<PAGE>
                                       1


                  U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                 FORM 10-KSB


(MARK ONE)

            [ X ]  ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995

           [   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

                        COMMISSION FILE NUMBER 1-7335

                             LEE PHARMACEUTICALS
               ----------------------------------------------
               (Name of small business issuer in its charter)


            CALIFORNIA                                95-2680312
  -------------------------------        ------------------------------------
  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)

1444 SANTA ANITA AVENUE, SOUTH EL MONTE, CALIFORNIA                  91733
---------------------------------------------------                ----------
    (Address of principal executive offices)                       (Zip code)


                  ISSUER'S TELEPHONE NUMBER:  (818) 442-3141


        SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT

                                                    Name of Each Exchange
      Title of Each Class                            on Which Registered
  ----------------------------                  -----------------------------
  Common stock, par value $.10                  American Stock Exchange, Inc.
           per share


SECURITIES REGISTERED UNDER SECTION 12 (g) OF THE EXCHANGE ACT:  NONE

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 in response to Item 405
of Regulation S-B is not 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. [ X ]

State issuer's revenues for its most recent fiscal year: $10,053,000 Gross

As of the close of business on November 30, 1995, the aggregate market value
of Lee Pharmaceuticals common stock held by nonaffiliates was $1,643,436.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. Common stock, par value
$.10; 4,135,162 shares outstanding as of the close of business on January 5,
1996.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE

<PAGE>

                                       2


                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

     Lee Pharmaceuticals is engaged in the research, development, purchase,
manufacture, and marketing of consumer personal care products and
professional dental products, all of which are targeted for the improved
well-being of the human body. The Company's business is directed to two main
areas: (a) the development and marketing of a range of consumer products
including nail extenders and strengtheners, depilatories, feminine hygiene
products and over-the-counter drug items and (b) the manufacture and sale of
materials and supplies for use in the professional dental health field. For
all years presented, revenues, operating results and identifiable assets of
the consumer products group were in excess of 90% of total company operations.

     Lee Pharmaceuticals' executive offices are located at 1444 Santa Anita
Avenue, South El Monte, California 91733, and its telephone number is (818)
442-3141. The Company was incorporated in April 1971 as a California
corporation.

CONSUMER PRODUCTS SEGMENT

     The Company's consumer products line consists primarily of a variety of
artificial fingernail extenders and related fingernail products. In addition,
the Company manufactures and sells hair removal and related feminine
products, antacid tablets, nasal care products, infant items and a variety of
over-the-counter drug products. The Company's product lines have been
developed internally, particularly in the case of fingernail products, and by
outside product line acquisitions.

     In fiscal years 1993 and 1994, the research and development capability
of Lee Pharmaceuticals generated several new product entries, including Lee
Press-On Body Tattoos, Lee Brush-On Nail Bleach, Lee Nail Whitener and the
Lee Fancy Fingers Nail Jewelry Kit. In addition, the consumer products line
of the Company was further diversified by the acquisition of seven products
from other manufacturers, including six over-the-counter drug products and
Sundance, a line of skin care products.

     In fiscal year 1995, the research and development capability of Lee
Pharmaceuticals generated several new product entries, including a new
product line -- Lee Press-On Nails - Professional Salon Style in fourteen
high fashion nail colors plus a nail extender product line known as Lee
Elegant Edge Nail Tip kits. In addition, there was further diversification of
the Company's consumer products line by the acquisition of products from
other manufacturers, including aloe vera skin care products, a line of men's
after shave lotions, infant care items and additional over-the-counter drug
products.

DOMESTIC CONSUMER PRODUCTS MARKETING

     Consumer products are sold nationally, principally through major retail
drug, food and discount department store chains. Retail distribution is
primarily accomplished through a network of independent general merchandise
sales representatives. All lines are advertised in a variety of media,
including television, magazines and newspapers.

CONSUMER PRODUCTS COMPETITION

     The Consumer Products Division of Lee Pharmaceuticals operates in a
highly competitive environment. In the area of fingernail extension, Lee
Pharmaceuticals competes with five to six companies of similar size and
financial resources.

     Competition in the depilatory product category is intense, but
competitors are not as numerous as in the artificial fingernail field. The
acquisition of Zip Wax and Bikini Bare brands of hair removal products has
given Lee Pharmaceuticals two major brands in this category sub-segment.

     Lee Pharmaceuticals continues to expand its product line via a
combination of acquisitions and in-house research and development activity.
The consumer products line today is dominated by nail extension, nail
treatment, and nail decor products, but it now includes depilatory products,
wax hair removal products, feminine deodorant products, a nailbiting
deterrent product, nasal care items, over-the-counter drug products, skin
care products and men's fragrance products. The Company's consumer products
line today is no longer restricted solely to the volatilities of the
cosmetics business.

REGULATION OF CONSUMER PRODUCTS

     The Company's consumer products are regulated by the Food and Drug
Administration. The regulations deal principally with consumer safety and
with the effectiveness of the products for the purposes for which they are
proposed to be used. For many years, the cosmetic regulations were applied
only in cases of adulteration or misbranding. Under the Fair Packaging and
Labeling Act (1966), the FDA has moved to require new labeling data as to
ingredients in cosmetics.

     The Company believes that all its cosmetic products are manufactured and
sold in compliance with the laws of each state and that no pre-marketing
clearance of its products is required from any state. The Company maintains a
comprehensive data file on each of its consumer products and believes that it
would be able to apply for any required clearances expeditiously if data were
ever required for its cosmetic products.

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                                       3

     To the extent the Company's products are marketed in foreign countries,
foreign laws are applicable as well as FDA regulations which control export
of cosmetics. To date, where regulations have been established by foreign
ministries of health which differ from those established in the United
States, the Company has been able to make acceptable substitutions. As a
result, marketing of the products has not been significantly impeded by
foreign regulations.

     Material Safety Data Sheets (MSDS) are available on all its consumer
finished products. The MSDS's are supplied to the Company's customers.

     All products for export shipped by air or sea which contain listed
hazardous materials meet United Nations Standards as of January 1991. The
requirements are based on the U.N.'s performance-oriented packaging (POP)
specifications found in the "Transport of Dangerous Goods" commonly called
"The Orange Book".

DENTAL PRODUCTS SEGMENT

     From its inception in 1971 through 1995, the Company at various times
introduced dental products designed to satisfy specific material or supply
requirements of the practicing dental professional and of the orthodontic and
endodontic specialist.

     Its dental product line consists of a variety of restorative materials
(filling materials, core build up materials, fissure sealants, etc.),
splints, orthodontic brackets, Maryland bridge adhesives, and enamel and
dentin bonding materials and related products.

     In 1991, the Company licensed the right to certain patents and
technology developed by the American Dental Association Health Foundation
through research it sponsored at the Paffenbarger Center for Excellence in
Dental Research at the National Institute of Technology and Standards for
fabricating dental inserts and inlays of special formulas of beta quartz. The
Company has been marketing nine shapes and sizes, and is now introducing
twenty-six more sizes and shapes which are intended to offer the dentist
several new classes of restorations between amalgam and composite
restorations on the one hand, and laboratory inlays on the other hand. These
new beta quartz designs are intended to permit the dentist to prepare inlays
in one visit, directly at the chairside, without the need for time consuming
impressions, or the need for expensive laboratory work.

DENTAL MARKETING IN THE UNITED STATES

     The Company markets its dental, orthodontic and endodontic products in
the United States through telephone solicitation, direct mail, advertisement
in trade journals, attendance at conventions, and dental dealers. The Company
plans and executes its own marketing programs, prepares its own technical
literature, produces its own clinical and marketing films, and regularly
displays its dental products at conventions throughout the country.

DENTAL MARKETING OUTSIDE THE UNITED STATES

     The Company markets dental products outside the United States through
foreign dental distributors who either solicit individual dentists and
orthodontists and sell the Company's products to them directly for use in the
treatment of their patients, or sell through local dealers whom they engage
to sell the Company's products on their behalf. The Company plans and
executes its own international marketing programs and regularly displays its
dental products at international conventions.

DENTAL COMPETITION

     The dental preventive and restorative materials industry is highly
competitive, and the Company's market share in the total industry is
insignificant. The Company competes with larger corporations which have
greater financial resources and believes other companies may enter this
field. The Company's principal competitors are 3M Dental Division, a division
of 3M; Kerr, a division of Sybron; L. D. Caulk Co., a division of Dentsply;
and Unitek, a division of 3M. The principal methods of competition are in the
area of product performance, technical assistance provided to the customer,
and price.

REGULATION OF DENTAL PRODUCTS

FOOD AND DRUG ADMINISTRATION

     Dental materials are classified as devices under the Medical Device
Amendments of 1976 to the Federal Food, Drug and Cosmetic Act.

     All the dental device products marketed by the Company were registered
as devices with the FDA at the mandatory time (December 31, 1977). All new
devices marketed after May 28, 1976, must be processed under the FDA
premarketing notification regulation (510 k) for determination of equivalency
to preenactment devices, or the product must be submitted as a new device
which requires providing considerable extra test data.

     The Safe Medical Devices Act (SMDA) became law on November 28, 1990,
requiring all serious injuries and serious illness contributed to or caused
by medical devices to be reported to distributors, manufacturers and the FDA.
SMDA also requires all premarket submissions to the FDA to contain adequate
information on safety and effectiveness.

<PAGE>

                                       4

     As required by the FDA, the Company observes certain procedures and
policies in the manufacture, quality control, and after-sale monitoring of
performance for its products. Although the various criteria to be used by the
FDA in regulating devices have not been finalized, the Company believes that
all of its products and procedures comply with all current and anticipated
device regulations. Over half the Company's products fall into the FDA's
Class II classification which requires that those products must meet certain
performance standards. The Company believes that all affected products meet
all current performance standards.

     For those products placed in Class II, final marketing approval from the
FDA is contingent on final acceptance of the Panel's findings and on
development of standards (in large part being done by the American Dental
Association). It is expected that, based upon current available information,
most of the Company's products will meet the standards currently anticipated;
for the products that do not meet the standards, the Company will have to
submit adequate data directly to the FDA. Failure to gain approval by the FDA
could impede the marketing of these devices to the point of removal from the
market until such time as clearance is obtained.

OTHER GOVERNMENTAL REGULATIONS

     To the extent the Company's products are marketed in foreign countries,
the Company believes it has complied with the laws of such countries, and
with the FDA regulations which control export of devices. It is anticipated
that compliance with the FDA regulations will ensure compliance also with
applicable foreign laws and regulations, although certain foreign countries
could develop more restrictive laws and regulations that could impede the
Company's ability to market its dental products in foreign countries.

     The Company believes that all its dental products are manufactured and
sold in compliance with the laws of each state and country to whom the
Company exports and that no premarketing clearance of its products is
required from any state.

DEPARTMENT OF TRANSPORTATION

     The Materials Transportation Bureau administers the Hazardous Materials
Regulation, effective July 7, 1975. It has been ascertained that those dental
products and components marketed by the Company which fall within the
provisions of the regulations are brought into compliance by proper labeling
and/or filing for exemptions. The Company believes that it is in full
compliance with all bureau regulations applicable to its products and that
compliance with these regulations will not significantly impede the marketing
of its products.


                          APPLICABLE TO ALL SEGMENTS

FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES



                                              YEAR ENDED SEPTEMBER 30
                                           ----------------------------
                                            1995       1994       1993
                                           ------      ----       ----
                                             (000)     (000)      (000)
     United States export sales
       (except Canada). . . . . . . . . .  $1,161      $781       $880

RESEARCH PROGRAM

     The Company conducts a research program to enhance its present products
and to develop new products. The members of the research staff devote a
majority of their time to development of new products and to production in
the areas of quality control and technical assistance. As needed, clinical
research on products is also done under contract with dental schools and
clinics. The Company follows the policy of expensing all research and
development costs when incurred. During the years ended September 30, 1995,
1994 and 1993, the Company spent approximately $186,000, $289,000 and
$248,000, respectively, on research activities relating to the development of
new products or the improvement of existing products.

RAW MATERIALS

     The raw materials used by the Company in the manufacture of most of its
dental and consumer products are obtained from commercial sources where they
are presently available in sufficient quantities and are refined by the
Company as needed for use in its products. The Company generally carries
sufficient amounts of raw materials inventory to meet the delivery
requirements of customers.

