U.S. Securities and Exchange Commission
                      Washington, D.C. 20549

                           Form 10-KSB

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE         
    SECURITIES EXCHANGE ACT OF 1934 [Fee required]

For the fiscal year ended May 31, 1997
                          ------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [No fee required]

For the transition period from _____________ to____________  

Commission file number 0-10035

                         LESCARDEN INC.                     
 ----------------------------------------------------------------
 (Exact name of small business issuer as specified in its charter)

        New York                                13-2538207    
------------------------------            -------------------
(State or other jurisdiction of           (I.R.S. Employer
 incorporation or organization)            Identification No.)

420 Lexington Avenue, New York Suite 2025          10170      
----------------------------------------- -------------------
(Address of principle executive offices)       (Zip Code)

Issuer's telephone number (212) 687-1050
                          --------------
Securities registered under Section 12(b) of the Act: None
                                                      ----
Securities registered under Section 12(g) of the Act:

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




Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]

Issuers revenues for its most recent fiscal year were $ 44,759.

The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on July 3, 1997 was approximately
$ 8,900,492.

The number of shares of registrant's Common Stock outstanding as of
July 3, 1997 was 15,882,218.

            DOCUMENTS INCORPORATED BY REFERENCES: None

Transitional Small Business Disclosure Format (Check one): Yes    
: No X  

<PAGE>

                                  PART I


ITEM 1. BUSINESS
        --------  
          The Company's present liquidity position must be viewed
as critical.  The successful conclusion of the Company's Chapter XI
proceeding contributed significantly to the continued improvement
of the Company's financial soundness (See Item 3. Legal
Proceedings).  And, despite greatly reduced food supplement sales
during this fiscal year, the Company's remains hopeful that sales
of its food supplement materials may be sufficient to allow the
Company to continue to meet its obligations and sustain its
operations for the near term. Moreover, the Company may receive
certain license fees in the near term which would also alleviate
the situation somewhat.
          
          During the fiscal year ended May 31, 1997, the Company 
continued sales of its proprietary bovine cartilage material, BIO-
CARTILAGE<F1>, to food supplement distributors for sale through
nutritional food supplement stores in the U.S.  In addition the
Company introduced a second food supplement product called POLY-
Nag<F2>. If these initial incursions into the nutritional food
supplement market are successful, it would further provide the much
needed revenue to finance continuing operations. (See Item 6.
Management's Discussion and Analysis or Plan for Operations).

          Moreover, Lescarden Inc. continues to develop and seek
government approval to market and sell its proprietary Catrix<F1> 
material, a cartilage derived therapeutic agent which the Company
believes has demonstrated promising results in the treatment of
metastatic renal cell cancer (as well as certain other diseases).
The therapeutic effects of Catrix<F1>  were discovered by one of the
Company's founders in connection with the treatment of various
human malignancies, the healing of surgical wounds and the control
of tissue inflammation.

          The Company has an Investigational New Drug ("IND")
exemption from the U.S. Food and Drug Administration ("FDA") and
the Canadian Health Protection Branch ("HPB") for the experimental
treatment of metastatic renal cell cancer in humans.  Prior to
obtaining the IND, the Company completed all pre-clinical studies
and Phase I clinical trials relating to the safety of Catrix<F1> .  It
is now conducting Phase II human clinical trials at two major
teaching hospitals, one in New York State and the other in Montreal
to establish the efficacy of Catrix<F1>  in the treatment of metastatic
renal cell cancer.

<PAGE>

          On completion of Phase II and subsequent Phase III
trials, the Company intends to submit a New Drug Application
("NDA") to the FDA and New Drug Submission ("NDS") to the HPB for
approval to market and commercially ship Catrix<F1>  for the treatment
of metastatic renal cell cancer.  The Company anticipates that the
NDA and NDS will be filed in approximately four to five years. 
Approval by the FDA and HPA may require an additional one to three
years, although the FDA and HPB can accelerate the process.

          As part of the FDA and HPB approval process, the Company 
may be required to do additional laboratory research into the
molecular composition of the active fractions of Catrix<F1> .  Results
of this research will assist the Company in developing standardized
manufacturing and production processes.  In addition, chemically
modified versions of the isolated active fractions may prove to
have additional therapeutic effects.

          In 1994, the Company licensed Orphan Medical Inc. to 
seek FDA approval for the use of pure Catrix<F1>  powder in treating
decubitus ulcers (the pressure sores experienced by some diabetics
and the chronically bed-ridden). Current treatment for these
lesions involves improved hygiene, nutrition and nursing care. The
Company believes that the ability to provide an active agent to
accelerate the healing process represents a clear business
opportunity in a significant market with a demonstrated need for a
more effective therapy. In early 1997, Orphan sought and was
granted expanded rights to use Catrix<F1>  in all topical formulations
other than cosmetic products. 

          The Company intends to focus a significant portion of its
resources on obtaining approval for the use of Catrix<F1>  in treating
metastatic renal cell cancer and decubitus ulcers, with an ultimate
goal of marketing the product, directly or through another
organization. This particular malignancy was chosen for
experimentation because of evidence of therapeutic efficacy,
likelihood of more expeditious regulatory approval, absence of non-
toxic or efficacious alternatives, and a large enough patient base
to support commercial development by the Company.  Furthermore, the
Company believes that the observed effects of Catrix<F1>  (including
acceleration of wound healing, tumor inhibition and reduction,
inhibition of excessive vascularization and modulation of immune
system functions) coupled with an absence of toxicity, present
additional promising avenues of investigation.

<PAGE>

Scientific Background.

          Background of Catrix<F1> .  In the early 1950's, one of the 
Company's co-founders discovered that cartilage powder
significantly hastened the healing of surgical wounds in animals. 
During early wound healing experiments, it was noted that the
margins of the surgical wounds treated with Catrix<F1>  were less red
and swollen than those of the controls.  This observation led the
discoverer to the application of Catrix<F1>  to various inflammatory
diseases, systemic and topical.  One inflammatory condition that
was successfully treated was psoriasis, a condition caused by an
over production of skin cells.  In certain ways, psoriasis
resembles the uncontrolled growth of cancer cells.  Based on the
aforementioned information as well as encouraging results from
animal cancer studies, the discoverer believed that Catrix<F1>  could
be successfully applied in the treatment of human cancer.

          The Company believes that Catrix<F1>  acts as a biological
response modifier, regulating the activity of important components
of the immune system.  Other observed effects of Catrix<F1>  include:
          -acceleration of wound healing;
          -inhibition of excessive vascularization of certain 
           tissues;
          -inhibition of proliferation of malignant cells; and
          -(in vitro) moderation of excessive collagen synthesis by
           fibroblast cells.

          Metastatic Renal Cell Cancer.  Metastatic renal cell
cancer (which is the spread of a primary kidney cancer to other
organs) is a particularly lethal form of cancer afflicting
approximately 10,000 individuals per year in the United States and
Canada.  Only eight to twenty percent of the metastatic renal cell
cancer patients survive two years after diagnosis.  The patient's
chance of overcoming the disease is dependent upon how advanced the
disease is at the time of diagnosis.  The disease originates as a
tumor in the kidney.  After a certain stage in tumor growth,
metastasis, or spread of cancerous cells to other body organs,
occurs.  Conventional treatment generally involves removal of the
diseased kidney followed by radiation or chemotherapy to affect
reduction of the secondary tumors or metastases.

          It has recently been recognized that renal cell cancers
may be responsive to treatment with some cytokines such as
interleukin-2.  Cytokines are intimate components of the body's
immune system, the integrity of which system is important  in
defending the body against many forms of cancer.  Interleukin-2 is
somewhat effective in treating renal cell cancer but its usefulness
is limited by its significant toxicity.  The Company believes that
Catrix<F1> , with its ability to modulate the body's immune system and
its non-toxic properties, is promising as a treatment for this
devastating disease.

<PAGE>

          Healing Decubitus Wounds.  Decubitus ulcers, or pressure
sores, are a scourge of the infirmed elderly, diabetic and
generally immobile, wheel chair limited patient.  Current therapy
includes removal of the dead tissue around the ulcer, good hygiene,
and nutrition and nursing care.  Given the ever increasing elderly
population in the United States and the costs of specialized
medical treatment, a product such as Catrix<F1>, which appears to
promote wound healing, will, the Company believes, be sought after
by the medical community.     
     
          In pursuit of this therapeutic application, the Company
granted a license in October 1994, to Orphan Medical Inc. of
Minnetonka, Minn.  The license entitles Orphan to use Catrix<F1> 
powder in clinical trials and assessing its efficacy in the
treatment of wounds.  In August 1996 Orphan filed a 510(k)  device
application with the FDA and the FDA approved the application in
December 1996.  Orphan intends to conduct Phase II/III human wound
healing clinical trials 1997. Under the license agreement, Orphan
is required to pay Lescarden certain license fees, and upon
securing marketing approval from the FDA, to pay a royalty on all
sales and to purchase all Catrix<F1>  powder from the Company.
Moreover, in early 1997, Orphan initiated talks with the Company
seeking expanded topical formulations rights for Catrix<F1>  which
resulted in an amendment to the parties' 1994 license agreement.

