SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the fiscal year ended March 31, 1999

Commission File No. 0-23721

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

Delaware 33-0539168
(State or other jurisdiction of (IRS Employer
Incorporation organization) I.D. Number)

10400 Trademark Street
Rancho Cucamonga, California 91730
(Address of principal executive offices) (Zip Code)

Registrant's telephone number including area code:
(909) 466-8047

Securities registered pursuant to Section 12 (b) of the Act:
None

Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.001 par value

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

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

As of June 3, 1999, there were 14,234,098 shares of the registrant's Common
Stock and 485,375 shares of the Preferred Series "A" Stock outstanding.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $8,986,000 (based on the average of the bid and
ask prices of Registrant's Common Stock on NASD's OTC Bulletin Board at June
3, 1999, or $1.1375 per share). This determination of affiliate status is
not necessarily a conclusive determination for other purposes.

PART I

ITEM 1. BUSINESS

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. Among the risks and uncertainties to
which LifePoint, Inc. ("LifePoint" or the "Company") is subject are the
risks that it will not obtain the substantial financing necessary to complete
the development of its products and, accordingly, not develop any revenue
source; that it will not secure the additional personnel required first to
complete the development program and, if that is successful, later to
implement the manufacturing process, especially in its current location; that
it will not complete the development on a timely or successful basis and that
the costs will be higher than projected; that, during the period before March
2000 when LifePoint's management currently believes that its saliva based
drugs of abuse and alcohol testing product will be submitted for United
States governmental approval, competitors, with greater financial resources,
will have produced and offered for sale a saliva based competitive product;
and that, because of the delays, the potential market for LifePoint's
products will not be as large as currently anticipated. As a result, the
actual results realized by LifePoint could differ materially from the
statements made herein. Stockholders of LifePoint are cautioned not to place
undue reliance on forward-looking statements made in this Report. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Forward Looking Statements" in Item 7 to this Report.

General

Overview

LifePoint, Inc. is a late development stage company developing a unique
product - the first product that will provide immediate, on-site diagnostic
results without the need to take blood or urine. The Company is focused on
the commercialization of the flow immunosensor technology licensed from the
United States Navy (the "USN"). This proprietary technology, when used in
conjunction with saliva as a non-invasive test specimen using the Company's
proprietary collection technology, will allow LifePoint to develop a broadly
applicable non-invasive, rapid, on-site diagnostic test system. The product
can be used for rapid diagnostic testing for screening (cardiovascular
disease, osteoporosis, cancer), rapid testing (heart attack, drug overdose),
and therapeutic drug monitoring in non-medical environments such as the
workplace, home health care, ambulances, pharmacies, and even law
enforcement. The first product under development is for the simultaneous
detection of drugs of abuse and alcohol. The market potential for this
product is estimated to be $750 million, and growing to over $1 billion by
2002. Marketing is anticipated to begin by the third quarter of 2000.

History of the Company

The Company was incorporated on October 8, 1992 under the laws of the
State of Delaware, under the name "U.S. Drug Testing Inc.," as a wholly-
owned subsidiary of Substance Abuse Technologies, Inc. ("SAT"), then a public
company. The Company's name was changed to "LifePoint, Inc." on February
25, 1998.

Effective as of January 1, 1993, SAT sublicensed or transferred to the
Company certain rights or assets to develop drug testing products in exchange
for 3,500,000 shares of the Company's Common Stock, $.001 per value (the
"Common Stock"). In October and November 1993, the Company had a public
offering of the Common Stock in which an aggregate of 1,721,900 shares was
sold. As of September 30, 1997, SAT owned 5,575,306 shares of the Common
Stock or 76.4% of the 7,297,206 shares of the Common Stock then outstanding.
From its inception until October 31, 1997, the Company was a subsidiary of
SAT or otherwise under its control.

On October 29, 1997, SAT sold the controlling stockholder interest in
the Company to Meadow Lane Partners, LLC ("Meadow Lane"), then an
unaffiliated party, for $250,000. On October 31, 1997, two directors of the
Company who were directors of SAT (and one of whom was SAT's Chief Executive
Officer) resigned. On November 4, 1997, Linda H. Masterson, the President
and Chief Executive Officer of the Company, resigned as a director of SAT,
thereby terminating SAT's last relationship with the Company. The Company
has operated as a totally independent Company since that time. For
additional information as to certain of the prior relationships between the
Company and SAT, its former parent, see the sections "Material Contracts-
Management Agreement," "Certain Relationships with SAT," "Loans from SAT
to the Company" and "Transfer of Assets from SAT to the Company" under this
caption "Business."

The Company has not produced any revenues through March 31, 1999 because
its products are still in the developmental stage. The Company is
developing proprietary systems that will generate immediate, diagnostic
results for a broad variety of substances by non-invasively testing saliva.
The first product under development is a test for substance abuse,
specifically the following five commonly used drugs of abuse: cocaine,
opiates (heroin, morphine and codeine), phencyclidine hydrochloride (PCP),
amphetamines (including methamphetamines), and tetrahydrocannabinol (THC,
marijuana) (collectively the "Drugs of Abuse"), and alcohol. As indicated
below, the Company's first efforts were to develop a device to test for the
Drugs of Abuse using urine as the test specimen. However, based on its
review of the potential market in 1995, the Company decided to develop a
saliva specimen testing product first. In late 1996, it expanded the
development program to also test for the presence of alcohol.

In January 1992, the USN and SAT signed a ten-year license agreement
(the License Agreement") covering the exclusive use by SAT of the USN's
technology for the five Drugs of Abuse and any other drugs that might be
added to the National Institute of Drug Abuse ("NIDA") list of drugs of
abuse. By an amendment dated March 15, 1994, the scope of the License
Agreement was broadened to permit SAT to use the technology for testing for
methadone, benzodiazapines, barbiturates, propoxyphene, tricyclic
antidepressants and anabolic steroids. Except as set forth in the two
preceding sentences, SAT under the License Agreement could not use the USN
technology to test for other substances.

By an amendment dated June 16, 1995, the term of the exclusive right
under the License Agreement was extended to terminate ten years from June 27,
1995. In addition, SAT was granted a nonexclusive right to use the
technology thereafter for the balance of the patent term, unless the License
Agreement was terminated sooner because of SAT's default. By letter dated
May 15, 1995, the USN notified SAT that, because the expiration date of the
USN patent had been extended to February 23, 2010 under the GATT/WTO treaty,
the expiration date of the License Agreement was extended to February 23,
2010.

With the sale of the SAT majority stockholder interest in the Company
(see the section "History of the Company" under this caption "Business"),
the license agreement with the USN was transferred directly to the Company
from SAT and the Sublicense between SAT and the Company was canceled.

Until the saliva based test system is submitted to the FDA and/or
marketing has commenced, no revenues from product sales are likely to be
produced. The Company conducted an internal feasibility study on the product
that was completed in November 1996. Based on the results of the feasibility
study, the Company proceeded to the next stage of development. Assuming
subsequent success in the remainder of the development program, the Company
currently expects to submit its six-panel screening assay to the FDA, and to
begin selling to non-medical markets, in the third quarter of 2000 at the
earliest, and to begin selling to non-medical markets after obtaining FDA
approval. However, there can be no assurance that such submission will occur
by such date or that the product will be successfully developed.

Once the product is submitted to the FDA, the Company will be able to
market it in the United States for non-medical purposes, such as law
enforcement agencies' testing and safety sensitive testing by industrial
companies, and in Europe where no FDA clearance is required. The Company
will be able to commence marketing of the product in medical markets when FDA
clearance is obtained. The Company anticipates such clearance to occur
approximately 100 days (based on the current experience of other companies at
the FDA) after submission if such approval is obtained. There can be no
assurance as to when the Company will submit such assay to the FDA, if at
all, as to when the FDA will give its clearance and as to when marketing in
either medical or non-medical markets will commence. Management recognizes
that, although FDA clearance is not required for use of drug testing for non-
medical purposes, such as law enforcement agencies' testing and industrial
safety sensitive testing, FDA clearance of the product will assist the
Company's marketing in the United States to such customers. A definitive
marketing plan has not been finalized or implemented, although preliminary
marketing efforts, including markets research, has been initiated for each
target market segment. 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 be evidentiary in the law enforcement market. In
addition, management expects that the Company's tests will be performed on a
non-evidentiary basis in the industrial marketplace. If a drug of abuse is
detected in the screening test, 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
evidentiary test. 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 a urine sample instrument. However, the use of
this product in other potential markets that are testing for recent drug use
or "lifestyle," such as pre-employment testing, may be limited with the
initial product.

Currently, to the Company's knowledge, no competitor is offering a
saliva sample testing product on an "on site" basis. However, management has
been advised that two or more companies may have such product under
development, although the technology they are using is very different from
that of the Company. There can be no assurance that a competitor will not
begin to offer such a product in the future, whether before or after the
Company completes its research and development. See the section "Competition"
under this caption "Business." There also can be no assurance that the
Company's product will be developed for use in the manner contemplated in
this section.

Need for Financing

As a result of LifePoint being a development stage company and,
accordingly, not deriving revenues from the sales of products and/or
services, the Company has, since obtaining its independence from SAT in
October 1997 (see the section "History of the Company" under this caption
"Business"), been dependent on the net proceeds derived from three private
placements pursuant to Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), to fund its operations, as described in the
succeeding three paragraphs.

On November 21, 1997, the Company closed as to the sale of 1,690,000
shares of the Common Stock. On December 10, 1997, the Company closed as to
the sale of an additional 1,510,000 shares of the Common Stock. The
aggregate of 3,200,000 shares was sold at $.50 per share and the Company
realized $1,600,000 in gross proceeds.

On July 23, 1998, the Company closed in a second private placement as
to the sale of 1,000,000 shares of the Common Stock. On August 26, 1998, the
Company sold an additional 25,000 shares of the Common Stock. This offering
of a minimum of 1,000,000 and a maximum of 5,000,000 shares of the Common
Stock expired by its terms on October 14, 1998 without any additional shares
being sold. The aggregate of 1,025,000 shares was sold at $1.00 per share
and the Company realized $1,025,000 in gross proceeds.

On January 21, 1999, the Company closed in a third private placement as
to the sale of 600,000 shares of the Series A 10% Cumulative Convertible
Preferred Stock, $0.001 par value (the "Series A Preferred Stock"), at
$10.00 per share and the Company realized $6,000,000 in gross proceeds.

Management believes that, with the net proceeds from the private
placement described in the preceding paragraph, the Company has sufficient
funds to complete the pre-production instrument for the testing product for
drugs of abuse and alcohol and that the pre-production instrument will be
completed not earlier than the first quarter of 2000. There can be no
assurance that management's estimate as to costs and timing will be correct.
Any delays may further increase the Company's costs of development.

Management's latest estimate is that completion of the development and
launching of a saliva based drugs of abuse and alcohol testing product after
the prototype will require additional funding of approximately $7,000,000,
beyond the $6,000,000 funding closed in January 1999, and that the product
will not be launched earlier than the third quarter of 2000. This contrasts
with SAT's June 1997 publicly announced incremental costs for the Company of
$16,000,000 to $18,000,000 (including the costs to develop the prototype) and
a launch date of the first quarter of 1999 at the earliest.

Since October 1997, management had been pursuing parallel paths for
financing: venture capital, strategic partnering, a public offering and/or a
private placement for all or part of the required funding.

Management had initially believed that one likely source for the
additional funding would have been an investment by a venture capital
investor or investors. Any such investment would have been likely to dilute
substantially the stock interest of the current stockholders. Management
does not currently believe that an investment in the Company by a venture
capital investor to be a likely source of funding at this time.

Management has also been exploring the possibility of obtaining a
strategic partner for the Company. To this end, the Company had an agreement
with Burrill & Company, a San Francisco-based merchant bank focused
exclusively on servicing life science companies. The agreement with Burrill &
Company was terminated by the Company on May 7, 1999. Prior to termination,
LifePoint paid $51,000 to Burrill and granted Burrill a Common Stock purchase
warrant to purchase 104,167 shares of the Common Stock at $1.15 per share.
Burrill may seek to assert a claim under the agreement for additional
compensation (both in the form of cash and stock) should the Company secure a
strategic partner from the list of potential candidates developed with
Burrill. A copy of the Company's agreement with Burrill is filed (by
incorporation by reference) as an exhibit to this Report and is incorporated
herein by this reference. The Company continues to pursue strategic
partnering through the Venture Merchant Group. Several large pharmaceutical
and diagnostic corporations have expressed initial interest in partnering
with the Company. Management anticipates that one or more partnering
agreements may be completed prior to the end of fiscal year 2000.

Management has also pursued the possibility of an underwritten public
offering and has received expressions of interest from several well-known
small national and large regional firms. At least one firm has offered to
conduct a public offering late in 1999 or early 2000. There can be no
assurance that stock market conditions would be receptive to a public
offering by the Company at that time. In addition, competitive conditions in
the substance abuse testing industry at that time may make the Company less
attractive to potential public investors. See the section "Competition"
under this caption "Business."

Having successfully consummated three private placements pursuant to
Regulation D under the Securities Act since November 1997, the Company may
seek to raise the additional necessary financing through this method. As
with a public offering, there can be no assurance that potential investors
would be receptive to a private placement by the Company at that time, either
because of general stock market conditions or conditions generally in the
substance abuse testing industry.

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

If all of the Common Stock purchase warrants (the "Warrants") to
purchase an aggregate of 2,714,014 shares of the Common Stock which were
outstanding on March 31, 1999 were subsequently exercised, the Company would
realize $2,464,272 in gross proceeds. If all of the stock options (the
"Options") pursuant to the LifePoint, Inc. 1997 Stock Option Plan (the
"Stock Option Plan") to purchase an aggregate of 794,167 shares outstanding
on March 31, 1999 were subsequently exercised, the Company would realize
$397,084 in gross proceeds. However, there can be no certainty as to when
and if any of these securities may be exercised, especially as to the Options
and a Selling Stockholders Warrant which were not all currently exercisable
as of March 31, 1999. Accordingly, management believes that the Company
cannot rely on these exercises as a source of financing.

