AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998

REGISTRATION NO. 333-42053

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM SB-2/A
PRE-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

AYURCORE, INC.
(Name of Small Business Issuer in Its Charter)
------------------------------

DELAWARE 2834 77-0341892
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

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

1737 N. FIRST STREET, SUITE 290
SAN JOSE, CALIFORNIA 95112
(408) 441-6380
(Address, including zip code, and telephone number, including area code, of
registrant's executive offices)
------------------------------

DEEPA CHITRE, M.D.
CHIEF EXECUTIVE OFFICER
AYURCORE, INC.
1737 N. FIRST STREET, SUITE 290
SAN JOSE, CALIFORNIA 95112
(408) 441-6380
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

With copies to:

IRWIN M. ROSENTHAL, ESQ. VIRGINIA K. SOURLIS, ESQ.
Rubin Baum Levin Constant & Friedman 192 Kingsley Street
30 Rockefeller Plaza Long Branch, New Jersey 07740
New York, New York 10112 Telephone: (732) 758-9001
Telephone: (212) 698-7700 Facsimile: (732) 758-6671
Facsimile: (212) 698-7825

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier registration statement for the same
offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. / /

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL SUCH REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED MAY 27, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

AYURCORE, INC.

1,350,000 SHARES OF COMMON STOCK

AyurCore, Inc. (the "Company") hereby offers 1,350,000 shares (the "Shares")
of its common stock, $.001 par value (the "Common Stock"), at an initial public
offering price of $6.00 per share (the "Offering"). The Offering price of the
Shares was established by negotiation between the Company and Network 1
Financial Securities, Inc., the representative (the "Representative") of the
underwriters of the Offering (the "Underwriters") and does not necessarily bear
any direct relationship to the Company's assets, book value, net worth or any
other recognized criteria of value. For a discussion of the factors considered
in determining the initial public offering price, see "Underwriting."

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that any such market will develop upon completion
of the Offering or, if developed, be sustained. The Company has applied for
quotation of the Common Stock on the Nasdaq SmallCap Market ("Nasdaq") under the
proposed symbol "AYUR."

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON
PAGE 8 AND "DILUTION" ON PAGE 20.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)

Per Share................................................ $6.00 $.60 $5.40
Total(3)................................................. $8,100,000 $810,000 $7,290,000

(1) In addition, the Company has agreed to pay to the Representative, (i) a
nonaccountable expense allowance equal to 3% of the gross proceeds of the
Offering, (ii) warrants (the "Representative's Warrants") to purchase up to
135,000 shares of Common Stock, and (iii) a 24-month financial advisory and
investment banking agreement for an aggregate payment of $120,000 payable in
full at the closing of the Offering. The Company has also agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses of the Offering payable by the Company, estimated
at $900,000 (including the Representative's nonaccountable expense
allowance). See "Underwriting."

(3) The Company has granted the Representative an option, exercisable during the
45 days following the date of this Prospectus, to purchase up to 202,500
additional shares of Common Stock on the same terms and conditions as set
forth above, solely for the purpose of covering over-allotments, if any. If
the Representative's over-allotment option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $9,315,000, $931,500 and $8,383,500, respectively. See
"Underwriting."

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

The shares of Common Stock are being offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to approval of certain legal matters by counsel and certain other
conditions. The Representative reserves the right to withdraw, cancel or modify
the Offering and to reject any order in whole or in part. It is expected that
delivery of certificates representing the shares of Common Stock offered hereby
will be made against payment therefor at the offices of the Representative, The
Galleria, Building 2, Penthouse, 2 Bridge Avenue, Red Bank, New Jersey
07701-1106, on or about , 1998.

[LOGO]

The date of this Prospectus is , 1998

AYURCORE, INC.
Discovery & Development of Novel Phyto-Pharmaceuticals
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* Targeting difficult-to-treat human diseases-Designed to save time-

(Picture of four plants used to make (Picture of Company's laboratory in
ARTREX-TM-) India)
Identification of Non-Toxic Medicinal Leading to Standardization
Plants Optimization and Clinical Testing

(Picture of two ARTREX boxes w/pills)
Resulting in Novel Proprietary Phyto-Pharmaceuticals

While certain of the Company's products are currently being marketed in India
and Singapore, none of them have yet received United States FDA approval, and
the Company does not expect to receive any such approval until, at the earliest,
the year 2001.

AVAILABLE INFORMATION

As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING PLACING STABILIZING BIDS OR EFFECTING PURCHASES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
EXCEPT AS OTHERWISE INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS,
INCLUDING PER SHARE DATA AND INFORMATION RELATING TO THE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING: (i) GIVES RETROACTIVE EFFECT TO THE RECLASSIFICATION
OF THE COMPANY'S CLASS A COMMON STOCK AND CLASS B COMMON STOCK INTO ONE CLASS OF
COMMON STOCK, AN INCREASE IN THE COMPANY'S AUTHORIZED CAPITAL STOCK, AND AN
18,333.486-FOR-1 SPLIT OF THE COMMON STOCK, EACH OF WHICH WAS EFFECTED ON
NOVEMBER 26, 1997, AND (ii) ASSUMES NO EXERCISE OF THE REPRESENTATIVE'S
OVER-ALLOTMENT OPTION TO PURCHASE UP TO 202,500 ADDITIONAL SHARES OF COMMON
STOCK. SEE "UNDERWRITING" AND NOTE K OF NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.

THE COMPANY

The Company is engaged primarily in the discovery, development, clinical
testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-to-treat human
diseases. The Company currently has three phyto-pharmaceuticals in various
stages of clinical and preclinical development. RA-11, the Company's lead
phyto-pharmaceutical, recently completed a six month test-marketing program in
India, is currently being sold in Singapore and, on a limited basis, India, and
is scheduled to be launched for sale on a national basis in India in June 1998;
IM-10, which is undergoing preclinical animal pharmacology testing in India, has
been indicated for the stimulation and restoration of bone marrow and the immune
system in cancer patients being treated with chemotherapy; and HP-11, an
early-stage product candidate, is undergoing laboratory testing in India for the
treatment of hepatitis. The Company has an exclusive license under a United
States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases. In addition, the Company has a United States patent
application pending relating to BV-6, a pharmaceutical derived from a single
animal cell component, which is undergoing early pharmacological studies at
Emory University for the treatment of degenerative diseases of the central
nervous system.

A key element of the Company's strategy is to apply the principles of
Ayurveda, an ancient science native to India, to reduce the time and costs
associated with the drug discovery process. Generations of Ayurveda scholars
have studied and documented the uses and efficacy of specific plants as
medicinal therapies over a period of several hundreds of years. Their findings,
preserved and detailed in Ayurvedic literature, provide valuable information for
modern day scientists. Through the study of Ayurveda, the Company's scientific
team seeks to rapidly identify plants, or combinations of plants, that have been
successfully used to treat symptoms and ailments characteristic of the diseases
targeted by the Company. In addition, because Ayurvedic literature has also
documented the safety of over 300 plant extracts for human use, once an
Ayurvedic plant candidate has been identified by the Company's researchers, they
are, in many instances, able to conduct early development activities in
parallel, rather than sequentially, when determining the candidate's safety and
efficacy. The Company believes that focusing its screening process on plants
whose safety and efficacy in medicinal use have been documented in Ayurvedic
literature will result in faster and more effective screening methods for the
discovery of new phyto-pharmaceuticals. The Company further believes that, based
on their long histories of safe use, these phyto-pharmaceuticals will have a
greater potential for safety and, as a result, may achieve more rapid regulatory
approval. See "Business--The AyurCore Model of Drug Discovery and Development."

administered in accordance with protocols designed to be consistent with the
standards of the United States Food and Drug Administration (the "FDA") and in
laboratories that are designed to operate in accordance with guidelines
consistent with FDA Good Laboratory Practices ("GLP"). In addition, the
Company's proprietary plant extraction process is conducted for it by Kancor
Flavours & Extracts Pvt. Ltd., a third-party Indian supplier with an ISO-9000
certification (a worldwide industry manufacturing standard). The Company has
thus established, and continues to enhance, a network infrastructure in India
designed to identify phyto-pharmaceuticals through an accelerated process and in
a low-cost, high quality environment.

RA-11, the Company's lead product, has been derived, initially through
Ayurvedic studies, from a combination of four different plant species. The
Company holds an exclusive license on two Indian patents relating to its
proprietary plant extraction and RA-11 formulation processes, as well as a
United States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases, such as rheumatoid arthritis and osteoarthritis.
Incidence of rheumatoid arthritis is reported to be approximately 2% of the
world population and the incidence of clinically symptomatic osteoarthritis is
reported to be between 10-15% worldwide. Moreover, in 1996, arthritis in general
was reported by the American College of Rheumatology ("ACR") to be the number
one cause of disability in the United States and the total market for
prescription arthritis drug therapy was estimated to be over $6 billion. Based
on clinical trials conducted in India (where RA-11 has been approved for
commercial sale by India's FDA equivalent) under protocols consistent with FDA
guidelines and ACR criteria, the Company believes that RA-11 may prove to be an
effective and safe drug for long-term treatment of osteoarthritis and may be
classified as a disease modifying, anti-rheumatic drug for the long-term
treatment of rheumatoid arthritis.

Effective September 1997, the Company entered into a three-year distribution
agreement with a Singapore-based pharmaceutical marketing and distribution
company, MD Pharmaceuticals Laboratories Ltd., for the distribution of RA-11 in
certain Pacific Rim countries. Marketing commenced under such agreement in May
1998. In March 1998, a six month test-marketing program of RA-11 in India was
completed. The test-marketing program was conducted by Alembic Chemical Works
Co. Limited, an Indian pharmaceutical company ("Alembic"). The Company is in
discussions with Alembic regarding a definitive agreement, and, subject to
finalization of an agreement, the Company anticipates a national launch of RA-11
in India in June 1998. Subject to successful completion of additional animal
pharmacology studies being conducted in India, the Company intends to file an
investigational new drug ("IND") application for RA-11 with the FDA in the
United States by the first quarter of 1999. Subject to approval of its IND
application, of which there can be no assurance, the Company will seek to
by-pass Phase I clinical trials (preliminary trials which focus on healthy human
subjects) in the United States, proceeding directly to Phase II clinical studies
(intermediate level trials, focused on a limited target patient population),
since it has already conducted two large, well-documented efficacy and safety
Phase II clinical trials in India using protocols prepared in the United States
consistent with FDA guidelines. The Company does not, however, anticipate
completing clinical trials or filing a new drug application ("NDA") with the FDA
for RA-11 (approval of which must be obtained prior to the commencement of its
commercial sale in the United States) until, at the earliest, the year 2001.

In addition to its activities related to RA-11, during the 12-month period
following the Offering the Company intends to focus its research and development
efforts (i) with respect to IM-10 and HP-11, on continued preclinical testing in
India and the United States and, subject to obtaining successful results, the
commencement of clinical trials in India, and (ii) with respect to BV-6, on
continued preclinical studies in the United States. The proceeds of the Offering
will not be sufficient to complete development efforts of any of these proposed
products and the Company will require substantial additional financing to
continue development efforts in these areas.

The Company is in the development stage and has not yet had any of its
products approved by the FDA. The Company's long-term viability, profitability
and growth will depend upon successful commercialization of products resulting
from its research and development activities. To date, the Company has

recorded only limited product sales ($101,000 in net product sales from
inception through March 31, 1998), and these have been derived primarily from
sales in India of SA-12, a proprietary anti-bacterial surgical scrub acquired by
the Company from its inventor in 1995. As a result, the Company has incurred
significant operating losses since its inception, including net losses of
$1,432,000 and $1,327,000 for the years ended December 31, 1997 and 1996,
respectively, and $281,000 for the quarter ended March 31, 1998. The Company
expects that its losses will increase as the Company expands its research and
development activities and that losses will continue until such time, if ever,
as the Company is able to generate sufficient revenues to support its
operations. The Company believes that its ability to generate sufficient
revenues primarily depends on the success of the Company in completing
development, and obtaining regulatory approvals in the United States and other
major markets for the commercial sale, of RA-11 and other product candidates.
There can be no assurance that any of such events will occur or that the Company
will ever achieve profitable operations. See "Risk Factors."

Set forth below is a summary of the Company's products and product
candidates.

PRODUCT TARGETED INDICATIONS OWNERSHIP STATUS STAGE OF DEVELOPMENT

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RA-11 Treatment of rheumatoid Exclusive licensee Two large Phase II level
arthritis and clinical trials have
osteoarthritis been completed in India
using protocols
consistent with FDA
guidelines; test-
marketing successfully
completed in India;
marketed in Singapore;
pre-IND in United States
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IM-10 Immunostimulation in Exclusive licensee Pre-clinical
cancer patients
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HP-11 Treatment of hepatitis, Owner (by assignment) Early pre-clinical
including hepatitis A,
B, C and chemically
induced hepatitis
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BV-6 Treatment of central Owner (by assignment) Early pre-clinical
nervous system
degenerative diseases
such as seizure
disorders, strokes,
multiple sclerosis and
Alzheimer's disease
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SA-12 Topical antibacterial Owner (by assignment) Marketed in India
surgical scrub and
general disinfectant for
use on hands and other
skin surfaces

The Company is a Delaware corporation which was organized on January 11,
1993 under the name Bio-Ved, Inc. The Company changed its name to AyurCore, Inc.
on September 27, 1995. The Company has one substantially wholly-owned
subsidiary, Bio-Ved Pharmaceuticals Private Limited, a company organized in
India ("Bio-Ved"). Unless the context otherwise requires, all references herein
to the "Company" shall be deemed to include and refer to AyurCore, Inc. and
Bio-Ved. The Company's principal executive office is located at 1737 N. First
Street, Suite 290, San Jose, California 95112 and its telephone number is (408)
441-6380.

THE OFFERING

Common Stock offered......................... 1,350,000 shares

Common Stock to be outstanding after the
Offering................................... 3,569,702 shares (1)

Use of Proceeds.............................. The Company intends to use the net proceeds
of the Offering for research and development,
repayment of indebtedness, manufacturing and
marketing, and working capital.

Risk Factors................................. The Company is a development stage company
and has incurred substantial losses since
inception. An investment in the securities
offered hereby is speculative in nature and
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution."