Pre-Clinical Studies of Catrix<F1>.

          During the 1970's, the Company conducted a wide range of
pre-clinical laboratory and animal studies to assess the potential
safety and efficacy of Catrix<F1> .  These studies included the
following:  Acute Oral Toxicity (rats); Acute Subcutaneous Toxicity
(mice): Acute Dermal Toxicity (rabbits): 18-Month Chronic Toxicity
and Carcinogenicity Study (mice); 2-Year Chronic Toxicity and
Carcinogenicity (rats); 14 week Chronic Toxicity Study (dogs); Per
cutaneous Toxicity (guinea pigs); Dental Wound Healing (rats);
Dental Wound Healing (dogs); and Irritation and Sensitization of
Human Skin by Catrix<F1> .  

          The results of these studies were submitted to the FDA
and HPB as part of the Company's application for an IND exemption,
approval of which is required prior to the commencement of human
clinical trials.  In 1985, the FDA granted the Company's request
for an IND exemption for the application of Catrix<F1>  in the
treatment of Scleroderma, a rare skin disease.  Shortly thereafter,
the IND exemption was expanded to include the application of
Catrix<F1>  for various forms of cancer, including metastatic renal
cell cancer.

<PAGE>

Human Clinical Trials Conducted with Catrix<F1>  and Catrix<F1> -S

          Since approval of the Company's IND, it has completed
Phase I clinical trials and is conducting Phase II clinical trials. 
The Company's clinical trials involve the administration  of
Catrix<F1>  capsules to solid tumor cancer patients.  (See, "Business-
Government Regulation").

Phase I Trials

          The objective of the Company's Phase I trials (involving
the initial introduction of Catrix<F1>  into human subjects) was to
test for safety, side effects, dosage tolerance, metabolism and
clinical pharmacology.  Initial testing was conducted on patients
with advanced cancers that were unresponsive to other forms of
therapy.  Regulatory authorities require that new cancer therapies
be administered in patients who have failed conventional therapy
and that some indication of efficacy be shown before the drug can
be used as the "drug of choice" in earlier stage patients (i.e., in
Phase II trials).

          The Company's Phase I studies were conducted in the early
1980's at Pennsylvania State University's Milton S. Hershey Medical
Center in Hershey, Pennsylvania , and at the University of Medicine
and Dentistry of New Jersey in Newark, New Jersey.  The FDA
required that both Phase I studies use Catrix<F1> -S, the injectable
dosage form of Catrix<F1>  only.  This was in spite of the Company's
experimental data indicating strongest response when both
injectable and oral forms of Catrix<F1>  were administered
sequentially.

     Phase II Trials.

          The Company is currently engaged in two Phase II trials. 
Phase II trials involve well controlled tests in a larger (but
still limited) patient population to determine the efficacy of the
drug for specific indications, to determine optimal dosage and to
identify possible side effects  and safety risks.  The Company's
Phase II trials are being conducted at the Montreal General
Hospital, McGill University, Montreal, Canada (the "Montreal
Study") and at the Westchester County Medical Center, New York
Medical College, in Valhalla, New York (the "Valhalla Study").

          The Montreal Study.  In the Montreal study initially,
twenty-four patients with metastatic renal cell cancer were started
on a protocol regimen of two weeks of Catrix<F1> -S followed by long
term treatment with Catrix<F1>  capsules. More recent patient
admissions into this study have eliminated the Catrix<F1> -S
administration and patients are treated with Catrix<F1>  capsules only.
All of the patients in this study were prior clinical failures

<PAGE>

under the original therapy (i.e. surgery, radiation and
chemotherapy) and were at various stages of serious disabilities
from their cancer. Initially, three of these patients  experienced
remission (two partial and one complete) and  continued to receive
Catrix<F1> .  No adverse effects were noted.  The other twenty one
patients did not respond to Catrix<F1>  and have either died or are now
being treated by conventional therapy.  There is currently only one
patient on study and the  disease is considered relatively stable.
There has been no evidence of any toxic side effects of Catrix<F1>  in
any patient.

          The Valhalla Study.  The Valhalla investigation has been
using the Canadian protocol for about 60 months. Of the thirty-five
patients enrolled, twenty-two patients, who had completed more than
three months of therapy, were considered evaluable for response by
the Medical Team overseeing the study.  Results to date were
reported on, by the study team, at the thirtieth annual meeting of
the American Society of Clinical Oncology, in Dallas, Texas, May,
1994, and those results were stated to be as follows:
          
          
          "Ten of the 22 valuable pts were not
          previously treated with any systemic therapy;
          all 3 responders (and 1 SD) occurred in the
          subset of untreated pts.  Lungs were the major
          site of response with disappearance of lesions
          (2) and >50% shrinkage (1); minor responses
          noted in liver (1) and kidney (1).  Duration
          of response is 30+ months (mos), 12+ mos and
          6+ mos in the 3 PRs.  Toxicity was mild (Grade
          I) and included dysgeusia (8), fatigue (3),
          dyspepsia (2), nausea (2), fever (2),
          dizziness (1), and scrotal edema (1).  Our
          results suggest that Catrix<F1> is very well
          tolerated and may be active in previously
          untreated pts with metastatic renal cell
          carcinoma.  Further accrual of patients is
          warranted."  [Initials mean: pts.= patients.
          SD= stable disease; mos.= months; PR= partial
          response].

     The Valhalla study currently has six patients on the treatment
protocol and two of these patients (treated since 1992 and 1993
respectively) are showing responses to the drug. A third patient
reveals stable disease and three await evaluation. 

<PAGE>

     The Company intends to expand the Montreal and Valhalla
Studies to include approximately 100 patients each over the next 3
to 5 years, assuming that sufficient funding is available. 

     Phase III Trials

          Upon completion of the Phase II trials the Company will
meet with the FDA and HPB for authorization to commence Phase III
trials to evaluate the overall risks and benefits of Catrix<F1>  in
relation to the treated disease and in light of other available
therapies.  Following this further evaluation of efficacy and
safety, the Company will file its NDA and NDS.  (See,
"Government Regulation-Orphan Drug Status").  

     Trials Involving Decubitus Ulcers

          Given the FDA's approval of Orphan's 510(k) application
for the use of Catrix<F1>  in wound treatment the drug could be
marketed presently.  However, Orphan has determined that a
relatively small human clinical trial should be conducted
potentially allowing for the making of expanded therapeutic claims. 
Such a trial is underway at this writing.

     Laboratory Studies

          As part of the FDA and HPB approval process, the Company 
may be required to do additional laboratory research into the
molecular composition of the active fractions of Catrix<F1> . 
Significant progress has been made in this regard by consultants
working under contract with the company.  Results of this research
will assist the Company in developing standardized manufacturing
and production processes.  In addition, chemically modified
versions of the isolated active fractions may prove to have
additional therapeutic effects.

          A large portion of the Company's laboratory related
resources were spent in the early 1980's on isolating pure
components in Catrix<F1>  which have specific biological activities of
interest in the treatment of disease. Its fractionation programs in
the early 1980's at Case Western Reserve University, Batelle
Columbus Laboratories and North Texas State University have
identified several fractions the Company believes have notable
effects on the immune system and that have direct anti-mitotic
activity.  The Company  may resume tests on these fractions in its
model assay for metastatic renal cell cancer with the goal of
reducing its search to two or three specific Catrix<F1>  fractions. 
The work is crucial in two ways;  first it should enable the
Company to establish a relevant quality control standard for its
products and aid in obtaining approval to market Catrix<F1>  in Canada
and the United States; and, second, it would be highly desirable to
develop each effective isolated fraction as a drug, taking greatest
advantage of the Company's complex cartilage product.   

<PAGE>

          Many cancer investigators today believe that human
cancers escape early detection by the body's self/non-self
detection system (the immune system) and in some ways continue to 
evade detection up to the time of death of the host.  The Company
believes that Catrix<F1>  exerts important beneficial effects on the
body's immune system.  It may heighten the body's awareness of
cancer cells (through stimulation of the immune system) and allow
the body's own defenses to defeat the progression of the disease. 
This effect on the immune system, combined with the direct anti-
mitotic effect of Catrix<F1> , forms the basis of the Company's
understanding of how Catrix<F1>  may work in the treatment of human
cancers.

          Several of the Company's specific laboratory research
projects conducted at Battelle Columbus Laboratories relating to
cancer conclude that there are low molecular weight components of
Catrix<F1>  which are anti-mitotic, that is, relatively small
components in Catrix<F1>  that prevent cell replication. Further
results indicate that certain higher molecular weight components of
Catrix<F1>  have a significant effect on many segments of the body's
immune system.  The results of these later investigations have been
published in the Journal of Biological Response Modifiers.

          Another development involves the identification by
outside investigators of a pure protein found in human renal cell
cancer cells which is present in concentrations inversely
proportional to the intensity of the patient's disease.  That is,
the protein diminishes as the severity of the disease increases. 
This protein is found in Catrix<F1>  and in abundance in many normal
cells in humans and animals, including, bovine tracheal cartilage. 
The Company intends to assess the quantity of this protein in
Catrix<F1> .

