SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) of the
                             SECURITIES ACT OF 1934

                    For the quarter ended September 30, 2000
                         Commission File Number 0-28392

                            HARVARD SCIENTIFIC CORP.
                 ----------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                      Nevada                               88-0226455
         -------------------------------               ------------------
         (State or Other Jurisdiction of                (I.R.S. Employer
         Incorporation or Organization)                Identification No.)

                1325 Airmotive Way, Suite 125, Reno, Nevada    89502
       -------------------------------------------------------------------
            (Address of Principal Executive Offices)         (Zip Code)

         Registrant's Telephone Number, Including Area Code: (775) 323-7122

         Securities registered under Section 12(g) of the Exchange Act:

                    Common Stock, Par Value $0.001 Per Share

                    Preferred 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 day.

(1)  Yes [ ]  No  [X]     (2)  Yes [ ]   No   [X]

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
Common Equity, as of the latest practicable date:

         Common Stock, Par

         Value $0.001 Per Share                          13,897,437
         ----------------------                        --------------
          (TITLE OF CLASS)                    (NUMBER OF SHARES OUTSTANDING
                                                  on September 30, 2000)


<PAGE>


Part I

Item No. 1.  FINANCIAL STATEMENTS


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                                  BALANCE SHEET

                                     ASSETS
<TABLE>
<CAPTION>

                                                                September     December
                                                                   2000         1999
                                                               (Unaudited)    (Audited)
                                                               -----------   -----------
<S>                                                            <C>           <C>
Current Assets:

     Cash and cash equivalents                                 $     1,831   $     1,610
     Accounts Receivable - Directors (Note 7 & 9)
     Deferred debt issue costs (Note 11) Legal Retainer
     Note & Interest Receivable (Note 6, 8, & 9)                      --       2,751,493
       Reserve for receivables (Note 6, 8, & 9)                       --      (2,751,493)
                                                               -----------   -----------

          Total Current Assets                                       1,831         1,610
                                                               -----------   -----------

Fixed Assets:

       Office Equipment                                              2,463             0

Intangible Assets:

     Intellectual Property, Net of accumulated amortization
        of $35,508 at September 30, 2000 and
        December 31, 1999, respectively (Note 4)                         0             0
      Investment in Signetics.net                                4,300,000             0
                                                                                       0

     Organizational cost, net of accumulated amortization of
        $175,550 at March 31, 2000 and December 31, 1999,
        respectively                                                     0             0

     Deposits                                                          300           300
                                                               -----------   -----------

          TOTAL ASSETS                                         $ 4,304,595   $     1,910
                                                               ===========   ===========
</TABLE>



    The accompanying Notes are an integral part of these financial statements

                                       F-1

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            BALANCE SHEET (CONTINUED)

                       LIABLITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                       September 30,    December 31,
                                                                           2000            1999
                                                                       (Unaudited)       (Audited)
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
Current Liabilities:

     Accounts Payable                                                  $    294,480    $    349,753
                                                                       ------------    ------------
        Total Current Liabilities                                           294,480         349,753
                                                                       ------------    ------------

Long-term Liabilities:

     Notes Payable                                                          158,100               0
                                                                       ------------    ------------
     Total Liabilities                                                      452,580         349,753
                                                                       ------------    ------------
Stockholders' Equity:

     Common Stock, $.001 par value; 100,000,000 shares
        authorized; 13,897,437 and 6,153,737  shares issued
        and  outstanding at September 30, 2000 and December 31,
        1999, respectively (Note 2)                                         138,974          61,537
      Preferred Stock, 10,000,000 shares authorized, 4,000 and none
        Issued and outstanding at September 30, 2000 and December 31
        1999, respectively  (Note 2)                                          4,000               0
     Additional paid-in capital                                          17,315,903      12,841,840
     Deficit accumulated during the development stage                   (13,606,862)    (13,251,220)
                                                                       ------------    ------------

        Total Stockholders' Equity                                        3,852,015        (347,843)
                                                                       ------------    ------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $  4,304,595    $      1,910
                                                                       ============    ============
</TABLE>


    The accompanying Notes are an integral part of these financial statements

                                       F-2


<PAGE>

<TABLE>
<CAPTION>

                                                        HARVARD SCIENTIFIC CORP.
                                                     (A DEVELOPMENT STAGE COMPANY)

                                                        STATEMENTS OF OPERATIONS

                                                                                                                   1/13/87
                                                     Three Months Ended               Nine Months Ended          (Inception)
                                                     ------------------               ------------------              To
                                                 Sept 30 2000     Sept 30, 1999  Sept 30,2000    Sept 30,1999     09/30/2000
                                                 (Unaudited)       (Audited)     (Unaudited)       (Audited)      (Unaudited)
                                                 ------------    ------------    ------------    ------------    ------------


<S>                                               <C>            <C>             <C>             <C>             <C>
Net Sales                                         $      --      $       --      $       --      $        --     $    187,387
Cost of Sales                                            --              --              --               --          221,557
                                                 ------------    ------------    ------------    ------------    ------------
      Gross Profit                                       --              --              --               --          (34,170)
                                                 ------------    ------------    ------------    ------------    ------------
Operating Expenses:
  General and administrative expenses                 74,404            204         228,824           67,673        6,864,664
  Research and development                           (19,500)            --          66,500            4,286        2,954,776
  Depreciation and amortization                          --              --             --             3,655          910,927
                                                 ------------    ------------    ------------    ------------    ------------
      Total Operating                                 54,904            204         295,324           75,614      (10,712,367)
      Loss from Operations                           (54,904)        (  204)       (295,324)         (75,614)     (10,746,537)
                                                 ------------    ------------    ------------    ------------    ------------
Other Income (Expense):

  Other Income                                           --              --              --              525               --
  Forgiveness of debt                                    --              --              --               --        1,047,958
  Settlements (Note 9)                               (50,000)            --         (50,000)              --         (835,983)
  Interest Income                                        --              --              --               53            7,500
  Dividend Income                                        --              --              --                9           62,963
  Interest Expense                                   (10,318)            --         (10,318)              --        2,096,227)
  Loss on disposition of Fixed Assets or
  Securities                                             --              --              --           (5,882)      (1,046,536)
                                                 ------------    ------------    ------------    ------------    ------------
      Total Other Income and Expense                 (60,318)            --         (60,318)          (5,295)      (2,860,325)
                                                 ------------    ------------    ------------    ------------    ------------
Net Loss                                            (115,222)       $ ( 204)       (355,642)     $   (80,909)    $(13,606,862)
                                                 ============    ============    ============    ============    ============
Loss per Common Share                            $      (.00)       $ (0.00)     $     (.04)     $     (0.01)    $         --
                                                 ============    ============    ============    ============    ============
Weighted Average Shares

  Outstanding (Note 2)                            13,527,437      6,078,737      10,025,587        6,071,225               --
                                                 ============    ============    ============    ============    ============
</TABLE>



    The accompanying Notes are an integral part of these financial statements

                                       F-3

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

            FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                        TO SEPTEMBER 30, 2000 (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                         Deficit
                                                        RESTATED          Additional       From
                                                      Common Stock         Paid-in      Inception
                                                Shares        Amount       Capital        To Date        Total
                                              ----------    ----------    ----------    ----------    ----------
<S>                                            <C>          <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                  146,000           146          --            --             146

Issuance of shares to acquire
     Grant City Corporation                       50,000            50        39,827          --          39,877
                                              ----------    ----------    ----------    ----------    ----------
Balance December 31, 1993                        350,000           350        61,147          --          61,497
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
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)
</TABLE>


    The accompanying Notes are an integral part of these financial statements

                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                                                      HARVARD SCIENTIFIC CORP.
                                                   (A DEVELOPMENT STAGE COMPANY)

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY
                                      FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                                  TO SEPTEMBER 30, 2000 (UNAUDITED)


                                                                                                   Deficit
                                                                 RESTATED            Additional     From
                                                               Common Stock           Paid-in     Inception
                                                           Shares         Amount      Capital       To Date         Total
                                                        -----------   -----------   -----------   -----------    -----------
<S>                                                     <C>           <C>           <C>           <C>            <C>
December 31, 1994 balance forward                         1,857,125         1,857       540,549      (550,386)        (7,980)
Issuance of shares for fees and services                    553,500           553       530,796          --          531,349
Issuance of shares at par value for
intellectual property rights                              6,138,500         6,139          --            --            6,139
Issuance of shares 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 shares for services                             255,000           255        59,828          --           60,083
Issuance of shares in conversion of debt                    310,254           310       249,690          --          250,000
Issuance of shares for legal settlement                     568,750           569       494,244          --          494,813
Discount on 7% Convertible Debentures                          --            --         500,000          --          500,000

Net (loss) for the year ended December 31, 1996                --            --            --      (2,438,945)    (2,438,945)
                                                        -----------   -----------   -----------   -----------    -----------
Balance December 31, 1996                                 9,883,129         9,883     3,206,207    (3,665,786)      (449,696)
Issuance of shares for cash, net of offering                250,000           250       124,750          --          125,000
costs

Issuance of shares for fees and services                  1,270,000         1,270          --            --            1,270

Discount on 6% Convertible Debentures                          --            --       1,250,000          --        1,250,000

Net (loss) for the Quarter ended March 31, 1997                --            --            --      (3,140,868)    (3,140,868)
                                                        -----------   -----------   -----------   -----------    -----------
Balance March 31, 1997                                   11,403,129   $    11,403   $ 4,580,957   $(6,806,654)   $(2,214,294)
                                                        -----------   -----------   -----------   -----------    -----------
</TABLE>


   The accompanying Notes are an integral part of these financial statements

                                       F-5

<PAGE>

<TABLE>
<CAPTION>

                                                          HARVARD SCIENTIFIC CORP.
                                                      (A DEVELOPMENT STAGE COMPANY)

                                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                                          FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                                     TO SEPTEMBER 30, 2000 (UNAUDITED)


                                                                                                 Deficit
                                                                RESTATED          Additional       From
                                                             Common Stock          Paid-in      Inception
                                                         Shares       Amount       Capital        To Date         Total
                                                      -----------   -----------   -----------   -----------    -----------
<S>                                                   <C>           <C>           <C>           <C>            <C>
March 31, 1997 balance forward                         11,403,129   $    11,403   $ 4,580,957   $(6,806,654)   $(2,214,294)
Issuance of shares for fees and services                6,172,000         6,172          --            --            6,172
Issuance of shares in conversion of debt                  450,000           450       133,300          --          133,750
Net (loss) for the Quarter ended June 30, 1997               --            --            --      (1,266,233)    (1,266,233)
                                                      -----------   -----------   -----------   -----------    -----------

Balance June 30, 1997                                  18,025,129   $    18,025   $ 4,714,257   $(8,072,887)   $(3,340,605)
Issuance of shares in conversion of debt                1,446,325         1,446     1,275,133          --        1,276,579
Issuance of shares for fees and services                  144,000           144          --            --              144
Net (loss) for the Quarter ended September 30,
1997                                                         --            --            --        (180,075)      (180,075)
                                                      -----------   -----------   -----------   -----------    -----------

Balance September 30, 1997                             19,615,454   $    19,615   $ 5,989,390   $(8,252,962)   $(2,243,957)
Issuance of shares in conversion of debt                2,375,919         2,376       985,789          --          988,165
Issuance of shares for fees and services                8,300,000         8,300       537,100          --          545,400
Issuance of shares in legal settlement                  1,150,000         1,150       439,075          --          440,225
Issuance of shares for intellectual property            2,000,000         2,000          --            --            2,000

Receivable due from related parties reflecting
the sale of stock Rule 16(b)                                 --            --         410,016          --          410,016
Receivable due from related parties                          --            --         333,535          --          333,535
Net (loss) for the Quarter ended December 31,
1997                                                         --            --            --      (1,229,065)    (1,229,065)
                                                      -----------   -----------   -----------   -----------    -----------

Balance at year end December 31, 1997                  33,441,373   $    33,441   $ 8,694,904   $(9,482,027)   $  (753,682)


    The accompanying Notes are an integral part of these financial statements
</TABLE>


                                       F-6

<PAGE>

<TABLE>
<CAPTION>

                                                      HARVARD SCIENTIFIC CORP.
                                                   (A DEVELOPMENT STAGE COMPANY)

                                                 STATEMENTS OF STOCKHOLDERS' EQUITY
                                      FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                                 TO SEPTEMBER 30, 2000 (UNAUDITED)

