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

                             FORM 10-KSB

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

For the fiscal year ended May 31, 1998

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [No fee required]

For the transition period from _______________ to _________________   

Commission file number 0-10035

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

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

420 LEXINGTON AVENUE, NEW YORK SUITE 2025          10170      
----------------------------------------- --------------------
(Address of principle executive offices)       (Zip Code)

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

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




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

Issuers revenues for its most recent fiscal year were $ 1,944.

The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on July 2, 1998 was approximately
$ 4,286,291.

The number of shares of registrant's Common Stock outstanding as of
July 2, 1998 was 16,611,308.

ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [X]   No [ ] 

              DOCUMENTS INCORPORATED BY REFERENCES: None

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

<PAGE>

                                  PART I


ITEM 1. BUSINESS
        --------  
          The Company's current liquidity position must be viewed
as critical.  The successful conclusion, in May 1997, of the
Company's Chapter XI proceeding contributed significantly to the
improvement of the Company's financial soundness.
          
          The Company, a New York Corporation, has been in business since
1960.  The Company's product developments continue to concentrate on its
proprietary materials, Catrix<F1> and POLY-NAG<F2>, both in terms of their
therapeutic and food supplement values.

          With regard to Catrix<F1>, the Company, in
the early 1980's, obtained an Investigational New Drug ("IND") exemption
from the U.S. Food and Drug Administration ("FDA") and the Canadian Health
Protection Branch ("HPB") for the experimental treatment of solid
tumors in humans.  Prior to obtaining the IND, the Company
completed all pre-clinical studies and Phase I clinical trials
relating to the safety of Catrix<F1>.  It is now conducting
Phase II human clinical trials at two major teaching hospitals, one in New
York State and the other in Montreal to establish the efficacy of
Catrix<F1> in the treatment of metastatic renal cell cancer.

          On completion of Phase II and subsequent Phase III
trials, the Company intends to submit a New Drug Application
("NDA") to the FDA and New Drug Submission ("NDS") to the HPB
seeking marketing approval for Catrix<F1> in the treatment of
metastatic renal cell disease.  The Company anticipates that the
NDA and NDS will not be filed for several years.  Thereafter,
approval by the FDA and HPA may require an additional one to three
years, although the FDA and HPB can accelerate the process.

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

          In 1994, the Company licensed Orphan Medical Inc. to 
seek FDA approval for the use of pure Catrix<F1> powder
in treating decubitus ulcers (the pressure sores experienced by some
diabetics and the chronically bed-ridden), and other topical wounds.
Traditional treatment for these lesions involves debridement,
improved hygiene, nutrition and nursing care.  Moreover, there
currently exist literally dozens of drugs and devices targeted to
treat chronic non-healing wounds.  The clinical efficacy of these
products in wound care is generally viewed as modest to merely
palliative. 

<PAGE>

          The Company believes that the ability to provide an
active agent to accelerate the healing process represents a clear
business opportunity in a significant market with a demonstrated
need for a more effective therapy.      

          Under the terms of its license, Orphan Medical filed a
so-called 510 (k) marketing application with the FDA in August
1996.  In December 1996 the FDA approved the 510 (k) application
thus establishing pure Catrix powder as safe and efficacious in the
management of wounds.  

          Thereafter, in later 1997, Orphan undertook an internal
review of its product development program and concluded that some
of its products would not be further pursued, among which was
Catrix.  This decision was not based on Catrix's safety or efficacy
but rather on resource allocation.  In early 1998 Orphan and the
Company amicably resolved the situation with the assignment to the
Company of all rights to the 510 (k) marketing approval together
with all record's and the name Repliderm<F2> which Orphan had coined
in place of Catrix for domestic use.  

          At this time, the Company intends to focus a significant
portion of its resources on the development of a complete marketing
program for pure Catrix powder, as well as Catrix Ointment, creams
and lip balm, in the treatment of a multiplicity of topical wounds. 
Furthermore, the Company believes that the observed effects of
Catrix<F1> (including acceleration of wound healing, tumor inhibition
and reduction, inhibition of excessive vascularization and
modulation of immune system functions) coupled with an absence of
toxicity, present additional promising avenues of investigation.

          Additionally, the Company is pursuing the clinical
efficacy of its POLY-NAG<F2> material.  The product is derived from
specially processed crustacean shells ("Poly-N-Acetyl-
Glucosamine").

          In 1996 the Company sponsored a clinical bio-availability
trial on 16 healthy individuals to determine metabolic absorption. 
The published results confirmed that POLY-NAG<F2> was indeed absorbed
and metabolized into glucosamine which was measurably present in
the subjects' serum.  This initial study also indicated that serum
levels of glucosamine remained somewhat more elevated longer in the
POLY-NAG subjects compared to those subjects who were administered
plain NAG over the same period of time.

          Scientific research has long established the potential
value of glucosamine in the treatment of various inflammatory
diseases such as arthritis and even ulcerative colitis.  Therefore,

<PAGE>

in July 1998, the Company sponsored the institution of a small
clinical trial orally administering capsules of POLY-NAG<F2> to
several arthritic patients.  Results will not be available until
later this year.

SCIENTIFIC BACKGROUND.

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

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

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

          It has recently been recognized that renal cell cancers
may be responsive to treatment with some cytokines such as
interleukin-2.  Cytokines are intimate components of the body's
immune system, the integrity of which system is important  in
defending the body against many forms of cancer.  Interleukin-2 is

<PAGE>

somewhat effective in treating renal cell cancer but its usefulness
is limited by its significant toxicity.  The Company believes that
Catrix<F1>, with its ability to modulate the body's immune
system and its non-toxic properties, is promising as a treatment for this
devastating disease.

