     - 89 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

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--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 12:- COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)

                    No royalties were paid or accrued during the years 2002,
                    2001 and 2000.

                    At December 31, 2002, Savyon has a remaining contingent
                    obligation to BIRD-F in the amount of $ 191.

               3.   At December 31, 2002, Savyon has a contingent obligation to
                    certain universities in Israel in the minimum annual amount
                    of $ 12. In addition, Savyon is obligated to pay to the
                    universities up to 50% of revenues received, for any
                    sub-license, with respect to the aforementioned products.

          b.   Lease commitments:

               The Group has leased several buildings, offices and warehouses
               under a few operating lease agreements that expire on various
               dates the latest of which is September 2007, and motor vehicles
               under various operating leases that expire on various dates, the
               latest of which is in December 2005.

               Future lease commitments under non-cancelable operating leases
               are as follows:

<Table>
<S>                                            <C>
                2003                           $         429
                2004                                      94
                2005                                      53
                2006 and thereafter                       67
                                               -------------

                                               $         643
                                               =============
</Table>

               Total rent expenses for the years ended December 31, 2002, 2001
               and 2000 were approximately $490, $ 536 and $ 476, respectively.

               As for charges, see Note 12e(2).

          c.   The Company has entered into a service agreement with Gamida for
               Life Israel, a related company, according to which the Company is
               obligated to pay management fees of $ 10 per month. The service
               agreement is automatically renewed for successive one-year terms,
               unless terminated by either party subject to a three-month
               notification.

          d.   In January 1999, the Company established an 80% - owned
               subsidiary - Danyel Biotech Ltd. The remaining 20% are owned by
               L.C. Tech Ltd., a company held by the general manager of the
               subsidiary. According to the incorporation agreement, the general
               manager can require the Company to acquire his 20% under two
               alternatives:

               1.   In the event that the General Manager ceases his role by
                    reason of death or incapability. In such event, the purchase
                    price will be the fair market value as determined by a third
                    party valuation at the termination date.

                                     - 90 -
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--------------------------------------------------------------------------------
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NOTE 12:- COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)

               2.   In the event of termination without cause, the purchase
                    price will be 90% of the fair market value as determined by
                    a third party valuation at the termination date.

                    Since the occurrence of the first event is not under control
                    of the Company, and the purchase price upon the occurrence
                    of such event is the fair market value of the shares and the
                    occurrence of the second event, which is under the control
                    of the Company, is considered by management to be remote, no
                    accounting implications are deemed to be necessary.

          e.   Charges (assets pledged) and guarantees:

               1.   As collateral for credit line provided to the Group,
                    totaling $ 600 as of December 31, 2002, the Group has placed
                    unlimited fixed and floating charges on certain assets and
                    share capital, in favor of the bank.

               2.   In connection with the building lease agreement, Savyon has
                    provided guarantees for the fulfillment of its commitments
                    in respect of the abovementioned rental agreement. Total
                    guarantee as of December 31, 2002 was approximately $ 245.

          f.   Litigation:

               The Company has become aware of third party patent rights, which
               may adversely limit its operations in respect of certain
               diagnostic kits. The Company filed an opposition against this
               patent in June 1997. The opposition resulted in a ruling in favor
               of the Company and the patent was revoked. An appeal was filed in
               May 1999 by the owner of the revoked patent. The Company filed a
               response to the appeal in February 2000. The appeal was withdrawn
               in June 2003.

NOTE 13:- SHAREHOLDERS' EQUITY

          a.   Ordinary shares confer upon their holders voting rights and the
               right to receive dividends, if declared.

          b.   In January 2001, the Company issued 1,000,000 Ordinary shares as
               a consideration for the purchase of all Gamida Gen's shares (see
               also Note 1e).

          c.   In 2001, the Company issued to a controlling shareholder
               2,000,000 Ordinary shares for a net consideration of $ 1,444
               (issuance expenses amounted to $ 136).

          d.   In July 2000, the Company's shareholders approved the Company's
               2000 Incentive Stock Option Plan, pursuant to which 500,000
               options will be granted to employees, directors and consultants
               of the Company and its subsidiaries.

                                     - 91 -
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--------------------------------------------------------------------------------
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NOTE 13:- SHAREHOLDERS' EQUITY (CONT.)

               As of December 31, 2002, an aggregate of 415,000 options are
               still available for future grants. Each option granted under the
               plan is exercisable for a period of 5 years from the date of the
               grant of the option. The exercise price of the options granted
               under the plan may not be less than the nominal value of the
               shares into which such options are exercised. The options vest
               primarily over 3 years. Any options, which are canceled or
               forfeited before expiration become available for future grant.

               In 2000, the Company granted to each of the three general
               managers of its subsidiaries, options to purchase 30,000 Ordinary
               shares, at an exercise price of $ 1.00 per share. The options
               shall vest over a three-year period.

               Additionally, in 2000, the Company granted to each of its two
               directors, options to purchase 10,000 shares, and to another
               director, options to purchase 20,000 shares, at an exercise price
               of $ 1.00 per share. The options shall vest over a three-year
               period (for further details regarding the Company's options, see
               Note 19a2).

          e.   Dividends:

               Dividends, when declared, will be paid in NIS. Dividends paid to
               shareholders outside Israel will be converted into dollars, on
               the basis of the exchange rate prevailing at the date of payment.
               The Company has determined that it will not distribute dividends
               out of tax-exempt profits.

NOTE 14:- TAXES ON INCOME

          a.   Tax benefits under the Law for the Encouragement of Capital
               Investments, 1959:

               Under the law, certain of the production facilities of Savyon
               have been granted "Approved Enterprise" status in 1994. Income
               derived from "Approved Enterprise" is tax exempt for a period of
               four years out of the seven-year period of benefits. Income
               derived during the remaining 5 years of benefits is taxable at
               the rate of 25%. The period of benefits is limited to 12 years
               from the commencement of production or 14 years from the date of
               approval, whichever is earlier and will expire in 2008.

               The entitlement to the abovementioned benefits is conditional
               upon Savyon's fulfillment of conditions stipulated in the
               abovementioned law, regulations published thereunder, and the
               instruments of approval for the specific investments in "Approved
               Enterprises". In the event of failure to comply with these
               conditions, the benefits may be canceled and Savyon may be
               required to refund the amount of the benefits, in whole or in
               part, including interest. As of December 31, 2002, management
               believes that Savyon is meeting all of the aforementioned
               conditions.

                                     - 92 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 14:- TAXES ON INCOME (CONT.)

               The tax-exempt profits that will be earned by the subsidiary's
               "Approved Enterprise" can be distributed to the Company, without
               imposing a tax liability on the Company, only upon the complete
               liquidation of the subsidiary. If these retained tax-exempt
               profits are distributed in a manner other than upon the complete
               liquidation of the subsidiary, they would be taxed at the
               corporate tax rate applicable to such profits, as if the
               subsidiary had not elected the alternative system of benefits
               (currently - 25% for an "Approved Enterprise"). The Law also
               grants entitlement to claim accelerated depreciation on equipment
               used by the "Approved Enterprise" during five tax years.

               Should Savyon derive income from sources other than the "Approved
               Enterprise" during the periods of benefits, such income shall be
               taxed at the regular corporate tax rate of 36%. The benefits are
               not yet utilized since Savyon did not generate taxable income.

          b.   Measurement of taxable income under the Income Tax (Inflationary
               Adjustments) Law, 1985:

               The Company and its Israeli subsidiaries are subject to the
               aforementioned law, pursuant to which the results for tax
               purposes are measured in real terms in accordance with changes in
               the CPI.

          c.   Carryforward tax losses:

               As of December 31, 2002, losses for Israeli tax purposes of the
               Group totaled approximately $ 11,000.

               Under Israeli law, these losses may be carried forward and offset
               against taxable income in the future for an indefinite period.
               Under the inflationary adjustments law, carryforward tax losses
               and deductions for inflation are linked to the CPI.

          d.   Tax benefits under the Law for the Encouragement of Industry
               (Taxes), 1969:

               Savyon is an "industrial company", as defined by this law and, as
               such, is entitled to certain tax benefits, mainly the accelerated
               depreciation of machinery and equipment, as prescribed by
               regulations published under the Inflationary Adjustments Law and
               amortization of patents and other intangible property rights, as
               a deduction for tax purposes for a period of three to eight
               years.

          e.   Deferred income taxes

               Due to the Group's history of losses, management currently
               believes that it is more likely than not that the deferred tax
               assets regarding loss carryforwards and other temporary
               differences will not be realized, therefore, no deferred taxes
               were recorded.

          f.   All income before taxes is domestic.

