SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                                 Commission File Number
    December 31, 1996                                            0-28392


                            HARVARD SCIENTIFIC CORP.
             (Exact name of registrant as specified in its charter)

        Nevada                                                 88-0226455
(State or other jurisdiction                                (I.R.S. Employer
of incorporation)                                         Identification Number)


 100 N. Arlington Ave., Suite 23P, Reno, Nevada                  89501
(Address of principal executive offices)                       (Zip Code)

Registrant's Telephone number, including area code:  (702) 796 1173
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act:

                    Common Stock, Par Value $0.001 Per Share
                                (Title of Class)

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. 
(1) Yes X No  (2) Yes X No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.   X

State Registrant's revenues for its most recent fiscal year.
$181,000.








<PAGE>



State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock as of a  specified  date  within the past 60
days: Given the closing price for the Registrant's  shares of $4.875 on April 9,
1997, such market value equals approximately $17,074,098.

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

As  of  December  31,  1996,   there  were  9,888,629  shares  of  common  stock
outstanding.

Documents incorporated by reference: No annual report to security holders, proxy
or information  statement or prospectus  filed pursuant to Rule 424(b) or (c) of
the Securities Act of 1933 are incorporated by reference herein.




                                      -ii-

<PAGE>



PART I

--------------------------------------------------------------------------------
ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------------------------------------------------------

(a)      Business Development

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

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

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

         There are outstanding 9,888,629 shares as of December 31, 1996.

         To  management's  knowledge,  the  Registrant  has not been  subject to
bankruptcy, receivership or any similar proceedings.

(b)      Business of the Issuer

         The  Registrant's  operations  consist of the research and development,
registration, commercialization, marketing and distribution of products relating
to  prostaglandin  E1 (PGE1) in  liposomes,  utilized in the  treatment  of male
erectile dysfunction.

         The  Registrant  is in the  development  stage.  During  the last three
years,  its  operations  have consisted of the  development,  commercialization,


                                        1

<PAGE>



marketing  and  distribution  of product  relating to  prostaglandin/microsphere
delivery and how it is applied in the treatment of male sexual dysfunction.  The
Registrant  will  continue  its  operations  accordingly  in order to bring  its
product to the marketplace.

         On February 13,  1996,  the  Registrant  received an  assignment  of an
application for a patent identified as Application  Serial No. 08/573408,  filed
12/15/95, for an invention PGE-1 Containing Lyophilized Liposomes For Use In The
Treatment of Erectile Dysfunction.  The assignment was made by the holder of the
application,  Bio-Sphere  Technology,  Inc.  (BTI)  BTI owns a  majority  of the
Registrant's  issued and outstanding stock. Dr. Jackie R. See, a director of the
Registrant, is the principal shareholder of BTI.

         The business objective of the Registrant is to develop, test, register,
market  and  distribute  its  products  relating  to   prostaglandin/microsphere
delivery  and how it is applied to the  treatment  of male  sexual  dysfunction.
Additionally,   the  Registrant  may  pursue  the  development,   marketing  and
distribution  of other  potential  products  this  microsphere  delivery  system
technology may produce.

         The Registrant shall register,  market and distribute PGE1 in liposomes
(a process for which a patent has been filed) for the treatment of male erectile
dysfunction--which  can occur due to a number of  conditions,  including but not
limited   to,   diabetes,   psychogenic   causes,   hypertension,   stress,   or
prostatectomy.  The product has reached Phase I development in which preliminary
efficacy data is available,  indicating the possible benefits of such a therapy.
Although this early data suggests  product  efficacy,  there can be no guarantee
that the product will reach the market successfully.

         Prostaglandin  is already  approved for the  treatment of male erectile
dysfunction  in an  injectable  formulation  by  Pharmacia/Upjohn  and an  intra
urethral  insertion of a  prostaglandin  containing  pellet by Vivus.  A locally
applied  intra-meatal  product  could be  advantageous  to patient  comfort when
compared with an injectable  product.  PGE1 is a drug and will therefore require
full  registration  with  the Food and  Drug  Administration  (FDA).  An IND was
submitted to the FDA in May 1996. A Phase I clinical trial was  implemented  and
concluded.   The  manufacturing   procedure  is  being  scaled  up,  with  assay
verification  and validation in progress.  A New Drug  Application will be filed
with the  FDA,  assuming  adequate  data is  generated  upon  conclusion  of the
clinical trial program.  There can be no assurance that the FDA will approve the
product for  marketing.  It is estimated  that the costs of completing the above
procedures  will amount to between $10 to $12  million.  The FDA review  process
could last as long as two (2) years and  perhaps  even  further  extended in the
event the FDA requests additional data.


                                       -2-

<PAGE>



Competition:

         The Registrant is competing in the market for products designed for the
treatment of male erectile  dysfunction.  Such products include,  but may not be
limited to, a needle  injection  process,  insertion  delivery  systems,  penile
implants and vacuum constriction devices. It is known that other competitors are
researching  and  developing   products  for  the  treatment  of  male  erectile
dysfunction.  There  is,  therefore,  no  guarantee  that once FDA  approval  is
received,  if  ever,  that  the  product  marketed  by the  Registrant  will  be
commercially successful.

         Also,  certain  competitors  may have advantages over the Registrant in
terms of FDA approval for marketing of their products.  For example,  management
of the Registrant  understands  that a competitor  which markets a direct needle
injection  process  received FDA approval for its product in July of 1995. Vivus
Inc.,  which  markets  an  intra  urethral  prostaglandin  -  containing  pellet
delivered via their Muse device achieved FDA approval in December 1996.

         Despite the time-frames  involved with FDA approval,  management of the
Registrant  believes that its locally  applied  product will  represent a highly
desirable  system  for the  treatment  of male  erectile  dysfunction.  That is,
compared to the direct needle injection  method and/or other insertion  delivery
systems,  the Registrant's  locally applied,  intra-meatal  product will be more
desirable to patients.  Accordingly,  the Registrant is posturing  itself in the
marketplace to provide such a product.

Regulation:

         The  Registrant   anticipates   that   governmental   regulation   will
significantly  impact  upon the time in which  the  Registrant  can  market  its
product in the United States.  FDA  procedures  involve  clinical  testing which
occurs in three phases to demonstrate safety and efficacy of the product.  Phase
I clinical trials consist of testing for the safety and tolerance of the product
with a small group of subjects and may also yield preliminary  information about
the  effectiveness  and dosage levels of the product.  Phase II clinical  trials
involve   testing  for   efficacy,   determination   of   optional   dosage  and
identification  of possible side effects in a larger  patient  group.  Phase III
clinical  trials  consist of additional  testing for efficacy and safety with an
expanded patent group. After the product has been approved for marketing,  Phase
IV  post-marketing  surveillance  studies may be required to provide  additional
data to the FDA for longer term follow-up concerns.

         Upon successful completion of Phase III testing, a New Drug Application
(NDA) can be filed.  Approval  requires a review of detailed data of the results
of clinical  studies,  the  composition of the drug or biological,  the labeling


                                       -3-

<PAGE>



that will be used,  information  on  manufacturing  methods,  and samples of the
products. After the FDA completes its review of the application,  the product is
typically reviewed by a panel of medical experts,  and the applicant required to
answer questions on its safety and efficacy. At the recommendation of the panel,
an NDA may be granted and the product may then be marketed.

Production and Manufacturing:

          The  Registrant's  product  will  be  manufactured  by 2  third  party
manufacturers located in Southern California. The manufacturers will produce the
Registrant's  product per the  Registrant's  directions and  specifications  and
deliver the product to the Registrant.  The Registrant sees no reason to acquire
the equipment  necessary for production at this time and  anticipates  utilizing
its existing current arrangement with outside laboratories for the manufacturing
of its products for distribution.

Marketing:

         The Registrant has completed its strategic  marketing and  distribution
plan for the product. The Korean distributor  agreement was canceled in November
of 1996 by mutual agreement. The Registrant is currently negotiating distributor
agreements  for North America with suitable  companies  with a major interest in
urology. The European distributor is ready to commence Phase III clinical trials
and has been put on notice to tighten  the terms of the  agreement  between  the
companies.

Employees:

         As of  December  31,  1996,  the  Registrant  had  two  (2)  full  time
employees.   These  full  time   employees   are  engaged  in   management   and
administrative  activities.  None of the Registrant's employees are subject to a
collective  bargaining  agreement and the Registrant believes its relations with
its employees are good.  From time to time, the Registrant  elicits the services
of key  management  and  technical  staff  from its parent  company,  Bio-Sphere
Technology,  Inc.  (BTI).  The Registrant  reimburses  BTI for time  contributed
directly by its  employees in providing  technical and  scientific  services and
assistance to the Registrant.










