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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.

Business Summary 

On February 26, 2002 the Company released the IMPACT Test System for sale to the international and domestic forensic markets. Since its release there have been a number of engineering improvements and retrofitting of the products in the field. 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/or 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 shortly after the Company responds to FDA clarification questions, if such approval is obtained. Usually, FDA 510(k) clearance takes approximately 100 days (based on the current experience of other companies at the FDA) after completion of submissions. The Company has begun the submission process with the FDA and intends to apply for a total of at least nine separate FDA clearances; six submissions have been initiated to date. There can be no assurance as to when and if the Company will complete its submissio ns 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/confirm ation testing 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 results for drugs of abuse and quantitative results for alcohol within 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 within 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:

The Company plans the 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.

The Saliva Test Modules ("STM") 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 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 benzodiazepines
• 1256 STM tests for marijuana, cocaine, amphetamines/meth-amphetamines, opiates and benzodiazepines 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 (U.S. Patent No. 5,183,740, "Flow Immunosensor Method and Apparatus," issued on February 2, 1993) 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. 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 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 January 1993.

In addition to the above, the Company has rights under the following patents:

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

• Alcohol Detection Assembly
• Rotary valve with Compliant Lining
• Automated Plunger-based Sample/Buffer Mixing Assembly
• Hydrophobic/Hydrophilic Sample Collection Tip
• Method for Accurately Mixing Sample Buffer Solutions
• Immunoassay Chemistry Cassette Barcode for Accurately Mixing Sample and Buffer Solutions
• Integral Sample Collection Tip
• Flow Immunoassay Assembly with Rotary Valve
• Tester for Automated Identification of Analytes in Bodily Fluids
• Plunger-based Flow Immunoassay Assembly
• Method of Manufacturing a Self-sealing Assembly
• Drug and Alcohol Assay Assembly
• Flow Immunoassay Assembly with Multiple Flow Channels
• Flow Immunoassay Scanning Assembly
• Orthogonal Read Assembly

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. Patent applications have been filed in Canada, certain European countries and certain Asian countries including Japan. As the Company submits patent applications to the United States, management plans to file the patents internationally within the following year.

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 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 expertise in organic chemistry, flow immunosensor technology, immunoassays, saliva physiology, alcohol and toxicology and the ability to develop long-lived production formulas.

The Company will continue to add enhancements and improvements to its product over time. The recent efforts by the development group have been to focus on design for manufacturability, which should increase the reliability of the product during manufacturing and in the customer's hands, as well as decreasing the product cost of goods - both materials and labor and on engineering improvements and retrofitting of the products in the field. Additionally, there is a significant effort to increase the menu of tests available, so that the product will be usable by customers in additional market segments.

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 the final assembly of the current instrument to the OEM manufacturer is expected to occur during the quarter ending December 31, 2003, at the earliest.

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 has established volume derived milestones at which point automation is added in order to increase capacity to meet customer demand. The Company has already completed the first phase of its scale-up plan, and is ready to initiate the second, semi-automation, within several months of completion of the July 2003 funding (see Item 7 of this Report for a detailed discussion of the July 2003 funding.) 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 operations 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 interim 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 global market opportunity. The Company estimates the worldwide sales 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 is focused on only one 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 observed as it is collected, it is much more difficult for it to 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 the United States Fortune 1000 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 (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 quickly and easily. 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 physicia ns treating 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.

Additional markets for the first product include substance abuse treatment and prevention programs, sports (professional, college and high school), the military, and the emerging school testing programs.

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 programs including lobbying and pre-marketing efforts to hasten acceptance of the product by the respective markets several years ago. The lobbying efforts continue internationally, nationally, and within individual states. Regional sales managers in the law enforcement market had been working with the Company's law enforcement distribution partner, CMI, Inc., to implement on-going sales strategies, training support and coordination of sales efforts. Its regional sales managers in the industrial/workplace market had started to establish distribution channels and managing marketing trials and pilot studies. The marketing staff developed a marketing communications plan including participation in trade shows, presentation of technical papers, and participation in lobbying efforts to facilitate the rapid market acceptance of the IMPACT Test System. Customer service and technical service policies and procedures have been established to support the qual ity customer relationships the Company desires. Because of the cash shortage in early 2003, these efforts were put on hold and the staff cut to a minimum, however with additional funding, the Company intends to place emphasis on continuing the development of these programs

CMI Inc., 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. The three-year term commences upon active marketing of the product by CMI who will sell, provide service and training for the IMPACT Test System to the law enforcem ent market, including driver testing, corrections, probation and parole, narcotics and drug courts. Based on CMI's initial forecasts, CMI will pay the Company approximately $5,000,000 during the first two and one-half years. 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. 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 commitments 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 March 31, 2003, 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.

The IMPACT Test System is undergoing governmental evaluations in several countries, pending delivery of additional STMs. It is expected that these studies will be published when completed, and be the basis of buying decisions. The evaluations include: Switzerland (Ministry of Interior), Austria (Ministry of Defense), Germany (Ministry of Justice), Poland (Ministry of Justice), Spain (Armed Forces), Croatia (Ministry of Defense), Slovenia (Ministry of Defense), Australia (Victoria Police), Hong Kong (Police Forensic Lab), and Indonesia (Ministry of Defense).

