<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) of the
               --------------------------------------------------
                             SECURITIES ACT OF 1934

                  For The Quarterly period ended June 30, 1998
                         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                              (IRS Employer
Incorporation or Organization)                               Identification No.)

                755 Rinehart Road, Suite 100, Lake Mary, FL 32746
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, Including Area Code: (407) 324-1606


                     Common Stock, Par Value $0.01 Per Share
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

  X   Yes   ____  No

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                                    5,601,547
                                    ---------
                    NUMBER OF COMMON STOCK SHARES OUTSTANDING
                    -----------------------------------------
                               on August 13, 1998
                               ------------------


Traditional Small Business Disclosure Format (Check One):

X   Yes   ____  No


<PAGE>


                            HARVARD SCIENTIFIC CORP.
                                      INDEX

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1:
         Balance Sheet - Assets
         Balance Sheet - Liabilities and Stockholders' Equity
         Statement of Operations
         Statement of Stockholders' Equity (4 pages)
         Statement of Cash Flows
         Notes to the Financial Statements (15 pages)

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

                                     PART II
                                OTHER INFORMATION
ITEM 1:
Legal Proceedings

ITEM 2:
Changes in Securities and Use of Proceeds

ITEM 3:
Defaults Upon Senior Securities

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

ITEM 5:
Other Information

ITEM 6:
Exhibits and Reports on Form 8-K

Signatures



<PAGE>
<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                                  BALANCE SHEET

                                     ASSETS
<CAPTION>


                                                                                June 30,     December 31,
                                                                                 1998           1997
                                                                              (Unaudited)     (Audited)
                                                                              ------------   ------------
<S>                                                                           <C>            <C>
Current Assets:
     Cash and cash equivalents                                                $   752,230    $   873,199
     Prepaid  expenses                                                             96,967         35,382
     Accounts Receivable - Directors (Note 6 & 8)                               4,984,197         57,711
     Due From Related Parties  (Note 6)                                                 -        852,305
     Deferred debt issue costs (Note 10)                                                -        156,250
                                                                              ------------   ------------

        Total Current Assets                                                    5,833,394      1,974,847
                                                                              ------------   ------------

Equipment and Leasehold Improvements:
     at cost, less accumulated depreciation of $12,228 and
     $11,930 at June 30, 1998 and December 31, 1997 (Note 3)                       38,931         50,704
                                                                              ------------   ------------

Intangible Assets:
     Intellectual Property, net of accumulated amortization
        of $17,821 and $4,147 at June 30, 1998 and
        December 31, 1997, respectively (Note 4)                                1,035,993        156,848
     Organizational cost, net of accumulated amortization of
        $158,118 and $140,686 at June 30, 1998 and
        December 31, 1997, respectively                                            17,432         34,864
                                                                              ------------   ------------

                                                                                1,053,425        191,712
                                                                              ------------   ------------

Other Assets:
     Deposits                                                                       5,314         10,414




        TOTAL ASSETS                                                          $ 6,931,064    $ 2,227,677
                                                                              ============   ============

</TABLE>



    The accompanying Notes are an integral part of these financial statements

<PAGE>
<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            BALANCE SHEET (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<CAPTION>

                                                                                June 30,     December 31,
                                                                                  1998          1997
                                                                               (Unadited)     (Audited)
                                                                              ------------   ------------
<S>                                                                           <C>            <C>
Current Liabilities:
    Accounts payable                                                          $    77,600    $    26,370
    Accrued expenses (Note 5 & 10)                                                204,569        131,694
    Obligation under capital lease - current (Note 3)                              10,789         16,979
    Debentures payable - Convertible (Note 10)                                  2,550,000      2,800,000
                                                                              ------------   ------------
       Total Current Liabilities                                                2,842,958      2,975,043
                                                                              ------------   ------------
Long-Term Liabilities:
    Obligation under capital lease - non-current (Note 3)                           6,317          6,317
                                                                              ------------   ------------


Stockholders' Equity:
    Common Stock, $.01 par value; 100,000,000 shares
       authorized; 5,481,855 and 3,344,137 shares issued
       and outstanding at June 30, 1998 and December 31,
       1997, respectively (Note 2 & 12)                                            54,818         33,441
    Additional paid-in capital                                                 15,342,822      8,694,904
    Deficit accumulated during the development stage                          (11,315,851)    (9,482,028)
                                                                              ------------   ------------
       Total Stockholders' Equity                                               4,081,789       (753,683)
                                                                             -------------   ------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $  6,931,064    $ 2,227,677
                                                                             =============   ============

</TABLE>


    The accompanying Notes are an integral part of these financial statements

<PAGE>
<TABLE>


                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS



                                                                                                                          1/13/87
                                                                  Three Months Ended           Six Months Ended         (Inception)
                                                               June 30,      June 30,       June 30,       June 30,          to
                                                                1998           1997           1998           1997          6/30/98
                                                             (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)    (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                         463,224        842,664      1,051,521      2,698,818      5,387,728
    Research and development                                    215,483        192,839        510,091        193,216      2,313,650
    Depreciation and amortization                                22,606        169,329         38,485        190,326        674,333
                                                            ------------   ------------   ------------   ------------   ------------
      Total Operating Expenses                                  701,313      1,204,832      1,600,097      3,082,360      8,375,711
                                                            ------------   ------------   ------------   ------------   ------------
      Loss from Operations                                     (701,313)    (1,204,832)    (1,600,097)    (3,082,360)    (8,409,881)
                                                            ------------   ------------   ------------   ------------   ------------
Other Income (Expense):
    Settlements                                                       -              -              -              -       (715,629)
    Interest Income                                               1,643            191          4,728            191          6,293
    Dividend Income                                               3,001         18,188          7,628         18,188         59,082
    Interest Expense                                            (39,225)       (79,781)      (234,503)    (1,343,121)    (2,219,636)
    Loss on disposition of Fixed Assets or Securities                 -              -        (11,580)             -        (36,080)
                                                            ------------   ------------   ------------   ------------   ------------
      Total Other Income and Expense                            (34,581)       (61,402)      (233,726)    (1,324,742)    (2,905,971)
                                                            ------------   ------------   ------------   ------------   ------------
Net Loss                                                    $  (735,894)   $(1,266,234)   $(1,833,823)   $(4,407,102)  $(11,315,852)
                                                            ============   ============   ============   ============   ============

Loss per Common Share                                       $     (0.13)   $     (1.07)   $     (0.36)   $     (3.78)   $     (2.14)
                                                            ============   ============   ============   ============   ============

Weighted Average Shares Outstanding (Note 2)                  5,656,943      1,180,146      5,099,867      1,164,618      5,282,395
                                                            ============   ============   ============   ============   ============
</TABLE>




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

<PAGE>
<PAGE>  
<TABLE>

                                         HARVARD SCIENTIFIC CORP.
                                      (A DEVELOPMENT STAGE COMPANY)


                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                         FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                        TO JUNE 30, 1998 (UNAUDITED)

<CAPTION>
                                                                               
                                                Restated                        Deficit
                                              Common Stock        Additional     From
                                        ------------------------    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.