Government Regulation.

          The production and marketing of the Company's products
and its research and development activities are subject to
comprehensive regulation by various federal, state and local
authorities in the United States and governmental authorities of
other countries.  Among others, the FDA and HPB exercise regulatory
authority over the development, testing, formulation, manufacture,
labeling, storage, record keeping, quality control, advertising and
promotion of the Company's products.  The Company believes that the
regulations and procedures involving the above in Canada are
essentially the same as the United States.  Accordingly, the
discussion set forth below is also applicable to the Company's
efforts to obtain regulatory approval in Canada.

<PAGE>
          A New Drug may not be marketed in the United States until
it has satisfied rigorous testing procedures established and
approved by the FDA.  The drug may then be marketed only for the
specific indications, uses, formulation, dosage, forms, and
strengths approved by the FDA.  Similar requirements are imposed by
foreign regulators upon the marketing of a new drug in their
respective countries.

          The steps required before a pharmaceutical agent may be
marketed in the United States include (a) pre-clinical laboratory
and animal tests, (b) the submission to the FDA of an application
for an IND, which must become effective before human clinical
trials may commence, (c) well controlled human clinical trials to
establish the safety and efficacy of the drug, (d) the submission
of a detailed NDA to the FDA, and (e) the FDA approval of the NDA
prior to any commercial sale or shipment of the drug.  In addition
to obtaining FDA approval for each product, each domestic drug
manufacturing establishment must comply with Good Manufacturing
Practices (GMP) and are subject to biennial inspections by the FDA. 
Foreign manufacturing establishments also must comply with GMP'S
and are subject to periodic inspection by the FDA or by local
authorities under agreement with the FDA.

          The results of the pre-clinical studies and clinical
trials are submitted to the FDA in the form of an NDA for approval
of the marketing and commercial shipment of the drug.  The NDA
includes information pertaining to the chemistry, formulation,
activity and manufacture of the drug and each component of the
final product, as well as details relating to the sponsoring
company.  Submission of an NDA does not assure FDA approval for
marketing.  The application review process takes more than two
years on average to complete, although FDA reviews of cancer
therapies, and other life-threatening diseases may be accelerated
and average less than two years.  However, the process may take
substantially longer if the FDA has questions or concerns about the
product.

          In general, the FDA requires at least two adequate and
well controlled clinical studies demonstrating efficacy with
sufficient levels of statistical assurance.  However, additional
support may be required.  The FDA may also request additional
information, such as long term toxicity studies or other studies
relating to the product safety.  Notwithstanding the submission of
such data, the FDA ultimately may decide that the application does
not satisfy its regulatory criteria for approval.  Finally, the FDA
may require additional clinical tests following NDA approval to
confirm product safety and efficacy (Phase IV clinical tests).

<PAGE>

          Among the requirements for product approval is the
requirement that prospective manufacturers conform to the FDA's
current GMP standards which thereafter must be followed at all
times.  In complying with GMP standards, manufacturers must
continue to expend time, money and effort in production, record
keeping and quality control to ensure technical compliance. 
Failure to so comply subjects the manufacturer to possible FDA
action such as the suspension of manufacturing or seizure of the
product.  The FDA may also require a voluntary recall of a product.

          All of the Company's contract manufacturing facilities
will be subject to periodic inspections by the FDA and comparable
agencies.  If violations of applicable regulations are discovered
during these inspections, the Company may be restrained from
continued marketing of the manufactured products.  Such facilities
are also subject to regulation regarding, among other things,
occupational safety, laboratory practices, the use and handling of
radio-isotopes and hazardous chemicals, prevention of illness and
injury, environmental protection and hazardous substance control.

          The product testing and approval process is likely to
take a substantial number of years and involves the expenditure of
substantial resources.  There can be no assurance that any approval
will be granted on a timely basis, or at all.  The FDA also may
require post-marketing testing and surveillance to monitor the
record of the product and continued compliance with regulatory
requirements.  Upon approval, a drug may be marketed only for the
approved indications in the approved dosage forms and at the
approved levels.  Adverse experiences with the product must be
reported to the FDA.  The FDA also may require the submission of
any lot of the product for inspection and may restrict the release
of any lot that does not comply with FDA standards, or otherwise
may order the suspension of manufacture, recall or seizure if non-
compliant product is delivered.  Product approvals may be withdrawn
if compliance with regulatory standards is not maintained or if
problems concerning safety or efficacy of the product are
discovered following approval.

          The Company also will be subject to foreign regulatory
authorities with respect to clinical trials and pharmaceutical
sales.  Whether or not the FDA approval has been obtained, approval
of a product by the comparable regulatory authorities of foreign
countries must be obtained prior to commencement of marketing of
the product in those countries.  The approval process varies from
country to country and the time required may be longer or shorter
than that required for FDA approval.

<PAGE>

Orphan Drug Status

          Pursuant to the Orphan Drug Act,(this discussion not to
be confused with the discussion on Orphan Medical Inc.) the FDA may
grant "orphan drug status" to certain drugs intended to treat a
"rare disease or condition", defined as a disease or condition
which effects fewer than 200,000 people in the United States, or,
which effects more than 200,000 people  and for which the cost of
developing and making the drug available will not be recovered from
sales of the drug in the United States.  Orphan Drug status may
provide certain benefits including exclusive marketing rights in
the United States for the drug, for the designated indication, for
seven years following marketing approval, and federal income tax
credits for certain clinical trial expenses.

          The Company may receive marketing exclusivity under the
Orphan Drug Act, only if it is the sponsor of the first NDA
approved for the drug for an indication for which Orphan Drug
status was designated prior to the time such NDA was submitted. 
Therefore, unlike patent protection, orphan drug status does not
prevent other manufactures from attempting to develop the drug for
the designated indication or from obtaining approval of a separate
NDA prior to the approval of the Company's NDA.  If another
sponsor's NDA for the same drug and the same indication is approved
first, that sponsor is entitled to the exclusive marketing rights
if that sponsor has received orphan drug designation for the drug. 
In that case, the FDA will refrain for seven years from approving
the Company's application to market the product.  If another
sponsor's NDA for the same drug and the same indication is approved
first, but that company has not obtained orphan drug status, the
FDA would still be permitted to approve the Company's NDA. 
However, the Company would not be able to receive the seven years'
exclusivity.

          Orphan Drug status does not prevent the FDA from
approving the same drug for different indication.  Furthermore,
doctors are not restricted by the FDA from prescribing an approved
drug for unapproved uses.  Therefore, another company's approval of
a drug for different uses could adversely affect the marketing
potential of a Company drug for which Orphan Drug Act status has
been obtained for a different indication.

          The Company believes that its products, if developed, may
qualify for Orphan Drug Status.  There can be no assurance,
however, that such products will receive orphan drug status.  The

<PAGE>

Company believes that it would be advantageous to obtain orphan
drug status for eligible products.  However, possible amendment of
the Orphan Drug Act by the United States Congress and possible re-
interpretation by the FDA are the subject of frequent discussions. 
Legislation to limit exclusivity, in some respects, was passed by
Congress, but vetoed by the President in 1991.  Similar legislation
is expected to be introduced in future Congressional Sessions.  The
FDA has proposed regulations embodying certain other limitations;
these regulations have not yet been adopted.  Therefore, there is
no assurance as to the precise scope of protection that may be
afforded by orphan drug status in the future or that the current
level of exclusivity and tax credits will remain in effect.

          Under the Drug Competition and Patent Term Restoration
Act of 1984, a product patent or method of treatment patent with a
17-year period of enforce ability covering a drug or biological
product may be extended for up to five years under certain
circumstances to compensate the patent holder for the time required
for FDA regulatory review of the product.  The benefits are only
available to the first approved use of the active ingredient in a
drug or biological product and may only be applied to one patent
per drug per product.  This law also establishes a period of time
following FDA approval of certain NDA's during which the FDA may
not accept or approve abbreviated applications for generic versions
of the drug from other sponsors.  However, there can be no
assurance that the Company will be able to take advantage of either
the patent term extension of marketing exclusivity provisions of
this law.

Raw Materials and Manufacturing.

          Catrix<F1>  is manufactured for the Company by Intergen
Biomanufacturing Corporation, located in Toronto, Canada
("Intergen"). Intergen is an FDA-approved pharmaceutical
manufacturing facility.  At the present time, the only FDA approved
manufacturer of the Company's drug is Intergen, although the
Company is investigating alternative sources to the point where
sample manufacturing has commenced.  The Company's food supplement
cartilage material, BIO-CARTILAGE<F1>  , and its POLY-Nag  are
manufactured in the United States and an additional manufacturer is
being developed in the Western Pacific Area.

          Raw Materials. Catrix<F1>  is prepared from animal cartilage
tissue. The most accessible and easily processed source is bovine
tracheas collected from normal healthy beef cattle, subsequent to
slaughter.  Tracheas are cleaned, flash frozen and delivered to
qualified pharmaceutical manufacturing facilities.

