<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


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

         FOR THE QUARTERLY PERIOD ENDED       SEPTEMBER 30, 2004
         -------------------------------------------------------

         OR

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

                         Commission File Number: 1-12362

                                 LIFEPOINT, INC.
                                 ---------------
             (Exact name of registrant as specified in its charter)

DELAWARE                                                  #33-0539168
--------------------------------------------------------------------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification Number)

1205 South Dupont Street, Ontario, CA                     91761
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                  (Zip Code)

               (909) 418-3000
--------------------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

[X] Yes         [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act).

[ ] Yes         [X] No


As of November 10, 2004 there were 96,231,196 shares of the registrant's Common
Stock, $.001 par value outstanding.

<PAGE>

<TABLE>
                                              2004 - LIFEPOINT, INC.
                                     For The Quarter Ended September 30, 2004

<S>     <C>
INDEX TO FINANCIAL STATEMENTS
-----------------------------

PART I -  FINANCIAL INFORMATION

         o        ITEM 1 - FINANCIAL STATEMENTS.............................................................     3

         o        BALANCE SHEETS AT SEPTEMBER 30, 2004 (UNAUDITED) AND MARCH 31, 2004 ......................     3

         o        STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED
                      SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)...............................................     4

         o        STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
                      SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)...............................................     5

         o        NOTES TO FINANCIAL STATEMENTS ............................................................     6

         o        ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS.............................................................    18

         o        ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK........................    30

         o        ITEM 4 - CONTROLS AND PROCEDURES .........................................................    30

PART II -  OTHER INFORMATION

         o        ITEM 1 - LEGAL PROCEEDINGS ...............................................................    31

         o        ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
                      SECURITIES............................................................................    31

         o        ITEM 3 - DEFAULTS UPON SENIOR SECURITIES..................................................    31

         o        ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................    31

         o        ITEM 5 - OTHER INFORMATION................................................................    31

         o        ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ................................................    31


                                                        2
</TABLE>
<PAGE>

<TABLE>
                                                   PART I
                                           FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                              LIFEPOINT, INC.
                                               BALANCE SHEETS

                                                                            SEPTEMBER 30,       MARCH 31,
                                                                                2004              2004
                                                                            -------------     -------------
                                                                             (unaudited)        (audited)
<S>                                                                         <C>               <C>

Current assets:
  Cash and cash equivalents                                                 $    694,285      $  3,710,761
  Accounts receivable                                                             30,553            65,650
  Inventory, net of allowance for excess inventory $1,354,591
    at September 30, 2004 and $1,096,571 at March 31, 2004                     2,601,525         2,309,343
  Prepaid expenses and other current assets                                      115,500           245,918
                                                                            -------------     -------------
          Total current assets                                                 3,441,863         6,331,672

Property and equipment, net                                                    1,536,209         1,881,826

Patents and other assets, net                                                    663,601           595,673
                                                                            -------------     -------------
                                                                            $  5,641,673      $  8,809,171
                                                                            =============     =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                          $    684,535      $    976,581
  Accrued expenses                                                               664,558         1,030,848
  Notes payable -short-term vendors                                              140,094           134,356
  Note payable -bank                                                              53,550           160,650
  Capital lease - short-term                                                       5,667                --
                                                                            -------------     -------------
          Total current liabilities                                            1,548,404         2,302,435
  Long-term liabilities                                                           46,856           151,734
                                                                            -------------     -------------
Total liabilities                                                              1,595,260         2,454,169
Commitments and contingencies (Note 6)
Stockholders' equity:
  Preferred Stock,  Series C 10% Cumulative Convertible, $.001
    par value, 600,000 shares authorized, 0 and 377,434 outstanding
    at September 30, 2004 and March 31, 2004, respectively                            --               377
  Preferred Stock,  Series D 6% Cumulative Convertible, $.001
    par value, 15,000 shares authorized, 9,022 and 9,584 outstanding at
    September 30, 2004 and March 31, 2004, respectively                                9                 9
  Common Stock, $.001 par value; 350,000,000 shares authorized,
    96,231,196 and 57,037,597 shares issued and outstanding
    at September 30, 2004 and March 31, 2004, respectively                        96,231            57,039

  Additional paid-in capital                                                  80,966,268        78,231,867
  Dividends payable in common stock                                              624,499         1,354,847
  Accumulated deficit                                                        (77,640,594)      (73,289,137)
                                                                            -------------     -------------
           Total stockholders' equity                                          4,046,413         6,355,002
                                                                            -------------     -------------
Total liabilities and stockholders' equity                                  $  5,641,673      $  8,809,171
                                                                            =============     =============


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

                                                     3
</TABLE>
<PAGE>

<TABLE>
                                                   LIFEPOINT, INC.

                                               STATEMENTS OF OPERATIONS


                                                             FOR THE                             FOR THE
                                                        THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                            SEPTEMBER 30                       SEPTEMBER 30
                                                  -------------------------------     -------------------------------
                                                      2004               2003              2004              2003
                                                  -------------     -------------     -------------     -------------
<S>                                               <C>               <C>               <C>               <C>
Revenues                                          $     76,068      $    (18,500)     $     76,068      $    (18,500)

Costs and expenses:
  Cost of goods sold                                   772,718                --         1,592,835                --
  Research and development                             582,713           818,339         1,181,723         1,524,166
  Selling and marketing                                338,102           139,565           695,519           246,478
  General and administrative                           480,104           104,106           889,615         1,041,347

                                                  -------------     -------------     -------------     -------------
    Total costs and expenses from operations         2,173,637         1,062,010         4,359,692         2,811,991
                                                  -------------     -------------     -------------     -------------
Loss from operations                                (2,097,569)       (1,080,510)       (4,283,624)       (2,830,491)

Interest income                                            319             3,297             4,087             5,096
Interest expense                                          (742)          (28,037)           (1,931)         (312,172)
Discount on settlement of trade payables               200,049           723,613           200,049           723,613
                                                  -------------     -------------     -------------     -------------