Drug Testing Products

(1) Urine Sample Testing. The Company's original product was a Drugs
of Abuse test system, consisting of an instrument and a reusable column that
would test for any or all of five Drugs of Abuse. The life of each column
was expected to be between 50 and 75 tests. Testing on a urine sample took
approximately 20 minutes per drug selected. FDA clearance was obtained for
the five tests for Drugs of Abuse and the instrument. However, because
additional development work was required before this product could be
marketed, work on this product has been abandoned. As indicated in the
section "History" under this caption "Business," the Company is focusing its
efforts on the development of the saliva sample testing product described
below.

(2) Saliva Sample Testing. Research is being conducted by the
Company, using the flow immunosensor technology, to test for drugs of abuse
and alcohol from saliva samples and for submission to the FDA for approval to
use saliva as a testing specimen. This research utilizes much of the
development work done for the Company's urine Drugs of Abuse testing system.
See the section "Government Regulation" under this caption "Business" for
information as to obtaining FDA clearance. Management anticipates that the
earliest that the saliva testing system and drugs assays for all five Drugs
of Abuse and alcohol will be ready for sale to the law enforcement and
industrial markets and for submission to the FDA in the third quarter of
2000. There can be no assurance that the Company will meet such timetable.

(a) Immunosensor Analyzer. The Company anticipates manufacturing
a small portable device in conjunction with the flow immunosensor
technology. When used with the drug assays described below, the Company
expects that this unit will provide portable, flexible and non-invasive
detection capability when used with saliva samples. The Company expects
that the assay time will be under five minutes per sample. There can
be, however, no assurance that the Company will be able to complete the
development and then market this product.

(b) Drug Assays for Immunosensor Analyzer. The Company intends
to develop disposable assay cartridges for use with its desktop model
using saliva samples. After the sample has been collected, it will be
automatically transferred to an assay cartridge containing up to ten
target analytes (drugs of abuse and alcohol for the first product) in
one panel, read by the instrument, and the results printed. The
disposable cartridge will be thrown away after use, with the waste
self-contained. Assay time is expected to be less than five minutes
per sample. The Company plans to continue its research and development
efforts for the drug assays concurrently with the instrument. There can
be no assurance that the Company will be able to complete the
development and then market the assay cartridges.

Manufacturing

Whenever the Company commences manufacturing, the Company will be
required, in the United States, to follow current Good Manufacturing
Practices ("GMP") as prescribed by the FDA. See the section "Government
Regulation" under this caption "Business." There can be no assurance that the
Company will be able to bring its plant into compliance and/or cause its
prospective third party manufacturers to comply with GMP. 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.

Marketing and Distribution

Although the Company had engaged the services of a consultant to
undertake a marketing survey in 1995, because of the delays in the
development of its products due to the decision to have a test using a saliva
sample, a definitive marketing program has not been finalized or implemented.
The Company has initiated preliminary marketing efforts, including additional
market research, to finalize product specifications and preliminary product
positioning in the three target markets: law enforcement, the industrial
workplace and the medical emergency room. The Company will be looking to
employ a Vice President, Marketing to expand on this effort and finalize the
preliminary marketing plan.

Government Regulation

The Company's first product under development is for the simultaneous
detection of drugs of abuse and alcohol. Once the product is submitted to
the FDA, the Company will be able to market it in the United States for non-
medical purposes, such as law enforcement agencies' testing and safety
sensitive testing by industrial companies, and in Europe where no FDA
clearance is required. The Company will be able to commence marketing of the
product in medical markets when FDA clearance is obtained. The Company
anticipates such clearance to occur approximately 100 days (based on the
current experience of other companies at the FDA) after submission if such
approval is obtained. There can be no assurance as to when the Company will
submit such assay to the FDA, if at all, as to when the FDA will give its
clearance and as to when marketing in either medical or non-medical markets
will commence. Management recognizes that, although FDA clearance is not
required for use of drug testing for non-medical purposes, such as law
enforcement agencies' testing and industrial safety sensitive testing, FDA
clearance of the product will assist the Company's marketing in the United
States to such customers. A definitive marketing plan has not been finalized
or implemented, although preliminary marketing efforts, including markets
research, has been initiated for each target market segment.

The Company's proposed medical screening and diagnostic products will
be subject to significant government regulation in the United States and
other countries. In order to conduct clinical tests, manufacture and market
products for human diagnostic use, the Company must comply with mandatory
procedures and safety standards established by the FDA and comparable foreign
regulatory agencies. Typically, such standards require that products be
approved by the FDA, or by comparable foreign regulatory agencies, as
appropriate, as safe and as effective for their intended use prior to being
marketed.

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. 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 approval is sought is "substantially equivalent" to devices
on the market prior to the Medical Device Amendments of 1976 or devices
approved thereafter pursuant to the 510(k) procedure. In some cases, data
from clinical studies must be included in the 510(k) application. The review
period for a 510(k) application was supposed to be 90 days from the date of
filing the application. However, the FDA has recently been taking
significantly longer in approving other companies' products. Management
believes that approximately 100 days has lately been the time period for
approval.

If the 510(k) procedure is not available for the Company's product,
then pre-market approval (the "PMA") must be obtained from the FDA. Under the
PMA procedure, the applicant must obtain an Investigational Device Exemption
(the "IDE") before beginning the substantial clinical testing which is
required to determine the safety, efficacy and potential hazards of the
product. Safety and efficacy must be established through extensive clinical
studies, which are conducted after the FDA's acceptance of the IDE
application. On completion of all of the requirements for the IDE and once
the results are evaluated, a PMA application is submitted to the FDA. The
review period under a PMA application is generally 180 days from the date of
filing. However, the application is not automatically deemed cleared if not
rejected during that period. The FDA may grant marketing clearance, request
additional data about the product's safety and efficacy or deny the
application if it determines that the product does not meet the regulatory
approval criteria. In addition, the preparation of a PMA application is
significantly more complex and time consuming than the 510(k) procedure.
Also the FDA's review of a PMA is more extensive than that required for a
510(k) application. Based on its discussions with the FDA, management
believes that the 510(k) procedure will be followed.

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 cost associated with the filing of applications with the FDA and of
research and development activities to support such applications, including
clinical trials, can be significant. There can be no assurance that the costs
of the Company's research and development activities will not exceed that
which is budgeted. In addition, 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.

Pursuant to applications filed by the Company to date, the Company had
received approval to manufacture and market the original urine test
instrument and five urine drug assays. However, as indicated in the section
"Drug Testing Products" under this caption "Business," because additional
development work was necessary before the product could be marketed, the
Company has abandoned further development work on this product. As indicated
in the section "History of the Company" under this caption "Business," the
Company is focusing its efforts on the development of the saliva sample
testing product.

In addition, regulations implementing the Clinical Laboratory
Improvement Amendments of 1988 (the "CLIA") promulgated by the United States
Department of Health and Human Services (the "HHS") and the Health Care
Financing Administration on February 28, 1992, which were to become effective
September 1, 1992, require that all employment drug testing, including on-
site testing, be processed by a federally approved laboratory. On August 28,
1992, the HHS announced that the application of the CLIA to workplace testing
would not go into effect on September 1, 1992 because of comments made on the
final regulations. The comments raised questions about, among other things,
whether bringing employee drug testing under the CLIA might have an
unintended chilling effect on efforts to encourage drug-free workplace
programs. As reported in the January 19, 1993 Federal Register, the final
decision on the regulations will be delayed until further investigation is
completed. Such decision has not been made as of the date hereof.

The Company believes that these proposed CLIA regulations will not be
made effective because:

(1) the increased costs and burdensome procedures imposed by the
CLIA will significantly reduce the volume of drug tests conducted,
which is in direct conflict with the government's long-standing war on
drugs,

(2) workplace testing is forensic in nature (i.e., for the purpose
of determining whether an individual is using illegal drugs) and not
for medical purposes (i.e., to make a health assessment for diagnostic
or treatment purposes) as was the original intent of the CLIA; and

(3) inclusion of employment drug testing may be a direct violation
of the Federal Administrative Procedures Act under Title 5 of the
United States Code and the United States Constitution.

If the regulations are not adopted, on-site drug testing in the
workplace will continue to be exempt from the CLIA. Although the Company can
obtain access to a forensic laboratory, management believes that the
consequences of adoption of the regulations would add to a potential
customer's costs and, accordingly, have a material adverse impact upon the
Company's business with respect to employment testing in the private sector.
However, the product under development is designed in such a way that
management believes that the product will be exempt from CLIA regulation,
even if the regulations are adapted in the current form.

Research and Development

During the fiscal years ended March 31, 1999 ("fiscal 1999"), 1998
("fiscal 1998"), and 1997 ("fiscal 1997"), the Company incurred
approximately $1,118,000, $1,052,000, and $1,735,000, respectively, for
development of the saliva drug testing and alcohol technology. From October
8, 1992 (inception) to March 31, 1999, the Company has spent $6,837,000 on
development of the drug testing technology. See the section "Need for
Financing" under this caption "Business" for information as to the estimated
costs to complete the product development.

Patents and Technology

In addition to its rights under the USN patent license (see the section
"History of the Company" under this caption "Business"), the Company has
rights under the following patents:

(1) U.S. Patent No. 5,183,740, "Flow Immunosensor Method and
Apparatus," issued on February 2, 1993;

(2) U.S. Patent No. 5,354,654, "Lyophilized Ligand-Receptor
Complexes for Assay and Sensors" issued on October 11, 1994; and

(3) On November 2, 1998, the Company filed a patent application
(Patent Application #09/183,295) which includes 26 claims for a saliva
aspiration system used for diagnostic purposes. Management believes
that this patent will provide broad patent protection for its unique
saliva collection system that has significant advantages over the
currently accepted method of absorption for saliva collection. The
Company is not certain whether and when this patent may issue.

The Company previously had rights to use Patent No. 5,066,859,
"Hematocrit and Oxygen Saturation Blood Analyzer," issued on November 19,
1992, but the assignment agreement dated January 16, 1992 between and Maurice
N. Karkur and James C. Velnosky was terminated on November 7, 1996.
Management does not consider termination of the Company's rights to use this
patent material to the future development and marketing of the Company's
products.

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. Termination of the Licensing Agreement for the USN
patent, which would occur only on the Company's default, would end the
Company's rights to develop products under the patent. Termination of the
other patents or licenses to use the same would require the Company to make
changes to its products that could further delay development and marketing
thereof. For additional information, see the section "Material Contracts"
under this caption "Business."

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 immunoassay sensor, 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 immunoassay sensor similar to the Company's.

Companies which 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 not begun and claims, if
any, would not likely be asserted until market introduction of such products.
If such a claim was to be made, its defense would be costly and the Company's
business would be adversely affected, even if the Company were to prevail.
No assurance can be given that the Company would be able to prevail in any
such action or that any license required under any such patent would be made
available on acceptable terms.

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

The Company maintains a policy of seeking patent protection in the
United States and other countries in connection with certain elements of its
technology when it believes that such protection will benefit the Company.
Lyophilization patent applications have been filed in Canada, certain
European countries and Japan. The saliva aspiration patent has only been
applied for in the United States. The Company has one year to initiate
filings of this patent in other countries.

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 project sponsors
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 technical information
independently developed by them to projects undertaken by the Company,
disputes may arise as to the proprietary rights to such information.

Competition

The Company has not generated any revenues to date because its products
are still in the developmental stage. If the products are developed, the
Company will compete with many of the companies of varying size that already
exist or may be founded in the future. 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. Management is not aware of any products that can
currently perform an on-site test for drugs in blood or saliva or that can
test simultaneously for drugs of abuse and alcohol. However, management
recognizes that such products may be developed in the future.

With respect to testing for the presence of alcohol, the Company will
compete with Intoxmeter, Inc., LifeLock, Inc. and other small manufacturers.

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

Management believes that saliva sample testing is unique in that, to
management's knowledge, no company is currently offering a substance abuse
detection method using saliva samples as a specimen on an "on-site" basis.
However, the Company has been advised that such a product may be under
development by two or more companies. Accordingly, there can be no assurance
that such a product will not be offered by a competitor. In addition, even if
no such product is developed, the Company anticipates, as indicated above,
competition from other substance abuse detection methods such as Syva's EMIT,
Roche's RIA, Marion's TLC, Abbott's FPIA methods, and other immunoassay tests
provided by Editek, Hycor, Princeton and BioSite.

The Company's market research to date has indicated a greater market
potential for a saliva sample portable testing instrument for use in
detecting drugs of abuse by law enforcement agencies, safety sensitive
industrial companies, hospitals and other medical facilities than a urine
sample instrument. However, because of the blood-equivalent, current status
result, the use of this product in other potential markets that require a
"lifestyle" result may be limited.

If the Company successfully completes the development of its on-site
saliva sample testing method, as to which there can be no assurance, the
Company may not have the financial resources to compete successfully with
other companies that have greater financial resources available to them. In
addition, the Company's delay in bringing a drugs of abuse and alcohol
testing product to market may adversely affect its future marketing efforts
because of the name recognition gained by competitors actively marketing a
product during this interim period.

Material Contracts

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

(a) License and Sublicense Agreements

In January 1992, the USN and SAT signed a ten-year license
agreement (the License Agreement") covering the exclusive use by SAT of the
USN's technology for the five Drugs of Abuse and any other drugs that might
be added to NIDA list of drugs of abuse. The License Agreement initially
provided that the USN would be paid a royalty equal to six percent of the Net
Selling Price (as defined in the License Agreement) for each Royalty-Bearing
Product (as defined in the License Agreement) made, used or sold by SAT or
its sublicensees in the Licensed Territory. There were minimum annual
royalty payments of $180,000 for 1993, $375,000 for 1994, $600,000 for 1995
and $1,000,000 for 1996 and each calendar year thereafter throughout the term
of the License Agreement. The License Agreement provided that the USN shall
approve all sublicenses and, in accordance with such provision, the
Sublicense was approved by the USN on September 24, 1993.