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:

• 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.
• A & B Analytical Instruments of Taipei, Taiwan, an established, reputable organization will represent LifePoint in China. A&B's customer base is extensive as a result of their distribution relationship with PerkinElmer, Inc., a leading provider of scientific instruments, consumables and services to the pharmaceutical, biomedical, and environmental testing markets worldwide.
• PT Professtama of Jakarta, Indonesia will market LifePoint products to all market segments in Indonesia.
• Getz Bros, Hong Kong, a subsidiary of the Marman Group, represents LifePoint in Hong Kong and Singapore.

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 Germany which will be the distributor to all markets in Germany, Switzerland and Austria.
• A distributor of law enforcement equipment and supplies will represent LifePoint in the Netherlands.
• A law enforcement distributor will carry the product line in Malaysia.
• All markets in Poland, and potentially other Eastern European countries, will be managed by a Polish distributor.
• 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 the United Kingdom which will be a distributor to all markets in the United Kingdom.

There can be no assurance as to when or if these other distributors will be engaged.

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 contains 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 are 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 must 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 tak e approximately 100 days for clearance, however, the Company's temporary loss of funding and subsequent cash shortage put the FDA submission process on hold. With the receipt of additional financing, the Company expects to be able to respond to the FDA queries, and we would expect the FDA clearance to occur shortly thereafter. However, the FDA could have additional questions, which would lengthen the time to approval. The Company has initiated filing six submissions with the FDA, with the first 510(k) submission filed in early May 2002. There can be no assurance that 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, workplac e 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. The majority 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"), Varian, Inc. ("Varian"), formerly known as AnSys, Brannan Medical ("Brannan") and Cozart Bioscience Ltd. ("Cozart"), market oral screening drugs of abuse devices. The type of technology used by these companies is called lateral flow membrane technology, which is the process by which a specimen flows across a treated test strip (membrane) and which produces colored test result on a portion of the test strip. Home pregnancy tests are a good example of lateral flow membrane technology. This type of test is less sensitive than the flow immunosensor technology and cannot provide quantifiable results, but only qualitative, yes/no answers. 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 defensible.

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, Varian, Brannan, 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 Varian, formerly sold by Roche Diagnostics, (2) clone enzyme donor immunoassay (CEDIA) 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 Varian, formerly sold by Toxi-lab, and (7) other immunoassay tests provided by eScreen, Inc. (eScreen), Princeton Biotech, Inc. ("Princeton") and BioSite Inc . ("BioSite"). All of these companies (i.e., Roche, Syva, Abbott, Varian, Editek, 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 generally 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 generally 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.

As of May 31, 2003, the Company had 7 full time, 4 part time employees, and 33 furloughed employees and consultants. Of these 44 persons, 15 were directly involved in research and development programs, 19 were in production/manufacturing and 10 in sales, marketing and administration. Following completion of the July 2003 funding (see Item 7 of this Report for a detailed discussion of the July 2003 funding) it is the Company's intent to commence bringing furloughed employees back. Additional personnel will be required to meet the demands of manufacturing, marketing and sales of the product as forecasted for fiscal 2004 and beyond.

On January 29, 2003, with the withdrawal of a $7.5 million credit line by an investor, the Company took immediate steps to conserve cash. In addition to a significant reduction in employees who were furloughed immediately, the senior managers took a 25% pay reduction, the middle managers a 20% pay reduction, and the remainder of the employees a 10% pay reduction and, effective March 21, 2003, CEO Linda Masterson elected to defer salary for additional cash conservation.

Subsequent additional terminations and furloughs have been effected on March 21, April 8, and May 19, 2003. 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.

The Company's website address is www.LifePointInc.com. On the site, free of charge, the Company makes available its annual report on Form 10-K quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after filing, by providing a hyperlink to the SEC's website directly to our reports.

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.

As of March 31, 2003, the Company had a deficit of $58,057,538. The Company has operated at a loss since inception and expects this to continue for some time. The amount of the accumulated deficit will continue to grow, as the Company continues to complete product trial acceptance with certain distributors, further develop the product distribution network and manufacturing capacity for our product.

In July 2003, the Company closed a $2 million private placement of Series D Convertible Preferred Stock ("Series D Preferred Stock") and warrants to purchase Common Stock ("Warrants"). The investors in the private placement have also agreed to purchase an additional $*** million of Series D Preferred Stock and Warrants at a second closing. The second closing is subject to the satisfaction of the following closing conditions: (i) the Company's receipt of stockholder approval of the private placement under AMEX rules and of an amendment to the Company's Restated Certificate of Incorporation increasing the authorized Common Stock of the Company, (ii) the Company negotiating certain compromise agreements with holders representing at least 75% of its outstanding trade payables, and (iii) other customary closing conditions. In addition, if the second closing is consummated, the holders of the Company's secured indebtedness have agreed to convert their secured indebtedness into approximately $3.6 million of Seri es D Preferred Stock and Warrants at the second closing.

If the second closing does not occur, the Company will be obligated to repurchase from each holder of the Series D Preferred Stock, at a per share price equal to the original purchase price paid for each share of Series D Preferred Stock, together with accrued and unpaid dividends through such date, all of the shares of Series D Preferred Stock (together with the Warrants) sold in the private placement.

There is substantial doubt about the Company's ability to continue as a going concern due to its historical negative cash flow and because the Company has not yet obtained sufficient capital to meet its projected operating needs for at least the next twelve months. The Company's independent auditors have included in their report on the financial statements for the twelve months ended March 31, 2003, an explanatory paragraph describing conditions that raise substantial doubt about the Company's ability to continue as a going concern.

