(Address of principal executive offices) (Zip Code)

(909) 418-3000

Effective April 19, 2000, Common Stock, $.001 par value

Common Stock, $.001 par value

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

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $93,656,576 (based on the closing price of Registrant's Common Stock on the American Stock Exchange at July 2, 2002, or $2.65 per share). This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of July 2, 2002, there were 35,342,104 shares of the registrant's Common Stock and 392,291 shares of the Preferred Stock outstanding.

Safe Harbor Statement under the Private Litigation Reform Act of 1995

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

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

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

The Company is initially marketing the product in the United States in markets not regulated by the Food and Drug Administration (the "FDA"), such as law enforcement and criminal justice testing, and in Europe and certain Asian countries where no FDA clearance is required. The Company will only be able to commence marketing of the product in the United States FDA regulated markets, such as medical markets, when FDA clearance is obtained. The Company anticipates such clearance to occur approximately 100 days (based on the current experience of other companies at the FDA) after completion of its submissions if such approval is obtained. The Company has begun the submission process with the FDA and intends to apply for at least nine separate FDA clearances, including one additional drug test just recently developed, within the next 90 days. There can be no assurance as to when and if the Company will complete its submissions to the FDA, as to when and if the FDA will give its clearance and as to when and if marketing in either medical or other regulated markets will commence. Management recognizes that, although FDA clearance is not generally required for use of drug testing for non-medical purposes, such as law enforcement agencies' testing or international markets, FDA clearance of the product may assist the Company's marketing in the United States to such customers. See the sections "Governmental Regulation" and "Marketing and Distribution" under this caption "Business."

Management anticipates that the Company's saliva based drugs of abuse and alcohol test will become evidential in the law enforcement market. However, management expects that the Company's tests may be performed on a non-evidential basis in some portions of the industrial marketplace where confirmation testing is required by regulation. If a drug of abuse is detected in the initial test, in some markets, the sample may need to be forwarded to a laboratory, where an expensive confirmatory analysis will be performed. Usually gas chromatography/mass spectrometry ("GC/MS") is employed for the confirmatory test. On February 25, 2002, the Company reported that it established a relationship with Quest Diagnostics, a leader in employee testing in the United States, to perform GC/MS confirmation testing on saliva samples when requested by some of the IMPACT Test System customers. This relationship enables the Company to provide a quick, low-cost, easy to implement laboratory secondary/confirmation t esting service on saliva samples that have been collected automatically and non-invasively by the IMPACT Test System. Quest Diagnostics has developed new protocols and procedures to provide confirmation testing at the low levels of sensitivity required from a saliva sample using the LifePoint Saliva Collection Device. This capability provides LifePoint's customers with the ability to meet the requirements for testing federally regulated safety-sensitive employees.

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

The IMPACT Test System is, to the Company's knowledge, the first saliva-based, on-site drug and alcohol testing system that delivers simultaneous, blood-comparable, quantitative results for alcohol and semi-quantitative results for drugs in less than five minutes. The product and its technologies provide the advantages of non-invasive sample collection, accuracy, speed, and convenience.

Using saliva as the specimen, which contains many of the same molecules as plasma, the IMPACT Test System produces objective, numeric results with the biological relevancy and accuracy of blood, serum or plasma. Once the sample is collected, the IMPACT Test System uses a powerful combination of 21^st-century technologies that, in the opinion of the Company, no other on-site testing device can currently match.

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

The Company believes that the IMPACT Test System's effectiveness lies in its combination of high sensitivity chemistry and fluorescence detection technologies. What puts this system so far ahead of the competition, in the opinion of the Company, is the accuracy, sensitivity, and speed of test results in an automated, operator-independent instrument system.

With the IMPACT Test System, sample collection, processing, test analysis and interpretation are integrated seamlessly. Saliva is automatically collected via aspiration with a vacuum device similar to that used in dentistry. The sample is measured as it is collected, and the collection occurs in less than a minute, much faster and more accurately than if performed by an absorbent-based collection device. The saliva flows into a disposable cassette that provides up to ten tests in a panel format. This observed, proprietary collection method and integrated sample processing virtually eliminate the possibilities of adulteration or substitution, sample mix-up, and user contact with specimen. The IMPACT Test System begins with a clean, efficient collection method and ends with objective, lab-quality answers.

The IMPACT Test System provides the following advantages:

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

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

Ensures adequate sample collection

Automatic quality check of instrument systems to ensure proper function

Automatic quality control

Automatic sample processing and analysis

Delivers and stores electronic and hard-copy test results

Laboratory quality test results

Automatic result interpretation

User definable breakpoints

The Company has begun development of a portable test system that will enable law enforcement officers to carry the device in all vehicles and will allow for on scene diagnostics by EMTs and paramedics. Development of the smaller instrument is expected to be completed by March 2003.

The Saliva Test Modules (the "STM's) are designed to work with the IMPACT Test System to test for a variety of molecules. Each STM consists of the mouthpiece, tubing and test cassette. The initial STM's in production are:

• 1250 STM tests for the five common US drugs of abuse (marijuana, cocaine, amphetamines/meth-amphetamines and opiates (heroin), and PCP).
• 1255 STM test for the five above drugs of abuse and alcohol simultaneously
• 1251 STM tests for marijuana, cocaine, amphetamines/meth-amphetamines, opiates and benzodiazapines
• 1256 STM tests for marijuana, cocaine, amphetamines/meth-amphetamines, opiates and benzodiazapines and alcohol simultaneously

Additionally, the Company is developing tests for tricyclic antidepressants, barbiturates and ecstasy. The Company expects to have over ten STM's available to customers within the next 12 months.

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

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

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

In April 1999, the Company and the USN completed negotiations for an expansion of the ten-year license agreement (the "License Agreement") originally granted to the Company's then parent ("SAT") in 1992 and transferred to the Company in 1997. The original License Agreement covered the exclusive use by the Company of the USN's technology for testing saliva for drugs of abuse. The new terms expand the field-of-use from drugs of abuse and anabolic steroids on urine samples to include all possible diagnostic uses for saliva. In addition, the royalty rate was reduced to 3% on the technology-related portion of the disposable cassette sales and 1% on instrument sales from the previous 10% on all LifePoint product sales. The minimum royalty payment was reduced to $50,000 in 2001 and $100,000 a year thereafter versus the previous $100,000 per year. The License Agreement may be terminated by the USN in the event the Company files bankruptcy or is forced into receivership, willfully misstates or omits material information, or fails to market the technology. Either party may terminate the agreement upon mutual consent. Either party may terminate the agreement upon mutual consent. Termination of the Licensing Agreement for the USN patent would end the Company's rights to develop products under the patent. Termination of the license would require the Company to make changes to its products that could further delay development and marketing thereof.

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

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

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

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

In addition to its rights under the USN patent license described above in this section, the Company has rights under the following patents:

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

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

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

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

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

The Company maintains a policy of seeking patent protection in the United States and other countries in connection with certain elements of its technology when it believes that such protection will benefit the Company. Lyophilization and saliva aspiration patent applications have been filed in Canada, certain European countries and certain Asian countries including Japan. The pH patent was originally only applied for in the United States, but the Company has initiated efforts to file this patent in international countries as indicated above. As the Company receives patent approval from the United States, management plans to file all patents internationally within one year of the United States patent approval.

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

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

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

The Company is of the opinion that it has been able to develop and transfer the novel and unique IMPACT Test System as quickly as it has because its research and development group is much more vertically integrated than most similar companies.

The development of the IMPACT Test System is complete, including the development of the first seven assays - alcohol, marijuana, cocaine, opiates, amphetamine/methamphetamine, PCP and benzodiazapines. The research and development department has already initiated efforts on the expanded menu for the IMPACT Test System that includes: a smaller portable instrument and the assays: ecstasy, barbiturates and tri-cyclic antidepressants.

LifePoint leases a 32,000-square foot building that houses its corporate headquarters and includes 22,000-square feet of manufacturing space. The Company manufactures the disposable cassettes, but plans to use an outside manufacturer for final assembly of the current instrument, after the initial scale-up of production. The transfer of final assembly of the current instrument is expected to take place during the quarter ending December 31, 2002. For the disposable cassette and mouthpiece, detailed manufacturing requirements for the initial 24 months have been defined and scale-up plans are being executed. The Company has developed and is implementing a detailed cost reduction plan that includes utilizing multi-cavity molds and, longer term, full automation. The Company expects to begin to automate its cassette manufacturing process within the quarter ending September 30, 2002. There can be no assurance that the Company's automation of its manufacturing process will significantly reduce its costs.

LifePoint's instrument production involves snap in place, low cost assembly operation to construct, test and certify the finished instrument system. The system has been designed as a series of pre-assembled and pre-tested modular sub-assemblies. Assemblies would include modules for optics and detection, mechanical cassette handling, fluid flow, and modules for I/O. All printed circuit boards (PCBs) are outsourced. LifePoint's instrument manufacturing consists of assembly, certification, packaging and labeling of the instrument system.