Proposed Nasdaq symbol....................... "AYUR"

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(1) Does not include: (i) 70,000 shares of Common Stock reserved for issuance
upon exercise of stock options granted, and 157,986 shares of Common Stock
reserved for issuance upon exercise of stock options available for future
grant, under the Company's 1997 Stock Option Plan (the "Option Plan"); (ii)
300,970 shares of Common Stock reserved for issuance upon exercise of
currently outstanding non-Option Plan options; (iii) 475,000 shares of
Common Stock reserved for issuance upon exercise of currently outstanding
warrants; and (iv) 135,000 shares of Common Stock reserved for issuance upon
exercise of the Representative's Warrants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Management--Stock Options," "Certain Transactions,"
"Description of Securities" and "Underwriting."

SUMMARY FINANCIAL DATA
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

The following sets forth certain summary historical financial data for the
Company as of December 31, 1997 and for each of the years in the two-year period
ended December 31, 1997 and for the period January 11, 1993 (inception) through
December 31, 1997, which have been derived from the Consolidated Financial
Statements of the Company included elsewhere in this Prospectus. The summary
historical financial data set forth as of March 31, 1998 and for the three-month
periods ended March 31, 1998 and 1997 and for the period January 11, 1993
(inception) through March 31, 1998, have been derived from the unaudited
consolidated financial data of the Company included elsewhere herein. The
summary historical financial data should be read in conjunction with such
consolidated financial statements and the notes thereto. Operating results for
the interim periods are not necessarily indicative of results of the full fiscal
year.

STATEMENT OF OPERATIONS DATA:

YEAR ENDED JANUARY 11, 1993 THREE MONTHS ENDED JANUARY 11, 1993
DECEMBER 31, (INCEPTION) MARCH 31, (INCEPTION)
---------------------- THROUGH DECEMBER 31, ---------------------- THROUGH MARCH 31,
1997 1996 1997 1998 1997 1998
---------- ---------- --------------------- ---------- ---------- -----------------

Revenue:
Net product sales...... $ 91 $ 91 $ 10 $ 101
Royalty income......... 12 12 12
Government grant....... 100 100 $ 56 100
---------- ------- ---------- ---------- --------
Total revenue............ 203 203 10 56 213
---------- ------- ---------- ---------- --------
---------- ------- ---------- ---------- --------
Costs and expenses:
Cost of sales.......... $ 100 $ 100 $ 6 $ 106
Research and
development.......... 272 $ 401 1,312 34 $ 89 1,346
General and
administrative....... 735 844 3,012 225 183 3,237
---------- ---------- ------- ---------- ---------- --------
Total operating
expenses................. 1,107 1,245 4,424 265 272 4,689
---------- ---------- ------- ---------- ---------- --------
Loss from operations..... (904) (1,245) (4,221) (255) (216) (4,476)
Net interest income
(expense)............ (528) (82) (632) (26) (27) (658)
---------- ---------- ------- ---------- ---------- --------
Net loss............... $ (1,432) $ (1,327) $ (4,853) $ (281) $ (243) $ (5,134)
---------- ---------- ------- ---------- ---------- --------
---------- ---------- ------- ---------- ---------- --------

Basic and Diluted loss
per share(1)............. $ (.70) $ (.66) $ (.13) $ (.12)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Weighted average number
of shares outstanding--
Basic and Diluted(1)... 2,034,945 1,999,994 2,219,702 1,999,994
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

BALANCE SHEET DATA:

MARCH 31, 1998
DECEMBER 31, ------------------------------
1997 ACTUAL AS ADJUSTED(2)(3)
------------- --------- -------------------

Working capital (deficit).............................................. $ (2,050) $ (2,355) $ 5,111
Total assets........................................................... 508 565 6,074
Total current liabilities.............................................. 2,098 2,412 888
Long-term debt......................................................... -- -- 514
Deficit accumulated during development stage........................... (4,963) (5,244) (5,244)
Total stockholders' equity (capital deficiency)........................ (1,590) (1,847) 4,672

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(1) See Note B [6] to the Company's Consolidated Financial Statements.

(2) Gives effect to the reclassification of approximately $605,000 in principal
amount of short-term debt ($250,000 of which was borrowed after March 31,
1998), plus accrued interest thereon ($38,000 as of March 31, 1998), to
long-term debt upon consummation of the Offering.

(3) As adjusted to give effect to the sale of the 1,350,000 shares of Common
Stock offered hereby at the Offering price of $6.00 per share and the
anticipated application of the estimated net proceeds therefrom and the
repayment of certain indebtedness (approximately $778,000 in outstanding
principal and interest). See "Use of Proceeds."

RISK FACTORS

THE SECURITIES BEING OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION AND FINANCIAL
DATA SET FORTH IN THIS PROSPECTUS, SHOULD BE CONSIDERED CAREFULLY IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE SHARES. THE
RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS PROSPECTUS ARE NOT INTENDED TO BE AN
EXHAUSTIVE LIST OF THE GENERAL OR SPECIFIC RISKS INVOLVED, BUT MERELY IDENTIFY
CERTAIN RISKS THAT ARE NOW FORESEEN BY THE COMPANY. IT MUST BE RECOGNIZED THAT
OTHER RISKS, NOT NOW FORESEEN, MIGHT BECOME SIGNIFICANT IN THE FUTURE AND THAT
THE RISKS WHICH ARE NOW FORESEEN MIGHT AFFECT THE COMPANY TO A GREATER EXTENT
THAN IS NOW FORESEEN OR IN A MANNER NOT NOW CONTEMPLATED.

EARLY STAGE OF PRODUCT DEVELOPMENT; NO ASSURANCE OF SUCCESSFUL PRODUCT
DEVELOPMENT. None of the Company's products or product candidates have been
approved for sale in the United States or Europe or in other countries with
comparable regulatory approval processes. The Company's products and product
candidates are in various stages of development and will require significant
additional development, clinical testing and investment prior to
commercialization in the United States and other countries. Products for use in
human healthcare must be evaluated in extensive human clinical trials to
determine their safety and efficacy as part of a lengthy process to obtain
government approval. Clinical trials may be terminated at any time for many
reasons, including safety or lack of efficacy. There can be no assurance that
the Company will not encounter problems in clinical trials that will cause the
Company to delay or suspend any trials which it may conduct. Further, there can
be no assurance that the Company's research and development efforts will be
successful or that any products developed will be safe, effective, capable of
being manufactured in commercial quantities at an economical cost, approved by
appropriate regulatory authorities, accepted for coverage and reimbursement by
third party payers or successfully marketed in quantities sufficient to generate
operating revenue. Failure of any of the Company's product candidates to
successfully complete any of the steps necessary for their successful
commercialization would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business."

DEVELOPMENT STAGE COMPANY; HISTORY OF SIGNIFICANT LOSSES; ANTICIPATED FUTURE
LOSSES; ACCOUNTANT'S EXPLANATORY PARAGRAPH REGARDING THE COMPANY'S ABILITY TO
CONTINUE AS A GOING CONCERN. The Company is in the development stage and, as
such, has generated only limited revenue and has incurred significant losses,
including net losses of $1,432,000 and $1,327,000 for the years ended December
31, 1997 and 1996, respectively, and $281,000 for the quarter ended March 31,
1998. As of March 31, 1998, the Company had an accumulated deficit of
$5,244,000. The Company expects to incur operating losses and negative cash flow
for the next several years and that its losses will increase as the Company
expands its research and development activities. The likelihood of the Company's
success must be considered in light of the problems, delays, expenses and
difficulties frequently encountered by enterprises in the early stage of
development, many of which may be beyond the Company's control. These include,
but are not limited to, unanticipated problems relating to product development,
preclinical and clinical testing, the obtainment of regulatory approvals for the
manufacture and sale of products, competition, manufacturing, marketing, and the
political, economic and regulatory problems associated with engaging in business
in India and other countries. These and other problems may result in additional
costs and expenses that exceed current estimates. There can be no assurance that
the Company will ever achieve significantly increased revenues or profitable
operations. In addition, the Company's independent auditors have included an
explanatory paragraph in their report stating that the Company's accumulated
deficit and its dependence, to date, upon equity financings and advances and
loans from stockholders and others raise substantial doubts about the Company's
ability to continue as a going concern. The Offering is an integral part of the
Company's plan to continue as a going concern. See "Management's Disccusion and
Analysis of Financial Condition and Results of Operations," "Certain
Transactions" and Consolidated Financial Statements.

SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON OFFERING PROCEEDS; WORKING
CAPITAL DEFICIT; NEED FOR ADDITIONAL FINANCING. The Company's capital
requirements have been and will continue to be significant. To date, the Company
has been dependent primarily upon equity investments and advances and loans
from, or guaranteed by, stockholders to fund its capital requirements. As of
March 31, 1998, the Company had a working capital deficit of $2,355,000, and it
is dependent upon the proceeds of the Offering to fund its continuing research
and development and other working capital requirements. The Company anticipates,
based on its currently proposed plans and assumptions relating to its operations
(including assumptions regarding the nature and extent of research and
development required in connection with the regulatory approval process, the
timing of obtaining regulatory approvals, if any, market acceptance, the
competitive position of the Company's products, and the ability of the Company
to continue to secure adequate manufacturing and distribution relationships)
that the net proceeds of the Offering will be sufficient to fund the Company's
contemplated capital requirements for at least 12 months following the
consummation of the Offering. In the event the Company's plans change or its
assumptions change or prove to be incorrect, the Company could be required to
seek additional financing sooner than currently anticipated. In addition, the
Company will need to raise substantial additional capital to fund its future
operations. There can be no assurance that additional financing will be
available when needed on terms acceptable to the Company, or at all. Any
inability to obtain additional financing when needed would have a material
adverse effect upon the Company and could prevent it from implementing its
business strategy and require it to significantly curtail its operations. In
addition, if additional funds are raised by issuing equity securities, dilution
to then existing stockholders will result and future investors may be granted
rights superior to those of existing stockholders. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS. The Company's success
depends in large part on the continued services of its executive management team
and other key personnel. The Company's success also depends on its ability to
retain and attract highly skilled personnel, both in the United States and
India. There can be no assurance that the Company will be able to continue to
attract or retain such persons. In addition, the Company relies to a large
extent on scientific consultants to assist it in the drug discovery and
development process. The Company's success is substantially dependent upon the
efforts of these third parties and the continued availability of their services
to the Company. Many of the Company's arrangements with its consultants are
relatively short-term or are informal. There is, therefore, no assurance that
the Company will be able to retain or continue to retain such consultants or
other qualified consultants on commercially reasonable terms, or at all. In
addition, the time and resources devoted to the Company's business by its
consultants will generally be controlled by them and not by the Company, and
many of these consultants may have commitments to other entities that could
limit their availability to the Company. Some of these consultants may also
provide consulting services to companies that may be competitors of the Company.
The loss of existing executive management or key personnel, or the failure to
recruit additional highly skilled personnel, could significantly impede the
Company's attainment of its objectives and have a material adverse effect on the
Company's business, financial condition and result of operations. See
"Business--Consultants" and "Management."

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's success
depends in part on its ability to obtain patent protection for its products and
to preserve its trade secrets. The Company holds an exclusive license on a
United States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases, including rheumatoid arthritis and osteoarthritis,
which patent expires in 2014. The Company also holds an exclusive license on two
Indian patents, one of which relates to the Company's proprietary plant
extraction process and the other of which relates to the Company's proprietary
process for formulating RA-11, both of which Indian patents expire in 2001. In
addition, the Company has a pending United States patent application related to
BV-6. No assurance can be given that the Company's pending patent application or
future patent applications will issue as patents, that any patents will provide
the Company with competitive advantages for its products or that they will not
be successfully challenged or circumvented by the Company's competitors. The
Company has not conducted an exhaustive patent

search and no assurance can be given that patents do not exist or could not be
filed which would have an adverse effect on the Company's ability to market its
products. If other companies were to successfully bring legal actions against
the Company claiming patent or other intellectual property right infringements,
then, in addition to any potential liability for damages, the Company could be
required to obtain a license in order to continue to use the affected process or
to manufacture or use the affected product and, if enjoined by a court, the
Company could be required to cease using such process or product. There can be
no assurance that the Company would prevail in any such action or that any
license required under any such patent would be made available on acceptable
terms, or at all. There is significant litigation in the pharmaceutical industry
regarding patent and other intellectual property rights. If the Company becomes
involved in such litigation, it could consume a substantial portion of the
Company's financial and other resources, regardless of the outcome of such
litigation. There can be no assurance that the Company will have the financial
or other resources necessary to enforce or defend a patent infringement action.
The Company also relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or independently
developed by competitors. See "Business--Patents, Licenses, and Proprietary
Rights."

At present, India only grants process patents for pharmaceutical products.
Although India is not a signatory of the Paris Convention, it is a member of the
World Trade Organization ("WTO"). As a signatory of WTO, India is required to
comply with its obligations under Trade-Related Aspects of Intellectual Property
Rights ("TRIPS"). TRIPS requires India to grant product patents for
pharmaceutical products after a certain transition period. During the transition
period, participating countries must establish a means for filing patent
applications relating to pharmaceutical products and agricultural chemicals and
also grant exclusive marketing rights for certain periods. In response to claims
raised by other countries, WTO ruled that India has not been abiding by its
transition period commitments under TRIPS. India appealed the WTO decision, but
lost the appeal. As a result, India is supposed to conform its patent rules to
WTO requirements. Failure to do so could result in economic or other retaliation
by member countries. In addition, as an aftermath of the Convention on
Biological Diversity, India is planning to enact a law on national
bio-diversity. This law may place restrictions and/or conditions for obtaining
patents or other intellectual property relating to biological material or
products derived therefrom. See "Business--Patents, Licenses and Proprietary
Rights."