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

• The progress and breadth of product refinement and manufacturing capacity, and timing of product trial acceptance by distributors, all of which directly influence cost and product sales;
• The costs involved in completing the regulatory process to get the Company's products approved, including the number, size, and timing of necessary clinical trials and costs associated with the current assembly and review of existing clinical and pre-clinical information;
• The costs involved in patenting our technologies and defending them;
• The cost of manufacturing and distributing the IMPACT Test System;
• Competition for the Company's products and the Company's ability, and that of its distributors, to commercialize its product.

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

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

From the date the Company was incorporated on October 8, 1992 through March 31, 2003, the Company has incurred net losses of $54,082,202. These losses were due to the fact that the Company has only recently initiated the marketing of its first product.

In February 2002, the Company launched marketing of the IMPACT Test System, its first product, to the international law enforcement market, one of three initial worldwide target markets. There was no governmental approval required as a prerequisite to market to these potential users of the Company's product. However, as indicated elsewhere in this section "Risk Factors," there are certain legal challenges that the Company must overcome to make its product fully acceptable in this market.

For the Company to market its product in the United States to hospitals and other medical facilities (including medical emergency rooms), which are another of the three initial worldwide target markets, the Company must first obtain clearance from the FDA for its product. The Company has initiated six and 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, 2003

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 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 product for medical purposes. In addition, the Company has commenced efforts 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 completion of the July 2003 funding (see Item 7 of this Report for a detailed discussion of the July 2003 funding). Although the Company can estimate, it cannot assure, as to when expected revenues will exceed expenses.

On January 29, 2003, LifePoint announced that its lender decided not to extend an additional $7.5 million available under a $10.0 million credit facility. Since then, LifePoint, in conjunction with two investment bankers, has been aggressively seeking $7.5 to $10.0 million in alternative financing to replace the additional funds no longer available under the credit facility.

In July 2003, the Company closed a $2 million private placement of Series D Convertible Preferred Stock ("Series D Preferred Stock") and warrants to purchase Common Stock ("Warrants"). The investors in the private placement have also agreed to purchase an additional $*** million of Series D Preferred Stock and Warrants at a second closing. The second closing is subject to the satisfaction of the following closing conditions: (i) the Company's receipt of stockholder approval of the private placement under AMEX rules and of an amendment to the Company's Restated Certificate of Incorporation increasing the authorized Common Stock of the Company, (ii) the Company negotiating certain compromise agreements with holders representing at least 75% of its outstanding trade payables, and (iii) other customary closing conditions. In addition, if the second closing is consummated, the holders of the Company's secured indebtedness have agreed to convert their secured indebtedness into approximately $3.6 million of Series D Preferred Stock and Warrants at the second closing.

If the second closing does not occur, the Company will be obligated to repurchase from each holder of the Series D Preferred Stock, at a per share price equal to the original purchase price paid for each share of Series D Preferred Stock, together with accrued and unpaid dividends through such date, all of the shares of Series D Preferred Stock (together with the Warrants) sold in the private placement.

The Company believes that, with the gross proceeds from the July 2003 financing of $2 million, the proceeds to be received from the second closing of that financing, 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 plans to negotiate, 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 completion of the July 2003 funding (see Item 7 of this Report for a detailed discussion of the July 2003 funding). 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 of credit and/or commercial equipment leasing lines on an acceptable and timely basis. Furthermore, if there are any delays in obtaining FDA ap proval, 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 ability of the Company to continue as a going concern will be dependent upon its ability to achieve profitable operations The Company will need to rely on the new financing to meet its capital needs until it achieves a positive cash flow from operations. The Company's ability to raise additional capital cannot be predicted at this time. Further, there can be no assurance that the Company will achieve positive cash flow in the next fiscal year or ever. 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 currently has limited financial and personnel resources. We have only recently begun to transition from a research and development focused organization to a production and sales organization. To successfully manage this transition, we will be required to grow the size and scope of our operations, maintain and enhance our financial and accounting systems and controls, hire and integrate new personnel and manage expanded operations. There can be no assurance that we will be able to identify, hire and train qualified individuals as the Company transitions and expands. Our failure to manage these changes successfully could have a material adverse effect on the quality of our products and technology, our ability to retain customers and key personnel and our operating results and financial condition.

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 can give no assurances that it will be able to effectively do so or otherwise manage future growth.

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

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

The Company experienced delays in marketing 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 market trial and customer sites. Accordingly, when a product performance problem surfaced, the Company had no choice except to make product improvements and modifications. The Company also had to delay completion of the field-testing necessary to furnish the data for some of the FDA submissions, and with it, to delay completion of the FDA submission.

By delaying the time of product production, 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 and could potentially adversely impact the Company's ability to continue as a going concern.

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

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

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

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

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, 2003. 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 bankrupt or had similar financial problems, this would prevent CMI from paying fees or making purchases. Otherwise, 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 whose three year term does not begin until general marketing of the IMPACT Test System begins in the law enforcement market. 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, 2003, the Company had received no payments from CMI.

The three-year term does not begin until general marketing of the IMPACT Test System begins in the law enforcement market. Due to the loss of financing, this is not expected to begin prior to the quarter ending September 30, 2003. 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 canno t 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, but specifically excluded in only six. Additional efforts will be needed to change the laws in these states which have not adopted saliva as a test specimen. 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. As of the date of this Report, the Company was four months in arrears on its lease of its corporate offices and manufacturing facility, or $93,900. 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. As of the date of this Report, the Company was four months in arrears on its lease of the laboratory facility, or $26,900. The Company has been in discussions with its lessors and has made arrangements to bring the leases current with the completion of the Series D financing described in this Report.

