TCPI INC, 10-K/A, 2000-11-01

TCPI INC
10-K/A, 2000-11-01
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
AMENDMENT NO. 4

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

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

FOR THE TRANSITION PERIOD FROM _______________ TO ___________

COMMISSION FILE NUMBER 0-25406
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TCPI, INC.
(Exact name of registrant as specified in its charter)

Florida 65-0308922
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3341 S.W. 15th Street, Pompano Beach, Florida 33069
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (954) 979-0400

Securities Registered Pursuant to Section 12(b) of the Act:

Name of exchange
Title of each class on which registered
------------------- -------------------
None None

Securities registered pursuant to 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 twelve months (or 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of Common Stock held by non-affiliates as of
March 27, 2000 was approximately $39,411,432 (based upon the closing sale price
of $1.59375 per share on the Nasdaq National Market on March 27, 2000).

As of March 27, 2000, 29,541,258 shares of the Registrant's $.001 par
value Common Stock were outstanding.

EXHIBIT INDEX IS LOCATED ON PAGE 61

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<PAGE>
INDEX
<TABLE>
<CAPTION>

Description Page Number

PART I

<S> <C> <C>
Item 1. Business.......................................................................... 4
The Company............................................................... 4
Forward Looking Statements................................................ 5
Strategic Direction....................................................... 6
Key Products.............................................................. 7
Non-Invasive Glucose Monitoring........................................... 7
Cholesterol Monitoring.................................................... 10
HealthCheck(R)Home Diagnostic Products.................................... 11
Diagnostic Product Portfolio.............................................. 12
Transdermal/Dermal Technology Portfolio................................... 14
Biochemical Manufacturing................................................. 14
Product Research and Development.......................................... 14
Manufacturing and Materials............................................... 15
Patents, Trademarks and Technologies...................................... 15
Competition............................................................... 17
Distribution and Marketing................................................ 17
Employees................................................................. 18
Year 2000................................................................. 18
Governmental Regulation................................................... 18
Product Liability Insurance............................................... 20

Item 2. Properties........................................................................ 20

Item 3. Legal Proceedings................................................................. 20

Item 4. Submission of Matters to a Vote of Security Holders............................... 23

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................................... 23

Item 6. Selected Financial Data........................................................... 24

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 25
</TABLE>

2
<PAGE>
<TABLE>
<CAPTION>

PART II

(Cont'd.)

<S> <C> <C>
Results of Operations...................................................... 25
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998......................................... 25
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997......................................... 26
Financial Condition........................................................ 27
Liquidity and Capital Resources............................................ 27

Item 7a. Quantitative and Qualitative Disclosures About Market Risks......................... 29

Item 8. Financial Statements And Supplementary Data......................................... 29
Report of Independent Certified Public Accountants......................... 30
Consolidated Balance Sheets................................................ 31
Consolidated Statements of Operations...................................... 32
Consolidated Statements of Redeemable Preferred Stock
and Common Stockholders' Equity.......................................... 33
Consolidated Statements of Cash Flows...................................... 35
Notes to Consolidated Financial Statements................................. 36

Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure........................................ 50

PART III

Item 10. Directors and Officers of the Registrant........................................... 51

Item 11. Executive Compensation............................................................. 55

Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................................................... 59

Item 13. Certain Relationships and Related Transactions..................................... 60

PART IV

Item 14. Exhibits, Financial Statement Schedules, and

Reports on Form 8-K............................................................... 61

Schedule II - Valuation and Qualifying Accounts............................ 61
Exhibits Description....................................................... 62
Signatures................................................................. 64
Index to Exhibits.......................................................... 65
Consent of Ernst & Young LLP............................................... 67
</TABLE>

3
<PAGE>

PART I

ITEM 1. BUSINESS

The Company

Technical Chemicals and Products, Inc. (the "Company" or "TCPI")
develops, manufactures and distributes a range of point-of-care medical
diagnostic products for use at home, in physician offices, and other healthcare
locations that are distributed through domestic and international channels. In
addition, TCPI also owns a broad, patent-protected proprietary portfolio of
transdermal and dermal drug delivery technologies and skin permeation enhancers.
The Company also manufactures high purity specialty biochemicals.

TCPI is currently scaling up to manufacture and market in the U.S. and
internationally approximately 47 medical diagnostic testing products that
utilize the Company's patented membrane-based technology. To date, 29 of these
diagnostic products have received 510(k) marketing clearance from the United
States Food and Drug Administration (the "FDA"). The balance of the Company's
diagnostic products are, from time-to-time, in various stages of development,
clinical and regulatory review in the U.S. and overseas, or intended for export
outside the U.S. (See - Product Portfolios.) Of the Company's currently marketed
diagnostic products, many incorporate TCPI's patented and proprietary
membrane-based technology platform. TCPI presently holds 26 U.S. and foreign
patents, and has 61 domestic and foreign patent applications pending.

The Company's diagnostic portfolio presently includes testing and
screening products for (a) family planning (pregnancy and ovulation timing), (b)
cholesterol monitoring and detection of diabetes, urinary tract infection and
kidney and bladder disease, skin cancer and deteriorating vision, (c) infectious
diseases, (d) drugs of abuse, (e) cardiac markers, and (f) certain types of
cancer. TCPI's transdermal/dermal technology portfolio includes
development-stage products in the areas of smoking addiction reduction, hormone
replacement therapy, and cardiovascular disease, as well as commercialization of
skin permeation enhancers.

The Company also has certain key products in various stages of
development and clinical trials that include its noninvasive TD GlucoseTM
Monitoring System (the "TD Glucose Monitoring System") for diabetics; its new
Total and HDL Cholesterol screening and monitoring products for over-the-counter
use and professional use; and its HealthCheck(R) and private-label brands of
over-the-counter diagnostic screening tests for at-home use by consumers.

The Company's diagnostic products are marketed worldwide through
multiple distribution channels that include (a) Original Equipment Manufacture
("OEM") marketing relationships with multinational pharmaceutical and diagnostic
companies for product use on a professional and/or over-the-counter basis, (b)
over-the-counter sales of TCPI's proprietary HealthCheck and private-label
brands for consumer use on an over-the-counter basis, and (c) Internet sales via
the Company's web site, www.health-check.com. In the OEM sector, a majority of
the Company's family planning products for pregnancy and fertility are marketed
by Roche Diagnostics for international distribution under their trademark. This
sector also includes marketing of TCPI's screening tests for drugs of abuse and
infectious diseases by other OEM customers for distribution in the U.S. and/or
international markets based on regulatory clearance. In addition, in January
1999, the Company opened its international sales and marketing office in Milan,
Italy to expand distribution of TCPI's diagnostic products outside of North
America. International expansion of the Company's diagnostic products is
ongoing. Product marketing and/or registration with local health officials is
underway in a number of foreign countries. TCPI's HealthCheck and private-label
diagnostic products are currently available in more than 17,000 pharmacies,
supermarkets and mass merchandise retail stores throughout the United States and
Canada as well as community pharmacies that are supplied directly by the leading
drug wholesale distributors. The Company private labels its family planning
products for 7 leading drug, discount and supermarket chains. In 1999, sales of
the Company's products to Roche Holdings AG accounted for approximately 31% of
sales; CVS Distribution, Inc. (CVS Drug Stores) accounted for approximately 25%
of sales; and LVMH Moet Hennessy Louis Vitton, Inc. accounted for approximately
13% of sales.

4
<PAGE>
ITEM 1. BUSINESS (Continued)

Forward Looking Statements

Information in this Form 10-K, including any information incorporated
by reference herein, includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and is subject to the safe-harbor created by
such sections. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements.

Statements regarding development and FDA clearance of future products,
future prospects, business plans and strategies, future revenues and revenue
sources, the resolution of pending litigation, future liquidity and capital
resources, health care market directions, future acceptance of the Company's
products, possible recommendations of health care professionals or governmental
agencies regarding use of diagnostic products, possible growth in markets for
at-home diagnostic testing, the possibility of additional equity investments,
mergers, acquisitions or other strategic transactions, as well as other
statements contained in this report that address activities, events or
developments that the Company expects, believes or anticipates will or may occur
in the future, and similar statements are forward-looking statements. These
statements are based upon assumptions and analyses made by the Company in light
of current conditions, future developments and other factors the Company
believes are appropriate in the circumstances, or information obtained from
third parties and are subject to a number of assumptions, risks and
uncertainties. Readers are cautioned that forward-looking statements are not
guarantees of future performance and that actual results might differ materially
from those suggested or projected in the forward-looking statements. Factors
that may cause actual future events to differ significantly from those predicted
or assumed include, but are not limited to: the satisfactory completion of
clinical trials demonstrating efficacy of the TD GlucoseTM Monitoring System;
FDA and foreign regulatory clearance of the TD Glucose Monitoring System; delays
in product development; risks associated with the Company's ability to
successfully develop and market new products on a profitable basis or at all;
availability of labor and sufficient parts and materials to complete the design,
construction and manufacturing scale-up of required equipment; ability to
complete the design, construction and manufacturing scale-up on a timely basis
within budget parameters; receipt of any required regulatory approvals for
manufacturing equipment or related facilities; future advances in technologies
and medicine; the uncertainties of health care reform; risks related to the
early stage of the Company's existence and its products' development; the
Company's ability to execute its business plans; engineering development; lead
time for delivery of equipment; the Company's dependence on outside parties such
as its key customers, suppliers, licensing and alliance partners; competition
from major pharmaceutical, medical and diagnostic companies; risks and expense
of government regulation and effects of changes in regulation (including risks
associated with obtaining requisite FDA and other governmental approvals for the
Company's products); the limited experience of the Company in manufacturing and
marketing products; uncertainties connected with product liability exposure and
insurance; risks associated with domestic and international growth and
expansion; risks associated with international operations (including risk
associated with international economies, currencies and business conditions);
risks associated with obtaining and maintaining patents and other protections of
intellectual property; risks associated with uncertainty of litigation and
appeals, and the payment of judgments not reversed on appeal or otherwise; the
Company's limited cash reserves and sources of liquidity; uncertainties in
availability of expansion capital in the future and other risks associated with
capital markets, including funding of ongoing operations, risks associated with
the Company's ability to negotiate and obtain additional financing, equity
investments or strategic transactions on favorable terms or at all, as well as
those listed in the Company's other press releases and in its other filings with
the Securities and Exchange Commission. The Company may determine to discontinue
or delay the development of any or all of its products under development at any
time. Moreover, the Company may not be able to successfully develop and market
new products, enter into strategic alliances or implement any or all of its
operating strategy unless it is able to generate additional liquidity and
working capital.

5
<PAGE>

Strategic Direction

Diagnostic Products:

TCPI's core strategic objective is to continue to develop, manufacture
and market a range of point-of-care medical diagnostic products for distribution
through multiple channels on a global basis. To do so, the Company intends to
become a fully integrated organization capable of providing the medical
diagnostic marketplace with products that offer accuracy, efficacy, ease of use
and reduced costs. In order to accomplish this objective, the Company has
developed the following strategy:

Provide Accurate, Easy to Use and Cost Effective Products. The Company
has developed and is continuing to seek to develop and market medical diagnostic
products that it believes are accurate, easy to use and cost-effective, and
provide disease-specific information to health care providers and patients. The
Company believes that its business approach is consistent with current trends to
reduce the overall cost of health care by providing high quality, value-added
products that offer an improved benefit to cost ratio over competitive products,
where they exist.

Provide a Range of Products. The Company has developed and is
continuing to develop and market a range of medical diagnostic products. The
Company believes that a diversified product base could increase potential
business opportunities, provide a stream of new product introductions over time
and reduce the risks associated with reliance on a single product or technology.

Focus on Large Market Opportunities. The Company concentrates its
development efforts on large existing markets in which the Company believes
there could be significant demand for its products. For example, industry
estimates project the worldwide finger-stick blood glucose monitoring market to
be approximately over $4 billion annually.

Enter into Strategic Alliances. TCPI intends to expand distribution of
certain of its medical diagnostic products and also enter into strategic
alliances with large multinational pharmaceutical and medical diagnostic
companies as well as independent distributors for the distribution and marketing
of many of its diagnostic products. The Company believes that these companies
will have significantly greater financial, marketing and other resources than
the Company such that they will be able to market TCPI's products through a
broader range of distribution channels.

Expand Distribution. The Company intends to continue to expand direct
and indirect distribution of its over-the-counter HealthCheck and private-label
family planning products as well as OEM and private-label distribution of its
diagnostic testing and screening products for drugs of abuse, infectious
diseases and certain types of cancer throughout North America and certain
international markets.

There can be no assurance that the Company will be able to successfully
develop and market new products on a profitable basis or at all; or that the
Company will be able to successfully negotiate strategic alliances with such
major multinational pharmaceutical and medical diagnostic companies or at all,
or that the terms of any such alliances will be more favorable to the Company
than the terms that the Company could otherwise obtain.

Transdermal Technologies:

The Company anticipates that the ongoing commercialization of its skin
permeation enhancers will likely continue. In June 1999, the Company closed its
transdermal/dermal research and development facility in California. As a result,
the strategic direction related to TCPI's portfolio of transdermal/dermal drug
delivery technology will likely advance only with third party involvement to
fund final product development, conduct clinical testing and obtain regulatory
approvals, and market the product; or license or divest the technology or
related patents.

There can be no assurance that the Company will be able to successfully
negotiate strategic alliances with third parties on favorable terms or at all.
Key Products

6
<PAGE>

Non-Invasive Glucose Monitoring

The Product. TCPI is developing its noninvasive TD Glucose Monitoring
System intended to be a painless, bloodless, easy to use and rapid method for
diabetics to monitor their glucose levels without the discomfort and
inconvenience associated with available finger stick blood glucose monitoring
systems. The TD Glucose Monitoring System is designed to be completely
noninvasive, nontoxic and safe. It consists of a hand-held electronic TD Glucose
Meter and single-use transdermal TD Glucose Patch that is applied to the forearm
for five minutes and read by the TD Glucose Meter to produce an instant glucose
reading. The retail price of the TD Glucose Monitoring System will be determined
in conjunction with any strategic partners responsible for distribution and
marketing, and is expected to be competitive with currently available
finger-stick blood glucose monitoring systems.

The TD Glucose Monitoring System combines proprietary and
patent-pending transdermal technology with TCPI's patented membrane-based
diagnostic technology, which is the technological platform for most of the
Company's diagnostic products. The product is designed to permit dermal glucose
to be accessed and transported into the patch where it causes an end-point
chemical reaction and color change in the membrane. Special optics in a
hand-held electronic meter detect the color change and produce a glucose
reading.

Clinical Trials. Clinical trials for the TD Glucose Monitoring System
remain ongoing. At this time, the Company anticipates being able to complete
these clinical activities and file a regulatory submission to the FDA during the
year 2000 seeking marketing clearance for the TD Glucose Monitoring System under
the 510(k) pre-market notification process.

Limited clinical study data related to the TD Glucose Monitoring System
were presented at the 1998 European Association for the Study of Diabetes
conference in Barcelona, Spain. Data from ongoing clinical studies were
presented during June 1999 at a Symposium at the America Diabetes Association
annual meeting held in San Diego, California. With respect to both studies, the
TD Glucose Monitoring System demonstrated a high degree of correlation with
current finger-stick blood glucose monitoring technology.

The Company anticipates that its first-generation noninvasive glucose
monitoring technology will be available by prescription. The physician would
then determine whether to calibrate the TD Glucose Meter to the individual
diabetic patient or utilize universal algorithms such that individual
calibration is not necessary. At this time, the recommended calibration interval
required for the TD Glucose Meter will be determined by the outcome of the
clinical trials. The Company anticipates that future generations of the TD
Glucose Monitoring System may include advancements in available features.

There can be no assurance that the clinical trials will be completed on
a timely basis or that such clinical trials will be successful or produce data
suitable for submission to the FDA. In addition, there can be no assurance that
the FDA will consider the TD Glucose Monitoring System for 510(k) clearance,
expedited or otherwise, or if considered, that the TD Glucose Monitoring System
will receive 510(k) clearance. Further, the FDA may elect to consider the TD
Glucose Monitoring System under the regulatory diagnostic guidelines for a
Pre-Market Approval ("PMA"). In that event, there can be no assurance that the
FDA will consider the TD Glucose Monitoring System for PMA approval, expedited
or otherwise, or if considered, that the TD Glucose Monitoring System will
receive PMA approval. (See Governmental Regulation.) In addition, there can be
no assurance that by the time the Company completes clinical trials and receives
FDA clearance or approval for the TD Glucose Monitoring System there will not be
products that are technologically equal or superior already on the market.

Manufacturing. The Company intends to manufacture both TD Glucose
Meters and TD Glucose Patches and sell these finished goods to its strategic
partners for global/regional distribution. In July 1998, the Company established
Technical Electronics Corporation, a joint venture company 80% owned by TCPI, to
manufacture electronic devices for TCPI's noninvasive glucose monitoring system,
cholesterol monitoring meter and other future electronic products. Through an
affiliate of the Company's joint venture partner, Technical Electronics
Corporation has manufacturing capabilities in China. In January 1999, TCPI
announced the commencement of the engineering phase of the manufacturing
scale-up process to commercially produce TD Glucose patches. The Company's plans
include the design and construction of high-speed, state-of-the-art machinery to
conduct the complex manufacture and automatic packaging of TD Glucose patches.
The engineering phase is a key element to the manufacturing scale-up process. It
is anticipated that the engineering and manufacturing scale-up process will
require a minimum of 24 months to complete - and include equipment installation
and full-scale operation under FDA diagnostic Good Manufacturing Practices, and
inventory build-up prior to market introduction. There can be no assurance that
the engineering or manufacturing scale-up process for the TD Glucose Patches
and/or TD Glucose Meters will be successful or that finished products will be
produced in sufficient quality or quantity, or on a timely or cost-effective
basis.

7
<PAGE>

Marketing. TCPI is presently pursuing strategic partners for global
and/or regional marketing and distribution rights of the TD Glucose Monitoring
System. The typical structure of such licensing agreements in the
pharmaceutical, biotechnology and medical technology environment is milestone
driven whereby both parties define major and minor development events and
associated payment for achieving each threshold. Such agreements may also
include provisions for royalty payments based on sales and transfer pricing of
finished goods, among other terms and conditions. There can be no assurance that
TCPI will be successful in locating strategic partners or in executing licensing
agreements, or that the terms and conditions of such agreements will be
favorable to the Company.

Blood Glucose Monitoring Market. Diabetes is a chronic disease in which
the body does not produce the protein insulin. Insulin permits metabolized
sugar, starches and other food energy (glucose) to transfer via osmosis from the
interstitial fluid ("ISF") into the cells. Without insulin, the cells are unable
to receive nutrition. ISF is an extra-cellular fluid that is prevalent
throughout the body, including the skin. Scientific research indicates that ISF
glucose levels correlate closely with blood glucose levels. At present, there is
no cure for diabetes and the exact cause is unknown, although such factors as
heredity, obesity and lack of exercise appear to play roles. Type I (or
juvenile) diabetes, the most severe form of the disease, comprises approximately
10% of diabetes cases in the United States and requires daily treatment with
insulin to sustain life. Type II (or adult onset) diabetes comprises the other
90% of diabetes cases in the United States and is usually managed by diet and
exercise, but may require treatment with insulin or other medication.

Diabetes is the fourth leading cause of death by disease in the U.S.
with about 625,000 new cases diagnosed each year. Medical costs in the U.S. for
the treatment of diabetes and diabetes related conditions are estimated to be
more than $100 billion annually. Worldwide there are in excess of 110 million
people with diabetes where only about 18 - 20 million people regularly monitor
their glucose levels. In the United States, there are 15.7 million people or
5.9% of the population who have diabetes. At present, the worldwide market for
finger-stick blood glucose monitoring products is estimated to be approximately
over $4 billion per year.