                                                                                                  Deficit
                                                               RESTATED          Additional         From
                                                            Common Stock           Paid-in        Inception
                                                         Shares       Amount       Capital         To Date         Total
                                                      -----------   -----------   -----------     -----------    -----------
<S>                                                   <C>                 <C>          <C>        <C>            <C>
Issuance of shares in conversion of debt              1,036,064           1,036        260,882            --           261,918
February 1, 1998, adjustment of shares to effect
a one-for-ten reverse split                         (31,029,693)           --             --              --              --
Issuance of shares for a commitment to a
financing agreement                                   1,580,278          15,803      4,984,197            --         5,000,000
Issuance of shares for services                          10,000             100           --              --               100


Issuance of shares for cash                             200,000           2,000        598,000            --           600,000
Net reversal of Receivable due from related
parties reflecting the sale of stock Rule 16(b)            --              --          (17,197)           --           (17,197)
Net (loss) for the Quarter ended March 31, 1998            --              --             --      $ (1,097,930)   $ (1,097,930)
                                                      ---------    ------------   ------------    ------------    ------------
Balance at March 31, 1998                             5,238,022    $     52,380   $ 14,520,786    $(10,579,957)   $  3,993,209

Issuance of shares for fees and services                 10,500             105        124,371            --           124,476
Issuance of shares for cash                             233,333           2,334        697,665            --           699,999
Net (loss) for the Quarter ended June 30, 1998             --              --             --          (735,893)       (735,893)
                                                      ---------    ------------   ------------    ------------    ------------
Balance at June 30, 1998                              5,481,855    $     54,819   $ 15,342,822    $(11,315,850)   $  4,081,791
                                                      =========    ============   ============     ===========    ============
Issuance of shares for fees and services                101,000           1,010        396,990            --           398,000
Issuance of shares for cash                              24,667             247         73,753            --            74,000
Issuance of shares for legal settlement                 600,000           6,000      2,762,900            --         2,768,900
Inventory                                                  --              --           18,000            --            18,000
Net (loss) for the Quarter ended September 30,
1998                                                       --              --             --        (1,212,055)     (1,212,055)
Balance September 30, 1998                            6,207,522    $     62,076   $ 18,594,465     (12,527,905)   $  6,128,636
                                                      =========    ============   ============     ===========    ============
</TABLE>


    The accompanying Notes are an integral part of these financial statements

                                       F-7

<PAGE>

<TABLE>
<CAPTION>

                                                         HARVARD SCIENTIFIC CORP.
                                                      (A DEVELOPMENT STAGE COMPANY)

                                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                                         FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                                     TO SEPTEMBER 30, 2000 (UNAUDITED)

                                                                                                    Deficit
                                                                 RESTATED            Additional       From
                                                             Common Stock             Paid-in       Inception
                                                         Shares        Amount         Capital        To Date           Total
                                                      -----------    -----------    -----------    -----------     -----------
<S>                                                   <C>            <C>            <C>            <C>             <C>
Adjustment of Waite & See Agreement                          --             --       (4,684,197)          --       (4,684,197)
Shares returned to Treasury Stock                        (270,200)        (2,702)          --             --           (2,702)
Issue of shares for fees and services                      51,390            513           --             --              513
Reclassifying of debt forgiveness                            --             --         (968,901)          --         (968,901)
Net (loss) for Quarter ended December 31, 1998               --             --         (136,752)          --         (136,752)
Balance at Year End                                          --             --             --         (666,133       (666,133)
Balance at December 31, 1998                            5,988,712         59,887     12,804,615    (13,194,038)      (329,536)
                                                      -----------    -----------    -----------    -----------     -----------
Issue of shares for service                                15,000            150           --             --              150
Issue of shares January 11, 1999                               25           --           16,725           --           16,725
Net (loss) for Quarter ended March 31, 1999                  --             --             --          (79,408)       (79,408)
Issue of shares for fees and services                      51,390            513           --             --              513
Reclassifying of debt forgiveness                            --             --         (968,901)          --         (968,901)
Net (loss) for Quarter ended December 31, 1998               --             --         (136,752)          --         (136,752)
Balance at December 31, 1998                            5,988,712         59,887     12,804,615    (13,194,038)      (329,536)
                                                      -----------    -----------    -----------    -----------     -----------
Issue of shares for service                                15,000            150           --             --              150
Issue of shares January 11, 1999                               25           --           16,725           --           16,725
Net (loss) for Quarter ended March 31, 1999                  --             --             --          (79,408)       (79,408)

Balance at March 31, 1999                               6,003,737         60,037     12,821,340    (13,273,446)      (392,069)

Net (loss) for Quarter ended June 30, 1999                   --             --             --           (1,296)        (1,296)
Balance as of June 30, 1999                             6,003,737         60,037     12,821,340    (13,274,742)      (393,365)
                                                        =========         ======     ==========    ===========       ========
June 30, 1999 Balance forward                           6,003,737         60,037     12,821,340    (13,274,742)      (393,365)
Shares issued for service                                 150,000           --             --             --             --
Reduction of note receivable                                 --             --           22,000           --           22,000
Net (loss) for quarter ended September 30, 1999              --             --             --             (204)          (204)


Balance at Quarter ended September 30, 1999             6,153,737         60,037     12,843,340    (13,274,946)      (371,569)
                                                        =========         ======     ==========    ===========       ========
</TABLE>


     The accompanying Notes are an integral part of these financial statements

                                       F-8

<PAGE>

<TABLE>
<CAPTION>

                                                          HARVARD SCIENTIFIC CORP.
                                                        (A DEVELOPMENT STAGE COMPANY)

                                                      STATEMENTS OF STOCKHOLDERS' EQUITY
                                           FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                                       TO SEPTEMBER 30, 2000 (UNAUDITED)


<S>                                                 <C>         <C>            <C>            <C>             <C>
Issuance of Shares for fees and
services                                              165,025          1,650         15,226           --            16,876
Reduction of Note receivable                             --             --           22,000           --            22,000
                                                   ----------   ------------     ----------   ------------    ------------
Net (loss) for the Year ended
   December 31, 1999                                     --             --             --          (57,183)        (57,183)
                                                   ----------   ------------     ----------   ------------    ------------
Balance at year ended December 31,
1999                                                6,153,737   $     61,537   $ 12,841,840   $(13,251,220)   $   (347,843)

Issuance of Shares for legal fees and services
                                                    6,500,000         65,000           --             --            65,000

Sale of shares                                        714,285          7,143         49,357           --            56,500
Issuance of preferred shares for
  Signetics.net acquisition                           400,000          4,000      4,296,000           --         4,696,000


Net loss for 3 mos. Ended March 31,2000                  --             --             --         (113,399)       (113,399)
                                                   ----------   ------------     ----------   ------------    ------------
Balance at March 31, 2000                          13,768,022   $    137,680     17,187,197   $(13,364,619)   $  4,356,258
Issuance of shares for legal fees and

services                                              278,000          2,880          3,120
                                                   ----------   ------------     ----------   ------------    ------------
Correction of shares issued (1st qtr)
For legal fees and services                          (898,585)        (8,986)         8,986

Net Loss for 3 mos. Ended June 30, 2000                                                           (127,021)     (  127,021)

Balance at June 30, 2000                           13,147,437        131,574      17,199,303   (13,491,640)      4,229,237

Issuance of shares for cash
  Net of offering costs                                50,000            500         14.500

Issuance of shares for interest                        50,000            500          9,500

Issuance of shares for legal fees                      70,000            700         13,300

Issuance of shares for legal
  Settlement                                           50,000            500         49,500

Issuance of shares to Mark Miller                      20,000            200           (200)

Issuance of stock for operating expenses              500,000          5,000         30,000

Net Loss for 3 mos. Ended September 30, 2000                                                      (115,222)       (115,222)

Balance at September 30, 2000                      13,897,437        138,974      17,315,903   (13,606,862)      4,114,015
</TABLE>

    The accompanying Notes are an integral part of these financial statements


                                       F-9

<PAGE>

<TABLE>
<CAPTION>

                                                 HARVARD SCIENTIFIC CORP.
                                              (A DEVELOPMENT STAGE COMPANY)

                                                 STATEMENTS OF CASH FLOWS

                                                                                                      1/13/87
                                                                        Nine Months Ended         (Inception) to
                                                                       Sept           Sept             Sept
                                                                      30, 2000      30, 1999         30, 2000
                                                                    (Unaudited)    (Unaudited)      (Unaudited)
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>           <C>
Reconciliation of Net Loss to Net Cash
  Used in Operating Activities:

Net Loss                                                            $   (355,642)   $    (80,909) $(14,575,763)
                                                                    ------------    ------------  ------------
Adjustments to Reconcile Net Loss to
  Net Cash Provided by (Used in)
  Operating Activities:

  Book value of assets sold                                                 --             6,182         6,483

  Loss on disposition of securities or fixed assets                         --             3,655     1,022,037
  Depreciation and amortization                                             --              --         285,928
  Amortization of Debt Issuance cost                                        --              --         625,000
  Issuance of stock for director's fees and
    employment services                                                   15,000            --       1,304,875
  Issuance of stock for consulting & legal fees                        4,475,500            --       4,758,681

  Issuance of stock for Property Rights                                     --              --           2,000

  Issuance of stock in legal settlement                                   50,000            --         856,208

  Discount on Convertible Debentures                                        --              --       1,750,000

  Interest Expense converted to Stock
    (Increase) decrease in assets:                                        10,000          13,297       108,795

    Accounts Receivable

    Note & Interest receivable                                              --              --      (1,047,958)
    Prepaid expenses                                                        --              --          37,173

    Deposits/Retainers                                                      --             1,210       (37,474)
    Legal Retainer                                                          --            37,174            --
    Other assets                                                            --                          18,000

  Increase (decrease) in liabilities:
    Accounts Payable                                                     (66,251)        (24,637)      362,557

    Credit Card Balance                                                   10,977            --          10,977
    Accrued expenses                                                        --            (6,054)       (8,616)
    Note Payable                                                         158,100            --         158,100
    Due to related parties                                                  --              --         310,300
                                                                    ------------    ------------  ------------
      Total Adjustments                                                4,653,326          30,827    10,573,066
                                                                    ------------    ------------  ------------
Net Cash Used in Operating Activities                               $ 4,297,684     $    (50,082) $ (4,002,697)
                                                                    ------------    ------------  ------------
</TABLE>

    The accompanying Notes are an integral part of these financial statements


                                      F-10

<PAGE>

<TABLE>
<CAPTION>

                                                  HARVARD SCIENTIFIC CORP.
                                               (A DEVELOPMENT STAGE COMPANY)

                                                  STATEMENTS OF CASH FLOWS

                                                                                                        1/13/87
                                                                          Nine Months Ended         (Inception) to
                                                                         Sept            Sept            Sept
                                                                       30, 2000       30, 1999          30,2000
                                                                      (Unaudited)    (Unaudited)      (Unaudited)
                                                                      ------------    -----------     ----------
<S>                                                                    <C>            <C>             <C>
Cash Flows from Investing Activities:

  Cash from sale (purchase) of stock                                    (4,295,000)          --       (4,295,000)


  Cash from sale (purchase) of equipment                                    (2,463)          --          (80,577)

  Cash from sale (purchase) of Intellectual Rights                            --             --         (150,000)

  Capitalized organization costs                                              --             --         (150,924)

                                                                       -----------    -----------    -----------

    Net Cash Used in Investing Activities                               (4,297,463)          --       (4,676,501)
                                                                       -----------    -----------     -----------

Cash Flows from Financing Activities:
  Proceeds from issuance of capital stock,
    net of offering costs                                                     --              150      4,584,821
  Proceeds from debt converted to capital stock                               --             --          250,000

  Proceeds from debt, net of costs                                            --             --          438,739

  Proceeds from debentures, net of costs                                      --             --        5,343,901

  Principal payments on debt paid in capital                                  --           38,725     (1,936,432)
                                                                       -----------    -----------    -----------
      Net Cash Provided by Financing Activities                               --           38,875      8,681,029
                                                                       -----------    -----------    -----------
Net Increase (Decrease) in Cash                                                221        (11,207)         1,831

Cash at beginning of period                                                  1,610         13,430           --
                                                                       -----------    -----------    -----------

Cash at end of period                                                  $     1,831    $     2,223    $     1,831
                                                                       ===========    ===========    ===========
</TABLE>


     The accompanying Notes are an integral part of these financial statements

                                      F-11


<PAGE>


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND ORGANIZATION

Nature of Business:

Harvard Scientific Corp. (the "Company") is a biopharmaceutical drug development
company  specializing  in  sexual  dysfunction  for both  male and  female.  The
Company'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
intends to conduct all clinical  testing  necessary for  regulatory  approval of
such  products  from the U.S.  Food and Drug  Administration  ("FDA") or similar
regulatory  agencies in foreign  countries  in order to initiate  marketing  and
establish distribution channels for its products.