NO ASSURANCE OF REGULATORY APPROVALS. The Company's research, preclinical
development, clinical trials, and manufacturing and marketing of its products in
the United States and other countries are subject to extensive regulation by
numerous governmental authorities including, but not limited to, the FDA. The
Company has no products approved by the FDA and does not expect to achieve
profitable operations until products receive FDA approval, are commercialized
successfully, and become eligible for reimbursement by third party payers. Any
potential therapeutic product developed by the Company will be subject to
rigorous preclinical and clinical testing and approval pursuant to regulations
administered by the FDA and comparable agencies in other countries. The approval
process for the Company's drug candidates is lengthy and is likely to involve
significant expenditures. No assurance can be made that the Company will be able
to file any NDAs or that any such filings will result in FDA approval.
Furthermore, the Company cannot predict with any degree of certainty when it
might be in a position to file any NDA or the length of time involved between
the filing of an NDA and obtaining FDA approval, if at all. The cost to the
Company of conducting human clinical trials for any potential product can vary
dramatically based on a number of factors, including the order and timing of
clinical indications pursued and the extent of development and financial
support, if any, from corporate partners. The Company may have difficulty
obtaining sufficient patient populations, clinicians or support to conduct its
clinical trials as planned and may have to expend substantial additional funds
to obtain access to such resources, or delay or modify its plans significantly.

The effect of government regulation may be to delay marketing of the
Company's proposed products for a considerable period of time, to impose costly
procedures upon the Company's activities and to furnish a competitive advantage
to companies that compete with the Company. There can be no assurance that FDA
or other regulatory authority approval for any product candidates developed by
the Company will be granted on a timely basis or at all. Any delay in obtaining
or any failure to obtain such approvals would materially and adversely affect
the marketing of the Company's drug candidates and the Company's business,
financial position and results of operations. In addition, legislation may be
enacted in the future which might adversely affect the Company's ability to
develop, manufacture or market its drug candidates. Any FDA approvals that may
be granted will be subject to continual review, and later discovery of
previously unknown problems may result in withdrawal of products from marketing.
Moreover, if and when such approval is obtained, the marketing and manufacture
of the Company's products would remain subject to extensive regulatory
requirements administered by the FDA and other regulatory bodies. Failure to
comply with these regulatory requirements could, among other things, result in
fines, suspensions or withdrawal of regulatory approvals, operating restrictions
and criminal prosecution. The Company intends, either on its own or in
collaboration with others, to market its products in major markets outside of
the United States. There can be no assurance that the Company will be successful
in establishing marketing relationships, conducting clinical testing in foreign
countries or obtaining required foreign regulatory approvals in a timely manner,
if at all. To market its products abroad, the Company must comply with numerous
and varying foreign regulatory requirements implemented by foreign health
authorities, governing, among other things, the design and conduct of clinical
trials, pricing regulations and marketing approval. The approval procedure may
vary among countries and can involve, for example, additional testing, and the
time required to obtain approval may differ from the time required to obtain FDA
approval. The foreign regulatory approval process includes all of the risks
associated with obtaining FDA approval. However, approval by the FDA of any drug
candidate does not ensure approval by the regulatory agencies of other
countries. See "Business--The Regulatory Approval Process" and "--Products and
Product Candidates."

OPERATIONS CONDUCTED IN INDIA AND DEPENDENCE ON POLITICAL AND ECONOMIC
STABILITY OF INDIA AND OTHER COUNTRIES. Substantially all the Company's
research and development operations are currently conducted, and most of the
Company's limited sales are currently generated, in India. To effectively manage
its operations in India, the Company requires, and will continue to require, the
engagement of persons with appropriate managerial skills and the implementation
of an effective supervisory program which will include a continual and current
flow of reliable information to the Company's officers in the United States and
frequent reports from, and visits to, its operations in India. Additional
administrative costs and greater security and operational risks, accordingly,
will be incurred than if the operations were conducted solely in the United
States. No assurance can be given that persons with the required managerial
skills can continue to be located and employed by the Company in India or that
an effective supervisory program can be maintained. Furthermore, the Company's
operations are, and will be, dependent on the political and economic stability
of India and other countries in which the Company may do business, as well as
such countries' laws, rules and regulations, particularly with respect to
licenses, permits, government controls, investments and conduct of operations by
foreign-owned entities, patents and other intellectual property protections,
taxes, customs, trade restrictions and exchange and currency controls. These
considerations may also apply to each of the individual states within India in
which the Company conducts or may conduct its operations. In May 1998,
underground nuclear explosions were detonated in India as part of a government
testing program. The action triggered condemnation by a number of countries
including the United States. The United States has imposed sanctions against
India in accordance with the provisions of the 1994 Nuclear Proliferation
Prevention Act. The Act, which reportedly has never before been used, provides
sanctions which cut off virtually all United States non-humanitarian aid to
India, bar American banks from making loans to the Indian government and
restrict exports of computers and other equipment that might have military uses.
The Act also requires the United States to oppose loans to India by the

World Bank and the International Monetary Fund. The Company cannot predict the
effect, if any, the sanctions will have on the Company's operations.

A significant portion of the Company's activities have been, and for the
forseeable future are expected to continue to be, conducted in India. As a
result, the Company is exposed to risks associated with currency exchange.
Devaluation of the rupee against the dollar would reduce the dollar value of
revenue generated in India, and the Company's rupee-denominated assets.
Devaluation of the rupee would also reduce the dollar value of expenses incurred
in India, including research, development and manufacturing costs, and of the
Company's rupee-denominated liabilities. Strengthening of the rupee versus the
dollar would have the opposite effect. To the extent the Company engages in
business in other foreign countries, the Company may be exposed to currency
exchange risks involving other currencies. To date, currency fluctuations have
not had a material effect on the Company's financial condition or results of
operations. The Company's business strategy includes marketing its products in
certain Pacific Rim countries. The economies and financial markets of many of
these countries, including Singapore where one of the Company's distributors is
based, have recently experienced significant turmoil. This may have an adverse
effect on the marketing of the Company's products in those countries. See
"--Foreign Trade Risks."

INABILITY TO REPATRIATE CERTAIN FUNDS. Foreign investments in India are
subject to regulation under the Foreign Exchange Regulation Act, 1973. Under
existing Indian law, foreign investments in Indian companies can either be made
on a repatriation or non-repatriation basis. Investments made on a repatriation
basis permit return out of India of the full capital amount invested, together
with interest, dividends and other amounts earned thereon. Investments made on a
non-repatriation basis do not permit return out of India of any of the capital
amount invested. Interest, dividends and other income earned on the capital
amount, however, are currently repatriable out of India, subject to a corporate
income tax and dividend distribution tax imposed by the Government of India in
the amount of 35% and 10%, respectively. Foreign investments made on a
repatriation basis require prior approval of the Foreign Investment Promotion
Board ("FIPB"), Government of India and Reserve Bank of India ("RBI").
Investments made on a non-repatriation basis require no governmental approval if
made by non-resident Indians or overseas corporate bodies owned at least 60% by
non-resident Indians (collectively, "NRIs"). However, these investments are
required to be declared in a filing made with the RBI. Prior to the Offering,
the Company has been considered an NRI. As of March 31, 1998, an aggregate of
approximately $744,000 had been provided by the Company to fund the Company's
operations in India. Of such amount, approximately $301,000 was provided to
Bio-Ved, approximately $263,000 of which has been registered as a contribution
to Bio-Ved's capital on a non-repatriation basis and cannot be repatriated from
India. Effective December 8, 1997, the FIPB approved an application submitted by
the Company to permit future investment in Bio-Ved on a repatriation basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON SOURCES OF SUPPLY. The plant materials from which the
Company's products are being developed are currently located primarily in India.
The ability of the Company to secure an adequate supply of cultivated plant
materials will be affected by factors such as location, seasonality and weather.
Plant materials used in the production of RA-11 are purchased from one supplier,
Kancor Flavours & Extracts Pvt. Ltd. ("Kancor"), a supplier of plant extracts
located in India. Although the Company has entered into a supply agreement with
Kancor, there can be no assurance that this supplier will continue to be able to
supply the Company with all of the Company's requirements. The Company is also
dependent on Kancor and another supplier for plant materials used in connection
with the Company's other phyto-pharmaceutical research and development
activities. In addition, a continued source of plant supply is subject to the
risks inherent in international trade. Those risks include unexpected changes in
regulatory requirements, exchange rates, tariffs and barriers, difficulties in
coordinating and managing foreign operations, potentially adverse tax
consequences and disruptions in the political and economic stability of India
and other regions in which the plants are grown. The Indian government presently
prohibits the export of certain plants, plant portions and their derivatives and
extracts. Although none of the Company's

products or product candidates are produced utilizing any of these plant
materials, there can be no assurance that the Indian government will not, in the
future, prohibit the export of plant materials used in the Company's products.
There can be no assurance of a continual source of supply of plant materials.
Interruptions in supply or material increases in the cost of the supply could
have a material adverse affect on the Company's business, financial condition
and results of operations. See "Business--Manufacturing and Supply."

LIMITED MANUFACTURING CAPACITY. The Company does not have the staff or
facilities necessary to manufacture its products on a commercial scale. The
Company has entered into a manufacturing agreement with a pharmaceutical company
located in India for the production of RA-11, and the Company will seek similar
manufacturing agreements as additional products are developed and
commercialized. SA-12 is manufactured under an agreement with another
pharmaceutical company located in India. In 1997, the Company became
dissatisfied with the performance of a former SA-12 manufacturer and began the
process of changing to the present manufacturer. Due to unanticipated delays,
related to transferring the right to use the trade name associated with SA-12,
which delays have been resolved, the Company was forced to suspend sales of
SA-12 during the first quarter of 1998. Although the Company intends to monitor
production at its manufacturers' facilities to assure their compliance with the
Company's product specifications, the Company will be dependent upon its
manufacturers to, among other things, satisfy performance and quality
specifications and dedicate sufficient production capacity to meet scheduled
delivery times. There can be no assurance that any manufacturer will devote the
resources necessary to meet any demand for the Company's products. Failure or
delay by the Company's manufacturers in supplying products would adversely
affect the Company's ability to deliver products on a timely and competitive
basis. Moreover, to the extent the Company engages manufacturers to manufacture
products to be sold in the United States, such manufacturers must comply with
the FDA's current good manufacturing practice ("cGMP") regulations and pass
pre-approval inspections by the FDA and periodic cGMP inspections. In the
future, the Company may decide to manufacture certain of its proposed products
on its own. This will require extensive investment in facilities and equipment
and will require experienced personnel. There can be no assurance that the
Company will be able to obtain the funds or other resources necessary to
establish its own manufacturing capabilities. See "Business--The Regulatory
Approval Process" and "Business--Manufacturing and Supply."

LIMITED MARKETING CAPABILITIES AND EXPERIENCE. The Company currently has no
marketing or sales staff and does not have the resources necessary to undertake
extensive marketing activities. Achieving market acceptance for the Company's
products will require substantial marketing efforts and the expenditure of
significant funds to inform potential customers of the perceived benefits of the
Company's products. Accordingly, the Company currently intends to rely on others
for the sale and marketing of its products. In March 1998, a six-month
test-marketing program of RA-11 in India was completed by Alembic Chemical Works
Co. Limited ("Alembic"), an Indian pharmaceutical company. Although the Company
is in discussions with Alembic regarding a definitive marketing agreement, there
can be no assurance that a definitive marketing agreement will be entered into
with Alembic or other potential marketers. Effective September 1997, the Company
entered into a distribution agreement with MD Pharmaceuticals Laboratories Ltd.,
a Singapore-based pharmaceutical company, covering the sale and marketing of
RA-11 and SA-12 in certain Pacific Rim countries. The Company has also entered
into a distribution agreement covering the sale and marketing of SA-12 in India.
The Company will continue to seek to market and distribute its products through
others pursuant to contractual arrangements, such as distribution agreements,
joint ventures or other strategic arrangements. To the extent the Company relies
on the efforts of others to market and distribute its products, the Company will
lose a degree of control over an important aspect of its business. While the
Company believes that third party distributors with which it enters into
distribution agreements will have an economic motivation to commercialize the
Company's products, the time and resources devoted to these activities will
generally be contributed and controlled by such entities and not by the Company.
A decline in the financial prospects of particular distributors could have an
adverse effect on the Company. There can be no assurance that the Company

will be able to maintain its relationships with existing distributors or enter
into additional distribution arrangements or that any such arrangements will
result in the successful commercialization of any of the Company's products. See
"Business--Business Strategy" and "Business --Marketing."

RISKS RELATING TO LICENSED OR PURCHASED TECHNOLOGIES. The Company has
entered into license agreements pursuant to which it acquired exclusive
worldwide rights to RA-11. One agreement relates to India and the other
agreement relates to the rest of the world. However, the Company's licensor does
not have any patent rights relating to RA-11 outside of the United States and
India. The Company has also entered into a license agreement pursuant to which
it acquired exclusive worldwide rights to IM-10. However, the Company's licensor
does not have any patent rights relating to IM-10. The Company's rights under
these agreements are dependent upon its paying royalties at agreed upon rates
and commencing marketing within agreed upon periods of time. Although the
Company is presently in compliance with its obligations under the agreements,
there can be no assurance that it will continue to be able to comply with such
obligations. The Company has also entered into an agreement pursuant to which it
has been assigned a United States patent application related to BV-6, in
exchange for royalties. Failure by the Company to comply with the terms of any
of these agreements could result in the forfeiture by the Company of the
technologies. Such forfeiture could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business--Patents, Licenses and Proprietary Rights."

RAPID TECHNOLOGICAL CHANGE AND SUBSTANTIAL COMPETITION. The pharmaceutical
industry is subject to rapid and substantial technological change. Technological
competition from pharmaceutical companies, biotechnology companies and
universities is intense and is expected to increase. Many of these entities have
significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources, and
represent significant competition for the Company. Some of the major
pharmaceutical companies, as well as several smaller companies, are seeking to
develop pharmacological products from plant derivatives. There can be no
assurance that developments by others will not render the Company's products or
technologies noncompetitive or that the Company will be able to keep pace with
technological developments. In addition, competitors have developed or are in
the process of developing technologies that are, or in the future may be, the
basis for competitive products. Some of these products may have an entirely
different approach or means of accomplishing the desired therapeutic effect and
may be more effective and less costly than the products developed by the
Company. The Company is aware of a number of companies engaged in research and
development of pharmaceuticals based on plants. The Company is also aware of a
number of local companies in India which sell traditional ayurvedic products,
some of which products are used to treat diseases targeted by the Company such
as arthritis. Other forms of medical treatment may also offer competition to the
Company's products. There can be no assurance that the Company will be able to
compete successfully. See "Business-- Competition."