   Total other income (expense)                        199,626           698,873           202,205           416,537
                                                  -------------     -------------     -------------     -------------

Net loss                                            (1,897,943)         (381,637)       (4,081,419)       (2,413,954)

Less preferred dividends                               134,959         6,884,500           270,039         7,220,896
                                                  -------------     -------------     -------------     -------------

Loss applicable to common shareholders            $ (2,032,902)     $ (7,266,137)     $ (4,351,458)     $ (9,634,850)
                                                  =============     =============     =============     =============

Loss applicable to common shareholders
  per common share:
  Weighted average common shares
    outstanding - basic and assuming dilution       95,669,131        38,027,320        78,254,200        37,633,414
                                                  =============     =============     =============     =============

Basic and diluted net loss per share
  applicable to common shareholders               $      (0.02)     $      (0.19)     $      (0.06)     $      (0.26)
                                                  =============     =============     =============     =============


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

                                                          4
</TABLE>
<PAGE>

<TABLE>
                                          LIFEPOINT, INC.
                                     STATEMENTS OF CASH FLOWS


                                                                          For the six months
                                                                          ended September 30,
                                                                     -----------------------------
                                                                         2004             2003
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
OPERATING ACTIVITIES
Net loss                                                             $(4,081,419)     $(2,413,954)
Adjustments to reconcile net loss to net cash used by
operating activities:
    Depreciation and amortization                                        360,854          361,110
    Amortization of debt discount                                             --          166,000
    Loan fees on note payable                                                 --          416,633
    Changes in operating assets and liabilities:
       Accountsreceivable                                                 35,097               --
       Inventories                                                      (292,182)           6,920
       Prepaidexpensesandothercurrentassets                              130,418           38,363
       Otherassets                                                        26,537          (98,601)
       Accountspayable                                                  (292,046)        (749,178)
       Accruedexpenses                                                  (246,290)         198,366
                                                                     ------------     ------------
Net cash used by operating activities                                 (4,359,031)      (2,074,341)

INVESTING ACTIVITIES
Capitalization of patent costs                                          (117,188)              --
Purchases / (adjustments) of property and equipment                        7,486          (11,998)
                                                                     ------------     ------------
Net cash used by investing activities                                   (109,702)         (11,998)

FINANCING ACTIVITIES
Conversion of preferred stock                                             (1,102)        (382,951)
Sales of preferred stock                                                      --        8,666,752
Expenses of preferred stock offering                                          --         (608,326)
Warrants issued as a consulting expense                                    1,122               --
Exercise of warrants                                                   1,772,810               --
Proceeds from note payable                                                (2,242)         690,000
Payments on note payable                                                 (15,807)         (13,915)
Proceeds from capital leases                                               9,576               --
Payments on note payable-bank                                           (107,100)              --
Payments on capital leases                                              (205,000)        (227,132)
                                                                     ------------     ------------
Net cash provided by financing activities                              1,452,257        8,124,428
                                                                     ------------     ------------
Increase/(decrease) in cash and cash equivalents                      (3,016,476)       6,038,089
Cash and cash equivalents at beginning of period                       3,710,761           75,588
                                                                     ------------     ------------
Cash and cash equivalents at end of period                           $   694,285      $ 6,113,677
                                                                     ============     ============

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION:
Cash paid for interest                                               $     1,931      $   257,023
                                                                     ============     ============
NON-CASH FINANCING ACTIVITIES:
    Value of common stock issued as dividends on preferred stock     $   270,039      $   336,396
                                                                     ============     ============
    Conversion of accounts payable to long term notes                $        --      $   255,595
                                                                     ============     ============


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

                                                5
</TABLE>
<PAGE>

                                 LIFEPOINT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

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

BASIS OF PRESENTATION

         In the opinion of LifePoint, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments except as disclosed below) necessary to present fairly the financial
position, results of operations and cash flows for the periods presented.
Results of operations for interim periods are not necessarily indicative of the
results of operations for a full year due to external factors that are beyond
the control of the Company. This Report should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2004
(the "Annual Report").

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

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

         The Company realistically expects to be able to obtain any capital
needed for its operations from a variety of possible sources. First, the company
has maintained its cash position over the last four quarters without utilizing
new sources of equity or incurring debt by obtaining a significant number of
early exercises of the warrants issued in connection with the Company's private
placement of Series D Convertible Preferred Stock. These have provided
approximately $2.0 million in capital to the Company without any further
dilution. The Company expects to obtain additional capital through additional
exercises of warrants. Additionally, the Company expects to be able to establish
and use the traditional commercial capital sources including capital lease
lines, working capital lines, international (a source of revenues) factoring,
and leases for customer purchases of IMPACT Test Systems. These may reduce
capital requirements for the Company. Additionally, the Company expects to
achieve sales revenue, which over the year, may reduce the cash requirements of
the Company. Lastly, if other sources fail, and the Company needs additional
capital, the Company will attempt to raise the capital shortfall through equity
or debt financing.


                                       6
<PAGE>

USE OF ESTIMATES

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

RECLASSIFICATIONS

         Certain amounts included in the prior quarter's financial statements
have been reclassified to conform with the current quarter`s presentation. Such
reclassifications did not have any effect on reported net loss.

CASH AND CASH EQUIVALENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

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

PROPERTY AND EQUIPMENT

         Property and equipment is stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the related assets
that range from three to seven years. Expenditures for maintenance and repairs
are charged to expense as incurred whereas major betterments and renewals are
capitalized. Property and equipment under capital leases are included with
property and equipment and amortization of these assets are included in
depreciation expense. Depreciation expense for the years ended March 31, 2004,
2003 and 2002 was $688,612, $622,907 and $516,021 respectively. Depreciation
expense for the six months ended September 30, 2004 was $338,131.

