HARVARD SCIENTIFIC CORP, SB-2/A, 1997-07-18

HARVARD SCIENTIFIC CORP
SB-2/A, 1997-07-18
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997

REGISTRATION NO. 333-25647

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM SB-2

AMENDMENT NO. 2 TO
REGISTRATION STATEMENT

SECURITIES ACT OF 1933

Harvard Scientific Corp.
--------------------------------------------
(Name of Small Business Issuer in Its Charter)

Nevada 2834 226455
------- ----------------- ------
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)

100 North Arlington, Suite 23-P, Reno, Nevada 89501 (702) 796-1173
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)

100 North Arlington, Suite 23-P, Reno, Nevada 89501 (702) 796-1173
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)

Don A. Steffens, CEO and President
100 North Arlington, Suite 23-P
Reno, Nevada 89501
(702) 796-1173
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

With copy to:

David R. Baker, Esq.
230 Park Avenue, Suite 640
New York, New York 10169-0639

Approximate Date of Proposed Sale to the Public: As soon as practicable
after the Registration Statement becomes effective.

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act Registration Statement Number of the earlier effective
registration statement for the same offering. / /
------------------

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE> 2
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
======================== ====================== ====================== ======================= ======================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities To Be Amount To Be Offering Price Per Aggregate Offering Amount of
Registered Registered (2) Unit (1) Price Registration Fee
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock 12,064,344 $4.75 (3) $57,305,634 $19,760.56
======================== ====================== ====================== ======================= ======================
</TABLE>

1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.

2) Based upon 300% of the shares issuable upon the conversion of
$15,000,000 principal amount of 6% Convertible Debentures on April 14,
1997 if the Debentures had been fully outstanding and were converted on
that date.

3) The average of the closing bid ($4.625) and asked ($4.875) prices of
the Common Stock of the Registrant on April 14, 1997 on the OTC
Electronic Bulletin Board was $4.75 per share.

4) Pursuant to Rule 416, this Registration Statement also covers such
indeterminable additional shares as may be issued or become issuable
upon conversion of the 6% Convertible Debentures in accordance with the
terms thereof.

The registrant hereby states that this registration statement shall
hereafter become effective in accordance with Section 8(a) of the Securities Act
of 1933 or on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE> 3

PRELIMINARY PROSPECTUS DATED JULY 18, 1997

SUBJECT TO COMPLETION

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

12,064,344 SHARES OF COMMON STOCK

HARVARD SCIENTIFIC CORP.

The shares of Common Stock ("Common Stock") offered hereby are offered
by the holder (the "Selling Securityholder") of 6% Convertible Debentures (the
"Debentures") of Harvard Scientific Corp. (the "Company"), such shares being
issuable upon the conversion of the Debentures. See "Selling Securityholder."
The Common Stock is currently quoted on the system of the National Association
of Securities Dealers, Inc. ("NASD") known as the "OTC Electronic Bulletin
Board" under the symbol "HVSF." On July 14, 1997 the closing quotations on the
NASD OTC Electronic Bulletin Board of the Common Stock were $1.875 asked and
$1.75 bid per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 6.

THIS PROSPECTUS RELATES TO AN AGGREGATE OF 12,064,344 SHARES OF COMMON STOCK,
$.001 PAR VALUE PER SHARE, WHICH IS 300% OF THE 4,021,448 SHARES ISSUABLE IF
$15,000,000 PRINCIPAL AMOUNT OF DEBENTURES HAD BEEN OUTSTANDING ON APRIL 14,
1997 AND ALL THE DEBENTURES HAD BEEN CONVERTED ON THAT DATE. SEE "SELLING
SECURITYHOLDER." THE EXACT NUMBER OF SHARES THAT WILL BE ISSUED ON THE
CONVERSION OF THE DEBENTURES WILL DEPEND ON THE MARKET PRICE (DETERMINED AS
PROVIDED BY THE TERMS OF THE DEBENTURES) OF THE COMMON STOCK DETERMINED WITH
RESPECT TO THE DATE OF CONVERSION AND IS NOT NOW KNOWN, ALTHOUGH IT WILL NOT BE
LESS THAN 2,298,850 SHARES, BASED ON THE MARKET PRICE OF $6.525 ON MARCH 21,
1997, THE DATE OF ISSUANCE OF THE INITIAL $5,000,000 PRINCIPAL AMOUNT OF
DEBENTURES, AND MAY INCLUDE A FURTHER INDETERMINATE NUMBER OF SHARES AS MAY BE
ISSUED OR BECOME ISSUABLE UPON CONVERSION IN ACCORDANCE WITH THE TERMS OF THE
DEBENTURES. SEE "DESCRIPTION OF SECURITIES - 6% CONVERTIBLE DEBENTURES." ALL THE
COMMON STOCK OFFERED HEREBY IS BEING SOLD BY THE SELLING SECURITYHOLDER AND MAY
BE OFFERED TO THE PUBLIC FROM TIME TO TIME BY THE SELLING SECURITYHOLDER. THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS RECEIVED BY THE SELLING
SECURITYHOLDER FROM THE COMMON STOCK SOLD.

THE COMPANY WILL PAY ALL REASONABLE EXPENSES OF THIS OFFERING ESTIMATED AT
$110,000. THE SELLING SECURITYHOLDER, HOWEVER, WILL BEAR THE COST OF ALL
BROKERAGE COMMISSIONS AND DISCOUNTS INCURRED IN CONNECTION WITH THE SALE OF
THEIR COMMON STOCK AND THEIR LEGAL EXPENSES IN EXCESS OF $3,500. THE COMMON
STOCK MAY BE SOLD BY SELLING STOCKHOLDERS DIRECTLY OR THROUGH UNDERWRITERS,
DEALERS OR AGENTS IN MARKET TRANSACTIONS OR PRIVATELY NEGOTIATED TRANSACTIONS.
SEE "SELLING SECURITYHOLDER."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 4
THE DATE OF THIS PROSPECTUS IS ________, 1997
<PAGE> 5
The Company is currently a reporting Company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the reports, proxy
statements and other information filed by the Company with the Securities and
Exchange Commission can be inspected and copied at the public reference
facilities of the Commission at 4509 Fifth Street, N.W., Washington, D.C. 20549;
at its New York Regional office, 7 World Trade Center, New York, New York 10048;
and its Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661-2511, and copies of such material can be obtained from the Commission's
Public Reference Section at prescribed rates. The Company furnishes its
shareholders with annual reports containing audited financial statements after
the close of each fiscal year.
<PAGE> 6
PROSPECTUS SUMMARY

THE COMPANY

The Company is a bio-pharmaceutical company in the development stage
currently working on a therapeutic treatment for male erectile dysfunction. This
product, tentatively designated as "PaGE(1)," consists of prostaglandin
("PGE-1," a natural occurring fatty acid) encapsulated in liposomes, which is
then lyophilized (freeze dried) to provide stability and a useful shelf life.
When needed for patient use, this lyopholized microsphere is reconstituted using
a specially formulated detergent which lyzes the liposomes, releasing the active
substance, PGE-1. The resulting liquid is then self-applied by the patient using
a soft catheter the Company has developed for this purpose. The catheter applies
the liquid into the urethra of the penis via the urethral meatus, with minimal
risk of trauma to the patient.

The Company is the assignee of Patent Application No. 08/573408, filed
December 15, 1995, for an invention "PGE-1 Containing Lyophilized Liposomes For
Use In The Treatment of Erectile Dysfunction." This invention consists of the
encapsulation of prostaglandin in liposomes and the subsequent rupturing of
those liposomes with a dilute detergent diluent to release the prostaglandin
immediately prior to application. The Patent Office has issued an Office Action
rejecting the application with comments, which comments the Company believes can
be responded to effectively. The Company, therefore, believes that it will be
able to pursue the application and believes it will be successful, although
there can be no assurance thereof. See "Risk Factors-Uncertainty of Patent
Protection." The Company also filed an application for a European Patent for the
invention in December 1996.

PGE-1 is already approved for the treatment of male erectile
dysfunction in an injectable formulation by Pharmacia/Upjohn and an intra
urethral insertion of a prostaglandin containing pellet by Vivus. A locally
applied intra-meatal product could be advantageous to patient comfort when
compared with an injectable or a pellet insertion product. In addition,
lyophilizing extends the shelf life of PGE-1 at room temperature from less than
two minutes to three years. Although PGE-1 has been approved for treatment, the
use of the specially formulated detergent to lyze the liposomes and the
lyophilizing of the liposome encapsulated PGE-1 require full registration with
the Food and Drug Administration ("FDA") of PaGE(1) as a new drug. An
Investigative New Drug application ("IND") was submitted to the FDA in May 1996
and the Phase I trial to test safety and tolerance of PaGE(1) with small group
of subjects was commenced.

The Phase I trial has been concluded with the result that preliminary
efficacy data is available indicating the possible benefits of such a therapy.
These results were presented to the FDA in April 1997 as part of the Company's
pre-Phase II Clinical Trial meeting. See "Description of Business - Government
Regulation." Although this early data suggests product efficacy, there can be no
assurance that the PaGE(1) will reach the market successfully. The manufacturing
procedure is being scaled up, with assay verification and validation in
progress. A New Drug Application will be filed with the FDA, assuming adequate
data is generated upon conclusion of the clinical trial program. There can be no
assurance that the FDA will approve the product for marketing. It is estimated
that the costs of completing the above procedures will amount to between $10 to
$12 million. The FDA review process could last as long as two (2) years and
perhaps even longer in the event the FDA requires Phase III trials or requests
additional data. See "Description of Business - Government Regulation."

The Company's future success is dependent upon its ability to raise
additional funds to complete the commercialization process for its erectile
dysfunction treatment product. The Company intends to obtain these funds through
public and private financing or from other sources such as collaboration
agreements. Although the Company has sold $5,000,000 principal amount of
Debentures and has an undertaking, subject to various conditions, to raise an
additional $10,000,000 principal amount of Debentures, there can be no assurance
that this additional funding will occur or be sufficient and that, if this
additional funding does not occur or is insufficient, other required funds will
be available or will be available on terms satisfactory to the Company. Failure
to obtain adequate financing could cause a delay or termination of the Company's
product development and marketing efforts.

3
<PAGE> 7
Over the next 12 months, the Company's primary focus will be on
continuing clinical trials and product validation to conform to the regulatory
process of the FDA. Additionally, the Company will be identifying and seeking
collaborative arrangements with pharmaceutical distribution concerns and/or
licensing agreements with companies to eventually distribute PaGE(1).

The Company continues to look at other products it can add to its
portfolio that it believes have market potential. In particular the Company
seeks to utilize medically researched and developed drug substances, to
determine the ability of these substances to be encapsulated in liposomes and to
determine the potential market for such products.

Harvard Scientific Corp. was incorporated in Nevada in 1987 under the
name Witch Doctor Bones, Inc. The Company's principal executive office is
located at 100 N. Arlington Avenue, Suite 23-P, Reno, Nevada, and its telephone
number is (702) 796-1173. The Company has no contractual relationship or
affiliation with Harvard University.

CURRENT FINANCING

In March 1997, pursuant to a private placement, the Company (a) sold to
one investor $5,000,000 principal amount of 6% Convertible Debentures (the
"Debentures") and (b) received a commitment from that investor, subject to
various conditions, to purchase additional Debentures in the aggregate principal
amount of up to $10,000,000 in two tranches of $5,000,000 each. The investor may
convert the Debentures into Common Stock (the "Conversion Shares"), and the
Company has the right to require such conversion, and on July 14, 1997, the
investor exercised its conversion rights as to $700,000 principal amount of
Debentures plus $13,232 accrued interest, receiving 864,523 shares of Common
Stock therefor. The Conversion Shares constitute the Selling Securityholder's
Common Stock being offered and sold by the Selling Securityholder pursuant to
this Prospectus. See "Description of Securities," "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and "Selling Securityholder and Plan of Distribution."

THE OFFERING

Common Stock Offered............. 12,064,344 shares (300% of the 4,021,448
shares issuable upon the conversion of 6%
Convertible Debentures, based on the Market
Price (as defined in the Debentures) of
$4.6625 per share on April 14, 1997)

Common Stock Outstanding
Prior to Offering............ 18,889,652 shares

Common Stock to be Outstanding
Immediately After Offering... 30,953,986 shares based on all shares
offered under this prospectus (36,222,985
shares based on the Market Price per share
on July 14, 1997)

Use of Proceeds.................. None of the proceeds of the sale of the
Common Stock registered hereunder will
accrue to the Company. See "Use of
Proceeds."

Risk Factors..................... Limited operating history; need for
additional funds; dependence on one product
line; dependence on third-party
manufacturing, marking and clinical
research; uncertainty of regulatory
approval, and other risks. See "Risk
Factors."

NASD OTC Electronic Bulletin
Board Symbol................. "HVSF"

4
<PAGE> 8
SUMMARY FINANCIAL INFORMATION

The summary financial information set forth below is taken from and
should be read in conjunction with the Financial Statements, including notes
thereto, included elsewhere in this Prospectus.

Statement of Operations Data:
- ----------------------------

<TABLE>
<CAPTION>
For the Three Months Ended
March 31, For the Year Ended December 31, Inception
--------- ------------------------------- 1/31/87 to
1997 1996 3/31/97
(Unaudited) (Unaudited) 1996 1995 1994 (Unaudited)
----------- ----------- ---- ---- ---- -----------

<S> <C> <C> <C> <C> <C> <C>
Net Sales - 0 - $26,959 $181,000 - 0 - - 0 - $187,387
Cost of Sales - 0 - 85,675 216,870 - 0 - - 0 - 221,557
Gross Profit (Loss) - 0 - (58,716) (35,870) - 0 - - 0 - (34,170)
Operating Expenses $1,860,861 335,924 1,395,297 $668,835 $487,937 4,451,249
(Loss) from Operations (1,860,861) (394,640) (1,431,167) (668,835) (487,937) (4,485,419)
Other Income (Expenses) (13,341) (1,612) (507,777) (7,620) (1,727) (554,569)
Net (Loss) $(1,874,202) $(396,252) $(1,938,944) $(676,455) $(489,664) $(5,039,988)
(Loss) Per Common Share $(0.18) $(0.05) $(0.21) $(0.29) $(0.34)
Weighted Average Shares
Outstanding 10,308,240 8,757,903 9,022,404 2,333,839 1,421,563
</TABLE>

Balance Sheet Data:

March 31, 1997 December 31,
(Unaudited) 1996 1995
----------- ---- ----

<S> <C> <C> <C>
Cash and Prepaid Expenses $4,342,023 $1,565 $1,224,560
Total Assets $4,421,656 $85,527 $1,349,080
Total Current Liabilities $5,573,953 $535,223 $664,727
Total Stockholders' Equity $(1,152,298) $(449,696) $684,353
</TABLE>

Reflects the receipt of $5,000,000 on March 21, 1997 and an obligation
in the principal amount of $5,000,000 incurred on March 21, 1997 as a result of
a subscription for 6% Convertible Debentures.

5
<PAGE> 9
RISK FACTORS

An investment in the securities offered hereby involves a high degree
of risk, including, but not necessarily limited to, the risk factors described
below, and should be considered only by those investors who can afford the risk
of loss of their entire investment. In addition to other information in this
Prospectus, each prospective investor should carefully consider the following
risk factors inherent in and affecting the business of the Company before making
an investment decision. Moreover, prospective investors are cautioned that the
statements in this Prospectus that are not descriptions of historical facts may
be forward looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as those discussed elsewhere in this Prospectus.

LIMITED OPERATING HISTORY AND REVENUES; SIGNIFICANT AND CONTINUING LOSSES;
UNCERTAINTY OF FUTURE PROFITABILITY

The Company is a development-stage company. Since inception, the
Company has been engaged primarily in the development of PaGE(1) and only
commenced limited use of PaGE(1) in clinical trials in 1996. Accordingly, the
Company has limited operating history upon which an evaluation of its
performance and prospects can be based.

The likelihood of the success of the Company must be considered in
light of the risks, problems, expenses, difficulties and complications
frequently encountered in connection with the shift from development to
commercialization of new products based on innovative technologies. It should be
noted that, during the period from January 1994 to February 1995, the Company
also investigated, acquired, tested, and ultimately abandoned technology related
to whole blood rapid testing for viruses, particularly the HIV. The decision to
abandon this technology was based on poor pre-marketing results.

Since inception, the Company has generated limited revenues and
incurred significant losses, including losses of $1,938,944, $676,455 and
$489,664 for the fiscal years ended December 31, 1996, 1995 and 1994,
respectively, and $1,874,202 and $396,252 for the three month periods ended
March 31, 1997 and 1996, respectively. Losses are continuing through the date of
this Prospectus and the Company anticipates that it will continue to incur such
losses until such time, if ever, as the Company generates sufficient levels of
revenues from product sales to offset its operating costs. The Company believes
that generation of such revenues is dependent upon, among other things, the
Company's ability to obtain FDA approval. There can be no assurance the Company
will be able to operate profitably or be commercially successful. See
"Business."