According to the American Diabetes Association (the "ADA"), people with
Type I diabetes must have daily treatment with insulin to control blood glucose
levels. A person's blood glucose level will vary depending upon diet, insulin
availability, exercise, stress and illness. Blood glucose testing several times
a day enables people with diabetes to better manage their disease by keeping
their blood glucose levels in a narrow range. This may be accomplished through
diet, physical activity and insulin dosage. Prior to the availability of
self-monitoring blood glucose systems, people with diabetes relied on urine
glucose testing to monitor their status and make appropriate adjustments to
their treatment. Because glucose appears in the urine only after a significant
period of elevated blood glucose, urine tests are inadequate for tight control
of blood glucose. Patients were also able to obtain an occasional blood glucose
test after referral by a health care provider to a clinical laboratory. These
tests were ordered infrequently, usually as part of a physician office visit,
and results were typically not available for immediate discussion and
intervention.

Beginning in the late 1970's, the availability of finger stick blood
glucose monitoring systems that provided fast and accurate blood glucose
measurements gave people with diabetes a tool to manage the disease more
effectively and to improve the quality of care. Since that time, worldwide sales
of self-monitoring blood glucose systems have increased dramatically. According
to industry sources, the worldwide market for blood glucose monitoring products
in 1995 was over $1.5 billion. In the United States, the market for blood
glucose monitoring products grew from approximately $570 million in 1991 to
approximately $1.5 billion in 1997.

8
<PAGE>

In July 1993, The New England Journal of Medicine published the results
of the Diabetes Control and Complications Trial (the "DCCT"), a major nine-year
clinical trial sponsored by the National Institutes of Health (the "NIH").
Participants in the DCCT were assigned to either intensive or conventional
therapy groups. Conventional therapy involved testing four times a day, with at
least three injections of insulin and making appropriate modifications to diet
and exercise while injecting insulin in accordance with blood glucose levels.
Each therapy group contained people with no significant complications as well as
people with mild complications. The study demonstrated that maintaining blood
glucose levels as close as possible to normal reduces by approximately 60% the
risk for development and progression of certain diabetes complications. Although
the DCCT included only people with Type I diabetes, the ADA has stated that
there is no reason to believe the effects of better control of blood glucose
levels would not apply to people with Type II diabetes. The results of the study
were so compelling that the study was terminated earlier than planned, because
those conducting the study felt that to continue conventional treatment for the
control group would deprive its participants of the benefits of the study's
findings. Because the intensive therapy that the DCCT study recommends involves
testing at least four times a day, the Company believes that DCCT will increase
awareness among people with diabetes of the benefits of frequent testing and
will be a key factor in changing diabetes management in the coming decade.
Moreover, various publications related to diabetes have recommended testing six
to eight times a day. Based on various studies, including a survey by the NIH,
the Company believes that people with diabetes, on average, test their blood
glucose levels less than twice per day. The Company believes that such patient
noncompliance is due, in part, to the pain and inconvenience associated with the
use of conventional finger stick blood glucose monitoring systems. The TD
Glucose Monitoring System has been designed by the Company to address the need
for a convenient, blood-free, pain-free self-monitoring blood glucose system.

The Company believes that growth in demand for self-administered blood
glucose monitoring products will also be driven by the trend toward greater
patient involvement in personal health management. Many chronic conditions may
be managed more cost effectively in the home. The Company believes that these
benefits are consistent with recent initiatives, particularly in the United
States, to control overall health care expenditures. It is estimated that
expenditures in the United States for costs associated with diabetes are
approximately $100 billion annually.

Existing Self-Monitoring Blood Glucose Systems. At present, blood
glucose levels are generally measured by first obtaining a blood sample using
the finger stick method. This method requires the user to prick a finger with a
lancet, draw a drop of blood and place the blood on a chemically treated
disposable test strip. The test strip is then placed in a meter containing a
light source and a digital read-out device. This reflectance meter measures the
color of the test strip at two or more wavelengths, thereby determining and
displaying the blood glucose level. A variation of the conventional reflectance
meter approach uses test strips which, rather than producing a color change,
produce a small electric current. The amount of current produced is a function
of the blood glucose level. Alternatively, the blood glucose level can be
obtained by conducting the finger stick method and placing blood on a chemically
treated disposable test strip which must be blotted or wiped off and then, after
an additional amount of time has elapsed, the result is read by visually
comparing the color of the test strip to that of a color chart.

With either method, adequate control of blood glucose levels requires a
finger stick each time a sample is taken. This is often an unpleasant experience
for the user, especially for children and the elderly. Depending upon the
relative dexterity of the user, the meter process generally takes at least two
to four minutes. Moreover, the ongoing costs of repeated finger stick testing,
including the cost of test strips, lancets, swabs, antiseptics, test solutions
and other related materials, are significant to the average user. Another
significant problem associated with these invasive finger stick methods is the
requirement to safely dispose of lancets and bloody test strips and swabs.
Finally, any type of invasive procedure entails some risk of infection.

9
<PAGE>

Cholesterol Monitoring

The Products. TCPI has developed cholesterol screening and monitoring
products for at-home use by consumers as well as use by healthcare professionals
to determine Total and HDL (good) cholesterol levels. The home screening tests
for consumers will utilize the Company's visual-read test strips for Total and
HDL cholesterol and will be sold on an over-the-counter basis under the
Company's HealthCheck brand. Healthcare professionals will have the option of
using the Company's new TriMeterTM quantitative system consisting of a small
electronic meter and strips for Total and HDL Cholesterol for analytical
monitoring or the visual products for initial screening. The TriMeter system
will also measure blood glucose obtained by the finger-stick method and there
will also be a smaller version of the TriMeter system for patients to use at
home on a prescription basis.

The Total and HDL Cholesterol Test Strips and Glucose Test Strips
utilize the Company's patented and proprietary membrane-based technology and are
designed to produce an end-point color reaction in the membrane in direct
proportion to the amount of Total or HDL cholesterol or glucose present.

These products are designed so that, a lancet is used to prick the
finger tip so that a drop of blood can be collected and placed on the Test Strip
where the reaction produces a blue-green color on the strip. The shade of color
produced is related to the amount of Total or HDL cholesterol in the blood. The
over-the-counter visually-read screening kits are expected to be available in
Total, HDL, and combination Total and HDL formats packaged with supplies for two
screenings per box that include test strips, lancets, alcohol wipes, plastic
pipettes and a corresponding color chart.

Clinical/Regulatory Status. For the Company's Total Cholesterol Home
Screening Test, a 510(k) submission seeking over-the-counter marketing clearance
was filed with the FDA on October 1, 1999. On March 10, 2000, the Company
announced that the United States Food and Drug Administration (FDA) had not
cleared the Total Cholesterol Home Screening Test for over-the-counter (OTC)
marketing. The Company plans to modify the format of the color chart in which
test results are displayed and obtain new clinical data for a new regulatory
submission of this consumer total cholesterol screening test. Concurrently, the
Company will conduct clinical trials for its new HDL Cholesterol Home Screening
Test for the OTC market and its TriMeter. The Company believes all of its new
cholesterol testing products are at a point where it is both cost and
time-effective to conduct parallel clinical trials. The Company anticipates it
will be able to initiate regulatory filings for these products later this year.
The Company's blood glucose test strip being used with the TriMeter monitoring
system previously received 510(k) marketing clearance from the FDA in 1987.
There can be no assurance that clinical studies for the Company's visual or
meter read products will be successful or produce data suitable for a 510(k)
submission to the FDA, or that any of these products will receive 510(k)
marketing clearance on a timely basis.

Marketing. The TriMeter monitoring system is designed to provide a
quantitative digital readout of the Total and HDL cholesterol and glucose value.
The Company believes that its TriMeter monitoring system may overcome the
disadvantages of laboratory testing by offering the healthcare provider and
patient a quick and easy-to-use method of testing for cholesterol in the
physician's office, clinic, pharmacy or other location. With a real-time result,
the healthcare provider is able to counsel the patient and begin immediate
treatment, eliminating the need for a follow-up visit. The Company's test also
is anticipated to eliminate the costs and delays associated with utilizing
laboratories, including those associated with specimen collection, preservation,
transportation, processing and reporting results.

Cholesterol Monitoring Market. In response to evidence linking high
total cholesterol levels to heart disease, the NIH launched the National
Cholesterol Education Program (the "NCEP"), a nationwide effort to reduce the
prevalence of high blood cholesterol. In 1988, the NCEP issued guidelines for
the testing of all adults over 20 years of age for high blood cholesterol, and
more extensive lipid monitoring and treatment for those found to be in high risk
categories. In 1991, testing guidelines were expanded to include children over
the age of two with a family history of high blood cholesterol or coronary heart
disease.

Starting in 1987, when an NIH expert panel in a draft statement
recommended that the HDL measurement be added to the total cholesterol
measurement when evaluating coronary heart disease risk in healthy individuals,
and

10
<PAGE>

that a lipid profile, consisting of total cholesterol, HDL cholesterol and
triglycerides, be conducted under certain circumstances, including the diagnosis
of individuals who have increased total cholesterol levels, or individuals with
desirable total cholesterol levels who have two or more other coronary heart
disease risk factors. Three lipid profiles, each to be conducted one week apart,
were also recommended prior to initiating drug or dietary therapy for patients
with lipid disorders. Following the NCEP and the NIH guidelines, individuals
with desirable total cholesterol levels should have their cholesterol tested
every five years; individuals with borderline high total cholesterol should have
a lipid screening repeated annually; and, as noted above, those with high total
cholesterol should have at least three lipid profiles conducted to confirm their
values and to help their physician decide what therapy, if any, should be
instituted. Individuals receiving diet or drug therapy would be expected to be
tested at least every three months to track the effectiveness of the therapy.
While early federal initiatives focused on males and coronary disease, recent
initiatives emphasize the incidence of coronary artery disease in women.

According to industry research conducted by Frost and Sullivan, the
U.S. market for all cholesterol testing is approximately $250 million per year.
At home testing for cholesterol is currently in the introductory stage of market
development. Coronary Artery Disease (CAD) is still the number one cause of
death in the U.S. The disease is typically asymptomatic with the first indicator
being a heart attack. Routine cholesterol screening can identify individuals at
risk. There can be no assurance that by the time the Company completes clinical
trials and receives FDA clearance for marketing, there will not be products that
are technologically equal or superior to the TriMeter system, that the Company
will be able to competitively price the system or that it will be able to
capture any portion of the cholesterol testing or screening market.

Existing Cholesterol Monitoring Systems. Cholesterol and lipoprotein
tests are generally performed in the laboratory using blood samples taken from
patients in a hospital on an outpatient basis or in a doctor's office. Most
testing is done using highly automated equipment and enzymatic chemistry. The
main disadvantage of the existing systems is the lack of immediate results.
There are currently several point-of-care cholesterol monitoring systems that
are either more expensive, lack accuracy, or have a high acquisition cost.

HealthCheck(R) Home Diagnostic Products

TCPI manufactures and markets its proprietary HealthCheck brand of
at-home medical diagnostic testing and screening products to chain drug stores
and community pharmacies, supermarkets and mass merchandise retail stores. The
Company believes such activities will allow it to capitalize on the growth in
the market for over-the-counter medical diagnostic products.

The HealthCheck line consists of at home testing and screening products
for diabetes, urinary tract infection, pregnancy, ovulation, cholesterol, skin
cancer, deteriorating vision and a series of health journals for use by
consumers. HealthCheck products are being sold at approximately 17,000 chain and
independent pharmacies, mass merchandisers and grocery stores in the United
States and Canada. In addition, international sales and/or product registration
are being conducted in Argentina, Australia, Austria, Bangladesh, Canada, Chile,
China, Cyprus, Denmark, Egypt, Germany, Hong Kong, Macao, Malaysia, Netherlands,
Norway, Oman, Philippines, Portugal, South Africa, Spain, Sweden, Switzerland,
Taiwan, Thailand, Tunisia, and Turkey.

The Company believes that simple-to-use products with the ability to
perform accurate, quantitative tests without an instrument will continue to
create new market opportunities for home health screening and monitoring. One of
the Company's strategies for competing in this market is to produce improvements
over existing at-home and other point-of-care testing products, where possible.
According to industry studies, growth in the medical diagnostic test market is
being experienced as health care providers and third party payers recognize that
regular diagnostic testing can result in earlier detection of disease, more
accurate diagnosis and more effective treatment as individuals become more
involved with their own health. In addition, home testing for a variety of
health conditions is becoming increasingly accepted and understood by consumers
much like home pregnancy testing was 10 to 15 years ago.

11
<PAGE>

The Company's strategy for its HealthCheck brand includes ongoing
domestic expansion through greater penetration of the retail pharmacy,
supermarket, mass merchandise and drug wholesale distribution channels as well
as establishing international distribution for its home testing products that
offer cost-effective pricing to the consumer.

Product Portfolios

The following tables set forth information relating to the Company's
diagnostic products and transdermal/dermal drug delivery technologies currently
on the market or in various stages of development and regulatory clearance.

-----------------------------------------------------------------------------------------------------------------------------------
TCPI PRODUCT STATUS MARKET
DIAGNOSTIC PRODUCT PORTFOLIO SECTOR

12
<PAGE>
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
TCPI PRODUCT STATUS MARKET
DIAGNOSTIC PRODUCT PORTFOLIO SECTOR

------------------------------------------------------------------------------------------------------------------------------------
In Pre- Regul- O-T-C O-T-C OEM/
Devel- Clinical Clinical atory On The Health- Private Pro-
opment Stage Trials Clearance Market Check Label fessional
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Pregnancy Value Pack: hCG Test Strip Double-Pack o o o o o X X X
------------------------------------------------------------------------------------------------------------------------------------
Ovulation Predictor Test Kit o o o o o X X X
------------------------------------------------------------------------------------------------------------------------------------
One Step One Minute(TM) Pregnancy Test: Midstream Wand o o o o o X X
------------------------------------------------------------------------------------------------------------------------------------
One Step Ovulation Midstream Wand o o o o o X X X
------------------------------------------------------------------------------------------------------------------------------------
Pregnancy test strips, 25 & 50 test kits o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PERSONAL HEALTH JOURNALS:
------------------------------------------------------------------------------------------------------------------------------------
Men's Journal o X
------------------------------------------------------------------------------------------------------------------------------------
Woman's Journal o X
------------------------------------------------------------------------------------------------------------------------------------
Senior's Journal o X
------------------------------------------------------------------------------------------------------------------------------------
My Pregnancy Journal o X
------------------------------------------------------------------------------------------------------------------------------------
All About Me Children's Journal o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
DRUG OF ABUSE SCREENING:
------------------------------------------------------------------------------------------------------------------------------------
One Step Cocaine Test Strip(TM) o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Opiate Test Strip(TM) o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Amphetamine Test Strip(TM)** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Methamphetamine Test Strip(TM) o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Phencyclidine (PCP) Test Strip(TM)** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Benzodiazepine Test Strip(TM)** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Canabinoids (THC) Test Strip(TM) o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Methadone Test Strip(TM)** o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Barbiturates Test Strip(TM) o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
ScanGuard(TM)Drug of Abuse Multi-Panel Tests o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
INFECTIOUS DISEASE SCREENING:
------------------------------------------------------------------------------------------------------------------------------------
RapidTest HIV(TM)Screen ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
RapidTest HBsAg(TM)Screen (Hepatitis B) ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Strep A(TM)Screen o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Strep B(TM)Screen o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
RapidTest Chlamydia(TM)Screen ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
RapidTest H. pylori(TM)Screen o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
SALIVA SAMPLE COLLECTOR:
------------------------------------------------------------------------------------------------------------------------------------
Sani-Sal(TM)Saliva Collector ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CANCER SCREENS:
------------------------------------------------------------------------------------------------------------------------------------
One Step PSA Test ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Alphafetalprotein Test ** o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
One Step LE Test (Lupus) o X
------------------------------------------------------------------------------------------------------------------------------------
One Step Fecal Occult Blood Test(R) o o o ++ X X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
URINALYSIS:
------------------------------------------------------------------------------------------------------------------------------------
Routine Urine Screening o o o o o X
------------------------------------------------------------------------------------------------------------------------------------
Urine Specialty Product / Drug of Abuse Screening o o o o o X
------------------------------------------------------------------------------------------------------------------------------------

** For Export Only
++ On The Market In Certain International Territories
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13

-----------------------------------------------------------------------------------------------------------------------------------
TCPI PRODUCT STATUS MARKET
TRANSDERMAL/DERMAL SECTOR
TECHNOLOGY PORTFOLIO
------------------------------------------------------------------------------------------------------------------------------------
In Pre- Regul- O-T-C O-T-C OEM/
Devel- Clinical Clinical atory On The Health- Private Pro-
opment Stage Trials Clearance Market Check Label fessional
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
SMOKING CESSATION:
------------------------------------------------------------------------------------------------------------------------------------
Nicotine * o o X X
------------------------------------------------------------------------------------------------------------------------------------
Nicotine Lozenge o o
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
HORMONE REPLACEMENT / OSTEOPOROSIS:
------------------------------------------------------------------------------------------------------------------------------------
Estradiol o o o X
------------------------------------------------------------------------------------------------------------------------------------
Estradiol / Progestin o o X
------------------------------------------------------------------------------------------------------------------------------------
Testosterone o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CARDIOVASCULAR DISEASE:
------------------------------------------------------------------------------------------------------------------------------------
Nitroglycerin o o X
------------------------------------------------------------------------------------------------------------------------------------
Isosorbide Dinitrate (ISDN) o o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
OTHER:
------------------------------------------------------------------------------------------------------------------------------------
Bup-4 Incontinence ** o o o X
------------------------------------------------------------------------------------------------------------------------------------
Ketorolac o o X
------------------------------------------------------------------------------------------------------------------------------------
Vitamin C/E Patch o X X
------------------------------------------------------------------------------------------------------------------------------------
Pain Patch o o X
------------------------------------------------------------------------------------------------------------------------------------
Physostigmine o X
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
SKIN PERMEATION ENHANCER:
------------------------------------------------------------------------------------------------------------------------------------
SR-38 o X
-----------------------------------------------------------------------------------------------------------------------------------

* Clinical Protocol For Abbreviated New Drug Application ("ANDA") Approved - Seeking
Strategic Alliance To Advance Clinical, Regulatory And Commercialization Stages
** Undergoing Clinical Evaluation In Japan
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Biochemical Manufacturing

The Company currently manufactures the specialty chemical Tris and its
analogs, a biological buffer having numerous applications in the manufacturing
of pharmaceutical, cosmetic, diagnostic and other products. Although the Company
is capable of manufacturing other biochemical products, it does not intend to
broaden its product line at this time. The Company does, however, intend to
continue manufacturing and selling Tris.

Product Research and Development

The Company's products are in various stages of commercialization, and
include those that are already on the market and others that are in development,
clinical review and seeking regulatory clearance. (See the "Diagnostic" and
"Transdermal/Dermal Technology" product portfolios as well as "Strategic
Direction".) The Company conducts an active research and development program to
attempt to strengthen and broaden its existing products and to develop new
products and systems. The Company's development strategy is to identify
diagnostic products and systems that are expected to be needed by a significant
number of potential customers in the Company's markets, and to allocate a
greater share of its research and development resources to areas with the
highest potential for future benefits to the Company. In addition, the Company
seeks to develop specific applications related to its present technology.
Further, because of the Company's limited resources, it may be

14
<PAGE>

unable to complete the development of all of its planned products and may only
be able to complete the development of those products that it believes have the
greatest potential for commercial success. There can be no assurance; however,
that the products selected for development by the Company or which have received
regulatory approval and are introduced into the market will in fact achieve any
degree of commercial success.

To help support the cost of its research and development function, the Company
periodically undertakes customer-sponsored research and development projects for
which it is paid by the sponsoring company. The cost of such projects was
$147,000, $151,000 and $99,000 for the years ended December 31, 1999, 1998, and
1997, respectively. The total amount spent for research and development
activities is identified in the statement of operations in the accompanying
financial statements.

Manufacturing and Materials

During 1999, the Company continued to expand its manufacturing
facilities and capabilities, and expects to continue to do so in order to
accommodate anticipated growth and further reduce its dependence on third party
suppliers. The Company's products utilize materials and components that are
manufactured in-house and obtained from outside suppliers, and such combination
varies from product to product. All of TCPI's diagnostic testing products
incorporate the Company's patented membrane-based technology that serves as a
technological platform where the in-house chemical treatment and processing of
the membrane is specific to the indicated use of the finished diagnostic
product. The Company is devoting a major portion of its manufacturing
capabilities to the production of new products.

