UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         COMMISSION FILE NUMBER 1-10352

                           COLUMBIA LABORATORIES, INC.
               (Exact name of Company as specified in its charter)

           DELAWARE                                      59-2758596
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

2875 NORTHEAST 191ST STREET, SUITE 400
         AVENTURA, FLORIDA                                 33180
(Address of principal executive offices)                 (Zip Code)

Company's telephone number, including area code: (305) 933-6089

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.01 PAR VALUE                        AMERICAN STOCK EXCHANGE
  (Title of each class)                      (Name of exchange where registered)

         Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of Columbia Laboratories, Inc. Common Stock,
$.01 par value, held by non-affiliates, computed by reference to the price at
which the stock was sold as of February 28, 1999: $126,733,625.

         Number of shares of Common Stock of Columbia Laboratories, Inc. issued
and outstanding as of February 28, 1999: 28,684,687.


<PAGE>
                                     PART I

ITEM 1. BUSINESS

GENERAL DESCRIPTION OF BUSINESS

         Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop
unique pharmaceutical products that treat female specific diseases and
conditions including infertility, dysmenorrhea, endometriosis, hormonal
deficiencies and the prevention of sexually transmitted diseases. Columbia's
research in endocrinology has also led to the development of a product to treat
"Andropause" in men. Columbia's products primarily utilize the Company's
patented bioadhesive delivery technology, the ("Bioadhesive Delivery System").

         Formulated products utilizing the Bioadhesive Delivery System consist
principally of a polymer, polycarbophil, and an active ingredient. The
Bioadhesive Delivery System is based upon the principle of bioadhesion, a
process by which the polymer adheres to epithelial surfaces and to mucin, a
naturally occurring secretion of the mucous membranes. The polymer remains
attached to epithelial surfaces and/or the mucin and is discharged upon normal
cell turnover or upon the detachment of the mucin from the mucous membranes, a
physiological process which, depending upon the area of the body, occurs every
12 to 72 hours. This extended period of attachment permits the Bioadhesive
Delivery System to be utilized in products when extended duration of
effectiveness is desirable or required.

         The Company has focused on women's health care because of the
significant number of women whose health and hygiene needs have not been met by
available products and because the Company has found vaginal delivery to be
particularly effective. The Company intends to continue to develop products that
improve the delivery of previously approved drugs.

         The Company is currently engaged solely in one business segment -- the
development and sale of pharmaceutical products and cosmetics. See footnote 7 to
the consolidated financial statements for information on foreign operations.

         The Company's principal executive offices are located at 2875 Northeast
191st Street, Suite 400, Aventura, Florida 33180, and its telephone number is
(305) 933-6089. The Company's subsidiaries, all of which are wholly-owned, are
Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories
(France) SA ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia
UK") and Columbia Research Laboratories, Inc. ("Columbia Research").

         Except for historical information contained herein, the matters
discussed in this document are forward looking statements made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products and prices, and other factors discussed
elsewhere in this report.

PRODUCTS

         CRINONE/registered trademark/. The Company's first prescription drug is
a sustained release, vaginally delivered, natural progesterone product. Crinone
utilizes the Company's patented Bioadhesive Delivery System which enables the
progesterone to achieve a "First Uterine Pass Effect"/copyright/. Crinone is the
first product to deliver progesterone directly to the uterus, thereby maximizing
therapeutic benefit and avoiding side effects seen with orally-delivered
synthetic progestins.

         In May 1997, the Company received U.S. marketing approval for Crinone
from the U.S. Food and Drug Administration ("FDA") for use as a progesterone
supplementation or replacement as part of an Assisted Reproductive Technology
(ART) treatment for infertile women with progesterone deficiency. In July 1997,
the Company received U.S. marketing approval for Crinone from the FDA for the
treatment of secondary amenorrhea (loss of menstrual period).

                                       2
<PAGE>

         Outside the U.S., Crinone has been approved for marketing for one or
more medical indications in the following countries: the United Kingdom,
Ireland, Finland, Argentina, Greece, Mexico, Colombia, Belgium, Italy, Germany
and France. The medical indications include the treatment of secondary
amenorrhea, progesterone supplementation or replacement as part of an ART
treatment for infertile women, the prevention of hyperplasia and endometrial
cancer in post-menopausal women receiving hormone replacement therapy ("HRT"),
the reduction of symptoms of premenstrual syndrome ("PMS"), menstrual
irregularities, dysmenorrhea and dysfunctional uterine bleeding.

         In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP markets
Crinone. Under the terms of the agreement, the Company has earned $17 million in
milestone payments to date and will continue to receive additional milestone
payments. The Company also supplies Crinone to AHP at a price equal to 30% of
AHP's net selling price.

          ADVANTAGE-S/trademark/. Advantage-S, the Company's female
contraceptive gel utilizes the Bioadhesive Delivery System with the active
ingredient nonoxynol-9 (the "Product") and it has been marketed in the United
States by the Company since July 1998 under an existing monograph for
nonoxynol-9 spermicidal products. The Product had been marketed in the United
States under the tradename Advantage 24/registered trademark/ by Lake
Pharmaceuticals, Inc. ("Lake"). In July 1997, the FDA alleged that the monograph
did not permit a claim for 24-hour effectiveness. Although, the Company believes
that its claim for 24-hour effectiveness was valid, it agreed with the FDA in
February 1998 to market the Product without a claim for 24-hour effectiveness
under the tradename of Advantage-S. During the period in which the Company was
disputing the FDA allegations, the Company terminated its license agreement with
Lake. In July 1998, the Company began marketing the Product in the United States
under the tradename Advantage-S. Among Advantage-S benefits is that it utilizes
the Company's Bioadhesive Delivery System, which enables the nonoxynol-9 to
adhere to the cervix. 

         In August 1998, the Company signed a distribution agreement with
Advantage Technology Development Co. Ltd. ("Advantech") for the distribution of
the Product in China under the tradename Advantage-LA/registered trademark/. An
introduction test was conducted by Advantech and was satisfactorily completed.
The product is now being sold in selected larger cities within China under an
agreement with the Chinese Health Authorities for what is known as "Trial
Sales". Upon successful completion of the "Trial Sales", which should be by
mid-1999, the Chinese Health Authorities will issue a Family Planning Import
Sales Certificate allowing distribution of Advantage-LA throughout China. In
Europe, the Company intends to register Advantage-S as an over-the-counter drug.

         Broader claims relating to prevention of sexually transmitted diseases
(STD's) will be requested upon completion, if successful, of clinical studies
now underway. The United Nations Global Program on AIDS (formerly known
as the World Health Organization Global Program on AIDS) has completed a 600
women safety study on Advantage-S. Analysis of the data generated indicates that
Advantage-S, as used in the study, was free of any serious side effects. In
addition, Advantage-S was shown to be safer than any other nonoxynol-9 product
studied. Studies to determine the efficacy of Advantage-S in preventing the
heterosexual transmission of HIV and other STD's have begun in a National
Institute of Health sponsored study in Kenya. Additional U.N. studies are
underway in Thailand, India and the Ivory Coast.

         REPLENS/registered trademark/. Replens replenishes vaginal moisture on
a sustained basis and relieves the discomfort associated with vaginal dryness.
Replens was the first product utilizing the Bioadhesive Delivery System. Replens
is marketed in the United States by the Company who reacquired the marketing
rights from the Warner-Lambert Company on April 1, 1998. Replens is marketed by
various pharmaceutical companies throughout the rest of the world.

         OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin
PM/registered trademark/, for the relief of occasional pain and sleeplessness
associated with minor muscle aches such as night leg cramps; Vaporizer in a
bottle/registered trademark/, a portable 


                                       3
<PAGE>

cough suppressant for the temporary relief of a cough due to the common cold;
and Diasorb/registered trademark/, a pediatric antidiarrheal product. These
products do not utilize the Bioadhesive Delivery System.

RESEARCH AND DEVELOPMENT

         The Company expended $7.8 million in 1998, $9.1 million in 1997 and
$10.9 million in 1996, on research and development activities. The expenditures
are primarily the result of costs associated with contracting for, supervising
and administering the clinical studies on the Company's Crinone, Advantage-S,
Chronodyne and Testosterone Bioadhesive Tablet products. These studies are
coordinated from the Company's New York and Paris offices.

         CHRONODYNE/registered trademark/. In June 1998, the Company announced
that it had been granted an Investigational New Drug Application ("IND") by the
FDA for terbutaline in Columbia's patented bioadhesive vaginal delivery system.
This product is intended to relax the uterus and prevent uterine dyskinesia
(abnormal contractions), and therefore may be useful in the treatment of
disorders such as dysmenorrhea, difficult and painful menstruation and for the
treatment and prevention of endometriosis, the growth of endometrial tissue
outside the uterus. Dysmenorrhea is a disorder that afflicts nearly 25 million
women in the U.S. which is more than 30% of all menstruating women.
Endometriosis effects 5 million women in the U.S. of whom 30 to 40% are
infertile.

         This vaginal form of terbutaline, trademarked Chronodyne by Columbia,
takes advantage of the Company's patented "First Uterine Pass Effect" whereby
the drug is preferentially delivered to the uterus. This results in high
concentrations in the uterus, the target organ, and low concentrations in the
systemic circulation thereby minimizing the potential for side effects.
Pharmacokinetic studies have demonstrated that when Chronodyne is administered
vaginally the common side effects of tachycardia (rapid heart rate) and tremor
are avoided because the systemic serum levels of terbutaline are only a fraction
of that seen after oral administration.

         Chronodyne represents a new approach in the treatment of dysmenorrhea.
Traditionally, analgesics are used by women after the pain occurs with the
result that only partial relief is obtained. Chronodyne can prevent pain from
occurring by addressing the root cause of dysmenorrhea painful uterine
contractions. Chronodyne would be used at the first sign of dysmenorrhea,
therefore preventing painful contractions.

         It is a widely held theory that endometriosis is the result of
retrograde (backward-flowing) menstruation. Endometriosis occurs when
endometrial tissue flows backward through the fallopian tubes and attaches to
nearby pelvic structures, such as the ovary, and then grows. It has been shown
that women who develop endometriosis usually have a long history of
dysmenorrhea. The Company believes that Chronodyne not only slows uterine
contractility but also prevents retrograde menstrual flow thereby eliminating
the source of endometrial implants.

         TESTOSTERONE BIOADHESIVE BUCCAL TABLET. In August 1998, the Company
announced that studies had been completed demonstrating that its patented
bioadhesive buccal tablet can completely replace the normal amount of
testosterone produced by men. The new bioadhesive buccal tablet which is only 9
mm in diameter and insensible after being inserted into the mouth, has been
shown to deliver physiologic levels of testosterone. This contrasts with large
transdermal patches which produce sub-physiologic levels because they deliver
only 5 mg per day.

         Testosterone has traditionally been used to treat hypogonadel men.
Hypogonadism in men is characterized by a deficiency or absence of endogenous
testosterone production. However, recent data has demonstrated that men with low
levels of testosterone may be at a greater risk of having a heart attack. Like
the failure of the ovaries in menopausal women to produce estrogen, failure of
the testes to product sufficient testosterone in men results in increasing
levels of Follicle Stimulating Hormone (FSH) and Luteinizing Hormone (LH). The
advent of "Andropause" in men may have the same impact as menopause in women-
increased risk of cardiovascular disease, Alzheimer's disease and ultimately
osteoporosis.

         Research sponsored by the Company has shown that testosterone
apparently plays the same role in men as estradiol does in women, i.e., it acts
as a potent coronary dilator. Acute administration of testosterone improves
exercise-induced myocardial ischemia in men with coronary artery disease.
Columbia's testosterone bioadhesive buccal tablet may play an important role in
the treatment of angina and in the secondary prevention of a heart attack.

                                       4
<PAGE>

         SPC3 (SYNTHETIC POLYMERIC CONSTRUCTION #3). In December 1993, the
Company entered into an Option and License Agreement with a French research
group based in Marseille, France, pursuant to which it was granted an option to
obtain an exclusive license to the North and South American rights to a
potential AIDS treatment. In May 1996, this agreement was amended such that the
Company had the right to obtain an exclusive license to the worldwide rights. A
phase I/II clinical trial in humans was conducted in the U.S. The purpose of
this trial was to determine the optimal dosage of SPC3 in late stage
seropositive patients. The Company did not exercise its options for the product
which expired in December 1998.

PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION

         The Company purchased the patents underlying the Bioadhesive Delivery
System from Bio-Mimetics, Inc. ("Bio-Mimetics"). The basic patent that covers
the Bioadhesive Delivery System was issued in the United States in 1986 and by
the European Patent Office in 1992. The Company has the exclusive right to the
use of the Bioadhesive Delivery System subject to certain third party licenses
issued by Bio-Mimetics that have been assigned to the Company and certain
restrictions on the assignment of the patents. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."

         During 1997, the Company was granted a United States patent covering
the technology used in its product Advantage-S, which potentiates the activity
of nonoxynol-9 against various organisms which can cause sexually transmitted
diseases, including AIDS, gonorrhea, chlamydia, trichomonal infections, syphilis
and genital herpes.

         During 1996, the Company was granted United States patents covering
vaginal moisturization and the direct transport of progesterone to the uterus.
In addition, a patent covering the treatment of ischemia through the delivery of
Crinone was filed in the United States. The Company is continuing to develop the
core Bioadhesive Delivery System and has filed additional patent applications
covering tissue moisturization, vaginal moisturization and progesterone
delivery. While patent applications do not ensure the ultimate issuance of a
patent, it is the Company's belief that patents based on these applications will
issue.

         Because the Company operates on a worldwide basis, the Company seeks
worldwide patent protection for its technology and products. While having patent
protection cannot ensure that no competitors will emerge, this is a fundamental
step in protecting the technologies of the Company.

         The Company has filed "Replens", "Advantage 24", "Advantage-S",
"Advantage-LA", "Crinone" and "Chronodyne"as trademarks in countries throughout
the world. Applications for the registration of trademarks do not ensure the
ultimate registration of these marks. The Company believes these marks will be
registered. In addition, there can be no assurance that such trademarks will
afford the Company adequate protection or that the Company will have the
financial resources to enforce its rights under such trademarks.

         The Company also relies on confidentiality and nondisclosure
agreements. There can be no assurance that other companies will not acquire
information which the Company considers to be proprietary. Moreover, there can
be no assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.

MANUFACTURING

         Crinone, Advantage-S, Advantage 24, Advantage-LA and Replens are
currently being manufactured and packaged by third-party manufacturers in Europe
utilizing the "form, fill and seal" single step manufacturing process.