                                       

<PAGE>  
<TABLE>

                                         HARVARD SCIENTIFIC CORP.
                                      (A DEVELOPMENT STAGE COMPANY)
<CAPTION>

                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                         FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                        TO JUNE 30, 1998 (UNAUDITED)
 
                                               Restated                         Deficit
                                              Common Stock        Additional     From
                                        ------------------------    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 costs                  250,000          250      124,750            -      125,000

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.

                                       

<PAGE>  
<TABLE>

                                         HARVARD SCIENTIFIC CORP.
                                      (A DEVELOPMENT STAGE COMPANY)

<CAPTION>

                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                         FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                        TO JUNE 30, 1998 (UNAUDITED)

                                                 Restated                          Deficit
                                               Common Stock         Additional      From
                                        --------------------------    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 31, 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)
                                        ============  ============  ============  ============  ============
</TABLE>

<PAGE>
<TABLE>

                                         HARVARD SCIENTIFIC CORP.
                                      (A DEVELOPMENT STAGE COMPANY)

<CAPTION>

                                    STATEMENTS OF STOCKHOLDERS' EQUITY
                         FOR THE PERIOD FROM JANUARY 13, 1987 (DATE OF INCEPTION)
                                        TO JUNE 30, 1998 (UNAUDITED)

                                                 Restated                          Deficit
                                               Common Stock         Additional      From
                                        --------------------------    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 2, 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       124,370                     124,475

Issuance of shares for cash                 233,333         2,333       697,666                     699,999

Net (loss) for the Quarter ended
    June 30, 1998                                 -             -             -      (735,894)     (735,894)
                                        ------------  ------------  ------------  ------------  ------------
Balance June 30, 1998                     5,481,855   $    54,818   $15,342,822  $(11,315,851)  $ 4,081,789
                                        ============  ============  ============  ============  ============
</TABLE>
   The accompanying Notes are an integral part of these financial statements.

<PAGE>
<TABLE>

                            HARVARD SCIENTIFIC CORP.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS


<CAPTION>


                                                                                1/13/87
                                                                              (Inception)
                                                    Six Months Ended               to
                                              June 30, 1998  June 30, 1997      6/30/98
                                               (Unaudited)     (Unaudited)     (Unaudited)
                                              -------------   -------------   -------------
<S>                                           <C>             <C>             <C>
Reconciliation of Net Loss to Net Cash
   Used in Operating Activities:

Net Loss                                      $ (1,833,823)   $ (4,407,102)   $(11,315,852)
                                              -------------   -------------   -------------

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

   Book value of assets sold                             -               -           6,483
   Loss on disposition of securities or 
          fixed assets                             (11,474)                        (11,474)
   Depreciation and amortization                    38,485         190,326         205,583
   Amortization of Debt Issuance cost              156,250               -         625,000
   Issuance of stock for director's fees
      and services                                 124,370       1,052,772       1,374,144
   Issuance of stock for Property Rights                 -               -           2,000
   Issuance of stock in legal settlement                 -               -         795,854
   Discount on Convertible Debentures                    -       1,250,000       1,750,000
   Interest Expense converted to Stock                   -           8,750          86,878
   (Increase) decrease in assets:
     Prepaid expenses                              (77,155)       (163,435)        (77,155)
     Deposits/Retainers                             14,937          (6,000)        (30,858)
   Increase (decrease) in liabilities:
     Accounts payable                               72,572         (14,659)         77,600
     Accrued expenses                               72,876          81,561         217,296
     Due to related parties                              -           2,175        (203,740)
                                              -------------   -------------   -------------
             Total Adjustments                     390,862       2,401,490       4,817,611
                                              -------------   -------------   -------------
Net Cash Used in Operating Activities         $ (1,442,961)   $ (2,005,612)   $ (6,498,241)
                                              =============   =============   =============

Cash Flows from Investing Activities:
   Cash from sale (purchase) of equipment                -         (46,617)        (78,114)
   Cash from sale (purchase) of Intellectual Rights      -               -        (150,000)
   Capitalized organization costs                        -               -        (150,924)
                                              -------------   -------------   -------------

     Net Cash Used in Investing Activities               -         (46,617)       (379,038)
                                              -------------   -------------   -------------
Cash Flows from Financing Activities:
   Proceeds from issuance of capital stock,
     net of offering costs                       1,315,802         125,000       2,687,748
   Proceeds from debt converted to capital stock         -               -         250,000
   Proceeds from debt, net of costs                      -          30,611         438,739
   Proceeds from debentures, net of costs                -       4,375,000       4,375,000
   Principal payments on debt                        6,190         (37,275)       (121,979)
                                              -------------   -------------   -------------
     Net Cash Provided by Financing
         Activities                              1,321,992       4,493,336       7,629,509
                                              -------------   -------------   -------------
Net Increase (Decrease) in Cash                   (120,969)      2,441,107         752,230

Cash at beginning of period                        873,199            (134)              -
                                              -------------   -------------   -------------

Cash at end of period                         $    752,230    $  2,440,973    $    752,230
                                              =============   =============   =============

</TABLE>


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

<PAGE>


                  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 and conclude 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 has developed five products designed to ameliorate sexual
dysfunction ("SD"):

     1. An Intrameatal therapeutic treatment for male erectile dysfunction
        ("Male Intrameatal 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").
     4. An orally administered form of liposomal, lyophilized Apomorphine for
        the treatment of male erectile dysfunction ("Male Oral Product"), and
     5. An orally administered form of liposomal, lyophilized Apomorphine for
        the treatment of female sexual dysfunction ("Female 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 its LLPGE1 for the treatment of erectile
dysfunction and bring the products to the marketplace. The Company presented the
results of its Phase I clinical study on the Male Intrameatal Product to the FDA
in April 1997, as part of its pre-Phase II clinical trial meeting. On 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 Intrameatal Product.
Protocols and research sites for this Phase II study are complete.

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 Intrameatal administration of an aqueous ("liquid") solution containing two
vasodilators, PGE1 and Papaverine.


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


<PAGE>


plan designed 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 with
5,481,855 shares issued and outstanding as of June 30, 1998 and 3,344,137 shares
issued and outstanding on December 31, 1997.

On February 10, 1998, three new members were elected to the Board of Directors
of the Company. Two of these members will serve as new Directors of the Company
and the third will fill an existing seat vacated by the resignation of a
previous director. The Company's Board of Directors currently consists of five
members.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATIONAL COSTS:
Organization costs are being amortized over a five-year period using the
straight-line method. Also see the discussion contained in Note 3 & 4.

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. See Note 3.

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. See Note 4.

EARNINGS PER SHARE:
The earnings per share calculations were based on the weighted average number of
shares outstanding during the period: 5,099,867 for the Period ending June 30,
1998, 1,164,618 for the Period ending June 30, 1997 and 5,282,395 shares
outstanding from inception to June 30,1998.

