F-1
                                

                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                             Page


Bradley Pharmaceuticals, Inc. and Subsidiaries

  Report of Independent Certified Public Accountants          F-2

  Consolidated Balance Sheets at December 31, 1997
      and 1996                                                F-3

  Consolidated Statements of Income for the
      Years Ended December 31, 1997 and 1996                  F-5

  Consolidated Statement of Shareholders' Equity for the
      Years Ended December 31, 1997 and 1996                  F-6

  Consolidated Statements of Cash Flows for the
      Years Ended December 31, 1997 and 1996                  F-7

  Notes to Consolidated Financial Statements               F-8 - F-28



                 REPORT OF INDEPENDENT CERTIFIED
                       PUBLIC ACCOUNTANTS



Board of Directors and Shareholders
Bradley Pharmaceuticals, Inc.


We  have audited the accompanying consolidated balance sheets  of
Bradley Pharmaceuticals, Inc. and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the two years  in
the  period  ended December 31, 1997.  These financial statements
are   the  responsibility  of  the  Company's  management.    Our
responsibility  is  to  express an  opinion  on  these  financial
statements based on our audits.

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

In  our  opinion,  the  financial statements  referred  to  above
present  fairly,  in  all  material  respects,  the  consolidated
financial   position   of  Bradley  Pharmaceuticals,   Inc.   and
Subsidiaries  as  of  December  31,  1997  and  1996,   and   the
consolidated  results of their operations, and their consolidated
shareholders' equity and their consolidated cash flows  for  each
of  the  two  years  in the period ended December  31,  1997,  in
conformity with generally accepted accounting principles.




GRANT THORNTON LLP

Parsippany, New Jersey
March 18, 1998






NOTE A - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES


Bradley  Pharmaceuticals, Inc. (the "Company") is  a  New  Jersey
corporation  founded  in  1985.  The Company's  primary  business
activity   is   the  manufacturing  and  marketing   of   various
pharmaceutical  and  dermatological  products,  which  have  been
acquired through the purchase of trademark rights and patents.

A  summary of the significant accounting policies of the  Company
applied  in  the  preparation  of the  accompanying  consolidated
financial statements follows:

1.  Principles of Consolidation

The  consolidated financial statements include  the  accounts  of
Bradley  Pharmaceuticals,  Inc. and its wholly-owned  subsidiary,
Doak Dermatologics Inc. ("Doak"), acquired February 1, 1994 (Note
C)  and  its  wholly-owned  foreign  sales  corporation,  Bradley
Pharmaceuticals Overseas, Ltd., formed in February 1995, and  its
wholly-owned subsidiary, Bradley Pharmaceuticals  (Canada)  Inc.,
formed  in  June 1996.  All intercompany transactions  have  been
eliminated in consolidation.

2.  Inventory

Inventory, consisting principally of finished goods, is stated at
the lower of cost or market.  Cost is determined by the first-in,
first-out method.

3.  Prepaid Samples and Materials

The   Company   capitalizes  product  samples   and   promotional
materials.   These items are charged to operations in the  period
in which they are distributed to customers.

4.  Depreciation

Depreciation is provided for in amounts sufficient to relate  the
cost  of  depreciable assets to operations over  their  estimated
service  lives  using  the straight-line and accelerated  methods
over  a period of five to seven years for equipment and ten years
for leasehold improvements.

5.  Intangible Assets

The costs of noncompete agreements, goodwill, license agreements,
and   purchased  trademarks  and  patents  are  capitalized   and
amortized  on  a  straight-line basis to  operations  over  their
estimated useful lives or statutory lives, whichever are shorter.
The estimated lives for trademarks are 10 to 40 years (See Note B
for discussion of a change in estimate).

The  estimated  amortization periods for other intangible  assets
are  as  follows:   10  to 20 years for goodwill,  10  years  for
license  agreements, 17 years (or the remaining life at the  time
of  purchase, if shorter) for patents and 3 years for  noncompete
agreements.






The   Company  has  adopted  Statement  of  Financial  Accounting
Standards  No.  121,  "Impairment  of  Long-Lived  Assets  to  be
Disposed  Of."   Accordingly, whenever  events  or  circumstances
indicate  that  the  carrying amount  of  an  asset  may  not  be
recoverable, management assesses the recoverability of the asset.
Management  compares  the cash flows, on an  undiscounted  basis,
expected  to be generated from the related assets to the carrying
amounts to determine whether an impairment has occurred.   It  is
reasonably  possible that the actual cash flows that result  will
be  insufficient  to recover the carrying amount  of  certain  of
these  intangibles.  No impairment loss was recorded for 1997  or
1996.

6.  Cash and Cash Equivalents

Cash  and  cash equivalents include investments in highly  liquid
securities having an original maturity of three months or less at
the time of purchase.

7.  Certain Concentrations

The  Company is potentially subject to concentrations  of  credit
risk, which consist principally of cash and cash equivalents  and
trade accounts receivable.  The cash and cash equivalent balances
at  December  31, 1997 were principally held by one  institution,
and  are  in  excess of the Federal Deposit Insurance Corporation
("FDIC")  insurance  limit.  Concentration of  credit  risk  with
respect  to accounts receivable is generally limited due  to  the
Company's large, diverse customer base.  However, at December 31,
1997   and   1996,   two   wholesale  customers   accounted   for
approximately  44% and 59%, respectively, of the  total  accounts
receivable balance.

Approximately  45%  and 51% of the Company's net  sales  for  the
years ended December 31, 1997 and 1996 were derived from sales of
its  Deconamine(r)  products. The Company cannot predict  the  date
Deconamine(r)SR status, mandated by the United States Food and Drug
Administration,  ("FDA") will change from a prescription  product
to an over-the-counter product.  The Company, however, based upon
information obtained currently from the FDA, believes the  status
will not change in the foreseeable future.

For  the  year ended December 31, 1997, three wholesale customers
accounted for approximately 39% (15%, 12% and 12%) of net  sales.
For  the  year ended December 31, 1996, three wholesale customers
accounted for approximately 37% (15%, 12% and 10%) of net sales.

One  company manufacturing products for the Company accounted for
approximately 19% and 16% of the Company's cost of goods sold for
the  years ended December 31, 1997 and 1996.  Management believes
it  can obtain replacement manufacturing arrangements and that  a
loss  of  any or all of their vendors and/or manufacturers  would
not have a material effect on the Company.

The  Company had export sales of approximately 13% and 11% of its
net  sales  for  the  years ended December  31,  1997  and  1996,
respectively.


 
 
 8.Net Income Per Common Share
 
 The  Company  computes  income  per  share  in  accordance  with
 Statement  of  Financial Accounting Standards No.  128  Earnings
 per   Share   (SFAS   128)  which  specifies  the   compilation,
 presentation  and disclosure requirements for income  per  share
 for  entities  with  publicly held  common  stock  or  potential
 common  stock.  The requirements of this statement are effective
 for  interim and annual periods ending after December 15,  1997.
 All prior years were restated in accordance with SFAS 128.
 
 Basic net income per common share is determined by dividing  the
 net  income by the weighted average number of shares  of  common
 stock  outstanding.   Diluted net income  per  common  share  is
 determined by dividing the net income by the weighted number  of
 shares  outstanding and dilutive common equivalent  shares  from
 stock options and warrants.
 
 9.Income Taxes

 The  Company  and  Doak file a consolidated Federal  income  tax
 return.