         Medical grade, cross-linked polycarbophil, the polymer used in the
Company's products utilizing the Bioadhesive Delivery System, is currently
available from only one supplier, B.F. Goodrich Company ("Goodrich"). The
Company believes that Goodrich will supply as much of the material as the
Company may require because the Company's products rank among the highest
value-added uses of the polymer. There can be no assurance that Goodrich 


                                       5
<PAGE>

will continue to supply the product. In the event that Goodrich cannot or will
not supply enough of the product to satisfy the Company's needs, the Company
will be required to seek alternative sources of polycarbophil. There can be no
assurance that an alternative source of polycarbophil will be obtained.

         All of the other raw materials used by the Company for its products
utilizing the Bioadhesive Delivery System are available from several sources.

OVER-THE-COUNTER DRUGS

         The Company currently markets five over-the-counter drugs: Advanced
Formula Legatrin PM, for the relief of occasional pain and sleeplessness
associated with minor muscle aches such as night leg cramps; Diasorb, a
pediatric antidiarrheal product; and Vaporizer in a bottle, a portable cough
suppressant, Replens and Advantage-S. These over-the-counter drugs are
manufactured by third-party manufacturers. All of the raw materials for the new
Bioadhesive Delivery System products used by the Company for its
over-the-counter drugs are available from several sources.

         The over-the-counter drugs are sold to drug wholesalers, mass
merchandisers and chain drug stores. The Company utilizes approximately 20 drug
manufacturers' representative firms to make calls on the Company's trade
customers. The manufacturers' representatives receive commissions based on sales
made within their respective territories. The Company supports the activities of
the manufacturers' representatives by advertising in consumer publications and
convention participation.

SALES

         The following table sets forth the percentage of the Company's
consolidated net sales by product, for each product accounting for 15% or more
of consolidated net sales in any of the three years ended December 31, 1998.
<TABLE>
<CAPTION>
                                       1998          1997          1996
                                       ----          ----          ----
          <S>                          <C>           <C>           <C>
          Crinone                       25%           68%            -
          Replens                       40            10            12%
          Advantage-S                    4             3*           18*
          Legatrin PM/Legatrin          26            15            55
          Other products                 5             4            15    
                                       ---           ---           ---
                                       100%          100%          100%
                                       ===           ===           ===
</TABLE>
-----------
* Prior to July 1997 the tradename was Advantage 24.

         The Company anticipates the percentage of sales attributable to
Legatrin PM and the other products to decrease in future years as additional
products utilizing the Bioadhesive Delivery System are introduced. AHP accounted
for approximately 25% and 68% of 1998 and 1997 consolidated net sales,
respectively, and Warner-Lambert accounted for approximately 4% and 5% of 1998
and 1997 consolidated net sales, respectively. A retail customer accounted for
approximately 15%, 5% and 18% of 1998, 1997 and 1996 consolidated net sales,
respectively. Another customer accounted for approximately 3% and 13% of 1997
and 1996 consolidated net sales, respectively.

COMPETITION

         While the Company has entered into the strategic alliance agreements
for the marketing of its women's health care products, there can be no assurance
that the Company and its partners will have the ability to compete successfully.
The Company's success to a great extent is dependent on the marketing efforts of
its strategic alliance partners, over which the Company has limited ability to
influence. The markets which the Company and its strategic alliance partners
operate in or intend to enter are characterized by intense competition. The
Company and its partners compete against established pharmaceutical and consumer
product companies which market products addressing similar needs. In addition,
numerous companies are developing or, in the future, may develop enhanced
delivery systems and products competitive with the Company's present and
proposed products. Some of the Company's and its partners' competitors possess
greater financial, research and technical resources than the Company or its
partners. 


                                       6
<PAGE>

Moreover, these companies may possess greater marketing capabilities than the 
Company or its partners, including the resources to implement extensive
advertising campaigns.

         Crinone, although a natural progesterone product, competes in markets
with other progestins, both synthetic and natural, which may be delivered
orally, by injections or by suppositories. Some of the more successful orally
dosed products include Provera marketed by the Upjohn Company and Prempro and
Premphase marketed by AHP. Although the Company is not aware of any product
incorporating rate-controlled technology with respect to vaginal lubrication,
the Company believes that Replens competes in the same markets as K-Y
Jelly/registered trademark/ and Gyne-Moisturin/registered trademark/, vaginal
lubricants marketed by Johnson & Johnson Products, Inc. and Schering-Plough
Corporation, respectively. The Company also believes that Advantage-S, Legatrin
PM and Diasorb compete against numerous products in their respective categories
and that Vaporizer in a bottle/registered trademark/ competes against Vicks
Vaporsteam, a product distributed by Richardson-Vicks, Inc.

GOVERNMENT REGULATION

          The Company is subject to both the applicable regulatory provisions of
the FDA in the United States and the applicable regulatory agencies in those
foreign countries where its products are manufactured and/or distributed.

          As in the United States, a number of foreign countries require
premarketing approval by health regulatory authorities. Requirements for
approval may differ from country to country and may involve different types of
testing. There can be substantial delays in obtaining required approvals from
regulatory authorities after applications are filed. Even after approvals are
obtained, further delays may be encountered before the products become
commercially available.

          In the United States, manufacturers of pharmaceutical products are
subject to extensive regulation by various Federal and state governmental
entities relating to nearly every aspect of the development, manufacture and
commercialization of such products. The FDA, which is the principal regulatory
authority in the United States for such products, has the power to seize
adulterated or misbranded products and unapproved new drugs, to require their
recall from the market, to enjoin further manufacture or sale and to publicize
certain facts concerning a product. As a result of FDA regulations, pursuant to
which new pharmaceuticals are required to undergo extensive and rigorous
testing, obtaining premarket regulatory approval requires extensive time and
cash expenditures. The manufacturing of the Company's products which are either
manufactured and/or sold in the United States, is subject to current Good
Manufacturing Practices prescribed by the FDA. The labeling of over-the-counter
drugs in the United States, as well as advertising relating to such products,
are subject to the review of the Federal Trade Commission ("FTC") pursuant to
the general authority of the FTC to monitor and prevent unfair or deceptive
trade practices.

PRODUCT LIABILITY

          The Company may be exposed to product liability claims by consumers.
Although the Company presently maintains product liability insurance coverage in
the amount of $15 million, there can be no assurance that such insurance will be
sufficient to cover all possible liabilities. In the event of a successful suit
against the Company, insufficiency of insurance coverage could have a materially
adverse effect on the Company.

EMPLOYEES

          As of February 28, 1999, the Company had 37 employees, 4 in
management, 15 in research and development administration, 5 in manufacturing, 3
in marketing, and 10 in support functions. None of the Company's employees are
represented by a labor union. The Company believes that its relationship with
its employees is satisfactory.

         The Company has employment agreements with certain employees, some of
whom are also stockholders of the Company. See "Executive
Compensation--Employment Agreements."

                                       7
<PAGE>

ITEM 2. PROPERTIES

          As of February 28, 1999, the Company leases the following properties:
<TABLE>
<CAPTION>
                                                                                                       ANNUAL
    LOCATION                     USE                  SQUARE FEET          EXPIRATION                   RENT
    --------                     ---                  -----------          ----------                  ------
<S>                        <C>                           <C>               <C>                        <C>
Aventura, FL               Corporate office              4,580             June 2003                  $119,000
Paris, France              Research admin office         9,500             August 2001                 324,000
Paris, France              Business residence            2,600             June 2001                    61,000
New York, NY               Residential office            1,000             April 2000                   50,000
Rockville Center, NY       Research admin office         1,400             October 2000                 35,000
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

         The Company filed an action in the United States District Court for the
Southern District of Florida in November 1997 seeking a declaratory judgement on
certain issues related to its relationship with Lake Pharmaceuticals, Inc.
("Lake") as governed in the contract between the Company and Lake. Lake filed an
action against the Company in the United States District Court, Northern
District of Illinois, for damages alleged by Lake to have been suffered by it as
a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9
product, then marketed by Lake under the tradename Advantage 24, was not
permitted to be sold under the monograph. This action was dismissed by the
Illinois Court and transferred to the Florida Court for consolidation as a
counterclaim in the Florida action. The Company is vigorously defending the Lake
claims and believes that Lake's action will be dismissed without any damage
award to Lake and that the Company will prevail in its claims against Lake for
damages. 

         Other claims and law suits have been filed against the Company. In the
opinion of management and counsel, none of these lawsuits are material and they
are all adequately reserved for or covered by insurance or, if not so covered,
are without any or have little merit or involve such amounts that if disposed of
unfavorably would not have a material adverse effect on the Company.

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

         The 1998 annual meeting of shareholders was held on January 28, 1999
for the purpose of electing the following eight directors (with each nominee
receiving at least 24,645,914 votes out of a possible 28,729,620 votes):James J.
Apostolakis, William J. Bologna, Jean Carvais, M.D., Dominique de Ziegler, M.D.,
Norman M. Meier, Denis O'Donnell, M.D., Selwyn Oskowitz, M.D. and Robert C.
Strauss.

                                       8
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         The Company's $.01 par value Common Stock ("Common Stock") trades on
the American Stock Exchange under the symbol COB. The following table sets forth
the high and low sales prices of the Common Stock on the American Stock
Exchange, as reported on the Composite Tape.
<TABLE>
<CAPTION>
                                               HIGH             LOW
                                               ----             ---
<S>                                           <C>              <C>
FISCAL YEAR ENDED DECEMBER 31, 1997
-----------------------------------
         First Quarter                        $17.13           $12.13
         Second Quarter                        19.50            10.25
         Third Quarter                         20.13            15.63
         Fourth Quarter                        18.88            12.25


FISCAL YEAR ENDED DECEMBER 31, 1998
-----------------------------------
         First Quarter                        $15.18           $11.25
         Second Quarter                        14.13             5.63
         Third Quarter                          8.94             2.50
         Fourth Quarter                         4.88             2.38
</TABLE>

         At February 28, 1999, there were 434 shareholders of record of the
Company's Common Stock, although the Company estimates that there are
approximately 9,500 beneficial owners, 2 shareholders of record of the Company's
Series A Convertible Preferred Stock ("Series A Preferred Stock"), 3
shareholders of record of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock") and 24 shareholders of record of the Company's
Series C Convertible Preferred Stock ("Series C Preferred Stock").

         On August 31, 1998 the Company granted to Value Management & Research
AG a warrant to purchase up to an aggregate of 120,000 shares of Common Stock at
an exercise price of $5.00 per share in exchange for consulting services
performed.

         Between January 7, 1999 and February 1, 1999 the Company sold (i) 6,660
shares of Series C Convertible Preferred Stock, convertible into shares of the
Company's Common Stock, par value $.01 (the "Series C Convertible Preferred
Stock"), and (ii) warrants to purchase up to an aggregate of 233,100 shares of
Common Stock at an exercise price of $3.50 per share (the "Series C Warrants")
for an aggregate purchase price of $6,660,000. The Series C Preferred Stock may
be converted into Common Shares at a conversion price equal to the lesser of (i)
$3.50 and (ii) 100% of the average of the closing prices of the Common Shares as
reported on the AMEX for the three Trading Days immediately preceding the date
of conversion. In accordance with Rule 501 of Regulation D under the Securities
Act of 1933 (the "Securities Act"), it was not necessary in connection with the
offer, sale and delivery of the Series C Preferred Stock to register the Series
C Preferred Stock under the Securities Act.

         On January 28, 1999 the Company granted to James Apostolakis, Shephard
Lane and Anthony Campbell, in exchange for services performed, warrants to
purchase up to an aggregate of 225,000 shares of Common Stock at an exercise
price of $4.8125 per share.

         The Series A Preferred Stock pays cumulative dividends at a rate of 8%
per annum payable quarterly on the first business day of the subsequent quarter.
As of December 31, 1998, dividends of $1,860 were payable on January 4, 


                                       9
<PAGE>

1999. The Series C Preferred Stock issued in January 1999 pays cumulative 
dividends at a rate of 5% per annum payable quarterly on the last day of the 
quarter.

         The Company has never paid a cash dividend on its Common Stock and does
not anticipate the payment of cash dividends in the foreseeable future. The
Company intends to retain any earnings for use in the development and expansion
of its business.

         Applicable provisions of the Delaware General Corporation Law may
affect the ability of the Company to declare and pay dividends on its Common
Stock as well as on its Preferred Stock. In particular, pursuant to the Delaware
General Corporation Law, a company may pay dividends out of its surplus, as
defined, or out of its net profits, for the fiscal year in which the dividend is
declared and/or the preceding year. Surplus is defined in the Delaware General
Corporation Law to be the excess of net assets of the company over capital.
Capital is defined to be the aggregate par value of shares issued.

ITEM 6. SELECTED FINANCIAL DATA

         The following consolidated selected financial data of the Company for
the five years ended December 31, 1998 (not covered by the auditors' report),
should be read in conjunction with the consolidated financial statements and
related notes thereto. See "Item 8. Financial Statements and Supplementary
Data."
<TABLE>
<CAPTION>
                                                 For the Years Ended December 31,
                                           1998        1997       1996        1995        1994
                                         -------------------------------------------------------
<S>                                      <C>         <C>        <C>         <C>         <C>     
Statement of Operations Data: (000's)

Net sales                                $ 10,018    $ 16,547   $  5,646    $  9,905    $  8,769
Net income ( loss) (1)                    (13,860)        763    (13,079)       (959)    (12,994)
Income (loss) per common share              (0.48)       0.03      (0.47)      (0.04)      (0.58)
Weighted average number
  of common shares outstanding-diluted     28,679      29,982     27,615      25,487      22,530

Balance Sheet Data: (000's)

Working capital (deficiency)             ($ 1,401)   $  5,140   $    720    ($ 1,968)   ($ 3,858)
Total assets                               11,880      15,002      9,980       7,687       6,808
Long-term debt                             10,000        --         --          --         6,218
Stockholders' equity (deficit)             (4,333)      8,814      4,673       1,556      (6,192)
</TABLE>

------------
(1) 1998, 1997, 1996 and 1995 net income (loss) includes $73,000, $7.0 million,
    $2.0 million and $8.1 million, respectively, of license fee income.