Thus far, the Company's  intention is to develop the following products designed
to ameliorate sexual dysfunction:

     1. An Intraureathral  therapeutic  treatment for male erectile  dysfunction
     ("Male Intraureathral Product") 2. A topical therapeutic treatment for male
     erectile  dysfunction  ("Male  Topical  Product") 3. A topical  therapeutic
     treatment for female sexual dysfunction ("Female Topical Product"),  and 4.
     An orally administered form of liposomal,  lyophilized  Apomorphine for the
     treatment of male erectile dys-function ("Male Oral Product")

The  Company  is a  development  stage  enterprise  as  defined  by FASB No.  7,
"Accounting and Reporting by Development Stage Enterprises".

The Company plans to focus on LLPGE1 for the treatment of sexual dysfunction and
bring the products to the  marketplace.  In May 29, 1998,  the Company  received
approval  from  the FDA of the  Phase I study  and  authorization  of  Phase  II
clinical trials for the Male Intraureathral Product. Protocols for this Phase II
study  are  complete.   Furthermore,   the  Company   intends  to  file  an  IND
(Investigational  new Drug)  application with the FDA for Female Topical Product
for the treatment of female sexual dysfunction.

On February 17, 1998, the U.S.  Patent Office  approved and assigned  patent No.
5,718,917 to the Company for an invention "PGE1 Containing Lyophilized Liposomes
For Use In The  Treatment of Erectile  Dysfunction,"  referred to as LLPGE1.  In
June 1998, the Company filed an application for a patent in numerous regions and
countries  (Australia,  Brazil,  Canada,  China,  the Czech  Republic,  Eurasia,
Europe, Hungary,  Iceland,  Israel, Japan, Mexico, New Zealand,  Norway, Poland,
Korea,  Singapore,  Slovak,  Turkey and the Ukraine). In addition, in June 1998,
the Company  submitted an application  with the US Patent and Trademark  Office,
for its  development of a new method for treating male erectile  dysfunction via
the Intraureathral  administration of an  aqueous("liquid")  solution containing
two vasodilators, PGE1 and Papaverine.

On November 15, 1999,  notice was received from the U.S.  Patent Office that the
patent  application  for methods For the Treatment of Female Sexual  Dysfunction
was allowed pursuant to Notice of Allowances Case No. 34437.

Organization:

The  Company was  incorporated  under the laws of the State of Nevada on January
13, 1987.  Effective  February 2, 1998, the Company  approved a 1 for 10 reverse
stock split.  Shares  outstanding  went from  34,477,437  on February 1, 1998 to
3,447,769  just after the split.  The Company is moving forward with a strategic

                                      F-12
<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

plan to  facilitate  marketing of its  products in a manner which is  consistent
with enhancing its corporate image and further increasing shareholder value. All
figures in this  Report give  effect to  previous  stock  splits and the reverse
stock splits, and previously stated number of shares are appropriately restated.
The Company has 100,000,000 shares of Common Stock authorized.  In addition,  on
July 9, 1998, the shareholders of the Company  authorized  10,000,000  shares of
"blank check" Preferred Stock, none are outstanding on December 31, 1999.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organizational Costs:

Organization  costs  are  being  amortized  over a  five-year  period  using the
straight-line  method. At December 31, 1999, the Organizational Costs were fully
amortized.

Inventory:

Inventory is valued at the lower of cost or market.

Equipment:

Equipment is stated at cost.  Depreciation is incorporated on a double declining
balance basis over a period of 5 years. Expenditures for maintenance and repairs
are charged to expense as incurred.  Upon retirement or disposal of assets,  the
cost and  accumulated  depreciation  are  eliminated  from the  accounts and any
resulting gain or loss is included in expense.

Use of Estimates:

In order to prepare  the  financial  statements  in  conformity  with  generally
accepted accounting  principles,  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.

Earnings per share:

The earnings per share calculations were based on the weighted average number of
shares outstanding during the period.

Fully  dilutive   earnings  per  share  are  not  reflected   because  they  are
anti-dilutive.

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

                                      F-13
<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 3 - EQUIPMENT & LEASEHOLD IMPROVEMENTS

Equipment and building improvements consists of the following:

                                           December 31, 1998  December 31, 1997
                                             -------------      -------------


    Equipment & Leasehold Improvements      $       45,299     $       62,634
         Less: Accumulated  depreciation            35,461             11,930
                                             -------------      -------------

                        Total               $        9,838     $       50,704
                                            ==============     ==============

In April 1997, the Company  entered into an agreement for the lease of equipment
used in the process of sizing  Liposomes  which the Company uses in the delivery
of the Prostaglandin E1. The total lease amount of $32,893 is to be paid over 24
months.  The Company  records the lease as a capital lease  amortizing  payments
over the life of the lease.

The  Company  had  incurred  leasehold  improvements  to the  Irvine  office  of
approximately $4,300 in 1997, amortized over the life of the lease. In May 1998,
the Company  terminated the Irvine lease and moved the research and  development
office  from  Irvine to Costa  Mesa,  California.  The  balance  of  unamortized
improvements of approximately $2,755 was written off.

During the fourth  quarter of 1998 and the first  quarter of 1999,  the  Company
closed three  offices  (Florida,  Arizona and  California)  with all  operations
maintained out of a Reno,  Nevada office.  The office equipment in these offices
were donated to charitable organizations.

NOTE 4 - INTELLECTUAL PROPERTIES

On January 7, 1994,  the Company  exchanged  285,600 shares of common stock with
BTI for the intellectual rights to patent, develop,  manufacture, and market the
LLPGE1 for the  treatment of male  erectile  dysfunction,  impotency  and sexual
enhancement. The Company recorded the transfer of intellectual properties at the
par value of stock transferred, which amounted to $2,856.

On November 16, 1995, the Company  exchanged 613,850 shares of common stock with
BTI for assistance in raising  working  capital and patent  application  and for
management  assistance and  distribution  agreements  associated with the LLPGE1
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 33,500  shares of common  stock,
ceased product development in connection with a settlement accrued in 1995.

                                      F-14
<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

During 1997, the Company entered into three additional significant  transactions
with BTI for the  acquisition of intellectual  rights,  and for the provision of
technological, management, fundraising and marketing assistance. In addition, in
1996,  the Company  incurred costs payable to BTI for  consultation  and rent of
$133,157 and for research and development $50,378 of the LLPGE1 product.  During
1997,  BTI chose to  convert  the  accounts  payable  balance of  $333,535  as a
contribution to additional-paid-in-capital.

On November 20, 1997,  the Company  agreed to exchange  200,000 shares of common
stock,  which has been issued,  to BTI for the  Intellectual  Property Rights to
Prostaglandin E1 Lyophilized Liposomes for the use of treatment of Psoriasis. In
addition,  the Company is to pay BTI $150,000.  BTI was to receive a 3% override
on royalties of the  Psoriasis  product.  On June 11, 1998,  BTI and the Company
agreed  that BTI would  transfer  an  irrevocable  royalty-free  license  to all
intellectual property,  intangibles,  patents, trade secrets,  trademarks, trade
names and goodwill relating to BTI that exists or is in development, relating to
male  and/or  female  sexual  dysfunction,  for the  return of the  intellectual
property related to the Psoriasis product that BTI previously had transferred to
the Company and the granting to BTI registration right (effective July 28, 1998)
as to all shares of the Company's  common stock held by BTI on July 20th,  1998.
In addition,  all royalty  agreements with respect to products other than sexual
dysfunction  have  been  terminated.   In  addition,  the  Company  forgave  the
indebtedness of BTI of $892,819.  The debt forgiveness is treated as part of the
cost of the intellectual properties received from BTI.

In  December  1998,  the  Company had a balance in  Intellectual  Properties  of
$1,053,814, with accumulated depreciation of $53,196 for a net of $1,000,619. On
December  31,  1998,  Intellectual  Properties  was  written  down to zero,  the
determined market value at that time.

NOTE 5 - ACCRUED EXPENSES

Accrued expenses consist of the following:

                                             (Audited)             (Audited)
                                         December 31, 1998     December 31, 1997
                                         -----------------     -----------------

Interest on notes and debentures             $      0           $131,694
Accrued payroll & payroll taxes                63,662                  0
                                             --------           --------

                             Total           $ 63,662           $131,694
                                             ========           ========


Also see Note 10 for interest on debentures.

NOTE 6 - RELATED PARTY TRANSACTIONS

1.   During 1994,  1995 and 1997,  the Company  entered  into three  significant
     transactions  with  related  parties for the  acquisition  of  intellectual
     rights, and for the provision of technological, management, fundraising and
     marketing assistance. Note 4 describes the valuation of these transactions.

                                      F-15

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

2.   During  1997,  the  Company  incurred a payable of  $150,000 to BTI for the
     Intellectual  Property Rights to Prostaglandin E1 Lyophilized Liposomes for
     the use of treatment of  Psoriasis.  On June 11, 1998,  BTI and the Company
     agreed that BTI would transfer an irrevocable  royalty-free  license to all
     its intellectual property relating to sexual dysfunction, for the return of
     the  intellectual  property  related to the Psoriasis and other  non-sexual
     dysfunction products that BTI previously had transferred.  In addition, the
     Company forgave BTI's  indebtedness of $895,819,  which was treated as part
     of the basis of the intellectual properties. See Note 4.

3.   During 1996, BTI advanced  20,000 of its shares on behalf of the Company as
     a subordinated  loan agreement.  The shares were loaned and are expected to
     be returned  to BTI in 1998.  At the time of the  advance,  the fair market
     value of the shares  transferred  was  $500,000.  During 1997,  the Company
     advanced to BTI $500,000 in connection with this  settlement.  The $500,000
     was part of the forgiven debt of $895,819 described above.

4.   In 1997, BTI, a major  stockholder of the Company,  received  $352,305 from
     the sale of the Company's Common Stock that was subject to recapture by the
     Company pursuant to Section 16(b) of the Securities Exchange Act of 1934.

     In January 1998, BTI received $40,514 from the sale of the Company's Common
     Stock that was subject  recapture by the Company  pursuant to Section 16(b)
     of the Securities Exchange Act of 1934. In January 1998, $40,514 was booked
     as a receivable from related parties to reflect the recapture.  This amount
     was also part of the forgiven debt of $895,819 described above.

5.   During the year 1997, BTI chose to convert the accounts  payable balance of
     $333,535 as a contribution to additional-paid-in-capital.

6.   BTI owned approximately 10% and 22% of the Company's shares on December 31,
     1998,  December 31, 1997,  respectively.  Dr.  Jackie See a Director of the
     Company and a controlling person of BTI. Dr. Jackie See owned approximately
     35% of the Common Stock of the Company on December 31, 1998,  including the
     shares  owned by BTI and  shares  that Dr.  See has the  right to  purchase
     (296,302 shares)(see Note 8).

7.   In November  1997,  the Company  issued  400,000  shares of Common Stock to
     Thomas E. Waite,  the  President  and  Chairman of the Board,  as a signing
     bonus. The transaction was recorded at par value.

8.   The Company has entered into a financing  agreement dated January 13, 1998,
     as amended on February 3, 1998,  between Dr. Jackie R. See, Thomas E. Waite
     and the  Company  for the  funding of the  Company up to  $10,000,000.  Dr.
     Jackie R. See and Mr. Thomas E. Waite were Directors of the Company. Thomas
     E. Waite was also President and Chief Executive Officer of the Company.  On
     February 3, 1998, the Company issued 790,139 shares to each Dr. Jackie See,
     M.D. and Thomas E. Waite in  connection  with this private  placement.  All
     shares  owned by Dr.  Jackie See and  Thomas E.  Waite,  have  registration
     rights.  These  registration  rights  have  been  exercised  and  upon  the
     registration  statement  becoming effective (July 28, 1998), the shares can
     be sold in accordance  with the  Securities  Act of 1933,  subject to state
     securities laws. See Note 8 and Note 9.