By an amendment dated March 15, 1994, the scope of the License
Agreement was broadened to permit SAT to use the technology for testing for
methadone, benzodiazapines, barbiturates, propoxyphene, tricyclic
antidepressants and anabolic steroids. Except as set forth in the preceding
sentence, SAT under the License Agreement could not use the USN technology to
test for other substances. The aforementioned minimum annual royalties were
amended November 28, 1994 as follows: the minimum annual royalty for 1995 was
reduced to $375,000 and, for 1996, it was reduced to $600,000.

By an amendment dated June 16, 1995, the term of the exclusive right
under the License Agreement was extended to terminate ten years from June 27,
1995. In June 1995, the License Agreement with the USN was renegotiated and
amended to provide for minimum annual royalties of $100,000 per year
commencing October 1, 1995 and terminating September 30, 2005. Additional
royalties will be paid pursuant to a schedule based upon sales of products.
In addition, SAT was granted a nonexclusive right to use the technology
thereafter for the balance of the patent term, unless the License Agreement
was terminated sooner because of SAT's default. By letter dated May 15,
1995, the USN notified SAT that, because the expiration date of the USN
patent had been extended to February 23, 2010 under the GATT/WTO treaty, the
expiration date of the License Agreement was extended to February 23, 2010.

With the sale of SAT's majority owned position in the Company (see the
section "History of the Company" under this caption "Business"), the USN
agreed to transfer its License Agreement with SAT directly to the Company.
An amendment dated November 12, 1997 to the License Agreement was executed to
modify the up-front $100,000 annual minimum payment so that it would be paid
in several payments over the year during 1998. The amendment also included a
one-time payment of $10,000 in satisfaction of any outstanding debt due to
the USN from SAT. The Company has assumed all of SAT's rights, and
undertaken all of SAT's obligations, under the License Agreement.

In April 1999, the Company and the USN completed negotiations for an
expansion of the License Agreement. The new terms expand the field-of-use
from drugs of abuse and anabolic steroids on urine samples to include all
possible diagnostic uses for saliva and urine. In addition, the royalty rate
has been 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 has been reduced to
$50,000 in 2001 (anticipated first year of product sales) and $100,000 a year
thereafter versus the previous $100,000 per year. The Company is further
developing the USN-developed technology for application in its own
proprietary test system. See the section "Patents and Technology" under
this caption "Business."

(b) CRDA

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 licensing 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. See the section "Patents and Technology" under
this caption "Business."

From April 1, 1993 until June 30, 1997, the Company paid SAT a
management fee pursuant to successive management agreements for services
performed by SAT on the Company's behalf. Such services included management,
administrative, accounting and other financial services and advice,
including, without limitation, the services then performed by the Treasurer
of the Company (who was also the Treasurer of SAT), for which he was not
directly compensated by the Company; services relating to the Company's
financial and banking relationships; services relating to the preparation of
financial statements, budgets, forecasts and cash flow projections; cash
management advice; and other miscellaneous services and advice. The
management fee was discontinued after June 30, 1997 because no services were
being provided after that date.

Certain Relationships with SAT

From October 1992 until January 1993, SAT conducted the Company's
business operations. Effective January 1, 1993, SAT transferred to the
Company all of its drug testing assets, including cash amounting to $11,626
and hard assets valued at their carrying value of $437,060 and intellectual
property rights associated with the drug testing operations, for 3,500,000
shares of the Common Stock. SAT also granted the Company the Sublicense with
respect to the USN technology.

As of September 30, 1997, SAT owned 76.4% of the outstanding shares of
the Common Stock. From incorporation on October 8, 1992 until October 31,
1997, all directors of the Company were also directors and security holders
of SAT. In addition, during that period executive officers of SAT also
served as executive officers of the Company.

As a result of the sale by SAT to Meadow Lane of the controlling
stockholder interest in the Company and their relationship to SAT, on October
31, 1997, Robert M. Stutman and Michael S. McCord resigned as directors of
the Company, with Mr. Stutman also resigning as its Chairman of the Board.
Messrs. Stutman and McCord were directors of SAT, with Mr. Stutman also
serving as SAT's Chairman of the Board and Chief Executive Officer. At the
same meeting, Jonathan J. Pallin who, as the transferee of Meadow Lane, is
the beneficial owner of 4,307,595 shares of the Common Stock or 29.5% of the
outstanding shares as of May 28, 1999, was elected as the Chairman of the
Board and a director of the Company. Since October 16, 1997, Mr. Pallin had
been serving as a financial consultant to the Company. In addition, Robert
Muccini resigned as the Vice President, Finance, the Treasurer, the Chief
Financial Officer and the Chief Accounting Officer of the Company because he
held comparable positions with SAT. On April 16, 1999 the Board of Directors
elected Michele A. Clark to succeed Mr. Muccini as Controller and Chief
Accounting Officer. Linda H. Masterson, the President, the Chief Executive
Officer and a director of the Company, resigned on November 4, 1997 as a
director of SAT, thereby severing the final interlocking relationship between
the Company and SAT.

Since October 31, 1997, the Company has sole responsibility for its
administrative and financial operations, with independent directors and
executive officers and no management service arrangements with SAT.

SAT had filed in February 1996 a Registration Statement on Form S-4
under the Securities Act to merge the Company with and into a wholly-owned
subsidiary of SAT (the "LifePoint Merger"). In consideration of their
consent to such merger, the minority stockholders of the Company were to
receive shares of SAT's Common Stock, $.01 par value. As a result of SAT's
bankruptcy and its subsequent sale of its shares of the Common Stock to
Meadow Lane, this SAT proposal to take the Company private was abandoned.

Loans from SAT to the Company

SAT had authorized loans to the Company not to exceed $2,000,000. The
loans bore interest at the rate of 8% per annum and were to become due on the
earlier of (1) five business days after the date the proposal for the then
minority stockholders of the Company to consent to the LifePoint Merger was
rejected or (2) the effective date of the LifePoint Merger. On May 23, 1997,
the SAT Board and, on May 26, 1997, the Company's Board authorized the
capitalization of $2,210,250 in indebtedness (including interest) owed by the
Company to SAT as of April 30, 1997, in consideration of the issuance by the
Company to SAT of 1,768,202 shares of the Common Stock. These shares are
included in the 2,075,306 shares described in the succeeding paragraph. The
Boards had also authorized the additional investment by SAT of $2,500,000 in
exchange for 2,000,000 shares of the Common Stock on the same basis of one
share of the Common Stock for each $1.25 of investment. On May 26, 1997, the
Board of Directors of the Company authorized the issuance of additional
shares of the Common Stock to SAT on the basis of a share of the Common Stock
for each $1.25 of indebtedness owed by the Company to SAT. As a result of
SAT's inability to obtain its own financing, SAT notified the Company in July
1997 that it would cease advances to the Company in August 1997.

Based on SAT's advice that the amount of indebtedness owed by the
Company to SAT was $2,594,133, all of which SAT agreed to treat as a capital
contribution, the Company authorized the issuance to SAT of 2,075,306 shares
of the Common Stock. Such shares were issued as of June 30, 1997 prior to
the sale of the shares of the Common Stock held by SAT to Meadow Lane.
Subsequent to the sale, SAT advised the Company that the amount of
indebtedness was $3,426,994. As such, the forgiveness of the remaining
indebtedness to SAT of $832,861 was reflected as additional paid in capital
as of September 30, 1997.

Recognizing that had SAT correctly reported the Company's indebtedness
to SAT, an additional 666,289 shares of the Common Stock would have been
issued to SAT and then sold to Meadow Lane, the Company's Board, on January
8, 1998, authorized the issuance to Meadow Lane of a Warrant expiring January
7, 2003 (the "Meadow Lane Warrant") to purchase 666,289 shares of the Common
Stock at $.50 per share. The Board concluded that, as a result of
structuring the transaction in this manner, Meadow Lane would receive what it
thought it was buying, i.e., all of SAT's shares in the Company, and the
Company, not SAT, would receive $383,144 if the Meadow Lane Warrant was
exercised.

Transfer of Assets from SAT to the Company

Included in the indebtedness that was converted to additional paid in
capital as noted above was approximately $345,000 relating to the purchase by
the Company of various fixed assets from SAT at the Rancho Cucamonga,
California premises. Certain of these assets, as well as other assets
already owned by the Company, were not required for the ongoing operations of
the Company and were subsequently sold for gross proceeds of approximately
$126,000.

Employees

As of May 28, 1999, the Company employed 18 employees, of whom 15 were
directly involved in its research and development program. Additional
personnel will be required to complete the development project and, if the
project is completed successfully, to manufacture the product.

ITEM 2. PROPERTIES

The Company maintains its principal executive offices, manufacturing
space and laboratory facilities in Rancho Cucamonga, California. The
premises, which consist of approximately 10,000 square feet, are leased at
$72,000 per year pursuant to a lease that expires March 31, 2002. Management
believes that additional space will be required when and if manufacturing of
the drug and alcohol test product commences.

ITEM 3. LEGAL MATTERS

The Company is not a party to any material litigation and is not
aware of any pending litigation or contemplated proceedings by any
governmental authority that could have a material adverse effect on the
Company's business, results of operations or financial condition.

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

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS

Exchange Market Data

The Common Stock was traded on the Pacific Exchange, Inc. (the
"Pacific Exchange") under the symbol "U.S.D.P" until May 12, 1997 when
trading was suspended because the Company failed to meet the Pacific
Exchange's maintenance criteria. The quarterly high and low sales prices for
the Common Stock as reported by the Pacific Exchange are set forth below
during the period indicated:

Quarter Ended High Low

Fiscal 1997

June 30, 1996 $4.25 $3.50
September 30, 1996 3.75 2.375
December 31, 1996 2.875 0.75
March 31, 1997 * *
___________________________

*According to the National Quotation Bureau, Inc., there were no sales
reported during the quarter ended March 31, 1997 and the high bid and low
asked prices were $1.875 and $2.00, respectively. These quotations reflected
inter-dealer process, without retail mark-up, mark-down or commission, and
may not have represented actual transactions. On May 12, 1997, the last day
on which there was a reported market price, the closing sale price was
$1.6875 per share.

Effective October 28, 1997, the Commission granted the Pacific
Exchange's application to delist and deregister the Common Stock under
Section 12(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

Subsequent Trading

Effective February 4, 1998, the Company registered the Common Stock
under Section 12(g) of the Exchange Act. On February 13, 1998, a broker-
dealer filed a Rule 15c2-11 notice with the National Association of
Securities Dealers, Inc. (the "NASD") to initiate quotations with respect to
the Common Stock. The Common Stock was subsequently quoted on the NASD's OTC
Bulletin Board under the symbol: LFPT. Based primarily on the current market
price for the common stock, the Company does not currently meet the entry
requirements for the Nasdaq system or any major national securities exchange.
Secondary trading (i.e., by its stockholders) is currently permissible in 50
states and the District of Columbia.

Over-the Counter Market Data

There have been quotations in the over-the-counter market for the
Common Stock since June 25, 1998. The quarterly high bid and low asked
prices as quoted by the NASD's OTC Bulletin Board for the fiscal year ending
1999 are as follows:

Quarter Ended High Low

June 30, 1998(1) $0.50 $1.50
September 30, 1998 2.75 1.00
December 31, 1998 1.75 0.75
March 31, 1999 1.69 1.63
______________________
(1) June 25 to 30, 1998 only.

The foregoing quotations reflected inter-dealer prices, without retail
mark-up, mark-down or commission, and may not have represented actual
transactions.

"Penny Stock" Rules

Because the bid price of the Common Stock has been below $5.00 per
share, the security has become subject to Rule 15g-9 promulgated under the
Exchange Act. This Rule imposes additional sales practices requirements on a
broker-dealer which sells Rule 15g-9 securities to persons other than the
broker-dealer's established customers and institutional accredited investors
(as such term is defined in Rule 501(a) under the Securities Act). For
transactions covered under Rule 15g-9, the broker-dealer must make a
suitability determination of the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. In addition, broker-
dealers, particularly if they are market makers in the Common Stock, have to
comply with the disclosure requirements of Rules 15g-2, 15g-3, 15g-4, 15g-5
and 15g-6 under the Exchange Act unless the transaction is exempt under Rule
15g-1. Consequently, Rule 15g-9 and these other Rules may adversely affect
the ability of broker-dealers to sell or to make markets in the Common Stock
and also may adversely affect the ability of purchasers of the shares offered
by this prospectus to resell their shares.

Holders

As of March 31, 1999, there were 137 holders of record and 750
beneficial shareholders.

Dividends

The Board of Directors has not declared any dividends on the Common
Stock and, in view of the continuing losses, the Company's cash requirements
and the provisions of the Series A Preferred Stock, the Board has no current
intention to pay any such dividends.

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected financial data of LifePoint for
the five fiscal years ended March 31, 1999, 1998, 1997, 1996 and 1995 and
cumulative from October 8, 1992 (inception) to March 31, 1999. This selected
financial data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Financial Statements and related notes thereto included elsewhere in this
Report.