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 effect of any settlement will not have a material effect on the financial statements.

The Company is subject to other lawsuits in the ordinary course of business and is currently subject to lawsuits filed by various vendors for non-payment of amounts allegedly owed. In the opinion of management, such claims, if disposed of unfavorably, would not have a material adverse effect on the accompanying financial statements of the Company.

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 closing sales prices as quoted by the AMEX for the fiscal years ended March 31, 2003 and 2002 are as follows:

June 30, $3.98 $2.41 $4.65 $3.18

September 30, 2.73 1.60 3.31 2.57

December 31, 2.20 1.25 3.70 1.98

March 31, 1.73 0.39 5.22 3.01

As of March 31, 2003, there were approximately 408 holders of record of the Common Stock and, based upon requests for copies in connection with the 2002 Annual Meeting of Stockholders, the Company believes that there are approximately 8,300 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, 2003 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, 2003, 2002, 2001, 2000 and 1999. The selected financial data are derived from the financial statements of LifePoint. 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, related notes and other financial information included herein.

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, although they have not been significant to date. There can be no assurance as to when the Company will achieve profitability, if at all.

The Company incurred net losses of $16,067,188 for the year ended March 31, 2003, and had a deficit in working capital of $1,567,353 and an accumulated deficit of $58,057,538 at March 31, 2003. The Company has reduced its operating expenses through a reorganization of its operations by reducing its headcount by approximately 54% from September 30, 2002 as well as reducing its facilities expenses, certain research and development expenses and certain outside consulting and contract costs. As the reduction of above expenses alone will not prevent future operating losses, the Company has been aggressively seeking further funding in order to satisfy its projected cash needs for at least the next twelve months. As further discussed in Note 9, on July 14, 2003, the Company closed on the initial funding for approximately $2 million of a financing anticipated to result in up to $11.4 million in gross proceeds to the Company. The balance of the financing will be received at a second closing, which will occur subject to the Company successfully obtaining stockholder approval of the transaction and an increase in its authorized common stock. Under the terms, should the Company not be successful in obtaining stockholder approval and achieving the second closing, the Company will be required to refund the proceeds of the initial closing. The Company will need to continue to rely on outside sources of financing to meet its capital needs for the next fiscal year. The Company's ability to raise the necessary capital cannot be predicted at this time. Further, there can be no assurance, assuming the Company successfully raises additional funds, that the Company will achieve positive cash flow in the next fiscal year or ever. If the Company is not able to secure additional funding, it will be required to further scale back its research and development programs, manufacturing, selling, general, and administrative activities and may not be able to continue in business. These financial statements do not include an y adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue in business.

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 2002 and 2003, as well as in the subsequent period to July 10, 2003.

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 $13,787,060 in gross proceeds (less $1,258,955 in costs 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.

On July 2003, the Company closed a $2 million private placement of Series D Convertible Preferred Stock ("Series D Preferred Stock") and warrants to purchase Common Stock ("Warrants"). The investors in the private placement have also agreed to purchase an additional $*** million of Series D Preferred Stock and Warrants at a second closing. The second closing is subject to the satisfaction of the following closing conditions: (i) the Company's receipt of stockholder approval of the private placement under AMEX rules and of an amendment to the Company's Restated Certificate of Incorporation increasing the authorized Common Stock of the Company, (ii) the Company negotiating certain compromise agreements with holders representing at least 75% of its outstanding trade payables, and (iii) other customary closing conditions. In addition, if the second closing is consummated, the holders of the Company's secured indebtedness have agreed to convert their secured indebtedness into approximately $3.6 million of prin cipal, plus interest and fees, of Series D Preferred Stock and Warrants at the second closing.

If the second closing does not occur, the Company will be obligated to repurchase from each holder of the Series D Preferred Stock, at a per share price equal to the original purchase price paid for each share of Series D Preferred Stock, together with accrued and unpaid dividends through such date, all of the shares of Series D Preferred Stock (together with the Warrants) sold in the private placement.

The Series D Preferred Stock has an aggregate stated value of $1,000 per share and is entitled to a quarterly dividend at a rate of 6% per annum, payable in stock or cash at the Company's option. The Series D Preferred Stock is entitled to a liquidation preference over the Company's Common Stock and Series C Preferred Stock upon a liquidation, dissolution, or winding up of the Company. The Series D Preferred Stock is convertible at the option of the holder into Common Stock at a conversion price of $0.30 per share, subject to certain anti-dilution adjustments (including full-ratchet adjustment upon any issuance of equity securities at a price less than the conversion price of the Series D Preferred Stock, subject to certain exceptions). Following the second anniversary of the closing, the Company has the right to force conversion of all of the shares of Series D Preferred Stock provided that a registration statement covering the underlying shares of Common Stock is in effect and the 20-day volume weighted average price of the Company's Common Stock is at least 200% of the conversion price.

The Company is required to redeem any shares of Series D Preferred Stock that remain outstanding on the third anniversary of the closing, at its option, in either (i) cash equal to the face amount of the Series D Preferred Stock plus the amount of accrued dividends, or (ii) shares of Common Stock equal to 90% of the 90-day volume weighted average price of the Common Stock ending on the date prior to such third anniversary.

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

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

The purchasers of the Series D Preferred Stock in the initial closing of the private placement also received for no additional consideration Warrants exercisable for an aggregate of ### shares of Common Stock at an initial exercise price of $0.50 per share, subject to certain anti-dilution adjustments. If the Warrants are exercised within 12 months of the closing, however, the exercise price will be $0.30 per share, subject to certain anti-dilution adjustments. The Warrants expire on July 13, 2008. If the second closing of the private placement occurs, Warrants to purchase an additional ### shares of Common Stock will be issued.