9.   The Company often pays for services,  fees,  and salaries by issuing shares
     of Common  Stock.  Most of this stock issued for services  must be held for
     investment to satisfy the exemption from registration under Section 4(2) of
     the Securities Act of 1933, as amended. Rule 144 under the statute requires
     that such  stock be held for a year,  before  it can be sold in  accordance
     with rule 144.

                                      F-16

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

     During 1998, the Company issued a total of 1,590,278 shares of Common Stock
     to  directors  of the  Company.  10,000 of these  shares were booked at the
     price of the most recent sale of the stock for cash to  shareholders of the
     registration  statement  held  effective  July 28,  1998.  The  balance  of
     1,580,278 was issued in conjunction  with the Waite and See Agreement,  see
     Notes 8 and 9.

     During 1998, the Company  approved and issued 10,000 shares of Common Stock
     (restricted)  to an employee of the Company for prior and current  services
     rendered.  In addition,  during 1998 the Company  issued  97,500  shares of
     Common Stock for services performed by outside consultants.  270,200 shares
     of Common  Stock were  returned to the Company  treasury as part of a legal
     settlement with prior affiliates of the Company (see Note 10). These shares
     were recorded at the lesser of 1) the value of the Common Stock on the date
     issued or 2) the most recent sale of the stock for cash to  shareholders of
     the registration statement held effective July 28, 1998.

     During the first quarter 1999,  the Company  issued 15,000 shares of Common
     Stock  to an  employee  of  Company,  in  accordance  with  her  employment
     agreement and considered additional  compensation fully earned in 1998. The
     stock is  restricted as defined in Rule 155 under  Securities  Act of 1933.
     The employee is no longer with the Company.  The  transaction was valued at
     the low bid price on the day of the transfer, or $16,875.

     Also see discussions  regarding  intellectual  properties and agreements in
     Notes 4 and 8.

NOTE 7 - INCOME TAXES

     The Company has federal net  operating  loss  carryforwards  for  financial
     statement purposes of approximately $14,000,000 at December 31, 1999, which
     will  be  used  to  offset  future  earnings  of  the  Company.   The  loss
     carryforwards  will expire during the years ending 2002 through 2013 if not
     used.

NOTE 8 - CONTRACTS & AGREEMENTS

1.   Certain  contracts and agreements with the Company have been placed on hold
     until  financing  arrangements  have been  made.  These  contracts  include
     certain  employment  contracts and other agreements between the Company and
     parties expected to perform services for the Company.

2.   A financing  agreement  dated  January 13, 1998,  as amended on February 3,
     1998 was entered  into between Dr.  Jackie R. See,  Thomas E. Waite and the
     Company for the funding of the Company up to $10,000,000.  The agreement as
     so  amended,  calls for  initial  funding of  $5,000,000  in  exchange  for
     1,580,278 shares of Common Stock, with registration  rights,  calculated at
     $3.164 per share  (the  average  closing  bid price per share of the Common
     Stock for the 10 days ending  January 12, 1998,  and adjusted for the 1 for
     10 reverse  split  effective  February 2, 1998).  This initial  funding was
     effected on February 3, 1998 by the delivery of a check for  $7,901.39  and
     Promissory   Notes  to  March  31,   1999  in  the   principal   amount  of
     $2,492,098.61,  bearing  interest at the rate of 1% above prime and secured
     by the  shares  purchased  from each of Dr. See and Mr.  Waite.  Subsequent
     funding is at the  discretion  of the  investors  and can be  purchased  in
     tranches of $500,000  to  $2,000,000  up to an  aggregate  of  $10,000,000,
     including the initial  funding,  prior to April 1, 1999. The future funding
     price is $6.328 per share for the next $2,500,000 and $12.626 per share for

                                      F-17
<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

     the last  $2,500,000  (as  adjusted to reflect  the 1 for 10 reverse  stock
     split  effective  February 2, 1998).  Dr.  Jackie R. See and Mr.  Thomas E.
     Waite were Directors of the Company. Thomas E. Waite was also President and
     Chief  Executive  Officer of the Company.  On February 3, 1998, the Company
     issued  790,139  shares to each Dr. Jackie See, M.D. and Thomas E. Waite in
     connection with this private placement with  registration  rights effective
     July 28, 1998. A fairness opinion has been obtained in connection with this
     Financing  Agreement  from HD Brous & Co.,  Inc., a New York Stock Exchange
     member firm located in Phoenix, Arizona.

     The  promissory  notes  began  to  accrue  interest  at 8% on the  date the
     registration statement (for these shares) became effective (July 28, 1998).
     At December 31, 1998,  the Company had accrued  interest  from both Dr. See
     and Mr. Waite of $165,861.  During the 4th quarter of 1998,  Mr. Waite made
     payments  towards his note balance of $300,000.  At December 31, 1998,  the
     principal  balance  due on these two  promissory  notes is  $4,684,197.  At
     December 31, 1998,  the full balance of principle and interest was reserved
     as  a  contra  asset  account  to  the  receivable  balance  with  interest
     receivable balance of $165,861 written off against interest income.

     On March 31,  1999,  the  Promissory  Notes due from Dr.  Jackie R. See and
     Thomas E. Waite were due and payable.

     On May 14, 1999,  the Company  agreed to resolve the Promisory Note payable
     of $2,492,099 by Dr. See to the Company,  plus accrued interest of $147,221
     through May 14, 1999, the date of this agreement,  as follows:  (i) Dr. See
     will use his 790,139 shares issued in connection  with the Promissory  Note
     transaction  to the  benefit of the  Company  whether by  contributing  the
     proceeds from the sale of such shares or by paying certain of the Company's
     obligations  with such  shares  (ii) Dr.  See  agrees to use an  additional
     300,000  shares - i.e.,  the entire balance of the shares owned by him - to
     the benefit of the Company.  Thus, all of Dr. See's  1,090,139  shares have
     been  obligated in this manner.  To date, Dr. See has  transferred  990,139
     shares to pay Company  obligations as well as the proceeds from the sale of
     another 100,000 shares. (iii) Bio-Sphere Technology, Inc., in behalf of Dr.
     See,  agrees to grant the Company an exclusive  license of its  proprietary
     invention  and  trade  secrets  regarding  the  use  of  liposomes  bearing
     prostaglandin's  for the  treatment  of  psoriasis.  (iv)  Dr.  See  waives
     arrearages in fees under his consulting agreement.

     Mr. Waite has not been relieved from his obligation to pay in full the note
     and interest balance due the Company ( See Note 9).

3.   On December 1, 1997, the Company renegotiated the consulting agreement with
     Martin E. Janis & Company, Inc. ("Janis"), dated December 13, 1996, whereby
     Janis, a public relations  agency,  is to carry out an extensive  financial
     promotional program including public relations for the Company, in exchange
     for 50,000 shares of the Company's  (restricted) Common Stock plus a fee of
     $5,000 a month for a period of one year  beginning  December  1,  1997.  On
     December 1, 1998, the consulting  agreement  expired and was not renewed by
     the Company. The Company recorded the shares at par value.

4.   On August 4, 1997, the Company entered into a consulting agreement with Dr.
     Lorenz  M.  Hofmann,  Ph.D.  ("Hofmann"),  whereby  Hofmann  is to lead the
     clinical  development  program  for  liposomal  Prostaglandin  E1  for  the
     treatment of male erectile  dysfunction.  The Company agreed to pay Hofmann
     $15,000 per month plus 10,000  shares of  (restricted)  Common  Stock.  The
     stock was recorded at par value.  On May 29, 1998,  the Company  terminated
     his agreement.

                                      F-18

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

5.   On August 1, 1997, the Company entered into a consulting agreement with Dr.
     Irwin Goldstein, M.D. ("Goldstein"),  whereas the Company has agreed to pay
     Goldstein  $10,000  upon signing the  agreement  and $4,000 per month until
     March 1, 1999.  Effective July 1, 1998, the Company agreed to pay Goldstein
     $7,000 per month until March 1, 1999.  Goldstein  is a Professor of Urology
     and is  assisting  the Company  through the required FDA stages in bringing
     the  LLPGE1  product  to the  marketplace.  Effective  January  1, 1999 the
     agreement with Dr. Irwin Goldstein was terminated.

6.   On July 15, 1997,  the Company  entered into a  consulting  agreement  with
     Scopes-Garcia-Carlisle  Advertising,  Inc. ("Scopes"),  whereby Scopes will
     provide  professional  advertising  and marketing,  and a public  relations
     promotion  plan to help promote the Company's  sale of it's  product(s) and
     stock, in exchange for a fee of $3,000 per month beginning August 15, 1997.
     The agreement expired January 15, 1998 and was not renewed.

7.   On March 19, 1997, and again on May 15, 1997,  the Company  entered into an
     agreement with Alexander H. Walker, Jr. ("Walker"), former General Counsel,
     Director and Officer of the Company. Walker was retained as General Counsel
     as to all legal matters for the Company. In addition,  he was to prepare or
     supervise the  preparation of Securities and Exchange  Commission  filings,
     contracts and agreements.  Walker was to receive $15,000 per month plus the
     issuance  of Common  Stock  shares of the  Company of up to 100,000  shares
     prorated over a three-year  period.  In 1997,  Walker received $231,678 and
     was issued  105,200  shares of Common Stock.  The shares  transferred  were
     recorded at par value.

8.   On November 6, 1997, the Company renegotiated the consulting agreement with
     I.W. Miller & Co. ("Miller") dated September 18, 1997,  whereby Miller will
     provide  investor  relation  consulting  services for the Company for a one
     year term  beginning  September  18, 1997  expiring  September 17, 1998, in
     exchange for 40,000 shares of the Company's Common Stock (with registration
     rights). All prior agreements with Miller have been terminated. In November
     1997,  the shares  transferred  were recorded at $537,500,  the fair market
     value of the shares on the date the shares  were  transferred.  The Company
     did not renew this agreement with Miller.

9.   On November 17, 1997,  the Company  amended the  consulting  agreement with
     Kostech Data  Corporation  ("Kostech")  dated  December  31, 1996,  whereby
     Kostech will  establish  and maintain an ongoing  Internet  based  investor
     relations  program including the reprint and republish of research material
     on wire service and media,  in exchange for 10,000  shares of  (restricted)
     Common Stock of the Company.  The agreement expired on December 9, 1998 and
     was not renewed. The Company recorded the shares at par value.

10.  On February 23, 1998, the Company  entered into a financing  agreement with
     an independent  investor  ("Investor"),  under which the Investor  provided
     financing  of $600,000 to the  Company in  exchange  for 200,000  shares of
     Common Stock of the Company.  The agreement states that if on the effective
     date of the Registration Statement,  the closing bid price of the Company's
     stock is less than $6.00 per share,  the Investor is to receive  additional
     shares  calculated by taking the difference  between (a) 600,000 divided by
     one-half  the  closing  bid  price  of the  company's  Common  Stock on the
     effective  date and (b) 200,000.  In February  1998,  the Company  received
     $600,000  and  issued  200,000  shares to the  Investor.  The  Registration
     Statement was effective July 28, 1998 and the closing bid price on that day
     was $6.62.

11.  On June 11, 1998,  the Company  authorized the issuance of 30,000 shares of
     Common Stock to a consultant of the Company, Medhat Gorgy, as a part of his
     consultant agreement dated June 10, 1998. Of such shares,  25,000 shares of
     Common Stock are entitled to  registration  rights under the Securities Act
     of 1933.  The 5,000 shares  without  registration  rights plus 3,000 shares

                                      F-19

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

     with  registration  rights  were  issued on June 11,  1998.  The balance of
     22,000 shares is issuable  monthly in lots of 2,000 shares each. The shares
     issued and  issuable to Mr. Gorgy are  effected  pursuant to the  exemption
     from  registration  under Section 4(2) of the  Securities  Act of 1933. The
     8,000  shares  issued  through June 30, 1998 were valued at the closing bid
     price on the day the shares were issued.  The  Registration  Statement  was
     effective July 28, 1998 and the closing bid price on that day was $6.62.

12.  On June 19,  1998,  the Company  entered  into a financing  agreement  with
     Ronald E.  Patterson,  under  which Mr.  Patterson  provided  financing  of
     $249,999 to the Company in exchange  for 83,333  shares of Common  Stock of
     the Company. If, on the effective date of the Registration  Statement,  the
     closing bid price of the Company's stock is less than $6.00 per share,  Mr.
     Patterson  is  to  receive  additional  shares  calculated  by  taking  the
     difference between (a) 249,999 divided by one-half the closing bid price of
     the  company's  Common  Stock on the  effective  date and (b)  83,333.  The
     Registration  Statement  was  effective  July 28,  1998 and the closing bid
     price on that day was $6.62.