The Company purchases the materials used to manufacture its products
from single suppliers to attempt to obtain the most favorable price and delivery
terms. With respect to the materials or components the Company does not yet
manufacture in-house, alternate supply sources have been identified. However, a
change in the supplier of these materials, without the appropriate lead times,
could result in a material delay in the delivery of certain materials or
components, and may subject the Company to less favorable price terms. A change
in the supplier of materials could also result in a material delay in the
delivery of products to the Company's customers. There can be no assurance that
the Company would not be subject to less favorable price and delivery terms as a
result of changing suppliers.

Patents, Trademarks and Technologies

Patents. TCPI presently holds 26 U.S. and foreign patents, and has 61
domestic and foreign patent applications pending.

The Company's President and Chief Technical Officer, Mr. Jack
Aronowitz, is the legal owner and a co-inventor of certain key patents utilized
by the Company, and he has licensed to the Company the right to utilize the
patents. The license agreement between Mr. Aronowitz and the Company provides
that any patents, products, inventions, devices or other items developed or
co-developed by Mr. Aronowitz during the term of the license agreement (other
than those based upon the patents licensed pursuant to the license agreement) in
the field of medical diagnostics, pharmaceuticals, transdermal testing,
transdermal drug delivery, medical chemistry or medical biochemistry, medical
device or health care products become the property of the Company. See "Certain
Relationships and Related Transactions."

Although the Company has obtained patents in the U.S. with regard to
aspects of its membrane-based technology and specific applications thereof, the
Company does not have European patents that correspond to certain of such U.S.
patents. To the best of the Company's knowledge, however, its membrane-based
technology does not infringe the patent of any third party in the U.S. or
Europe. The Company is seeking, and intends to continue to seek, patent
protection where appropriate for improvements to its membrane-based technology.

The Company requires its key employees, consultants and advisors to execute a
confidentiality and assignment of proprietary rights agreement upon the
commencement of an employment or a consulting relationship with the Company.
These agreements generally provide that all inventions, ideas and improvements
made or conceived by

15
<PAGE>

the individual arising out of the employment or consulting relationship shall be
the exclusive property of the Company and that all information related thereto
shall be kept confidential and not disclosed to third parties except by consent
of the Company or in other specified circumstances. There can be no assurance;
however, that these agreements will provide effective protection for the
Company's proprietary information in the event of unauthorized use or disclosure
of such information.

The Company's success will depend, in part, on its ability to protect,
obtain or license patents, protect trade secrets and operate without infringing
the proprietary rights of others. See "Business - Litigation." There can be no
assurance, however, that existing patent applications will mature into issued
patents, that the Company will be able to obtain additional licenses to patents
of others, or that the Company will be able to develop its own patentable
technologies. Further, there can be no assurance that any patents issued to the
Company will provide it with competitive advantages or that the ownership or
validity of such patents will not be challenged by others, or if challenged,
will be held valid, or that the patents of others will not have an adverse
effect on the ability of the Company to conduct its business. In addition, there
is no assurance that the Company's current patents or any patents issued in the
future will prevent other companies from independently developing similar or
functionally equivalent products.

Trademarks. The following represents the Company's products that have received
registered and/or trademark authority:

CholestoCheck(R)
hCG Pregnancy One Step(R)
HealthCheck(R)
Health Test Center(R)
Pregnancy One Step(R)
Pregnancy One Step Test Strip(R)
One Step Fecal Occult Blood Test(R)
One Step LH Test Strip(R)
One Step HDL Cholesterol Test Strip(R)
One Step Whole Blood Cholesterol Test Strip(R)
Soft-E-Touch(R)
One Step Drugs of Abuse Test Strip - Cocaine(R)
One Step Drugs of Abuse Test Strip - Opiate(R)
One Step Drugs of Abuse Test Strip - AmphetamineTM
One Step Drugs of Abuse Test Strip - BenzodiazepineTM
One Step Drugs of Abuse Test Strip - BarbiturateTM
One Step Drugs of Abuse Test Strip - Cannabinoids (THC)TM
One Step Drugs of Abuse Test Strip - MethadoneTM
One Step Drugs of Abuse Test Strip - MethamphetamineTM
One Step Drugs of Abuse Test Strip - Phencyclidine (PCP)TM
One Step Drug ScanTM
TD GlucoseTM
One Step-One Minute Pregnancy TestTM
One Step H. pylori ScreenTM
One Step Strep A ScreenTM
One Step Strep B ScreenTM
RapidTest HIVTM
RapidTest Chlamydia ScreenTM
RapidTest HBsAg ScreenTM
Sani SalTM
ScanGuardTM
SR-38TM
We're Bringing Healthcare HomeTM

16
<PAGE>

Competition

Competition in the development and marketing of medical diagnostic
tests and transdermal drug delivery technologies is intense and expected to
increase. The Company's competitors include companies that have developed
products similar in design and capability to those of the Company as well as
suppliers of such products, including hospitals and laboratories. The Company
believes that competition in the sale of medical diagnostic tests is based
primarily upon the factors of accuracy and precision, speed of response, ease of
use and cost. The Company believes that its transdermal drug delivery
technologies will have to compete on the basis of safety, efficacy, patient
compliance, reduced side effects, product appearance and comfort, price, and, in
certain cases, scope of patent rights.

Many of the Company's current and potential competitors have
significantly greater technical, financial and marketing resources than the
Company. There can be no assurance that the Company will have the financial
resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. There can be no assurance
that the Company's products will be competitive with existing or future products
of competitors or that the Company will successfully develop technologies and
products that are more effective or affordable than those developed by its
competitors. In addition, one or more of TCPI's competitors may achieve patent
protection, regulatory approval or achieve commercialization earlier than the
Company.

Distribution and Marketing

The Company's medical diagnostic products are distributed and marketed
through multiple channels on a global basis for point-of-care use by consumers
at home and as well as professional use in the physician's office or other
healthcare location. Such distribution channels currently include OEM (Original
Equipment Manufacture), over-the-counter branded and private label, as well as
direct to consumers via the Internet, and vary on a product-by-product basis
(See - Product Portfolios.)

Since the Company was founded in 1992, its One Step hCG Pregnancy Test
Strip, One Step hCG Midstream Wand and its One Step LH Ovulation Test Strip
family planning diagnostic products have been distributed on an OEM basis
worldwide through a strategic alliance with Roche Holdings AG (formerly
Boehringer Mannheim-Italia). Additional products in the Company's diagnostic
portfolio are also distributed and marketed on an OEM and/or private-label basis
with other pharmaceutical and diagnostic companies. Since 1996, the Company's
diagnostic testing and screening products have also been marketed
over-the-counter through private label arrangements with drug, supermarket and
discount retail chains as well as the Company's proprietary HealthCheck brand
name. In January 2000, the Company's HealthCheck products became available for
consumer purchase online through the Company's www.health-check.com Web site.
The Company anticipates that, subject to the receipt and timing of related
regulatory clearance, its new products will be intended for the over-the-counter
and the professional market, including consumer use under a physician
prescription.

The Company also anticipates entering into strategic alliances with
pharmaceutical and diagnostic companies for the marketing of certain of its
diagnostic products. The Company anticipates that these companies will have
significantly greater financial, marketing and other resources than the Company,
and will therefore be able to market the Company's products more effectively
through a wider range of distribution channels to a larger market. There is no
assurance, however, that the Company will be able to successfully negotiate such
strategic alliances with such major multinational medical diagnostic and
pharmaceutical companies or at all, or that the terms of any such alliance will
be favorable to the Company.

The Company's strategy with respect to development and
commercialization of its transdermal drug delivery technologies and skin
permeation enhancer products include the following elements: (i) identify those
products which are candidates for the Abbreviated New Drug Application ("ANDA")
process and/or that can be sold over-the-counter, (ii) enter into strategic
alliances with third parties that can fund product development costs, market the
product and perform clinical testing and obtain regulatory approvals, and/or
(iii) license or divest the technology or related patents. In an effort to
exercise control over the quality of its products and capture a larger portion
of the revenues therefrom, the Company may seek to retain manufacturing rights
to products developed under such strategic alliances. The Company anticipates
the ongoing commercialization of its skin permeation enhancers will continue.

17
<PAGE>

Employees

The Company presently has 49 full-time employees involved in research
and development, administration, operations, and marketing and sales. The
Company also hires part time employees to temporarily expand its capabilities
for larger assembly and packaging projects. The Company has no collective
bargaining or similar agreement with its employees. The Company does have
employment agreements with its President and Chief Technical Officer; its Chief
Executive Officer; its Vice President of Finance and Chief Financial Officer;
its Vice President and General Counsel; and its Vice President of Sales and
Marketing. See "Note 7 to the accompanying Consolidated Financial Statements."
Although management does not anticipate any difficulty in locating and engaging
employees to meet the Company's expansion plans, there can be no assurance that
the Company will be successful in doing so.

Year 2000

The term "Year 2000 issue" is a general term used to describe the
various problems that may have resulted from the improper processing of dates
and date-sensitive calculations by computers and other machinery as the year
2000 was reached. These problems generally arise from the fact that most of the
world's computer hardware and software has historically used only two digits to
identify the year in a date, often meaning that the computer will fail to
distinguish dates in the "2000s" from dates in the "1900s". These problems may
also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field.

The Company, its division and operating subsidiaries, implemented a
Year 2000 readiness program with the objective of having all significant
business systems function properly with respect to the Year 2000 issue before
January 1, 2000. Since 1997, the Company has added to its existing computer
capabilities as well as installed new computer systems and programs to
accommodate anticipated future growth of TCPI's business and internal
operations. Costs related to the Company's actions to become Year 2000 compliant
were funded through cash from operating activities. The total estimated costs
related to Year 2000 compliance efforts were approximately $60,000, of which
$55,000 was expensed and $5,000 capitalized.

The Company did not experience any Year 2000 computer related
difficulties. However, due to the general uncertainty with respect to the Year
2000 issue, there can be no assurance that all Year 2000 issues have been
foreseen and corrected, or that no future material disruption of the Company's
business will occur directly or indirectly as it relates to the Year 2000
compliance status of the Company's key vendors and customers or a general
failure of external local, national or international systems (including power,
communications, postal or transportation systems) necessary for the ordinary
conduct of business.

While the Company has developed a contingency plan that would allow for
the supply of materials and services from alternate key vendors as well as
inventory of necessary materials sufficient in the event a disruption occurs as
a result of the Year 2000 issue, these contingency plans are subject to
uncertainties.

Governmental Regulation

Overview. The development, manufacture and marketing of drug delivery
systems and medical diagnostic products are subject to regulation by the FDA and
other federal, state and local entities. These entities regulate, among other
things, research and development activities and the testing, manufacturing,
packaging, labeling, distribution, storage and marketing of the Company's
products. Sales of the Company's products outside the United States are subject
to regulatory requirements that vary widely from country to country.

Medical Diagnostic Products. FDA permission to market and distribute a
new medical diagnostic product can be obtained in one of two ways. If a new or
significantly modified product is "substantially equivalent" to an existing
legally marketed product, the new product may be commercially introduced after
submission of a 510(k)

18
<PAGE>

notification to the FDA, and after the subsequent clearance by the FDA. Less
significant modifications to existing products that do not significantly affect
the product's safety or effectiveness may be made by the Company without a
510(k) notification. A company that manufactures devices subject to 510(k)
clearance must also comply with device good manufacturing practices ("CGMP") and
is subject to periodic inspections by the FDA to confirm compliance.

The second, more stringent approval process applies to a new product
that is not substantially equivalent to an existing product. A premarket
approval application ("PMA") will be required for this type of product. The
steps required in the PMA process generally include: (1) preclinical studies;
(2) clinical trials in compliance with testing protocols approved by an
Institutional Review Board ("IRB") for the participating research institution;
(3) data from clinical trials sufficient to establish safety and effectiveness
of the device for its intended use; (4) submission to the FDA of an application
that contains, among other things, the results of clinical trials, a full
description of the product and its components, a full description of the
methods, facilities and controls used for manufacturing and proposed labeling;
and (5) review and approval of the PMA by the FDA before the device may be
shipped or sold commercially. Finally, the manufacturing site for the product
subject to PMA approval must operate using CGMP.

A device requiring a PMA that has not been cleared for marketing in the
United States, or one that is not substantially equivalent to a currently
marketed device, may be exported to a foreign country for sale, subject to the
laws of such foreign jurisdictions and obtaining from the FDA the appropriate
export certificates: (a) Certificate To Foreign Government, commonly known as
Certificates of Free Sale and Certificates of Export, and/or (b) Certificates of
Exportability.

Drug Delivery Products. The process required by the FDA before a drug
delivery system may be marketed in the United States depends on whether the
pharmaceutical compound has existing clearance for use in other dosage forms
(e.g., oral solution, tablet). If the drug is a new chemical entity that has not
been cleared, then the process includes: (1) preclinical laboratory and animal
tests; (2) the filing of an Investigational New Drug Application ("IND") with
the FDA requesting authorization to conduct clinical trials; (3) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the drug for its intended use; (4) submission to the FDA of a New Drug
Application ("NDA"); and (5) FDA review and clearance of the NDA. If the drug
has been previously cleared, then the sponsor of a generic form of the same drug
may obtain approval by submitting an ANDA that demonstrates that the two
products are bioequivalent. In addition to the foregoing, the FDA requires proof
that the drug delivery system delivers sufficient quantities of the drug to the
bloodstream to produce the desired therapeutic result.

Under the Drug Price Competition and Patent Term Restoration Act of
1984, an NDA sponsor may be granted market exclusivity for a period of time
following FDA approval, regardless of the patent status of the product, for
certain drug products (e.g., new chemical entities). This marketing exclusivity
would prevent a third party from obtaining FDA clearance for a similar or
identical drug through the ANDA process. There can be no assurance, however,
that any of the Company's products will be afforded market exclusivity.

In addition to obtaining FDA clearance for each drug product, each
manufacturing establishment of new drugs must receive clearance by the FDA.
Among the conditions for such approval is the requirement that the prospective
manufacturer's quality control and manufacturing procedures conform to the FDA's
current drug CGMP regulations. Drug manufacturers are also subject to periodic
CGMP audits. Finally, in order to export unapproved drug products from the
United States for commercial or clinical use, prior FDA export clearance is
required.

The process of completing clinical testing and obtaining FDA clearance
for device or drug products is likely to take a number of years and require the
expenditure of substantial resources. The FDA may deny a clearance if applicable
regulatory criteria are not satisfied or may require additional clinical
testing. Even if such data are submitted, the FDA may ultimately decide that the
submission does not satisfy the criteria for clearance. Product clearances may
be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. The FDA may require testing
and surveillance programs to monitor the effect of products that have been
commercialized, and it has the power to prevent or limit further marketing of
the product based on the results of these post-marketing programs.

There can be no assurance that problems will not arise that could delay
or prevent FDA clearance or approval of, or the commercialization of the
Company's products, or that the FDA, state and foreign regulatory agencies will
be satisfied with the results of the clinical trials and approve the marketing
of any products. In the event the Company receives the necessary regulatory
approvals, there can be no assurance that unforeseen problems will not occur in
product manufacturing and commercial scale-up or marketing or product
distribution, which could significantly delay the commercialization of such
products, or prevent its market introduction entirely.

19
<PAGE>

Product Liability Insurance

The Company's business exposes it to potential product liability risks
that are inherent in the testing, manufacturing, marketing and sale of medical
diagnostic and drug delivery products. Although the Company carries product
liability insurance, there can be no assurance that claims exceeding the policy
limit may not be made, potentially causing a material adverse effect on the
Company.

Item 2. PROPERTIES

The Company leases approximately 32,000 square feet of space, including
its corporate headquarters, general office, manufacturing, and warehouse space,
in a building located at 3341 S.W. 15th Street, Pompano Beach, Florida 33069.
The present lease expires in 2003 and the Company currently pays approximately
$26,000 per month in rent, including sales tax and maintenance fees. The rent is
adjusted annually based upon changes in the U.S. Consumer Price Index. The lease
also requires the Company to pay real estate taxes, insurance and certain costs
for maintaining the premises. Management believes that suitable premises are
readily available on acceptable terms should the present premises become
unavailable for any reason.

Effective July 1999, the Company did not renew the lease of a
transdermal drug delivery research and development facility in Menlo Park,
California and essentially relocated its Pharmetrix Division to the Company's
corporate headquarters. During 1998, the Company spent in excess of $2.1 million
to operate this R&D center.

Item 3. LEGAL PROCEEDINGS

The Company is subject to claims and suits arising in the ordinary
course of business. Management believes, after consultation with counsel, that
the allegations against the Company included in the lawsuits described herein
are without merit and the Company is vigorously defending each of the
allegations. At this time, it is not possible to estimate the final outcome of
these legal matters or the ultimate loss or gain except as otherwise stated, if
any, related to these lawsuits, or if any such loss will have a material adverse
effect on the Company's results of operations or financial position, except as
otherwise stated. For the year ended December 31, 1999, the Company has incurred
substantially increased litigation expenses compared to earlier periods.

HIV Saliva Collector Technology. A lawsuit was brought against the
Company in 1995 in the Circuit Court of the 17th Judicial Circuit in and for
Broward County, Florida (Joseph D'Angelo, Americare Transtech, Inc., Americare
Biologicals, Inc. and International Medical Associates, Inc. v. Technical
Chemicals & Products, Inc., Jack Aronowitz, Henry Schur, Analyte Diagnostics,
Inc., John Faro and Nicholas Levandoski) - Case No. CACE 95-011256 - related to
saliva collector technology for an HIV diagnostic test.

On December 30, 1998, a jury returned a verdict in this lawsuit finding
that TCPI did not misappropriate the plaintiffs' trade secrets, but found that
Mr. Aronowitz had intentionally misappropriated such trade secrets and assessed
damages of $500,000 against him, individually. Additionally, the jury found that
both the Company and Mr. Aronowitz intentionally interfered with the plaintiffs'
business relationships and assessed approximately $328,000 in damages against
TCPI in connection with this second claim, but awarded no damages against Mr.
Aronowitz, individually, in connection with that claim. Separately, the jury
assessed more than $4.1 million in damages against other unrelated corporate and
individual defendants.

On January 29, 1999, TCPI and Mr. Aronowitz filed their appeal to the
Florida Fourth District Court of Appeal in West Palm Beach, Florida - Case No. 4
DCA 99-00423. On March 29, 2000, the court issued its opinion reversing the
judgment against Mr. Aronowitz for misappropriation of trade secrets. However,
the appellate court affirmed the judgment against TCPI for tortious interference
with a business relationship. The court's decision is not final until the
disposition of any timely filed motion for rehearing, which the Company may file
as to the tortious interference claim against the Company. The Company also
plans to vigorously pursue any other available proceedings to have the judgment
relating to the tortious interference matter reversed or set aside.

20
<PAGE>

TCPI has previously obtained appeal bonds staying enforcement of the
judgment against the Company and Mr. Aronowitz. Until such time as the appellate
court's decision is final, the Company will maintain the appeal bonds. If the
appellate court does not reverse its finding as to Mr. Aronowitz on
reconsideration or rehearing, the bond relating to the claims against Mr.
Aronowitz will no longer be required. Further, the Company believes that a bond
may be required to stay enforcement of the tortious interference judgment if the
Company seeks to set it aside. There can be no assurance that the appellate
court will not reverse its decision as to Mr. Aronowitz on reconsideration or
rehearing, that the Company will be successful in reversing or setting aside the
judgment as to the Company, or that the Company will be able to obtain any
necessary bond or otherwise to stay enforcement of the judgment against the
Company.

The liability, if any, that may result from this matter and efforts to
set the judgment aside cannot be reasonably estimated at this time and therefore
no accrual for loss has been recorded in the financial statements as of December
31, 1999.

Noninvasive Glucose Monitoring Technology. In November 1997, a lawsuit
was brought against the Company and Mr. Aronowitz in the United States District
Court for the Southern District of Florida, styled Americare Diagnostics, Inc.,
Joseph P. D'Angelo, et al. v. Technical Chemicals and Products, Inc., et al. -
Case No. 97-3654-CIV-JORDAN - relating to noninvasive glucose monitoring
technology in which the plaintiffs allege, among other things, patent
infringement, misappropriation of trade secrets, breach of contract, breach of
fiduciary duty, breach of confidential relations, breach of trust, unfair
competition and conversion. The Company and Mr. Aronowitz have answered the
complaint and have filed counterclaims against the plaintiffs for declaratory
judgment that the patent-in-suit is invalid; patent misuse; patent prosecution
fraud; trade libel; slander of title; commercial disparagement; unfair
competition under the Lanham Act; tortious interference with a contract or
advantageous business relationship; and for injunctive relief. In December 1999,
the discovery phase of this lawsuit ended and the court is presently proceeding
with various pending motions. A trial date has not been set.