                                       -4-

<PAGE>



--------------------------------------------------------------------------------
ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------------------------------------------------------

         The  Registrant's  research  and development offices have approximately
3000 square  feet and are  located at 17791  Fitch,  Irvine,  California  92614.
Telephone number (714) 252-1942. They are leased on a month-to-month basis.

         The  Registrant  does not own any real  estate,  nor is the  Registrant
engaged in the business of investing in real estate or real estate mortgages.


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


         The following  litigation  either is pending or was pending  during the
year 1996:

1.       Harvard  Scientific  Corp. v. Nevada Agency and Trust Company, A Nevada
         Corporation,  and Thomas E. Waite & Associates,  a Florida Corporation,
         Case No. CV96-04945, Filed in the Second Judicial District Court of the
         State of Nevada, in and For the County of Washoe.

         On  August 2,  1996,  the  Registrant  filed a  complaint  in the above
captioned action naming Thomas E. Waite & Associates, a Florida corporation, and
Nevada Agency and Trust  Company,  a Nevada  corporation,  as  defendants.  This
action  involved  a  dispute  over  performance  of  an  agreement  between  the
Registrant and Thomas E. Waite & Associates.  Under the terms of that agreement,
the  Registrant  had issued Thomas E. Waite & Associates  350,000  shares of the
Registrant's  common stock in exchange for services to be performed by Thomas E.
Waite &  Associates.  Those  services  involved  obtaining the financing for the
Registrant.  In this  action,  the  Registrant  claimed  that  Thomas E. Waite &
Associates had not performed  those services and had breached its agreement with
the  Registrant.  Nevada Agency and Trust  Company,  the  Registrant's  transfer
agent,  was  included  as a  defendant  in order to enjoin the  transfer  of the
350,000  shares  which had been  issued to Thomas  E.  Waite &  Associates.  The
Registrant sought to recover damages for Thomas E. Waite & Associate's breach of
contract and obtain a declaratory  judgment  declaring the agreement between the
Registrant  and Thomas E. Waite & Associates  null and void,  and  canceling the
shares issued to Thomas E. Waite & Associates.  The action was settled  amicably
between the parties and is no longer pending.

                                       -5-

<PAGE>



2.       Harvard Scientific Corp. v. Ailouros Ltd., a Foreign corporation, CV-N-
         97-00088-HDM, Originally Filed in the Second Judicial District Court of
         the State of Nevada, in and for the County of Washoe and Removed to the
         United States District Court for the District of Nevada.

         On February 6, 1997, the Registrant filed the above captioned action in
connection with certain  convertible  notes the Registrant had executed in favor
of the  defendant.  In this action,  the  Registrant  claimed the  defendant had
breached  its  contract  with  the  Registrant   regarding  the  terms  of  such
convertible notes and that the defendant had breached its duty of good faith and
fair dealing in connection  with those  contract  terms.  Also,  the  Registrant
alleged that an accord and  satisfaction had been reached between the parties on
their dispute,  and that such accord and satisfaction  should be enforced by the
Court.  Also,  the  Registrant  sought  damages for the breach of the underlying
contract  terms.  The  litigation  is pending  and is related to the  litigation
outlined below.

3.       Ailouros Ltd. v. Harvard Scientific Corp., CV-N-97-00089-ECR,  Filed in
         the United States District Court for the District of Nevada.

         On February 13, 1997,  Ailouros Ltd. filed the above  captioned  action
naming the Registrant as a defendant.  In this action, Ailouros claimed that the
Registrant  had breached the contract which is the subject of the action brought
by the Registrant  against Ailouros referred to above. In this action,  Ailouros
claims it is entitled to 263,225 shares of the Registrant's  common stock and/or
is entitled to damages in the amount of $2,000,000.  Ailouros sought to have the
State  Court  action  filed by the  Registrant  referred  to in heading 2 above,
removed to  Federal  Court and that  action was in fact then  removed to Federal
Court.  Ailouros  also  has  sought  to  have  the  two  Federal  Court  actions
consolidated.

         On or about March 10, 1997, the Registrant  filed an amended  complaint
in the Federal  Court  action  which added a cause of action not included in the
State Court action.  The new cause of action sought to have any shares issued to
Ailouros,  issued  pursuant to the  requirements of Regulation S due to the fact
that at the time the  Registrant  had entered into its agreement  with Ailouros,
the Registrant was not a reporting company. This litigation is still pending.








                                       -6-

<PAGE>



4.       Harvard  Scientific  Corp. v. D. Weckstein  and  Co., Inc.,  a New York
         Corporation,  and Donald E. Weckstein,  CV97-00806, Filed in the Second
         Judicial  District  Court of the State of Nevada, in and For the County
         of Washoe.

         On February 10, 1997, the Registrant  filed the above captioned  action
in connection with disputes between the Registrant and the defendants  regarding
an  agreement  between the parties to the action.  Pursuant to the terms of that
agreement,  the defendants had agreed to help the Registrant obtain financing in
exchange for 25,000 shares of the Registrant's common stock. In this action, the
Registrant  alleges  that  defendants  breached  their  agreement  to  help  the
Registrant  obtain financing and/or were negligent in performing their duties in
helping the Registrant  obtain financing.  In this action,  the Registrant seeks
damages  for the  defendants'  negligence  and  breach of  contract  and seeks a
declaratory  judgment  which  declares  that  the  Registrant  does  not owe the
defendants  any of the  Registrant's  common stock  pursuant to the terms of the
agreement between the parties. The action currently is pending.

5.       D. Weckstein  and  Co., Inc. v. Harvard  Scientific Corp. and Thomas E.
         Waite  &  Associates,  Inc.,  Index No. 97-103324, Filed in the Supreme
         Court of the State of New York, County of New York.

         On or about  February 18, 1997,  the  plaintiff in the above  captioned
action filed this matter naming the Registrant  and Thomas E. Waite & Assoc.  as
defendants.  In this action,  the plaintiff claims that the Registrant  breached
the same  agreement  which is the subject of the action filed by the  Registrant
against this plaintiff in the State Court of Nevada. Also, the plaintiff in this
action seeks damages  against  Thomas E. Waite &  Associates,  Inc. for what the
plaintiff claims is Thomas E. Waite & Associates,  Inc.'s tortious  interference
with the agreement between the Registrant and the plaintiff.  The plaintiff also
seeks damages for alleged fraud on Thomas E. Waite & Associates,  Inc.'s part in
connection with its dealings with the plaintiff.

         The  complaint in this action also  contains a cause of action  against
the  Registrant  for "abuse of  process"  in  connection  with the filing of the
Nevada action brought by the Registrant  against this plaintiff.  In this claim,
the  plaintiff  asserts  that the Nevada Court has no  jurisdiction  over either
party of the  subject  matter  of the  Nevada  action,  and that the  Registrant
brought the action in Nevada simply to inconvenience the plaintiff.

         In this action,  the plaintiff  seeks damages on its breach of contract
claims  against the  Registrant  in the amount of  $250,000  and  $400,000,  and
damages on the abuse of process  claim  against the  Registrant in the amount of
$10,000. This litigation is pending.



                                       -7-

<PAGE>



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


         No matters were submitted  during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the solicitation of
proxies or otherwise.




                                       -8-

<PAGE>



PART II

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

Market Information:

         The capital stock of the Registrant is currently  trading on the system
of the National  Association of Securities  Dealers,  Inc. (NASDAQ) known as the
Bulletin Board under the symbol HVSF.

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

                                                   Capital Stock
                           Quarter Ended        High Bid        Low Bid


                           December 31, 1996     $ 2.62          $ 0.87
                           September 30, 1996    $ 3.31          $ 1.50
                           June 30, 1996         $ 7.25          $ 2.19
                           March 31, 1996        $ 16.63         $ 5.25
                           December 31, 1995     $ 14.50         $ 2.75
                           September 30, 1995    $ 3.63          $ 1.69
                           June 30, 1995         $ 1.88          $ 0.25
                           March 31, 1995        $ None          $ None
                           December 31, 1994     $ None          $ None
                           September 30, 1994    $ None          $ None
                           June 30, 1994         $ None          $ None

Holders:

         The approximate  number of record holders of the  Registrant's  capital
stock as of December 31, 1996 was 180.

Dividends:

         The  Registrant  has never paid cash dividends on its capital stock and
does not intend to do so in the  foreseeable  future.  The Registrant  currently
intends to retain its earnings for the operation and expansion of its business.






                                       -9-

<PAGE>



--------------------------------------------------------------------------------
ITEM 6.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
         OPERATION
--------------------------------------------------------------------------------


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

Overview:

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

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

         The Registrant's  future success is dependent upon its ability to raise
additional  funds to complete  the  commercialization  process for its  erectile
dysfunction  treatment  product.  The  Registrant  intends to obtain these funds
through public and private financing or from other sources such as collaboration
agreements.  There can be no assurance that such funds will be available or will
be available on satisfactory terms to the Registrant. Failure to obtain adequate
financing  could  cause a  delay  or  termination  of the  Registrant's  product
development and marketing efforts.