<PAGE>

          Regulatory Review.  All Catrix<F1>  and production procedures
have been submitted in extensive detail to both the FDA and the
HPB, and accepted as part of the review of the Company's official
submissions with respect to studying Catrix<F1>  in patients.

Patents and Proprietary Technology.

          The Company was granted and owns, by assignment, several
United States patents some of which have expired, and has assigned
certain patents to Catrix<F1>  Research Limited Partnership (see,
"Certain Relationships and Related Transactions").  The most recent
patent granted was for the use of cartilage-based agents as an
anti-tumor agent and method (U.S. Patent #4,827,607).

          The Company also holds several patents in various foreign
countries.  While the Company believes that these patents may be
valuable, there is no assurance that any such patent will afford
the Company any material protection.  Furthermore, if any of its
patents should be infringed, there is no assurance that the Company
would be financially capable of protecting its interests.

Competition.

          Competition in the anti-cancer pharmaceutical industry is
based primarily on:  product performance, including efficacy,
safety, ease of use and adaptability to various modes of
administration; patient compliance; price;  acceptance by
physicians; marketing; and distribution.  The availability of
patent protection and orphan drug status, and the ability to obtain
government approval for testing, manufacturing and marketing are
also critical factors.  See "Business-Government Regulation."

          Most companies, including well-known pharmaceutical and
chemical companies, are marketing anti-cancer drugs and seeking to
develop new products and technologies for the treatment of cancer. 
Many of these companies have substantially greater financial and
technical resources and production and marketing capabilities than
the Company.  In addition, many such companies have had
significantly greater experience both in undertaking pre-clinical
testing and human clinical trials of new or improved pharmaceutical
products, and obtaining the approval of the FDA or other regulatory
authorities to market products for health care.  Accordingly, the
Company's competitors may succeed in obtaining regulatory approval
of such products before the Company obtains approval  of
competitive products.

<PAGE>

Human Resources.

          Employees and Consultants.

          At August 1, 1997, the Company had one full time employee
and retains several consultants to assist in the administration of
the Company and coordinating its ongoing research and clinical
trials.  
          Scientific Advisory Board.
          
          The Company benefits from consultations with prominent
scientists active in fields related to the Company's business.  For
this purpose, the Company maintains a Scientific Advisory Board. 
At the Company's request, these advisors review the feasibility of
product development  programs under consideration, advise the
Company of research advances in areas related to the Company's
technology and aid in recruiting personnel.  It is intended that
the Scientific Advisors meet individually and in small groups with
the Company's management and scientists.  Because the scientific
advisors may have consulting or advisory positions with other
companies which may compete with the Company, the Company has
entered into confidentiality agreements with each member of the
Scientific Advisory Board.  

          The Company's Scientific Advisory Board consists of Dr.
William T. Sherman, Vice President for Science-Elect. , as Chair,
and the following persons:

          Michael Bazinet M.D., co-director of the Company's Phase
II Montreal Study, is assistant Urologist, Attending Staff at The
Montreal General Hospital in Montreal, Quebec, Canada, and
Assistant Professor of Urology, McGill University.  Dr. Bazinet has
completed residencies in surgery and urology at Sherbrooke
University and a residency in urology at the Royal Victoria
Hospital.  He has served as a Research Fellow in Human Tumor
Immunology and as a Clinical Fellow in Urologic Oncology at
Memorial Sloan-Kettering Hospital in New York, NY.  He has authored
or co-authored numerous papers and presentations.

          Robert W. Gracy, Ph.D., principal advisor to the Company
for biochemistry, is professor of Chemistry and Associate Dean for
Basic Science and Research at The University of North Texas, Texas
College of Osteopathic Medicine in Fort Worth, Texas.  Dr. Gracy
received his Ph.D. from the University of California, in Riverside,
and performed postdoctoral work in molecular biology at the Albert
Einstein College of Medicine, where he was a postdoctoral fellow. 
He became an Associate Professor of Chemistry at North Texas State
University, and subsequently a visiting professor of physiological
chemistry at the University of Wurtzburg.  Dr. Gracy has published
over 130 papers in peer-reviewed scientific journals and books.

<PAGE>

          Carmelo Anthony Puccio, M.D., director of the Company's
Phase II Valhalla Study, is Assistant Professor of Medicine at New
York Medical College and an Attending Physician at Westchester
County Medical Center, both in Valhalla, New York.  Dr. Puccio
received his medical degree from the Universidad Autonoma de
Guadalajara, graduating first in his class.  He completed the Fifth
Pathway Program at the Albert Einstein College of Medicine in New
York City, and a residency in Internal Medicine at Maimonides
Medical Center.  He was a Research Fellow at New York Medical
College prior to attaining his present position.  Dr. Puccio's
papers have been published in several scientific journals.

Item 2. Properties
        ----------
          The Company owns no real property.  Its executive offices
in New York City, occupying approximately 1,500 square feet, are
leased for a term ending on March 31, 1998.  Management considers
that its leased premises are well maintained and sufficient for its
present operations and that when its current lease expires it will
be able to lease office space on acceptable terms.

Item 3. Legal Proceedings
        -----------------
          In May of 1996 the Company's Board of Directors
determined that given the then pendancy of certain litigation which
had been reduced to judgment unfavorable to the Company, the
Company's survival required the filing of a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code. Such a filing was
made in May 1996.  Upon completion of all necessary formalities, in
May 1997, the U.S. Bankruptcy Court for the Southern District of
New York approved the Company's Disclosure Statement and
incorporated Reorganization Plan thus concluding the bankruptcy
proceeding.

     The essential nature of the reorganization plan consisted of
the exchange of all pre-petition unsecured debt for the Company's
common stock.  As of this writing such exchange of debt for common
stock has been essentially completed and is fully reflected in the
financial reports which are an integral part of this annual report.

Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------
          None

<PAGE>

                             PART II



Item 5. Market for Common Equity and Related Stockholder Matters
        --------------------------------------------------------
                    The Common Stock of the Company is traded in the over-the
          counter market under the symbol "LCAR".  The following
          table sets forth, for the periods indicated, the high and
          low bid quotations for the Common Stock as reported by
          the National Quotation Bureau.  

Fiscal Year Ending May 31, 1997              High      Low
                                              
Fourth Quarter                                .72      .58
Third Quarter                                 .78      .30
Second Quarter                                7/16     .20
First Quarter                                 3/8      3/16

Fiscal Year Ending May 31, 1996              

Fourth Quarter                               11/16     1/4  
Third Quarter                                  5/8     1/8
Second Quarter                               17/32     1/16
First Quarter                                11/32     1/16



          On July 3, 1997 the closing bid price per share of Common
Stock, as reported by the National Quotation Bureau, was $.80.  As
of May 31, 1997 there were 567 holders of record of the Company's
Common stock.

Item 6.  Management's Discussion and Analysis of Operations 
         --------------------------------------------------                 
Results of Operations

Overview
          Since its inception, the Company has primarily devoted
its resources to fund research, drug discovery and development.  
In addition, the Company licenses its technology for
commercialization by other companies and in the fiscal year ended
May 31, 1995, the Company began sales of its proprietary bovine
cartilage material, BIO-CARTILAGE<F1> , to a food supplement
distributor for sale through nutritional food supplement stores in
the U.S.  The Company has been unprofitable to date and may
continue to incur  operating losses in the foreseeable future. The
Company has sustained net losses of approximately $13.3 million
from inception to May 31, 1997.  The Company has primarily financed
its research and development activities through a public offering
of Common Stock, private placements of debt and equity securities,
and in recent years, revenues from licensing fees and product
sales.

<PAGE>

     On May 7, 1996 the Company filed a Chapter XI Petition for Re-
organization with the United States Bankruptcy court for the
Southern District of New York.  This action was precipitated by a
decision of the New York State Supreme Court, New York County,
which confirmed an arbitration award against the Company for
monetary damages in excess of the Company's liquid assets. On May
14, 1997 the United States Bankruptcy Court for the Southern
District of New York signed an Order confirming the Company's Plan
of Reorganization, thus concluding the voluntary bankruptcy
proceeding on that date.  See Item 3. - Legal Proceedings).

Fiscal year ended May 31, 1997 compared to May 31, 1996  

          The Company generates revenues primarily by selling BIO-
CARTILAGE<F1>  and Catrix<F1>  and from royalties and license fees.
     
          The Company's revenues decreased in the year ended May
31, 1997 from the comparative prior fiscal year primarily due to
lower sales of BIO-CARTILAGE<F1>  to food supplement distributors, for
sale through nutritional food supplement stores in the U.S. Total 
costs and expenses during the year ended May 31, 1997 were 57%
lower than those of the comparative prior year.  The decrease was
principally due to lower costs of product sales related to the
sales of BIO-CARTILAGE<F1>  in the year ended May 31, 1997 and the
absence of interest expense on the Company's Notes payable in the
year ended May 31, 1997 in accordance with accounting rules for
Company's operating under Debtor-In-Possession.
          
Liquidity and Capital Resources.