PATENTS

         The cost of patents is being amortized over their expected useful
lives, which is generally 17 years. At September 30, 2004 accumulated
amortization of patents was $96,531. At March 31, 2004, 2003 and 2002,
accumulated amortization of patents was approximately $74,000, $37,000 and
$22,000, respectively. During the six months ended September 30, 2004, $117,188
in patent costs was incurred. For the years ended March 31, 2004, 2003, and 2002
additional patent costs were approximately $0, $61,000 and $160,000,
respectively.

IMPAIRMENT OF LONG LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", if
indicators of impairment exist, the Company assesses the recoverability of the
affected long-lived assets by determining whether the carrying value of such
assets can be recovered through the undiscounted future operating cash flows. If
impairment is indicated, the Company measures the amount of such impairment by
comparing the carrying value of the asset to the present value of the expected
future cash flows associated with the use of the asset. While the Company's
current and historical operating and cash flow losses are indicators of
impairment, the Company believes the future cash flows to be received from the
long-lived assets will exceed the assets' carrying value, and accordingly, the
Company has not recognized any impairment losses through September 30, 2004.


                                       7
<PAGE>

RESEARCH AND DEVELOPMENT COSTS

         Research and development costs are expensed as incurred.

INVENTORIES

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

DIVIDENDS

         During the quarter ended September 30, 2004, the Company accrued a
dividend expense of $134,959 for the equivalent of 449,818 shares of its common
stock related to its Series D Preferred Stock. During the six months ended
September 30, 2004, the Company accrued a dividend expense of $270,039 on its
Series D Preferred Stock. During the quarter ended June 30, 2004, the Company's
Series C Preferred Stock had a mandatory conversion on June 20, 2004. Based on
this conversion, 3,264,096 shares of common stock were paid as premium shares to
the holders of the Series C Preferred Stock.

REVENUE RECOGNITION

         The majority of the Company's revenue is from sales of the IMPACT Test
System, which launched at the end of fiscal year 2002. The Company recognizes
revenue in the period in which cash is received for products shipped, title
transferred and acceptance and other criteria are met in accordance with the
Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). SAB 104
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. While the Company believes it has met the criteria of SAB
104, due to delays in receiving payments on some of the Company's initial
shipments of products, the Company elected, during the quarter ended December
31, 2002 and going forward, to record revenue related to shipments only to the
extent the related cash had been collected, as amended by SAB 104. During the
quarter ended September 30, 2004, the Company had $30,553 in product shipments
to customers that are subject to customer evaluations and acceptance. These
product shipments are included in finished goods inventory at cost and as such
have not been recognized in revenue.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

STOCK-BASED COMPENSATION

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


                                       8
<PAGE>

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

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

<TABLE>
                                                        Years ended March 31,
                                                        ---------------------
                                               2004               2003             2002
                                           -------------     -------------     -------------
<S>                                        <C>               <C>               <C>
Loss applicable to common stockholders     $(15,231,597)     $(18,418,601)     $(13,592,801)
Stock-based employee compensation
   expense determined under fair value
   presentation for all options                (615,635)       (1,777,179)       (1,547,995)
                                           -------------     -------------     -------------

Pro forma net loss                         $(15,847,232)     $(20,195,780)     $(15,140,796)
                                           =============     =============     =============
</TABLE>

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

NET LOSS PER COMMON SHARE

         Net loss per common share is based upon the weighted average number of
common shares outstanding during the periods reported. Common stock equivalents
have not been included in this calculation because their inclusion would be
anti-dilutive. As of September 30, 2004, the Company had outstanding 95,203,970
warrants, 5,942,067 options, 30,070,326 common shares issuable upon conversion
of Series D Convertible Preferred Stock and 1,897,635 dividends payable,
collectively these securities would have converted into 133,113,998 shares of
common stock.

COMPREHENSIVE INCOME

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


                                       9
<PAGE>

INCOME TAXES

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

2.  INVENTORY

         Inventory is summarized as follows:

                                         September 30,        March 31,
                                             2004               2004
                                        ---------------    ---------------

           Raw materials                $    2,940,882     $    2,995,162
           Work in process                     440,719            247,645
           Finished goods                      574,515            163,107
                                        ---------------    ---------------
                                             3,956,116          3,405,914
           Less:  inventory reserve          1,354,591          1,096,571
                                        --------------     --------------
                                        $    2,601,525     $    2,309,343
                                        ===============    ===============


Finished goods inventory includes finished goods in customers' hands prior to
receipt of payment.


                                       10
<PAGE>

3.  PROPERTY AND EQUIPMENT

         Property and equipment is summarized as follows:

<TABLE>
                                                             Estimated         September 30,         March 31,
                                                             Useful Lives          2004                2004
                                                                              ---------------     ---------------
<S>                                                          <C>              <C>                 <C>
           Furniture and fixtures                            3 - 7 years      $    3,039,126      $    3,007,848
           Test equipment                                    5 - 7 years             427,158             451,940
           Leasehold improvements                            3 - 5 years           1,372,966           1,372,966
                                                                              ---------------     ---------------
                                                                                   4,839,250           4,832,754
           Less: accumulated depreciation and
              amortization                                                         3,303,041           2,950,928
                                                                              ---------------     ---------------
                                                                              $    1,536,209      $    1,881,826
                                                                              ===============     ===============
</TABLE>

4.  DEBT

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

         On December 30, 2002 the Company entered into a Promissory Note with a
vendor for services rendered to the Company amounting to $162,394. No interest
is due under the terms of the note which is payable though the period ending
January 31, 2005. At September 30, 2004, $118,479 is outstanding under the note.
In addition, during the period ending September 30, 2003, the Company reached
agreement with a number of its vendors to extend payment terms on outstanding
accounts payable resulting in $42,947 in long-term notes payable which will
mature over the course of fiscal year 2005.


