<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                        PACIFICHEALTH LABORATORIES, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

               Delaware                              22-3367588
     ------------------------------              ------------------
       (State or jurisdiction of                  (I.R.S. Employer
     incorporation or organization)              Identification No.)

                         1480 Route 9 North - Suite 204
                              Woodbridge, NJ 07095
                    ----------------------------------------
                    (Address of principal executive offices)

                                  732/636-6141
                           ---------------------------
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $.0025 per share.

Check whether the issuer (1) filed all reports required to be filed by Section
     13 or 15(d) of the Exchange Act during the past 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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
     Regulation S-B contained in this form, and no disclosure will be contained,
     to the best of registrant's knowledge, in definitive proxy or information
     statements incorporated by reference in Part III of this Form 10-KSB or any
     amendment to this Form 10-KSB. |_|

The issuer's revenues for its most recent fiscal year were $3,841,387.

The aggregate market value of the common equity held by non-affiliates based on
the closing sale price of Common stock as of February 28, 2001, was $2,766,130.

The number of shares outstanding of each class of the issuer's common equity, as
of February 28, 2001, was as follows: Common Stock - 4,646,367 shares.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|


<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                                   FORM 10-KSB
                       Fiscal Year Ended December 31, 2000

                                TABLE OF CONTENTS
                                -----------------


PART I

ITEM 1.  BUSINESS.............................................................3
ITEM 2.  DESCRIPTION OF PROPERTY.............................................12
ITEM 3.  LEGAL PROCEEDINGS...................................................12
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................12

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............13
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.................................14
ITEM 7.  FINANCIAL STATEMENTS................................................19
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.................................19

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
         ACT ................................................................20
ITEM 10. EXECUTIVE COMPENSATION..............................................23
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT..........................................................26
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................28
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
         ON FORM 8-K.........................................................28




                                       2

<PAGE>

PART I


ITEM 1. BUSINESS.

1(a) Business Development:

         PacificHealth Laboratories, Inc. (hereinafter referred to as the
"Company") is a research based Company incorporated in the State of Delaware in
April 1995 to develop and market innovative nutritional and natural products
which have demonstrable benefits to improve health and well being and which can
be marketed without prior Food and Drug Administration approval under current
regulatory guidelines.

1(b) Business of the Issuer

         The Company is a nutrition and natural product company strongly
committed to research and development of dietary and nutritional supplements
that can enhance health and well being. The Company selects product categories
in which it believes: (1) there has been little prior innovation, (2) market
potential justifies broad scale consumer advertising and (3) a proprietary
position can be established and maintained. The Company's three primary areas of
research to date have been sports nutrition, weight loss and diabetes.

         The Company's first product, ENDUROX(R) was introduced in March 1996,
and commercial sales began in May 1996. In March 1997, we extended the ENDUROX
line of products with ENDUROX ProHeart(R) and ENDUROX EXCEL(R). Prosol Plus(TM),
a product marketed to sustain emotional balance and promote a positive frame of
mind, was introduced in December 1997. In February 1999, the Company introduced
ENDUROX(R)R4(TM) Performance/Recovery Drink, the latest in our ENDUROX line of
products, which demonstrated a number of exercise related benefits in clinical
studies, including enhanced performance, extended endurance, decreased
post-exercise muscle stress and reduced free radical build-up. In April 2000,
the Company introduced a new weight loss product, SATIETROL(R), that competes in
the approximately $10 billion market for weight loss and weight control
products.

         The Company's business activities have been financed primarily with
proceeds from private placements in 1995 and 1996, and an initial public
offering of Common Stock that was completed in December 1997. The Company's
revenues since its first year of operations are as follows:

                         Year              $ Amount
                         ----              --------
                         1996              3,085,726
                         1997              3,356,725
                         1998              1,000,019
                         1999              2,112,399
                         2000              3,841,387

                                       3
<PAGE>

         All of the Company's existing products, and its proposed products, are
expected to be manufactured in the United States by third parties. See Item
1(b)(i) below.

1(b)(i) Principal Products and Markets

         (a) ENDUROX(R) Product Line-Dietary Supplements

         The Company's initial product, ENDUROX(R), is a dietary supplement of
which the principal ingredient is the herb ciwujia. Laboratory tests and trials
have demonstrated that ENDUROX changes the way the body fuels a workout by
shifting the fuel source from carbohydrate to fat, thereby increasing fat
metabolism; builds endurance by slowing the lactic acid buildup that causes
muscle soreness and fatigue; raises the anaerobic threshold during workout; and
speeds recovery following workout, as measured by heart rate and lactic acid
levels. The Company introduced ENDUROX in March 1996 and commenced commercial
sales of the product in May 1996. In December 1996, the Company was issued
patent #5,585,101 for its ENDUROX product. ENDUROX is sold in caplet form.

         ENDUROX EXCEL(R) and ENDUROX ProHeart(R) were introduced in March 1997.
ENDUROX EXCEL contains 50% more ciwujia than regular ENDUROX, plus vitamin E. It
is targeted to "serious" athletes, i.e., individuals who engage in competitive
athletics or whose exercise regimen is comparable to that of a competitive
athlete. ENDUROX ProHeart, which contains vitamins E and C and folic acid, was
targeted to heart conscious consumers who exercise regularly. ENDUROX ProHeart
was discontinued in 1999 as the Company decided to use its limited financial
resources on other products which management believes have greater market
potential.

         (b) ENDUROX(R)R4(TM) Recovery / Performance Drink

         The Company launched ENDUROX R4 Performance / Recovery Drink in March
1999. Clinical trials of this product had been conducted during 1998 at the
University of North Texas Health Science Center in Fort Worth, Texas and the
Human Performance Lab at St. Cloud University in St. Cloud, Minnesota. In these
trials, the Company's product was tested against the nation's leading sports
drink and shown to deliver equal hydration effectiveness, while enhancing
performance and extending endurance by 55%, decreasing post-exercise muscle
stress by 36%, reducing free radical build-up by 69%, and increasing insulin
levels by 70%. The results of these trials were presented at the American
College of Sports Medicine's national meeting in 1999.

         The Company advertises ENDUROX R4 nationally in such magazines as
Bicycling, Running Times, Fitness Swimmer, Inside Triathlon, Triathlete, and
numerous other publications. At the present time, this product is being sold in
over 5,000 retail outlets including General Nutrition Centers, health food
stores and bicycle retailers, as well as through catalog and Internet companies.
ENDUROX R4 was introduced as a 2.28 lb. canister (14-serving) Fruit Punch
flavor, and is now available in a Tangy Orange flavor, as well as an economy
size 4.56 lb. canister in both flavors. A Lemon Lime flavor in both sizes will
be added in 2001.

                                       4
<PAGE>


         In April 2000, the Company was issued patent #6,051,236 for ENDUROX R4
covering all 77 claims, including claims that the product (a) increases
endurance, (b) reduces post-exercise muscle damage, and (c) speeds the
replenishment of muscle carbohydrate stores. Patent office acceptance of these
claims does not necessarily permit the Company to make any specific claims to
the public regarding this product. The Company's ability to make those claims is
governed by Food and Drug Administration, Federal Trade Commission, and other
federal government agency regulations and guidelines.

         (c)  SATIETROL(R)

         SATIETROL, the Company's new weight loss product, is based on the use
of nutritional ingredients to stimulate cholecystokinin (CCK), a protein
released after eating which has shown to be an important satiety signal in
humans.

          In the early 1980's, researchers at Columbia University demonstrated
that CCK was an important satiety signal in humans. CCK causes individuals to
feel fuller even without eating. Studies have shown that an injection of CCK
reduced food intake by 16-22%. The release of CCK has been shown to be
stimulated by the ingestion of protein and fat. When CCK is stimulated by
ingestion of food, it activates two negative feedback loops that inhibit
continued release of CCK. One mechanism involves the pancreas and the second
involves the gall bladder. When CCK is stimulated, the pancreas secretes
protease enzymes, which inactivates a protein called CCK Releasing Peptide
(CCKRP). When this protein is inactivated, release of CCK is halted. The second
mechanism that controls CCK release is the gall bladder. CCK stimulates the gall
bladder to release bile salts. Bile salts are powerful inhibitors of further CCK
release. A major problem with the direct use of CCK as a supplement is that it
must be given by injection since stomach enzymes activate it.

         The Company's research efforts have focused on developing a calorically
efficient nutritional formula that can be taken orally which would stimulate CCK
release and extend its duration of action. Such a product would be highly useful
in control of weight by helping overweight individuals feel fuller or more
satiated while eating less food. This formulation became the basis for the
Company's first weight loss product, SATIETROL. The Company has developed a
number of SATIETROL formulas that stimulate and extend the action of CCK and has
filed a number of patents regarding this unique technology.

         Clinical studies presented at the North American Association for the
Study of Obesity (NAASO) 1999 national meeting have shown that, when taken as a
pre meal beverage 10-15 minutes before eating, SATIETROL can reduce hunger up to
40% 3 1/2 hours after eating and reduce caloric consumption in a subsequent meal
by 43%. In October 2000, the Company received a Notice of Allowance of Claims


                                       5
<PAGE>

from the U.S. Patent Office for all 72 claims for SATIETROL including its use
for Type 2 diabetes as well as conjunctive use with other products for treatment
of bulimia. Studies on CCK have also suggested that this agent may be effective
for treating Type 2 diabetes, one of the fastest growing chronic diseases in the
United States. The Company intends to conduct studies to determine if SATIETROL
would be of value in Type 2 diabetes.

         The Company's objective is to develop a patent portfolio to protect its
proprietary technology involving the use of nutritional ingredients to stimulate
and extend the action of CCK. The Company has the following patents pending:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
                                           PATENT                                                  STATUS
---------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>
Nutritional Intervention Composition for Enhancing and Extending Satiety                       Approved 10/00
---------------------------------------------------------------------------------------------------------------
Nutritional Intervention Composition for Enhancing and Extending Satiety (International)          Pending
---------------------------------------------------------------------------------------------------------------
Nutritional Intervention Composition for Enhancing and Extending Satiety (Method-DIV)             Pending
---------------------------------------------------------------------------------------------------------------
A Method for Extending the Satiety of Food by Adding a Nutritional Composition Designed to        Pending
Stimulate Cholecystokinin (CCK)
---------------------------------------------------------------------------------------------------------------
Composition Containing Protease Inhibitor Extends Post Meal Satiety                               Pending
---------------------------------------------------------------------------------------------------------------
Nutritional Composition for Improving the Efficacy of a Lipase Inhibitor                          Pending
---------------------------------------------------------------------------------------------------------------
Use of a Bile Acid Sequestrant to Extend Satiety                                                  Pending
---------------------------------------------------------------------------------------------------------------
</TABLE>

         In April 2000, the Company launched its first SATIETROL product.
SATIETROL is a powder that is mixed with 6-8 oz of water and taken 10-15 minutes
before a meal. It is the first weight loss product commercially available that
is designed to stimulate CCK, the body's own satiety mechanism. The market for
all types of weight loss products and services in the US exceeds $50 billion a
year and government figures estimate that 55% of adult Americans are overweight.
SATIETROL is available in chocolate and vanilla flavors. In January 2001, the
Company introduced SATIETROL COMPLETE, a 220 calorie meal replacement product
that incorporates the SATIETROL technology. The Company's clinical studies
presented at the NAASO national meeting in 2000 showed that, versus the leading
meal replacement product, SATIETROL COMPLETE was more effective in reducing
hunger over 5 hours and reducing caloric consumption in a subsequent meal. The
meal replacement market segment in the United States exceeds $900 million.
SATIETROL COMPLETE is a powder mixed with skim, soy, or rice milk that is
available in chocolate and vanilla flavors.