During 1997, Company entered into an agreement with a 6% Debenture holders (see
Note 11 & 13), allowing for the conversion of the debenture on demand. At June
30, 1998, the Company had an outstanding debt balance with the debenture holders
of $2,550,000 plus accrued interest of $183,928. On June 30, 1998, if the
debenture holders chose to convert their debenture to Common Stock, the
converted balance would have calculated to additional 613,152 shares of Common
Stock issued for the six months ending June 30, 1998. See Note 10. 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.


<PAGE>


NOTE 3 - EQUIPMENT & LEASEHOLD IMPROVEMENTS

Equipment and building improvements consists of the following:
<TABLE>
<CAPTION>

                                                            June 30, 1998           December 31, 1997
                                                             (Unaudited)                (Audited)
                                                      ---------------------------------------------------
       <S>                                                     <C>                       <C>     
       Equipment & Leasehold Improvements                      $ 51,159                  $ 62,634
       Less: accumulated depreciation                            12,228                    11,930
                                                      ----------------------------------------------------
         Total Net Equipment & Leasehold Improvements          $ 38,931                  $ 50,704
                                                      ----------------------------------------------------
</TABLE>

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 E-1. 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.

During December 1996, the Company established its administrative headquarters in
Reno, Nevada (see Note 12). In November 1997, the Company established the world
headquarters in Lake Mary, Florida. In May 1998, the Company moved the research
and development office from Reno, Nevada to Costa Mesa, California. The Company
has reduced its need for certain equipment and leasehold improvements because
the Company currently does not own manufacturing equipment for its product. The
product has been and will continue to be manufactured by third-party
manufacturers according to the Company's specifications.


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
LLPGE-1 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. BTI's largest
shareholder, Dr. Jackie See M.D., the inventor of the Lyophilized Liposomal
LLPGE-1, holds a 2% royalty interest on the sale of products.

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 LLPGE-1
product. The Company recorded the transfer at the par value of stock
transferred, which amounted to $6,139.

During 1996, the Company expensed the unamortized cost of acquiring technology
relating to the development of an HIV home test kit. The Company, which
originally acquired the rights in exchange for 33,500 shares of Common Stock,
ceased product development in connection with a settlement accrued in 1995 (Note
10).

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
the first quarter 1998, BTI chose to convert the accounts payable balance of
$333,535 as a contribution to additional-paid-in-capital.


<PAGE>


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 of registration rights (see Note 12) 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 $892,819 of BTI. The debt forgiveness is treated as part of the
cost of the intellectual properties received from BTI. See Note 6.


NOTE 5 - ACCRUED EXPENSES

Accrued expenses consist of the following:
<TABLE>
<CAPTION>

                                                              June 30, 1998        December 31, 1997
                                                               (Unaudited)              (Audited)
                                                         ---------------------------------------------------
                    <S>                                       <C>                      <C>          
                    Interest on notes and debentures          $     196,922            $     131,694
                    Accrued payroll & payroll taxes                   7,647                        -
                                                         ---------------------------------------------------
                                                   Total      $     204,569            $     131,694
                                                         ---------------------------------------------------
</TABLE>

Also see Notes 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.

2.   During 1997, the Company incurred a payable of $150,000 to BTI for the
     Intellectual Property Rights to Prostaglandin E-1 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.


<PAGE>


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

6.   BTI owned approximately 12.6% and 22% of the Company's shares on June 30,
     1998 and December 31, 1997, respectively. Dr. Jackie See a Director of the
     Company and a controlling person of BTI. Dr. Jackie See owned approximately
     40.3% of the Common Stock of the Company on June 30, 1998, including the
     shares owned by BTI and shares that Dr. See has the right to purchase.

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 are Directors of the Company. Thomas
     E. Waite is 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, the shares can be sold in
     accordance with the Securities Act of 1933, subject to state securities
     laws. See Note 8 and Note 12.

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.

     During 1998, the Company issued a total of 10,000 shares of Common Stock to
     directors of the Company. These shares were booked at the closing stock
     price of the Company's Common Stock on the day the stock was issued.


<PAGE>


     During 1997, the Company approved the issuance of 1,190,200 shares of
     Common Stock (restricted) to officers and directors of the Company for
     prior and current services rendered or signing bonuses. In addition, during
     1997 the Company issued 428,400 shares of Common Stock (restricted) for
     services performed by outside consultants or scientists, and 50,000 shares
     of Common Stock (restricted) to an employee of the Company as a signing
     bonus.
     These shares were recorded at par value.

Also see discussions regarding intellectual properties, agreements, and
subsequent events in Notes 4, 8, and 12.


NOTE 7 - INCOME TAXES

The Company has federal net operating loss carryforwards for financial statement
purposes of approximately $11,213,000 at June 30, 1998, which will be used to
offset future earnings of the Company. The loss carryforwards will expire during
the years ending 2002 through 2012 if not used.


NOTE 8 - AGREEMENTS

1.   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
     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 are Directors of the Company. Thomas E. Waite is 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. 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 will begin to accrue interest at 8% on the date the
     registration statement, being prepared for the Company, becomes effective.
     See Note 12.

2.   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
     Intrameatal Product) to develop, manufacture, sell, practice and exploit
     the use of the Company's proprietary license technology. In February 1996,


<PAGE>


     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 council. 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, and demanded binding arbitration under Nevada law of the existing
     disputes between the parties pursuant to the terms of the licensing
     agreement. The parties have discussed the appointment of an arbitrator.
     Pharma has retained Nevada counsel; however, no arbitrator has been
     selected at this time. Once an arbitrator has been selected, the Company
     will pursue arbitration.

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. 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 E-1 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.

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. Goldstein is a Professor of Urology and is assisting the
     Company through the required FDA stages in bringing the LLPGE-1 product to
     the marketplace. At June 30, 1998, the Company had paid Goldstein $58,000.
     Effective July 1, 1998, the Company agreed to pay Goldstein $7,500 per
     month until March 1, 1999.

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.


<PAGE>


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
     issued to himself 105,200 shares of Common Stock. The shares transferred
     were recorded at par value. In December 1997, the Company terminated all
     agreements with Walker requesting all records, documents, agreements, the
     corporate minute book, etc. be turned over to the Company immediately. See
     Note 9.

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.

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 expires December 9, 1998.
     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. If, on the effective date of the registration
     (see Note 12) of the 200,000 shares under the Securities Act of 1933, 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.

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 (see Note 12). The 5,000 shares without registration rights plus
     3,000 shares 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.

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 this Registration Statement (see
     Note 12), the closing bid price of the Company's stock is less than $6.00


<PAGE>


     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.

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 this Registration Statement (see Note
     12), 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.