SIGNIFICANT CAPITAL REQUIREMENTS; AUDITORS' GOING CONCERN REPORT; DEPENDENCE ON
OFFERING PROCEEDS; POSSIBLE ISSUANCE OF ADDITIONAL SECURITIES; FUTURE DILUTION

The Company's capital requirements have been and will continue to be
significant, and the Company currently has very limited cash flow from
operations. As a result, the Company has been dependent on equity and debt
financings. The Independent Auditor's Report accompanying the Company's
financial statements for the years ended December 31, 1996, 1995 and 1994 states
that, in light of the recurring losses suffered by the Company, its continued
existence depends upon its ability to resolve its liquidity problems. See
"Management's Discussion" and "Financial Statements."

Based on the Company's operating plan, internal forecasts and
assumptions (which include: successful conclusion of clinical trials, rapid
acceptance of product due to ease and comfort of administration, price parity
with competitor products and continued growth of erectile dysfunction market
niche as more patients become aware of therapy for the problem) management
believes that the proceeds from the private placement of 6% Convertible
Debentures in the aggregate principal amount of $5,000,000 and in an additional
principal amount of $10,000,000

6
<PAGE> 10
that has been committed and anticipated cash flow from operations and other
sources will be sufficient to meet the Company's anticipated cash needs and
finance its plans for growth. In the event that the Company's plans change, its
assumptions change or prove inaccurate, its revenues are less than anticipated,
the commitment to purchase the additional $10,000,000 principal amount of 6%
Convertible Debenture or its further financing otherwise prove insufficient to
fund operations, the Company may be required to seek additional financing. No
assurance can be given that the Company will be successful in obtaining such
additional financing, or if obtained, that such financing will be on terms
favorable to the Company. Any inability to obtain additional financing when
needed and on acceptable terms could have a material adverse effect upon the
Company's operations, including the possibility of requiring the Company to
curtail or cease its operations. In addition, any additional equity financing
may involve substantial dilution to the Company's then existing shareholders.
See "Use of Proceeds" and "Management's Discussion."

DEPENDENCE UPON SALES OF PRINCIPAL PRODUCT; LIMITED CUSTOMER BASE

The Company's future performance will depend, almost entirely, on the
successful development, introduction and customer acceptance of the Company's
principal product, PaGE(1). To date, substantially all of the Company's revenues
have been generated by the distribution of PaGE(1) for use in clinical trials
overseas. The Company anticipates that, once FDA approval is obtained,
substantially all of its revenues for the foreseeable future will be generated
by sales of PaGE(1), both overseas and in the U.S. Although early clinical data
regarding the product suggests good probable efficacy, new product development
is highly uncertain and unanticipated developments, clinical and regulatory
delays, adverse or unexpected side effects or inadequate therapeutic efficacy
could slow or prevent the commercialization of PaGE(1). There can be no
assurance that the Company will not experience these or other difficulties that
could delay or prevent the commercialization of PaGE(1) . Furthermore, no
assurance can be given that, if commercialization is commenced, PaGE(1) will
meet with market acceptance. The inability to successfully commercialize
PaGE(1), for any reason, would have a material adverse effect on the Company's
financial condition, prospects, and ability to continue operations. See
"Business."

GOVERNMENT REGULATION; UNCERTAINTY OF REGULATORY APPROVAL; UNCERTAINTY OF
PRODUCT DEVELOPMENT

The Company is subject to various FDA regulations which govern or
influence the research, testing, manufacture, safety, labeling, storage,
recordkeeping and advertising and promotion of pharmaceutical products,
biologics, and medical devices. Outside the United States the Company is subject
in most cases to similar regulation. The Company believes it is in substantial
compliance with all FDA and other material federal and state laws and
regulations. There can be no assurance, however, that the Company will be able,
for financial and other reasons, to comply with applicable laws, rules and
regulations. Failure or delay by the Company to comply with applicable
regulatory requirements could subject the Company to civil remedies, including
fines, suspensions, delays of approvals, injunctions, recalls or seizures of
products, operating restrictions, as well as potential criminal sanctions, which
could have a material adverse effect on the Company. See "Business - Government
Regulation."

The Company expects that certain aspects of PaGE(1) also may be
regulated by the FDA as Class III devices. Preclinical evaluations of Class III
devices are similar to those of pharmaceuticals and biologics, with additional
emphasis on implant persistence, implant sensitization, and carrier
characterization and specifications. See "Business - Government Regulation."

There can be no assurance that FDA or other regulatory clearance in the
United States and elsewhere will not take longer than currently anticipated
because of delays, problems or unforeseen safety difficulties. Failure to

7
<PAGE> 11
obtain FDA approval would prevent the Company from marketing PaGE(1) in the
U.S., which would have a material adverse effect on the Company's business,
financial condition and results of operations, and failure to obtain approval in
key markets outside the United States would also have a material adverse effect.
Even if regulatory approval is obtained, a marketed pharmaceutical product and
its manufacturer are subject to continuing regulatory review, and discovery of
previously unknown problems or amendments to existing statutes or regulations or
the adoption of new statutes or regulations could result in restrictions on such
product or manufacturer, including withdrawal of the product from the market. In
addition, the FDA requires submission of a pre-market approval ("PMA")
notification for any change or modification to a previously marketed product
that significantly affects safety or effectiveness. In addition, if the Company
develops a different delivery device for PaGE1, this device would be subject to
FDA review procedures prior to release for marketing. See "Business - Government
Regulation."

DEPENDENCE ON THIRD-PARTY RESEARCH

The Company intends to use a significant portion of the proceeds of the
Debentures to conduct research and clinical studies, primarily for the purpose
of obtaining FDA approval for the marketing of PaGE(1) in the U.S. The Company
has to date conducted only Phase I trials with respect to PaGE1. These trials
were conducted by two private, practicing urologists in Las Vegas, Nevada. The
Company plans to continue to utilize third parties to conduct the necessary
clinical trials. Several Clinical Research Organizations ("CRO"s) have submitted
bids for the clinical trials. These are under review and a suitable CRO will be
selected shortly. Therefore, the Company will be substantially dependent upon
third-party researchers and others, over whom the Company will not have absolute
control, to satisfactorily complete scientific studies performed on behalf of
the Company. There can be no assurance that third parties will be able to carry
out these studies in the proper manner, within the time frame, and within the
cost estimates currently relied upon by management. In the event that the
studies were carried out incorrectly or improperly, or were not completed within
the time frame currently contemplated, or exceeded current cost parameters, the
Company's business could be materially adversely affected.

LACK OF MANUFACTURING EXPERIENCE AND CAPABILITIES; DEPENDENCE ON THIRD-PARTY
MANUFACTURING AND SUPPLIERS

The Company does not own or lease any manufacturing facilities, does
not manufacture the product or any of its ingredients, and purchases all
ingredients from unaffiliated suppliers, including FDA validated suppliers of
the active ingredient, PGE-1. The Company does not now have any contracts with
manufacturers, although it is in the process of negotiating such contracts.
Although the Company believes that there are adequate suppliers and
manufacturers sufficient to satisfy the Company's requirements, the terms on
which suppliers and manufacturers will be available could have a material effect
on the success of the Company. See "Uncertainty of Supply of Key Pharmaceutical
Ingredient" and "Business - Manufacturing."

LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE; DEPENDENCE UPON THIRD
PARTY MARKETING EFFORTS

The Company has limited marketing experience and limited financial,
personnel and other resources to independently undertake extensive marketing
activities. The Company's prospects will be significantly affected by its
ability to develop and maintain a network of distributors. Although the Company
had entered into four separate marketing agreements, all but one has been
terminated. Moreover, the Company has generated only $181,000 in revenues from
the distribution agreements, primarily due to the fact that the product has not
yet received regulatory approval. These revenues were derived from reimbursement
of production costs of clinical materials supplied to a distributor for use in
clinical trials. To the extent that the Company enters into third-party
marketing and distribution arrangements, it is dependent on the marketing
efforts of such third parties and upon their provision of installation and
support services and the vagaries of changes in market conditions. While the
Company believes that any third parties with which it enters into marketing
arrangements will have an economic motivation to commercialize the Company's
products, the time and resources devoted to these activities will be controlled
by such entities and not by the Company. There can be no assurance that the
Company will be able, for financial or other reasons, to finalize

<PAGE> 12
any third-party marketing arrangements or that such arrangements, if finalized,
will result in successful commercialization of the product.

COMPETITION; NO ASSURANCE OF MARKET FOR PRINCIPAL PRODUCT

The market for treatment of male erectile dysfunction is emerging and
evolving and is characterized by an increasing number of entrants. Although the
Company is not aware of any other product that delivers prostaglandin in a
locally applied intra-meatal formulation, several other companies offer products
designed to treat male erectile dysfunction. The competition is both direct
(i.e., companies that produce prostaglandin using alternative delivery
mechanisms) and indirect (i.e., companies that produce penile implants, vacuum
constriction devices, and other alternative treatments). Prostaglandin is
already FDA-approved for the treatment of male erectile dysfunction in an
injectable formulation by Pharmacia/Upjohn and in a formulation using
intra-urethral insertion of a prostaglandin-containing pellet by Vivus. Other
companies, such as Pfizer and Zonagen, are currently developing tablet
formulations, and Macrochem is working on a topical solution. See "Business -
Competition."

There can be no assurance that additional technologies or products
which are functionally similar to those of the Company are not currently under
development or that other companies with the expertise or resources that would
encourage them to attempt to develop or market competing products will not
develop new products directly competitive with PaGE(1) or that the Company can
complete clinical testing of PaGE(1), obtain regulatory approvals and commence
commercial-scale manufacturing in a timely manner to be competitively effective.
Some of the Company's competitors and potential competitors have
well-established reputations for success in the development, sale and service of
medical equipment and have substantially greater financial, technical, personnel
and other resources than the Company, enabling them to undertake clinical
testing of products, obtain regulatory approvals and manufacture and market
pharmaceutical products in response to competitors seeking to market new
products and enter into new markets. There can be no assurance that the Company
will be able to compete successfully, that competitors will not develop
technologies or products that render the Company's product obsolete or less
marketable, or that the Company will be able to successfully enhance its
existing product or develop or acquire new products or produce them at
competitive prices. See "Business - Competition."

The commercial success of PaGE(1) will require acceptance by
urologists, family practitioners with a significant elderly male clientele, and
medical doctors practicing as sex therapists and the medical community as a
whole. Such acceptance will depend in large part on the results of clinical
trials and the conclusion by these physicians that PaGE(1) is a safe,
cost-effective and acceptable method of treatment. There can be no assurance
that physicians will be sufficiently encouraged by the results of the clinical
trials to decide to use the product. They may elect to use other treatment
methods and procedures which they believe to be more efficient or to have
advantages over PaGE(1). Accordingly, achieving market acceptance for PaGE(1)
will require substantial marketing efforts and expenditure of significant funds
to educate doctors, pharmacists, and the public about what the Company believes
are the advantages and benefits of PaGE(1). The majority of such marketing
expenses are expected to be borne by the distributors. However, the company
expects to expend over $3 million over the first few years of launch in
supportive activities. There can be no assurance that such efforts will result
in significant initial or continued market acceptance for PaGE(1). In addition,
PaGE(1), being a complex pharmaceutical product, may contain a number of side
effects or other problems that become apparent subsequent to widespread
commercial use. Remedying such problems could delay the Company's plans and
cause it to incur additional costs that would have a material adverse effect on
the Company. See "Business - Sales and Marketing."

DEPENDENCE ON THIRD-PARTY REIMBURSEMENT

Successful commercialization of PaGE(1) may depend in part upon the
availability of reimbursement for the cost of related treatment from third-party
healthcare providers, principally Medicare, Medicaid and private health
insurance plans, including health maintenance organizations. To the extent
reimbursement is not provided or is limited, patients will have to pay for the
PaGE(1) out of their own pockets. Third-party payers are increasingly
challenging the price of medical products and services, which have had and could
continue to have a significant effect on the purchasing patterns of many
healthcare providers.

9
<PAGE> 13
In markets other than the United States, reimbursement is obtained from
a variety of sources, including governmental authorities, private health
insurance plans and labor unions. In most foreign countries, there are also
private insurance systems that may offer payments for alternative therapies.
Although not as prevalent as in the U.S., health maintenance organizations are
emerging in some European countries. Accordingly, the Company may need to seek
reimbursement approvals in such other countries, although there can be no
assurance that any such approvals will be obtained in a timely manner or at all.
Failure to receive reimbursement approvals in such other countries could have an
adverse effect on market acceptance of the Company's product in those
international markets in which such approvals are sought.

The Company believes that reimbursement will be subject of increased
restrictions in the future in the U.S. and foreign markets. The overall
escalating cost of medical products and services has led to and will likely
continue to lead to increased pressures on the health care industry to reduce
the costs of products and services, potentially including products offered by
the Company. Significant uncertainty generally exists as to the reimbursement
status of newly approved healthcare products. Failure to receive adequate levels
of reimbursement for the use of prostaglandin in general, and PaGE(1) in
particular, could have a material adverse effect on the Company's business,
financial condition and results of operations.

UNCERTAINTY OF PATENT PROTECTION; UNCERTAINTY OF PROTECTION OF PROPRIETARY
TECHNOLOGY

The strength of the Company's patent position may play an important
role in its long-term success. The Company is the assignee of Patent Application
No. 08/573408, filed December 15, 1995, for an invention "PGE-1 Containing
Lyophilized Liposomes For Use In The Treatment of Erectile Dysfunction." The
Patent Office has issued an Office Action rejecting the application with
comments, which comments the Company believes can be met so that it can go
forward with the application. However, there can be no assurance that any
patents in fact will be issued as a result of this application or that, if
issued, such patent or patents will be effective to protect the Company's
product from duplication by others. In addition, there can be no assurance that
the Company will be able to afford the expense of any litigation which may be
necessary to enforce its rights under any patent. Moreover, although the Company
believes that its product does not and will not infringe upon the patents or
violate the proprietary rights of others, it is possible that such infringement
or violation has or may occur. In the event that the Company's product is
determined to infringe upon the patents or proprietary rights of others, the
Company could be required to modify its product or obtain a license for the
manufacture and/or sale of the product, or could be prohibited from selling the
product. There can be no assurance that, in such an event, the Company would be
able to do so in a timely manner, upon acceptable terms and conditions, or at
all, and the failure to do any of the foregoing could have a material adverse
effect upon the Company. Furthermore, there can be no assurance that the Company
will have the financial or other resources necessary to enforce or defend a
patent infringement or proprietary rights violation action. In addition, if the
Company's product is deemed to infringe upon the patents or proprietary rights
of others, the Company could, under certain circumstances, become liable for
damages, which could also have a material adverse effect on the Company.

The Company also relies substantially upon its proprietary
technologies, utilizing non-disclosure agreements with its employees,
consultants and customers to establish and protect the ideas, concepts and
documentation of its proprietary technology and know-how. Such methods, however,
may not afford complete protection, and there can be no assurance that third
parties will not independently develop such know-how or obtain access to the
Company's know-how, ideas, concepts and documentation, which could have a
material adverse effect on the Company.

POTENTIAL PRODUCT LIABILITY EXPOSURE AND INSURANCE EXPENSE

Upon the commencement of commercial production, the Company's business
will expose it to an inherent risk of potential product liability claims,
including claims for serious bodily injury or death, which could lead to
substantial damage awards. The Company currently maintains product liability
insurance in the amount of $1,000,000, with a maximum payout of $3,000,000,
which is the standard insurance coverage for the biopharmaceutical industry. The
Company will seek to increase the level of such insurance as its products are

10
<PAGE> 14
commercialized. There can be no assurance, however, that the Company will be
able to maintain or increase its insurance on acceptable terms or at reasonable
costs, or that such insurance will provide the Company with adequate coverage
against potential liabilities. A successful claim brought against the Company in
excess of, or outside of, its insurance coverage could have a material adverse
effect on the Company's results of operations and financial condition. Claims
against the Company, regardless of their merit or eventual outcome, may also
have a material adverse effect on the Company's ability to obtain physician
endorsement of its products or expand its business.

RELIANCE ON INTERNATIONAL SALES; CURRENCY EXCHANGE RISKS ASSOCIATED WITH
INTERNATIONAL SALES

The Company anticipates marketing PaGE(1) internationally, as well as
in the U.S. To the extent the Company is able to market its product in foreign
countries, the Company will become subject to the risks associated with
international sales, including, but not limited to, health and welfare
regulatory controls imposed by foreign governments, shipping delays, customs
duties, export quotas and other trade restrictions, increased collection risks
and international political, regulatory and economic developments, and exchange
risks, any one of which could have an adverse effect on the Company's operating
results. See "Management's Discussion."

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts and abilities of Jackie R. See,
M.D., its founder and Director; and of Don A. Steffens, its Chief Executive
Officer, President and Director. Unforeseen circumstances could cause one or
more of these individuals to be unable to render his or their services to the
Company. The loss of the services of any such officers or other key personnel
could have a material adverse effect on the Company's operations.