         The Company has also embarked on a clinical study investigating the
concomitant use of SATIETROL with orlistat, the number one selling prescription
diet product in the U.S. Recent studies indicate that orlistat may reduce CCK
levels which could translate into increased appetite. If this were the case,
SATIETROL used in combination with orlistat would offer significant benefits.



                                       6
<PAGE>


         (d) ACCELERADE(R)

         The Company began research and development and formulation work on a
new generation of sports drink, ACCELERADE, in the 3rd quarter of 2000.
ACCELERADE uses the ENDUROX R4 technology that features the patented 4-1 ratio
of carbohydrate to protein to speed the movement of carbohydrate from the blood
into the muscle during exercise. By increasing the energy efficiency of every
gram of carbohydrate an athlete consumes, ACCELERADE spares muscle glycogen and
improves endurance capacity. In clinical trials conducted by the Company,
subjects taking ACCELERADE increased endurance performance by 22% compared to
subjects drinking a conventional sports drink containing the same amount of
carbohydrate. ACCELERADE should be commercially launched in the 2nd quarter of
2001.

         (d) Other Products

         The Company also sells, on a limited basis, PROSOL PLUS(TM), a unique
product that combines hypericum (St. John's Wort), ginkgo biloba and four
essential vitamins and which is used to maintain and promote a positive mental
and emotional state.

1(b)(ii) Distribution Methods

         The Company has pursued a "multi-channel" distribution strategy in
marketing its ENDUROX line of products. These products are sold through the
General Nutrition Centers ("GNC") chain, independent health food retailers,
sports specialty stores, health clubs, catalogs, and on the Internet.

         The Company began distribution of ENDUROX in Canada in 1997 through an
independent distributor with the first retail sales made in April 1997. In 1998,
the Company began selling its ENDUROX products in South Africa with an
independent distributor on a non-exclusive basis. In 2000, the Company began
selling its ENDUROX products in Brazil, Hong Kong, and Singapore through
independent distributors on a non-exclusive basis

         SATIETROL is sold through Internet retailers, select health food
chains, television direct response programs, and over the Company's Internet
site at www.hungeroff.com.
        -----------------

         To support its marketing efforts, the Company advertises in trade and
consumer health food and sports magazines that are intended to reach its
targeted consumer. In addition, the Company attends trade shows and exhibitions,
sponsors promotional programs/events and in-store promotions, and engages in an
extensive public relations effort that has resulted in articles in numerous
health, fitness, trade and natural product publications, newspaper coverage, and
television spots. In addition, the Company utilizes a number of paid endorsers
to promote its sports nutrition line of products, including several well-known
athletes and a number of professional coaches who specialize in bicycling,
running, swimming and triathlete disciplines.

                                       7
<PAGE>

         In the twelve-month periods ended December 31, 2000 and December 31,
1999, the Company's expenditures for product advertising and promotion were
approximately $1,678,796 and $1,533,108, respectively.

1(b)(iii) Status of Publicly Announced New Products

         The status of all products which have been the subject of or mentioned
in public announcements by the company in the past year are discussed above
under the caption "Principal Products and Markets".

1(b)(iv) Competition

         Depending on the product category, the Company's competition varies.

         The sports drink market in which Endurox R4 competes is dominated by
such brands as Gatorade and Powerade who sell ready-to-drink products, as well
as smaller companies such as Cytosport (Cytomax), Champion Nutrition (Revenge),
and Twin Labs (Ultrafuel) who sell powdered, ready-to-mix products. In addition,
there are a number of new foreign entries such as Enervit and Extran that have
recently introduced sports drinks into the U.S. focusing on the endurance
athlete. Increased competitive activity from such companies could have a
material, adverse effect on the Company since such companies have greater
financial and other resources available to them and possess far more extensive
manufacturing, distribution and marketing capabilities than the Company.

         The competitive market for weight loss products is divided into four
basic segments: herbal supplements (e.g., Metabolite), meal replacement products
(e.g., Slim Fast), food plans (e.g., Weight Watchers) and prescription products
(e.g., Xenical). Today, weight loss products are manufactured by dietary
supplement manufacturers, pharmaceutical manufacturers, diet food companies
(e.g. Slim?Fast Foods Company), and over-the-counter drug companies. Intense
competitive activity in this arena could have a material, adverse effect on the
Company as most of the companies who have products in this category have greater
financial, marketing, sales, manufacturing, and distribution resources than the
Company.

         Since the Company's products are based upon natural ingredients, its
competitors have access to the same ingredients and will be able to develop and
market products the same as or similar to the Company's products. Except to the
limited extent that the Company may obtain patent protection for certain uses of
ingredients in its products, its competitors' products may make the same claims
of benefits from use of the products that the Company makes.

         The Company believes that long term success in the marketplace for any
of the Company's products is likely to be less dependent on the novelty of the
product than on such factors as distribution and marketing capabilities, and
whether or not the product enjoys some proprietary advantage, such as patent
protection, an established brand name, etc.


                                       8
<PAGE>

1(b)(v) Suppliers of Raw Materials

         The Company obtains all of the raw materials necessary for the
manufacture of its products from independent sources. The Company generally does
not have contracts with any entities or persons committing such suppliers to
provide the materials required for the production of its products. The Company
obtains ciwujia for its ENDUROX line of products from suppliers in the Peoples
Republic of China. At the present time, the Company obtains all of its needs
from one supplier, but believes that adequate alternative suppliers are
available if needed. The Company's newest product, SATIETROL, is composed of
numerous ingredients, most of which are available from multiple sources. For
those ingredients available only from a single source, the Company intends to
enter into long term supply agreements. In addition, all the other herbs,
vitamins, etc. used in the Company's existing products are available from
multiple sources.

         There is no assurance that suppliers will provide the raw materials
needed by the Company in the quantities requested or at a price the Company is
willing to pay. Because the Company does not control the source of these raw
materials, it is also subject to delays caused by interruption in production of
materials based on conditions outside of its control.

1(b)(vi) Dependence on Major Customer

         General Nutrition Centers accounted for approximately 44% of net sales
in fiscal 2000. The loss of this customer, or a significant reduction in
purchase volume by or financial difficulty of such customer, for any reason,
could have a material adverse effect on the Company's results of operations and
financial condition. The Company has no agreement with or commitment from this
customer with respect to future purchases.

1(b)(vii) Patents and Trademarks

         The Company received a United States patent in December 1996 covering
the use of ciwujia, the principal active herb in ENDUROX, to improve physical
performance and stamina during exercise, and for enhancing recovery after
exercise is completed. The Company has applied for foreign patents on ciwujia in
Canada, Mexico, all Western European countries, and in 51 other principal
European, South American and Asian countries.

         The Company received a patent in April 2000 for ENDUROX R4 covering all
77 claims that were submitted.

         The Company received a Notice of Allowance of Claims in October 2000
for a patent covering all 72 claims for the formulation of SATIETROL and has
filed additional patents for this technology (see section 1(b)(i)(c)).


                                       9
<PAGE>

         To the extent the Company does not have patents on its products, there
can be no assurance that another company will not replicate one or more of the
Company's products, nor is there any assurance that patents which are obtained
will provide meaningful protection or significant competitive advantages over
competing products. For example, the Company's use patent on ciwujia would not
prevent the sale of a product containing that herb with a claim or for a use
that was not covered by the Company's patent.

         The Company has federal trademark registrations for ENDUROX, ENDUROX
EXCEL, ENDUROX ProHeart, ENDUROX R4, SATIETROL, SATIETROL COMPLETE, and
ACCELERADE. The Company also has filed its trademarks in most Western European
countries, Canada, Mexico and Japan. The Company's policy is to pursue
registrations for all of the trademarks associated with its key products, and to
protect its legal rights concerning the use of its trademarks. The Company
relies on common law trademark rights to protect its unregistered trademarks.

1(b)(viii) and (ix) Governmental Regulation

         The Company believes that all of its existing and proposed products, as
described above, are dietary supplements that do not require governmental
approvals to market in the United States. The processing, formulation,
packaging, labeling and advertising of such products, however, are subject to
regulation by one or more federal agencies including the Food and Drug
Administration ("FDA"), the Federal Trade Commission, the Consumer Products
Safety Commission, the Department of Agriculture and the Environmental
Protection Agency. The Company's activities also are subject to regulation by
various agencies of the states and localities in which its products are sold.

         The Company markets products that fall under two types of FDA
regulations, Nutritional Supplements and Dietary Supplements. Nutritional
Supplements contain food and GRAS (Generally Regarded As Safe) ingredients and
do not required FDA approval or notification. Such products must follow labeling
guidelines outlined by the FDA. The Company's current products are all
classified as Dietary Supplements.

         Dietary Supplements is a classification of products resulting from the
enactment of the Dietary Supplement Health and Education Act of 1994 (the
"DSHEA") in October 1994. The DSHEA amended and modified the application of
certain provisions of the Federal Food, Drug and Cosmetics Act (the "FFDC Act")
as they relate to dietary supplements, and required the FDA to promulgate
regulations consistent with the DSHEA.

         The DSHEA defines a dietary supplement to include (i) any product
intended to supplement the diet that bears or contains a vitamin, mineral, herb
or other botanical, an amino acid, a substance to supplement the diet by
increasing the total dietary intake, or any concentrate, constituent, extract,
or combination of any such ingredient, provided that such product is either
intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid
droplet form or, if not intended to be ingested in such form, is not represented
for use as a conventional food or as a sole item of a meal or the diet, (ii) is
not represented for use as a conventional food or as a sole item of a meal or
the diet, and (iii) is labeled as a dietary supplement. The practical effect of
such an expansive definition is to ensure that the new protections and
requirements of the DSHEA will apply to a wide class of products.

                                       10
<PAGE>


         Under the DSHEA, companies that manufacture and distribute dietary
supplements are allowed to make any of the following four types of statements
with regard to nutritional support on labeling without FDA approval: (i) a
statement that claims a benefit related to a classical nutrient deficiency
disease and discloses the prevalence of such disease in the United States; (ii)
a statement that describes the role of a nutrient or dietary ingredient intended
to affect structure or function in humans; (iii) a statement that characterizes
the documented mechanism by which a nutrient or dietary ingredient acts to
maintain or function; or (iv) a statement that "describes general well-being"
from consumption of a nutrient or dietary ingredient. In addition to making sure
that a statement meets one of these four criteria, a manufacturer of the dietary
supplement must have substantiation that such statement is truthful and not
misleading, must not claim to diagnose, mitigate, treat, cure, or prevent a
specific disease or class of diseases, and must contain the following
disclaimer, prominently displayed in boldface type: "This statement has not been
evaluated by the Food and Drug Administration. This product is not intended to
diagnose, treat, cure, or prevent any disease."