14. The Company has the following office lease commitments at June 30, 1998:

    a     The Company occupies 5,428 square feet in Irvine, California where the
          Company maintains research & development laboratories. Rent of $6,242
          is paid monthly the first year beginning April 17, 1997 and increasing
          to $6,514 in the second year expiring April 30, 1999.

    b     The Company occupies 2992 square feet in Lake Mary, Florida where the
          corporate headquarters and general operations of the Company are
          maintained. Rent of $4,268.58 is paid monthly beginning December 15,
          1997 through December 31, 2000.

    c     The Company occupies 425 square feet in Reno, Nevada where all
          accounting operations are maintained. Rent of $425 is paid monthly
          beginning December 1, 1997 expiring May 3, 1998. The Company has
          continued on a month-to-month basis. See Note 12.


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) HARVARD SCIENTIFIC CORPORATION V. NEVADA AGENCY & TRUST COMPANY, A
         NEVADA CORPORATION, and DOES I - V, INCLUSIVE AND ABC CORPORATIONS I-V,
         INCLUSIVE, Case No. CV98-00017 filed in the District Court of the State
         of Nevada, Washoe County, Nevada, filed on January 2, 1998. In this
         action, Harvard filed a request for an injunction against Nevada Agency
         & Trust Company, Harvard's former transfer agent, to relinquish all
         records of the Company to a newly appointed transfer agent located in
         Salt Lake City, Utah. The Company was granted the injunction, and the
         records were transferred to the new transfer agent on January 6, 1998.
         The Company is prosecuting this action further to recover damages
         associated with Nevada Agency's delay in turning over the records in
         question, and the costs associated with obtaining the injunction.
         Discovery is ongoing in this matter.

     (b) COGDILL VS. HARVARD SCIENTIFIC CORP., DR. JACKIE R. SEE INDIVIDUALLY
         AND ON BEHALF OF HARVARD SCIENTIFIC CORP., AND NEVADA AGENCY & TRUST
         COMPANY, filed in the Superior Court for the State of California, in


<PAGE>


         the County of Los Angeles on June 2, 1997, Case No. KC-025611. Cletus
         Cogdill, ("Cogdill") a shareholder of the Company alleges that he
         purchased the Company's Common Stock on March 17, 1994. At that time,
         Rule 144 under the Securities Act of 1933 required that such stock be
         held for two years before it could be sold. The certificate was issued
         on June 17, 1994. On March 18, 1996, Cogdill completed form 144 in an
         attempt to sell his stock listing his acquisition date as June 17,
         1994. On April 12, 1996, Cogdill completed a revised form 144
         indicating the shares had been acquired in March 1994, and thereby
         should be re-issued new free-trading certificates. New certificates
         were approved and issued to Cogdill but were apparently lost in the
         mail or lost by Cogdill's broker. Two months later Cogdill sold his
         stock and due to the reduction in market share price during that time,
         he claims he lost value of approximately $45,000.

         Cogdill alleges that his stock certificate was improperly dated which
         caused him to improperly complete his Form 144, thereby causing his
         loss. In addition, Cogdill alleges the Company made misrepresentations,
         causing damages of $6,500, plus punitive damages. A non-binding
         arbitration is scheduled for August 13, 1998.

         Although there can be no guarantee that the Company will prevail, the
         Company denies both generally and specifically each and every
         allegation in the complaint. The Company has filed a cross-complaint
         against Cogdill's brokerage firm for indemnity.

     (c) ERIC N. SAVAGE V. HARVARD SCIENTIFIC CORP., DR. JACKIE SEE, DOES I
         THROUGH X, Case No. A381022, filed in the District Court, Clark County,
         Nevada on November 10, 1997. The Plaintiff alleges that the Company
         restricted Savage from selling his Common Stock in the Company and is
         seeking damages in excess of $1,260,000 plus attorney fees and costs.
         The Company filed an answer to Savage's Complaint denying all
         liability. The discovery process is ongoing in this matter.

     (d) HARVARD SCIENTIFIC CORP. V. SPRINGRANGE INVESTMENT GROUP, Case No. 98
         civ. 0735 (DC), filed in the United States District court, Southern
         District of New York, filed on February 3, 1998. The defendant is the
         holder of 6% Convertible Debentures issued pursuant to the Securities
         Purchase Agreement dated March 21, 1997. The Company alleges that the
         defendant had breached its representations under the agreement by
         taking a short position and otherwise manipulating the price of the
         Company's Common Stock. The Company is seeking to recover its damages
         arising from Springrange's breach of contract and misrepresentations.
         On January 28, 1998, the investor of the 6% Convertible Debenture gave
         notice to the Company to convert into Common Stock $250,000 of
         principal plus interest calculated at $12,863. The conversion
         calculated at 80% of the market price, calls for the transfer of
         525,726 shares of Common Stock to the investor. On January 29, 1998,
         again the investor of the 6% Convertible Debenture gave notice to the
         Company to convert into Common Stock $250,000 of principal plus
         interest calculated at $12,904. The conversion calculated at 80% of the
         market price, calls for the transfer of 486,859 shares of Common Stock
         to the investor. The Company has not honored the above requests and
         will not honor any requests by the defendant to convert the outstanding
         $2,550,000 principal amount of 6% Convertible Debentures into Common
         Stock until this matter has been resolved, see (e) below and Note 10.

         On February 18, 1998. Springrange filed a motion to dismiss the
         Complaint and to enjoin the Company's Financing Agreement with Thomas
         E. Waite and Dr. Jackie R. See. SEE "SELLING STOCKHOLDERS AND PLAN OF
         DISTRIBUTION - CURRENT FINANCING." Springrange also sought injunctive
         relief requiring the Company to deliver shares of Common Stock pursuant


<PAGE>


         to notices of conversion filed in January 1998. The Company opposed the
         motion and requested injunctive relief. In early March 1998, a hearing
         on the motion was held and the judge granted Springrange's motion to
         dismiss the Complaint, with leave to amend in 30 days, and in view of
         the dismissal, denied Springrange's motion for injunctive relief. On
         April 3, 1998, the Company filed a first amended Complaint against
         Springrange to recover its damages arising from Springrange's breach of
         contract, misrepresentations and stock manipulation. Springrange is
         free to pursue its claims independently or in this action. The matter
         is in active settlement discussion.

     (e) SPRINGRANGE INVESTMENT GROUP LTD. VS. HARVARD SCIENTIFIC CORP., THOMAS
         E. WAITE, DR. JACKIE R. SEE, MARTIN J. HOLLORAN, ROBERT T. HAYDEN,
         CURTIS A. ORGILL, Case No. A385912 in the Eighth Judicial Court for the
         State of Nevada and the County of Clark filed on March 17, 1998.
         Springrange is seeking to enjoin and nullify the Financing Agreement
         between the Company and Mr. Waite and Dr. See. On March 18, 1998,
         Springrange filed an ex-parte Application for Temporary Restraining
         Order and a Motion for Preliminary Injunction. On March 23, 1998, the
         Court issued a Temporary Restraining Order against the Company, Mr.
         Waite and Dr. See. On March 31, 1998, the Company filed a motion to
         Vacate the Temporary Restraining Order requesting the imposition of
         sanctions against Springrange and its counsel for untruthful
         representations made in Springrange's application for a Temporary
         Restraining Order. The Company also moved to have the action
         transferred from Las Vegas, Nevada to Reno, Nevada. On April 6, 1998,
         the Nevada District Court dissolved the Temporary Restraining Order and
         continued any determination with regard to Springrange's motion for
         preliminary injunction. Further, the District Court entered orders (i)
         transferring the litigation to Reno, Nevada, and (ii) imposing a
         sanction award against Springrange in the amount of $11,095.76. The
         matter is in active settlement discussion. See Note 10.