 The  Company  accounts for income taxes under the provisions  of
 Statement   of   Financial   Accounting   Standards   No.   109,
 "Accounting  for Income Taxes."  This statement requires,  among
 other  things,  an  asset and liability approach  for  financial
 accounting  and  reporting  for  deferred  income   taxes.    In
 addition,  the deferred tax liabilities and assets are  required
 to  be adjusted for the effect of any future changes in the  tax
 law  or  rates.   Deferred  income taxes  arise  from  temporary
 differences  resulting  in the basis of assets  and  liabilities
 for financial reporting and income tax purposes.

 10.Accounting for Stock Options

 Statement   of   Financial   Accounting   Standards   No.   123,
 "Accounting for Stock Based Compensation,"  introduced a  method
 of  accounting for employee stock-based compensation plans based
 upon  the fair value of the awards on the date they are granted.
 Under  this  fair value based method, public companies  estimate
 the  fair value of stock options using a pricing model, such  as
 the  Black  Scholes  model, which requires inputs  such  as  the
 expected  volatility of the stock price and an estimate  of  the
 dividend  yield over the option's expected life.  This statement
 gives  entities  a  choice of recognizing  related  compensation
 expense  by adopting the new valuation method or to continue  to
 measure  compensation using the intrinsic value  approach  under
 Accounting  Principles  Board  ("APB")  Opinion  No.  25.    The
 Company  has  adopted the APB No. 25 method of measurement  (see
 Note G-2).

 11.Reclassifications

 Certain  reclassifications have been  made  to  the  prior  year
 financial  statements  in  order  to  conform  to  the   current
 presentation.



12. Using Estimates in Financial Statements

In  preparing  financial statements in conformity with  generally
accepted  accounting principles, management is required  to  make
estimates  and  assumptions that affect the reported  amounts  of
assets  and  liabilities and the disclosure of contingent  assets
and  liabilities  at  the  date of the financial  statements  and
revenues  and  expenses  during  the  reporting  period.   Actual
results   could  differ  from  those  estimates.   The  Company's
estimate for chargebacks, rebates and the determination of useful
lives of intangibles represent  particularly sensitive estimates.

13. Chargebacks and Rebates

Chargebacks  and rebates are based on the difference between  the
prices  at  which  the  Company sells its  products  (principally
DECONAMINE(r)SR) to wholesalers and the sales price ultimately paid
by  the  end-user (often governmental agencies and  managed  care
buying  groups) pursuant to fixed price contracts.   The  Company
records  an estimate of the amount either to be charged  back  to
the  Company, or rebated to the end user, at the time of sale  to
the   wholesaler.  Management  has  recorded   an   accrual   for
chargebacks and rebates of $1,150,000 and $1,565,000 at  December
31,  1997  and 1996, respectively (included in accrued expenses),
based  upon factors including current contract prices, historical
chargeback rates and actual chargebacks claimed.  The  amount  of
actual  chargebacks claimed could differ (either higher or lower)
in the near term from the amounts accrued by the Company.

The Company's analysis of the trend in actual chargebacks and
rebates resulted in a decrease in the percentage used to adjust
gross sales to net sales for the second quarter of 1997,
resulting in increased net sales and net income of $45,000.
Additionally, during the second quarter of 1997, the Company
released approximately $229,000 of the previously established
chargeback and rebate reserves, resulting in an increase to net
sales and net income. During 1997 and 1996, the Company received
monetary concessions of approximately $357,000 and $275,000,
respectively from managed care vendors receiving rebates.


14.  New Accounting Standards
 
The  Financial Accounting Standards Board released  Statement  of
Accounting  Standards  No. 130, "Reporting Comprehensive  Income"
(SFAS   No.   130),  governing  the  reporting  and  display   of
comprehensive  income  and  its  components,  and  Statement   of
Financial  Accounting  Standards  No.  131,  "Disclosures   About
Segments  of  an  Enterprise and Related Information"  (SFAS  No.
131),  requiring that all public businesses report financial  and
descriptive   information   about  their   reportable   operating
segments.   The Company will implement SFAS 130 and SFAS  131  as
required  in 1998.  The impact of adopting SFAS No.  130  is  not
expected to be material to the consolidated financial statements.
Management is currently evaluating the effect of SFAS No. 131  on
the consolidated financial statement disclosures.




NOTE B - INTANGIBLE ASSETS

 Intangible assets are summarized as follows:

                                  1997                      1996
                                         Accumulated               Accumulated
                                Cost     Amortization     Cost     Amortization
Trademarks                 $ 16,324,790  $4,564,412   $16,905,140   $3,675,007
Patents                       1,327,454     919,080     1,327,454      735,517
Licenses                        124,886      59,280       124,886       46,800
Goodwill                      1,253,975     444,186     1,284,125      318,399
Covenants not to compete        162,140     162,140       162,140      160,486
                                                         
                            $19,193,245  $6,149,098   $19,767,745   $4,936,209


Intangible  assets  arose principally from the  Doak  acquisition
(Note C) and the following transactions in 1992 through 1997.

 1. LUBRIN(r)

In  December 1992, the Company acquired certain rights, including
the  trademark  and  patent, to the personal lubricating  insert,
LUBRIN(r)  INSERTS ("LUBRIN(r)") and agreed for seven  years  not  to
compete with the Company with respect to the product LUBRIN"r". The
Company  and  UPSHER-SMITH LABORATORIES,  INC.  ("UPSHER-SMITH"),
have  since  entered  into  a manufacturing  contract,  renewable
annually, to manufacture LUBRIN(r) for the Company.

Total  consideration  for the Company's  acquisition  of  LUBRIN(r)
consisted  of:   (i) $1 million, $500,000 of which  was  paid  at
closing,  with the balance payable at a rate of 9% per annum,  in
20  quarterly installments of $31,321 each, commencing  on  March
15,  1993; (ii) a 4% royalty on adjusted sales of LUBRIN(r)  up  to
and  including the first $5,000,000 and 3% of adjusted  sales  in
excess  of  the  first $5,000,000 through October 30,  1999;  and
(iii)  warrants to purchase up to 60,000 shares of the  Company's
Class  A common stock at a price of $4.50 per share which expired
on  December 15, 1997.  Of the total purchase price,  $1  million
was attributed to patents with an estimated life of seven years.

2.   TRANS-VER-SAL(r) Wart Products/GLANDOSANE(r)

On  March 30, 1993, the Company acquired from Tsumura Medical,  a
division   of   Tsumura  International,  Inc.,   all   technical,
proprietary  and  distribution rights to five specialized  dermal
patch  products currently used in the treatment of warts ("TRANS-
VER-SAL(r)") and a synthetic saliva aerosol product ("GLANDOSANE(r)")
used  to  alleviate  dry mouth caused by various  treatments  and
illnesses.

Total  consideration  for  the  Company's  acquisition  of  these
products  consisted  of:  (i) $1,300,000, of which  $850,000  was
paid  at  closing  and  the balance of $450,000  payable  by  the
Company's  promissory note at 7% per annum  in  twenty  quarterly
installments of $26,861; (ii) a 5.5% royalty on net sales of  the
products payable for a period of five years or until an aggregate
$600,000  of  royalty  payments  are  made;  (iii)  approximately
$170,000 paid for the acquisition ofinventory  on hand; and (iv) 
warrants granted to purchase  up  to 150,000 shares of the Company's
Class A common stock at $4.50 per share  exercisable at any time 
through March 30,  1998.   Of  the total purchase price, $866,250 
was attributed to trademarks  with an estimated life of 20 years.