         On March 23, 1999, a new labeling format for dietary supplements went
into effect which necessitated the Company's abandonment of approximately
$18,000 worth of packaging materials that were in the old format.

         On February 6, 2000, the Food and Drug Administration issued new
guidelines concerning statements made for dietary supplements. These new
regulations have important implications for the marketing of weight loss
products such as Satietrol. Previously the Regulations made it clear that a
product that made a claim for obesity must be treated as a drug. Under the new
regulations the FDA now makes a distinction between obesity and overweight.
Overweight is no longer considered a disease but rather a natural life process.
Overweight is considered a condition that effects the structure and function of
the body. As now defined, dietary supplements can make a claim for ordinary
weight loss rather than as a treatment for obesity. Furthermore, these
Regulations also permit the use of appetite suppressant as a structure/function
claim under DSHEA (Dietary Supplement Health Education Act of 1994). The
issuance of these Regulations will give SATIETROL greater latitude than the
types of claims the product can make as long as such claims are substantiated by
the necessary studies.

1(b)(x) Expenditures for Research and Development

         The Company's research and development expenditures in the past two
fiscal years, exclusive of market research and marketing related expenditures,
were as follows: 2000 - $222,728; 1999 - $179,873.


                                       11
<PAGE>



1(b)(xi) Compliance with Environmental Laws

         The Company is not aware of any "administrative" or other costs, which
it incurs which are directly related to compliance with environmental laws.

1(b)(xii) Employees

         At the present time, the Company has nine full time employees at its
Woodbridge, NJ offices. Of these, two employees are executive, five are in sales
and marketing, and two are in accounting and operations. The Company employs a
number of consultants who devote limited portions of their time to the Company's
business. None of the Company's employees are represented by a union, and the
Company believes that its employee relations are good.


ITEM 2. DESCRIPTION OF PROPERTY

         The Company entered into a new five-year lease in February 1998 for
approximately 3,684 square feet at $14.50 per square foot, including utilities,
for an annual rent expense of $53,418 for the first three years. In the fourth
and fifth years of the lease, the rent increases to $16.50 per square foot,
including utilities. The Company believes that its facilities are adequate for
its present needs.

         The Company does not intend to develop its own manufacturing
capabilities, since management believes that the availability of manufacturing
services from third parties on a contract basis is more than adequate to meet
the Company's needs in the foreseeable future.

         The Company does not have any real estate investments.


ITEM 3. LEGAL PROCEEDINGS

         The Company is not a party to, or involved in, any legal proceedings.


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

(a)      On August 16, 2000, the Company held its Annual Meeting of
         Stockholders, pursuant to information contained in the Company's Notice
         of Annual Meeting of Stockholders and Proxy Statement that were mailed
         to stockholders on July 12, 2000.

(b)      One of the matters listed in the Company's Proxy for the meeting was
         the annual Election of Directors. There were five nominees for
         election, who were elected by the shareholders to serve for a one-year
         term. The results of the balloting were as follows (Shares voting:
         4,448,510 of 4,554,367):


                                       12
<PAGE>



             Nominee                     For            Against          Abstain
             -------                     ---            -------          -------
          Robert Portman              4,414,702           -0-             33,808
          Stephen P. Kuchen           4,416,002           -0-             32,508
          David Portman               4,416,102           -0-             32,408
          T. Colin Campbell           4,415,702           -0-             32,808
          Irving Tabachnick           4,415,602           -0-             32,908


(c)      In addition to the election of directors, other matters voted upon by
         the stockholders were the approval of the Company's 2000 Incentive
         Stock Option Plan and the ratification of the appointment of Larson,
         Allen, Weishair & Co., LLP as independent auditors for the Company for
         the fiscal year ending December 31, 2000. Both matters were approved.
         The results of the balloting for these matters are as follows:


               Matter                           For        Against      Abstain
               ------                           ---        -------      -------
         2000 Incentive Stock Option Plan     2,968,933     95,604       11,720
         Appointment of auditors              4,414,021     26,485        8,004


PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

5(a) Market Information.

         Since December 19, 1997, the Company's Common Stock has been quoted on
the SmallCap Market of the Nasdaq Stock Market, Inc. ("Nasdaq") under the symbol
"PHLI". The following sets forth certain information with respect to the high
and low bid prices reported by The Nasdaq Stock Market for the Common Stock
during the periods shown:

                                            HIGH              LOW
                                            ----              ---
         01/01/99 - 03/31/99                $3.50             $1.50
         04/01/99 - 06/30/99                $3.50             $0.875
         07/01/99 - 09/30/99                $3.625            $1.75
         10/01/99 - 12/31/99                $3.625            $1.25

         01/01/00 - 03/31/00                $4.75             $1.875
         04/01/00 - 06/30/00                $7.625            $2.25
         07/01/00 - 09/30/00                $3.625            $1.375
         10/01/00 - 12/31/00                $2.25             $0.25

         01/01/01 - 02/28/01                $1.46875          $0.28125


                                       13
<PAGE>

         The closing price of the Company's Common Stock on February 28, 2001,
as reported by Nasdaq, was $0.78125.

5(b) Holders.

         As of February 28, 2001, there were approximately 67 holders of record
of the Company's Common Stock. The Company believes that they are significantly
more beneficial holders of the Company's stock as many beneficial holders have
their stock in "street name".

5(c) Dividends.

         The Company has never paid or declared dividends upon its Common Stock
and does not contemplate or anticipate paying any dividends on its Common Stock
in the foreseeable future.

5(d) Recent Sales of Unregistered Securities; Use of Proceeds from the Sale of
     Registered Securities

5(d)(i) Recent Sales of Unregistered Securities.

         There were no sales of unregistered securities by the Company in the
year ended December 31, 2000.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the Company's financial statements, including the notes thereto, appearing
elsewhere in this Report.

FORWARD-LOOKING STATEMENTS

         This annual report on Form 10-KSB contains statements relating to
future results of the Company (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties, including
but not limited to changes in political and economic conditions; demand for and
market acceptance of new and existing products, as well as other risks and
uncertainties detailed from time to time in the filings of the Company with the
Securities and Exchange Commission.


                                       14
<PAGE>



(a) Introduction

          PacificHealth Laboratories, Inc. was incorporated in April 1995 to
develop and market dietary supplements that improve and promote health and well
being and can be offered for sale without prior approval by The Food and Drug
Administration in compliance with current regulatory guidelines. Our first
product, ENDUROX was introduced in March 1996, and commercial sales began in May
1996. In March 1997, we extended the ENDUROX line of products with ENDUROX
ProHeart and ENDUROX EXCEL. Prosol Plus, a product marketed to sustain emotional
balance and promote a positive frame of mind, was introduced in December 1997.
In March 1999, we launched ENDUROX R4 Performance/Recovery Drink, the latest in
our ENDUROX line of products, which demonstrated a number of exercise related
benefits in clinical studies, including enhanced performance and extended
endurance, decreased post-exercise muscle stress, and reduced free radical
build-up. In April 2000, we introduced a new product, SATIETROL, that will
compete in the approximately $50 billion market for weight loss and weight
control products, goods and services. In the 2nd quarter of 2001, we expect to
launch ACCELERADE, a new generation of sports drink products that uses the
ENDUROX R4 patented technology.

(b) Results of Operations - Years Ended December 31, 2000 and 1999

         The Company incurred a net loss of $957,566 or $0.21 per share for the
year ended December 31, 2000, compared to a net loss of $1,225,381 or $0.27 per
share for the year ended December 31, 1999. The reduction in our net loss for
the year ended December 31, 2000 is due primarily to increased sales. The
Company's net losses were reduced by $115,573 and $162,285, in the years ended
December 31, 2000 and 1999, respectively, from the losses the Company would
otherwise have incurred by the reduction of our reserve for the return or
exchange of certain of our original ENDUROX line of products in those amounts.
Net losses were also reduced by the sale of certain tax benefits for $206,078
and $283,527, respectively, in the years ended December 31, 2000 and 1999. Per
share, the effect of the last two items above was to reduce our net loss for
2000 by $0.07 and for 1999 by $0.10 in the aggregate. These two items are
described in greater detail below.

         Revenues for the year ended December 31, 2000 were $3,841,387 compared
to $2,112,399 for the same period in 1999. Revenue increases during 2000 were
due to the increase of 25% in sales of our ENDUROX R4 Performance/Recovery
Drink, which was introduced in March 1999, as well as sales of $1,628,797 of our
new weight loss product, SATIETROL. These more than offset decreases in sales of
other ENDUROX products. The following table provides additional information
concerning our revenues in 2000 and 1999:


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                        Revenues
                              ----------------------------------------------------------------
                                                ENDUROX R4
                              ENDUROX &         Performance
                              ENDUROX           Recovery
Year Ended                    EXCEL             Drink               SATIETROL         Other(1)
-----------------------------------------------------------------------------------------------
<S>                           <C>               <C>                 <C>               <C>
December 31, 2000             $662,397          $1,639,759          $1,628,797        ($89,566)
                              ========          ==========          ==========        ========

December 31, 1999             $766,428          $1,308,272          $    - 0 -         $37,699
                              ========          ==========          ==========        ========
</TABLE>



         (1)Sales revenues reported for the years ended December 31, 2000 and
December 31,1999 are net of credits of $97,618 and $84,474, respectively, for
the return of certain discontinued products. We discontinued marketing ENDUROX
ProHeart and PROSOL PLUS in 1999 because we believed that our advertising
dollars would be better used promoting new products that compete in categories
having greater sales potential. We do not anticipate material credits for the
return of these products after 2000.

         Our gross profit margin decreased from 58.8% for the year ended
December 31, 1999 to 54.0% for the year ended December 31, 2000 because of a
decrease in the gross profit margin on ENDUROX R4, the introduction of SATIETROL
into our product mix, and less sales as a percentage of total sales (17% of
sales in 2000 vs. 36% of sales in 1999), of the original ENDUROX caplet
products. When ENDUROX R4 was first introduced in 1999, it was only available in
one size and one flavor. Since then, we have expanded that line to include
several size canisters and flavors, both of which served to increase our cost of
goods sold for ENDUROX R4 products. In addition, SATIETROL has a lower gross
margin than the original ENDUROX and ENDUROX R4 product lines as this product
competes in the highly competitive weight loss products segment resulting in
competitive pricing pressures. The original ENDUROX caplet products have a
higher gross profit margin than the other product lines. As sales of these
original ENDUROX products decreases as a percentage of total sales, the overall
gross profit margin decreases.