         Over the next 12  months,  the  Registrant's  primary  focus will be on
continuing  clinical trials and product  validation to conform to the regulatory
process of the FDA. The Registrant  believes that an 18 to 24 month time-line to


                                      -10-

<PAGE>



obtain  regulatory  approval  is the  current  assumption,  but  there can be no
assurance,  if ever,  that the product  will  receive FDA  approval in that time
span. Additionally, the Registrant will be identifying and seeking collaborative
arrangements  with   pharmaceutical   distribution   concerns  and/or  licensing
agreements  with  companies to eventually  distribute  the erectile  dysfunction
product.

         The  Registrant's   success  is  dependent  on  its  ability  to  raise
additional capital to effect all aspects of its operations.

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

Result of Operations:

For the Period from January 13, 1987 (Inception) through December 31, 1993:

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

For the Year Ended December 31, 1994:

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

         At this same time,  the Registrant investigated and eventually acquired
an additional  intellectual property and technology related to whole blood rapid
testing for viruses,  particularly  the HIV virus.  At the time,  the Registrant
felt the addition of this new product line was valuable to the Registrant in two


                                      -11-

<PAGE>



ways.  First, the technology was qualified as the best available  testing device
for both accuracy and ease of use in the  marketplace.  Second,  it provided the
Registrant  with  diversity in its potential  product  line,  reducing the risks
associated with a single product company.

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

         In July 1994, the Registrant  entered into a joint venture research and
development  agreement with Disease  Detection  International,  Inc., a Delaware
corporation,   and  its  current  parent,   Trinity  Biotech,   Ltd.,  an  Irish
corporation,  for the  improvement  and enhancement of the rapid whole blood HIV
test device. The agreement calls for complimentary  marketing rights and a 50/50
split of the profits on any  products  produced  as a result of this  agreement.
Subsequently,  in August of 1994, the two companies signed a marketing agreement
further  defining  the  manufacturing,  pricing  and  patent  rights  to the new
product.

         After several months of pre-marketing  of this rapid detection  device,
the Registrant determined that approval by the marketing authority in the United
States was not likely due to adverse psychological  reactions by private testing
patients.  Trinity Biotech,  Ltd. terminated the agreements in February of 1995.
The Registrant contributed $34,470 directly to the research and development cost
of this product.  At this time,  the Registrant has not taken any action in this
matter and has abandoned the project with Trinity Biotech, Ltd.

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

For the Year Ended December 31, 1995:

         In 1995,  the  Registrant  experienced  an increase in both general and
administrative expenses, as well as research and development expenses.  The  net


                                      -12-

<PAGE>




loss for the year ended  December  31,  1995  amounted  to  $676,455.  The total
operating  expenditures  for the two years ended  December 31, 1995  represented
approximately 97% of the total operating expenses from inception,  primarily due
to the fact that the Registrant was not  operational  prior to that time and all
expenses  incurred form  inception to the end of 1993 were primarily to maintain
the Registrant's status.

         In 1995, the Registrant's  activities  centered around raising capital.
The  Registrant  started the year with a cash balance of $724.  The only capital
available for most of the year was provided  through loans from the Registrant's
directors  and  others.  These  monies were  primarily  used to attempt to raise
investment capital and maintain the corporate entity.

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

         As a result of this reorganization, the Registrant raised $831,300, net
of issuance  cost,  on December 29, 1995.  These  proceeds were used to fund the
Registrant's existing operations and retire a portion of loans and note payables
incurred earlier in the year.

For the Year Ended December 31, 1996:

The Registrant  experienced an increase in administrative  and general expenses,
including  research  and  development   costs.  The  Registrant   experienced  a
management  change in December 1996.  The net loss for the year ending  December
31, 1996 amounted to $1,938,944.

During 1996 the Registrants  activities  centered around  continued fund raising
efforts and development of the product.  The Registrant  started the year with a
cash balance of $799,466.  The  Registrant  raised funds though a Regulation "S"
debenture in June 1996. The Registrant submitted an IND to the FDA and concluded
a Phase I clinical trial.

Risk Factors:

         The  Registrant  has  identified  at  least  two  sources  as  contract
manufacturers  for its product.  The product under development by the Registrant
has never been  manufactured on a commercial scale and there can be no assurance


                                      -13-

<PAGE>



that such a product can be manufactured at a cost or in quantities  necessary to
make it commercially viable.

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

         There is a concern  in that  there  are  limited  suppliers  of the key
pharmaceutical agent in the product.

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

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

General:

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

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

         The Registrant expects to obtain capital funds either from the issuance
of common stock or debt. It is expected that external  sources will be available
to provide these funds, but there can be no guarantees of such funding.









                                      -14-

<PAGE>



--------------------------------------------------------------------------------
ITEM 7.  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



                                      -15-

<PAGE>


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                         REPORT ON FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995














                                      -16-

<PAGE>



                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)





                                TABLE OF CONTENTS


                                                                       PAGE  NO.


INDEPENDENT AUDITOR'S  REPORT

         On Financial Statements                                             1-2

         On Supplemental Schedules                                            16

FINANCIAL STATEMENTS

         Balance Sheets                                                      3-4

         Statements of  Operations                                             5

         Statements of  Stockholders' Equity                                 6-7

         Statements of Cash Flows                                            8-9

         Notes to the Financial Statements                                 10-15

         Schedule V --  Property,  Plant, and Equipment                       17

         Schedule VI - Accumulated Depreciation and Amortization
                              of Property, Plant, and Equipment               18
                             

         Letter from Former Independent Accountant                            19





                                      -17-

<PAGE>


DALE MCGHIE                                           Town & Country Plaza
CERTIFIED PUBLIC ACCOUNTANT                   1539 Vassar St. Reno, Nevada 89502
                                                       Tel:  702-323-7744
                                                       Fax:  702-323-8288



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
     and Shareholders of
Harvard Scientific Corp.

I have audited the balance  sheet of Harvard  Scientific  Corp.  (A  Development
Stage  Company)  as  of  December  31,  1996,  and  the  related  statements  of
operations,  stockholders' equity, and cash flows for the year then ended. These
financial  statements are the  responsibility  of the Company's  management.  My
responsibility is to express an opinion on the financial  statements based on my
audit.  The  financial  statements  of the  Company  for the fiscal  years ended
December 31, 1995 and 1994,  were audited by other auditors whose report thereon
dated March 22, 1996,  expressed  an  unqualified  opinion  with an  explanatory
paragraph discussing its going-concern assumption.

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

In my opinion, the financial statements referred to above present fairly, in all
material  respects,  the financial  position of Harvard  Scientific  Corp. as of
December 31, 1996,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been presented  assuming that the
company  will  continue  as a  going  concern.  As  discussed  in Note 11 to the
financial statements,  the Company has suffered recurring losses from operations
that raises  substantial doubt about its ability to continue as a going concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

                                      -18-
<PAGE>


Page 2
Independent Auditor's Report


The accompanying statements of operations,  stockholders' equity, and cash flows
for the period from January 13, 1987  (inception) to December 31, 1993, were not
audited by me, and accordingly, I do not express an opinion on them.

/s/ Dale McGhie
W. Dale McGhie, CPA
Reno, Nevada
March 20, 1996
<PAGE>













                                      -19-

<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS
                           December 31, 1996 and 1995

<CAPTION>




                                                                                    1996                    1995
                                                                             --------------------    -------------------

         Current Assets:
<S>                                                                             <C>                    <C>             
              Cash                                                              $               -      $         799,466
              Prepaid expenses (Note 7)                                                     1,565                425,094
                                                                             --------------------    -------------------
                   Total Current Assets                                                     1,565              1,224,560
                                                                             --------------------    -------------------

         Equipment and Leasehold Improvements:
              at cost, less accumulated depreciation of
              $3,491 at December 31, 1996 and $6,637 at
              December 31, 1995 (Note 3)                                                    5,925                 10,861
                                                                             --------------------    -------------------

         Intangible Assets:
              Intellectual property,  net of accumulated  amortization of $1,048
                   at December 31, 1996 and $1,771 at December 31, 1995 (Notes 4
                   and 7)                                                                   7,948                  8,563
              Organizational  cost, net of accumulated  amortization of $105,760
                   at December 31, 1996,  and $70,754 at December 31, 1995 (Note
                   7)                                                                      69,789                104,796
                                                                             --------------------    -------------------

                                                                                           77,737                113,359
                                                                             --------------------    -------------------