Shareholder Class Action. During November 1998 through January 1999,
several lawsuits were filed in the United States District Court for the Southern
District of Florida - Case No. 98-7334-CIV-DAVIS - against the Company and its
Chairman on behalf of various shareholders of TCPI alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5
promulgated thereunder. In general, plaintiffs allege that defendants made
untrue and misleading statements in the Company's public disclosure documents
and in certain press releases, articles and reports. The disclosures relate
primarily to the development, clinical testing and viability of the Company's TD
Glucose Monitoring System. The plaintiffs are seeking certification as a class
on an unspecified amount of damages, interest, costs and attorneys' fees. The
Company believes the allegations lack merit and plans to contest the allegations
vigorously. On April 19, 1999, an Amended Consolidated Class Action Complaint
was served upon the Company. In response, on June 18, 1999, the Company filed a
motion to dismiss the Amended Consolidated Class Action Complaint. Plaintiff's
response to this motion, as well as defendant's reply, have been served, but the
court has not yet ruled. Discovery has been stayed pending resolution of the
motion to dismiss. At this time, it is not possible to estimate the ultimate
loss, if any, related to these claims and therefore no accrual for loss has been
recorded as of December 31, 1999.

The Company maintains Directors and Officer's Liability Insurance;
however, there can be no assurance that such insurance coverage will be adequate
to fund the costs of a settlement, an award, if any, or attorneys' fees. The
Company's Articles of Incorporation provide for indemnification, to the fullest
extent permitted by law, of any person made party to an action by reason of the
fact that such person is an officer or director of the Company.

Lanham Act. On July 1, 1999, the Company and Mr. Aronowitz, seeking
damages and injunctive relief, filed suit against Joseph P. D'Angelo, Americare
Health Scan, Inc., Americare Biologicals, Inc., Medex, Inc., Teratech Corp.
d/b/a HIV Cybermall, Confidential Home Testing, The Creative Connection, Inc.,
Debra Lapierre and Stanley

21
<PAGE>

A. Lapides, in the United States District Court for the Southern District of
Florida - Case No. 99-1862-CIV-JORDAN. The suit alleges violations of the Lanham
Act, libel/defamation per-se, misappropriation of trade secrets and confidential
information, cancellation of the Federal trademark "ANA-SAL," violations of the
Florida Deceptive and Unfair Trade Practices Act, and common law unfair
competition. Certain defendants filed a motion to dismiss, and on December 15,
1999, the court dismissed the count relating to unfair and deceptive trade
practices and unfair competition and struck certain allegations, but found that
the remaining counts stated causes of action. On January 4, 2000, the Company
and Mr. Aronowitz filed a Second Amended Complaint, which omitted the count
dismissed, by the court and the allegations that the court struck. The
Defendants Joseph P. D'Angelo, Americare Health Scan, Inc., and Americare
Biologicals, Inc. have alleged counterclaims of malicious prosecution and abuse
of process. The Company and Mr. Aronowitz have filed a motion to dismiss these
counterclaims. A default has been entered against Medex, Inc., and the
Defendants The Creative Connection, Inc., and Debra Lapierre, have made a motion
for a summary judgment. This case is currently in the discovery phase, which is
scheduled to close on June 30, 2000. A trial date is set for April of 2001.

Home Diagnostics Litigation. In November 1993, the Company and Jack L.
Aronowitz filed suit against Home Diagnostics, Inc. ("HDI"), for patent
infringement, among other claims, in the United States District Court for the
Southern District of Florida - Case No. 93-CIV-6999-DAVIS. The patents-in-suit
are U.S. Patent Nos. 4,744,192 (the "'192 Patent") and 4,877,580 (the "'580
Patent").

On September 3, 1996, the court entered judgment against the Company
and Mr. Aronowitz after a bench trial that was held in September 1995. On April
9, 1998, the U.S. Court of Appeals for the Federal Circuit affirmed in part and
reversed in part the lower court's decision and remanded the case to the
district court for further proceedings, including for a determination whether
Mr. Aronowitz owned the patents-in-suit at the time the action was commenced and
whether HDI infringed the `192 Patent. The appellate court found infringement of
the `580 Patent and remanded to the district court for a determination whether
the `580 Patent was within the scope of certain licensing agreements between
TechniMed Corporation, a prior assignee of the patents-in-suit, and HDI.

On remand, the district court denied a request by the Company and Mr.
Aronowitz to reopen the trial record and directed the parties to submit, based
on the existing record, proposed findings of fact and conclusions of law on the
issues that were remanded. Proposed findings of fact and conclusions of law have
been submitted, and on March 20, 2000, the court heard argument by the parties'
counsel on certain issues on remand. A ruling by the court is pending.

Defamation Action. On June 16, 1999, the Company and Jack L. Aronowitz
were sued by Joseph P. D'Angelo and related companies in the Circuit Court of
the 17th Judicial Circuit in and for Broward County, Florida - Case No.
99-010726-CACE-18 - alleging libel per quod, libel per se, slander, and false
light. The Company has filed a motion for summary judgment, which is pending.
Discovery in this matter is continuing, and no trial date has been set yet.

Arbitration. On August 27, 1999, the U.S. District Court for the
Northern District of California - Case No. C-97-00525CAL - confirmed an
arbitration award against the Company in favor of Hooper & Associates, Inc. for
$197,807. Gary Hooper was the president and chief operating officer of Pharma
Patch, PLC. The Company acquired certain assets of Pharma Patch, PLC in November
1995. The arbitration award found that Hooper & Associates was entitled to that
amount pursuant to an employment agreement between Hooper & Associates and
Pharma Patch, PLC. Hooper & Associates is seeking to enforce the judgement in
Florida (Technical Chemicals and Products, Inc. v. Hooper & Associates, Broward
County Circuit Court - Case No. 019847). Enforcement of the arbitration award
has been stayed by a Florida court during the pendency of claims by the Company
against Hooper & Associates, Inc. in the United States District Court, Southern
District of Florida. To stay enforcement of the judgment, the Company was
required to post a bond. At this time, it is not possible to estimate the
ultimate loss, if any, related to the resolution of these matters and therefore
no accrual for loss has been recorded as of December 31, 1999.

Judgment In Hazardous Waste Lawsuit. On January 31, 2000, the United
States District Court for the Southern District of Florida - Case No.
98-6201-CIV - entered a judgment against the Company and its President, Jack L.
Aronowitz, in connection with a lawsuit brought by the United States of America
on behalf of the Environment Protection Agency under the Comprehensive
Environmental Response Compensation and Liability Act of 1983, relating to the
clean-up of a facility that during 1985 through 1992 contained alleged hazardous
substances. The Company occupied this facility during part of 1992. The judgment
holds the defendants, jointly and severally, liable for $401,177, representing
their share of site clean-up costs, plus post-judgment interest as allowed by
law. Further, the Court retained jurisdiction to rule on trial expenses, such as
costs, attorney's fees and travel, which may be awarded to the United States.
The Company's Articles of Incorporation provide for indemnification, to the
fullest extent permitted by law, of any person made party to an action by reason
of the fact that such person is an officer or director of the Company.

22
<PAGE>

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

No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the submission of
proxies or otherwise.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is listed on The Nasdaq Stock Market(R) and
traded on the Nasdaq National Market System under the symbol TCPI. The following
table sets forth the range of high and low sale prices for the Common Stock for
the periods indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>

Sale Prices
-----------
High Low
---- ---
<S> <C> <C> <C>
Fiscal Year 1998
Quarter Ended March 31, 1998............................... $ 13.750 $ 8.000
Quarter Ended June 30, 1998................................ $ 10.875 $ 7.500
Quarter Ended September 30, 1998........................... $ 8.563 $ 1.625
Quarter Ended December 31, 1998............................ $ 4.500 $ 1.375
Fiscal Year 1999
Quarter Ended March 31, 1999............................... $ 2.250 $ 1.063
Quarter Ended June 30, 1999................................ $ 1.438 $ 1.063
Quarter Ended September 30, 1999........................... $ 1.500 $ 0.719
Quarter Ended December 31, 1999............................ $ 1.750 $ 0.281
Fiscal Year 2000
Quarter Ended March 31, 2000 (to March 27, 2000)........... $ 4.000 $ 0.469
</TABLE>
------------------
There are presently approximately 215 holders of record of the
Company's Common Stock. In addition, the Company estimates there are
approximately 10,700 beneficial owners of its Common Stock. The Company has not
paid cash dividends in the past.

23
<PAGE>

Item 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction
with the consolidated financial statements and the notes thereto included
elsewhere in this report. The statement of operations data for the years ended
December 31, 1999, 1998, and 1997, respectively, and the balance sheet data at
December 31, 1999 and 1998, respectively, are derived from the audited
consolidated financial statements included elsewhere in this report and should
be read in conjunction with those consolidated financial statements and the
notes thereto.

Statement of Operations Data:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
(Amounts in thousands, except share data) ---------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales............................................. $ 5,432 $ 5,442 $ 6,194 $ 5,568 $4,188
Gross profit.......................................... 1,826 2,388 2,777 1,862 936
Research and development contract revenue............. 470 585 423 1,280 --
Operating expenses:
Selling, general and administrative, including
litigation expenses............................ 10,226 8,809 6,575 4,079 1,807
Research and development........................... 1,724 2,787 2,726 1,767 435
Depreciation and amortization...................... 1,927 1,860 1,742 1,670 219
Loss from operations.................................. (11,581) (10,483) (7,843) (4,374) (1,525)
Loss before income taxes.............................. (11,199) (9,827) (7,126) (4,053) (1,433)
Income tax (expense) benefit.......................... (4,140) -- 2,637 1,503 220
Net loss.............................................. (15,339) (9,827) (4,489) (2,550) (1,274)
Accrued dividends and accretion to redemption value
of redeemable convertible preferred stock............. (2,917) (1,030) -- -- --
Net loss attributed to common stockholders............ (18,256) (10,857) (4,489) (2,550) (1,244)
Basic and diluted net loss per common share........... $ (1.64) $ (1.09) $ (.45) $ (.27) $ (.18)
Weighted average number of common shares
outstanding........................................... 11,122,414 9,996,951 9,992,066 9,290,476 7,069,507

Balance Sheet Data:
DECEMBER 31,
(Amounts in thousands) ---------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Cash, cash equivalents and investments $ 3,987 $ 10,255 $ 7,337 $ 13,300 $ 1,777
Working capital 6,010 14,743 9,401 15,348 (2,979)
Total assets 23,588 36,369 33,597 37,526 22,610
Total current liabilities 2,348 713 2,069 1,660 6,452
Redeemable preferred stock 12,457 13,131 - - -
Total common stockholders' equity 7,971 22,356 31,358 35,694 16,154
</TABLE>

24
<PAGE>

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

Results of Operations

The Company's operations for the year ended December 31, 1999 continued
to reflect the incidence of significant losses connected with the ongoing
research and development activities, manufacturing scale-up, and marketing
associated with expanding worldwide distribution for existing and future
products. With respect to the Company's Financial Statements for the year ended
December 31, 1999, the Company has received a "going-concern" opinion from its
auditors. As more fully described in the Notes to the Financial Statements, the
Company's recurring operating losses and its continued experience of negative
cash flows from operations, raise substantial doubt about the Company's ability
to continue as a going concern. A "going-concern" opinion indicates that the
financial statements have been prepared assuming the Company will continue as a
going-concern and do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
---------------------------------------------------------------------

Net Sales. The Company's net sales for both 1999 and 1998 were
approximately $5.4 million. During 1999, the Company experienced an increase in
sales from its HealthCheck at-home diagnostic testing and screening products of
approximately $62,000, as well as its SR-38 skin permeation enhancer under a
licensing agreement with LVMH Moet Hennessy Louis Vuitton, Inc., which was
entered into during the year ended December 31, 1999. In addition, the Company
experienced an increase in sales of its specialty chemical biological buffers of
approximately $76,000. However, these gains were offset by lower dollar volume
of sales in 1999, as compared to 1998, of the Company's OEM drug of abuse and
infectious disease screening products of approximately $478,000 and by an
increase in the sales allowance of approximately $309,000 in 1999 related to the
Company's market penetration of the retail pharmacy market. The decrease in
sales of the company's OEM drug of abuse and infectious disease screening
products was due to lower demand and the timing of large customer orders.

Gross Profit. The Company's gross profit from product sales for the
year ended December 31, 1999 declined to $1.8 million in 1999 as compared to
$2.4 million in 1998. Gross profit as a percent of net sales declined to 34% in
1999 as compared to 44% in 1998. The decline was primarily a result of a
write-down of the value of certain of the Company's inventory due to product
obsolescence and higher sales allowances as discussed above.

Operating Expenses. The Company's operating expenses for the year ended
December 31, 1999 increased by approximately 3% to $13.9 million as compared to
$13.5 million in the prior year. The mix of selling, general and administrative;
litigation; and research and development expenses are as follows:

Selling, General and Administrative. Selling, general and
administrative (SG&A) expenses declined slightly in 1999 to $7.5 million from
SG&A expenses of $7.7 million incurred in 1998. This decrease was due to company
wide cost reduction programs.

Litigation. Litigation expenses for the year ended December 31, 1999
increased to $2.7 million from $1.1 million incurred in the prior year. This
substantial increase was primarily due to the status and timing of the ongoing
defense of certain legal matters that involved greater discovery and other
activities during 1999 as compared to a year earlier. Additionally, the 1999
expenses included an accrual of $0.5 million to reflect management's estimate of
an expected loss related to the resolution of certain litigation.

Research and Development. During the past year, the Company's R&D
efforts focused primarily on the continued development of the Company's TD
Glucose monitoring technology as well as its development of cholesterol testing
products. Additionally, R&D activities related to transdermal drug delivery
technologies were suspended due to the closing of the California facility. The
result was a reduction of R&D expenses to $1.7 million from $2.8 million in the
prior year.

25
<PAGE>

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

Results of Operations (continued)

Net Loss. The Company's net loss for the year ended December 31, 1999
increased to $15.3 million from a net loss of $9.8 million in 1998. Excluding
the effect of the non-cash, $4.1 million increase in the deferred tax asset
valuation allowance, the Company's net loss increased to $11.2 million in 1999
from $9.8 million in 1998. The increase in the valuation allowance was necessary
because at December 31, 1999, management no longer believed that the tax
planning strategies, which were the basis for the net deferred tax assets at
December 31, 1998, were feasible or prudent in light of the further accumulation
of operating losses, the continued increase in the magnitude of the operating
losses, and the resulting decrease in liquid assets to fund future operations.
(See - Note 6 to the accompanying financial statements.)

The Company had a net loss attributable to common stockholders of $18.3
million in 1999 as compared to a net loss attributable to common stockholders of
$10.9 million in 1998. This difference was largely the result of the increase in
the deferred tax asset valuation allowance as well as the accrued dividend and
accretion to redemption value of $2.9 million related to the 1998 issuance of
redeemable convertible preferred stock. The full amount of the accretion to
redemption value has been recognized.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
---------------------------------------------------------------------

Net Sales. The Company's net sales for 1998 decreased by 12% to $5.4
million from $6.2 million in 1997. The Company experienced an increase in
year-over-year product sales from its HealthCheck at-home diagnostic tests and
screening products of approximately $46,000 as well as an increase in sales of
its diagnostic products for infectious diseases and drugs of abuse, as well as
several other similar testing products of approximately $150,000. These gains
were primarily the result of increased customer demand. However, these gains
were offset by an approximately $794,000 decline in international sales of the
Company's OEM family planning products and an increase in the sales allowance of
approximately $154,000. The decrease in sales of the Company's OEM family
planning products was due principally to the acquisition of TCPI's primary
customer by another major pharmaceutical company and its delayed impact on
marketing relationships with independent distributors worldwide. This
acquisition also served to cancel the marketing and distribution agreement for
certain of the Company's diagnostic tests in Latin America that resulted in
anticipated product sales not being realized. The increase in sales allowance
was due to the Company's continued penetration of the retail pharmacy market.

Gross Profit. The Company's gross profit on product sales declined to
$2.4 million in 1998 from $2.8 million in 1997. Gross profit as a percent of net
sales moved slightly lower to 44% in 1998 from 45% in 1997. The minor decrease
was principally due to a change in product mix. In addition, the Company
continued to increase its in-house manufacturing capabilities in anticipation of
scale-up for both new and existing diagnostic products.

Selling, General and Administrative. Selling, general and
administrative (SG&A) expenses increased substantially in 1998 as compared to
1997. This increase was primarily due to the ongoing implementation of sales and
marketing programs related to the HealthCheck product line and future
introduction of various new products. The Company also hired additional
operating personnel for the scale-up of in-house manufacturing in anticipation
of new diagnostic products and also expanded its manufacturing facilities in
Pompano Beach, Florida to approximately 40,000 square feet. The Company's SG&A
expenses, increased to $7.7 million in 1998 from $6.1 million in 1997.

Litigation. Litigation expenses for the year ended December 31, 1998
increased to $1.1 million from $473,000 incurred in the prior year. This
substantial increase was primarily due to the defense of certain legal matters
that were not present a year earlier.

Research and Development. While the Company continued to advance its
diagnostic testing products and transdermal drug delivery technologies through
the various stages of development and clinical trials towards commercialization,
TCPI held its expenses associated with ongoing R&D activities relatively
constant from the prior year at $2.8 million in 1998 as compared to $2.7 million
in 1997.

26
<PAGE>

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

Results of Operations (continued)

Net Loss. The Company posted a pre-tax net loss in 1998 of $9.8
million, which increased from a pre-tax net loss in 1997 of $7.1 million
primarily due to higher than planned operating expenses related to the scale-up
of manufacturing, research and development, and facility expansion which
combined with lower than anticipated product sales. The Company had a net loss
attributable to common stockholders of $10.9 million in 1998 as compared to a
net loss attributable to common stockholders of $4.5 million in 1997. This
difference was largely impacted by the above expenses with the non-cash income
tax benefit of $2.6 million recorded in 1997 but not in 1998 as well as the
accrued dividend and accretion to redemption value of $1 million related to the
issuance of redeemable preferred stock in 1998.

Financial Condition

The Company had cash and investments of $4.0 million at December 31,
1999, as compared to $10.3 million at December 31, 1998. Working capital at
December 31, 1999 was $6.0 million, as compared to $14.7 million at December 31,
1998. The Company had current assets of $8.4 million and common stockholders'
equity of $ 8.0 million at December 31, 1999. This compares to current assets of
$15.5 million and common stockholders' equity of $22.4 million at December 31,
1998. These decreases in working capital and current assets were due primarily
to the Company's use of cash to fund its operations.

The Company expects to continue to draw upon its working capital and to
the extent it is successful in securing additional financing, utilize such
working capital additional funds to purchase production equipment, complete
clinical trials and regulatory submissions relating to the TD Glucose Monitoring
System and Total and HDL cholesterol monitoring products, engage in research and
development related to transdermal drug delivery technology, develop new
diagnostic products, conduct clinical trials, continue its investment in
marketing and facility expansion, and continue its day-to-day business.

Liquidity And Capital Resources

Net cash used in operating activities was $6.0 million in 1999 as
compared to $9.5 million in 1998. This difference is primarily due to the effect
of the increase in loss before income taxes, which was offset by a current year
increase of $1.6 million in the accounts payable and accrued expenses, as
compared to a $1.4 million decrease in accounts payable and accrued expenses in
1998.

Net cash provided by investing activities was $2.3 million in 1999 as
compared to net cash used in investing activities of $2.6 million in 1998. This
difference was primarily due to an increase in the proceeds from the sale of
investments from $4.0 million in 1998 to $9.3 million in 1999 which was only
slightly offset by an increase of $1.7 million in the use of cash for purchases
of investments. As a result, investments decreased from $5.0 million at December
31, 1998 to $2.5 million at December 31, 1999.