SELECTED FINANCIAL DATA YEARS ENDED MARCH 31,

Cumulative From
October 8, 1992
(Inception)
to
1999 1998 1997 1996 1995 March 31, 1999
Selected Statement of
Operations Data:

Revenues: $ - $ - $ - $ - $ - $ -
Costs and Expenses:
Selling, General
and
Administrative 1,483,135 672,998 268,668 318,510 475,400 4,067,683

Research and
Development 1,117,786 1,052,233 1,735,449 949,439 1,261,219 6,836,887

Depreciation and
Amortization 142,387 217,034 143,634 143,969 162,871 919,079
Interest Expense -
Parent - 34,530 23,095 - 3,319 95,790
Management Fees -
Parent - 409,838 420,000 420,000 420,000 2,089,838
Interest Expense - 956 5,822 71,882 40,640 119,300
--------- --------- --------- --------- --------- ----------
Total Costs and
Expenses 2,743,308 2,387,589 2,596,668 1,903,800 2,363,449 14,128,577
--------- --------- --------- --------- --------- ----------
Loss from Operations (2,743,308) (2,387,589) (2,596,668) (1,903,800) (2,363,449) (14,128,577)
Other Income (Expense) 46,595 (164,701) (33,905) 262,995 31,232 (241,735)
--------- --------- --------- ---------- --------- ----------
Net Loss $(2,696,713) $(2,552,290) $(2,630,573) $ (1,640,805) $(2,332,217) $(14,370,312)
Earnings per Common
Share:
Weighted Average
Common Shares
Outstanding 11,566,684 8,032,231 5,221,900 5,221,900 5,221,900

Net Loss per
Common Share $ (.23) $ (.32) $ (.50) $ (.31) $ (.45)

Earnings per Common
Share,
Assuming Dilution:
Weighted Average
Common Shares 11,566,684 8,032,231 5,221,900 5,221,,900 5,221,900

Net Loss per Common
Share,
Assuming Dilution $ (.23) $ (.32) $ (.50) $ (.31) $ (.45)

March 31,
1999 1998 1997 1996 1995
Selected Balance Sheet
Data:
Working Capital
( Deficit) $ 4,350,843 $ 409,951 $(1,996,218) $ 536,880 $ 2,089,323
Total Assets $ 5,058,408 $ 1,073,284 $ 595,947 $ 1,175,390 $ 4,444,105
Stockholders' Equity $ 4,428,684 $ 735,831 $(1,573,686) $ 1,056,887 $ 2,697,692

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

Liquidity and Capital Resources

The Company is a development stage enterprise with no earnings history.
Since its inception, the Company has devoted substantially all of its
resources to research and development and has experienced an ongoing
deficiency in working capital. The Company does not anticipate generating
revenue from product sales until the third quarter of 2000.

Because the Company has not produced any revenues as a result of its
being a development stage company, it has been dependent, ever since gaining
its independence from SAT in October 1997 (see the section "History of the
Company" in Item 1 to this Report), on the net proceeds derived from three
private placements pursuant to Regulation D under the Securities Act to fund
its operations, as described in the succeeding three paragraphs.

On November 21 and December 10, 1997, the Company closed as to the
sales of an aggregate of 3,200,000 shares of the Common Stock at $.50 per
share and the Company realized $1,600,000 in gross proceeds. There were no
underwriting discounts or commissions allowed or paid pursuant to the private
placement. A finder's fee of $160,000 was paid to Jonathan J. Pallin who was
a member of Meadow Lane and who, on October 31, 1997, was elected as the
Chairman of the Board and a director of the Company.

On July 23 and August 26, 1998, the Company closed as to the sales of
an aggregate of 1,025,000 shares of the Common Stock at $1.00 per share and
the Company realized $1,025,000 in gross proceeds. There were no
underwriting discounts or commissions paid related to the private placement.
However, a Warrant expiring December 13, 2003 to purchase 50,000 shares of
the Common Stock at $1.08 was granted to an unaffiliated person for his
assistance in completing $500,000 of this offering.

On January 21, 1999, the Company closed as to the sale of 600,000
shares of the Series A Preferred Stock at $10.00 per share and the Company
realized $6,000,000 in gross proceeds. Finders' fees were paid to various
consultants and bankers for their assistance in helping the Company to
complete this private placement consisting of an aggregate of $592,078 in
cash fees (including $420,451 to Mr. Pallin) and Warrants expiring January
20, 2004 to purchase an aggregate of 404,725 shares of the Common Stock (net
of a cancellation) at $2.41 per share.

Management's latest estimate is that completion of the development and
launching of a saliva based drugs of abuse and alcohol testing product, after
the prototype, will require additional funding of approximately $7,000,000,
beyond the recently raised $6,000,000, and that the product will not be
launched earlier than the third quarter of 2000. This contrasts with SAT's
June 1997 publicly announced incremental costs for the Company of $16,000,000
to $18,000,000 (including the costs to develop the prototype) and a launch
date of the first quarter of 1999 at the earliest. However, these estimates
were prior to the suspension of product development efforts and the
subsequent reduced product development efforts over the last 20 months.

Since October 1997, management had been pursuing parallel paths for
long-term financing venture capital, strategic partnering, a public offering
and/or a private placement for all or part of the required funding.

Management had initially believed that one likely source for the
additional funding would have been an investment by a venture capital
investor or investors; however, management does not currently believe that an
investment in the Company by a venture capital investor to be a likely source
of funding at this time.

Management has also been exploring the possibility of obtaining a
strategic partner(s) for the Company. To this end, the Company had an
agreement with Burrill & Company ("Burrill"), a San Francisco-based merchant
bank focused exclusively on servicing life science companies. The agreement
with Burrill was terminated on May 7, 1999.

The Company continues to pursue strategic partnering through the
Venture Merchant Group. Several large pharmaceutical and diagnostic
corporations have expressed initial interest in partnering with the Company.
Management anticipates that one or more partnering agreements may be
completed prior to the end of this fiscal year.

Management has also pursued the possibility of an underwritten public
offering and has received expressions of interest from several well-known
small national and large regional firms. At least one firm has offered to
conduct a public offering late 1999 or early 2000. There can be no assurance
that stock market conditions would be receptive to a public offering by the
Company at that time. In addition, competitive conditions in the substance
abuse testing industry at that time may make the Company less attractive to
potential public investors.

Having successfully consummated three private placements pursuant to
Regulation D under the Securities Act since November 1997, the Company may
seek to raise the additional required financing through this method. As with
a public offering, there can be no assurance that potential investors would
be receptive to a private placement by the Company at that time, either
because of general stock market conditions or conditions generally in the
substance abuse technology industry.

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

If all of the Warrants to purchase an aggregate of 2,714,014 shares of
the Common Stock which are outstanding on March 31, 1999 were subsequently
exercised, the Company would realize $2,464,272 in gross proceeds. If all of
the Options to purchase an aggregate of 794,167 shares outstanding on March
31, 1999 were subsequently exercised, the Company would realize $397,084 in
gross proceeds. However, there can be no certainty as to when and if any of
these securities may be exercised, especially as to the Options and a Warrant
which were not all currently exercisable as of March 31, 1999. Accordingly,
management believes that the Company cannot rely on these exercises as a
source of financing.

Operating Cash Flows

Net cash used for operations during fiscal 1999 amounted to $2,096,000
as compared to $2,322,000 and $2,119,000 in fiscal 1998 and 1997,
respectively. The cash used by operating activities in fiscal 1999 was
reduced by $226,000 from fiscal 1998, which was the result of reduced
expenses in fiscal 1999 due to cash constraints versus normal product
development early in fiscal 1998. Cash used in operating activities for
fiscal 1998 increased $203,000 from fiscal 1997 due primarily from moving
product development from the research stage to the development stage.

Investing Cash Flows

During fiscal 1999, net cash used by investing activities was $24,000
as a result of purchases of property and equipment and patent related costs.
During fiscal 1998, net cash provided by investing activities of $20,000 was
generated from the sale of property and equipment offset by the purchases of
property and equipment. Net cash used by investing activities of $53,000
during fiscal 1997 was for purchases of property and equipment.

Financing Cash Flows

Net cash provided by financing activities amounted to $6,320,000 during
fiscal 1999 related to the second private placement of 1,025,000 of the
Common Stock with net proceeds approximating $1,018,000 and net proceeds of
$5,146,000 from the sale of 600,000 shares of the Series A Preferred Stock as
described above.

Net cash provided by financing activities amounted to $2,900,000 during
fiscal 1998. Financing cash flows were provided by loans from SAT of
approximately $1,465,000 and the net proceeds of approximately $1,434,000 of
a private placement of 3,200,000 shares of the Common Stock at $0.50 per
share.

Net cash provided by financing activities amounted to $1,922,000 during
fiscal 1997. Financing cash flows were provided by loans from SAT of
approximately $1,668,000 and net proceeds from repayment of note receivable
from SAT in the amount of approximately $282,000.

Results of Operations

Fiscal 1999 vs. Fiscal 1998

During fiscal 1999, the Company continued as a development stage
enterprise with no revenues. Research and development expenses in fiscal 1999
were $1,118,000 as compared to $1,052,000 in fiscal 1998, or an increase of
$66,000 or 6.2%. The increase in fiscal 1999 was primarily due to increased
staffing levels. Selling, general and administrative expenses were
$1,483,000 in fiscal 1999 as compared to $673,000 in fiscal 1998, or an
increase of $810,000 or 120.4%. In fiscal 1998 the Company paid management
fees to SAT of $410,000 which are not included in the selling, general and
administrative expenses. Total selling, general and administrative expense
including management fees for fiscal 1998 was $1,083,000, or an increase in
fiscal 1999 of $400,000 or 36.9%. This increase is as a result of the
Company's focus on investor relations, as well as additional expenses
incurred for legal, accounting and administrative functions assumed with its
independence from SAT. As of March 31, 1999, the Company did not anticipate
generating revenues from product sales during the fiscal year ending March
31, 1999 and not until after submission of the drugs of abuse/alcohol testing
product to the FDA in March 2000 at the earliest. Accordingly, management
anticipated that operating losses would continue for at least a 24-month
period.

The net loss for fiscal 1999 was $2,697,000 as compared to $2,552,000
for fiscal 1998. The increase of $145,000 or 5.7% was primarily the result of
the increase in selling, general and administrative expenses noted above.

Fiscal 1998 vs. Fiscal 1997

During fiscal 1998, the Company continued as a development stage
enterprise with no revenues. Selling, general and administrative expenses
were $673,000 in fiscal 1998 as compared to $269,000 in fiscal 1997, or an
increase of $404,000 or 150.2%. Management fees paid to SAT were $410,000 in
fiscal 1998 as compared to $420,000 in fiscal 1997, a decrease of $10,000 or
2.4%. During fiscal 1998, the management fees were based on the proportional
costs for shared resources and personnel. However, during the second quarter
of fiscal 1998, the management fee was discontinued because services were no
longer provided by SAT. Overall, selling, general and administrative
expenses and management fees were $1,083,000 in fiscal 1998 versus $689,000
in fiscal 1997, and increased based on actual incurred expenses rather than a
previously negotiated fee. Research and development expenditures totaled
$1,052,000 in fiscal 1998 as compared to $1,735,000 in fiscal 1997 or a
decrease of $683,000 or 39.4%. The decrease was primarily the result of the
temporary suspension and subsequent reduced expenditures for product
development efforts by the Company, due to a cessation of funding by its
former parent SAT.

The net loss for fiscal 1998 was $2,552,000 as compared to $2,631,000
for fiscal 1997. The decrease of $79,000 or 2.8% was primarily the result of
a suspension and subsequent reduction in the product development expenditures
due to a cessation of funding by the Company's former parent SAT.

Impact of the Year 2000 Issue

The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any
computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

Based on a recent assessment, the Company determined that all of the
software currently in use on its computer system properly utilizes dates
beyond December 31, 1999.

Inflation

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

Forward Looking Statements

This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements that are subject
to a number of risks and uncertainties. Among the important factors that
could cause actual results to differ materially from those anticipated by the
statements made above are the following:

As indicated in the section "Liquidity and Cash Resources" under this
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," management estimates an incremental cost of
$7,000,000 over the recently raised $6,000,000 to complete the development of
a saliva-based drug and alcohol testing product. Unless this financing is
obtained and the product development program successfully completed (which is
not anticipated until the third quarter of 2000 at the earliest), the Company
will continue without revenues from a product or service and, accordingly,
will have to cease operating. Although management is pursuing, or will
pursue, these financial routes: a strategic partner, a public offering and a
private placement, there can be no assurance that any additional financing
will be consummated.

As of March 31, 1999, the Company employed 14 employees, of whom 12
were directly involved in its research and development program. Management
estimates that it will require approximately 24 scientists and engineers to
complete this project and, if the product is successfully developed,
approximately 24 persons to commence manufacturing thereof. There can be no
assurance that such personnel will be available when the Company requires
them, especially at its current location in Rancho Cucamonga, California.
Management anticipates that the Company, in such circumstances, may have to
move to a different location in California where such personnel may be more
readily available, which move will add to the Company's costs. There can be
no assurance that the Company, in such circumstances, will be any more
successful in such new location in obtaining such personnel.

An independent consultant in June 1997 confirmed management's belief
that the Company's saliva-based drugs of abuse and alcohol testing products
could be developed and that, once developed, there would be a significant
market therefor. However, there are certain risks in any research and
development program that the product will not ultimately be developed, that
it will be developed later than anticipated, that the estimated costs will be
higher than projected and that the market may be smaller then anticipated
when the product is ultimately marketed.

Also, as indicated in "Business-Competition," management believes that
saliva sample testing is unique in that, to its knowledge, no company is
currently offering a substance abuse detection method using saliva samples as
a specimen on an "on-site" basis. However, as noted therein, the Company
has been advised that such a product may be under development by two or more
companies and, accordingly, there can be no assurance that such a product
will not be offered by a competitor.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9. CHANGES IN ACCOUNTANTS AND ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Directors and Executive Officers

The following table contains certain information relating to the
directors and executive officers of the Company as of May 28, 1999:

Name Age Position

Linda H. Masterson 48 President, Chief Executive
Officer, and a director
Thomas J. Foley 59 Senior Vice President,
Research and Development
Michele A. Clark 46 Controller and Chief
Accounting Officer
Peter S. Gold 74 Director
Jonathan J. Pallin 49 Director
Paul Sandler 59 Director

Each director of the Company is elected to serve until the next Annual
Meeting of Stockholders or until his or her successor is elected and shall
have qualified. Each director listed above was reelected at the Annual
Meeting of Stockholders held on August 13, 1998. 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 August 13, 1998.
The current Board intends to call the next Annual Meeting of Shareholders for
August 20, 1999.