PRODUCT LIABILITY EXPOSURE. The Company faces an inherent risk of exposure
to product liability claims in the event that the investigation or use of
products manufactured by the Company results in illness or injury. While the
Company will continue to attempt to take appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company currently has product liability insurance coverage in India, the country
in which most of its sales are generated. The Company is seeking to obtain
product liability insurance to cover sales in other foreign countries in amounts
consistent with industry practice in the countries in which its products are to
be marketed. There can be no assurance that the Company's current insurance
coverage is adequate or that adequate insurance coverage will be available at an
acceptable cost, if at all. In the event of a partially or completely uninsured
successful claim against the Company, the business and financial condition of
the Company could be materially adversely affected. See "Business--Product
Liability."

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS. In connection with the
performance of its research and development activities and the manufacturing of
materials for its clinical trials, the Company is subject to

standards imposed by India and, to the extent the Company conducts operations or
maintains facilities in the United States, the Company will be subject to United
States federal, state and local laws, rules, regulations and policies governing
the use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials and wastes (which activities involve
the controlled handling and disposal of hazardous and regulated materials such
as tissue samples, live viruses and chemicals). Although the Company believes
that its safety procedures comply with applicable standards in India and, when
performed in the United States, will comply with standards prescribed by United
States federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for the damages
that result and any such liability could exceed the resources of the Company.
Moreover, there can be no assurance that the Company will not be required to
incur significant costs to comply with environmental and health and safety
regulations in the future. See "Business--Other Government
Regulation--Environmental Regulation."

UNCERTAINTY OF HEALTHCARE REIMBURSEMENT; PRICING. In both domestic and
foreign markets, sales of the Company's products, if any, will be dependent in
part on coverage and reimbursement by third party payers, such as government and
private insurance plans. Third party payers are increasingly challenging the
prices charged for pharmaceutical products and services. There can be no
assurance that the Company's products will be considered cost effective, that
reimbursement will be available, or if available, that the payer's reimbursement
policies will not adversely affect the Company's ability to sell its products
with an appropriate return on its investment. See "Business--Other Government
Regulation--Coverage and Reimbursement by Third Party Payers."

FOREIGN TRADE RISKS. To date, substantially all of the Company's sales have
been made in India and the Company intends to continue to rely on sales to
foreign markets for a significant portion of its revenues. If, and to the extent
that, the Company is able to successfully market its products in foreign
markets, the Company will become increasingly subject to the risks inherent in
foreign trade, including shipping delays, increased collection risks, trade
restrictions, export duties and tariffs, fluctuations in foreign currencies and
international political, regulatory and economic developments, all of which
could have an adverse effect on the Company's operating margins and results of
operations and exacerbate the risks inherent in the Company's business. While
the Company believes that the products it currently markets have all necessary
governmental clearances required for the importation and sale of such products
in the foreign countries in which its products are currently marketed, there can
be no assurance that this is actually the case or that governmental authorities
in such foreign countries will not, in the event of noncompliance, suspend
distribution of the Company's products. See "Business--Marketing."

CONTROL BY EXISTING STOCKHOLDERS; POSSIBLE DEPRESSIVE EFFECT ON THE
COMPANY'S SECURITIES. Immediately following the consummation of the Offering,
the Company's existing stockholders will, in the aggregate, beneficially own
approximately 68% of the outstanding Common Stock (including 698,802 shares
underlying options and warrants exercisable within 60 days of the date of this
Prospectus). As a result, the Company's existing stockholders will be able to
elect all of the Company's directors, dissolve, merge or sell all of the
Company's assets and otherwise control the Company. Such concentration of
control of the Company may also have the effect of delaying, deferring or
preventing a third party from acquiring control of the Company, may discourage
bids for the Company's Common Stock at a premium over the market price and may
adversely affect the market price of the Common Stock. See "Principal
Stockholders."

IMMEDIATE AND SUBSTANTIAL DILUTION. A purchaser in the Offering will
experience immediate and substantial dilution of approximately $4.69 per share
or 78.2% from the initial public offering price per share (based on the Offering
price of $6.00 per share). See "Dilution."

BENEFITS OF THE OFFERING TO CURRENT STOCKHOLDERS. Upon the consummation of
the Offering, the current stockholders of the Company will receive substantial
benefits, including the creation of a public trading market for their securities
and the corresponding facilitation of sales by such stockholders of their shares

of Common Stock in the secondary market (although such shares are subject to
12-month "lock-up" agreements with the Representative and to certain limitations
on resale imposed upon officers, directors and affiliates of the Company under
the Federal securities laws), as well as an immediate increase in net tangible
book value of $2.34 per share to such stockholders based upon the adjusted net
tangible book value per share after the consummation of the Offering and the
application of the estimated net proceeds of the Offering (based upon the
Offering price of $6.00 per share). If, at the time the existing stockholders
are able to sell their shares of Common Stock in the public market, the market
price per share remains at the initial public offering price, of which there can
be no assurance, such stockholders would realize an average gain of $4.83 per
share on the sale of their existing shares (again, based upon the Offering price
of $6.00 per share). In addition, the Company intends to use proceeds from the
Offering to repay its outstanding bank debt, all of which is personally
guaranteed by Sanjeev and Deepa Chitre, each a principal stockholder, director
and officer of the Company, and secured by collateral pledged by a trust for the
benefit of their daughter. This repayment will result in a benefit to such
individuals, as their guarantees and security will be released. See "Use of
Proceeds," "Dilution," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Principal Stockholders," "Certain Transactions," "Shares Eligible for Future
Sale" and "Underwriting."

NO DIVIDENDS ANTICIPATED. The Company has never paid any dividends on its
securities and does not anticipate the payment of dividends in the foreseeable
future. See "Description of Securities--Dividend Policy."

ANTI-TAKEOVER PROVISIONS; POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF
PREFERRED STOCK. The Company's Certificate of Incorporation and By-Laws and
Delaware's General Corporation Law contain certain provisions that could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Common Stock. Certain of such provisions
impose various procedural and other requirements which could make it more
difficult for stockholders to effect certain corporate actions. Furthermore, the
Company's Certificate of Incorporation authorizes the issuance of up to
5,000,000 shares of preferred stock on terms which may be fixed by the Company's
Board of Directors without further stockholder action. The terms of any series
of preferred stock, which may include priority claims to assets and dividends
and special voting rights, redemption rights and terms and liquidation
preferences could adversely affect the rights of holders of the Common Stock.
The issuance of preferred stock could make the possible takeover of the Company
or the removal of management of the Company more difficult, discourage hostile
bids for control of the Company in which stockholders may receive premiums for
their shares of Common Stock or otherwise dilute the rights of holders of Common
Stock and the market price of the Common Stock. See "Description of Securities."

NO ASSURANCE OF PUBLIC MARKET; NEGOTIATED OFFERING PRICE; POSSIBLE
VOLATILITY OF MARKET PRICE OF COMMON STOCK. Prior to the Offering, there has
been no public market for the Common Stock. There can be no assurance that any
trading market for the Common Stock will develop or that, if any such market
develops, it will be sustained. The initial public offering price of the Common
Stock has been established by negotiation between the Company and the
Representative and may not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition or other
established criteria of value. The market price of the Common Stock following
the Offering may be highly volatile as has been the case with the securities of
other development stage companies and many emerging companies. Factors such as
the Company's operating results, announcements by the Company or its competitors
of technological innovations or new products, and various factors affecting the
pharmaceutical industry generally, may have a significant impact on the market
price of the Company's securities. In addition, in recent years, the stock
market has experienced a high level of price and volume volatility and market
prices for the stock of many companies, particularly of small and emerging
growth companies, the common stock of which trade in the over-the-counter
market, have experienced wide price fluctuations which have not necessarily been

related to the operating performance of such companies. Accordingly, purchasers
of the Common Stock may experience difficulty selling or otherwise disposing of
their Common Stock. See "Underwriting."

POSSIBLE NASDAQ DELISTING; LOW STOCK PRICE. It is currently anticipated
that the Common Stock will be eligible for listing on Nasdaq upon the
consummation of the Offering. For continued listing on NASDAQ, a company, among
other things, must have (i) net tangible assets of at least $2,000,000, net
income of at least $500,000 in two of the three most recent fiscal years, or a
market capitalization of at least $35,000,000, (ii) a minimum bid price of $1.00
per share, (iii) a public float of at least 500,000 shares, (iv) a market value
of public float of at least $1,000,000 and (v) adhere to certain corporate
governance provisions. If, in the future, the Company should fail any of these
maintenance tests or requirements, the Common Stock could be delisted from
trading on Nasdaq and trading, if any, in the Common Stock would thereafter be
conducted in the non-Nasdaq over-the-counter market. The effects of delisting
include the limited release of the market prices of the Company's securities and
limited news coverage of the Company. Delisting may restrict investors' interest
in the Company's securities and materially adversely affect the trading market
and prices for such securities and the Company's ability to issue additional
securities or to secure additional financing. In addition to the risk of
volatile stock prices and possible delisting, low price stocks are subject to
the additional risks of federal and state regulatory requirements and the
potential loss of effective trading markets. In particular, if the Common Stock
were delisted from trading on Nasdaq and the trading price of the Common Stock
was less than $5.00 per share, the Common Stock could be subject to Rule 15g-9
under the Exchange Act which, among other things, requires that broker/dealers
satisfy special sales practice requirements, including making individualized
written suitability determinations and receiving purchasers' written consent,
prior to any transaction. If the Company's securities were also deemed penny
stocks under the Securities Enforcement and Penny Stock Reform Act of 1990, this
would require additional disclosure in connection with trades in the Company's
securities, including the delivery of a disclosure schedule explaining the
nature and risks of the penny stock market. Such requirements could severely
limit the liquidity of the Company's securities and the ability of purchasers in
the Offering to sell their securities in the secondary market.

FUTURE SALES OF RESTRICTED SECURITIES; REGISTRATION RIGHTS. Upon the
consummation of the Offering, the Company will have 3,569,702 shares of Common
Stock outstanding, of which the 1,350,000 shares of Common Stock offered hereby
will be freely tradable by persons other than affiliates of the Company, without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"). The remaining 2,219,702 shares of Common Stock (the
"Restricted Shares") outstanding were sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act and are
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act and may not be sold in the absence of registration under the Securities Act
unless an exemption therefrom, including an exemption afforded by Rule 144, is
available. Under Rule 144 (and subject to the conditions thereof), 619,850 of
the Restricted Shares are eligible for sale as of the date of this Prospectus,
1,380,144 of the Restricted Shares will become eligible for sale beginning 90
days after the date of this Prospectus, and substantially all of the remaining
219,708 Restricted Shares will become eligible for sale as of October 31, 1998.
The Company's officers, directors and existing stockholders have entered into
agreements which prohibit them from selling any securities of the Company
without the prior written consent of the Representative for a period of 12
months following the date of this Prospectus. The holders of the
Representative's Warrants and October 1997 Warrants will also be entitled to
certain registration rights with respect to such securities. The sale of a
substantial number of shares of Common Stock or the availability of Common Stock
for sale could adversely affect the market price of the Common Stock prevailing
from time to time. See "Shares Eligible for Future Sale" and "Underwriting."

EFFECT OF PREVIOUSLY ISSUED OPTIONS AND WARRANTS AND OF THE REPRESENTATIVE'S
WARRANTS ON STOCK PRICE. The Company has reserved from the authorized, but
unissued, Common Stock 845,970 shares of Common Stock for issuance upon exercise
of outstanding options and warrants (375,970 of which have exercise prices of
$4.00 or less) and 157,986 shares of Common Stock for issuance upon exercise of
options

available for future grant under the Option Plan. In addition, upon the
consummation of the Offering, the Company will sell to the Representative, for
nominal consideration, the Representative's Warrants to purchase an aggregate of
up to 135,000 shares of Common Stock at a price per share equal to 125% of the
initial offering price per share. The existence of these options and warrants
may prove to be a hindrance to future financings, since the holders of such
securities may be expected to exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. In addition, the holders of the Representative's Warrants will have
certain registration rights, and the sale of the shares issuable upon exercise
of such securities or the availability of such shares for sale could adversely
affect the market price of the Common Stock. See "Description of Securities" and
"Underwriting."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this
Prospectus, including without limitation, statements containing the words
"believes," "anticipates," "intends," "expects," "plans" and words of similar
import, constitute "forward-looking statements." Such forward-looking statements
involve known and unknown risks, uncertainties, assumptions and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the risks identified above under
"Risk Factors." Given these uncertainties, prospective investors are cautioned
not to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
result of any revision to any of the forward-looking statements contained herein
to reflect future events or developments.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,350,000 shares of Common Stock offered hereby are estimated to be
approximately $6,390,000 (approximately $7,447,050 if the Representative's
over-allotment option is exercised in full), and after deducting underwriting
discounts and estimated offering expenses. The Company expects to use the net
proceeds as follows:

APPROXIMATE
APPROXIMATE PERCENTAGE OF
ANTICIPATED USE OF NET PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ---------------------------------------------------------------- -------------- ---------------

Research and development(1)..................................... $ 4,350,000 68.1%
Repayment of indebtedness(2).................................... 755,000 11.8%
Manufacturing and marketing(3).................................. 300,000 4.7%
Working capital(4).............................................. 985,000 15.4%
-------------- -----
Total......................................................... $ 6,390,000 100.0%
-------------- -----
-------------- -----

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

(1) Includes estimated costs and expenses relating to (i) completion of animal
pharmacology studies necessary for, and filing of, an IND and, if IND
approval is obtained, commencing a Phase II clinical trial in the United
States and a Phase III clinical trial in India, all relating to RA-11; (ii)
continued preclinical testing of IM-10, BV-6 and HP-11 and, subject to
obtaining successful preclinical results, the commencement of clinical
trials for IM-10 and HP-11 in India; and (iii) establishing and equipping
additional laboratory facilities in India. Also includes $140,000
representing accounts payable related to research and development
activities. See "Business--Products and Product Candidates" and
"--Facilities."