Management believes that the net proceeds from the offerings (assuming the second closing is consummated), 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 CMI's initial sales 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.

There can be no assurance that the Company will be successful, if required, in securing additional financing, whether through a capital leasing firm, an asset-based lender, 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, 2003 a single note totaling $15,000 was due to the Company with a due date of September 14, 2006, bearing interest of 9%. The note had a term of eighteen months, which was extended to sixty months by the Board of Directors. 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.

Net cash used for operations during fiscal 2003 amounted to $14,711,000 as compared to $11,989,000 and $6,952,000 in fiscal 2002 and 2001, respectively. The cash used by operating activities in fiscal 2003 increased by $2,722,000 from fiscal 2002, which was the result of increased staffing, related expenses associated with the commercialization of the IMPACT Test System including product redesign and rework, delays in bringing the product to market and subsequent inventory write downs. Net cash used by operating activities in fiscal 2002 increased by $5,037,000 from fiscal 2001, which was the result of increased staffing, facilities and related expenses associated with the final development phase of the IMPACT Test System.

During fiscal 2003, 2002 and 2001, net cash used by investing activities was $789,000, $888,000 and $747,000, respectively. The $99,000 decrease in cash used in fiscal 2003 over fiscal 2002 was directly related to fewer patents and trademarks costs in fiscal 2003. The increase in fiscal 2002 over fiscal 2001 of $141,000 was directly related to the cost of obtaining trademark rights for "LifePoint", "IMPACT" and "ARIS" in the United States, Europe, Australia and Japan.

Net cash provided by financing activities amounted to $12,591,000 during fiscal 2003 primarily related to the seventh private placement of common stock with net proceeds of $9,420,000 and proceeds of a convertible debt offering of $2,500,000. An additional $652,000 was received from the exercise of stock options and warrants.

Net cash provided by financing activities amounted to $9,634,000 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, representing $9,528,000 of new investments and $3,000,000 of Series B Preferred Stock converted into Series C Preferred Stock. 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, proceeds from the exercise of warrants and options of $1,685,000 and net payments of capital leases of $242,000.

During fiscal 2003 the Company recognized revenues of $49,000 from the sales of IMPACT Test Systems and Saliva Test Modules. While the Company believes it has met the criteria of SAB 101, due to delays in receiving payments on some of the Company's initial product shipments, the Company has elected to record revenue related to shipments made during the year ended March 31, 2003 only to the extent the related cash has been collected. The Company recognized $1,317,000 of cost of sales for the year ended March 31, 2003 which includes costs related to the warranty repair or replacement of IMPACT Test Systems already in the field and units being used for field evaluation, contingent sales (inventory being evaluated for purchase) and internal use, and a reserve of $747,000 for inventories which may be in excess of current requirements. During fiscal 2002, the Company recognized revenues of $136,000, and cost of sales of $623,000, including an adjustment of $350,000 for exce ss inventory. During fiscal 2003, the Company spent $9,791,000 on research and development, $2,671,000 on general and administrative expenses and an additional $1,956,000 on selling expenses, as compared with $7,906,000, $2,494,000 and $1,896,000, respectively, during fiscal 2002. The increase of $1,885,000, or 24%, in research and development expenditures in 2003 primarily related to increased expenses due to transfer of product to manufacturing, a write down of inventory to offset modifications made to existing IMPACT Test Systems and write off of parts changed due to design modifications. General and administrative expenses increased $177,000, or 7%, primarily as a result of costs associated with the transfer to new corporate counsel with resulting fees from both law firms during the transfer period. Depreciation and amortization during fiscal 2003 were $638,000 as compared to $522,000 for fiscal 2002 . Selling expenses increased $60,000, or 3%, as a result of increased staffing and focus on market ing the IMPACT Test System. Interest expense for fiscal 2003 was $458,000, including $201,000 in non-cash interest expense related to the amortization of debt discount, while interest income was $77,000, as compared to $168,000 and $355,000, respectively, for fiscal 2002.

During fiscal 2002, the Company recognized revenues of $136,000. Cost of goods sold for fiscal 2002 included an adjustment of $350,000 for excess inventory 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 $7,906,000 as compared to $5,423,000 in fiscal 2001, or an increase of $2,483,000 or 46%. The increase in research and development during 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 $4,390,000 in fiscal 2002 as compared to $2,165,000 in fiscal 2001, or an increase of $2,225,000 or 103%. The increase was due to increase d sales and marketing activities related to product launch in February 2002. In addition, staffing increased 63.6% for fiscal 2002. Depreciation and amortization during fiscal 2002 were $522,000 as compared to $255,000 for fiscal 2001. The increase of $266,000 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 for fiscal 2002 was $355,000 as compared to $504,000 for fiscal 2001. The decrease of $149,000 was the result of lower interest earned due to lower average cash on hand during the year. Interest expense in fiscal 2002 was $168,000 as compared to $79,000 for fiscal 2001. The increase was a result of interest paid to certain holders of the Series C Preferred Stock and 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 $7,163,000 for fiscal 2001 . The increase of $5,434,000 or 76% was primarily the result of the increase in product development, pilot manufacturing and marketing and sales 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 accounting principles generally accepted in the United States 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 believes the following critical accounting policies involve significant judgements and estimates that are used in the preparation of our financial statements.