PATENTS AND TRADEMARKS

     The Company has adopted the policy of making patent disclosures on its
products and of filing applications for patents on the products or on aspects
of their manufacture or use when appropriate. The Company owns forty U.S.
patents, and owns the rights in a number of other U. S. patent applications
pending. A U.S. patent on sculptured nails has been granted. There are
currently ten foreign patents held by the Company. In addition, one design
patent has been granted for a nail buffer and for artificial nails. There is
no assurance that any of the patent applications will be granted or that, if
granted, the Company will be afforded any competitive advantages thereby. The
Company believes that, while patent protection is desirable in certain areas,
it is not essential; therefore, certain foreign patents have been abandoned
as not necessary to the interest of the Company. In addition to the forty
patents noted above, which apply to dental and consumer products, the Company
has been assigned three U.S. patents which relate to general epoxy chemistry.
Two of these may be used by the Epoxylite Corporation for other than medical
and dental products without the

<PAGE>

                                       5


payment of any royalty or other consideration. United States trademarks for
the major dental products have been granted. Additional trademarks for other
products have been applied for, both in the U. S. and in foreign countries.
Trademarks for certain minor products, or in countries with minor market
potential, have been abandoned as not necessary to the interest of the
Company.

     The Company has the right to use the name "Epoxylite" in connection with
the marketing and sale of its medical and dental products and owns the
trademark "Epoxylite" in medical and dental categories. The Epoxylite
Corporation owns the trademark "Epoxylite" in all other categories. The
trademark "Epoxylite" is registered for medical and dental classifications in
the U.S., Canada, Mexico, England, France, and numerous other countries. The
Company owns, or applications are pending for, trademarks for the names under
which each of its principal products is marketed.

CURRENT REGULATORY REGISTRATION

     The Company is registered with the federal and State of California FDA
agencies as a manufacturer and distributor of Drugs, Medical Devices and
Cosmetics. The Company is also registered as a waste generator with the
Environmental Protection Agency (EPA).

ENVIRONMENTAL PROTECTION REGULATION AND LITIGATION

     The Company believes that its manufacturing facilities are operated in
compliance with all federal, state and local provisions regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment.

     The Company owns a manufacturing facility located in South El Monte,
California. The California Regional Water Quality Control Board (The
"RWQCB"), has alleged that the soil and shallow groundwater at the site are
contaminated. On August 12, 1991, the Board issued a "Cleanup and Abatement
Order" directing the Company to conduct further testing and cleanup the site.
The Company did not complete the testing, and in June, 1992, the RWQCB
requested that the EPA evaluate the contamination and take appropriate
action. At the EPA's request, Ecology & Environment, Inc. conducted an
investigation of soil and groundwater on the Company's property. Ecology &
Environment Inc.'s Final Site Assessment Report, which was submitted to the
EPA in June, 1994, did not rule out the possibility that some of the
contamination originated onsite, and resulted from either past or current
operations on the property. While the Company may be liable for all or part
of the costs of remediating the contamination on its property, the
remediation cost is not known at this time. The EPA has not taken any further
action in this matter, but may do so in the future.

     The Company and nearby property owners are in the process of engaging a
consultant to perform a site investigation with respect to soil and shallow
groundwater contamination. Based upon proposals received to date, the Company
currently estimates the cost to perform the site investigation to be
$175,000. Accordingly, while recognizing it may be jointly and severally
liable for the entire cost, the accompanying financial statements include the
proportionate amount ($87,500) which the Company believes is its liability
for a site investigation.

     The tenants of nearby properties upgradient have sued the Company
alleging that hazardous materials from the Company's property caused
contamination on the properties leased by the tenants. The Company does not
believe there is any basis for the allegations and is vigorously defending
the lawsuit. The case name is DEL RAY INDUSTRIAL ENTERPRISES, INC. v.
ROBERT MALONE, ET AL., Los Angeles County Superior Court, Northwest District,
commenced August 21, 1991. In this action, the plaintiff alleges
environmental contamination by defendants of its property, and seeks a court
order preventing further contamination and monetary damages. The Company does
not believe there is any basis for the allegations and is vigorously
defending the lawsuit.

     The Company's South El Monte manufacturing facility is also located over
a large area of possibly contaminated regional groundwater which is part of
the San Gabriel Valley Superfund site. The Company has been notified that it
is a potentially responsible party ("PRP") for the contamination. The cost of
any cleanup of the groundwater is not known at this time. In September 1992,
EPA announced that the levels of contamination in the Whittier Narrows area
of the Superfund site were sufficiently low and that it was not planning a
cleanup at this time, but rather would continue to monitor the groundwater
for an indefinite period. The Company's property is adjacent to the Whittier
Narrows area. Except as described above, it is not clear what action the EPA
will take with respect to the Company's property.

     In August, 1995, the Company was informed that the EPA entered into an
Administrative Order on Consent with Cardinal Industrial Finishes
("Cardinal") for a PRP lead remedial investigation and feasibility study (the
"Study") which, the EPA states, will both characterize the extent of
groundwater contamination in South El Monte and analyze alternatives to
control the spread of contamination. The Company and others have entered into
the South El Monte Operable Unit Site Participation Agreement with Cardinal
pursuant to which, among other things, Cardinal will contract with an
environmental firm to conduct the Study. The Study is anticipated to take
eighteen to twenty-four months. The Company's share of the cost of the Study
is currently $15,000 which has been accrued for in the accompanying financial
statements.

     The City of South El Monte, the city in which the Company has it's
manufacturing facility, is located in the San Gabriel Valley. The San Gabriel
Valley has been declared a Superfund site. The 1995 Water Quality Control
Plan issued by the California Regional Water Quality Control Board states
that the primary groundwater basin pollutants in the San Gabriel Valley are
volatile organic compounds from industry, nitrates from subsurface sewage
disposal and past agricultural activities. In addition, the Plan noted that
hundreds of underground storage tanks leaking gasoline and other toxic
chemicals have existed in the San Gabriel Valley. The California Department
of Toxic Substance Control have declared large areas of the San Gabriel
Valley to be environmentally hazardous and subject to cleanup work.

<PAGE>

                                       6


     The Company believes the City of South El Monte does not appear to be
located over any of the major plumes. However, the EPA recently announced it
is studying the possibility that, although the vadose soil and groundwater,
while presenting cleanup problems, there may be a contamination by DNAPs
(dense non-aqueous phase liquids), i.e., "sinkers", usually chlorinated
organic cleaning solvents. The EPA has proposed to drill six "deep wells"
throughout the City of South El Monte at an estimated cost of $1,400,000. The
EPA is conferring with SEMPOA (South El Monte Property Owners Association) as
to cost sharing on this project. SEMPOA has obtained much lower preliminary
cost estimates. The outcome cost and exact scope of this are unclear at this
time.

     The Securities and Exchange Commission has issued a formal order of
investigation concerning certain matters, including the Company's
environmental liabilities. The Company is cooperating with the investigation.

     Currently, the Company does not have any reliable information on the
likely cleanup costs of its property. Thus, it cannot determine the extent,
if any, of its share of liability for any such cleanup costs. The Company has
been seeking reimbursement of costs from its insurance carriers, who have
denied reimbursement of costs, based on their review and analysis of the
insurance policies, the history of the site, the nature of the claims and
current court decisions in such cases.

OTHER REGULATIONS

     During the last several years, several state, local and federal agencies
have finalized or proposed regulations relating to hazardous materials. These
include Los Angeles County Hazardous Materials Business Plan, California and
federal OSHA "right to know" laws, EPA "community right to know" laws and
Extremely Hazardous Substance Regulations, Los Angeles County's program for
monitoring and closing underground tanks, the California Safe Drinking and
Toxic Enforcement Act of 1986 (Prop 65), California Connelly-Sterling Toxic
Hot Spots Information Act and AQMD's New Source of Carcinogenic Air
Contaminants (Rule 1401). The Company believes it is in compliance with these
regulations that are in effect and is anticipating it will be in compliance
with those of these acts yet to be finalized.

EMPLOYEES

     The Company's work force of 92 presently includes 27 permanent
employees, both salaried and hourly, and 65 personnel leased through
employment agencies.

OTHER

     The Company is not dependent upon any one supplier for any important raw
material item. Most raw material items are commodities and readily available
in the market. In most instances, the Company utilizes two or more suppliers
to furnish raw materials as needed. Sources are believed to be sufficient to
satisfy current and anticipated needs.

     Demand for the Company's principal product line is not seasonal. The
depilatory line of products is, however, generally seasonal, with demand
significantly higher during the spring and summer months.

     Although the Company does not believe that it is dependent upon any one
customer or distributor, a customer accounted for 7% and 10% of the Company's
net revenues during fiscal 1995 and 1994, respectively. No other customer
accounted for 10% or more of the Company's net revenues for those fiscal
years.

     Backlog is not a significant factor in the Company's business. Most
orders are filled immediately and in any event, are cancelable under certain
conditions. There are no material contracts with distributors.

     Consumer Products Division returns must include proof of purchase, sales
receipt and a written explanation of the reason for the return. The Company
generally provides credits for replacement of product, however, on occasion
it may provide a cash refund.

     In addition, discontinued or overstocked items may be returned once the
customer receives a computer printed "return authorization" and "shipping
labels" for full case stock of factory fresh product to be sent freight
prepaid to the Company's warehouse. The customer will not receive credit for
additional merchandise that may have been added to the return. Also, the
Company issues a damaged merchandise allowance of 1/2 of 1% visibly deducted
on each and every invoice from the total net value of that invoice in lieu of
accepting returns of damaged merchandise. Finally, only 20% of the original
merchandise order of custom packed assortments is subject to return.

     The Company's sales return policy for the Dental Division, is as
follows: "products returned to Lee Pharmaceuticals for credit must be sent
postage paid and within 90 days of purchase". Defective merchandise can be
replaced free of charge at any time prior to the date of expiration.
Excessively used or improperly stored merchandise is not eligible for
replacement.

<PAGE>

                                       7

ITEM 2.  DESCRIPTION OF PROPERTIES.

     The Company occupies, through ownership or lease, ten buildings on
contiguous lots in South El Monte, California. The Company owns the
following:

                            APPROXIMATE
                              SQUARE
ADDRESS                       FOOTAGE       USAGE
-------                     -----------     -----
1428 Santa Anita Avenue        12,000       Chemical processing and filling


     The Company leases the following:

<TABLE>
<CAPTION>
                             APPROXIMATE    AGGREGATE         LEASE
                                SQUARE        ANNUAL        EXPIRATION
ADDRESS                        FOOTAGE        RENTAL           DATE         USAGE
-------                      -----------    ---------       ----------      -----
<S>                          <C>            <C>             <C>             <C>
1434 Santa Anita Avenue         11,000        $52,812       11/30/2000      Inventory control, purchasing,
                                                                            personnel, data processing, accounting
                                                                            offices and dental production/shipping

1460 Santa Anita Avenue (2)     15,000         64,728       11/30/2000      Executive office, consumer shipping and
                                                                            paper printing

1470 Santa Anita Avenue          8,000         43,056       11/30/2000      Vacant, available for subleasing

1500 Santa Anita Avenue         18,000         85,884       11/30/2000      Warehouse, consumer packaging operations,
                                                                            injection molding and corrugated printing

1516 Santa Anita Avenue         18,000         87,960       11/30/2000      Sales/marketing offices and warehouse

1444 Santa Anita Avenue (1)     10,000         62,508       11/30/2000      Executive office, research facility,
                                                                            quality control and bottle printing

1427 Lidcombe Avenue             6,000         28,134       11/30/2000      Maintenance and chemical processing
                                                                            (rear building)

1425 Lidcombe Avenue             6,000         28,134       11/30/2000      Chemical packaging

1445 Lidcombe Avenue (1)         8,000         58,680       11/30/2000      Effective November 8, 1995, the building
                                                                            is being subleased on a one-year agreement.
                                                                            The gross monthly rental income is $3,678.

</TABLE>

(1)  This property is treated as a sale leaseback agreement between the
     Company and one of its directors (former Chairman). The monthly
     lease payments were set at the currently prevailing rates in the
     area at the time the leases were written.

(2)  The Company entered into a sublease agreement, effective January
     15, 1996, which expires November 30, 2000. The gross annual rental
     income is $57,250. The tenant occupies 13,000 square feet of the
     total 15,000 square footage. In June 1998, the subleasee will
     commence occupancy of the entire 15,000 square footage and the
     monthly rent will be adjusted accordingly. The sublease includes a
     cost of living adjustment in June 1998.

     All of the Company's business segments use the properties owned or
leased by the Company except for 1470 Santa Anita Avenue (available for
subleasing) and 1445 Lidcombe Avenue which was vacated in August 1995 and
subleased effective November 8, 1995.