          HEALING DECUBITUS WOUNDS.  Decubitus ulcers, or pressure
sores, are a scourge of the infirmed elderly, diabetic and
generally immobile, wheel chair limited patient.  Current therapy
includes removal of the dead tissue around the ulcer, good hygiene,
and nutrition and nursing care.  Given the ever increasing elderly
population in the United States and the costs of specialized
medical treatment, a product such as Catrix, which appears to
promote wound healing, will, the Company believes, be sought after
by the medical community.     
     
          In July 1998, in pursuit of its marketing opportunities
worldwide for Catrix powder and wound care, the Company entered
into an agreement with Xavier Gras Balaguer, M.D. of Barcelona,
Spain.  This agreement appoints Dr. Balaguer as the Company's
exclusive agent in Europe for the purpose of securing marketing
approval from the Spanish Health Ministry for Catrix powder in the
treatment of all manner of topical wounds.

          Spain is one of the 16 member countries of the European
Union.  Under the rules of the EU one member's approval of a
therapeutic drug or device results in the automatic approval in the
other member nations.  Dr. Balaguer has expressed his optimism that
Catrix powder should be approved in Spain by the end of 1998.

          OTHER TOPICAL TREATMENTS.  For the past two years the
Company has engaged a corporate specialty formulator for the
purpose of designing and formulating several topical products. 
Among these products are an ointment, creams and a lip balm.  Each
of these products contains various strengths of pure Catrix powder,
generally either 5% or 10%.

          The Ointment product, containing 10% Catrix, is intended
for the use of physicians only, particularly clinical
dermatologists whose practice is largely devoted to laser surgery
of the face and/or chemical peel procedures.  Patients who undergo
such treatments suffer from facial wounds requiring weeks of
healing.

          The Company's Catrix Ointment, when applied post-
surgically, contributes significantly to the wound healing process
greatly reducing the healing period.  At this time, Catrix Ointment
is the subject of a human clinical trial, ultimately to involve
some twenty-five patients undergoing some sort of facial surgery. 
The trial has received IRB approval and is being conducted by Dr.
Maritza I. Perez in her private practice in Mount Kisco, New York. 

<PAGE>

This trial will not be concluded for several months.  However,
initial results are most encouraging.

          With the assistance of the same formulator, first above
mentioned, the Company has also designed and formulated a 5% Catrix
Cream and a 5% Catrix Lip Balm.  The Cream is a consumer product
intended for use on various skin conditions such as psoriasis, mild
sun or chemical burns, scratches and other topical anamolies. 
Modest sales of these products have already occurred principally
via the Company's Internet web site at www.catrix.com.

PRE-CLINICAL STUDIES OF CATRIX.

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

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

HUMAN CLINICAL TRIALS CONDUCTED WITH CATRIX<F1>

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

PHASE I TRIALS

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

<PAGE>

and that some indication of efficacy be shown before the drug can
be used as the "drug of choice" in earlier stage patients (i.e., in
Phase II trials).

          The Company's Phase I studies were conducted in the early
1980's at Pennsylvania State University's Milton S. Hershey Medical
Center in Hershey, Pennsylvania , and at the University of Medicine
and Dentistry of New Jersey in Newark, New Jersey.  The FDA
required that both Phase I studies use Catrix<F1>-S, the injectable
dosage form of Catrix<F1> only.

     PHASE II TRIALS.

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

          The Montreal Study.  In the Montreal study initially,
twenty-four patients with metastatic renal cell cancer were started
on a protocol regimen of two weeks of Catrix<F1>-S followed by long
term treatment with Catrix<F1> capsules. More recent patient
admissions into this study have eliminated the Catrix<F1>-S
administration and patients are treated with Catrix<F1>
capsules only. All of the patients in this study were prior clinical failures
under the original therapy (i.e. surgery, radiation and
chemotherapy) and were at various stages of serious disabilities
from their cancer. Initially, three of these patients  experienced
remission (two partial and one complete) and  continued to receive
Catrix<F1>.  No adverse effects were noted.  The other twenty
one patients did not respond to Catrix<F1> and have either
died or are now being treated by conventional therapy.  There is currently
only one patient on study and the  disease is considered relatively stable.
There has been no evidence of any toxic side effects of Catrix<F1> in
any patient.

          The Valhalla Study.  The Valhalla investigation has been
using the Canadian protocol for about 6 years. Of the thirty-five
patients enrolled, twenty-two patients, who had completed more than
three months of therapy, were considered evaluable for response by
the Medical Team overseeing the study.  Results to date were
reported by the study team, at the thirtieth annual meeting of the
American Society of Clinical Oncology, in Dallas, Texas, May, 1994,
and those results were stated to be as follows:
          
<PAGE>

          "Ten of the 22 valuable pts were not
          previously treated with any systemic therapy;
          all 3 responders (and 1 SD) occurred in the
          subset of untreated pts.  Lungs were the major
          site of response with disappearance of lesions
          (2) and >50% shrinkage (1); minor responses
          noted in liver (1) and kidney (1).  Duration
          of response is 30+ months (mos), 12+ mos and
          6+ mos in the 3 PRs.  Toxicity was mild (Grade
          I) and included dysgeusia (8), fatigue (3),
          dyspepsia (2), nausea (2), fever (2),
          dizziness (1), and scrotal edema (1).  Our
          results suggest that Catrix is very well
          tolerated and may be active in previously
          untreated pts with metastatic renal cell
          carcinoma.  Further accrual of patients is
          warranted."  [Initials mean: pts.= patients.
          SD= stable disease; mos.= months; PR= partial
          response].