Overview

          The Company has had losses from operations in each of the
five years ended May 31, 1997.  This trend may continue in the
foreseeable future.  Working capital has been provided since the
Company's inception primarily from the sale of equity securities, 
from borrowings (from its officers, directors, and shareholders and
from outside investors), and in recent years, from revenues from
licensing fees and product sales.

<PAGE>

Present Liquidity

          The Company's present liquidity position is critical.  As
of May 31, 1997 the Company's current assets exceed its current
liabilities by $10,026 and its total assets exceed its total
liabilities by $13,106.  The company will require additional
product sales or funding during or, shortly after the end of the
fiscal quarter ending August 31, 1997, to sustain its operations.

          As a result of the history of losses incurred by the
Company, the net loss during the year ended May 31, 1997 of
($345,518), and the limited amount of funds currently available to
finance the Company's operations, the report of the Company's
independent Certified Public Accountants on the Financial
Statements as of May 31, 1996 and 1997 contain an explanatory
paragraph  indicating that the Company may be unable to continue in
existence.  
     
          Pursuant to the terms of the Company's Plan of
Reorganization under its Chapter XI proceeding the Company
converted $2,158,431 of debt into 2,989,208 shares of the Company's
common stock, as of May 31, 1997, thus substantially reducing the
Company's amount of debts.         

          The Company plans to continue to implement plans to sell
BIO-CARTILAGE<F1>  in the over-the-counter food supplement market and
may also introduce a second product in the same marketplace in the
near future. If successful, the Company may increase cash flow in
order to allow the Company to continue to meet its obligations and
sustain its operations.  The Company also plans to try to obtain a
short-term financing from the sales of unregistered shares of
common stock.

          In addition, the Company's licensee, ORPHAN MEDICAL INC.
of Minnetonka, MN, continues to make progress developing the
Company's proprietary bovine cartilage material, Catrix<F1> , in powder
form only, for topical wound healing purposes.

          The Company has no material commitments for capital
expenditures at May 31, 1997.

          Item 7.   Financial Statements and Supplementary Data
                    -------------------------------------------
          See page F-1 for Lescarden Inc. Index to Financial
Statements.

          Item 8.   Changes in and Disagreements with Accountants on
                    Accounting and Financial Disclosure
                    ------------------------------------------------
          None.

<PAGE>
                             Part III



Item 9.   Directors, Executive Officers, Promoters and Control
          Persons, Compliance with Section 16(a) of the Exchange
          Act.
          ---------------------------------------------------------

The executive officers and directors of the Company are as follows:

Name                                         Position
Gerard A. Dupuis                             Chairman and
                                             Chief executive
                                             Officer, Director.

William T. Sherman, Ph.D.                    Vice President
                                             Science Elect.

William H. Chisholm                          Vice Chairman
                                             Director.

Frank E. Berglas                             Director.

George E. Ehrlich, M.D.                      Director.
          
          Mr. Dupuis (age 59) is an attorney who practiced in New
York City for more than twenty five years.  He became General
Counsel, Secretary and a Director of the Company in February 1986. 
On June 19, 1990 Mr. Dupuis was elected President and Chief
Executive Officer of the Company and in 1992 was elected chairman. 
Mr. Dupuis is a graduate of Syracuse University and received his
law degree from Columbus School of Law, of the Catholic University
of America in Washington, D.C.

          Dr. Sherman (age 55) Executive Vice President for
Science-Elect of the Company, received his Bachelor of Science in
pharmacy from the Philadelphia College of Pharmacy and Science, and
a Ph.D. in pharmacology from Temple University.  Since 1989 Dr.
Sherman has been an independent consultant to the pharmaceutical
industry.  From 1987 to 1989 he served as Vice President of Martec
Pharmaceutical Company.  Prior to that he was Vice President for
research and development for the Company.  Dr. Sherman is a
registered pharmacist in Pennsylvania and New Jersey and has
published in several scientific journals.

<PAGE>

          Mr. Chisholm (age 80) is a retired paper manufacturer and
served as a director of several publicly owned companies.  He
became a Director of the Company in December 1987.  Mr. Chisholm is
a graduate of Yale University.
     
          Mr. Berglas (age 56) is President and Chief Executive
Officer of Great Lakes American Reinsurance Co., a position he has
held for more than the past five years.  He became a Director of
the Company on December 1, 1993.  Mr. Berglas is a graduate of City
College of New York.

          Dr. Ehrlich (age 68) is the President of George E.
Ehrlich Associates, International Consultant Firm, a position he
has held for more than the past five years.  He became a Director
of the Company on March 2, 1995. Dr. Ehrlich is a graduate of
Harvard University and received his medical degree from Chicago
Medical School. 
          
Item 10.  Executive Compensation
          ----------------------
                         Annual Compensation           Long-Term
                                                       Compensation
                                                       Awards
------------------------------------------------------------------------
Name and                 Fiscal Year
Principal                Ended
Position                 May 31,        Salary $       Warrants (#)
------------------------------------------------------------------------  
Gerard A. Dupuis         1997          $127,000           -
President and CEO        1996          $132,250        500,000
                         1995          $112,250        140,000

<PAGE>

Aggregated Option and Warrant Exercises in Last Fiscal Year and FY
End Option and Warrant Values.
----------------------------------------------------------------------
              Shares              Number of      Value of
              Acquired            Unexercised    Unexercised
              on        Value     Options/       In-the-money
              Exercise  Realized  Warrants       Options
                                  at FY End (#)  Warrants
                                                 at FY End ($)
Name            (#)       ($)     Exercisable    Exercisable
----------------------------------------------------------------------
G.A. Dupuis                       Options        Options
                                  80,000         $ 8,800
                                  Warrants       Warrants
                                  1,640,312      $876,388


Item 11. Security Ownership of Certain Beneficial Owners and
         Management
         ----------------------------------------------------
         The following table sets forth, as of May 31, 1997, the
ownership of the Company's Common Stock by (I) each person who is
known by the Company to own Shares of record or beneficially, more
that (5%) of the Company's Common Stock, (ii) each of the Company's 
directors and executive officers and (iii) all directors and
executive officers as a group.  Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.


         Name and                 Number of Shares
Title of Address of               Beneficially        Percent
Class    Beneficial Owner         Owned               of Class (1)
---------------------------------------------------------------------------
Common   Gerard A. Dupuis (2)       1,901,229             10.80%
Stock    2 Kittle Road            
         Chappaqua, NY

         William H. Chisholm (2)      803,451              4.93%
         280 Railroad Avenue
         Greenwich, CT


         Charles T. Maxwell (2)     2,585,183             15.32%
         C.J. Lawrence, Inc.
         1290 Avenue of the Americas
         New York, NY

         Frank E. Berglas (2)         275,000              1.71%
         139 Brook Farm Road East
         Bedford, New York

         Peter B. Ruffin (2)        2,477,642             15.09%
         753 Forest Hills Drive
         Wilmington, NC
         
         George E. Ehrlich (2)        100,000              0.63%
         38 Holly Drive
         Loveladies, NJ
              
<PAGE>

         Directors and              3,079,680             16.85%
         Officers as a group
         (2) (4 persons)


         (1) The percentages are calculated on the basis of
15,882,218 shares of Common Stock outstanding.  For the purpose of
calculating the percentage of shares of the Company's Common Stock
owned by any person, the shares issuable upon the exercise of
rights to acquire, owned by such a person if exercisable within 60
days of May 31, 1997 are deemed outstanding, but such shares are
not deemed outstanding for the purpose of calculating the
percentage of Common Stock owned by any other person.  All share
ownership is direct unless otherwise indicated.

         (2) Includes 533,295, 1,720,312, 404,000, 175,000,
100,000 and 453,295 stock option grants and/or warrants to purchase
the Company's Common Stock held by Mr. Ruffin, Mr. Dupuis, Mr.
Chisholm, Mr. Berglas, Dr. Ehrlich and Mr. Maxwell, respectively. 

         As of May 31, 1997, Merrs. Dupuis, and Chisholm received
warrants of shares of the Company's common stock in exchange for
debts in connection with the Company's reorganization under Chapter
XI; they plan to file reports on Form 4 reporting their changes in
beneficial ownership of shares of the Company's common stock late,
by the end of August 1997 or shortly thereafter.      
         
         Item 12. Certain Relationships and Related Transactions.
                  -----------------------------------------------
         With respect to the litigation between the Company and
its former Chairman, Dr. John F. Prudden, described in last year's
report, such litigation was automatically stayed by the Chapter 11
filing.  Moreover, Dr. Prudden's claims in bankruptcy, consisting
of the claims in suit, were sold by him to several other parties
and they, in turn, had such claims liquidated pursuant to the
Reorganization Plan approved by the Court in May 1997.   

<PAGE>

         Pursuant to an agreement with Donald K. Lourie a former
employee of the Company, the Company is obligated to pay Mr. Lourie
an annual pension of $25,000 provided the company meets certain
income or net worth milestones.

         In June 1982, Dr. Prudden and others formed Catrix<F1>
Research Limited Partnership ( the "Catrix<F1> Partnership"), of which
Dr. Prudden is general partner.  The Company has entered into two
agreements with the "Catrix<F1> Partnership," a Research Agreement and
a Licensee Agreement.  See note 4 to the Notes to Financial
Statements for description of these agreements.