         Our selling, general and administrative expenses increased from
$2,798,873 for the year ended December 31, 1999 to $3,137,661 for the year ended
December 31, 2000. The approximate $338,000 net increase in S,G & A for the
comparable period is presented by major identifiable areas in the following
table:

S, G & A expense category                            $ change from 1999 to 2000
-------------------------                            --------------------------
Spokespersons' Fees                                        Decrease of $185,000
Print/Radio Advertising                                    Increase of $325,000
Consultants                                                Increase of $150,000
Investor Relations                                         Increase of $ 70,000
Legal                                                      Increase of $ 50,000
Salaries                                                   Decrease of $ 72,000
                                                                       --------
Net increase for the year ended 2000 from 1999:                        $338,000
                                                                       ========

                                       16
<PAGE>

         Additional details concerning these changes in expenses are as follows:

o  Spokesperson's Fees decreased as we eliminated certain spokespersons from
   promoting our products.
o  Print/Radio Advertising increased with the introduction of SATIETROL. We
   advertised this new product in regional and national newspapers as well as in
   radio advertisements in select markets. This type of advertising is more
   expensive than advertising for the ENDUROX products which is done primarily
   in magazines for its niche markets.
o  Consultants' expenses increased as accounting rules forced us to expense the
   fair-market value of stock options given to outside consultants which
   amounted to $97,000. In addition, we entered into a 5-month contract with our
   former CFO after his retirement in order to maintain an orderly transition.
o  Investor Relations costs increased as we reverted back to outsourcing this
   function.
o  Legal increased due to our increased level of patent filings.
o  Salaries decreased as we eliminated certain positions and increased
   efficiencies throughout the staff.

         Research and development expenses increased from $179,873 for the year
ended December 31, 1999 to $222,728 for the year ended December 31, 2000 due to
the research and development program associated with the SATIETROL product line.
This increased level of research and development led to the filing of three
additional patents as noted above in Item 1(b)(vii) - Patents and Trademarks. We
anticipate that these research and development costs will continue at this level
as we broaden both the SATIETROL and ENDUROX R4 product lines.

         As previously noted in paragraph (b) in this Item, our net losses for
2000 and 1999 were reduced as a result of a reduction in our reserve for the
return or exchange of certain products. These adjustments were based upon our
estimates of our future costs for product replacement at year-end 2000 and 1999.
We reduced our reserve by $115,573 and $162,285 for the years ended December 31,
2000 and December 31, 1999, respectively, and offset our net loss by taking back
into income these amounts. As of December 31, 2000, we believed circumstances no
longer required a product replacement reserve and therefore eliminated this
reserve as of December 31, 2000. In addition, during 1999, the New Jersey
Economic Development Authority established the Tax Benefit Transfer Program.
Pursuant to this program, the Company was qualified by the state to sell a
portion of its unused New Jersey net operating loss deductions to other
corporations having taxable income in New Jersey. In December 2000 we received
$206,078 and in December 1999 we received $283,527 as payment for the sale of
these New Jersey tax deductions. These payments were included in income and
therefore offset our net loss for the years ended December 31, 2000 and December
31,1999. The Company has additional New Jersey net operating loss deductions of
approximately $1,960,000 that the Company may sell for approximately $140,000
should the Company determine sale would be more beneficial than prospective use
by the Company.

                                       17
<PAGE>


(c) Liquidity and Capital Resources

         At December 31, 2000, the Company's current assets exceeded its current
liabilities by approximately $1.64 million with a ratio of current assets to
current liabilities of approximately 3.1 to 1 versus a ratio of approximately
7.4 to 1 at December 31, 1999. The decrease in current ratio was attributable
primarily to the net loss for the year ended December 31, 2000. Accounts
receivable were lower at December 31, 2000 compared to December 31, 1999 as
sales were lower in the fourth quarter 2000 than in the fourth quarter of 1999.
Inventory levels were substantially higher at December 31, 2000 compared to
December 31, 1999 in order to support both actual and anticipated increased
sales levels. The initial response to SATIETROL upon its introduction in April
2000 was very positive and inventory was purchased to meet sales based on sales
growth we anticipated from the original response. We have also built SATIETROL
inventory in anticipation of the coming diet season that begins after December
31, 2000.

         We are currently seeking an additional $1,500,000 equity/debt financing
in order to fund our expected growth. We have no commitments for significant
capital expenditures over the next 12 months. The largest expenditures now
contemplated (apart from expenses necessary to support current levels of sales,
general and administrative costs) are advertising and promotional expenditures
associated with the continued development of SATIETROL sales and to fund the
continued launch of our SATIETROL COMPLETE meal replacement product launched in
January 2001. We are also seeking additional equity to fund the launch of
additional flavors for ENDUROX R4 and to fund the launch of ACCELERADE in the
first quarter of 2001. Without adequate financing, sales and corporate growth
may be limited.

(d) Impact of Inflation

         The Company expects to be able to pass inflationary increases for raw
materials and other costs on to its customers through price increases, as
required, and does not expect inflation to be a significant factor in its
business. However, the Company's operating history is very limited, and this
expectation is based more on observations of its competitors' historic
operations than its own experience.

(e) Seasonality

         Sports nutrition products tend to be seasonal, especially in the colder
climates. Lower sales are typically realized during the first and fourth
quarters and higher sales are typically realized during the second and third
fiscal quarters. We also plan our advertising and promotional campaigns for the
Endurox products around these seasonal demands. Weight loss products also have
seasonality with greater sales seen in the first and second quarters following
New Year's resolutions and people getting in shape for the summer. Similarly,
advertising and promotional expenditures for Satietrol are designed to take
advantage of this seasonality. The Company believes that the impact of new
product introductions and marketing expenses associated with the introduction of
new products will have a far greater impact on its operations than industry and
product seasonality.

                                       18
<PAGE>
(f) Impact of Recently Issued Financial Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133,
which is effective, as amended, for all quarters in fiscal years beginning after
June 15, 2000, establishes accounting and reporting standards for derivative
financial instruments and hedging activities related to those instruments, as
well as other hedging activities. As the Company does not currently engage in
derivative or hedging activities, the adoption of this standard is not expected
to have a significant impact on the Company's financial statements.

         In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. In June 2000, the SEC staff amended SAB 101 to provide registrants
with additional time to implement SAB 101. The Company adopted SAB No. 101
effective October 2000. The impact on the Company's financial statements is not
expected to be material.

         In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44),
Accounting for Certain Transactions Involving Stock Compensation. The Company
will be required to adopt FIN 44 effective July 1, 2000 with respect to certain
provisions applicable to new awards, exchanges of awards in a business
combination, modifications to outstanding awards, and changes in grantee status
that occur on or after that date. FIN 44 addresses practice issues related to
the application of Accounting Practice Bulletin Opinion No. 25, Accounting for
Stock Issued to Employees. The Company has not completed its determination of
the impact of the adoption of this new accounting standard on its financial
position to results of operations.


ITEM 7. FINANCIAL STATEMENTS

         Financial information required in response to this Item of Form 10-KSB
is set forth at pages F-1 through F-16 of this Report.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None.


                                       19

<PAGE>




PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

9(a) Directors and Executive Officers

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

     Name                              Position with the Company
     ----                              -------------------------

     Robert Portman, Ph.D.             President and Chief Executive Officer,
                                       Treasurer and Chairman of the Board of
                                       Directors
     Stephen P. Kuchen                 Vice President - Finance, Chief Financial
                                       Officer and Director*
     David I. Portman                  Secretary and Director
     T. Colin Campbell, Ph.D.          Director*
     Irving I.A. Tabachnick, Ph.D.     Director*

      *Member of Audit Committee

         DR. ROBERT PORTMAN, age 56, has served as President, Treasurer and
Chairman of the Board of Directors of the Company since its inception. Dr.
Portman has a Ph.D. in Biochemistry and worked as a senior scientist at Schering
Laboratories before co-founding M.E.D. Communications in 1974 with his brother,
David Portman. In 1987, Dr. Portman started a consumer agency and, in 1993, he
merged both agencies to form C&M Advertising. C&M Advertising, with billings in
excess of $100 million, handled national advertising for such diverse accounts
as Berlex Laboratories, Ortho-McNeil Laboratories, Tetley Tea, Radisson Hotels
and HIP of New Jersey. Effective June 1, 1995, Dr. Portman relinquished his
responsibilities as Chairman of C&M Advertising (which since has been renamed
"The Sawtooth Group") to assume his present positions with the Company on a full
time basis, and, in September 1996, Dr. Portman sold his interest in that
company.

         STEPHEN P. KUCHEN, age 40, is the Vice President - Finance and Chief
Financial Officer, as well as a Director, of the Company. Mr. Kuchen joined the
Company in February of 2000 as Controller, and was appointed to his current
positions in June 2000 to fill a vacancy. Prior to joining the Company, Mr.
Kuchen was employed from 1996 to 1999 as the Controller of Able Laboratories, a
South Plainfield, New Jersey based subsidiary of DynaGen, Inc., a public company
that manufactures and sells generic pharmaceuticals. Prior to his employment by
Able Laboratories, Mr. Kuchen was the Controller of Jerhel Plastics, a privately
owned manufacturer of women's compact cases from 1993 to 1996. Mr. Kuchen is a
graduate of Seton Hall University in South Orange, NJ, and is a Certified
Management Accountant.


                                       20
<PAGE>

         DAVID I. PORTMAN, age 60, has served as Secretary and a Director of the
Company from its inception. Mr. Portman has a BS in Pharmacy and an MBA. He
worked as a sales representative and marketing manager for Eli Lilly,
Beecham-Massengill, Winthrop Laboratories and Sandoz Pharmaceuticals before
co-founding M.E.D. Communications in 1974. In 1988, Mr. Portman sold his
interest in M.E.D. Communications to Robert Portman, and became President of
TRIAD Development, a real estate company that has numerous commercial and rental
properties in New Jersey, a position that he still holds. Mr. Portman also has
served as a director of First Montauk Securities Corp. since 1993.

         DR. T. COLIN CAMPBELL, age 67, has served as a Director of the Company
since its inception. Dr. Campbell also serves as Chairman of the Company's U.S.
Scientific Advisory Board. Dr. Campbell has been Jacob Gould Schurman Professor
of Nutritional Biochemistry of Cornell University since 1985. Over the past
three decades, Dr. Campbell has been directing research correlating diet,
lifestyle and disease. In 1979, Dr. Campbell, with the encouragement of the
Chinese government, initiated the largest epidemiological study ever undertaken
focusing on the relationship between nutrition and disease. The China-Cornell
Research Project is expected to continue well into the 21st Century. Dr.
Campbell is an honorary professor at the Chinese Academy of Preventive Medicine.

         DR. IRVING I.A. TABACHNICK, age 76, was elected a director of the
Company in December 1997. Dr. Tabachnick has served as a consultant to Schering
Plough Corporation, a New York Stock Exchange listed company, since 1989. Prior
to 1989, he was employed by Schering Plough Corporation in a number of
positions, including Vice President -- Drug Safety and Metabolism, Senior
Director -- Biological Research and Development, and Director -- Biological
Sciences and Director -- Physiology and Biochemistry.

         In connection with its initial public offering of Common Stock,
completed in December 1997, for which First Montauk Securities Corp. ("First
Montauk") acted as underwriter, the Company agreed for a period of five years
from December 19, 1997 to cause a person designated by First Montauk to be
elected to the Company's Board of Directors. First Montauk has not advised the
Company of any designee to serve on the Board of Directors and, further, has
advised the Company that it does not intend to exercise its right to designate a
nominee for election as a Director in the near future.