     The Valhalla study currently has two patients on the treatment
protocol and both are showing responses to the drug.  One of these
patients has been treated since 1992 and remains essentially
disease free. 

     The Company intends to expand the Montreal and Valhalla
Studies to include approximately 100 patients each over the next 6
years, assuming that sufficient funding is available. 

     PHASE III TRIALS

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

     TRIALS INVOLVING DECUBITUS ULCERS

          Given the FDA's approval of Orphan's 510(k) application
for the use of Catrix<F1> in wound treatment, Catrix powder
can be marketed in the U.S. presently.  In order to spark interest in the 
material, the Company has been supplying Catrix powder to the
Cabrini Wound Care Center in New York City for the treatment of a
single patient suffering from multiple decubitus ulcers.  At this
writing the patient has been under Catrix treatment for about 4
weeks and his wounds are showing improvement.

<PAGE>

     LABORATORY STUDIES

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

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

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

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

<PAGE>

GOVERNMENT REGULATION.

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

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

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

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

<PAGE>

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

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

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

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

          The Company also will be subject to foreign regulatory
authorities with respect to clinical trials and pharmaceutical

<PAGE>

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

ORPHAN DRUG STATUS

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

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

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

          The Company believes that its products, if developed, may

<PAGE>

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

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

RAW MATERIALS AND MANUFACTURING.

          Catrix<F1> is manufactured for the Company by Intergen
Biomanufacturing Corporation, located in Toronto, Canada
("Intergen"). Intergen is an FDA-approved pharmaceutical
manufacturing facility.  At the present time, the only FDA approved
manufacturer of the Company's drug is Intergen, although the
Company is investigating alternative sources to the point where
sample manufacturing has commenced.  The Company's food supplement
cartilage material, BIO-CARTILAGE<F1> , and its POLY-Nag<F2> are
manufactured in the United States and an additional manufacturer is
being developed in the Western Pacific Area.

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

          REGULATORY REVIEW.  All Catrix<F1> and production procedures

<PAGE>

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

PATENTS AND PROPRIETARY TECHNOLOGY.

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

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

COMPETITION.

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

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

HUMAN RESOURCES.

<PAGE>

          EMPLOYEES AND CONSULTANTS.

          At August 1, 1998, the Company had two full time
employees, a part-time Marketing Director and retains several
consultants to assist in the administration of the Company and
coordinating its ongoing research and clinical trials.  
          
          SCIENTIFIC ADVISORY BOARD.
          
          The Company benefits from consultations with prominent
scientists active in fields related to the Company's business.  For
this purpose, the Company maintains a Scientific Advisory Board. 
At the Company's request, these advisors review the feasibility of
product development  programs under consideration, advise the
Company of research advances in areas related to the Company's
technology and aid in recruiting personnel.  It is intended that
the Scientific Advisors meet individually and in small groups with
the Company's management and scientists.  Because the scientific
advisors may have consulting or advisory positions with other
companies which may compete with the Company, the Company has
entered into confidentiality agreements with each member of the
Scientific Advisory Board.  

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

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

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

<PAGE>




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

ITEM 2. PROPERTIES
        ----------

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

ITEM 3. LEGAL PROCEEDINGS
        -----------------

          None

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

          None

                               PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        --------------------------------------------------------

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



FISCAL YEAR ENDING MAY 31, 1998                HIGH    LOW

Fourth Quarter                                 7/16    3/16 
Third Quarter                                  .26     1/4
Second Quarter                                 5/8     1/4
First Quarter                                  .80     .40

<PAGE>


FISCAL YEAR ENDING MAY 31, 1997              HIGH      LOW
                                              
Fourth Quarter                                .72      .58
Third Quarter                                 .78      .30
Second Quarter                                7/16     .20
First Quarter                                 3/8      3/16




          On July 2, 1998 the closing bid price per share of Common
Stock, as reported by the National Quotation Bureau, was $.375.  As
of May 31, 1998 there were 570 holders of record of the Company's
Common stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS 
         --------------------------------------------------        
RESULTS OF OPERATIONS
---------------------
OVERVIEW
--------
          Since its inception, the Company has primarily devoted
its resources to fund research, drug discovery and development.  
In addition, the Company licenses its technology for
commercialization by other companies and in the fiscal year ended
May 31, 1995, the Company began sales of its proprietary bovine
cartilage material, BIO-CARTILAGE<F1>, to a food supplement
distributor for sale through nutritional food supplement stores in
the U.S.  The Company has been unprofitable to date and may
continue to incur  operating losses in the foreseeable future. The
Company has sustained net losses of approximately $13.7 million
from inception to May 31, 1998.  The Company has primarily financed
its research and development activities through a public offering
of Common Stock, private placements of debt and equity securities,
and in recent years, revenues from licensing fees and product
sales.

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

<PAGE>


FISCAL YEAR ENDED MAY 31, 1998 COMPARED TO MAY 31, 1997  
-------------------------------------------------------

     The Company's revenues decreased in the year ended May 31,
1998 from the comparative prior fiscal year primarily due to lower
product sales and lower royalties and other revenue.  The Company's
revenues in the year ended May 31, 1997 include $ 25,000 of license
fees from Orphan Medical Inc. ("Orphan") and approximately $ 15,000
of revenue form sales of BIO-CARTILAGE<F1> compared to no such
revenues in the 1998 fiscal year.  Total  costs and expenses during
the year ended May 31, 1998 were 39% higher than those of the
comparative prior year.  The increase was principally due to higher
officer's salary, travel, professional fees and other
administrative expenses.  $ 37,000 of professional fees in the year
ended May 31, 1998 was paid with the issuance of 92,500 shares of
restricted Common Stock of the Company.
          