     The Company has a right of first refusal to acquire most of the
buildings which it leases.

     The Company believes that its existing facilities are adequate to enable
it to continue to produce its products at their present volume together with
any moderate increases thereto.

ITEM 3.  LEGAL PROCEEDINGS.

     In the ordinary course of its business, the Company is involved from
time to time in litigation. In the opinion of management of the Company none
of the litigation currently pending will have a material effect on its
business or financial condition. See Item I -- "Applicable to all segments --
Environmental protection regulation and litigation" (including the SEC formal
investigation) for additional information concerning certain litigation and
an investigation by the Securities and Exchange Commission.

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

      Not applicable.

<PAGE>

                                       8


                                    PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.

     Lee Pharmaceuticals' common stock has been traded on the American Stock
Exchange since October 24, 1973. For the two most recent fiscal years, its
shares have closed at high and low trading prices as follows:

                          QTR         HIGH         LOW
              FY 1995      1Q       $ .9375      $ .4375
                           2Q        1.0000        .5000
                           3Q         .6875        .4375
                           4Q         .8750        .5000
              FY 1994      1Q       $3.5000      $1.6250
                           2Q        2.0625       1.3125
                           3Q        2.0000       1.0625
                           4Q        1.4375        .8125


     The Company does not currently meet the guidelines for continued listing
of the Company's Common Stock on the American Stock Exchange. No assurances
can be given that the Company's Common Stock will continue to be traded on
the American Stock Exchange. The Company is exploring the possibility of
moving the trading of its stock to the over the counter market.

     There were approximately 894 shareholders of record of the Company's
common stock as of the close of business on September 30, 1995.

     The Company has not paid any cash dividends and has no present intention
of paying cash dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994

     Net revenues decreased during fiscal 1995 by $1,730,000 or 16% when
compared to fiscal 1994. The decrease in net revenues was the result of lower
sales volume of the Company's nail extender products. The decline in sales
revenue was caused by lower competitive pricing, contracting inventory levels
and customer consolidations by the retailers. The Company's percentage of
sales returns to gross revenues was basically constant when comparing fiscal
1995 and 1994. New product launches and brand acquisitions accounted for
approximately 6% of the total net revenues for fiscal 1995.

     As noted under "Description of Business -- Consumer Products Segment" the
Company has pursued a policy of diversifying its product line and has
increasingly emphasized lower priced products. The overall economic recession
had some effect on the down turn in the Company's sales volume in fiscal 1995.

     Cost of sales as a percentage of gross revenues increased during fiscal
1995 when compared to fiscal year 1994. The increased cost of sales
percentage (47% versus 41%) is attributed to bulk sales of slow moving
finished goods at lower than normal gross margins. Also the Company's charge
to cost of sales to increase the inventory obsolescence allowance amounted to
$485,000 or approximately 500 basis points of the fiscal year cost of sales
percentage increase (47% versus 41%).

     Selling and advertising expenses decreased $1,047,000 or 20% when
comparing fiscal year 1995 and 1994. The cost reductions occurred in several
major expense classifications, namely: 1) decrease in payroll and related
fringe benefits due to cutbacks of personnel, 2) decline in advertising
promotion costs, 3) lower manufacturer representative commissions (lower
sales volume) and 4) lower consulting and amortization expenses.

     Research and development expenses decreased $103,000 (36%) to $186,000
for 1995, as compared to $289,000 at September 30, 1994. A reduction in
personnel and related fringe benefit costs explains the reduction in
expenditures. The recent Company trend has been in the direction of brand
acquisitions rather than extensive internal research and development.

     General and administrative expenses remained constant when comparing
fiscal year 1995 and 1994. When comparing fiscal year 1995 and 1994, the
following key expense categories decreased; salaries and wages plus related
fringe benefits ($152,000), legal ($27,000), and insurance ($17,000). The
reduction in expenses were offset primarily by increases for an environmental
cleanup accrual ($102,500) and a write off of an affiliate receivable
($83,000).

<PAGE>

                                       9


LIQUIDITY AND CAPITAL RESOURCES

Working capital was $1,260,000 at September 30, 1995, as compared with
$3,042,000 at September 30, 1994. The ratio of current assets to current
liabilities was 1.3 to 1 at September 30, 1995 and 2.0 to 1 at September 30,
1994. The decrease in working capital during fiscal 1995 primarily resulted
from a decrease in inventory levels ($962,000) as a result of scrapping
excess packaging components. Also, the Company's accounts payable and
payables due to related parties increased $358,000 and $223,000,
respectively. The decrease in current ratio during 1995 compared to 1994
resulted primarily from: 1) a real estate bank loan (approximately $289,000)
which becomes due in March 1996, 2) the increase in inventory obsolescence
allowance of $485,000 and 3) the recognition and recording of the remaining
current portion ($660,000) of the long term liabilities related to prior
brands acquisitions. Accounts and notes payable (current) increased
($935,000) from 1994 to 1995. Accounts payable as a percentage of total costs
and expenses increased to 16% from 11% when comparing fiscal years 1995
versus 1994. The accounts receivable turnover has remained relatively
constant when comparing fiscal year 1995 and 1994.

     In fiscal 1995, the Company received additional cash advances from the
Company's Chairman. The additional borrowing was obtained for the continued
payment to suppliers. The Company extended the repayment terms of several
notes prior to their maturity during fiscal 1995.

     Customer consolidations, as expected, materialized in fiscal 1995 and
will, no doubt, continue in fiscal 1996. Management continues to face lower
retail store inventory levels and expanded computerization (EDI - electronic
data interchange) in the field.

     The Company has an accumulated deficit of $4,805,000. The Company's
recurring losses from operations and inability to generate sufficient cash
flow from normal operations to meet its obligations as they came due raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue in existence is dependent upon future
developments, including obtaining additional financing and achieving a level
of profitable operations sufficient to enable it to meet its obligations as
they become due.

     In order to increase its working capital, the Company developed the
following financial plan. The Company has taken steps to conserve cash by
reducing its occupied facility square footage by 25% since August 1995. The
lease on a 7,000 square foot facility was canceled by paying a six (6) month
advance rent buyout. Two other facilities were vacated and will be subleased
during fiscal 1996. One subleasee took occupancy of a building in November of
1995, and the second building will be occupied in January 1996. The amount of
rental income will be slightly less than the Company's current monthly rent
expense related to these buildings. The total annualized economic savings via
the lease buyout and rental income on the two buildings is approximately
$133,000. Additionally, the Company is conducting a review of its
inventory and is diligently working to reduced the amount of working capital
tied up in inventory. The Company reduced its gross inventory level during
fiscal 1995 by approximately $477,000, exclusive of material scrapped from
inventory. Plus, the Company is reviewing proposals from finance companies
regarding the possibility of them making a loan secured by the Company's
accounts receivable, inventory and equipment. The Company is hopeful that
this funding will be available should the need arise. Also, the renegotiation
of the Company's real estate loan ($289,000) which matures in March, 1996 is
underway. No assurances can be given that the Company's efforts in this
regard will be successful.

     The Company does not believe that inflation had a significant impact on
its operations during fiscal years 1995 and 1994.

ITEM 7.  FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>

                                                                                   PAGE
INDEX TO FINANCIAL STATEMENTS                                                     NUMBER
<S>                                                                               <C>
Independent Auditors' Reports                                                      10-11

Financial Statements:

     Balance sheet as of September 30, 1995                                         12

     Statements of operations for each of the years in the two-year
     period ended September 30, 1995                                                13

     Statements of changes in stockholders' equity (deficiency) for each
     of the years in the two-year period ended September 30, 1995                   14

     Statements of cash flows for each of the years in the two-year
     period ended September 30, 1995                                               15

     Notes to financial statements                                                 16-23

</TABLE>

     All schedules not filed or included herein are omitted either because
they are not applicable or not required, or the required information is
included in the financial statements or notes thereto.

<PAGE>

                                       10


                                GEORGE BRENNER

                         CERTIFIED PUBLIC ACCOUNTANT
                     9300 WILSHIRE BOULEVARD, SUITE 480
                       BEVERLY HILLS, CALIFORNIA 90212

                         Independent Auditor's Report

Board of Directors
Lee Pharmaceuticals
South El Monte, California

I have audited the accompanying balance sheet of Lee Pharmaceuticals as of
September 30, 1995 and the related statements of operations, changes in
stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit. The financial statements of Lee Pharmaceuticals for the period
ending September 30, 1994 were audited by other auditors whose report
thereon dated December 6, 1994 expressed an unqualified opinion on those
statements.

I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lee Pharmaceuticals as
of September 30, 1995, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1
to the financial statements, the Company's recurring losses from operations
and inability to generate sufficient cash flow from normal operations raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Notes 1
and 15. The financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from
the possible inability of the Company to continue as a going concern.

As discussed in Note 10 to the financial statements, the Company is
involved in various matters involving environmental cleanup issues. The
Company is presently planning and/or participating in remedial cost studies
and has made the appropriate provision in the financial statements for the
cost of these studies. However, the ultimate outcome of these matters
cannot presently be determined. Accordingly, no provision for any loss that
may result from the resolution of these matters has been made in the
accompanying financial statements.

                                       Very truly yours,

                                       GEORGE BRENNER

                                       George Brenner, CPA

January 6, 1996
Beverly Hills, California

<PAGE>

                                       11


                                  MEIR & MEIR

                        CERTIFIED PUBLIC ACCOUNTANTS


                        Independent Auditor's Report


Board of Directors
Lee Pharmaceuticals
South El Monte, California


We have audited the statements of operations, changes in  stockholders'
equity, and cash flows of Lee Pharmaceuticals  for the year ended September
30, 1994. 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 audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Lee
Pharmaceuticals for the year ended September 30, 1994, in conformity with
generally accepted accounting principles.

As discussed in Note 10 to the financial statements, the Company is involved
in various matters involving environmental cleanup issues. The ultimate
outcome of these matters cannot presently be determined. Accordingly, no
provision for any loss that may result from the resolution of these matters
has been made in the accompanying financial statements.

MEIR & MEIR

December 6, 1994

          139 South Beverly Drive, Suite 204 Beverly Hills, CA 90212
                   Tel: (310) 274-7541 Fax: (310) 274-1015

<PAGE>

                                       12


                              LEE PHARMACEUTICALS

                                  BALANCE SHEET

                               SEPTEMBER 30, 1995

                                     ASSETS


CURRENT ASSETS (Note 6F):
  Cash..........................................................   $   123,000
  Accounts receivable, less allowance for doubtful accounts
    of $141,000 and sales returns allowance of $243,000.........     1,331,000
  Inventories (Note 4)..........................................     2,460,000
  Other current assets..........................................     1,087,000
                                                                   -----------
    TOTAL CURRENT ASSETS........................................     5,001,000
                                                                   -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 5 and 6F):
  Land..........................................................        49,000
  Building......................................................       204,000
  Machinery and equipment.......................................     6,531,000
  Leasehold improvements........................................       322,000
                                                                   -----------
                                                                     7,106,000
  Less accumulated depreciation and amortization................     6,519,000
                                                                   -----------
    NET PROPERTY, PLANT AND EQUIPMENT...........................       587,000
                                                                   -----------
INTANGIBLE AND OTHER ASSETS, net of accumulated amortization
  of $2,558,000 (Notes 3, 6F and 8).............................     3,127,000
                                                                   -----------
TOTAL...........................................................   $ 8,715,000
                                                                   ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Note payable to bank (Note 5).................................   $   289,000
  Notes payable, other (Note 8).................................       165,000
  Current portion - royalty agreements (Note 2).................       743,000
  Accounts payable..............................................     1,636,000
  Other accrued liabilities.....................................       455,000
  Due to related parties (Note 7)...............................       388,000
  Deferred income (Note 7)......................................        65,000
                                                                   -----------
    TOTAL CURRENT LIABILITIES...................................     3,741,000

LONG-TERM NOTES PAYABLE TO RELATED PARTIES (Note 6).............     3,346,000
LONG-TERM PAYABLE - royalty agreements, less current
  portion $743,000 (Note 2).....................................     1,525,000
DEFERRED INCOME (Note 7)........................................       273,000
                                                                   -----------
  TOTAL LIABILITIES.............................................     8,885,000
                                                                   -----------

SUBSEQUENT EVENT (Note 15)