In addition, to date, the Company has relied extensively on the
services of management and technical staff from its parent company, BTI. This
technical and management assistance has been provided as part of the
consideration for the issuance of the Company's stock, but there is no specific
agreement between the Company and BTI in this regard. There can be no assurance
that BTI will continue to provide such technical and management assistance, or
if provided, on terms acceptable to the Company, which if not provided could
have a material adverse effect on the Company's operations. To the extent that
the services of key personnel become unavailable, the Company will be required
to retain other qualified persons, for whose services the Company will be in
competition with other employers, many of which have significantly greater
resources than the Company. There can be no assurance that the Company will be
able to hire or retain such other qualified persons. See "Management's
Discussion."

LACK OF BUSINESS INTERRUPTION INSURANCE

The Company does not currently maintain business interruption insurance
coverage. The Company is a development stage concern at this time. It relies on
a few key employees to direct and administrate the activities of the Company.
See "Dependence on Key Personnel." The Company outsources most aspects of its
operations, except administration. See "Dependence on Third-Party Research,"
"Dependence on Third-Party Manufacturing and Suppliers" and "Dependence on
Third-Party Marketing Efforts." There can be no assurance that the Company will
be able to either obtain cost effective insurance, diversify its outsourced
functions, or maintain a core group of effective personnel sufficiently adequate
to protect the Company's financial condition.

BARRIERS TO TAKEOVER

The Company's Certificate of Incorporation and By-Laws contain certain
provisions which may deter, discourage, or make more difficult the assumption of
control of the Company by another corporation or person through a tender offer,
merger, proxy contest or similar transaction or series of transactions. These
provisions include an unusually large number of authorized shares (100,000,000)
and the prohibition of cumulative voting. The overall effect of these provisions
may be to deter a future tender offer or other takeover attempt that some

11
<PAGE> 15
stockholders might view to be in their best interest as the offer might include
a premium over the market price of the Company's capital stock at the time. In
addition, these provisions may have the effect of assisting the Company's
current management in retaining its position and place it in a better position
to resist changes which some stockholders may want it to make if dissatisfied
with the conduct of the Company's business. These provisions also present a risk
of future dilution to existing shareholders. See "Market for Common Equity --
Nevada Law and Corporate Provisions Affecting Shareholders."

LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS

Section 78.751 of the Nevada General Corporation Law ("NGCL") allows
the Company to indemnify any person who is or was made a party to, or is or was
threatened to be made a party to, any pending, completed, or threatened action,
suit or proceeding by reason of the fact that he or she is or was a director,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise. The NGCL permits the
Company to advance expenses to an indemnified party in connection with defending
any such proceeding, upon receipt of an undertaking by the indemnified party to
repay those amounts if it is later determined that the party is not entitled to
indemnification.

The foregoing provision may reduce the likelihood of derivative
litigation against directors and officers and discourage or deter shareholders
from suing directors or officers for breaches of their duties to the Company,
even though such an action, if successful, might otherwise benefit the Company
and its shareholders. In addition, to the extent that the Company expends funds
to indemnify directors and officers, funds will be unavailable for operational
purposes. See "Market for Common Equity -- Nevada Law and Corporate Provisions
Affecting Shareholders."

VOLATILITY OF THE COMPANY'S COMMON STOCK PRICES

The market price of the Company's Commons Stock has experienced
significant volatility, with per share bids ranging from a low of $.25 to a high
of $16.63 over the period from the second quarter of 1995 to July 17, 1997.
Various factors and events, including announcements by the Company or its
competitors concerning patents, proprietary rights, technological innovations or
new commercial products, as well as public concern about the safety of medical
products and practice in general, may have a significant impact on the Company's
business and the price of the Company's Common Stock.

EFFECT OF DEBENTURE CONVERSION

Upon conversion of the Debentures there will be not less than
20,323,314 shares of Common Stock outstanding, consisting of 18,025,129 shares
currently outstanding and a minimum of 2,298,185 shares (and potentially
substantially more depending upon the Market Price at the time of conversion)
issuable upon conversion by the Debentures available for offer by the Selling
Shareholders, which shares will be tradable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), as long as the prospectus covering such sales remains current and
effective. No prediction can be made as to the effect, if any, that future sales
of shares of Common Stock, whether offered by the Selling Securityholder or
others, will have on the market price of the shares of Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock, or the
perception that these sales could occur, could adversely affect prevailing
market prices for the Common Stock and could impair the ability of the Company
to raise additional capital through the sale of its equity securities or through
debt financing. See "Market for Common Equity and Related Stockholder Matters."

ILLIQUID MARKET RISKS RELATING TO LOW-PRICED STOCKS

The Common Stock of the Company is currently traded on the system of
the National Association of Securities Dealers, Inc., known as the OTC
Electronic Bulletin Board under the symbol "HVSF." This market

12
<PAGE> 16
generally is not as liquid as the market for NASDAQ equity securities or
exchange-listed securities, and discounts and transactional costs may be greater
than in the more liquid markets. In addition, the trading price of the Common
Stock has fallen below $5.00 per share at various times during the past years
and may do so in the future, at which price trading in the Common Stock is
subject to the requirements of certain rules promulgated under the Exchange Act,
which require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a penny stock (generally, any non-NASDAQ
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors. The additional burdens imposed upon broker-dealers by
such requirements could, in the event the Common Stock were deemed to be a penny
stock, discourage broker-dealers from effecting transactions in the stock, which
could severely limit the market liquidity of the Common Stock and the ability of
purchasers in this offering to sell the stock in the secondary market.

TRANSACTIONS WITH CONTROLLING PERSONS; POTENTIAL CONFLICTS OF INTEREST

In consideration of the assignment of the intellectual property rights
to patent, develop, manufacture and market the PaGE1, the Company issued
2,856,000 shares of common stock to its parent company, BTI. The Company also
issued a further 6,138,500 shares of common stock to BTI for BTI's assistance in
raising working capital, prosecuting the patent application, management
assistance, and for assignment of rights under four distribution agreements for
the PaGE1 product. BTI owned 36.3% of the Company's outstanding shares as of
July 17, 1997. 11,000,000 of BTI's shares, or 44%, are owned by Jackie R. See,
M.D., who is also the Company's founder, Head of Research and Development and a
Director. Dr. See also has potential voting rights on another 2,000,000 BTI
shares.

During 1994, the Company paid $150,000 to related parties for work
performed in completing a merger with Grant City Corporation ("GCC"), which was
effected in 1993. Of this amount, $100,000 was paid to BTI and the remaining
$50,000 was paid to individuals affiliated with BTI.

The Company has entered into a royalty agreement with Dr. See, whereby
it will pay Dr. See two percent (2%) of net revenues from the sale of PaGE1 and
any other products the Company produces under Patent Application No. 08/573408.
These royalty payments shall continue for the life of the patent application and
any patents that may issue therefrom.

Dr. See owns 11,202,500 shares of the Company's common stock, including
6,852,500 shares owned by BTI, of which Dr. See is a controlling person, and
1,000,000 shares in trust for his wife. 350,000 of these shares were transferred
for past services and 4,000,000 (including the 1,000,000 shares transferred to
his wife in trust) were transferred in consideration of an amendment to his
consulting agreement with the Company, subsequent to December 31, 1996.

The foregoing arrangements and relationships may give rise to conflicts
of interest with respect to future interpretation of the agreements between the
Company, BTI and Dr. See. There can be no assurance that future transactions or
arrangements between the Company and any affiliates will be advantageous to the
Company, although the Company intends to enter into transactions with BTI or Dr.
See only if they are at least as favorable to the Company as could be could be
obtained from independent third parties. See "Dependence on Key Personnel,"
"Dependence on Third-Party Researchers," "Management's Discussion" and "Certain
Transactions."

OWNERSHIP BY MANAGEMENT AND EXISTING STOCKHOLDERS

Upon conversion of the Debentures, directors and officers of the
Company and certain principal stockholders and their affiliates will
beneficially own in the aggregate 14,616,250 shares of Common Stock,
representing 40.4% of the outstanding shares of Common Stock of the Company,
assuming that all of the Debentures are converted at a Market Price of $1.03 per
share, which was the Market Price (as defined in the

13
<PAGE> 17

Debentures) on July 14, 1997. Accordingly, directors, officers and principal
stockholders will have the ability to influence significantly the affairs of the
Company and matters requiring a stockholder vote, including the election of the
Company's directors, the amendment of the company's charter documents, the
merger or dissolution of the Company and the sale of all or substantially all of
the company's assets. The voting power of these holders may also discourage or
prevent any proposed takeover of the Company pursuant to a tender offer. See
"Common Stock Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions."

PENDING LITIGATION

The Company is a party to several legal proceedings during the past
twelve months which could have a materially adverse effect upon the Company's
financial condition or operation. See "Business - Legal Proceedings."

DESCRIPTION OF SECURITIES

COMMON STOCK

The Company's authorized stock consists of 100,000,000 shares of Common
Stock, $.001 par value. As of the date hereof, there were 18,889,652 shares of
Common Stock outstanding, which were held of record by 188 stockholders. The
Company's shares are listed on the NASD OTC Electronic Bulletin Board under the
symbol "HVSF".

Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of Common
Stock are not entitled to cumulative voting rights. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities. Holders of Common Stock have no preemptive rights and no right to
convert their Common Stock into any other securities. There are no redemption or
sinking fund provisions applicable to the Common Stock. All the outstanding
shares of Common Stock are validly issued, fully paid and nonassessable.

The Company has not paid any dividends on its Common Stock since its
inception and does not contemplate or anticipate paying any dividends on its
Common Stock in the foreseeable future. Earnings, if any, will be used to
finance the development and expansion of the Company's business.

6% CONVERTIBLE DEBENTURES

The Company's 6% Convertible Debentures ("Debentures") bear an interest
rate of six percent (6%) per annum and mature on March 30, 1998 as to the
$4,300,000 principal amount of Debentures currently outstanding and as of the
end of the first anniversary month of the issuance of the two additional
$5,000,000 trenches of Debentures that the Selling Shareholder has agreed to
purchase. See "Use of Proceeds from Sale of Debentures." The Debentures are
issuable in denominations of $100,000 and integral multiples thereof and, at the
holder's request, are exchangeable for an equal aggregate principal amount of
debentures of different authorized denominations. Upon maturity of the
Debentures, payment for principal and accrued interest will be made either in
currency or in shares of the Company's Common Stock, at the option of the
holder.

The holder may convert the Debentures into Common Stock commencing on
the effective date of this Registration Statement. In addition, the Selling
Securityholder has agreed in principle, contingent upon the Company's filing of
this prospectus and registration statement, to amend the Debentures to give the
Company the right to require conversion by giving notice thereof to the holder
at least ten days prior to the Maturity Date. The conversion price per share
will be either (a) $6.525, the Market Price as defined in the Debentures as of
March 21, 1997, or (b) 80% of the Market Price on the date of conversion,
whichever is lower. "Market Price," as used herein,

14
<PAGE> 18
means the average closing bid price of the Common Stock on the five (5) trading
days immediately preceding March 21, 1997 or Conversion Date as may be
applicable, as reported by the National Association of Securities Dealers, or
the closing bid price on the over-the-counter market on such date or, in the
event the Common Stock is listed on a stock exchange or traded on NASDAQ, the
Market Price means the closing price on the exchange on such date, as reported
in the Wall Street Journal. The Company has the option to pay the interest
accrued from the date of issuance to the date of conversion either in cash or in
shares of Common Stock.

The Company may redeem any Debentures for which a Notice of Conversion
has not been submitted if the conversion price equals or is less than $1.60 per
share by delivering a Notice of Redemption to the holder. However, the holder
may still opt to convert any such Debentures into shares of Common Stock by
submitting a Notice of Conversion to the Company within three business days of
the holder's receipt of the Company's Notice of Redemption.

The redemption price will be 125% of the principal amount of the
Debentures, plus accrued unpaid interest. The Company must pay the redemption
price to the holder within ten days from the date of the Notice of Redemption.
If the Company fails to make the redemption payment within these ten days, the
Company forfeits its right to redeem those Debentures.

A holder may also require the Company to declare whether it intends to
effect a redemption within the following ten days by faxing a notice to the
Company. The Company must respond to this notice within 24 hours. If it fails to
do so, the Company may not redeem that holder's Debentures during the ten day
period commencing 24 hours after the date of the notice from the holder.

If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and, as a
condition of such merger, consolidation or sale, the holders of the Company's
Common Stock are entitled to receive stock or securities in another corporation
or to receive property in exchange for the Company's Common Stock, then the
Debenture may be converted into the kind and amount of stock, securities or
property receivable by the holders of the Company's Common Stock pursuant to the
transaction. If, within 15 days of the holder's receipt of a notice from the
Company advising of a proposed merger, consolidation or sale, the holder has not
submitted a Notice of Conversion, then the Company may prepay all outstanding
principal and accrued interest and thereby terminate the holder's conversion
rights.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company began trading on the system of the
National Association of Securities Dealers, Inc. (NASD) known as the OTC
Electronic Bulletin Board under the symbol "HVSF" in June 1995 and continues to
be traded thereon as of the effective date of this Prospectus and Registration
Statement.

The following table sets forth the range of high and low bid quotations
for the Company's Common Stock for each quarterly period indicated, as reported
by brokers and dealers making a market in the capital stock. Such quotations
reflect inter-dealer prices without retail markup, markdown or commission, and
may not necessarily represent actual transactions:

COMMON STOCK
------------
QUARTER ENDED HIGH BID LOW BID
------------- -------- -------
<S> <C> <C>
June 30, 1997 $6.1875* $1.25*
March 31, 1997 $8.13 $2.50
</TABLE>

<PAGE> 19
<TABLE>
<S> <C> <C>
December 31, 1996 $2.62 $0.87
September 30, 1996 $3.31 $1.50
June 30, 1996 $7.25 $2.19
March 31, 1996 $16.63 $5.25
December 31, 1995 $14.50 $2.75
September 30, 1995 $3.63 $1.69
June 30, 1995** $1.88 $0.25
</TABLE>
------------------------------------
* High and low bid information is provided through June 16, 1997
** From initial time of trading in June 1995

On July 14, 1997, the high and low bid quotations were $1.75 and $1.25,
respectively.

REGISTRATION RIGHTS

In connection with the Company's private placement of $5,000,000
principal amount of 6% Convertible Debentures on March 21, 1997, the Company was
required to prepare and file, within 30 days of such date, a registration
statement under the Securities Act for 300% of the number of shares of Common
Stock issuable upon the exercise of the Conversion rights calculated as of the
time of filing the registration statement and assuming the entire $15,000,000
principal amount of Debentures had been issued. Timely filing of the
registration statement has been made. The Company was obligated to use its best
efforts to cause the registration statement to become effective by June 19, 1997
and to keep the registration statement effective for two years or until the
Selling Securityholder may sell all registerable securities under Rule 144 or
until the Selling Securityholder no longer owns any registerable securities,
whichever occurs first. The Company is further obligated to register additional
shares issuable upon conversion of the Debentures, upon request by the Selling
Securityholder, if the number of shares issuable upon conversion exceed the
number of shares registered, as well as to register and qualify the registerable
shares under such state securities laws as the Investors may request subject to
specified limitations. The Company will bear the reasonable expenses of the
registration and qualification of the shares under the Securities Act and State
Securities laws other than any underwriting discounts and commissions and legal
fees in excess of $3,500.

If the Registration Statement is not effective by June 19,1997 (the
"Initial Date"), then the Company must make payments to the Selling
Securityholder in such amounts and at such times as determined pursuant to
Section 2(c) of the Registration Rights Agreement, which states that the amount
to be paid by the Company to the Selling Securityholder shall be determined as
of each Computation Date, and such amount shall be equal to two percent (2%) of
the purchase price paid by the Selling Securityholder for the Debenture for the
period from the Initial Date to the first Computation Date, and three percent
(3%) of the purchase price for each Computation Date thereafter, to the date the
Registration Statement is declared effective by the SEC, except to the extent
any delay in the effectiveness of the Registration Statement occurs because of
an act of, or a failure to act or to act timely, by the Selling Securityholder
or its counsel. "Computation Date" means the date which is the earlier of (a) 35
days after the Company is notified by the SEC that the Registration Statement
may be declared effective or (b) July 19, 1997, and, if the Registration
Statement has not theretofore been declared effective by the SEC, each date
which is thirty (30) days after the previous Computation Date until such
Registration Statement is so declared effective. Thus, if the registration
statement is not effective by June 19, 1997, then for the period from June 20,
1997 to July 19, 1997, the Company must pay to the Selling Securityholder a
penalty of $100,000. If the registration statement still is not effective on
July 19, 1997, then for the period from July 20, 1997 to August 18, 1997, the
Company must pay to the Selling Securityholder an additional penalty of
$150,000, and so on.

The Selling Securityholder agreed in principle to waive the above
penalties if the Company filed Amendment No. 1 to the Registration Statement on
Form SB-2 on or before June 25, 1997, and if such registration statement became
effective by July 7, 1997. Although timely filing of Amendment No. 1 to the
registration statement

16
<PAGE> 20

was made, the registration statement did not become effective on a timely basis.
However, due to the Company's efforts to meet the deadline established by the
Selling Securityholder, the Selling Securityholder nevertheless is considering
waiver of the above penalties.

Should the above waiver of penalties fail, the Company expects to pay
any penalties out of the proceeds of the original sale of the Debentures.