         Other Assets:
              Deposits                                                                        300                    300
                                                                             --------------------    -------------------


              TOTAL ASSETS                                                      $         85,527       $      1,349,080
                                                                             ====================    ===================
</TABLE>








    The accompanying Notes are an integral part of these financial statements

                                       -20-
<PAGE>

                                     
<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS
                           December 31, 1996 and 1995


<CAPTION>



                                                                                    1996                    1995
                                                                             --------------------    -------------------

         Current Liabilities
<S>                                                                             <C>                     <C>            
              Accounts payable (Note 7)                                         $         36,625        $       105,791
              Accrued expenses (Note 5)                                                   20,329                 84,380
              Bank Overdraft                                                                 134
              Due to related parties (Note 7)                                            190,860                406,881
              Note payable to related parties (Notes 6 and 7)                             37,275                 67,675
              Note payable -- Convertible (Note 6)                                       250,000                      -
                                                                             --------------------    -------------------
                   Total Current Liabilities                                             535,223                664,727
                                                                             --------------------    -------------------


         Contingencies: (Note 10)                                                              -                      -


         Stockholders' Equity:
              Common stock, $.001 par value,  100,000,000 authorized;  9,883,129
                   and 8,749,125  shares issued and  outstanding at December 31,
                   1996 and December 31, 1995 respectively (Note 1)                        9,883                  8,749
              Additional paid-in capital                                               2,706,207              1,902,445
              Deficit accumulated during the development stage                        (3,165,786)            (1,226,841)
                                                                             --------------------    -------------------

                   Total Stockholders'  Equity                                          (449,696)               684,353
                                                                             --------------------    -------------------


              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $         85,527        $     1,349,080
                                                                              ====================    ===================
</TABLE>








    The accompanying Notes are an integral part of these financial statements

                                       -21-
<PAGE>


<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED DECEMBER 31, 1996,1995 AND 1994
            AND THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
<CAPTION>
                             TO DECEMBER 31, 1996


                                                                                                              Inception
                                                                                                                 to
                                                                                                              12/31/96
                                                             1996             1995             1994          (Unaudited)
                                                        ----------------  --------------   --------------  ----------------

<S>                                                        <C>              <C>              <C>              <C>         
Net Sales                                                  $    181,000     $         -      $         -      $    187,387
Cost of Sales                                                   216,870               -                -           221,557
                                                        ----------------  --------------   --------------  ----------------

         Gross Profit                                          (35,870)               -                -          (34,170)
                                                        ----------------  --------------   --------------  ----------------

Operating Expenses:
    General and administrative                                1,244,272         434,320          324,699         2,040,870
    Research and development (Notes 7 and 9)                    109,553         194,965          124,366           428,884
    Depreciation and amortization (Notes 3 and 7)                41,472          39,550           38,872           120,634
                                                        ----------------  --------------   --------------  ----------------

         Total Operating Expenses                             1,395,297         668,835          487,937         2,590,388
                                                        ----------------  --------------   --------------  ----------------

         ( Loss ) from Operations                            (1,431,167)       (668,835)        (487,937)       (2,624,558)
                                                        ----------------  --------------   --------------  ----------------

Other Income (Expenses)
    Settlements (Note 10)                                      (494,813)              -                -          (494,813)
    Interest income                                                   -               -                -
    Interest expense                                            (12,964)         (7,620)          (1,727)          (22,312)
    Loss on disposition of marketable securities                      -               -                -           (24,500)
                                                        ----------------  --------------   --------------  ----------------

                                                               (507,777)         (7,620)          (1,727)         (541,228)
                                                        ----------------  --------------   --------------  ----------------

Net Loss                                                   $ (1,938,944)    $  (676,455)     $  (489,664)       (3,165,786)
                                                        ================  ==============   ==============  ================


Loss Per Common Share                                      $       0.21     $      0.29      $      0.34
                                                        ================  ==============   ==============


Weighted Average Shares Outstanding                           9,022,404       2,333,839        1,421,563
                                                        ================  ==============   ==============
</TABLE>


    The accompanying notes are an integral part of these financial statements

                                       -22-
<PAGE>

<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                       STATEMENTS OF STOCKHOLDER'S EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
            AND THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1996
<CAPTION>


                                                                                             Deficit
                                                  Restated                 Additional         From
                                                Common Stock                Paid-in         Inception
                                       -------------------------------
                                          Shares           Amount           Capital          To Date           TOTAL
                                       --------------   --------------   --------------  ----------------  ---------------
<S>                                          <C>         <C>              <C>                               <C>              
   Issuance of shares for cash on
        January 13, 1987 (inception)         103,000     $        103     $       2,097                     $        2,200
  
   Issuance of shares for cash,
        net of offering costs                 51,000               51            19,223                             19,274
 
   Issuance of shares for services            90,000               90                 -                                 90

   Issuance of shares for services            20,000               20                 -                                 20
  
   Issuance of shares for services            36,000               36                 -                                 36

   Issuance of shares to acquire
        Grant City Corporation                50,000               50            39,827                             39,877

   Issuance of shares to effect a
        four-for-one split                 1,050,000            1,050            (1,050)                                 -
 
   Issuance of shares for
        intellectual property rights       4,196,000            4,196                 -                              4,196
 
   Issuance of shares for
        corporation property rights          394,000              394            24,231                             24,625

   Issuance of shares for fees
        and services                       1,045,000            1,045            96,893                             97,938
                                       --------------   --------------   --------------                    ---------------

   Balance carried forward                 7,035,000             7,035          181,221                            188,256
                                       --------------   --------------   --------------                    ---------------
</TABLE>




    The accompanying Notes are an integral part of these financial statements

                                       -23-
<PAGE>

<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                       STATEMENTS OF STOCKHOLDER'S EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
            AND THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1996
<CAPTION>

                                                                                             Deficit
                                                  Restated                 Additional         From
                                                Common Stock                Paid-in         Inception
                                       -------------------------------
                                          Shares           Amount           Capital          To Date           TOTAL
                                       --------------   --------------   --------------  ----------------  ---------------

<S>                                        <C>                  <C>            <C>               <C>              <C>    
   Balance brought forward                 7,035,000            7,035          181,221                            188,256

   Issuance of shares for cash,
        net of offering costs                393,500              393          353,757                            354,150
   Adjustment of shares to effect
        a four-for-one reverse split      (5,571,375)          (5,571)           5,571                                  -
   Cumulative loss from inception
        to December 31, 1994                       -                -                -          (550,386)        (550,386)
                                       --------------   --------------   --------------  ----------------  ---------------

   Balance December 31, 1994               1,857,125            1,857          540,549          (550,386)          (7,980)
   Issuance of common stock
        for directors' fees and
        services                             553,500              553          530,796                 -          531,349
    Issuance of common stock
        at par value for
        intellectual property rights       6,138,500            6,139                -                 -            6,139
   Issuance of common stock
        for cash, net of offering
        costs                                200,000              200          831,100                 -          831,300
   Net loss for the year ended
        December 31, 1995                          -                -                -          (676,455)        (676,455)
                                       --------------   --------------   --------------  ----------------  ---------------

   Balance December 31, 1995               8,749,125            8,749        1,902,445        (1,226,841)         684,353
   Issuance of common stock for
        services and debt reduction          565,254              565          309,518                 -          310,083
   Issuance of common stock
        for legal settlement                 568,750              569          494,244                 -          494,813
   Net loss for the year ended
        December 31, 1996                          -                -                -        (1,938,945)      (1,938,945)
                                       --------------   --------------   --------------  ----------------  ---------------

   Balance December 31, 1996               9,883,129      $     9,883     $  2,706,207     $  (3,165,786)    $   (449,696)
                                       ==============   ==============   ==============  ================  ===============
</TABLE>

   The accompanying Notes are an integral part of these financial statements.