                                       11
<PAGE>

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

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

5.  STOCKHOLDERS' EQUITY

SERIES B PREFERRED STOCK

         On March 29, 2001, the Company sold an aggregate of 75,000 shares of
the Company's Series B 20% Cumulative Convertible Preferred Stock, $.001 par
value (the "Series B Preferred Stock"). Each share was entitled to one vote and
was convertible into 10 shares of the Company's common stock. Dividends were
cumulative and payable annually at a rate of $0.20 per share in year one, $0.24
per share in year two, $0.288 per share in year three and $2.40 per share
thereafter. The dividends were payable in shares of Series B Preferred Stock for
the first three years after the date of original issuance and in shares of
common stock thereafter. The Series B Preferred Stock had preference in
liquidation over all other forms of capital stock of the Company at a rate of
$40 per share plus all accrued and unpaid dividends.

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

SERIES C PREFERRED STOCK

         On June 20, 2001 the company sold, at $35,000 per unit, to eleven
investors an aggregate of 228.007 units of the Company's Series C Convertible
Preferred Stock, $.001 par value (the "Series C Preferred Stock"). Each unit
consisted of 1,000 shares of the newly-designated Series C Preferred Stock and a
common stock purchase warrant expiring June 19, 2006 to purchase 10,000 shares
of the Company's common stock at $3.50 per share. Dividends were cumulative and
payable annually at a rate of 10 % per year through June 30, 2004 and 5% per
year thereafter. The dividends were payable in shares of common stock at the
option of the Company. For the year ended March 31, 2004 the Company paid
dividends of $1,336,479 through the issuance of 3,338,844 shares of common
stock.


         In June 2003, as a condition to the initial closing of the Company's
private placement of Series D Preferred Stock, the holders of the Series C
Preferred Stock consented to the issuance of the Series D Preferred Stock and
Warrants and agreed to the following modifications of their rights: (i) the


                                       12
<PAGE>

conversion price of the Series C Preferred Stock was permanently set at $3.00
per share, and all reset and price-based anti-dilution provisions were
eliminated; (ii) each holder of Series C Preferred Stock was offered the
opportunity to purchase Series D Preferred Stock, and for each $1 of Series D
Preferred Stock so purchased, $2 of Series C Preferred Stock retained a one-time
conversion price reset to $0.30 per share, and the same portion of warrants held
by any such holders received a reset on the exercise price of warrants held by
such holder to $0.50 per share, with the number of shares issuable upon exercise
of the warrants remaining the same; (iii) the Series C Preferred Stock would
convert into Common Stock at maturity, unless earlier converted; (iv) all future
dividends on the Series C Preferred Stock would be accrued and paid at
conversion; and (v) the Series C Preferred Stock would become junior to the
shares of Series D Preferred Stock upon liquidation.

         During the quarter ended June 30, 2004, as part of the mandatory
conversion, holders of 377,434 shares of Series C Preferred Stock converted
their shares into 28,914,072 shares of the Company's common stock. Additionally,
based on the mandatory conversion of the Series C Preferred Stock, 3,264,096
premium shares was paid as dividends as per the conversion. As of September 30,
2004, there were no shares of Series C Preferred Stock outstanding after the
conversion.

SERIES D PREFERRED STOCK

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

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

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

         The Company is required to redeem any shares of Series D Preferred
Stock that remain outstanding on the third anniversary of the closing, at its
option, in either (i) cash equal to the face amount of the Series D Preferred
Stock plus the amount of accrued dividends, or (ii) subject to certain
conditions being met, shares of Common Stock equal to the lesser of the then
applicable conversion price or 90% of the 90-day volume weighted average price


                                       13
<PAGE>

of the Common Stock ending on the date prior to such third anniversary. As the
redemption is not required to be paid in cash, the Company has not recorded the
preferred stock as a liability in the accompanying balance sheet.

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

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

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

         During the quarter ended September 30, 2004, a holder of 8 shares of
the Series D Preferred Stock converted their preferred stock into 26,663 shares
of Common Stock. Related to the conversion, the Company issued 1,834 shares of
Common Stock as dividend shares. The dividend shares amount has been recorded on
the Company's Statement of Operations.

COMMON STOCK

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

         During the six months ended September 30, 2004, holders of the Series D
Preferred Stock Warrants purchased 5,905,693 shares of the Company's Common
Stock. The Company received $1,771,708 for the early exercise of these warrants.

STOCK OPTION/STOCK ISSUANCE PLAN

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


                                       14
<PAGE>

         As of September 30, 2004, options to purchase an aggregate of 5,942,067
shares of the Common Stock granted to employees including officers, directors
and consultants were outstanding. As of such date, options to purchase an
aggregate of 851,741 shares of the Common Stock had been exercised and options
to purchase an aggregate of 569,679 shares of the Common Stock were then
exercisable. Options granted to date under both Option Plans have generally
become exercisable as to one-quarter of the shares subject thereto on the first
anniversary date of the date of grant and as to 1/36th of the remaining shares
on such calendar day each month thereafter for a period of 36 months. Certain
options will become exercisable upon the achievement of certain goals related to
corporate performance and not that of the optionee. The exercise price per share
for incentive stock options under the Code may not be less than 100% of the fair
market value per share of the Common Stock on the date of grant. For
nonqualified stock options, the exercise price per share may not be less than
85% of such fair market value. No option may have a term in excess of ten years.

6.  COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

         LifePoint entered into a lease agreement commencing October 1, 1997,
which was extended by an amendment and was renewed for one year until June 30,
2005 for the research facilities in Rancho Cucamonga, California. In addition to
rent of $72,000 per year, LifePoint will pay real estate taxes and other
occupancy costs.