Business History

Linda H. Masterson has over 26 years industry experience and over 20
years experience in marketing, sales and business development in the medical
diagnostics, healthcare and biotechnology fields. She was elected a director
of SAT on September 26, 1995. Effective May 13, 1996, she became the
President and Chief Operating Officer of SAT. On May 31, 1996, she was
elected a director of the Company and, on July 31, 1996, the President and
Chief Operating Officer of the Company. Effective November 19, 1996, she
relinquished her duties as the Chief Operating Officer of SAT in order to
devote more time to supervising the development program of the Company and
the operations of the then Alcohol Products and BioTox Divisions of SAT. On
May 23, 1997, she resigned as the President of SAT in order to become the
Chief Executive Officer of the Company (formally designated as such on May
26, 1997). On November 4, 1997, she resigned as a director of SAT, thereby
terminating her last position with the former parent of the Company. Until
May 13, 1996 when she became an employee of SAT, she was employed as the
Executive Vice President of Cholestech, Inc., a start-up diagnostic company,
for which she developed and restructured the 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, which 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 and five-year 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 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 Co. Ms. Masterson has a BS in
Medical Technology from the University of Rhode Island, an MS 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 25 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 Worthington Diagnostics from 1981 to 1983.
Prior to Worthington Diagnostics, Dr. Foley worked at Beckman Instruments,
Inc. and was the chemistry product development manager for the Astra, one of
Beckman's most successful product lines. Dr. Foley has a Ph.D. in
Biochemistry from Trinity College, Dublin.

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

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.

Jonathan J. Pallin was elected Chairman of the Board and a director of
the Company on October 31, 1997. He resigned as the Chairman of the Board on
January 8, 1999. However, he continued to serve the Company as a financial
consultant until March 31, 1999. He has over 22 years experience in the
financial markets as an institutional fixed income broker, financial
consultant, and served in an investment banking advisory role. Mr. Pallin
served as Senior Vice President, Retail Brokerage for PaineWebber
Incorporated from January 1991 to July 1993, as a Senior Vice President
Investments, Retail Brokerage for Baraban Securities Incorporated from July
1993 to May 1996 and as a Vice President, Retail Brokerage for Sutro & Co.
Incorporated from May 1996 to October 1997. Mr. Pallin has an MBA from
Arizona State University with a major emphasis on Accounting, and a BS from
Long Island University (Southampton) in Business and Psychology.

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.

Family Relationships

Jonathan J. Pallin and Paul Sandler are brothers-in-law. There are no
other family relationships between the officers and directors of the Company.

Compliance with Section 16(a) of the Exchange Act

Based solely on a review of Forms 3 and 4 furnished to LifePoint under
Rule 16a-3(e) promulgated under the Exchange Act, with respect to fiscal
1999, LifePoint is not aware of any director or 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 1999. Except
that each of Linda H. Masterson (the President, the Chief Executive Officer
and a director), Thomas J. Foley (Senior Vice President, Research and
Development) and William B. Benken (formerly a Vice President) filed one
report three days late, each reporting one transaction (i.e., the grant on an
Option under the Stock Option Plan).

As of March 31, 1999, Jonathan J. Pallin, Herman S. Sandler and the
General Conference Corporation of Seventh-day Adventists (the "Seventh-day
Adventists") were the only beneficial owners of 10% or more of the Common
Stock. Both Mr. Pallin and the Seventh-day Adventists have advised LifePoint
that they made timely filings with respect to their transactions in fiscal
1999 and Mr. Sandler has advised that he had no transactions in fiscal 1999.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides certain summary information concerning
compensation paid or accrued by LifePoint during fiscal 1999, fiscal 1998 and
fiscal 1997 to the sole person who served as Chief Executive Officer during
fiscal 1999 and to each other executive officer whose total annual salary and
bonus exceeded $100,000 during any such year.

Annual Compensation Long Term Compensation
Other
Annual Securities
Compen- Underlying All Other
Name and Principal Position Year Salary Bonus sation Options Compensation

Linda H. Masterson 1999 184,038(2) 50,000
Chief Executive Officer 1998 125,249(2) 700,000
and President (1) 1997 0(3)

Thomas J. Foley 1999 135,769 220,000
Sr. Vice President, Research
and Development

Stephen J. Kline 1999 --
Vice President, Research 1998 20,131(5) 150,000(6)
and Development(4) 1997 125,000 50,000(6)

(1) Ms. Masterson was elected President of LifePoint effective August 1,
1996 and designated as its Chief Executive Officer on May 26, 1997.

(2) The amount shown in the table for 1998 does not reflect $33,654 paid
by SAT to Ms. Masterson for the period April 1 to June 1, 1997 nor $19,038 in
deferred salary which was paid in October, 1998 after LifePoint obtained
long-term financing. Effective August 11, 1997, LifePoint directly paid all
compensation for Ms. Masterson.

(3) Ms. Masterson became an employee of SAT on May 13, 1996 and all
compensation paid to her for fiscal 1997 was paid by SAT. To the extent any
such services were on behalf of LifePoint, this was reflected in SAT's
management fee to LifePoint.

(4) Dr. Kline resigned on September 12, 1997.

(5) The amount shown in the table does not reflect $50,000 paid by SAT to
Dr. Kline during fiscal 1998.

(6) These options were cancelled upon his resignation. See note (6) to
this table.

Option/SAR Grants in Last Fiscal Year

On August 14, 1997, the Board of Directors adopted, subject to
stockholder approval, the Stock Option Plan providing for the granting of
Options to purchase up to 1,000,000 shares of the 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 Stock 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.

As of March 31, 1999, Options to purchase an aggregate of 794,000
shares of the Common Stock granted to employees (including officers) were
outstanding. As of such date, Options to purchase an aggregate of 41,197
shares of the Common Stock had been exercised and Options to purchase an
aggregate of 130,278 shares of the Common Stock were then exercisable.
Options granted to date under the Stock Option Plan 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. The exercise price per share for incentive stock options under the
Code may not be less than 100% of the fair market value per share of the
Common Stock on the date of grant. For nonqualified stock options, the
exercise price per share may not be less than 85% of such fair market value.
No Option may have a term in excess of ten years. Of the Options outstanding
as of March 31, 1999, all were incentive stock options except for Options to
purchase an aggregate of 120,000 shares and all had an exercise price of $.50
per share. The Options had expiration dates ranging from August 13, 2002 to
June 30, 2008.

The Company has never granted any stock appreciation rights.

The following table contains information concerning the grant of stock
options to the named executive officers whose compensation for fiscal 1999
exceeded $100,000 as reported in the Summary Compensation Table in this Item
11 to this Report.

Individual Grants
----------------------------------------------------------
Number of Percentage of Potential Realizable Value
Securities Total Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation
Options Empoyees in Exercise or for Option Term (3)
Granted Fiscal Base Price Expiration ---------------------------
Name (#) 1999 (1) ($/Sh) (2) Date 5% ($) 10% ($)

Linda H. Masterson 50,000 28.6% $0.50 6/30/08 $40,722 $64,844

Thomas J. Foley 20,000 11.4% $0.50 6/30/08 $16,289 $25,937

(1) Based upon Options to purchase 175,000 shares of Common Stock granted in
fiscal 1999.

(2) The exercise price is equal 100% of the fair market value of the Common
Stock at the date of grant, as determined by the Board of Directors at the
time of grant.

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

Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

A total of 41,197 stock options were exercised by employees terminating
their employment during fiscal 1999.

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

The following table shows the fiscal year-end option values for the
named executive officers whose compensation for fiscal 1999 exceeded $100,000
as reported in the Summary Compensation Table in this Item 11 to this Report.

Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options At Fiscal Year-End (#) At Fiscal Year End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable

Linda H/. Masterson 466,667/283,333 $772,917/$469,270 (1)

Thomas J. Foley 25,000/195,000 $41,406/$322,969 (1)

(1) The market value of the options on March 31, 1999 is based on the
average of the high bid and low asked prices of $1.65625 per share on that
date.

Other 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 1999 or thereafter.

Director Compensation

On April 16, 1999 the Board of Directors approved a compensation plan
for outside directors. In consideration of the services to be performed as a
director of the Corporation, each director:

(a) who is not an employee of the Corporation, or any subsidiary of
the Corporation (if hereafter created) or

(b) who is not a consultant to the Corporation, or any subsidiary of
the Corporation and is paid a fee on a monthly basis shall receive as
compensation a grant of an option pursuant to the Stock Option Plan.
Each grant shall be for the right to purchase 15,000 shares of the Common
Stock on an annual basis. The initial grant to be on the day of his/her
first election as a director of the Corporation, whether by the Board
or the stockholders and thereafter on the anniversary day of such first
election. The exercise price of each option shall be the Fair Market Value
as determined pursuant to the Stock Option Plan on the respective date of the
grant, or if not a business day, on the preceding day on which the Common
Stock was traded. Each option will expire ten years from its date of grant
and will become exercisable as to one quarter of the shares of Common Stock
on the first anniversary of the date of grant and 1/36th of the remaining
shares of the Common Stock on the same date each month thereafter for a
period of 36 months.

See Item 13 to this Report for information as to a compensation arrangement
with Jonathan J. Pallin for his former services as Chairman of the Board and
subsequently as a financial consultant to the Company.

Employment and Severance Agreements

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,
the Company has agreed to pay Ms. Masterson for her services as Chief
Executive Officer and President of the Company a base salary of $165,000;
provided, however, such amount was to be $120,000 from October 27, 1997 to
the date at least $5,000,000 in long term financing was obtained, at which
time or upon her termination the difference was to be paid to her. As a
result of the consummation of the Company's third private placement on
January 21, 1999 (see "Business-Need for Financing") this limitation
terminated and, effective January 29, 1999, she is being paid at the
authorized rate and $19,038 of the deferred salary was paid to her in October
1998.

The Masterson Severance Agreement also provided for the grant of:

(1) a stock option under the Stock Option Plan to purchase 150,000 shares
of the Common Stock at $.50 per share, the option to become immediately
exercisable as to all shares subject thereto in the event she is terminated
without cause, the Company is acquired or sold without the Board's approval,
the corporate headquarters are moved outside the State of California, the
positions of Chief Executive Officer or President are eliminated or her
duties are substantially changed;

(2) stock options to purchase 150,000 shares of the Common Stock,
an option to purchase 75,000 shares to be granted upon completion of
the working pilot plant project and an option to purchase 75,000 shares
to be granted upon product release into the first targeted market; and

(3) Common Stock purchase warrants to purchase 400,000 shares of
the Stock at $.50 per share, a warrant to purchase 200,000 shares which
was granted upon the purchase of SAT's shares by Meadow Lane and a
warrant to purchase 200,000 shares to be granted at the completion of
the long term financing of at least $5,000,000.

The stock options have all been granted as Options under the Stock Option
Plan. Also as a result of the private placement referred to in the preceding
paragraph, the second warrant has now become exercisable.

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.

The Company had a Severance Agreement dated as of October 24, 1997 (the
"Benken Severance Agreement") with William B. Benken, the then Vice
President, Operations of the Company. Because Mr. Benken was terminated for
cause on October 7, 1998, the Benken Severance Agreement did not become
operative.

Copies of the Masterson Severance Agreement and the Benken Severance
Agreement are filed (by incorporation by reference) as exhibits to this
Report and are incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of May 28, 1999, certain information
with respect to (1) any person known to the Company who beneficially owned
more than 5% of the Common Stock, (2) each director of the Company, (3) the
Chief Executive Officer of the Company; and (5) all directors and executive
officers as a group. Each beneficial owner who is a natural person has
advised the Company that he or she has sole voting and investment power as to
the shares of the Common Stock, except that until a Warrant or an Option is
exercised, there is no voting right. See "Description of Securities-Series
A Preferred Stock-Voting Rights" for information as to the voting rights of
the holders of shares of the Series A Preferred Stock.

Number of Shares Percentage of
Name and Address of Common Stock Common Stock
of Beneficial Owner Beneficially Owned Beneficially Owned (1)

General Conference Corporation 5,735,000(2) 30.5%
of Seventh-day Adventists
12501 Old Columbia Pike
Silver Spring, MD 20804-6600

Jonathan J. Pallin (3) 4,307,595(4) 29.5%
131 East Holly Street
Pasadena, CA 91103

Herman Sandler 1,700,000(5) 11.5%
2 World Trade Center, 104th Floor
New York, NY 10048

Melvin Simon
c/o Melvin Simon & Associates, Inc.(6) 500,000(7) 3.4%
115 W. Washington Street
Indianapolis, IN 46204

Herbert Simon (6)
c/o Melvin Simon & Associates, Inc. 500,000(7) 3.4%
115 W. Washington Street
Indianapolis, IN 46204

Peter S. Gold (8) 900,000(9) 6.2%
16027 Ventura Blvd., Suite 601
Encino, CA 91436

Linda H. Masterson (10) 484,375(11) 3.3%
10400 Trademark Street
Rancho Cucamonga, CA 91730

Paul Sandler (8) 200,000 1.4%
333 West Hatcher Road
Phoenix, AZ 85021

All directors and executive 5,930,302(12) 38.7%
officers as a group (six persons)
_________________________

(1) The percentages computed in this column of the table are based upon
14,294,357 shares of the Common Stock which were outstanding on May 28, 1999.
Effect is given, pursuant to Rule 13d-3(l)(i) under the Exchange Act, to
shares issuable upon the exercise of the Warrants and Options currently
exercisable or exercisable within 60 days of May 28, 1999 and, where
applicable, to the conversion of the Series A Preferred Stock, all of which
shares was currently convertible as of such date.

(2) The shares reported in the table include 4,500,000 shares issuable upon
the conversion of 225,000 shares of the Series A Preferred Stock.
(3) A director of the Company since October 31, 1997 and the Chairman of
the Board from that date until January 8, 1999.

(4) The shares reported in the table reflect (a) 4,007,306 shares of the
5,575,306 shares acquired by Meadow Lane from SAT (see section "Business-
History of the Company") and then transferred to Mr. Pallin and (b) 300,289
shares issuable upon the exercise of that portion of the Meadow Lane Warrant
transferred to him. The shares reported in the table do not give effect to a
common stock purchase warrant expiring October 28, 1999 to purchase 100,000
shares at $.0448 per share from Mr. Pallin granted by him to an unaffiliated
person in October 1997.