(2) Includes $575,000 aggregate principal amount borrowed at various times from
November 1996 through February 1998 from the Atlantic Bank of New York under
three-month term notes at prime plus 2% per annum. The notes have been
consolidated and are presently due on August 4, 1998. Also includes $150,000
principal amount borrowed from two individual investors in March and July
1996 (plus accrued interest of approximately $30,000). The proceeds of all
such loans were used for research and development, marketing and working
capital. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

(3) Represents manufacturing expenditures relating to RA-11 and SA-12 for the
build-up of product inventory and marketing expenditures relating to RA-11
and SA-12 for promotional materials and samples, medical symposia, product
educational programs and various related activities. See
"Business--Marketing."

(4) Working capital will be used for general corporate purposes, including
approximately $330,000 in aggregate annual base compensation for the
Company's three executive officers. Also includes costs for (i) seeking
collaborative arrangements with pharmaceutical companies, (ii) establishing
and enhancing management and information systems needed to monitor, control
and coordinate the Company's activities and (iii) patent and trademark
filings. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Management."

The foregoing represents the Company's best estimate of the allocation of
the net proceeds of the Offering during the next 12 months. This estimate is
based on certain assumptions, including that development, testing and regulatory
requirements relating to the Company's products can be completed at budgeted
costs and that commercial sales of the Company's products will increase
significantly from results previously achieved by the Company. Projected
expenditures are estimates or approximations only. Future events, including the
problems, delays, expenses, difficulties and complications frequently
encountered by companies in an early stage of development, changes in economic,
regulatory or competitive conditions or in the Company's planned business, and
the success or lack thereof of the Company's development and

sales and marketing efforts during the 12-month period following the
consummation of the Offering may make shifts in the allocation of funds and
curtailment of certain planned expenditures necessary or desirable. Any such
shifts will be at the discretion of the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

If the Representative exercises the over-allotment option in full, the
Company will realize additional net proceeds of $1,057,050. Such additional
proceeds are expected to be added to the Company's working capital.

Proceeds not immediately required for the purposes described above will be
invested principally in short-term interest bearing securities, money market
funds, certificates of deposit or direct or guaranteed obligations of the United
States government.

DILUTION

The difference between the initial public offering price per share of Common
Stock and the net tangible book value per share of Common Stock after the
Offering constitutes the dilution to investors in the Offering. Net tangible
book value per share on any given date is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.

At March 31, 1998, net negative tangible book value of the Company was
$(2,280,000) or $(1.03) per share. After also giving retroactive effect to the
sale of the 1,350,000 shares of Common Stock offered hereby at a price of $6.00
per share and the receipt and anticipated application of the estimated net
proceeds therefrom, the as adjusted net tangible book value of the Company at
March 31, 1998 would have been $4,672,000 or $1.31 per share, representing an
immediate increase in net tangible book value of $2.34 per share to existing
stockholders and an immediate dilution of $4.69 (78.2%) per share to investors
in the Offering.

The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:

Initial public offering price................................ $ 6.00

Net negative tangible book value before Offering........... $ (1.03)
Increase attributable to investors in the Offering......... 2.34
---------

Adjusted net tangible book value after the Offering.......... 1.31
---------
Dilution to investors in the Offering........................ $ 4.69
---------
---------

The following table sets forth, with respect to existing stockholders and
the investors in the Offering, a comparison of the number of shares of Common
stock purchased from the Company, the percentage ownership of such shares, the
aggregate consideration paid, the percentage of total consideration paid, and
the average price paid per share.

SHARES ACQUIRED TOTAL CONSIDERATION
---------------------- -----------------------
AVERAGE
PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ----------- ---------- ----------- -----------

Existing stockholders..................... 2,219,702 62.2% $2,601,000 24.3% $ 1.17
Investors in the Offering................. 1,350,000 37.8% 8,100,000 75.7% $ 6.00
--------- ----- ---------- -----
3,569,702 100.0% $10,701,000 100.0%
--------- ----- ---------- -----
--------- ----- ---------- -----

The foregoing table assumes no exercise of the Representative's
over-allotment option. If such option is exercised in full, the new investors
will have paid $9,315,000 (based upon the Offering price of $6.00 per share) for
1,552,500 shares of Common Stock, representing approximately 78.2% of the total
consideration for 41.2% of the total number of shares outstanding. In addition,
computations set forth in the above table exclude an aggregate of 845,970 shares
of Common Stock reserved for issuance upon the exercise of currently outstanding
stock options and warrants, at various prices ranging from $.34 per share to
130% of the initial public offering price per share, and 135,000 shares of
Common Stock reserved for issuance upon the exercise of the Representative's
Warrants. See "Management--Stock Options," "Description of Securities" and
"Underwriting."

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company as of March 31, 1998: (i) on a historical or actual basis and (ii) as
adjusted, to reflect the issuance and sale of the 1,350,000 shares of Common
Stock offered hereby at a price of $6.00 per share and the anticipated
application of the estimated net proceeds therefrom.

MARCH 31, 1998
-------------------------
AS
ACTUAL ADJUSTED(2)
---------- -------------

Short-term debt:
Due to bank.................................................... $ 10,000 $ 10,000
Bank debt...................................................... 600,000 --
Notes payable to stockholders.................................. 405,000 --
Other notes payable............................................ 100,000 --
Accrued interest............................................... 66,000 --
---------- -------------
Total short-term debt........................................ $1,181,000 $ 10,000
---------- -------------
---------- -------------

Long-term debt (net of unamortized discount of $129,000)......... $ -- $ 514,000
---------- -------------
Stockholders' equity:
Preferred Stock, $.001 par value; 5,000,000 shares authorized;
none issued.................................................. -- --
Common Stock, $.001 par value: 25,000,000 shares authorized;
2,219,702 shares issued and outstanding actual, and 3,569,702
shares issued and outstanding as adjusted (1)................ 2,000 4,000
Additional paid-in capital....................................... 3,564,000 10,081,000
Unearned compensatory stock options.............................. (166,000) (166,000)
Foreign currency translation adjustment.......................... (3,000) (3,000)
Deficit accumulated during development stage..................... (5,244,000) (5,244,000)
---------- -------------
Total stockholders' equity (capital deficiency).............. (1,847,000) 4,672,000
---------- -------------
---------- -------------
Total capitalization....................................... $(1,847,000) $ 5,186,000
---------- -------------
---------- -------------

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

(1) Does not include: (i) 70,000 shares of Common Stock reserved for issuance
upon exercise of stock options granted, and 157,986 shares of Common Stock
reserved for issuance upon exercise of options available for future grant,
under the Option Plan; (ii) 300,970 shares of Common Stock reserved for
issuance upon exercise of outstanding non-Option Plan options; (iii) 475,000
shares of Common Stock reserved for issuance upon exercise of outstanding
warrants; and (iv) 135,000 shares of Common Stock reserved for issuance upon
exercise of the Representative's Warrants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations"--Liquidity and
Capital Resources," "Management--Stock Options," "Certain Transactions,"
"Description of Securities" and "Underwriting."

(2) Includes the repayment of approximately $750,000 in principal plus accrued
interest thereon of $28,000 and the reclassification of approximately
$605,000 in principal amount of short-term debt ($250,000 of which was
borrowed after March 31, 1998), plus accrued interest thereon ($38,000 as of
March 31, 1998), to long-term debt upon consummation of the Offering.

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements included elsewhere in
this Prospectus. The statement of operations data as set forth below for each of
the years in the two-year period ended December 31, 1997 and for the period from
January 11, 1993 (inception) through December 31, 1996 and the balance sheet
data as of December 31, 1997, are derived from the audited consolidated
financial statements of the Company. The summary historical financial data set
forth as of March 31, 1998 and for the three-month periods ended March 31, 1998
and 1997 and for the period January 11, 1993 (inception) through March 31, 1998,
have been derived from the unaudited consolidated financial data of the Company
included elsewhere herein. The summary historical financial data should be read
in conjunction with such consolidated financial statements and the notes
thereto. Operating results for interim periods are not necessarily indicative of
results of the full fiscal year.

STATEMENT OF OPERATIONS DATA:

YEAR ENDED JANUARY 11, 1993 THREE MONTHS ENDED JANUARY 11, 1993
DECEMBER 31, (INCEPTION) MARCH 31, (INCEPTION)
-------------------- THROUGH DECEMBER 31, -------------------- THROUGH MARCH 31,
1997 1996 1997 1998 1997 1998
--------- --------- --------------------- --------- --------- -------------------

Revenue:
Net product sales................... $ 91 $ 91 $ 10 $ 101
Royalty income...................... 12 12 12
Government grant.................... 100 100 $ 56 100
--------- ------- --------- --------- -------
Total revenue......................... 203 203 10 56 213
--------- ------- --------- --------- -------
Costs and expenses:
Cost of sales....................... $ 100 $ $ 100 $ 6 $ 106
Research and development............ 272 401 1,312 34 $ 89 1,346
General and administrative.......... 735 844 3,012 225 183 3,237
--------- --------- ------- --------- --------- -------
Total operating expenses.............. 1,107 1,245 4,424 265 272 4,689
--------- --------- ------- --------- --------- -------
Loss from operations.................. (904) (1,245) (4,221) (255) (216) (4,476)
Net interest income (expense)....... (528) (82) (632) (26) (27) (658)
--------- --------- ------- --------- --------- -------
Net loss............................ $ (1,432) $ (1,327) $ (4,853) $ (281) $ (243) $ (5,134)
--------- --------- ------- --------- --------- -------
--------- --------- ------- --------- --------- -------

Basic and diluted loss per share(1)... $ (.70) $ (.66) $ (.13) $ (.12)
--------- --------- --------- ---------

Weighted average number of shares
outstanding--basic and diluted(1)... 2,034,945 1,999,994 2,219,702 1,999,994
--------- --------- --------- ---------
--------- --------- --------- ---------

BALANCE SHEET DATA:

MARCH 31, 1998
DECEMBER 31, --------------------------------
1997 ACTUAL AS ADJUSTED(2)(3)
------------- ----------- -------------------

Working capital (deficit).......................................... $ (2,050) $ (2,355) $ 5,111
Total assets....................................................... 508 565 6,074
Total current liabilities.......................................... 2,098 2,412 888
Long-term debt..................................................... -- -- 514
Deficit accumulated during development stage....................... (4,963) (5,244) (5,244)
Total stockholders' equity (capital deficiency).................... (1,590) (1,847) 4,672

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

(1) See Note B[6] to the Company's Consolidated Financial Statements.

(3) As adjusted to give effect to the sale of 1,350,000 shares of Common Stock
offered hereby at the Offering price of $6.00 per share and the anticipated
application of the estimated net proceeds therefrom, including repayment of
certain indebtedness (approximately $778,000 in outstanding principal and
interest).

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

HISTORY

The Company was organized in January 1993. The Company's initial efforts
were focused on assembling a high quality and diverse network of scientists and
institutions in the United States and India to support the Company's drug
discovery and development efforts in India. In 1994 and 1995, the Company
entered into license agreements pursuant to which it acquired exclusive
worldwide rights to RA-11 and IM-10, respectively. In 1995, the Company also
obtained exclusive licenses under a United States patent and two Indian patents
related to RA-11 and acquired SA-12 and a pending United States patent
application related to BV-6. The Company's research efforts led to the
identification of HP-11. The Company has been engaged in the development and
testing of all of these products. The Company has also devoted significant
resources to securing intellectual property protection with respect to certain
of these products. It is part of the Company's strategy to seek early revenue on
its products in India and other countries where plant-based pharmaceuticals are
more commonly known, and are generally subject to a more simplified regulatory
approval process. The Company began selling SA-12 through a distributor in India
in early 1997. In March 1998, the Company successfully completed a
test-marketing program of RA-11 in India. In May 1998, the Company initiated
commercial sales of RA-11 in Singapore through a distributor, and the Company
anticipates commencing sales of RA-11 in India on a national basis through a
distributor in June 1998. See "Business--Products and Product Candidates,"
"Business--Marketing" and "Business--Patents, Licenses and Proprietary Rights."

The Company's initial activities in India were conducted through a liaison
office in India. In November 1995, Bio-Ved was formed to facilitate the
Company's activities in India. Since the formation of Bio-Ved, substantially all
of the Company's India-based activities have been conducted by Bio-Ved under the
direction of the Company. As of March 31, 1998, the Company had provided an
aggregate of approximately $744,000 in connection with its operations in India.
Of such amount, approximately $301,000 was provided to Bio-Ved, approximately
$263,000 of which has been registered as a contribution to Bio-Ved's capital on
a non-repatriation basis. Effective December 8, 1997, the Company received
approval for future investment in Bio-Ved on a repatriation basis. The Company
expects to continue to devote significant financial and other resources to its
research and development and other operations. See "Business--Research and
Development."

As a development stage company, the Company has generated only limited
revenue and has incurred significant losses since its inception. As a result, as
of March 31, 1998, the Company had an accumulated deficit of $5,244,000. The
Company expects to incur operating losses and negative cash flow for the next
several years and that its losses will increase as the Company expands its
research and development activities. In addition, the Company's independent
auditors have included an explanatory paragraph in their report stating that the
Company's accumulated deficit and its dependence, to date, upon advances and
loans from stockholders raise substantial doubts about the Company's ability to
continue as a going concern. The Offering is an integral part of the Company's
plan to continue as a going concern. See Consolidated Financial Statements.

The Company's business strategy includes marketing its products in certain
Pacific Rim countries. The economies and financial markets of many of these
countries, including Singapore where one of the Company's distributors is based,
have recently experienced significant turmoil. This may have an adverse effect
on the marketing of the Company's products in those countries.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1998 V. THREE MONTHS ENDED MARCH 31, 1997

The Company earned revenue of $10,000 during the three months ended March
31, 1998 (the "1998 Three Months"), with a gross margin of $4,000. All of the
revenue was attributable to sales of RA-11 in India under a test-marketing
program conducted through Alembic. The Company is in discussions with Alembic
regarding a definitive distribution agreement and, subject to finalization of an
agreement, the Company anticipates a national launch of RA-11 in India in June
1998. Sales of SA-12 were suspended in India during the 1998 Three Months due to
a change in contract manufacturers and related delays in transferring the right
to use the trade name "Multicidal." The cause of the delays has been resolved.
Also during the 1998 Three Months, both RA-11 and SA-12 were registered for sale
in Singapore, and the initial order for RA-11 was placed with the Company by its
distributor, MD Pharmaceuticals. Although the Company now has two products
approved or eligible for sale in two countries and is pursuing approvals in
additional countries, the Company does not expect margins from product sales to
be significant in comparison to the Company's anticipated expenses during the
near term. One of the Company's primary goals is to achieve approved regulatory
status for its products as prescription pharmaceuticals in the United States and
other major world markets. See "Business Strategy," "Business-Manufacturing and
Supply" and "Business-Marketing."