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' DEFICIENCY (Notes 11 and 13):
  Common stock, $.10 par value; authorized 7,500,000 shares;
    issued and outstanding, 4,135,162 shares....................       413,000
  Additional paid-in capital....................................     4,222,000
  Accumulated deficit (Note 1)..................................    (4,805,000)
                                                                   -----------
    TOTAL STOCKHOLDERS' DEFICIENCY..............................      (170,000)
                                                                   -----------
TOTAL...........................................................   $ 8,715,000
                                                                   ===========

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                                       13


                              LEE PHARMACEUTICALS

                            STATEMENTS OF OPERATIONS

                        FOR THE YEARS ENDED SEPTEMBER 30,


                                                       1995           1994
                                                    -----------    -----------
GROSS REVENUES...................................   $10,053,000    $11,915,000
  Less: Sales returns, discounts
    and allowances...............................      (914,000)    (1,046,000)
                                                    -----------    -----------
NET REVENUES.....................................     9,139,000     10,869,000
                                                    -----------    -----------

COSTS AND EXPENSES:
  Cost of sales..................................     4,762,000      4,884,000
  Selling and advertising........................     4,077,000      5,124,000
  General and administrative.....................     1,110,000      1,114,000
  Research and development.......................       186,000        289,000
                                                    -----------    -----------
TOTAL COSTS AND EXPENSES.........................    10,135,000     11,411,000
                                                    -----------    -----------
OPERATING LOSS...................................      (996,000)      (542,000)
INTEREST EXPENSE.................................      (363,000)      (238,000)
INTEREST INCOME..................................            --         24,000
GAIN ON SALE OF BUILDINGS AND OTHER (Note 7).....        65,000         67,000
OTHER INCOME.....................................        12,000         26,000
                                                    -----------    -----------
NET LOSS.........................................   $(1,282,000)   $  (663,000)
                                                    ===========    ===========
PER SHARE:
  Net loss.......................................   $      (.31)   $      (.16)
                                                    ===========    ===========

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                                       14


                              LEE PHARMACEUTICALS

          STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                       FOR THE YEARS ENDED SEPTEMBER 30,


<TABLE>
<CAPTION>

                                            COMMON STOCK                             RETAINED
                                      ------------------------      ADDITIONAL       EARNINGS
                                      NUMBER OF                       PAID-IN      (ACCUMULATED
                                        SHARES         AMOUNT         CAPITAL         DEFICIT)           TOTAL
                                      ---------       --------      ----------     ------------       -----------
<S>                                   <C>             <C>           <C>            <C>                <C>
Balance at September 30, 1993         4,135,162       $413,000      $4,222,000      $(2,860,000)      $ 1,775,000
Net loss                                                                               (663,000)         (663,000)
                                      ---------       --------      ----------     ------------       -----------
Balance at September 30, 1994         4,135,162        413,000       4,222,000       (3,523,000)        1,112,000
Net loss                                                                             (1,282,000)       (1,282,000)
                                      ---------       --------      ----------     ------------       -----------
Balance at September 30, 1995         4,135,162       $413,000      $4,222,000      $(4,805,000)      $  (170,000)
                                      =========       ========      ==========     ============       ===========

</TABLE>

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                                       15


                              LEE PHARMACEUTICALS

                           STATEMENTS OF CASH FLOWS

                       FOR THE YEARS ENDED SEPTEMBER 30,

                                                       1995           1994
                                                    -----------     ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.......................................   $(1,282,000)    $(663,000)
                                                    -----------     ---------
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
  Depreciation...................................       249,000       391,000
  Amortization of intangibles....................       245,000       216,000
  (Gain) on disposal of property, plant
    and equipment................................       (19,000)       (1,000)
Change in operating assets and liabilities:
  (Increase) decrease in accounts receivable.....      (398,000)      696,000
  Decrease (increase) in inventories.............       962,000       (42,000)
  Decrease (increase) in other current assets....       278,000      (420,000)
  Increase in accounts payable...................       358,000       180,000
  Increase (decrease) in accounts payable,
    related party................................       223,000      (316,000)
  Increase in note payable bank..................       289,000            --
  Increase in notes payable - other..............        65,000       100,000
  (Decrease) in customer advances and deposits...       (26,000)     (109,000)
  (Decrease) in accrued salaries and wages.......       (48,000)      (10,000)
  (Decrease) in other accrued liabilities........      (170,000)     (122,000)
  Increase in accrued royalties..................        83,000            --
  (Decrease) in deferred income..................       (65,000)     (189,000)
                                                    -----------     ---------
  Total adjustments..............................     2,026,000       374,000
                                                    -----------     ---------
    Net cash provided by (used in) operating
      activities.................................       744,000      (289,000)
                                                    -----------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment.....       (98,000)     (300,000)
  Proceeds from sale of equipment................        26,000         1,000
  Acquisition of product brands..................      (552,000)     (101,000)
                                                    -----------     ---------
    Net cash (used in) investing activities......      (624,000)     (400,000)
                                                    -----------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on bank loans.........................      (296,000)       (7,000)
  Proceeds from notes payable to related party...       193,000       510,000
                                                    -----------     ---------
    Net cash (used in) provided by financing
      activities.................................      (103,000)      503,000
                                                    -----------     ---------

NET INCREASE (DECREASE) IN CASH..................        17,000      (186,000)
Cash, beginning of year..........................       106,000       292,000
                                                    -----------     ---------
Cash, end of year................................   $   123,000     $ 106,000
                                                    ===========     =========

              SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid (refunded) during the year for:
  Interest.......................................   $   138,000     $ 181,000
  Taxes..........................................            --     $ (43,000)


    The accompanying notes are an integral part of the financial statements.


<PAGE>
                                  16

                          LEE PHARMACEUTICALS
                     NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       DESCRIPTION OF BUSINESS

       The  Company  manufactures  and markets  consumer  products  to
       national  and regional retailers of varying financial strength.
       The  Company  also  manufactures and sells dental  products  to
       dental  service  providers principally in  the  United  States.
       For   all   years  presented,  sales,  operating  results   and
       identifiable  assets  of the consumer products  group  were  in
       excess of 87% of total company operations.

       CONTINUED EXISTENCE

       The  financial statements have been prepared assuming that  the
       Company will continue as a going concern.  The Company  has  an
       accumulated  deficit  of $4,805,000.  The  Company's  recurring
       losses  from  operations and inability to  generate  sufficient
       cash  flow  from  normal operations to meet its obligations  as
       they  came  due  raise  substantial doubt about  the  Company's
       ability  to continue as a going concern.  The Company's ability
       to   continue   in   existence   is   dependent   upon   future
       developments,  including  obtaining  additional  financing  and
       achieving  a  level  of  profitable  operations  sufficient  to
       enable  it  to  meet  its  obligations  as  they  become   due.
       Management's plans in regard to these matters are described  in
       Note  15 --  "Subsequent Events."  The financial statements  do
       not  include  any  adjustments to reflect the  possible  future
       effects  on the recoverability and classification of assets  or
       the  amounts and classification of liabilities that may  result
       from  the  possible inability of the Company to continue  as  a
       going concern.

       INVENTORIES

       Inventories are stated at the lower of average cost or market
       using the first-in, first-out method.

       DEPRECIATION AND AMORTIZATION

       Property,  plant  and  equipment  are  depreciated  using   the
       straight-line method over estimated useful lives  of  three  to
       ten   years   for   machinery  and   equipment   and   building
       improvements and thirty-one years for the building.   Leasehold
       improvements  are amortized over the shorter of  the  estimated
       useful lives of the assets or the related lease term.

       The  excess of acquisition costs over the fair value of certain
       assets  acquired is being amortized over forty years. Covenants
       not  to  compete are being amortized over three to five  years,
       which  is the term of the related agreements.  Amortization  is
       provided using the straight-line method.

       ENVIRONMENTAL EXPENDITURES

       Environmental   expenditures  that  relate   to   an   existing
       condition  caused  by  past  operations,  and  which   do   not
       contribute  to  current  or  future  revenue  generation,   are
       expensed.    The   Company's   proportionate   share   of   the
       liabilities are recorded when environmental remediation  and/or
       cleanups   are  probable,  and  the  costs  can  be  reasonably
       estimated.    See  Note  10 --  "Assessment  for  environmental
       cleanup."

       MAJOR CUSTOMER

       The   Company   had  one  major  customer  with  sales   volume
       approximating 7% and 10% of the Company's net revenues for  the
       years  ending  September 30, 1995 and 1994, respectively.   The
       amount  due  from  the customer was $118,000  and  $278,000  at
       September  30, 1995 and 1994, respectively, and is included  in
       accounts receivable in these financial statements.

       CONCENTRATION OF CREDIT RISK

       Financial instruments which potentially subject the Company  to
       concentrations  of  credit  risk  consist  of  cash  and  trade
       receivables.   The  Company places its cash  with  high  credit
       quality financial institutions.  At times such investments  may
       be   in  excess  of  the  FDIC  limit.   In  regards  to  trade
       receivables,  the risk is limited due to the  large  number  of
       customers  comprising the customer base, and the dispersion  in
       different industries and geographies.

       NET LOSS PER SHARE

       Net  loss per share is based on the weighted average number  of
       common  shares  outstanding which were 4,135,162  in  1995  and
       1994.   Common  stock  equivalents (common stock  options)  for
       fiscal  1995 and 1994 were not considered in the net  loss  per
       share computations since the effect was anti-dilutive.


<PAGE>
                                   17

       ACCUMULATED DEFICIT

       The  Company  has experienced recurring losses from operations.
       Management  plans  to  fund  any  potential  additions  to  the
       deficit  by  borrowing from various sources.   See  Note  15 --
       "Subsequent Events."


  NOTE 2 - CHANGE IN ACCOUNTING POLICY

       The  Company  has changed its method of accounting for  royalty
       agreements  in  connection  with brand  acquisitions.   Minimum
       royalty  obligations that are fixed and certain in  amount  are
       "grossed   up"  and  recorded  as  liabilities.   The   related
       intangible assets acquired are amortized over the life  of  the
       royalty  agreement.   This change which is  a  grossing  up  of
       assets and liabilities, in equal amounts, has no effect on  the
       statements of operations.

       Certain  reclassifications have been made in the  Statement  of
       Cash  Flows for the year ending September 30, 1994 to make  the
       statement comparable to the September 30, 1995 presentation.


NOTE 3 - INTANGIBLE ASSETS

       The  Company acquired certain product lines in 1995  (See  Note
       14)   and  prior  years.   Certain  amounts  related  to  these
       acquisitions were allocated to intangible assets.  Included  in
       intangible  and  other assets at September  30,  1995  are  the
       following intangible assets:

               Goodwill                             $1,373,000
               Covenants not to compete              1,388,000
               Trademark                               322,000
               Royalty agreements                    2,276,000
               Other                                   326,000
                                                    ----------
               Total                                 5,685,000
               Less:  accumulated amortization      (2,558,000)
                                                    ----------
               Intangibles - Net                    $3,127,000
                                                    ==========

NOTE 4 -  INVENTORIES

       Inventories consist of the following at September 30,
  1995:

               Raw materials                        $2,185,000
               Work-in-process                         416,000
               Finished goods                          485,000
                                                    ----------
                                                     3,086,000
               Allowance for obsolescence             (626,000)
                                                    ----------
               Total                                $2,460,000
                                                    ==========

NOTE 5 -  NOTE PAYABLE TO BANK

       Note  payable to bank, secured by a deed on land and  building,
       requires monthly payment of $3,900, including interest  at  the
       bank's  reference  rate  plus  2%,  maturing  March  1996.   At
       September 30, 1995, the interest rate was 13.75%.  The note  is
       guaranteed by the former Chairman of the Company.  The  Company
       is  going  through the renegotiations with the  bank  regarding
       this real estate loan.  See Note 15 -- "Subsequent Events."