(5) The shares reported in the table reflect (a) 1,250,000 shares of the
5,575,306 shares acquired by Meadow Lane from SAT and then transferred to Mr.
Sandler; (b) 150,000 shares issuable upon the exercise of that portion of the
Meadow Lane Warrant transferred to Mr. Sandler; and (c) 300,000 shares
issuable upon the exercise of a Warrant expiring November 4, 2002 exercisable
at $.50 per share.

(6) The shares reported in the table for each of these two stockholders
were acquired by Melvin Simon & Associates, Inc. from LifePoint in two
private placements and subsequently distributed to the stockholders in March
1999. Because the two stockholders may be deemed to be a "group" pursuant
to Rule 13d-5(b)(1) under the Exchange Act, LifePoint reported their
ownership in the table, even though they disclaim beneficial ownership in
each other's shares.

(7) The shares reported in the table include 250,000 shares issuable upon
the conversion of 12,500 shares of the Series A Preferred Stock.

(8) A director of the Company since December 5, 1997.

(9) The shares reported in the table include an aggregate of 200,000 shares
issuable upon the exercise of the two Warrants expiring November 4, 2002, one
for 100,000 shares exercisable at $.50 per share and the other exercisable at
$1.00 per share.

(10) A director of the Company since May 31, 1996; effective August 1, 1996,
its President; and, effective May 23, 1997, its Chief Executive Officer.

(11) The shares reported in this table reflect (a) 400,000 shares issuable
upon the exercise of two Warrants expiring October 26, 2002 at $.50 per
share, (b) 71,875 shares issuable upon the exercise at $.50 per share of an
Option expiring August 13, 2007 and (c) 12,500 shares issuable upon the
exercise of an Option expiring June 29, 2008.. The shares do not reflect (a)
an aggregate of 115,625 shares subject to the foregoing Options as to which
the Options were not exercisable at May 28, 1999 or within 60 days thereafter
or (b) 150,000 shares subject to another Option which was not exercisable at
May 28, 1999 or within 60 days thereafter.

(12) The shares reported in the table include (a) those issuable upon the
exercise of the Warrants and the Options described in Notes (4), (9) and (11)
to the table and (b) 33,332 shares issuable upon the partial exercise at $.50
per share of an Option expiring March 19, 2008 granted to an executive
officer of the Company and (c) 5,000 shares issuable upon the partial
exercise at $.50 per share of an option expiring June 29, 2008 granted to the
same executive officer.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See the sections "Material Contracts "and" Certain Relationships
with SAT" under the caption "Business" for information as to transactions
between the Company and SAT, its major stockholder, during fiscal 1998.

See the section "Employment and Severance Agreements" under this
caption "Management" for information relating to the severance agreements
with Linda H. Masterson, the President, the Chief Executive Officer and a
director of the Company, and William B. Benken, the former Vice President,
Operations of the Company.

As indicated in "Business-Need for Financing," Jonathan J. Pallin, the
Chairman of the Board from October 31, 1997 until January 8, 1999 and a
director of the Company, received a finder's fee of $160,000 for a private
placement, which fee was authorized prior to his being elected to such
positions.

On April 28, 1998, the Board authorized the following compensation
arrangement for Mr. Pallin for his services on a daily basis as Chairman of
the Board of the Company:

(1) a fee of $10,000 per month for a one-year period commencing
April 1, 1998 and

(2) a bonus of (a) $75,000 if the Company obtains cash financing
of $5,000,000 to $6,900,000; (b) $100,000 if the Company obtains cash
financing of $7,000,000 to $9,900,000; and (c) $125,000 if the Company
obtains cash financing of over $10,000,000, subject to certain
limitations.

On January 8, 1999, the Board accepted the resignation of Mr. Pallin as
the Chairman of the Board, canceled the foregoing bonus compensation
arrangement and authorized his engagement as a financial consultant to the
Company on the following terms:

(1) he would continue to receive $10,000 per month through March
31, 1999 on the basis he would continue to serve the Company on a daily
basis as a financial consultant and

(2) he would receive a finder's fee of 10% of the gross proceeds
from any purchaser whom or which he secured for a Company financing.

He received $420,451 as his finder's fee for the Company's third private
placement closed on January 21, 1999 (see the section "Liquidity and
Capital" in Item 7 to this Report).

PART IV

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

(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:

Page

Report of Ernst & Young LLP F-1
Report of Wolinetz, Gottlieb & Lafazan, P.C. F-2
Balance Sheets as of March 31, 1999 and 1998 F-3
Statements of Operations for the years ended March 31, 1999,
1998 and 1997 and for the Period from October 8, 1992
(inception) to March 31, 1999 F-4
Statements of Stockholders' Equity for the years
ended March 31, 1999, 1998 and 1997 and for the Period
from October 8, 1992 (inception) to March 31, 1999 F-5
Statements of Cash Flows for the years ended March 31, 1999,
1998 and 1997 and for the Period from October 8, 1992
(inception) to March 31, 1999 F-6
Notes to Financial Statements F-8

(2) Financial Statement Schedules

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

(3) Exhibits

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 the Company or 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.

Exhibit
Number Exhibit Title
2(b) Agreement and Plan of Merger dated as of April 23, 1996 by and
among SAT, U.S. Drug Acquisition Corp. and LifePoint.(1)
2(b)(1) Agreement and Plan of Merger dated as of February 17, 1997 by and
among SAT, U.S. Drug Acquisition Corp. and LifePoint.(3)
3(a) Copy of Certificate of Incorporation of LifePoint as filed in
Delaware on October 8, 1992.(2)
3(a)(1) Copy of Amendment to the Certificate of Incorporation as filed
in Delaware on October 13, 1992.(3)
3(a)(2) Copy of Amendment to Certificate of Incorporation filed in
Delaware on February 25, 1998(4)
3(a)(3) Copy of Amendment to Certificate of Incorporation as filed in
Delaware on January 19, 1999. (5)
3(a)(4) Copy of Restated Certificate of Incorporation as filed in
Delaware on April 29, 1999.
3(b) Copy of By-Laws of LifePoint as initially adopted.(3)
3(b)(1) Copy of By-Laws of LifePoint as adopted on February 26, 1999
superseding those filed as Exhibit 3(b) hereto.
10(a) Copy of License Agreement dated January 24, 1992 by and between
the USN and USAT. (Confidential Treatment Requested for Exhibit.)(3)
10(a)(1) Copy of Amendment dated March 15, 1994 to License Agreement filed
as Exhibit 10(a) hereto.(1)
10(a)(2) Copy of Amendment dated June 16, 1995 to License Agreement filed
as Exhibit 10(a) hereto.(1)
10(a)(3) Copy of Letter dated May 15, 1995 from the USN to SAT.(1)
10(a)(4) Copy of Fifth Modification dated November 12, 1997 to License
Agreement filed as Exhibit 10(a) hereto.(4)
10(a)(5) Copy of Partially Exclusive License dated March 12, 1999 between
LifePoint and the United States of America as represented by
the Secretary of the Navy.
10(b) Copy of Assignment dated as of January 1, 1993 between U.S. Drug
and USAT of Licensing Agreement filed as Exhibit 10(a)
hereto.(3)
10(b)(1) Copy of Amended Sublicense Agreement dated September 23, 1993
superseding the Assignment filed as Exhibit 10(b) hereto.(1)
10(b)(2) Copy of Approval dated September 24, 1993 by the USN of Amended
Sublicense Agreement filed as Exhibit 10(b) hereto.(1)
10(c) Copy of Cooperative Research Agreement (the "CRDA Agreement")
dated April 16, 1992 by and between Naval Research
Laboratory Section, United States Department of the Navy,
and SAT.(3)
10(d) Copy of Management Agreement dated April 1, 1993 by and between
LifePoint and SAT.(3)
10(d)(1) Copy of Amendment dated July 20, 1993 to Management Services
Filed as Exhibit 10(d) hereto.(3)
10(e) Copy of Lease expiring January 31, 1997 by and between Rancho
Cucamonga Business Park (now The Realty Trust) as landlord
and SAT as Tenant(6)
10(e)(1) Copy of Lease Modification Agreement to Lease filed as Exhibit
10(e) hereto.(7)
10(e)(2) Copy of Sub-Lease Agreement dated as of January 1, 1993 by and
between SAT as sub-landlord and LifePoint as subtenant.(3)
10(e)(3) Copy of Third Amendment dated January 2, 1997 to Lease filed as
Exhibit 10(e), hereto.(8)
10(e)(4) Copy of Fourth Amendment dated November 3, 1997 to Lease filed as
Exhibit 10(e) hereto.(4)
10(e)(5) Copy of Fifth Amendment dated August 18, 1998 to Lease dated
March 18, 1991 by and between Rancho Cucamonga Business Park
(now The Realty Trust) as landlord and SAT (now LifePoint)
as tenant.(5)
10(e)(6) Copy of Sixth Amendment dated March 31, 1999 to Lease dated March
18, 1991 by and between Rancho Cucamonga Business Park (now
The Realty Trust) as landlord and SAT (now LifePoint) as
tenant.
10(f) Form of Warrant Agreement by and between LifePoint and Baraban
Securities, Incorporated.(3)
10(f)(1) Form of Common Stock purchase warrant expiring October 13, 1998
of LifePoint.(3)
10(g) Copy of LifePoint's 1994 Stock Option/Stock Issuance Plan.(9)
10(g)(1) Form of Stock Option expiring October 2, 2004 of LifePoint.(9)
10(g)(2) Copy of LifePoint's 1997 Stock Option Plan.(4)
10(g)(3) Form of Stock Option used under Plan filed as Exhibit 10(g)(2).(4)
10(h) Copy of Employment Agreement dated March 1, 1993 between Doug
Allen, SAT and LifePoint.(1)
10(i) Copy of Severance Agreement dated as of October 27, 1997 between
LifePoint and Linda H. Masterson.(4)
10(j) Copy of Severance Agreement dated as of October 24, 1997 between
LifePoint and William B. Benken.(4)
10(k) Copy of Agreement dated December 1, 1998 between Burrill and
Company and LifePoint.(5)
23(a) Consent of Ernst & Young LLP
23(b) Consent of Wolinetz, Gottlieb and Lafazan, P.C.
__________________

(1) Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.

(2) Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.

(3) Filed as an exhibit to LifePoint's Registration Statement on Form SB-2,
File No. 33-61786, and incorporated herein by this reference.

(4) Filed as an exhibit to LifePoint's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998 and incorporated herein by this
reference.

(5) Filed as an exhibit to LifePoint's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1998 and incorporated herein by this
reference.

(6) Filed as an exhibit to SAT's Annual on Form 10-K for the fiscal year
ended March 31, 1996 and incorporated herein by this reference.

(7) Filed as an exhibit to LifePoint's Quarterly Report on Form 10-K for
the quarter ended September 30, 1997 and incorporated herein by this
reference.

(8) Filed as an exhibit to SAT's Annual Report on Form 10-K for the fiscal
year ended March 31, 1997 and incorporated herein by this reference.

(9) Filed as an exhibit to SAT's Registration Statement on Form S-8, File
No. 33-89346.

SIGNATURES

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 June 29, 1999.

LIFEPOINT, INC.
(Registrant)

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 June 29, 1999.

Signature Title

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

/s/ Michele A. Clark Principal Accounting Officer
Michele A. Clark

/s/ Peter S. Gold Director
Peter S. Gold

/s/ Jonathan J. Pallin Director
Jonathan J. Pallin

/s/ Paul Sandler Director
Paul Sandler

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
LifePoint, Inc.

We have audited the accompanying balance sheets of LifePoint, Inc. (a
development stage enterprise) (the "Company") as of March 31, 1999 and 1998,
and the related statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended March 31, 1999, and for the
period October 8, 1992 (inception) through March 31, 1999. 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. The financial statements for the period October 8, 1992
(inception) through March 31, 1995 were audited by other auditors whose report
dated May 26, 1995 expressed an unqualified opinion on those statements. The
financial statements for the period October 8, 1992 (inception) through March
31, 1995 include total costs and expenses and a net loss of $4,497,000 and
$4,850,000, respectively. Our opinion on the statements of operations and cash
flows for the period October 8, 1992 (inception) through March 31, 1999,
insofar as it relates to amounts for prior periods through March 31, 1995, is
based solely on the report of other auditors.

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

In our opinion, based on our audit and the report of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of LifePoint, Inc. at March 31, 1999 and 1998,
and the results of its operations and its cash flows for each of the three
years in the period ended March 31, 1999 and the period from October 8, 1992
(inception) through March 31, 1999, in conformity with generally accepted
accounting principles.

Ernst & Young LLP

Riverside, California
March 31, 1999

Page F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders
LifePoint, Inc.
Rancho Cucamonga, California

We have audited the accompanying statements of operations, stockholders'
(deficit) equity and cash flows for the year ended March 31, 1995 and the
period from October 8, 1992 (inception) through March 31, 1995 of LifePoint,
Inc. (a Development Stage Enterprise). These statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the statements referred to above present fairly, in all
materials respects, the results of operations and cash flows of LifePoint, Inc.
for the year ended March 31, 1995 and the period from October 8, 1992
(inception) through March 31, 1995, in conformity with generally accepted
accounting principles.

WOLINETZ, GOTTLIEB & LAFAZAN, P.C.