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

The majority of the Company's revenue is from sales of the IMPACT Test System, which launched at the end of fiscal 2002. The Company recognizes revenue in the period in which products are shipped, title transferred and acceptance and other criteria are met in accordance with the 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. While the Company believes it has met the criteria of SAB 101, due to delays in receiving payments on some of the Company's initial shipments of products, the Company elected, during the quarter ended December 31, 2002, to begin recording revenue related to shipments only to the extent the related cash has been collected. During the year ended March 31, 2003, the Company had $146,000 in product shipments to customers that are subject to customer evaluations and acceptance. These product shipments are inc luded in finished goods inventory at cost.

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

Patents are recorded at cost and amortized using the straight-line method over the expected useful lives of the patents or 17 years, whichever is less. Cost is comprised of the consideration paid for patents and related legal costs. If management determines that development of products to which patent cost relate is not reasonably certain or that costs exceed recoverable value, such costs are charged to operations.

License costs are recorded based upon the fair value of consideration paid and amortized using the straight-line method over the expected useful life of the underlying patents.

The Company assesses the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, the Company reduces the carrying value of the asset to fair value. While the Company's current and historical operating cash flow losses exceed the assets' carrying value, and accordingly, the Company has not recognized any impairment losses on long-lived assets through March 31, 2003.

Since the Company's inception, virtually all of its activities have consisted of research and development efforts related to developing our IMPACT Test System. The Company expenses all such expenditures in the period incurred.

Not Applicable.

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

On July 8, 2003, the Company was notified by its independent auditors, Ernst & Young LLP, that they would not stand for re-election after completion of the current audit for the year ended March 31, 2003. Ernst & Young's report for the year ended March 31, 2003 is unqualified with an explanatory paragraph related to the Company's ability to continue as a going concern, and their report for the year ended March 31, 2002 was unqualified. There were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. The Company has authorized Ernst & Young to respond fully and without limitation to any inquiries of a successor independent audit firm to be retained by the Company. Such a successor firm has not been named by the Company as of the date of this filing.

The following table contains certain information relating to the directors and executive officers of the Company as of May 31, 2003:

Linda H. Masterson 52 President, Chief Executive Officer,

and Chairman of the Board

Thomas J. Foley 63 Senior Vice President, Research and Development

Donald W. Rutherford 63 Chief Financial Officer, Vice President Finance, Secretary

Michele A. Clark 50 Controller

Charles J. Casamento 58 Director

Peter S. Gold 78 Director

Paul Sandler 63 Director

Roger Stoll 61 Director

Stan Yakatan 60 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 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.

Donald W. Rutherford, with over 30 years experience, was appointed CFO in April 2003. Mr. Rutherford is a partner with Tatum CFO Partners LLP and since 1999 he has provided CFO services to a number of client companies. From 1995 to 1999, Mr. Rutherford served as CFO of USGT Resources Inc., a natural gas marketer and asset manager. From 1988 to 1995, he served as CFO of General Automation, Inc. a developer and manufacturer of computer hardware and software with a number of international subsidiaries. From 1995 to 1998, he served as Vice President Finance for the Sales Division of Micom Systems, Inc. Previously Mr. Rutherford served as CFO and held other executive positions with several technology companies and a Venture Capital company prior to which he worked with Coopers and Lybrand (now PricewaterhouseCoopers) in their audit practice and with their consulting associate. Mr. Rutherford is both a Chartered Accountant and a professional engineer with a BASc in Industrial Engineering from th e University of Toronto.

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 (CAO) 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. In April 2003, with the appointment of Mr. Rutherfo rd as Chief Financial Officer, Ms. Clark stepped down as CAO and will remain with the Company as Controller.

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.

Roger G. Stoll, Ph.D. was elected a director of the Company on July 9, 2002. Dr. Stoll is currently a partner and co-founder of MassHealth Ventures LLP, a healthcare venture capital partnership. From 1998 to January 2001, Dr. Stoll served as Executive Vice President at Fresenius Medical Care-North America, with responsibility for the Dialysis Products Division. From 1991 to 1998, he served as President and CEO of Ohmeda Inc., a pharmaceutical and medical products company with worldwide sales of approximately $1 billion. From 1986 to 1991, Dr. Stoll served as a senior executive at Bayer AG, where he rose to the position of Executive Vice President and General Manager of the worldwide diagnostic business group. Dr. Stoll also serves on the board of directors for Cortex Pharmaceuticals, Inc., Agensys Inc. and Questcor Pharmaceuticals Inc. Dr. Stoll received his Bachelor of Science degree in pharmacy from Ferris State College and a doctorate in biopharmaceutics and drug metabolism from the Uni versity of Connecticut. He conducted post-doctoral studies in pharmacokinetics at the University of Michigan and has published more than 30 scientific papers.

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.

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 2003, 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 2003.

As of March 31, 2003, 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 2003.

The following table provides certain summary information concerning compensation paid or accrued by the Company during fiscal 2003 and the fiscal years ended March 31, 2002 ("fiscal 2002") and 2001 ("fiscal 2001") to the sole person who served as the Chief Executive Officer during fiscal 2003 and to the other executive officers who served during fiscal 2003.