NOTE 6  - NOTES PAYABLE - RELATED PARTIES

<TABLE>
       <S>  <C>                                                                 <C>
       A.   Notes payable to related parties, unsecured, bearing
            interest at bank's prime rate (8.75% at September 30,
            1995), maturing January 2005.                                       $90,000

       B.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate (8.75% at September 30, 1995),
            principal is maturing and accrued interest is payable
            in January 2005.                                                    193,000

       C.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate (8.75% at September 30, 1995), principal
            is maturing and accrued interest is payable in January
            2005.                                                               150,000

       D.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate  (8.75% at September 30, 1995), principal
            is maturing and accrued interest is payable in January
            2005.                                                               371,000

</TABLE>

<PAGE>
                                   18

<TABLE>
       <S>  <C>                                                                 <C>
       E.   Notes  payable to related party, secured by product brand,
            bearing interest at bank's prime rate (8.75% at September 30,
            1995), principal is maturing and accrued interest is payable
            in January 2005.                                                    400,000

       F.   Note payable to related party, secured by assets of the
            Company, bearing interest at bank's prime rate (8.75% at
            September 30, 1995) and principal payable based on a twelve
            (12) year fully amortized schedule commencing March 15, 1997.     1,440,000

       G.   Notes payable to officer, secured by product brand,
            bearing interest at bank's prime rate (8.75% at September 30,
            1995), principal is maturing and accrued interest is payable
            in January 2005.                                                    250,000

       H.   Note payable to officer, secured by product brand,
            bearing interest at bank's prime rate (8.75% at September 30,
            1995), principal is maturing and accrued interest is payable
            in January 2005.                                                    100,000

       I.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate (8.75% at September 30, 1995), principal
            is maturing and accrued interest is payable in July 1998.           129,000

       J.   Note payable to officer, secured by product brand,
            bearing interest at bank's prime rate (8.75% at September 30,
            1995), principal is maturing and accrued interest is payable
            in March 1997.                                                       38,000

       K.   Note payable to related party, unsecured, bearing interest
            at bank's prime rate (8.75% at September 30, 1995), maturing
            January 1997.                                                        10,000

       L.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate (8.75% at September 30, 1995), principal
            is maturing and accrued interest payable in November 1997.           20,000

       M.   Note payable to officer, unsecured, bearing interest at
            bank's prime rate (8.75%  at September 30, 1995), principal
            is maturing and accrued interest is payable in January 2005.
            The original note was $250,000 and the Company made principal
            installment payments during fiscal 1995 in the amount of
            $95,000.                                                            155,000
                                                                             ----------
                                                                             $3,346,000
                                                                             ==========
</TABLE>

       The  Company's  Chairman  retired in  April  1995.   The  above
       referenced  notes  B,  C, D, G, H and  M  are  payable  to  the
       Company's retired officer.

       At September  30,  1995,  the  Company  was  committed  to  the
       following minimum principal payments.

                                            MINIMUM
                  YEAR ENDING              PRINCIPAL
                 SEPTEMBER 30,              PAYMENT
                 ------------             ----------
                      1996                       -0-
                      1997                   132,000
                      1998                   269,000
                      1999                   120,000
                      2000                   120,000
                   Thereafter              2,705,000
                                          ----------
                     Total                $3,346,000
                                          ==========

NOTE  7 -  RELATED PARTY TRANSACTIONS

       In  1991, the Company sold and leased back two of its operating
       facilities  in  a  transaction with its Chairman.   An  initial
       gain  was recognized and a deferred gain was recorded which  is
       to  be  amortized over the term of the two leases which  expire
       November  2000.  The amount of deferred gain recognized  during
       1995 and 1994 was $65,000.

       During  the  fiscal year ending September 30, 1995,  the  total
       interest expensed to related parties (Note 6) was $291,000  out
       of  which  $66,000  was paid and $318,000  was  accrued  as  of
       September 30, 1995.


<PAGE>
                                   19

       There  were  no consulting fees charged by the Chairman's  firm
       during  fiscal  year ending September 30, 1995.  During  fiscal
       year  1995  the Company paid the $38,000, which was payable  as
       of  September  30, 1994.  In April 1995, the Chairman  retired.
       He  will  continue as a director of the Company.  The  Chairman
       (thru  April  1995) is a majority shareholder  with  a  freight
       consulting  firm.  During the fiscal year ending September  30,
       1994,  the  Chairman's firm provided the Company with  analysis
       of  freight  shipments and development of  expert  system  type
       computer   programs   for   traffic  management.    The   total
       consulting  fees  approximated  $113,000  for  the  year  ended
       September 30, 1994.

       The   Company's   primary   agent  for  purchasing   television
       advertising  is Western International Media Corp. (WIMC)  whose
       President  and Chief Executive Officer, Dennis F. Holt,  was  a
       Director  of the Company during 1995.  Agency and advertisement
       expenses  in  connection with (WIMC) were $204,000 and  $61,000
       for  the years ended September 30, 1995 and 1994, respectively.
       Amounts owed to WIMC by the Company at September 30, 1995  were
       $153,000.  See Note 15 -- "Subsequent Events."


NOTE 8 -  NOTES PAYABLE - OTHER

<TABLE>
       <S> <C>                                                               <C>
       A.  Note payable secured by product brand, bearing interest at
           15%, interest payable monthly, maturing July 1996.                $   50,000

       B.  Note payable secured by product brand, bearing interest at
           15%, interest payable monthly, maturing July 1996.                    50,000

       C. Installment note payable related to a consulting
          agreement of a brand  acquisition, bearing interest at 10%,
          calling for monthly payments of $5,000 plus accrued interest,
          commencing September 1, 1995 and maturing November 1, 1996.            65,000
                                                                             ----------
                                                                             $  165,000
                                                                             ==========
</TABLE>

NOTE 9 -  FOURTH QUARTER RESULTS

       The  Company increased its fourth quarter, ended September  30,
       1995,  unaudited operating loss by $601,000 due  primarily  to:
       1)  increased inventory obsolescence allowance of $355,000,  2)
       accrual  for  estimated  environmental  remediation  costs   of
       $102,500  and  3)  a  write off of an affiliate  receivable  of
       approximately $83,000.  The fourth quarter ended September  30,
       1995  operating  loss (including the above)  was  approximately
       $885,000.


NOTE 10 - COMMITMENTS AND CONTINGENCIES

       LEASE COMMITMENTS

       At  September  30,  1995,  the Company  was  committed  to  its
       former Chairman  and  to  others  under noncancelable operating
       leases for  land and buildings requiring minimum annual rentals
       as follows:

                  YEAR ENDING
                 SEPTEMBER 30,            OTHERS       CHAIRMAN
                 ------------           ----------     --------
                      1996                 391,000      121,000
                      1997                 391,000      121,000
                      1998                 391,000      121,000
                      1999                 391,000      121,000
                      2000                 391,000      121,000
                   Thereafter               65,000       20,000
                                        ----------     --------
                     Total              $2,020,000     $625,000
                                        ==========     ========

       Generally,  the leases provide that maintenance, insurance  and
       a  portion  of  property taxes are to be paid by  the  Company.
       The  Company also has a right of first refusal to acquire  most
       of  the  buildings  which  it  leases.   The  Company's  rental
       expense  for  the years ended September 30, 1995 and  1994  was
       $552,000  and $547,000, respectively.  The amount of rent  paid
       to the Company's former Chairman was $147,000 and $105,000  for
       the years ended September 30, 1995 and 1994, respectively.

<PAGE>
                                   20

       ASSESSMENT FOR ENVIRONMENTAL CLEANUP

       The  Company owns a manufacturing facility located in South  El
       Monte,  California.   The  California  Regional  Water  Quality
       Control  Board  (The "RWQCB"), has alleged that  the  soil  and
       shallow  groundwater at the site are contaminated.   On  August
       12,  1991,  the  Board issued a "Cleanup and  Abatement  Order"
       directing  the Company to conduct further testing  and  cleanup
       the  site.   The Company did not complete the testing,  and  in
       June,  1992,  the  RWQCB requested that the  EPA  evaluate  the
       contamination  and  take  appropriate  action.   At  the  EPA's
       request,    Ecology   &   Environment,   Inc.   conducted    an
       investigation   of  soil  and  groundwater  on  the   Company's
       property.   Ecology & Environment Inc.'s Final Site  Assessment
       Report,  which was submitted to the EPA in June, 1994, did  not
       rule  out  the  possibility  that  some  of  the  contamination
       originated  onsite, and resulted from either  past  or  current
       operations  on the property.  While the Company may  be  liable
       for  all  or part of the costs of remediating the contamination
       on  its  property, the remediation cost is not  known  at  this
       time.   The  EPA  has  not  taken any further  action  in  this
       matter, but may do so in the future.

       The  Company and nearby property owners are in the  process  of
       engaging  a  consultant  to perform a site  investigation  with
       respect  to soil and shallow groundwater contamination.   Based
       upon   proposals  received  to  date,  the  Company   currently
       estimates  the  cost  to perform the site investigation  to  be
       $175,000.   Accordingly, while recognizing it  may  be  jointly
       and  severally  liable  for the entire cost,  the  accompanying
       financial   statements   include   the   proportionate   amount
       ($87,500)  which  the Company believes is its liability  for  a
       site investigation.

       The  tenants  of  nearby properties upgradient  have  sued  the
       Company  alleging that hazardous materials from  the  Company's
       property caused contamination on the properties leased  by  the
       tenants.   The Company does not believe there is any basis  for
       the  allegations and is vigorously defending the lawsuit.   The
       case   name  is   DEL  RAY   INDUSTRIAL  ENTERPRISES,  INC.  v.
       ROBERT  MALONE,  ET  AL.,  Los Angeles  County  Superior  Court,
       Northwest  District,  commenced  August  21,  1991.   In   this
       action,  the  plaintiff alleges environmental contamination  by
       defendants  of its property, and seeks a court order preventing
       further  contamination and monetary damages.  The Company  does
       not  believe  there  is any basis for the  allegations  and  is
       vigorously defending the lawsuit.

       The  Company's  South El Monte manufacturing facility  is  also
       located  over  a  large area of possibly contaminated  regional
       groundwater  which is part of the San Gabriel Valley  Superfund
       site.   The  Company has been notified that it is a potentially
       responsible party ("PRP") for the contamination.  The  cost  of
       any  cleanup of the groundwater is not known at this time.   In
       September  1992, EPA announced that the levels of contamination
       in  the  Whittier  Narrows  area of  the  Superfund  site  were
       sufficiently  low  and that it was not planning  a  cleanup  at
       this   time,   but  rather  would  continue  to   monitor   the
       groundwater  for an indefinite period.  The Company's  property
       is  adjacent to the Whittier Narrows area.  Except as described
       above,  it  is  not clear what action the EPA  will  take  with
       respect to the Company's property.

       In  August, 1995, the Company was informed that the EPA entered
       into   an   Administrative  Order  on  Consent  with   Cardinal
       Industrial  Finishes  ("Cardinal")  for  a  PRP  lead  remedial
       investigation  and feasibility study (the "Study")  which,  the
       EPA  states,  will both characterize the extent of  groundwater
       contamination  in  South El Monte and analyze  alternatives  to
       control  the spread of contamination.  The Company  and  others
       have  entered  into  the  South El  Monte  Operable  Unit  Site
       Participation Agreement with Cardinal pursuant to which,  among
       other  things,  Cardinal will contract  with  an  environmental
       firm  to  conduct the Study.  The Study is anticipated to  take
       eighteen  to  twenty-four months.  The Company's share  of  the
       cost  of  the Study is currently $15,000 which has been accrued
       for in the accompanying financial statements.

       The  City of South El Monte, the city in which the Company  has
       it's  manufacturing  facility, is located in  the  San  Gabriel
       Valley.   The San Gabriel Valley has been declared a  Superfund
       site.   The  1995  Water Quality Control  Plan  issued  by  the
       California  Regional Water Quality Control  Board  states  that
       the  primary  groundwater basin pollutants in the  San  Gabriel
       Valley  are volatile organic compounds from industry,  nitrates
       from   subsurface   sewage  disposal  and   past   agricultural
       activities.   In  addition, the Plan  noted  that  hundreds  of
       underground  storage  tanks leaking gasoline  and  other  toxic
       chemicals  have  existed  in  the  San  Gabriel  Valley.    The
       California Department of Toxic Substance Control have  declared
       large  areas  of  the San Gabriel Valley to be  environmentally
       hazardous and subject to cleanup work.

       The  Company  believes  the City of South  El  Monte  does  not
       appear  to  be located over any of the major plumes.   However,
       the  EPA  recently  announced it is  studying  the  possibility
       that,   although   the  vadose  soil  and  groundwater,   while
       presenting  cleanup problems, there may be a  contamination  by
       DNAPs  (dense  non-aqueous  phase  liquids),  i.e.,  "sinkers",
       usually  chlorinated organic cleaning solvents.   The  EPA  has
       proposed  to  drill  six "deep wells" throughout  the  City  of
       South El Monte at an estimated cost of $1,400,000.  The EPA  is
       conferring   with  SEMPOA  (South  El  Monte  Property   Owners
       Association)  as to cost sharing on this project.   SEMPOA  has
       obtained  much lower preliminary cost estimates.   The  outcome
       cost and exact scope of this are unclear at this time.