The Company had no revenue from product sales during the three months ended
March 31, 1997 (the "1997 Three Months"). However, during that period, the
Company earned income of $56,000, representing an installment payment on a
$100,000 Small Business Innovative Research ("SBIR") grant awarded by the
National Institutes of Health ("NIH") in September, 1996 related to BV-6. See
"Business-Research and Development."

The Company incurred research and development expenses of $34,000 and
$89,000 during the 1998 Three Months and 1997 Three Months, respectively. The
higher expenditure in 1997 was the result of BV-6-related activities conducted
in the United States, which activities were funded by the above-mentioned SBIR
grant. Research and development expenses consist primarily of compensation to
employees and consultants conducting the Company's research activities,
laboratory expenses, and testing fees for clinical and preclinical trial work.
Much of these activities is conducted in India, where compensation and other
expenses are significantly lower than in the United States.

Selling, general and administrative expenses were $225,000 and $183,000
during the 1998 Three Months and 1997 Three Months, respectively. The increase
primarily resulted from higher professional fees incurred by the Company during
the 1998 Three Months. Selling, general, and administrative expenses include
compensation to the Company's officers and administrative employees in the
United States and India, legal, accounting and other professional fees and costs
related to seeking and establishing commercial partnerships.

Interest expense remained unchanged at $27,000 for the 1998 Three Months and
the 1997 Three Months. During the second quarter of 1998, the Company will
expense a non-cash charge of $201,000, representing the fair value attributable
to the extension in that quarter of the expiration date of expired warrants. In
addition, in April 1998, a note payable was discounted by $129,000, which amount
will be amortized as interest expense over the period of the note.

During the 1998 Three Months, the Company had a net loss of $281,000, as
compared to a net loss of $243,000 for the 1997 Three Months. The increase is
primarily attributable to the lack of grant revenue and

higher selling, general and administrative expenses in the 1998 Three Months,
partially offset by lower research and development expenses.

YEAR ENDED DECEMBER 31, 1997 V. YEAR ENDED DECEMBER 31, 1996

The Company earned revenue of $203,000 during 1997, consisting of $91,000 in
net product sales of RA-11 and SA-12, $12,000 in royalty income attributable to
sales of SA-12 and $100,000 in government grant income for the BV-6-related SBIR
grant. The Company initiated commercial sale of SA-12 in India, and
test-marketing of RA-11 in India, in 1997. The Company had no revenue during
1996.

The Company incurred research and development expenses of $272,000 and
$401,000 during 1997 and 1996, respectively. The decrease is primarily
attributable to (i) clinical trials of RA-11 in India moving into the
less-expensive open label phase as compared to the placebo-controlled trial
completed in 1996, (ii) the Company's suspension of research activities related
to certain dermatological product; and (iii) the completion in 1996 of SA-12
development activities.

Selling, general, and administrative expenses during 1997 were $735,000, as
compared to $844,000 during 1996. The decrease reflects the Company's efforts to
contain costs due to a shortage of liquidity, and is primarily attributable to a
net decrease in officer compensation and a decrease in legal fees.

The Company incurred net interest expense of $528,000 and $82,000 during
1997 and 1996, respectively. The increase is primarily attributable to (i)
increased average debt during 1997, (ii) a $384,000 non-cash interest charge in
connection with the conversion into Common Stock on October 31, 1997 of
approximately $839,000 in principal and accrued interest under certain
promissory notes at the rate of $4.00 per share (the "Note Commission") and
(iii) a non-cash charge of $90,000 relating to the granting at October 31, 1997
of warrants exercisable at $4.00 per share. See "Certain Transactions."

During the year ended December 31, 1997, the Company had a net loss of
$1,432,000, as compared to a net loss of $1,327,000 during the year ended
December 31, 1996. The increase is primarily attributable to higher interest
expense, partially offset by lower operating expenses and grant revenue.

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital requirements have been and will continue to be
significant. As of March 31, 1998, the Company had a working capital deficit and
accumulated deficit of $2,355,000 and $5,244,000, respectively, and the Company
is dependent upon the proceeds of the Offering to fund its continuing research
and development and other working capital requirements. The Company anticipates,
based on its currently proposed plans and assumptions relating to its operations
(including assumptions regarding the nature and extent of research and
development required in connection with the regulatory approval process, the
timing of obtaining regulatory approvals, if any, market acceptance, the
competitive position of the Company's products, and the ability of the Company
to secure adequate manufacturing and distribution relationships) that the net
proceeds of Offering will be sufficient to fund the Company's contemplated
capital requirements for at least 12 months following the consummation of the
Offering. In the event the Company's plans change or its assumptions change or
prove to be incorrect, the Company could be required to seek additional
financing sooner than currently anticipated. In addition, the Company will need
to raise substantial additional capital to fund its future operations. There can
be no assurance that additional financing will be available when needed on terms
acceptable to the Company, or at all.

The Company's operations have been funded primarily through a combination of
approximately $2,307,000 in equity (including the conversion into equity of
$700,000 principal amount of, and $139,000 in accrued interest on, certain debt
in connection with the Note Conversion) and $1,380,000 in principal amount of
debt ($50,000 of which principal amount has been repaid). In addition, the
Company has received an aggregate of $100,000 through SBIR grant funding from
the NIH. See "Business--Products and Product Candidates--BV-6."

At various times from June 1993 through February 1995 the Company sold an
aggregate of 412,866 shares of Common Stock to a limited number of investors for
an aggregate purchase price of $1,465,000. These shares were sold at varying
valuations ranging from $.55 to $6.00 per share. In addition, in connection with
the Note Conversion, effective October 31, 1997, $700,000 principal amount of,
and $138,830 in accrued interest on, certain of the Company's then outstanding
notes were converted into Common Stock at the rate of $4.00 per share.

As of the date of this Prospectus, the Company has $1,330,000 in principal
amount of loan obligations outstanding, $150,000 (plus accrued interest of
approximately $30,000) of which is currently due and payable on demand, $575,000
of which is scheduled to become due and payable in August 1998, and $605,000 of
which is scheduled to become due and payable on demand commencing one year
following the consummation of the Offering. Other than such $605,000, all
presently outstanding loans are anticipated to be repaid from the proceeds of
the Offering.

The debt (including debt converted into equity in connection with the Note
Conversion) incurred by the Company since its inception includes the following:

In October 1994, the Company borrowed $250,000 from Fred Kassner, a
principal stockholder of the Company, under a two-year convertible promissory
note bearing interest at prime plus 2% per annum convertible into 61,050 shares
of Common Stock. In April 1996, the Company borrowed an additional $250,000 from
this stockholder under a 90-day promissory note bearing interest at prime plus
2% per annum. In connection with the April 1996 loan, Mr. Kassner was granted
two-year warrants to purchase up to 125,000 shares of Common Stock at 130% of
the initial public offering price per share, which warrants expired in April
1998. In May 1998, the expiration date of the warrants was extended to May 2000.
Effective October 31, 1997, pursuant to the Note Conversion, all principal and
accrued interest owing under these notes (a total of $620,000) were converted by
Mr. Kassner into 154,967 shares of Common Stock at the rate of $4.00 per share.
In connection with this transaction, Mr. Kassner was also granted October 1997
Warrants to purchase up to 45,000 shares of Common Stock at $4.00 per share. See
"Certain Transactions."

At various times from January 1996 through March 1998, the Company borrowed
an aggregate principal amount of approximately $280,000 from Sanjeev Chitre,
Chairman of the Board of Directors and a principal stockholder of the Company.
The loan is represented by a promissory note bearing interest at prime plus 2%
per annum payable semi-annually. Originally, the note was to become due on
demand, in stages. The terms of the note have been revised to provide that no
amounts will become due and payable thereunder until one year following the
consummation of the Offering, provided the Offering is consummated by August 1,
1998. The Company has allocated no proceeds of the Offering to repayment of the
loan. See "Certain Transactions."

In January 1996, the Company borrowed $25,000 from Irwin Rosenthal, the
Secretary of the Company and husband of a director of the Company, under a
promissory note bearing interest at prime plus 2% per annum. Originally, the
note was to become due on demand commencing January 1997. Mr. Rosenthal was a
director of the Company at the time of the loan. The terms of the loan have been
revised to provide that no amounts will become due and payable thereunder until
one year following the consummation of the Offering, provided the Offering is
consummated by August 1, 1998. The Company has allocated no proceeds of the
Offering to repayment of this loan. See "Certain Transactions."

In March 1996, the Company borrowed $50,000 from a stockholder and former
director of the Company under a promissory note bearing interest at prime plus
2% per annum. The note is currently due and payable on demand and is anticipated
to be repaid out of the proceeds of the Offering. In connection with the loan,
the Company granted the individual two-year warrants to purchase up to 25,000
shares of Common Stock at 130% of the initial public offering price per share,
which warrants expired in March 1998. In May, 1998, the expiration date of the
warrants was extended to May 2000.

In each of March 1996 and August 1997, the Company borrowed $100,000 from
Michael Splinter, who subsequently became a director of the Company, and his
wife, under promissory notes each bearing interest at prime plus 2% per annum.
In connection with the loans, these individuals were granted two-year warrants
to purchase up to an aggregate of 100,000 shares of Common Stock at 130% of the
initial public offering price per share. In May 1998, the expiration date of the
warrants granted in March 1996 (which warrants expired in March 1998) was
extended to May 2000. Effective October 31, 1997, pursuant to the Note
Conversion, all principal and accrued interest owing under these notes were
converted by the holder into 54,741 shares of Common Stock at the rate of $4.00
per share. In December 1997, the Company borrowed an additional $50,000 from
these individuals under a promissory note bearing interest at prime plus 2% per
annum. The promissory note is payable on demand commencing December 23, 1998 or,
if the Offering is consummated by August 1, 1998, one year from consummation of
the Offering. See "Certain Transactions."

In July 1996, the Company borrowed $100,000 from an unrelated individual
under a promissory note bearing interest at 10% per annum. The note is currently
due and payable on demand and is anticipated to be repaid out of the proceeds of
the Offering. See "Use of Proceeds."

At various times from November 1996 through January 1998, the Company
borrowed an aggregate principal amount of $625,000 from the Atlantic Bank of New
York ("Atlantic Bank") under three-month term notes bearing interest at Atlantic
Bank's prime rate plus 2% per annum, payable monthly. In January and May 1998,
the Company repaid a total of $50,000 in principal, and notes evidencing the
$575,000 principal balance have been consolidated and are presently due on
August 4, 1998. The Atlantic Bank loan is guaranteed by Sanjeev and Deepa Chitre
and secured by a pledge of common stock of another company, which stock is owned
by the Avantika Sanjeev Chitre Irrevocable Trust, dated July 8, 1991, Bruce W.
McRoy, trustee (the "Avantika Trust"), a trust for the benefit of Sanjeev and
Deepa Chitre's minor daughter. See "Certain Transactions."

In April 1998, the Company borrowed $250,000 principal amount from an
individual under a promissory note bearing interest at prime plus 2% per annum
payable on demand commencing April 1, 1999 or, if the Company consummates the
Offering by September 30, 1998, commencing one year following consummation of
the Offering. In connection with the loan, the Company granted the lender
two-year warrants to purchase up to 125,000 shares of Common Stock at 130% of
the initial public offering price per share. The Company has allocated no
proceeds of the Offering to repayment of this loan.

BUSINESS

GENERAL

The Company is engaged primarily in the discovery, development, clinical
testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-to-treat human
diseases. The Company currently has three phyto-pharmaceuticals in various
stages of clinical and preclinical development. RA-11, the Company's lead
phyto-pharmaceutical, recently completed a six month test-marketing program in
India, is currently being sold in Singapore and, on a limited basis, India, and
is scheduled to be launched on a national basis in India in June 1998; IM-10,
which is undergoing preclinical animal pharmacology testing in India, has been
indicated for the stimulation and restoration of bone marrow and the immune
system in cancer patients being treated with chemotherapy; and HP-11, an
early-stage product candidate, is undergoing laboratory testing in India for the
treatment of hepatitis. The Company has an exclusive license under a United
States patent relating to RA-11 and its use in treating degenerative
musculoskeletal diseases. In addition, the Company has a United States patent
application pending relating to BV-6, a pharmaceutical derived from a single
animal cell component, which is undergoing early pharmacological studies at
Emory University for the treatment of degenerative diseases of the central
nervous system.

A key element of the Company's strategy is to apply the principles of
Ayurveda, an ancient science native to India, to reduce the time and costs
associated with the drug discovery process. Generations of Ayurveda scholars
have studied and documented the uses and efficacy of specific plants as
medicinal therapies over a period of several hundreds of years. Their findings,
preserved and detailed in Ayurvedic literature, provide valuable information for
modern day scientists. Through the study of Ayurveda, the Company's scientific
team seeks to rapidly identify plants, or combinations of plants, that have been
successfully used to treat symptoms and ailments characteristic of the diseases
targeted by the Company. In addition, because Ayurvedic literature has also
documented the safety of over 300 plant extracts for human use, once an
Ayurvedic plant candidate has been identified by the Company's researchers, they
are, in many instances, able to conduct early development activities in
parallel, rather than sequentially, when determining the candidate's safety and
efficacy. The Company believes that focusing its screening process on plants
whose safety and efficacy in medicinal use have been documented in Ayurvedic
literature will result in faster and more effective screening methods for the
discovery of new phyto-pharmaceuticals. The Company further believes that, based
on their long histories of safe use, these phyto-pharmaceuticals will have a
greater potential for safety and, as a result, may achieve more rapid regulatory
approval. See "-- The AyurCore Model of Drug Discovery and Development."