                                       -24-
<PAGE>



<TABLE>


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
            AND THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1996
<CAPTION>

                                                                                                              Inception
                                                                                                                 to
                                                                                                              12/31/96
                                                             1996             1995             1994          (Unaudited)
                                                        ----------------  --------------   --------------  ----------------
Cash Flows from Operating Activities
<S>                                                      <C>                <C>             <C>             <C>           
     Cash received from customers                        $      181,000     $         -     $          -    $      181,000
     Cash paid to suppliers and employees                    (1,389,634)        (38,958)        (251,363)       (1,711,867)
     Cash paid for interest                                      (3,167)              -                -            (3,167)
     Cash paid for settlement                                   (50,000)              -                -           (50,000)
                                                        ----------------  --------------   --------------  ----------------

         Net Cash Used in Operating Activities               (1,261,801)        (38,958)        (251,363)       (1,584,034)
                                                        ----------------  --------------   --------------  ----------------

Cash Flows from Investing Activities:
     Cash from sale (purchase) of equipment                      (7,399)              -         (17,498)          (24,897)
     Capitalized organization costs                                   -               -        (150,000)         (150,924)
     Purchase of marketable securities                                -               -               -           (24,500)
                                                        ----------------  --------------   --------------  ----------------

         Net Cash Used in Investing Activities                   (7,399)              -        (167,498)         (200,321)
                                                        ----------------  --------------   --------------  ----------------

Cash Flows from Financing Activities:
     Proceeds from issuance of capital stock,
        net of offering costs                                   250,000         831,300          354,149         1,496,946
     Proceeds from debt, net of costs                           251,100          80,719           83,625           415,444
     Principal payments on debt                                 (31,500)        (74,319)         (22,350)         (128,169)
                                                        ----------------  --------------   --------------  ----------------
         Net Cash Provided by Financing
              Activities                                        469,600         837,700          415,424         1,784,221
                                                        ----------------  --------------   --------------  ----------------

Net Increase (Decrease) in Cash                                (799,600)        798,742           (3,437)             (134)


Cash at beginning of year                                       799,466             724            4,161                 -
                                                        ----------------  --------------   --------------  ----------------

Cash at end of year                                       $        (134)    $   799,466      $       724     $        (134)
                                                        ================  ==============   ==============  ================

</TABLE>

    The accompanying Notes are an integral part of these financial statements

                                       -25-
<PAGE>

<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                      STATEMENTS OF CASH FLOWS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
            AND THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1996
<CAPTION>

                                                                                                              Inception
                                                                                                                 to
                                                                                                              12/31/96
                                                             1996             1995             1994          (Unaudited)
                                                        ----------------  --------------   --------------  ----------------


Reconciliation of Net Loss to Net Cash
     Used in Operating Activities

<S>                                                        <C>               <C>              <C>              <C>         
Net Loss                                                   $ (1,938,945)     $ (676,455)      $ (489,664)      $(3,165,786)
                                                        ----------------  --------------   --------------  ----------------

Adjustments to Reconcile Net Loss to
     Net Cash Provided by (Used in)
     Operating Activities

     Book value of assets sold
                                                                  6,483               -                -             6,483
     Loss on disposition of marketable securities                     -               -                -            24,500
     Depreciation and amortization                               41,472          39,550           38,872           120,634
     Issuance of stock for director's fees
        and services                                            485,129          71,974           97,938           689,375
     Issuance of stock in legal settlement                      494,813                                            494,813
     (Increase) decrease in assets:                                                                                      -
        Prepaid expenses                                         (1,565)         38,281           (4,000)           (1,565)
        Deposits                                                                      -             (300)             (300)
     Increase (decrease) in liabilities:
        Accounts payable                                       (69,116)         100,962            1,268            36,624
        Accrued expenses                                       (64,051)          82,779            1,600            20,328
        Due to related parties                                (216,021)         303,951          102,923           190,860
                                                        ----------------  --------------   --------------  ----------------

         Total Adjustments                                      677,144         637,497          238,301         1,581,752
                                                        ----------------  --------------   --------------  ----------------


                                                                                                                         -
Net Cash (Used) in Operating Activities                    $ (1,261,801)    $   (38,958)      $ (251,363)      $(1,584,034)
                                                        ================  ==============   ==============  ================

</TABLE>


    The accompanying Notes are an integral part of these financial statements

                                       -26-
<PAGE>
                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995



NOTE 1 - NATURE OF BUSINESS AND  ORGANIZATION

Nature of  Business:
Harvard  Scientific  Corp. (the "Company") is a development  stage company.  The
Company's primary business operations consist of development, commercialization,
marketing,  and distribution of products  relating to  prostaglandin/microsphere
delivery  and the way in which the  product is applied in  treating  male sexual
dysfunction. The Company has preliminary data available, indicating the possible
benefits of such a therapy.

On February 13, 1996, the Company received an assignment of an application for a
patent entitled "PGE-1 Containing Lyophilized Liposomes For Use In The Treatment
of  Erectile  Dysfunction"  and  identified  as United  States  Application  No.
08/573,408 ("PGE-1").  The assignment was made by the holder of the application,
Bio-Sphere  Technology,  Inc. ("BTI"), the Company's majority  shareholder.  The
Company plans to focus its  operations on PGE-1 in order to bring the product to
the marketplace.

Organization:
The  Company was  incorporated  under the laws of the State of Nevada on January
13, 1987,  under the name of Witch Doctors  Bones,  Inc. On August 12, 1987, the
Company  qualified  a public  offering  under  Rule 504 of  Regulation  D of the
Securities  Act of 1933, as amended,  with the Secretary of State of Nevada.  On
June 17, 1988, the Company changed its name to CareyWard, Inc.

On October 18, 1993,  the Company  acquired  Grant City  Corporation  by merger,
changed its name to Grant City  Corporation,  and issued  50,000 shares of stock
carrying  two  classes  of  warrants.  Class A warrants  entitled  the holder to
purchase  stock at $8.00 per share and the Class B warrants  entitled the holder
to purchase stock for $10.00 per share.  The warrants could only be exercised if
a  registration  statement  was filed  with the  United  States  Securities  and
Exchange  Commission  ("SEC") pursuant to the Securities Act of 1933 as amended.
The  warrants  were  redeemable  by  written  notice  of  twenty  (20) days at a
redemption price of $.001 per warrant. During 1996, before the warrants could be
exercised,  the Company  gave the required  notice and redeemed  both classes of
warrants.

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

The Company has  100,000,000  shares of common stock  authorized  with 9,883,129
shares issued and outstanding as of December 31, 1996. The Company had 8,749,124
shares issued and outstanding on December 31, 1995. BTI owned  approximately 63%
of the Company's shares at December 31, 1996.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organizational Costs:
Organization  costs  are  being  amortized  over a  five-year  period  using the
straight line method. See also discussion contained in Note 7.

                                      -27-
<PAGE>
                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Equipment:
Equipment is stated at cost.  Depreciation  is  incorporated  on a straight line
basis over a period of 5 to 7 years.  Expenditures  for  maintenance and repairs
are charged to expenses as incurred.  Upon retirement or disposal of assets, the
cost and  accumulated  depreciation  are  eliminated  from the  account  and any
resulting gain or loss is included in expense. See Note 3.

Use of Estimates:
In order to prepare financial  statements in conformity with generally  accepted
accounting  principals,  management  must make  estimates and  assumptions  that
affect certain reported  accounts and  disclosures.  Actual results could differ
from these estimates.

Intellectual Properties:
The costs of  intellectual  properties  are  amortized  using the  straight-line
method over a period of fifteen years. See Note 4.

Earnings per share:
The earnings per share  calculation  is based on the weighted  average number of
shares  outstanding  during the period:  9,022,404  shares in 1996 and 2,333,839
shares in 1995 .

Income Tax:
Because of losses  sustained  since  inception,  no provision  has been made for
income tax.


NOTE 3 - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and building  improvements  at December 31, 1996 and 1995,  consist of
the following:

                                        1996                                1995
                                        ----                                ----

Equipment                         $    9,417                          $   11,682
Leasehold Improvements                     -                               5.816
                                       -----                               -----
                                       9,417                              17,498
Less accumulated depreciation          3,491                               6,637
                                       -----                               -----

                                  $    5,926                         $    10,861
                                 -----------                         -----------

The Company relocated to Reno, Nevada, during December, 1996. By relocating, the
Company reduced its need for certain equipment and leasehold  improvements.  The
Company does not own  manufacturing  equipment for its product.  The product has
been and will continue to be manufactured by third-party manufacturers according
to the Company's specifications.

                                      -28-
<PAGE>
                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995



NOTE 4- INTELLECTUAL PROPERTIES
On January 7, 1994,  the  Company  exchanged  2,856,000  shares with BTI for the
intellectual  rights to patent,  develop,  manufacture,  and market  PGE-1.  The
Company  recorded the transfer of  intellectual  properties  at the par value of
stock  transferred,  which amounted to $2,856.  BTI's largest  shareholder,  the
originator of PGE-1 holds a 2% royalty interest in the Company's gross proceeds.

On November 16, 1995,  the Company  exchanged  6,138,500  shares of common stock
with  BTI for  assistance  in  raising  working  capital,  patent  application.,
management  assistance and  distribution  agreements  associated  with the PGE-1
product.   The  Company  recorded  the  transfer  at  the  par  value  of  stock
transferred, which amounted to $6,139.

During 1996, the Company expensed the unamortized  cost of acquiring  technology
relating  to the  development  of an HIV  home  test  kit.  The  Company,  which
originally  acquired the rights in exchange for 335,000  shares of common stock,
ceased product development in connection with a settlement accrued in 1995 (Note
10).