POSSIBLE EFFECT OF FUTURE SALES OF COMMON STOCK

The Company would have 36,222,985 shares of Common Stock outstanding,
assuming the sale of $15,000,000 principal amount of Debentures, and further
assuming the conversion of all the Debentures, at a Market Price (as defined in
the Debentures) of the Common Stock of $1.03, the Market Price on July 14, 1997,
of which the Common Stock offered hereby will be freely tradable without
restriction or further registration under the Securities Act. Most of the
remaining Shares outstanding are held by Affiliates (as defined below) of the
Company and may only be sold pursuant to an effective registration under the
Securities Act, in compliance with the exemption provisions of Rule 144
promulgated under the Securities Act or pursuant to another exemption under the
Securities Act, such as Regulation "S". "Affiliates" of the Company include all
executive officers and directors of the Company and all other persons that
directly, or indirectly through one or more intermediaries, control, or are
controlled by, or are under common control with, the Company.

In general, under Rule 144, subject to the satisfaction of certain
other conditions, a person, including an Affiliate of the Company (or persons
whose shares are aggregated with an Affiliate) who has owned restricted shares
of Common Stock beneficially for at least one year is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the then outstanding shares of the issuer's Common Stock or the average
weekly trading volume during the four calendar weeks preceding such sale,
provided that certain public information about the issuer as required by Rule
144 is then available and the seller complies with certain other requirements.
Affiliates must sell such shares in compliance with Rule 144 regardless of the
holding period requirement. A person who is not an Affiliate, has not been an
Affiliate within three months prior to sale, and has beneficially owned the
restricted shares for at least two years is entitled to sell such shares under
Rule 144 without regard to any of the limitations described above.

No prediction can be made as to the effect, if any, that market sales
of Common Stock, including the Conversion Shares, or the availability of such
shares for sale will have on the market price prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely effect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.

NEVADA LAW AND CORPORATE PROVISIONS AFFECTING SHAREHOLDERS

The Company's Certificate of Incorporation and By-laws contain certain
provisions which may deter, discourage, or make more difficult the assumption of
control of the Company by another corporation or person through a tender offer,
merger, proxy contest or similar transaction or series of transactions. These
provisions include an unusually large number of authorized shares (100,000,000)
and the prohibition of cumulative voting. The overall effect of these provisions
may be to deter a future tender offer or other takeover attempt that some
stockholders might view to be in their best interest as the offer might include
a premium over the market price of the Company's capital stock at the time. In
addition, these provisions may have the effect of assisting the Company's
current management in retaining its position and place it in a better position
to resist changes which some stockholders may want it to make if dissatisfied
with the conduct of the Company's business. Also, the unusually large number of
authorized shares relative to the amount of shares outstanding presents a risk
of future dilution to existing shareholders. See "Risk Factors - Barriers to
Takeover."

17
<PAGE> 21
Furthermore, Section 78.751 of the Nevada General Corporation Law
("NGCL") allows the Company to indemnify any person who is or was made a party
to, or is or was threatened to be made a party to, any pending, completed, or
threatened action, suit or proceeding by reason of the fact that he or she is or
was a director, officer, employee or agent of the Company or is or was serving
at the request of the Company as a director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise. The NGCL
permits the Company to advance expenses to an indemnified party in connection
with defending any such proceeding, upon receipt of an undertaking by the
indemnified party to repay those amounts if it is later determined that the
party is not entitled to indemnification.

The foregoing provisions may reduce the likelihood of derivative
litigation against directors and officers and discourage or deter shareholders
from suing directors or officers for breaches of their duties to the Company,
even though such an action, if successful, might otherwise benefit the Company
and its shareholders. In addition, to the extent that the Company expends funds
to indemnify directors and officers, funds will be unavailable for operational
purposes. See "Risk Factors - Limitations on Liability of Officers and
Directors."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Nevada Agency
and Trust Company, Reno, Nevada.

USE OF PROCEEDS FROM SALE OF DEBENTURES

None of the proceeds from the sale of the Common Stock registered
hereunder will accrue to the Company.

Through private placement, the Company has obtained $5,000,000 of
financing in the form of 6% Convertible Debentures. The holder of these
Debentures, who is also the Selling Securityholder, has agreed to purchase an
additional $10,000,000 aggregate principal amount of Debentures in two tranches
of $5,000,000 each commencing not less than 60 days after the effective date of
the Registration Statement of which this Prospectus is a part, subject to (i)
the effectiveness of the Registration Statement of which this Prospectus is a
part, (ii) the continuing material accuracy of specified representations and
warranties of the Company to the Selling Securityholder and (iii) the Market
Price of the Common Stock for the five trading days prior to the purchase of the
tranches exceeds $3.50.

The Company intends to apply the net proceeds of the Debentures to
conclude the process/manufacturing validation, to fulfill FDA requirements for
the submission of a New Drug Application and to fulfill the requirements for
foreign regulatory approval of PaGE1, estimated to be $10,000,000 to
$12,000,000.

The Company believes that its existing available resources, the net
proceeds of the Debentures, anticipated up-front and milestone payments from
strategic distribution partners, and revenues from sales of clinical materials
under the IND and for use in overseas clinical trials should be sufficient to
fund its operating expenses until it reaches positive cash flow, although there
can be no assurance thereof. The amount and timing of expenditures will depend
upon the progress of the clinical trials, the terms of any collaborative
arrangements entered into by the Company for licensing and distribution, the
timing of receipt of regulatory approvals, if any, and other factors, many of
which are beyond the Company's control. The Company reserves the right to
allocate the net proceeds among the foregoing uses. See "Business - Strategic
Alliances, Collaborations and Licenses."

Pending such uses, the net proceeds will be invested in short-term,
interest bearing securities.

18
<PAGE> 22
CAPITALIZATION

The following table sets forth, as of March 31, 1997, the actual
capitalization of the Company; as adjusted to reflect the sale of an additional
$10,000,000 principal amount of Debentures, the conversion of $700,000 principal
amount of Debentures on July 14, 1997 and the issuance of 7,486,523 additional
shares of Common Stock after March 31, 1997; and as further adjusted to reflect
the conversion of the $4,300,000 outstanding and $10,000,000 issuable principal
amount of Debentures, assuming that the Market Price of the Common Stock on the
date of conversion of the Debentures is $1.03, the Market Price on July 14,
1997, but excluding any shares of Common Stock issued with respect to interest
on the Debentures converted and disregarding the effect of interest on the
Debentures. On July 14, 1997, the high, low and closing bid prices of the
Company's Common Stock, as reported on the OTC Bulletin Board by NASDAQ Trading
and Marketing Services, were $1.75, $1.25 and $1.75, respectively. "Market
Price," as used herein, means the average closing bid price of the Common Stock
on the five (5) trading days immediately preceding March 21, 1997 or Conversion
Date as may be applicable, as reported by the National Association of Securities
Dealers, or the closing bid price on the over-the-counter market on such date
or, in the event the Common Stock is listed on a stock exchange or traded on
NASDAQ, the Market Price means the closing price on the exchange on such date,
as reported in the Wall Street Journal. The table should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Prospectus.

March 31, 1997

Pro Forma*,
Assuming Conversion
Actual Pro Forma* of Remaining Debentures

<S> <C> <C> <C>
Liabilities:
6% Convertible Debentures $ 5,000,000 $14,300,000 - 0 -
Other Short-Term Debt 573,593 573,593 $573,593
----------- ----------- --------
Total Liabilities $ 5,573,593 $14,873,593 $573,593
----------- ----------- --------
Stockholders' equity:
Common stock, $.001 par value,
100,000,000 authorized; 11,403,129
outstanding and 36,222,985
outstanding pro forma assuming
conversion of Debentures based on
the Market Price on July 14, 1997 $ 11,403 $ 18,890 $ 36,223
Additional paid in capital 3,876,287 4,861,954 19,144,621
Deficit accumulated during development stage $(5,039,988) $(5,039,988) $(5,039,988)
------------ ------------ -----------
Total Stockholders' Equity
$(1,152,298) $ (159,144) $14,140,856
------------ ------------ -----------
Total Liabilities and Stockholders' Equity $ 4,421,656 $14,714,449 $14,714,449
============ ============ ===========
Stockholders' Equity per Share $(0.10) $(0.01) $0.39

</TABLE>

19
<PAGE> 23

- -----------------------------------------

* Reflects sale of an additional $10,000,000 principal amount of Debentures, the
conversion of $700,000 principal amount of Debentures on July 14, 1997 and the
issuance of 7,486,523 shares of Common Stock subsequent to March 31, 1997.

SELLING SECURITYHOLDER AND PLAN OF DISTRIBUTION

The Selling Securityholder whose Conversion Shares are being registered
hereby is Springrange Investment Group Ltd. The Selling Securityholder is a
foreign entity with principal place of business located at Road Town, Tortola,
British Virgin Islands. The Selling Securityholder does not have a domestic
agent for service of process. The Selling Securityholder has no other
affiliation with the Company or its officers, directors, promoters or principal
shareholders.

It may be difficult for United States investors to effect service
within the United States upon the Selling Securityholder or its officers and
directors or to realize in the United States upon judgments rendered against the
Selling Securityholder or its officers and directors by courts of the United
States predicated upon civil liabilities under the Securities Act of 1933
("Securities Act") or state securities laws. Except under the circumstances
described below, there is substantial doubt as to the enforceability in the
British Virgin Islands against the Selling Securityholder or any of its officers
and directors, in original actions or in actions for enforcement of judgments
rendered by United States courts, of liabilities predicated solely on the
Securities Act or state securities laws.

The Company has been informed by Krieger & Prager, Esqs., counsel to
the Selling Securityholder, that in its opinion, a judgment of a court of the
United States predicated solely upon civil liabilities under United States
federal securities laws may be enforceable in the British Virgin Islands by a
British Virgin Islands court against a British Virgin Islands resident as a
foreign judgment if the resident had been served while present in the foreign
jurisdiction or had voluntarily submitted to the foreign court's jurisdiction by
agreement or by attornment, or if the foreign jurisdiction had a real and
substantial connection with the subject matter of the proceedings. Any recovery
under such foreign judgment would be payable in any currency the parties agree
upon. A foreign judgment is not enforceable in the British Virgin Islands if
procured by fraud, if there was a failure of natural justice, if the procedure
of the foreign court was unfair, if enforcing the foreign judgment would be
contrary to the public policy of the British Virgin Islands or if the foreign
judgment was not a final judgment.

As of the date of this Prospectus, the Selling Securityholder owned
$4,300,000 principal amount of 6% Convertible Debentures, had committed to
purchase an additional $10,000,000 of Debentures, and held 864,523 shares of
Common Stock. Upon conversion of the outstanding Debentures, the Selling
Securityholder will acquire shares on the basis set forth in the following
paragraph, provided however, that the Selling Securityholder can never own more
than 4.9% of the outstanding shares. (See note (1), in Common Stock Ownership of
Certain Beneficial Owners and Management.)

20
<PAGE> 24

The Company has agreed to register the public offering of the Selling
Securityholder's shares of Common Stock under the Securities Act and to pay all
expenses in connection therewith other than brokerage commissions and discounts
in connection with the sale of the Conversion Shares and the expenses of counsel
for the Selling Securityholder in excess of $3,500. The aggregate number of
Conversion Shares that may be offered and sold pursuant to this Prospectus by
the Selling Securityholder will be determined by how many shares are issued upon
conversion of the Debentures, which will be determined by the conversion price
applicable to the Conversion Shares. See "Description of Securities." The
conversion price for a Conversion Share will be the lesser of the Market Price
(as defined in the Debentures) on March 21, 1997, which was $6.525, and 80% of
the Market Price on the Conversion Date of the Debenture with respect to such
share. Assuming that the Market Price on the date of Conversion is $1.03 (which
is the Market Price calculated as of July 14, 1997) with respect to all the
Debentures, and that all the Debentures are converted, the aggregate number of
Conversion Shares issued would be 18,197,856 (excluding any Conversion Shares
issued with respect to accrued interest on the Debentures at the time of
conversion), and if all the Conversion Shares are sold, the Selling Shareholder
would have no beneficial interest in the Common Stock of the Company, assuming
that the Selling Shareholder did not acquire a beneficial interest in the Common
Stock of the Company otherwise than through the conversion of the Debentures.

The Selling Securityholder's Shares may be offered and sold from time
to time as market conditions permit, provided that a registration statement
covering such Shares is effective at the time of such offer and/or sale. Under
Section 10(a)(3) of the Securities Act of 1933, as amended, when a prospectus is
used more than nine months after the effective date of the registration
statement, the information contained therein must be as of a date not more than
16 months prior to such use.

The Selling Securityholder's Shares may be offered and sold in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
The Selling Securityholder's Shares may be sold by one or more of the following
methods, without limitation: (i) a block trade in which a broker or dealer so
engaged will attempt to sell the share as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (ii) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
accounts pursuant to this Prospectus; (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (iv) transactions
between sellers and purchasers without a broker or dealer. In effecting sales,
brokers or dealers engaged by the Selling Securityholder may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Securityholder in amounts to be
negotiated. Such brokers and dealers and any other participating brokers and
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act, in connection with such sales.

DESCRIPTION OF BUSINESS

The Company was incorporated under the laws of the State of Nevada on
January 13, 1987 with the name of Witch Doctor Bones, Inc. On August 12, 1987,
the Company qualified a public offering under Rule 504 of Regulation D of the
Securities Act of 1933, as amended, with the Secretary of State of Nevada. On
June 17, 1988, the Company changed its name to Careyward, Inc. and authorized a
forward split of ten (10) shares for one (1).

On October 18, 1993, the Company acquired Grant City Corporation by a
merger. As a result thereof, 50,000 shares were issued which carried two classes
of warrants. Class A warrants entitled the holder to purchase stock at $8.00 per
share and the Class B warrants entitled the holder to purchase stock for $10.00
per share. The warrants could only be exercised if a registration statement was
in effect filed with the United States Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. No such filing has been made
by the Company. Both classes of warrants have been redeemed by the Company at
$0.001 per warrant with twenty (20) days written notice. Thus, the warrants have
been canceled.

On January 6, 1994, the Company entered into an Asset Purchase
Agreement with Bio-Sphere Technologies, Inc. ("BTI") whereby the Company
acquired intellectual property rights relating to prostaglandin microsphere
delivery in exchange for 2,856,000 shares of the Company's Common Stock. As a
result of this transaction, the Company became a subsidiary of BTI.

21
<PAGE> 25

On January 18, 1994, the name of the Company was changed to The Male
Edge, Inc. On May 10, 1994, the name of the Company was changed to Harvard
Scientific Corp.

The Company is a development stage bio-pharmaceutical company engaged
in the development of a product for the treatment of male erectile dysfunction.
On February 13, 1996, the Company received an assignment of an application for a
patent identified as Application Serial No. 08/573408, filed December 15, 1995,
for an invention "PGE-1 Containing Lyophilized Liposomes For Use In The
Treatment of Erectile Dysfunction." The assignment was made by the holder of the
application, BTI, which owns a majority of the Company's issued and outstanding
stock. The assignment states that BTI sold, assigned, transferred and set over
to the Company "the entire right, title and interest" in the application for the
PGE-1 invention. The Company understands this to mean that the assignment in
question is exclusive. The Company also filed an application for a European
Patent in December 1996.

The Company's principal product, PaGE1, is a lyophilized liposomal
formulation of Prostaglandin E-1 ("PGE-1") in which the PGE-1 is encapsulated in
liposomes and then lyophilized (freeze dried). This provides the product with
stability, the shelf life of which is expected to exceed three years at room
temperature. The lyophilized material is reconstituted through the use of a
non-irritating dilute detergent, which lyzes the liposomes, releasing the PGE-1
into solution. This solution is then applied via the urethral meatus (the
opening at the end of the urethral tract at the tip of the penis).

PGE-1 is an oxygenated, unsaturated cyclic fatty acid which occurs
naturally in all cells of the body. It has already been approved by the FDA for
therapeutic use as an intravenous infusion in newborn babies with congenital
heart defects. PGE-1 has also been approved by the Food and Drug Administration
("FDA") for the treatment of male erectile dysfunction, as an injection and as
an intra-urethrally administered pellet. However, the use of the specially
formulated detergent to lyze the liposomes and the lyophilizing of the
liposome-encapsulated PGE-1 require full registration of PaGE(1) with the FDA as
a new drug. Accordingly, the Company filed an Investigative New Drug ("IND")
application with the FDA in May 1996. PaGE(1) has undergone a Phase I clinical
study, the results of which indicated the possible benefits of such therapy and
provided the Company with sufficient information for the recommendation of two
doses of the product to be developed for marketing, as well as an indication of
the safety of the product. The study's results were presented at a Podium
Session of the annual American Urology Association meeting in New Orleans in
April 1997. The Session was attended by approximately 500 urologists and
interested persons, and the Company believes that the presentation was well
received and interpreted comments on the data positively.

The Company continues to qualify products in development within BTI to
determine safety, effectiveness, market potential, and time and cost to
commercialization. In addition, the Company is looking into existing
pharmocological agents of other pharmaceutical companies which could be made
more effective by utilizing the Company's delivery system technology. As of this
date, the Company is concentrating its personnel and financing resources
exclusively on its erectile dysfunction treatment and has no immediate plans to
add additional products to the Company's commercialization and marketing
efforts. BTI has no obligation to make products it develops available to the
Company other than pursuant to its express obligations referred to in this
Prospectus.