     (f) ALEXANDER H. WALKER JR. V. HARVARD SCIENTIFIC CORP. AND JACKIE R. SEE,
         M.D., Case No. 980901221 in the Third Judicial District Court in Salt
         Lake City, Utah, filed on February 6, 1998. In this action, the
         plaintiff, a former officer, director and General Council to the
         Company, alleges two causes of action: 1) breach of contract by the
         Company with respect to his employment agreement, and 2) false
         representations allegedly made to Walker by the Company. Walker seeks
         damages in the amount of $420,000 for the breach of contract claim and
         unspecified damages for the alleged false representation claim.
         Pursuant to the Company's request, this action was removed to the
         Federal District Court for the Southern District of Utah. Thereafter,
         the Company filed a motion to dismiss for lack of personal jurisdiction
         over the Company in Utah, or in the alternative, to change the venue of
         the action to the Federal District Court for the District of Nevada.
         The US District Court remanded case back to the Utah State Court. The
         Company will renew its motion to dismiss for lack of personal
         jurisdiction in the Utah State Court. The Company denies liability to
         Walker and has initiated an action against Walker and Nevada Agency &
         Trust, Co., in the District Court for the State of Nevada (See (g)).

     (g) HARVARD SCIENTIFIC CORP. VS. ALEXANDER H. WALKER JR. AND NEVADA AGENCY
         & TRUST, CO., Case No. CV98-01959 in the Second Judicial District Court
         of the State of Nevada in the County of Washoe, filed on March 23,
         1998. The Company is seeking to recover damages sustained by the
         Company as a result of Walker's failure to perform his responsibilities
         as General Counsel for the Company, and breaches of fiduciary duties
         owed to the Company by both Walker and Nevada Agency & Trust, Co.
         Additionally, the Company is seeking indemnity from Walker for damages
         it sustained and settlements it has been forced to negotiate in other
         litigation. The Nevada Court has stayed this action pending the outcome


<PAGE>


         of the jurisdictional issued raised in the Utah litigation with
         Alexander H. Walker, Jr. A motion to consolidate this case with the
         case referred to in (f) above is pending. (See (f) above).

     (h) ALEXANDER H. WALKER, JR., DON STEFFENS INDIVIDUALLY AND AS TRUSTEE FOR
         THE STEFFENS FAMILY TRUST, AND IAN HICKS, VS. ATLAS STOCK TRANSFER
         COMPANY, HARVARD SCIENTIFIC CORP., AND JACKIE R. SEE, M.D., Case No.
         98-0905858 in the Third Judicial District Court in the State of Utah in
         the County of Salt Lake, filed on June 12, 1998. The action alleges
         share ownership by the Plaintiffs named, and requests the Court to
         remove any stop transfer orders or other prohibitions against
         plaintiffs trading of said shares. In addition, Plaintiffs have
         requested damages in conjunction with any prohibitions placed on the
         trading of Plaintiffs shares by Atlas Stock Transfer Company, the
         Company and/or Dr. See. The Company denies Plaintiffs allegations and
         that Plaintiffs own the shares in question. The shares in dispute
         include 1) 120,200 shares issued to Alexander H. Walker, Jr., 2)
         125,000 shares issued to Don Steffens and/or the Steffens Family Trust,
         and 3) 25,000 shares issued to Ian Hicks. See (g) and (i).

The financial statements reflect the manner in which the Company has resolved
certain litigations:

     (a) On October 27,1997, the Company became a defendant in a U.S. District
         Court action initiated by Wood Gundy ("Gundy"), a 7% debenture holder.
         On December 26, 1997, the Company reached an agreement with Gundy
         electing to convert the balance of $125,000 in 7% convertible debenture
         plus accrued interest of $14,384 into 1,000,000 shares of Common Stock
         of the Company. The Company recorded the shares at the fair market
         value of the Common Stock on the date of the agreement, amounting to
         $350,000. Approximately $210,600 was expensed to legal settlements in
         1997.

     (b) On December 3, 1997, the Company agreed to transfer 15,000 shares as
         payment in full of an outstanding debt of $90,225 owed to Pyramid
         Laboratories, Inc. ("Pyramid") by the Company for work performed on the
         PaGE1 project. The Company maintains a good relationship with Pyramid
         whereby Pyramid has agreed to perform a six-month stability study for
         the LLPGE1 product.

     (C) HARVARD SCIENTIFIC CORP. V. VIVUS, INC., Case No. CV-N-97-00562-HDM
         (RAM) United States District Court, District of Nevada, filed October
         1, 1997. In a letter dated August 29, 1997 Vivus, Inc. alleges that the
         product and method used by Harvard Scientific for the treatment of male
         erectile dysfunction infringed on a patent held by Vivus. On September
         16, 1997, the Company responded advising Vivus that they did not
         infringe on such patent, identifying those claim limitations not
         present in the defendant's product and methods. On September 19, 1997,
         Vivus again reiterated its claim of infringement against the Company.

         The Company then filed this complaint for declaratory judgment of
         non-infringement of the patent. Defendant filed a motion asking for
         dismissal of the plaintiff's declaratory judgment action on the basis
         that there is no infringement and, therefore, no actual controversy.
         Vivus then asserted that its allegation of infringement was premature
         because the plaintiff's use of its product and method for treating
         erectile dysfunction is limited to FDA clinical trials which is a
         non-infringing use under the patent laws. The Company has opposed


<PAGE>


         Vivus' motion to dismiss on the basis that it has taken concrete steps
         toward the commercialization of its product and method and that Vivus'
         allegation of infringement is damaging the Company's ability to
         complete FDA clinical trials. On March 16, 1998, the court granted
         defendants motion for dismissal, without prejudice to the Company
         renewing the action at an appropriate time.

     Other Negotiating Matters:

     (a) On April 21, 1998, the Company issued a Demand Letter to Don Steffens
         ("Steffens"), former officer and director of the Company, for the
         return of 125,000 shares of its Common Stock issued to him in 1997 plus
         the return of $100,000 cash paid to him on April 18, 1997. The Company
         believes he is in breach of his fiduciary duty, causing the Company
         substantial damages. The Company demands repayment of the $100,000 paid
         to Steffens and a declaration of the invalidity of their shares. See
         Note 12.


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 $1,250,000 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 has 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 has not honored these requests. See Note 9.

At June 30, 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 debenture principle balance and accrued interest at June 30, 1998 and
December 31, 1997 is $2,550,000, $183,928 and $2,800,000, $131,694,
respectively.