Rockville Centre, New York
May 26, 1995

Page F-2

LIFEPOINT, INC.
(a Development Stage Enterprise)

BALANCE SHEETS
March 31

1999 1998
ASSETS

Current assets:

Cash and cash equivalents $ 4,796,432 $ 597,254
Prepaid expenses and other
current assets 35,882 150,150
--------- ---------
Total current assets 4,832,314 747,404
Property and equipment, net 153,290 286,188
Patents and other assets, net 72,804 39,692
--------- ---------
$ 5,058,408 $ 1,073,284

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 231,264 $ 119,577
Accrued expenses 250,207 217,876
--------- ---------
Total current liabilities 481,471 337,453
Accrued consulting - long term 148,253 -
--------- ---------
629,724 337,453
Commitments and contingencies (Note 6)

Stockholders' equity:

Series A 10% Cumulative Convertible
Preferred Stock, $.001 par value,
600,000 shares authorized, 557,725
issued and outstanding at March 31, 1999 558 -

Common Stock, $.001 par value;
50,000,000 shares authorized, 12,665,209
and 10,497,206 shares issued and
outstanding at March 31, 1999 and 1998,
respectively 12,665 10,497

Additional paid-in capital 18,791,442 12,398,933
Deficit accumulated in the
development stage (14,375,981) (11,673,599)
---------- ----------
Total stockholders' equity 4,428,684 735,831
---------- ----------
$ 5,058,408 $ 1,073,284

See Accompanying Notes.

Page F-3

LIFEPOINT, INC.
(a Development Stage Enterprise)

STATEMENTS OF OPERATIONS

Cumulative
From
October 8, 1992
Years Ended March 31 (Inception) to
1999 1998 1997 March 31, 1999

Revenues $ - $ - $ - $ -
Costs and expenses:
Selling, general and
administrative expenses 1,483,135 672,998 268,668 4,067,683
Research and development 1,117,786 1,052,233 1,735,449 6,836,887
Depreciation and amortization 142,387 217,034 143,634 919,079
Interest expense-parent - 34,530 23,095 95,790
Management fees-parent - 409,838 420,000 2,089,838
Interest expense - 956 5,822 119,300
--------- --------- --------- ----------
Total costs and expenses 2,743,308 2,387,589 2,596,668 14,128,577
--------- --------- --------- ----------
Loss from operations (2,743,308) (2,387,589) (2,596,668) (14,128,577)
Other income (expense):
Interest income 46,595 13,895 - 496,111
Loss on disposal of property
and equipment - (178,596) (33,905) (212,501)
Loss on sale of marketable
securities - - - (627,512)
Interest income-parent - - - 102,167
--------- --------- --------- ----------
Total other income (expense) 46,595 (164,701) (33,905) (241,735)
--------- --------- --------- ----------
Net loss $ (2,696,713) $ (2,552,290) $ (2,630,573) $(14,370,312)
--------- --------- --------- ----------
Earnings per common share - basic:
Weighted average common shares
outstanding 11,566,684 8,032,231 5,221,900
Net loss per common share $ (0.23) $ (0.32) $ (0.50)
Earnings per common share, assuming
dilution:
Weighted average common shares
outstanding 11,566,684 8,032,231 5,221,900
Net loss per common share,
assuming dilution (1998 $ (0.23) $ (0.32) $ (0.50)
has been restated; see Note 1)

See Accompanying Notes.

Page F-4

LIFEPOINT, INC.
(a Development Stage Enterprise)

STATEMENTS OF STOCKHOLDERS' EQUITY
For the Period October 8, 1992 (Inception) to March 31, 1999

Deficit
Accumulated
Additional in the
Common Preferred Paid-In Development
Stock Stock Capital Stage Total
Balance at October 8, 1992 $ - $ - $ - $ - $ -
Issuance of 3,500,000 shares of common
stock for value of assets transferred from
Parent 3,500 - 445,186 - 448,686
Net loss for the period ended March 31, 1993 - - - (257,422) (257,422)
---------- ------- ----------- ------------ -------------
Balance at April 1, 1993 3,500 - 445,186 (257,422) 191,264
Sale of 1,721,900 shares of common stock in
connection with initial public offering, net
of offering costs of $1,510,663 1,722 - 7,097,215 - 7,098,937
Net loss for the year ended March 31, 1994 - - - (2,260,292) (2,260,292)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1994 5,222 - 7,542,401 (2,517,714) 5,029,909
Net loss for the year ended March 31, 1995 - - - (2,332,217) (2,332,217)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1995 5,222 - 7,542,401 (4,849,931) 2,697,692
Net loss for the year ended March 31, 1996 - - - (1,640,805) (1,640,805)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1996 5,222 - 7,542,401 (6,490,736) 1,056,887
Net loss for the year ended March 31, 1997 - - - (2,630,573) (2,630,573)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1997 5,222 - 7,542,401 (9,121,309) (1,573,686)
Issuance of 2,075,306 shares of common
stock for forgiveness of debt by former
Parent 2,075 - 3,424,919 - 3,426,994
Sale of 3,200,000 shares of common stock
through private placement offering, net
of offering costs of $165,187 3,200 - 1,431,613 - 1,434,813
Net loss for the year ended March 31, 1998 - - - (2,552,290) (2,552,290)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1998 10,497 - 12,398,933 (11,673,599) 735,831
Sale of 1,025,000 shares of common stock
through private placement offering,net
of offering costs of $5,736 1,025 - 1,018,239 - 1,019,264
Issuance of 255,000 shares of common stock
for consulting services 255 - 203,085 - 203,340
Sale of 600,000 shares of preferred stock
through private placement offering, net
of offering costs of $853,636 - 600 5,145,764 - 5,146,364
Conversion of 42,275 shares of preferred stock 846 (42) (804) - -
Stock dividend on conversion of preferred stock 1 - 4,864 (4,865) -
Exercise of 41,197 stock options 41 - 20,557 - 20,598
Net loss for the year ended March 31, 1999 - - - (2,696,713) (2,696,713)
---------- ------- ----------- ------------ -------------
Balance at March 31, 1999 $ 12,665 $ 558 $ 18,791,442 $(14,375,981) $ 4,428,684

See Accompanying Notes.

Page F-6

LIFEPOINT, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS

Cumulative
From
October 8, 1992
Years Ended March 31 (Inception) to
1999 1998 1997 March 31, 1999

Net loss $ (2,696,713) $ (2,552,290) $ (2,630,573) $ (14,370,312)
Adjustments to reconcile net loss to net
cash used by operating activities:

Depreciation and amortization 142,387 217,034 143,634 919,079
Loss on disposal of property and
equipment - 178,596 33,905 237,976
Consulting expense 361,160 - - 361,160
(Gain) loss on marketable securities - - - 627,512
Amortization of bond discount - - - (4,855)
Changes in operating assets and
liabilities:
Prepaid expenses and other
current assets 204,268 (15,150) 20,203 88,519
Other assets (18,130) (517) 1,174 (22,466)
Cash overdraft - (119,514) 119,514 -
Accounts payable 111,687 (97,110) 199,761 285,623
Accrued expenses (200,795) 66,536 (6,580) (117,919)
---------- ---------- ---------- -----------
Net cash used by operating activities (2,096,136) (2,322,415) (2,118,962) (11,995,683)
INVESTING ACTIVITIES
Sale of marketable securities - - - 3,285,625
Purchase of marketable securities - - - (3,908,281)
Purchases of property and equipment (6,786) (59,380) (52,540) (603,563)
Proceeds from sale of property and
equipment, net - 80,828 - 80,828
Additional patent costs (17,685) (1,402) - (56,924)
---------- ---------- ---------- -----------
Net cash provided by investing
activities (24,471) 20,045 (52,540) (1,202,315)
FINANCING ACTIVITIES
Sale of common stock 1,025,000 1,600,000 - 11,246,226
Expenses of common stock offering (5,736) (165,187) - (1,681,586)
Sale of preferred stock 6,000,000 - - 6,000,000
Expenses of preferred stock offering (720,077) - - (720,077)
Payments of loan to parent - - - (1,917,057)
Payment of loan by parent - - - 1,634,762
Proceeds of loan payable - parent - 1,464,811 1,668,179 4,715,067
Payment of loan payable - parent - - - (1,299,782)
Proceeds of note receivable - parent - - 282,295 -
Proceeds of capital leases - - - 101,572
Payments of capital leases - - (28,019) (105,293)
Proceeds of brokerage loan payable - - - 2,674,683
Payments of brokerage loan payable - - - (2,674,683)
Exercise of stock option 20,598 - - 20,598
---------- ---------- ---------- -----------
Net cash provided by financing
activities 6,319,785 2,899,624 1,922,455 17,994,430
---------- ---------- ---------- -----------
Increase (decrease) in cash and cash
equivalents 4,199,178 597,254 (249,047) 4,796,432
Cash and cash equivalents at beginning
of period 597,254 - 249,047 -
---------- ---------- ---------- -----------
Cash and cash equivalents at end of period $ 4,796,432 $ 597,254 $ - $ 4,796,432

Page F-6

SUPPLEMENTAL DISCLOSURE OF
CASH INFORMATION:
Cash paid for interest $ - $ 35,486 $ 5,873 $ 192,046
Noncash operating activities:
Value of common stock for
consulting services $ 53,340 $ 150,000 $ - $ 203,340
Noncash investing activities:
Value of assets transferred to lessor
in lieu of payment on capital leases $ - $ 71,405 $ - $ 71,405
Noncash financing activities:
Value of common stock issued and
additional paid-in capital for the
transfer of assets from Parent $ - $ 344,000 $ - $ 781,060
Value of common stock issued to
Parent and additional paid-in capital
for the forgiveness of debt $ - $ 3,160,502 $ - $ 3,160,502
Value of common stock warrants issued
for consulting services $ 187,500 $ - $ - $ 187,500
Value of common stock issued and
additional paid-in capital issued as
dividends on preferred conversion $ 4,864 $ - $ - $ 4,864
Value of common stock warrants issued
for preferred stock offering $ 133,559 $ - $ - $ 133,559

See Accompanying Notes.

Page F-7

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

LifePoint, Inc. ("LifePoint" or the "Company") is a development stage
company focused on the commercialization of the flow immunosensor technology
licensed from the Naval Research Laboratory. LifePoint was incorporated on
October 8, 1992 under the laws of the State of Delaware as a wholly-owned
subsidiary of Substance Abuse Technologies, Inc. ("SAT"). On October 29, 1997,
the majority ownership of the Company was transferred from SAT to Meadow Lane
Partners, LLC. The Company is now completely independent from SAT.

Basis of Presentation

As LifePoint is devoting its efforts to research and the development of
its products and there has been no revenue generated from product sales as yet,
LifePoint's financial statements are presented as statements of a development
stage enterprise.

Use of Estimates

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

Cash and Cash Equivalents and Fair Value of Financial Instruments

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

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the related assets
that range from 5 to 13 years. Expenditures for maintenance and repairs are
charged to expense as incurred whereas major betterments and renewals are
capitalized. Property and equipment under capital leases are included with
property and equipment and amortization of these assets are included in
depreciation expense.

Patents

The cost of patents is being amortized over its expected useful life of
17 years using the straight-line method. At March 31, 1999, and 1998,
accumulated amortization of patents was approximately $9,000 and $6,300,
respectively.

Research and Development Costs

Research and development costs are expensed as incurred.

Page F-8

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting for Stock-Based Compensation

LifePoint grants stock options for a fixed number of shares to
employees with an exercise price equal to or above the fair value of the
shares at the date of grant. LifePoint accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and accordingly, recognizes no compensation expense for employee stock option
grants. (See Note 4.)

Net Loss per Common Share

Net loss per common share is based upon the weighted average number of
common shares outstanding during the periods reported. Common stock
equivalents have not been included in this calculation because their inclusion
would be anti-dilutive.

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS
No. 128), which was effective for annual and interim periods ending after
December 15, 1997. SFAS No. 128 replaced the previously required primary and
fully diluted earnings per share (EPS) with basic and diluted EPS. Unlike
primary earnings per share, basic earnings per share exclude any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share are very similar to the previously required fully diluted earnings per
share. All earnings per share amounts for all periods have been presented and,
where necessary, restated to conform to SFAS No. 128. Net loss per common
share, assuming dilution, for the year ended March 31, 1998 has been restated
due to an error in the calculation. There were no adjustments necessary to net
loss in calculating the income available to common stockholders after assumed
conversions of stock options and warrants that are considered to be dilutive.

Income Taxes

LifePoint accounts for income taxes under SFAS No. 109, Accounting For
Income Taxes. In accordance with SFAS No. 109, deferred tax assets and
liabilities are established for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled.

2. CONTINUING OPERATIONS

During the period from October 8, 1992 (inception) through March 31,
1999, the Company has realized no revenues and has accumulated losses of
$14,370,312. The Company will require additional capital to continue the
research, development and ultimate manufacture and marketing of its product
past prototype phase. Recovery of the Company's assets is dependent upon
future events, including completion of the development program and ultimately
achieving profitable operations. The outcome of these events is
undeterminable.

The Company successfully completed private placements of both common
and preferred stock in the fiscal year ended March 31, 1999, with resulting
proceeds of $7,025,000. As a result, management believes.

Page F-9

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

2. CONTINUING OPERATIONS (continued)

that the Company has sufficient cash on hand at March 31, 1999 to sustain
operations through March 31, 2000. The Company continues to pursue parallel
paths to secure additional funding including strategic partnering, venture
capital investors, additional private placements, and a possible public
offering. There can be no assurance that any of these additional sources of
financing will be available and, in such event, the Company would not be able
to complete the development, manufacturing and marketing of its product on a
timely basis.

3. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:
March 31
1999 1998
Furniture, Fixtures and Equipment $ 285,594 $ 287,502
Test Equipment 425,768 425,768
Leasehold Improvements 217,849 209,155
--------- ---------
929,211 922,425
Less: Accumulated Depreciation 775,921 636,237
--------- ---------
$ 153,290 $ 286,188

4. STOCKHOLDERS' EQUITY

Series A Preferred Stock

On January 21, 1999, the Company sold 600,000 shares of the Company's
Series A 10% Cumulative Convertible Preferred Stock, $.001 par value (the
"Series A Preferred Stock"), pursuant to a third private placement pursuant to
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). Each share is convertible into 10 shares of the Company's common stock.
Dividends are cumulative and are payable semi-annually at a rate of $1.00 per
share. The dividends are payable in cash or Common Stock. Shares may be
redeemed at the option of the Company upon not less than 30 days nor more than
60 days notice. In the event that the Average Market Price of the Common Stock
for any 30-day period is $4.00 or more, the Company shall, by notice to the
holders, call all of the then outstanding shares of the Series A Preferred
Stock for redemption as of a date not less than ten nor more than 30 days after
the date the notice is given. Preferred Stock dividends and redemption price
may be satisfied in cash or common stock or a combination of both, at the
Company's sole discretion. Holders of the Series A Preferred Stock have the
right to vote one vote per share, with the holders of the common stock, on the
election of directors and on all other matters submitted to a vote of the
holders of the common stock. Rights to vote, one vote per share, as a class
are granted where the holders consent is requested by the Company or where
provided by the General Corporation Law of the State of Deleware.