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

The drugs of abuse and alcohol testing market is a multi-billion dollar international market opportunity. The Company estimates the worldwide market opportunity for the first three markets for its initial product, including the next two therapeutic drug monitoring products, to be over $3.5 billion. There can be no assurance as to the portion of this market opportunity that the Company will attain. This is especially so because the Company's marketing program has just begun and not in all of its three initial target markets.

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

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

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

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

The Company initiated marketing efforts to include lobbying and pre-marketing efforts to help ensure quick acceptance of the product by the respective markets several years ago. LifePoint's marketing department continues to be involved in lobbying efforts internationally, nationally, and within individual states. Over the last year there have been many changes in LifePoint's sales and marketing operations. In the United States, the Company currently employs sales personnel in various regions in the law enforcement market. Its regional sales managers in the law enforcement market are working with its law enforcement partner, CMI, to implement on-going sales strategies, training support and coordination of sales efforts. Its regional sales managers in the industrial/workplace market have been working to establish distribution channels and managing marketing trials and pilot studies. The marketing staff has develop a marketing communications plan including participation in trade shows, pr esentation of technical papers, and participation in lobbying efforts to facilitate the rapid market acceptance of the IMPACT Test System. Customer Service and Technical Service managers were hired and have setup the needed departments, policies and practices to ensure the quality customer relationships the Company desires.

CMI, headquartered in Owensboro, Kentucky, is the exclusive, law enforcement marketing partner for the IMPACT Test System in North America. CMI, a subsidiary of MPD, Inc., also headquartered in Owensboro, Kentucky, is a market and manufacturing leader for evidential breath alcohol testing instruments in law enforcement in the United States. The terms of the renewable, three-year agreement establish CMI as the exclusive distributor of the IMPACT Test System for law enforcement in the United States and Canada. CMI will sell, 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 Company believes that, based on its initial forecasts, CMI will pay the Company approximately $5,000,000 during the first two and one-half years of the agreement. The Company can give no assurance, however, that CMI will make sales as it initially forecasted and, acco rdingly, make significant payments to the Company. Even if CMI were to pay the Company the contractual minimum amounts to maintain its exclusive marketing rights, such payments would be materially less than the forecasted amount of $5,000,000. For the Company to realize such forecasted amount from CMI, CMI would have to sell, on the average, at least 15 IMPACT Test Systems per month during the two-and-one-half-year period. 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. However, these amounts are materially less than the forecasted amount. As of May 31, 2002, the Company had received no payments from CMI.

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

The emergency medical market in the United States will be the focus of the Company's direct sales effort. Less than 1,000 hospitals perform more than 80% of the drug testing done on overdose patients. More importantly, it is most likely that products that will be developed for the IMPACT Test System will be used in medical markets, and this focus will help the Company leverage both its research and development efforts, as well as its sales and marketing efforts. The Company will develop its own direct sales department for medical marketing no earlier than the quarter ending December 31, 2002, with FDA clearance for the products anticipated during that same quarter.

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

• MedVet Science Pty., Ltd, with headquarters in Thebarton, South Australia, will be the exclusive distributor to all medical and workplace markets throughout Australia.
• Medical Europe Diagnostic of Madrid, Spain, a newly established business by Medical Greystoke and Instituto de Tratamiento y Analisis de las Dependencias (INSTAD), also of Madrid, Spain, will focus solely on the distribution of the IMPACT Test System to all market segments within Spain.
• Lion Laboratories, based in South Wales, United Kingdom, is a subsidiary company of MPD Inc and a sister company to CMI Inc., will be the exclusive distributor to all law enforcement, medical and industrial markets in the United Kingdom.
• In addition the Company is in final negotiations with distributors from the following countries and markets:

• A distributor from Australia which will be the exclusive distributor to the law enforcement markets throughout Australia.
• A distributor from Hong Kong which will be the distributor to Hong Kong and Singapore medical and industrial markets.
• A distributor from Hong Kong which will be the distributor to Hong Kong and Singapore law enforcement markets.
• A distributor from Germany which will be the distributor to all markets in Germany, Switzerland and Austria.
• A distributor from Italy which will be the distributor to all markets in Italy, Portugal, Turkey and Greece.
• A distributor from Croatia which will be the distributor to the law enforcement and medical markets in Croatia, Bosnia, Slovenia and Herzogovina.
• A distributor from Sweden which will be the distributor to the law enforcement and industrial markets in Sweden, Norway, Denmark and Finland.

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

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

The FDA regulates the introduction, manufacturing, labeling, record keeping and advertising for all medical devices in the United States. There are two principal methods by which FDA clearance may be obtained to market medical device products such as the Company's proposed screening and diagnostic test kits: 1) Pre-market Approval (PMA) and 2) Pre-market Notification (510(k)). PMA's represent the highest level of regulatory scrutiny applied to medical devices. Most medical devices, however, receive pre-market review through the 510(k) process. . One method is to seek FDA clearance through a pre-market notification filing under Section 510(k) ("510(k)") of the Food, Drug and Cosmetics Act. Applicants under the 510(k) procedure must prove that the device for which clearance is sought is "substantially equivalent" to devices on the market prior to the Medical Device Amendments of 1976 or devices cleared thereafter pursuant to the 510(k) procedure. In some cases, data from clinical studies mus t be included in the 510(k) application. Our clinical studies have been designed to show the correlation of the IMPACT Test System results for testing drugs and alcohol in saliva to currently approved FDA products that test for drugs and alcohol in saliva by a laboratory with discrepancies reconciled by an analytical confirmation method. The review period for a 510(k) application is supposed to be 90 days from the date of filing the application. The FDA is currently taking approximately 89 77 days of review time and 102 days average total elapsed time (including "on-hold" time) to clearance according to FDA year 2000 Annual Report (CDRH).to the Health Industry Management Association Management believes that, based on discussions with the FDA, the Company's product will be reviewed under the 510(k) protocol and that it will take approximately 100 days for clearance. The Company has begun filing its submissions with the FDA, with the first 510(k) submission filed in early May 2002. There can be no assurance th at any of the Company's proposed products will ever obtain the necessary FDA or foreign regulatory clearances for commercialization.

In addition, the United States Department of Health and Human Services on February 28, 1992 issued regulations intended to implement the Clinical Laboratory Improvement Amendments of 1988. These Amendments are commonly referred to as CLIA. These regulations were to become effective September 1, 1992. The proposed regulations would require that all test sites performing workplace drug testing, including on-site testing, follow CLIA guidelines for operator training and quality control, similar to those used by laboratories. On August 28, 1992, the Department announced that the application of the statute to workplace testing would not go into effect on September 1, 1992 because of comments made on the final regulations. If the regulations are not adopted, on-site drug testing in the workplace will continue to be exempt from the statute. Recently, the Department again confirmed its intention not to adopt the CLIA regulations in the workplace. However, if the regulations are adopted, workplace testing would then be subject to the same requirements as currently required for on-site testing in the medical markets. The Company is in the process of completing studies that it believes will produce data that demonstrates that its product provides the same results when used by technical personnel as it does when used by non-technical personnel. If the Company demonstrates in its FDA submission that its product delivers similar accuracy from these two user groups, this demonstration should exempt the IMPACT Test System from CLIA regulation in the medical market and, if the statute is ever applied, in the workplace market. If the Company cannot obtain a waiver from CLIA, the costs of running the IMPACT Test System could be higher for potential customers. The Company cannot give any assurance that the Department of Health and Human Services or the FDA will agree to waive the IMPACT Test System from CLIA regulation.

In November 2000, the FDA published draft guidance for over-the-counter (OTC) screening tests for drugs of abuse. In this document the FDA announced its intention to be consistent in its regulation of drugs of abuse screening tests used in the home, workplace, insurance, and sports settings. The FDA would, however, continue to defer oversight for law enforcement applications. Should the FDA adopt such regulations, despite the Company's efforts and those of others to dissuade the FDA from doing so, such regulations would 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, this agency would require to approve the Company's entry into the industrial market in the United States. The Company will seek this clearance from the FDA simultaneously with seeking its approval of use of its p roduct for medical purposes.

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

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

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

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

Four companies, Avitar, Inc. ("Avitar"), OraSure Technologies, Inc. ("OraSure"), AnSys, Inc. ("AnSys"), 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 of allowing a specimen to flow across a treated test strip (membrane) and which produces a visual 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 does not provide quantifiable results, but only qualitative, yes/no answers. The results, therefore, cannot be evidential (used in court). LifePoint believes this type of technology is not sensitive enough to detect certain drugs at levels that are found in saliva. Additionally, on-site tests that are not instrument-based and rely on a subjective result reading are not generally legally admissible or de fensible.

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

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

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

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

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

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

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

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

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

On October 1, 2001, in order to conserve cash with the September delay in product launch, senior management took a 25% pay reduction and the rest of the employees took a 15% pay reduction. As of January 1, 2002, the pay reduction for all but senior management was cancelled and, on April 1, 2002 senior management returned to full pay. Additionally, there have been no pay increases for senior management since September 2000. See, however, the section "Board Compensation Committee Report on Executive Compensation" in Item 11 to this Report.