9(b) Other Key Advisors and Consultants

         None


                                       21
<PAGE>

9(c) Scientific Advisory Boards

         The Company has established a Scientific Advisory Board to provide it
with on-going advice and counsel regarding research direction, product
development, analysis of data, and general counseling. As a need arises, the
Company consults with individual members of this Board on a non-scheduled basis.
A brief description of the backgrounds of the Advisory Boards' members are set
forth below:

         T. Colin Campbell, a Director of the Company, is Chairman of the
Company's U.S. Advisory Board. Its other members are:

         David Kritchevsky, Ph.D., Institute Professor, Wistar Institute,
Professor of Biochemistry in Surgery. Dr. Kritchevsky is an expert in lipid
biochemistry, atherosclerosis, and the relationship between nutrition and aging
and nutrition and cancer. He has published on the effects of dietary fiber on
colon cancer, circulating cholesterol and the effects of dietary fat and energy
on experimental carcinogenesis. He was a member of the 1982 National Academy of
Sciences Committee on Diet, Nutrition and Cancer, is a member of numerous
professional societies, serves as editor of several professional annuals and was
Western Hemisphere Editor of the journal, Atherosclerosis.

         William Pryor, Ph.D., Thomas and David Boyd Professor, Departments of
Chemistry and Biochemistry; Director, Biodynamics Institute, Louisiana State
University. Dr. Pryor is an authority in free radical chemistry and biology. He
has published on the role that various reactive oxygen species play in the
production of degenerative tissue damage, such as cancer and atherosclerotic
diseases. His publications number over 500. Dr. Pryor wrote the first textbook
on free radicals (McGraw-Hill 1966) and was the founder and first editor of the
journal, Free Radical Biology & Medicine.

         David J. Jenkins, Ph.D., Dsc, Professor of Medicine & Nutritional
Sciences, University of Toronto; Director, Clinical Nutrition & Risk Factor
Modification Center, St. Michael's Hospital. Dr. Jenkins has extensively
researched the effects of soluble and insoluble dietary fiber upon various
biochemical factors associated with, or predictive of, cardiovascular disease,
diabetes and colorectal and prostate cancers. Dr. Jenkins is a member of several
professional nutrition societies, in Canada, Great Britain and the United
States. He has served on a number of international committees involved in the
treatment and prevention of diabetes.

         Steven R. Peikin, MD, Professor of Medicine, Head, Division of
Gastroenterology and Liver Diseases at Robert Wood Johnson Medical School at
Camden Cooper Hospital/University Medical Center. Dr. Peikin has published
extensively on the impact of cholecystokinin (CCK) on appetite. He is also a
recognized authority on the use of weight loss products. He is the author of two
books.

         John L. Ivy, Ph.D., Professor and Head of the Department of Kinesiology
and Health Education at the University of Texas at Austin. He is also Adjunct,
Professor, Cardiovascular Research Institute, University of North Texas Health
Science Center, Ft. Worth, Texas. Dr. Ivy is one of the world's foremost
exercise physiologists. He has published over 300 papers and chapters on the
topic. He is a member of The American College of Sports Medicine. Dr. Ivy did
much of the fundamental research, which have furthered our understanding on the
role nutrition plays in improving muscle performance during and after exercise.

                                       22
<PAGE>


         Edmund R Burke, Ph.D., Professor of Exercise Physiology, at the
University of Colorado at Colorado Springs, CO. Dr. Burke is a member of the
American College of Sports Medicine and is a leading authority in the area of
sports nutrition. Dr. Burke is the author of over 18 books and has been an
advisory to two US Olympic Cycling Teams.

9(d) Family Relationships

         Robert Portman and David Portman are brothers. There are no other
family relationships among our directors, executive officers or persons
nominated or chosen to become directors or executive officers.

9(e) Involvement in Certain Legal Proceedings

         No events have occurred during the past five years that are required to
be disclosed pursuant to Item 401(d) of Regulation S-B.


ITEM 10. EXECUTIVE COMPENSATION

         Robert Portman is the only executive officer of the Company with a
fixed-term employment agreement. Under his 1998 Employment Agreement, Dr.
Portman was employed for a three-year term commencing January 1, 1998, at an
annual salary of $150,000 for the first two years (i.e., through December 31,
1999) and at an annual salary of $200,000 for the final year ending December 31,
2000. Dr. Portman's $200,000 salary for 2000 was not set in the Employment
Agreement but was determined by a Compensation Committee of the Company's Board
of Directors as specified in the Employment Agreement. Under a new 2001
Employment Agreement, Dr. Portman is employed for a two-year term commencing
January 1, 2001, at an annual salary of $200,000. The new Employment Agreement
also provides that Dr. Portman may request the Compensation Committee of the
Board renegotiate his salary if the Company's financial situation improves.

         Dr. Portman's 2001 Employment Agreement provides for a re-pricing of
the grant of options issued under his 1998 Employment Agreement to purchase up
to 475,000 shares of Common Stock, from $6.00 to $0.313 per share, the market
price of the stock at December 31, 2000. These options are fully vested. Dr.
Portman's 2001 Employment Agreement also provides for a grant of options under
the Company's 2000 Incentive Stock Option Plan to purchase up to an additional
460,000 shares of Common Stock priced at $0.313 per share, the market price of
stock at December 31, 2000. This option vests as to one-half of the shares
issuable upon full exercise of the option as of the first and second
anniversaries of the effective date of the employment agreement, provided that
Dr. Portman is employed by the Company at such dates. To the extent not
previously vested, the option also will vest if Dr. Portman's employment is
terminated by the Company without cause or by Dr. Portman with cause. In
addition, if Dr. Portman's employment is terminated by the Company without
cause, or by Dr. Portman with cause, Dr. Portman will be entitled to receive a
lump sum payment of an amount equal to the lesser of full salary for one year or
for the remaining term of the agreement.


                                       23
<PAGE>


         The table below sets forth information concerning compensation paid to
Dr. Portman, Jonathan D. Rahn, Executive Vice President of the Company, and
Stephen Kuchen, Vice President in 2000, 1999, and 1998. No executive officers of
the Company other than Dr. Portman and Mr. Rahn received compensation of
$100,000 or more in fiscal 2000, 1999, and 1998.

                           Summary Compensation Table
<TABLE>
<CAPTION>


----------------------------------------------------------------------------------------------------------------------
                                Annual Compensation                     Long Term Compensation
                              -----------------------------------------------------------------------
                                                                   Awards                    Payouts
                                                                  -----------------------------------
                                                                               Securities
                                                      Other                    Under-
                                                      Annual      Restricted   lying                     All Other
Name and                                              Compen-     Stock        Options/       LTIP       Compen-
Principal                     Salary          Bonus   Sation      Award(s)     SARs           Payouts    sation
Position             Year     ($)             ($)     ($)         ($)          (#)            ($)        ($)

(a)                  (b)      (c)             (d)     (e)         (f)          (g)            (h)        (i)
----------------------------------------------------------------------------------------------------------------------
<S>                  <C>      <C>              <C>    <C>           <C>         <C>             <C>        <C>
Robert Portman,      2000     200,000         -0-     (1)          -0-          275,000(2)     -0-        -0-
President            -------------------------------------------------------------------------------------------------
                     1999     150,000         -0-     (1)          -0-          300,000        -0-        -0-
                     -------------------------------------------------------------------------------------------------
                     1998     150,000         -0-     (1)          -0-          -0-            -0-        -0-
----------------------------------------------------------------------------------------------------------------------
Stephen Kuchen,      2000      72,452(3)      -0-     (1)          -0-           35,000        -0-        -0-
Vice President       -------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Jonathan Rahn,       2000      35,417(4)      -0-     27,500 (5)   -0-          -0-            -0-        -0-
Executive Vice       -------------------------------------------------------------------------------------------------
President            1999     103,333         -0-     (2)          -0-           50,000        -0-        -0-
                     -------------------------------------------------------------------------------------------------
                     1998     125,000         -0-     (2)          -0-          -0-            -0-        -0-
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Less than 10% of annual salary and bonus.
(2) Subsequent to the end of the fiscal year, 475,000 options issued to Dr.
    Portman prior to 1999 were re-priced, as discussed above.
(3) Mr. Kuchen joined the Company in February 2000. His salary was increased to
    $85,000 annually upon becoming Chief Financial Officer on June 1, 2000.
(4) Jonathan Rahn resigned from the Company effective May 31, 2000.
(5) Jonathan Rahn was engaged as a consultant to the Company from June 1, 2000
    through October 31, 2000.





                                       24


<PAGE>

         The following table sets forth certain information regarding options
granted in fiscal 2000:

                      Option/SAR Grants in Fiscal Year 2000
                               (Individual Grants)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                        Number of            Percent Of Total
                                        Securities           Options/SARs
                                        Underlying           Granted to          Exercise Or
                                        Options/SARs         Employees In        Base Price        Expiration
Name                                    Granted (#)          Fiscal Year         ($/Sh)            Date
(a)                                     (b)                  (c)                 (d)               (e)
----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                       <C>             <C>               <C>
Robert Portman                           275,000                   66.6%          $2.50             06/01/05
----------------------------------------------------------------------------------------------------------------------
Stephen P. Kuchen                         10,000                    2.4%          $3.25             02/11/05
----------------------------------------------------------------------------------------------------------------------
Stephen P. Kuchen                         25,000                    6.1%          $2.375            05/11/05
----------------------------------------------------------------------------------------------------------------------
</TABLE>

         Dr. Portman's options vested immediately upon issuance. Mr. Kuchen's
options vest over a period of one year.

         The following table sets forth information with respect to the number
of unexercised options and the value of unexercised "in-the-money" options held
by Robert Portman and Stephen Kuchen at December 31, 2000.


             Aggregated Option/SAR Exercises in Fiscal Year 2000 and
                          Option/SAR Values at 12/31/00
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                        Number of Securities            $ Value of Unexercised
                               Shares                   Underlying Unexercised          In-the-Money Options/SARs
                               Acquired                 Options/SARs At 12/31/00        At 12/31/00
                               On Exercise  Value       Exercisable/                    Exercisable/
                               (#)          Realized    Unexercisable                   Unexercisable
Name                           (b)          ($)         (#)                             ($)
(a)                                         (c)         (d)                             (e)
----------------------------------------------------------------------------------------------------------------------
                                                        Exercisable    Unexercisable    Exercisable    Unexercisable
----------------------------------------------------------------------------------------------------------------------
<S>                             <C>          <C>        <C>             <C>               <C>           <C>
Robert Portman                 -0-          -0-         1,275,000      -0-               -0-           -0-
----------------------------------------------------------------------------------------------------------------------
Stephen Kuchen                 -0-          -0-         -0-            35,000            -0-           -0-
----------------------------------------------------------------------------------------------------------------------
</TABLE>


         For the purpose of computing the value of "in-the-money" options at
December 31, 2000, in the above table, the fair market value of the Common Stock
at such date is deemed to be $0.313 per share, the closing sale price of the
Common Stock on such date as reported by Nasdaq.