                                       10
<PAGE>

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

FORWARD-LOOKING INFORMATION

          The Company and its representatives from time to time make written or
verbal forward looking statements, including statements contained in this and
other filings with the Securities and Exchange Commission and in the Company's
reports to stockholders, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such statements
include, without limitation, the Company's expectations regarding sales,
earnings or other future financial performance and liquidity, product
introductions, entry into new geographic regions and general optimism about
future operations or operating results. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, without limitation:
(i) increased competitive activity from companies in the pharmaceutical
industry, some of which have greater resources than the Company; (ii) social,
political and economic risks to the Company's foreign operations, including
changes in foreign investment and trade policies and regulations of the host
countries and of the United States; (iii) changes in the laws, regulations and
policies, including changes in accounting standards, that affect, or will
affect, the Company in the United States and abroad; (iv) foreign currency
fluctuations affecting the relative prices at which the Company and foreign
competitors sell their products in the same market; and (v) the ability of the
Company and third parties, including customers or suppliers, to adequately
address Year 2000 issues. Additional information on factors that may affect the
business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission. All forward-looking
statements should be considered in light of these risks and uncertainties. The
Company assumes no responsibility to update forward-looking statements made
herein or otherwise.

LIQUIDITY AND CAPITAL RESOURCES

          Cash and cash equivalents decreased from approximately $2.3 million at
December 31, 1997 to approximately $315,000 at December 31, 1998. The Company
received $9.7 million, net of expenses, in March 1998 from the issuance of a
note to an institutional investor and approximately $356,000 from the exercise
of options and warrants. The Company paid $4.6 million in April 1998 to the
Warner-Lambert Company to reacquire the rights to the product Replens and used
approximately $7.5 million for operating activities.

         In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP markets
Crinone. Under the terms of the agreement, as of February 28, 1999, the Company
has earned $17 million in milestone payments and will continue to receive
additional milestone payments. The Company also supplies Crinone to AHP at a
price equal to 30% of AHP's net selling price.

         In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary amenorrhea (loss of menstrual
period). In November 1996, the Company submitted a second NDA for clearance to
market Crinone for use in Assisted Reproductive Technologies ("ART") procedures,
including IN-VITRO fertilization, ovum donation and stimulated cycles. The FDA
granted the ART filing a priority review. In addition, in February 1997, the FDA
approved the Company's Treatment Protocol under its IND for the use of Crinone
in assisted fertility procedures. As a result, through leads generated by the
Wyeth-Ayerst institutional sales force, the Company has begun distributing
Crinone to leading infertility clinics throughout the United States.

          In May 1997, the Company received U.S. marketing approval for Crinone
from the FDA for use as a progesterone supplementation or replacement as part of
an Assisted Reproductive Technology (ART) treatment for infertile women with
progesterone deficiency. In July 1997, the Company received U.S. marketing
approval for Crinone from the FDA for the treatment of secondary amenorrhea
(loss of menstrual period).

          In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. In May 1996, this agreement
was amended such that the Company had the right to obtain an exclusive license
to the worldwide rights. A phase I/II clinical trial in humans was 


                                       11
<PAGE>

conducted in the U.S. The purpose of this trial was to determine the optimal
dosage of SPC3 in late stage seropositive patients. The Company did not exercise
its options for the product which expired in December 1998.

          In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met. Through December 31, 1998, the Company has paid approximately $1.3
million in royalty payments.

          As of December 31, 1998, the Company has outstanding exercisable
options and warrants that, if exercised, would result in approximately $38.8
million of additional capital. However, there can be no assurance that such
options or warrants will be exercised.

          Significant expenditures anticipated by the Company in the near future
are concentrated on research and development related to new products. The
Company anticipates it will spend approximately $7.5 million on research and
development in 1999 and an additional $400,000 on property and equipment.

          As of December 31, 1998, the Company had available net operating loss
carryforwards of approximately $49 million to offset its future U.S. taxable
income.

          In accordance with Statement of Financial Accounting Standards No.
109, as of December 31, 1998 and 1997, other assets in the accompanying
consolidated balance sheet include deferred tax assets of approximately $18
million and $16 million, respectively, (comprised primarily of a net operating
loss carryforward) for which a valuation allowance has been recorded since the
realizability of the deferred tax assets are not determinable.

          In January 1999, the Company raised approximately $6.4 million, net of
expenses, from the issuance and sale of Series C Convertible Preferred Stock.
("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at the lower of: (i) $3.50 per common share (based
on 125% of the average of the five day's closing bid prices immediately
preceding the transaction, and (ii) 100% of the average of the closing prices
during the three trading days immediately preceding the conversion notice). If
conversion is based on the $3.50 conversion price, conversion may take place
after the underlying common stock is registered. If conversion is based on the
alternative calculation, conversion cannot take place for fifteen months. The
Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day
of the quarter.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1998 VERSUS 
DECEMBER 31, 1997 VERSUS DECEMBER 31, 1996

          Net sales decreased by 39% in 1998 to $10.0 million as compared to
$16.5 million in 1997. Sales of Crinone which were $11.2 million in 1997 fell to
$2.5 million in 1998. American Home Products Corporation, our licensee for
Crinone, had purchased large initial quantities of Crinone from the Company in
1997 and used this inventory to fulfill most of their 1998 Crinone requirements.
Sales of Replens increased from $1.6 million in 1997 to $4.2 million in 1998.
The increase reflects the reacquisition of the product by the Company from the
Warner-Lambert Company in April 1998. As a result of the reacquisition, the
Company sells Replens directly to chain drugstores, food stores and mass
merchandisers at wholesale prices instead of to Warner-Lambert at contract
manufacturing prices which are much lower than wholesale prices. Sales increased
by 193% to $16.5 million in 1997 as compared to $5.6 million in 1996 because of
the initial sales of Crinone which amounted to $11.2 million in 1997.

          Gross profit as a percentage of sales fell to 43% in 1998 as compared
to 60% in 1997. The reduction in Crinone sales, with its 80% gross profit,
accounts for almost all of the reduction. Gross profit as a percentage of sales



                                       12
<PAGE>

was 60% in 1997 as compared to 38% in 1996 primarily as the result of the sales
of Crinone which had a higher gross profit than the existing group of products.

          Selling and distribution expenses increased by 41% to $4.1 million in
1998 from $2.9 million in 1997. Contributing to the $1.2 million increase were
additional expenses related to the reacquisition of Replens and the marketing of
the product such as: amortization of the Replens trademark $230,000; media
advertising $464,000; advertising billbacks $209,000; and broker commissions
$133,000. Selling and distribution expenses in 1997 were $2.9 million versus
$3.0 million in 1996.

          General and administrative expenses increased by 46% to $5.8 million
in 1998 from $4.0 million in 1997. The principal reasons for the $1.8 million
increase were an increase in legal expense from $707,000 in 1997 to $1,793,000
in 1998 and an increase in investor/public relations expenses from $543,000 in
1997 to $966,000 in 1998. The increase in legal fees reflected additional
attorney charges related to litigation and dissident shareholder activities. The
increase in investor/public relation expenses reflected work done in 1998 on
Crinone media promotion and investor relations work performed in Europe. The
European investor relations expense included $264,000 which represented the
value of warrants granted to non-employees. Other increases in 1998 general and
administrative expenses included $135,000 for salaries and benefits and $84,000
for insurance. General and administrative expenses increased by 14% to $4.0
million in 1997 from $3.5 million in 1996. The principal reasons for the
$478,000 increase was a $153,000 increase in salary expense, a $45,000 increase
in insurance expense, a $73,000 increase in travel and entertainment and a
$57,000 increase in investor relations expense.

          Research and development expenditures decreased in 1998 to $7.8
million as compared to $9.1 million in 1997 as the number of Crinone studies
continued to decline. Research and development expenditures in 1997 were $9.1
million as compared to $10.9 million in 1996, when costs were incurred on the
pivotal studies required for filing the New Drug Applications in the United
States associated with Crinone.

          License fees in 1998 were $73,088. License fees in 1997 and 1996 were
$7.0 million and $2.0 million, respectively, and primarily represented milestone
payments received in connection with the licensing agreement with AHP.

          Interest income in 1998 was $141,564 as compared to $70,664 in 1997.
The increase resulted from interest earned on the money received from the
issuance of a $10 million note issued to SBC Warburg Dillon Read in March 1998,
after paying $4.6 million to reacquire the rights to the product Replens in
April 1998.

          As a result, the net loss for 1998 was $13,859,734 or $0.48 per share
as compared to net income of $762,906 or $0.03 per share in 1997 and to the net
loss of $13,078,984 or $0.47 per share in 1996.

IMPACT OF THE YEAR 2000

          The Company and each of its operating subsidiaries are in the process
of implementing a Year 2000 ("Y2K") readiness program with the objective of
having all significant business systems function properly with respect to Y2K
before January 1, 2000.

          The first component of the Y2K readiness program was to identify all
internal information technology ("IT") and non-IT systems, business systems of
the Company and its operating subsidiaries that are susceptible to system
failures or processing errors as a result of Y2K problems. This step has been
completed and all systems have been upgraded to avoid the Y2K problem,
principally through the replacement or modification of computer software of
affected systems. The cost incurred by the Company and its operating
subsidiaries approximated $5,000.

                                       13
<PAGE>

          The second component of the Y2K readiness program is to identify
significant service providers, vendors and customers that are believed to be
critical to the Company's business operations after January 1, 2000. Steps are
being undertaken in an attempt to reasonably ascertain their stage of Y2K
readiness through questionnaires, interviews and other available means.
Estimated costs of assessing readiness of significant service providers, vendors
and customers should not exceed $1,000. The possible consequences of the
Company's service providers, vendors and customers not being fully Y2K compliant
by January 1, 2000 include, among other things delays in delivery of products,
delays in the receipt of supplies, invoice and collections errors, and inventory
obsolescence. There can be no assurance that systems of third parties on which
the Company relies will be converted in a timely manner, or that a failure to
properly convert by another company would not have a material adverse impact on
the Company's financial condition or results of operations. However, based on
surveys of vendors, the Company believes that all vendors will be Y2K compliant
by January 1, 2000.

          The Company believes it has developed an effective program to address
the Y2K problem and, based upon current plans and assumptions, the Company does
not expect that the Y2K problem will have a material adverse impact on the
Company's financial condition or results of operations. Due to the general
uncertainty with respect to Y2K, however, there can be no assurance that all Y2K
issues will be foreseen and corrected on a timely basis, or that no material
disruption of the Company's business operations will occur. Further, the
Company's expectations are based on the assumption that there will be no general
failure of external local, national or international systems (including power,
communications, postal or transportation systems) necessary for the ordinary
conduct of business. The Company will, however, continue to assess the risks
presented by the Y2K problem and will develop contingency plans if and when such
plans become necessary.

          THE ESTIMATES AND CONCLUSIONS HEREIN WITH RESPECT TO Y2K ISSUES ARE
FORWARD-LOOKING STATEMENTS UNDER THE REFORM ACT AND ARE BASED ON MANAGEMENT'S
BEST ESTIMATES OF FUTURE EVENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
COMPANY'S ESTIMATES AND CONCLUSIONS AS A RESULT OF A NUMBER OF FACTORS INCLUDING
THE AVAILABILITY OF RESOURCES, THE ABILITY TO DISCOVER AND CORRECT THE POTENTIAL
Y2K SENSITIVE ISSUES WHICH COULD HAVE A SERIOUS IMPACT ON CERTAIN OPERATIONS AND
THE ABILITY OF THE COMPANY'S VENDORS, SUPPLIERS, PROVIDERS OF GOODS AND SERVICES
AND CUSTOMERS TO BRING THEIR SYSTEMS INTO Y2K ISSUES COMPLIANCE.

EURO

          On January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between their existing
currencies ("legacy currencies") and one common currency (the "Euro"). The Euro
trades on currency exchanges and may be used in business transactions. Under the
regulations governing the transition to a single currency, there is a "no
compulsion, no prohibition" rule which states that no one is obliged to use the
Euro until the notes and coinage have been introduced on January 1, 2002.
Beginning in January 2002, new euro-denominated bills and coins will be issued
and legacy currencies will be withdrawn from circulation. The Company's
operating subsidiaries affected by the Euro conversion have established plans to
address the systems and business issues raised by the Euro currency conversion.
These issues include: (1) the need to adapt computer and other business systems
and equipment to accommodate Euro-denominated transactions, and (2) the
competitive impact of cross-border price transparency, which may make it more
difficult for business to charge different prices for the same products on a
country-by-country basis particularly once the Euro currency is issued in 2002.
Based upon current plans and assumptions, the Company does not expect that the
Euro conversion will have a material adverse impact on its financial condition
or results of operations.

IMPACT OF INFLATION

          Sales revenues, manufacturing costs, selling and distribution
expenses, general and administrative expenses and research and development costs
tend to reflect the general inflationary trends.

                                       14
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The financial statements of the Company are annexed to this report on
pages F-1 through F-20. An index to the financial statements appears on page
F-1. The financial statement schedules are also annexed to this report on pages
S-1 through S-4. An index to the financial statement schedules appears on page
S-1.

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

          On January 7, 1999, the Board of Directors of Columbia Laboratories,
Inc. (the "Registrant") approved the engagement of Goldstein Golub Kessler LLP
as the Registrant's independent certified public accountants to audit the
Registrant's consolidated financial statements. During the last two fiscal years
and each subsequent interim period, the Registrant has not consulted with
Goldstein Golub Kessler LLP regarding the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Registrant's financial statements or on
any matter that was the subject of a disagreement or a reportable event.

          Simultaneously with the approval of the Registrant's new accountants,
the Board of Directors dismissed Arthur Andersen LLP as the Registraint's
independent certified public accountants. During the two most recent fiscal
years or any subsequent interim period, there have been no adverse opinions,
disclaimers of opinion or qualifications or modifications as to uncertainty,
audit scope or accounting principles regarding the reports of Arthur Andersen
LLP, on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure of a nature which if not resolved to
the satisfaction of Arthur Andersen LLP would have caused it to make reference
to the subject matter of such disagreement in connection with its report.

                                       15
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

          The executive officers and directors of the Company as of February 28,
1999 are as follows:
<TABLE>
<CAPTION>
         NAME                      AGE           POSITION
         ----                      ---           --------
<S>                                <C>      <C>
William J. Bologna                 56       Chairman of the Board

James J. Apostolakis               56       Vice Chairman of the Board

Norman M. Meier                    59       President, Chief Executive Officer
                                            and Director

David L. Weinberg                  53       Vice President--Finance and
                                            Administration, Chief Financial
                                            Officer, Secretary and Treasurer

Dominique de Ziegler, M.D.         51       Vice President--Pharmaceutical
                                            Development and Director

Howard L. Levine, Pharm. D.        44       Vice President--Research and
                                            Development

Annick Blondeau, Ph.D.             53       Vice President--Regulatory Affairs

Jean Carvais, Ph.D.                71       Director

Denis M. O'Donnell, M.D.           45       Director

Selwyn P. Oskowitz, M.D.           52       Director

Robert C.  Strauss                 57       Director
</TABLE>

                                       16
<PAGE>

         WILLIAM J. BOLOGNA has been a director of the Company since inception
and was elected Chairman of the Company's Board of Directors in January 1992.
From December 1988 to January 1992, Mr. Bologna served as Vice Chairman of the
Company's Board of Directors. In addition, from 1980 to 1991, he was Chairman of
Bologna & Hackett ("B&H"), an advertising agency specializing in pharmaceutical
products which has in the past performed services for various international
pharmaceutical companies. B&H ceased operations in May 1991. Prior to 1980, Mr.
Bologna was employed by William Douglas McAdams, Inc., a company engaged in the
marketing of pharmaceuticals, in a variety of positions, including Senior Vice
President. In 1965, Mr. Bologna received his B.S. in Pharmacy from Fordham
University. He received an MBA in Finance from Fordham University in 1971.