Item 13. Exhibits and Reports on Form 8-K
         --------------------------------
         (a) (1) Exhibit

         Exhibit Number

         Description of Exhibit

2.1           Plan of Reorganization dtd. January 15, 1997 (and
              Amended Disclosure Statement dtd. March 12,
              1997).****

3.1           Certificate of Incorporation of Registrant, as
              amended.*

3.2           By-Laws of Registrant, as amended.*

10.1          License Agreement between the Company and Donell,
              Inc., dated October 2, 1989, with amendments dated
              June 18, 1990 and March 16, 1992.*

10.2          Employment Agreement with John F. Prudden dated
              November 15, 1985, as amended July 14, 1992.*

10.3          Letter agreements with Donald K. Lourie dated
              November 15, 1985, February 11, 1988, and September
              7, 1990.*

10.4          Lease for 6th floor office space at 790 Madison
              Avenue, New York, NY  dated August 19, 1986, as
              amended on April 18, 1991.*

10.5          Licensee Agreement between Lescarden Inc. and
              Catrix<F1> Research Ltd. Partnership dated June 4,
              1982.*

<PAGE>

10.6          Research Agreement between Lescarden Inc. and
              Catrix<F1> Research Ltd. Partnership dated June 4,
              1983.*

10.7          Lease for office space at 420 Lexington Avenue, New
              York, NY  dated March 9, 1993.**

22.1          Subsidiaries of the Registrant.*

23.           Notice of annual meeting of shareholders and Proxy
              Statement for Annual Meeting of shareholders held
              October 19, 1992.**

27.           Financial Data Schedule

99.1          Award of the Arbitrator in the Matter of the                
              Arbitration between John F. Prudden, M.D. and the 
              Registrant dated September 6, 1995.***

*             Incorporated by reference to Registrant's Form S-1
              (Registration no. 33-50743) filed August 12, 1992.

**            Incorporated by reference to Registrant's Form 10-
              KSB for the fiscal year ended May 31, 1993.

***           Incorporated by reference to Registrant's Form 8K 
              dated September 6, 1995.

****          Filed herewith.

(b)           Reports on Form 8-K

              There were no reports on Form 8-K filed by the
              Company during the fourth Quarter at the year ended
              May 31, 1997.

<PAGE>
                                SIGNATURES


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

                                  LESCARDEN INC.

                                  By: S/Gerard A. Dupuis
                                  Gerard A. Dupuis, President
                                  August 20, 1997

         Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.


By: S/Gerard A. Dupuis           President, Principal Executive
    Gerard A. Dupuis             Officer, Principal Financial
    August 20, 1997              Officer, Principal Accounting
                                 Officer and Director


By: S/William H. Chisholm        Vice Chairman, Director
    William H. Chisholm
    August 20, 1997


By: S/Frank E. Berglas           Director
    Frank E. Berglas
    August 20, 1997



By: S/George E. Ehrlich          Director
    George E. Ehrlich
    August 20, 1997

<PAGE>
                                                            LESCARDEN INC.

                                             INDEX TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------

Independent Auditor's Report                                            F-2
Balance Sheet as of May 31, 1997                                        F-3
Statement of Operations for the Years Ended May 31, 1997 and 1996	      F-4
Statement of Stockholders' Equity
  for the Years Ended May 31, 1997 and 1996                             F-5
Statement of Cash Flows for the Years Ended May 31, 1997 and 1996	      F-6
Notes to Financial Statements                                       F-7 - F-13

F-1
<PAGE>

INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders of
Lescarden Inc.


We have audited the accompanying balance sheet of Lescarden Inc. (the
"Company") as of May 31, 1997 and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lescarden Inc. as of May
31, 1997, and the results of its operations and its cash flows for each of the
two years in the period then ended in conformity with generally accepted
accounting principles.

On May 14, 1997, the bankruptcy court confirmed the Company's Plan of
Reorganization.  The plan is described in Note 1 of the notes to financial
statements.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
, and has recognized limited revenue which raises substantial doubt about its
ability to continue as a going concern.  Management's plans in regard to these
matters are described in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York

July 8, 1997
F-2
<PAGE>
                                                                LESCARDEN INC.
<TABLE>
                                                                BALANCE SHEET
                                                               (Note 1)

<CAPTION>
May 31, 1997
------------------------------------------------------------------------------

ASSETS
<S>                                                                   <C>
Current Assets:
  Cash                                                          $     115,340
  Inventory (Note 2)                                                    9,488
------------------------------------------------------------------------------
       Total current assets                                           124,828

Security Deposit                                                        3,080

Deferred Income Tax Asset, net of valuation allowance
  of $3,935,000 (Note 7)                                                -
------------------------------------------------------------------------------
       Total Assets                                             $     127,908
------------------------------------------------------------------------------
------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities - accounts payable and accrued expenses     $     114,802
------------------------------------------------------------------------------
     Total liabilities                                                114,802
------------------------------------------------------------------------------

Commitments and Contingencies (Notes 1, 3, 4 and 5)

Stockholders' Equity (Notes 1, 3, 4 and 6):
  Convertible preferred stock - $.02 par value; $1.50 liquidation value
   (aggregating $138,000); authorized 2,000,000 shares, issued and
   outstanding 92,000 shares                                           1,840
  Common stock - $.001 par value; authorized 200,000,000 shares,
   issued and outstanding 15,882,218 shares                           15,882
  Additional paid-in capital                                      13,248,298
  Accumulated deficit                                            (13,252,914)
------------------------------------------------------------------------------
          Stockholders' equity                                        13,106
------------------------------------------------------------------------------
          Total Liabilities and Stockholders' Equity           $     127,908
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
The accompanying notes and independent auditor's report should be read in
conjunction with the financial statements.

F-3
<PAGE>
                                                              LESCARDEN INC.

<TABLE>
                                                     STATEMENT OF OPERATIONS
                                                     (Note 1)

<CAPTION>
Year ended May 31,                                     1997           1996
------------------------------------------------------------------------------

<S>                                                  <C>           <C>
Revenue:
  Product sales                                $     15,185   $    440,534
  Royalties and other (Notes 2 and 5)                29,574         45,340
------------------------------------------------------------------------------
Total revenue                                        44,759        485,874
------------------------------------------------------------------------------
Costs and expenses:
  Cost of product sales                               5,341        151,224
  Salaries:
    Officer                                         134,672         96,000
    Office                                           11,099          9,533
  Professional fees and consulting (Note 5)          98,480         97,496
  Research and development (Note 2)                  12,696         31,553
  Rent and office expenses (Note 5)                  61,211         58,401
  Travel and meetings                                 4,104         22,247
  Taxes                                                 816          2,596
  Insurance                                           1,151            625
  Interest                                             -            61,850
  Interest to related parties                          -            59,775
  Provision for arbitration award (Note 5)             -           313,612
  Printing                                            3,430           -       
  Other administrative (income) expenses             17,824         (4,054)
------------------------------------------------------------------------------
Total costs and expenses                            350,824        900,858
------------------------------------------------------------------------------
Loss before reorganization items                   (306,065)      (414,984)
------------------------------------------------------------------------------
Reorganization items (Note 1):
  Professional fees                                  36,235          4,410
  Bankruptcy fees and miscellaneous                   3,218           -       
------------------------------------------------------------------------------
Total reorganization items                           39,453          4,410
------------------------------------------------------------------------------
Net loss                                       $   (345,518)  $   (419,394)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net loss per common share                      $       (.03)  $       (.04)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Weighted average number of common shares
   outstanding (Note 2)                          12,249,165     11,838,677
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
The accompanying notes and independent auditor's report should be read in
conjunction with the financial statements.

F-4
<PAGE>
                                                             LESCARDEN INC.
<TABLE>

                                          STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>

                                     Convertible
                                   Preferred Stock          Common Stock          Additional                          Stockholders'
                                Number of   Par Value    Number of   Par Value     Paid-in         Accumulated        (Deficiency) 
                                  Shares      Amount      Shares      Amount       Capital            Deficit           Equity     
----------------------------------------------------------------------------------------------------------------------------------

<S>                               <C>         <C>        <C>         <C>           <C>             <C>                  <C>
Balance at June 1, 1995           92,000     $1,840      11,822,010  $11,822       $10,634,177     $(12,488,002)      $(1,840,163)

Issuance of common stock
 for cash                           -          -             50,000       50             7,450             -                7,500
Issuance of common stock
 warrants in settlement of
 liability to former chairman
 (Note 5)                           -          -               -        -              146,000             -              146,000
Net loss                            -          -               -        -                 -            (419,394)         (419,394)
----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1996           92,000      1,840      11,872,010   11,872        10,787,627      (12,907,396)       (2,106,057)

Issuance of common stock in
 bankruptcy settlement of claims    -          -          2,986,208    2,986         2,155,445             -            2,158,431
Issuance of common stock
 upon exercise of common
 stock warrants                     -          -            624,000      624           145,626             -              146,250
Issuance of common stock for 
 cash                               -          -            400,000      400           159,600             -              160,000
Net loss                            -          -               -        -                 -            (345,518)         (345,518)
----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1997           92,000     $1,840      15,882,218  $15,882       $13,248,298     $(13,252,914)        $  13,106
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

The accompanying notes and independent auditor's report should be read in
conjunction with the financial statements.