3.  DECONAMINE(r)

On December 10, 1993 (the "Closing Date"), in accordance with the
terms and conditions set forth in the Purchase Agreement dated as
of  November  10,  1993,  as amended (the "Purchase  Agreement"),
between  Bradley  Pharmaceuticals, Inc. and Berlex  Laboratories,
Inc.  ("Berlex"), the Company acquired all technical, proprietary
and  distribution  rights to an allergy and  decongestant  remedy
called DECONAMINE(r) ("DECONAMINE(r)").

Specifically, the Company acquired customer receivables,  net  of
chargebacks and rebates from sales of DECONAMINE(r) from the  close
of  business  on  October  29, 1993  to  the  Closing  Date;  all
DECONAMINE(r)  inventory  existing at the  Closing  Date;  and  all
intellectual  property  rights, marketing  materials,  books  and
records,   licenses   and  permits  and  goodwill   relating   to
DECONAMINE(r).

Total  consideration for the Company's acquisition (after  giving
effect  to  imputed interest of approximately $1.6  million)  was
originally approximately $16.4 million (the "Purchase Price") and
consisted  of:  (i) approximately $4.3 million, paid at  closing,
from  the  proceeds of a private placement (Note  G-3),  with  an
additional  $1.7 million paid from proceeds of DECONAMINE(r)  sales
from  November 1, 1993 to the date of closing; (ii) $0.4  million
representing the standard costs of the inventory as of the  close
of  business on October 29, 1993 (except for 50% of the inventory
of  the  raw  material active ingredient) paid 30 days  from  the
Closing Date; (iii) the standard costs of 50% of the inventory of
the  raw  material active ingredient paid 60 days  from  closing;
(iv)  a  non-interest-bearing note calling  for  payments  of  $2
million during December 1994, approximately $2.66 million each on
the  second, third and fourth anniversaries of the Closing  Date;
and  (v)  $84,000  to  be  paid on the last  day  of  each  month
beginning with January 1996, up to a maximum of $2 million if the
effective  date  (plus  grace  period  for  compliance,  if  any)
announced  by  the  FDA  publication with respect  to  the  final
"Monograph"  for DECONAMINE(r) has occurred; and the  Company  has,
prior to or during such month, expended funds for the purpose  of
preserving the prescription drug status of DECONAMINE(r).

During   the   fourth  quarter  of  1995,  the  Company   accrued
approximately  $1,512,000  representing  18  months  of  payments
pursuant to item (v) above as the minimum amount it determined to
be  payable prior to DECONAMINE(r) coming off prescription  status.
During  the  first  quarter of 1996, an additional  $252,000  was
accrued, representing an additional three months of payments.



On  January 5, 1996, the Company and Berlex amended the agreement
to provide for the following:
    
       The $2.67 million due on December 9, 1995 was rescheduled
  to  provide  a  payment of $800,000 in February  1996  and  the
  remainder  to  be  paid on June 30, 1996.   All  payments  were
  collateralized by the Company's accounts receivable and inventory
  until after the June 30, 1996 payment was made.

       The  $84,000 monthly payments described in item (v) above
  became payable beginning in January 1, 1998.

       Interest accrued on the deferred $2.67 million payment at
  prime  plus  4%.  Interest accrued on  the  $84,000  per  month
  beginning February, 1996 at prime plus 2%.

On  December 23, 1996, the Company and Berlex further amended the
 agreement to provide the following:

The Company was to make payments of $250,000 each on December 23,
1996,  December 31, 1996, January 30, 1997 and February 18, 1997;
$700,000 was due on March 17, 1997; $1.0 million was due  on  May
15,  1997;  and $100,000 per month was due June 15, 1997  through
January 15, 1998.  $500,000 of the $1,200,000 due Berlex for  the
period  January  1997 through March 1997 was paid  through  March
1997.  A one-month extension until April 15, 1997 was granted  by
Berlex for the March 1997 payment.

The  Company  also  issued  to Berlex 1,000,000  Class  A  shares
(approximately 13% of the new public float of 7.7 million shares)
with  a then market value of $1,125,000, which the Company caused
to be registered with the Securities and Exchange Commission.

The difference between the carrying amount of the obligation to
Berlex  and  the amount of consideration to be paid  under  the
December 23, 1996 amendment represents a reduction in  the  net
purchase  price  of DECONAMINE(r) pursuant to the  December  1996
amended agreement, amounted to $2,413,000 and was recorded as a
reduction of the intangible assets.

On  September 19, 1997 (the "Closing"), the Company consummated
the negotiated settlement of all of its outstanding obligations
to Berlex by amending the purchase agreement. Immediately prior
to  the  Closing,  the Company was indebted to  Berlex  in  the
approximate aggregate amount of $2.5 million.

At  the  Closing, in satisfaction of all outstanding  obligations
owing to Berlex, and in consideration of Berlex's release of  its
lien covering the Company's accounts receivable, the Company  (i)
paid  to Berlex $1.15 million in cash, plus accrued interest (the
"Cash Payment"), (ii) issued to Berlex 450,000 shares of Class  A
Common Stock (which, when added with the other shares of Class  A
Common Stock previously issued to Berlex represented, at the time
of  issuance, approximately 19% of the outstanding Class A Common
Stock  of the Company) and (iii) agreed to issue to Berlex,  when
permissible  in  accordance with applicable state corporate  law,
warrants  entitling Berlex to purchase, under certain conditions,
up  to an additional 750,000 shares of Class A Common Stock  with
an exercise price of $1.25 per share.  These warrants are subject
to  certain  anti-dilution provisions and expire two years  after
issuance, but may be extended under certain conditions.








The  difference between the carrying amount of the obligation  to
Berlex and the total consideration specified by the September 19,
1997  amendment  amounted  to $572,000  and  was  recorded  as  a
reduction in the net purchase price of DECONAMINE(r), and  will  be
recorded as a reduction to the intangible assets.

In   conjunction  with  the  final  amendment  to  the   purchase
agreement, the Company revised its estimate of the useful life of
DECONAMINE(r).   Based  on  various changes in  circumstances,  the
Company determined that a useful life of 25 years (21 years  from
the date of the final amendment) is appropriate.  This change  in
estimate  resulted  in  a  reduction of amortization  expense  of
approximately  $100,000 for the quarter and year  ended  December
31, 1997.

4.  ADEFLOR M(r) and PAMINE(r) Acquisitions

In  February  1994, the Company acquired from The Upjohn  Company
("Upjohn"),  all  United  States  manufacturing,  packaging   and
proprietary  rights,  including  all  trademarks,  registrations,
marketing  data, and customer lists of ADEFLOR M(r), a vitamin  and
mineral    tablet    with   fluoride,   and   PAMINE(r)    tablets,
methscopalamine bromide, used in connection with the treatment of
peptic ulcers.  In consideration therefore, the Company agreed  to
pay  Upjohn  $225,000,  $50,000 at closing,  with  the  remaining
$175,000 payable in equal quarterly installments of $25,000, each
commencing on June 30, 1994.  In addition, the Company agreed  to
pay  Upjohn  an  8% royalty against net sales of  these  products
through  February  1,  1996, and a 4%  royalty  thereafter  until
February  1, 2004.  In 1996, the Company and Upjohn entered  into
an  agreement whereby the Company paid Upjohn $25,000 in lieu  of
royalty  payments accruing on or after December  31,  1996.   The
Company  further agreed to purchase from Upjohn, at approximately
Upjohn's  cost, all salable inventory of ADEFLOR M(r)  and  PAMINE(r)
existing at the closing date.