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

         On August 28, 2000 the Company entered into a lease financing agreement
with Finova Capital Corporation ("Finova") of Scottsdale, Arizona whereby Finova
agreed to provide LifePoint with up to a $3,000,000 lease line for the purchase
of equipment including up to $500,000 of leasehold improvements. At March 31,
2004 and 2003, $1,249,930 had been drawn against the line. Each closing schedule
has been financed for 36 months at a rate equal to the then current three-year
U.S. Treasury Note. At the end of each schedule, LifePoint will have the option
to purchase all (but not less than all) of the equipment at 15% of the original
equipment cost. As of March 31, 2004, the Company owed $485,000 on its lease of
its capital equipment and was in litigation regarding such. The Company has
reached a settlement on the outstanding balances and has negotiated a payment
schedule commencing in July 2004. The Company has a balance of $280,000 as an
accrued expense and the amount is reflected as a short-term liability.

         The Company leases certain equipment under non-cancelable lease
arrangements. These capital leases expire on various dates through 2004 and may
be renewed for up to 12 months. Furniture, fixtures and equipment includes
assets acquired under capital leases of $1,280,633, $1,280,633 and $1,249,930 as
of June 30, 2004, March 31, 2004 and March 31, 2003, respectively. Accumulated
depreciation for assets under capital lease was $861,654 at September 30, 2004.
In addition, accumulated depreciation was $751,895 and $643,743 at March 31,
2004 and 2003, respectively. Amortization of assets under capital lease is
included with depreciation expense. See Note 3 - Property and Equipment.


                                       15
<PAGE>

SIGNIFICANT CONTRACTS

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

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

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

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

         On November 25, 2003, CMI notified the Company that they were
terminating their distribution agreement. The Company believes that this
notification is not valid under the terms of the agreement and on December 30,
2003, the Company demanded a break-up fee from CMI for their desired early
termination of this agreement. No resolution has been reached regarding the
break-up fee.

7. LEGAL MATTERS

         The Company does not have any lawsuits pending.

8. SUBSEQUENT EVENT

         On November 15, 2004 the Company finalized a Convertible Note and
Warrant Purchase Agreement (the "Note"), with an investment fund (the "Lender").
This Note is convertible into the Company's Preferred Stock or Common Stock upon
the closing of the next financing, defined as when the Company sells shares of
its Preferred Stock or Common Stock (or securities exercisable for or


                                       16
<PAGE>

exchangeable for shares of its Preferred Stock or Common Stock), or secures debt
for an aggregate consideration of at least $3,000,000. The Note matures on the
closing of the next financing, as defined above, or sale of the Company in which
funds are provided to the Company. Upon the execution of the Note, the Lender is
to make an advance to the Company of $150,000. Advances are cumulative, but
shall not at any time exceed $1,000,000 in aggregate outstanding principal
amount. Interest on the unpaid principal balance of the Note is at 8.5% per
annum, payable in cash on the maturity date. The Note is secured by a second
priority security interest in all of the Company's assets, excluding assets
under certain UCC liens. In addition, the Company is to issue to the Lender
warrants to purchase up to 500,000 shares of the Company's Common Stock. The
warrants are immediately exercisable at $0.50 per share. If the Company issues
warrants in connection with the next financing, as defined above, the warrant
exercise price will be equal to the exercise price per share of the warrants
issued in the next financing, as defined above. The warrants expire on November
11, 2009.


                                       17
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

FINANCIAL CONDITION

         As of September 30, 2004, the Company had an accumulated deficit of
$77,640,594. The Company has devoted substantially all of its resources to
research and development and has experienced an ongoing deficiency in working
capital. The Company has recently re-initiated manufacturing and shipment of its
product to customers. There can be no assurance as to when the Company will
achieve profitability, if at all. The Company's revenues and results of
operations have fluctuated and can be expected to continue to fluctuate
significantly from quarter to quarter and from year to year. Various factors
that may affect operating results include: a) the length of time to close
product sales; b) customer budget cycles; c) the implementation of cost
reduction measures; d) the timing of required approvals from government
agencies, such as the Food and Drug Administration; and e) the timing of new
product introductions by the Company and its competitors. As of the date of this
filing, there is substantial doubt about the Company's ability to continue as a
going concern due to its historical negative cash flow and because the Company
does not have sufficient committed capital to meet its projected operating needs
for at lease the next twelve months.

         Prior to September 2003, the Company was a development stage company
and had not produced any revenues. The Company had been dependent on the net
proceeds derived from seven private placements pursuant to Regulation D under
the Securities Act of 1933 to fund its operations.

         On September 22, 2003, the Company closed a $13 million private
placement of Series D Convertible Preferred Stock ("Series D Preferred Stock")
and warrants to purchase Common Stock. For a complete description of the Series
D Preferred Stock, see "Notes to Financial Statements - Note 5 - Stockholders'
Equity - Series D Preferred Stock."

         The Company is utilizing distributors and/or partners for sales and
service of its products in the international markets. The distributors the
Company has elected to work with have knowledge of their respective markets and
local rules and regulations. The Company has entered into, or expects to enter
into, distribution agreements with distributors in Europe and Asia. There can be
no assurance as to when or if such distribution agreements will be completed.

         The Company has filed 510(k) submissions to the Food and Drug
Administration (the "FDA") for the IMPACT Test System and the NIDA-5 drugs of
abuse, with the first submission filed in the fall of 2002. Although the
applications were delayed because the Company could not provide additional data
requested by FDA on a timely basis, principally due to a lack of funding and
personnel, the Company responded to the FDA in December 2003, April 2004 and
June 2004 in response to additional inquiries. There can be no assurance as to
when or if the FDA will grant clearance on these products.