13.  On June 29, 1998 the Company entered into financing  agreements with the RK
     Company,  under which The RK Company provided a total financing of $450,000
     to the  Company  in  exchange  for  150,000  shares of Common  Stock of the
     Company.  If, on the  effective  date of the  Registration  Statement,  the
     closing bid price of the Company's stock is less than $6.00 per share,  the
     RK  Company  is to  receive  additional  shares  calculated  by taking  the
     difference  between (a) 50,000 divided by one-half the closing bid price of
     the  company's  Common  Stock on the  effective  date and (b)  16,667.  The
     Registration  Statement  was  effective  July 28,  1998 and the closing bid
     price on that day was $6.62.

14.  On July 1, 1998, the Company  entered into a settlement  agreement  between
     GensiaSicor  Pharmaceuticals,  Inc. and agreed to transfer 20,000 shares of
     Common  Stock of the  Company in  exchange  for the  release of all claims,
     demands, etc. arising from a manufacturing  agreement with the Company. The
     shares were transferred on July 8, 1998 and valued at $3.00,  which was the
     lesser of 1) the  closing  stock price on the date  transferred  or 2) cash
     received in exchange for stock from investors  included in the registration
     statement effective July 28, 1998.

15.  On July 1, 1998, the Company entered into financing  agreements with the RK
     Company,  under which the RK Company  provided  financing of $50,000 to the
     Company in exchange for 16,667  shares of Common Stock of the Company.  If,
     on the effective date of this Registration Statement, the closing bid price
     of the Company's stock was less than $6.00 per share, the RK Company was to
     receive  additional shares calculated by taking the difference  between (a)
     50,000  divided by one-half the closing bid price of the  company's  Common
     Stock on the effective date and (b) 16,667. The Registration  Statement was
     effective July 28, 1998 and the closing bid price on that day was $6.62.

16.  On July 7, 1998,  the  Company  entered  into a  financing  agreement  with
     Elisabeth & Samuel Valenzisi, under which Mr. and Mrs. Valenzisi provided a
     total  financing  of $24,000 to the Company in exchange for 8,000 shares of
     Common Stock of the Company. If, on the effective date of this Registration
     Statement, the closing bid price of the Company's stock was less than $6.00
     per  share,  Mr.  &  Mrs.  Valenzisi  were  to  receive  additional  shares
     calculated by taking the difference  between (a) 24,000 divided by one-half
     the closing bid price of the company's  Common Stock on the effective  date
     and (b) 8,000. The  Registration  Statement was effective July 28, 1998 and
     the closing bid price on that day was $6.62.

                                      F-20

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

17.  The Company  entered into a consulting  agreement  with Francis C. Pizzulli
     effective  June 1, 1998,  whereby Mr.  Pizzulli is to perform legal advice,
     service  and legal  consulting  and to  retain  legal  counsel  to serve as
     counsel of record in litigation and arbitration  matters to the Company, in
     exchange for a fee of $10,000 per month plus 45,000 shares of the Company's
     Common Stock as a signing bonus. The shares issued have registration rights
     and have been included in the  Registration  Statement  filed with the U.S.
     Securities and Exchange Commission on July 20, 1998, which became effective
     on July 28, 1998.

18.  On July 20, 1998, the Company's  filed a registration  statement  under the
     Securities Act of 1933,  registering  4,166,133 shares of its Common Stock,
     and was declared effective on July 28th, 1998. The closing bid price of the
     stock on that day was $6.62.

19.  Since  January  1999,  the  Chief  Financial  Officer  of the  Company  has
     maintained the Company's  operations out of his Reno, Nevada office.  Prior
     to that time, the Company had the following office lease commitments:

    (a)  In June 1998, the Company moved its research & development offices from
         Irvine,  California to Costa Mesa,  California  where they occupied 930
         square feet.  Rent was $900 monthly  beginning  June 15, 1998  expiring
         June 14, 1999. During January 1999, the Company  negotiated out of this
         lease  closing  this  office.  All  research  and  development  will be
         performed out of a designated laboratory still to be determined.

    (b)  On July 20, 1998 the Company moved the administrative headquarters from
         Reno, Nevada to Scottsdale,Arizona where the accounting operations were
         maintained. They occupied 144 square feet and paid rent of $610 monthly
         expiring August 31, 1999.  During January 1999, the Company  negotiated
         out of this lease,  moving all  administrative  functions  to the Reno,
         Nevada office.

    (c)  In December  1998, the Company  closed its  headquarters  in Lake Mary,
         Florida.


NOTE 9 - CONTINGENCIES

The Company is a party in certain  pending or  threatened  legal,  governmental,
administrative,  or judicial  proceedings  that arose in the ordinary  course of
business.  The  following  includes  a list of  current  pending  or  threatened
proceedings,  which are  believed  not to affect the  financial  position of the
Company in a material way at this time:

    (a) Investors Capital Enterprises, Inc. v. Harvard Scientific Corp. and Does
        1-50 Case No:  BC209049,  filed April 20, 1999 in  Superior  Court,  Los
        Angeles County , State of California.  Investor's  Capital  Enterprises,
        Inc. alleges that it was due a fee of 87,500 shares  (post-split) of the
        Company's Common Stock in exchange for arranging certain financing.  The
        complaint  alleges that it did arrange certain financing through DJ Ltd.
        Investors Capital  Enterprises claims that such an investment  qualifies
        for its commission  agreement and that it advised the Company in writing
        on July 1, 1996.  The complaint  alleges that the market value of 87,500
        shares on May 15, 1996 was $2,100,000.

        During September 1999, the court ordered this Case to proceed to binding
        arbitration.  However, to date, Investors Capital Enterprises,  Inc. has
        not initiated the arbitration.

    (b) On March 8,  1999,  an action  entitled  Thomas  Waite,  Plaintiff,  vs.
        Harvard Scientific Corp., a Nevada  Corporation,  and Dr. Jackie R. See,
        Defendants,  was filed by Mr. Waite, former President,  CEO and Chairman
        of the  Board.  The case  was  filed  in the  Circuit  Court of the 18th
        Judicial  District  in  and  for  Seminole  county,  Florida,  Case  No.
        99-508-CA-15-K.  The  action  alleges  that Mr.  Waite was  fraudulently
        induced to enter into the February 1998 financing  agreement approved by
        the stockholders in May of 1998. In addition, Mr. Waite seeks rescission
        of such loan agreement in the amount of  $2,492,098.61  and repayment of

                                      F-21

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

         $300,000 loaned under the agreement and consequent  cancellation of the
         transaction that resulted in 790,139 shares issued to Waite in February
         1998.  On April 6,  1999,  the  Company  and Dr.  See filed a notice of
         removal of the  action  tot he United  States  District  Court,  Middle
         District of Florida, Orlando Division, as Case No.  99-409-CIV-ORL-22B.
         On September 3, 1999 the Judge dismissed the Case without prejudice and
         directed to the clerk to close the file.

    (c)  Harvard    Scientific   Corp.   v.   Thomas   E.   Waite,    Case   No.
         CV-N-99-00245-ECR,  was filed on April 30,  1999 in the  United  States
         District Court for the District of Nevada,  Reno. The complaint alleges
         breach of contract of fiduciary  duty and unjust  enrichment  claims in
         connection with former CEO,  President and Director,  Thomas E. Waite's
         non-payment  of a promissory  note due to the Company on March 31, 1999
         in the amount of  $2,492,098.61.  The  complaint  also  alleges a claim
         under section 16(b) of the Securities Exchange Act of 1934, as amended,
         in  connection  with  profits  alleged to be over  $700,000 on sales of
         Company stock in 1997. The Company is awaiting a response from Waite to
         the complaint, and to the motion to transfer the action Waite has filed
         in the state of Florida to be consolidated  with this case filed in the
         federal  court in  Reno,  Nevada  (see  above).On  ________the  Company
         settled in principal all  litigation  with Thomas Waite,  including any
         claims past or present Mr.  Waite may have against the Company for back
         salaries or other claimed  sums.  The Company will cancel the remaining
         note for the shares  issued  pursuant to the financing  agreement  with
         Thomas Waite subject to Thomas Waite  returning to the direction of the
         Company  the  remaining  490,000  shares  which was the  subject of the
         financing  agreement.  In addition  the Company will arrange to relieve
         Thomas Waite of any personal  obligation to Mr. Lee Tawes regarding the
         $300,000  note  secured by 300,000  shares of the  financing  agreement
         stock.

    (d)  On November  3, 1995,  BTI entered  into an  agreement  with a European
         marketer, Pharma Maehle ("Pharma"), whereby Pharma was to establish the
         European market for the Company's  erectile  dysfunction  product (only
         the Intraureathral Product) to develop, manufacture, sell, practice and
         exploit the use of the Company's  proprietary  license  technology.  In
         February  1996, an amendment to the agreement was signed to reflect the
         transfer of said agreement from BTI to the Company.  On March 20, 1996,
         Section  19.0  (Entire  Agreement)  was  amended to better  express the
         intent of the  parties.  On December  20,  1996,  the Company  notified
         Pharma in writing that it was  terminating  the agreement for breach of
         contract  and the  implied  covenant  of good  faith  and fair  dealing
         inherent in all contracts by failing to exercise  reasonable  diligence
         to exploit the technology  and patent rights.  On January 13, 1997, the
         Company  signed a Letter of  Understanding  with  Pharma,  whereby  the
         parties would consider  working out a formal  agreement  settling their
         disputes after seeking advice from legal counsel.  The agreement was to
         be accomplished  within 10 working days from January 13, 1997, and when
         that did not occur, the Company again notified Pharma of it's intent to
         terminate  any and all  agreements  with  Pharma  referencing  previous
         termination notices. Pharma contends the various notices of termination
         were  withdrawn  or  ineffective  and  the  agreement  is  enforceable.
         However,  the  Company  believes  it  has  rightfully   terminated  the
         agreement with Pharma,  which has been and continues to be in breach of
         the agreement in any event.  The validity of the agreement is currently
         in dispute.

         On February 19, 1998,  the Company  renewed  it's  previous  notices of
         termination  and renoticed the  termination of the licensing  agreement
         with Pharma. The Company demanded binding  arbitration under Nevada law
         of the existing  disputes  between the parties pursuant to the terms of
         the  licensing  agreement.  It appears that Pharma Maehle has abandoned
         arbitration.

    (e)  Hardesty, Ltd., vs. Harvard Scientific Corp. et al, Case No. CV99-05715
         filed on October  22,  1999,  in the Second  Judicial  District  Court,
         Washoe County, State of Nevada.  Hardesty,  Ltd. Challenges it rendered
         legal  services and advanced  costs for  Defendant  from  December 1997
         through  December 1998 in excess of $10,000.  The Company has requested
         through its  Attorney  the subject fee dispute be  arbitrated  with the
         State  Bar of  Nevada.  No action is  expected  until  late in the year
         regarding this arbitration.

                                      F-22

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

    (f)  RK Company vs. Harvard  Scientific  Corp.,  Case No. 99 C 4261,  United
         States District Court, Northern District of Illinois, Eastern Division.
         Plaintiff  alleges  massive  fraud  perpetrated  by Defendant to induce
         Plaintiff  to invest and hold  securities  in Harvard  Scientific.  The
         Company  through  its  attorney  and  Optima  Financial  is in  serious
         settlement  negotiations to bring this case to a close by the middle of
         August,  2000 for cash and stock as yet to be determined as part of the
         Companys  reorganization  plan. The Company expects to settle this case
         in terms favorable to the Company.

    (g)  Pyramid  Laboratories vs. Harvard  Scientific  Corp.,Case No. 811584 in
         the  Superior  Court of the  State of  California,  County  of  Orange,
         Central Justice Center:  Pyramid Laboratories is seeking  approximately
         $133,100.00 in damages from Harvard for services  allegedly provided to
         Harvard. This amount is disputed by Harvard. Harvard asserts that there
         should  be  an  offset  of  this  amount  due  to  actions  of  Pyramid
         Laboratories.  This  matter is set for trial on May 30,  2000 in Orange
         County  Superior  Court.  This case and the  Medhat  Gorgy vs.  Harvard
         Scientific  set out in h below were  settled for the Company in June on
         the  date of  trial  by  Optima  Financial.  Settlement  terms  include
         promissory  notes and the issuance of an undetermined  number of shares
         of common stock. As part of the settlement,  Pyramid  Laboratories  and
         Medhat Gorgy have agreed to resume work for the Company on a pay as you
         go plan.