5.  CARMOL(r) Acquisition

In  June  1994,  the Company acquired from Syntex  (U.S.A.)  Inc.
("Syntex")   all   manufacturing,  packaging,  quality   control,
stability,  drug  experience, file history,  customer  lists  and
marketing  rights,  titles  and  interests,  including  all  U.S.
trademarks  to  CARMOL(r) 10 and CARMOL(r) 20 (nonprescription  total
body  moisturizers)  and  CARMOL(r) HC (a prescription  moisturizer
containing   hydrocortisone)   (the   "CARMOL   Products").    In
consideration  for this acquisition, the Company  agreed  to  pay
Syntex  $450,000,  $150,000 of which was paid  at  closing.   The
remaining   $300,000  is  payable  in  three  (3)  equal   annual
installments of $100,000 each, commencing on June 10,  1995.   In
addition, the Company agreed to pay Syntex a 3% royalty on  sales
of  the CARMOL Products, commencing June 10, 1997 for a period of
seven years.

6.  ITG LABORATORIES, INC. Investment

Effective  June  15,  1995,  the Company  entered  into  a  Stock
Purchase  and Distribution Agreement with ITG Laboratories,  Inc.
("ITG"), a product research company headquartered in Atherton, CA
and Yavne, Israel, whereby:

The  Company  purchased approximately 17% of  the  stock  of  ITG
(approximately  1,000,000 shares) for 100,000 shares  of  Bradley
Class  A Common Stock, which was distributed during August  1995,
and $150,000.

The  Company was appointed exclusive U.S. distributor for all  of
ITG's  Omiderm  products, including ITG's Synthetic  Polyurethane
Wound  Dressing.   Omiderm is a clinically proven,  unique  wound
dressing  line  which allows permeability of  water,  oxygen  and
aqueous medications, while maintaining a sterile environment  for
healing   by   preventing  microbial  invasion.  The   value   of
consideration for this acquisition was $565,625 and  is  included
as  a  reduction  of  stockholders' equity  on  the  accompanying
consolidated balance sheet.

During  1996, the Company and ITG entered into an agreement  that
resulted  in an unwinding of this transaction, and the  recording
of a $90,000 loss,  and that provided for the following:

The Company delivered the 1,000,000 shares of ITG stock to ITG.

ITG  delivered  the 100,000 shares of Bradley stock  and  $60,000
(payable by ITG through April 1998) to Bradley.

Bradley  retained its nonexclusive U.S. distribution rights for
the Omiderm products.

7.  ACID MANTLE(r) Acquisition

In  May  1996,  the Company acquired from Sandoz  Pharmaceuticals
Corp.  ("Sandoz") the trademark rights to the ACID  MANTLE(r)  skin
treatment  line,  including  the  manufacturing,  marketing   and
distribution rights within the United States and Puerto Rico.  In
consideration  for this acquisition, the Company  agreed  to  pay
Sandoz  $900,000,  of which $250,000 was paid  at  closing.   The
remaining $650,000 is payable in installments of $250,000 in  May
1997  and $100,000 per year from May 1998 through May 2001.   The
Company  also purchased Sandoz's entire inventory of ACID MANTLE(r)
salable products and raw material.

The  majority of the Purchase Price was attributed to  trademarks
 with an estimated life of 15 years.


NOTE C - ACQUISITION OF DOAK PHARMACAL CO., INC.

In  1994,  67.7%  of  the  shares of  Doak  Pharmacal  Co.,  Inc.
("Doak"), for approximately $929,000.  Doak was a publicly traded
company   engaged  in  the  manufacture  and  sale  of   cosmetic
dermatologic  products and pharmaceutical dermatologic  products.
The  acquisition  was  accounted  for  as  a  purchase.  Goodwill
resulting  from this purchase totaling approximately $640,000  is
being amortized over ten years.

In  January 1995, the Company consummated the merger of Doak with
the Company, pursuant to which the Company acquired substantially
all  of  the  remaining outstanding shares of Doak (at  the  same
$1.74 per share price as the initial acquisition) for a total  of
approximately $420,000, of which approximately $335,000 was  paid
through March 15, 1996 (representing the Doak shares forwarded to
the  Company  for redemption to date). Subsequently, the  Company
acquired  certain  minor  additional shares  of  Doak  which  are
recorded as additional goodwill.



NOTE D - INCOME TAXES

The provision for income tax expense (benefit) is as follows:

                                            Year ended     Year ended
                                           December 31,   December 31,
                                               1997           1996
    Current                                               
       Federal                              $  395,000     $   950,000
        State                                   76,500         193,000
                                            ----------     ----------- 
                                            $  471,500     $ 1,143,000
                                                                
    Utilization of net operating loss                           
    carryforwards
       Federal                                (378,000)     ( 895,000)
       State                                   (35,000)       (98,000)
                                            -----------    ----------
                                              (413,000)      (993,000)
                                            -----------    ----------
                                           $    58,500    $   150,000
                                            ===========    ==========

The following is a summary of the items giving rise to deferred
tax benefits at December 31, 1997 and 1996.

                                               1997           1996
    Current                                               
       Allowance for doubtful accounts       $ 23,000       $ 26,000
         Allowance on sales                   226,000        286,000
         Inventory reserves and               100,000        124,000
    capitalization
         Accrued expenses                       -0-          93,000
                                                                
                                              349,000        529,000
                                                                
  Long-term                                                     
         Net operating loss carryforward      191,000        307,000
         Alternative minimum tax credit       181,000        188,000
         Amortization of intangibles and      340,000        352,000
    fixed assets
                                              712,000        847,000
    Total deferred tax assets                1,061,000      1,376,000
                                                                
    Less valuation allowance                (1,061,000)    (1,376,000)
                                           $ -----------  $   ---------
                                                 -             --




A  valuation allowance has been recorded at December 31, 1997 and
1996  reflecting  the  uncertainty of the future  utilization  of
these tax benefits.

The  difference between the actual Federal income tax expense and
the amount computed by applying the prevailing statutory rate  to
income before income taxes is reconciled as follows:

                                    Year ended      Year ended
                                     December        December
                                      31,1997        31,1996
                                                                
    Tax at statutory rate               34.0%          34.0%
    State income tax expense,                                   
    net of Federal tax effect            2.8            3.5
    Change in valuation                                         
    allowance and previously
    unrecorded benefits                (32.6)         (31.5)
    Other                                1.9            2.6
                                                                
    Effective tax rate                   6.1 %          8.6 %


The  Company  has a net operating loss carryforward  for  Federal
income tax purposes of $ 215,000, which will expire in 2010.

Internal  Revenue  Code Section 382 places a  limitation  on  the
utilization  of  Federal  net operating  loss  and  other  credit
carryforwards  when an ownership change, as defined  by  the  tax
law,  occurs.   Generally, this occurs when  a  greater  than  50
percentage  point  change in ownership occurs.  Accordingly,  the
actual  utilization of the net operating loss  carryforwards  and
other  deferred  tax  assets  for tax  purposes  may  be  limited
annually to the percentage (about 6%) of the fair market value of
the Company at the time of any such ownership change.