NOTE 5- ACCRUED EXPENSES
Accrued expenses at December 31, 1996 and 1995, consist of the following:

                                     1996                                   1995
                                     ----                                   ----
Settlement costs (Note 10)    $         -                            $    50,000
Payroll                             9,680                                 32,000
Payroll taxes                       1,000                                  1,680
Interest on notes                   9,649                                      -
Transfer fees                           -                                    700
                              -----------                             ----------

                              $    20,329                            $    84,380
                              -----------                            -----------

See also Notes 9 and 10.

NOTE 6- NOTES PAYABLE
The Company had the following notes payable at December 31, 1996 and 1995:

                                                  1996                      1995
8% note, payable to former director
           on demand, unsecured (Note 7)    $   37,275                $   62,675
8% note, payable to a related party
           on demand, unsecured                      -                     5,000
7% convertible debentures                      250,000                         -
                                               -------                   -------

                                            $  287,275                $   67,675
                                            ----------                ----------

                                      -29-
<PAGE>
                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995


NOTE 6 - NOTES PAYABLE (CONTINUED) 
See also Notes 9 and 10.


NOTE 7 - RELATED PARTY TRANSACTIONS
During 1994, the Company paid $150,000, to related parties for work performed in
completing a merger (described in Note 1). Of this amount,  $100,000 was paid to
BTI. The remaining  $50,000 was paid to individuals  affiliated  with BTI. These
amounts have been capitalized and are included in organizational costs.

Additional organizational costs of $24,625 were capitalized in 1994. The Company
transferred  246,000  shares to its former  owners and  directors  in return for
corporation  property rights and 148,000 shares to individuals for assistance in
acquiring the rights.
These shares were valued at $.0625 per share as determined by a 1994 appraisal.

During 1994 and 1995, the Company  entered into three  significant  transactions
with  related  parties  for  the  acquisition  of  intellectual  rights  and the
provision of technological,  management,  fundraising, and marketing assistance.
Note 4 describes the valuation of these transactions.

The  Company has a payable to BTI of $183,535  and  $130,000 as of December  31,
1996 and 1995, respectively.  The payable is related to costs incurred by BTI on
the  Company's  behalf  for  consultation  and  rent,  as well as  research  and
development of the PGE-1 product.

The Company has a note payable to a former  director as of December 31, 1996 and
1995  (Note 6).  The  amount of  accrued  interest  associated  with the note at
year-end in 1996 and 1995 was $6,419 and $8,097, respectively.

The Company often pays for services,  fees, and salaries by issuing stock.  Most
of this stock is issued with a two-year selling  restriction.  After the Company
files its  registration  statement  in 1997,  the  two-year  restriction  may be
lifted.  The shares are valued at a discount of  free-trading  stock,  if market
valuation is  available.  Several  material  transactions  of this type occurred
during  1995 and 1996  during  which time the Company  issued  1,188,754  shares
recorded at $841,432.

See also the discussions  regarding  agreements,  intellectual  properties,  and
subsequent events in Notes 4, 9, and 12.

NOTE 8 - INCOME TAXES
The Company has federal net operating loss carryforwards for financial statement
purposes of approximately $3,200,000 at December 31, 1996, which will be used to
offset future earnings of the Company. The loss carryforwards will expire during
the years ending 2002 through 2012 if not used.

                                      -30-
<PAGE>
                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995



NOTE 9 - AGREEMENTS
In  conjunction  with the  agreement of November  16, 1995,  between BTI and the
Company (Note 4), BTI transferred  four agreements to the Company related to the
manufacture,  marketing,  and  distribution of the PGE-1 product  overseas.  The
Company  terminated two of these agreements  during 1996 for  nonperformance.  A
third  agreement  for  distribution  in Korea was  terminated  in 1996 by mutual
agreement.  The  Company is prepared to  terminate a fourth  agreement  with its
European licensor,  Pharma Maehle unless Pharma Maehle can resolve the Company's
concerns (Note 10).

In December 1996,  the Company  entered into an agreement with Martin E. Janis &
Company,  Inc. The agency will create and carry out a financial public relations
program in  exchange  for costs and an option on 50,000  shares of  free-trading
stock, exercisable at $1.25 a share.

NOTE 10 - CONTINGENCIES
The Company has been named as a party in certain  pending or  threatened  legal,
governmental, administrative, or judicial proceedings that arose in the ordinary
course of  business.  These  pending or  threatened  proceedings  may affect the
Company in a material way.

These  financial  statements  reflect the way in which the Company  resolved two
lawsuits:

         a.   The  Company  reached  a  mutual  release regarding a Distribution
              Agreement  which  provided  for  the  manufacture,  marketing, and
              distribution  of  HIV test kits.  The  mutual release called for a
              $50,000  payment  which  accrued during 1995 and  was paid in full
              during the first quarter of 1996.

         b.   The  Company  amicably  settled an action  with  Thomas E. Waite &
              Associates  regarding  the a  contract  under  which  Waite was to
              provide an array of business services.  The Company issued 568,750
              shares of stock in settlement which was accrued in these financial
              statements at $494,813.

The ultimate effect of other  proceedings  cannot be estimated at this time. The
Company  has noted  some  possible  irregularities  pertaining  to the June 1996
issuance  of its  convertible  debentures  and has taken  steps to  rectify  the
matter. The Company hopes to resolve two pending claims related to the debenture
issuance  which aim to force a stock  conversion.  These claims were filed after
December 31, 1996, and are discussed in Note 12 as subsequent events.

One  additional   act  may  impact  the  Company  in  the  future   although  no
determination can be made at this time. The Company is prepared to terminate its
licensing agreement with Pharma Maehle, the holder of the Company's distribution
rights in a portion  of its  overseas  market.  The  Company is  negotiating  to
resolve the contract  issues to benefit  business  operations,  but the ultimate
resolution and its impact upon the Company cannot be estimated.

                                      -31-
<PAGE>

                            HARVARD SCIENTIFIC CORP.
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 1996 and 1995


NOTE 10 - CONTINGENCIES  (CONTINUED)
The Company  experienced  a management  change in December  1996 as it moved its
headquarters  to Reno,  Nevada.  The Company expects no negative impact from the
change.

NOTE 11 - UNCERTAINTY - GOING CONCERN
The financial  statements  of the company have been  prepared  assuming that the
Company will continue as a going concern.  The Company's  continued existence is
dependent  upon its ability to resolve its liquidity  problems,  principally  by
obtaining  additional  equity capital and through the sale of the PGE-1 product.
If additional capital is not secured,  then there is substantial doubt about the
Company's ability to continue as a going concern. See also Note 12 regarding the
Company's plans to issue 6% Convertible Debentures in 1997.

NOTE 12 - SUBSEQUENT EVENTS
In February 1997, the Company became a defendant in a U.S. District Court action
initiated by Ailouros Ltd.  Ailouros  claims it is entitled to 263,225 shares of
common  stock  and/or  damages  in the amount of  $2,000,000.  The  Company  had
previously  initiated a lawsuit in the Nevada courts  respecting  the same claim
and both matters were removed to Federal  court.  The Company is asking that any
shares issued to Ailouros be issued  pursuant to the  requirements  of the SEC's
Regulation  S.  It is too  early  to  estimate  the  monetary  outcome  of  this
litigation.

In February  1997, the Company filed an action for damages due to negligence and
breach of  contract  by D.  Weckstein  and Co. Inc.  and Donald  Weckstein.  The
contract at issue was an agreement  to obtain  financing in exchange for Company
stock. The Weckstein defendants subsequently filed a lawsuit in New York against
the Company  respecting the same contract and asked for damages  against a third
party for tortious interference with the contract. The Weckstein plaintiffs seek
damages on their  contract  claim in the amount of $250,000  and  $400,000,  and
damages in excess of $10,000  on an abuse of process  claim.  It is too early to
estimate the monetary outcome of this litigation.

The  Company  is  preparing  to  issue   $15,000,000  worth  of  6%  Convertible
Debentures. If issued as planned, the Debentures will be convertible into shares
of common stock at the lesser of the market  price on March 21, 1997,  or 80% of
the market price on the conversion date.

During 1997,  the Company  authorized  a transfer of 1,250,000  shares of common
stock to related parties in exchange for services previously rendered.

As discussed in Note 3, the Company moved its headquarters to Reno,  Nevada,  in
early 1997. The Company still shares  research and  development  facilities with
BTI in Irvine, California.

                                      -32-
<PAGE>



DALE MCGHIE                                          Town & Country Plaza
CERTIFIED PUBLIC ACCOUNTANT                   1539 Vassar St. Reno, Nevada 89502
                                                      Tel:  702-323-7744
                                                      Fax:  702-323-8288



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
     and Shareholders of
Harvard Scientific Corp.