         On March 6, 2000 and June 16, 2000, the Compensation Committee
authorized that executive officers and senior staff designated as significant
employees, who are optionees under the LifePoint, Inc. 1997 Stock Option Plan
and the 2000 Option Plan, respectively, or who hold common stock purchase
warrants may exercise an option or a warrant by delivering a promissory note
(the "Note") to the order of the Company. On December 15, 2000, the Board of
Directors authorized that an executive officer who executed a note in payment of
the exercise price for an option or warrant could, at his or her election,
surrender to the Company shares of common stock to pay off such note. The number
of shares surrendered was determined by taking the total principal on a note
plus all accrued interest and dividing it by the fair market value on the date
of surrender. On December 2, 2002, Linda H. Masterson, President and Chief
Executive Officer, surrendered 424,586 shares of common stock to payoff notes
totaling $897,500 in principal and $36,588 in interest due to the Company. Ms.
Masterson has no further notes due to the Company. As of June 30, 2004, no
additional notes remain outstanding. Due to the recent changes enacted under The
Sarbanes-Oxley Act of 2002, the Company will accept no further notes in favor of
the Company from executive officers covered by the Sarbanes-Oxley Act.


                                       18
<PAGE>

OPERATING CASH FLOWS

         Net cash used by the Company in operations for the six months ended
September 30, 2004 amounted to $4,359,031 as compared to $2,074,341 for the same
period ended September 30, 2003, an increase of $2,284,690. This was due
primarily to the higher net loss associated with the re-deployment of the
operations in fiscal year 2005 in comparison to the furloughed position of the
organization during fiscal year 2004. In addition, during the six months ended
September 30, 2004, $416,633 in loan fees and $166,000 for the amortization of
the debt was converted to preferred stock during fiscal 2004 and was eliminated
as of June 30, 2004.

INVESTING CASH FLOWS

         During the six months ended September 30, 2004, net cash used by
investing activities was $109,702 compared to $11,998 for the same period ended
September 30, 2003. The $97,704 increase in cash used was for the capitalization
of patents during the six months ended September 30, 2004. Adjustments to
property and equipment during the six months ended September 30, 2004 was
related to the transfer of internal systems to marketing expense.

FINANCING CASH FLOWS

         Net cash provided by financing activities amounted to $1,452,257 for
the six months ended September 30, 2004 compared to $8,124,428 for the same
period ended September 30, 2003. The $6,672,171 decrease in cash provided by
financing activities for the six months ended September 30, 2004 was principally
from the net proceeds of $8,058,426 raised in fiscal 2004 from the sale of
preferred stock. This was partially offset by the $1,772,810 in proceeds raised
in fiscal 2005 from the exercise of warrants.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2004 VS. SEPTEMBER 30, 2003

         The Company recognized $76,068 in revenues during the three months
ended September 30, 2004 compared to a credit for the return of instruments of
$18,500 in revenues for the three months ended September 30, 2003. These
revenues reflect payments made on previous shipments of the Company's products.
As adopted in fiscal year 2003, the Company has elected to record revenue only
when related cash has been collected. During the six months ended June 30, 2003
the Company was in the middle of a furlough related to the loss of its critical
funding and was forced to reduce its staff during the quarter. This factor was a
main contributing factor as to the lower operating expenses that occurred during
the six months ended September 30, 2003. Over the past six months, the Company
has resumed shipping product to potential customers and based on this, $772,718
was recognized as cost of goods sold for the three months ended September 30,
2004. This includes the manufacturing overhead incurred during that period. All
standard cost of sales associated with the shipment of product has been deferred
and will be recognized as a cost of sales upon payment of the invoice. The
Company recognized no cost of sales during the three months ended September 30,
2003 due to manufacturing costs being expensed as research and development
charges. During the three months ended September 30, 2004, the Company spent
$582,713 on research and development, excluding manufacturing costs, $480,104 on
general and administrative expenses and $338,102 on selling expenses, as
compared with $818,839, including manufacturing costs, $104,106 and $139,565,
respectively, during the three months ended September 30, 2003. The decrease of
$235,626, or 29%, in research and development expenditures was primarily due to


                                       19
<PAGE>

the reduction of engineering costs due to the transition from a research
organization to a manufacturing and marketing focused company. General and
administrative expenses increased $375,998, or 361%, during the three months
ended September 30, 2004 primarily due to the re-establishment of administrative
personnel during the three months ended September 30, 2004 in comparison to the
same period last year. The increase of $198,537, or 142%, in selling and
marketing expenses for the three months ended September 30, 2004 was primarily
related to the Company's increase in its sales and marketing personnel which
accounted for higher salary and travel charges in comparison to the three months
ended September 30, 2003 in which there was limited staffing during the
furlough. Interest expense for the three months ended September 30, 2004 was
$742 which represented the expense paid on the short-term loan in comparison to
$28,037 for the three months ended September 30, 2003, which represented
interest paid on debt. Interest income was $319 for the three months ended
September 30, 2004, as compared to $3,297 during the three months ended
September 30, 2003. This represented interest earned on short-term investments.
Additionally, the Company recognized a favorable adjustment of $200,049 in the
three months ended September 30, 2004 on a discount from the settlement of trade
payables in comparison to the $723,613 discount as a result from the settlement
of trade payables during the three months ended September 30, 2003.