NOTE E -REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

In order to raise the funds necessary for the Company to make the
Cash  Payment to Berlex (See Note B), the Company entered into  a
$3  million  revolving credit facility with The CIT  Group/Credit
Finance   Inc.   ("CIT").   Advances  under  this  facility   are
calculated  pursuant  to  a  formula  which  is  based  upon  the
Company's  then  "eligible"  accounts  receivable  and  inventory
levels.   This line of credit has an initial term of three  years
and  is renewable for successive periods of two years each.   The
credit facility requires an annual facility fee and is subject to
an  unused  credit  line  percentage fee.   Interest  accrues  on
amounts outstanding under this facility at the rate equal to  the
prime  rate of interest from time to time announced by The  Chase
Manhattan  Bank as its prime rate of interest plus 2  1/4%.   The
Company's  obligations  under  this  credit  facility  have  been
collateralized by the grant by the Company to CIT of a lien upon,
and  the pledge of a security in, all of the Company's inventory,
accounts  receivable, intangible assets (subject to  prior  lien)
and other assets.  The credit facility contains certain covenants
and  restrictions  and  a  limited personal  guaranty  by  Daniel
Glassman, the Company's Chairman and Chief Executive Officer.

Long-term debt consists of the following:

                                              1997          1996
                                                                    
    Installment note due 2001 (a)            $85,001     $  118,989
    Installment note due 1997 (b)               -           118,542
    Installment note due 1998 (c)             26,399        151,738
    Installment note due 1997 (d)               -         2,879,882
    Installment note due 1997 (e)               -            98,282
    Installment note due 2001 (f)            320,448        520,957
    Other installment notes and capital        1,701         87,143
    lease obligations
                                             -------      ---------           
                                             433,549      3,975,533
    Less:  current maturities               (169,143)    (3,444,569)
                                                              
                                           $  264,406   $   530,964
                                                                    

(a) The  note,  which originated in August 1991 in  connection
    with  the  acquisition of a trademark (DUADACIN(r)), calls  for
    interest  only,  at the rate of 10% commencing  August  1992,
    and   quarterly  installments  consisting  of  principal  and
    interest  in  the amount of $6,865 for the eight-year  period
    commencing  November  1993.  This note is  collateralized  by
    the trademark assigned to the Company.

(b) The  note  payable, which originated  in
    December  1992 and was repaid in 1997 in connection with  the
    acquisition  of  a  patent  and  trademark  (LUBRIN(r)),  bears
    interest  at  the  rate  of  9% with  quarterly  installments
    consisting  of  principal  and  interest  in  the  amount  of
    $31,321.

(c) The  note  payable, which originated in March  1993  in
    connection  with the acquisition of trademarks  and  a  patent
    (TRANS-VER-SAL(r)/GLANDOSANE(r)), bears interest at  the  rate  of
    7%  and  is payable in 20 equal quarterly     installments  of
    $26,861.   The seller has been granted a security interest  in
    the  assets  acquired  by  the Company.   The  Company  is  in
    default of this note for failure to make timely payments.

(d) The  note  payable,  which originated  in  December  1993  in
    connection    with   the   acquisition   of    a    trademark
    (DECONAMINE(r)),  was non-interest-bearing.   Pursuant  to  the
    renegotiated terms (Note B), the note was satisfied  in  full
    in 1997.

(e) The note payable, which originated in June 1994  and
    was  repaid  in  1997,in connection with the  acquisition  of
    trademarks (CARMOL(r)), was non-interest-bearing and was payable in
    annual installments of $100,000 commencing June 1995.  Interest
    at an annual rate of 7% was imputed for this note.

(f) The note payable, which originated in May 1996 in connection
    with the acquisition of trademarks (ACID MANTLE(r)) is non interest
    bearing and is payable in installments of $250,000 in May 1997,
    and $100,000 each per year from May 1998 through 2001.  Interest
    at an annual rate of 9.5% has been imputed for this note.  The seller 
    has been granted a security interest in the assets acquired by the
    Company.


 The annual maturities of long term debt is $103,000 due in 1999,
$113,000  due  in 2000 and $48,000 due in 2001.  Because  of  the
nature of the Company's debt, it is impractical to determine  its
fair value.


NOTE F - RELATED PARTY TRANSACTION

During  the  years ended December 31, 1997 and 1996, the  Company
received  administrative support services (consisting principally
of  advertising  services, mailing, copying, data processing  and
other  office  services) which were charged  to  operations  from
Banyan  Communications Group, Inc. ("Banyan"), an  affiliate,  in
the  amount of  $135,000 and $280,000, respectively.  At December
31, 1997, the Company owed Banyan $2,897.

NOTE G -SHAREHOLDERS' EQUITY

 The Company's authorized shares of common stock are divided into
two  classes, of which 26,400,000 shares are Class A common stock
and  900,000  shares  are  Class B  common  stock.   The  rights,
preferences and limitations of the Class A and the Class B common
stock  are equal and identical in all respects, except that  each
Class  A  share entitles the holder thereof to one vote upon  any
and  all matters submitted to the shareholders of the Company for
a  vote,  and each Class B share entitles the holder  thereof  to
five votes upon certain matters submitted to the shareholders  of
the Company for a vote.

Both  Class A common stock and Class B common stock vote together
as  a  single  class upon any and all matters  submitted  to  the
shareholders  of the Company for a vote, provided, however,  that
the holders of Class A common stock and holders of Class B common
stock  vote  as  two separate classes to authorize  any  proposed
amendment  to  the Company's Certificate of Incorporation,  which
affects  the rights and preferences of such classes.  So long  as
there  are at least 325,000 shares of Class B common stock issued
and  outstanding, the holders of Class B common stock vote  as  a
separate  class  to  elect a majority of  the  directors  of  the
Company  (who are known as "Class B Directors"), and the  holders
of  Class A common stock and voting preferred stock, if any, vote
together  as  a  single  class  to elect  the  remainder  of  the
directors of the Company.

The  Board of Directors may divide the preferred stock  into  any
number  of  series, fix the designation and number of  shares  of
each  such  series,  and  determine or  change  the  designation,
relative  rights, preferences and limitations of  any  series  of
preferred stock.  The Board of Directors may increase or decrease
the  number of shares initially fixed for any series, but no such
decrease shall reduce the number below the number of shares  then
outstanding and shares duly reserved for issuance.

1.  Stock Repurchase Plan

In January 1997, the Company announced a program to repurchase up
to  5%  of  the outstanding Class A common stock in  open  market
transactions over the next 24 months.  These shares will be  held
in  Treasury  by  the  Company to be  used  for  purposes  deemed
necessary  by  the Board of Directors, including funding  company
matching  contributions  to the 401(k) Plan.   During  1997,  the
Company acquired 146,008 shares at a cost of $ 231,198, net.

2.  Stock Option Plan

The  Board  of Directors has adopted the 1990 Stock Option  Plan,
reserving  1,500,000  shares  of  Class  A  common  stock     for
issuance.   The  number  of  shares  reserved  for  issuance  was
increased  to  2,600,000 in 1996 (see Note G-6).  The  plan  will
expire  on  January 31, 2000, but options may remain  outstanding
past this date.