THE MARKET

Male erectile dysfunction ("ED") occurs when there is a persistent
inability to achieve an erection sufficient to permit sexual intercourse. It is
not a loss of desire or the ability to experience orgasm. In about 60% of cases
a medical condition such as diabetes, vascular disease, high blood pressure or a
neurological disorder is found to be interfering with the erection process. An
estimated additional 25% of cases occur due to medications such as
anti-hypertensive medications. Smoking and excessive drinking of alcohol may
also contribute to the condition. The remaining 15% of cases may have some form
of psychological difficulty, including anxiety and stress. Often there is a
combination of factors at work.

22
<PAGE> 26
According to the Consensus Report of the American Medical Association,
ten to twenty percent of men in the United States suffer from erectile
dysfunction. The market for treatments for ED, such as PaGE(1), is expected to
grow over the next few years as more men become comfortable with the fact that
ED is treatable. The aging of the male population as the so-called "Baby
Boomers" enter middle age is also expected to expand the market, since incidence
of ED is likely to increase with a man's age.

PaGE(1) treats ED in the following manner: The intra-urethrally applied
PGE-1 is absorbed across the urethral mucosa into the corpus spongiosum. Some of
the dose enters the corpora cavernosum, while some of the dose goes into pelvic
veinous circulation. The half life of PGE-1 varies from 30 seconds to 10
minutes, although intra-urethrally administered product is barely discernable in
circulation. Alprostadil, another component of PaGE(1) which is already approved
by the FDA, causes the smooth muscle in the penile corpora to relax and dilates
the arteries. This results in rapid filling of the corpora with blood, which
causes the compression of corporal sinusoids against the tunica albuginea,
impeding venous outflow. The result is the development of an erection.

COMPETITION

The market for treatment of ED is emerging and evolving and is
characterized by an increasing number of entrants. The company faces competition
from a number of existing and potential competitors. Pharmacia/ Upjohn, Schwartz
Pharma and Senetek each produce PGE-1 in injectable formulations. Upjohn's
product has received regulatory approval worldwide, Schwartz Pharma's product is
approved for use in Europe, and Senetek's product has received FDA approval for
sale in the United States.

The product most similar to the Company's product is produced by Vivus.
It consists of a pellet containing PGE-1 which is released into the urethra via
the specialized MUSE(R) device designed specifically for this purpose. This
product has the potential for side effects, including dizziness, drop in blood
pressure and pain at application.

There are tablet formulations of erectile dysfunction products
(phentolamine and sildanafil) currently in Phase III of clinical testing. The
tablet formulations have potential benefits for patients who suffer from mild
dysfunction problems. However, they could present various undesirable side
effects which must be overcome. Pfizer and Zonagen are the two known competitors
developing tablet formulations.

Another competitor, Macrochem is currently undertaking Phase I clinical
trials of a topical solution containing PGE-1.

Other forms of competition are penile implants and vacuum pumps.
However, the Company anticipates that the market for these devices will decline
with the increasing awareness of various drug formulations which provide a more
natural erection.

Although the Company is not aware of any additional technologies or
products which are functionally similar to those of the Company currently under
development, there can be no assurance that such technologies or products will
not be developed or that other companies with the expertise or resources that
would encourage them to attempt to develop or market competing products will not
develop new products directly competitive with PaGE(1). Some of the Company's
competitors and potential competitors have well-established reputations for
success in the development, sale and service of biopharmaceuticals and have
substantially greater financial, technical, personnel and other resources than
the Company, enabling them to undertake clinical testing of products, obtain
regulatory approvals and manufacture and market pharmaceutical products in
response to competitors seeking to market new products and enter into new
markets. In addition, there can be no assurance that the Company can complete
clinical testing of PaGE(1), obtain regulatory approvals and commence
commercial-scale manufacturing in a timely manner to be effectively competitive.

<PAGE> 27
PRODUCTION AND MANUFACTURING

The Company's product will be manufactured by two third party
manufacturers located in Southern California. The manufacturers will produce the
Company's product per the Company's directions and specifications and deliver
the product to the Company. The Company sees no reason to acquire the equipment
necessary for production at this time and anticipates utilizing its existing
current arrangement with outside laboratories for the manufacturing of its
products for distribution.

The Company anticipates that the ingredients from which PaGE(1), will
be manufactured will be supplied by Sigma Chemical Company, Austin Chemical Co.,
Inc., Spectrum Chemical Company, Interchem Corporation and West Company.

The Company is not aware of any environmental issues related to the use
of disposal of its product. The chemistry involved produces no damaging effects
on human, animal or plant life if exposed to the general population's air, water
or soil supply. The Company's previous manufacturer, Collaborative Laboratories,
did not disclose or relate any information indicating that the manufacturing
process would produce any environmentally harmful by-products.

MARKETING

The commercial success of PaGE1 will require acceptance by urologists,
family practitioners with a significant elderly male clientele, medical doctors
practicing as sex therapists and the medical community as a whole. Such
acceptance will depend in large part on the results of clinical trials and the
conclusion by these physicians that PaGE1 is a safe, cost-effective and
acceptable method of treatment. Accordingly, achieving market acceptance for
PaGE(1) will require substantial marketing efforts and expenditure of
significant funds to educate doctors, pharmacists, and the public about what the
Company believes are the advantages and benefits of PaGE(1). To that end, the
Company is currently negotiating distribution agreements with major
international pharmaceutical companies delivering the United States, European
and South American market. As is customary in the biopharmaceutical industry
operating in these markets, the Company anticipates that these distribution
agreements will provide for the distributor to pay the Company up-front
licensing fees and milestone payments. In addition, the distributor will be
responsible for the costs of registration and/or FDA approval and validations.
Despite these arrangements, the Company expects to expend over $3 million over
the first few years of launch in marketing support activities. Based on market
studies undertaken by the Company, it expects that sales of PaGE(1), both in the
United States and internationally, may generate material revenues to the Company
by the end of 1999.

EMPLOYEES

As of July 17, 1997, the Company had five full time employees. These
full time employees are engaged in management and administrative activities. Of
the Company's officers and directors, two (Don Steffens and C. Thomas Walters)
are full-time employees of the Company. As of the date of the filing of this
prospectus and registration statement, no written employment agreements were in
place with regard to any of these employees. None of the Company's employees is
subject to a collective bargaining agreement, and the Company believes its
relations with its employees are good. In addition, from time to time, the
Company elicits the services of management and technical staff from its parent
company, Bio-Sphere Technology, Inc. ("BTI"). The Company reimburses BTI for
time contributed directly by its employees in providing technical and scientific
services and assistance to the Company.

<PAGE> 28
GOVERNMENT REGULATION

The Company is subject to various FDA regulations which govern or
influence the research, testing, manufacture, safety, labeling, storage,
recordkeeping and advertising and promotion of pharmaceutical products,
biologics, and Class II devices. The Company believes it is in substantial
compliance with all material federal and state laws and regulations. There can
be no assurance, however, that the Company will be able, for financial and other
reasons, to comply with applicable laws, rules and regulations. Failure or delay
by the Company to comply with FDA regulations or other applicable regulatory
requirements could subject the Company to civil remedies, including fines,
suspensions, delays of approvals, injunctions, recalls or seizures of products,
operating restrictions, as well as potential criminal sanctions, which could
have a material adverse effect on the Company.

The Company's research, development, clinical trials, manufacturing and
marketing of PaGE(1) are subject to extensive, rigorous and frequently changing
regulatory review process by the FDA and other regulatory agencies in the U.S.
and various foreign countries. The process of obtaining and maintaining required
regulatory approvals is lengthy, expensive and uncertain. FDA procedures for
approval of pharmaceuticals and biologics involve clinical testing which occurs
in three phases to demonstrate the safety and efficacy of the product. Phase I
clinical trials consist of testing for the safety and tolerance of the product
with a small group of subjects and may also yield preliminary information about
the effectiveness and dosage levels of the product. Phase II clinical trials
involve testing for efficacy, determination of optimal dosage, and
identification of possible side effects in a larger patient group. Phase III
clinical trials consist of additional testing for efficacy and safety with an
expanded patient group. Upon successful completion of Phase III testing, a New
Drug Application ("NDA") can be filed. Approval requires a review of detailed
data resulting from the clinical studies, the composition of the drug, the
labeling that will be used, information on manufacturing methods, and samples of
the products. After the FDA completes its review of the application, the product
is typically reviewed by a panel of medical experts, and the applicant is
required to answer questions regarding its safety and efficacy. At the
recommendation of the panel, an NDA may be granted and the product may then be
marketed. After the product has been approved for marketing, Phase IV
post-marketing surveillance studies may be required to provide additional data
to the FDA for longer term follow-up concerns.

The Company submitted an Investigative New Drug ("IND") application to
the FDA in May 1996 and has concluded its Phase I trial. The results of the
Phase I trial were presented to the FDA in April 1997 during the Company's
pre-Phase II clinical trial meeting. At this meeting, the FDA confirmed that the
clinical trials conducted thus far met the agency's standards and that the
Company's proposed delivery device is acceptable. The FDA requested certain
additional information regarding the product's stability and chemistry.
Regarding the Phase II trial, the FDA recommended that the product's dosage be
increased by 50%, that the study's parameters be refined to conform more closely
to other equivalent studies, and that certain potential indirect effects of the
product's use be more closely monitored. The FDA did not require the Company to
perform any further animal studies but also prohibited the Company from making
any label claims based on the animal study it had previously conducted, due to
the small size of this study.

Currently, the manufacturing procedure is being scaled up, with assay
verification and validation in progress through Gensia Laboratories, located in
Irvine, California. The Company anticipates that an NDA will be filed with the
FDA in late 1998, assuming adequate data is generated upon conclusion of the
clinical trial program. It is estimated that the costs of competing the above
procedures for approval by the FDA will cost $10,000,000 to $12,000,000. The FDA
review process could last as long as two years and perhaps be even further
extended in the event that the FDA requires additional data.

The Company expects that certain of its potential products also may be
regulated by the FDA as Class II devices upon completion of clinical testing.
Class II devices include urological catheters . A Form 510(k) for the catheter
to be used with PaGE1 will be filed with the FDA at the time of the NDA
submission. This application must contain data demonstrating the safety of the
product for human use, as well as information on manufacturing processes and
procedures.

There can be no assurance that FDA or other regulatory clearance will
not take longer than currently anticipated because of delays, problems or
unforeseen safety difficulties. Failure to obtain FDA approval would

25
<PAGE> 29
prevent the Company from marketing PaGE(1) in the U.S. which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Even if regulatory approval is obtained, a marketed
pharmaceutical product and its manufacturer are subject to continuing regulatory
review, and discovery of previously unknown problems or amendments to existing
statutes or regulations or the adoption of new statutes or regulations could
result in restrictions on such product or manufacturer, including withdrawal of
the product from the market. In addition, the FDA requires submission of a
pre-market approval ("PMA") notification for any change or modification to a
previously marketed product that significantly affects safety or effectiveness.

At present, the Company also plans to distribute PaGE1 in Europe and
South America, and Management believes that such distribution may generate
material royalty revenues by 1999. However, such distribution of the Company's
products outside the United States will also be subject to extensive government
regulation. These regulations, including the requirements for approvals or
clearance to market, and the time required for regulatory review and the
sanctions imposed for violations, vary from country to country. There can be no
assurance that the Company will obtain regulatory approvals in such countries or
that it will not be required to incur significant costs in obtaining or
maintaining its foreign regulatory approvals. Failure to obtain necessary
regulatory approvals, the restriction, suspension or revocation of existing
approvals or any other failure to comply with regulatory requirements would
prevent the Company from marketing PaGE(1) in such foreign country or countries,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.

The manufacturing processes of the Company's product will be subject to
certain regulatory guidelines. These guidelines are laid down by the FDA. All
pharmaceutical manufacturers must conform to these guidelines. The FDA inspects
these facilities on a regular basis and any deficiencies are notes. The facility
must correct those deficiencies within a finite period of time.

Any new pharmaceutical facility must go through a strict inspection by
the FDA, in a full audit, and then adhere to the guidelines. Any facility not
adhering to these guidelines is subject to FDA regulatory action.

COLLABORATIVE ARRANGEMENTS

The Company operates as a "virtual company" and relies on
subcontracting and collaborative arrangements for its research and development,
manufacturing, clinical trial and marketing operations. Since January 1994, when
BTI acquired the majority of the Company's Common Stock, the Company has relied
extensively on management, technical and financial services provided by BTI.

The Company has paid BTI for the PaGE(1) patent application, as well as
licensing and distribution agreements and utilization of its scientific and
technical personnel, with Company stock. The Company initially issued 714,000
shares (as currently restated) to BTI in January 1994 for the intellectual
rights to the product with the stipulation that the company pay for and effect a
patent application. The Company was not able to fund the patent process. In
order to protect its primary assets, a reorganization agreement between BTI and
the Company was structured in 1995 and culminated in November whereby BTI
received 6,138,500 additional shares of the Company for funding the patent
application and other benefits to the Company mentioned above.

The Company reimburses BTI for the time contributed by its employees.
The Company paid Bio-Sphere Technology, Inc. $40,501 in overhead expenses
incurred in 1994, $67,979 in 1995 and $80,000 in 1996.

Furthermore, the Company intends to continue to seek and enter into
collaborative arrangements with pharmaceutical distribution concerns to
eventually distribute PaGE(1).

LEGAL PROCEEDINGS

1. Harvard Scientific Corp. v. Nevada Agency and Trust Company and Thomas E.
Waite & Associates, Case No. CV96-0495, Second Judicial District Court of
Nevada, County of Washoe, filed August 2, 1996. This action involved a dispute
over performance of an agreement between the Company and a consultant, Thomas E.
Waite & Associates ("Waite"), who had been issued 350,000 shares of Common Stock
in exchange for services to be

26
<PAGE> 30
performed by Waite. Those services involved obtaining the financing for the
Company. In this action, the Company claimed that Waite had not performed those
services and had breached its agreement with the Company. Nevada Agency and
Trust Company, the Company's transfer agent, was included as a defendant in
order to enjoin the transfer of the 350,000 shares which had been issued to
Waite. The Company sought to recover damages for Waite's breach of contract and
obtain a declaratory judgment declaring the agreement between the Company and
Waite null and void, and canceling the shares issued to Waite.

This action was settled amicably between the parties and is no longer
pending. Under the terms of the settlement agreement, the Company acquiesced in
the transfer of the 350,000 shares of Common Stock to Waite and issued an
additional 568,750 shares to Waite. See Note 10 to Financial Statements.

2a. Harvard Scientific Corp. v. Ailouros Ltd., Case No.
CV-N-97-00088-HDM, Second Judicial District Court of the State of Nevada, County
of Washoe, filed February 6, 1997, removed to United States District Court for
the District of Nevada. This action concerns 7% Convertible Debentures ("7%
Debentures") in the aggregate amount of $150,000 the Company issued to the
defendant in June 1996 under the provisions of Regulation "S" promulgated under
the Securities Act. The Company claimed the defendant had breached its contract
with the Company regarding the terms of resale for the 7% Debentures and
conversion shares issued pursuant thereto and that the defendant had breached
its duty of good faith and fair dealing in connection with the entering into and
performance of the agreement underlying the 7% Debentures. The Company also
alleged that an accord and satisfaction had been reached between the parties on
their dispute, and that such accord and satisfaction should be enforced by the
Court. The Company also sought damages for the breach of the underlying contract
terms.

On or about March 10, 1997, the Company filed an amended complaint
which added a cause of action seeking to have the 33,333 shares previously
issued to Ailouros upon conversion of $25,000 of the 7% Debentures, as well as
any shares which may be issued to Ailouros in the future pursuant to the 7%
Debenture agreement which is the subject of this action, be issued pursuant to
the requirements of Regulation S due to the fact that at the time the Company
entered into its agreement with Ailouros, the Company's Form 10 filing had not
yet become effective and therefore the Company was not a reporting company.

2b. Ailouros Ltd. v. Harvard Scientific Corp., Case No.
CV-N-97-00089-ECR, United States District Court for the District of Nevada,
filed February 13, 1997. In this action Ailouros claimed that the Company had
breached the 7% Debenture agreement which is the subject of the action brought
by the Company against Ailouros referred to above. Ailouros claimed it is
entitled to 263,225 shares of the Registrant's common stock and/or is entitled
to damages in the amount of $2,000,000. Ailouros sought to have its suit against
the Company and the Company's suit against Ailouros consolidated. The Company
does not oppose such consolidation.

As of June 16, 1997, Ailouros and the Company agreed in principle to
settle all litigation between the parties. The settlement agreement is currently
being drafted and will require the parties to maintain confidentiality regarding
the settlement terms, although in anticipation of such agreement, 450,000 shares
of the Company's common stock have been issued to Ailouros.