SIX MONTHS ENDED SEPTEMBER 30, 2004 VS. SEPTEMBER 30, 2003

         The Company recognized $76,068 in revenues during the six months ended
September 30, 2004 compared to a credit for the return of instruments of $18,500
in revenues for the six months ended September 30, 2003. On January 29, 2003,
the Company lost critical funding and the ability to draw on a $7.5 million line
previously available under a debt facility. As a result, the Company was forced
to reduce operating expenses and headcount during the six months ended September
30, 2003. The Company recognized $1,592,835 in cost of goods sold during the six
months ended September 30, 2004 in comparison to no cost of goods sold during
the six months ended September 30, 2003. The Company recognized no cost of sales
during the six months ended September 30, 2003 due to the employee furlough and
manufacturing costs being expensed as research and development charges. During
the six months ended September 30, 2004, the Company spent $1,181,723 on
research and development, excluding manufacturing expenses, $889,615 on general
and administrative expenses and an additional $695,519 on selling expenses, as
compared with $1,524,166, $1,041,347 and $246,478, respectively, during the six
months ended September 30, 2003. The decrease of $342,443, or 22%, in research
and development expenditures was primarily due to the reduction of engineering
costs due to the transition from a research organization to a manufacturing and
marketing focused company. The decrease of $151,732, or 15%, in general and
administrative expenses was primarily due to the expensing of loan fees and
increased accounting fees associated with the bridge loan and financing during
the six months ended June 30, 2003. The increase of $449,041, or 182%, in
selling expenses in the six months ended September 30, 2004 was primarily
related to the Company's increase in its sales and marketing personnel. Interest
expense for the six months ended September 30, 2004 was $1,931 while interest
income was $4,087, as compared to $312,172 and $5,096, respectively, for the
period ending September 30, 2003. Additionally, the Company recognized a
favorable adjustment of $200,049 in the six months ended September 30, 2004 on a
discount from the settlement of trade payables in comparison to the $723,613
discount as a result from the settlement of trade payables the six months ended
September 30, 2003.

FORWARD-LOOKING STATEMENTS

         Some of the information in this Report may contain forward-looking
statements. These statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward looking" information. When considering forward-looking
statements, a stockholder or potential investor in LifePoint should keep in mind


                                       20
<PAGE>

the risk factors and other cautionary statements in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 2004. These forward-looking
statements could involve known and unknown risks, uncertainties and other
factors that might materially alter the actual results suggested by the
statements. In other words, although forward-looking statements may help to
provide complete information about future prospects, the Company's performance
may be quite different from what the forward-looking statements imply. The
forward-looking statements are made as of the date of this Report and LifePoint
undertakes no duty to update these statements.

INFLATION

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

CRITICAL ACCOUNTING POLICIES

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

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

INVENTORY

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

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

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


                                       21
<PAGE>

         Finished goods inventory also includes the standard cost of product in
customers' hands until payment is received for the goods.

REVENUE RECOGNITION

         The majority of the Company's revenue is from sales of the IMPACT Test
System. The Company recognizes revenue in the period in which cash payments are
received for products shipped, title transferred and acceptance and other
criteria are met in accordance with the Staff Accounting Bulletin No. 104,
"Revenue Recognition" ("SAB 104"). SAB 104 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements. While the
Company believes it has met the criteria of SAB 104, due to delays in receiving
payments on some of the Company's initial shipments of products, the Company
elected, during the quarter ended December 31, 2002, to begin recording revenue
related to shipments only to the extent the related cash has been collected,
based on the guidance provided in SAB 104, as amended by SAB 104. During the
quarter ended September 30, 2004, the Company had $30,553 in product shipments
to customers that are subject to customer evaluations and acceptance. These
product shipments are included in finished goods inventory at cost.

WARRANTY AND RETURNS

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

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

RISK FACTORS

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

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

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

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


                                       22
<PAGE>

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

         In the past, the Company has raised funds by public and private sale of
its stock, and the Company is likely to do this in the future to raise needed
funds. Sale of the Company's stock to new private or public investors usually
results in existing stockholders becoming "diluted". The greater the number of
shares sold, the greater the dilution. A high degree of dilution can make it
difficult for the price of the Company's stock to rise rapidly, among other
things. Dilution also lessens a stockholder's voting power.

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

OPERATIONAL LOSSES ARE EXPECTED TO CONTINUE AT LEAST ANOTHER THREE QUARTERS
FOLLOWING THE QUARTER ENDED SEPTEMBER 30, 2004.

         From the date the Company was incorporated on October 8, 1992 through
September 30, 2004, the Company has incurred net losses of $77,640,594. In
February 2002, the Company launched marketing of the IMPACT Test System, its
first product, to the international law enforcement market, one of three initial
worldwide target markets. There was no governmental approval required as a
prerequisite to market to these potential users of the Company's product.
However, as indicated elsewhere in this section "Risk Factors," there are
certain legal challenges that the Company must overcome to make its product
fully acceptable in this market.

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

         The Company's other initial target market is the industrial market -
companies that currently test employees for drugs and alcohol. In November 2000,
the FDA announced its intention to be consistent in its regulation of drugs of
abuse screening tests used in the home, work place, insurance and sports
settings. The FDA published draft guidance for public comment in April 2004.
Should the FDA enforce such regulations, despite the Company's efforts and those
of others to dissuade the FDA from doing so, such regulations might delay the
start of marketing to the industrial market in the United States until the
Company complies. However, in anticipation of such adoption, the Company has
been collecting the additional field data which management believes, based on
discussions with the FDA, and the draft guidelines, this agency would require
approving the Company's entry into the industrial market in the United States.
The Company has submitted for industrial workplace clearance from the FDA under


                                       23
<PAGE>

the proposed guidelines simultaneously with seeking its approval of use of its
product for medical purposes. In addition, the Company has commenced efforts to
market its product through distributors to law enforcement agencies and medical
users in Europe and Australia prior to obtaining FDA approval for use in the
United States. This program could offset any loss in early revenues due to the
delay, if it occurs, in the Company's marketing to the industrial market in the
United States.

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

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

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

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

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

THE COMPANY'S BUSINESS IS SUBJECT TO CHANGING REGULATION OF CORPORATE GOVERNANCE
AND PUBLIC DISCLOSURE THAT HAS INCREASED BOTH ITS COSTS AND THE RISK OF
NONCOMPLIANCE.

         Because the Company's common stock is publicly traded, it is subject to
certain rules and regulations of federal, state and financial market exchange
entities charged with the protection of investors and the oversight of companies
whose securities are publicly traded. These entities, including the Public
Company Accounting Oversight Board, the SEC and the American Stock Exchange,
have recently issued new requirements and regulations and continue developing
additional regulations and requirements in response to recent corporate scandals
and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. The
Company's efforts to comply with these new regulations have resulted in, and are
likely to continue resulting in, increased general and administrative expenses
and diversion of management time and attention from revenue-generating
activities to compliance activities.