    (h)  Medhat Gorgy vs. Harvard  Scientific  Corp., Case No. CV99-04662 in the
         Second Judicial District Court of Washoe County,  Nevada. Medhat Gorgy,
         a principal of Pyramid  Laboratories,  has filed suit  against  Harvard
         claiming  damages for  services  alledgedly  provided  to Harvard.  The
         amount  sought is disputed by Harvard.  The Company  seeks an offset of
         the amount due to actions  of Medhat  Gorgy and seeks  damages  against
         Medhat  Gorgy in a  counterclaim.  The Company  seeks  damages  against
         Pyramid Laboratory as a third party defendant to this action.  Case was
         settled  on June 1,  2000,  for a  promissory  note  in the  amount  of
         $65,000.00 and 50,000 shares of Common stock.

NOTE 10 - CONVERTIBLE DEBENTURES

In March  1997,  pursuant  to a private  placement,  the Company (a) sold to one
investor  $5,000,000   principal  amount  of  6%  Convertible   Debentures  (the
"Debentures")  due  March  30,  1998 and (b)  received  a  commitment  from that
investor,  subject to various conditions,  to purchase additional  Debentures in
the  aggregate  principal  amount  of up  to  $10,000,000  in  two  tranches  of
$5,000,000  each,  also to be due March 30, 1998. The Debentures are 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.  Market price is defined as
the  average  closing bid of the Common  Stock on the five (5) days  immediately
preceding  March 21,  1997 or the actual  conversion  date.  The Company has the
right to require,  by written notice to the holder of this debenture at any time
on or  before  ten days  prior to the  maturity  date,  that the  holder of this
debenture  exercise its right of conversion  with respect to all or that portion
of the  principal  amount and  interest  outstanding  on the maturity  date.  In
addition, at the time of issuance, the Company accounted for the 20% discount to
market of $1,000,000 as additional interest expense and paid-in-capital.

Issuance costs of $625,000 related to the first  $5,000,000  principal amount of
6%  Convertible  Debentures  sold in March  1997  were  deferred  and are  being
amortized on a  straight-line  basis through March 31, 1998. On January 6, 1998,
the investor served a conversion notice for the sum of $250,000 of the principal
amount plus $11,917 of interest expense, for the issuance of 1,036,064 shares of
Common Stock on January 15,  1998.  Springrange  had  submitted  two  additional
conversion notices: 1) January 28, 1998 for the conversion of $250,000 principle
plus  interest,  and 2) on  January  29,  1998 for the  conversion  of  $250,000
principle plus interest. The Company did not honor these requests.

On September 23, 1998, the Company came to an agreement with Springrange and the
courts  approved  the terms of the  settlement  agreement.  The  Company  issued
600,000  shares of its  Common  Stock to a third  party who  purchased  them for
$1,800,000,  and, in turn,  paid  $1,800,000 to  Springrange  for full and final
settlement of all claims.

                                      F-23

<PAGE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

On September 23, 1998,  $2,450,000 of the Debenture plus $75,661 interest on the
Debenture had been converted into 385,831 shares of the Company's  Common Stock.
The Company  recorded the  transfer of 600,000  shares of Common Stock valued at
$1,800,000,  eliminating the debt balance of $2,550,000 plus accrued interest of
$218,901,with  the net of $968,901  booked to forgiveness of debt and treated as
ordinary income.

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 from other sources. If additional capital is
not secured, there is considerable doubt about the Company's ability to continue
as a going concern.

NOTE 12 - SUBSEQUENT EVENTS

Eric N. Savage v. Harvard  Scientific  Corp.,  Dr. Jackie See, Does I through X,
Case No. A381022 filed on November 10, 1997 in the District Court, Clark County,
Nevada.  Eric N. Savage  ("Savage"),  a former  employee and officer of Harvard,
alleges that pursuant to an oral  representation made in March 1994, that he was
entitled to receive 150,000 shares (restated to reflect the current stock splits
and reverse stock  splits),  which were not authorized for issuance to him until
July 1994.  Savage also alleges that the Company agreed to backdate the issuance
of the 150,000 shares to Savage to the date March 17, 1994 employment  contract,
which contract made no mention of any share compensation. Savage further alleges
that the  defendants  restricted and delayed him from selling shares causing him
financial losses in excess of $1,250,000.

On May 18, 2000 an  agreement  was reached  whereby  Harvard  will issue  75,000
shares of stock to Savage.

Harvard  Scientific  Corporation  vs. David E Jordan,  Case No.  98-2031-CA-16-P
filed in the circuit court of the 18th  Judicial  Circuit,  in Seminole  County,
Florida,  filed on or about October 1, 1998.  David E. Jordan  ("Jordan")  was a
consultant to the Company. On May 15, 1997, the Board of Directors  considered a
resolution engaging Jordan for his services.  At that time the Company discussed
a compensation of $15,000 per month plus 100,000 shares (restated to reflect the
1 for 10 reverse  split  effective  February  2, 1998) of the  Company's  Common
Stock. A Consulting  Agreement was never  consummated.  Despite the fact that no
agreement was consummated,  stock certificates  evidencing 100,000 shares of the
Company's  Common Stock were issued and  delivered to Jordan on June 6, 1997. On
or about June 17, 1997,  the Company  cancelled  the 100,000  shares  issued and
delivered to Jordan.  In April 1997,  prior to the issuance  date of the 100,000
shares, Jordan marketed and sold portions of these shares. Jordan also presented
himself as an agent of the Company in the sale of these shares when,  indeed, he
had never  received the  authority to do so. This case was settled and dismissed
by a Court Order dated April 17, 2000. The settlement agreement requires Harvard
to issue 125,000 shares to David Jordan or his nominees.

                                      F-24

<PAGE>

ITEM 2:  Management's Discussion and Analysis or Plan of Operation

         The discussion  contained in this Item 2 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 section.

OVERVIEW:
--------

         Harvard  Scientific  Corp.  is  a  biopharmaceutical  drug  development
company.  The Company'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 intends to conduct and conclude, either on its own or with
the assistance of an industry  partner(s),  all clinical  testing  necessary for
regulatory  approval of such products from the U.S. Food and Drug Administration
("FDA")  and/or  similar  regulatory  agencies in foreign  countries in order to
initiate  marketing and establish  distribution  channels for its products.  The
Company is currently  focused on three of its four products,  each of which uses
the  Company's  patented  formula  of  lyophilized  liposomal  Prostaglandin  E1
("LLPGE1"):  (i) an  intraurethrally  administered  treatment  for male erectile
dysfunction ("Male Intraurethral  Product"),  and (ii) a topically applied cream
treatment  for male  sexual  disorder  ("Male  Topical  Product"),  and  (iii) a
topically  applied treatment for female sexual arousal disorder ("FSAD") in both
a gel-base and an aqueous solution spray ("Female Topical Product").

         The Company also has acquired the rights for an oral delivery treatment
whereby lyophilized liposomal delivery of Apomorphine will be developed to treat
male sexual disorder. A capsule that contains lyophilized  liposomal Apomorphine
is taken  orally by the  patient.  The capsule is  designed to pass  through the
stomach (acidic pH) without degradation or uptake of the drug and into the small
intestine  (basic pH) whereby the capsule is dissolved and  Apomorphine  is then
gradually  released from the liposome.  The Company believes this will alleviate
the  undesired  side effects of nausea and  vomiting  normally  associated  with
Apomorphine.

         The Company plans to license each of these  products to  pharmaceutical
companies for marketing  and  worldwide  distribution  upon approval by the U.S.
Food and Drug  Administration  and/or other  foreign  regulatory  agencies.  The
Company has previously  attempted  discussions with several globally  recognized
pharmaceutical companies regarding licensing of its LLPGE1 products for male and
female sexual  disorder  treatment.  During the 3rd quarter of 1998, the Company
entered into  Letter(s) of Intent ("LOI") with two such  companies.  These LOI's

                                        2

<PAGE>

did not work for the  Company  resulting  in backward  momentum  for the Company
during 1999,  resulting in the  resignation  of the Thomas Waite  management and
Director  group in early 1999,  the  installation  of the Ira Miller  management
group and resignation  thereof on December 22, 1999. Upon resignation of the Ira
Miller  management  group in  December  of 1999,  the  Company  was  faced  with
responding  to  several  large  lawsuits  without  any  source  of  funds,  over
$2,000,000  of accounts  payable and a share price of under $.10 per share.  The
remaining  Board of Directors began to prepare the company for filing of Chapter
XI  Bankruptcy   Reorganization  while  continuing   discussions  with  possible
financing and reorganization groups. On or about January 13, 2000,  negotiations
resulted in the Company  entering into an agreement  with Stuart Brame and David
Nelson of Optima  Financial to acquire for stock a company or  companies  with a
minimum independent evaluation of $4,000,000. Stuart Brame was elected President
and Director,  with Optima  Financial being retained by the Company as exclusive
financial consultants to the Company to assist in reorganization, the settlement
of debts  and  outstanding  litigation  and  facilitating  new  funding  for the
Company.  Funds were advanced by Optima  Financial to satisfy certain  immediate
obligations of the Company including the funds to overturn a $2,500,000  default
judgment in the RK Company case and the  maintenance  of patent  filings for the
female patent which  subsequently  issued on February 26, 2000, with publication
occurring on April 6, 2000.

         The  transaction  with Stuart  Brame along with David Nelson and Optima
Financial  has  proceeded as planned with funds  advanced to the Company for the
purchase  of shares  pursuant  to an option  with  Optima  Financial  to acquire
2,000,000  shares of the Company's  common stock to provide much needed  interim
funding.  Stuart Brame acting as President,along with the consulting  assistance
of Optima  Financial has provided the leadership to turn the Company around with
a new positive direction. As part of the transaction entered into on January 13,
2000,  the Company  has  acquired  for  4,000,000  shares of Harvard  Scientific
convertible  preferred stock series A (convertible at .33 per share into Harvard
Scientific   common)all  of  the  common  stock  in   Signetics.net,   a  Nevada
corporation.  Signetics.net  develops  diagnostic  technology  relating  to  the
detection of ovulation within the human female.  Signetics.net with the existing
technology for an ovulation detection meter has been independently  evaluated by
Newcomb  &Company,  a NASD  Broker/Dealer  at  between  4.3M and 6.5M based upon
substantially discounted pro forma income statements. Signetics.net, as a wholly
owned  subsidiary  will  continue  with the final  development  of the ovulation
detection device under the direction of Dr. Rick Millis as President. Dr. Millis
is a Professor  of  BioPhysics  at Howard  University,  Washington,  D.C.,  well
published,  known in his  field  and has over 15 years of  involvement  with the
development of the subject ovulation detection device.  Signetics.net intends to
begin formal trial testing of the ovulation detection device in a Canadian based
fertility clinic  simultaneously  with an application for pre marketing approval
in Canada  within the next 120 days as a Class 1 medical  device,  non  evasive,
with no chance of harm to the user.  Completion  of trial  testing and  Canadian
approval  for pre  marketing  is  anticipated  within  six - nine  months.  Upon
completion  of  Canadian   testing  and  receipt  of  pre  marketing   approval,
Signetics.net will apply for FDA approval with the filing of a form 510-K, along
with  additional  testing should the same be required.  The Canadian  pre-market
approval  process   application  follows  the  same  format  as  the  FDA  510-K
application program.


                                        3

<PAGE>

         Referencing the male and female sexual disorder  products,  the Company
believes a sizable market already exits for both male and female sexual disorder
and that this market will continue to expand as effective  products are approved
for treatment.  With the recent  issuance and  publication of the Female Topical
Product patent (patent information set out below) for the treatment of FSAD, the
Company  is  quite  confident  of  developing  licensing  and/or  joint  venture
production  and marketing  agreements to generate  substantial  revenues for the
Company.  Licensing  and/or joint venture  agreements will not be limited to the
FDA controlled US market but will be pursued in selected  international  markets
where the Company  maintains  patent  protection.  In conjunction with potential
licensing,   the  Company  will  be  reviewing  with  patent  counsel   possible
infringement by other companies of its recently published Female Topical Product
Patent, # 6,046,240.