No significant net cash amounts were provided by financing activities
in 1999. In 1998, the Company received approximately $14.0 million in net
proceeds from the issuance of preferred stock.

The Company has experienced sustained significant operating losses that have
resulted in substantial consumption of its cash reserves. The Company believes
it will continue to incur net losses and have negative cash flow in the
immediate future. Based on the Company's current rate of losses and cash flow,
the Company will not be able to continue its operations unless it is able to
secure additional financing, reduce its operating losses, reduce expenses,
increase sales of its products, or sell assets.

If the Company is unable to obtain additional funding on satisfactory terms and
reduce its operating losses, the Company would have to consider selling some or
all of its technologies, reduce or terminate completely its

27
<PAGE>

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

Liquidity And Capital Resources (continued)

research and development activities, or reduce or discontinue some or all of its
operations and/or apply for protection from its creditors under the federal
bankruptcy laws.

In addition, as described under Item 3, "Legal Proceedings," the
Company has pending judgments in various legal proceedings, some of which are
currently secured by bonds collateralized by existing working capital. If the
Company were required to satisfy all or a significant portion of these judgments
on a basis faster than presently anticipated the Company's severe liquidity
condition would be further exacerbated.

The Company's long-term ability to meet its liquidity requirements and
to continue operations will depend on (i) its ability to raise additional
capital, (ii) the successful completion of clinical trials and receipt of
governmental approvals to begin manufacturing and selling its new products, and
(iii) the ability of the Company to sell its new products at a profit.

The Company's future working capital requirements may vary materially
from those now planned depending on numerous factors, including:

(1) the outcome of clinical testing of products under development (including
the TD Glucose Monitoring System and Total and HDL cholesterol monitoring
products), delays or changes in government required testing and clearance
or approval procedures and the Company's ability to receive FDA clearance
or approval for the marketing of its products under development;
(2) competitive and technological advances that may require the Company to
modify the design of its products under development;
(3) the Company's ability to successfully resolve pending litigation; and
(4) manufacturing costs for the Company's current and future products.

In 1998, the Company issued 15,000 shares of its Series A Convertible
Preferred Stock (the "Preferred Stock"). The Preferred Stock is convertible into
the Company's common stock at an exchange ratio based on the market price of the
Company's Common Stock and is also redeemable at the option of the holder under
certain circumstances. During 1999, the holder of the Preferred Stock converted
3,350 shares of Preferred Stock into 4,528,228 shares of Common Stock. Through
March 14, 2000, the holder of the Preferred Stock converted an additional 8,650
shares of Preferred Stock into 14,828,021 additional shares of Common Stock. As
of March 14, 2000, the Company had 2,700 shares of its Preferred Stock
outstanding. Based upon the terms of the Preferred Stock, as of March 14, 2000
the outstanding shares of Preferred Stock would be convertible into 2,935,000
shares of Common Stock. In accordance with the terms of the Preferred Stock,
upon the occurrence of any Mandatory Redemption Event (including, if the
Company's Common Stock is delisted from the Nasdaq National Market, and such
delisting continues for 10 days), then the holders of the Preferred Stock shall
have the right to require that the Company redeem all outstanding shares of
Preferred Stock for an amount equal to the greater of (i) 120% of the stated
value of the shares plus any accrued dividends or (ii) the value of the Common
Stock into which such shares of Preferred Stock were convertible (calculated in
accordance with the provisions of the Preferred Stock). As of March 14, 2000,
the Company was in compliance with Nasdaq National Market listing requirements
and the issue of redemption was not applicable. In order to maintain its listing
on the Nasdaq National Market, the Company, unless it receives a waiver, must
meet a variety of requirements, including (1) net tangible assets of $4.0
million, (2) a minimum bid price of $1.00 per share and (3) shares having a
market capitalization of at least $5.0 million must be publicly traded. If the
Company is unable to meet the requirements for continued listing and is unable
to receive a waiver, then Nasdaq could delist the Common Stock and the Company
could be required to redeem the outstanding shares of Preferred Stock. In
addition, any such delisting of the Common Stock could have a material adverse
effect on the Company's ability to secure additional financing on favorable
terms or at all.

28
<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS

At December 31, 1999, the Company had only cash equivalents and high
grade, short-term securities, which are not typically subject to material market
risk. The Company has no outstanding loans. A hypothetical 10% change in
interest rates would have an immaterial impact on the fair value of these
instruments.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Consolidated Financial Statements and supplementary data
for the Company are attached and incorporated into Item 7.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Financial Statements

December 31, 1999
<TABLE>
<CAPTION>

Contents

<S> <C>
Report of Independent Certified Public Accountants...............................................................30

Audited Consolidated Financial Statements

Consolidated Balance Sheets......................................................................................31
Consolidated Statements of Operations............................................................................32
Consolidated Statements of Redeemable Preferred Stock and Common Stockholders' Equity............................33
Consolidated Statements of Cash Flows............................................................................35
Notes to Consolidated Financial Statements.......................................................................36
</TABLE>

29
<PAGE>

Report of Independent Certified Public Accountants

Board of Directors
Technical Chemicals and Products, Inc.

We have audited the accompanying consolidated balance sheets of Technical
Chemicals and Products, Inc. and subsidiaries (the Company) as of December 31,
1999 and 1998, and the related consolidated statements of operations, redeemable
preferred stock and common stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Technical
Chemicals and Products, Inc. and subsidiaries at December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming
that Technical Chemicals and Products, Inc. and subsidiaries will continue as a
going concern. As more fully described in Note 1, the Company has incurred
recurring operating losses and has continued to experience negative cash flows
from operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to these
matters are also described in Note 1. The consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

/s/ ERNST & YOUNG LLP

Miami, Florida
March 3, 2000, except for
the fourth and fifth paragraphs of Note 9
as to which the date is March 29, 2000

30
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Balance Sheets

(Amounts in thousands, except share data)

December 31
1999 1998
-------- --------

Assets
Current assets:
Cash and cash equivalents $ 1,447 $ 5,207
Investments 2,540 5,048
Accounts receivable, net 1,163 1,605
Inventory 2,036 2,550
Due from related parties 686 836
Other 486 210
-------- --------
Total current assets 8,358 15,456

Property and equipment, net 2,096 2,503
Patents and trademarks, net 11,256 12,190
Goodwill, net 1,807 1,979
Deferred tax asset, net -- 4,140
Other assets 71 101
-------- --------
Total assets $ 23,588 $ 36,369
======== ========

Liabilities, redeemable preferred stock and common
stockholders' equity
Current liabilities:
Accounts payable $ 988 $ 390
Accrued expenses 1,360 323
-------- --------
Total current liabilities 2,348 713
Deferred revenue 812 --
Other liabilities -- 169
Redeemable preferred stock, $.001 par value:
authorized shares--25,000,000;
11,350 and 14,700 shares of Series A 6%
cumulative convertible issued and
outstanding in 1999 and 1998, respectively 12,457 13,131
Common stock, $.001 par value:
authorized shares--100,000,000;
Issued and outstanding shares--14,541,544 in
1999 and 10,006,316 in 1998 15 10
Additional paid-in capital 41,638 40,697
Accumulated deficit (33,682) (18,351)
-------- --------
Total common stockholders' equity 7,971 22,356
-------- --------
Total liabilities, redeemable preferred stock and common
stockholders' equity $ 23,588 $ 36,369
======== ========
See accompanying notes.

31
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Statements of Operations

(Amounts in thousands, except share data)
<TABLE>
<CAPTION>

Year ended December 31
1999 1998 1997
------------ ------------ ------------

<S> <C> <C> <C>
Net sales $ 5,432 $ 5,442 $ 6,194
Cost of sales 3,606 3,054 3,417
------------ ------------ ------------
Gross profit 1,826 2,388 2,777

Research and development contract revenue 470 585 423

Operating expenses:
Selling, general and administrative 7,534 7,672 6,102
Litigation 2,692 1,137 473
Research and development 1,724 2,787 2,726
Depreciation and amortization 1,927 1,860 1,742
------------ ------------ ------------
13,877 13,456 11,043
------------ ------------ ------------
Loss from operations (11,581) (10,483) (7,843)

Other income (expense):
Interest income 397 672 731
Interest expense (15) (16) (14)
------------ ------------ ------------
Loss before income taxes (11,199) (9,827) (7,126)
Income tax (expense) benefit (4,140) -- 2,637
------------ ------------ ------------
Net loss (15,339) (9,827) (4,489)

Accrued dividends and accretion to redemption
value of redeemable convertible preferred stock (2,917) (1,030) --
------------ ------------ ------------
Net loss attributable to common stockholders $ (18,256) $ (10,857) $ (4,489)
============ ============ ============

Basic and diluted net loss per common share $ (1.64) $ (1.09) $ (.45)
============ ============ ============

Weighted average number of common shares outstanding 11,122,414 9,996,951 9,992,066
============ ============ ============
</TABLE>

See accompanying notes.

32
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Statements of Redeemable Preferred Stock
and Common Stockholders' Equity
<TABLE>
<CAPTION>

(Amounts in thousands, except share data)

Redeemable Preferred Stock Common Stock
---------------------------- ----------------------- Additional
Number of Number of Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 -- $ -- 9,938,634 $ 10 $ 39,608 $ (3,924) $ 35,694
Comprehensive loss:
Net loss -- -- -- -- -- (4,489) (4,489)
Other comprehensive
loss, net of tax -
unrealized losses on
investments, net -- -- -- -- -- (46) (46)
------
Comprehensive loss -- -- -- -- -- -- (4,535)
Shares issued upon
exercise of warrants -- -- 76,402 -- 199 -- 199
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 -- -- 10,015,036 10 39,807 (8,459) 31,358
Comprehensive loss:
Net loss -- -- -- -- -- (9,827) (9,827)
Other comprehensive
loss, net of tax -
unrealized losses on
investments, net -- -- -- -- -- (65) (65)
------
Comprehensive loss -- -- -- -- -- -- (9,892)
Issuance of Series A
preferred stock, net of
issuance costs of $640 15,000 12,409 -- -- 1,091 -- 1,091
Issuance of 150,000
warrants with Series A
preferred stock -- -- -- -- 860 -- 860
Accrued dividends on
Series A preferred stock -- 557 -- -- (557) -- (557)
Accretion to redemption
value of Series A
preferred stock -- 473 -- -- (473) -- (473)
Purchase of common stock -- -- (87,961) -- (339) -- (339)
Conversion of preferred
stock to common stock (300) (308) 79,241 -- 308 -- 308
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 14,700 $ 13,131 10,006,316 $ 10 $ 40,697 $ (18,351) $ 22,356
</TABLE>

(continued on next page)

33
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Statements of Redeemable Preferred Stock
and Common Stockholders' Equity
<TABLE>
<CAPTION>

(Amounts in thousands, except share data)

Redeemable Preferred Stock Common Stock
--------------------------- ----------------- Additional
Number of Number of Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
------------------------------------ -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 14,700 $ 13,131 10,006,316 $ 10 $ 40,697 $ (18,351) $ 22,356

Comprehensive loss:
Net loss -- -- -- -- -- (15,339) (15,339)
Other comprehensive
loss, net of tax -
unrealized gains on
investments, net -- -- -- -- -- 8 8
-------
Comprehensive loss -- -- -- -- -- -- (15,331)
Accrued dividends on
Series A preferred
stock -- 799 -- -- (799) -- (799)
Accretion to redemption
value of Series A
preferred stock -- 2,118 -- -- (2,118) -- (2,118)
Conversion of preferred
stock to common stock (3,350) (3,591) 4,528,228 5 3,586 -- 3,591
Shares issued to
directors and
employee -- -- 7,000 -- 10 -- 10
Issuance of 400,000
warrants for services -- -- -- -- 262 -- 262
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999 11,350 $ 12,457 14,541,544 $ 15 $ 41,638 $ (33,682) $ 7,971
========== ========== ========== ========== ========== ========== ==========
</TABLE>

See accompanying notes.

34
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(Amounts in Thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net loss $(15,339) $ (9,827) $ (4,489)
Adjustments to reconcile net loss to net cash used by
operating activities:
Income tax expense (benefit) 4,140 -- (2,637)
Depreciation 476 484 399
Amortization 1,451 1,376 1,343
Changes in operating assets and liabilities:
Accounts receivable 442 450 123
Inventory 514 (698) (812)
Other current assets (14) 16 264
Change in other assets and liabilities (139) (9) (4)
Accounts payable and accrued expenses 1,635 (1,356) 409
Deferred revenue 812 -- --
-------- -------- --------
Net cash used by operating activities (6,022) (9,564) (5,404)

Investing activities
Purchases of property and equipment (328) (344) (697)
Due from related party 150 (836) --
Purchases of investments (6,747) (5,080) (2,000)
Proceeds from sales of investments 9,263 3,988 9,626
Investment in patents and intangible assets (86) (294) (15)
-------- -------- --------
Net cash provided by (used in) investing activities 2,252 (2,566) 6,914

Financing activities
Net proceeds from issuance of common stock 10 -- --
Net proceeds from issuance of redeemable preferred
stock -- 14,360 --
Proceeds from stock options or warrants exercised -- -- 199
Purchase of common stock -- (339) --
-------- -------- --------
Net cash provided by financing activities 10 14,021 199
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (3,760) 1,891 1,709
Cash and cash equivalents at beginning of year 5,207 3,316 1,607
-------- -------- --------
Cash and cash equivalents at end of year $ 1,447 $ 5,207 $ 3,316
======== ======== ========

Supplemental information
Cash paid during the year for interest $ 15 $ 16 $ 14
======== ======== ========
Significant non-cash transactions
Issuance of warrants for future services $ 262 $ -- $ --
======== ======== ========
</TABLE>

See accompanying notes.

35
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

December 31, 1999

1. Organization

Operations

Technical Chemicals and Products, Inc. and its subsidiaries (the Company) are
principally engaged in the design, development, manufacture and marketing of a
wide range of medical diagnostic products for use in physician offices, at home
and other point of care locations throughout the world. The Company's medical
diagnostic products employ its patented and proprietary membrane-based
technology. In addition to its ongoing diagnostics business, the Company is
involved in the commercialization of transdermal technologies and skin
permeation enhancers.

Basis of Presentation

Throughout 1997, 1998 and 1999, the Company continued to experience recurring
operating losses and negative cash flows from operations. The Company's
operating losses have in large part been due to the inability of the Company's
current product portfolio to support its operating costs, including those
related to the development of the Company's future products. In addition,
significant costs were incurred during 1998 and 1999 relating to ongoing
litigation involving the Company (refer to Note 9, Commitments and
Contingencies).

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company must raise
additional funds to sustain research and development, provide for future
clinical trials and continue its operations until it is able to generate
sufficient revenue from the sale and/or licensing of its products to support its
operations. The Company plans to obtain required financing through one or more
methods, including obtaining additional equity financing and negotiating
additional licensing or collaboration agreements with other companies. There can
be no assurance that the Company will be successful in raising such funds on
terms acceptable to it, or at all, or that sufficient additional capital will be
raised to complete commercialization of the Company's current product
candidates. The Company's future success is dependent upon raising additional
monies to provide for the necessary operations of the Company. If the Company is
unable to obtain additional financing, there would be a material adverse effect
on the Company's business, financial position and results of operations. The
Company's continuation as a going concern is dependent on its ability to
generate sufficient cash flows to meet its obligations on a timely basis, to
obtain additional financing as may be required and, ultimately, to attain
profitable operations.

2. Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include Health-Mark
Diagnostic, L.L.C. (Health-Mark) and Health Test, Inc., which are both
wholly-owned subsidiaries. Significant intercompany transactions and accounts
have been eliminated.

36
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Deposits in banks may
exceed the amount of insurance provided on such deposits. The Company performs
reviews of the credit worthiness of its depository banks. The Company has not
experienced any losses on its deposits of cash and cash equivalents.

Investments

Investments are carried at fair market value based on quoted market prices, with
resulting unrealized holding gains and losses reported as a separate component
of other comprehensive income or loss. Realized gains and losses and declines in
value judged to be other-than-temporary are included in other operating income.
Interest and dividends on investments are included in interest income. The cost
of investments sold is based on the specific identification method.

Inventory

Inventory, consisting of raw materials, work in process and finished goods, is
valued at the lower of cost (computed on the first-in, first-out method) or
market.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from five to seven years. Routine maintenance and repairs that do not extend the
life of the assets are charged to expense as incurred and major renovations or
improvements are capitalized.

Intangible Assets

Purchased patents and trademarks are amortized using the straight-line method
over a composite life of 15 years based on the shorter of the legal lives or
estimated useful lives of the individual patents and trademarks, which range
from 11 to 17 years. Goodwill is amortized using the straight-line method over
15 years. The Company periodically reviews its intangible assets to assess
recoverability and a charge will be recognized in the consolidated statement of
operations if a permanent impairment is determined to have occurred.
Recoverability of intangibles is determined based on undiscounted future
operating cash flows from the related business unit or activity. The amount of
impairment, if any, would be measured based on discounted future operating cash
flows using a discount rate reflecting the Company's average cost of funds. The
Company does not believe that any impairment has occurred as of December 31,
1999, 1998 and 1997.

37
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (continued)

Valuation of Long-Lived Assets

Long-lived assets, including intangible assets, are reviewed for potential
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset or group of assets may not be recoverable. When
evaluating groups of assets, management evaluates them at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
groups of assets. If the sum of the undiscounted cash flows is less than the
carrying amount of the assets or groups assets, an impairment loss will be
recognized in the consolidated statement of operations. The impairment loss, if
any, would be measured as the amount by which the carrying amount of the asset
or group of assets exceeds the fair value of the assets. The Company does not
believe that any impairment has occurred as of December 31, 1999, 1998, and
1997.

Revenue Recognition

Revenues are recognized when a product is shipped and the risk of ownership
transfers. Product returns are permitted only in limited circumstances and are
estimated and reflected as adjustments to current period sales.

Payments received in advance of shipment of products are recognized as deferred
revenue in the consolidated balance sheets until the related products are
shipped, the risk of ownership transfers and all contractual obligations have
been met.

Research and development contract revenue is recognized when the Company has
fulfilled its obligations in accordance with the provisions of the contractual
arrangements and collectibility is reasonably assured.

Research and Development Costs

Research and development costs are expensed as incurred. Payments received for
research and development arrangements are recognized as research and development
contract revenue when earned.

Advertising Costs

Advertising costs included in selling, general and administrative expense are
expensed as incurred, and totaled approximately $616,000, $521,000, and $449,000
for the years ended December 31, 1999, 1998 and 1997, respectively.

Accounting for Stock Based Compensation

The Company grants stock options for a fixed number of shares to employees
primarily with an exercise price equal to the fair value of the shares on the
date of grant. The Company accounts for these stock option grants in accordance
with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and accordingly, generally recognizes no compensation
expense for stock options granted at fair value. The Company recognizes
compensation expense for stock options granted with an exercise price below the
fair value of the shares on the date of grant.

38
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (continued)

Accounting for Stock Based Compensation (continued)

Under the Company's stock option plans, the Company may grant stock options or
warrants for a fixed number of shares to independent consultants and contractors
primarily with an exercise price equal to the fair market value of the shares on
the date of grant. The Company accounts for these stock option or warrant grants
using the fair value method of Financial Accounting Standards Board (FASB)
Statement of Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The fair value of these options or warrants is estimated at the
date of grant using a stock option pricing model and recognized as an expense.

Dividends and Net Loss Per Common Share

Basic and diluted net loss per common share is calculated using the weighted
average number of common shares outstanding during the respective periods.
Potential common stock relating to options, warrants and convertible preferred
stock is not included in the computation of diluted net loss per common share in
1999, 1998 and 1997 as its effect is antidilutive. At December 31, 1999,
approximately 31,151,000 shares of potentially issuable common stock relating to
options, warrants and convertible preferred stock (estimated based on the
current conversion rate) were excluded from the calculation of diluted net loss
per share, since their effect is antidilutive. In 1999 and 1998, net loss per
common share reflects the effect of accrued dividends related to the Series A
convertible preferred stock and accretion to the redemption value of the Series
A convertible redeemable preferred stock.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

Recent Pronouncements

During 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which, as amended by SFAS No. 137, is effective for
fiscal years beginning after June 15, 2000. This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. As of December 31, 1999, the Company is
not party to any derivative instruments. Therefore, the adoption of SFAS 133
will not have a material impact on the Company's financial statements.