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

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

From the date the Company was incorporated on October 8, 1992 through March 31, 2002, the Company has incurred net losses of $38,079,589. These losses were due to the fact that the Company had no product or service to offer for sale or rental.

On February 26, 2002, the Company formally launched marketing of the IMPACT Test System, its first product, to law enforcement agencies that was 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 currently expects to complete all nine filings of 510(k) applications, including the latest drugs developed, for clearance with the FDA during the quarter ending September 30, 2002. The Company currently expects to obtain FDA clearance approximately 100 days after completion of its submissions.

The Company's other initial target market is industrial 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. Should the FDA enforce such regulations, despite the Company's efforts and those of others to dissuade the FDA from doing so, such regulations would 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 additionally field data which management believes, based on discussions with the FDA, this agency would require to approve the Company's entry into the industrial market in the United States. The Company will seek this clearance from the FDA simultaneously with seeking its approval of use of its product for medical purposes. In addition, the Company has commenced effo rts to market its product to law enforcement agencies and medical users in Europe and Australia prior to obtaining FDA approval for use in the United States. This program could offset any loss in early revenues due to the delay, if it occurs, in the Company's marketing to the industrial market in the United States.

The Company may not meet the schedule described in the preceding two paragraphs, both as to its additional market launches and making its submissions to the FDA. In addition, the FDA or a foreign government may not grant clearance for the sale of the Company's product for routine screening and/or diagnostic operations. Furthermore, the clearance process may take longer than projected. Even if the Company does meet its schedule and although the Company has begun to generate revenues, it is anticipated that profitability will not be attained sooner than five quarters after March 31, 2002. Although the Company can estimate, it cannot assure, as to when expected revenues will exceed expenses.

The Company expects to encounter the risks and difficulties frequently encountered by companies that have recently made a transition from research and development activities to commercial production and marketing. The Company has set forth below certain of these risks and difficulties in this section "Risk Factors." As an example, the transition from a development stage company to a commercial company may strain managerial, operational and financial resources. If the Company's product achieves market acceptance, then the Company will need to increase the number of employees, significantly increase manufacturing capability and enhance operating systems and practices. The Company cannot give assurances that it will be able to effectively do so or otherwise manage future growth.

The Company believes that, with the net proceeds from its private placement in June and September 2001 of $12,528,105, the marketing fees and sales proceeds forecasted to be paid from CMI, the proceeds from standard commercial banking lines of credit and/or commercial equipment leasing lines which the Company is currently negotiating, and the $9,554,062 in net proceeds received from the sale in April 2002 of 272 units, each unit consisting of 10,000 shares of the Company's Common Stock, $.001 par value (the "Common Stock"), and a common stock purchase warrant to purchase 2,000 shares of the Common Stock, the Company shall have sufficient funds to manufacture and market its product and reach profitability. The Company expects to achieve profitability not sooner than five quarters after March 31, 2002. There can be no assurance that the Company's estimate as to costs and timing will be correct. In addition, the Company may not be able to consummate standard commercial banking lines o f credit and/or commercial equipment leasing lines on an acceptable and timely basis. Furthermore, if there are any delays in obtaining FDA approval, or if there is a reduced rate of growth in revenues from those anticipated, the Company may require additional funding. In addition, if orders for the Company's product come in faster than anticipated, the Company could require additional financing to expand manufacturing, sales and other capabilities. The Company's inability to meet any such increased demand could result in the cancellation of orders and thus delay the attainment of profitability.

The Company experienced delays in launching its product because of unanticipated performance problems that had arisen first in the Company's own testing in its research and development facility and later at beta sites. The Company had made a commitment to itself and to its stockholders and prospective customers not to release its product for sale until the Company was confident that its product met or exceeded customer's expectations. In many markets, the Company will get only one chance with a customer. If a customer's initial experience with a product is not good, it is very difficult to go back a second time. Accordingly, when a product performance problem surfaced, the Company had no choice except to delay the product release. The Company also had to delay completion of the field-testing necessary to furnish the data for its FDA submission, and with it, to delay the FDA submission.

By delaying the time of product launch, these product problems delayed receipt of revenues. They 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.

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

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.

The Company also faces as competitors BioSite Diagnostics Inc., Syva Company (a division of Dade International Inc.), Roche Diagnostics (a division of Hoffman La Roche, Inc.) and at least five other major 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.

Attention has been drawn to the fact that the Company cannot market its saliva based testing device to hospitals and other medical facilities unless the Company has obtained FDA approval. The Company has also pointed out that FDA announced its intention to regulate marketing to the industrial market in the United States. (See the section "Government Regulation" under this caption "Business"). There can be no assurance that the Company will attain FDA approval on a timely basis, if at all. In addition, if the FDA determines to regulate the industrial market in the United States, this will delay the receipt of revenues by the Company in this market.

Attention has also been drawn to the fact that, if the Company cannot obtain a waiver from CLIA regulation (see the section "Government Regulation" under this caption "Business"), the cost of running the IMPACT Test System could be higher for potential customers.

The Company first began its manufacturing process in January 2001. It is anticipated that it could take up to nine months to complete the full automation of the saliva test module assembly line, once started. However, the Company has not as yet made any significant deliveries of its product. Accordingly, the Company 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 STM's at its own facility. In addition, the Company intends to continue to assemble the current instrument for at least another four to six 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 has engaged an OEM supplier 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 December 31, 2002. The Company could, accordingly, turn over instrument assembly to a number of qualified OEM instrument assembly suppliers in the event of such problems at the Company facility. The Company can use another manufacturer for the final assembly of its instrument because other suppliers furnish the subassemblies and other components. 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 OEM supplier should it so require. However, the cassette is a proprietary device developed by the Company and, accordingly the Company is not currently aware of any alternative manufacturer for the STM.

As already indicated, the initial target market in the United States was the law enforcement market. On June 4, 2001, the Company entered into an exclusive three-year, renewable, distributorship agreement with CMI, Inc. ("CMI") to distribute the IMPACT Test System to the law enforcement markets in the United States and Canada. The Company selected CMI because, to its knowledge, it is the marketing and manufacturing leader for evidentiary breath alcohol testing instruments in law enforcement in this country. Nevertheless, CMI may not be able to sell the quantities of IMPACT Test Systems of which the Company believes that CMI is capable. In such event, the Company would be required to seek another distributor or increase its own internal selling staff. The Company can give no assurance as to how quickly or successfully these alternative methods of product distribution will be implemented. Another risk to the Company is, of course, that, if MPD Inc., CMI's parent corporation, became b ankrupt or had similar financial problems, this would prevent CMI from paying fees or making purchases. Otherwise the Company believes that, based on CMI's initial forecasts, CMI will pay the Company approximately $5,000,000 during the first two and one-half years of the agreement. The Company can give no assurance, however, that CMI will make sales as it initially forecasted and, accordingly, make significant payments to the Company. Even if CMI were to pay the Company the contractual minimum amounts to maintain its exclusive marketing rights, such payments would be materially less than the forecasted amount of $5,000,000. For the Company to realize such forecasted amount from CMI, CMI would have to sell, on the average, at least 15 IMPACT Test Systems per month during the two-and-one-half-year period. As of June 30, 2002, the Company had received no payments from CMI.

The three-year term did not begin until general marketing of the IMPACT Test System began on February 26, 2002. The Company notes that CMI will benefit from volume discounts and, therefore, 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.

Another risk is that CMI may terminate the distribution agreement as described in the section "Marketing and Distribution" under this caption "Business".

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 Daubert and Frye standards for admission as scientific evidence in court. These two standards have been adopted in all 50 states. These standards require acceptance of the Company's product or technology by members of the scientific community and proven performance equal to currently used methods. 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 c annot give assurance that its technology will be accepted. Until the Company's product is challenged in court, legal precedence will not have occurred.

The desire to use saliva for drug testing in the workplace market is very strong. As an example, SAMHSA, the federal agency that regulates drug testing on federal safety-sensitive workers, has indicated that it is in the process of adding saliva to the menu of applicable technologies for drug testing of federal safety sensitive personnel. There are few state laws limiting the use of saliva for workplace testing. Currently, saliva or other bodily substances testing of employees for drugs is permitted in all states but Maryland.

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. Additional efforts will be needed to change the laws in states which have not adopted saliva as a test specimen. The Company believes this change will occur because law enforcement officials are anxious to have a non-invasive test method for drug testing and are willing to support legislation. The Company is currently working on draft legislation for this joint effort. Nevertheless, the Company cannot give assurance as to when and if this legislation will be adopted in the other states.

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

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. In any event, payment of a royalty or licensing fee to any such company would also add to costs of operations and thereby adversely affect the Company's results of operations.

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.

Now that the Company has held the market launch of the IMPACT Test System in the United States, it has commenced efforts to market its product through distributors in other countries, starting with certain of the Western European and Asian countries.

In addition to economic and political issues, the Company 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:

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 Company's marketing its 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.

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

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 effect the Company's distributors' ability to perform and, accordingly, impact the Company's revenues.