LIQUIDITY AND CAPITAL RESOURCES.

OVERVIEW

          The Company has had losses from operations in each of the
five years ended May 31, 1998.  This trend may continue in the
foreseeable future.  Working capital has been provided since the
Company's inception primarily from the sale of equity securities, 
from borrowings (from its officers, directors, and shareholders and
from outside investors), and in recent years, from revenues from
licensing fees and product sales.


PRESENT LIQUIDITY

          The Company's present liquidity position is critical.  As
of May 31, 1998 the Company's total liabilities exceed its assets
by $ 304,439.  The Company will require additional product sales or
funding during or, shortly after the end of, the current fiscal
quarter ending August 31, 1998, to sustain its operations.

          
          As a result of the history of losses incurred by the
Company, the net loss during the year ended May 31, 1998 of
($484,860), and the limited amount of funds currently available to
finance the Company's operations, the report of the Company's
independent Certified Public Accountants on the Financial
Statements as of May 31, 1997 and 1998 contain an explanatory
paragraph  indicating that the Company may be unable to continue in
existence.  
     
          Pursuant to the terms of the Company's Plan of
Reorganization under its Chapter XI proceeding the Company
converted $2,158,431 of debt into 2,989,208 shares of the Company's
common stock, as of May 31, 1997, thus substantially reducing the
Company's amount of debts.         

<PAGE>

          During the quarter ended February 28, 1998, Orphan and
the Company terminated their license agreement for Orphan to
develop the Company's proprietary bovine cartilage material,
CATRIX<F1>, in powder from only, for topical wound healing
purposes. The Company received from Orphan its approved 510 (K) files and
related regulatory and clinical materials related to the product's
development.  The Company is seeking to obtain either a new
licensee, or distributors, for the product.

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

          The Company has no material commitments for capital
expenditures at May 31, 1998.

          The Company has conducted a review of its computer
systems to identify the systems that could be affected by the Year
2000 Issue.  The company presently believes that, with conversions
to new software, if required, the Year 2000 problem will not pose
significant operational problems.

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------
          See page F-1 for Lescarden Inc. Index to Financial
Statements.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE
          ------------------------------------------------
          None.

<PAGE>

                               Part III



Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
          ACT.
          -------------------------------------------------------

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

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

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

William H. Chisholm                          Vice Chairman
                                             Director.

Frank E. Berglas                             Director.

George E. Ehrlich, M.D.                      Director.

Charles T. Maxwell                           Director.
          
          Mr. Dupuis (age 60) is an attorney who practiced in New
York City for more than twenty five years.  He became General
Counsel, Secretary and a Director of the Company in February 1986. 
On June 19, 1990 Mr. Dupuis was elected President and Chief
Executive Officer of the Company and in 1992 was elected chairman. 
Mr. Dupuis is a graduate of Syracuse University and received his
law degree from Columbus School of Law, of the Catholic University
of America in Washington, D.C.

          Dr. Sherman (age 56) Executive Vice President for
Science-Elect of the Company, received his Bachelor of Science in
pharmacy from the Philadelphia College of Pharmacy and Science, and
a Ph.D. in pharmacology from Temple University.  Since 1989 Dr.
Sherman has been an independent consultant to the pharmaceutical
industry.  From 1987 to 1989 he served as Vice President of Martec
Pharmaceutical Company.  Prior to that he was Vice President for
research and development for the Company.  Dr. Sherman is a
registered pharmacist in Pennsylvania and New Jersey and has
published in several scientific journals.

<PAGE>
          
          Mr. Chisholm (age 81) is a retired paper manufacturer and
served as a director of several publicly owned companies.  He
became a Director of the Company in December 1987.  Mr. Chisholm is
a graduate of Yale University.
     
          Mr. Berglas (age 57) was the President and Chief
Executive Officer of Great Lakes American Reinsurance Co., a
position he has held for more than the past five years until his
retirement in 1997.  He became a Director of the Company on
December 1, 1993.  Mr. Berglas is a graduate of City College of New
York.

          Dr. Ehrlich (age 69) is the President of George E.
Ehrlich Associates, International Consultant Firm, a position he
has held for more than the past five years.  He became a Director
of the Company on March 2, 1995. Dr. Ehrlich is a graduate of
Harvard University and received his medical degree from Chicago
Medical School. 

          Mr. Maxwell (age 66) was the Vice Chairman and Senior
Energy Strategist of C.J. Lawrence Inc., a member firm of the New
York Stock Exchange, for more than twenty-five years, until his retirement
in 1997.  Mr. Maxwell has acted as a consultant to various oil companies
and the United States Government on oil policy matters.  He became a
Director of the Company in July 1997.  Mr. Maxwell is a graduate of
Princeton University and Oxford University.
          
ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------
                         Annual Compensation           Long-Term
                         -------------------           Compensation
                                                       Awards
                                                       -------------
Name and                 Fiscal Year
Principal                Ended
Position                 May 31,        Salary $       Warrants (#)
--------                 -------       ---------       -------------
Gerard A. Dupuis         1998          $152,000        100,000
President and CEO        1997          $127,000           -
                         1996          $132,250        500,000


<PAGE>

Aggregated Option and Warrant Exercises in Last Fiscal Year and FY
End Option and Warrant Values.
------------------------------------------------------------------
               Shares              Number of      Value of
               Acquired            Unexercised    Unexercised
               on        Value     Options/       In-the-money
               Exercise  Realized  Warrants       Options
                                   at FY End (#)  Warrants
                                                  at FY End ($)
Name             (#)       ($)     Exercisable    Exercisable
------------------------------------------------------------------
G.A. Dupuis                        Options        Options
                                   40,000         $    0
                                   Warrants       Warrants
                                   1,740,312      $342,873


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT
          ---------------------------------------------------
          The following table sets forth, as of May 31, 1998, the
ownership of the Company's Common Stock by (I) each person who is
known by the Company to own Shares of record or beneficially, more
that (5%) of the Company's Common Stock, (ii) each of the Company's 
directors and executive officers and (iii) all directors and
executive officers as a group.  Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.


          Name and                 Number of Shares
Title of  Address of               Beneficially        Percent
Class     Beneficial Owner         Owned               of Class (1)
-------------------------------------------------------------------
Common    Gerard A. Dupuis (2)       1,961,229              10.66%
Stock     2 Kittle Road            
          Chappaqua, NY

          William H. Chisholm (2)      783,451              4.63%
          280 Railroad Avenue
          Greenwich, CT


          Charles T. Maxwell (2)     2,585,182              15.40%
          C.J. Lawrence, Inc.
          1290 Avenue of the Americas
          New York, NY

<PAGE>          

          Frank E. Berglas (2)         275,000              1.64%
          139 Brook Farm Road East
          Bedford, New York

          Peter B. Ruffin (2)        2,272,648              13.48%
          753 Forest Hills Drive
          Wilmington, NC
          
          George E. Ehrlich (2)        100,000              0.60%
          38 Holly Drive
          Loveladies, NJ
               
          Directors and              5,704,862             29.78%
          Officers as a group
          (2) (5 persons)


          (1) The percentages are calculated on the basis of
16,611,308 shares of Common Stock outstanding.  For the purpose of
calculating the percentage of shares of the Company's Common Stock
owned by any person, the shares issuable upon the exercise of
rights to acquire, owned by such a person if exercisable within 60
days of May 31, 1998 are deemed outstanding, but such shares are
not deemed outstanding for the purpose of calculating the
percentage of Common Stock owned by any other person.  All share
ownership is direct unless otherwise indicated.

          (2) Includes 252,000, 1,820,000, 317,000, 175,000,
100,000 and 172,000 stock option grants and/or warrants to purchase
the Company's Common Stock held by Mr. Ruffin, Mr. Dupuis, Mr.
Chisholm, Mr. Berglas, Dr. Ehrlich and Mr. Maxwell, respectively. 

          During the year end May 31, 1998, Merrs. Maxwell and
Chisholm received shares of the Company's common stock upon the
exercise of common stock purchase Warrants; they plan to file
reports on Form 4 reporting their changes in beneficial ownership
of shares of the Company's common stock late, by the end of August
1998 or shortly thereafter.        
          
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          -----------------------------------------------
          With respect to the litigation between the Company and
its former Chairman, Dr. John F. Prudden, described in last year's
report, such litigation was automatically stayed by the Chapter 11
filing.  Moreover, Dr. Prudden's claims in bankruptcy, consisting
of the claims in suit, were sold by him to several other parties
and they, in turn, had such claims liquidated pursuant to the
Reorganization Plan approved by the Court in May 1997. 
          Pursuant to an agreement with Donald K. Lourie a former
employee of the Company, the Company is obligated to pay Mr. Lourie
an annual pension of $25,000 provided the company meets certain
income or net worth milestones.

<PAGE>

          In June 1982, Dr. Prudden and others formed Catrix
Research Limited Partnership ( the "Catrix Partnership"), of which
Dr. Prudden is general partner.  The Company has entered into two
agreements with the "Catrix Partnership," a Research Agreement and
a Licensee Agreement.  See note 5 to the Notes to Financial
Statements for description of these agreements.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------
          (A) (1) EXHIBIT

          EXHIBIT NUMBER

          DESCRIPTION OF EXHIBIT

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

3.1            Certificate of Incorporation of Registrant, as
               amended.*

3.2            By-Laws of Registrant, as amended.*

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

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

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

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

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

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

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

22.1           Subsidiaries of the Registrant.*

<PAGE>

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

27.            Financial Data Schedule

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

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

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

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

****           Filed herewith.

(b)            Reports on Form 8-K

               There were no reports on Form 8-K filed by the
               Company during the fourth Quarter at the year ended
               May 31, 1998.

<PAGE>

                              SIGNATURES


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

                                   LESCARDEN INC.


                                   By: S/Gerard A. Dupuis
                                   Gerard A. Dupuis, President
                                   August 20, 1998

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


By:  S/Gerard A. Dupuis            President, Principal Executive
     Gerard A. Dupuis              Officer, Principal Financial
     August 20, 1998               Officer, Principal Accounting
                                   Officer and Director


By:  S/William H. Chisholm         Vice Chairman, Director
     William H. Chisholm
     August 20, 1998


By:  S/Frank E. Berglas            Director
     Frank E. Berglas
     August 20, 1998



By:  S/George E. Ehrlich           Director
     George E. Ehrlich
     August 20, 1998

By:  S/Charles T. Maxwell          Director
     Charles T. Maxwell
     August 20, 1998

<PAGE>



                                                               LESCARDEN INC.