3a. Harvard Scientific Corp. v. D. Weckstein and Co., Inc., and Donald
E. Weckstein, Case No. CV-97-00806, Second Judicial District Court of Nevada,
County of Washoe, filed February 10, 1997. This action involved an agreement
between the Company and defendant consultants (collectively "Weckstein"),
pursuant to the terms of which Weckstein agreed to help the Company obtain
financing in exchange for 25,000 shares of the Company's common stock. In this
action, the Company alleged that Weckstein breached their agreement to help the
Company obtain financing and/or were negligent in performing their duties in
helping the Company obtain financing. The complaint also alleged that Weckstein
breached the covenant of good faith and fair dealing and misrepresented their
expertise, know-how, contacts and experience in order to induce the Company to
enter into the agreement that is the subject of this action.

3b. D. Weckstein and Co., Inc. v. Harvard Scientific Corp. and Thomas
E. Waite & Associates, Inc., Index No. 97-103324, Supreme Court of New York,
County of New York, filed February 18, 1997. In this action, Weckstein claimed
that the Company breached the same agreement which is the subject of the action
filed by the

27
<PAGE> 31
Company against Weckstein in Nevada. Weckstein also sought damages against
Thomas E. Waite & Associates, claiming that Thomas E. Waite & Associates
tortiously interfered with the agreement between the Company and Weckstein.
Weckstein also sought damages for alleged fraud on the part of Thomas E. Waite &
Associates, in connection with its dealings with Weckstein.

Weckstein also brought a cause of action against the Company for "abuse
of process" in connection with the filing of the Nevada action brought by the
Company against Weckstein. In this claim, Weckstein asserted that the Nevada
Court has no personal jurisdiction over either of the defendants to the Nevada
action, and that the Company brought the action in Nevada simply to
inconvenience Weckstein.

This suit and countersuit has been settled amicably between the parties
and is no longer pending. Under the terms of the settlement agreement, the
Company caused 35,000 shares of the Company's common stock to be delivered to
Weckstein.

4. Rex Morden v. Harvard Scientific Corp. and Does I through X, Case
No. A371111, District Court of Nevada, County of Clark, filed March 17, 1997. In
this action, the plaintiff, a former officer of the Company, alleged that the
Company failed to pay when demanded the principal amount and accrued interest of
a Promissory Note executed by the Company on March 1, 1995 and due on demand.
The plaintiff sought damages of $42,275 (the alleged principal amount of the
Note) plus interest accrued at the rate of 8% per annum. The plaintiff also
sought attorneys fees and costs.

This litigation has been settled amicably between the parties and is no
longer pending. Under the terms of the settlement agreement, the Company paid
Morden $43,775.

5. Neil Armstrong v. Harvard Scientific Corp., Don Steffens, Dr. Jackie
R. See, Ian Hicks, and Does I through X, Case No. A371879 District of Nevada,
County of Clark, filed April 4, 1997. In this action, the plaintiff, a former
officer and director of the Company, alleges that the Company breached the terms
of an employment agreement he alleges he had with the Company. The plaintiff
alleges that the Company wrongfully terminated his employment with the Company
and that the other defendants conspired with one another to wrongfully terminate
his employment with the Company. The complaint seeks compensatory damages,
punitive damages and reasonable attorneys fees and costs in a total amount
exceeding $10,000. This litigation remains pending.

In addition to these lawsuits, the Company is negotiating with its
European marketer, Pharma Maehle, to terminate its licensing and marketing
agreement.

28
<PAGE> 32
SELECTED FINANCIAL DATA

The following selected financial information is derived from
the Company's Audited Financial Statements, unless other wise indicated. The
financial statements for the years ended December 31, 1996 and 1995 have been
audited by Dale McGhie, independent certified public accountant, as set forth in
his report thereon appearing elsewhere herein. Mr. McGhie's report includes an
explanatory paragraph stating that, in light of the recurring losses suffered by
the Company, its continued existence depends upon its ability to resolve its
liquidity problems.

Certain other financial data has been derived from unaudited financial
statements prepared by the Company. The selected financial data presented below
should be read in conjunction with the Company's Financial Statements, including
the notes thereto, contained in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Historical results
are not necessarily indicative of the results of operations which may be
expected in the future.

Statement of Operations Data:
- -----------------------------

<TABLE>
<CAPTION>
For the Three Months Ended
March 31, For the Year Ended December 31, Inception
--------- ------------------------------- 1/31/87 to
1997 1996 3/31/97
---- ---- -------
(Unaudited) (Unaudited) 1996 1995 1994 (Unaudited)
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales - 0 - $ 26,959 $ 181,000 - 0 - - 0 - $ 187,387
Cost of Sales - 0 - 85,675 216,870 - 0 - - 0 - 221,557
------------ ------------ ------------ ------------ ------------ ------------
Gross Profit (Loss) - 0 - (58,716) (35,870) - 0 - - 0 - (34,170)

Operating Expenses:
General and
Administrative (note 7) 1,856,154 287,148 1,244,272 434,320 324,699 3,897,024
Research and
Development (notes 7 and 9) 377 38,529 109,553 194,965 124,366 429,261
Depreciation and
Amortization (notes 3 and 7) 4,330 10,247 41,472 39,550 38,872 124,964
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses $ 1,860,861 335,924 1,395,297 $ 668,835 $ 487,937 4,451,249
------------ ------------ ------------ ------------ ------------ ------------
(Loss) from Operations (1,860,861) (394,640) (1,431,167) (668,835) (487,937) (4,485,419)
------------ ------------ ------------ ------------ ------------ ------------

Other Income (Expenses):
Settlements (note 10) - 0 - - 0 - (494,813) - 0 - - 0 - (494,813)
Interest Income - 0 - - 0 - - 0 - - 0 - - 0 - 397
Interest Expense (13,341) (1,612) (12,964) (7,620) (1,727) (35,653)
(Loss on disposition of
marketable securities - 0 - - 0 - - 0 - - 0 - - 0 - (24,500)
------------ ------------ ------------ ------------ ------------ ------------
Total (13,341) (1,612) (507,777) (7,620) (1,727) (554,569)

Net (Loss) $ (1,874,202) $ (396,252) $ (1,938,944) $ (676,455) $ (489,664) $ (5,039,988)
(Loss) Per Common Share $ (0.18) $ (0.05) $ (0.21) $ (0.29) $ (0.34)
Weighted Average Shares
Outstanding 10,308,240 8,757,903 9,022,404 2,333,839 1,421,563
</TABLE>

29
<PAGE> 33
Balance Sheet Data:
- -------------------

<TABLE>
<CAPTION>
March 31, 1997 December 31,
(Unaudited) ------------
------------
1996 1995
---- ----
<S> <C> <C> <C>
Cash and Prepaid Expenses $ 4,342,023 $ 1,565 $1,224,560
Total Assets $ 4,421,656 $ 85,527 $1,349,080
Total Current Liabilities $ 5,573,953 $ 535,223 $ 664,727
Total Stockholders' Equity $(1,152,298) $(449,696) $ 684,353
</TABLE>

30
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

The discussion contained in this Item 6 is "forward looking", as that
term is identified in, or contemplated by, Section 27A of the Securities Act and
Section 21E of the Exchange Act. Accordingly, actual results may materially
differ from projections. Additional information concerning factors that could
cause actual results to differ materially is readily available in this item.

OVERVIEW:

Harvard Scientific Corp., is a bio-pharmaceutical development company.
The Company's corporate objective is to utilize medically researched and
developed drug substances, determine the ability of these substances to be
encapsulated in liposomes and to determine the potential market for such
products. The company will ensure development, regulatory testing and Federal
Drug Administration (FDA) processing to the point of distribution. The Company
is currently working on only one product--a therapeutic treatment for male
erectile dysfunction. The Company presented the results of its Phase I clinical
study to the FDA in April 1997 as part of its pre-Phase II clinical trial
meeting. During 1994, 1995 and 1996, the Company's activities consisted
primarily of raising capital, identifying a core management team, developing a
patent application, concluding manufacturing scale up and initial clinical
trials and formulating both a commercialization and clinical development
strategy.

The Company continues to look at other products it can add to its
portfolio that it believes has market potential.

Over the next 12 months, the Company's primary focus will be on
continuing clinical trials and product validation to conform to the regulatory
process of the FDA. The Company believes that an 18 to 24 month time-line to
obtain regulatory approval is the current assumption, but there can be no
assurance, if ever, that the product will receive FDA approval in that time
span. Additionally, the Company will be identifying and seeking collaborative
arrangements with pharmaceutical distribution concerns and/or licensing
agreements with companies to eventually distribute the erectile dysfunction
product.

In the next twelve months, the Company has no plans to purchase or sell
any significant capital assets in the form of either plant or equipment, with
the exception of office equipment and furnishings to effect its administrative
activities.

The Company's future success is dependent upon its ability to raise
additional funds to complete the commercialization process for its erectile
dysfunction treatment product. In his Report on Financial Statements, the
Company's independent auditor has included explanatory language addressing the
Company's ability to continue as a going concern. See Note 11 to Financial
Statements. In the past, the Company has relied upon the private purchase of its
securities by sophisticated investors to raise such funds, and the Company
intends to continue this practice in the future. The Company may also obtain
these funds through public financing or from other sources such as collaboration
agreements. There can be no guarantee that the investors who have been
interested in purchasing the Company's securities in the past will be interested
in doing so in the future, or that alternative investors will be found or that
public financing or collaborative arrangements will be available or will be
available on terms satisfactory to the Company.

It should be noted that although the Selling Securityholder has
purchased only $5,000,000 of Debentures as of the filing of this Prospectus and
registration statement, the Selling Securityholder has committed to purchasing
an additional $10,000,000 of Debentures, in two tranches of $5,000,000 each,
subject to certain conditions. See "Use of Proceeds from Sale of Debentures." In
addition, the Selling Securityholder may opt to exercise its conversion rights
in one lump sum. If the Selling Securityholder converts all or any one tranch of
the Debentures and then immediately sells those shares on the market in one lump
sum, or in several large amounts, the number of shares issued and outstanding
will increase significantly in a very short period of time. This may severely
depress the market for the Company's shares. A depressed market for the
Company's shares could, in turn, have an adverse impact on the Company's ability
to raise funds through public or private sales of its shares.

31
<PAGE> 35
Management does not know if the Selling Securityholder will elect to
convert the Debentures in such a manner as to obtain the maximum amount of
Conversion Shares in one lump sum, or whether it would then immediately attempt
to sell all of the converted shares at one time.

Failure to obtain adequate financing could cause a delay or termination
of the Company's product development and marketing efforts.

RESULT OF OPERATIONS:

FOR THE PERIOD FROM JANUARY 13, 1987 (INCEPTION) THROUGH DECEMBER 31, 1993:

The Company was in the development stages and had limited operating
revenues since its inception on January 13, 1987. During this period, the
Company's activities consisted primarily of reviewing business opportunities and
acquisitions, as well as maintaining the business entity. During 1987 and 1988,
the Company realized limited revenues from wholesaling activities unrelated to
its current planned operations. The Company had no operational activity from
fiscal years 1989 through 1993 and all expenses incurred during that period were
related solely to maintaining the entity and reviewing possible business
opportunities. Therefore, the Company has had a limited history of operation.
From January 13, 1987 through December 31, 1993, the Company had an accumulated
deficit of $60,722.

FOR THE YEAR ENDED DECEMBER 31, 1994:

In July of 1994, the Company entered into a joint venture research and
development agreement with Disease Detection International, Inc., a Delaware
corporation, and its current parent, Trinity Biotech, Ltd., an Irish
corporation, for the improvement and enhancement of a rapid whole blood HIV test
device. The intellectual property rights and technology for such enhancement
and improvement had been acquired from three individuals, two of whom were
directors of the Company and the third of whom was the son of one of the
directors of the Company. The joint venture agreement with Disease Detection
International and Trinity Biotech called for complimentary marketing rights and
a 50/50 split of the profits on any products produced as a result of this
agreement. Subsequently, in August of 1994, the two companies signed a marketing
agreement further defining the manufacturing, pricing and patent rights to the
new product. After several months of pre-marketing of this rapid detection
device, the Company determined that approval by the marketing authority in the
United States was not likely due to adverse psychological reactions by private
testing patients. Trinity Biotech, Ltd. terminated the agreements in February of
1995. The

32
<PAGE> 36
Company contributed $34,470 directly to the research and development cost of
this product. At this time, the Company has not taken any action in this matter
and has abandoned the project with Trinity Biotech, Ltd.

The Company incurred a net loss for the year ended December 31, 1994 in
the amount of $489,664. General and administrative expenses consisted primarily
of salaries of corporate officers, directors fees, office staffing, accounting,
legal and marketing-related expenses, rent and occupancy costs. Research and
development cost consisted primarily of reimbursements to our parent company for
expenditures to consultants, patent attorneys, lab costs and product sampling
materials necessary to formulate the treatment for erectile dysfunction.
Inclusive in the Company's research and development for 1994 was the expenditure
of $34,470 with regard to the HIV testing research and development program.

FOR THE YEAR ENDED DECEMBER 31, 1995:

In 1995, the Company experienced an increase in both general and
administrative expenses, as well as research and development expenses. The net
loss for the year ended December 31, 1995 amounted to $676,455. The total
operating expenditures for the two years ended December 31, 1995 represented
approximately 97% of the total operating expenses from inception, primarily due
to the fact that the Company was not operational prior to that time and all
expenses incurred form inception to the end of 1993 were primarily to maintain
the Company's status.

On December 29,1995, the Company raised $831,300, net of issuance cost,
which monies were used to fund the Company's existing operations and retire a
portion of loans and note payables incurred earlier in the year.

FOR THE YEAR ENDED DECEMBER 31, 1996:

The Company experienced an increase in administrative and general
expenses primarily as a result of increased consulting, legal and professional
fees. These fees were paid mostly to auditors, attorneys and marketing
consultants. In addition, the Company experienced an increase in payroll costs,
as it had four employees until December 6,1996, when a management change took
place. As a result of this management change, Neal Armstrong, Rex Morden,
Stephen M. Goldberg and David F. Miller were removed and Don Steffens and Ian
Hicks were appointed as officers and directors of the Company.

During 1996, the Company's activities centered around continued fund
raising efforts and development of the product. The Company submitted an IND to
the FDA and concluded a Phase I clinical trial. The Company started the year
with a cash balance of $799,466. The Company raised funds though the sale of
$500,000 aggregate principal amount of 7% Convertible Debentures ("7%
Debentures") in June 1996. The Company received revenues of $181,000 resulting
from the supply of its product to its Korean distributor for the conduct of
clinical trials and incurred research and development and other costs of the
goods sold in the amount of $326,423. The Company also incurred $494,813 in
costs for legal settlements, based on the fair market value of 568,750 shares
issued to Thomas Waite & Associates ("Waite") in settlement of litigation
between the Company and Waite. See "Business - Legal Proceedings." The net loss
for the year ended December 31, 1996 amounted to $1,938,944.

33
<PAGE> 37

FOR THE PERIOD ENDED MARCH 31, 1997:

The Company's major transaction during the first quarter of 1997 was
the issuance of $5,000,000 aggregate principal amount of 6% Convertible
Debentures, which are at the heart of the transaction which is the subject of
this registration. The issuance of such Debentures brought a net amount of
$4,375,000 into the Company's general operating account. Indeed, all of the cash
generated by the Company's operations during the first quarter of 1997 came from
the issuance of the Debentures.

Comparison of the three month period ended March 31, 1997, with the three month
period ended March 31, 1997

The Company had no net sales during the first quarter of 1997, and,
accordingly, had no cost of sales during that period. The first quarter of 1996
saw net sales of $26,959 and cost of sales of $85,675. Accordingly, gross profit
in the first quarter of 1996 was a negative $58,716. The difference in the sales
figures for the first quarters of 1997 and 1996 is attributable primarily to the
Company's focus on raising investment capital in 1997, for the purpose of
completing the required regulatory review process for its erectile dysfunction
product, as opposed to promotions of the Company's products in 1996.

34
<PAGE> 38
During the first quarter of 1997, the Company also experienced a
significant increase in operating expenses over what was experienced in the
first quarter of 1996. For the first quarter of 1997, total operating expenses
were $1,860,861, while in the same quarter in 1996 such expenses were $335,942.

The primary difference in operating expenses between these two periods
comes in general and administrative expenses. General and administrative expense
in the first quarter of 1997 were $1,856,154, while in the same quarter of 1996,
they were $287,148. General and administrative expense increased in 1997 due to
the issuance of the 6% Convertible Debentures in March 1997. The Company paid
finders' fees of approximately $750,000 in connection with the investment
capital transferred to the Company in exchange for the Debentures. Also, the
Company paid legal, accounting and public relations fees of approximately
$576,000 during the first quarter of 1997, almost all of which were incurred in
connection with, or as a result of, the issuance of the Debentures in March
1997.

All of the general and administrative expenses incurred in the first
quarter of 1997 represent significant increases over such expenses incurred in
the first quarter of 1996. Management anticipates that such general and
administrative expenses will continue to be incurred in similar amounts
throughout 1997 as the Company obtains additional investment capital and expands
its operations. The Company also continues to incur legal expenses in connection
with litigation in which the Company is involved.