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 consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.

39
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

3. Estimated Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, investments and trade accounts
receivable reflected in the balance sheets approximate market value. The market
value of investments is determined based upon quoted prices for the same or
similar securities (see Note 5). Management believes that the other financial
instruments approximate market value because they were entered into during the
current year and there have been no significant changes in their status that
would affect their market value.

4. Details of Balance Sheet

Details of selected balance sheet accounts at December 31 are as follows (in
thousands):

1999 1998
-------- --------
Accounts receivable:
Accounts receivable $ 1,481 $ 1,680
Allowance for doubtful accounts (318) (75)
-------- --------
$ 1,163 $ 1,605
======== ========
Inventories:
Raw materials and supplies $ 1,807 $ 1,828
Work in process 4 234
Finished goods 225 488
-------- --------
$ 2,036 $ 2,550
======== ========
Property and equipment:
Furniture, fixtures and equipment $ 3,766 $ 3,191
Real property -- 217
Leasehold improvements 174 907
-------- --------
3,940 4,315
Accumulated depreciation (1,844) (1,812)
-------- --------
$ 2,096 $ 2,503
======== ========
Patents and trademarks:
Patents and trademarks $ 15,403 $ 15,317
Accumulated amortization (4,147) (3,127)
-------- --------
$ 11,256 $ 12,190
======== ========
Goodwill:
Goodwill $ 2,494 $ 2,494
Accumulated amortization (687) (515)
-------- --------
$ 1,807 $ 1,979
======== ========

Accrued Expenses:
Litigation costs $ 737 $ 119
Rent 231 --
Insurance 126 10
Vacation 45 47
Unmatched inventory receipts -- 61
Other 221 86
-------- --------
$ 1,360 $ 323
======== ========

40
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

5. Investments

Investments consist of the following (in thousands):

Gross
Unrealized Fair
Cost Gains (Losses) Value
------- ------------- -------

December 31, 1999
U.S. Corporate bond $ 210 $ (1) $ 209
U.S. Government agency bonds 2,363 (32) 2,331
------- ------- -------
$ 2,573 $ (33) $ 2,540
======= ======= =======
December 31, 1998

U.S. Corporate bonds $ 3,973 $ (36) $ 3,937
U.S. Government agency bond 1,107 4 1,111
------- ------- -------
$ 5,080 $ (32) $ 5,048
======= ======= =======

The contractual maturity of investments at December 31, 1999, is as follows (in
thousands):

Fair
Cost Value
------ ------
Due within one year $1,183 $1,189
Due between one year and five years 1,390 1,351
------ ------
$2,573 $2,540
====== ======

6. Income Taxes

The components of the income tax expense (benefit) for the years ended December
31 are as follows (in thousands):

1999 1998 1997
------- ----- -------
Current $ -- $ -- $ --
Deferred 4,140 -- (2,637)
------- ----- -------
Total $ 4,140 $ -- $(2,637)
======= ===== =======

41
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6. Income Taxes (continued)

Significant components of the Company's deferred tax assets (liabilities) as of
December 31 are as follows (in thousands):

1999 1998
-------- --------
Net operating losses $ 11,870 $ 8,462
Deferred revenue 310 --
Environmental reserve 191 --
Depreciation and amortization 30 (44)
Allowance for doubtful accounts 121 29
Other 146 42
-------- --------
Net deferred tax asset 12,668 8,489
Valuation allowance (12,668) (4,349)
-------- --------
Net deferred taxes $ -- $ 4,140
======== ========

SFAS 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, including tax
planning strategies that are prudent and feasible that the Company would
implement, management has determined that a valuation allowance of approximately
$12,668,000 and $4,349,000 at December 31, 1999 and 1998, respectively, is
necessary to reduce the net deferred tax assets to the amount that will more
likely than not be realized. In light of the further accumulation of operating
losses, the continued increase in the magnitude of the operating losses, and the
resulting decrease in liquid assets to fund future operations, at December 31,
1999, management no longer believed that the tax planning strategies, which were
the basis for the net deferred tax assets at December 31, 1998, were feasible or
prudent. At December 31, 1999, the Company has available net operating loss
carryforwards of approximately $12,562,000 relating to years prior to 1998,
which expire in the years 2010 through 2012, and net operating loss
carryforwards of approximately $18,503,000 relating to the years ended December
31, 1999 and 1998 which expire in years 2018 and 2019.

The reconciliation of the expected income tax expense (benefit) with the actual
income tax expense (benefit) reported for the years ended December 31 computed
on loss before income taxes at federal statutory rates is as follows:

1999 1998 1997
------ ------ ------
Tax at federal statutory rate (34.0)% (34.0)% (34.0)%
State and local income taxes,
net of federal tax benefit (4.2) (4.2) (4.1)
Nondeductible items .5 .2 .1
Change in valuation allowance 74.3 38.4 --
Other .4 (.4) 1.0
------ ------ ------
Total 37.0% -- % (37.0)%
====== ====== ======

42
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7. Related Party Transactions

The Company and its founding major stockholder (Major Stockholder) are parties
to an exclusive, worldwide license agreement dated January 31, 1996 (License
Agreement) under which the Company has the right to manufacture, promote, market
and sell all medical, pharmaceutical and health care products and devices
created by the Major Stockholder on or before the date of the License Agreement
(Technology). The License Agreement is for a term of twenty years with automatic
renewals and requires annual fees equal to the greater of (i) 3% of net
collected sales revenues from products based upon the Technology or (ii)
$10,000, with an aggregate maximum limitation of $10,000,000. The License
Agreement replaces an earlier license agreement with similar provisions. During
1999, 1998 and 1997, the Major Stockholder earned approximately $149,000,
$161,000 and $148,000, respectively, pursuant to the License Agreement. During
1999 and 1998, the Company advanced the Major Stockholder $100,000 and $250,000,
respectively, under the License Agreement, of which $40,000 and $89,000 in
License Agreement advances are included in due from related party in the balance
sheets at December 31, 1999 and 1998, respectively, because such amounts have
not been earned. No such advances were made in 1997.

During August 1998, the Company's outside directors unanimously approved the
Company's guarantee for a period of up to 90 days of $750,000 of the collateral
obligations of the Major Stockholder's family limited partnership (Partnership)
to a brokerage house. Under the terms of the Company's agreement with the
Partnership, the brokerage house called on the Company's guarantee; the
Partnership then executed and delivered to the Company a promissory note
personally guaranteed by the Major Stockholder in an amount equal to the amount
of the guarantee. The note was a six month note payable on demand and bears
interest at the rate of interest charged by the brokerage house (7 3/4% at
December 31, 1999). In February 1999, accrued interest was paid and the note was
extended an additional three months. After becoming due on May 26, 1999,
interest was paid and an additional extension of one year was authorized by the
Board of Directors. The balance of funds advanced under the note is
approximately $647,000 and $747,000 at December 31, 1999 and 1998, respectively,
and is included in due from related party in the balance sheets based on the
Company's understanding that such amounts will be repaid during 2000. The
Company recorded income related to this note of approximately $54,000 and
$20,000 for the years ended December 31, 1999 and 1998, respectively.

The Company and the Major Stockholder entered into an employment agreement
effective October 9, 1998, amending an employment agreement dated September 27,
1996, under which the Major Stockholder serves as president. The terms provide
for a salary of approximately $160,000 per year (with per year raises equal to
the greater of 5% or a cost of living adjustment as defined in the agreement) as
annual base compensation, plus an annual bonus equal to at least 5% of the
consolidated pretax income of the Company. During 1999, 1998 and 1997, the
president received salaries of approximately $168,000, $158,000, and $152,000,
respectively.

In connection with the amendment of the employment agreement described above,
the provisions of the agreement defining events constituting a change in control
were modified.

In connection with a previous amendment of the employment agreement, the Company
issued its Major Stockholder an option to purchase 500,000 shares of common
stock at an exercise price of $15 per share.

43
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

8. Sales and Significant Customers

The Company had a nonexclusive worldwide marketing and distribution agreement
with Boehringer Mannheim Italia ("BMI") for its family planning diagnostic
products from 1992 to 1998. Following the acquisition of Boehringer Mannheim by
Roche Holdings AG (Roche), domiciled in Switzerland, the Company established a
new agreement during 1998 with Roche whereby the Company directly supplies its
finished and packaged family planning products to both corporate Roche
distributors and independent distributors around the world. A significant part
of the Company's business is dependent upon Roche. During the years ended
December 31, 1999, 1998 and 1997, Roche accounted for approximately 31% and 33%
of sales and BMI accounted for approximately 50% of sales, respectively. As of
December 31, 1999 and 1998, accounts receivable from Roche were approximately
$143,000 and $630,000, respectively.

During the years ended December 31, 1999 and 1998, a significant portion of the
Company's business was dependent on one North American customer, CVS
Distribution, Inc. (CVS). During the years ended December 31, 1999 and 1998, CVS
accounted for approximately 25% and 24%, respectively, of sales. As of December
31, 1999 and 1998, accounts receivable from CVS were approximately $253,000 and
$160,000, respectively.

During the year ended December 31, 1999, a significant portion of the Company's
business was dependent on an international customer, LVMH Moet Hennessy Louis
Vuitton, Inc. (LVMH), domiciled in France. During the year ended December 31,
1999, LVMH accounted for approximately 13% of sales. As of December 31, 1999,
accounts receivable from LVMH were approximately $709,000.

Other than the foreign customers noted in the paragraphs above, other foreign
customers collectively accounted for no more than 5% of annual sales. A summary
of the Company's sales by product line is as follows:

1999 1998 1997
---- ---- ----
Point of care medical diagnostic products 82% 96% 96%
Skin permeation enhancers 13 - -
Other 5 4 4
--- --- ---
100% 100% 100%
=== === ===
9. Commitments and Contingencies

Leases

The Company leases its operating facilities under operating leases expiring in
October 2003. Rent expense under operating leases for the years ended December
31, 1999, 1998 and 1997 was approximately $758,000, $660,000 and $618,000,
respectively.

At December 31, 1999, future minimum rentals, subject to cost-of-living
adjustments, are approximately as follows (in thousands):

2000 $ 342
2001 353
2002 364
2003 312
-------
$1,371
=======

44
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

9. Commitments and Contingencies (continued)

Litigation

In December 1998, a jury returned a verdict against the Company, the Major
Stockholder, and other unrelated corporate and individual defendants (the
Lawsuit). In its verdict, the jury found that the Major Stockholder had
misappropriated trade secrets and awarded damages of $500,000 against the Major
Stockholder, individually. Additionally, the jury found that both the Company
and the Major Stockholder intentionally interfered with the plaintiffs' business
relationships. The jury awarded approximately $328,000 in damages against the
Company in connection with the second claim, but awarded no damages against the
Major Stockholder, individually, in connection with that claim. In January 1999,
a judgment against the Company and the Major Stockholder was entered by the
trial court in accordance with the verdict.

On January 29, 1999, the Company and the Majority Stockholder filed their appeal
to the Florida Fourth District Court of Appeal in West Palm Beach, Florida -
Case No. 4 DCA 99-00423. On March 29, 2000, the court issued its opinion
reversing the judgment against the Majority Stockholder for misappropriation of
trade secrets. However, the appellate court affirmed the judgment against the
Company for tortious interference with a business relationship. The court's
decision is not final until the disposition of any timely filed motion for
rehearing, which the Company may file as to the tortious interference claim
against the Company. The Company also plans to vigorously pursue any other
available proceedings to have the judgment relating to the tortious interference
matter reversed or set aside.

The liability, if any, that may result from this matter and efforts to set the
judgment aside cannot be reasonably estimated at this time and therefore no
accrual for loss has been recorded in the financial statements as of December
31, 1999.

In November 1998, a purported shareholder class action lawsuit was filed against
the Company. Eight additional complaints were subsequently filed in the same
court. These claims were filed on behalf of a purported class of persons who
purchased the Company's stock between November 27, 1995 and October 6, 1998. The
complaints allege that the Company and certain officers and directors
artificially inflated the Company's stock price by issuing false and misleading
statements concerning the Company's prospects. The claims do not specify the
damages resulting from the alleged conduct. These cases were consolidated in
March 1999. The Company believes the claims lack merit and plans to contest the
allegations vigorously. The Company maintains Directors and Officer's liability
insurance; however there can be no assurance that such insurance coverage will
be adequate to fund the costs of an award, if any, or attorneys' fees related
these claims. At this time, it is not possible to estimate the ultimate loss, if
any, related to these claims and therefore no accrual for loss has been recorded
at December 31, 1999.

In August 1999, the U.S. District Court for the Northern District of California
confirmed an arbitration award against the Company in favor of Hooper &
Associates, Inc. for approximately $198,000. Gary Hooper was the president and
chief operating officer of Pharma Patch, PLC. The Company acquired certain
assets of Pharma Patch, PLC in November 1995. The arbitration award found that
Hooper & Associates was entitled to that amount pursuant to an employment
agreement between Hooper & Associates and Pharma Patch, PLC. However, Hooper &
Associates must enforce its claim in Florida. Enforcement of the arbitration
award has been stayed by a Florida court while the Company is pursuing certain
claims against Mr. Hooper and Hooper & Associates related to his actions as an
employee of Pharma Patch, PLC. The Florida court has scheduled a hearing for May
11, 2000 to hear arguments

45
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

9. Commitments and Contingencies (continued)

Litigation (continued)

by the parties on a continuation of the stay. At this time, it is not possible
to estimate the ultimate loss, if any, related to the resolution of these
matters and therefore no accrual for loss has been recorded as of December 31,
1999.

In January 2000, the U. S. District Court for the Southern District of Florida
entered a judgment against the Company and the Major Stockholder holding them
both liable, jointly and severally, for approximately $401,000, plus trial
expenses and post-judgment interest. The judgment was the result of a civil cost
recovery action brought against the Company and the Major Stockholder by the
United States of America under the Comprehensive Environmental Response,
Compensation, and Liability Act. Management believes that payment of this
judgment and related expenses is probable and has estimated that the ultimate
loss related to the resolution of this matter will be approximately $500,000
and, accordingly, has recorded an accrual for loss equal to this amount as of
December 31, 1999.

In addition to the above, the Company is subject to claims and suits arising in
the ordinary course of business. In the opinion of management, the ultimate
resolution of such pending legal proceedings, including those described above,
will not have a material adverse effect on the Company's results of operations
or financial position.

10. Redeemable Preferred Stock

In May 1998, the Company adopted Amended and Restated Articles of Incorporation
designating 16,200 shares of the authorized preferred stock as Series A
Convertible Preferred Stock (Preferred Stock) with a stated value of $1,000 per
share. The conversion features of the Preferred Stock are described below, and
under certain circumstances it is redeemable at the option of the holder.

On May 18, 1998, the Company issued to a single institutional investor 15,000
shares of Preferred Stock and warrants to purchase 150,000 shares of the
Company's common stock and received proceeds of approximately $14,360,000, net
of offering costs of approximately $640,000. The conversion price of the
Preferred Stock was established at 92% of the market price of the common stock
on the conversion date up to a maximum of $11.89 per share, with the possible
exception described in the following paragraph. The warrants are exercisable at
$11.89 per share. The Preferred Stock must be converted and the warrants can be
converted at any time during the five-year period that commenced on May 18,
1998, with the possible exceptions described in the following paragraph. The
Preferred Stock earns dividends at the rate of 6% per year which accumulate and
increase the conversion value of the Preferred Stock.

If, on the conversion date, the closing price of the common stock is below
$9.51, then the conversion price equals 115% of the market price at that time.
In this situation, the Company has the right, but not an obligation, to redeem
the Preferred Stock for cash in an amount equal to the value of the common stock
on the conversion date which otherwise would have been issued to the holders of
the Preferred Stock. The Company also has the right, but not an obligation, to
convert the Preferred Stock into Convertible Notes Payable (the Notes) which
would modify the conversion terms, bear interest at 10%, and mature three years
from the date of issue. The holder of the Notes can convert them at any time
during the three year period to maturity or can hold them to maturity and redeem
them for a cash payment equal to the principal amount plus accrued interest.
Additionally, if certain mandatory redemption events occur as defined in the
Amended and Restated Articles of Incorporation, the holder of any outstanding
shares of preferred stock has the right to require the Company to redeem those
shares at the stated redemption value.

46
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

10. Redeemable Preferred Stock (continued)

The financing was arranged by placement agents who received a fee of
approximately $488,000 and a nontransferable option to purchase up to 1,200
shares of Preferred Stock upon the same terms and conditions as the
institutional investor and expiring on December 31, 1998. The placement agents
did not exercise this option.

The Preferred Stock was recorded at approximately $12,409,000, net of the value
of the conversion feature of approximately $1,731,000, and the warrants were
recorded at approximately $860,000, which represents the estimated fair value at
the date of issuance. The Preferred Stock has been accreted up to the ultimate
redemption value as of December 31, 1999 through periodic charges to additional
paid-in capital. For the years ended December 31, 1999 and 1998, the Company
recorded accretion of approximately $2,118,000 and $473,000, respectively.

During the year ended December 31, 1999, the institutional investor converted
3,350 shares of preferred stock and received 4,528,228 shares of the Company's
common stock. During the year ended December 31, 1998, the institutional
investor converted 300 shares of preferred stock and received 79,241 shares of
the Company's common stock.

11. Common Stockholders' Equity

During the year ended December 31, 1999, the Company issued 400,000 warrants to
an investment banking company in exchange for consulting services related to
corporate finance and other financial services matters. The warrants are for a
term of five years and 200,000 of the warrants have an exercise price of $1.19,
100,000 of the warrants have an exercise price of $2.00, and 100,000 of the
warrants have an exercise price of $3.00. The warrants and a related deferred
expense were recorded at $262,000, which represents the estimated fair market
value of the warrants at the date of issuance. The deferred expense is being
amortized on a straight-line basis over the three year term of the related
consulting agreement. Selling, general, and administrative expense includes
approximately $58,000 related to the amortization of these warrants during the
year ended December 31, 1999.

During 1996, the Company issued 15,000 shares of common stock in lieu of rent
for a warehouse facility. The 15,000 shares of common stock had a fair market
value of $225,000 at the date of issuance, which was amortized to rent expense
on a straight-line basis over the three year term of the lease. During 1999, due
to a decrease in the value of the Company's common stock, an additional
agreement was reached with the lessor whereby the Company agreed to issue
approximately 169,000 additional shares of common stock with a fair market value
of approximately $207,000 at the date of the agreement, and a liability was
recorded for the fair value of the shares to be issued. These shares were issued
in February, 2000. The approximately $207,000 of rent expense associated with
the additional agreement was included in rent expense over the remaining term of
the rental agreement, which ended during the year ended December 31, 1999.

In conjunction with the 1995 initial public offering, the Company issued 220,000
warrants with an exercise price of $2.60 and a term of four years to the
representative of the underwriters. Of the total warrants issued, 181,156 were
exercised and 38,844 were outstanding as of December 31, 1999. The 38,844
outstanding warrants expired in February 2000. The fair market value of the
warrants was recorded as a reduction of the proceeds from the issuance of common
stock.

During 1996, the Company amended its Incentive Stock Option Plan (the Plan) to
reserve 800,000 shares of common stock for issuance to employees or outside
directors (Participant) of the Company. The exercise price of any stock

47
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

11. Common Stockholders' Equity (continued)

option granted under the Plan to an eligible Participant must be at least equal
to the fair market value of the shares on the date of the grant. Under the
Amended Plan options expire no later than seven years from the date of the
grant, but the vesting period is discretionary. The vesting periods for the
options outstanding under the Plan at December 31, 1999 range from one to five
years from the date of grant.