                                                INDEX TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
Independent Auditor's Report                                            F-2
Balance Sheet as of May 31, 1998                                        F-3
Statement of Operations for the Years Ended May 31, 1998 and 1997       F-4
Statement of Stockholders' Deficiency
  for the Years Ended May 31, 1998 and 1997                             F-5
Statement of Cash Flows for the Years Ended May 31, 1998 and 1997       F-6
Notes to Financial Statements                                       F-7 - F-13

<PAGE>

INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders of
Lescarden Inc.

We have audited the accompanying balance sheet of Lescarden Inc. (the
"Company") as of May 31, 1998 and the related statements of operations,
stockholders' deficiency, and cash flows for each of the two years in the
period then ended.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lescarden Inc. as of
May 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with generally
accepted accounting principles.

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

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




GOLDSTEIN GOLUB KESSLER LLP
New York, New York

July 15, 1998
F-2
<PAGE>
                                                                  LESCARDEN INC.
<TABLE>                                                        
                                                                      BALANCE SHEET
                                                                            (Note 1)
<CAPTION>
May 31, 1998
-----------------------------------------------------------------------------------
ASSETS
<S>                                                                 <C>

Current Assets:
  Cash                                                              $        32,308
  Inventory                                                                  35,066
-----------------------------------------------------------------------------------
        Total current assets                                                 67,374

Security Deposit                                                              3,080

Deferred Income Tax Asset, net of valuation allowance
  of $3,735,000                                                                -
-----------------------------------------------------------------------------------
        Total Assets                                                $        70,454
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
  Accounts payable and accrued expenses                             $       109,668
  Advances from related parties                                             265,225
-----------------------------------------------------------------------------------
        Total liabilities                                                   374,893
-----------------------------------------------------------------------------------
Commitments and Contingencies

Stockholders' Deficiency:
  Convertible preferred stock - $.02 par value; $1.50 liquidation value
   (aggregating $138,000); authorized 2,000,000 shares, issued and
   outstanding 92,000 shares                                                  1,840
  Common stock - $.001 par value; authorized 200,000,000 shares,
   issued and outstanding 16,611,308 shares                                  16,611
  Additional paid-in capital                                             13,414,884
  Accumulated deficit                                                   (13,737,774)
-----------------------------------------------------------------------------------
        Stockholders' deficiency                                           (304,439)
-----------------------------------------------------------------------------------
        Total Liabilities and Stockholders' Deficiency              $        70,454
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>

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

F-3
<PAGE>
                                                                  LESCARDEN INC.

<TABLE>
                                                            STATEMENT OF OPERATIONS
                                                                            (Note 1)
<CAPTION>
Year ended May 31,                                             1998            1997
-----------------------------------------------------------------------------------
<S>                                                      <C>          <C>
Revenue:
  Product sales                                                        $     15,185
  Royalties and other                                    $    1,944          29,574
-----------------------------------------------------------------------------------
Total revenue                                                 1,944          44,759
-----------------------------------------------------------------------------------
Costs and expenses:
  Cost of product sales                                        -              5,341
  Salaries:
    Officer                                                 159,384         134,672
    Office                                                    9,190          11,099
  Professional fees and consulting                          172,896          98,480
  Research and development                                   23,286          12,696
  Rent and office expenses                                   60,367          61,211
  Travel and meetings                                        19,979           4,104
  Taxes                                                         745             816
  Insurance                                                   1,534           1,151
  Printing                                                                    3,430
  Other administrative expenses                              39,423          17,824
-----------------------------------------------------------------------------------
Total costs and expenses                                    486,804         350,824
-----------------------------------------------------------------------------------
Loss before reorganization items                           (484,860)       (306,065)
-----------------------------------------------------------------------------------
Reorganization items:
  Professional fees                                            -             36,235
  Bankruptcy fees and miscellaneous                            -              3,218
-----------------------------------------------------------------------------------
Total reorganization items                                                   39,453
-----------------------------------------------------------------------------------
Net loss                                                 $ (484,860)   $   (345,518)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Net loss per common share                                $     (.03)   $       (.03)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Weighted average number of common shares outstanding     16,293,704      12,249,165
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>

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

F-4
<PAGE>

                                                                  LESCARDEN INC.
<TABLE>
                                                                                            STATEMENT OF STOCKHOLDERS' DEFICIENCY
                                                                                                                          (Note 1)

<CAPTION>
                                   Convertible
                                 Preferred Stock            Common Stock            Additional                     Stockholders'
                              Number of   Par Value   Number of    Par Value        Paid-in        Accumulated      (Deficiency)
                                 Shares      Amount      Shares       Amount          Capital          Deficit        Equity   
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>      <C>       <C>             <C>            <C>             <C>              <C> 
Balance at June 1, 1996          92,000   $1,840    11,872,010      $11,872        $10,787,627     $(12,907,396)    $(2,106,057)

Issuance of common stock in
 bankruptcy settlement of claims   -        -        2,986,208        2,986          2,155,445              -         2,158,431
Issuance of common stock
 upon exercise of common
 stock warrants                    -        -          624,000          624            145,626              -           146,250
Issuance of common stock for
 cash                              -        -          400,000          400            159,600              -           160,000
Net loss                           -        -             -            -                  -             (345,518)      (345,518)
---------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1997          92,000    1,840    15,882,218       15,882         13,248,298       (13,252,914)        13,106
Issuance of common stock
 upon exercise of common
 stock warrants                    -        -          636,590          637            105,768              -           106,405
Issuance of common stock 
 for services                      -        -           92,500           92             36,908              -            37,000
Issuance of common stock
 warrants for services             -        -             -            -                23,910              -            23,910
Net loss                           -        -             -            -                  -             (484,860)      (484,860)
---------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998          92,000   $1,840    16,611,308      $16,611        $13,414,884      $(13,737,774)   $  (304,439)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