The  number of shares covered by each outstanding option, and the
exercise price, must be proportionately adjusted for any increase
or  decrease  in  the number of issued shares  resulting  from  a
subdivision or consolidation of shares, stock
split, or the payment of a stock dividend, and are summarized  as
follows:

                                                     Weighted
                                                     Average
                                      Number of      Exercise
                                       Options        price
                                                               
 Balance, December 31, 1995           1,637,328       $3.42                   
 Granted                                265,391       $1.32
 Exercised                                 -            -
 Canceled                             (423,354)        1.72
                                                         
 Balance, December 31, 1996           1,479,365       $1.34
 Granted                                 68,000        1.25
 Exercised                              (31,500)       1.39
 Canceled                              (174,740)       1.51
                                                         
Balance, December 31, 1997            1,341,125       $1.32

As  of  December  31,  1997, options outstanding  for  $1,243,000
shares were exercisable at prices ranging from $.68 to $3.65, and
the  weighted  remaining contractual life was 4.9 years.   As  of
December 31, 1996,  options outstanding for 1,177,236 shares were
exercisable  at  prices  ranging  from $.68  to  $3.65,  and  the
weighted  remaining contractual life was 4.9 years.  Compensation
cost charged to operations, which the Company records for options
granted to nonemployees, was none and $58,000 in the years  ended
December  31,  1997 and 1996,  respectively.  There were  131,645
options  outstanding  to nonemployees at December  31,  1997,  of
which 128,145  were  exercisable.   There  were  232,805  options
outstanding  to  nonemployees  at December  31,  1996,  of  which
211,697 were exercisable.


The  following  table summarizes option data as of  December  31,
1997:

                                                          
                    Number      Weighted     Weighted    Number     Weighted
                  Outstanding   average      average   Exercisable  Average
      Range of      as of       remaining    exercise    as of      Exercise
      exercise   December 31,  contractual     price   December 31,   Price
       prices        1997         life                  1977
                   (in                                    (in            
                 thousands)                             thousands)
  $  .68 - 1.40      691           5.5         $1.19       613       $1.18
    1.41 - 3.65      518           3.0          1.49       498        1.50
                     ---                                   ---
                   1,209                                 1,111           



               Bradley Pharmaceuticals, Inc. and Subsidiaries


                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31,1997 AND 1996



The   Company  measures  compensation  in  accordance  with   the
provisions  of  APB Opinion No. 25 in accounting  for  its  stock
compensation plans.  Accordingly, no compensation cost  has  been
recorded  for  options granted to employees or directors  in  the
years  ended December 31, 1997 and 1996.  The fair value of  each
option  granted  has been estimated on the grant date  using  the
Black-Scholes Option Valuation Model.  The following  assumptions
were made in estimated fair value:

      Dividend yield                                 0%
      Risk-free interest rate                        6.0%
      Expected life after vesting period             
     Directors and officers                          4 years
     Others                                          2 years
      Expected volatility - through December 1,      60%
      1995
     December 2, 1995 - through December 31, 1997    90%
                                                     

Had  compensation cost been determined under SFAS  No.  123,  net
income and net income per share would have been as follows:

                                     Year ended  December 31,
                                        1997            1996
      Net income                                   
     As reported                     $ 906,406       $1,598,507
     Pro forma for SFAS No. 123        783,702        1,206,544
      adjustment
                                                          
      Net Income per share                                
     As reported                   $        .11   $          .22
     Pro forma for SFAS No. 123             .09              .17
     adjustment                                                            





The  weighted  average fair value of options granted during  1997
 and 1996 was $ .69 and $ .83,  respectively.

During  1996,  the  Company allowed holders of stock  options  to
reprice their options at then prevailing market prices.  Repriced
options  were included as new grants for purposes of  determining
SFAS  No.  123  compensation cost and the weighted  average  fair
value  of  options granted during the year. The weighted  average
exercise price of repriced options was $1.46.

The  weighted  average fair value and weighted  average  exercise
price  of  options granted in 1996, for which the exercise  price
equals  the market price on the grant date, were $.83 and  $1.42,
respectively.   The  weighted average  fair  value  and  weighted
average exercise price of options granted in 1996, for which  the
exercise  price exceeded the market price on the grant date  were
$.84  and  $1.41, respectively.  For the year ended December  31,
1997, the exercise price of all options equalled the market price
on the grant date.

In  November  1993, the Company granted options  to  purchase  an
aggregate  of  447,500 shares of Class A common stock  at  option
prices  of $2.3125-$2.5438 per share for a period of five to  ten
years.   The  grant  of  these options  was  conditional  upon  a
portion  (447,500 shares) of the shares being granted as  options
to  persons  who have placed their shares in escrow should  those
original  escrow  shares  be  lost  due  to  their  inability  to
accomplish  the  release of the shares from  escrow.   Management
attained the required earnings level in 1994 and accordingly  the
Company  has  obtained the release of the escrow  shares.   These
options were therefore canceled.  Certain of these escrow  shares
were  subsequently returned to the Company and retired (Note G-5)
and the Company has issued new options.

During  the  initial  phase-in  period  of  SFAS  No.  123,  such
compensation  expense  may not be representative  of  the  future
effects of applying this statement.

3.  Private Placement of the Company's Securities

In  December  1993, the Company completed a private placement  of
its  securities, issuing an aggregate of 160 units at $45,000 per
unit.  The  net  proceeds to the Company, after  commissions  and
expenses  of $1,014,063, were $6,185,937.  Each unit consists  of
24,000  shares of the Company's Class A stock and 12,000 Class  D
warrants.   Each Class D warrant entitled the bearer to  purchase
one  share of Class A stock at a cost of $3 per share and expired
December  1996.   In  addition, the placement agent  received  an
option to purchase an additional 40 units through December 1998.




4.  Reserved Shares

The  following  table summarizes shares of common stock  reserved
for  issuance at December 31, 1997, as adjusted for the  dilutive
effect of the private placement of the Company's securities:

                                                      Number
                                                     of shares
       Reserved for                                   issuable
                                                               
      Warrants to Tsumura for products acquired          
      (expiring
      March, 1998)                                     150,000
      Placement agent's options to purchase              
      private placement units
     (expiring December, 1998)                         960,000
      1990 Stock Option Plan                         1,341,125
                                                         
                                                     2,451,125

5.  Escrow Shares

During fiscal 1993, certain members of the Board of Directors and
certain  other  parties  were conditionally  granted  options  to
purchase an aggregate of 447,500 shares of Class A common  stock.
These options were canceled effective January 1, 1995, due to the
release  of 450,000 shares of the Company's Class B common  stock
held  in  escrow  to such members of the Board of  Directors  and
other  persons  upon  the  Company  achieving  certain  financial
performance tests in fiscal 1994.

On November 2, 1995, the Company announced that 450,000 shares of
the  Company's  Class  B  common stock released  from  escrow  to
certain  members  of the Board of Directors of  the  Company  and
other  persons upon achieving certain financial performance tests
in fiscal 1994 were to be voluntarily returned to the Company and
retired.   The  three  members  of the  Board  of  Directors  who
directly received escrow shares have agreed to return such shares
to the Company (418,035 of the total 450,000).  The other parties
have  been  contacted  by the Company and  asked  to  voluntarily
return  their  31,965 escrow shares.  During 1995, two  directors
returned 364,467 escrow shares to the Company.  During 1996,  the
third  director returned 53,568 escrow shares and  other  parties
returned a total of 10,323 escrow shares.

As  a  result of the Company's determination to have such  escrow
shares  voluntarily  returned to the  Company  and  retired,  the
Company  has  granted to such members of the Board  of  Directors
options to purchase 428,358 shares of Class A common stock at  an
exercise  price equal to the fair market value of the  shares  on
the date the escrow shares were returned to the Company.