The following table summarizes information relative to the Company's options
granted under the Plan:

Weighted
Average
Options Exercise Price
-------- --------------

Outstanding at January 1, 1997 112,500 $ 14.90
Granted 160,500 9.73
Canceled (24,000) 15.00
-------- ---------

Outstanding at December 31, 1997 249,000 11.56
Granted 126,600 7.25
Canceled (13,600) 12.70
-------- ---------

Outstanding at December 31, 1998 362,000 10.01
Granted 410,800 1.11
Canceled (119,766) 11.04
-------- ---------
Outstanding at December 31, 1999 653,034 $ 4.22
======== =========

Exercisable at December 31, 1999 189,484 $ 10.58
======== =========

Weighted-average fair value of options granted
under the Plan during 1999 $ .73
========

48
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

11. Common Stockholders' Equity (continued)

The Company has also granted options (not under the Plan) as incentives to
executives and independent contractors who have performed services for the
Company. The following table summarizes information relative to the Company's
options not issued under the Plan:
Weighted
Average
Options Exercise Price
-------- --------------

Outstanding at January 1, 1997
Granted 652,000 $ 14.61
Canceled 6,000 12.40
Exercised (30,000) 15.00
-------- ---------

Outstanding at December 31, 1997 628,000 14.57
Granted 4,000 10.38
Canceled (74,000) 13.03
-------- ---------

Outstanding at December 31, 1998 558,000 14.75
Granted 133,000 1.10
Canceled (22,600) 2.35
-------- ---------

Outstanding at December 31, 1999 668,400 $ 12.45
======== =========

Exercisable at December 31, 1999 633,400 $ 13.10
======== =========

Weighted-average fair value of
options (not under the Plan)
granted during 1999 $ .49
======

The vesting periods for options outstanding not issued under the company's stock
option plan at December 31, 1999 range from immediate vesting to vesting three
years from the date of grant with expiration terms ranging from five to ten
years.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123, Accounting
for Stock-Based Compensation (Statement 123), requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

49
<PAGE>

Technical Chemicals and Products, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

11. Common Stockholders' Equity (continued)

Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method required by Statement 123.
The fair value for these options was estimated at the date of grant using
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999 - risk-free interest rate of 5.52%; volatility factors of
the expected market price of the Company's common stock of 1.020; and a
weighted-average expected life of the option ranging from one to five years, and
for 1998 and 1997 - risk-free interest rate of 6.11%; volatility factors of the
expected market price of the Company's common stock of .701; and a
weighted-average expected life of the option ranging from three to five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (amounts in thousands, except per share amounts):

1999 1998 1997
-------- -------- --------

Pro forma net loss $(16,191) $(10,606) $ (4,876)
Accrued dividends on and accretion to
redemption value of redeemable
convertible preferred stock (2,917) (1,030) --
-------- -------- --------
Pro forma net loss attributable to
common stockholders $(19,108) $(11,636) $ (4,876)
======== ======== ========
Pro forma net loss per
common share $ (1.72) $ (1.16) $ (.49)
======== ======== ========

The weighted-average remaining contractual life of options is 6.2 years.

Shares of common stock reserved for future issuance at December 31, 1999 are as
follows:

Options 1,468,400
Warrants 588,844
---------
2,057,244
=========

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

None.

50
<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers of the Company are elected by the Board of Directors
to hold office until their successors have been chosen and qualified or until
earlier resignation or removal. Set forth below are the names, positions and
ages of the Company's executive officers and directors as of December 31, 1999.
<TABLE>
<CAPTION>

NAME AGE POSITION DIRECTOR SINCE
<S> <C> <C>
Jack L. Aronowitz 59 Chairman, President and Chief 1992
Technical Officer (Class I - term
expiring in 2002)

Elliott Block, Ph.D. 54 Chief Executive Officer and Director 1999
(Class III - term expiring 2001)

Noel Buterbaugh(1)(2)(3) 66 Director (Class I - term expiring in 1998
2002)

Martin Gurkin, Ph.D.(1)(2)(3) 67 Director (Retired as Senior Vice 1996
President and Chief Operating
Officer effective March 5, 1999)
(Class III - term expiring in 2001)

Clayton Rautbord(1)(2)(3) 72 Director (Class II - nominee for a 1996
term expiring in 2003)

Stanley M. Reimer, Ph.D. (1)(2)(3) 69 Director (Class II - nominee for a 1998
term expiring in 2003)

Jay E. Eckhaus 55 Vice President, General Counsel and
Secretary

Robert M. Morrow 62 Vice President of Sales and Marketing

Walter V. Usinowicz, Jr. 52 Vice President of Finance and Chief
Financial Officer
</TABLE>

(1) Member of the Company's Audit Committee
(2) Member's of the Company's Compensation and Stock Option Committee
(3) Member of the Company's Board Organization and Governance Committee

JACK L. ARONOWITZ, Chairman of the Board, President and Chief Technical
Officer, founded Technical Chemicals and Products, Inc. in January 1992. Mr.
Aronowitz has been involved in the development and commercialization of medical
diagnostic products for more than 35 years. Prior to founding the Company, he
was Executive Vice President, Technical Director and Director of Operations of
TechniMed Corporation ("TechniMed") from May 1985 to October 1991 and President
from January 1983 to April 1985. TechniMed was engaged in the medical diagnostic
and biochemical businesses. From 1974 to 1983 he was the founder, Chairman and
President of Leon Laboratories, which developed and manufactured diagnostic and
research reagents for numerous life science companies on a worldwide basis. From
1970 to 1974, Mr. Aronowitz was a founder and Executive Vice President of
Reliable Chemicals, which developed and manufactured diagnostic and research
reagents for numerous life science companies on a worldwide basis. From 1968 to
1970, he was Director of Laboratories for Sigma Chemicals, Inc. Prior to that he
was the founder, Chairman and President of Hall Laboratory Products Corp.

51
<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)

ELLIOTT BLOCK, Ph.D., Chief Executive Officer since May 1999 and a
Director of the Company since September 1999, has responsibility for the
Company's strategic direction and day-to-day business operations. Dr. Block has
more than 28 years of senior level experience in the research, manufacturing and
international marketing of over-the-counter and clinical diagnostic products, as
well as the operation of licensed clinical laboratories. Dr. Block was the
President, CEO and a director of Medicorp Inc., a privately held biomedical
company headquartered in Montreal, Canada from its inception in 1986 to 1999.
Medicorp is involved in the research, manufacturing and international marketing
of clinical diagnostic tests, the distribution of research kits and reagents in
Canada and the operation of a licensed clinical laboratory. He was also
instrumental in forming Decision Diagnostics LLC, a joint venture with Dianon
Systems, Inc. (Nasdaq: DIAN), to license new technology for the improved
diagnosis of prostate cancer. From 1981 through 1985, Dr. Block served as a
director and the first President and CEO of Hygeia Sciences, Inc. Hygeia
developed and manufactured the First Response(R) over-the-counter pregnancy and
ovulation kits marketed by Tambrands, Inc. (the manufacturer of Tampax(R)
products), which subsequently purchased Hygeia. These same assays were
manufactured for Hoffmann-La Roche, which sold them to the professional market.
From 1972 through 1981, he held positions of increasing responsibility at Becton
Dickinson Immunodiagnostics, a division of Becton, Dickinson & Co., including
Vice President, Operations and Vice President, Research & Development.
Previously, he worked in clinical diagnostics research at Syva Company. Dr.
Block has a Ph.D. from Brandeis University and was an Alexander von Humboldt
Fellow at the University of Cologne, Germany. He has a B.A. degree from Queens
College.

NOEL BUTERBAUGH has been a Director of the Company since April 1998. He
has 45-plus years of experience in biotechnology and medical technology. Until
his retirement in 1999, Mr. Buterbaugh was President and Chief Executive Officer
of BioWhittaker, Inc., ("BioWhittaker") which was acquired by Cambrex
Corporation (NYSE: CMB) in 1997. He was with BioWhittaker since the early 1950s
and became its President in 1979. BioWhittaker is a major supplier of cell
cultures and related scientific products to the biotechnology industry and the
leading supplier worldwide of these biological products to the medical and
clinical diagnostics industry. He holds a Bachelor of Science degree in Business
Administration from American University in Washington, D.C. In addition to his
corporate responsibilities, Mr. Buterbaugh presently is a Director for the
Maryland Health Care Development Corporation and Director for the High
Technology Council of Maryland. His previous outside service included posts as a
Director of the Health Industry Manufacturers Association (HIMA) and Chairman of
the HIMA Science and Technology Steering Committee, as well as a member of the
U.S. Department of Commerce Technical Advisory Committee on Biotechnology
(BIOTAC).

MARTIN GURKIN, Ph.D. has been a Director of the Company since January
1996. Dr. Gurkin retired from the Company as of March 5, 1999, at which time he
was Senior Vice President, Chief Operating Officer and a Director. Prior to
joining the Company, he served as Vice President of ISCO, Inc., a company
engaged in the manufacture of scientific analytical instrumentation, from
October 1989 to December 1995. Prior to joining ISCO, Inc., Dr. Gurkin was
employed in various capacities for over 17 years by E. M. Science (an affiliate
of E. Merck KGAA), a company engaged in the manufacturing of laboratory reagents
and chromatography supplies.

CLAYTON L. RAUTBORD has been a Director of the Company since August
1996. Mr. Rautbord is presently the Secretary and Treasurer of Wenk Aviation
Insurance Corporation. From 1980-1989, he was the founder and President of Photo
Con-X-Ion, Inc., a manufacturer of photographic chemicals, and was the President
and CEO of APECO, a company listed on the NYSE, from 1963 to 1974. In addition
to the Company's Board of Directors, Mr. Rautbord also serves on the Board of
Directors of Albany Bank and Trust Company in Chicago.

STANLEY M. REIMER, Ph.D. has been a Director of the Company since
September 1998. Dr. Reimer has more than 30 years of diverse experience in the
healthcare industry, including basic and applied research and technical,
clinical and public health management. Since 1988, Dr. Reimer has been President
of Laboratory Management Associates, which provides direction and consultation
to the clinical laboratory and healthcare industry. He also served as Assistant
Commissioner of Health and Director of the Public Health Laboratories for the
City of New

52
<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)

York from 1991 to 1996. In addition, Dr. Reimer previously was Vice President
and General Manager of Allied Clinical Laboratories from 1985 to 1988, and Vice
President and Area Manager with Bio-Science Laboratories from 1971 to 1985. Dr.
Reimer holds Bachelor of Science degrees in chemistry and physiology from
Allegheny College and both his Master of Science degree and Ph.D. in
biochemistry from Rutgers University. His research and teaching affiliations
have included Academy of Senior Professionals at Eckerd College; Harvard Medical
School; Beth Israel Hospital (Boston, MA); National Heart Institute; Downstate
Medical Center (Brooklyn, NY); Long Island University; and Woods Hole Marine
Biology Laboratories. He also holds laboratory director's licenses in Florida
and New York State.

JAY E. ECKHAUS, Vice President, General Counsel and Secretary, has more
than 25 years of extensive corporate and commercial legal experience. From 1990
to 1998, Mr. Eckhaus was in private practice focusing on corporate and
commercial law. He held senior level positions at General Foods Corporation from
1973 to 1989, including vice president and chief counsel of its baking
operations as well as assignments in both domestic and international food
operations. Mr. Eckhaus also served as vice president, general counsel and
secretary for the U.S. operations of Alfa-Laval, Inc., a leading European
technology company. He received his Juris Doctorate Degree from The Ohio State
University and his B.S. degree in Business Administration from Bowling Green
State University.

ROBERT M. MORROW, Vice President of Sales and Marketing, has more than
33 years of senior management experience in various industries that include
over-the-counter diagnostics, prescription pharmaceuticals, medical devices,
food products and services and hospitality with a strong emphasis on sales and
marketing. He was President and Acting Chief Executive Officer of Thames
Pharmacal Co. from 1997 to 1999. From 1982 to 1997, Mr. Morrow served in
numerous executive assignments with Nutmeg Consultants that include: Vice
President and General Manager of TurboChef, Inc.; Executive Vice President,
Chief Operating Officer and Director of Veriden Corporation; President, Chief
Executive Officer, Co-Founder and Director of Kushi Macrobiotics Corp.;
President and Chief Operating Officer for Culinar Sales Corp.; President and
Chief Operating Officer for RIM Industries, Inc.; Executive Vice President and
Chief Operating Officer for Savoy Industries, Inc.; and Senior Vice President
and General Manager of Hicks & Greist Advertising Agency. In addition, from 1974
to 1982, Mr. Morrow was Group Vice President of Marketing and Development/Food
Group of International Telephone & Telegraph Corp. He also served as Director of
Marketing and Sales for Revlon, Inc. and Almay Cosmetics Co. Mr. Morrow has a
M.B.A. degree from Long Island University and a B.S. degree in chemistry and
marketing research from The Ohio State University.

WALTER V. USINOWICZ, JR., Vice President of Finance and Chief Financial
Officer, is responsible for the Company's financial reporting and treasury
functions, as well as support of the Company's strategic planning and business
development activities. Mr. Usinowicz has more than 25 years of senior
management experience in the life sciences and medical technology industries
that includes financial management, business development and general management
experience. From 1990 to 1999, Mr. Usinowicz was primarily engaged in the
management of start-ups and turnaround situations. Recently, he was CFO of
BuyMatrix, Inc., an e-commerce store serving the needs of physicians, where he
was successful in securing the initial venture capital funding. Previously, Mr.
Usinowicz held executive management positions in several biotechnology
companies, where he was successful in establishing strategic alliances,
conducting financial turnaround activities, and raising capital. From 1991 to
1994, Mr. Usinowicz was the Chief Operating Officer of Rocky Mountain Instrument
Co., a manufacturer of precision optics. From 1984 to 1990, he served as CFO of
Mountain Medical Equipment, Inc., a publicly held manufacturer of respiratory
therapy equipment. From 1974 to 1984, he held positions of increasing
responsibility at Becton, Dickinson & Company, including Director of Business
Planning-Laboratory Group and controller at a diagnostics division. Prior to
that, he held positions in manufacturing cost accounting and production control
systems at W. R. Grace & Co. and at General Foods Corporation. Mr. Usinowicz
holds a M.B.A. degree from New York University and a B.S. degree in Finance from
Lehigh University.

There is no family relationship between any executive officer or
director of the Company.

53
<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)

COMPENSATION OF DIRECTORS

Each non-employee director of the Company is paid an annual fee of
$5,000. Each non-employee director acting as a Committee Chair receives an
additional $500 per year. In addition, each non-employee director receives $500
for each Committee and Board meeting attended, provided that the Committee
meeting is other than on a day when a Board Meeting is held. Non-employee
directors are also reimbursed for their travel expenses to meetings of the Board
of Directors. On April 2, 1999, each non-employee director received 1,000 shares
of the Company's stock as additional compensation. On June 18, 1999, each
non-employee director was granted an option to purchase 19,600 shares of the
Company's Common Stock at an exercise price equal to that day's closing price,
as quoted by The Nasdaq Stock Market. No director who is an employee of the
Company receives separate compensation for services rendered as a director.

MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES

The Board of Directors held nine meetings during the year ended
December 31, 1999. Each director attended at least 75% or more of the aggregate
number of meetings held by the Board of Directors and the committees on which he
or she served. Dr. Kathryn Harrigan resigned from the Board of Directors in
September of 1999. At a meeting of the Board of Directors held on September 27,
1999, Elliott Block, Ph.D. was elected a director to fill the vacancy.

The Company's Board of Directors has three standing committees: the
Audit Committee, the Compensation and Stock Option Committee and the Board
Organization and Governance Committee. All such Committees consisted of
non-employee directors Dr. Harrigan (until September 1999), Mr. Rautbord, Mr.
Buterbaugh and Mr. Reimer. Dr. Gurkin replaced Dr. Harrigan as member of such
Committees upon her resignation.

The Audit Committee held one meeting during the year ended December 31,
1999. The primary functions of the Audit Committee are to assist the Board of
Directors in fulfilling its responsibilities with respect to the accounting and
financial reporting practices of the Company (including its system of internal
controls and financial management practices), to select the Company's
independent accountants and to meet with the Company's independent accountants
to address and review the scope and results of the audit and other services
performed by the Company's independent accountants.

The Compensation and Stock Option Committee held three meetings during
the year ended December 31, 1999. The primary functions of the Compensation and
Stock Option Committee are to review and approve the Company's compensation
policies and practices, to propose compensation levels for executive officers
and other key employees and to administer the Company's Amended and Restated
1992 Stock Option Plan the ("Plan").

The Board Organization and Governance Committee held three meetings
during the year ended December 31, 1999. The Board Organization and Governance
Committee is responsible for corporate governance and also serves as the
Nominating Committee for the Company.

54
<PAGE>

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the year ended
December 31, 1999, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with.

Item 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company,
during the fiscal years ended December 31, 1999, 1998, and 1997 to the officers
whose names appear in the table below. No restricted stock awards, long-term
incentive plan payouts or other types of compensation other than the
compensation identified in the chart below were paid to these officers. No other
executive officer of the Company earned a total annual salary and bonus during
1999, 1998 and 1997 in excess of $100,000.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

LONG TERM
COMPENSA-
TION
ANNUAL COMPENSATION AWARDS
-----------
Securities
Name and Principal Other Annual Underlying Other
Position Year(a) Salary($) Bonus($) Compensation($) Options(#) Compensation
-------- ------- --------- -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Jack L. Aronowitz 1999 $167,512 -- $ 13,267(b) --
President, Chief 1998 160,864 -- 13,076(b) --
Technical Officer, and 1997 151,938 -- 24,644(b) --
Chairman of the Board

Elliott Block, Ph.D. 1999 106,298 -- 988(b) 250,000
Chief Executive 1998 (a) -- -- --
Officer and Director 1997 (a) -- -- --

Jay E. Eckhaus 1999 131,750 -- 2,185(b) 5,000
Vice President, 1998 97,116 18,750 1,113(b) 15,000
General Counsel and 1997 (a) -- -- --
Secretary

Robert M. Morrow 1999 114,250 -- 2,638(b) 30,000
Vice President of 1998 (a) -- -- --
Sales and Marketing 1997 (a) -- -- --

Stuart R. Streger 1999 99,429 -- 2,569(b) --
Vice President 1998 134,514 25,000 3,085(b) 1,000
and Chief Financial 1997 127,625 35,000 2,216(b) 11,000
Officer (Through
September 1999)
</TABLE>

-------------------
(a) Not employed by the Company at that time.
(b) Includes the cost of an automobile and/or health insurance.

55
<PAGE>

PART III

Item 11. EXECUTIVE COMPENSATION (Continued)

STOCK OPTION GRANTS AND EXERCISES; LONG-TERM INCENTIVE PLANS IN 1999

The following table sets forth the stock options granted to the
executive officers named in the Summary Compensation Table during the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>

OPTION GRANTS

POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
TERM(a)
NUMBER OF
SECURITIES PERCENT OF TOTAL
NAME UNDERLYING OPTIONS GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN FISCAL PRICE PER EXPIRATION DATE 5% ($) 10% ($)
GRANTED(#) YEAR SHARE ($/SH)
------------------------ ----------------- --------------------- --------------- ----------------- ------------- ------------

<S> <C> <C> <C> <C> <C> <C> <C>
Elliott Block, Ph.D. 250,000 59.41% $1.250 5/10/09 $196,530 $498,045

Jay E. Eckhaus 5,000 1.19% $0.438 11/04/09 $1,377 $3,490

Robert M. Morrow 10,000 2.38% $1.375 2/15/05 $4,676 $10,609

10,000 2.38% $1.375 2/15/06 $5,598 $13,045

10,000 2.38% $1.375 2/15/07 $6,565 $15,724
</TABLE>

(a) The potential realizable values set forth under these columns result from
calculations assuming 5% and 10% annualized stock price growth rates from
grant dates to expiration dates and are not intended to forecast future
price appreciation of the Company's Common Stock based upon growth at these
prescribed rates. The Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
factors. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Company. There can be no assurance that the
amounts reflected in this table will be achieved.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND

FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

SHARES VALUE OF UNEXERCISED
NAME ACQUIRED ON VALUE NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
EXERCISE(#) REALIZED($) UNEXERCISED OPTION AT YEAR-END(#) YEAR-END($)(1)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- ---------------- ---------------- ---------------- -------------------- ---------------- -----------------

<S> <C> <C> <C> <C> <C> <C>
Elliott Block, Ph.D. -- -- 83,334 166,666 -- --

Jay E. Eckhaus -- -- 10,000 10,000 -- $310

Robert M. Morrow -- -- 10,000 20,000 -- --

Stuart R. Streger -- -- 32,000 -- -- --
</TABLE>

(1) Calculated by multiplying the number of shares underlying options by the
difference between the closing sale price for the Common Stock of $0.50 as
reported by The Nasdaq Stock Market on December 31, 1999 and the exercise price
of the options.