Although the Company made an effort to satisfy itself 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 Company maintains its principal executive offices and manufacturing space in Ontario, California and laboratory facilities in Rancho Cucamonga, California. The corporate offices and manufacturing facility, which consist of approximately 32,000 square feet, is leased at $226,000 per year pursuant to a lease that expires July 31, 2005. The laboratory facility, which consists of approximately 10,000 square feet, is leased at $72,000 per year pursuant to a lease that expires March 31, 2004 with options to extend the lease until July 31, 2005.

Global Consultants, LLC d/b/a Global Capital instituted an action on June 18, 2001 in a California state court against the Company and Linda H. Masterson, Chairman, President and Chief Executive Officer. The plaintiff seeks damages aggregating $4,500,000 for the non-issuance and termination of common stock purchase warrants for an aggregate of 392,275 shares of the Common Stock. The plaintiff's computation of damages is based on the market price of the Common Stock on one day reaching $8.00 per share and on an excessive and unsupportable number of shares subject to the warrants. The plaintiff's second amended complaint does not allege the previously alleged claims relating to fraud, negligence and accounting and for punitive or exemplary damages. The Company believes that the plaintiff's remaining causes of action for breach of contract, conversion and violation of a California statute are without merit. The Company's trial counsel, the law firm of Rosenfeld, Meyer & Susman, LLP, i s of the opinion that the probability of any recovery by the plaintiff of damages in excess of 10 percent of the Company's current assets (i.e., current assets of $7,617,790 as of December 31, 2001) is remote. The Company is of the further opinion that, even if the plaintiff were able to overcome all of the affirmative defenses and the allegations of the Company's counterclaims, its maximum provable damages are less than a third of that amount. However, unanticipated results in litigation are always possible should this proceeding proceed to trial

Not Applicable.

From June 25, 1998 to April 18, 2000, the Common Stock was reported on the OTC Bulletin Board of the National Securities Dealers, Inc. under the symbol "LFPT." On April 19, 2000, the Common Stock began trading on The American Stock Exchange ("AMEX") and the symbol was changed to "LFP." The quarterly high and low sales prices as quoted by the AMEX for the fiscal years ended March 31, 2001 and March 31, 2002 are as follows:

June 30, $4.65 $3.18 $6.88* $3.75*

September 30, 3.31 2.57 6.69 4.44

December 31, 3.70 1.98 7.00 3.75

March 31, 5.22 3.01 6.03 3.30

As of March 31, 2002, there were approximately 406 holders of record of the Common Stock and, based upon requests for copies in connection with the 2001 Annual Meeting of Stockholders, the Company believes that there are approximately 8,800 beneficial owners of the Common Stock.

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

There were no securities sold during the quarter ended March 31, 2002 which were not registered under the Securities Act of 1933, as amended (the "Securities Act"). See Note 5 - Stockholder's Equity for information on the sales of securities not registered under the Securities Act that have occurred over the past three years.

The following tables set forth selected financial data of LifePoint for the five fiscal years ended March 31, 2002, 2001, 2000, 1999 and 1998. This selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and related notes thereto included elsewhere in this Report.

Until December 31, 2001, the Company had been a development stage enterprise with no revenue history. Until recently, the Company has devoted substantially all of its resources to research and development and has experienced an ongoing deficiency in working capital. The Company has just begun generating revenue from product sales. There can be no assurance as to when the Company will achieve profitability, if at all.

Prior to December 31, 2001, the Company had not produced any revenues as a result of its being a development stage company. The Company had been dependent on the net proceeds derived from seven private placements pursuant to Regulation D under the Securities Act to fund its operations. The succeeding three paragraphs describe the private placements in fiscal 2000, 2001 and 2002.

On February 29 and March 14, 2000, the Company closed as to sales at $5,000 per unit of an aggregate of 1,840 units, each unit consisting of 2,500 shares of the Common Stock and a common stock purchase warrant expiring February 28 or March 13, 2005 to purchase 2,500 shares of Common Stock at $3.00 per share. The warrants were not exercisable prior to September 14, 2000 and the shares included in the units were restricted securities for at least one year. The Company realized $9,200,000 in gross proceeds. Finders' fees were paid to various consultants and bankers for their assistance in helping the Company to complete this private placement consisting of an aggregate of $604,706 in cash fees and common stock purchase warrants expiring March 13, 2005 to purchase an aggregate of 273,075 shares of the Common Stock at $3.00 per share.

As a result of the $9,200,000 in gross proceeds realized in the Company's fourth private placement which was closed in February and March 2000, management believed, as the Company had previously announced, that the Company had sufficient funds to complete the commercialization of its testing product and bring the same to market. This expectation has proven to be correct. However, as the Company had also previously reported, the Company also required additional funds to bridge the gap between the time the Impact Test System was first brought to market and the time the resultant revenues from sales of such product resulted in profitability.

In June 2001, the Company closed an initial round of a private placement and in September 2001, closed the final round of the private placement. The Company realized $13,787,085 in gross proceeds (less $1,092,278 in expenses related to the private placement) from the sale of 393.916 units each unit consisting of 1,000 shares of the Series C Preferred Stock and a Common Stock purchase warrant to purchase 10,000 shares of the Common Stock. The Company had previously realized $3,000,000 in gross proceeds from the sale of 75,000 shares of the then designated Series B Preferred Stock. However, the $3,000,000 purchase price for these shares was applied to purchase units of the Series C Preferred Stock and the shares of Series B Preferred Stock were cancelled and the related common stock purchase warrants surrendered.

On April 2, 2002, the Company sold 272 units, at $37,500 per unit, to eight accredited investors. Each unit consisted of 10,000 shares of the Common Stock and a common stock purchase warrant expiring April 1, 2007 to purchase 2,000 shares of the Common Stock at $4.50 per share. The Company realized $10,200,000 in gross proceeds from the private placement. The Company has closed this offering and no further units will be offered.

As a result, management believes that the net proceeds from the offerings, together with certain other sources of funds, will be sufficient to enable the Company to reach the period when the Company can reasonably expect to achieve profitability. There can be no assurance that management's estimate as to costs and timing will be correct. However, if there are any additional delays in the Company meeting its timetable, the Company may require additional funding.

The Company has entered into a strategic partnering agreement with CMI to distribute the Company's products exclusively to the law enforcement market. Based on its initial forecasts, CMI will make payments of approximately $5 million to LifePoint over a two and one-half year period. However, there can be no assurance that CMI will make payments approximating that amount. 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. Additionally, the Company continues to pursue additional strategic partnering for other markets. However, there can be no assurance when and if such arrangements will be made.

Management has investigated the possibility of an underwritten public offering and has received expressions of interest from several well-known firms, but only on a post-revenue basis. However, because the market currently is not generally receptive to public offerings, there can be no assurance that stock market conditions in 2002 will be receptive to a public offering by the Company, especially in view of the general volatility of the financial markets in 2000 and 2001. In addition, competitive conditions may make the Company less attractive to potential public investors. See the section "Competition" under the caption "Business" in this Report.

There can be no assurance that the Company will be successful, if required, in securing additional financing, whether through a capital leasing firm, a strategic partner, a public offering or a private placement.

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 ("the 1997 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. As of March 31, 2002 Notes totaling $912,500 were due to the Company with various due dates from March 13, 2003 through August 27, 2003 bearing interest rates ranging from 6% to 9%. All Notes have a term of eighteen months. A detailed list of the Notes due from Officers and senior staff may be found in Item 13 Certain Relationships and Related Transactions. All other notes previously issued have been fully repaid, including interest payments.

If all of the common stock purchase warrants that were outstanding on March 31, 2002 were subsequently exercised (13,288,988 shares), the Company would realize $35,786,752 in gross proceeds. If all of the options pursuant to the Company's two Stock Option Plans to purchase an aggregate of 2,155,326 shares outstanding on March 31, 2002 were subsequently exercised, the Company would realize $7,025,136 in gross proceeds. However, there can be no certainty as to when and if any of these securities may be exercised, especially as to the options, which were not all currently exercisable as of March 31, 2002. Accordingly, management believes that the Company cannot rely on these exercises as a source of financing.

Net cash used for operations during fiscal 2002 amounted to $12,023,000 as compared to $6,952,000 and $3,857,000 in fiscal 2001 and 2000, respectively. The cash used by operating activities in fiscal 2002 increased by $5,071,000 from fiscal 2001, which was the result of increased staffing, related expenses associated with the commercialization of the IMPACT Test System and delays in bringing the product to market. Net cash used by operating activities in fiscal 2001 increased by $3,095,000 from fiscal 2000, which was the result of increased staffing, facilities and related expenses associated with the final development phase of the IMPACT Test System.

During fiscal 2002, 2001 and 2000, net cash used by investing activities was $888,000, $747,000 and $105,000, respectively. The $141,000 increase in cash used in fiscal 2002 over fiscal 2001 was directly related to the granting of trademark rights for "LifePoint", "IMPACT" and "ARIS" in the United States, Europe, Australia and Japan. The increase in fiscal 2001 over fiscal 2000 of $642,000 was as a result of leasehold improvements to the manufacturing facility in Ontario and the addition of furniture and equipment to that facility and $37,000 directly related to the granting of trademark rights for "LifePoint" in the United States and Europe.