I have audited the balance  sheet of Harvard  Scientific  Corp.  (A  Development
Stage  Company)  as  of  December  31,  1996,  and  the  related  statements  of
operations,  stockholders'  equity,  and cash flows for the year then ended, and
have issued my opinion thereon dated March 20, 1997.  Such financial  statements
and opinion are  included in your 1987  Annual  Report to  Stockholders  and are
incorporated herein by reference. My examination also comprehended  Supplemental
Schedules V and VI of Harvard Scientific Corp. (A Development Stage Company). In
my  opinion,  Schedules  V and VI,  when  considered  in  relation  to the basic
financial  statements,  present fairly in all material  respects the information
shown therein.


/s/ Sale McGhie
W. Dale McGhie, CPA
Reno, Nevada
March 20, 1996

                                      -33-
<PAGE>

<TABLE>


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                  SCHEDULE V -- PROPERTY, PLANT, AND EQUIPMENT
                 For the Years Ended December 31, 1996 and 1995

====================================================================================================================================
                    Column A              Column B           Column C          Column D                   Column E
====================================================================================================================================
<CAPTION>
                                                                                                                 Other Changes
                                        Balance at           Additions                       Reclassifications     Balance at
                 Classification       Beginning of Year      at cost         Retirements        add (deduct)      End of Year
                ----------------      -----------------      ---------      -------------    -----------------    -----------

December 31, 1996:
<S>                                    <C>                 <C>             <C>               <C>                 <C>            
      Furniture and equipment          $         11,682    $      7,399    $        (9,665)  $               -   $      9,416   
      Intellectual property*                     10,335               -             (1,340)                  -          8,995
      Leasehold and leasehold
           improvements                           5,816               -             (5,816)                  -              -
                                       -----------------   -------------  -----------------  ------------------ --------------
                Total                  $         27,833    $      7,399    $       (16,821)  $               -   $     18,411
                                       =================   ===================================================================

December 31, 1995:
      Furniture and equipment          $         11,682    $          -    $             -   $               -   $     11,682
      Intellectual property*                      4,196           6,139                  -                   -         10,335
      Leasehold and leasehold
           improvements                           5,816               -                  -                   -          5,816
                                       -----------------   -------------  -----------------  ------------------ --------------
                Total                  $         21,694    $      6,139    $                 $               -   $     27,833
                                       =================   =============  =================  ================== ==============
</TABLE>


                                      -34-
 *Supplemental disclosure
<PAGE>

<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

       SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
                        OF PROPERTY, PLANT, AND EQUIPMENT
                 For the Years Ended December 31, 1996 and 1995

====================================================================================================================================
                    Column A              Column B             Column C        Column D                      Column E
====================================================================================================================================
<CAPTION>

                                                              Additions                          Other Changes
                                        Balance at         Charged to Costs                    Reclassifications      Balance at
                 Classification       Beginning of Year      and Expenses     Retirements         add (deduct)       End of Year
                ----------------      -----------------    ----------------  -------------     -----------------     -----------

December 31, 1996:
<S>                                    <C>                  <C>               <C>              <C>                 <C>            
      Furniture and equipment          $          4,408     $        3,235    $     (4,152)    $              -    $       3,491  
      Intellectual property*                      1,771              2,067          (2,791)                   -            1,047
      Leasehold and leasehold
           improvements                           2,228              1,163          (3,391)                   -                -
                                      ------------------   ----------------  ---------------   -----------------  ---------------
                Total                  $          8,407     $        6,465    $    (10,334)    $              -    $       4,538
                                      ==================   ======================================================================

December 31, 1995:
      Furniture and equipment          $          2,072     $        2,336    $           -    $              -    $       4,408
      Intellectual property*                        728              1,043                -                   -            1,771
      Leasehold and leasehold
           improvements                           1,065              1,163                -                   -            2,228
                                      ------------------   ----------------  ---------------   -----------------  ---------------
                Total                  $          3,865     $        4,542    $           -    $              -    $       
                                       ==================   ================  ===============   =================  ===============
</TABLE>


                                      -35-
 *Supplemental disclosure
<PAGE>


Fair, Anderson
& Langerman
A Professional Corporation
Certified Public Accountants

The Board of Directors
Harvard Scientific Corporation
Reno, Nevada

We consent to the inclusion of our report dated March 22, 1996,  with respect to
the balance sheets of Harvard  Scientific Corp. (A Development State Company) as
of  December  31,  1995 and 1994,  and the  related  statements  of  operations,
stockholders'  equity and cash flows for the years then ended,  which appears in
the Form 10KSB of Harvard Scientific Corp.

/s/ Fair, Anderson & Langerman
FAIR, ANDERSON & LANGERMAN

Las Vegas, Nevada
March 18, 1997




                                      -36-


<PAGE>


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


         The   Registrant  has  retained  W.  Dale  McGhie,   Certified   Public
Accountant,   1539  Vasser  Street,  Reno,  Nevada  89502  as  the  Registrant's
independent  accountant.  Mr.  McGhie was retained for purposes of reviewing the
Registrant's year end financial statements.

         The Registrant's  former  accountant did not resign and did not decline
to stand for  re-election.  The  former  accountant  was simply  replaced  as of
December  1996 due to the fact that the  Company's  headquarters  were  moved to
Reno, Nevada. The decision to change accountants was recommended and approved by
the Board of Directors.

         The principal  accountant's report on the financial  statements for the
past two (2) years did not  contain an  adverse  opinion  or  disclaimer  of the
opinion,  and was not modified as to  uncertainty,  audit scope,  or  accounting
principles.

         There were no disagreements with the former accountant on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope  or  procedure,   which,  if  not  resolved  to  the  former   accountants
satisfaction,  would have caused the former  accountant to make reference to the
subject matter of any such disagreements in connection with its reports.










                                      -37-

<PAGE>



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

(a)  Directors and Executive Officers

         As of December 31, 1996,  the directors  and executive  officers of the
Registrant,  their ages,  positions in the company,  the dates of their  initial
election or appointment as director or executive officer,  and the expiration of
the terms as directors are as follows:
                                                          (3)*
(1)                                 (2)                    Period Served As
Name                     Age      Position                 Director

Jackie R. See, M.D.       55      Director of              Since 1-6-94
                                  Research

Ian Hicks                 45      Chairman of the          Since 12-6-96
                                  Board, President
                                  Chief Executive
                                  Officer and Director

Don Steffens              49      Chief Financial          Since 12-6-96
                                  Officer, Secre-
                                  tary, Treasurer
                                  And Director

*The  Registrant's  directors are elected at the annual meeting of  stockholders
and  hold  office  until  their  successors  are  elected  and  qualified.   The
Registrant's officers are appointed annually by the Board of Directors and serve
at the pleasure of the Board.

         (4)      Business Experience:

         Jackie R. See, M.D., F.A.C.C., age 54, is founder, Head of Research and
Development and a Director of the Registrant.  Dr. See is a cardiologist and the
principal investigator of the microsphere technology of "PGE1-EDT".  He received
his M.D. from the  University  of  California,  College of Medicine  (Irvine) in
1968.  Dr. See  completed  his  Residency in Internal  Medicine at Huntington in
1973.  He went on to do research  fellowship  work in  cardiology  at Peter Bent
Brigham Hospital,  Harvard Medical School (Boston). He was an Associate Director
of the Foundation for  Cardiovascular  Research  (1968-1984) and a Fellow of the
American College of Cardiology since 1980.


                                      -38-

<PAGE>



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

         Ian Hicks,  age 45,  is  the  Chairman  of  the Board, President, Chief
Executive  Officer and a Director of the  Registrant.  Mr. Hicks has significant
experience  in  the  various  aspects  of  pharmaceutical  product  development,
business  development and operations  internationally and in the USA. He holds a
Science degree, and marketing qualifications. Mr. Hicks has specialized in niche
market products for treatment of conditions in areas such as neurology, oncology
and infectious  diseases.  He gained his broad experience during  assignments in
South  Africa,  Sweden  and the USA.  Mr.  Hicks  brings  more  than 20 years of
experience to the company.

         Don  Steffens,  age 49,  is the  Chief  Financial  Officer,  Secretary,
Treasurer  and a Director  of the  Registrant.  He brings  more than 20 years of
business  management,   product  development  and  marketing  expertise  to  the
Registrant.  Mr.  Steffens  has founded  companies  and  assisted Dr. See in the
development and manufacturing process of the product. Mr. Steffens was President
of Marina  Systems  International,  Inc., a software  development  and marketing
company based in San Francisco,  California;  Branch Manager, Litton Industries,
Los Angeles,  California;  and Regional Sales Manager, Victor Business Products,
Chicago, Illinois.

(5)      Directors of Other Reporting Companies:

         None of the directors is a director of other reporting companies.