56
<PAGE>

PART III

Item 11. EXECUTIVE COMPENSATION (Continued)

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation and Stock Option Committee consisted of Mr.
Buterbaugh, Dr. Gurkin (effective September 1999), Dr. Harrigan (through
September 1999), Mr. Rautbord and Dr. Reimer during 1999. During 1999, there
were no interlocking relationships of the Compensation and Stock Option
Committee. Each member serving on the Compensation and Stock Option Committee
was an outside director and no member has ever been an officer or employee of
the Company, except Dr. Gurkin who served as the Company's Senior Vice President
and Chief Operating Officer until his retirement from the Company effective
March 5, 1999.

EMPLOYMENT CONTRACTS

The Company entered into an employment agreement with Jack L.
Aronowitz, as of January 1, 1993, as amended on September 27, 1996 and October
9, 1998, pursuant to which Mr. Aronowitz serves as President of the Company. The
agreement provides that Mr. Aronowitz receive: (i) a current base salary of
$175,900, increased annually by 5%; and (ii) an annual bonus of 5% of the
Company's consolidated pre-tax income. The agreement also provides that Mr.
Aronowitz is entitled to health insurance, a car allowance of $10,000 per year,
other fringe benefits, and, at the Board's discretion, further bonuses and
reimbursement for various expenses. In addition, the agreement prohibits Mr.
Aronowitz (i) during and after the term of the agreement, from disclosing
confidential information relating to the Company and (ii) during the term of the
agreement and for a period of two years after termination thereof, from
competing with the Company anywhere in the United States where the Company is
engaged in business or has evidenced an intention to engage in business.
Notwithstanding the foregoing, if Mr. Aronowitz's employment is terminated by
the Company for any reason other than Mr. Aronowitz having engaged in any
material act of dishonesty, disloyalty, negligence and/or fraud which is, or may
be, damaging to the Company's business, the Company must pay Mr. Aronowitz two
times his then base salary plus an amount equal to two times the last bonus paid
to or accrued for him pursuant to the agreement (three times base salary plus
bonus in the event of termination following a "change of control," as defined in
the agreement).

The Company entered into an employment agreement with Elliott Block,
Ph.D., dated September 10, 1999, pursuant to which Dr. Block serves as a Chief
Executive Officer of the Company. The agreement provides that Dr. Block receive:
(i) a current base salary of $173,250, increased annually by a minimum of 5%;
and (ii) Upon achieving defined goals, an annual bonus of not less than $10,000
nor more than fifty per cent of Dr. Block's salary in effect for the period
applicable to such Bonus Award; and an annual bonus equal to 3% of the Company's
after tax net income not to exceed 50% of his base salary. Dr. Block is also
entitled to a one-time bonus of $25,000 upon the attainment of certain net
income goals. Upon execution of this agreement, the Company granted Dr. Block
240,000 Incentive Stock Options and 10,000 Non-Qualified Stock Options and made
a loan to Dr. Block in the amount of $50,000, which shall be deemed repaid with
respect to 50% of the amount due and owing on each of the first two anniversary
dates of this agreement as long as Dr. Block remains an employee of the Company
or is not terminated for cause (as defined). Dr. Block receives health
insurance, other fringe benefits, and, at the Board of Directors' discretion,
reimbursement for various expenses. In addition, the agreement prohibits Dr.
Block from disclosing confidential information relating to the Company during
the term of the agreement and for five years thereafter. The agreement further
provides that if Dr. Block's employment is terminated by the Company without
cause (as defined), if he is constructively discharged, or if he terminates his
employment for good reason (as defined), the Company must pay Dr. Block the
greater of the amounts due for the unexpired term of employment or two times his
then base salary plus an amount equal to any bonuses paid or accrued to him
during the 12 months prior to such termination. Dr. Block is also entitled to
receive an amount equal to two times base salary plus two times bonuses paid or
accrued in the last 12 months in the event of termination following a change of
control (as defined). Notwithstanding the foregoing, if Dr. Block's employment
is terminated due to the death or disability of Dr. Block, the Company must pay
Dr. Block or to his estate an amount equal to two times his then base salary.
Dr. Block is also a director of the Company.

57
<PAGE>

PART III

Item 11. EXECUTIVE COMPENSATION (Continued)

On October 9, 1998, the Company entered into an employment agreement
with Jay E. Eckhaus, pursuant to which he serves as Vice President and General
Counsel. Mr. Eckhaus' current base salary is $136,500, which may be increased at
the discretion of the Board of Directors. On May 27, 1999, the Company entered
into an employment agreement with Robert M. Morrow, pursuant to which he serves
as Vice President of Sales and Marketing. Mr. Morrow's current base salary is
$135,200, which may be increased at the discretion of the Board of Directors.
The Company also granted Mr. Morrow 30,000 options upon execution of the
agreement. On November 22, 1999, the Company entered into an employment
agreement with Walter V. Usinowicz, Jr., pursuant to which he serves as Vice
President and Chief Financial Officer of the Company. Mr. Usinowicz's current
base salary is $135,000, which may be increased at the discretion of the Board
of Directors. The Company also granted Mr. Usinowicz 35,000 options upon
execution of the agreement. The Agreements also provide that Messrs. Eckhaus,
Morrow and Usinowicz may receive yearly bonuses at the discretion of the Board
of Directors. Messrs. Eckhaus, Morrow and Usinowicz also receive health
insurance, other fringe benefits and reimbursement for business expenses. In
addition, the agreements prohibit Messrs. Eckhaus, Morrow and Usinowicz during
and after the expiration of the agreement for a period five years from
disclosing confidential information relating to the Company. Each of the
aforementioned agreements provide that in the event that the employment of any
of them is terminated by the Company for any reason other than for Cause (as
defined in the agreement) or by the employee without Good Reason (as defined in
the agreement), the aforementioned employee receives an amount equal to the
employee's base salary for the remainder of the term of the respective agreement
(but at least six months' base salary) plus an amount equal to the bonus paid to
such employee in the previous fiscal year (two times salary plus two times bonus
paid or accrued in the last year in the event of termination following a "change
if control" as defined in the agreement.) The employment agreements for Messrs.
Block, Eckhaus, Morrow and Usinowicz also provide for share appreciation rights
being granted to such persons.

58
<PAGE>

PART III

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

SECURITY OWNERSHIP

The following table sets forth certain information as of April 19, 2000
with respect to the Common Stock of the Company owned by (1) any person who is
known to the Company to be the beneficial owner of more than five percent of any
class of the Company's voting securities, (2) each director and director nominee
of the Company, (3) each executive officer named in the Summary Compensation
Table and (4) all directors and executive officers as a group.

On April 19, 2000, there were 29,541,258 shares of Common Stock
outstanding. Unless indicated, each of the persons in the table below has sole
voting power and sole dispositive power as to all of the shares shown as
beneficially owned by them.
<TABLE>
<CAPTION>

Name and Address of Beneficial Owner(a) Amount and Nature of Percent
Beneficial Ownership(b)

<S> <C> <C>
Jack L. Aronowitz.......................................... 4,607,316(c) 15.6%

Elliott Block, Ph.D........................................ 96,934(d) *

Noel Buterbaugh............................................ 20,600(d) *

Jay E. Eckhaus............................................. 22,200(d) *

Martin Gurkin, Ph.D........................................ 20,000(d) *

Robert M. Morrow........................................... 30,000(d) *

Clayton L. Rautbord........................................ 24,200(d) *

Stanley M. Reimer, Ph.D.................................... 23,600(d) *

Stuart R. Streger.......................................... 33,200(d) *

All directors and executive officers
as a group (9 persons)..................................... 4,878,050 16.5%
</TABLE>

---------------------
* Does not exceed one percent.

(a) The address of each of Messrs. Aronowitz, Block, Buterbaugh, Eckhaus,
Gurkin, Morrow, Rautbord, and Reimer is c/o Technical Chemicals and
Products, Inc., 3341 S.W. 15th Street, Pompano Beach, FL 33069.

(b) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission rules, includes shares as to which a
person has or shares voting power and/or investment power.

(c) Includes 500,000 shares that may be acquired upon exercise of a currently
exercisable warrant and 370,000 shares as to which Mr. Aronowitz holds a
voting proxy. With respect to such voting proxy, the Company has been
informed that, since the date of such proxy, the legal ownership of 345,000
shares may have been transferred ("Transferred Shares"). The Company has
been unable to determine whether the beneficial ownership of such
Transferred Shares has changed as a result of the transfers, in which event
Mr. Aronowitz would no longer have the right to vote such shares.

(d) Includes options that are currently exercisable in the following amounts:
Dr. Block - 83,334; Mr. Buterbaugh - 19,600; Dr. Gurkin - 19,600; Mr.
Eckhaus - 20,000; Mr. Morrow - 20,000; Mr. Rautbord - 22,600: Dr. Reimer -
20,600; and Mr. Streger - 32,000.

59
<PAGE>

PART III

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During August 1998, the Company's outside directors unanimously
approved the Company's guarantee, for a period of up to 90 days, of $750,000 of
the collateral obligations of Mr. Aronowitz's family limited partnership
(Partnership) to a brokerage house. Under the terms of the Company's agreement
with the Partnership, the brokerage house called on the Company's guarantee; the
Partnership then executed and delivered to the Company a promissory note
personally guaranteed by Mr. Aronowitz in an amount equal to the amount of the
guarantee. The note was a six-month note payable on demand and bears interest at
the rate of interest charged by the brokerage house (7 3/4% at December 31,
1999). In February 1999, accrued interest was paid and the note was extended an
additional three months. After becoming due on May 26, 1999, interest was paid
and an additional extension of one year was authorized by the Board of
Directors. The balance of funds advanced under the note was approximately
$647,000 at December 31, 1999, and was included in due from related party in the
balance sheets based on the Company's understanding that such amounts will be
repaid during 2000. At the Board meeting on April 27, 2000, an additional
extension of eighteen months commencing on September 1, 2000 was authorized by
the Board of Directors, with payments due quarterly.

The Company and Mr. Aronowitz are parties to an exclusive, worldwide
license agreement dated January 31, 1996 ("License Agreement") under which the
Company has the right to manufacture, promote, market and sell all medical,
pharmaceutical and health care products and devices created by Mr. Aronowitz on
or before the date of the License Agreement. The License Agreement is for a term
of twenty years with automatic renewals and requires annual fees equal to the
greater of (i) 3% of net collected sales revenues from products based upon
certain technology or (ii) $10,000, with an aggregate maximum limitation of
$10,000,000. The License Agreement replaces an earlier license agreement with
similar provisions. During 1999, 1998, 1997 and 1996, Mr. Aronowitz earned
approximately $149,000, $161,000, $148,000 and $114,000, respectively, pursuant
to the License Agreement. He waived all licensing fees due him for the years
ended December 31, 1995 and 1994. Mr. Aronowitz is also party to an employment
contract with the Company. See "- Employment Contracts."

The Company made a loan to Dr. Block in the amount of $50,000 pursuant
to his Employment Agreement with the Company, which shall be deemed repaid with
respect to 50% of the amount due and owing on each of the first two anniversary
dates of this agreement as long as Dr. Block remains an employee of the Company
or is not terminated for cause (as defined). The principal amount of this loan
bears interest at the London Interbank (LIBOR) rate, as adjusted quarterly, with
such principal and accrued interest due on September 1, 2001, subject to such
loan being deemed repaid as provided above. As of March 31, 2000, the
outstanding principal and interest is $51,738.99.

60
<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K

A. The following documents are filed as part of the report:

(1) The Financial Statements filed as part of this report are
listed separately in the index to Financial Statements
beginning on page 30 of this report.

(2) Financial Statement Schedules.

TECHNICAL CHEMICALS AND PRODUCTS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
December 31, 1999
<TABLE>
<CAPTION>

Additions
----------------------------------
Balance at Charged to Charged to
Beginning Costs and Other Accounts Deductions- Balance at End
Description Period Expenses - Describe Describe of Period
------------------------------------- ---------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999:
Allowance for doubtful accounts $ 75,000 $ 280,419 $ - $ 37,419(1) $ 318,000
Tax Valuation Allowance 4,349,325 8,318,575 - - 12,667,900
--------------------------------------------------------------------------------------
Total $ 4,424,325 8,598,994 $ - $ 37,419(1) 12,985,900
======================================================================================

Year Ended December 31, 1998:
Allowance for doubtful accounts $ 18,000 $ 198,000 $ - $ 141,000(1) $ 75,000
Tax Valuation Allowance 572,801 3,776,524 - - 4,349,325
--------------------------------------------------------------------------------------
Total $ 590,801 $ 3,974,524 $ - $ 141,000(1) $ 4,424,325
======================================================================================

Year Ended December 31, 1997:
Allowance for doubtful accounts $ 18,000 $ - $ - $ - $ 18,000
Tax Valuation Allowance 572,801 - - - 572,801
--------------------------------------------------------------------------------------
Total $ 590,801 $ - $ - $ - $ 590,801
======================================================================================
</TABLE>

(1) Uncollected accounts written off, net of recoveries.

All other Financial Statements and schedules not listed have been omitted since
the required information is included in the Consolidated Financial Statements or
the Notes thereto, or is not applicable, material or required.

61
<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K
(Continued)

(3) Exhibits
<TABLE>
<CAPTION>

Exhibit
Number Exhibit Description
------ -------------------
<S> <C>
3.1 ***** Amended and Restated Articles of Incorporation of the Company.
3.2 ***** Amended and Restated Bylaws of the Company.
3.3 **** Articles of Amendment to the Articles of Incorporation of the Company.
4.1 ***** See Exhibits 3.3 above for provisions of the Amended and Restated Articles of Incorporation of the
Company and the Amended and Restated Bylaws of the Company defining the rights of holders of Common
Stock of the Company.
4.2 *** Form of Common Stock Certificate of the Company.
10.2 ***** Amended and Restated 1992 Incentive Stock Option Plan.
10.3 ***** Cancellation and Exclusive License Agreement between Jack Aronowitz and the Company dated January
31, 1996.

10.4 ***** Stock Option Agreement between the Company and Martin Gurkin, Stuart R. Streger, Colin Morris,
Kathryn Harrigan, Clayton Rautbord and Stephen Dresnick.
10.6 ** Lease - Pompano Beach, Florida.
10.6.1 Filed
Herewith Business Lease Extension - Pompano Beach, Florida.
10.6.2 ***** Main Lease - Menlo Park, California; Sublease - Menlo Park.
10.6.3 ***** Assignment and Assumption of Sublease and Landlord's Consent Thereto between Menlo Business Park,
Patrician Associates, Inc., Flora, Inc. Pharma Patch PLC and Technical Chemicals and Products, Inc.
10.8 *** Warrant Agreement between the Company and Jack L. Aronowitz.
10.8.1 * Amended Employment Agreement dated October 9, 1998 between the Company and Jack L.
Aronowitz.
10.9 * Employment Agreement dated October 9, 1998 between the Company and Jay E. Eckhaus.
10.14 ***** Letter Agreement between the Company and Redstone Securities, Inc. dated January 15, 1996.
10.15 ****** Stock Option Agreement with Martin Gurkin dated November 1996.
10.16 ***** Letter Agreement with Flora, Inc. dated February 5, 1996.
10.17 ******* Employment Agreement dated September 10, 1999 between the Company and Elliott Block, Ph.D.
10.18 ******** Employment Agreement dated November 22, 1999 between the Company and Walter V. Usinowicz, Jr.

62
<PAGE>

10.19 ********* Employment Agreement dated May 27, 1999 between the Company and Robert M. Morrow.
21 ********* Subsidiaries of the Company.
Filed
23 Herewith Consent of Ernst & Young LLP.
27 ********* Financial Data Schedule.

* Incorporated by reference to Exhibits 10.2, 10.3 and 10.4 of the Company's Form 10-Q filed on
November 12, 1998.
** Incorporated by reference to the Exhibit of the same
number in the Company's Registration Statement on Form
SB-2 filed on October 28, 1994 (No. 33-85756).
*** Incorporated by reference to the Exhibit of the same number in Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on April 23, 1996 (No. 333-1272).
**** Incorporated by reference to Exhibit 3.1 of Form 8-K filed on May 21, 1998.
***** Incorporated by reference to the Exhibit of the same
number in the Company's Registration Statement on Form
S-1 filed on February 12, 1996 (No. 333-1272).
****** Incorporated by reference to the Exhibit of the same
number in Amendment No. 2 to the Company's Registration
Statement on Form S-1 filed on March 20, 1996.
******* Incorporated by reference to Exhibit 10.17 of the Company's
Form 10-Q filed on November 9, 1999.
******** Incorporated by reference to Exhibit A of Form 8-K filed on December 15, 1999.
********* Incorporated by reference to the exhibits of the same numbers of the Company's Form 10-K
filed on March 30, 2000.
</TABLE>

B. Reports on Form 8-K

Report on Form 8-K filed on December 15, 1999.

63
<PAGE>

SIGNATURES

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

TCPI, INC.

By: /signed / Elliott Block, Ph.D
----------------------------------------
Elliott Block, Ph.D
President and Chief Executive Officer

Date: November 1, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature Title Date

/signed / Elliott Block, Ph.D. Chief Executive Officer, President November 1, 2000
--------------------------------------------- and Director (Principal Executive
Elliott Block, Ph.D. Officer)

/signed / Walter V. Usinowicz, Jr Vice President of Finance and November 1, 2000
--------------------------------------------- Chief Financial Officer (Principal
Walter V. Usinowicz, Jr. Financial Officer and Principal
Accounting Officer)

/signed / Noel Buterbaugh Director November 1, 2000
---------------------------------------------
Noel Buterbaugh

/signed / Martin Gurkin Chairman of the Board November 1, 2000
---------------------------------------------
Martin Gurkin

/signed / Clayton Rautbord Director November 1, 2000
---------------------------------------------
Clayton Rautbord

/signed / Stanley M. Reimer, Ph.D. Director November 1, 2000
---------------------------------------------
Stanley M. Reimer, Ph.D.
</TABLE>

64
<PAGE>

Exhibit Index to Exhibits
Number

<S> <C>
3.1 ***** Amended and Restated Articles of Incorporation of the Company.
3.2 ***** Amended and Restated Bylaws of the Company.
3.3 **** Articles of Amendment to the Articles of Incorporation of the Company.
4.1 ***** See Exhibits 3.3 above for provisions of the Amended and Restated Articles of Incorporation of the
Company and the Amended and Restated Bylaws of the Company defining the rights of holders of Common
Stock of the Company.
4.2 *** Form of Common Stock Certificate of the Company.
10.2 ***** Amended and Restated 1992 Incentive Stock Option Plan.
10.3 ***** Cancellation and Exclusive License Agreement between Jack Aronowitz and the Company dated January
31, 1996.

65
<PAGE>
<TABLE>

<S> <C> <C>
27 ********* Financial Data Schedule.

* Incorporated by reference to Exhibits 10.2, 10.3 and 10.4 of the Company's Form 10-Q filed on
November 12, 1998.

** Incorporated by reference to the Exhibit of the same
number in the Company's Registration Statement on Form
SB-2 filed on October 28, 1994 (No. 33-85756).

*** Incorporated by reference to the Exhibit of the same number in Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on April 23, 1996 (No. 333-1272).

**** Incorporated by reference to Exhibit 3.1 of Form 8-K filed on May 21, 1998.

***** Incorporated by reference to the Exhibit of the same
number in the Company's Registration Statement on Form
S-1 filed on February 12, 1996 (No. 333-1272).

****** Incorporated by reference to the Exhibit of the same
number in Amendment No. 2 to the Company's Registration
Statement on Form S-1 filed on March 20, 1996.

******* Incorporated by reference to Exhibit 10.17 of the Company's
Form 10-Q filed on November 9, 1999.

******** Incorporated by reference to Exhibit A of Form 8-K filed on December 15, 1999.

********* Incorporated by reference to the exhibits of the same number of the Company's Form 10K
filed on March 30, 2000.
</TABLE>