       The  Securities  and Exchange Commission has  issued  a  formal
       order  of  investigation concerning certain matters,  including
       the  Company's  environmental  liabilities.   The  Company   is
       cooperating with the investigation.

       Currently,  the Company does not have any reliable  information
       on  the  likely cleanup costs of its property.  Thus, it cannot
       determine  the  extent, if any, of its share of  liability  for
       any  such   costs.  The Company has been seeking  reimbursement
       of   costs  from  its  insurance  carriers,  who  have   denied
       reimbursement of costs, based on their review and  analysis  of
       the insurance policies, the history of the site, the nature  of
       the claims and current court decisions in such cases.


<PAGE>
                                   21

      OTHER COMMITMENTS AND CONTINGENCIES

       The  Company has been named as a defendant in, or is  otherwise
       a   party   to,  several  other  lawsuits,  claims  and   legal
       proceedings  arising  out  of  the  conduct  of  its  business,
       including  those related to commercial transactions  and  other
       safety  matters.  While the ultimate results of these  lawsuits
       and  other  proceedings against the Company cannot be predicted
       with  certainty, after considering all relevant facts  and  the
       opinion  of outside counsel, management of the Company believes
       such  matters will not have a material effect on the  financial
       position of the Company.

NOTE 11 - STOCK OPTIONS

       Under  the Company's 1985 Employee Incentive Stock Option Plan,
       as  amended,  common stock options may be granted  to  officers
       and  other key employees for the purchase of up to a  total  of
       580,000  shares of common stock of the Company at a  price  per
       share  equal  to  its fair market value on the date  of  grant.
       Options  expire  five  years  from  the  date  of  grant,   are
       contingent upon continued employment and become exercisable  in
       equal  installments  during each of the three  years  beginning
       eighteen months after the date of grant.

       The  following  table  sets forth the number  of  shares  under
       option and the related option prices at September 30, 1994  and
       1995:

                                                            OPTION PRICE RANGE
                                                  NUMBER         PER SHARE
                                                 --------   ------------------
       Outstanding at September 30, 1993         462,000       $1.25 -- $4.13
         Granted                                 204,000       $1.31 -- $1.44
         Canceled                                (94,000)      $3.75 -- $4.13
                                                --------
       Outstanding at September 30, 1994         572,000       $1.25 -- $4.13
         Granted                                 165,000       $0.50
         Canceled                               (270,000)      $1.25 -- $2.07
                                                --------
       Outstanding at September 30, 1995         467,000       $0.50 -- $1.31
                                                ========

       At  September  30,  1995, 204,000 shares  are  eligible  to  be
       exercised  and  113,000 shares are available for future  grants
       under the plan.

       The  1987  Stock  Option  Plan was  adopted  by  the  Board  of
       Directors  on January 4, 1988 and was approved by the Company's
       shareholders  on  March  8,  1988.   This  Stock  Option   Plan
       provides  for the granting of options to the Company's  outside
       directors  for  the  purchase of a total of  50,000  shares  of
       common  stock of the Company at a price per share equal to  the
       fair  market  value on the date of grant.  Options expire  five
       years  from the date of grant and become exercisable  in  equal
       installments during each of the three years beginning  eighteen
       months after the date of grant.

       At  September 30, 1995, options to purchase 50,000 shares  were
       outstanding  and 12,000 shares are eligible to be exercised  at
       a price of $1.31 per share.

NOTE 12 - INCOME TAXES

       As  of  September 30, 1995, the Company had net operating  loss
       carryforwards  of  approximately  $5,700,000  for  Federal  and
       $3,300,000  for California which for tax purposes can  be  used
       to  offset  future  Federal and California income  taxes.   The
       differences in the state carryforwards relate primarily to  the
       treatment  of loss carryforwards and depreciation of  property,
       plant  and  equipment.   The  carryforwards  expire  from  2003
       through 2010.

NOTE 13 - EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

       The  Company established an Employee Stock Ownership  Plan  and
       Trust  ("Plan").   The Plan is a tax-qualified  employee  stock
       ownership  plan  which is designed to invest primarily  in  the
       common  stock  of the Company for the benefit of the  employees
       and their beneficiaries.

       The  benefits provided by the Plan are paid for entirely by the
       Company.   The  Company contributions are used to purchase  the
       common   stock  of  the  Company  which  is  credited  to   the
       individual accounts maintained for each participant.  For  each
       twelve-consecutive-month   period  of   employment,   employees
       receive  a  one-year  period of service  credit.   After  three
       years  of service employees have a 20% vested interest in their
       accounts  under the Plan, increasing at a rate of 20% per  year
       with full vesting occurring at seven years of service.

<PAGE>
                                   22

       The  Plan  consists of a stock bonus plan,  ("Plan  A")  and  a
       money  purchase pension plan, ("Plan B").  Under  Plan  A,  the
       Company's Board of Directors annually determines the amount  to
       be  contributed to the Plan.  The contribution by  the  Company
       for  any  single  plan  year (October 1 through  September  30)
       cannot  exceed fifteen percent (15%) of the total  compensation
       paid  to  Plan participants for the year.  Plan B  requires  an
       automatic   contribution  equal  to  ten   percent   (10%)   of
       participant compensation each Plan Year.  The Company  did  not
       make  any  contributions (expense) related to Plan  A  for  the
       year ending September 30, 1995 or  September 30, 1994.

       Effective June 30, 1993, Plan B was canceled; therefore,  there
       was  no contribution under Plan B  for the year ended September
       30,  1995  or for the period October 1, 1993 through  September
       30, 1994.  All participants under Plan B became 100% vested  on
       July 1, 1993 due to the cancelation of Plan B.

       Effective  September  30,  1995,  Plan  A  was  canceled.   All
       participants  under Plan A became 100% vested on September  30,
       1995 due to the cancelation of Plan A.

NOTE 14 - ACQUISITIONS

       On  October  1,  1993,  the  Company purchased  certain  assets
       related  to  an  over-the-counter (OTC) personal care  product,
       from  Medtech  Laboratories,  Inc.  of  Jackson,  Wyoming   for
       $100,000.   In  addition, the Company signed  a  licensing  and
       royalty  agreement  to  pay Rumson Laboratories,  Inc.  of  Red
       Bank,  New Jersey a royalty based on net sales of the  acquired
       brand.    The   agreement  expires  on  September   30,   1999.
       According to the agreement the Company paid $50,000 in cash  as
       an  initial  license  fee.   In addition,  the  annual  royalty
       payment  is $100,000 per year.  The aggregate royalty over  the
       six  (6)  year period totals $600,000.  The total  of  $650,000
       for royalty and license fee will be expensed over the terms  of
       the agreement.

       On  August  31, 1994, the Company entered into an agreement  to
       purchase  certain   assets  of   the  "WATE-ON-R-"  and  "SUPER
       WATE-ON-R-" line  of  nutritional products  from  The Fleetwood
       Company  for  approximately  $67,000  in  cash.   In  addition,
       the  Company  remitted  $100,000 to the  seller  which  was due
       upon closing.   A royalty  agreement  was  entered into whereby
       the Company is required to remit approximately $6,900 per month
       for thirty-six months.   The  royalty  amount is to be expensed
       over the length of the agreement which terminates on August 31,
       1999.

       On  August  31, 1994, the Company entered into an agreement  to
       purchase certain assets of the Aloe E and Aloe 99 line of  aloe
       vera  products  from  Alivio Products, Inc.  for  approximately
       $50,000  in cash.  A royalty agreement was entered into whereby
       the  Company  is  required to remit $120,000 which  is  payable
       over  a  twelve month period commencing on September  30,  1994
       and  continuing on the last of each month for the  next  eleven
       (11) months.

       On  June 15, 1995, the Company purchased certain assets of  the
       Brush  'n  Floss-R-  product  which is a  patented  device   to
       facilitate  tooth  flossing from Sundance Healthcare  Products,
       Inc.  for  approximately  $24,000  cash.   The  purchase  price
       ($24,000) includes a $20,000 prepayment of a five year  royalty
       which is being expensed monthly commencing July, 1995.

       On  June 30, 1995, the Company purchased certain assets of  the
       Baby  Gasz-TM-  and Baby Gumz-TM-  brand of baby  products from
       Reinhard Labs, Inc. for approximately $73,000 cash. The Company
       signed a  consulting agreement whereby the Company prepaid  the
       three (3)  year  consulting fee ($60,000) which is included  in
       the $73,000 purchase price.   The  consulting fee  is  expensed
       monthly  commencing  July  1, 1995 thru  June  30,  1998.   The
       royalty   agreement  is  for  a  period  of  five  (5)   years,
       commencing  July  1, 1995, and is based on 10%  of  net  sales.
       The  royalty payments are payable thirty (30) days  after  each
       calendar quarter.

       On  August  10, 1995, the Company purchased certain  assets  of
       the XS-R- line of hangover relief/over indulgence products from
       Barnett  Laboratories,  Inc.  for approximately  $129,000.   In
       addition,  the  Company signed a consulting  agreement  to  pay
       Barnett  Laboratories, Inc. $75,000.  The Company  is  required
       to  remit  $5,000 per month, commencing on September  1,  1995,
       plus  accrued interest at 10%.  The payments will continue  for
       the  next fifteen (15) months.  The royalty agreement covers  a
       period   of   sixty-four  and  two-thirds  (64   2/3)   months,
       commencing  August 10, 1995, and is payable  thirty  (30)  days
       after  each quarter.  The royalty agreement is based on 25%  of
       net sales.

NOTE 15 - SUBSEQUENT EVENTS

       In   order  to  increase  its  working  capital,  the   Company
       developed the following financial plan.  The Company has  taken
       steps  to  conserve  cash  by reducing  its  occupied  facility
       square footage by 25% since August 1995.  The lease on a  7,000
       square  foot  facility was canceled by paying a six  (6)  month
       advance  rent  buyout.  Two other facilities were  vacated  and
       will  be  subleased  during fiscal 1996.   One  subleasee  took
       occupancy  of  a  building  in November  1995  and  the  second
       building  will  be  occupied in January 1996.   The  amount  of
       rental  income will be slightly less than the Company's current
       monthly  rent  expense related to these buildings.   The  total
       annualized  economic savings via the lease  buyout  and  rental
       income   on   the  two  buildings  is  approximately  $133,000.
       Additionally,  the  Company  is  conducting  a  review  of  its
       inventory  and  is diligently working to reduce the  amount  of
       working capital tied up in inventory.  The Company reduced  its
       gross  inventory  level  during fiscal  1995  by  approximately
       $477,000, exclusive

<PAGE>
                                    23

       of  material  scrapped from inventory.  Plus,  the  Company  is
       reviewing  proposals  from  finance  companies  regarding   the
       possibility  of  them making a loan secured  by  the  Company's
       accounts  receivable, inventory and equipment.  The Company  is
       hopeful  that  this funding will be available should  the  need
       arise.   Also,  the  renegotiation of the Company  real  estate
       loan ($289,000) which matures in March, 1996 is underway.

       Effective  October   12,  1995,  Mr.  Holt  resigned  from  the
       Company's Board of Directors.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE.

  As  previously  reported  in  a  Current  Report  on  Form  8-K,  on
September  27,  1995,  the Board of Directors of  Lee  Pharmaceuticals
authorized, effective September 27, 1995, (1) the termination  of  the
engagement   of   Meir  &  Meir  as  independent  auditors   for   Lee
Pharmaceuticals for the fiscal year ended September 30, 1995  and  (2)
the  engagement  of  Jeffery, Corrigan & Shaw, 245  South  Los  Robles
Avenue,  Suite  400, Pasadena, California 91101-2894,  as  independent
auditors for Lee Pharmaceuticals for fiscal 1995.  Jeffery, Corrigan &
Shaw  was  engaged as the Company's principal independent auditors  on
September 29, 1995.

  During  the  fiscal  year  ended  September  30,  1994  and  through
September 27, 1995 there were no disagreements with Meir & Meir on any
matter  of  accounting  principles or practices,  financial  statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Meir & Meir would have caused them  to
make  reference in connection with their report to the subject matter.
The Company had been informed by Meir & Meir that information had come
to their attention that made them conclude that the scope of the audit
should  be  expanded  to  include  an  expert  opinion  regarding  the
environmental  issues the Company is involved with.   The  finding  of
such  expert may materially impact the fairness or reliability of  the
previously   issued   audit  reports  or  the   underlying   financial
statements,  or  the  financial statements to be issued  covering  the
fiscal  periods  subsequent to the date of  the  most  recent  audited
financial  statements (including information that might  preclude  the
issuance  of an unqualified report).  The request by Meir  &  Meir  to
include the expert opinion in the fiscal 1995 audit was not the  basis
for the Company's change in independent accountants.