         JAMES J. APOSTOLAKIS has been a director and Vice Chairman of the
Company's Board of Directors since January 1999. Mr. Apostolakis has been a
Managing Director at Poseidon Capital Corporation, an investment banking firm,
since February of 1998. Mr. Apostolakis has also served as President of
Lexington Shipping & Trading Corporation, a company engaged in shipping
operations, since 1973. From 1989 until 1992, Mr. Apostolakis served as a
director on the Board of Directors of Grow Group, a paint and specialty
chemicals company. From 1982 to 1988, he served as a director for Macmillan,
Inc., a publishing and information services company.

         NORMAN M. MEIER has been President, Chief Executive Officer and a
director of the Company since inception. From 1971 to 1977, Mr. Meier was Vice
President of Sales and Marketing for Key Pharmaceuticals, Inc., a company which
had been engaged in the marketing and sales of pharmaceuticals until its sale to
Schering-Plough Corporation in June 1986. From 1977 until June 1986, Mr. Meier
served as a consultant to Key Pharmaceuticals, Inc. In 1960, Mr. Meier received
his B.S. in Pharmacy from Columbia University. He received his M.S. in Pharmacy
Administration from Long Island University in 1964. Mr. Meier is also a director
of Universal Heights, Inc.

         DAVID L. WEINBERG has been Vice President--Finance and Administration,
Chief Financial Officer, Treasurer and Secretary of the Company from September
1997 to the present and previously from the inception of the Company to June
1991. From October 1991 until September 1997, Mr. Weinberg was employed by
Transmedia Network Inc., a company specializing in consumer savings programs,
where he served in various capacities including Vice President and Chief
Financial Officer. From February 1981 until August 1986, Mr. Weinberg worked for
Key Pharmaceuticals, Inc., a company engaged in the development, manufacturing,
marketing and sales of pharmaceuticals until its sale to Schering-Plough
Corporation. Mr. Weinberg served in various capacities including Vice President
- Finance, Treasurer and Secretary. Mr. Weinberg received a B.B.A. in Accounting
from Hofstra University in 1968.

         DOMINIQUE DE ZIEGLER, M.D. has been Vice President--Pharmaceutical
Development of the Company since January 1996 and a director since January 1998.
Dr. de Ziegler has been employed by the Company since 1992 as Director of
Research Development. In addition, from 1988 through 1991, Dr. de Ziegler was an
Associate Professor at the Department of Obstetrics and Gynecology, Hospital A.
Beclere in Clamart, France. In 1990, Dr. de Ziegler became a Diplomat of the
American Board of Obstetrics and Gynecology, Reproductive Endocrinology and
Infertility. Dr. de Ziegler is a member of the American Fertility Society, the
American Society for Reproductive Endocrinogolists, The American Endocrine
Society, the Society of Gynecologic Investigation and the Association Francaise
pour l'Etude de la Menopause. Dr. de Zeigler has also been a journal editor and
an "ad hoc" reviewer for Fertility Sterility, Human Reproduction, The Journal of
In Vitro Fertilization and Embryo Transfer, Contraception Fertilite Sexualite
and Reproduction Humaine et Hormone.

         HOWARD L. LEVINE, Pharm.D. has been Vice President-Research and
Development since September, 1997. Dr. Levine has been employed by the Company
since 1990. Prior to joining the Company, Dr. Levine was with the Medical
Department of Pfizer Labs. Dr. Levine has held faculty and clinical practice
positions at the University of Southern California, Long Island University and
Duquesne University. He has instructed both pharmacy and medical students in
clinical pharmacology, as well as providing numerous lectures for the continuing
education of practitioners. Dr. Levine received his B.S. in Pharmacy from Oregon
State University and Doctor of Pharmacy degree from the State University of New
York at Buffalo in 1980.

                                       17
<PAGE>

         ANNICK BLONDEAU, PH. D. has been Vice President--Regulatory Affairs
since June 1996. Dr. Blondeau has been employed by the Company since 1993 as
Director of Regulatory Affairs. From 1984 through 1993, Dr. Blondeau was
responsible for all of the international filings for Debat Centre R&D Garches, a
large French pharmaceutical company. Dr. Blondeau also worked at Pfizer as Head
of the Pharmacology Department. Dr. Blondeau received her doctorate in
pharmacology and physiology from the Faculte des Sciences de Potiers France in
1971.

         JEAN CARVAIS, PH.D. has been a director of the Company since October
1996. Since 1984, Dr. Carvais has been an independent consultant in the
pharmaceutical industry. Prior to that time, Dr. Carvais was President of The
Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer.
As such, he was involved in the development of a line of anti-cancer drugs,
including Bleomycin and Adriamycin, as well as a new line of antibiotics and
quinolones. Following the acquisition of Roger Bellon, S.A., Dr. Carvais became
a member of Rhone-Poulenc's central research committee which directs the
company's worldwide research and development activities. Dr. Carvais is also a
director of Imclone Systems Incorporated.

         DENIS M. O'DONNELL, M.D. has been a director of the Company since
January 1999. Dr. O'Donnell has been a Managing Director at Seaside Advisors
LLC, a small cap investment fund, since 1997. From 1995 to 1997, Dr. O'Donnell
served as President of Novavax, Inc., a pharmaceutical and drug delivery
company. From 1991 to 1995, he was Vice President of IGI, Inc., a company
engaged in the marketing of human and animal pharmaceuticals. Currently, Dr.
O'Donnell served on the Board of Directors and the audit committees of both
Novavax, Inc. and ELXSI, Inc., a restaurant and water inspection services
company, and also serves on the Board of Directors of Bell National Corporation,
a medical diagnostics company.

         SELWYN P. OSKOWITZ, M.D. has been a director of the Company since
January 1999. Dr. Oskowitz has been a clinical professor of obstetrics,
gynecology and reproductive biology at Harvard Medical School since 1993. He is
a reproductive endocrinologist at, and the Director of, Boston IVF, a fertility
clinic with which he has been associated since 1986. Dr. Oskowitz is also a
former President of the Boston Fertility Society.

         ROBERT C. STRAUSS has been a director of the Company since January
1997. Since December 1997, Mr. Strauss has been the President & Chief Executive
Officer of Noven Pharmaceuticals, Inc. Prior to joining Noven, Strauss was
President, Chief Executive Officer and Chairman of the Board of Cordis
Corporation. In the past he has held senior positions at Ivax Corporation,
Touche-Ross & Company and Food Fair, Inc. Mr. Strauss received undergraduate and
graduate degrees in physics and serves on the Board of Trustees for the
University of Miami. Mr. Strauss holds a position on the Board of Directors of
several companies including CardioGenesis Corporation, American Bankers
Insurance Group and the Florida High Tech and Industry Council. Mr. Strauss also
devotes his time to many civic duties, namely, the United Way of Miami-Dade
County.

         During 1998, two Form 4 filings were filed late, however, all remaining
filings of Forms 3, 4 and 5 were made on a timely basis.

         All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors receive no
compensation for serving on the Board, except for the receipt of stock options
and the reimbursement of reasonable expenses incurred in attending meetings.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. The Board of Directors has three standing committees,
the Audit Committee, the Compensation/Stock Option Committee, and the Finance
Committee.

                                       18
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

         The tables, graph and descriptive information set forth below are
intended to comply with the Securities and Exchange Commission compensation
disclosure requirements applicable to, among other reports and filings, annual
reports on Form 10-Ks. This information is being furnished with respect to the
Company's Chief Executive officer ("CEO") and its four other executive officers,
other than the CEO, whose salary and bonus exceeded $100,000 for the most recent
fiscal year (collectively, the "Executive Officers").
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                         ANNUAL COMPENSATION      LONG-TERM COMPENSATION
                                         -------------------      ----------------------
                                                                         SECURITIES
NAME AND                                                                 UNDERLYING
PRINCIPAL POSITION         YEAR              SALARY                        OPTIONS 
------------------         ----              ------                      ----------
<S>                        <C>              <C>                            <C>
Norman M. Meier            1998             $400,000                       250,000
President and Chief        1997              301,000                       250,000
Executive Officer          1996              250,000                       150,000

William J. Bologna         1998              400,000                       250,000
Chairman of the Board      1997              294,000                       250,000
                           1996              250,000                       150,000

Nicholas A. Buoniconti (1) 1998              231,250                          -
Vice Chairman and          1997              237,000                       400,000
Chief Operating Officer    1996              200,000                          -

Dominique de Ziegler       1998              221,800                        25,000
Vice President-            1997              221,800                        25,000
Pharmaceutical             1996              203,500                        15,000
Development

Howard L. Levine (2)       1998              279,198                        50,000
Vice President-            1997               82,500                          -
Research and Development   1996                  -                            -
</TABLE>

------------
(1)  Nicholas A. Buoniconti resigned from his positions as Vice Chairman and
     Chief Operating Officer, effective October 8, 1998.

(2)  Howard L. Levine was elected as Vice President - Research and Development
     on September 29, 1997.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                            OPTION GRANTS DURING 1998

                         NUMBER OF    % OF TOTAL 
                         SECURITIES   OPTIONS                            GRANT
                         UNDERLYING   GRANTED TO   EXERCISE              DATE
                         OPTIONS      EMPLOYEES    PRICE      EXERCISE   PRESENT
NAME                     GRANTED      IN 1998      ($/SH)     DATE       VALUE(1)
----                     ----------   ----------   --------   --------   --------          
<S>                      <C>             <C>        <C>        <C>       <C>
Norman M. Meier          250,000         33%        $11.63     3/2/08    $1,227,025

William J. Bologna       250,000         33%         11.63     3/2/08     1,227,025

Nicholas A. Buoniconti         -          -              -          -             -

Dominique de Ziegler      25,000          3%         11.63     3/2/08       122,703

Howard L. Levine          50,000          7%         11.63     3/2/08       245,405
</TABLE>

------------
(1) The estimated grant date present value reflected in the above table is
    determined using the Black-Scholes model. The material assumptions and
    adjustments incorporated in the Black-Scholes model in estimating the value
    of the options reflected in the above table include the following: (i) an
    exercise price equal to the fair market value of the underlying stock on the
    date of grant, (ii) an option term of three years, (iii) an interest rate of
    6% that represents the interest rate on a U.S. Treasury security with a
    maturity date corresponding to that of the expected option term, (iv)
    volatility of 55% calculated using daily stock prices for the two-year
    period ending on December 31, 1997 and (v) no annualized dividends paid with
    respect to a share of Common Stock at the date of grant. The ultimate values
    of the options will depend on the future price of the Company's Common
    Stock, which cannot be forecast with reasonable accuracy. The actual value,
    if any, an optionee will realize upon exercise of an option will depend on
    the excess of the market value of the Company's Common Stock over the
    exercise price on the date the option is exercised.

<TABLE>
<CAPTION>
    AGGREGATED OPTION EXERCISES DURING 1998 AND FISCAL YEAR END OPTION VALUES

                                                          NUMBER OF SECURITIES      VALUE OF UNEXERCISED
                                                          UNDERLYING UNEXERCISED       IN-THE-MONEY
                                                             OPTIONS AT                  OPTIONS AT
                    SHARES ACQUIRED        VALUE          DECEMBER 31, 1998           DECEMBER 31, 1998
NAME                  ON EXERCISE        REALIZED     EXERCISABLE UNEXERCISABLE   EXERCISABLE UNEXERCISABLE
----                ---------------      --------     ----------- -------------   ----------- -------------
<S>                        <C>             <C>         <C>           <C>             <C>          <C>
Norman M. Meier            -               $  -          830,000     340,000         $  -         $  -

William J. Bologna         -                  -          830,000     340,000            -            -

Nicholas A. Buoniconti     -                  -        1,247,500           -            -            -

Dominique de Ziegler       -                  -          120,000      25,000            -            -

Howard L. Levine           -                  -          200,000      50,000            -            -
</TABLE>

                                       20
<PAGE>

EMPLOYMENT AGREEMENTS

         In January 1996, the Company entered into five-year employment
agreements with each of William J. Bologna and Norman M. Meier, to serve as
Chairman and President of the Company, respectively. Pursuant to their
respective employment agreements, each such employee is entitled to a base
salary of $250,000. In addition, each such employee was granted options to
purchase 150,000 shares of the Company's Common Stock at an exercise price of
$7.25. Pursuant to the terms of such agreements, each employee has agreed to
dedicate his services on a substantially full-time basis and has agreed for the
term of his agreement and for two years thereafter not to compete with the
Company. The employment agreements were amended effective September 15, 1997 to
increase the base salary to $400,000. Messrs. Bologna and Meier agreed to a
voluntary 25% reduction in base salary for the six month period ending June 30,
1999.

         In April 1997, the Company entered into a four-year employment
agreement with Nicholas A. Buoniconti, to serve as Vice Chairman and Chief
Operating Officer of the Company. Pursuant to this agreement, Mr. Buoniconti was
paid an annual salary of $200,000. As additional compensation, Mr. Buoniconti
was granted an option to purchase 150,000 shares of the Company's Common Stock
at an exercise price of $11.88 per share, which option vests over four years.
Pursuant to the terms of such agreement, Mr. Buoniconti had agreed to dedicate
his services on a substantially full-time basis and has agreed for the term of
his agreement and for two years thereafter not to compete with the Company. The
employment agreement was amended effective September 15, 1997 to increase the
base salary to $300,000. In October 1998, the Company and Mr. Buoniconti entered
into a further amendment to Mr. Buoniconti's employment agreement. Under the
terms of this amendment, in order to permit him to devote more time to interests
outside of the Company, Mr. Buoniconti resigned from his position as Chief
Operating Officer and Vice-Chairman of the Board of Directors and agreed not to
seek re-election as a director of the Company at the Company's 1998 Annual
Meeting of Stockholders. By the terms of the October 1998 Agreement, Mr.
Buoniconti agreed to serve the Company in a part-time capacity, devoting
approximately five hours per month to such duties as will be determined by the
Board of Directors. By the terms of the October 1998 Agreement, Mr. Buoniconti
received his base salary and his automobile allowance pursuant to the terms of
his employment agreement, as amended to date, through December 31, 1998. From
January 1, 1999 through April 15, 2001 (the date of expiration of his original
employment agreement), Mr. Buoniconti's compensation will be decreased to the
rate of $500 per month and he will no longer be entitled to an automobile
allowance. By the terms of the October 1998 Agreement, in addition, options to
purchase shares of the Company's Common Stock granted to Mr. Buoniconti under
the Company's 1988 Stock Option Plan will continue to remain exercisable in
accordance with the terms of the 1988 Stock Option Plan. Options granted to Mr.
Buoniconti under the Company's 1996 Long-Term Performance Plan which did not
vest by October 18, 1998 have been cancelled. If, prior to such date, Mr.
Buoniconti exercised any options which already vested under the 1996 Long-Term
Performance Plan, an equal number of unvested options immediately vested on a
one-for-one basis in the order such options would otherwise have vested.
Pursuant to the terms of the 1996 Long-Term Performance Plan, any vested options
will remain exercisable by Mr. Buoniconti until the tenth anniversary of their
respective dates of grant.