                                       25
<PAGE>


                   Directors' Compensation in Fiscal Year 2000

         For the year ended December 31, 2000, the Company did not compensate
any of its two independent Directors.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As of February 28, 2001, the Company had 4,646,367 shares of Common
Stock outstanding. The following table sets forth information concerning the
present ownership of the Company's Common Stock by the Company's directors,
executive officers and each person known to the Company to be the beneficial
owner of more than five percent of either of such classes of the capital stock,
the beneficial ownership of these securities by such persons following the
offering, and the total voting power represented by the securities owned by such
persons.

<TABLE>
<CAPTION>


                                         Common Stock (1)                       Common Stock (1)
Name and Address                         Amount Beneficially Owned              Percentage of Class
----------------                         -------------------------              -------------------
<S>                                              <C>                                   <C>
Robert Portman (2)                               2,019,767                             34.1%
President, Chief Executive Officer
and a Director
188 Igoe Road
Morganville, NJ 07751

Stephen P. Kuchen (3)                               10,000                               *
Vice President, Chief Financial
Officer and a Director
39 Overbrook Drive
Colonia, NJ 07067

David I. Portman                                   198,000                              4.3%
Secretary and a Director
300 Ocean Avenue-Apt. #6A
Long Branch, NJ  07740

T. Colin Campbell (4)                              177,954                              3.8%
Director
26 Beckett Way
Ithaca, NY  14850
</TABLE>
                                       26
<PAGE>


<TABLE>
<CAPTION>


                                         Common Stock (1)                       Common Stock (1)
Name and Address                         Amount Beneficially Owned              Percentage of Class
----------------                         -------------------------              -------------------
<S>                                              <C>                                   <C>

Irving Tabachnick (5)                               15,000                               *
Director
9 Woodland Avenue
North Caldwell, NJ  07006

Executive Officers and Directors as a            2,420,721                             40.6%
group (5 persons)
</TABLE>
------



*   Less than one percent

(1) Common Stock which is issuable upon the exercise of a stock option which is
    presently exercisable or which becomes exercisable within sixty days is
    considered outstanding for the purpose of computing the percentage ownership
    (x) of persons holding such options, and (y) of officers and directors as a
    group with respect to all options held by officers and directors.

(2) Includes (a) a presently-exercisable option issued pursuant to the Company's
    1995 Incentive Stock Option Plan (a "1995 Plan Option") to acquire 225,000
    shares at a price of $3.75 per share, (b) a presently-exercisable 1995 Plan
    Option to acquire 200,000 shares at a price of $2.25 per share, (c) a
    presently-exercisable 1995 Plan Option to acquire 100,000 shares at a price
    of $1.75 per share, (d) a presently-exercisable 1995 Plan Option to acquire
    275,000 shares at a price of $2.50 per share, and (e) a 1998 Employment
    Contract Option to acquire an additional 475,000 shares at a price of $6.00
    per share. Does not include 200,000 shares of Common Stock owned by Jennifer
    Portman, Dr. Portman's wife, individually and as Trustee for his and her
    minor children, as to which Dr. Portman disclaims beneficial ownership.

(3) Includes a 1995 Plan Option to acquire 10,000 shares at a price of $3.25 per
    share.

(4) Includes (a) a 1995 Plan Option to acquire 5,000 shares at a price of $3.75
    per share and (b) a 1995 Plan Option to acquire 5,000 shares at a price of
    $2.25 per share. Does not include 38,900 shares of Common Stock owned by Dr.
    Campbell's wife or 160,521 shares of Common Stock owned by Dr. Campbell's
    adult children, as to which he disclaims beneficial ownership.

(5) Represents (a) an option to purchase 10,000 shares at a price of $4.75 under
    the Company's 1995 Option Plan and (b) a 1995 Plan Option to acquire 5,000
    shares at a price of $2.25 per share.

                                       27
<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During the last two fiscal years, the Company has not entered into any
material transactions or series of transactions which, in the aggregate, would
be considered material in which any officer, director or beneficial owner of 5%
or more of any class of capital stock of the Company had a direct or indirect
material interest, nor are any such transactions presently proposed.


ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) A list of the financial statements and financial statement schedule filed as
a part of this report is set forth on page F-1 hereof. A list of the exhibits
filed as a part of this report is set forth in the Exhibit Index starting after
page F-17 hereof.

(b) Reports on Form 8-K

         During the last quarter of the period covered by this report, the
Company did not file any Current Reports on Form 8-K.

                            SUPPLEMENTAL INFORMATION

         The Issuer has not sent an annual report or proxy statement to security
holders in respect of the fiscal year ending December 31, 2000 or otherwise in
2000. Such report and proxy statement will be furnished to security holders in
connection with the Company's Annual Meeting, scheduled to be held in the third
quarter of 2001. Copies of such material will be furnished to the Commission
when it is sent to security holders.



                                       28

<PAGE>

                        PACIFICHEALTH LABORATORIES, INC.

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999


<PAGE>

                        PACIFICHEALTH LABORATORIES, INC.

                                TABLE OF CONTENTS

                           DECEMBER 31, 2000 AND 1999

                                                                      Page
                                                                      ----

Independent Auditor's Report                                             3

Financial Statements:
       Balance Sheets                                                    4
       Statements of Operations                                          5
       Statements of Stockholders' Equity                                6
       Statements of Cash Flows                                          7

Notes to Financial Statements                                         8-17





<PAGE>


                          INDEPENDENT AUDITOR'S REPORT




To the Board of Directors and Stockholders
of PacificHealth Laboratories, Inc.


We have audited the accompanying balance sheets of PacificHealth Laboratories,
Inc. as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PacificHealth Laboratories,
Inc. as of December 31, 2000 and 1999, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.




                                              LARSON, ALLEN, WEISHAIR & CO., LLP

Blue Bell, Pennsylvania
February 6, 2001


<PAGE>

                        PACIFICHEALTH LABORATORIES, INC.
                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>

                                     ASSETS
                                                                             2000                 1999
                                                                             ----                 ----
<S>                                                                      <C>                   <C>
Current assets:
   Cash and cash equivalents                                             $  170,491            $1,742,360
   Accounts receivable, net                                                 441,396               538,837
   Inventories                                                            1,652,693               385,427
   Prepaid expenses                                                         162,466                89,305
                                                                         ----------            ----------
       Total current assets                                               2,427,046             2,755,929
                                                                         ----------            ----------
Property and equipment                                                       74,043                84,339
                                                                         ----------            ----------
Other assets:
   Deposits                                                                  53,991                 3,991
                                                                         ----------            ----------
                                                                         $2,555,080            $2,844,259
                                                                         ==========            ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                     $   47,741
   Accounts payable and accrued expenses                                    735,377            $  211,061
   Reserve for product replacement                                                                161,062
                                                                         ----------            ----------
      Total current liabilities                                             783,118               372,123
                                                                         ----------            ----------
Commitments

Stockholders' equity:
   Common stock, $.0025 par value; authorized
     10,000,000 shares;  issued and outstanding
     4,646,367 shares in 2000 and 1999                                       11,616                11,386
   Additional paid-in capital                                            11,060,246            10,803,085
   Accumulated deficit                                                   (9,299,900)           (8,342,335)
                                                                         -----------           -----------
                                                                          1,771,962             2,472,136
                                                                         ----------            ----------
                                                                         $2,555,080            $2,844,259
                                                                         ==========            ==========
</TABLE>
                See accompanying notes to financial statements.
                                      (4)

<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
                                                                            2000                  1999
                                                                            ----                  ----
<S>                                                                      <C>                      <C>
Revenues                                                                 $3,841,387            $ 2,112,399
                                                                         ----------            -----------

Cost of goods sold:
   Inventories, beginning                                                   385,427                375,074
   Purchases                                                              3,034,335                880,119
                                                                         ----------            -----------
                                                                          3,419,762              1,255,193
   Less: inventories, ending                                              1,652,693                385,427
                                                                         ----------            -----------
                                                                          1,767,069                869,766
                                                                         ----------            -----------
Gross profit                                                              2,074,318              1,242,633
                                                                         ----------            -----------
Selling, general and administrative expenses                              3,137,660              2,798,873
Research and development                                                    222,728                179,873
Amortization expense                                                            928                  3,180
Depreciation expense                                                         40,195                 36,936
Provision for replacement of product                                       (115,573)              (162,285)
                                                                         -----------           ------------
                                                                          3,285,938              2,856,577
                                                                         ----------            -----------
Net operating loss                                                       (1,211,620)            (1,613,944)
                                                                         -----------           ------------
Other income:
   Interest income                                                           47,977                105,036
                                                                         ----------            -----------
Loss before income taxes                                                 (1,163,643)            (1,508,908)

Provision (benefit) for income taxes                                       (206,078)              (283,527)
                                                                         -----------           ------------

Net loss                                                                 $ (957,565)           $(1,225,381)
                                                                         ===========           ============

Basic net loss per share of common stock                                 $     (.21)           $      (.27)
                                                                         ==========            ===========

Diluted net loss  per share of common stock                              $     (.21)           $      (.27)
                                                                         ==========            ===========
Basic and diluted weighted average shares outstanding                     4,592,517              4,554,367
                                                                         ==========            ===========
</TABLE>
                See accompanying notes to financial statements.
                                      (5)



<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>



                                                                 Paid-in
                                             Common           Stockholders'            Accumulated              Total
                                              Stock             Capital                   Deficit               Equity
                                            ---------       ---------------          -----------------        --------
<S>                                          <C>                <C>                     <C>                    <C>
Balance, January 1, 1999                     $ 11,386           $10,803,085             $(7,116,954)           $3,697,517

Net loss for the year ended
 December 31, 1999                                                                       (1,225,381)           (1,225,381)
                                             --------           -----------             -----------            ----------

Balance, December 31, 1999                     11,386            10,803,085              (8,342,335)            2,472,136

Common stock issued                               230               159,770                                       160,000

Fair value of non-employee
   stock options grants                                              55,180                                        55,180

Fair value of non-employee
   stock warrants grants                                             42,211                                        42,211

Net loss for the year ended
   December 31, 2000                                                                       (957,565)             (957,565)
                                             --------           -----------             -----------            ----------

Balance, December 31, 2000                   $ 11,616           $11,060,246             $(9,299,900)           $1,771,962
                                             ========           ===========             ===========            ==========

</TABLE>
                See accompanying notes to financial statements.
                                      (6)

<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>



                                                                                   2000                      1999
                                                                                   ----                      ----
<S>                                                                            <C>                       <C>
Cash flows from operating activities:
   Net loss                                                                    $  (957,565)              $(1,225,381)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation                                                                  40,195                    36,936
      Amortization                                                                                             3,180
      Bad debts                                                                        790                       135
      Fair value of nonemployee stock options and warrants                          97,391
   Changes in assets and liabilities:
      (Increase) decrease in accounts receivable                                    96,652                  (268,299)
      (Increase) decrease in prepaid expenses                                      (73,161)                  120,160
      Increase in inventory                                                     (1,267,266)                  (10,353)
      Increase in deposits                                                         (50,000)
      Increase (decrease) in accounts payable and
        accrued expenses                                                           524,316                   (41,201)
      Decrease in reserve for product replacement                                 (161,062)                 (183,402)
      Decrease in customer deposits                                                                           (5,529)
                                                                               -----------                ----------
Net cash used in operating activities                                           (1,749,710)               (1,573,754)
                                                                               -----------                ----------