The aggregate of 600,000 shares was sold at $10.00 per share and the
Company realized $6,000,000 in gross proceeds. Finders' fees were paid to
various consultants and bankers for their assistance in helping the Company to
complete this private placement. For their assistance in completing this
private placement, finders' fees were paid in cash payments of $592,708 and in
404,725 common stock purchase Warrants expiring on January 20, 2004 with an
exercise price of $2.41 per share.

Page F-10

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

4. STOCKHOLDERS' EQUITY (continued)

Common Stock

On May 24, 1997, the Board of Directors of LifePoint authorized the
issuance of additional shares of the Common Stock to SAT on the basis of a
share of the Common Stock for each $1.25 of indebtedness of LifePoint to SAT.
Based on SAT's advice that the amount of indebtedness owed by LifePoint to SAT
was approximately $2,594,000, all of which SAT agreed to treat as a capital
contribution, LifePoint authorized the issuance to SAT of 2,075,306 shares of
the Common Stock. As of September 30, 1997, SAT owned 5,575,306 shares of the
Common Stock or 76.4% of the 7,297,206 outstanding shares of the Common Stock.
SAT ceased providing advances to LifePoint in August 1997 as a result of its
inability to secure financing for its own programs. On October 27, 1997, the
controlling stockholder interest in LifePoint was sold to an unaffiliated party
for $250,000. LifePoint is now completely independent from SAT.

The purchaser of the Common Stock also loaned money to LifePoint to
allow LifePoint to recommence product development. During the third quarter
of 1997, LifePoint repaid the loans from the net proceeds of a private
placement pursuant to Regulation D under the Securities Act, which sold
3,200,000 shares of the Common Stock at $0.50 per share or an aggregate
purchase price of $1,600,000. The net proceeds of the private placement
totaled approximately $1,434,000 after the payment of capital formation
costs of approximately $166,000, including $160,000 in the form of a finder's
fee to Jonathan J. Pallin, who, on October 31, 1997 was elected Chairman of
the Board and a director of LifePoint. These capital formation costs have
been reflected as a reduction in additional paid-in capital.

On July 23, 1998, the Company closed in a second private placement as to
the sale of 1,000,000 shares of the Common Stock. On August 26, 1998, the
Company sold an additional 25,000 shares of the Common Stock. This offering of
a minimum of 1,000,000 and a maximum of 5,000,000 shares of the Common Stock
expired by its terms on October 14, 1998 without any additional shares being
sold. The aggregate of 1,025,000 shares was sold at $1.00 per share and the
Company realized $1,025,000 in gross proceeds.

Stock Option/Stock Issuance Plan

On August 14, 1997, the Board of Directors adopted, subject to
stockholder approval, the Stock Option Plan providing for the granting of
Options to purchase up to 1,000,000 shares of the 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 Stock 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.

Page F-11

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

4. STOCKHOLDERS' EQUITY (continued)

As of March 31, 1999, Options to purchase an aggregate of 794,167 shares
of the Common Stock granted to employees (including officers) were outstanding.
As of such date, Options to purchase an aggregate of 41,197 shares of the
Common Stock had been exercised and Options to purchase an aggregate of 130,278
shares of the Common Stock were then exercisable. Options granted to date
under the Stock Option Plan 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. The exercise price per share for
incentive stock options under the Code may not be less than 100% of the fair
market value per share of the Common Stock on the date of grant. For
nonqualified stock options, the exercise price per share may not be less than
85% of such fair market value. No Option may have a term in excess of ten
years. Of the Options outstanding as of March 31, 1999, all were incentive
stock options except for Options to purchase an aggregate of 120,000 shares and
all had an exercise price of $.50 per share.

Incentive Stock Options Non-Statutory Options

Number of Price Range Number of Price Range
Shares Per Share Shares Per Share
Outstanding - April 1, 1995 218,000 $7.00 10,000 $7.00
Canceled (66,000) 7.00 (10,000) 7.00
-------- --------
Outstanding - March 31, 1996 152,000 7.00 - -
Canceled (152,000) 7.00 - -
-------- --------
Outstanding - March 31, 1997 - - - -
Granted 950,000 0.50 300,000 1.00-4.00
-------- --------
Outstanding - March 31, 1998 950,000 0.50 300,000 1.00-4.00
Granted 40,000 0.50-1.34 135,000 0.50
Exercised (41,197) 0.50 (155,000) 1.00
Canceled (274,636) 0.50-1.34 (160,000) 0.50-1.00
-------- --------
Outstanding - March 31, 1999 674,167 0.50 120,000 0.50

Warrants

In connection with its initial public offering in October and November
1993, LifePoint granted to the underwriter, for a nominal fee, Common Stock
purchase warrants to purchase 150,000 shares of the LifePoint Common Stock at
$7.50 per share. These warrants expired on October 13, 1998. LifePoint granted
Common Stock purchase warrants, expiring on various dates through January 20,
2004, to purchase 1,136,725 shares of the Common Stock at $0.50 to $2.41 per
share during fiscal 1999 and 1,577,289 shares of the common stock at $0.50 to
$1.00 per share during fiscal 1998.

Page F-12

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

4. STOCKHOLDERS' EQUITY (continued)

Warrants
Number of Price Range
Shares Per Share
Outstanding - April 1, 1995 150,000 $ 7.50
---------
Outstanding - March 31, 1996 150,000 7.50
---------
Outstanding - March 31, 1997 150,000 7.50
Granted 1,577,289 0.50 - 1.00
---------
Outstanding - March 31, 1998 1,727,289 0.50 - 7.50
Expired (150,000) 7.50
Granted 1,136,725 0.75 - 2.41
---------
Outstanding - March 31, 1999 2,714,014 0.50 - 2.41

A summary of the status of the stock option and warrant grants as of
March 31, 1999, 1998 and 1997, and activities during the years ending
on those dates, is presented below:

1999 1998 1997
--------------------- --------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Options and Exercise Options and Exercise Options and Exercise
Warrants Price Warrants Price Warrants Price

Outstanding at
beginning of year 2,977,289 $1.09 150,000 $7.50 302,000 $7.25
Granted 1,311,725 1.31 2,827,289 0.75 - -
Canceled (434,636) 0.72 - - (152,000) 7.00
Exercised (196,197) 0.90 - - - -
Expired (150,000) 7.50 - - - -
---------- --------- ---------
Outstanding at end
of year 3,508,181 0.82 2,977,289 1.09 150,000 7.50
Options and warrants
exercisable at year end 2,837,190 0.89 2,027,289 1.36 150,000 7.50
Weighted-average fair
value of options and
warrants granted
during the year $ 0.82 $ 0.53 $ -

The following table summarizes information about stock options and
warrants outstanding as of March 31, 1999:

Options and Warrants Options and Warrants
Outstanding Exercisable
Weighted ------------------------------------------------
Average Weighted Weighted
Range of Remaining Options Average Options Average
Exercise Life and Exercise and Exercise
Prices (Years) Warrants Price Warrants Price

$0.50 to $2.41 6.0 3,508,181 $ 0.82 2,837,190 $ 0.89

Page F-13

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

4. STOCKHOLDERS' EQUITY (continued)

The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", under which no compensation
cost for stock options is recognized for stock option awards granted at or
above fair market value. Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("FAS 123"), established accounting
and disclosure requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. The Company has elected to remain on
its current method of accounting as described above, and has adopted the
disclosure requirements of FAS 123. Had compensation cost for the Company's
stock option plan been determined based upon the Black-Scholes valuation
methodology, prescribed under FAS 123, the effect on the Company's net loss and
net loss per share, as of March 31, 1999 would have been adjusted to the
proforma amounts as indicated below:

Net Loss
As reported $ (2,696,713)
Pro forma (3,144,713)

Net Loss per share (Basic)
As reported $ (0.23)
Pro forma (0.27)

Net Loss per share (Diluted)
As reported $ (0.23)
Pro forma (0.27)

In the fiscal year ended March 31, 1999 the Company employed the Black-Scholes
option pricing model in order to calculate the above effect on net loss and net
loss per share. The Minimum Value method was used for the years ended March
31, 1998 and 1997. The following table describes the assumptions utilized by
the Black-Scholes option-pricing model and the resulting fair value of the
options granted for the year ended March 31, 1999.

Volatility 1.87
Risk-free interest rate 6.00%
Expected life in years 5
Forfeiture rate 0.00%
Dividend yield 0.00%

Page F-14

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

5. INCOME TAXES

For income tax purposes, LifePoint has a net operating loss carry
forward at March 31, 1999 of approximately $12,806,000 expiring in 2009 to
2014 if not offset against future federal taxable income. In addition,
LifePoint has a capital loss carryover of approximately $625,000 which expires
in 2001 if not offset against future capital gains.

Income tax benefit attributable to net loss differed from the amounts
computed by applying the statutory Federal Income tax rate applicable for each
period as a result of the following:

March 31
1999 1998 1997

Computed "expected" tax benefit $ 918,000 $ 586,000 $ 869,000
Decrease in tax benefit resulting from
net operating loss for which no benefit
is currently available (918,000) (586,000) (869,000)
---------- ---------- ----------
$ - $ - $ -

The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:
March 31
1999 1998
Deferred tax assets:
Net operating loss carryforwards $4,354,000 $3,436,000
Capital loss carryforwards 213,600 213,600
---------- ---------
4,567,600 3,649,600
Less:
Valuation allowance under SFAS 109 4,567,600 3,649,600
---------- ---------
Net deferred tax assets $ - $ -

SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a $4,567,600 valuation allowance at March 31, 1999 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the current
year is $918,000.

Page F-15

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

6. COMMITMENTS AND CONTINGENCIES

Lease Commitments

LifePoint has entered into a lease agreement commencing October 1, 1997
and, extended by an amendment, terminating on March 31, 2002, for the office
and research facilities in Rancho Cucamonga, California. In addition to rent
of $72,000 per year for fiscal years ending March 31, 2000 through March 31,
2002, LifePoint will pay for real estate taxes and other occupancy costs. Rent
expense for the fiscal years ended March 31, 1999, 1998 and 1997 was $69,000,
$44,000 and $45,000, respectively.

Significant Contracts

Effective January 1, 1993, LifePoint entered into a sub-license
agreement with SAT in which LifePoint sublicensed all of SAT's rights under a
license agreement with the Department of the Navy (the License Agreement).

SAT and the Department of the Navy on January 24, 1992 had entered into
a ten-year agreement granting SAT a partial exclusive patent license to
products for drug testing in the United States and certain foreign countries.
In June 1995, SAT's License Agreement with the Department of Navy was
renegotiated and amended to provide for minimum royalties of $100,000 per
year commencing October 1, 1995 and terminating September 30, 2005. Additional
royalties will be paid pursuant to a schedule based upon sales of products.
LifePoint was a sub-licensee under this agreement from SAT and, accordingly,
had an obligation to SAT for the royalty payments required by the License
Agreement. Royalties expensed under the License Agreement by LifePoint were
$40,000, $100,000 and $50,000 for the years ended March 31, 1998, 1997 and
1996, respectively. No amounts were paid or due for the fiscal year ended
March 31, 1999.

With the sale of SAT's majority-owned position in LifePoint, the U.S.
Navy also agreed to transfer its License Agreement with SAT directly to
LifePoint. An amendment dated November 12, 1997 was executed to modify the up-
front $100,000 annual minimum payment to be paid in several payments over the
year; it also included a onetime payment of $10,000 for any outstanding debt
due to the Navy from SAT. LifePoint has assumed all of SAT's rights and
undertaken all of SAT's obligations under the License Agreement.

In April 1999, the Company and the USN completed negotiations for an
expansion of the License Agreement. The new terms expand the field-of-use from
drugs of abuse and anabolic steroids on urine samples to include all possible
diagnostic uses for saliva and urine. In addition, the royalty rate has been
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 has been reduced to $50,000 in 2001
(anticipated first year of product sales) and $100,000 a year thereafter versus
the previous $100,000 per year. The Company is further developing the USN-
developed technology for application in its own proprietary test system.

7. INTERCOMPANY ALLOCATIONS

LifePoint was originally obligated to pay a fixed annual management fee
of $420,000 plus three percent of its gross revenues to SAT, it's former
parent. In addition, the Company was allocated overhead expenses such as rent,
utilities, etc. based on estimated usage. In March of 1997, the Management

Page F-16

LIFEPOINT, INC.
(a Development Stage Enterprise)

NOTES TO FINANCIAL STATEMENTS
March 31, 1999

7. INTERCOMPANY ALLOCATIONS (continued)

Agreement was again amended to provide for a percentage of time and services
agreement whereby the costs of certain SAT employees and facilities were
allocated to LifePoint based on a percentage of usage. As the activity of
LifePoint had been increasing, there had been a tremendous increase in time
required by SAT employees and expanded use of leased space to satisfy
LifePoint's needs. The services provided to LifePoint by SAT pursuant to the
Management Agreement included management, administrative,
accounting and other financial services and advice, including, without
limitation, the services then performed by the Treasurer of LifePoint (who was
also the Treasurer of SAT), for which he was not directly compensated by
LifePoint; services relating to LifePoint's financial and banking
relationships; services relating to the preparation of financial statements,
budgets, forecasts and cash flow projections; cash management advice; and other
miscellaneous services and advice. LifePoint paid $410,000 and $420,000 for
the years ended March 31, 1998 and 1997 in management fees. The management fee
was discontinued after June 30, 1997 because no services were being provided
after that date.

Page F-17