Net cash provided by financing activities amounted to $9,669,000 during fiscal 2002 primarily related to the sixth private placement of 393,916 shares of the Company's Series C Preferred Stock with net proceeds of $12,528,000 less the redemption of the Series B Preferred Stock or $9,528,000. An additional $814,000 was received from the exercise of stock options and warrants.

Net cash provided by financing activities amounted to $4,443,000 during fiscal 2001 related to the fifth private placement of the Series B Preferred Stock with gross proceeds of $3,000,000 and proceeds from the exercise of warrants and options of $1,685,000 and net payments against capital leases of $242,000.

Net cash provided by financing activities amounted to $8,649,000 during fiscal 2000 related to the fourth private placement of units of Common Stock and common stock purchase warrants with net proceeds approximating $8,577,000 and proceeds from the exercise of warrants and options of $119,000.

During fiscal 2002, the Company recognized its first revenues of $135,980. Cost of goods sold for fiscal 2002 included an adjustment of $350,000 for inventory impairment and to the higher start-up costs associated with pilot manufacturing and the initial builds of product (R&D purchases of initial parts and the use of engineering rather than production labor). Research and development expenses in fiscal 2002 were $7,411,000 as compared to $5,180,000 in fiscal 2001, or an increase of $2,231,000 or 43%. The increase in fiscal 2002 was a result of the Company's transition into the final stages of development including product launch delays. Staffing levels in product development increased 37.9% in fiscal 2002, while staffing in pilot manufacturing increased 467% in fiscal 2002. Selling, general and administrative expenses were $4,364,000 in fiscal 2002 as compared to $2,152,000 in fiscal 2001, or an increase of $2,212,000 or 103%. The increase was due to increased sales and market ing activities related to product launch in February 2002. In addition, staffing increased 63.6% for fiscal 2002. Depreciation and amortization during fiscal 2002 were $521,500 as compared to $255,400 for fiscal 2001. The increase of $266,100 was a result of increased furniture, equipment and leasehold improvements from fiscal 2001 related to the addition of the corporate headquarters and manufacturing facility. Interest income, which is a component of interest income, net, for fiscal 2002 was $355,000 as compared to $503,600 for fiscal 2001. The decrease of $148,600 was the result of lower interest earned due to lower average cash on hand during the year. Interest expense, which is a component of interest income, net, in fiscal 2002 was $168,100 as compared to $78,500 for fiscal 2001. The increase was a result of $34,700 interest paid to certain holders of the Series C Preferred Stock and $10,900 paid to the General Conference Corporation of Seventh-day Adventists (the "GCC") on the $1.5 million short-term note. The net loss for fiscal 2002 was $12,597,000 as compared to $7,162,500 for fiscal 2001. The increase of $5,434,500 or 76% was primarily the result of the increase in product development, pilot manufacturing and marketing and sales expenses noted above.

During fiscal 2001, the Company continued as a development stage enterprise with no revenues. Research and development expenses in fiscal 2001 were $5,180,000 as compared to $2,448,000 in fiscal 2000, or an increase of $2,732,000 or 112%. The increase in fiscal 2001 was a result of the Company's transition into the commercialization phase of product development including the establishment of pilot manufacturing. Staffing levels in product development increased 53% in fiscal 2001 and facilities expenses increased 189% due to the addition of the manufacturing facilities in Ontario. Selling, general and administrative expenses were $2,152,000 in fiscal 2001 as compared to $1,518,000 in fiscal 2000, or an increase of $634,000 or 42% as a result of an increase in staffing of 120% and accelerating pre-marketing and lobbying efforts. Depreciation and amortization during fiscal 2001 were $255,400 as compared to $99,700 for fiscal 2000. The increase of $155,700 is directly attributable to t he increase in capital assets acquired in fiscal 2001 as the Company completed the construction and equipping of its manufacturing facility. Other income for fiscal 2001 was $425,100 as compared to $116,200 for fiscal 2000. The increase of $308,900 was the result of interest income that, due to increased cash on hand resulted in higher returns. As of March 31, 2001, the Company did not anticipate generating revenues from product sales until the third quarter of 2001 at the earliest.

The net loss for fiscal 2001 was $7,163,000 as compared to $3,950,000 for fiscal 2000. The increase of $3,213,000 or 81% was primarily the result of the increase in product development and commercialization expenses noted above.

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

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 generally accepted accounting principles 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.

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

The majority of our revenue is from the sales of the IMPACT Test System. We recognize revenue in the period in which products are sold. Revenue is recognized in accordance with the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Not Applicable.

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

Not Applicable.

The following table contains certain information relating to the directors and executive officers of the Company as of May 31, 2002:

Linda H. Masterson 51 President, Chief Executive Officer,

Thomas J. Foley 62 Senior Vice President, Research and

Michele A. Clark 49 Controller and Chief Accounting

Donald C. Fletcher 50 Vice President Operations

Charles J. Casamento 57 Director

Peter S. Gold 77 Director

Paul Sandler 62 Director

Stan Yakatan 59 Director

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

The last Annual Meeting of Stockholders was held on September 7, 2001. The current Board has called the next Annual Meeting of Stockholders for September 12, 2002.

Linda H. Masterson has 30 years' industry experience, over 20 years' experience in marketing, sales and business development in the medical diagnostics, healthcare and biotechnology fields, and extensive experience as a senior manager. On May 31, 1996, she was elected a director of the Company and, on July 31, 1996, the President and the Chief Operating Officer of the Company. On May 23, 1997, she became the Chief Executive Officer of the Company (formally designated as such on May 26, 1997). On June 16, 2000, she was elected as Chairman of the Board of the Company. Until May 13, 1996 when she became an employee of the then parent of the Company, she was employed as the Executive Vice President of Cholestech, Inc., a start-up diagnostic company, for which she developed and restructured that company's business strategy. In November 1993, Ms. Masterson founded Masterson & Associates, a company of which she was the President and owner until she joined Cholestech, Inc. in May 1994, whi ch was engaged in the business of providing advice to start-up companies, including the preparation of technology and market assessments and the preparation of strategic business plans for biotech, medical device, pharmaceutical and software applications companies. From April 1992 to November 1993, Ms. Masterson was employed as the Vice President of Marketing and Sales of BioStar, Inc., a start-up biotech company focused on the commercialization of a new detection technology applicable to both immunoassay and hybridization based systems. From 1989 to 1992, she was employed as the Senior Vice President of Marketing, Sales and Business Development by Gen-Probe, Inc., a specialized genetic probe biotechnology company focused on infectious diseases, cancer and therapeutics. Prior to 1989, Ms. Masterson was employed for 12 years in various domestic and international marketing and sales positions at Johnson & Johnson, Inc., Baxter International Inc. and Warner-Lambert Company. Ms. Masterson has a B.S. in Medic al Technology from the University of Rhode Island and an M.S. in Microbiology/ Biochemistry from the University of Maryland and attended the Executive Advanced Management Program at the Wharton School of Business at the University of Pennsylvania.

Thomas J. Foley has over 35 years' experience in the medical diagnostic industry. He was elected to his officership in the Company effective March 9, 1998. From November 1997 to March 1998, he was a consultant to various companies. From November 1994 to November 1997, he served as the Executive Vice President of Business and Product Development at HiChem/Elan Diagnostics ("HiChem"), where he managed research and development, regulatory affairs (including FDA submissions), strategic and business planning, technology assessment for acquisitions, and manufacturing operations. Prior to joining HiChem in November 1994, Dr. Foley was Vice President of Research and Development at Hycor Biomedical, Inc. ("Hycor"), where he was responsible for research and development of all products, including drugs of abuse products, over an eight-year period from May 1986 to November 1994. Prior to Hycor, Dr. Foley was Vice President of Research and Development at Gilford Instruments from 1983 to 1986 and Worthi ngton Diagnostics from 1981 to 1983. Prior to Worthington Diagnostics, Dr. Foley worked at Beckman Instruments, Inc. and was the chemistry product development manager for the Astra, one of Beckman's most successful product lines. Dr. Foley has a Ph.D. in Biochemistry from Trinity College, Dublin.

Michele A. Clark became an employee of LifePoint on April 12, 1999 and was elected as the Controller and appointed as the Chief Accounting Officer on April 16, 1999. Ms. Clark has over twenty-five years of accounting and finance experience in manufacturing and high tech companies. Ms. Clark was most recently the Controller at Auto-Graphics, Inc., a software development company, where she managed all accounting, finance, human resource, and administrative functions within the company. Additionally, she was responsible for all SEC filings and shareholder relations. Prior to Auto-Graphics, Ms. Clark was Controller at Typecraft, Inc., a commercial lithographer, where she was responsible for all accounting, finance, and human resource functions. Prior to Typecraft, Ms. Clark served as accounting manager for three retail companies with multiple locations. Ms. Clark graduated Cum Laude with a B.S. in Accounting from University of La Verne.