                                     - 93 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 14:- TAXES ON INCOME (CONT.)

          g.   The main reconciling items between the statutory tax rate of the
               Company and the effective tax rate are the non-recognition of tax
               benefits from accumulated net operating losses carryforward among
               the subsidiaries due to the uncertainty of the realization of
               such tax benefits and the effect of approved enterprise.

          h.   On January 1, 2003, a comprehensive tax reform took effect in
               Israel. Pursuant to the reform, resident companies are subject to
               Israeli tax on income accrued or derived in Israel or abroad. In
               addition, the concept of "controlled foreign corporation" was
               introduced, according to which an Israeli company may become
               subject to Israeli taxes on certain income of a non-Israeli
               subsidiary if the subsidiary's primary source of income is
               passive income (such as interest, dividends, royalties, rental
               income or capital gains). The tax reform also substantially
               changed the system of taxation of capital gains.

NOTE 15:- SELECTED STATEMENTS OF OPERATIONS DATA

          a.   Research and development costs, net:

<Table>
<Caption>
                                                                                YEAR ENDED DECEMBER 31,
                                                                   --------------------------------------------------
                                                                       2002              2001              2000
                                                                   ------------      -------------     --------------
<S>                                                                <C>               <C>               <C>
                Expenses incurred                                  $      1,070      $       3,164     $        1,408
                Less - participations                                       158                  -                 -
                                                                   ------------      -------------     --------------

                                                                   $        912      $       3,164     $        1,408
                                                                   ============      =============     ==============
</Table>

          b.   Financial income (expenses), net:

<Table>
<S>                                                                <C>               <C>               <C>
                Expenses:
                  Interest and others                              $       (65)      $        (155)    $         (106)
                  Expenses with respect to short-term bank
                    credits and charges                                     (77)              (133)              (158)
                  Foreign currency translation adjustments                 (476)              (100)                 -
                                                                   ------------      -------------     --------------

                                                                           (618)              (388)              (264)
                                                                   ------------      -------------     --------------
                Income:
                  Interest on bank deposits                                  20                 71                110
                  Foreign currency translation adjustments                  107                  -                274
                  Gain on marketable securities                               -                  6                  9
                                                                   ------------      -------------     --------------

                                                                            127                 77                393
                                                                   ------------      -------------     --------------

                                                                   $       (491)     $        (311)    $          129
                                                                   ============      =============     ==============
</Table>

                                     - 94 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 15:- SELECTED STATEMENTS OF OPERATIONS DATA (CONT.)

          c.   Other income, net:

<Table>
<Caption>
                                                                                YEAR ENDED DECEMBER 31,
                                                                  ---------------------------------------------------
                                                                       2002              2001              2000
                                                                   ------------      -------------     --------------
<S>                                                                <C>               <C>               <C>
                Expenses:
                Capital loss on sale of property and equipment     $          -      $          (7)    $          (51)
                                                                   ------------      -------------     --------------

                Income:
                Capital gain on sale of property and equipment               76                  -                  -
                Capital gain from realization of Gamidor
                  Diagnostics UK                                             13                  -                  -
                Gain from decrease in holdings in Procognia               1,349                903                805
                Other income                                                 44                  -                  -
                                                                   ------------      -------------     --------------

                                                                          1,482                903                805
                                                                   ------------      -------------     --------------

                                                                   $     1,482       $         896     $          754
                                                                   ============      =============     ==============
</Table>

NOTE 16:- MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION

          a.   Summary information about geographic areas:

               The Group manages its business on the basis of one reportable
               segment. See Note 1a. for a brief description of the Group's
               business.

               This data is presented in accordance with Statement of Financial
               Accounting Standard No. 131 "Disclosures about Segments of an
               Enterprise and Related Information" ("SFAS No. 131"). The Group
               attributes revenues based on the end customers' location.

               The following presents total revenues and long-lived assets for
               the years ended and as of December 31, 2002, 2001 and 2000:

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                       ----------------------------------------------------------------------------
                                                2002                       2001                      2000
                                       ----------------------     ------------------------   ----------------------
                                        TOTAL      LONG-LIVED      TOTAL        LONG-LIVED     TOTAL    LONG-LIVED
                                       REVENUES      ASSETS       REVENUES       ASSETS      REVENUES     ASSETS
                                       --------    ----------     --------     -----------   --------   ----------
<S>                                    <C>         <C>            <C>          <C>           <C>         <C>
                Israel                 $ 13,352    $    2,473     $ 12,535     $     4,350   $ 11,951    $  4,704
                Europe                    2,584             -        2,704               -      2,460           -
                United States               225             -          201               -        396           -
                Other                       515             -          573               -        649           -
                                       --------    ----------     --------     -----------   --------    --------

                                       $ 16,676    $    2,473     $ 16,013     $     4,350   $ 15,456    $  4,704
                                       ========    ==========     ========     ===========   ========    ========
</Table>

                                     - 95 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 16:- MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION (CONT.)

          b.   Major customer data (percentage of total sales):

<Table>
<Caption>
                                     YEAR ENDED DECEMBER 31,
                                     -----------------------
                                      2002     2001    2000
                                     ------   ------   -----
                                                %
                                     -----------------------
<S>                                     <C>      <C>     <C>
               A                        8.6      7.8     5.1
               B                        5.7      5.2     5.0
               C                        3.6      3.9     4.0

</Table>

NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES

          a.   Balances with related parties:
<Table>
<Caption>
                                                                                           DECEMBER 31,
                                                                                   ------------------------------
                                                                                      2002              2001
                                                                                   ------------      ------------
<S>                                                                                <C>               <C>
                Assets:
                Other accounts receivable and prepaid expenses - subsidiaries
                  and affiliates of Gamida for Life B.V. (the "Parent Company")    $        862      $        212
                                                                                   ============      ============

                Liabilities:
                Other accounts payable and accrued expenses - subsidiaries and
                  affiliates of Gamida for Life B.V. (the "Parent Company")        $        112      $        227
                                                                                   ============      ============
</Table>

          b.   Expenses (income):

<Table>
<Caption>
                                                                            YEAR ENDED DECEMBER 31,
                                                                   ---------------------------------------
                                                                     2002            2001          2000
                                                                   ---------       --------      ---------
<S>                                                                <C>             <C>           <C>
                Rent received from a related company               $       -       $      -      $      32
                Management fees and reimbursement of expenses
                  to a related company                             $     124       $    290      $     154
                Consulting fees related to research and
                  development paid to directors                    $       -       $     88      $      92
                Directors' salaries                                $      30       $     29      $      25

                Benefits to related parties:
                Wages and salaries to related parties employed
                  by the Company (directors)                       $     144       $    289      $     177
                Number of directors to whom the benefits are
                  related                                                  1              2              1
</Table>

          The transactions with related parties are made in the ordinary course
          of business and at fair market value.

NOTE 18:- SUBSEQUENT EVENTS

          In January 2003, Gamida Gen Marketing transferred one of its
          distribution rights to a third party in consideration of $ 60, which
          will be received in 12 equal monthly installments.

                                     - 96 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP ON
          THE CONSOLIDATED FINANCIAL STATEMENTS

          a.   The Company's consolidated financial statements are prepared in
               accordance with generally accepted accounting principles in
               Israel ("Israeli GAAP"), which differ in certain respects from
               those generally accepted in the United States of America ("U.S.
               GAAP"). The differences as they apply to the Company and the
               necessary adjustments are summarized below.

               1.   Functional currency translation:

                    According to U.S. GAAP, financial statements of companies
                    whose functional currency is not the reporting entity's
                    currency are translated into the reporting currency in
                    accordance with Statement of Financial Accounting Standard
                    No. 52 "Foreign Currency Translation" ("SFAS No. 52").

                    A majority of the Company's and certain of its subsidiaries'
                    sales is made outside Israel, mainly in U.S. dollars
                    ("dollar"). In addition, a substantial portion of the
                    Company's and certain of its subsidiaries' costs is incurred
                    in dollars. Company's management believes that the dollar is
                    the primary currency of the economic environment in which
                    the Company and certain of its subsidiaries operate. Thus,
                    the functional and reporting currency of the Company and
                    certain of its subsidiaries is the dollar.

                    Accordingly, monetary accounts maintained in currencies
                    other than the dollar are remeasured into U.S. dollars. All
                    transactions gains and losses of the remeasurement of
                    monetary balance sheet items are reflected in the statements
                    of operations as financial income or expenses as
                    appropriate.

                    The financial statements of certain subsidiaries whose
                    functional currency is not the U.S. dollar, have been
                    translated into U.S. dollars. All balance sheet accounts
                    have been translated using the exchange rates in effect at
                    the balance sheet date. Statement of operations amounts have
                    been translated using the average exchange rate for the
                    period. The resulting translation adjustments are reported
                    as a component of shareholders' equity, accumulated other
                    comprehensive loss.

                    According to Israeli GAAP, the financial statements of these
                    companies, whose functional currency is not the U.S. dollar,
                    have been translated into U.S. dollars, in accordance with
                    Interpretation 8 to Statement 36 of the Institute of
                    Certified Public Accountants in Israel. All balance sheet
                    accounts have been translated using the exchange rates in
                    effect at the balance sheet date. Statement of operations
                    amounts have been translated using the exchange rate at the
                    balance sheet date.