F-5
<PAGE>

                                                                  LESCARDEN INC.
<TABLE>

                                                                             STATEMENT OF CASH FLOWS
                                                                                            (Note 1)
<CAPTION>

Year ended May 31,                                                           1998              1997
---------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>
Cash flows from operating activities:
  Net loss                                                             $ (484,860)     $   (345,518)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
    Issuance of common stock for services                                  37,000              -      
    Issuance of common stock warrants for services                         23,910              -
    Changes in operating assets and liabilities:
      (Increase) decrease in inventory                                    (25,578)            4,368
      Decrease in prepaid expenses                                           -               17,673
      (Decrease) increase in accounts payable and accrued expenses         (5,134)           78,632
---------------------------------------------------------------------------------------------------
      Net cash used in operating activities                              (454,662)         (244,845)
---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Proceeds from issuance of common stock                                  106,405           306,250
  Advances from related parties                                           265,225              -      
---------------------------------------------------------------------------------------------------
      Cash provided by financing activities                               371,630           306,250
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                           (83,032)           61,405

Cash at beginning of year                                                 115,340            53,935
---------------------------------------------------------------------------------------------------
Cash at end of year                                                    $   32,308      $    115,340
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Supplemental schedule of noncash financing activities:

  Conversion of liabilities to common stock under the Plan of
   Reorganization                                                      $     -         $  2,158,431
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
  Issuance of common stock for services                                $   37,000      $       -
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
  Issuance of common stock warrants for services                       $   23,910      $       -
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>

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

F-6
<PAGE>
                                                               LESCARDEN INC.
                                                NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
1.    REORGANIZATION AND EMERGENCE FROM CHAPTER 11:

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

The POR provides for, among other things, the cancelation of certain
indebtedness in exchange for new equity securities and settlement of certain
claims and mutual releases of certain claims of the Company.

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

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

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

2.  Operations and Significant Accounting Policies:

The Company is engaged in the research, testing and development of medications
for the control and cure of various diseases and the licensing of its
technologies for commercialization by other companies.  In its research and
testing to date, the Company has discovered and is primarily investigating
Catrix<F1>, a complex of mucopolysaccharides derived from bovine cartilage.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As shown in the financial statements, the
Company has suffered recurring losses from operations, during the year ended
May 31, 1998 has limited revenue and a stockholders' deficit.  These factors
indicate that the Company may be unable to continue as a going concern.  In
the past few years, management has implemented plans to enter the food
supplement business and during the year ending May 31, 1999, management
expects the continuation of these plans and additional activity is expected
regarding its  products for therapeutic applications and wound healing.
If successful, this may increase cash flow which would allow the Company to
meet its obligations and sustain operations.  The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

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

F-7
<PAGE>

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

The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, Earnings per Share.  The adoption of this statement had no effect
on the Company's financial statements.

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

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

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

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates by management.
Actual results could differ from those estimates.  Management does not
believe that any recently issued, but not yet effective, accounting standards
if currently adopted would have a material effect on the accompanying
financial statements.

3.  ADVANCES FROM RELATED PARTIES:

Certain members of the Company's board of directors have loaned the Company
$265,225.  These loans are non-interest-bearing and are due on demand.  It is
the intention of the individuals and the Company to convert these advances
into common stock at some time in the future.  The conversion terms will be
based on the fair market value of the Company's stock at the time of
conversion.

4.    Stock Options and Warrants:

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

F-8
<PAGE>

(or from other subsequent dates on which they become exercisable).  The two
stock option plans expired in November 1991 without affecting any options
then outstanding.  Changes in incentive and nonqualified stock options
granted and outstanding are as follows:


May 31,                            1998                      1997
-----------------------------------------------------------------------------
                                        Weighted-                  Weighted-
                                         Average                   Average
                                         Exercise                  Exercise
                            Options       Price         Options     Price
-----------------------------------------------------------------------------

Outstanding at beginning
 of year                    175,000       $.61          175,000          $.61
Canceled during year         95,000        .50             -                -
-----------------------------------------------------------------------------
      Outstanding at
       end of year           80,000       $.75          175,000          $.61
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

The following table summarizes information about stock options outstanding
and exercisable at May 31, 1998:

                                              Remaining 
                       Number                Contractual             Exercise 
Exercise Price      Outstanding                 Life                  Price
-----------------------------------------------------------------------------

$.75                   80,000                  7 months               $.75
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

All of the above options are exercisable at May 31, 1998.  No options have
been exercised under either plan.

In the year ended May 31, 1993, the Company approved the "1992 Employee
Incentive Stock Plan" (the "1992 Plan").  The 1992 Plan authorized the
issuance of stock options, restricted shares of stock and stock bonus awards
to eligible participants.  The 1992 Plan provides for the reservation and
availability of 2,000,000 shares of common stock, subject to adjustment for
future stock splits, dividends, reorganizations and other similar events, at
exercise prices not less than the fair market value at the date of grant.
Options are exercisable from 12 months after the date of grant and expire 10
years from the date of grant.  At May 31, 1998, no options were granted under
the 1992 Plan.

The Company has outstanding warrants permitting the holders to purchase
shares of its common stock at prices ranging from $.10 to $1.00 per share.
The warrants have varying expiration dates to May 15, 2007.  Warrants to
purchase 4,017,839 common shares were outstanding at May 31, 1998.  In the
year ended May 31, 1998, warrants to purchase 84,000 common shares expired
and warrants to purchase 636,590 common shares were exercised at prices
ranging from $.15625 to $.25 per share.  During the year ended May 31, 1998,

F-9
<PAGE>

warrants to purchase 180,000 shares of common stock were issued.  Warrants
are granted at exercise prices not less than the fair market value at the
date of grant.  The warrants contain restrictions on transfer and require
that the underlying shares be acquired solely for investment.