         In July 1995, the Company entered into a three-year employment
agreement with Dominique de Ziegler, to serve as Director of Research
Development. Pursuant to this agreement, Dr. de Ziegler was paid an annual
salary of $203,500. As additional compensation, Dr. de Ziegler was granted
options to purchase 25,000 shares of the Company's Common Stock at an exercise
prices of $7.25 per share. Pursuant to the terms of such agreement, Dr. de
Ziegler agreed to dedicate his services on a substantially full-time basis and
has agreed for the term of his agreement and for two years thereafter not to
compete with the Company. Dr. de Ziegler's contract expired in July 1998. For
the calendar years 1997 and 1998, Dr. de Ziegler's salary was increased to
$221,800.

         The exercise price of all of the options granted pursuant to the
aforementioned employment agreements are based on the closing price of the
Company's Common Stock on the American Stock Exchange on the day of grant.

                                       21
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As of February 28, 1999, directors and named executive officers,
individually and as a group, beneficially owned Common Stock as follows:
<TABLE>
<CAPTION>
              NAME OF                                         SHARES, NATURE OF INTEREST
         BENEFICIAL OWNER                               AND PERCENTAGE OF EQUITY SECURITIES(1)
         ----------------                               --------------------------------------
<S>                                                        <C>                    <C>
Norman M. Meier (2)                                        1,848,150               6.3%
William J. Bologna (3)                                     2,985,310              10.0%
James J. Apostolakis (4)                                   1,114,078               3.9%
David L. Weinberg (5)                                         77,600                *
Dominique de Ziegler (5)                                     145,000                *
Annick Blondeau (5)                                          120,000                *
Howard L. Levine (5)                                         250,000                *
Jean Carvais (5)                                              22,000                *
Denis M. O'Donnell                                                 -                *
Selwyn P. Oskowitz                                                 -                *
Robert C. Strauss (5)                                         25,000                *

The James J. Apostolakis Group (6)                         1,524,900               5.3%
   c/o Lexington Shipping and Trading Corp.
   950 Third Avenue, 27th Floor
   New York, New York 10022

The David M. Knott Group (7)                               1,397,828               4.8%
   485 Underhill Boulevard, Ste. 205
   Syosset, New York 11791-3419

Anthony R. Campbell (8)                                    1,412,600               4.9%
   c/o TC Management
   237 Park Avenue, Suite 800
   New York, New York

Officers and directors as a group (11 people)              6,587,138              20.7%
</TABLE>

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

 *  Represents less than 1 percent.

(1) Includes shares issuable upon exercise of both options and warrants which
    are currently exercisable or which may be acquired within 60 days and shares
    issuable upon conversion of the Series A, Series B and Series C Preferred
    Stock (12.36 for the Series A Preferred Stock, 20.57 for the Series B
    Preferred Stock and 285.71 for the Series C Preferred Stock).

(2) Includes 100,000 shares issuable upon conversion of 350 shares of Series C
    Preferred Stock. Includes 1,161,950 shares issuable upon exercise of options
    and warrants, which are currently exercisable or which may be acquired
    within 60 days.

(3) Includes 20,570 shares issuable upon conversion of 1,000 shares of Series B
    Preferred Stock and 71,428 shares issuable upon conversion of 250 shares of
    Series C Preferred Stock. Includes 1,118,750 shares issuable upon exercise
    of options and warrants, which are currently exercisable or which may be
    acquired within 60 days. Includes 198,062 shares beneficially owned by Mr.
    Bologna's spouse.

(4) Includes 71,428 shares issuable upon conversion of 250 shares of Series C
    Preferred Stock. Includes 108,750 shares issuable upon exercise of warrants
    which are currently exercisable or which may be acquired within 60 days.
    Additionally, Mr. Apostolakis has filed a schedule 13D as he may be deemed
    to have acted as a member of a group with other shareholders (see footnote 6
    herein).

                                       22
<PAGE>

(5) Includes shares issuable upon exercise of options, which are currently
    exercisable or which may be acquired within 60 days, to purchase 75,000
    shares with respect to Mr. Weinberg, 145,000 shares with respect to Dr. de
    Ziegler, 120,000 shares with respect to Dr. Blondeau, 250,000 shares with
    respect to Dr. Levine, 22,000 shares with respect to Dr. Carvais and 25,000
    shares with respect to Mr. Strauss.

(6) Based on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1
    to Schedule 13D dated July 16, 1998, an Amendment No. 2 dated October 2,
    1998, an Amendment No. 3 dated November 4, 1998 and an Amendment No. 4 dated
    December 14, 1998, Messrs. James J. Apostolakis, David Ray and Bernard
    Marden and, by reference to a Schedule 13D separately filed by David M.
    Knott, Mr. Knott and certain affiliated entities and, by reference to a
    Schedule 13D dated separately filed by Mr. Campbell, Mr. Campbell may be
    deemed to have acted together as a group for certain purposes. The
    information contained in the Schedule 13D reflects that Messrs. Apostolakis,
    Ray and Marden beneficially own 935,900, 214,000 and 375,700 shares of the
    Company's Common Stock, respectively. And each has sole voting and
    dispositive power with respect to all shares beneficially owned by such
    person. Such persons have indicated that their filings do not constitute an
    admission that they are members of a "group" for any purpose.

(7) Base on a Schedule 13D dated July 6, 1998, as amended by an Amendment No. 1
    to Schedule 13D dated October 2, 1998, an Amendment No. 2 dated November 23,
    1998 and an Amendment No. 3 dated December 14, 1998, an Amendment No. 4
    dated January 19, 1999 and an Amendment No. 5 dated January 27, 1999, Mr.
    Knott, Knott Partners, L.P., Dorset Management Corporation and Matterhorn
    Offshore Fund Limited, along with Messrs. Apostolakis, Ray, Marden and
    Campbell, may be deemed to have acted together as a group for certain
    purposes. Such persons have indicated, however, that their filings do not
    constitute an admission that they are members of a "group" for any purpose.
    The information contained in the Schedule 13D reflects that Mr. Knott
    beneficially owns 1,397,828 shares of the Company's Common Stock and (a)
    individually (i) has the sole power to vote and to dispose of (1) 52,120
    shares of the Company's Common Stock held in his and his IRA's accounts and
    (2) 801,008 shares held in the account of Knott Partners, L.P., and (ii)
    shares with the respective account owners the power to dispose of (but not
    to vote) 600 shares held by the accounts of Mrs. Knott and her IRA, and (b)
    as President of Dorset Management Corporation (i) has the sole power to vote
    and dispose of 448,100 shares of the Company's Common Stock and (ii) shares
    with the respective account owner the power to vote and dispose of 96,100
    shares held in the account of Matterhorn Offshore Fund Limited.

(8) Based on a Schedule 13D dated November 4, 1998, as amended by an Amendment
    No. 1 dated December 14, 1998, and an Amendment No. 2 dated December 18,
    1998, Mr. Campbell, and Messrs. Apostolakis, Ray, Marden and Knott and
    certain affiliated entities may be deemed to have acted together as a group
    for certain purposes. The information contained in the Schedule 13D reflects
    that Mr. Campbell beneficially owns 1,412,600 shares of the Company's Common
    Stock and has sole voting and dispositive power with respect to all shares
    beneficially owned by such person. Additionally, Mr. Campbell individually
    owns 42,500 shares of Common Stock and a trust estate for the benefit of Mr.
    Campbell's children owns 30,000 shares of Common Stock (as to which Mr.
    Campbell disclaims beneficial ownership). Mr. Campbell expressly disclaims
    beneficial ownership of any Common Stock beneficially owned by Messrs.
    Apostolakis, Ray, Marden or any other person. Such persons have also
    indicated that their filings do not constitute an admission that they are
    members of a "group" for any purpose. TC Management, as the general partner
    of Windsor LP and manager of the TC Managed Account, may be deemed to
    beneficially own the shares directly owned by Windsor LP and the TC Managed
    Account. TC Management, Windsor LP and TC Managed Account own 1,382,600,
    1,238,800 and 101,300 shares of the Company's Common Stock, respectively.

As of February 28, 1999, the Company knows of no persons other than shown above
who beneficially own or exercise voting or dispositive control over 5% or more
of the Company's outstanding Common Stock.

                                       23
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During 1993, the Company loaned Messrs. Meier and Bologna, $80,000 and
$110,350, respectively. The notes, which bear interest at 10% per annum and are
unsecured but with full recourse, were due on or before December 7, 1996. The
due dates of these notes have subsequently been extended through December 7,
1999. At December 31, 1998, the balances including interest are $121,806 and
$166,833, respectively.

         In connection with the issuance of the Series C Convertible Preferred
Stock in January 1999, the Company received two notes receivable from Messrs.
Meier and Bologna for $350,000 and $250,000, respectively. The notes bear
interest at 5% per annum and are due on July 28, 1999.


                                       24
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AND
         REPORTS ON FORM 8-K

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

         Indexes to financial statements and financial statement schedules
appear on F-1 and S-1, respectively.

<TABLE>
<CAPTION>
EXHIBITS
--------
<S>      <C>      <C>
3.1      --       Restated Certificate of Incorporation of the Company, as amended(1)
3.2      --       Amended and Restated By-laws of Company
4.1      --       Certificate of Designations, Preferences and Rights of Series C Convertible
                  Preferred Stock of the Company, dated as of January 7, 1999
4.2      --       Securities Purchase Agreement, dated as of January 7, 1999, between the
                  Company and each of the purchasers named on the signature pages thereto
4.3      --       Securities Purchase Agreement, dated as of January 19, 1999, among the
                  Company, David M. Knott and Knott Partners, L.P.
4.4      --       Securities  Purchase  Agreement,  dated as of  February  1, 1999,  between  the
                  Company and Windsor Partners, L.P.
4.5      --       Registration Rights Agreement, dated as of January 7, 1999,
                  between the Company and each of the purchasers named on the
                  signature pages thereto
4.6      --       Form of Warrant to Purchase Common Stock
10.1     --       Employment  Agreement  dated as of January 1, 1996,  between  the  Company  and
                  Norman M. Meier(6)
10.2     --       Employment  Agreement  dated as of January 1, 1996,  between  the  Company  and
                  William J. Bologna(6)
10.3     --       1988 Stock Option Plan, as amended, of the Company(4)
10.4     --       1996 Long-term Performance Plan(7)
10.5     --       License and Supply  Agreement  between  Warner-Lambert  Company and the Company
                  dated December 5, 1991(3)
10.6     --       Asset Purchase, License and Option Agreement, dated November 22, 1989(1)
10.7     --       Employment  Agreement  dated as of April 15,  1997,  between  the  Company  and
                  Nicholas A. Buoniconti(8)
10.8     --       License and Supply  Agreement for Crinone between Columbia  Laboratories,  Inc.
                  (Bermuda) Ltd. and American Home Products dated as of May 21, 1995(5)
10.9     --       Addendum to  Employment  Agreement  dated as of September 1, 1997,  between the
                  Company and Norman M. Meier(8)
10.10    --       Addendum to  Employment  Agreement  dated as of September 1, 1997,  between the
                  Company and William J. Bologna(8)
10.11    --       Addendum to  Employment  Agreement  dated as of September 1, 1997,  between the
                  Company and Nicholas A. Buoniconti(8)
10.12    --       Convertible Note Purchase Agreement,  7 1/8% Convertible  Subordinated Note due
                  March 15,  2005 and  Registration  Rights  Agreement  all dated as of March 16,
                  1998 between the Company and SBC Warburg Dillon Read Inc.(9)
10.13    --       Termination  Agreement  dated as of April 1, 1998  between  the Company and the
                  Warner-Lambert Company(9)
10.14    --       Addendum  to  Employment  Agreement  dated as of October 8, 1998,  between  the
                  Company and Nicholas A. Buoniconti.
10.15    --       Agreement  dated as of December 14, 1998, by and among  Columbia  Laboratories,
                  Inc.,  William J. Bologna,  Norman M. Meier,  James J. Apostolakis,  David Ray,
                  Bernard Marden, Anthony R. Campbell, David M. Knott and Knott Partners, L.P.
21       --       Subsidiaries of the Company
27       --       Financial Data Schedule
</TABLE>

                                       25
<PAGE>
------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (File No. 33-31962) declared effective on May 14, 1990.

(2) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the year ended December 31, 1990.

(3) Incorporated by reference to the Registrant's Current Report on Form 8-K,
    filed on January 2, 1992.

(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the year ended December 31, 1993.

(5) Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (File No. 33-60123) declared effective August 28, 1995.

(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the year ended December 31, 1995.

(7) Incorporated by reference to the Registrant's Proxy Statement dated August
    26, 1996.

(8) Incorporated by reference to the Registrants Annual Report on Form 10-K for
    the year ended December 31, 1997.

(9) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 1998.

REPORTS ON FORM 8-K

         On January 7, 1999, the Company filed a Form 8-K stating that it had
engaged Goldstein Golub Kessler LLP as its independent certified public
accountants to audit the Company's consolidated financial statements.

                                       26
<PAGE>
                                   SIGNATURES

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

                                        COLUMBIA LABORATORIES, INC.