The Company's research and development activities are primarily conducted by
the Company's Indian subsidiary at laboratories located in Pune, India, which
are staffed with 19 full time employees and 12 consultants. There, the Company's
India-based scientists are able to study the Ayurvedic literature (primarily
written in the ancient Sanskrit language) to accelerate the plant screening
process. In addition, by conducting operations in India, the Company is able to
access highly skilled scientific talent and other resources at an estimated
one-tenth of the cost of comparable labor and resources in the United States.
Although the Company's clinical trials to date have only been conducted in
India, they have been administered in accordance with protocols designed to be
consistent with the standards of the United States Food and Drug Administration
(the "FDA") and in laboratories that are designed to operate in accordance with
guidelines consistent with FDA Good Laboratory Practices ("GLP"). In addition,
the Company's proprietary plant extraction process is conducted for it by a
third-party Indian supplier with an ISO-9000 (a worldwide industry manufacturing
standard) certification. The Company has thus established, and continues to
enhance, a network infrastructure in India designed to identify
phyto-pharmaceuticals through an accelerated process and in a low-cost, high
quality environment.

The Company is in the development stage and does not anticipate completing
clinical trials or filing a new drug application ("NDA") with the FDA for any of
its products (approval of which must be obtained prior to the commencement of
their commercial sale in the United States) until, at the earliest, the year

2001. The Company's long-term viability, profitability and growth will depend
upon successful commercialization of products resulting from its research and
development activities. To date, the Company has recorded only limited product
sales revenues, and these have been derived primarily from sales in India of
SA-12, a proprietary anti-bacterial surgical scrub acquired by the Company from
its inventor in 1995. The Company believes that its ability to generate
sufficient revenues to support its operations primarily depends on the success
of the Company in completing development, and obtaining regulatory approvals for
the commercial sale, of RA-11 and other product candidates. There can be no
assurance that any of such events will occur or that the Company will ever
achieve profitable operations.

INDUSTRY OVERVIEW

According to an industry survey published in May 1997, the total worldwide
sales of prescription and over-the-counter pharmaceutical products in 1996 were
over $285 billion, of which the United States market represented over 33%.
Although growth in pharmaceutical sales has generally remained constant over the
past few years, future growth rates are expected to rise due to projected
population trends. Because a disproportionately large amount of pharmaceuticals
are prescribed for middle-aged and elderly people, expansion in these
demographic sectors bodes well for drug companies. Based on estimates by the
United States Department of Commerce, the over-65 segment and the 45- to
64-year-old segment of the population is expected to expand 16% and 46%,
respectively, from 1996 through 2010 as the baby boomers age. The influence of
these demographic trends should be especially pronounced for treatments
targeting chronic conditions that often afflict people as they age, such as
hypertension and arthritis.

Currently, the incidence of rheumatoid arthritis is reported to be
approximately 2% of the world population and the incidence of clinically
symptomatic osteoarthritis is reported to be between 10-15% worldwide. Moreover,
in 1996, arthritis in general was reported by the American College of
Rheumatology ("ACR") to be the number one cause of disability in the United
States and the total market for prescription arthritis drug therapy was
estimated to be over $6 billion. For arthritis and other chronic,
difficult-to-treat conditions, such as viral hepatitis (of major medical
importance worldwide today and yet the only available treatments for which are
usually symptomatic and involve costly injectibles with numerous side effects),
plant-based pharmaceuticals with their natural attributes have potential to be
an efficient and cost-effective therapy.

Plant-based pharmaceuticals have historically been a significant source of
therapy in Europe and other countries outside of the United States. In 1993, as
estimated by the Herbal Medical database, the phyto-pharmaceutical market was
approximately $12.4 billion worldwide of which $6.5 billion was attributed to
Europe. According to that publication, the industry had grown at an approximate
annual rate of 10-15% from 1985 through 1993, and it was estimated that such
growth rate would continue through at least 1998.

BUSINESS STRATEGY

The Company's business strategy is to capitalize on what it perceives to be
an ever growing market for phyto-pharmaceutical therapies by developing (using
Ayurvedic principles as a means of potentially accelerating both the discovery
and the regulatory approval processes) and commercializing safe and effective
plant-based pharmaceuticals for the treatment of difficult-to-treat, chronic
diseases in humans. In furtherance of its strategy, the Company intends to:

- OBTAIN FDA APPROVAL FOR RA-11 -- RA-11 has been approved for sale in India
and is exempt from licensing in Singapore. Following successful completion of
additional animal pharmacology studies being conducted in India, the Company
intends to file an investigational new drug ("IND") application with the FDA in
the United States, relating to the use of RA-11 for the treatment of rheumatoid
arthritis, osteoarthritis and other forms of non-infectious, inflammatory
arthritis, by the first quarter of 1999. The Company has already completed two
large, double blind, placebo controlled Phase II clinical trials in India
relating to RA-11 and based upon the results of such trials, the Company
believes that RA-11 may prove to be an effective and safe drug for long-term
treatment of osteoarthritis and may be classified as a disease

modifying anti-rheumatic in the long-term treatment of rheumatoid arthritis.
Subject to approval of its IND application, of which there can be no assurance,
the Company will seek to by-pass Phase I clinical trials (preliminary trials
which focus on healthy human subjects) in the United States, proceeding directly
to Phase II clinical studies (intermediate level trials, focused on a limited
target patient population), since it has already conducted two large,
well-documented efficacy and safety Phase II level clinical trials in India
using protocols consistent with FDA guidelines. Concurrently, the Company will
seek to conduct a Phase III clinical trial in India and, subject to successful
results, the Company would then conduct a Phase III clinical trial in the United
States. Two Phase III trials are required in connection with the United States
FDA approval process, one of which must be conducted in the United States. The
Company does not anticipate completing clinical trials or filing an NDA until,
at the earliest, the year 2001. See "--The Regulatory Approval Process" and
"--Products and Product Candidates -- RA-11."

- EXPAND INTERNATIONAL MARKETING EFFORTS FOR RA-11 AND SA-12 -- The Company
has begun to recognize initial revenue from sales of SA-12 in India. In
addition, limited sales of RA-11 commenced in India in November 1997 under a
test-marketing program. The test-marketing program was successfully completed in
March 1998. The Company is in discussions with the Indian pharmaceutical company
which conducted the test-marketing program regarding entering into a definitive
marketing agreement. Subject to finalization of an agreement, the Company
anticipates a national launch of RA-11 in India in June 1998. The Company has
begun to sell RA-11 in Singapore through a distributor. The Company anticipates
the commencement of marketing of SA-12 in certain countries in the Pacific Rim
through a pharmaceutical distributor in Singapore during the second quarter of
1998. Pending regulatory approval of RA-11 by the FDA, the Company will continue
to target national pharmaceutical marketing companies in markets outside Japan,
Europe and the United States. See "--Marketing."

- ESTABLISH CORPORATE PARTNERSHIPS WITH MULTI-NATIONAL PHARMACEUTICAL
COMPANIES -- To assist the Company in conducting clinical trials, the Company is
actively seeking collaborations or partnerships with major pharmaceutical
companies or research companies whereby such strategic partners would provide
the resources to continue clinical trials, obtain regulatory approvals and
provide marketing capabilities relating to a particular product candidate, in
exchange for the receipt of exclusive marketing rights to the product in
designated geographical areas or for designated therapeutic uses. The Company
would retain proprietary rights to the product and receive royalties based on
sales. As of the date hereof, however, the Company has not entered into any such
agreements or arrangements, and no assurance can be given that the Company will
be able to successfully negotiate collaborative agreements or that if concluded,
they will not eliminate or substantially reduce the Company's proprietary rights
in the applicable product. In addition to providing financing, the Company
believes such strategic partners could be instrumental in promoting product
penetration in key markets such as Europe, the United States and Japan, if and
when applicable regulatory approvals are received. See "--Marketing."

- CONTROL MANUFACTURING -- For the foreseeable future, the Company intends
to have its products manufactured on a contract basis. All agreements will
contain provisions enabling the Company to maintain quality control over the
extraction, formulation and manufacturing processes (most of which are
proprietary to the Company). The Company's principal supplier of plant extracts
and raw material has achieved ISO-9000 certification (a worldwide industry
manufacturing standard), and the two formulation and finished product
manufacturers used by the Company in India have applied for GMP-certification
from the World Health Organization. The Company provides personnel to each of
the foregoing to support and supervise the extraction and manufacturing
processes. In connection with United States clinical trials, the Company intends
to import active plant ingredients in bulk and contract with third-party
manufacturers who have obtained GMP-certification from the FDA to produce the
finished and packaged product necessary for clinical trials. There are fewer
requirements applicable to the importation of bulk substances than to finished
pharmaceutical products. The Company's long-term goal is to operate its own FDA
GMP-certified manufacturing facilities in India. See "--Manufacturing and
Supply."

- EXPAND PIPELINE OF PHYTO-PHARMACEUTICALS -- The Company has a number of
products in various stages of research and development. The Company will
continue to apply the principles of Ayurveda in an

effort to discover and develop new phyto-pharmaceuticals for the treatment of
chronic, difficult-to-treat diseases. The Company believes that the application
of such principles will enable it to rapidly identify new phyto-pharmaceuticals
for potential new applications. The Company's goal is to screen many sources
through an accelerated development process in a low-cost, high-quality location.
See "--The AyurCore Model of Drug Discovery and Development."

THE AYURCORE MODEL OF DRUG DISCOVERY AND DEVELOPMENT

AYURVEDA

Ayurveda is a medical science whose literature documents the study and use
of plants for medicinal purposes. Ayurveda comes from one of the most advanced
civilizations of the ancient world, India. In Sanskrit, the language in which
Ayurveda is documented, AYUR means life and VEDA means knowledge. Treatises,
written as early as 4,000 years ago, give essential information on the use,
safety and efficacy of certain medicinal plants for specific therapies. Safety
parameters were a primary goal in Ayurvedic medicine. Considerable work has been
done over the centuries in this science to define specific therapies for
specific symptoms and ailments. However, even with a documented history of
safety and efficacy, very little Ayurveda testing has been conducted in
accordance with United States standards in the past.

The Company believes that by applying the knowledge gained from the study of
Ayurveda, it can rapidly identify the specific plant species to be utilized for
targeted indications. Because the safety and efficacy of the plants included in
Ayurveda have been documented, the Company believes it can make a significant
leap in the early drug discovery process, thereby accelerating the entire
development cycle and reducing pre-clinical costs.

DRUG DISCOVERY & DEVELOPMENT PROCESS

The Company has focused its efforts on several difficult-to-treat
disease/treatment areas. In India, the Company has assembled a multidisciplinary
team of scientists which plays an important role in the Company's drug discovery
and development process. These scientists include, but are not limited to,
biochemists, ethnobotanists, phytochemists, toxicologists, pharmacologists,
immunologists, and pharmaceutical chemists.

This scientific team, along with Ayurveda specialists, search the Ayurvedic
literature to identify potential plant applications. The results of the search
are compared to modern medicine parameters, in terms of both diagnosis and
treatment. Once an Ayurveda/modern medicine interface is established, a plant
species is recommended for further evaluation in the treatment of a specific
disease condition. Identification of a plant lead is confirmed through the
testing of the plant's pharmacological activities, and subsequent investigation
of Ayurvedic and other scientific literature determines whether phytochemical
analysis of the plant has been undertaken by others previously. Based upon these
findings, purified extracts of the plant species are completed for
phyto-pharmaceutical applications. The resulting phyto-pharmaceutical candidate
must retain the desired characteristics of the original plant, yet be purified
and standardized to the level of pharmaceutical preparation quality. Once this
is accomplished, animal and human pharmacological screens are developed and
implemented using these standardized extracts or fractions thereof to establish
the efficacy of the drug for human therapeutic use.

The Company's research and development team in India conducts activities
consisting of, but not limited to: (i) toxicology studies; (ii) further
phytochemical analysis/fractionation; (iii) any other applicable preclinical
studies; (iv) Phase I pharmacokinetic and pharmaco-dynamic studies in human
volunteers; and (v) Phase II-type dose ranging/efficacy studies. Given the
history of use of ayurvedic treatments in humans, these activities can, in some
instances, be conducted in parallel.

Results of the above activities are intended to form the basis of the data
required to file an IND application with the FDA. With this approach, the
Company believes it can significantly reduce both the discovery and development
time of phyto-pharmaceuticals in the treatment of difficult-to-treat diseases.

THE REGULATORY APPROVAL PROCESS

GENERAL

Pharmaceutical products, including phyto-pharmaceuticals, are significantly
regulated by a number of governmental entities, especially by the FDA in the
United States and by comparable authorities in other countries. These entities
regulate, among other things, research and development activities and the
testing, manufacture, safety, effectiveness, labeling, storage, record keeping,
approval, advertising, promotion, distribution and sale of such products.
Product development and approval within this regulatory framework takes a number
of years and involves the expenditure of substantial resources. Many products
that initially appear promising ultimately do not reach the market because they
are found to be unsafe or do not demonstrate efficacy during the testing
required by the regulatory process. In addition, there can be no assurance that
this regulatory framework will not change or that additional regulation will not
arise at any stage of a product's development that may affect approval, delay an
application or require additional expenditures. Moreover, even if approval is
obtained, failure to comply with present or future regulatory requirements, or
new information adversely reflecting on the safety or effectiveness of the
approved product, can lead to the FDA's withdrawal of approval to market the
product or other sanctions, including fines, recall or seizure of products,
injunctions and criminal prosecutions.

UNITED STATES REGULATION

In the United States, plant-derived pharmaceuticals are subject to FDA
review and approval as "drugs" under the Federal Food, Drug, and Cosmetic Act.
In most cases, the steps required before a new pharmaceutical can be
commercially distributed in the United States include: preclinical laboratory
and animal studies; the filing of an investigational new drug application, or
IND, with the FDA summarizing preclinical development work; controlled clinical
trials in humans to determine safety and efficacy; filing a new drug
application, or NDA, with the FDA; and FDA approval of the product for
commercial sale and of the product manufacturing facility for commercial
manufacturing.

PRECLINICAL STUDIES AND GLP. The initial testing of a pharmaceutical
product before it may be marketed in the United States is called preclinical
testing. Preclinical tests include formulation development, laboratory
evaluation of product chemistry and other end points and animal studies to
assess the potential safety and efficacy of the product as formulated. Many
preclinical studies are regulated by the FDA under a series of regulations
called the "Good Laboratory Practice" regulations. Violations of GLP regulations
can, in some cases, lead to invalidation of the studies, requiring them to be
replicated. The results of preclinical trials are submitted to the FDA as part
of the IND and are reviewed by the FDA prior to authorizing the sponsor to
conduct clinical trials in human subjects.