         The market for treating  female  sexual  arousal  disorder  ("FSAD") is
relatively new when compared to the male sexual disorder  treatment  market.  In
fact, certain world-renowned authorities and some market analysts are suggesting
that the market for FSAD will surely equal, if not surpass,  the market for male
sexual disorder.  Independent  studies by Dr. Irwin  Goldstein,  a Professor and
Urologist at Boston  University  School of Medicine and formerly a Consultant to
the Company,  found that  approximately  10-million  women in the United States,
between the ages of 50 and 74,  reported a lack of  lubrication  on  229-million
sexual  intercourse  occasions  and 58.5  percent of the 260 female  partners of
impotent men he surveyed were affected  with some form of sexual  disorder.  The
Company  believes  its  patented  Female  Topical  Product  (in which  LLPGE1 is
reconstituted  into either a gel  formulation  or an aqueous  solution  (liquid)
spray and then applied  topically to the female's  vaginal  area) will provide a
solution to this problem by enhancing blood flow within the clitoral and vaginal
tissue to stimulate  nerve endings for increased  sensitivity  in the female sex
organs. The Company believes this should facilitate  lubrication,  thus enabling
greater satisfaction and possibly sexual orgasm for the female.

         The Company is moving forward with  implementation of its protocols for
gaining  regulatory  approvals.  During  September 1998,  toxicity  studies were
completed on female rabbits and the results showed no toxicity and no redness or
irritation at any dose or with the gel itself when  observed  visually each day.
Therefore,  there was no gross (clinical)  toxicity in the LLPGE1 gel base used.
The results also showed the virtual  microscopic  absence of inflammation at the
highest dose administered.  In fact, microscopic  inflammation was significantly
less at each escalating dose,  including 1.5 mg, than when the rabbits were only
given  placebo  gel,  suggesting  that the  application  process  itself  for 14
consecutive  days  caused very minor  microscopic  but not  clinically  apparent
inflammation which was reduced by the increased blood flow into the area induced
by the LLPGE1.

         Additionally,  very minor microscopic  inflammation at the highest dose
administered  was reduced by the  increased  blood flow into the area induced by
the LLPGE1.  The Company is currently  interviewing  drug trial consulting firms
for  preparation  and submition of its application for an IND in connection with
the Female Topical Product to the U.S. Food and Drug Administration in 2000.

The Company's Male Topical Product is a local treatment and will be administered
directly to the end of the penis  (glands) as a lotion or as a liquid spray.  It
is very similar in composition  to the Company's new treatment  product for FSAD
and compliments the aqueous solution Male Intraurethral Product.

                                        4

<PAGE>

The  Company   previously   contracted  with  Dr.  Goldstein  as  its  Principal
Investigator  in trials  involving the use of the Company's  patented LLPGE1 for
the treatment of both male and female sexual  disorder  products.  On August 27,
1998, the Company submitted an Investigational  New Drug Application  ("IND") to
the U.S. Food and Drug  Administration for Lyophilized  Liposomal  Prostaglandin
E1, as an  intraurethrally  delivered  treatment  for male sexual  disorder.  On
August 28, 1998, the FDA assigned IND Number 56,840 to the Company. Simultaneous
to  receiving  the new IND,  the Company  withdrew  IND Number  50,502  which is
currently  under  investigation  by the FDA for an allegedly false patient study
submitted  to the  FDA  by  prior  management.  Mr.  Goldstein  is no  longer  a
consultant to the Company.  On May 18, 2000, the Company received an FDA Warning
Letter  regarding  IND # 50502  and an  investigation  into an  allegedly  false
patient study  submitted to the FDA. The Company will be reviewing with the drug
trial  consulting  firm selected the FDA issue of the allegedly  falsified study
submitted by prior management in 1997. Simultaneous with the warning letter from
the FDA, the Company  received a private request for  information  regarding the
FDA matter from the SEC.  No action has been taken at this time.  The Company is
aware that prior officers and Directors are under investigation by the FDA.

         The  Company's  core  technology  is  covered by the  following  issued
patents:  (1) U.S. Patent Number 5,718,917 issued to the Company on February 17,
1998 "PGE1 CONTAINING LYOPHILIZED LIPOSOMES FOR USE IN THE TREATMENT OF ERECTILE
DYSFUNCTION".  (2) U.S.  Patent  Number  6,046,240  published  on April 4, 2000.
TOPICAL  APPLICATION OF PGE-1 IN  LYOPHILIZED  LIPOSOMES FOR TREATMENT OF SEXUAL
DYSFUNCTION IN THE FEMALE.  PGE-1 is the active drug agent used in the Company's
Male  Intraurethral,  Male Topical and Female Topical Products.  There can be no
assurance  that any of the Company's  products will be  commercially  successful
even if they  are  scientifically  successful  and gain FDA  and/or  other  than
U.S.regulatory agency approval, none of which is assured.

         The  Company  is  currently   reorganizing   with  the   settlement  of
outstanding litigation, accounts payable, developing a new management team along
with new financing plans, product licensing strategies and acquisitions.  During
the third quarter the Company continued to complete  outstanding  settlements of
major  litigation  with the exception of the RK Company case.  The Company is in
final  negotiations  to settle the RK Company  case. In addition the Company has
been  successful  in  bringing  Pyramid  Laboratories  back on board to  further
develop the Company's  technology  base. With Pyramid  Laboratories on board the
Company is in a position to provide technical information for proposed licensees
and  joint  venture  partners.  The  Company  through  its  consultants,  Optima
Financial,  have begun  discussions with Japanese and South African interests to
license the female topical cream technology.  Subject to settling the RK Company
case,  the  Company  has been  contacted  by two  groups  to  provide  necessary
financing to implement the Company's strategic plan. Over the next 6 months, the
Company's primary focus will be to strategically implement a new management team
and business plan as it pertains to furthering the  development of both male and
female  treatment  products  for  sexual  disorders  and to  secure  a  globally
recognized  pharmaceutical  company as a licensing  partner for its products and
secure  private  placement  financing  for  the  Company.  A  website  has  been
established at HARVARDSCIENTIFIC.WS for information on the Company.

         With settlement of the RK Company Case, he Company  anticipates it will
obtain private  placement and/or joint venture  financing to : 1) submit its IND
for its FSAD product to the FDA and commence  clinical  trials under this IND as
allowed by the FDA, 2) proceed  with phase  II/III  clinical  trials and product
validation  of its Male  Intraurethral  Product  to  conform  to the  regulatory
process of the FDA, 3) petition the FDA for an IND for its Male Topical  Product
as soon as possible and initiate clinical trials when the FDA approves the right
to do so, 4) continue  development  with the Male and Female Oral  Products,  5)
continue monitoring patent applications  6)complete testing of the Signetics.net
ovulation  detection meter along with obtaining pre market approval in Canada to
begin  production and commercial  sales 7) seek to identify other  companies and
universities  with similar  technologies for acquisition or joint venture and 8)
and formulating  strategic alliances for joint venture  arrangements,  licensing
and  distribution  agreements,  research and  development  agreements  and other
collaborative   arrangements  to  assist  in  the  development,   marketing  and
distribution  of the Company's  products.  The Company is also  considering  the
outright sale of its patents.

         It is the  belief  of the  Company  that if an  agreement  with a major
industry  partner can be secured,  the  possibility  exists that the  regulatory
process for its products  could be expedited.  This should enhance the Company's
ability to bring its products to market more quickly,  thus enabling the Company
to make  fuller use of the  remaining  life of its  patent for LLPGE1  which was
issued  February 17, 1998 and its newly issued FSAD Patent.  Without the benefit
of an industry  partner,  the Company  believes an 24 to 36 month  time-line  to
obtain  regulatory  approval  of the Male  Intraurethral  Product  and the newly
patented  FSAD  product  is  probable,  but there can be no  assurance  that the
product will receive FDA approval in that time span,  if ever.  The Company will
also pursue licensing  outside of the United States for both the Male and Female
products.

                                        5

<PAGE>

         In addition  the Company  intends to prepare its  previously  developed
home AIDS TEST kit for marketing  through its subsidiary,  SIGNETICS.NET.  It is
the  intent  to  establish  a product  identity  trademark  for home  diagnostic
products to be licensed for marketing along with the ovulation detection device.
An Internet will be established to promote and sell these products direct to the
consumer.  The Company may also add a line of holistic  supplements and vitamins
under this trademark for Internet marketing.

         During the third quarter, the Company attempted a merger/acquisition of
Power Skor, a Canadian based internet software Company.  Power Skor with its IBM
sponsorship and unique secure  internet credit card payment program  appeared to
be a viable candidate for acquisition as a wholly owned subsidiary.  The Company
has placed further  negotiations  on hold until such time as Power Skor resolves
certain internal problems which arose during negotiations.

         The  Company's  future  success is dependent  upon its ability to raise
additional  funds to complete the  commercialization  process for its Female and
Male Topical Products,  Male Intraurethral Product and its other products either
through  strategic  agreements  (i.e.  licensing,  distribution,  sale or  joint
venture) or through  private  placements  or public  issuance  of the  Company's
common stock.  In the past, the Company has relied upon the private  purchase of
its securities by accredited  investors to raise such funds and may have to rely
upon this practice in the future.  There can be no guarantee  that investors who
have been interested in purchasing the Company's  securities in the past will be
interested  in doing so in the future,  or that  alternative  investors  will be
found, or that public financing or collaborative  arrangements will be available
on terms satisfactory to the Company.

         The  Company  does not  expect  to  purchase  or sell  any  significant
equipment overcthe next ninety days.

         Stuart Brame  currently  serves without  salary and received  2,000,000
shares as asigning bonus. Optima Financial will serve without payment of monthly
consultingcfees  and  has  received  2,000,000  shares  for  its  services.   An
additional  1,000,000  shares was issued to  Alexander  H.  Walker,  Jr. for his
services as Chairman of the Board,  1,000,000 shares was issued to Curtis Orgill
for his services as an officer and  director  and 500,000  shares were issued to
Gordon Cole for his services as a director.

Results of  Operations  for the three  months  ending June 30, 1999 and June 30,
1998

         During  both  quarters  ending  June 30,  2000 and June 30,  1999,  the
Company  had no net  sales,  and,  accordingly,  had no cost of sales  for those
quarters.  During that time,  the Company has remained  focused on 1) completing
the required  regulatory review process for its Male Intraurethral  product,  2)
introducing the new male and the new female sexual dysfunction products,  and 3)
forming  alliances  for  securing a joint  venture or licensing  agreement.  The
Company  intends to focus on promotions of their products only after  completing
the regulatory review process.

                                        6

<PAGE>

         During second  quarter ending June 30, 1998,  General &  Administrative
expenses exceeded the period ending September 30, 1999 by $718,740. In 1998, the
Company  was  operating  out of 3  offices  with a  management  team of  about 7
employees,  none of which exists during the first quarter 1999.  Management does
not  anticipate  that General and  Administrative  expenses will escalate to the
level it was in 1998. As the Company obtains  additional  investment capital and
expands its  operations,  management  intends on hiring a lean staff to continue
its operations.  Careful consideration will be given to the necessity of opening
another  office.  It  is  the  Company's   intention  to  minimize  General  and
Administrative  expenses and to focus on applying  monies to the  development of
it's products.  The Company also continues to incur legal expenses in connection
with litigation in which the Company is involved.

         Research & Development costs for the third quarter ending 1998 exceeded
the third quarter 1999 by $352,443. During 1998, the Company was incurring large
research  consulting  fees and was in the middle of clinical trials for the Male
Intraurethral  product.  In  addition,  they were  beginning  tests for the FSAD
(female sexual arousal disorder) product. As a result of lack of financing, very
little  activity in clinical  trials and Research & Development  has taken place
during the third quarter 1999.