Cash flows for investing activities:
   Purchase of property and equipment                                              (29,900)                  (16,742)
                                                                               -----------                ----------
Cash flows from financing activities:
   Issuance of common stock                                                        160,000
   Proceeds (repayment) of note payable                                             47,741                   (82,264)
                                                                               -----------                ----------
Net cash provided by (used in) financing activities                                207,741                   (82,264)
                                                                               -----------                ----------
 Net decrease in cash                                                           (1,571,869)               (1,672,760)

Cash and cash equivalents, beginning balance                                     1,742,360                 3,415,120
                                                                               -----------                ----------
Cash and cash equivalents, ending balance                                      $   170,491                $1,742,360
                                                                               ===========                ==========
</TABLE>
                See accompanying notes to financial statements.
                                       (7)



<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


NOTE 1 BUSINESS

       PacificHealth Laboratories, Inc. (the Company or PHL) was incorporated in
       April 1995 to develop and market dietary supplements that improve and
       promote health and well being and can be offered for sale without prior
       approval by The Food and Drug Administration in compliance with current
       regulatory guidelines. The Company's first product, ENDUROX(R) was
       introduced in March 1996, and commercial sales began in May 1996. In
       March 1997, the Company extended the ENDUROX line of products with
       ENDUROX ProHeart(R) and ENDUROX EXCEL(R). Prosol Plus(TM), a product
       marketed to sustain emotional balance and promote a positive frame of
       mind, was introduced in December 1997. In February 1999, PHL introduced
       ENDUROX(R)R(4)(TM) Performance/Recovery Drink, the latest in the
       Company's ENDUROX line of products, which demonstrated a number of
       exercise related benefits in clinical studies, including enhanced
       performance and extended endurance, decreased post-exercise muscle
       stress, and reduced free radical build-up. The Company introduced a new
       product, Satietrol(R), that will compete in the market for weight loss
       and weight control products, in 2000. The Company operates in only one
       business segment.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Cash and cash equivalents
       -------------------------

       For purposes of reporting cash flows, the Company considers all cash
       accounts and money market mutual funds, which are not subject to
       withdrawal restrictions or penalties, and certificates of deposit and
       commercial paper with original maturities of 90 days or less to be cash
       or cash equivalents.

       Accounts receivable
       -------------------

       The Company provides an allowance for doubtful accounts, as needed, for
       accounts deemed uncollectible.

       Inventory
       ---------

       Inventory is recorded at the lower of cost or market using the first-in,
       first-out (FIFO) method.

       Equipment and depreciation
       --------------------------

       Property and equipment are carried at cost. Depreciation is calculated
       using the straight-line method over their estimated useful lives ranging
       from 2 to 5 years. Depreciation expense for the years ended December 31,
       2000 and 1999 was $40,195 and $36,936, respectively.

                                      (8)

<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

       Use of estimates
       ----------------

       The preparation of the accompanying financial statements in conformity
       with generally accepted accounting principles requires management to make
       certain estimates and assumptions that directly affect the results of
       reported assets, liabilities, revenue, and expenses. Actual results may
       differ from these estimates.

       Earnings (loss) per share
       -------------------------

       In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
       Earnings per Share. SFAS No. 128 replaced the previously reported primary
       and fully diluted earnings per share with basic and diluted earnings per
       share, respectively. Unlike the previously reported primary earnings per
       share basic earnings per share excludes the dilutive effects of stock
       options. Diluted earnings per share is similar to the previously reported
       fully diluted earnings per share. Earnings per share amounts for all
       periods presented have been calculated in accordance with requirements of
       SFAS No. 128. For the year ended December 31, 2000 and 1999, the
       computation of diluted loss per share was antidilutive; therefore, the
       amounts reported for basic and dilutive loss per share were the same.

       Revenue recognition
       -------------------

       Revenue from product sales is recognized upon shipment to customers.
       Provisions for discounts and rebates to customers, and returns and other
       adjustments are provided for in the same period the related sales are
       recorded.

       Research and development
       ------------------------

       Research and development costs consist of expenditures incurred by the
       Company during the course of planned search and investigation aimed at
       the discovery of new knowledge which will be used to develop and market
       natural products which improve health and well being. The Company
       expenses all such research and development costs as they are incurred.

       Advertising costs
       -----------------

       Advertising costs are charged to operations in the year incurred and
       totaled $1,678,796 and $1,533,108 in 2000 and 1999, respectively.


                                      (9)

<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

       Income taxes
       ------------

       Income taxes are provided for the tax effects of transactions reported in
       the financial statements and consist of taxes currently due plus deferred
       taxes related primarily to differences between the basis of balance sheet
       items for financial and income tax reporting. There is no difference
       between the basis for financial and income tax reporting, thus no
       deferred tax asset or liability was recorded.

       Recent accounting pronouncement
       -------------------------------

       In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
       Instruments and Hedging Activities. SFAS No. 133, which is effective, as
       amended, for all quarters in fiscal years beginning after December 31,
       2000, establishes accounting and reporting standards for derivative
       financial instruments and hedging activities related to those
       instruments, as well as other hedging activities. As the Company does not
       currently engage in derivative or hedging activities, the adoption of
       this standard is not expected to have a significant impact on the
       Company's financial statements.

       In December 1999, the Securities and Exchange Commission (SEC) issued
       Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
       Financial Statements. In June 2000, the SEC staff amended SAB 101 to
       provide registrants with additional time to implement SAB 101. The
       Company adopted SAB No. 101 effective October 2000. The impact on the
       Company's financial statements was not material.

       In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44),
       Accounting for Certain Transactions Involving Stock Compensation. The
       Company adopted FIN 44 effective July 1, 2000 with respect to certain
       provisions applicable to new awards, exchanges of awards in a business
       combination, modifications to outstanding awards, and changes in grantee
       status that occur on or after that date. FIN 44 addresses practice issues
       related to the application of Accounting Practice Bulletin Opinion No.
       25, Accounting for Stock Issued to Employees. The impact on the Company's
       financial statements was not material.

NOTE 3 ACCOUNTS RECEIVABLE
                                                    2000                 1999
                                                    ----                 ----

       Accounts receivable                        $443,671             $540,322
       Allowance for doubtful accounts               2,275                1,485
                                                  --------             --------
                                                  $441,396             $538,837
                                                  ========             ========

                                      (10)

<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 4 INVENTORIES

       Inventories at December 31, 2000 and 1999 consisted of the following:

                                             2000                      1999
                                             ----                      ----

          Raw materials                   $  194,647
          Work-in-process                    311,475                  $ 68,404
          Finished goods                   1,146,571                   317,023
                                          ----------                 ---------
                                          $1,652,693                  $385,427
                                          ==========                  ========

       In 1997, the Company reformulated the original ENDUROX product into a
       caplet, rather than a capsule, because the capsule form was very
       hygroscopic and became altered in size and color in conditions of high
       heat and humidity. At June 30, 1997, the Company estimated a reserve for
       charges resulting from exchanging its retailers' inventory of capsules
       for caplets or issuing a credit refund for returned capsules. At the end
       of each quarter, management compares the reserve's balance to a current
       estimate of capsule exchange/credit refund exposure. During 2000, the
       Company estimated that its remaining capsule exchange for caplets and/or
       credit refunds would not exceed $-0-. As a result, the Company reduced
       its reserve in 2000 and 1999 by $115,573 and $162,285, respectively, and
       offset net loss by taking that amount back into income. At December 31,
       2000 and 1999, the balance in the reserve for product replacement was
       $-0- and $161,062, respectively.

       In December 1998, management decided to write-off a majority of its
       Endurox ProHeart finished goods and work-in-process inventories due to
       obsolescence. The Company determined that the product's lack of sales
       movement, coupled with the timing of its product expiration dates,
       indicated a high probability that the product would not be saleable into
       the near future. The obsolete inventory write-off was charged to cost of
       goods sold in the amount of $350,706 and the finished goods and
       work-in-process inventories were reduced by $139,628 and $211,078,
       respectively. In December 1999, management decided to write-off the
       remaining ENDUROX ProHeart finished goods inventory due to obsolescence.
       The obsolete inventory write-off was charged to cost of goods sold and
       the finished goods inventory was reduced in the amount of $40,851.

NOTE 5 PROPERTY AND EQUIPMENT
                                                      2000                1999
                                                      ----                ----

          Furniture and equipment                   $200,553            $184,512
          Molds and dies                              70,375              56,517
                                                   ---------           ---------
                                                     270,928             241,029
          Less: accumulated depreciation             196,885             156,690
                                                    --------            --------

                                                    $ 74,043            $ 84,339
                                                    ========            ========


                                      (11)
<PAGE>


                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 6 LONG-TERM DEBT:

       Installment note payable to insurance
       finance company due in monthly installments
       of $5,536, including interest at 10.35%
       through October 2001                                 $ 47,741

       Less: current portion                                  47,741
                                                            --------

       Long-term debt                                       $      0
                                                            ========

NOTE 7 STOCK

       Capital stock
       -------------

       The total number of shares of all classes of stock which the Company has
       authority to issue is 11,000,000 shares, consisting of (a) ten million
       (10,000,000) shares of Common Stock, par value $.0025 per share, and (b)
       one million (1,000,000) shares of Preferred stock, par value $.01 per
       share. The preferred stock may be issued in one or more series, and may
       have such voting powers, full or limited, or no voting powers, and such
       designations, preferences and relative, participating, optional, or other
       special rights and qualifications, limitations, or restrictions as shall
       be stated in the resolution or resolutions providing for the issue
       thereof adopted by the Board of Directors of the Company, from time to
       time.

NOTE 8 COMMITMENTS

       Strategic Alliance Agreement
       ----------------------------

       In connection with its organization in 1995, the company entered into an
       exclusive relationship with the Institute of Nutrition & Food Hygiene
       (INFH) of the Chinese Academy of Preventative Medicine in Beijing,
       People's Republic of China. Under this relationship, in exchange for a
       royalty on net sales of products utilizing natural constituents exported
       from China or developed in China, the INFH granted to the Company the
       right to commercialize within and outside of China all products
       identified and developed by the Company and the INFH based upon natural
       Traditional Chinese Medicine herbs and other natural agents. The
       Company's royalty obligations to the INFH are conditioned upon the
       Company first achieving a specified level of profits. To date, the
       Company has not incurred any obligation for royalties to the INFH.

       Employment agreement
       --------------------

       The Company entered into a two-year employment contract on January 1,
       2001, with the Chairman and CEO that provides for minimum annual
       compensation of $200,000. The Company is the beneficiary of a keyman life
       insurance policy (on the Chairman's life) for $2,000,000.


                                      (12)
<PAGE>





                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 8 COMMITMENTS (Continued)

       Rent
       ----

       On February 3, 1998, the Company signed a new lease agreement with the
       new owners of its office building. The new lease provides for the rental
       of 3,684 square feet.