         In particular, the Company's efforts to prepare to comply with Section
404 of the Sarbanes-Oxley Act and related regulations for fiscal years ending on
or after July 15, 2005 regarding management's required assessment of the
Company's internal control over financial reporting and its independent


                                       24
<PAGE>

auditors' attestation of that assessment will require the commitment of
significant financial and managerial resources. Although management believes
that ongoing efforts to assess the Company's internal control over financial
reporting will enable management to provide the required report, and its
independent auditors to provide the required attestation, under Section 404, the
Company can give no assurance that such efforts will be completed on a timely
and successful basis to enable our management and independent auditors to
provide the required report and attestation in order to comply with SEC rules.
Moreover, because the new and changed laws, regulations and standards are
subject to varying interpretations in many cases due to their lack of
specificity, their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This evolution may result in
continuing uncertainty regarding compliance matters and additional costs
necessitated by ongoing revisions to the Company's disclosure and governance
practices.

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

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

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

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

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

         The Company experienced delays in marketing its product because of
unanticipated performance problems that had arisen first in the Company's
testing in its research and development facility and later at market trial and
customer sites in 2002. Accordingly, when a product performance problem
surfaced, the Company had no choice except to make product improvements and
modifications. The Company also had to delay completion of the field-testing
necessary to furnish the data for some of the FDA submissions, and with it,
delayed clearance by the FDA due to the loss of critical financing.


                                       25
<PAGE>

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

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

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

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

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

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

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

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

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

         The Company cannot market its saliva-based testing device to hospitals
and other medical facilities unless it has obtained FDA approval. Additionally,
the FDA announced its intention to regulate marketing to the industrial market
in the United States. If the FDA determines to regulate the industrial market in
the United States, this may further delay the receipt of revenues by the Company
in this market. If the Company cannot obtain a waiver from CLIA ("Clinical
Laboratory Improvement Act of 1988") regulation, the cost of running the IMPACT
TEST SYSTEM in FDA regulated medical markets could be higher for potential


                                       26
<PAGE>

customers. There can be no assurance that the Company will obtain a waiver from
CLIA regulation or FDA approval on a timely basis, if at all. If the Company
does not obtain such waiver and approvals, its business will be adversely
affected.

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

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

         The Company expects to conduct all manufacturing of the Saliva Test
Module's (STM) at its own facility for at least another six to nine months. The
Company is now reviewing the possibility on engaging an outside manufacturer for
the final assembly of the STMs as part of it overall strategy to reduce costs.
However, the chemistry portion of the STM is a proprietary technology and
process developed by the Company and, accordingly the Company plans to continue
to manufacture the chemistry portion of the STM for both intellectual property
protection and proprietary know how. In addition, the Company intends to
continue to assemble the IMPACT Test System for at least another six to nine
months or more. If the Company's facility or the equipment in its facility is
significantly damaged or destroyed, the Company may not be able to quickly
restore manufacturing capacity. The Company plans to engage an outside
manufacturer of instruments to final assemble the current instrument in
conjunction with its own in-house assembly. The Company's current timetable for
transfer of some of the final assembly of the current instrument is during the
quarter ending March 31, 2005. The Company could, accordingly, turn over
instrument assembly to a number of qualified outside instrument assembly
suppliers in the event of such problems at the Company's facility. Accordingly,
any capable electronics manufacturer would have the capability to produce this
type of equipment. The Company has identified several potential electronic
manufacturers as potential alternatives to its initial outside supplier should
it so require.

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

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

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


                                       27
<PAGE>

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

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

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

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

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

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

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

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

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

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

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


                                       28
<PAGE>

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


THE FOLLOWING RISK FACTORS RELATE TO OWNERSHIP OF THE COMPANY'S CAPITAL STOCK:

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

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

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

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

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

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

         In addition, the Company is obligated to comply with the procedures of
Section 203 of the Delaware corporate statute, which may discourage certain
potential acquirers which are unwilling to comply with its provisions. Section
203 prohibits the Company from entering into a business combination (for
example, a merger or consolidation or sale of assets of the corporation having


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<PAGE>

an aggregate market value equal to 10% or more of all of the Company's assets)
for a period of three years after a stockholder becomes an "interested
stockholder." An interested stockholder is defined as being the owner of 15% or
more of the outstanding voting shares of the corporation. There are exceptions
to its applicability including the Company's board of directors approving either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder. At a minimum the Company believes such
statutory requirements may require the potential acquirer to negotiate the terms
with its directors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company does not hold any investments in market risk sensitive
instruments. Accordingly, the Company believes that it is not subject to any
material risks arising from changes in interest rates, foreign currency exchange
rates, commodity prices, equity prices or other market changes that affect
market risk instruments.

ITEM 4. CONTROLS AND PROCEDURES.

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

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

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


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<PAGE>

PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not applicable

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable

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

         Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      EXHIBITS

         31       Certifications pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.
         32       Certifications pursuant to Section 906 of the Public Company
                  Accounting Reform and Investor Act of 2002

         (b)      REPORTS ON FORM 8-K

         On August 12, 2004, the Company filed with the Securities and Exchange
         Commission a Current Report on Form 8-K related to the Company's
         announcement of its financial results for the quarter ended June 30,
         2004.


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<PAGE>

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned therein to be duly authorized.

                                          LIFEPOINT, INC.

Date:    November 15, 2004                By /s/ Linda H. Masterson
                                             ----------------------------------
                                          Linda H. Masterson
                                          President and Chief Executive Officer


                                          By /s/ Craig S. Montesanti
                                             ----------------------------------
                                          Craig S. Montesanti
                                          Chief Accounting Officer


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<PAGE>

                                 EXHIBIT INDEX
                                 -------------

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

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


                                       33