                    The resulting difference between the investment and the
                    remeasurement of shareholders' equity, in respect of the
                    said companies, and according to changes in the exchange
                    rates of the different functional currencies, is carried to
                    a separate item among the statement of changes in
                    shareholders' equity, "Cumulative foreign currency
                    translation adjustments".

                    There was no material effect of the differences between
                    Israeli and U.S. GAAP.

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP ON
          THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

                                     - 97 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

          2. Accounting for stock-based compensation:

             According to U.S. GAAP, the Company has elected to follow
             Accounting Principles Board Opinion No. 25, "Accounting for Stock
             Issued to Employees" (APB No. 25) and FASB Interpretation No. 44
             "Accounting for Certain Transactions Involving Stock Compensation"
             ("FIN No. 44") in accounting for its employee stock option plans.
             Under APB No. 25, when the exercise price of the Company's stock
             option is less than the market price of the underlying shares on
             the date of grant, compensation expense is recognized. The Company
             applies SFAS No. 123 and EITF 96-18 "Accounting for Equity
             Instruments that are Issued to Other than Employees for Acquiring,
             or in Conjunction with Selling, Goods or Services" with respect to
             options issued to non-employees. SFAS No.123 requires use of an
             option valuation model to measure the fair value of the options on
             the grant date.

             Pro forma information regarding net loss and net loss per share is
             required by SFAS No. 123, and has been determined assuming the
             Company had accounted for options under the fair value method
             prescribed by that Statement. 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
             2000: risk-free interest rate of 6%; dividend yield of 0%,
             volatility factor of the expected market price of the Company's
             Ordinary shares of 1.626 and a weighted-average expected life of
             the option of 3 years.

             The following table illustrates the effect on net loss and net loss
             per share, assuming that the Company has applied the fair value
             recognition provision of SFAS No. 123 on its stock-based employee
             compensation:

<Table>
<Caption>
                                                                     YEAR ENDED DECEMBER 31,
                                                         ------------------------------------------------
                                                              2002             2001             2000
                                                         ---------------  ---------------   -------------
                                                                    U.S. DOLLARS IN THOUSANDS
                                                                    (EXCEPT PER SHARE AMOUNTS)
                                                         ------------------------------------------------
<S>                                                        <C>              <C>              <C>
            Net loss, according to U.S. GAAP
              (see Note 19.b.1)                            $  (1,827)       $  (6,046)       $  (2,045)
                                                         ==============   ==============   ==============

            Add: stock-based employee compensation
              expense included in reported net loss        $      40        $     113        $      72
                                                         ==============   ==============   ==============

            Deduct: stock-based employee compensation
              expense determined under fair
              value-based method                           $     (49)       $    (139)       $     (98)
                                                         ==============   ==============   ==============

            Pro forma net loss                             $  (1,836)       $  (6,072)       $  (2,071)
                                                         ==============   ==============   ==============

            Pro forma basic and diluted net loss per
              share                                        $   (0.24)        $  (1.02)       $   (0.45)
                                                         ==============   ==============   ==============
</Table>

             According to Israeli GAAP, the benefit component of stock options
             issued to employees is not recognized in the financial statements.

                                     - 98 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

                See also Notes 19b.1.3, 19b.1.4 and 19b.1.5, for the related
                expenses.

                The following is additional disclosure information required by
                U.S. GAAP:

                A summary of the Company's stock option activity and related
                information is as follows:

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                  ------------------------------------------------------------------------------
                                            2002                      2001                       2000
                                  ------------------------- -------------------------  -------------------------
                                                 WEIGHTED                  WEIGHTED                  WEIGHTED
                                                 AVERAGE                   AVERAGE                    AVERAGE
                                    AMOUNT       EXERCISE     AMOUNT       EXERCISE      AMOUNT      EXERCISE
                                  OF OPTIONS       PRICE    OF OPTIONS       PRICE     OF OPTIONS      PRICE
                                  -----------  ------------ -----------  ------------  ----------- -------------
                                                     $                         $                         $
                                               ------------              ------------              -------------
<S>                                <C>             <C>       <C>             <C>        <C>            <C>

          Outstanding at the
            beginning of the year  177,500         1.84      217,500         1.69       107,500        2.43
          Granted                        -            -            -            -       130,000        1.00
          Canceled and forfeited   (55,000)        2.86      (40,000)        1.00       (20,000)       3.39
                                  -----------               -----------                -----------

          Outstanding at the
            end of the year        122,500         1.38      177,500         1.84       217,500        1.69
                                  ===========  ============ ===========  ============  =========== =============

          Exercisable at the
            end of the year        102,500         1.65      117,500         2.27        87,500        2.71
                                  ===========  ============ ===========  ============  =========== =============
</Table>

                The options outstanding as of December 31, 2002, have been
                classified by exercise price, as follows:

<Table>
<Caption>
                                                                                                      WEIGHTED
                                                    WEIGHTED                         OPTIONS          AVERAGE
                                    OPTIONS          AVERAGE        WEIGHTED       EXERCISABLE        EXERCISE
                                OUTSTANDING AS      REMAINING       AVERAGE           AS OF            PRICE
               EXERCISE         OF DECEMBER 31,    CONTRACTUAL      EXERCISE       DECEMBER 31,      OF OPTIONS
                 PRICE               2002             LIFE           PRICE             2002         EXERCISABLE
          -------------------- ----------------- --------------- --------------  ----------------  --------------
                                                    IN MONTHS
                                                 ---------------
<S>                                  <C>               <C>         <C>                <C>             <C>
              $      1.00            60,000            25          $     1.00         40,000          $   1.00
              $      1.75            62,500            *)          $     1.75         62,500          $   1.75
                               -----------------                                 ----------------

                                    122,500                        $     1.38        102,500          $   1.65
                               =================                 ==============  ================  ==============
</Table>

                *) As long as serves as a director.

                Where the Company had recorded deferred stock compensation for
                options issued with an exercise price below the fair value of
                the Ordinary shares, the deferred compensation is recorded and
                amortized as compensation expense, ratably over the vesting
                period of the options.

                Compensation expenses recognized by the Company related to its
                stock-based employee compensation awards amounted to $ 40, $ 55
                and $ 69, for the years ended December 31, 2002, 2001 and 2000,
                respectively (see Note 19.b.1.3).

                                     - 99 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             The weighted average fair values of options granted during the year
             2000 were:

<Table>
<Caption>
                                                      EXCEEDS            EQUALS            LESS THAN
                                                   MARKET PRICE       MARKET PRICE        MARKET PRICE
                                                 -----------------  -----------------   ----------------
<S>                                               <C>                <C>                 <C>
             Weighted average exercise price      $            -     $            -      $            1
                                                 =================  =================   ================
             Weighted average fair value on
               grant date                         $            -     $            -      $            2
                                                 =================  =================   ================
</Table>

             Compensation expenses recognized by Procognia related to its
             stock-based employee compensation award amounted to $ 0, $ 20 and $
             3 for the years ended December 31, 2002, 2001 and 2000,
             respectively (see Note 19.b.1.4).

             In respect of options granted to consultants, Procognia accounted
             for compensation expenses of $ 0, $ 38 and $ 0 for the years ended
             December 31, 2002, 2001 and 2000, respectively. Procognia had
             accounted for its options to consultants under the fair value
             method of SFAS No. 123 and EITF 96-18. The fair value for these
             options was estimated at the date of grant, using the Black -
             Scholes Options Valuation method, with the following
             weighted-average assumptions for the years ended December 31, 2001;
             risk-free interest rate of 4%; dividend yield of 0% and a
             weighted-average contractual life of the option of three years (see
             Note 19.b.1.5).

             According to Israeli GAAP, compensation expenses in respect of
             options granted to consultants are not recognized in the financial
             statements.

          3. Accrued severance pay:

             According to U.S. GAAP, accrued severance pay is included in the
             balance sheet at the total liabilities amount and total amounts
             funded through provident funds and insurance policies. Income from
             earnings on amounts funded is added to severance pay fund.

             According to Israeli GAAP, accrued severance pay is included in the
             balance sheets net, and income from earnings on amounts funded is
             netted from the severance pay.

             See Note 19.b.2.1 for the related presentation in the balance
             sheets.

          4. The accounting treatment for the purchase of a newly consolidated
             subsidiary:

             Effective April 1, 1997, the Company acquired 100% of Gamida Gen
             Marketing's shares from a director and from a related party who had
             the ability to direct the Company's activities and prior to the
             acquisition, held less than 50% of the voting rights in the
             Company.

                                    - 100 -
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             Effective January 1, 2001, the Company acquired 100% of Gamida
             Gen's shares, 78%, of which were acquired from a related party who
             had the ability to direct the Company's activities and prior to the
             acquisition held less than 50% of the voting rights in the Company.