<PAGE>


NOTE 11 - UNCERTAINTY - GOING CONCERN

The financial statements of the Company have been prepared assuming that the
Company will continue as a going concern. The Company's continued existence is
dependent upon its ability to resolve its liquidity problems, principally by
obtaining additional equity capital and through the sale of its products. If
additional capital is not secured, then there is substantial doubt about the
Company's ability to continue as a going concern.

See Note 8 regarding agreements arranged by the Company and the sale of stock by
the Company.


NOTE 12 - SUBSEQUENT EVENTS

1.   On July 1, 1998, the Company entered into a settlement agreement between
     Gensia Sicor 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 the closing stock
     price on the date transferred.

2.   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.

3.   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.

4.   The Company held their annual shareholder meeting on July 9, 1998 and voted
     on the following matters:

     (a)  Election of Board of Directors as provided in the Company's Proxy
          Statement, for continuation of their term (Thomas E. Waite, Dr. Jackie
          R. See, Curtis A. Origill, Martin J. Holloran, and Col. Robert T.
          Hayden), and

     (b)  to ratify and approve the financing agreement dated January 13,1998,
          and amended February 3, 1998, between the Company and Dr. Jackie R.
          See, Director and Thomas E. Waite, Director, CEO and President of the
          Company, and


<PAGE>


     (c)  to amend the Company's Articles of Incorporation to approve the
          increase in the number of authorized shares of Common Stock from
          10,000,000 to 100,000,000 shares and to authorize 10,000,000 shares of
          serial or "blank check" preferred stock, and

     (d)  to ratify the appointment of Ronald D. Simpkins and Associates, CPA,
          P.A. as the Company's principal accountants to audit the Company's
          financial statements for the fiscal year ending December 31, 1998.

     A majority of all shares voted "FOR" all the above matters.


5.   On July 9, 1998, the Company changed transfer agents from Atlas Stock
     Transfer Co. in Salt Lake City, Utah to Olde Monmouth Stock Transfer Co.,
     Inc. in Atlantic Highlands, New Jersey.

6.   BIOSPHERE TECHNOLOGY INC. AND HARVARD SCIENTIFIC CORP. VS. DON STEFFENS,
     INDIVIDUALLY AND AS TRUSTEE FOR THE STEFFENS FAMILY TRUST AND IAN HICKS,
     Filed in the Superior Court for the County of Los Angeles, State of
     California, Case No.BC194236, filed on July 14, 1998. On April 21, 1998,
     the Company issued a Demand Letter to Don Steffens ("Steffens"), former
     officer and director of the Company, for the return of 125,000 shares of
     its Common Stock issued to him in 1997 plus the return of $100,000 cash
     paid to him on April 18, 1997. The shares were issued to Steffens in
     consideration of his performance as an officer and director of the Company,
     and were advanced in accordance with his employment contract, for the
     period beginning May 1997 through May 2000. Steffens resigned his positions
     as officer and director of the Company on November 14, 1997. Ian Hicks
     ("Hicks") was issued 25,000 shares of Common Stock in consideration of
     promised faithful discharge of officer and director duties. Hicks resigned
     in May 1997. However, during such time they held their positions, they
     undertook various actions which the Company believes were in breach of
     their fiduciary duty, causing the Company substantial damages. The Company
     demands repayment of the $100,000 paid to Steffens, a declaration of the
     invalidity of their shares, and damages. See Note 10.

7.   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. See Note 8.

8.   In July 1998, the Company moved the administrative headquarters from Reno,
     Nevada to Scottsdale, Arizona where all accounting operations are
     maintained. They occupy 610 square feet and pay rent of $610 monthly
     beginning July 20, 1998 expiring August 31, 1999.

9.   On August 10, 1998, the Company entered into a 1-year consulting agreement
     with Francis C. Pizzulli, Esq. 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.


<PAGE>


         Item 2. Management's Discussion Analysis and 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, 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 giving attention to three products, each of which uses the
Company's patented formula of lyophilized liposome Prostaglandin E1 ("LLPGE1"):
(i) an Intrameatal therapeutic treatment for male erectile dysfunction ("Male
Intrameatal Product"), (ii) a topically applied cream therapeutic treatment for
male erectile dysfunction ("Male Topical Product"), and (iii) topically applied
cream therapeutic treatment for female sexual dysfunction ("Female Topical
Product"). The Company presented the results of its Phase I clinical study on
the Male Intrameatal Product to the FDA in April 1997, as part of its pre-Phase
II clinical trial meeting. On May 29, 1998, the Company received approval from
the FDA on the Phase I study, and approval to initiate Phase II clinical trials
therefor. Protocols and research sites for the Phase II study on the Male
Intrameatal Product is complete and the Company is moving forward with its Phase
II clinical trials.

         The Company believes that a sizable market already exits for sexual
dysfunction and that this market will expand for products that can effectively
treat female sexual dysfunction as well as male sexual dysfunction. Independent
studies of Dr. Irwin Goldstein, a Professor and Urologist at Boston University
School of Medicine and 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 dysfunction. The Company believes that a vasodilator such as its
Female Topical Product (in which LLPGE1 is reconstituted to form an aqueous
solution suspended in a cream base and applied to the female's vaginal area)
will provide a solution to this problem by stimulating the production of vaginal
fluid and increasing blood flow to the area, thus providing suitable lubrication
for sexual intercourse as well as heightened sensation. Toxicity studies will be
conducted on female animals before the Company submits its application for an
IND in connection with the Female Topical Product to the U.S. food and Drug
Administration.

         The Company's Male Topical Product compliments its aqueous solution
Male Intrameatal Product. This Male Topical Product will be administered locally
to the penis glands as a lotion and is very similar to the Company's new
treatment for female sexual dysfunction. The Company has named 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 dysfunction products.
The Company's core technology is covered by a U.S. patent. On August 18, 1997,
the Company received a Notification of Allowance for Patent from the U.S. Patent
and Trademark Office for "PGE1 CONTAINING LYOPHILIZED LIPOSOMES FOR USE IN THE
TREATMENT OF ERECTILE DYSFUNCTION". This is the active drug agent used in the
Company's Male Intrameatal, Male Topical and Female Topical Products. The U.S.
Patent and Trademark Office issued patent number 5,718,917 to the Company on
February 17, 1998.

         The Company also has acquired the rights for an oral delivery treatment
for male and female sexual dysfunction via the lyophilized lipsomal delivery of
Apomorphine. The Male and Female Oral Products are designed to scientifically
manipulate the liposome through the stomach and into the small intestine where
it attaches to the intestinal wall, thereby greatly reducing the adverse effects
associated with this drug. While the Company believes these products have great
potential, it has not independently done any material investigation of these
products or of the opportunities to promote them in the marketplace.


<PAGE>


         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 other regulatory approval, none of which is assured.