F-5
<PAGE>

                                                                  LESCARDEN INC.
<TABLE>                                                   

                                                           STATEMENT OF CASH FLOWS
<CAPTION>
Year ended May 31,                                                1997        1996
-----------------------------------------------------------------------------------

<S>                                                           <C>         <C>
Cash flows from operating activities:
  Net loss                                                 $  (345,518)  $(419,394)
  Adjustments to reconcile net loss to net cash provided
   by (used in) operating activities:
    Provision for arbitration award                               -        313,612
    Changes in operating assets and liabilities:
      Decrease in accounts receivable                             -         94,379
      Decrease in inventory                                      4,368       3,490
      (Increase) decrease in prepaid expenses                   17,673     (17,673)
      Increase in trade and other miscellaneous claims          78,632      18,000
      Increase in trade and other miscellaneous
       claims - related parties                                   -         23,775
----------------------------------------------------------------------------------
        Net cash provided by (used in) operating activities   (244,845)     16,189
----------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from issuance of common stock                       306,250       7,500
  Repayment of note payable                                       -        (10,000)
----------------------------------------------------------------------------------
        Net cash provided by (used in) financing activities    306,250      (2,500)
----------------------------------------------------------------------------------

Net increase in cash                                            61,405      13,689

Cash at beginning of year                                       53,935      40,246
----------------------------------------------------------------------------------
Cash at end of year                                         $  115,340   $  53,935
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------


Supplemental disclosure of cash flow information:

  Cash paid during the year for professional fees rendered in
   connection with Chapter 11 proceedings                   $    -       $  16,883
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------

Supplemental schedule of noncash financing activities:

  Conversion of liabilities to common stock under the Plan of
   Reorganization                                          $2,158,431    $    - 
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------

  Issuance of common stock warrants in settlement of liability
   to former chairman                                      $     -       $ 146,000
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>

The accompanying notes and independent auditor's report should be read in
conjunction with the financial statements.

F-6

<PAGE>
                                                              LESCARDEN INC.

                                               NOTES TO FINANCIAL STATEMENTS
----------------------------------------------------------------------------
1. Reorganization and Emergence from Chapter 11:

On May 14, 1997, Lescarden Inc. (the "Company") emerged from Chapter 11 of
the federal bankruptcy laws ("Chapter 11") in the United States Bankruptcy
Court for the Southern District of New York.  The Plan of Reorganization
("POR"), which was confirmed by the bankruptcy court on January 15, 1997,
resulted in a net reduction of approximately $2,100,000 in total indebtedness
and liabilities subject to compromise.  The POR provides for, among other
things, the cancelation of certain indebtedness in exchange for new
equity securities and settlement of certain claims and mutual releases of
certain claims of the Company.

On May 14, 1997, in conjunction with the reorganization and in accordance
with the POR, the Company converted the claims to the Company's common stock
at an average market price of $.7228 per share, which was based on the high
and low quoted bid and ask prices of the Company's common stock as reported
by the National Quotation Market for the 10 business days prior to the
confirmation date.  Additionally, 30% of the common stock issued was
unrestricted and 70% was restricted.

The Company's results of operations for the year ended May 31, 1996 primarily
include its operations before its Chapter 11 filing.  The results of operations
for the year ended May 31, 1997 primarily include its operations during the
Chapter 11 filing.

While in Chapter 11 the Company incurred expenses relating to the
reorganization and restructuring of its business.  These items are included in
reorganization items in the accompanying statement of operations.

2. Operations and Significant Accounting Policies:

The Company is engaged in the research, testing and development of medications
for the control and cure of various diseases and the licensing of its
technologies for commercialization by other companies.  In its research and
testing to date, the Company has discovered and is primarily investigating
Catrix<F1>, a complex of mucopolysaccharides derived from bovine cartilage.
During the year ended May 31, 1996, the Company made sales of its proprietary
bovine cartilage material, BIO-CARTILAGE<F1>, to a food supplement distributor
who in turn sold the material to nutritional food supplement stores in the U.S.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As shown in the financial statements, the
Company has suffered recurring losses from operations, during the year ended
May 31, 1997 had limited revenue and, before its bankruptcy reorganization
(see Note 1) reflected a stockholders' deficit.  These factors indicate that
the Company may be unable to continue as a going concern.  In the past few
years, management has implemented plans to enter the food supplement business
and during the year ending May 31, 1998, additional activity is expected
regarding its licensed product for therapeutic applications and wound healing.
If successful, this may increase cash flow which would allow the Company to
meet its obligations and sustain operations.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

F-7
<PAGE>

Revenue from royalties and license fees is recorded when the funds are
received.  Revenue from the product sales is recognized upon shipment of the
product.

Research and development costs, including patent costs, are charged to costs
and expenses in the year incurred.

Net loss per common share is based upon the weighted average number of common
shares outstanding during the year.  Stock options, warrants and convertible
preferred stock are excluded from the computation of net loss per common share
since they would have an antidilutive effect.

Inventory, consisting principally of Catrix<F1> and BIO-CARTILAGE<F1> supplies
, is stated at the lower of cost, determined by the first-in, first-out
method, or market.

In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-based Compensation.  The Company has
elected to apply APB Opinion No. 25 and related interpretations in accounting
for its stock options issued to employees and has adopted the disclosure-only
provisions of SFAS No. 123.

In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share.  Management does not believe SFAS No. 128 or any other
recently issued, but not yet effective, accounting standards, if currently
adopted, would have a material effect on the accompanying financial statements.

The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates by management.  Actual
results could differ from those estimates.

3. Notes Payable:

At May 31, 1996, the Company had notes payable totaling $1,013,000, with
interest at rates ranging between 10% and 13.5% per annum, of which $260,000
was past due and $753,000 was due on December 31, 1996.

Upon the Company's emergence from Chapter 11 and in accordance with the POR,
the notes payable were converted into common stock (see Note 1).

4. Stock Options and Warrants:

Pursuant to the Company's 1981 incentive and nonqualified stock option plans,
as amended, options have been granted to officers and key employees, and to
directors, officers, consultants and key employees, respectively, at exercise
prices not less than the fair market value at date of grant.  Options are
generally exercisable at the grant date or at other determinate dates
subsequent to the grant date, and expire 5 or 10 years from the date of grant
(or from other subsequent dates on which they become exercisable).  The two
stock option plans expired in November

F-8
<PAGE>

1991 without affecting any options then outstanding.  Changes in incentive and
nonqualified stock options granted and outstanding are as follows:

May 31,                            1997                     1996
---------------------------------------------------------------------------

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

Outstanding at beginning
of year                           175,000      $.61     730,000     $1.10
Canceled during year                 -          -       555,000      1.25
---------------------------------------------------------------------------

Outstanding at
 end of year                      175,000      $.61     175,000    $  .61
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The following table summarizes information about stock options
outstanding and exercisable at May 31, 1997:

                                        Weighted-
                                         Average               Weighted-
                                        Remaining               Average
  Range of              Number         Contractual             Exercise 
Exercise Price          Outstanding       Life                  Price
---------------------------------------------------------------------------
$.50 - $.75              175,000         9 years                 $.61
---------------------------------------------------------------------------
---------------------------------------------------------------------------

All of the above options are exercisable at May 31, 1997.  No options have
been exercised under either plan.

In the year ended May 31, 1993, the Company approved the "1992 Employee
Incentive Stock Plan" (the "1992 Plan").  The 1992 Plan authorized the
issuance of stock options, restricted shares of stock and stock bonus awards
to eligible participants.  The 1992 Plan provides for the reservation and
availability of 2,000,000 shares of common stock, subject to adjustment for
future stock splits, dividends, reorganizations and other similar events, at
exercise prices not less than the fair market value at the date of grant.
Options are exercisable from 12 months after the date of grant and expire 10
years from the date of grant.  At May 31, 1997, no options were granted under
the 1992 Plan.

The Company has outstanding warrants permitting the holders to purchase shares
of its common stock at prices ranging from $.10 to $1.00 per share.  The
warrants have varying expiration dates to May 15, 2005.  Warrants to purchase
4,558,429 common shares were outstanding at May 31, 1997.  In the year ended
May 31, 1997, warrants to purchase 245,000 common shares expired and warrants
to purchase 624,000 common shares were exercised at a price of $.25 per share.
Warrants are granted at exercise prices not less than the fair market value
at the date of grant.  The warrants

F-9
<PAGE>

contain restrictions on transfer and require that the underlying shares be
acquired solely for investment.