             According to Israeli GAAP, pursuant to the directives of the
             Securities Regulations (Presentation of Transactions Between the
             Company and a Controlling Party Therein in the Financial
             Statements, 1996), control is defined as the ability to direct a
             Company's activities. Accordingly, the assets and liabilities of
             Gamida Gen Marketing and Gamida Gen were consolidated in the
             Company's consolidated financial statements in accordance with
             their carrying value as it appeared in Gamida Gen Marketing's and
             Gamida Gen's books, which approximated the fair values. The excess
             amounts of the cost over carrying value of the assets acquired
             amounted to $ 4,923 and $ 2,242 in respect of Gamida Gen Marketing
             and Gamida Gen, respectively. The excess of $4,923 was divided as
             follows: an amount of $4,630 was carried to additional paid-in
             capital and an amount of $293 was recorded as goodwill. The excess
             of $ 2,242 was divided as follows: an amount of $1,749 was carried
             to additional paid-in capital and an amount of $493 was recorded as
             technology.

             According to U.S. GAAP, these transactions would not be accounted
             for as transaction between companies under common control as
             defined in Interpretation No. 39 to Accounting Principles Board
             Opinion No. 16, "Business Combinations". The transactions were
             accounted for by the purchase method of accounting and the excess
             of the cost over the fair value of the acquired assets was carried
             to goodwill and technology: an amount of $4,923, which relates to
             the acquisition of Gamida Gen Marketing, was carried to goodwill
             and an amount of $2,242, which relates to the acquisition of Gamida
             Gen, was carried to technology. Goodwill will be amortized over 10
             years and technology will be amortized over its useful life, which
             is three years. Accordingly, the assets and liabilities of Gamida
             Gen Marketing and Gamida Gen were consolidated based on their fair
             values.

             Amortization of goodwill and technology for the years ended
             December 31, 2002, 2001 and 2000, were $ 387, $ 1,046 and $ 463,
             respectively.

             "Intangible assets subject to amortization arose from acquisitions
             prior July 1, 2001, are being amortized on a straight-line basis
             over their useful life in accordance with APB Opinion No. 17
             "Intangible Assets"("APB No. 17"). Acquired technology is amortized
             over 5 years, and customer relationship is amortized over 10 years.

                                    - 101 -
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                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

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--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             Intangible assets acquired in a business combination for which date
             is on or after July 1, 2001, should be amortized over their useful
             life using a method of amortization that reflects the pattern in
             which the economic benefits of the intangible assets are consumed
             or otherwise used up, in accordance with Statement of Financial
             Accounting Standards No. 142 "Goodwill and Other Intangible
             Assets", ("SFAS No. 142"). Acquired technology is amortized over a
             weighted average of 5 years, and customer relationship is amortized
             over a weighted average of 10 years.

             The unaudited results of operations presented below for the three
             years ended December 31, 2002, 2001 and 2000, respectively, reflect
             the operations had the Company adopted the non-amortization
             provisions of SFAS No. 142 effective January 1, 2000:

<Table>
<Caption>

                                                                       YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------------
                                                                2002             2001             2000
                                                           ---------------  ---------------   -------------

<S>                                                         <C>              <C>               <C>
             Reported net loss                              $    (1,827)     $    (6,046)      $   (2,045)
              Goodwill amortization                                   -              709              659
                                                           ---------------  ---------------   -------------

             Adjusted net loss                              $    (1,827)     $    (5,337)      $   (1,386)
                                                           ===============  ===============   =============
             Basic and diluted loss per share:
                Reported net income                         $     (0.24)     $     (1.02)      $    (0.44)
                Goodwill amortization                                 -             0.12             0.14
                                                           ---------------  ---------------   -------------

             Adjusted net loss                              $     (0.24)     $      (0.9)      $     (0.3)
                                                           ===============  ===============   =============
</Table>

             See Notes 19b.1. and 19b.1.(2) for the related expenses and Note
             19b.2.(2) for the related presentation in the balance sheet.

       5. Convertible debentures of a subsidiary:

          a) According to Israeli GAAP, when a parent company holds shares in a
             subsidiary and the subsidiary issues convertible securities, a
             change in the holding percentage will take place upon conversion of
             such convertible securities. The decrease in the ownership of the
             parent company in its subsidiary may result either in gain or loss.
             When an exercise of convertible securities is deemed probable
             (computation of probability is based on the ratio between the
             market price of the shares and the present value of the price of
             the exercising warrants into shares or the present value of the
             payments for conversion of the debentures into shares) a loss in
             respect of this dilution would be recognized, a provision for this
             loss should be recorded immediately and not only upon the exercise
             of the warrants or the conversion of the debentures.

                                    - 102 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS


NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             Under U.S. GAAP, such a loss in the parent company is recorded when
             the conversion of the debenture or the exercise of a warrant
             actually occurs in the subsidiary.

             As of balance sheet date, all the convertible debentures were
             converted into equity or repaid (see also Note 1c and 11).
             Accordingly there was no effect of the difference between Israeli
             and U.S. GAAP.

          b) According to Israeli GAAP, the balance of the minority interest in
             a subsidiary that issued convertible securities, is presented net
             of the balance of the related debt.

             According to U.S. GAAP, minority interest balance is included in
             the balance sheet as a mezzanine finance presented between total
             liabilities and shareholders' equity, while the convertible
             securities balance is presented on a gross basis within long-term
             liabilities.

             See Note 19b.2.(4) for the related presentation in the balance
             sheet.

       6. Treatment of deferred income taxes:

          a) Under U.S. GAAP, paragraph 9(f) of SFAS No. 109, "Accounting for
             Income Taxes", creates an exception which prohibits the recognition
             of deferred tax liabilities or assets that arise from differences
             between the financial reporting and tax bases of assets and
             liabilities that are remeasured from the local currency into U.S.
             dollars using historical exchange rates and that result from (i)
             changes in exchange rates or (ii) indexing for tax purposes.

             Under Israeli GAAP, companies reporting in U.S. dollar or
             currencies linked to the U.S. dollar provide deferred income taxes
             on differences between the financial reporting and tax bases of
             assets and liabilities.

             No deferred taxes were recorded under Israeli GAAP, and therefore
             there is no effect of the differences between Israeli and U.S.
             GAAP.

          b) Under U.S. GAAP, deferred tax assets are reduced by a valuation
             allowance if based on the weight of available evidence, it is more
             likely than not that some portion or all of the deferred tax assets
             will not be realized.

             Under Israeli GAAP, deferred tax assets are not recognized when it
             is not probable that the deferred tax assets will be realized.

             All deferred tax assets under U.S. GAAP were fully reduced by a
             valuation allowance and therefore there is no effect of the
             difference between Israeli and U.S. GAAP.

                                    - 103 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             A valuation allowance has been recorded against the deferred tax
             assets as follows:

<Table>
<Caption>
                                                                                 DECEMBER 31,
                                                                      ---------------------------------
                                                                           2002              2001
                                                                      ---------------   ---------------

<S>                                                                    <C>               <C>
             Carryforward losses                                       $      3,960      $      5,428
             Provision for vacation and severance pay                           193               249
                                                                      ---------------   ---------------

             Net deferred tax assets before valuation allowance               4,153             5,677
             Valuation allowance                                             (4,153)           (5,677)
                                                                      ---------------   ---------------

             Net deferred tax assets                                   $          -      $          -
                                                                      ===============   ===============
</Table>

             The Group provided valuation allowances in respect of deferred tax
             assets resulting from losses carryforward and other temporary
             differences, since it has a history of losses over the past three
             years. Management currently believes that it is more likely than
             not that the deferred taxes will not be realized.

       7. Earnings per share:

          According to U.S. GAAP basic net earnings (loss) per share is computed
          based on the weighted average number of Ordinary shares outstanding
          during each year. Diluted net earnings per share is computed based on
          the weighted average number of Ordinary shares outstanding during each
          year, plus dilutive potential Ordinary shares considered outstanding
          during the year, in accordance with Statement of Financial Standard
          No. 128, "Earnings Per Share".

          According to Israeli GAAP (Opinion No. 55), the dilutive effect of
          options is included in the computation of basic net earnings per share
          only if their exercise is considered to be probable, based on the
          relationship between the market price of the shares issuable upon the
          exercise of the options and the discounted present value of the future
          proceeds derived from the exercise of such options and convertible
          debentures. The exercise of the options is not considered to be
          probable, therefore the options were not included in the computation
          of the basic and dilutive net earnings per share.