Donald C. Fletcher has over 25 years of directly related experience in the medical diagnostic, including over 23 years experience in manufacturing and operations with extensive experience in product scale-up and transfer, and product development team management. Mr. Fletcher was most recently Vice President, Operations of Sigma Diagnostics, a division of Sigma Aldrich Corporation, where he was responsible for manufacturing 1,500 medical products including both reagent kits and instrument systems. He also guided the new product development and product transfer of a new immunoassay test system. Prior to Sigma Diagnostics, Mr. Fletcher was Vice President, Manufacturing and an Officer of Diamedix Corporation, a start-up immunodiagnostic manufacturer, where he developed and scaled-up manufacturing for an instrument manufacturing department. Prior to Diamedix, Mr. Fletcher was employed by Beckman Coulter, Inc. in a variety of project management, plant management and manufacturing positions. Mr. Fletcher has a BA in Biological Sciences with a minor in chemistry from California State University, San Jose, California.

Charles J. Casamento was elected as a director of the Company on June 16, 2000. Mr. Casamento has extensive experience in marketing, business development and executive management in pharmaceutical, biotechnology and medical products companies. From November 1999 to date, he has been serving as the Chairman, President and Chief Executive Officer of Questcor Pharmaceuticals, Inc. ("Questcor"), a specialty pharmaceutical company focusing on serving the acute care and critical care hospital markets. From June 1993 to November 1999, he served as the Chairman, President and Chief Executive Officer of RiboGene, Inc., a therapeutics company which merged with another company to form Questcor in November 1999. From March 1989 to May 1993, he served as the President and Chief Executive Officer of Interneuron Pharmaceuticals, a biopharmaceutical company of which he was a co-founder. From December 1970 to March 1989, he held management positions with Genzyme Corporation, Sandoz, Inc., Hoffman-La Roche, Inc., Johnson & Johnson and American Hospital Supply Corporation, all in the pharmaceutical area of their businesses. Mr. Casamento received his B.S. in Pharmacy from Fordham University and his M.B.A. from Iona College and is a licensed pharmacist.

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

Paul Sandler was elected as a director of the Company on December 5, 1997. He is a Board Certified pediatric nephrologist at the Arizona Kidney Disease & Hypertension Center in Phoenix. Additionally, Dr. Sandler is the Medical Director at Walter Boswell Memorial Hospital, the Phoenix Artificial Kidney Center, and South Phoenix Dialysis Center, the South Mountain Dialysis Services, and Phoenix Memorial Hospital PPG. Dr. Sandler was a fellow at Albert Einstein College of Medicine in New York City, and received his post-graduate training at Kings County Hospital, New York City. Dr. Sandler received his MD at the State University of New York, and received his BA from Emory University.

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

  Linda H. Masterson, Chairman, President and Chief Executive Officer of the Company was a director of Substance Abuse Technologies ("SAT") on September 10, 1997 when SAT filed its petition in bankruptcy. SAT was the principal stockholder of the Company until October 31, 1997. Ms. Masterson subsequently resigned as a director of SAT and SAT was subsequently discharged from bankruptcy under a plan of reorganization. No other executive officer or director of the Company has been similarly involved in any bankruptcy or similar proceedings during the past five years.

None

  Based solely on a review of Forms 3 and 4 furnished to LifePoint under Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to fiscal 2002, LifePoint is not aware of any director or executive officer of LifePoint who failed to file on a timely basis, as disclosed in such forms, reports required by Section 16(a) of the Exchange Act during fiscal 2002.

  As of March 31, 2002, the GCC was the only beneficial owner of 10% or more of the Common Stock known to the Company. The GCC has advised LifePoint that it made timely filings with respect to its transactions in fiscal 2002.

The following table provides certain summary information concerning compensation paid or accrued by the Company during fiscal 2002 and the fiscal years ended March 31, 2001 ("fiscal 2001") and 2000 ("fiscal 2000") to the sole person who served as the Chief Executive Officer during fiscal 2002 and to the other executive officers who served during fiscal 2002.

1. Ms. Masterson was elected the President of the Company effective August 1, 1996 and designated as its Chief Executive Officer on May 26, 1997. On June 16, 2000, she was elected as the Chairman of the Board of the Company.

 

2. Dr. Foley was elected as Vice President, Research and Development effective March 9, 1998 and his title was changed by the Board to Senior Vice President, Research and Development on March 12, 1999.

 

3. Mr. Fletcher was elected as Vice President, Operations on August 25, 2000.

 

4. Ms. Clark was elected Chief Accounting Officer and Controller on April 16, 1999.

 

5. Ms. Masterson, Dr. Foley, Mr. Fletcher and Ms. Clark were subject to a 25% salary reduction for the period October 1, 2001 through March 31, 2002.

As of March 31, 2002, options to purchase an aggregate of 2,155,326 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 835,651 shares of the Common Stock had been exercised and options to purchase an aggregate of 786,091 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 nonqual ified 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. Of the options outstanding as of March 31, 2002, all were incentive stock options except for options to purchase an aggregate of 308,476 shares and the options all were granted at the then market price, with exercise prices ranging from $.50 - $6.56 per share. The options have expiration dates ranging from August 14, 2007 to March 22, 2012.

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

The Company has never granted any stock appreciation rights.

The following table contains information concerning the grant of options to the Chief Executive Officer of the Company and other named executive officers whose compensation for fiscal 2002 is reported in the Summary Compensation Table under this caption "Executive Compensation."

1. Based upon options to purchase an aggregate of 1,137,140 shares of Common Stock granted in fiscal 2002.

 

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

 

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

  Options to purchase 430,838 share of the Common Stock were exercised by employees, including 272,600 by senior managers or officers, during fiscal 2002.

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

  The following table shows the fiscal year-end option values for the Chief Executive Officer of the Company and the other named executive officers whose compensation for fiscal 2002 is reported in the Summary Compensation Table under this caption "Executive Compensation".

1. The market value of the options on March 31, 2002 is based on the closing sale price of $4.12 per share on that date.

  On January 21, 2000, the Board of Directors modified the compensation arrangements previously adopted on April 16, 1999 for outside directors. In consideration of the services to be performed as a director of the Company, each director:

1. who is not an employee of the Company, or any subsidiary of the Company (if hereafter created), or

 

2. who is not a consultant to the Company, or, when incorporated, any subsidiary of the Company, and who is not paid a fee on a monthly basis

shall receive as compensation (1) an annual cash payment of $10,000, payable quarterly, but subject to retroactive pro rata adjustment in the fourth quarter if he or she fails to attend, or participate in, at least 75% of the directors' meetings held during the calendar year, and (2) a grant of an option pursuant to the 1997 Option Plan or, since June 16, 2000, a stock option pursuant to the 2000 Option Plan, depending on the then availability of shares under the respective Plan. Each grant shall be for the right to purchase 10,000 shares (previously 15,000 shares) of the Common Stock on an annual basis, except that in the first year as a director the grant is for 15,000 shares. Except for incumbent directors as of January 21, 2000, the initial grant shall be on the day of his or her first election as a director of the Company, whether by the Board or the stockholders, and thereafter on the anniversary day of such first election. The exercise price of each option or stock option sha ll be the Fair Market Value as determined pursuant to the 1997 Option Plan or the 2000 Option Plan on the respective date of the grant, or if not a business day, on the preceding day on which the Common Stock was traded. Each option will expire ten years from its date of grant and will become exercisable as to one quarter of the shares of the Common Stock on the first anniversary of the date of grant and 1/36^th of the remaining shares of the Common Stock on the same date each month thereafter for a period of 36 months, with any odd amount being exercisable in the 36th month.

In addition, each director is entitled to receive annually (1) a fee of $2,000 for any Board Committee as to which he or she serves as the Chairperson and (2) a fee of $1,000 for each Board Committee on which he or she serves. The current Board Committees are the Audit Committee, the Compensation Committee and the Nomination Committee.

In lieu of receiving the cash payments described in the preceding two paragraphs, a director may elect, prior to the commencement of the calendar year, to receive, pursuant to either the 1997 Option Plan or the 2000 Option Plan, an option subject to the following terms and conditions: (1) the right to purchase that number of shares of the Common Stock which is the dividend of (a) the cash compensation otherwise payable to him or her for the year and (b) the value of having the right to purchase that number of shares over a ten-year period at the exercise price hereinafter set forth, the value to be determined in accordance with a customary formula; (2) an exercise price equal to 85% of the closing sales price of the Common Stock on the date of election to receive an option in lieu of cash; (3) the option becomes exercisable on January 1 of the following year and (4) an expiration date of ten years from the date of election. The number of shares is subject to the same retroactive pro rat a adjustment as is the cash payment. Paul Sandler, a non-employee, non-consultant director, has made the election to receive an option in lieu of cash payments for 2002 and, accordingly, was granted an option expiring December 6, 2011 to purchase 4,380 shares at $2.64 per share.

  Peter S. Gold and Dr. Sandler, each a non-employee, non-consultant director, was granted as of April 16, 2001, an Option expiring April 15, 2011 under the 1997 Option Plan to purchase 10,000 shares at $4.09 per share. Charles J. Casamento and Stan Yakatan, each a non-employee, non-consultant director, was granted on June 16, 2001, an option expiring June 15, 2011 under the 2000 Option Plan to purchase 10,000 shares at $3.48 per share.