(b)      Employees:

         Messrs.  Hicks  and  Steffens  are  the only full time employees of the
Registrant.  Dr. See is a consultant to the Registrant, but has also acted as an
employee in the past.

(c)      Family Relationships:

         There are no family relationships between the directors,  and executive
officers.

(d)      Involvement in Certain Legal Proceedings:

         In the past five (5) years,  none of the officers and  directors of the
Registrant has been:

         (1)      an  officer  or partner in any business which has been subject
                  to bankruptcy proceedings;


                                      -39-

<PAGE>



         (2)      subject  to  criminal  proceedings  or convicted of a criminal
                  act;

         (3)      subject to any order,  judgment or decree entered by any Court
                  for  violating  any  laws  relating to business, securities or
                  banking activities; or

         (4)      subject  to  any  order  for  violation  of  federal  or state
                  securities laws or commodities laws.

--------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------


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

                                                          Summary Compensation Table

                                                           Long Term Compensation
                             Annual Compensation       Awards                  Payouts
                                                   (e)                  (g)
                                                  Other     (f)     Securities         (i)
          (a)                                     Annual  Restricted Under-   (h)    Other
Name and                             (c)    (d)   Compen  Stock     Lying    LTIP    Compen-
Principal                   (b)    Salary  Bonus  sation  Awards    Options/ Payouts sation
Position                    Year    ($)     ($)     ($)     ($)     SARs(#)   ($)     ($)
--------                   ------  ------  ------  ------  -----   --------  ------  -------

<S>                        <C>     <C>      <C>    <C>    <C>       <C>      <C>    <C>   
Jackie R. See              1996    $104,000 $ None $ None $350,000  $ None   $ None $ None
Director of                1995    $ 16,000 $ None $ None $  7,000  $ None   $ None $ None
Research                   1994    $ None   $ None $ None $    790  $ None   $ None $ 26,000

Ian Hicks                  1996    $ None  $ None  $ None $250,000  $ None   $ None $ 16,440
Chief Execu-               1995    $ None  $ None  $ None $ None    $ None   $ None $ None
tive Officer,              1994    $ None  $ None  $ None $ None    $ None   $ None $ None
President

Don Steffens               1996    $ None  $ None  $ None $250,000  $ None   $ None $ None
Chief Finan-               1995    $ None  $ None  $ None $ None    $ None   $ None $ None
cial Officer,              1994    $ None  $ None  $ None $ None    $ None   $ None $ None
Secretary &
Treasurer

</TABLE>




                                      -40-

<PAGE>



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

(a)      5% Shareholders:

         The following  information  sets forth certain  information as of March
18,  1997 by each  person who is known to the  Registrant  to be the  beneficial
owner of more than five percent (5%) of the Registrant's Common Stock:
<TABLE>
<CAPTION>

                           (2)
(1)               Name and Address                                    (3)                                (4)
Title             of Beneficial                               Amount and Nature of                    Percent of
of Class          Owner                                       Beneficial Ownership                    Class

<S>               <C>                                                  <C>                                <C>  
Common            Bio-Sphere Technology, Inc.                           6,152,500                          53.9%
Stock             Suite 23P,100 N. Arlington Ave.,
                  Reno, NV 89501

                  Thomas E. Waite & Assoc.                                883,750                           7.7%
                  106 Ridge Road
                  Lake Mary, Florida 32746
<CAPTION>

(b)      Security Ownership of Management:

                           (2)
(1)               Name and Address                                    (3)                                (4)
Title             of Beneficial                               Amount and Nature of                    Percent of
of Class          Owner                                       Beneficial Ownership                    Class

<S>               <C>                                                      <C>                              <C> 
Common            Dr. Jackie R. See                                        370,000                          3.2%
Stock             17991 Fitch
                  Irvine, CA 92614

                  Ian Hicks                                                250,000                          2.2%
                  17991 Fitch
                  Irvine, CA  92614

                  Don Steffens                                             250,000                          2.2%
                  17991 Fitch
                  Irvine, CA 92614

                  All Directors and                                        870,000                          7.6%
                  Officers as a Group
</TABLE>

(c)      Changes in Control:

During 1966, there was no arrangement which may result in a change in control.

                                      -41-

<PAGE>



--------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------


         During  the  past  three (3) years,  the Registrant obtained its assets
from  Bio-Sphere  Technology,  Inc., a Nevada  corporation.  The Chairman of the
Board of Biosphere  Technology,  Inc.,  Jackie R. See,  M.D.,  is the  principal
stockholder of Bio-Sphere Technology,  Inc. Bio-Sphere  Technology,  Inc. is the
parent of the Registrant owning approximately 60% of the outstanding stock.

         The Registrant entered into three (3) significant transactions with the
parent and an  affiliated  group for the  acquisition  of  intellectual  rights,
technology and distribution agreements.

         The  Registrant has a payable to the parent of $167,450 and $270,592 as
of September  30, 1996 and  December  31, 1995.  The payable is related to costs
incurred by the parent on the  Registrant's  behalf for research and development
of the PGE-1
product.

         The Registrant has notes payable to related parties as of September 30,
1996 and December 31, 1995. The amount of accrued  interest  associated with the
notes payable at September 30, 1996 and December 31, 1995 was $5,674 and $8,097,
respectively.

         On March 1, 1994,  the  Registrant  entered into an  agreement  with an
individual  (landlord)  to rent office space located in Las Vegas,  Nevada.  The
agreement was for a two-year  period  ending  February 29, 1996. In exchange for
the right to occupy the space,  the  Registrant  issued  12,000 shares of common
stock (3,000 after considering the effect of the four-for-one reverse split) for
the first year of the lease. The Registrant  recorded the transaction at $24,000
or $2 per  share,  which  represents  the fair  value of the rent  received.  On
December 29, 1995, the Registrant paid the landlord $24,000 in cash for rent for
the second year. Included in prepaid expenses is $4,000 as of December 31, 1995.

         During November 1995, the Registrant  entered into a two-year agreement
with a  consultant  to  provide an array of  business  services  to enhance  the
Registrant's asset base and further the development of the Registrant's business
plan. The contracted services include public/investor  relations,  marketing and
sales  plans,   identifying  strategic  partnership   arrangements,   and  other
opportunities  that  would  enhance  the  market  value  and  viability  of  the
Registrant.  In December  1995, the  Registrant  issued the  consultant  350,000
shares of its common stock in  consideration  of the services to be provided for
the two-year duration.  The Registrant has valued the transaction at $1.3125 per
share,  which  represents  50% of the market value at the date the agreement was

                                      -42-

<PAGE>



entered into.  The amount has been capitalized and is included asa prepaid as of
December 31, 1995.

         In July  1996,  the  Registrant  entered  into a lawsuit  in Nevada and
Florida  seeking to void the agreement for  non-performance  and a return of the
shares issued thereunder. The lawsuit has been settled to mutual satisfaction.

         The  Registrant  compensated  a member of the  Registrant's  scientific
advisory  board  with  10,000  shares  of stock in  exchange  for  research  and
development  conducted  by the  individual.  The  Registrant  placed a  two-year
selling  period on the stock given to the  individual.  At the conclusion of the
two-year  period,  the restriction may be lifted and the individual may sell the
stock.

         Dr. Jackie R. See could be considered a promoter of the Registrant.


                                      -43-

<PAGE>



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


(a)      Exhibits
         (2)      Plan of acquisition, reorg., arrgmnt, liquid., or succession:
                  None.
         (3)      (ii) By-laws:  Incorporated by reference from the Registrant's
                  Forms 10-SB.
         (4)      Instruments defining the rights of holders, incl. indentures:
                  None during the time covered by this Form 10-KSB.
         (9)      Voting trust agreement: None.
         (10)     Material  Contracts:    Incorporated  by  reference  from  the
                  Registrant's Form 10-SB.
         (11)     Statement re: computation of per share earnings:  See Part II,
                  Item 7.
         (13)     Annual or quarterly reports, Form 10-Q:  Previously filed Form
                  10-Q's incorporated by this reference.
         (16)     Letter on change in certifying accountant
         (18)     Letter on change in accounting principles: None
         (22)     Published report regarding matters submitted to vote: None.
         (23)     Consent of experts and counsel: None.
         (24)     Power of attorney: None.
         (99)     Additional Exhibits: None.


(b) Reports on Form 8-K.

         No reports on Form 8-K were filed during the last quarter of the period
covered by this report.



                                      -44-

<PAGE>


--------------------------------------------------------------------------------
                                   SIGNATURES
--------------------------------------------------------------------------------


         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

Dated: April 9, 1997.

                                        HARVARD SCIENTIFIC CORP.



                                        By       /s/ Don Steffens
                                             Don Steffens
                                             Secretary



                                      -45-