  Prior  to such firm's engagement, Jeffery, Corrigan & Shaw  was  not
consulted  by  the Company (or anyone acting on its behalf)  regarding
(1)  either  the application of accounting principles to  a  specified
transaction,  either  completed or proposed,  or  the  type  of  audit
opinion  that  might  be  rendered on Lee  Pharmaceuticals'  financial
statements  or  (2)  any  matter that was  either  the  subject  of  a
"disagreement"  of a "reportable event" as such terms are  defined  in
Regulation S-K promulgated by the Securities and Exchange Commission.

  As  previously reported in a Current Report on Form 8-K, on  October
27,  1995,  the Board of Directors of Lee Pharmaceuticals  authorized,
effective  October 27, 1995, (1) the termination of the engagement  of
Jeffery,   Corrigan   &   Shaw  as  independent   auditors   for   Lee
Pharmaceuticals for the fiscal year ended September 30, 1995  and  (2)
the  engagement of George Brenner, CPA, 9300 Wilshire Boulevard, Suite
480,  Beverly Hills, California 90212, as independent auditor for  Lee
Pharmaceuticals for fiscal 1995.  George Brenner, CPA was  engaged  as
the Company's principal independent auditor on October 27, 1995.

  In  connection  with  its activities for the  period  September  27,
1995, (the date Jeffery, Corrigan & Shaw was engaged), through October
27,  1995,  there  were no disagreements on any matter  of  accounting
principles  or practices, financial statement disclosure, or  auditing
scope  or  procedure,  which disagreements  if  not  resolved  to  the
satisfaction  of Jeffrey, Corrigan & Shaw would have  caused  them  to
make  reference in connection with their report to the subject matter.
Jeffrey,  Corrigan  &  Shaw  was unable  to  proceed  with  the  audit
engagement because of its failure to obtain the insurance it  believed
was necessary.

  Prior  to  such  firm's  engagement, George  Brenner,  CPA  was  not
consulted  by  the Company (or anyone acting on its behalf)  regarding
(1)  either  the application of accounting principles to  a  specified
transaction,  either  completed or proposed,  or  the  type  of  audit
opinion  that  might  be  rendered on Lee  Pharmaceuticals'  financial
statements  or  (2)  any  matter that was  either  the  subject  of  a
"disagreement"  of a "reportable event" as such terms are  defined  in
Regulation S-K promulgated by the Securities and Exchange Commission.

<PAGE>
                                  24

                              PART   III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT.

  Directors  are  elected to serve until the next annual stockholders'
meeting  or  until their respective successors have been  elected  and
qualified or as otherwise provided in the bylaws.  Set forth below for
the current directors and executive officers are their ages, principal
occupations  during the past five years, and the period  during  which
they have served as a director or officer of the Company.

<TABLE>
<CAPTION>
                                                      A DIRECTOR
                                 POSITIONS  HELD      OR  OFFICER                PRINCIPAL OCCUPATION
NAME                      AGE     WITH COMPANY           SINCE               DURING THE PAST FIVE YEARS (1)
----                      ---    ---------------      -----------            ------------------------------
<S>                       <C>    <C>                  <C>           <C>

Dr.  Henry  L.  Lee        69    Director                 1971      Chairman  of  the Board of Lee Pharmaceuticals through
                                                                    April,  1995  when  he  retired, available as a consultant,
                                                                    currently  a  Director  of  the Company

Ronald  G. Lee             43    President, Chairman      1977      President and since April 1995 Chairman of the Board
                                 and Director                       of the Company

Theo.  H.  Dettlaff        65    Vice President,          1979      President  of Consumer Products Division and
                                 President of Consumer              Director of Company
                                 Products Division and
                                 Director

Michael  L.  Agresti       53    Vice President  --       1977      Vice President -- Finance, Treasurer and Secretary
                                 Finance, Treasurer                 of the Company
                                 and  Secretary

William  M.  Caldwell IV   48    Director                 1987      President  of Union Jack Group, a merchant
                                                                    banking firm

</TABLE>

      (1)  None of the companies named, other than the Company,  is a
parent, subsidiary or other affiliate of the Company.

FAMILY RELATIONSHIPS

      Ronald G. Lee is the son of Dr. Henry L. Lee.

<PAGE>

                                  25

ITEM 10.  EXECUTIVE COMPENSATION.

  The   following  table  sets  forth  information  with  respect   to
remuneration  paid  by the Company to the executive  officers  of  the
Company  with  total annual salary and bonus of at least $100,000  for
services  in all capacities while acting as officers and directors  of
the Company during the fiscal years ended September 30, 1995, 1994 and
1993.

                      SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                          LONG TERM
                                                                         COMPENSATION
                                             ANNUAL COMPENSATION            AWARDS
                                       ------------------------------    -------------
NAME AND                                                OTHER ANNUAL                        ALL OTHER
PRINCIPAL POSITION          YEAR        SALARY ($)    COMPENSATION ($)    OPTIONS (#)     COMPENSATION ($)
------------------          ----        ----------    ----------------    -----------     ----------------
<S>                         <C>           <C>             <C>              <C>             <C>

Dr. Henry L. Lee,           1995          119,190            475(1)            --                 (6)
 Chairman                   1994          137,932          3,028(1)        55,000(3)           231(6)
 (thru April 25, 1995)      1993          249,544          9,174(1)            --           22,177(6)

Ronald G. Lee,              1995          178,595          5,734(2)        80,000(4)              (7)
 President, Chairman        1994          206,244          3,884(2)        55,000(4)         1,909(7)
 (since April 26, 1995)     1993          225,852          5,464(2)            --           24,464(7)
 & Director

Theo. H. Dettlaff, Vice     1995          167,575                          51,500(5)              (8)
 President, President       1994          185,791                          55,000(5)         2,728(8)
 of Consumer Products       1993          209,480                              --           25,569(8)
 Division & Director

</TABLE>

 (1) Includes reimbursement of medical and dental expenses not  covered
     by   the   Company's   insurance  plan  of  $1,294   and   $8,116,
     respectively,  in 1994 and 1993, and non-cash fringe  benefits  of
     $475, $1,734 and $1,058, respectively, in 1995, 1994 and 1993.

 (2) Includes reimbursement of medical and dental expenses not  covered
     by  the  Company's  insurance plan of  $5,081,  $713  and  $4,383,
     respectively, in 1995, 1994 and 1993 and non cash fringe  benefits
     of $653, $3,171 and $1,081, respectively, in 1995, 1994 and 1993.

 (3) The Company granted 55,000 stock options on January 24, 1994 which
     had an option price of $1.44 at the date of grant.

 (4) The  Company granted 80,000 stock options on May 8, 1995 which had
     an  option  price  of $.50 at the date of grant and  55,000  stock
     options on January 24, 1994 which had an option price of $1.31  at
     the date of grant.

 (5) The  Company granted 51,500 stock options on May 8, 1995 which had
     an  option  price  of $.50 at the date of grant and  55,000  stock
     options on January 24, 1994 which had an option price of $1.31  at
     the date of grant.

 (6) Amount   represents  the  fair  market  value  of  Company  shares
     purchased  and/or  forfeitures  in the  Company's  Employee  Stock
     Ownership  Plan and Trust.  There were no shares purchased  and/or
     forfeitures  in  the Company's Employee Stock Ownership  Plan  and
     Trust in 1995.

 (7) Amount   represents  the  fair  market  value  of  Company  shares
     purchased  and/or  forfeitures  in the  Company's  Employee  Stock
     Ownership  Plan and Trust of $0 in 1995, $349 in 1994 and  $22,177
     in  1993 and life insurance policy with an annual premium of $0 in
     1995, $1,560 in 1994 and $2,287 in 1993.

 (8) Amount   represents  the  fair  market  value  of  Company  shares
     purchased  and/or  forfeitures  in the  Company's  Employee  Stock
     Ownership  Plan and Trust of $0 in 1995, $311 in 1994 and  $22,177
     in  1993 and life insurance policy with an annual premium of $0 in
     1995, $2,417 in 1994 and $3,392 in 1993.

     Dr.  Henry  Lee's  participation in the Company's  Employee  Stock
     Ownership  Plan and  Trust  ("Plan") terminated  when  he retired.
     Subsequent  distribution of  the  66,286  shares  and $9,058  cash
     was  made  after September 30, 1995.  He elected to take all  cash
     which was $39,380 net after mandatory (22%) withholding taxes.

     Each  of the directors of the Company who is not employed  by  the
     Company  receives  a director's fee of $750 for each  quarter  and
     $500 for each meeting of the Board of Directors attended.

                 OPTION GRANTS IN LAST FISCAL YEAR
                         Individual Grants
                 ---------------------------------

<TABLE>
<CAPTION>

                                      % OF TOTAL
                                    OPTIONS GRANTED
                       OPTIONS      TO EMPLOYEES IN    EXERCISE OF BASE     EXPIRATION
NAME                 GRANTED (#)      FISCAL YEAR       PRICE ($/SHARE)        DATE
----                 -----------    ----------------   -----------------    -----------
<S>                  <C>            <C>                <C>                  <C>
Ronald G. Lee          80,000              49                 .50             5/7/2000
Theo. H. Dettlaff      51,500              20                 .50             5/7/2000

</TABLE>


               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>

                    NUMBER  OF  UNEXERCISED  OPTIONS
                         AT FISCAL YEAR END (#)
NAME                    EXERCISABLE/UNEXERCISABLE
----                --------------------------------
<S>                 <C>
Ronald G. Lee                 76,333/116,667
Theo. H. Dettlaff             76,333/88,167

</TABLE>


<PAGE>

                                  26

                   EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

   The  Company established an Employee Stock Ownership Plan and Trust
("Plan")  effective  December 1, 1985.  The Plan  is  a  tax-qualified
employee stock ownership plan which is designed to invest primarily in
the  common stock of the Employer for the benefit of the employees and
their beneficiaries.

   The  benefits  provided by the Plan are paid for  entirely  by  the
Employer.  The Employer contributions are used to purchase the  common
stock  of  the Employer, which is credited to the individual  accounts
maintained  for  each  participant.   In  addition  to  providing   an
opportunity  for  employees to participate in  the  Employer's  growth
through   stock   ownership  and  to  provide  funds  for   employees'
retirement,  the Plan is designed to be available as  a  technique  of
corporate finance to the Employer.

   All  employees  who  had completed at least a six-month  period  of
service  with  the  Employer as of the effective  date  of  this  Plan
(December  1, 1985) became participants in the Plan as of  such  date.
Every  other employee will become a participant in the Plan as of  the
first day of the month coinciding with or next following the date upon
which  he completes a six-month period of service provided that he  is
employed by the Employer on such date.

   The Employer makes contributions only on behalf of the participants
who  are  employed by it on the last day of each Plan year,  September
30.  Contributions made on behalf of the employees will not be taxable
to them until the time benefits are actually paid to them.

  Effective October 1, 1989, the Plan consists of two (2) parts:  Plan
A, a stock bonus plan, and Plan B, a money purchase pension plan.  The
Company's  Board of Directors determines the amount to be  contributed
annually  to  Plan  A  up  to  a  maximum  of  fifteen  percent  (15%)
participant  compensation  for  the  Plan  year  (October  1   through
September  30).   The contribution under Plan B is a non-discretionary
amount equal to ten percent (10%) of participant compensation for  the
Plan  year.   The  contribution by the Company to the  Trust  for  any
single Plan year cannot exceed twenty-five percent (25%) of the  total
compensation paid to Plan participants for the year.

   Company  contributions are allocated to each Participant's  Company
Contribution Account in the proportion that his compensation  for  the
Plan year bears to the total compensation paid to all participants for
the Plan year.  Forfeitures which arise under Plan A are allocated  to
the  accounts  of the other participants at the end of the  Plan  year
during which the forfeitures arise due to termination of employment in
the  same  manner as Company contributions are allocated.  Forfeitures
which  arise  under  Plan B are used to offset the Company's  required
contribution under Plan B.

   The  term  "vested" as applied in the context of  employee  benefit
plans  refers  to that portion of a participant's accounts  which  has
become  nonforfeitable because the participant has accrued  a  certain
number  of period-of-service credits.  If a participant reaches normal
retirement age (age 65), becomes permanently disabled, dies or retires
at  age  65,  his  interest in his accounts becomes  immediately  100%
vested, i.e. nonforfeitable.