         Should the Company  secure  additional  financing,  it is expected  the
Company  will  proceed  with  clinical  trials  on the Male  sexual  dysfunction
products and the female sexual arousal  disorder  products.  Dividend income and
interest  income have decreased  significantly  due to the lack of funds earning
interest  and due to the  write-off  of the  interest  accrued on the  Financing
Agreement  Promissory Notes with Dr. See and Mr. Waite.  There was a decrease in
Loss on  Disposition  of Assets of in the  first  quarter  of $5,698 in 1999 vs.
1998, a result of closing the Irvine, California office and disposing of certain
assets from downsizing the office to another location.  During the first quarter
1998,  the  Company  entered  into a financing  agreement  with Jackie R. See, a
director and a controlling  stockholder of, and consultant to, the Company,  and
Thomas E. Waite,  former  President,  Chief Executive  Officer,  Chairman of the
Board of Directors and a controlling  stockholder  of the Company,  whereby such
investors (a) purchased an initial tranche of 1,580,278  shares of the Company's
Common  Stock  (the  "Initial  Shares")  for  an  aggregate  purchase  price  of
$5,000,000.  Promissory Notes were due March 31, 1999 in the principal amount of
$2,492,098.61, bearing interest at the rate of 1% above prime and secured by the
shares purchased.  These notes plus accrued interest are in default, and thereby
the Company has reserved 100% of the balance due as a result of the  uncertainty
of  collectability.  At March 31,  1999,  the Company  reported  total assets of
$23,828.  This compares with total assets at March 31, 1998 of  $6,868,118.  The
reasons  for this  decrease  in assets is a result of 1) a  decrease  in cash of
$737,518, 2) a 100% decrease in prepaid expenses of approximately  $20,000, 3) a
100%  decrease  in  Due  from  Related  Parties  of  $892,819,  4)  the  reserve
established  for  the  possible  uncollectable  Promissory  Notes  plus  accrued
interest of $4,943,742 bringing the note receivable balance to zero at March 31,
1999,  5) an increase in  inventory of $18,000,  6) the Company has  depreciated
it's  Equipment  and  organizational  costs down by $63,521,  and 7)  intangible
assets of $154,004 at March 31, 1998 have been  written down to zero at December
31,  1998 to reflect the  current  value  until such time a market  value can be
established.

                                        7

<PAGE>

         The Company's total current  liabilities for the period ending June 30,
1999  decreased by  $2.431.261  over the total current  liabilities  at June 30,
1998.

         The Company  issued a total of 15,000 shares of common stock during the
first  quarter  1999,  as compared to  1,893,884  shares  during the same period
ending 1998.  This difference is mostly  attributed to the Debentures  converted
during January 1998 (103,606),  securing two additional  financing  arrangements
(1,780,278),   plus  shares  issued  to  new  directors  (10,000).  The  Company
anticipates  that it will continue the practice of issuing  shares of its common
stock as compensation for services rendered to the Company.

Liquidity and Capital Resources
-------------------------------

         To  complete  the  regulatory  process  for its  products,  the Company
estimates it will need as much as $12-million  for the Female  Topical  Product,
potentially  $10-million for the Male Topical Product and as much as $12-million
for the Male Intraurethral  Product. For the next six months,  expected costs to
be incurred for research & development  is $1,983,000,  which includes  clinical
trials on the Male Intraurethral  Product as well as the Male and Female Topical
products.  Up to an additional  $20-million may be required to complete  testing
and bring to market the Company's additional products.  However,  regulatory and
testing  costs per product for these  additional  products  are  projected to be
lower due to data generated by the CMC,  animal and clinical data related to the
Male Intraurethral Product.

         The Company expects to obtain capital funds either from the issuance of
common stock or debt.  Management is working  extensively on obtaining financing
for the  Company.  It is expected  that  external  sources  will be available to
provide  these  funds,  but  there  can be no  guarantees  of such  funding.  If
additional  capital  is not  secured,  there is  considerable  doubt  about  the
Company's ability to continue as a going concern.

Results of Operations:
----------------------

For the Year Ended December 31, 1998

         During the period  ending  December  31,  1998,  the Company had no net
sales, and, accordingly, had no cost of sales. During that time, the Company has
remained focused on 1) completing the required regulatory review process for its
Male  Intraurethral  product,  2)  introducing  the new male and the new  female
sexual  dysfunction  products,  and 3) forming  alliances  for  securing a joint
venture or licensing  agreement.  The Company  intends to focus on promotions of
their products only after completing the regulatory review process.

                                        8

<PAGE>

         During  September 1998, the Company settled a lawsuit with  Springrange
Investment  Group and was able to book as ordinary income, a forgiveness of debt
amount of $968,901.  For the twelve months ending December 31, 1998, General and
Administrative Expenses decreased slightly by approximately $91,000 over 1997, a
direct  result  of  identifying  a core  management  team in  November  1997 and
strategically  eliminating unnecessary costs. Research and Development decreased
by  approximately  $340,000  as a result of  securing  key  manufactures  in the
industry.  Depreciation and Amortization  decreased by approximately $240,000 in
1998 over 1997 as a result of the  debenture  issuance  cost which  became fully
depreciated in March 1998.  Overall,  the Total Operating Expenses resulted in a
decrease of  approximately  $670,000 in 1998 over 1997; a positive affect of the
cost-saving measures implemented beginning November 1997.

         As discussed  above,  dividend income and interest expense were greater
in 1997 by  $39,943  and  $1,362,045,  respectively,  a direct  result of the 6%
Convertible  Debenture.  The  Debentures are  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. At the time of issuance (March 1997), the Company
accounted for the 20% discount to market of  $1,250,000  as additional  interest
expense and paid-in-capital. The balance of the deferred issuance cost on the 6%
Debenture of $156,250 was amortized within the first quarter of 1998.

         On February 3, 1998 (as amended),  the Company entered into a financing
agreement with Jackie R. See, then a director and a controlling  stockholder of,
and consultant to, the Company,  and Thomas E. Waite,  former  President,  Chief
Executive  Officer,  Chairman  of  the  Board  of  Directors  and a  controlling
stockholder  of the Company,  whereby such  investors  (a)  purchased an initial
tranche of 1,580,278 shares of the Company's Common Stock (the "Initial Shares")
for an aggregate  purchase  price of  $5,000,000,  and (b) may purchase up to an
aggregate  of  592,604  additional  shares of the  Company's  Common  Stock (the
"Additional Shares"), upon certain terms and conditions, at an aggregate maximum
additional  purchase price of $5,000,000.  The initial funding of $5,000,000 was
effected on  February 3, 1998 by the  delivery to the Company by each of Dr. See
and Mr. Waite of a check for $7,901.39 and  Promissory  Notes due March 31, 1999
in the principal  amount of  $2,492,098.61,  bearing  interest at the rate of 1%
above  prime and secured by the shares  purchased.  At December  31,  1998,  the
Company reported total assets of $5,943,925.  This compares with total assets at
December 31, 1997 of $2,227,677.  The primary reason for this increase in assets
is a result of the two  promissory  notes,  totaling  $4,850,058 at December 31,
1998 and a decrease in cash of  $859,769.  Interest  Income  accrued for 1998 on
these two notes totaled $165,861.

         The Company's  total current  liabilities  for the year ending December
31, 1998 decreased by $2,552,260 over the total current  liabilities at December
31, 1997. The difference is primarily due to a settlement  agreement resolved in
September  1998,   eliminating  the  $2,800,000  principal  balance  of  the  6%
Convertible Debentures (see Part I, Notes to the Financial Statements,).

         The Company  issued a total of 3,577,057  shares of common stock during
the twelve months ending December 31, 1998,  mostly attributed to the Debentures
converted during January 1998  (1,036,064),  securing four additional  financing
arrangements (2,638,278), shares issued to new directors (10,000), shares issued
for services and fees  (107,500)  shares issued in legal  settlements  (55,390).
270,200  shares were returned to the  Company's  treasury as a result of a legal
settlement.  The  Company  anticipates  that it will  continue  the  practice of
issuing shares of its common stock as compensation for services  rendered to the
Company.

                                        9

<PAGE>

Liquidity and Capital Resources
-------------------------------

         The Company's major financial  transaction for 1997 incurred during the
first quarter was the issuance of $5,000,000  aggregate  principal  amount of 6%
Convertible  Debentures  on  March  21,  1997,  resulting  in a net  receipt  of
$4,375,000 by the Company for its general  operating  account.  During 1997, the
majority of the cash used in the Company's  operations came from the issuance of
the 6%  Convertible  Debentures.  During the first quarter of 1998,  the Company
managed to secure two additional financing  arrangements:  (1) the Company's two
principal stockholders,  Thomas E. Waite, President and Chief Executive Officer,
and Jackie R. See, M.D., F.A.C.C., Director of Research and Development, entered
into the  Financing  Agreement  pursuant  to which on February 3, 1998 they each
made payments of $7,901.39 and gave a promissory note of $2,492,098.61 due March
31, 1999,  with a right to purchase an  additional  $5,000,000  of the Company's
Common  Stock  together,  and (2) O.  Lee  Tawes  III,  a person  otherwise  not
affiliated with the Company,  purchased  200,000 shares of the Company's  Common
Stock for $600,000,  with the right to receive additional shares of Common Stock
of the  Company  if the price  per  share is below  $6.00  when the  shares  are
registered  with the U.S.  Securities  and Exchange  Commission.  (The Company's
Registration Statement filed on July 20, 1998 became effective on July 28, 1998,
and the closing  bid price on that day was $6.62 per  share).  During the second
quarter of 1998,  two additional  investors,  under the same terms as Mr. Tawes,
purchased  shares  of  Common  Stock of the  Company:  1)  Ronald  E.  Patterson
purchased 83,333 shares for $249,999,  also with the right to receive additional
shares of Common Stock of the Company if the price per share is below $6.00, and
2) RK Company purchased  150,000 shares for $450,000,  with the right to receive
additional shares of Common Stock of the Company if the price per share is below
$6.00.  Total monies raised in the second quarter of 1998 were $699,999.  During
the third quarter of 1998,  three  additional  investments  were made, under the
same terms as described above,  whereby they purchased shares of Common Stock of
the Company for cash:  1) RK Company  purchased  16,667  shares for $50,000,  2)
Elisabeth and Samuel Valenzisi purchased 8,000 shares for $24,000, and 3) O. Lee
Tawes purchased 600,000 shares for $1,800,000, in lieu of a litigationsettlement
(see Part I, Notes to the Financial  Statements,  Note #10 (j) and (k), and Note
11. Total monies raised in the Third quarter of 1998 were $1,874,000.

         During the fourth  quarter of 1998,  Thomas E. Waite put $300,000  into
the Company reducing his promissory note by the same.

         To  complete  the  regulatory  process  for its  products,  the Company
estimates it will need as much as $12-million  for the Female  Topical  Product,
potentially  $10-million for the Male Topical Product and as much as $12-million
for the Male Intraurethral  Product. For the next six months,  expected costs to
be incurred for research & development  is $1,983,000,  which includes  clinical
trials on the Male Intraurethral  Product as well as the Male and Female Topical
products.  Up to an additional  $20-million may be required to complete  testing
and bring to market the Company's additional products.  However,  regulatory and
testing  costs per product for these  additional  products  are  projected to be
lower due to data generated by the CMC,  animal and clinical data related to the
Male Intraurethral Product.

         The Company 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.

                                       10

<PAGE>

                                     PART II

                                Other Information

ITEM 1:  Legal Proceedings

         Registrant  incorporates  herein by this  reference the  description of
legal  proceedings  contained  in the  Registrant's  Form 10-KSB  filed with the
Securities and Exchange Commission on May 26, 2000.

ITEM 2:  Changes in Securities and Use of Proceeds

         Any  Changes  regarding  the  securities  or  use  of  proceeds  of the
Registrant  are  described  in the  Registrant's  Form  10-KSB  filed  with  the
Securities  and  Exchange  Commission  on May  26,  2000.  Such  information  is
incorporated herein by this reference.

ITEM 3:  Defaults Upon Senior Securities

         None

ITEM 4:  Submission of Matters to a Vote of Security Holders

         No matters have been submitted to a vote of the security holders during
the  period  covered  by this  report  through  the  solicitation  of proxies or
otherwise.

ITEM 5:  Other Information

         None.

ITEM 6:  Exhibits and Reports on Form 8-K

A.       Exhibits

   (2)   Plan of acquisition, reorganization, liquidation or succession:
         NONE.

   (3)  (i)  Articles of Incorporation *
        (ii) By-laws *

  (27)   Financial Data Schedule.

* Incorporated by reference from the Registrant's Form 10-SB.

B.       Reports on Form 8-K.

         The  Registrant  did not file  reports  on Form 8-K  during  the  first
quarter of 2000.

                                       11
<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.

                          HARVARD SCIENTIFIC CORP.


      Name                                        Title
      Date

/s/ Stuart Brame                           President, and Chief Executive
----------------                           Officer
    Stuart Brame
November 17, 2000


/s/ Gordon W. Cole                         Director
------------------
    Gordon W. Cole
November 17, 2000


/s/ Curtis A. Orgill                       Director, Treasurer, and
--------------------                       Chief Financial Officer
    Curtis A. Orgill
November 17, 2000



                                       12