                                    - 104 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

          The following table sets forth the computation of the basic and
          diluted net loss per share according to U.S. GAAP:

<Table>
<Caption>
                                                                        YEAR ENDED DECEMBER 31,
                                                            -----------------------------------------------
                                                                 2002             2001            2000
                                                            --------------   --------------   -------------
<S>                                                          <C>              <C>              <C>
           Numerator:
           Numerator for basic and diluted net loss per
              share - loss available to shareholders         $   (1,827)      $   (6,046)      $   (2,045)
                                                            ==============   ==============   =============
           Denominator:
           Denominator for basic and diluted net loss per
              share - weighted average shares used for
              computation of basic and diluted net loss
              per share (in thousands)                            7,644            5,977            4,644
                                                            ==============   ==============   =============
           Basic and diluted net loss per share according
           to U.S. GAAP                                      $    (0.24)      $    (1.01)      $    (0.44)
                                                            ==============   ==============   =============
</Table>

                All outstanding options have been excluded from the calculation
                of the diluted net loss per share because all such securities
                are anti-dilutive for all periods presented. The total weighted
                average number of shares related to the outstanding options
                excluded from the calculations of diluted net loss per share
                were 147,500 ,177,500 and 217,500 for the years ended December
                31, 2002, 2001 and 2000, respectively.

       8. Comprehensive income:

                Under U.S. GAAP, SFAS No. 130, "Reporting Comprehensive Income",
                the Company should include and display specific income component
                as part of shareholders equity.

                Under Israeli GAAP, foreign currency translation adjustment are
                recorded in the Company's statements of changes in shareholders
                equity as cumulative foreign currency translation adjustments.

                See below for the related comprehensive income presentation in
                the statements of shareholders' equity under U.S. GAAP.

                                    - 105 -
<Page>

                               HEALTHCARE TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S. GAAP
          ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

<Table>
<Caption>
                                                                                                       ACCUMULATED
                                                              TOTAL                     ADDITIONAL        OTHER
                                                          COMPREHENSIVE     SHARE        PAID-IN      COMPREHENSIVE
                                                               LOSS         CAPITAL      CAPITAL      INCOME (LOSS)
                                                         ----------------  ----------  ------------  ---------------
<S>                                                       <C>               <C>         <C>           <C>
          Balance at January 1, 2000                                        $    71     $ 20,591      $       (11)
          Net loss                                        $  (2,045)              -            -                -
          Other comprehensive income:
          Foreign currency translation adjustments               36               -            -               36
                                                         ----------------
          Other comprehensive income                             36
                                                         ----------------
          Total comprehensive loss                        $  (2,009)
                                                         ================
          Deferred stock compensation                                             -          234                -
          Amortization of deferred stock compensation                             -            -                -
                                                                           ----------  ------------  ---------------

          Balance at December 31, 2000                                           71       20,825               25

          Net loss                                        $  (6,046)              -            -                -
          Other comprehensive loss:
          Foreign currency translation adjustments             (116)              -            -             (116)
                                                         ----------------
          Other comprehensive loss                             (116)
                                                         ----------------
          Total comprehensive loss                        $  (6,162)
                                                         ================
          Forfeiture of options granted to employees                              -          (28)               -
          Issuance of shares, net                                                28        2,274                -
          Amortization of deferred stock compensation                             -           38                -
                                                                           ----------  ------------  ---------------

          Balance at December 31, 2001                                           99       23,109              (91)
          Net loss                                        $  (1,827)              -            -                -
          Other comprehensive loss:
          Foreign currency translation adjustments              (27)              -            -              (27)
                                                         ----------------
          Other comprehensive loss                              (27)
                                                         ----------------
          Total comprehensive loss                        $  (1,854)
                                                         ================
          Issuance expenses                                                       -         (108)               -
          Forfeiture of options granted to employees                              -          (15)               -
          Capital surplus                                                         -          268                -
          Amortization of deferred stock compensation                             -            -                -
                                                                           ----------  ------------  ---------------

          Balance at December 31, 2002                                      $    99     $ 23,254      $      (118)
                                                                           ==========  ============  ===============

<Caption>
                                                                                               TOTAL
                                                            DEFERRED       ACCUMULATED     SHAREHOLDERS'
                                                          COMPENSATION       DEFICIT          EQUITY
                                                         ---------------  --------------  ---------------

<S>                                                        <C>            <C>             <C>
          Balance at January 1, 2000                       $        -     $  (10,484)     $     10,167
          Net loss                                                  -         (2,045)           (2,045)
          Other comprehensive income:
          Foreign currency translation adjustments                  -              -                36

          Other comprehensive income

          Total comprehensive loss

          Deferred stock compensation                            (234)             -                 -
          Amortization of deferred stock compensation              72              -                72
                                                         ---------------  --------------  ---------------

          Balance at December 31, 2000                           (162)       (12,529)            8,230

          Net loss                                                  -         (6,046)           (6,046)
          Other comprehensive loss:
          Foreign currency translation adjustments                  -              -              (116)

          Other comprehensive loss

          Total comprehensive loss

          Forfeiture of options granted to employees               28              -                 -
          Issuance of shares, net                                   -              -             2,302
          Amortization of deferred stock compensation              75              -               113
                                                         ---------------  --------------  ---------------

          Balance at December 31, 2001                            (59)       (18,575)            4,483
          Net loss                                                  -         (1,827)           (1,827)
          Other comprehensive loss:
          Foreign currency translation adjustments                  -              -               (27)

          Other comprehensive loss

          Total comprehensive loss

          Issuance expenses                                         -              -              (108)
          Forfeiture of options granted to employees               15              -                 -
          Capital surplus                                           -              -               268
          Amortization of deferred stock compensation              40              -                40
                                                         ---------------  --------------  ---------------

          Balance at December 31, 2002                     $       (4)    $  (20,402)     $      2,829
                                                         ===============  ==============  ===============
</Table>

                                    - 106 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

          9. Gain from issuance of subsidiary's shares to a third party:

             In 2000, the Company recorded gain from issuance of Procognia's
             Preferred shares to a third party in the amount of $ 1,708 (see
             Note 1c).

             According to U.S. GAAP gain from issuance of a development stage
             subsidiary's Ordinary shares to a third party, is recorded as an
             additional paid-in capital. In case the subsidiary issues Preferred
             shares to a third party, no gain from such issuance will be
             recorded.

             According to Israeli GAAP, gain from issuance of a subsidiary's
             shares which is in the development stage to a third party, was
             recorded as a deferred capital gain and amortized according to the
             highest of (i) three years period (ii) the Company's interest in
             the subsidiary's losses. The Company recorded capital gain of $ 903
             and $ 805 in 2001 and 2000, respectively, in regard to the issuance
             of shares in Procognia.

             See table in Note 19b.1.(6) for the elimination of the related
             gain.

         10. Marketable securities:

             For U.S. GAAP purposes, the Company has determined, as of the
             purchase date and as of the balance sheets date, that its
             marketable securities should be classified as trading securities
             and stated at fair value, with unrealized gains and losses,
             reported in the statement of operations, in accordance with
             Statement of the Financial Accounting Standard No. 115 "Accounting
             for Certain Investments in Debt and Equity Securities" ("FASB No.
             115"). According to U.S. GAAP, proceeds from sale of marketable
             securities held for trading should be included in net cash provided
             by operating activities.

             According to Israeli GAAP, marketable securities designated for
             sale in the short-term are carried at market value, in accordance
             with Statement of Opinion No. 44 of the Institute of Certified
             Public Accountants in Israel. Unrealized gains from securities
             classified as a "current investment" in accordance with Israeli
             GAAP are reflected in earnings even if transactions are not carried
             out on the basis, which would meet the definition of the trading
             security under U.S. GAAP. Proceeds from sale of marketable
             securities are presented in investing activities in the statements
             of cash flows.

             See Note 19b.3. for the related presentation in the statements of
             cash flows.

                                    - 107 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

          11.Preferred shares of a subsidiary:

             During the year 2000, Procognia effected a private placement of its
             equity securities, raising an aggregate amount of $ 2,500, as a
             result of which the Company's holdings in the share capital of
             Procognia decreased to approximately 70.08%.

             According to U.S. GAAP, the issuance of subsidiary's Preferred
             shares to a third party, should be accounted for as a separate
             component of minority interest, Preferred shares in a subsidiary
             that does not participate in the losses of the subsidiary. An
             amount of $ 2,477 is attributed to Preferred shares in Procognia
             held by a minority.

             According to Israeli GAAP in accordance with Statement of Opinion
             No. 57 of the Institute of Certified Public Accountants in Israel,
             a subsidiary's losses are attributed to the minority interest,
             according to the ownership level. For the years ended December 31,
             2002, 2001 and 2000, an amount of $ 206, $ 971 and $ 214,
             respectively, was attributed to the holders of Preferred shares of
             the subsidiary and was recorded as a minority interest in earnings
             or losses of a subsidiary.

             See Note 19.b.1(7) for the related elimination of minority interest
             in losses of a subsidiary and Note 19.b.2(5) for the related
             presentation in the balance sheet.

         12. Proportionate consolidation:

             On December 31, 2002, the Company entered into an agreement with
             the Levin Family LLC. for the establishment of a new jointly owned
             entity, Savyon. At the same date, Savyon purchased from Pronto
             certain assets, inventory, patent rights and know how related to
             the diagnosis of infectious diseases in consideration of $ 1,900.

             Under U.S. GAAP, investments in jointly controlled entities are
             accounted for by the equity method.

             Under Israeli GAAP, jointly controlled entities are included in the
             Company's financial statements, using the proportionate
             consolidation method.