         During fiscal years 1994 through 1997 and during the first and second
quarters of 1998, the Company's activities consisted primarily of raising
capital, identifying a core management team, developing a patent application for
LLPGE1 and the submission of this application to the U.S. Patent and Trademark
office, which resulted in the issuance of Patent No. 5,718,917, concluding
manufacturing scale up and initial clinical trials and formulating both a
commercialization and clinical development strategy. The Company has considered
and evaluated additional products and market potential for those products in
order to enhance its own current product portfolio and intends to continue this
strategy for future corporate development.

         The Company believes that its strategic plan, which was launched by a
new management team in November 1997, will be successful, although there is no
assurance that it will be. The Company's management team is currently
established, and it is not expected that the Company will need to hire any
additional employees during the next twelve months. Since the middle of November
1997: (i) the Company's International Patent Application, No. PCT/US96/18820
(International Publication No. W097/2234) for LLPGE1 received a favorable
Preliminary Examination Report, from the U.S. Patent and Trademark Office
Examiner acting as the International Preliminary Examining Authority, (ii) a
study utilizing gamma radiation instead of standard 0.2 micron filters to
sterilize the chemical components used in the Company's products proved
successful in the production of "GMP" (Good Manufacturing Practice) product,
which should lead to substantial cost savings, (iii) a financing agreement to
provide funds of up to $10,000,000 was signed between the Company and its two
largest stockholders, Thomas E. Waite, President and Chief Executive Officer of
the Company, and Jackie R. See, M.D., F.A.C.C., Director of Research and
Development, (iv) financing agreements of independent investors brought in a
total of $1,299,999 to the Company to be used toward working capital, and (v)
stability studies on LLPGE1 conducted with the collaborative efforts of Pyramid
Labs, Inc. in Costa Mesa, California have proven that LLPGE1 remains stable
without any degradation and chemical breakdown at room temperature for at least
12-months. These stability studies are ongoing in order to determine the exact
shelf life for the Company's products at room temperature.

         Over the next 12 months, the Company's primary focuses will be to 1)
proceed with phase II/III clinical trials and product validation of its Male
Intrameatal Product to conform to the regulatory process of the FDA, 2) petition
the FDA to perform phases I and II of the Male and Female Topical Products
immediately 3) continue development with the Male and Female Oral Products, 4)
continue monitoring patent applications, and 5) identify companies with similar
technologies or companies seeking new proprietary products to strengthen their
existing market position and seek the formation of strategic alliances, joint
venture arrangements, licensing and distribution agreements, research and
development agreements and other collaborative arrangements with major
pharmaceutical distribution concerns and/or licensing agreements to eventually
assist in the development and distribution of the Company's products.

         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. Without the benefit of an industry partner, the
Company believes an 18 to 24 month time-line to obtain regulatory approval of
the Male Intrameatal Products is probable, but there can be no assurance that
the product will receive FDA approval in that time span, if ever.

         The Company's future success is dependent upon its ability to raise
additional funds to complete the commercialization process for its Male
Intrameatal Product and its other products either through strategic agreements
(i.e. licensing, distribution or joint venture) or through private placements or


<PAGE>


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 the 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.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDING JUNE 30, 1998 AND JUNE 30, 
1997
----------------------------------------------------------------------------

         During the second quarter of 1997, the Company began spending for
research & development ("R&D") which was initially booked to General &
Administrative ("G&A") expense. Later during 1997, these costs were reclassified
to accurately reflect expenditures in R&D. Consequently, by comparison, the June
1997 G&A includes almost all the R&D costs incurred for that period. As a
result, the costs for the three months ending June 30th should be reviewed by
comparing the overall Total Operating Expenses for the three months of $701,313
in 1998 vs. $1,204,832 in 1997, for a decrease of approximately $504,000 in 1998
over 1997. This decrease is primarily a result of reduced legal fees of
approximately $210,000 and an overall reduction in consulting fees and payroll
paid of $180,000. The balance resulting in an additional saving of $114,000 in
1998 over 1997, a direct result of identifying a core management team in
November 1997 and strategically eliminating unnecessary costs.

         With exception to the reclassification discussed above, management
anticipates that such general and administrative expenses will continue to be
incurred in similar amounts throughout 1998 as the Company obtains additional
investment capital and expand its operations. The Company also continues to
incur legal expenses in connection with litigation in which the Company is
involved.

         For the three months ending June 30, dividend and interest income
decreased from 1997 to 1998 by approximately $14,000 while interest expense also
decreased significantly in the second quarter 1998as a result of the reduction
of the 6% convertible Debenture. Overall, the Company has continued to make
efforts to reduce costs and increase operation efficiency. These savings are
expected to be reflective throughout the balance of the year.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDING JUNE 30, 1998 AND JUNE 30, 1997
-------------------------------------------------------------------------------

         During both quarters ending June 30, 1998 and June 30, 1997, 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 completing the
required regulatory review process for its ED product and introducing the new
male and the new female sexual dysfunction products. The Company intends to
focus on promotions of their products only after completing the regulatory
review process.

         For the six months ending June 30, 1998, Total Operating Expenses
resulted in a decrease of $1,482,263 in 1998 over 1997. This decrease is
primarily a result of a one-time payment of $750,000 in March 1997 for a funding
fee and $175,000 paid to officers/directors of the Company in the first quarter
of 1997, both a result of securing financing with the 6% Debenture holder. In
addition, the Company paid Consultants an additional $302,000 more in 1997 than
in 1998 and legal expenses were greater in 1997 by $100,000. The balance
resulting in an additional saving of approximately $155,000 in 1998 over 1997, a
direct result of identifying a core management team in November 1997 and
strategically eliminating unnecessary costs.


<PAGE>


         As discussed above, dividend income, interest income and interest
expense were all greater in 1997 by $1,264,389, as 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.

         At the end of the second quarter of 1998, the Company reported total
assets of $6,931,064. 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 $4,984,000 (described above).

         The Company's total current liabilities for the second quarter of 1998
decreased by $132,085 over the total current liabilities at December 31, 1997.
The difference is due to the conversion of $250,000 principal of the 6%
Convertible Debentures netted against an increase in accounts payable and
accrued expenses and a small decrease in lease obligations, for a total net of
approximately $118,000.

         The Company issued a total of 2,137,717 shares of common stock during
the first half of the year ending June 30, 1998, mostly attributed to the
Debentures converted during January 1998 (103,606), securing four additional
financing arrangements (2,013,611), shares issued to new directors (10,000) and
shares issued for services and fees (10,500). 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
-------------------------------

         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 payment 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


<PAGE>


quarter of 1998, three 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.

         Funding needed to complete the regulatory process for the Male
Intrameatal Product is estimated to be as much as $15,000,000. For the next six
months, expected costs to be incurred for research & development is $1,884,000
which includes clinical trials on the Male Intrameatal Product as well as the
Male and Female Topical products. Up to an additional $20,000,000 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 Intrameatal 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.


<PAGE>


                           PART II - OTHER INFORMATION

ITEM NO. 1.  LEGAL PROCEEDINGS.