At May 31, 1997, shares of common stock have been reserved as follows:

                                                                  Number of
                                                                    Shares   
---------------------------------------------------------------------------
Stock option plans                                                  175,000
Total warrants outstanding including those specifically
 described in the notes to financial statements                   4,558,429
---------------------------------------------------------------------------

5. Commitments, Contingencies and Related Party Transactions:

Rent expense charged to operations for the years ended May 31, 1997 and 1996
amounted to approximately $44,000 and $43,000, respectively.In March 1993,
the Company entered into an operating lease for its executive offices,
expiring March 31, 1998.  The lease provides for minimum annual rental
payments, exclusive of real estate taxes and other operating costs, of
$37,000.

At May 31, 1997, the Company was not covered by product liability insurance.

On July 14, 1992, effective as of June 1, 1992, the Company amended a 1985
agreement with its former Chairman.  As of such date, the Chairman became a
consultant to the Company and resigned as Chairman and as a Director of the
Company.

This agreement, which terminated in November 1996, provided for a minimum
annual compensation of $75,000 and certain additional forms of compensation,
including payments for life insurance premiums, and:

  -  the issuance of 100,000 shares of the Company's unregistered common stock;
     and

  -  an annual pension of $25,000, commencing upon the termination of services
as provided under the agreement or upon death or permanent disability.  Pension
payments shall be due only in years in which the Company's net worth is in
excess of $2,500,000 and pretax profits of $500,000 are achieved.  The
Company's obligation shall not be satisfied until an aggregate of $500,000
has been paid.

On June 2, 1994, this former Chairman instituted an arbitration proceeding
against the Company, pursuant to the terms of his consultancy agreement,
asserting that the Company breached the agreement.  On September 6, 1995,
the arbitrator ruled in favor of this former Chairman. The arbitrator awarded
$381,250 to this former Chairman.  In addition, the arbitrator ruled that this
former Chairman should receive warrants to purchase 937,651 shares of common
stock at an exercise price of $.15625 per share, the market value at December
31, 1993.  These warrants were awarded in settlement of approximately $146,000
that was owed to this former

F-10
<PAGE>

Chairman at December 31, 1993.  While the Company was in Chapter 11, this
former Chairman's claim was purchased by a group, including certain of the
Company's other creditors for a negotiated amount of $85,000.  This claim was
transferred and assigned, pro-rata, to each purchaser and converted to common
stock in accordance with the POR.  At May 31, 1997, there are no further
obligations to this former stockholder.

A revised agreement with another former Chairman, which is for a period of 20
years, provides for a minimum annual consultancy fee/pension payment of
$25,000 to be paid in any year in which the Company's net worth is in excess
of $2,500,000 or pretax profits of $500,000 are achieved.  In the event of the
death of this former Chairman, any amounts due under this agreement will be
payable to his estate.

Additionally, the agreement provides for the issuance of nonqualified stock
options to purchase 100,000 shares of the Company's common stock.

Under the agreement, pension costs cannot be reasonably estimated principally
because the conditions required to create a pension liability do not exist at
May 31, 1997 and are not anticipated in the foreseeable future.

In June 1982, individuals related to the Company formed the Catrix<F1>
Research Limited Partnership (the "Partnership").

The Company has entered into two agreements with the Partnership, as follows:

  A.  Research Agreement:

      Under the Research Agreement, the Company received $200,000 from the
      Partnership to perform or cause to be performed research in connection
      with Catrix<F1> involving several technologies.  No further payments to
      the Company by the Partnership are contemplated under the Research
      Agreement.

  B.  License Agreement:

      Under the License Agreement, the Company assigned to the Partnership (for
      additional consideration of $25,000) three of its United States patents
      and one of its United States patent applications.  In addition, the
      Company assigned to the Partnership all foreign patents and patent
      applications corresponding thereto, together with certain technical
      information pertaining to Catrix<F1>.  The Partnership granted the
      Company exclusive worldwide licenses to make, use and sell products
      developed therefrom, subject to the Company's obligation to pay the
      Partnership three-fourths of 1% of the net sales price of any licensed
      products manufactured and sold by the Company, plus percentages ranging
      from 3.125% to 6.25% of any amounts received from any sublicensees of
      the Company.

      If the Partnership is terminated, dissolved or its assets are
      liquidated, the Company will have the option to purchase for


F-11
<PAGE>
      $25,000 all United States and foreign patents and patent applications
      transferred by the Company to the Partnership.

      At May 31, 1997, the principal asset of the Partnership consists of the
      License Agreement described above.

During the year ended May 31, 1990, the Company entered into a license
agreement, which was amended, the last amendment occurring on March 16, 1992,
with Donell, Inc. ("Donell").  This license agreement gives Donell the right
to license, sublicense and sell the Company's Catrix<F1> material for all
topical uses in the United States and Canada.  The license agreement provided
for license fee income of $500,000 through March 1, 1991, 6% royalty for
topical Catrix<F1> product sales and an additional 6% royalty on sales
commencing on January 1, 1991 until the Company receives additional royalties
of $1,000,000 and other royalty arrangements, as defined.  In addition, the
Company will receive 15% of all consideration paid to Donell whether in the
form of a sublicense fee and/or royalties, as defined, for a period of two
years from the date when and if royalty payments to Donell actually begin.
Royalties and license fee revenue from this agreement amounted to $4,436 and
$34,750 for the years ended May 31, 1997 and 1996, respectively.

The term of the license agreement is 25 years with a renewal option for an
additional period of 25 years, with the payment of a renewal fee of $1,200,000
as adjusted for the Consumer Price Index.

Upon execution of the license agreement the Company received 300,000 shares
of Donell's capital stock representing a then 30% interest in Donell.  This
stock was determined to have no value and, accordingly, no investment has been
recorded in the accompanying balance sheet.  In addition, audited financial
information for Donell is currently not available since Donell does not
prepare audited financial statements.

On October 8, 1996, Donell agreed that it no longer wanted to operate under
the March 16, 1992 agreement.  Donell agreed to liquidate its Catrix<F1>
inventory and use the Catrix<F1> name only until June 30, 1997.  Also, Donell
would pay the Company the defaulted royalties for two quarters and royalties
from inventory liquidation amounting to approximately $25,000.  Subsequent
payment of approximately $4,000 was received, leaving an outstanding balance
of $21,000.  The Company is uncertain of the receipt of this amount and did
not record a receivable.

For the years ended May 31, 1997 and 1996 approximately 0% and 6%,
respectively, of the Company's product sales were to Donell.

During the year ended May 31, 1995, the Company entered into a worldwide,
15-year license agreement with Orphan Medical, Inc. ("Orphan").  This license
agreement, which was amended, the last amendment occurring on December 16,
1996, gives Orphan the right to develop Catrix<F1>, in all therapeutic
applications, for topical wound healing purposes.  Orphan is required to
purchase the Catrix<F1> it may require, pursuant to the terms of the license
agreement from the Company.  The license agreement provides for $50,000 to be
received by October 1999,

F-12
<PAGE>

provided a New Drug Application is obtained from the Food and Drug
Administration.  Also, the Company will receive a royalty of 6% on all of
Orphan's net annual sales.  In addition, as consideration for the additional
license rights, $35,000 will be due within 30 days of completing the clinical
trial, payment to be received no later than December 31, 1997; $25,000 will
be due within 30 days of initial marketing, no later than June 30, 1998; and
$90,000 will be due within 30 days of aggregate net sales of $1,500,000.
Lastly, there are minimum royalties due of $25,000 commencing in 1998,
$35,000 commencing in 1999 and $50,000 commencing in 2000 and for each
remaining year of the license agreement which are payable quarterly in each
year.  During the years ended May 31, 1997 and 1996, the Company received
$25,000 and $7,500, respectively, which is included in royalties and other in
the accompanying statement of operations.

6. Stockholder's Equity:

The convertible preferred stock has a preference upon liquidation of $1.50
per share; is convertible, at the option of the holder, into one share of the
Company's common stock, for each share of preferred stock; and is callable,
at the option of the Company, at such time as its net worth exceeds
$3,000,000, for $1.50 per share.  Additionally, holders of preferred stock
are entitled to vote for directors of the Company on a one-share/one-vote
basis.

7. Income Taxes:

The Company has net operating loss carryforwards of approximately $10,700,000
available to reduce future taxable income which expire in various years
through 2012.

In addition, the Company has a tax credit carryforward, from research
activities, of approximately $335,000, which expires in various years through
2000.

The utilization of net operating loss carryforwards may be limited as a result
of cumulative changes in the Company's stock ownership.Deferred income taxes
reflect the impact of net operating loss carryforwards and tax credits.  In
recognition of the uncertainty regarding the ultimate amount of income tax
benefits to be derived from the Company's net operating loss and tax credit
carryforwards, the Company has recorded a valuation allowance for the entire
deferred tax asset.  Estimated deferred tax assets are comprised of the
following at May 31, 1997:

Net operating loss carryforwards                                $ 3,600,000
Tax credits                                                         335,000
---------------------------------------------------------------------------
Gross deferred tax assets                                         3,935,000
---------------------------------------------------------------------------
Valuation allowance                                              (3,935,000)
        Net deferred tax assets $                                     - 0 -     
---------------------------------------------------------------------------
---------------------------------------------------------------------------

F-12


<F1>
A registered trademark of Lescarden Inc.
<F2>
A trademark of Lescarden Inc.


<PAGE>