             However, proportionate consolidation is permitted by the
             regulations of the Securities and Exchange Commission that are
             applicable to foreign private issuers.

                                    - 108 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             The following is summarized financial information regarding the
             effect of the proportionate consolidation:

<Table>
<Caption>
                                                                     YEAR ENDED DECEMBER 31, 2002
                                                         ----------------------------------------------------
                                                          AS REPORTED
                                                           IN THESE           EFFECT OF           AS ON
                                                           FINANCIAL        PROPORTIONATE       THE EQUITY
                                                          STATEMENTS        CONSOLIDATION         BASIS
                                                         --------------   ------------------  ---------------
<S>                                                       <C>                   <C>               <C>
             BALANCE SHEET:
             Current assets                               $      7,852          $  (283)          $   7,569
             Long-term investments                                 240                -                 240
             Equity investment                                       -             (134)               (134)
             Property and equipment, net                         1,705             (253)              1,452
             Other assets, net                                     768             (280)                488
             Current liabilities                                (5,982)             710              (5,272)
             Long-term liabilities                                (337)             240                 (97)
                                                         --------------   ---------------     ---------------

             Shareholders' equity                         $      4,246          $     -           $   4,246
                                                         ==============   ===============     ===============
</Table>

             Statements of operations and cash flows were not provided due to
             the fact that the establishment of Savyon took place in December
             31, 2002 (see Note 19.2.7).

          13.Decrease in holdings of voting rights resulting from issuance of
             an investee's or, a subsidiary evolving into an investee, Preferred
             shares to a third party:

             In April 2002, Procognia's parent company, the Company's
             subsidiary, issued Preferred B and B1 shares in a private placement
             upon which an amount of approximately $ 14,300 was raised. In
             December 2002, Procognia acquired all of the shares of Sense
             Proteomic Ltd., in an exchange of issuance of Ordinary shares. In
             respect of this transaction, Procognia issued Preferred "B" shares
             in a private placement, in which $ 4,000 was raised. As a result,
             the Company's voting rights declined from 70% to 11.6% and
             consequently Procognia has now become an affiliate (rather than a
             subsidiary) financial statements are no longer consolidated with
             those of the Company.

             According to Israeli GAAP, a decrease in holdings of voting rights
             in an investee, derived from the issuance of any type of shares,
             would result in a gain. The Company recorded a capital gain in the
             amount of $1,349. The previous losses that relate to the stock
             retained by the investor that were previously accrued, were
             reversed and the carrying amount of the investment was reduced to
             zero.

                                    - 109 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)


             According to U.S. GAAP, a decrease in holdings of voting rights in
             an investee, derived from the issuance of other than Ordinary
             shares (Preferred shares), would not result in a gain. The previous
             losses that relate to the stock retained by the investor that were
             previously accrued, remained as part of the carrying amount of the
             investment. The Company recorded the investment in this investee,
             formerly a subsidiary, in its negative balance of $ (4,761) (see
             Note 19.b.2.7 for the related presentation in the balance sheet and
             Note 19.b.1.9).

         14. Beneficial conversion feature on convertible securities:

             As part of the capital raise in the parent of Procognia, in April
             2002, Procognia's parent company, the Company's subsidiary,
             converted a portion of its convertible debentures in the amount of
             $1,250.

             According to Israeli GAAP, the beneficial conversion feature
             component is not recognized in the financial statements.


           According to U.S. GAAP, EITF 98-5, "Accounting for Convertible
             Securities with Beneficial Conversion Features or Contingently
             Adjustable Conversion Ratios" and EITF 00-27, "Application of Issue
             No. 98-5 to Certain Convertible Instruments" ("EITF 00-27"),
             determine that embedded beneficial conversion features present in
             convertible securities should be valued separately at issuance. The
             embedded beneficial conversion feature should be recognized and
             measured by allocating a portion of the proceeds equal to the
             intrinsic value of that feature to additional paid-in capital. That
             amount should be calculated at the commitment date as the
             difference between the conversion price and the fair value of the
             Ordinary shares or other securities into which the security is
             convertible, multiplied by the number of shares into which the
             security is convertible (intrinsic value). In circumstances under
             which (a) the convertible securities become convertible only upon
             the occurrence of a future event outside the control of the holder
             and (b) a security that is convertible from inception but contains
             conversion term that change upon the occurrence of future event,
             the Task Force reach a consensus that any contingent beneficial
             conversion feature should be measured at the commitment date but
             not recognized in earnings until the contingency is resolved. In
             addition, Issue 2 of EITF 00-27 states that changes to the
             conversion terms that would be triggered by future events not
             controlled by the issuer should be accounted for as contingent
             conversion options, and the intrinsic value of such conversion
             options would not be recognized until and unless the triggering
             event occurs.


                                    - 110 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             As the conversion terms of two convertible debentures issued by
             Procognia would have been trigged only by a future event, the
             intrinsic value of such conversion options had not been recognized
             in earnings at the issuance date or until the conversion occurred
             in 2002. The Company recorded in 2002 an expense in the amount of
             $313 in that regard (see Note 19.b.1.9).

         15. Sale of assets from Pronto to Savyon:

             Under Israeli GAAP, the transaction between Savyon and Levin Family
             LLP was financed with a loan provided by the Levin Family LLP to
             Savyon, which terms have not yet been determined. Accordingly,
             assets, inventory, patent rights and know how that were transferred
             to Savyon, were recorded in Savyon's books according to their book
             value as it appeared in Pronto books. The excess of the purchase
             price over the book value of the assets and know-how, in the amount
             of $ 268, that were transferred, was recorded as additional paid-in
             capital.

             Under U.S. GAAP, the assets that were transferred to Savyon
             comprise a business based on EITF 98-3, "Determining Whether a
             Non-monetary Transaction Involves Receipt of Productive Assets or
             of a Business". However, Savyon qualifies as a joint venture, as
             defined in EITF 01-2, "Interpretations of APB Opinion No. 29". The
             Company holds a 50% equity interest in Savyon and has equal risks
             and rewards with the other investor. Under U.S GAAP, the property
             and equipment, inventory, patent rights and know-how sold to Savyon
             were recorded in Savyon books according to the Company's carrying
             value with respect to its 50% in the joint venture. The excess of
             50% of the purchase price over the carrying amount of 50% the net
             assets deemed sold to Savyon in the amount of $ 134 was allocated
             to acquired technology. The excess of the other 50% of the purchase
             price over the carrying amount of the other 50% of net assets,
             which were sold to Savyon should have been recorded as a gain. The
             Company did not recognize this gain amounting to the difference
             between 50% the purchase price and the book value in the amount of
             $ 134, as Savyon is a highly leveraged entity and realization of
             gain is not assured. Such difference was carried to additional
             paid-in capital (see Note 19.b.s.6 for the balance sheet
             presentation).

         16. Recently issued accounting pronouncements in the U.S.

             In June 2002, the FASB issues Statement of Financial Accounting
             Standard No. 146, "Accounting for Costs Associated with Exit or
             Disposal Activities" ("SFAS No. 146"), which addresses significant
             issue regarding the recognition, measurement, and reporting of
             costs associated with exit and disposal activities, including
             restructuring activities. SFAS No. 146 requires that costs
             associated with exit or disposal activities be recognized when they
             are incurred rather than at the date of a commitment to an exit or
             disposal plan. SFAS No. 146 is effective for all exit or disposal
             activities initiated after December 31, 2002. The Company does not
             expect the adoption of SFAS No. 146 to have a material impact on
             its results of operations or financial position.

                                    - 111 -
<Page>

NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

             In November 2002, the FASB issued FASB Interpretation No. 45,
             "Guarantor's Accounting and Disclosure Requirements for Guarantees,
             Including Indirect Guarantees of Indebtedness of Others, an
             interpretation of FASB Statements No. 5, 57, and 107 and Rescission
             of FASB Interpretation No. 34" ("FIN No. 45"). FIN No. 45
             elaborates on the disclosures to be made by a guarantor in its
             interim and annual financial statements about its obligations under
             certain guarantees that it has issued. It also clarifies that a
             guarantor is required to recognize, at the inception of a
             guarantee, a liability for the fair value of the obligation
             undertaken in issuing the guarantee. FIN No. 45 does not prescribe
             a specific approach for subsequently measuring the guarantor's
             recognized liability over the term of the related guarantee. It
             also incorporates, without change, the guidance in FASB
             Interpretation No. 34, "Disclosure of Indirect Guarantees of
             Indebtedness of Others," which is being superseded. The disclosure
             provisions of FIN No. 45 are effective for financial statements of
             interim or annual periods that end after December 15, 2002, and the
             provisions for initial recognition and measurement are effective on
             a prospective basis for guarantees that are issued or modified
             after December 31, 2002, irrespective of a guarantor's year-end.
             The Company does not expect the adoption of FIN No. 45 to have a
             material impact on its results of operations or financial position.