6.  Reissuance of Class B Shares

On June 2, 1997, the Board of Directors of the Company authorized
the  issuance of 254,311 shares of Class B common stock (the "New
Class  B  Stock") to Daniel Glassman.  The New Class B Stock  was
issued  to   Daniel  Glassman in consideration for,  among  other
things,   Daniel   Glassman's  delivery  to  the   Company,   for
cancellation, of 254,311 shares of Class A common  stock  of  the
Company.   The  issuance  of the New  Class  B  Stock  to  Daniel



Glassman  was the result of the Board of Directors'  decision  to
restore  management  status quo following  the  Board's  recently
learning  that  Daniel Glassman had pledged  (the  "Pledge"),  in
April 1995, 254,311 shares of Class B common stock then owned  by
Daniel   Glassman  (the  "Pledged  Shares")  to  secure   certain
obligations  of  Daniel  Glassman to an unaffiliated  third-party
lender.  Daniel Glassman has delivered to the Company a letter in
which  he states that the Pledge was an inadvertent error on  his
part and that had he been aware of the potential ramifications of
the  Pledge, he would have pledged other collateral to secure the
obligations in question.

Pursuant  to  the  Company's  Certificate  of  Incorporation,  as
amended   (the   "Charter"),  the  Pledged  Shares  automatically
converted into shares of Class A common stock upon the Pledge  by
Daniel  Glassman.  Consequently, the number of outstanding shares
of  Class  B  common stock following the Pledge was reduced  from
431,552  shares  to  177,241 shares.  Pursuant  to  the  Charter,
holders  of  the Company's Class B common stock are  entitled  to
elect a majority of the Company's directors so long as there  are
at  least  325,000  shares  of Class B common  stock  issued  and
outstanding; otherwise, all holders of Class A and Class B common
stock, voting as a single class, are entitled to elect all of the
Company's  directors.   During November  1995,  and  pursuant  to
matters  unrelated to the Pledge, an aggregate of  428,358  other
shares of Class B common stock were returned to, and retired  by,
the  Company (see Note G-5).  As a result thereof, the number  of
outstanding  shares  of  Class  B common  stock  fell  below  the
aforementioned  325,000  share  threshold.   In  light   of   the
Company's  being unaware of the Pledge, holders of the  Company's
Class  A  and  Class B common stock, voting as separate  classes,
elected two directors and three directors, respectively,  at  the
Company's  Annual  Stockholders' Meeting held in  May  1996  (the
"1996  Annual Meeting"), rather than voting together as a  single
class to elect all of the Company's directors. Accordingly, since
the  1996  Annual Meeting, only the two directors of the  Company
elected by the holders of the Class A common stock (the "Class  A
Directors") have been duly and validly elected.  Prior to June 3,
1997,  the  Company's By-Laws stated that the Company shall  have
three  directors.   Since their election by stockholders  at  the
1996 Annual Meetings, the two Class A Directors, each of whom was
an  independent director, voted in favor of all matters  approved
by  the  Board of Directors.  Prior to the authorization  of  the
issuance of the New Class B Stock to Daniel Glassman, the Class A
Directors  appointed David Hillman, Secretary of the Company,  as
the third director of the Company.

Since  the  issuance of the New Class B Stock to Daniel  Glassman
caused  the  number of issued and outstanding shares of  Class  B
common  stock  to increase to 431,552 shares (above  the  325,000
share  threshold set forth in the Company's Charter), the holders
of  Class  B  common stock became entitled to  elect  a  majority
(consisting of three) of the Company's directors.  Following  the
issuance  to  Daniel  Glassman of the  New  Class  B  Stock,  the
directors of the Company amended the Company's By-Laws to provide
that  the  Board of Directors shall be comprised of five  persons
and  the holders of the outstanding Class B common stock,  acting
separately  as a class in accordance with the Company's  Charter,
elected, by majority written consent in lieu of a meeting, Daniel
Glassman and Iris Glassman as directors of the Company and  David
Hillman was designated as a director by the holders of the  Class
B common stock.

At  a Special Meeting of Stockholders held in August 1996, it was
reported that an amendment (the "Option Plan Amendment")  to  the
Company's  1990 Stock Option Plan, as amended (the  "Plan"),  had
been  approved by stockholders increasing, from 1,500,000  shares
to 2,600,000 shares, the number of shares of Class A common stock
authorized  for issuance under the Plan.  Given the ramifications
of  the  Pledge,  and, in particular, that the  254,311  Class  B
shares  voted  in favor of the Option Plan Amendment  by   Daniel
Glassman  were counted as 1,271,555 votes (giving effect  to  the
5:1  voting power attributable to Class B shares) but should have
been  counted  as  only 254,311 shares of Class  A  common  stock
voting  in  favor  of  the Option Plan Amendment,  there  was  an
insufficient  number  of shares of common stock  of  the  Company
voting  to  approve the Option Plan Amendment.  Accordingly,  the
Board  of  Directors  has determined to  treat  the  Option  Plan
Amendment  as having been rejected by the Company's stockholders.
Options under the Plan to acquire an aggregate of 140,000  shares
of  Class A common stock granted by the Company in reliance  upon
the Option


Plan  Amendment  having been approved by stockholders  have  been
returned voluntarily to the Company by the relevant optionees for
cancellation.  As a consequence of believing, in good faith, that
the  Option  Plan  Amendment had been approved  by  stockholders,
between  August  15,  1996  and December  31,  1996,  there  were
outstanding  options  to acquire under  the  Plan  in  excess  of
1,500,000 shares of Class A common stock.  As a result of options
to acquire an aggregate of 423,354 shares of Class A common stock
under  the  Plan  being  canceled during 1996  due  to  optionees
leaving the employ of the Company, there are outstanding,  as  of
December  31, 1997, options to acquire an aggregate of  1,489,845
shares  of  Class A common stock under the Plan.   At  a  Special
Meeting of Stockholders held in August 1997, an amendment to  the
Company's  1990  Stock Option Plan, as amended, was  approved  by
stockholders  increasing,  from  1,500,000  shares  to  2,600,000
shares,  the number of shares of Class A Common Stock  authorized
for issuance under the Plan.

NOTE H - COMMITMENTS AND CONTINGENCIES

1.  Leases

The  Company  leases office facilities in Fairfield,  New  Jersey
from  Daniel and Iris S. Glassman, directors and shareholders  of
the Company, and in Westbury, New York.

The  lease on the Fairfield, New Jersey facility is for a  period
from  August 1, 1997 to July 31, 1998 for 14,120 square  feet  of
office  and  warehouse space, with an option to  renew  and  also
includes  payments of electric, water and sewer and the allocated
portion  of  the real estate taxes.  Rent expense,  including  an
allocated   portion  of  real  estate  taxes,  was  approximately
$194,000  and $176,000 for the years ended December 31, 1997  and
1996, respectively.

The term of the lease occupied by Doak in Westbury,  New York  is
through January 31, 1999 and contains a monthly rental payment of
$5,000.   From  May 1994 to October 1994, the lease payments  for
such property were suspended pending further investigation of the
environmental matters discussed below.

Approximate   aggregate   minimum  annual   rental   commitments,
including  rent and real estate taxes, are as follows:   $173,000
for  1998 and $5,000 for 1999.  Total rent expense for the  years
ended  December  31,  1997 and 1996 was  $312,000  and  $301,000,
respectively.