During fiscal 2002, Charles J. Casamento, Peter S. Gold and Paul Sandler served as members of the Board's Compensation Committee, with Dr. Sandler serving as Chairperson. None of the foregoing is, or ever was, an officer or employee of the Company. In addition, none of the foregoing had any relationship with the Company requiring disclosure under any paragraph of Item 404 of Regulation S-K under the Securities Act and Exchange Act. No executive officer of the Company serves on the compensation committee or board of directors of any other entity.

  The Company's executive officer compensation program is administered and reviewed by the Compensation Committee of the Board of Directors consisting of directors (currently three) who are neither officers or employees of the Company and who have no other interlocks with the Company. The Compensation Committee currently consists of Messrs. Charles J. Casamento, Peter S. Gold and Paul Sandler, with Dr. Sandler serving as its Chairperson. Messrs. Gold and Sandler have continuously served as members since the Compensation Committee was created on December 5, 1997. Mr. Casamento was appointed to the Compensation Committee by the Board on June 16, 2000 when he was first elected as a director of the Company. Appointments to the Compensation Committee are reviewed on an annual basis.

 Policy and Mission

  The Compensation Committee has determined that the compensation program for the Company's executive officers should not only be adequate to attract, motivate and retain competent personnel, but should also - to the extent feasible - be related to the short-term and long-term objectives of the Company. Because the Company had continued to be a development stage company through most of the fiscal year ended March 31, 2002 ("fiscal 2002"), deriving no revenues from products or services until December 2001, the Compensation Committee has not been able to relate executive compensation to the financial performance of the Company in terms of an officer's contribution to profitability. Even with the beginning of revenues, the officers' projections do not anticipate a profit for the Company until five quarters after March 31, 2002, if not later.

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

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

  Although the Compensation Committee, prior to March 23, 2001, has not used performance goals as the basis for determining monetary compensation, it has used the achievement of operational objectives by the Company as the basis for determining the exercisablity of certain warrants and options. On March 23, 2001, the Compensation Committee adopted the LifePoint, Inc. Management Bonus Plan (the "Bonus Plan") pursuant to which officers can earn cash compensation equal to a percentage of their base salary based on the achievement of goals during the prior fiscal year, commencing with fiscal 2002. At least one of a participant's annual goals must relate to the Company's overall performance, while the others may relate to his or her area of specific responsibility. The Bonus Plan reserves the right of the Compensation Committee to defer payment of the cash bonuses if the members are concerned about the liquidity of the Company or any delay in its achieving profitability. The Compensation C ommittee, in adopting the Bonus Plan, believed that this new incentive was necessary for the attraction, motivation and retention of key personnel in view of what competitors offer. Although initially in adopting the Bonus Plan the Compensation Committee acted on projections that the Company would begin to have revenues at the end of the fiscal year ended March 31, 2001 ("fiscal 2001") and might achieve profitability in the quarter when the results for fiscal 2002 were reported, the Compensation Committee remains of the opinion that the Bonus Plan is necessary for competitive reasons even without achievement of the revenues and profitability when initially projected and that its reserve power will enable the Committee to protect stockholders' interests should the Company's financial position at the end of any fiscal year so require. The Compensation Committee has exercised its right to defer payment of bonuses for fiscal 2002 until the Committee is satisfied that revenues are being derived on a regular and s atisfactory basis.

  The Compensation Committee, on the anniversary date of the initial grant, reviews the grants of options to optionees, including executive officers, in accordance with an approved formula for future grants and an evaluation of the optionee's performance in the prior year. Although the Compensation Committee receives a report as to any annual increases in an executive officer's base salary (the initial salary having been approved by the Board of Directors or the Compensation Committee), the Compensation Committee currently (under the Company's Grants of Authority) only approves increases raising an annual base salary to $150,000 or more. Currently, only the Chief Executive Officer and, effective September 14, 2002, the Senior Vice President, Research and Development requires approval of her or his salary. The Chief Executive Officer approves the increases for the other executive officers provided that the base salary, after the increase, is below $150,000.

  Because of the delay in bringing the Company's product to market, no employee in the Company has received a salary increase for 22 months. On June 14^th, the Compensation Committee consented to management's recommendation that salary increases be implemented for all but executive officers. On that date, the Compensation Committee also approved increases for the executive officers which will not become effective until the aforementioned objective as to revenues is achieved. In addition, all employees had incurred a 15% pay cut for three months, while the senior management had incurred a 25% pay cut for six months. In lieu of authorizing a cash adjustment, the Compensation Committee granted a stock option to each employee (including senior management) for each dollar lost due to the salary reduction.

 Chief Executive Officer's Compensation in 2002

  As indicated above, the Compensation Committee has based its salary and option awards to the Chief Executive Officer based on its review of independent survey data for comparable companies and its evaluation of her performance, as well as taking into consideration the cash requirements of the Company. Despite the Committee's unanimous approval of her performance, the cash requirements led the Committee to setting on September 1, 2000 her cash compensation for fiscal 2001 in the 25% percentile rather than in a higher percentile to which their evaluation of her performance would have entitled her and to attempt, in lieu thereof, to be liberal in awarding her stock compensation. As indicated above, the fiscal 2001 compensation ($190,000 on an annualized basis) continued to be paid to her during fiscal 2002 and the first three months of the fiscal year ending March 31, 2003 ("fiscal 2003"). In determining on June 14, 2002 that her base salary should be increased to $207,500 for the balance of fisca l 2003 and until the Compensation Committee otherwise authorizes, the Compensation Committee made its determination on a similar basis as it previously did in 2000. As previously indicated, effectiveness of the increased salary rate has been deferred until achievement of the revenue objective. The Compensation Committee believes that, as the Company's revenues begin to grow and ultimately as profitability is achieved, the Chief Executive Officer's compensation will be evaluated on a basis more typical to chief executive officers in an operational company. The Compensation Committee has agreed to review the compensation issue later in fiscal 2003.

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

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

 Board Action

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

Submitted by the Compensation Committee on June 28, 2002.

Paul Sandler, Chairman

Charles J. Casamento

Peter S. Gold

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

The following table sets forth, as of June 30, 2002, certain information with respect to (1) any person known to us who or which beneficially owned more than 5% of the Common Stock, (2) each director of the Company, (3) the Chief Executive Officer and (3) all directors and executive officers as a group. Each beneficial owner who is a natural person has advised us that he or she has sole voting and investment power as to the shares of the Common Stock, except that, until a common stock purchase warrant or an option is exercised, or a share of preferred stock is converted, there is no voting right.

___________________

1. The percentages computed in this column of the table are based upon 35,626,090 shares of the Common Stock which were outstanding on June 30, 2002. Effect is given, pursuant to Rule 13d-3(1)(i) under the Exchange Act, to shares issuable upon the exercise of common stock purchase warrants and options currently exercisable or exercisable within 60 days of March 31, 2002 and to the shares issuable upon the conversion of shares of the Company's Series C Preferred Stock, $.001 par value (the "Series C Preferred Stock"), all of which shares are currently convertible.

 

2. The shares of the Common Stock reported in the table include (a) 240,000 shares issuable upon the exercise by this holder and its affiliate at $3.00 per share of a common stock purchase warrant expiring February 28, 2005; (b) 333,424 shares issuable upon the conversion of 28,571 shares of the Series C Preferred Stock; (c) 333,424 shares issuable upon the exercise as $3.00 per share of a common stock purchase warrant expiring June 19, 2006; (d) 500,000 shares issuable upon the exercise at $3.25 per share of a common stock purchase warrant expiring January 29, 2007; (e) 64,410 shares estimated to be issued upon the future redemptions of premium with respect to the 28,571 shares of the Series C Preferred Stock; and (f) 12,500 shares issued, and 5,000 shares estimated to be issued, as compensatory shares.

 

3. The shares of the Common Stock reported in the table include an aggregate of 306,289 shares issuable upon the exercise at $.50 per share of four common stock purchase warrants expiring January 7, 2003.

 

4. A director of the Company since May 31, 1996; effective August 1, 1996, its President; effective May 23, 1997, its Chief Executive Officer; and, effective June 16, 2000, its Chairman of the Board.

 

5. The shares of the Common Stock reported in this table as being beneficially owned by Ms. Masterson are held, or, following exercise, will be held by Robert P. Masterson and Linda H. Masterson, Trustees of Masterson Family Trust, dated September 23, 2000 and include (a) 6,992 shares issuable upon the exercise at $.50 per share of an option expiring June 29, 2008; (b) 24,083 shares issuable upon the exercise at $1.67 per share of an option expiring October 9, 2009; (c) 55,750 shares issuable upon the exercise at $6.00 per share of an option expiring October 19, 2010 and (d) 22,840 shares issuable upon the exercise at $3.17 per share of an option expiring December 6, 2011.