On August 14, 1997, the Board of Directors adopted, subject to stockholder approval, the 1997 Stock Plan providing for the granting of options to purchase up to 1,000,000 shares of Common Stock to employees (including officers) and persons who also serve as directors and consultants of the Company. On June 5, 1998, the Board increased the number of shares subject to the 1997 Option Plan to 2,000,000, again subject to stockholder approval. Stockholder approval was given on August 13, 1998. The options may either be incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to be granted to employees or nonqualified stock options to be granted to employees, directors or consultants. On June 16, 2000, the Board of Directors adopted, and, on August 25, 2000, the stockholders approved, the Company's 2000 Stock Option Plan (the "2000 Option Plan") which would permit the granting of options to purchase an aggregate of 2,000,000 shares of C ommon Stock on terms substantially similar to those of the 1997 Option Plan.

As of March 31, 2003, options to purchase an aggregate of 2,306,735 shares of the Common Stock granted to employees including officers, directors and consultants were outstanding. As of such date, options to purchase an aggregate of 851,741 shares of the Common Stock had been exercised and options to purchase an aggregate of 1,037,343 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 nonqu alified 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.

The Company has not granted any options to consultants other than to the two current members of its Scientific Advisory Board and the nine 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 2003 is reported in the Summary Compensation Table under this caption "Executive Compensation."

Options to purchase 15,925 shares of the Common Stock were exercised by employees, during fiscal 2003.

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 2003 is reported in the Summary Compensation Table under this caption "Executive Compensation".

The Company currently has no pension plan in effect and has in effect no restricted stock plan, no stock appreciation rights nor any other long-term incentive plan under which grants or allocations may be made in the fiscal 2003 or thereafter.

On December 13, 2002, the Board of Directors modified the compensation arrangements previously adopted on January 21, 2000 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 in lieu of cash compensation; (1) each new non-employee director will receive an initial grant of options to purchase 30,000 shares of the Corporation's Common Stock upon election to the Board and thereafter will receive an annual grant of 10,000 options for continued service on the Board, (2) each non-employee Committee chairman shall receive an annual grant of 3,000 stock options, (3) each non-employee Committee member shall receive an annual grant of 2,000 stock options for such service. 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 shall 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. Eac h 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.

During fiscal 2003, Charles J. Casamento, Peter S. Gold, Paul Sandler and Roger G. Stoll who replaced Mr. Casamento served as members of the Board's Compensation Committee, with Dr. Sandler then Mr. Gold 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 nor employees of the Company and who have no other interlocks with the Company. The Compensation Committee currently consists of Messrs. Peter S. Gold, Paul Sandler and Roger G. Stoll, with Mr. Gold serving as its Chairperson. Messrs. Gold and Sandler have continuously served as members since the Compensation Committee was created on December 5, 1997. Mr. Stoll was appointed to the Compensation Committee by the Board on December 13, 2002. Appointments to the Compensation Committee are reviewed on an annual basis.

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 derive little revenues from products or services through fiscal year ended March 31, 2003 ("fiscal 2003"), , 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. The officers' projections do not anticipate a profit for the Company until five quarters after the July 2003 funding.

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 Committe e, 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, 2002 ("fiscal 2002") and might achieve profitability in the future, 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 satisfactory 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, the Chief Financial Officer and 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 since September 2000.

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 fiscal 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. Since March 21, 2003 the Chief Executive Officer voluntarily deferred her compensation pending the securing of additional financing. 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 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 two executive officers 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 been eligible to participate, commencing with fiscal 2002, in the Bonus Plan.

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 18, 2003.

Peter S. Gold, Chairman

Paul Sandler

Roger Stoll

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.

GRAPH.GIF 

The following table sets forth, as of March 31, 2003, 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 37,226,378 shares of the Common Stock which were outstanding on March 31, 2003. 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, 2003 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) 250,000 shares estimated to be issued upon the future redemptions of premium with respect to the 28,571 shares of the Series C Preferred Stock; (f) 1,500,000 shares issuable upon the exercise at $3.00 per share of a common stock purchase warrant expiring November 11, 2007; and (f) 625,000 shares issuable upon conversion of a convertible debt agreement into shares of the Company's common stock.
3. The shares of the Common Stock reported in the table include 1,000,000 shares issuable upon the exercise at $3.00 per share of a common stock purchase warrant expiring February 18, 2008.
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) 45,000 shares issuable upon the exercise at $1.67 per share of an option expiring October 9, 2009; (c) 77,500 shares issuable upon the exercise at $6.00 per share of an option expiring October 19, 2010 and (d) 65,340 shares issuable upon the exercise at $3.17 per share of two options each expiring December 6, 2011.
6. A director of the Company.
7. The shares of the Common Stock reported in the table include (a) 15,000 shares issuable upon the exercise at $1.81 per share of an option expiring April 15, 2009; (b) 7,708 shares issuable upon the exercise at $3.22 per share of an option expiring April 15, 2010; and (c) 5,208 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) 15,000 shares issuable upon the exercise at $1.81 per share of an option expiring April 15, 2009; (b) 7,708 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) 5,208 shares issuable upon the exercise at $4.09 per share of an option expiring April 15, 2011; (e) 3,183 shares issuable upon the exercise at $3.77 per share of an option expiring December 14, 2010; and (f) 4,380 shares issuable upon the exercise at $2.64 per share of an option expiring December 6, 2011. 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, accordingly, 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 78,750 shares to be issued to PMLDSS Ltd. upon the future redemptions of premium with respect to the shares of the Series C Preferred Stock.
9. The shares of the Common Stock reported reflected in the table reflect (a) 10,938 shares issuable upon the exercise at $6.56 per share of an option expiring June 15, 2010 and (b) 4,792 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) 32,500 shares issuable to the same executive officer upon his exercise at $1.67 per share of an option expiring October 9, 2009; (d) 38,750 shares issuable to the same executive officer upon his exercise at $6.00 per share of an option expiring October 19, 2010; (e) 39,145 shares issuable to the same executive officer upon his exercise at $3.17 per share of two options each expiring December 6, 2011; (f) 30,213 shares issuable to another executive officer upon her exercise at $1.81 per share of an option expiring April 15, 2009; (g) 31,250 shares issuable to the same executive officer upon her exercise at $1.87 per sha re of an option expiring November 16, 2009; (h) 9,063 shares issuable to the same executive officer upon her exercise at $4.38 per share of an option expiring December 14, 2010; (i) 22,020 shares issuable to the same executive officer upon her exercise at $3.17 per share of two options each expiring December 6, 2011.