LIQUIDITY AND CAPITAL RESOURCES:

On January 7, 1994, the Company acquired intellectual property rights
from Bio-Sphere Technology, Inc. for the treatment of male erectile dysfunction.
The Company issued 2,856,000 shares (714,000 shares as currently restated) to
acquire this technology. Subsequently, the Company offered a private placement
memorandum to qualified investors to fund the further development and
commercialization of this product. The capital raised totaled $354,150 net of
issuance cost during this period.

In July of 1994, the Company purchased the property rights to the HIV
testing technology that would permit the improvement of the existing product of
the Disease Detection International and Trinity Biotech, Ltd. companies. The
Company issued 1,340,000 shares (335,000 shares as currently restated) to three
individuals for those property rights. Two of those individuals were directors
and the third was the son of one of the directors of the Company.

In 1995, the Company raised capital primarily through loans from the
Company's directors and others. These moneys were primarily used to attempt to
raise investment capital and maintain the corporate entity.

In November of 1995, the Company exchanged 6,138,500 shares of its
common stock with its parent company, Bio-Sphere Technology, Inc. (BTI) for
patent assignment necessary to strengthen its position on the treatment of male
erectile dysfunction. In addition, BTI assigned licensing and distribution
contracts associated with the Company's impotency treatment. BTI agreed to make
scientific and technical, as well as to provide management and marketing,
personnel available for the Company's use and to assist in raising working
capital. As a result of this reorganization, the Company raised $831,300, net of
issuance cost, on December 29, 1995.

In June 1996, the Company sold 7% Convertible Debentures ("7%
Debentures") outside the United States under the provisions of Regulation "S"
promulgated under the Securities Act, as follows:

PURCHASER AMOUNT
--------- ------

35
<PAGE> 39

<TABLE>
<S> <C>
Ailouros Ltd. $150,000
DJ Limited $100,000
Wood Gundy London Limited $250,000
</TABLE>

The 7% Debentures bear an interest rate of seven percent (7%) per annum
and matured on December 7, 1996. The Debentures are issuable in denominations of
$25,000 and integral multiples thereof and, at the holder's request, are
exchangeable for an equal aggregate principal amount of debentures of different
authorized denominations.

The holder may convert the 7% Debentures into Common Stock commencing
forty-one (41) days after the Closing Date, which was June 10, 1996. The
conversion price per share will be 50% of the Market Price on the date of
conversion. "Market Price," as used herein, means the closing bid price of the
Common Stock on the trading day immediately preceding the Conversion Date, as
reported by the National Association of Securities Dealers, or the closing bid
price on the over-the-counter market on such date or, in the event the Common
Stock is listed on a stock exchange or traded on NASDAQ, the Market Price means
the closing price on the exchange on such date, as reported in the Wall Street
Journal.

The Company has the right to force conversion commencing sixty (60)
days after the Closing Date. No portion of the interest accrued from the date of
issuance to the date of conversion is payable in shares of Common Stock. In
addition, each holder of the 7% Debentures has waived the interest accrued from
the date of issuance to the date of conversion.

The Company has the right of first refusal with regard to any proposed
sale of the 7% Debentures prior to conversion.

On August 22, 1996, DJ Limited converted the entirety of its 7%
Debenture holdings into 123,076 shares of the Company's common stock. On August
22, 1996, Wood Gundy Limited ("Wood Gundy") converted $125,000 of its 7%
Debenture holdings into 153,845 shares of common stock. The remainder of Wood
Gundy's holdings of 7% Debentures are still outstanding. On August 15, 1996,
Ailouros Ltd. ("Ailouros") converted $25,000 of its 7% Debenture holdings into
33,333 shares of common stock. The remaining $125,000 of 7% Debentures held by
Ailouros were converted into 450,000 shares of common stock on June 12, 1997.

On March 21, 1997, the Company sold $5,000,000 aggregate principal
amount of 6% Convertible Debentures ("Debentures") to the Selling
Securityholder. This transaction is the primary subject of this registration
statement. As a result of the sale of the Debentures, at the end of the first
quarter of 1997, the Company reported total assets of $4,421,656. This compares
with total assets at December 31, 1996 of $85,527. The primary reason for the
increase in assets was the increase in cash of $3,497,023 and the appearance of
deferred debt issue costs of $625,000, all in connection with the Debentures
issued in March 1997.

The Company's total current liabilities for the first quarter of 1997
also increased significantly over the total current liabilities at December 31,
1996. Total current liabilities in the first quarter of 1997 were $5,573,953,
compared with $535,223 at December 31, 1996. Again, the difference comes
primarily from the issuance of the $5,000,000 in 6% Debentures in March 1997.

The Company also issued shares of its common stock during the first
quarter of 1997. During this time, the Company issued a total of 1,520,000
shares in connection with legal and consulting services and for services
rendered by officers and directors of the Company. See "Certain Relationships
and Related Transactions." The Company anticipates that it will continue the
practice of issuing shares of its common stock as compensation for services
rendered to the Company.

36
<PAGE> 40
RISK FACTORS:

The financial statements of the Company included in this prospectus for
the years ended December 31, 1996 and 1995 include an explanatory paragraph
stating that, in light of the recurring losses suffered by the Company, its
continued existence depends upon its ability to resolve its liquidity problems.
See "-Overview" and Note 11 to Financial Statements.

The Company has identified at least two sources as contract
manufacturers for its product. The product under development by the Company has
never been manufactured on a commercial scale and there can be no assurance that
such a product can be manufactured at a cost or in quantities necessary to make
it commercially viable.

The Company has engaged a clinical research organization to develop and
strategize on completing the FDA regulatory process. The Company's long-term
success is predicated on the strength of its patent position. The Company is the
exclusive assignee of a U.S. patent application for the therapeutic remedy of
male erectile dysfunction. The Company relies on trade secrets and unpatented
proprietary technology in producing its product.

The competition for the product of the Company is primarily Upjohn and
Vivus and secondarily other treatments for male erectile dysfunction, including
penile implants and vacuum systems.

Another uncertainty is the dependence on key personnel familiar with
the manufacturing process. The loss of any of the Company's key scientific
personnel could have an adverse effect on the Company's continued product
development and business operations.

GENERAL:

According to the Consensus Report of the American Medical Association,
erectile dysfunction in one form or another afflicts nearly 50,000,000 men
world-wide. This number is expected to increase as the male population increases
its life expectancy and the current "baby boom" generation ages. Erectile
dysfunction becomes more prevalent as men get older.

If the Company's product receives the appropriate regulatory approvals,
which is not certain, the Company expects to be able to capitalize on this
trend. Estimates of funding needed to pursue the regulatory process run as high
as $15,000,000. In the short term, this is likely to retard liquidity as the
Company's capital needs will increase.

The Company expects to obtain capital funds either from the issuance of
common stock or debt. It is expected that external sources will be available to
provide these funds, but there can be no guarantees of such funding. See "-
Overview," "Description of Securities" and "Use of Proceeds from Sale of
Debentures." As of the date of this prospectus, the Company has no plans to
obtain capital funds other than as described in the above-referenced sections of
this prospectus.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

DIRECTORS AND EXECUTIVE OFFICERS

As of July 17, 1997, the directors and executive officers of the
Company, their ages, positions in the company, the dates of their initial
election or appointment as director or executive officer, and the expiration of
the terms as directors are as follows:

37
<PAGE> 41

<TABLE>
<CAPTION>
PERIOD SERVED AS DIRECTOR OR
----------------------------
NAME AGE POSITION (1) EXECUTIVE OFFICER
---- --- ------------ -----------------
<S> <C> <C> <C>
Jackie R. See, M.D. (2) 55 Director Since 1-6-94

Don Steffens 49 Chief Executive Officer, Since 12-6-96
President and Director

C. Thomas Walters 60 Chief Financial Officer Since 5-22-97
and Treasurer

Alexander H. Walker, Jr. 71 Secretary and Director Since 5-22-97
</TABLE>

(1) The Company's directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified. The
Company's officers are appointed annually and as needed by the Board of
Directors and serve at the pleasure of the Board.

(2) In his role as consultant, Dr. See acts as the Company's Chief Scientific
Officer.

BUSINESS EXPERIENCE:

JACKIE R. SEE, M.D., F.A.C.C., is a Director of the Company. Dr. See is
a cardiologist and the principal investigator of the microsphere technology of
"PGE-1-EDT". He received his M.D. from the University of California, College of
Medicine (Irvine) in 1968. Dr. See completed his Residency in Internal Medicine
at Huntington in 1973. He went on to do research fellowship work in cardiology
at Peter Bent Brigham Hospital, Harvard Medical School (Boston). He was an
Associate Director of the Foundation for Cardiovascular Research (1968-1984) and
a Fellow of the American College of Cardiology since 1980.

Dr. See is licensed to practice medicine in the States of California
and Nevada and is Board eligible by the American Board of Cardiovascular
Diseases. He is the author or co-author of more than 60 research articles for
various medical publications.

DON A. STEFFENS is the Chief Executive Officer, President and a
Director of the Company. He brings more than 20 years of business management,
product development and marketing expertise to the Company. Mr. Steffens has
performed an important role in the research, development and manufacturing
process of PaGE(1) and has worked with Dr. See in the development and
commercialization of a number of other products. Mr. Steffens served as Vice
President and Chief Financial Officer of BTI from 1992 until his appointment as
Chief Financial Officer, Secretary and Treasurer of the Company in December
1996. Prior to 1992, he served as President of Marina Systems International,
Inc., a software development and marketing company based in San Francisco,
California; Branch Manager, Litton Industries, Los Angeles, California; and
Regional Sales Manager, Victor Business Products, Chicago, Illinois.

C. THOMAS WALTERS, CPA, is Chief Financial Officer and Treasurer of the
Company. He has over 25 years of accounting, financial reporting, international
accounting and financial management experience. His B.Sc. degree was obtained
from Central Missouri State University, and he is a licensed Certified Public
Accountant in the State of California. Prior to his employment with the Company,
Mr. Walter served as Manager of Financial Accounting for M/A COM, PHO, a
division of M/A COM, Inc, an AMP Company, from 1995 to 1996. From 1991 to 1994,
he served as Controller and Chief Financial Officer of JWP Mechanical Services.

ALEXANDER H. WALKER, JR., Esq. is Secretary and Director of the
Company, as well as its corporate counsel. Mr. Walker brings over 40 years of
legal experience to the Company. He has served on the Board of Directors of
various pharmaceutical, real estate, mining and oil and gas corporations and is
the owner and Chairman of the Board of Nevada Agency and Trust Company, which
was established in 1903. Mr. Walker received his B.A. from Waynesburg College,
Pennsylvania, in 1950 and his J.D. from the University of Pittsburgh School of
Law in 1952.

38
<PAGE> 42
EXECUTIVE COMPENSATION

The following table sets forth information about compensation paid or
accrued by the Company during the years ended December 31, 1996, 1995 and 1994
to the Company's officers and directors. None of the Company's Executive
Officers earned more than $110,000 during the years ended December 31, 1996,
1995 and 1994:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Other Securities
Salary/ Annual Restricted Underlying Other
Name and Consulting Compen- Stock Options/ LTIP Compen-
Principal Position Year Fees Bonus sation Awards (1) SARs Payouts sation
- ------------------ ---- ---------- ----- -------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JACKIE R. SEE (2) 1996 $104,000 None None 350,000 None None None
Director of Research 1995 $ 16,000 None None 20,000 None None None
1994 None None None 790,000 None None $26,000

IAN HICKS (3) 1996 None None None 250,000 None None $16,440
CEO & President 1995 None None None None None None None
1994 None None None None None None None

DON STEFFENS (4) 1996 None None None 250,000 None None None
CEO & President 1995 None None None None None None None
1994 None None None None None None None

C. THOMAS WALTERS 1996 None None None None None None None
(5) 1995 None None None None None None None
CFO & Treasurer 1994 None None None None None None None

ALEXANDER H. 1996 None None None None None None None
WALKER (5) (6) 1995 None None None None None None None
Secretary 1994 None None None None None None None
</TABLE>

(1) The number and value of aggregate restricted stock holdings of officers and
directors as of December 31, 1996 was 1,345,000 shares worth $804,500
(calculated according to item 402(b)(2)(iv)(A) of Regulation S-B, which
requires the dollar value of any award of restricted stock to be calculated
by multiplying the closing market price of the registrant's unrestricted
stock on the date of grant by the number of shares awarded. Thus, the
850,000 shares awarded to Dr. See, Mr. Hicks and Mr. Steffens on December
6, 1996, when the closing market price was $0.87 per share, are worth
$739,500. The 20,000 shares awarded to Dr. See on September 25, 1995, when
the closing market price was $3.25 per share, are worth $65,000. The
790,000 shares awarded to Dr. See in 1994 are valued at $0, because there
was no public market for the shares at that time). All of the restricted
stock awards vest at the time that they are granted. No dividends will be
paid on the restricted stock.

(2) Dr. See is not an employee, and all compensation paid to him was as a
consultant. His consultancy agreement, which was entered into as of April
1, 1996 and will terminate on March 30, 1999, calls for the Company to pay
him a consulting fee of $12,500 per month. In addition, he will be
reimbursed for all reasonable and necessary business expenses incurred in
the discharge of his consulting duties. Dr. See will also receive a royalty
fee equal to two percent (2%) of the net revenues from the sale of PaGE(1)
and any other products the Company may produce under Patent Application No.
08/573408. Dr. See will receive these royalty fees for the life of the
patent application and any patents that may issue therefrom.

(3) Mr. Hicks was not an employee of the Company during 1994 and 1995, and he
is no longer an employee of the Company as of May 14, 1997.

<PAGE> 43
(4) Mr. Steffens was not an employee of the Company during 1994 and 1995, and
he moved from the positions of CFO, Secretary and Treasurer of the Company,
to which he was appointed in 1996, to his current positions of President
and CEO as of May 22,1997.

(5) Mr. Walters and Mr. Walker were not employees of the Company during the
years above mentioned.

(6) Mr. Walker is not an employee of the Company, although he became counsel to
the Company on March 19, 1996. He did not received any cash payment for
legal fees and received $600 as reimbursement of expenses in 1996 for his
services as counsel.

In addition to the above, on April 2, 1997, the Company entered into a
consulting agreement with David E. Jordan for the provision of financial public
relations and other services. Under this agreement , Mr. Jordan was entitled to
receive 200,000 shares of Common Stock (which Mr. Jordan and parties related to
Mr. Jordan received), as well as a monthly fee of $8,000 and, in addition to the
monthly fee, all agency fees which public relations and/or advertising firms
receive when preparing material or placing advertising. An additional 1,000,000
shares of Common Stock were issued to Mr. Jordan and parties related to Mr.
Jordan. The Company terminated the consulting agreement on June 17, 1997 and
cancelled the 1,000,000 shares that had been issued to Mr. Jordan and parties
related to Mr. Jordan.

40
<PAGE> 44
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth certain information as of July 14, 1997
and as adjusted to reflect the issuance of Common Stock upon conversion of an
additional $14,300,000 principal amount of Debentures (excluding interest),
estimated as 18,197,856 shares for the purposes of calculation based on the
Market Price on July 14, 1997, see "Selling Securityholder and Plan of
Distribution", by (i) each Director and Executive Officer of the Company, (ii)
all directors and officers as a group and (iii) each person known to the Company
to be the beneficial owner of more than five percent of the Company's Common
Stock:

41
<PAGE> 45

- ---------------------------------------------------------------------------------------------------------------------
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE OF OUTSTANDING
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP (1) SHARES OF COMMON STOCK
- -------------------- ------------------------------- ------------------ --------------------- -----------------------
JULY 14, 1997 AFTER CONVERSION (2)
- -------------------- ------------------------------- ------------------ --------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock Dr. Jackie R. See 11,202,500 (3) 59.3% 30.9%
100 N. Arlington
Suite 23-P
Reno, NV 89501

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock Ian Hicks (5) 250,000 1.3% 0.7%
5967 Jacaranda Lane
Yorba Linda, CA 92887

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock Don Steffens (6) 1,250,000 6.6% 3.5%
100 N. Arlington
Suite 23-P
Reno, NV 89501

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock C. Thomas Walters (7) -0- 0.0% 0.0%
17992 Mitchell South
Irvine, CA 92614

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock Alexander H. Walker, Jr. (8) 1,245,000 6.6% 3.4%
American Plaza II
57 West 200 South, Ste. 400
Salt Lake City, UT 84101

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock All Directors and 13,697,500 (4) 72.5% 37.8%
Officers as a Group

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
Common Stock Bio-Sphere Technology, Inc. 6,852,500 36.3% 18.9%
Suite 23P
100 N. Arlington Avenue
Reno, NV 89501

- -------------------- ------------------------------- ------------------ --------------------- -----------------------
</TABLE>

<PAGE> 46

(1) The ownership of the shares deemed to be held by Springrange Investment
Group, Ltd., the Selling Securityholder, due to its ownership of $5,000,000
principal amount of Debentures and its right to acquire an additional
$10,000,000 principal amount of Debentures, is not reflected due to
Springrange's contractual obligation to the Company pursuant to which it is
not entitled to convert any Debenture to the extent that after such
conversion the number of shares of Common Stock beneficially owned by
Springrange and its affiliates (excluding any shares deemed beneficially
owned through any continuing ownership of Debentures) exceeds 4.9% of the
outstanding Common Stock. The 864,523 shares of Common Stock issued to
Springrange upon conversion of $700,000 principal amount of Debentures on
July 14, 1997 do not exceed 4.9% of the 18,889,652 shares then outstanding.
The conversion price will be adjusted and the number of shares beneficially
owned and being offered by the Selling Securityholder will vary in
accordance with the terms of the Debentures to reflect changes in the
Market Price of common stock, stock dividends, stock splits, and certain
other circumstances. See "Description of Securities."