          b. The effect of the material differences between Israeli and U.S.
             GAAP of the aforementioned items on the financial statements is as
             follows:

             1. On statement of operations items:

<Table>
<Caption>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                        ---------------------------------------------
                                                                            2002            2001           2000
                                                                        -------------  -------------- --------------
<S>                                                                       <C>           <C>            <C>
             Net income (loss) as reported according to Israeli GAAP      $     468     $    (3,013)   $      (491)
             Amortization of goodwill (1)                                       196            (463)          (463)
             Additional amortization of technology (2)                         (583)           (583)             -
             Healthcare's stock-based compensation expenses (3)                 (40)            (55)           (69)
             Procognia's stock-based compensation expenses (4)                    -             (20)            (3)
             Procognia's compensation expenses related to
               consultants (5)                                                    -             (38)             -
             Gain from issuance of shares in Procognia (6)                        -            (903)          (805)
             Minority interest in earnings of Procognia (7)                    (206)           (971)          (214)
             Capital gain from decrease in holdings in Procognia (8)         (1,349)              -              -
             Beneficial conversion feature expenses related to
               conversation of convertible debentures in Procognia
               (9)                                                             (313)              -              -
                                                                        -------------  -------------- --------------

             Net loss according to U.S. GAAP                              $  (1,827)    $    (6,046)   $    (2,045)
                                                                        =============  ============== ==============
</Table>

                (1) Amortization expense of goodwill (see Note 19.a.4).
                (2) Amortization expense of technology (see Note 19.a.4).
                (3) Recognition of stock based compensation (see Note 19.a.2).
                (4) Recognition of stock based compensation in subsidiary
                    (see Note 19.a.2).

                                    - 112 -
<Page>


NOTE 19:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

                (5) Recognition of compensation for non-employees in a
                    subsidiary (see Note 19.a.2).
                (6) Elimination of capital gain from issuance of Preferred
                    shares in a development stage subsidiary (see Note 19.a.9).
                (7) Elimination of losses attributed to the holders of Preferred
                    shares of a subsidiary (see Note 19.a.11).
                (8) Elimination of capital gain (see Note 19.a.13).
                (9) Recognition of beneficial conversion feature upon conversion
                    of the debentures (see Note 19.a.14).

             2. On balance sheet items:

<Table>
<Caption>
                                                   DECEMBER 31, 2002                      DECEMBER 31, 2001
                                         -------------------------------------- --------------------------------------
                                           AS PER                      AS PER       AS PER                    AS PER
                                           ISRAELI                      U.S.        ISRAELI                     U.S.
                                            GAAP       ADJUSTMENT       GAAP         GAAP      ADJUSTMENT      GAAP
                                         -----------  ------------  ----------- ------------ ------------- -----------

<S>                                       <C>          <C>           <C>         <C>          <C>           <C>
             Severance pay fund (1)       $       -    $     819     $     819   $       -    $     893     $     893
             Goodwill (2)                 $     373    $   2,627     $   3,000   $     715    $   2,431     $   3,146
             Technology (3) (6)           $     166    $     717     $     883   $     441    $   1,166     $   1,607

             Total assets                 $  10,565    $   4,163     $  14,728   $  12,485    $   4,490     $  16,975


             Investment in Procognia (7)  $       -    $  (4,761)    $  (4,761)  $       -    $       -     $       -
             Accrued severance pay (1)    $    (246)   $    (819)    $  (1,065)  $    (300)   $    (893)    $  (1,193)
             Convertible debentures
               of a subsidiary (4)        $       -    $       -     $       -   $    (600)   $    (416)    $  (1,016)
             Preferred shares in a
               subsidiary (5)             $       -    $       -     $       -   $       -    $  (2,477)    $  (2,477)
             Shareholders' equity (2)     $  (4,246)   $   1,417     $  (2,829)  $  (3,779)   $    (704)    $  (4,483)

             Total liabilities and
               shareholders' equity       $ (10,565)   $  (4,163)    $ (14,728)  $ (12,485)   $  (4,490)    $ (16,975)

</Table>

                (1) Amounts funded in regard to severance pay are presented
                    under Israeli GAAP as a deduction from the liabilities
                    whereas under U.S. GAAP, they are presented as long-term
                    assets (see Note 19a.3.).

                (2) An additional goodwill, in the amount of $ 4,630, arising
                    upon the acquisition of Gamida Gen Marketing Ltd. (acquired
                    from controlling party) (net of accumulated amortization of
                    $ 2,003 and $ 2,199 as of December 31, 2002 and 2001,
                    respectively) (see Note 19.a.4.).

                (3) An additional technology, in the amount of $ 1,749, arising
                    upon the acquisition of Gamida Gen Ltd. (acquired from
                    controlling party) (net of accumulated amortization of $
                    1,166 and $ 583 as of December 31, 2002 and 2001,
                    respectively) (see Note 19a.4.).

                                    - 113 -
<Page>

NOTE 20:- EFFECT OF MATERIAL DIFFERENCES BETWEEN ISRAELI GAAP AND U.S.
          GAAP ON THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

                (4) Minority interest in a subsidiary's deficiency is presented
                    under Israeli GAAP as a deduction from convertible
                    securities liability issued by the same subsidiary whereas
                    under U.S. GAAP is presented as a mezzanine finance account
                    (see Note 19.a.5.b).

                (5) Issuance of Preferred shares to a third party in a
                    subsidiary and pick-up of related earnings (see Note
                    19.a.11).

                (6) Technology, in the amount of $ 134, arising from the sale of
                    assets from Pronto to Savyon (see Note 19a.15).

                (7) Investment in Procognia (see Note 19a.13).

             3. Statement of cash flows:

                Pursuant to Israeli GAAP investment in marketable securities is
                classified as an investment activity.

                Pursuant to U.S. GAAP the aforementioned investment is
                classified as an operating activity (see Note 19.a.10.):

<Table>
<Caption>
                                                                       YEAR ENDED DECEMBER 31, 2000
                                                            --------------------------------------------------
                                                               AS PER                              AS PER
                                                               ISRAELI                              U.S.
                                                                GAAP           ADJUSTMENT           GAAP
                                                           ---------------   ---------------   ---------------
<S>                                                         <C>               <C>               <C>
                Net cash provided by (used in) operating
                   activities                               $      310        $     (337)       $       (27)
                                                           ===============   ===============   ===============

                Net cash used in investing activities       $     (971)       $      337        $      (634)
                                                           ===============   ===============   ===============
</Table>

                              - - - - - - - - - - -

                                    - 114 -
<Page>
                3.  Reports of other auditors upon whom the principal auditors
                    are relying.

            (b) Exhibits

                                    - 115 -
<Page>

EXH. NO. INCORP. BY REF. TO


<Table>
<S>      <C>        <C>
1.1      1.1(8)     Memorandum of Association of the Registrant, as amended.

1.2      1.2(8)     Articles of Association of the Registrant, as amended.

2.1      2.1(1)     Debenture  Purchase  Agreement,  dated as of May 14, 1991, among Healthcare,  Rosebud,  Evergreen-Canada
                    Israel Investment and Company Ltd. et. al.

         4.1        2.3(1) Agreement dated February 21, 1991 between Savyon and New Horizons Diagnostic Corp.

4.2      2.4(1)     Agreement dated August 1, 1986 between Diatech Ltd. and Diamotek Ltd.

4.3      2.5(1)     Agreement dated February 22, 1987 between Diatech Ltd. and Yissum University.

4.4      2.6(1)     Agreement  dated  September 9, 1987 between  Diatech Ltd.  and Ramot  University  Authority  for Applied
                    Research & Industrial Development Ltd.

4.5      2.7(1)     Agreement dated July 15, 1989 between Diatech Ltd. and Yissum University.

4.6      2.8(1)     Agreement dated January 1, 1991 between Diatech Ltd. and Yeda.

4.7      2.9(1)     Distributorship Agreement between Savyon and Toshin, dated March 3, 1986.

4.8      2.11(4)    Lease Agreement for Savyon's Facilities in Ashdod, Israel, dated March 29, 1993.

4.9      2.13(4)    Agreement between the Company and Savyon dated October 10, 1994.

4.10     2.15(6)    Agreement  dated January 23, 1995 between the Company,  Eriphyle  Trading Ltd. and Gamida-Gen  Marketing
                    Ltd., for the acquisition by the Company of shares of Gamida-Gen Marketing Limited (Gamidor).

4.11     2.17(7)    Agreement  dated  April 10,  1997  between  the  Company,  Gamida for Life BV,  Yacob  Ofer,  Gamida-Gen
                    Marketing  Ltd. and Gamidor  Diagnostics  (1984) Ltd.,  for the  acquisition  by the Company of ordinary
                    shares of Gamida-Gen Marketing Ltd.

4.12     2.19(9)    Asset  Purchase  Agreement  dated  October 7, 1998  between  Gamidor  Limited  (Gamidor  UK) and Gamidor
                    Diagnostics UK.