       Minimum annual rentals, including utilities, for each year subsequent to
       December 31, 2000 are as follows:

                 Year Ending
                 December 31,
                 ------------

                    2001                                  $ 60,166
                    2002                                    60,780
                    2003                                     5,065
                                                          --------
                                                          $126,011


NOTE 9 INCENTIVE STOCK OPTION PLAN

       In 1995, the Company established an incentive stock option plan (the
       Plan). In addition to the Plan, the Company issued stock options pursuant
       to contractual agreements. In 2000 and 1999, 413,000 and 586,000,
       options, respectively, were granted to certain officers, spokespersons
       and/or consultants to the Company. Exercise prices on the options granted
       in 1999 range from $1.25 to $2.25 per common share and vest over varying
       periods of time. Exercise prices on the options granted in 2000 range
       from $2.00 to $3.50 per common share and vest over varying periods of
       time. All issuances were granted at the fair market value of the
       Company's common stock at time of grant. As of December 31, 2000, 92,000
       options have been exercised.

       In 2000, the Company established another stock option plan, since the
       shares of common stock set aside for the 1995 plan options will be fully
       granted. As of December 31, 2000, no options have been granted under this
       2000 plan.


                                      (13)
<PAGE>



                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 9 INCENTIVE STOCK OPTION PLAN (Continued)

       Transactions since inception are as follows:
<TABLE>
<CAPTION>

                                                                     Exercise Price    Weighted Average
                                        Option         Vested          Per Vested      Exercise Price Per
                                        Shares         Shares        Common Share      Vested Common Share
                                        ------         ------        ------------      -------------------
<S>                                  <C>            <C>                <C>                   <C>
       Balance, January 1, 1999       1,391,700      1,050,034

       Granted during the year          586,000        242,833         $1.25 - $6.00           $4.84
                                      ---------      ---------

       Balance, December 31, 1999     1,977,700      1,292,867                                 $3.91

       Granted during the year          413,000        873,667         $1.25 - $6.00           $3.625
       Exercised during the year        (92,000)       (92,000)
       Expired during the year         (300,000)      (300,000)
       Cancelled during the year       (136,000)       (44,334)
                                      ---------      ---------

       Balance, December 31, 2000     1,862,700      1,730,200                                 $3.74
                                      =========      =========
</TABLE>


       The Company accounts for stock-based compensation in accordance with SFAS
       No. 123, Accounting for Stock-Based Compensation which permits the use of
       the intrinsic value method described in APB Opinion No. 25, Accounting
       for Stock Issued to Employees, and requires the Company to disclose the
       pro forma effects of accounting for stock-based compensation using the
       fair value method as described in the optional accounting requirements of
       SFAS No. 123. As permitted by SFAS No. 123, the Company will continue to
       account for stock-based compensation under APB Opinion No. 25, under
       which the Company has recognized no compensation expense for employee
       granted options and recognized an expense for non-employee granted
       options by the Company during 2000 and 1999. Total expense recognized for
       non-employee granted options was $55,180 and $0, respectively

       Had compensation cost for the Company's stock option plan been determined
       based on the fair value of the Company's common stock at the dates of
       awards under the fair value method of SFAS No. 123, the Company's net
       loss and net loss per common share would have been reduced to the pro
       forma amounts indicated below.

                                           2000                    1999
                                           ----                    ----
       Net loss:
          As reported                    $(957,565)            $(1,225,381)
          Pro forma                    $(1,611,410)            $(1,640,332)


                                      (14)
<PAGE>

                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 9 INCENTIVE STOCK OPTION PLAN (Continued)

                                               2000                    1999
                                               ----                    ----
       Net loss per common share:
          As reported                        $ (.21)                  $ (.27)
          Pro forma                          $ (.35)                  $ (.36)

       The weighted-average fair value of options granted in 2000 and 1999 were
       $.82 and $.45, respectively.

       Significant assumptions used to calculate the above fair value of the
       awards are as follows:
                                                      2000               1999
                                                      ----                ----

         Risk free interest rates of return           6.00%              5.00%
         Expected option life                     60 months          60 months
         Volatility                                     40%                20%
         Expected dividends                             $ 0               $ 0

NOTE 10 WARRANTS

       During 2000, the Company granted warrants for the purchase of 149,750
       shares of the Company's common stock at exercise prices ranging between
       $3.438 to $6.25 per common share. The warrants expire at the close of
       business on July 18, 2001 (22,000 warrants exercisable at $3.438 per
       share, 113,750 warrants exercisable at $3.75 per share, 14,000 warrants
       exercisable at $6.25 per share). As of December 31, 2000, 149,750
       warrants were outstanding and no warrants had been exercised during the
       year. The total expense recognized by the Company during 2000 for these
       non-employee warrants was $42,211.

NOTE 11 INCOME TAXES

       Income tax provision (benefit) consists of the following:

                                               2000                 1999
                                               ----                 ----
                Current:
                   Federal                    $       0           $        0
                   State                       (206,078)            (283,527)
                                              ----------          -----------
                                               (206,078)           $(283,527)
                                              ----------           ----------
                Deferred:
                   Federal                    $       0           $        0
                   State                              0                    0
                                              ---------           ----------
                                              $       0           $        0
                                              =========           ==========


                                      (16)
<PAGE>



                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 11 INCOME TAXES (Continued)

       The Company has $8,932,008 in Federal net operating loss carryovers,
       which can be used to offset future taxable income. The net operating loss
       carryforwards expire in the year 2030.

       During 1999, the New Jersey Economic Development Authority established
       the Tax Benefit Transfer Program. This program permits new or expanding
       emerging technology and biotechnology corporations located in New Jersey
       to "sell" unused New Jersey net operating loss (NOL) deductions to other
       corporations who have taxable income in New Jersey for at least 80% of
       their tax benefit value. The State established a maximum amount of
       allowable NOL's that could be sold during 2000 and 1999 and allocated
       this sum among all of the qualifying companies.

       In 2000, the Company received its certification under this program and
       was able to sell $2,862,200 worth of its New Jersey NOL's for 80% of
       their tax benefit value ($257,598) for a total of $206,078. The Company
       has $1,010,278 of state net operating loss carryovers which can be used
       to offset future taxable income. The net operating loss carryforwards
       expire in the year 2014.

       In 1999, the Company received its certification under this program and
       was able to sell $4,200,400 worth of its New Jersey NOL's for 75% of
       their tax benefit value ($378,036) for a total of $283,527. The Company
       has $3,868,458 of state net operating loss carryovers which can be used
       to offset future taxable income. The net operating loss carryforwards
       expire in the year 2013.

       The components of the Company's deferred tax assets are as follows:

                                                    2000                 1999
                                                    ----                 ----

          Net operating loss carryforwards       $3,215,000         $2,890,000
          Valuation allowance                    (3,215,000)        (2,890,000)
                                                -----------         ----------

          Deferred tax asset                     $        0         $        0
                                                ===========         ==========

NOTE 12 RESEARCH AND DEVELOPMENT COSTS

       For the year ended December 31, 2000 and 1999, research and development
       costs expensed were $222,728 and $179,873, respectively.

                                      (16)
<PAGE>

                        PACIFICHEALTH LABORATORIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


NOTE 13 FINANCIAL INSTRUMENTS

       Concentration of credit risk
       ----------------------------

       Financial instruments, which potentially subject the Company to
       concentrations of credit risk, consist primarily of cash, cash
       equivalents and trade accounts receivable.

       The Company has concentrated its credit risk for cash by maintaining
       substantially all of its depository accounts in a single financial
       institution. Accounts in the bank are guaranteed by the Federal Deposit
       Insurance Corporation (FDIC) up to $100,000. At various times throughout
       the year the Company had cash balances in this financial institution that
       exceeded the FDIC limit. The financial institution has a strong credit
       rating, and management believes that credit risk relating to these
       deposits is minimal.

       Cash equivalents consist of money market mutual funds maintained in an
       account with the investment division of the above financial institution.
       The financial institution has a strong credit rating and management
       believes that credit risk relating to these cash equivalents is minimal.

       While the Company does not require collateral on its trade accounts
       receivable, credit risk is limited due to major retailers in the health
       and well being industry comprising the Company's customer base.
       Historically, the Company has not suffered significant losses with
       respect to trade accounts receivable.

       Fair value of financial instruments
       -----------------------------------

       Cash, cash equivalents, accounts receivable, accounts payable and
       long-term debt approximate their fair values due to the short maturity of
       these instruments.

NOTE 14 SIGNIFICANT CUSTOMERS

       For the year ended December 31, 2000, the Company had revenues from one
       customer which accounted for approximately 44% of total revenue. Accounts
       receivable outstanding related to these sales at December 31, 2000 were
       $316,663 which amounted to 72% of total receivables.

       For the year ended December 31, 1999, the Company had revenues from one
       customer, which accounted for approximately 55% of total revenue.


                                      (17)





<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

PacificHealth Laboratories, Inc.

By: /s/ Robert Portman
   --------------------------------------------------
   Robert Portman, President, Chief Executive Officer

Date:  March 28, 2001

In accordance with the Securities Exchange Act of 1934 and the requirements of
Form 10-KSB, this Report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dated indicated.


s/Robert Portman                 Director and Chief              March 28, 2001
---------------------------      Executive Officer
Robert Portman


s/Stephen P. Kuchen              Director and Principal          March 28, 2001
---------------------------      Financial and Accounting
Stephen P. Kuchen                Officer


s/David I. Portman               Director and Secretary          March 28, 2001
---------------------------
David I. Portman


                                       29

<PAGE>


EXHIBIT INDEX

                                                                    Incorporated
Exhibit No.                                 Description             by Reference
-----------                                 -----------             ------------
3.1        --     Certificate of Incorporation of the Company and
                  all amendments thereto                                  A

3.2        --     Amended and Restated Bylaws of the Company              C

4.1        --     Specimen Common Stock Certificate                       C

4.2        --     Underwriter's Warrant Agreement and Form of
                  Warrant                                                 C

10.1       --     Incentive Stock Option Plan of 1995                     A

10.2       --     Employment Agreement between the Company
                  and Robert Portman effective January 1, 1998            C

10.3       --     Strategic Alliance Agreement between the Company
                  and the Institute of Nutrition and Food Hygiene         A

10.4       --     Exclusive Licensing Agreement between the
                  Company and the INFH                                    A

10.5       --     Shareholders Agreement                                  A

10.6       --     2000 Incentive Stock Option Plan                        D

10.7       --     Employment Agreement between the Company
                  and Robert Portman effective January 1, 2001            *

23.1       --     Consent of Larson, Allen, Weishair & Co., LLP           *

27         --     Financial Data Schedule                                 *
----------------
*   Filed herewith

A   Filed with Registration Statement on Form SB-2 (Registration No. 333-36379)
    (the "1997 SB-2") on September 25, 1997

B   Filed with Amendment No. 1 to the 1997 SB-2 on October 23, 1997

C   Filed with Amendment No. 3 to the 1997 SB-2 on December 17, 1997

D   Filed with Definitive Proxy Statement (Schedule 14A) for annual meeting held
    on August 16, 2000, filed on July 11, 2000.

                                       30