 The plans not approved by stockholders include the following:

1. Common stock purchase warrants expiring April 7, 2003 held by five holders to purchase an aggregate of 3,040 shares at $1.00 per share issued in connection with an investor relations consulting agreement.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. A common stock purchase warrant expiring November 11, 2007 to purchase 1,500,000 shares at $3.00 per share issued in connection with a long-term financing arrangement.
11. Common stock purchase warrants expiring December 12, 2007 to purchase an aggregate of 60,000 shares at $1.65 per share issued in connection with a consulting agreement for manufacturing and operational services.
12. A common stock purchase warrant expiring February 18, 2008 to purchase 1,000,000 shares at $3.00 per share issued in connection with a short-term financing arrangement.

On December 13, 2002, pursuant to its policy of making annual reviews of each optionee, the Compensation Committee granted, pursuant to the 2000 Option Plan, stock options expiring December 12, 2012 exercisable at $1.65 per share to: Linda H. Masterson, Chairman of the Board, President, Chief Executive Officer and director, to purchase 120,000 shares of the Common Stock; Thomas J. Foley, Senior Vice President, Research and Development, to purchase 60,000 shares of the Common Stock; and to Michele A. Clark, Controller and Chief Accounting Officer, to purchase 30,000 shares of the Common Stock. These options become exercisable in accordance with the terms of the 2000 Option Plan (see "Executive Compensation-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, then Secretary of the Company and a partner of Wachtel & Masyr, LLP, then 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 permitted to optionees in other public companies.

As a result of the procedure described in the preceding paragraph, the following Note was outstanding as of March 31, 2003, bearing an interest rate of 9%:

1. 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. The 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 December 2, 2002 Linda H. Masterson, Chief Executive Officer, surrendered 424,586 shares to payoff Notes due to the Company totaling $897,500 in principal and $36,588 in interest. Ms. Masterson has no further Notes due to the Company. As of March 31, 2003, a single Note for $15,000 was outstanding with a due date of September 14, 2006 and bearing interest at the rate of 9%. Due to the recent changes enacted under The Sarbanes-Oxley Act of 2002, the Company will accept no further Notes in favor of the Company from executive officers covered by the Sarbanes-Oxley Act.

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. On May 23, 2003, the Board of Directors expanded Ms. Masterson's Severance Agreement to 18 months for a change in control, and to be consistent with the Severance Agreements established for the other senior managers as outlined below. On May 23, 2003 the Board of Directors approved Severance Agreements due to a change of control for Dr. Foley, senior vice-president of the Company and for four other members of senior managemen t. Under these agreements, the recipient would be eligible for continuation of their salary and benefits for periods of from 6 to 12 months dependant upon their length of service with the Company. In addition, all stock options would immediately vest and the time period for the exercise of warrants would be extended to two (2) years, unless the original expiration date of such Stock Award or Warrants is sooner, subject to the terms of the original expiration date of such Stock Awards or Warrants.

Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date we carried out our evaluation.

(a)(1) Financial Statements:

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

 Financial Statement Schedules are omitted as they are not required, are inapplicable, or the information is included in the financial statement or notes thereon.

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 14, 2002.

By: /s/ Linda H. Masterson

Linda H. Masterson

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Company and in the capacities indicated on July 14, 2002.

Signature Title

/s/ Linda H. Masterson Principal Executive Officer and a Director

Linda H. Masterson

/s/ Donald W. Rutherford Principal Financial Officer

Donald W. Rutherford

/s/ Charles J. Casamento Director

Charles Casamento

/s/ Peter S. Gold Director

Peter S. Gold

/s/ Paul Sandler Director

Paul Sandler

/s/ Roger G. Stoll Director

Roger G. Stoll

/s/ Stanley Yakatan Director

Stanley Yakatan

Certification requirements set forth in Section 302(a) of the Sarbanes-Oxley Act.

I, Linda H. Masterson, certify that:

1. I have reviewed this annual report on Form 10-K of LifePoint, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/   LINDA H. MASTERSON

Name: Linda H. Masterson

Title: Chairman, President and Chief

Executive Officer

Date: July 14, 2003

I, Donald W. Rutherford, certify that:

1. I have reviewed this annual report on Form 10-K of LifePoint, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/   DONALD W. RUTHERFORD

Name: Donald W. Rutherford

Title: Chief Financial Officer

Date: July 14, 2003

 The Board of Directors and Stockholders of

LifePoint, Inc.

We have audited the accompanying balance sheets of LifePoint, Inc. (the "Company") as of March 31, 2003 and 2002, and the related statements of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended March 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LifePoint, Inc. at March 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 1 to the financial statements, the Company has incurred significant operating losses and has a working capital deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 1. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Orange County, California

June 27, 2003

except for Note 9, as to which the date is

July 11, 2003