4.13     2.20(9)    Agreement  dated  December 23, 1998 between the Company,  Gamida  Trading  Ltd.,  Gamida for Life BV and
                    Gamidor Limited (Gamidor UK).

4.14     2.21(9)    Heads of Agreement  dated  October 1, 1998 between  Gamidor  Diagnostics  (1994) Ltd. and the  principal
                    shareholder in Yaron Chemicals Ltd.

4.15     2.22(9)    Agreement  dated  February 7, 1999  between  Healthcare  Technologies  Ltd.,  Hadasit  Medical  Research
                    Services & Development Limited and others.

4.16     2.23(9)    Agreement between Luly Gurevich and Entity as adopted by Healthcare Technologies Ltd. in June 1999.

4.17     2.24(10)   The Company's year 2000 Incentive Share Option Plan.

4.18     2.25(11)   Share Purchase Agreement dated August 21, 2000, by and between Healthcare  Technologies Ltd.,  Glycodata
                    Ltd.,  Mr. Ofer Markman,  Mr.  Yeshayahu  Yakir and certain  investors,  including  Form of  Convertible
                    Debenture attached as Exhibit B thereto.

4.19     2.26(11)   Share Purchase  Agreement dated October 2, 2000 between  Healthcare  Technologies  Ltd., Gamida For Life
                    BV (and other shareholders of GamidaGen Ltd.) and GamidaGen Ltd.

4.20     2.27(11)   Assignment  and Transfer  Agreement  dated  December 1, 2000 between  Healthcare  Technologies  Ltd. and
                    Savyon Diagnostics Ltd.

4.21     2.28(11)   Asset  Transfer and  Assignment  Agreement  dated  December 30, 2000 between  Diatech  Diagnostics  Inc,
                    Diatech Diagnostics Ltd. and Savyon Diagnostics Ltd.

4.22     2.29(11)   Share Sale and Assignment  Agreement dated December 31, 2000 between Diatech  Diagnostics  Inc,  Diatech
                    Diagnostics Ltd. and Healthcare Technologies Ltd.

4.23     2.30(11)   Agreement dated January 21, 2001 between Healthcare Technologies Ltd and Savyon Diagnostics Ltd.

4.24     2.31(12)   Share  Exchange  Agreement  dated April 29, 2002 between  Procognia  Ltd.,  Glycodata  Ltd.,  Healthcare
                    Technologies Ltd. and the other shareholders of Glycodata Ltd.

4.25     2.32(12)   Subscription  and  Shareholders'  Agreement  relating to  Procognia  Ltd.  dated April 29, 2002  between
                    certain investors,  executives and additional subscribers,  Healthcare Technologies Ltd., Procognia Ltd.
                    and Glycodata Ltd.

4.26     99.1(13)   Distribution Agreement between Dade Behring Marburg GmbH and Gamidor Diagnostics

4.27     99.2(13)   Distribution Agreement between Amersham Pharmacia Biotech AB and Danyel Biotech Ltd.

4.28     99.3(13)   Deal Structure Document for Savyon 2003 Transaction.

4.29     10(14)     Agreement  between  Biodiagnostic  (Savyon)  and Advance  Products  (B.G.  Negev
                    Technologies and Applications) Ltd. dated October 31, 1983.

4.30     (15)       Agreement dated October 26, 1994 with the Washington Research Foundation.

4.31     (15)       Collaboration Agreement with Prochon Biotech Ltd. dated February 2003.

8        (16)       Subsidiaries of the Registrant.

12.1     (15)       Certification  of Chief  Executive  Officer  pursuant to 18 U.S.C.  Section 1350 as adopted  pursuant to
                    Section 906 of the Sarbanes-Oxley Act Of 2002.

12.2     (15)       Certification  of Chief  Financial  Officer  pursuant to 18 U.S.C.  Section 1350 as adopted  pursuant to
                    Section 906 of the Sarbanes-Oxley Act Of 2002.

12.3     (15)       Certification  of  Chief  Executive  Officer  pursuant  to  Section  302  of the
                    Sarbanes-Oxley Act Of 2002.

12.4     (15)       Certification  of  Chief  Financial  Officer  pursuant  to  Section  302  of the
                    Sarbanes-Oxley Act Of 2002.
</Table>


                                    - 116 -
<Page>

         -----------------------
         (1)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-1 (File No. 44811)

         (2)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-1 (File No. 33-22868)

         (3)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-1 (File No. 33-54190)

         (4)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-2 (File No. 33-85144)

         (5)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1994.

         (6)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1995.

         (7)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1996.

         (8)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1997.

         (9)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1998.

         (10)     Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 1999.

         (11)     Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the Fiscal year ended December 31, 2000.

                                    - 117 -
<Page>

         (12)     Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F for the fiscal year ended December 31, 2001, as
                  amended.

         (13)     Incorporated by reference to Registrant's Registration
                  Statement on form F-3 (SEC File No. 333-99601).


         (14)     Incorporated  by reference to Registrant's  Registration
                  Statement on Form F-3 (SEC File No. 33-22868).

         (15)     Filed herewith.

         (16)     Previously filed.


                                    - 118 -
<Page>

                                   SIGNATURES

         Pursuant to the requirement of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                          HEALTHCARE TECHNOLOGIES LTD.

                                          By: /s/ Daniel Kropf
                                              ----------------------------------
                                              Daniel Kropf
                                              Chairman of the Board of Directors

Date:  August 5, 2003

                                    - 119 -
<Page>


                                TABLE OF CONTENTS
<Table>
<Caption>
                                                                                                          PAGE
<S>                                                                                                       <C>
INTRODUCTION................................................................................................1

PART I......................................................................................................3

     Item 1.      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.....................................3


     Item 2.      OFFER STATISTICS AND EXPECTED TIMETABLE...................................................3


     Item 3.      KEY INFORMATION...........................................................................3

                  A.       Selected Financial Data..........................................................3
                  B.       Capitalization and Indebtedness..................................................6
                  C.       Reason for the Offer and Use of Proceeds.........................................6
                  D.       Risk Factors.....................................................................6

     Item 4.      INFORMATION ON THE COMPANY...............................................................17

                  A.       History and Development of the Company..........................................17
                  B.       Business Overview...............................................................20
                  C.       Organizational Structure........................................................34
                  Property, Plant and Equipment............................................................35

     Item 5.      Operating and Financial Review and Prospects.............................................36

                  A.       Results of Operations...........................................................36
                  B.       Impact of Inflation and Devaluation.............................................39
                  C.       Liquidity and Capital Resources.................................................39
                  D.       Research and Development, Patents and Licenses, Etc.............................40
                  E.       Trend Information...............................................................41

     Item 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...............................................43

                  A.       Directors and Senior Management.................................................43
                  B.       Compensation....................................................................45
                  C.       Board Practices.................................................................45
                  D.       Employees.......................................................................46
                  E.       Share Ownership.................................................................46

     Item 7.      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS........................................47

                  A.       Major Shareholders..............................................................47
                  B.       Related Party and Inter-Company Transactions....................................48
                  C.       Interests of Experts and Counsel................................................51

     Item 8.      FINANCIAL INFORMATION....................................................................51

                  A.       Consolidated Statements and other Financial Information.........................51
                  B.       Significant Changes.............................................................52

     Item 9.      THE OFFER AND LISTING....................................................................52

                  A.       Offer and Listing Details.......................................................52

     Item 10.     ADDITIONAL INFORMATION...................................................................53
</Table>

<Page>

                               TABLE OF CONTENTS
                                  (CONTINUED)
<Table>
<Caption>
                                                                                                          PAGE
<S>                                                                                                       <C>
                  A.       Share Capital...................................................................53
                  B.       Memorandum and Articles of Association..........................................53
                  C.       Material Contracts..............................................................56
                  D.       Exchange Controls...............................................................59
                  E.       Taxation........................................................................60
                  F.       Dividends and Paying Agent......................................................61
                  G.       Statements by Experts...........................................................61
                  H.       Documents on Display............................................................61
                  I.       Subsidiary Information..........................................................61

     Item 11.     Quantitative and Qualitative Disclosure About Market Risk................................62


     Item 12.     Description of Securities other than Equity Securities...................................62


PART II....................................................................................................62

     Item 13.     Defaults, Dividends, Arrearages and Delinquencies........................................62


     Item 14.     Material Modifications to the Rights of Security holders and Use of Proceeds.............62


     Item 15.     [Reserved]...............................................................................62


     Item 16.     [Reserved]...............................................................................63


PART III...................................................................................................63

     Item 17.     FINANCIAL STATEMENTS.....................................................................63


     Item 18.     FINANCIAL STATEMENTS.....................................................................63


     Item 19.     FINANCIAL STATEMENTS AND EXHIBITS........................................................63


SIGNATURES................................................................................................119
</Table>

Exhibit 12.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002

Exhibit 12.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002


Exhibit 12.3 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Exhibit 12.4 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002


Exhibit 99.4 CHART OF HEALTHCARE COMPANIES