   The  Plan has been amended to conform with the requirements of  the
Tax  Reform  Act  of 1986 and effective October 1, 1989,  the  vesting
schedule of the Plan is as follows:

          PERIOD OF SERVICE               VESTED PERCENTAGE
          -----------------               -----------------
          Less than 3 years                     0%
               3 years                         20%
               4 years                         40%
               5 years                         60%
               6 years                         80%
               7 years                        100%

   The following tabulation shows the interest in the Plan and vesting
percentages  of  the officers who are named in the  Cash  Compensation
Table and all executive officers as a group as of September 30, 1995.

                                 INTEREST IN THE PLAN
                                 --------------------

                         SHARES OF        CASH         VESTED
  NAME                  COMMON STOCK     AMOUNT      PERCENTAGE
  ----                  ------------     ------      ----------

Henry L. Lee               66,286         $9,058        100%
Theo. H. Dettlaff          52,549        $11,504        100%
Ronald G. Lee              52,083        $11,172        100%
All executive officers    194,371        $36,872        100%
 as a group (4 persons)


  The Company's former Chairman's participation in the Plan terminated
when he retired.  The  distribution  of his  participation in the Plan
was made after September 30, 1995.  He elected to take all cash  which
totaled  $39,380, net after mandatory  (22%)  withholding taxes.


<PAGE>

                                  27


   Effective July 1, 1993, the plan was amended for a second time.  On
June  30, 1993 Plan B was canceled; therefore, all participants became
100%  vested, in Plan B only, effective July 1, 1993.  No contribution
was  made  to  Plan  A  or B for the period October  1,  1993  through
September 30, 1994.

  Effective September 30, 1995, Plan A was canceled.  All participants
under  Plan  A  became 100% vested on September 30, 1995  due  to  the
cancelation of Plan A.  No contribution was made to Plan A  or  B  for
the  period October 1, 1994 through September 30, 1995.  In connection
with  the  termination of Plan A, the Company wrote off  the  Employee
Stock Ownership Plan and Trust receivable as of September 30, 1995.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

  The  following table sets forth the persons who, as of November  30,
1995,  were known to the Company to be beneficial owner of  more  than
five percent of the Company's Common Stock:

<TABLE>
<CAPTION>

                           NAME AND ADDRESS               AMOUNT AND NATURE      PERCENTAGE
    TITLE  OF CLASS      OF BENEFICIAL OWNER           OF BENEFICIAL OWNERSHIP    OF CLASS
    ---------------      -------------------           -----------------------    ----------
    <S>                 <C>                            <C>                        <C>

     Common Stock       Dr. Henry L. Lee                    357,468 shares (1)       9%
                        1444 Santa Anita Avenue
                        South El Monte, CA 91733

     Common  Stock      Dimensional Fund Advisors, Inc.     229,200 shares           6%
                        1299 Ocean Avenue, 11th Floor
                        Santa Monica, CA 90401

</TABLE>

(1)   Includes 28,000 shares of the Company's common stock  which  Dr. Lee
      holds  as trustee for the benefit of certain family members.   He
      has  the  right to vote such shares but otherwise disclaims beneficial
      ownership.

  The following table sets forth the ownership of the Company's Common
Stock  by  its  directors  and its named executive  officers  and  all
executive officers and directors as a group.

<TABLE>
<CAPTION>

                                 NAME OF             AMOUNT AND NATURE        PERCENTAGE
    TITLE  OF CLASS          BENEFICIAL OWNER     OF BENEFICIAL OWNERSHIP      OF CLASS
   ---------------           ----------------     -----------------------     ----------
   <S>                    <C>                     <C>                         <C>

     Common Stock         Dr. Henry L. Lee              357,468 (3)               9%
     Common Stock         Ronald G. Lee                 138,616 (1) (2)           3%
     Common Stock         Theo. H. Dettlaff             128,914 (1) (2)           3%
     Common Stock         William M. Caldwell IV          3,866 (2)               *
     Common Stock         All officers and directors
                           as a group (5 persons)       706,102 (1) (2)          17%

</TABLE>


(1) Includes shares held under the Plan.
(2) Includes shares subject to options exercisable at or within 60
    days after December 31, 1995.
(3) Includes 28,000 shares of the Company's common stock which Dr. Lee
    holds as trustee for the benefit of certain family members. He has the
    right to vote such shares but otherwise disclaims beneficial ownership.
 *  Less than 1%


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

  Dennis  Holt,  a Director of the Company during 1995, is  an  owner,
president  and chief executive officer of Western International  Media
Corp.,  a company which purchases radio and television time on  behalf
of  advertisers.  During the fiscal year ended September 30, 1995  and
1994,  the  Company  purchased  approximately  $204,000  and  $61,000,
respectively,  of  television  time from Western  International  Media
Corp.  to  advertise its products. Western International  Media  Corp.
realized  a  commission of approximately $19,000 and $3,000  from  the
purchase of such time during fiscal years ended September 30, 1995 and
1994,   respectively.   In  addition,  Mr.  Holt  received  a   direct
remuneration from the Company of $2,000 and $3,000 during fiscal  year
1995  and 1994, respectively, as a Director's fee.  Effective  October
12, 1995, Mr. Holt resigned from the Board of Directors.

  The  information  regarding borrowings from and sale  and  leaseback
transactions between the Company and it's Chairman of the Board  which
is  contained in Item 6 and Note 7 of Notes to Financial Statements is
incorporated herein by this reference.


<PAGE>

                                  28


                                PART IV

 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

  (a) Exhibits.  The following exhibits have  been  or  are
      being filed herewith, and are numbered in accordance
      with Item 601 of Regulation S-B:

      The following exhibits are filed herewith:

        10.17   - Promissory notes which were amended in January  1995
                  evidencing advances by the Registrant's officers
                  and directors

        10.18   - Promissory notes evidencing advances  made  by  the
                  Registrant's officers and directors

        10.19   - Promissory notes which were amended  in  July  1995
                  evidencing advances made to the Registrant

        10.20   - Royalty agreement dated August 31, 1994, between  Lee
                  Pharmaceuticals  and   The  Fleetwood  Company,  regarding
                  a  brand acquisition.

        10.21   - Royalty agreement dated October 4, 1988, between  Lee
                  Pharmaceuticals and  Roberts Proprietaries, Inc., regarding
                  a brand acquisition.

     The following exhibits have previously been filed by the Company:

         3.1    - Articles of Incorporation, as amended (1)

         3.4    - By-laws, as amended December 20, 1977 (2)

         3.5    - Amendment of By-laws effective March 14, 1978 (2)

         3.6    - Amendment to By-laws effective November 1, 1980 (3)


        10.1    - Qualified Stock Option Plan  including forms of grant (4)

        10.2    - 1985 Employee Incentive Stock Option Plan (5)

        10.3    - Description of bonus agreements between the Registrant
                  and its officers (2)

        10.4    - Lease dated December 1, 1990, for the premises located
                  at 1470 Santa Anita Avenue, South El Monte, California (6)

        10.5    - Lease dated April 16, 1990, for the premises located at
                  1425 and 1427 Lidcombe Avenue, South El Monte, California (6)

        10.6    - Lease dated April 16, 1990, for the premises located at
                  1434 Santa Anita Avenue, South El Monte, California (6)

        10.7    - Lease dated April 16, 1990, for the premises located at
                  1460 Santa Anita Avenue, South El Monte, California (6)

        10.8    - Lease dated April 16, 1990, for the premises located at
                  1457 Lidcombe, South El Monte, California (6)

        10.9    - Lease dated April 16, 1990, for the premises located at
                  1500 Santa Anita Avenue, South El Monte, California (6)

        10.10   - Lease dated April 16, 1990, for the premises located at
                  1516 Santa Anita Avenue, South El Monte, California (6)

        10.11   - Lease dated March 1, 1991, for the premises located at
                  1444 Santa Anita Avenue, South El Monte, California (6)

        10.12   - Lease dated March 1, 1991, for the premises located at
                  1445 Lidcombe Avenue, South El Monte, California (7)

        10.13   - Promissory notes which were amended in September 1992
                  evidencing advances by the Registrant's officers and
                  directors (8)

        10.14   - Promissory notes which were amended in September 1994
                  evidencing advances by the Registrant's officers and
                  directors (9)

        10.15   - Promissory notes evidencing advances  made  to  the
                  Registrant's officers and directors (9)

        10.16   - Promissory notes evidencing advances  made  to  the
                  Registrant (9)


<PAGE>

                                  29


           (1)   Filed  as  an  Exhibit of the same  number  with  the
                 Company's  Form S-1 Registration Statement filed  with  the
                 Securities  and  Exchange Commission on  February  5,  1973
                 (Registrant  No.  2-47005),  and  incorporated  herein   by
                 reference.

           (2)   Filed  as  Exhibits  3.4,  3.5  and  13.18  with  the
                 Company's  Form  10-K  Annual Report for  the  fiscal  year
                 ended  September  30, 1978, filed with the  Securities  and
                 Exchange  Commission  in  December  1978  and  incorporated
                 herein by reference.

           (3)   Filed  as  an  Exhibit of the same  number  with  the
                 Company's  Form  10-K  Annual Report for  the  fiscal  year
                 ended  September  30, 1979, filed with the  Securities  and
                 Exchange  Commission  in  December  1979  and  incorporated
                 herein by reference.

           (4)   Filed  as  Exhibit 5.1 with the Company's  Form  10-K
                 Annual  Report  for  the fiscal year  ended  September  30,
                 1973, filed with the Securities and Exchange Commission  in
                 December 1973 and incorporated herein by reference.

           (5)   Filed  as Exhibits 13.27 and 13.28 with the Company's
                 Form   10-K  Annual  Report  for  the  fiscal  year   ended
                 September 30, 1986, filed with the Securities and  Exchange
                 Commission  in  December  1986 and incorporated  herein  by
                 reference.

           (6)   Filed  as Exhibit 13.31 with the Company's Form  10-K
                 Annual  Report  for  the fiscal year  ended  September  30,
                 1990, filed with the Securities and Exchange Commission  in
                 December 1990 and incorporated herein by reference.

           (7)   Filed  as Exhibit 13.32 with the Company's Form  10-K
                 Annual  Report  for  the fiscal year  ended  September  30,
                 1991, filed with the Securities and Exchange Commission  in
                 December 1991 and incorporated herein by reference.

           (8)   Filed  as Exhibit 13.33 with the Company's Form  10-K
                 Annual  Report  for  the fiscal year  ended  September  30,
                 1992, filed with the Securities and Exchange Commission  in
                 December 1992 and incorporated herein by reference.

           (9)   Filed  as Exhibit 13.34 with the Company's Form  10-K
                 Annual  Report  for  the fiscal year  ended  September  30,
                 1994, filed with the Securities and Exchange Commission  in
                 December 1994 and incorporated herein by reference.

 (b)      Reports on Form 8-K:

          A  current  report  on  From  8-K  dated  September  27,  1995
          reporting   Item   4   (Changes  in  Registrant's   Certifying
          Accountant) was filed on October 3, 1995.

          A  current report on Form 8-K dated October 27, 1995 reporting
          Item  4  (Changes  in Registrant's Certifying Accountant)  was
          filed on November 2, 1995.

<PAGE>


                                  30


                              SIGNATURES

     In accordance with 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.

                          LEE PHARMACEUTICALS



 Date:  January 12, 1996       RONALD G. LEE
        ----------------       -----------------------
                                Ronald G. Lee
                                Chairman of the Board




     In  accordance  with 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.



 Date:  January 12, 1996       RONALD G. LEE
        ----------------       -----------------------
                                Ronald G. Lee
                                Chairman of the Board
                                (Principal Executive Officer) and Director

 Date:  January 12, 1996       HENRY L. LEE, JR.
        ----------------       -----------------------
                                Henry L. Lee, Jr.
                                Director

 Date:  January 12, 1996       THEO. H. DETTLAFF
        ----------------       -----------------------
                                Theo. H. Dettlaff
                                Director

 Date:  January 12, 1996       WILLIAM M. CALDWELL IV
        ----------------       -----------------------
                                William M. Caldwell IV
                                Director

 Date:  January 12, 1996       MICHAEL L. AGRESTI
        ----------------       -----------------------
                                Michael L. Agresti
                                Vice President -- Finance
                                (Principal Financial and Accounting Officer)