2.  Research and Development Agreement

The  Company  is required to file an ANDA with the  FDA  for  its
DECONAMINE(r) SR  product.   The cost of developing  the  necessary
studies  for  this  application is estimated to be  approximately
$900,000.  The Company completed the first phase of these studies
at a cost of approximately $150,000.  The Company has entered the
second  phase  of  these studies at a cost of $150,000  of  which
$75,000 has already been charged to operations as of the date  of
this document.  Following the completion of the second phase, the
project  will  be  deferred until the regulatory and  competitive
environment warrants completion.

However,  these research and development projects are subject  to
the   Company  either  generating  sufficient  cash  flows   from
operations or obtaining requisite financing from outside sources,
of  which  there  can  be no assurance.  Therefore,  the  Company
cannot  at  this  time reasonably anticipate the  timing  of  the
expenditure of funds for these  purposes.  The inability  of  the
Company  to  further develop and/or file the necessary  ANDA  for
DECONAMINE(r)  SR  would  have a material  adverse  effect  on  the
Company.




3.  Environmental Matters

On  April 8, 1994, the Company was apprised by the New York State
Department  of Environmental Conservation ("NYSDEC") that  Doak's
current   leased  manufacturing  facility  located  on  adjoining
parcels  at  62 Kinkel Street and 67 Sylvester Street,  Westbury,
New  York  and  former leased facility located  at  128  Magnolia
Avenue,  Westbury,  New  York  are  located  in  the  New  Cassel
Industrial Area, which has been designated by the NYSDEC  on  the
Registry of Inactive Hazardous Waste Sites (the "Registry").  The
real  property on which Doak's current manufacturing facility  is
situated  is  owned  by and leased to the Company  by  Dermkraft,
Inc., an entity owned by the former controlling shareholders  and
officers of Doak.

On  February 7, 1995, the Company was apprised by NYSDEC that the
current   manufacturing  facility  will  be  excluded  from   the
Registry.   By  letter dated April 21, 1995, the NYSDEC  notified
the Company that it intended to investigate the Company's current
manufacturing  facility to determine if hazardous substances  had
previously  been  deposited on that property.   By  letter  dated
October  24,  1995,  NYSDEC  notified Dermkraft,  Inc.  that  the
Company's current manufacturing facility is included in  or  near
an  inactive  hazardous  waste  site  described  as  "Kinkel  and
Sylvester   Streets"  and  that  NYSDEC  intends  to  conduct   a
Preliminary  Site  Assessment to study  the  site  and  immediate
vicinity.   The Company has been advised that NYSDEC has  made  a
preliminary determination to include the 62 Kinkel Street portion
of  the  current manufacturing facility on the Registry and  that
the  67  Sylvester  Street portion of the facility  will  not  be
included, but those determinations could change before  they  are
finalized.  Thereafter, by letter dated May 3, 1996 and addressed
to  Dermkraft, Inc., the NYSDEC notified Dermkraft that the  site
at  62  Kinkel Street has been listed on the Registry due to  the
presence  of  trichloroethylene ("TCE") in soils and  groundwater
due  to  the  use  of  TCE by LAKA Tools and  Stamping  and  LAKA
Industries, a former tenant from 1971 through 1984.   The  NYSDEC
documents  refer to Doak Dermatologics as the current tenant  but
do  not  refer  to  any activities of Doak Dermatologics  or  the
Company  as a basis for the listing in the Registry.  The Company
cannot  at  this time determine whether the cost associated  with
the  investigation  and  required remediation,  if  any,  of  the
current manufacturing facility will be material. With respect  to
the  former  manufacturing  facility on  Magnolia  Avenue,  which
remains  designated  by  the NYSDEC  as  part  of  the  Registry,
management believes that Doak will not be obligated to contribute
to any remediation costs, if any are required.

4.  Consulting Agreements

The  Company entered into consulting agreements with the  sellers
of  Doak  that provide for monthly payments of $8,333 from  April
1994  through March 1997.  The amounts due under such  agreements
have  been accrued for at December 31, 1995, as the parties  have
ceased providing services.

5.  Legal Proceedings

The  Company  and Doak have been named defendants  in  a  lawsuit
filed  November 29, 1996.  The complaint alleges that the Company
and  Doak  were  negligent  in their hiring  and  supervising  an
employee  who  in  turn allegedly assaulted the  plaintiff.   The
complaint  seeks  $600,000  in  compensatory  and  $1,000,000  in
punitive  damages.  The Company believes that it has  meritorious
defenses.






6.  Trans CanaDerm Settlement

On  June 5, 1996, Trans CanaDerm, Inc. ("Trans CanaDerm"),  Louis
Vogel  ("Vogel"),  the  former controlling stockholder  of  Trans
CanaDerm,  and  other  former  stockholders  of  Trans   CanaDerm
(collectively,  "Plaintiffs") commenced  an  action  against  the
Company and its subsidiary, Doak Dermatologics ("Doak"),  in  the
United  States  District Court for the Southern District  of  New
York,  96  Civ. 4175 (JFK).  The complaint alleged that  in  1957
Doak  and Vogel entered into an agreement (the "Agreement") under
which  Vogel was given the sole and exclusive right to distribute
Doak's   products  in  Canada,  which  Agreement  was  thereafter
assigned by Vogel to Trans CanaDerm.  In May 1996, Vogel and  the
other  Trans  CanaDerm  stockholders sold their  stock  in  Trans
CanaDerm to Stiefel Canada, Inc. ("Stiefel"), a competitor of the
Company.  Shortly thereafter, the Company and Doak terminated the
Agreement.  The complaint alleged:  (i) that the termination  was
wrongful,  (ii)  that the Company and Doak tortiously  interfered
with  the  contract between the former stockholders and  Stiefel,
and  (iii) that the Company and Doak should be equitably  stopped
from   terminating  the  Agreement.   The  complaint  sought   an
injunction restraining the Company and Doak from terminating  the
Agreement  and  compensatory and punitive damages in  unspecified
amounts.

On  September  30,  1996, the Company and  Doak  entered  into  a
settlement  agreement  with  the  Plaintiffs.   Pursuant  to  the
settlement, the Company received $2 million relating to the  sale
of   the   Company's  independent  Canadian  distributor,   Trans
CanaDerm,  Inc., of which the Company did not have  an  ownership
position,  to  Stiefel,  a competitor of  the  Company,  and  the
Company  transferred  to  Trans CanaDerm  all  of  the  Company's
rights,  title and interest in certain Doak products  in  Canada.
Direct expenses related to this transaction were $354,868.

Trans  CanaDerm currently distributes several Doak  products,  as
well  as other unrelated brands in Canada, and by virtue  of  the
foregoing  transfer and payment, Trans CanaDerm will continue  to
market the Doak product line in Canada.  Trans CanaDerm also  has
agreed  to  continue  to  purchase  certain  materials  used   in
connection with the manufacture of the transferred Doak  products
through December 31, 1997.

7.  Defined Contribution 401(k) Plan

Effective  January,  1997,  the  Company  established  a  defined
contribution  401(k)  plan whereby the Company  matches  employee
contributions  up  to  25%  of  the  employee's   first   6%   of
contributions with shares of the Company's Class A common  stock.
Contributions of $28,600 were charged to expenses  for  the  year
ended December 31, 1997.