Date:  MARCH 24, 1999                   By: /S/ DAVID L. WEINBERG
                                            -----------------------------------
                                                David L. Weinberg, VicePresident

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
         NAME                            TITLE                         DATE
         ----                            -----                         ----
<S>                           <C>                                 <C>
 /S/ NORMAN M. MEIER          President, Chief Executive          March 24, 1999
-------------------------     Officer, Director
Norman M. Meier               (Principal Executive Officer)

/S/ WILLIAM J. BOLOGNA        Chairman of the Board of Directors  March 24, 1999
-------------------------     
William J. Bologna

/S/ JAMES J. APOSTOLAKIS      Vice Chairman of the Board          March 24,1999
-------------------------     of Directors
James J. Apostolakis

/S/ DAVID L. WEINBERG         Vice President-Finance and          March 24, 1999
-------------------------     Administration, Chief Financial
David L. Weinberg             Officer, Treasurer and Secretary
                              (Principal Financial and Accounting
                              Officer)

/S/ DOMINIQUE DE ZIEGLER      Vice President - Pharmaceutical     March 24, 1999
-------------------------     Development and Director
Dominique de Ziegler

/S/ JEAN CARVAIS              Director                            March 24, 1999
-------------------------     
Jean Carvais

/S/ DENIS M. O'DONNELL        Director                            March 24, 1999
-------------------------     
Denis M. O'Donnell

/S/ SELWYN P. OSKOWITZ        Director                            March 24, 1999
-------------------------     
Selwyn P. Oskowitz

/S/ ROBERT C. STRAUSS         Director                            March 24, 1999
-------------------------     
Robert C. Strauss
</TABLE>

                                       27
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

                                                                           PAGE
                                                                           ----
<S>                                                                         <C>
Report of Independent Certified Public Accountants                          F-2

Report of Independent Certified Public Accountants                          F-3

Consolidated Balance Sheets
  As of December 31, 1998 and 1997                                          F-4

Consolidated Statements of Operations
  for the Three Years Ended December 31, 1998                               F-6

Consolidated Statements of Comprehensive Operations
  for the Three Years Ended December 31, 1998                               F-7

Consolidated Statements of Stockholders' Equity (Deficiency)
  for the Three Years Ended December 31, 1998                               F-8

Consolidated Statements of Cash Flows
  for the Three Years Ended December 31, 1998                               F-10

Notes to Consolidated Financial Statements                                  F-12
</TABLE>

                                      F-1
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
   of Columbia Laboratories, Inc.:

We have audited the accompanying consolidated balance sheet of Columbia
Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1998, and the related consolidated statements of operations, comprehensive
operations, stockholders' equity (deficiency) and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Laboratories, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year ended December 31, 1998 in conformity with
generally accepted accounting principles.

Goldstein Golub Kessler LLP

New York, New York
February 26, 1999

                                      F-2
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
   of Columbia Laboratories, Inc.:

We have audited the accompanying consolidated balance sheet of Columbia
Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1997, and the related consolidated statements of operations, comprehensive
operations, stockholders' equity (deficiency) and cash flows for each of the two
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 Columbia Laboratories, Inc. and
Subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 1997
in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Miami, Florida,
  February 13, 1998.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1998 AND 1997

                                     ASSETS

                                                                                    1998                    1997
                                                                                ------------            ------------
<S>                                                                             <C>                     <C>         
CURRENT ASSETS:
  Cash and cash equivalents, of which $85,795  is
     interest bearing as of December 31, 1998                                   $    315,288            $  2,256,590
  Accounts receivable, net of allowance
    for doubtful accounts of $229,829
    and $132,276 in 1998 and 1997, respectively                                    1,323,271               6,223,842
  Inventories                                                                      2,411,434               2,252,675
  Prepaid expenses                                                                   472,538                 477,857
  Other current assets                                                               288,639                    --
                                                                                ------------            ------------
    Total current assets                                                           4,811,170              11,210,964
                                                                                ------------            ------------

PROPERTY AND EQUIPMENT:
  Leasehold improvements                                                             186,905                 155,939
  Machinery and equipment                                                          2,159,970               3,075,075
  Furniture and fixtures                                                             193,092                 156,251
                                                                                ------------            ------------
                                                                                   2,539,967               3,387,265
  Less-accumulated depreciation
    and amortization                                                               1,166,516               1,686,129
                                                                                ------------            ------------
                                                                                   1,373,451               1,701,136
                                                                                ------------            ------------

INTANGIBLE ASSETS, net                                                             5,283,277               1,119,697

OTHER ASSETS                                                                         411,648                 969,955
                                                                                ------------            ------------
TOTAL ASSETS                                                                    $ 11,879,546            $ 15,001,752
                                                                                ============            ============
</TABLE>
                                  (Continued)

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1998 AND 1997

                                  (CONTINUED)

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                                                                                    1998                    1997
                                                                                ------------            ------------
<S>                                                                             <C>                     <C>         
CURRENT LIABILITIES:
  Accounts payable                                                              $  4,153,151            $  3,709,368
  Accrued expenses                                                                 1,480,839               1,319,400
  Deferred revenue                                                                   578,150               1,042,638
                                                                                ------------            ------------
      Total current liabilities                                                    6,212,140               6,071,406
                                                                                ------------            ------------

CONVERTIBLE SUBORDINATED NOTE PAYABLE                                             10,000,000                    --

OTHER LONG-TERM LIABILITIES                                                             --                   116,781
                                                                                ------------            ------------
TOTAL LIABILITIES                                                                 16,212,140               6,188,187
                                                                                ------------            ------------

COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY (DEFICIENCY):
  Preferred stock, $.01 par value; 1,000,000 shares authorized
     Series A Convertible Preferred Stock,
      923 shares issued and
      outstanding  in 1998 and 1997
      (liquidation preference of $92,300 at  December 31, 1998)                            9                       9
     Series B Convertible Preferred Stock,
      1,630 shares issued and
      outstanding  in 1998 and 1997,  respectively
      (liquidation preference of $163,000 at  December 31, 1998)                          16                      16
  Common stock, $.01 par value; 40,000,000
    shares authorized; 28,684,687 and 28,623,187
    shares issued and outstanding in 1998 and 1997, respectively                     286,846                 286,231
  Capital in excess of par value                                                  93,221,998              92,588,038
  Accumulated deficit                                                            (97,988,640)            (84,128,906)
  Accumulated other comprehensive income                                             147,177                  68,177
                                                                                ------------            ------------
    Total stockholders' equity (deficiency)                                       (4,332,594)              8,813,565
                                                                                ------------            ------------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                       $ 11,879,546            $ 15,001,752
                                                                                ============            ============
</TABLE>
           The accompanying notes to consolidated financial statements
                    are an integral part of these statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                1998                     1997                     1996
                                            ------------             ------------             ------------
<S>                                         <C>                      <C>                      <C>         
NET SALES                                   $ 10,017,644             $ 16,547,411             $  5,646,031

COST OF GOODS SOLD                             5,707,814                6,630,820                3,517,163
                                            ------------             ------------             ------------
    Gross profit                               4,309,830                9,916,591                2,128,868
                                            ------------             ------------             ------------

OPERATING EXPENSES:
  Selling and distribution                     4,099,446                2,908,504                3,012,089
  General and administrative                   5,785,895                3,972,077                3,493,621
  Research and development                     7,821,642                9,135,573               10,942,065
                                            ------------             ------------             ------------
    Total operating expenses                  17,706,983               16,016,154               17,447,775
                                            ------------             ------------             ------------

    Loss from operations                     (13,397,153)              (6,099,563)             (15,318,907)
                                            ------------             ------------             ------------


OTHER INCOME (EXPENSE)
  License fees                                    73,088                7,038,853                2,018,205
  Interest income                                141,564                   70,664                  359,224
  Interest expense                              (599,773)                 (24,186)                 (22,041)
  Other, net                                     (77,460)                (137,862)                (115,465)
                                            ------------             ------------             ------------
                                                (462,581)               6,947,469                2,239,923
                                            ------------             ------------             ------------

Income (loss) before income taxes            (13,859,734)                 847,906              (13,078,984)
Provision for income taxes                          --                     85,000                     --
                                            ------------             ------------             ------------

    Net income (loss)                       $(13,859,734)            $    762,906             $(13,078,984)
                                            ============             ============             ============


INCOME (LOSS) PER COMMON
 SHARE - BASIC AND DILUTED                  $      (0.48)            $       0.03             $      (0.47)
                                            ============             ============             ============

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING:
      BASIC                                   28,679,000               28,350,000               27,615,000
                                            ============             ============             ============
      DILUTED                                 28,679,000               29,982,000               27,615,000
                                            ============             ============             ============
</TABLE>
           The accompanying notes to consolidated financial statements
                    are an integral part of these statements.


                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                   1998          1997           1996
                                               ------------    ---------    ------------
<S>                                            <C>             <C>          <C>          
NET INCOME (LOSS)                              $(13,859,734)   $ 762,906    $(13,078,984)

Other Comprehensive income (loss):
    Foreign currency translation, net of tax        (79,000)     (38,557)         12,772
                                               ------------    ---------    ------------

Comprehensive income (loss)                    $(13,938,734)   $ 724,349    $(13,066,212)
                                               ============    =========    ============
</TABLE>

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

                                      F-7
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                        SERIES A                      SERIES B                                           
                               CONVERTIBLE PREFERRED STOCK   CONVERTIBLE PREFERRED STOCK           COMMON STOCK          
                               ---------------------------   ---------------------------      ------------------------   
                                 NUMBER OF                      NUMBER OF                     NUMBER OF                  
                                   SHARES         AMOUNT          SHARES           AMOUNT       SHARES         AMOUNT    
                                 ---------        ------        ----------         ------     ----------       ------    
<S>                                  <C>               <C>          <C>               <C>    <C>              <C>        
BALANCE,  January 1, 1996            1,323             $13          1,750             $18    25,982,373       $259,824   
Issuance of common stock                --              --             --              --     1,358,000         13,580   
Options exercised                       --              --             --              --       253,374          2,534   
Warrants exercised                      --              --             --              --       475,382          4,754   
Conversion of preferred stock           --              --           (120)             (2)        2,467             24   
Dividends on preferred stock            --              --             --              --            --             --   
Translation adjustment                  --              --             --              --            --             --   
Net loss                                --              --             --              --            --             --   
                                     -----             ---          -----             ---    ----------       --------   
BALANCE,  December 31, 1996          1,323              13          1,630              16    28,071,596        280,716   
Options exercised                       --              --             --              --       366,500          3,665   
Warrants exercised                      --              --             --              --       180,147          1,801   
Conversion of preferred stock         (400)             (4)            --              --         4,944             49   
Dividends on preferred stock            --              --             --              --            --             --   
Fair market value of warrants
 granted to non-employees               --              --             --              --            --             --   
Fair market value of options
 granted to non-employees               --              --             --              --            --             --   
Translation adjustment                  --              --             --              --            --             --   
Net income                              --              --             --              --            --             --   
                                     -----             ---          -----             ---    ----------       --------   
BALANCE, December 31,1997              923             $ 9          1,630             $16    28,623,187       $286,231   
</TABLE>

<TABLE>
<CAPTION>
                               
                                                                         ACCUMULATED
                                   CAPITAL IN                               OTHER
                                   EXCESS OF          ACCUMULATED        COMPREHENSIVE
                                   PAR VALUE            DEFICIT          INCOME (LOSS)         TOTAL
                                   -----------        -----------        --------------        -----
<S>                               <C>                <C>                     <C>         <C>         
BALANCE,  January 1, 1996         $73,067,014        $(71,812,828)           $ 42,392    $  1,556,433
Issuance of common stock           12,220,519                  --                  --      12,234,099
Options exercised                   1,651,872                  --                  --       1,654,406
Warrants exercised                  2,326,116                  --                  --       2,330,870
Conversion of preferred stock             (22)                 --                  --              --
Dividends on preferred stock          (10,614)                 --                  --         (10,614)
Translation adjustment                     --                  --             (12,772)        (12,772)
Net loss                                   --         (13,078,984)                 --     (13,078,984)
                                  -----------        ------------            --------    ------------ 
BALANCE,  December 31, 1996        89,254,885         (84,891,812)             29,620       4,673,438
Options exercised                   2,161,804                  --                  --       2,165,469
Warrants exercised                    860,095                  --                  --         861,896
Conversion of preferred stock             (45)                 --                  --              --
Dividends on preferred stock           (8,088)                 --                  --          (8,088)
Fair market value of warrants
 granted to non-employees             269,264                  --                  --         269,264
Fair market value of options
 granted to non-employees              50,123                  --                  --          50,123
Translation adjustment                     --                  --              38,557          38,557
Net income                                 --             762,906                  --         762,906
                                  -----------        ------------            --------    ------------ 
BALANCE, December 31,1997         $92,588,038        $(84,128,906)           $ 68,177    $  8,813,565
</TABLE>
                                  (Continued)

                                      F-8
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                  (Continued)

                                        SERIES A                      SERIES B                                           
                               CONVERTIBLE PREFERRED STOCK   CONVERTIBLE PREFERRED STOCK           COMMON STOCK          
                               ---------------------------   ---------------------------      ------------------------   
                                 NUMBER OF                      NUMBER OF                     NUMBER OF                  
                                   SHARES         AMOUNT          SHARES           AMOUNT       SHARES         AMOUNT    
                                 ---------        ------        ----------         ------     ----------       ------    
<S>                                  <C>               <C>          <C>               <C>    <C>              <C>        
BALANCE,  January 1, 1998              923             $ 9          1,630             $16    28,623,187       $286,231   

Options exercised                       --              --             --              --        31,500            315   
                                                                                                                         
Warrants exercised                      --              --             --              --        30,000            300   
Dividends on preferred stock            --              --             --              --            --             --   
Fair market value of warrants
  granted to non-employees              --              --             --              --            --             --   
Fair market value of options
  granted to non-employees              --              --             --              --            --             --   
Translation adjustment                  --              --             --              --            --             --   
Net loss                                --              --             --              --            --             --   
                                     -----             ---          -----             ---    ----------       --------   
BALANCE, December 31, 1998             923             $ 9          1,630             $16    28,684,687       $286,846   
                                     =====             ===          =====             ===    ==========       ========   
</TABLE>


<TABLE>
<CAPTION>
                                                                         ACCUMULATED
                                   CAPITAL IN                               OTHER
                                   EXCESS OF          ACCUMULATED        COMPREHENSIVE
                                   PAR VALUE            DEFICIT          INCOME (LOSS)         TOTAL
                                   -----------        -----------        --------------        -----
<S>                               <C>                <C>                     <C>         <C>         
BALANCE,  January 1, 1998         $92,588,038        $(84,128,906)           $ 68,177    $  8,813,565