 

6. A director of the Company.

 

7. The shares of the Common Stock reported in the table include (a) an aggregate of 200,000 shares issuable upon the exercise of two common stock purchase warrants expiring December 7, 2002, one for 100,000 shares exercisable at $.50 per share and the other exercisable at $1.00 per share; (b) 12,621 shares issuable upon the exercise at $1.81 per share of an option expiring April 15, 2009; (c) 5,918 shares issuable upon the exercise at $3.22 per share of an option expiring April 15, 2010; and (d) 3,422 shares issuable upon the exercise at $4.09 per share of an option expiring April 15, 2011.

 

8. The shares of the Common Stock reported in the table include (a) 12,621 shares issuable upon the exercise at $1.81 per share of an option expiring April 15, 2009; (b) 5,918 shares issuable upon the exercise at $3.22 per share of an option expiring April 15, 2010; (c) 3,921 shares issuable upon the exercise at $2.55 per share of an option expiring January 20, 2010; (d) 3,422 shares issuable upon the exercise at $4.09 per share of an option expiring April 15, 2011; and (e) 3,183 shares issuable upon the exercise at $3.77 per share of an option expiring December 14, 2010. The shares reported in the table also include (w) 105,030 shares issuable upon the conversion of 9,000 shares of the Series C Preferred Stock and (x) 105,030 shares issuable upon the exercise at $3.00 per share of a common stock purchase warrant expiring September 27, 2006, both of which securities being held in the name of PMLDSS Ltd., a family partnership of which Dr. Sandler is the President of the corporate general partner and, accordi ngly, may be deemed the beneficial owner of such securities. The table also reflects as beneficially owned: (y) the Company's estimate as to an aggregate of 26,985 shares to be issued to PMLDSS Ltd. upon the future redemptions of premium with respect to the shares of the Series C Preferred Stock and (2) 6,300 shares issued, and 1,575 shares estimated to be issued, to PMLDSS Ltd. as compensatory shares.

 

9. The shares of the Common Stock reported reflected in the table reflect (a) 8,253 shares issuable upon the exercise at $6.56 per share of an option expiring June 15, 2010 and (b) 3,013 shares issuable upon the exercise at $3.48 per share of an option expiring June 15, 2011.

 

10. The shares of the Common Stock reported in the table include (a) those issuable upon the exercise of the common stock purchase warrants and the options described in Notes (5), (7), (8) and (9) to the table; (b) an aggregate of 145,008 shares issuable to an executive officer upon his exercise at $.50 per share of two options expiring March 19, 2008 and one option expiring June 30, 2008; (c) 22,042 shares issuable to the same executive officer upon his exercise at $1.67 per share of an option expiring October 9, 2009; (d) 27,875 shares issuable to the same executive officer upon his exercise at $6.00 per share of an option expiring October 19, 2010; (e) 17,895 shares issuable to the same executive officer upon his exercise at $3.17 per share of an option expiring December 6, 2011; (f) 22,312 shares issuable to another executive officer upon her exercise at $1.81 per share of an option expiring April 15, 2009; (g) 22,277 shares issuable to the same executive officer upon her exercise at $1.87 per share of a n option expiring November 16, 2009; (h) 6,392 shares issuable to the same executive officer upon her exercise at $4.35 per share of an option expiring December 14, 2010; (i) 11,395 shares issuable to the same executive officer upon his exercise at $3.17 per share of an option expiring December 6, 2011; (j) an aggregate of 42,714 shares issuable to a third executive officer upon his exercise at $4.81 per share of three options expiring August 24, 2010; and (k) 16,830 shares issuable to the same executive officer upon his exercise at $3.17 per share of an option expiring December 6, 2011.

The plans not approved by stockholders include the following:

1. A common stock purchase warrant expiring March 19, 2003 to purchase 5,000 shares at $0.50 per share.

 

2. Common stock purchase warrants expiring April 7, 2003 held by five holders to purchase an aggregate of 7,040 shares at $1.00 per share issued in connection with an investor relations consulting agreement.

 

3. A common stock purchase warrant expiring November 30, 2003 to purchase 124,890 shares at $1.15 per share issued in connection with a consulting agreement to secure product strategic partners for the Company.

 

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

 

5. Two common stock purchase warrants, one expiring December 31, 2005 and the other October 9, 2006, each to purchase 500,000 shares or an aggregate of 1,000,000 shares, at $1.72 per share, each becoming exercisable only upon the achievement by the Company of a specified performance goal. The warrants were granted to Linda H. Masterson, the Chairman of the Board, the President, the Chief Executive Officer and a director of the Company.

 

6. Two common stock purchase warrants, one expiring December 31, 2006 and the other March 31, 2007, each to purchase 250,000 shares, or an aggregate of 500,000 shares, at $1.72 per share, each becoming exercisable only upon the achievement by the Company of a specified performance goal. The warrants were granted to Thomas J. Foley, Senior Vice President, Research and Development of the Company.

 

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

 

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

 

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

 

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

On September 7, 2001, pursuant to its policy of making annual reviews of each optionee, the Compensation Committee granted, pursuant to the 2000 Option Plan, stock options expiring September 5, 2011 exercisable at $2.95 per share to Donald C. Fletcher, Vice President, Operations of the Company, to purchase 25,500 shares of the Common Stock. On December 7, 2001 the Compensation Committee also granted options expiring December 6, 2011 exercisable at $3.17 per share to: Linda H. Masterson, Chairman of the Board, President, Chief Executive Officer and director, to purchase 142,840 shares of the Common Stock; Thomas J. Foley, Senior Vice President, Research and Development, to purchase 77,895 shares of the Common Stock; Mr. Fletcher to purchase 16,830 shares of the Common Stock and to Michele A. Clark, Controller and Chief Accounting Officer, to purchase 41,395 shares of the Common Stock. These options become exercisable in accordance with the terms of the 2000 Option Plan (see "Executive Compe nsation-Option/SAR Grants in the Last Fiscal Year" elsewhere in this Report).

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

  As a result of the procedure described in the preceding paragraph, the following Notes were outstanding as of March 31, 2002, bearing interest rates of 6% from Ms. Masterson and 9% from Mr. Smith:

1. 500,000 of these shares were issued upon the exercise of a Common Stock purchase warrant and also secure this loan.

 

2. 75,000 of these shares were issued upon the exercise of an option and also secure this loan.

 

3. 30,000 of these shares were issued upon the exercise of an option and also secure this loan.

On December 15, 2000, the Board of Directors authorized that an executive officer who has, or will in the future execute, a Note in payment of the exercise price for an option or warrant may, at his or her election, surrender to the Company shares of the Common Stock issued upon exercise to payoff the Note. Number of shares surrendered is determined by taking the total principal on the Note plus all accrued interest and dividing it by the Fair Market Value (as defined in the 2000 Option Plan) on the date of surrender. On February 25, 2002 the following Officers surrendered shares to payoff Notes due to the Company:

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

  Pursuant to a Severance Agreement dated as of October 27, 1997 (the "Masterson Severance Agreement") between the Company and Linda H. Masterson, in the event that Ms. Masterson is terminated without cause (as defined in the Masterson Severance Agreement), she will be paid severance pay in a lump sum amount equal to her annual base salary that would have been paid to her had she not been terminated during the period between the date of termination and October 27, 2001. On August 1, 2001 the Board of Directors extended Ms. Masterson's Severance Agreement for five years.

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

Page

Report of Independent Auditors F-1

Balance Sheets as of March 31, 2002 and 2001 F-2

Statements of Operations for the years ended

March 31, 2002, 2001, and 2000 F-3

Statements of Stockholders' Equity for the period

from March 31, 1999 to March 31, 2002 F-4

Statements of Cash Flows for the years ended

March 31, 2002, 2001 and 2000 F-5

Notes to Financial Statements F-8

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

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

__________________

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on July 12, 2002.

By: /s/ Linda H. Masterson

Report of Independent Auditors

		Years ended March 31,
		2002		2001		2000
Revenues		$ 135,980		$ -		$ -
Costs and expenses:
Cost of sales		623,242		-		-
Selling, general and administrative
expenses		4,364,185		2,151,985		1,517,776
Research and development		7,410,899		5,180,230		2,448,484
Depreciation and amortization		521,501		255,435		99,693
Total costs and expenses		12,919,827		7,587,650		4,065,953
Loss from operations		(12,783,847)		(7,587,650)		(4,065,953)
Other income:
Interest income, net		186,883		425,121		116,169
Net loss		(12,596,964)		(7,162,529)		(3,949,784)
Less dividend on preferred stock		995,837		-		547,246
Loss applicable to common stockholders		$(13,592,801)		$(7,162,529)		$ (4,497,030)
Loss applicable to common stockholders per common share:
Weighted average common shares
Outstanding - basic and assuming dilution		31,747,342		30,491,519		15,251,400
Net loss per share applicable to common stockholder		$ (0.43)		$ (0.23)		$ (0.29)
Net loss per common share
Weighted average common shares
Outstanding - basic and assuming dilution		31,747,342		30,491,519		15,251,400
Net loss per common share		$ (0.40)		$ (0.23)		$ (0.26)