(2) Assumes that $15,000,000 principal amount of Debentures is issued and all
Debentures are converted at a Market Price of $1.03 per share of Common
Stock, the Market Price that would have resulted from the exercise of
Debentures on July 14, 1997. See "Description of Securities."

(3) Includes 6,852,500 shares owned by Bio-Sphere Technology, Inc., of which
Dr. See is a controlling person.

(4) Includes 6,852,500 shares owned by Bio-Sphere Technology, Inc., of which
Dr. See is a controlling person, but does not include 250,000 Shares owned
by Ian Hicks.

(5) Mr. Hicks resigned as President, Chief Executive Officer and Director of
the Company as of May 14, 1997.

(6) As of May 22, 1997, Mr. Steffens moved from the positions of Chief
Financial Officer, Secretary and Treasurer of the Company to the positions
of President and Chief Executive Officer of the Company.

(7) Mr. Walters was appointed Chief Financial Officer and Treasurer as of May
22,1997.

(8) Mr. Walker was appointed Secretary of the Company as of May 22,1997.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of June 15, 1997, BTI owned 38% of the Company's outstanding shares.
11,000,000 of BTI's shares, or 44%, are owned by Dr. Jackie See, who is also a
Director of the Company. Dr. See also has potential voting rights on a further
2,000,000 BTI shares. Dr. See may be considered a promoter of the Company.

On September 25, 1995, the Company issued 203,500 shares to the
following officers, directors or consultants for services to the Company:

<TABLE>
<S> <C>
Rex Morden 21,000
Alexander Sparkuhl 5,000
Neal Armstrong 50,000
Steven Rayman 75,000
</TABLE>

<PAGE> 47
<TABLE>
<S> <C>
Eric Savage 32,500
Jackie R. See 20,000
</TABLE>

On February 2, 1994, the Company issued a total of 960,000 shares in
connection with the assignment of intellectual property to the Company and for
services rendered by consultants and former owners and directors of the Company.
Of this amount, 714,000 shares were issued to BTI in consideration of the
assignment of the intellectual property rights to patent, develop, manufacture
and market the PGE-1 product. The remaining shares were issued to consultants
and former owners and directors of the Company in return for services they
rendered. Of this amount, 123,000 shares were returned to treasury in July of
1994 as a result of the non-performance of services by the individuals who had
originally received the shares.

On December 7, 1995 the Company issued 6,138,500 shares of common stock
to BTI for BTI's assistance in raising working capital, prosecuting the patent
application, management assistance, and for assignment of rights under four
distribution agreements for the PaGE(1) product. In entering into the Exchange
Agreement with BTI under which this transaction took place, the Company's
management prepared its valuation of the BTI technology based on the three
standard comparative conventional methods of assessment--income, replacement
cost and industry comparables. The component parts of the property were assessed
at the time of exchange in total and allocated to the parts. The total value
determined for property asset was $6,852,500 and is broken out as follows:

<TABLE>
<S> <C>
Technology $5,612,000
Patent Application 300,000
Sae Han Pharmaceutical Agreement 363,500
Pharma Maehle Agreement 425,000
Aerobic Life Agreement 52,000
Commercial Service Agreement -0-
</TABLE>

The issuance of stock was based on a valuation study conducted by an
independent appraiser, Houlihan Valuation Advisors ("HVA"). HVA determined the
fair market value of the Company's stock to be $1.62 per share. In addition, HVA
conducted a detailed analysis of the discount appropriate for restricted
securities relative to their freely trading counterparts ("restricted
discount"). This analysis relied on the SEC Institutional Investor Study of
1971, the Gelman Study of 1972, the Trout study of 1972, the Moroney Study of
1973, the Maker Study of 1976, the Standard Research Consultants Study of 1983,
and the Willamette Management Associates Study of 1984. Based on its analysis,
HVA determined that the restricted discount for the Company's stock issued to
BTI under the Exchange Agreement should be between 40% and 80%. The Company
issued the stock to BTI at a discount of 31.1%.

During November 1995, the Company entered into a two-year agreement
with Thomas Waite & Associates ("Waite") to provide an array of business
services to enhance the Company's asset base and further the development of the
Company's business plan. The contracted services include public/investor
relations, marketing and sales plans, identifying strategic partnership
arrangements, and other opportunities that would enhance the market value and
viability of the Company. In December 1995, the Company issued 350,000 shares of
Common Stock to Waite in consideration of the services to be provided for the
two-year duration. An additional 568,750 shares were issued to Waite on December
18, 1996 in settlement of litigation between the Company and Waite. See
"Description of Business - Legal Proceedings."

On April 12, 1996, the corporation issued 180,000 shares of Common
Stock to Alexander H. Walker, Jr. in connection with legal services rendered and
to be rendered to the Company. On July 5, 1996, the Company issued 20,000 shares
of Common Stock to Alexander H. Walker III and 20,000 shares of Common Stock to
J.T. Cardinalli for legal services rendered and to be rendered to the Company.

The Company entered into a royalty agreement with its founder, Dr. See,
in April 1996, whereby it will pay Dr. See two percent (2%) of net revenues from
the sale of PaGE(1) and any other products the Company may produce under Patent
Application No. 08/573408. Dr. See will receive these royalty fees for the life
of the patent application and any patents that may issue therefrom.

<PAGE> 48
The Company has a payable to BTI of $183,535 as of March 31, 1997. The
payable is related to costs incurred by the parent on the Company's behalf for
research and development of PaGE(1) and can be broken down as follows:

<TABLE>
<CAPTION>
PERIOD ENDED
--------------------------------------
12/31/95 12/31/96 3/31/97 TOTAL
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Payroll $ 184,531 $ 10,100 $ -0- $ 194,631
Management fees -0- 90,000 -0- 90,000
Legal and professional fees 53,539 8,299 -0- 61,838
Research & development expenses -0- 50,378 -0- 50,378
Rent 16,800 12,000 -0- 28,800
Travel & entertainment expenses 5,044 11,570 -0- 16,614
Utilities 10,678 -0- -0- 10,687
Product liability insurance -0- 7,736 -0- 7,736
Equipment rental -0- 4,392 -0- 4,392
------------ ------------- ----------- -------------
Total expense 270,592 194,475 -0- 465,067
============ ============= =========== =============
Payments and credit adjustments -0- (281,532)
=============
Net payable to BTI as of 3/31/97 $ 183,535
=============
</TABLE>

The terms of the payable are open intercompany account. The payable does not
accrue interest.

In January and February of 1997, the Company issued a total of 250,000
shares to Ronald E. Patterson for $125,000. On March 18, 1997, the Company
issued a total of 1,270,000 shares of its common stock to eight individuals for
legal and consulting services and for services rendered by officers and
directors of the Company as follows:

<TABLE>
<S> <C>
J.T. Cardinalli 20,000
Roger T. Crenshaw, M.D. 100,000
Ian Hicks 250,000
Ronald E. Patterson 100,000
Jackie R. See 350,000
Don Steffens 250,000
Alexander H. Walker, Jr. 180,000
Alexander H. Walker III 20,000
</TABLE>

Mr. Cardinalli, Mr. Walker, Jr. and Mr. Walker, III received shares as
compensation for legal services rendered. Dr. Crenshaw received shares as
compensation for his efforts in the conduct of the Phase I clinical trial. The
shares originally issued to Mr. Patterson were transferred to Mr. Walker, Jr.,
in return for Mr. Walker, Jr. transferring 35,000 unrestricted shares from his
holdings to D. Weckstein and Co., Inc. ("Weckstein") as part of a legal
settlement between the Company and Weckstein. See "Business - Legal
Proceedings." Mr. Hicks, Mr. Steffens and Dr. See received shares as
compensation for their services as officers and directors of the Company.

On April 18, 1997, the Company issued a total of 200,000 shares of
common stock to David E. Jordan and parties related to Mr. Jordan as
compensation for arranging financing for the Company.

On May 15, 1997, the Company authorized the issuance of 33,000 shares
to three individuals as compensation for financial consulting services rendered
to the Company. As of the date of this prospectus, these shares have not yet
been issued.

On June 6, 1997, the Company issued an additional 1,000,000 shares in
the aggregate to David E. Jordan and parties related to Mr. Jordan; however,
these shares were subsequently cancelled for failure of consideration.

On June 10, 1997, the Company issued 5,872,000 shares, as follows:

<TABLE>
<S> <C>
Wassgren Anita See Trust 1,000,000
</TABLE>

<PAGE> 49
<TABLE>
<S> <C>
Jackie R. See 3,000,000
Don A. Steffens 1,000,000
Alexander H. Walker, Jr. 872,000
</TABLE>

The shares issued to Mr. Steffens were issued as compensation for his assumption
of the duties of Chief Executive Officer and President of the Company, and the
shares issued to Mr. Walker were issued as compensation for his assumption of
the duties of Secretary and Director of the Company. The shares issued to Dr.
See and to Wassgren Anita See Trust were issued in consideration of an amendment
to Dr. See's consulting agreement with the Company.

On June 10, 1997, the Company issued 100,000 shares to Joseph L.
Williams, MD, as compensation for product promotion services rendered by Dr.
Williams.

The Company may continue the practice of issuing shares of Common Stock
in lieu of cash payment in the future if it determines that such issuance is in
the best interests of the Company and is consistent with the Company's
agreement.

The foregoing arrangements and relationships may give rise to conflicts
of interest with respect to future interpretation of the agreements between the
Company and its affiliates or with respect to future transactions between the
Company and its affiliates. There can be no assurance that future transactions
or arrangements between the Company and any affiliates will be advantageous to
the Company. See "Risk Factors Transactions with Affiliates," "- Dependence on
Key Personnel," "- Dependence on Third-Party Researchers," "Business - Research
and Development," "Management's Discussion" and "Principal Shareholders."

LEGAL MATTERS

The validity of the shares of Common Stock will be passed upon for the
Company by Alexander H. Walker, Jr., Esq., Reno, Nevada, who owns 1,245,000
shares of the Company's common stock and is an officer of the Company. Certain
matters relating to the British Virgin Islands have been passed upon by Krieger
& Prager, Esqs., New York, New York, as set forth herein. Various legal matters
will be passed upon for the Company by David R. Baker, Esq., New York, New York.

EXPERTS AND CHANGE IN ACCOUNTANTS

The financial statements of the Company included in this prospectus for
the years ended December 31, 1996 and 1995 have been audited by Dale McGhie,
independent certified public accountant, as set forth in his report thereon
appearing elsewhere herein. Mr. McGhie's report includes an explanatory
paragraph stating that, in light of the recurring losses suffered by the
Company, its continued existence depends upon its ability to resolve its
liquidity problems.

The Company's former accountant, Fair, Anderson & Langerman, was
replaced by W. Dale McGhie, Certified Public Accountant, 1539 Vasser Street,
Reno, Nevada 89502, as the Company's independent accountant in connection with
the financial statements for the year ended December 31, 1996. Fair, Anderson &
Langerman did not resign and did not decline to stand for re-appointment. They
were replaced because the Company's headquarters were moved to Reno, Nevada,
where Mr. McGhie is located, from Las Vegas, Nevada, where Fair, Anderson &
Langerman is located, and the Company believed that it would be more efficient
and effective to use Mr. McGhie as a Reno-based accountant. The decision to
change accountants was recommended and approved by the Board of Directors.

Fair, Anderson & Langerman's report on the financial statements for the
years ended December 31, 1995 and 1994 was presented on the assumption that the
Company would continue as a going concern and was unqualified. (This assumption
was also made by Mr. McGhie in his report on the financial statements for the
years ended December 31, 1996 and 1995.) There were no disagreements with Fair,
Anderson & Langerman on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if

<PAGE> 50
not resolved to that firm's satisfaction, would have caused that firm to make
reference to the subject matter of any such disagreements in connection with its
reports.

Valuation of the Company's common stock in connection with the issuance
of 6,138,500 shares to its parent company, BTI, in December 1995 was conducted
by Houlihan Valuation Advisors, Salt Lake City, Utah.

ADDITIONAL INFORMATION

The Company is a reporting company under the Exchange Act. Reports and
other information filed by the Company with the Securities and Exchange
Commission may be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, DC 20549 and at its Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such reports and other information can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission, at http://www.sec.gov.

The Company furnishes its shareholders with annual reports containing
audited financial statements after the close of each fiscal year.

The Company will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in the prospectus. Please direct
requests to Secretary, Harvard Scientific Corp., 100 North Arlington, Suite
23-P, Reno, Nevada 89501, or call (702) 796-1173.

47
<PAGE> 51
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PROSPECTUS SUMMARY .............................................. 3
THE OFFERING ..................................................... 4
RISK FACTORS ..................................................... 6
DESCRIPTION OF SECURITIES ........................................ 14
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ......... 15
USE OF PROCEEDS FROM SALE OF DEBENTURES .......................... 18
CAPITALIZATION ................................................... 19
SELLING SECURITYHOLDER AND PLAN OF DISTRIBUTION .................. 20
DESCRIPTION OF BUSINESS .......................................... 21
SELECTED FINANCIAL DATA .......................................... 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION ........ 31
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ..... 37
EXECUTIVE COMPENSATION ........................................... 39
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................... 43
LEGAL MATTERS .................................................... 46
EXPERTS AND CHANGE IN ACCOUNTANTS ................................ 46
ADDITIONAL INFORMATION ........................................... 47
INDEX TO FINANCIAL STATEMENTS .................................... F-1
</TABLE>

<PAGE> 52
HARVARD SCIENTIFIC CORP.

12,064,344

SHARES OF
COMMON STOCK

PROSPECTUS
<PAGE> 53
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following paragraph previously set forth in this Item 26 is amended to read
as follows:

In January and February of 1997, the Company issued a total of 250,000
shares to Ronald E. Patterson for cash payment of $125,000. Such shares were
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended, in view of the sophistication of the issuee.

The following paragraph is added to Item 26:

On July 14, 1997, Springrange Investment Group Ltd. converted $700,000
principal amount of 6% Convertible Debentures and related interest in the amount
of $13,232 into 864,523 shares of Common Stock. Such shares were issued pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as
amended.

ITEM 27. EXHIBITS

The following exhibits are filed with this Amendment No. 2 to the registration
statement:

Number Description
6.1b Consent of W. Dale McGhie, CPA.
6.4 Consent of Houlihan Valuation Advisors

II-1
<PAGE> 54
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned on
July 14, 1997.

HARVARD SCIENTIFIC CORP.

By /s/Don A. Steffens.
--------------------------
Don A. Steffens, President

In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities and on the dates stated.

Name Title Date
---- ----- ----
<S> <C> <C>

Director, President and
/s/ Don A. Steffens Chief Executive Officer 7/14/1997
- ---------------------------------
Don A. Steffens

Chief Financial Officer
/s/ C. Thomas Walters and Treasurer 7/14/1997
- ---------------------------------
C. Thomas Walters

/s/ Alexander H. Walker, Jr. Director and Secretary 7/14/1997
- -----------------------------------
Alexander H. Walker, Jr.

/s/ Jackie R. See, MD Director 7/14/1997
- ---------------------------------
Jackie R. See, MD
</TABLE>

II-2

<PAGE> 55
EXHIBIT INDEX
-------------

Number Description
------ -----------

6.1b Consent of W. Dale McGhie, CPA.

6.3 Consent of Houlihan Valuation Advisors

<PAGE> 1
ITEM 6.1b

CONSENT OF W. DALE MCGHIE, CPA.
<PAGE> 2
CONSENT OF INDEPENDENT AUDITOR

I hereby consent to the reference to my firm under the caption
"Experts" and to the use of my report on financial statements for the years
ended December 31, 1996, 1995 and 1994 dated March 20, 1997 except for Notes 12
and 13 dated June 2, 1997, in the Registration Statement (Form SB-2) in which
this consent is included and the related Prospectus of Harvard Scientific Corp.

I also consent to the addition of Supplemental Schedules V and VI of
Harvard Scientific Corp. for the years ended December 31, 1996 and 1995 in such
Registration Statement and Prospectus.

/s/ Dale McGhie
-----------------------------------
W. Dale McGhie, CPA

Dated: July 11, 1997
Reno, Nevada

<PAGE> 1
ITEM 6.4

CONSENT OF HOULIHAN VALUATION
ADVISORS
<PAGE> 2
CONSENT OF EXPERT

I hereby consent to the reference to my company under the caption
"Certain Relationships and Related Transactions" in the Prospectus contained in
this Registration Statement.

/s/ Frederic L. Jones, President
---------------------------------------
Houlihan Valuation Advisors

Dated: July 7, 1997
Salt Lake City, Utah