Options exercised                     209,938                  --                  --         209,938
                                                                                               31,500
Warrants exercised                    145,950                  --                  --         146,250
Dividends on preferred stock           (6,714)                 --                  --          (6,714)
Fair market value of warrants
  granted to non-employees             39,696                  --                  --          39,696
Fair market value of options
  granted to non-employees            245,405                  --                  --         245,405
Translation adjustment                     --                  --              79,000          79,000
Net loss                                   --         (13,859,734)                 --     (13,859,734)
                                  -----------        ------------            --------    ------------ 
BALANCE, December 31, 1998        $93,221,998        $(97,988,640)           $147,177    $ (4,332,594)
                                  ===========        ============            ========    ============
</TABLE>
          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-9
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                                    1998           1997            1996
                                                                ------------    -----------    ------------
<S>                                                             <C>             <C>            <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                             $(13,859,734)   $   762,906    $(13,078,984)
  Adjustments to reconcile net income (loss) to net
   cash used in operating activities-
     Depreciation and amortization                                   992,358        913,945         848,469
     Provision for (recovery of) doubtful accounts                    97,553         35,001          (8,162)
     Provision for (recovery of) returns and allowances               61,020           --           (82,718)
     Write-down of inventories                                     1,176,200           --            77,380
     Issuance of warrants and options for consulting services        285,101         94,998            --
    Write-off of property and equipment                               52,111          3,411            --

Changes in assets and liabilities-
     (Increase) decrease in:
      Accounts receivable                                          4,741,998     (4,818,322)       (228,558)
      Inventories                                                 (1,334,959)    (1,309,531)        (66,610)
      Prepaid expenses                                                 5,319        (72,065)        (38,383)
      Other assets                                                   269,668         59,080        (304,561)

    Increase (decrease) in:
      Accounts payable                                               320,288        905,117        (491,797)
      Accrued expenses                                               161,439        130,322          46,953
      Deferred revenue                                              (464,488)       (15,336)         (8,902)
                                                                ------------    -----------    ------------
        Net cash used in operating activities                     (7,496,126)    (3,310,474)    (13,335,873)
                                                                ------------    -----------    ------------
</TABLE>
                                  (Continued)

                                      F-10

<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                  (Continued)
                                                                   1998           1997            1996
                                                                ------------    -----------    ------------
<S>                                                             <C>             <C>            <C>          
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of product rights                                     $ (4,615,644)          --              --
  Purchase of property and equipment                                (264,720)   $(1,011,987)   $   (750,763)
                                                                ------------    -----------    ------------
    Cash used in investing activities                             (4,880,364)    (1,011,987)       (750,763)
                                                                ------------    -----------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of note payable                                        10,000,000           --              --
  Repayments of notes payable and long-term debt                        --             --          (156,749)
  Proceeds from issuance of common stock                                --             --        12,234,099
  Proceeds from exercise of options and warrants                     356,188      3,027,365       3,985,276
                                                                ------------    -----------    ------------
    Net cash provided by financing activities                     10,356,188      3,027,365      16,062,626
                                                                ------------    -----------    ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                               79,000        (10,108)        (43,148)
                                                                ------------    -----------    ------------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                (1,941,302)    (1,305,204)      1,932,842

CASH AND CASH EQUIVALENTS,
  Beginning of year                                                2,256,590      3,561,794       1,628,952
                                                                ------------    -----------    ------------
CASH AND CASH EQUIVALENTS,
  End of year                                                   $    315,288    $ 2,256,590    $  3,561,794
                                                                ============    ===========    ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION
  Interest paid                                                 $    367,357    $    20,825    $     24,124
                                                                ============    ===========    ============
  Taxes paid                                                    $    110,255    $    54,076            --
                                                                ============    ===========    ============
</TABLE>
           The accompanying notes to consolidated financial statements
                    are an integral part of these statements

                                      F-11
<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    ORGANIZATION-

         Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop
unique pharmaceutical products that treat female specific diseases and
conditions including infertility, dysmenorrhea, endometriosis, hormonal
deficiencies and the prevention of sexually transmitted diseases. Columbia's
research in endocrinology has also led to the development of a product to treat
"Andropause" in men. Columbia's products primarily utilize the Company's
patented bioadhesive delivery technology.

    PRINCIPLES OF CONSOLIDATION-

         The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

    ACCOUNTING ESTIMATES-

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

    FOREIGN CURRENCY-

         The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at current exchange rates and revenue and expense
items are translated at average rates of exchange prevailing during the period.
Resulting translation adjustments are accumulated as a separate component of
stockholders' equity.

    INVENTORIES-

         Inventories are stated at the lower of cost (first-in, first-out) or
market. Components of inventory cost include materials, labor and manufacturing
overhead. Inventories consist of the following:
<TABLE>
<CAPTION>
                                                    DECEMBER 31,                
                                          -------------------------------
                                             1998                 1997               
                                          ----------           ----------
<S>                                       <C>                  <C>       
Finished goods                            $1,550,917           $1,399,835
Raw materials                                860,517              852,840
                                          ----------           ---------- 
                                          $2,411,434           $2,252,675
                                          ==========           ========== 
</TABLE>

   PROPERTY AND EQUIPMENT-

         Property and equipment are stated at cost less accumulated
depreciation. Leasehold improvements are amortized over the life of the
respective leases. Depreciation is computed on the straight-line basis over the
estimated useful lives of the respective assets, as follows:
<TABLE>
<CAPTION>
                                                               YEARS 
                                                               -----
                     <S>                                       <C>
                     Machinery and equipment                   5 - 10
                     Furniture and fixtures                         5
</TABLE>

                                      F-12
<PAGE>

         Costs of major additions and improvements are capitalized and
expenditures for maintenance and repairs which do not extend the life of the
assets are expensed. Upon sale or disposition of property and equipment, the
cost and related accumulated depreciation are eliminated from the accounts and
any resultant gain or loss is credited or charged to operations.

         A deposit on manufacturing equipment totaling approximately $600,000 as
of December 31, 1997, is included in other assets in the accompanying
consolidated balance sheets.

    INTANGIBLE ASSETS-

         Intangible assets consist of the following:
<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                             -----------------------------------
                                                1998                    1997
                                             ------------           ------------
       <S>                                   <C>                    <C>         
       Patents                               $  2,600,000           $  2,600,000
       Trademarks                               4,956,644                341,000
                                             ------------           ------------
                                                7,556,644              2,941,000
       Less accumulated amortization           (2,273,367)            (1,821,303)
                                             ------------           ------------
                                             $  5,283,277           $  1,119,697
                                             ============           ============
</TABLE>

         Patents are being amortized on a straight-line basis over their
remaining lives (through 2003). Trademarks are being amortized on a
straight-line basis over ten years to fifteen years.

         In April 1998, the Company and the Warner-Lambert Company signed an
agreement terminating their December 1991 license and supply agreement under
which the Warner-Lambert Company had distributed Replens, a vaginal moisturizer
which had been developed by the Company. Under the terms of the termination
agreement, the Company agreed to pay $4.6 million for the right to reacquire the
product Replens, effective on April 9, 1998. The $4.6 million cost has been
capitalized and is being amortized over a 15 year period, which represents the
remaining term on the terminated December 1991 license and the patent underlying
the product.

    LONG-LIVED ASSETS-

         Following the acquisition of any long-lived assets, the Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining estimated useful life of the long-lived asset may warrant
revision or that the remaining balance of the long-lived asset may not be
recoverable. When factors indicate that a long-lived asset may be impaired, the
Company uses an estimate of the underlying product's future cash flows,
including amounts to be received over the remaining life of the long-lived asset
from license fees, royalty income, and related deferred revenue, in measuring
whether the long-lived asset is recoverable. Unrecoverable amounts are charged
to operations.

    INCOME TAXES-

         As of December 31, 1998, the Company has U.S. tax net operating loss
carryforwards of approximately $49 million which expire through 2013. The
Company also has unused tax credits of approximately $949,000 which expire at
various dates through 2012. Utilization of net operating loss carryforwards may
be limited in any year due to limitations in the Internal Revenue Code.
Accordingly, the Company recorded an $85,000 alternative minimum tax provision
for U.S. Federal taxes in 1997.

         As of December 31, 1998 and 1997, other assets in the accompanying
consolidated balance sheets include deferred tax assets of approximately $18
million and $16 million, respectively, (comprised primarily of a net operating
loss carryforward) for which a valuation allowance has been recorded since the
realizability of the deferred tax assets are not determinable.

                                      F-13
<PAGE>

   REVENUE RECOGNITION-

         Sales are recorded as products are shipped and services are rendered.
Royalties and additional monies owed to the Company based on the strategic
alliance partners sales are recorded as revenue as sales are made by the
strategic alliance partners.

    LICENSE FEES-

         License fees are recognized as other income when the Company has no
further obligations with respect to the payments and thus the earnings process
is complete.

   ADVERTISING EXPENSE-

         All costs associated with advertising and promoting products are
expensed in the year incurred. Advertising and promotion expense was
approximately $758,000 in 1998, $460,000 in 1997 and $540,000 in 1996.

   RESEARCH AND DEVELOPMENT COSTS-

         Company sponsored research and development costs related to future
products are expensed as incurred. Costs related to research and development
contracts are charged to cost of sales upon recognition of the related revenue.

    INCOME/LOSS PER SHARE-

         Basic income per share is computed by dividing net income less
preferred dividends by the weighted average number of common stock outstanding
during the period. Diluted income per share is computed by dividing net income
by the weighted average number of shares of common stock outstanding during the
period assuming the exercise or conversion of all securities that are
exercisable or convertible into common stock. Basic loss per share is computed
by dividing the net loss plus preferred dividends by the weighted average number
of shares of common stock outstanding during the period. Shares to be issued
upon the exercise of the outstanding options and warrants or the conversion of
the preferred stock are not included in the computation of loss per share as
their effect is antidilutive.

    STATEMENTS OF CASH FLOWS-

         For purposes of the statements of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.

    STOCK-BASED COMPENSATION-

         In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting
for Stock-Based Compensation". Under the provisions of SFAS No. 123, companies
can either measure the compensation cost of equity instruments issued under
employee compensation plans using a fair value based method, or can continue to
recognize compensation cost using the intrinsic value method under the
provisions of Accounting Principles Board Opinion ("APB") No. 25. However, if
the provisions of APB No. 25 are continued, pro forma disclosure of net income
or loss and earnings or loss per share must be presented in the financial
statements as if the fair value method had been applied. For the three years
ended December 31, 1998, the Company recognized compensation costs under the
provisions of APB No. 25, and for the three years ended December 31, 1998, the
Company has provided the expanded disclosure required by SFAS No. 123 (see Note
4).

   RECENT ACCOUNTING PRONOUNCEMENTS:

         In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". The Company adopted SFAS 130 on January 1, 1998. The SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of financial statements. Comprehensive income is
defined as the change in equity during the financial reporting period of a
business enterprise resulting from non-owned sources. Accordingly, the Company
has included "Consolidated Statements of Comprehensive Operations" as part of
its financial statements.

                                      F-14
<PAGE>

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", was also issued by the FASB in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has adopted SFAS 131 effective
December 31, 1998 (See note 7).

         The Company does not believe that any recently issued, but not yet
effective accounting standards will have a material effect on the Company's
consolidated financial position, results of operations or cash flows.

(2) STRATEGIC ALLIANCE AGREEMENTS:

         In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP will market
Crinone. Under the terms of the agreement, the Company earned $7 million and $2
million in milestone payments in 1997 and 1996 and expects to receive additional
milestone payments in the future. The Company also supplies Crinone to AHP at a
price equal to 30% of AHP's net selling price.

         The Company has also entered into strategic alliance agreements for the
marketing and distribution of Replens and Advantage-S with various
pharmaceutical companies. Pursuant to these agreements, the Company has received
advance payments, of which $578,150 and $1,042,638, respectively, are reflected
as deferred revenue in the accompanying December 31, 1998 and 1997 consolidated
balance sheets. These advance payments will be recognized as products are
shipped to the applicable strategic alliance partners or as sales are made by
the strategic alliance partners.

(3) CONVERTIBLE SUBORDINATED NOTE PAYABLE:

         On March 16, 1998, the Company issued to an institutional investor a
$10 million convertible subordinated note due March 15, 2005. The note is
subordinate to other senior securities of the Company and bears interest at 7
1/8% which is payable semi-annually on March 15 and September 15. The note is
convertible into 662,032 shares of common stock at a price equal to $15.105 per
share. The Company also granted certain registration rights to the investor,
under which the earliest the shares underlying the note could be registered
would be March 19,1999. The carrying amount of the Company's convertible
subordinated note payable approximates fair value using the Company's estimated
incremental borrowing rate.

(4) STOCKHOLDERS' EQUITY (DEFICIENCY):

     PREFERRED STOCK-

         In November 1989, the Company completed a private placement of 151,000
shares of Series A Convertible Preferred Stock ("Series A Preferred Stock"). The
Series A Preferred Stock pays cumulative dividends at a rate of 8% per annum
payable quarterly and each share is convertible into 12.36 shares of Common
Stock. As of December 31, 1997 dividends of $116,781 were earned but were not
declared and were included in other long-term liabilities in the accompanying
consolidated balance sheet. As of December 31, 1998, there were no dividends
earned, but not declared.

         In August 1991, the Company completed a private placement of 150,000
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock").
Each share of Series B Preferred Stock is convertible into 20.57 shares of
Common Stock.

         Upon liquidation of the Company, the holders of the Series A and Series
B Preferred Stock are entitled to $100 per share. In addition, the holders of
Series A Preferred Stock are entitled to accumulated unpaid dividends. The
Series A Preferred Stock shares are redeemable for cash, at the option of the
Company, at specified redemption prices. The Series B Preferred Stock will be
automatically converted into Common Stock upon the occurrence of certain events.


                                      F-15
<PAGE>

Holders of the Series A and Series B Preferred Stock are entitled to one vote
for each share of Common Stock into which the preferred stock is convertible.

     WARRANTS-

         As of December 31, 1998, the Company had warrants outstanding for the
purchase of 240,253 shares of Common Stock. Information on outstanding warrants
is as follows:
<TABLE>
<CAPTION>
                             EXERCISE
                               PRICE  
                             --------
                              <S>                        <C>
                              $ 5.00                     120,000
                               10.78                      60,253
                               16.00                      20,000
                               18.00                      20,000
                               20.00                      20,000
                                                         -------
                                                         240,253
                                                         =======
</TABLE>

The 120,000 of $5.00 warrants and the 60,253 of $10.78 warrants were exercisable
on December 31, 1998.


     STOCK OPTION PLAN-

         All employees, officers, directors and consultants of the Company or
any subsidiary were eligible to participate in the Columbia Laboratories, Inc.
1988 Stock Option Plan, as amended (the "Plan"). Under the Plan, a total of
5,000,000 shares of Common Stock were authorized for issuance upon exercise of
the options. As of October 1996, no further options will be granted pursuant to
this Plan.