Registrant hereby references the description of legal proceedings contained in
the Registrant's (1) Form 10-QSB for the first quarter 1998 filed with the U.S.
Securities and Exchange Commission on May 15, 1998, and (2) Registration
Statement, form SB-2, filed with the U.S. Securities and Exchange Commission on
July 20, 1998, effective July 28, 1998. The Registrant has reported, herein,
legal proceedings which have become a reportable event during the second quarter
of 1998 or a reportable event reported in a prior filings in which there has
been a material development during the second quarter.

LEGAL PROCEEDINGS:


                  1. ALEXANDER H. WALKER, JR., DON STEFFENS INDIVIDUALLY AND AS
TRUSTEE FOR THE STEFFENS FAMILY TRUST, AND IAN HICKS, VS. ATLAS STOCK TRANSFER
COMPANY, HARVARD SCIENTIFIC CORP., AND JACKIE R. SEE, M.D., Case No. 98-0905858
in the Third Judicial District Court in the State of Utah in the County of Salt
Lake, filed on June 12, 1998. The action alleges share ownership by the
Plaintiffs named, and requests the Court to remove any stop transfer orders or
other prohibitions against plaintiffs trading of said shares. In addition,
Plaintiffs have requested damages in conjunction with any prohibitions placed on
the trading of Plaintiffs shares by Atlas Stock Transfer Company, the Company
and/or Dr. See. The Company denies Plaintiffs allegations and that Plaintiffs
own the shares in question. The shares in dispute include 1) 120,200 shares
issued to Alexander H. Walker, Jr., 2) 125,000 shares issued to Don Steffens
and/or the Steffens Family Trust, and 3) 25,000 shares issued to Ian Hicks.

Other Negotiating Matters
-------------------------

None

ITEM NO. 2.  CHANGES IN SECURITIES.

Registrant hereby references the description of any Changes in Securities
regarding the securities of the Registrant to the Registrants Registration
Statement Form SB-2 filed with the U.S. Securities and Exchange Commission on
July 20, 1998, effective July 28, 1998. Such information is contained in the
sections captioned "Description of Securities" and "Market for Common Equity and
Related Stockholder Matters".

ITEM NO. 3. DEFAULTS UPON SENIOR SECURITIES.

The Registrant hereby references the description of any Default upon Senior
Securities regarding the securities of the Registrant to the financial
information provided in Part I of this Form 10Q-SB. Reference should be made to
the disclosure provided in Part I in the "Notes to the Financial Statements",
Note 9 "Contingencies" No. (d) and (e), and in Note 10 "Convertible Debentures".

ITEM NO 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Registrant hereby references the this section to the financial information
provided in Part I of this Form 10Q-SB. Reference should be made to the
disclosure provided in Part I in the "Notes to the Financial Statements", Note
12 "Subsequent Events" No. (4). However, further information is provided here,
as follows:

(a) Annual meeting date July 9, 1998 held in Lake Mary, Florida.
(b)  The meeting will involve the election of directors whose term of office as
     a director will continue after the meeting, as follows:
         1)    Thomas E. Waite
         2)    Dr. Jackie R. See


<PAGE>


         3)    Curtis A. Orgill
         4)    Robert T. Hayden
         5)    Martin J. Holloran

(c)  The Annual Meeting, held July 9, 1998 (subsequent to this filing period),
     calculated total of 4,611,721 shares voted of the 5,240,547 shares issued
     an outstanding on the record date of May 29,. 1998, of which: 1) 4,592,345
     voted "FOR" the election of all Directors, and 19,535 shares voted to
     "WITHHOLD" for Thomas E.
     1)  Waite, 12,880 shares voted to "WITHHOLD" for Jackie R. See, M.S.,
         F.A.C.C., 14,000 shares voted to "WITHHOLD" for Curtis A. Orgill,
         14,050 shares voted to "WITHHOLD" for Martin J. Holloran, and 14,096
         shares voted to "WITHHOLD" for Robert T. Hayden, and ,

     2)  3,568,928 voted "FOR", 167584 voted "AGAINST", and 7,193 voted to
         "ABSTAIN" on Proposal One: To ratify and approve the Financing
         Agreement between Dr. Jackie R. See and Thomas E. Waite, and

     3)  3,560,305 voted "FOR", 175,463 voted "AGAINST", and 7,937 voted to
         "ABSTAIN" on Proposal Two: To Amend the Company's Articles of
         Incorporation to increase the number of authorized shares of Common
         Stock from 10,000,000 to 100,000,000 shares, and to authorize
         10,000,000 shares of serial or "blank check" Preferred Stock, and

     4)  4,584,616 voted "FOR", 21,065 voted "AGAINST", and 7,000 voted to
         "ABSTAIN" on Proposal Three: To ratify the appointment of Ronald D.
         Simpkins and Associates, CPA, P.A. as the Company's principal
         accountants to audit the Company's financial statements for the fiscal
         year ending December 31, 1998.


ITEM NO. 5.  OTHER INFORMATION.
None.

                  ITEM NO. 6. EXHIBITS AND REPORTS ON FORM 8-K
                  --------------------------------------------
A.        Exhibits
          (2)  There is NO plan of acquisition, reorganization, liquidation or
               succession
         (3)   (i)   Articles of Incorporation , incorporated by reference *
               (ii)  By-laws - incorporated by reference *
          (4)  Instruments, defining the rights of holders, incl. indentures *,
               **
          (10) Materials contracts:
               (i)   Securities Purchase Agreement dated March 21, 1997 between
                     the Registrant and
                     Springrange Investment Group, Ltd.  *
               (ii)  Financing Agreement between Thomas E. Waite and Dr. Jackie
                     R. See, Directors of the
                     Company - incorporated by reference *
               (iii) Employment Contract between Thomas E. Waite *
          (11) Statement re: Computation of per share earnings - Explanation not
               necessary - computation can be clearly determined from the
               financial statements attached.
          (15) Letter on Unaudited Interim Financial Information - Not
               applicable.
          (18) Letter on Changes in Accounting Principles - Not applicable.
          (19) Report Furnished to Security Holders - Not applicable.
          (23) Consents of Experts and Counsel- Not applicable.
          (22) Published report regarding matters submitted to vote **
          (24) Power of Attorney - Not applicable.
          (27) Financial Data Schedule -Attached

         * Incorporated by reference from the Registrant's Registration
         Statement Form SB-2 filed July 20, 1998 with the U.S. Securities and
         Exchange Commission, effective July 28, 1998.


<PAGE>


         ** Incorporated by references from the Registrant's Proxy Statement 14D
         filed with the U.S. Securities and Exchange Commission on June 5, 1998,
         for the annual shareholder meeting held July 9, 1998.

B.       Reports on Form 8-K.
         None filed during the reporting period.


<PAGE>


                                   SIGNATURES
                                   ----------

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated:   August 13, 1998


                                            HARVARD SCIENTIFIC CORP
                                                 (Registrant)


Date: August 13, 1998                       By: /s/Thomas E. Waite
      ------------------------------            --------------------------------
                                                Thomas E. Waite
                                                President & CEO