The Company has elected, in accordance with the provisions of SFAS No. 123,
to apply the accounting rules under APB Opinion No. 25 and related
interpretations in accounting for its stock warrants and to present the
disclosure-only information as required by SFAS No. 123.  If the Company had
elected to recognize compensation cost based on the fair value of the
warrants granted at the grant date as prescribed by SFAS No. 123, the
Company's net loss and net loss per common share for the years ended May 31,
1998 and 1997 would approximate the pro forma amounts indicated in the table
below.

Year ended May  31,                                     1998             1997
-----------------------------------------------------------------------------
Net loss - as reported                            $ (484,860)       $(345,518)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net loss - pro forma                              $ (507,060)       $(345,518)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net loss per common share - as reported           $     (.03)       $    (.03)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net loss per common share - pro forma             $     (.03)       $    (.03)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

The fair value of each warrant grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for the year ended May 31, 1998: expected volatility of
1.43; risk-free interest rate of 6.1%; and expected lives of five years.

At May 31, 1998, shares of common stock have been reserved as follows:

                                                                   Number of
                                                                     Shares   
-----------------------------------------------------------------------------
Stock option plans                                                   80,000
Total warrants outstanding including those specifically
 described in the notes to financial statements                   4,017,839
-----------------------------------------------------------------------------

5.	COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS:

The Company leases office space under a month-to-month lease.  The lease
provides for minimum monthly rental payments, exclusive of real estate taxes
and other operating costs, of $3,083.

Rent expense charged to operations for the years ended May 31, 1998 and 1997
amounted to approximately $45,000 and $44,000, respectively.

F-10
<PAGE>

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

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

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

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

On June 2, 1994, this former Chairman instituted an arbitration proceeding
against the Company, pursuant to the terms of his consultancy agreement,
asserting that the Company breached the agreement.  On September 6, 1995,
the arbitrator ruled in favor of this former Chairman. The arbitrator awarded
$381,250 to this former Chairman.  In addition, the arbitrator ruled that
this former Chairman should receive warrants to purchase 937,651 shares of
common stock at an exercise price of $.15625 per share, the market value at
December 31, 1993.  These warrants were awarded in settlement of
approximately $146,000 that was owed to this former Chairman at December 31,
1993.  While the Company was in Chapter 11, this former Chairman's claim was
purchased by a group, including certain of the Company's other creditors, for
a negotiated amount of $85,000.  This claim was transferred and assigned,
pro-rata, to each purchaser and converted to common stock in accordance with
the POR.  At May 31, 1998, there are no further obligations to this former
stockholder.

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

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

Under the agreement, pension costs cannot be reasonably estimated principally
because the conditions required to create a pension liability do not exist
at May 31, 1998 and are not anticipated in the foreseeable future.

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

F-11
<PAGE>

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

	A.	Research Agreement:

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

	B.	License Agreement:

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

		If the Partnership is terminated, dissolved or its assets are
            liquidated, the Company will have the option to purchase for
            $25,000 all United States and foreign patents and patent
            applications transferred by the Company to the Partnership.
            
		At May 31, 1998, the principal asset of the Partnership consists
            of the License Agreement described above.

On October 31, 1997, a license agreement with Orphan Medical, Inc.
("Orphan"), pursuant to which Orphan was granted certain rights to technology
and products developed and owned by the Company was terminated.  As of
October 31, 1997: (a) Orphan shall have no continuing rights to manufacture,
use, promote, distribute, sell or market the technology or the products;
(b) the Company shall be free to manufacture, use, promote, sell or market
the technology and the products or, to license to others to do so; and (c)
Orphan shall have no obligations to make any further payments to the Company
under the license agreement.

The Company is due $21,000 under a license agreement with Donnell Inc.
("Donnell").  The agreement was terminated in 1996.  The Company is uncertain
of the receipt of this amount and has not recorded a receivable.  In
addition, upon execution of the license agreement the Company received
300,000 shares of Donnell's capital stock representing a then 30% interest
in Donnell.  This stock was determined to have no value and, accordingly,

F-12

<PAGE>

no investment has been recorded in the accompanying financial statements.
In addition, audited financial information for Donnell is not available
since Donnell does not prepare audited financial statements.


6.	STOCKHOLDERS' DEFICIENCY:

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

7.    INCOME TAXES:

The Company has net operating loss carryforwards of approximately $10,100,000
available to reduce future taxable income which expire in various years
through 2013.

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

The utilization of net operating loss carryforwards may be limited as a
result of cumulative changes in the Company's stock ownership.

Deferred income taxes reflect the impact of net operating loss carryforwards
and tax credits.  In recognition of the uncertainty regarding the ultimate
amount of income tax benefits to be derived from the Company's net operating
loss and tax credit carryforwards, the Company has recorded a valuation
allowance for the entire deferred tax asset.  The deferred income tax asset
is comprised of the following at May 31, 1998:

Net operating loss carryforwards                                 $ 3,400,000
Tax credits                                                          335,000
----------------------------------------------------------------------------
Gross deferred tax assets                                          3,735,000
Valuation allowance                                               (3,735,000)
-----------------------------------------------------------------------------
      Net deferred income tax asset                               $  - 0 -
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

F-13

<PAGE>

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