         In October 1996, the Company adopted the 1996 Long-term Performance
Plan ("Performance Plan") which provides for the grant of stock options, stock
appreciation rights and restricted stock to certain designated employees of the
Company, non-employee directors of the Company and certain other persons
performing significant services for the Company as designated by the
Compensation/Stock Option Committee of the Board of Directors. Pursuant to the
Performance Plan, an aggregate of 3,000,000 shares of Common Stock have been
reserved for issuance.

         A summary of the status of the Company's two stock option plans as of
December 31, 1998, 1997 and 1996 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
                                                 1998                           1997                         1996
                                       -------------------------    --------------------------     ------------------------
                                                        WEIGHTED                      WEIGHTED                     WEIGHTED
                                                        AVERAGE                       AVERAGE                      AVERAGE
                                                        EXERCISE                      EXERCISE                     EXERCISE
                                         SHARES         PRICE         SHARES          PRICE         SHARES         PRICE
                                       ---------        --------    ----------        --------     ---------       --------
<S>                                    <C>                 <C>       <C>                 <C>       <C>              <C>   
Outstanding at beginning of year       4,557,274           $ 8.92    3,591,272           $ 6.25    3,176,646        $ 5.37
Granted                                  904,000            11.52    1,332,500            14.72      699,000         10.41
Exercised                                (31,500)            6.66     (366,498)            5.92     (253,374)         6.53
Forfeited                               (244,836)           11.29         --            --           (31,000)         6.80
                                       ---------                     ---------                     ---------       
Outstanding at end of year             5,184,938             9.13    4,557,274             8.92    3,591,272          6.25
                                       =========                     =========                     =========        

Options exercisable at year end        4,210,938                     2,984,774                     2,808,772              
                                       =========                     =========                     =========
</TABLE>

                                      F-16
<PAGE>

         The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
                                             OPTIONS OUTSTANDING                                        OPTIONS EXERCISABLE
                       ----------------------------------------------------------------    -----------------------------------------
                                                      WEIGHTED
                                                       AVERAGE           WEIGHTED                                         WEIGHTED
         RANGE OF               NUMBER                REMAINING           AVERAGE                   NUMBER                AVERAGE
         EXERCISE             OUTSTANDING            CONTRACTUAL         EXERCISE                EXERCISABLE              EXERCISE
          PRICES         AT DECEMBER 31, 1998       LIFE (YEARS)           PRICE             AT DECEMBER 31, 1998          PRICE
---------------------- ----------------------------------------------------------------    -----------------------------------------
      <S>                    <C>                        <C>                <C>                   <C>                       <C>
          $4.00                 10,000                  9.69               $4.00                    --                     $ --
      $ 4.38-$ 7.25          2,344,750                  5.71                4.81                 2,344,750                 4.81
      $ 8.00-$ 12.13         1,591,000                  8.02               10.93                   627,000                10.44
      $ 12.25-$16.03         1,112,188                  7.76               14.76                 1,112,188                 7.76
      $16.63-$18.63            127,000                  8.71               17.64                   127,000                 8.71
                             ---------                                                           ---------
       $ 4.00-$18.63         5,184,938                  6.94                9.13                 4,210,938                 8.66
                             =========                                                           =========
</TABLE>



         The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for the stock option plans. Had compensation cost been determined based on the
fair value at the grant dates for those awards consistent with the method of
FASB Statement 123, the Company's net income or loss per share would have been
decreased or increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
                                                               1998              1997           1996
                                                           ------------       ----------    ------------
<S>                             <C>                        <C>                <C>           <C>
Net income (loss)               As reported                ($13,859,734)        $762,906    ($13,078,984)
                                Proforma                    (17,479,167)      (7,013,855)   ($16,648,154)
                                                           =============================================  

Income (loss) per share         As reported                      ($0.48)           $0.03          ($0.47)
                                Proforma                         ($0.61)          ($0.25)         ($0.60)
                                                           ---------------------------------------------  
</TABLE>

         The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value of
the options reflected in the above table include the following: (i) an exercise
price equal to the fair market value of the underlying stock on the dates of
grant, (ii) an option term of three years, (iii) a risk free rate of 6% that
represents the interest rate on a U.S. Treasury security with a maturity date
corresponding to that of the option term, (iv) volatility of 55% for 1998 and
1997 and 60% for 1996 and (v) no annualized dividends paid with respect to a
share of Common Stock at the date of grant. The ultimate values of the options
will depend on the future price of the Company's Common Stock, which cannot be
forecast with reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of the market value
of the Company's Common Stock over the exercise price on the date the option is
exercised.

                                      F-17
<PAGE>

(5) COMMITMENTS AND CONTINGENCIES:

CASH AND CASH EQUIVALENTS-

         The Company maintains its cash in bank deposit accounts which at times
may exceed federally insured limits. The Company believes that there is no
credit risk with respect to these accounts.

     LEASES-

         The Company leases office space, apartments and office equipment under
noncancelable operating leases. Lease expense for each of the three years ended
December 31, 1998, 1997 and 1996 totaled $813,167, $679,791 and $736,372
respectively. Future minimum lease payments as of December 31, 1998 are as
follows:
<TABLE>
                     <S>                              <C>
                     1999                             $  679,169
                     2000                                593,019
                     2001                                421,344
                     2002                                154,606
                     2003                                 66,394
                     Thereafter                           13,325
                                                      ----------
                                                      $1,927,857
                                                      ========== 
</TABLE>


     ROYALTIES-

         In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which
consisted of the patents underlying the Company's Bioadhesive Delivery System,
other patent applications and related technology, for $2,600,000, in the form of
9% convertible debentures which were converted into 500,000 shares of Common
Stock during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc.
receives a royalty equal to two percent of the net sales of products based on
the Bioadhesive Delivery System to an aggregate amount of $7,500,000. In
addition, beginning in March 1995, the Company agreed to prepay a portion of the
remaining royalty obligation if certain conditions are met. The Company may not
assign the patents underlying the Bioadhesive Delivery System without the prior
written consent of Bio-Mimetics, Inc. until the aggregate royalties have been
paid.

         In May 1989, the Company signed an exclusive agreement to license the
U.S. and Canadian marketing rights for Diasorb/registered trademark/, a unique
pediatric antidiarrheal product formerly marketed by Schering-Plough
Corporation. Under the terms of the agreement, the Company is obligated to pay a
royalty equal to 5% of the net sales of Diasorb.

     EMPLOYMENT AGREEMENTS-

         The Company has employment agreements with certain employees, some of
whom are also stockholders of the Company. The remaining terms of the employment
agreements range from one to four years. Future base compensation to be paid
under these agreements as of December 31, 1998 are as follows:
<TABLE>
                     <S>                              <C>
                     1999                             $  706,000
                     2000                                806,000
                     2001                                  1,750
                                                      ----------
                                                      $1,513,750
                                                      ==========
</TABLE>

         During 1993, the Company's stockholders approved an Incentive
Compensation Plan covering all employees pursuant to which an aggregate of 5% of
pretax earnings of the Company for any year will be awarded to designated
employees of the Company. As a result of the Company's income in 1997, a
provision for 5% of pretax income was included in general and administrative
expenses. No provision has been made in 1998.

                                      F-18
<PAGE>

    LEGAL PROCEEDINGS-

         The Company filed an action in the United States District Court for the
Southern District of Florida in November 1997 seeking a declaratory judgement on
certain issues related to its relationship with Lake Pharmaceuticals, Inc.
("Lake") as governed in the contract between the Company and Lake. Lake filed an
action against the Company in the United States District Court, Northern
District of Illinois, for damages alleged by Lake to have been suffered by it as
a result of the FDA's allegations in July 1997 that the Company's nonoxynol-9
product, then marketed by Lake under the tradename Advantage 24/registered
trademark/, was not permitted to be sold under the monograph. This action was
dismissed by the Illinois Court and transferred to the Florida Court for
consolidation as a counterclaim in the Florida action. The Company is vigorously
defending the Lake claims and believes that Lake's action will be dismissed
without any damage award to Lake and that the Company will prevail in its claims
against Lake for damages. 

         Other claims and lawsuits have been filed against the Company. In the
opinion of management and counsel, none of these lawsuits are material and they
are all adequately reserved for or covered by insurance or, if not so covered,
are without any or have little merit or involve such amounts that if disposed of
unfavorably would not have a material adverse effect on the Company.

(6) OTHER RELATED-PARTY TRANSACTION:

         During 1993, the Company loaned two individuals who are officers,
directors and stockholders of the Company an aggregate of $190,350. These notes,
which bear interest at 10% per annum and which were due on or before December 7,
1997 have subsequently been extended through December 7, 1999. Accordingly, as
of December 31, 1998, the aggregate balance of $288,639 is included in other
current assets in the accompanying 1998 consolidated balance sheet.

(7) SEGMENT INFORMATION:

         The Company and its subsidiaries are engaged in one line of business,
the development and sale of pharmaceutical products and cosmetics. One customer
accounted for approximately 25% and 68% of 1998 and 1997 consolidated net sales,
respectively. Another customer accounted for approximately 4% and 5% of 1998 and
1997 consolidated net sales, respectively. A third customer accounted for
approximately 15%, 5% and 18% of 1998, 1997 and 1996 consolidated net sales,
respectively. A fourth customer accounted for approximately 3% and 13% of 1997
and 1996 consolidated net sales, respectively. The following table shows
selected information by geographic area:
<TABLE>
<CAPTION>

                                                INCOME
                                 NET         (LOSS) FROM    IDENTIFIABLE
                                SALES         OPERATIONS       ASSETS   
                            ------------    ------------    -----------
<S>                         <C>             <C>             <C>        
As of and for the year
 ended December 31, 1998-
      United States         $  7,515,436    $ (4,114,779)   $ 7,965,715
      Europe                   2,502,208      (9,282,374)     3,913,831
                            ------------    ------------    -----------
                            $ 10,017,644    $(13,397,153)   $11,879,546
                            ============    ============    ===========
As of and for the year
 ended December 31, 1997-
      United States         $ 15,623,341    $  4,984,325    $ 7,804,944
      Europe                     924,070     (11,083,888)     7,196,808
                            ------------    ------------    -----------
                            $ 16,547,411    $ (6,099,563)   $15,001,752
                            ============    ============    ===========

As of and for the year
 ended December 31, 1996-
      United States         $  4,434,410    $ (5,560,059)   $ 5,370,215
      Europe                   1,211,621      (9,758,848)     4,609,882
                            ------------    ------------    -----------
                            $  5,646,031    $(15,318,907)   $ 9,980,097
                            ============    ============    ===========
</TABLE>

                                      F-19
<PAGE>


 (8) SUBSEQUENT EVENT:

         In January 1999, the Company raised approximately $6.4 million, net of
expenses from the issuance and sale of Series C Convertible Preferred Stock
("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at the lower of: (i)$3.50 per common share (based
on 125% of the average of the five day's closing bid prices immediately
preceding the transaction and (ii) 100% of the average of the closing prices
during the three trading days immediately preceding the conversion notice). If
conversion is based on the $3.50 conversion price, conversion may take place
after the underlying common stock is registered. If conversion is based on the
alternative calculation, conversion cannot take place for fifteen months. The
Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day
of the quarter.

         In connection with the issuance of the Series C Convertible Preferred
Stock in January 1999, the Company received two notes receivable from Messrs.
Meier and Bologna for $350,000 and $250,000, respectively. The notes bear
interest at 5% per annum and are due on July 28, 1999.

                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      INDEX TO FINANCIAL STATEMENT SCHEDULE

                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Report of Independent Certified Public Accountants                          S-2

Report of Independent Certified Public Accountants                          S-3

Schedule II-Valuation and Qualifying Accounts and Reserves                  S-4
</TABLE>


                                      S-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:

We have audited in accordance with generally accepted auditing standards, the
financial statements of Columbia Laboratories, Inc. and subsidiaries included in
this Form 10-K and have issued our report thereon dated February 26, 1999. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Goldstein Golub Kessler LLP

New York, New York
February 26, 1999

                                      S-2
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Columbia Laboratories, Inc.:

We have audited in accordance with generally accepted auditing standards, the
1997 and 1996 financial statements of Columbia Laboratories, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 13, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The year ended December 31, 1997 and 1996
portions of this schedule have been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Miami, Florida,
  February 13, 1998.


                                      S-3
<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1998

                                                     CHARGED TO
                                      BALANCE AT   (CREDITED TO)                BALANCE
                                      BEGINNING      COSTS AND                  AT END
        DESCRIPTION                   OF PERIOD      EXPENSES     DEDUCTIONS   OF PERIOD
        -----------                   -----------  -------------  ----------   ---------
<S>                                    <C>          <C>            <C>         <C>     
YEAR ENDED DECEMBER 31, 1998:
   Allowance for doubtful accounts     $132,276     $ 105,000      $ 7,447     $229,829
                                       ========     =========      =======     ========

YEAR ENDED DECEMBER 31, 1997:
  Allowance for doubtful  accounts     $ 97,275     $  35,001      $  --       $132,276
                                       ========     =========      =======     ========

YEAR ENDED DECEMBER 31, 1996:
  Allowance for doubtful  accounts     $105,437     $  (8,162)     $  --       $ 97,275
                                       ========     =========      =======     ========
</TABLE>

                                      S-4
<PAGE>
<TABLE>
<CAPTION>
                                INDEX TO EXHIBITS

EXHIBIT
NUMBERS
-------
<S>      <C>      <C>
3.2      --       Amended and Restated By-laws of Company
4.1      --       Certificate of Designations, Preferences and Rights of Series
                  C Convertible Preferred Stock of the Company, dated as of
                  January 7, 1999
4.2     --        Securities Purchase Agreement, dated as of January 7, 1999,
                  between the Company and each of the purchasers named on the
                  signature pages thereto
4.3      --       Securities Purchase Agreement, dated as of January 19, 1999,
                  among the Company, David M. Knott and Knott Partners, L.P.
4.4      --       Securities Purchase Agreement, dated as of February 1, 1999,
                  between the Company and Windsor Partners, L.P.
4.5      --       Registration Rights Agreement, dated as of January 7, 1999,
                  between the Company and each of the purchasers named on the
                  signature pages thereto
4.6      --       Form of Warrant to Purchase Common Stock
10.14    --       Addendum to Employment Agreement dated as of October 8, 1998,
                  between the Company and Nicholas A. Buoniconti
10.15    --       Agreement dated as of December 14, 1998, by and among Columbia
                  Laboratories, Inc., William J. Bologna, Norman M. Meier, James
                  J. Apostolakis, David Ray, Bernard Marden, Anthony R.
                  Campbell, David M. Knott and Knott Partners, L.P.
21       --       Subsidiaries of the Company
27       --       Financial Data Schedule
</TABLE>