THE IND. FDA regulations provide that human clinical trials may begin 30
days following the submission and receipt of an IND, unless the FDA advises
otherwise or requests additional information, clarification or additional time
to review the IND submission. There is no assurance that the submission of an
IND will eventually allow a company to commence clinical trials. Once trials
have commenced, the FDA may stop the trials, or particular types of trials, by
placing a "clinical hold" on such trials because of concerns about, for example,
the safety of the product being tested or the adequacy of the trial design. Such
holds can cause substantial delay and in some cases may require abandonment of a
product. There can be no assurance that the FDA's acquiescence in an IND
constitutes any indication that the FDA will find the protocol satisfactory for
a clinical trial or that authorization of one phase of clinical trials will
result in authorization of other phases or that the FDA will accept any data
generated from a clinical trial.

CLINICAL TRIALS. Clinical trials involve the administration of the
investigational drug product to human subjects. Each protocol indicating how the
clinical trial will be conducted must be submitted for review to the FDA. The
FDA's review of a study protocol does not necessarily mean that, if the study is
successful, it will constitute proof of efficacy or safety. Further, each
clinical trial must be conducted under the auspices of an institutional review
board ("IRB"), which must be constituted and operated in conformance with FDA
regulations. The IRB considers, among other factors, ethical concerns and
informed consent

requirements. The FDA or the IRB may require changes in a protocol both prior to
and after the commencement of a trial.

Clinical trials are typically conducted in three sequential phases, although
in certain cases, the phases may overlap. In Phase I trials (which constitute
the initial introduction of the pharmaceutical into human subjects) the
pharmaceutical is tested in healthy subjects, as opposed to patients, primarily
for safety (adverse effects), side effects, metabolism, clinical pharmacology
and optimal dosage. Phase II trials involve studies in a limited target patient
population to (i) further evaluate optimal dosage, (ii) identify possible
adverse effects and safety risks and (iii) determine the efficacy of a drug for
a specific indication. These can be further classified into Phase IIa trials,
which study dose ranging and schedule optimization from the perspective of
efficacy, and Phase IIb trials, which study (in parallel or individually) one
dose and one schedule (the frequency of dose administration) to determine length
of therapy and safety versus efficacy. When a product is found to have an
acceptable safety profile in Phase II evaluation, Phase III clinical trials are
undertaken to evaluate clinical efficacy and to further test for safety within
an expanded target patient population at geographically dispersed multiple
clinical study sites. The FDA may order the temporary or permanent
discontinuation of a clinical trial at any time for any reason. There can be no
assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specified time period, if at all, with respect to any of
the Company's products.

THE NDA. Upon completion of clinical trials, the results of the preclinical
studies and the human clinical trials are submitted to the FDA in an NDA,
approval of which must be obtained prior to commencement of commercial sales.
The NDA also includes information pertaining to the preparation of drug
substances, analytical methods, drug product formulation, details on the
manufacture of finished product and proposed product packaging and labeling. The
interval between the filing of the IND and the filing of an NDA application can
be lengthy. In general, the FDA requires at least two properly conducted and
well-controlled Phase III clinical trials demonstrating efficacy. The FDA may
deny an NDA if, among others reasons, clinical trial protocols are not adequate
or appropriate. The FDA also may deny an NDA or require additional testing or
information to assess the safety of the product if the FDA does not view the NDA
as containing adequate evidence of the product's safety and efficacy.
Notwithstanding the submission of such data, the FDA may ultimately decide that
the application does not satisfy its regulatory criteria for approval and, even
if the NDA is approved, the product may be required to undergo post-licensure
testing and surveillance to continue to monitor its safety and effectiveness
(Phase IV studies).

POST-MARKETING APPROVAL REQUIREMENTS. Once an NDA has been approved, the
NDA applicant remains subject to post-marketing requirements. These include
manufacturing, record keeping, and reporting obligations. For instance, any
adverse experiences relating to the use of the product must be reported to the
FDA. Failure to comply with the FDA's post-marketing obligations can result in
the FDA's withdrawal of approval, seizures, injunctions, and/or civil or
criminal penalties.

In the United States, in addition to patent protection, drug products
containing new chemical entities ("pioneer drugs") approved through the NDA
process may be subject to periods of marketing exclusivity. After the applicable
patents and periods of exclusivity expire, however, those pioneer drugs are
subject to competition from generic versions (duplicate or related versions) of
themselves. The FDA may approve an abbreviated NDA for the marketing of a
generic drug (I.E., a duplicated or related version of an approved pioneer drug)
that has been shown to be as safe and effective as a pioneer drug whose patents
have expired, without requiring the submission of "full reports" of safety and
effectiveness.

MANUFACTURING REGULATIONS. The FDA mandates that drugs be manufactured in
conformity with current Good Manufacturing Practice ("cGMP") regulations. In
complying with the cGMP regulations, manufacturers must continue to expend time,
money and effort in production, record keeping and quality control to ensure
that the product meets applicable specifications and other requirements. The FDA
periodically inspects drug manufacturing facilities to ensure compliance with
applicable cGMP requirements. Failure to comply subjects the manufacturer to
possible FDA action, such as suspension of

manufacturing, seizure of the product, voluntary recall of a product, fines,
injunctions, failure to approve a product, or withdrawal of approval of a
product.

FOREIGN REGULATIONS

To market its products abroad, the Company is also subject to numerous and
varying foreign regulatory requirements, implemented by foreign health
authorities, governing, among other things, the design and conduct of human
clinical trials, product pricing and reimbursement, and marketing approval
criteria. The approval procedure currently varies among countries and can
involve additional testing. As a result, the time required to obtain foreign
approvals may differ from that required to obtain FDA approval. At present,
foreign marketing authorizations are applied for at a national level, although
within the European Union certain uniform registration procedures are available
to companies wishing to market a product in more than one member country. The
foreign regulatory approval process includes all of the risks associated with
obtaining FDA approval set forth above. However, approval by the FDA does not
ensure approval by other countries.

INDIA REGULATION

In India, pharmaceuticals, including plant-derived pharmaceuticals, are
subject to review and approval by the India Food and Drug Administration (the
"Indian FDA"), under the Drugs and Cosmetics Act of 1940, as amended, and the
regulations promulgated thereunder. The Indian FDA is a national administrative
authority which also includes separate departments having jurisdiction over each
state. The Indian FDA is headed at the national level by the Drugs Controller
General of India (the "Controller General"), and at each state level by separate
Commissioners. The scope of activities regulated by the Indian FDA is comparable
to that regulated by the US FDA, encompassing pre-clinical and clinical testing,
manufacture, safety, effectiveness, labeling, record-keeping, advertising,
marketing and sale of pharmaceuticals.

The approval process for new drugs, which are generally defined to include
drugs which have not been previously marketed in India, generally requires the
submission of comprehensive pre-clinical and clinical data regarding safety and
efficacy. The nature and extent of the required data can, under certain
circumstances, be limited if the drug has been approved for marketing in certain
countries other than India. Since Ayurvedic drugs have been available in India
for centuries, they are not considered "new drugs" and, as such, are generally
subject to a less burdensome approval process. Ayurvedic drugs which are
produced in accordance with formulation specifications described in Ayurvedic
literature do not require pre-marketing approval by the Indian FDA. If, however,
Ayurvedic drugs are produced using formulations not specifically described in
Ayurvedic literature, such as is the case with the Company's novel
phyto-pharmaceuticals, pre-marketing approval is required. Although the
regulatory approval process for new Ayurvedic drugs has become more strict in
recent years, it remains significantly less burdensome than the approval process
for new non-Ayurvedic drugs. Unlike new non-Ayurvedic drugs, new Ayurvedic
formulations require no pre-clinical data and generally require only limited
clinical data to demonstrate safety and efficacy.

Applications for approval of new Ayurvedic drugs are reviewed by a technical
advisory board of the Indian FDA at the state level (which has authority to
request additional safety or efficacy data). Unlike new non-Ayurvedic drugs
which require approval at the national level by the Controller General, a final
approval determination with respect to new Ayurvedic drugs is made by a state
commissioner. RA-11 has been approved for commercial sale in India by the Indian
FDA.

PRODUCTS AND PRODUCT CANDIDATES

RA-11

GENERAL. RA-11, the Company's lead phyto-pharmaceutical, is derived from a
combination of four different plant species. The Company holds an exclusive
license on two Indian patents relating to its proprietary plant extraction and
RA-11 formulation processes, as well as a United States patent relating to RA-11
and its use in treating degenerative musculoskeletal diseases, such as
rheumatoid arthritis and

osteoarthritis. Incidence of rheumatoid arthritis is reported to be
approximately 2% of the world population and the incidence of clinically
symptomatic osteoarthritis is reported to be between 10-15% worldwide. Based on
clinical trials conducted in India under protocols consistent with FDA
guidelines and ACR criteria, the Company believes that RA-11 may prove to be an
effective and safe drug for long-term treatment of osteoarthritis and may be
classified as a disease modifying, anti-rheumatic drug for the long-term
treatment of rheumatoid arthritis. Additional animal pharmacology studies are
being conducted in India pursuant to an arrangement entered into in November
1997 between Bio-Ved and the National Institute of Immunology in New Delhi. The
Company anticipates completing these studies by the first quarter of 1999, at
which time the Company plans to file an IND application with the FDA. See "--The
Regulatory Approval Process" and "--Patents, Licenses and Proprietary Rights."

RHEUMATOID ARTHRITIS. Rheumatoid arthritis is an immunological disease
characterized by inflammatory arthritis of peripheral joints and associated with
a number of other manifestations. Treatments available today include steroids,
non-steroidal anti-inflammatory drugs ("NSAIDs")(eg. Diclofenac and Naproxen),
and disease modifying anti-rheumatic drugs (E.G. Methotrexate and gold salts).
All of these treatments can be accompanied by serious side effects, and the
duration of the therapeutic effects associated with steroid and NSAID treatment
is relatively brief. Newer agents under development include specific
target-oriented monoclonal antibodies and the cyclo-oxygenase-2 inhibitors.

RA-11 was initially evaluated for use in treating rheumatoid arthritis in a
small clinical trial in India. During 1994 and 1995, the Company conducted a
large Phase IIb trial in India of RA-11's efficacy and safety using ACR criteria
and FDA guidelines. This study was comprised of two parts: a 16 week, double-
blind, placebo-controlled, parallel trial, followed by a crossover study in
these patients. Out of a total of 1,445 arthritis patients screened, 182
patients participated in the study. Of these 182 patients, 165 patients
completed the full 16 weeks of the study. The treatment groups were matched with
respect to demographics at study entry. The protocol for both the double-blind
phase and the 16-week open label phase of the trial were prepared for the study
by Dr. Richard Polisson, the Clinical Director of Massachusetts General
Hospital's arthritis unit; statistics were performed by Boston Biostatistics,
Inc.; and Dr. Arvind Chopra, a rheumatologist associated with the
Interdisciplinary School of Health Sciences at the University of Pune, served as
the Chief Investigator for the trial. See "--Consultants."

Results obtained at the conclusion of the 16-week study, indicated that
patients on the drug did better than the placebo group in several clinical and
lab parameters. Statistical significance, however, as defined by the ACR and
FDA, was obtained in only two important clinical parameters--joint count and
score for swelling--and two lab indicators--rheumatoid factor and hemoglobin
count.

After 32 weeks of participation in the study, however, patients showed
statistically significant improvements from baseline, as defined by the ACR and
FDA, in all clinical criteria and, most importantly, in the latest laboratory
blood testing criteria: Interleukin-6, C-Reactive protein and Erythrocyte
sedimentation rate. These patients were further followed for 54 weeks in an open
label phase and RA-11 continued to have persistent efficacy results in both
clinical and lab criteria. The Company believes that the safety of RA-11 is
demonstrated by the fact that the incidence of minor side effects was similar in
placebo and active groups through the course of the study. Based on the data
obtained from the study, the Company believes that RA-11 has shown promising
results as a safe disease-modifying anti-rheumatic drug which can be indicated
in the long-term therapy of rheumatoid arthritis. A total of 111 patients from
the original study have now been followed for more than 3 1/2 years, and all
have remained in clinical remission (free from clinical signs and symptoms of
arthritis), free of significant side effects and with stable, normal blood
counts, serum electrolytes, and renal and liver function tests.

Concurrent with the clinical trials, the Company completed acute, subacute
and chronic toxicity studies in albino rats. These studies were not performed in
a United States GLP-certified laboratory. The animals were tested for all
typical potential toxic effects such as gastrointestinal, central nervous
system, respiratory, food consumption, abnormal secretions and alteration of
fur. The drug was administered in several multiples of therapeutic doses. In the
chronic model (6 months) there was mild incidence of bronchopneumonia (which the
Company believes can be explained by force feeding of drug/placebo and

hence aspiration) equal in both active and placebo groups. Also noted were mild,
cloudy changes in the kidneys of certain of the animals, in both placebo and
active groups, and which the Company does not believe is significant. Part of
the proceeds of the Offering will be used to repeat these studies as well as
carcinogenicity and mutagenicity studies at a United States GLP-certified and
AALAC (American Association for Laboratory Animal Certification) accredited
laboratory.

OSTEOARTHRITIS. Osteoarthritis, also known as degenerative joint disease,
is believed to be the most common human joint disease. With the significant
increase in age expectancy in both developed and developing countries, it is
anticipated that the incidence of osteoarthritis will increase significantly
over the next decade.

Therapy in osteoarthritis is primarily with NSAIDs, but limited due to lack
of efficacy over long periods of time and/or side effects and toxicity. Steroid
injections provide temporary relief, and may be used in conjunction with
physical therapy. The patient may require surgical replacement of the affected
joints as a last resort.

During 1995 and 1996, the Company conducted a large 32-week Phase IIb
double-blind, placebo-controlled clinical trial using patients with established
osteoarthritis of the knee. As in the rheumatoid arthritis trial, the protocol
and study design were prepared by Dr. Polisson, statistics were performed at
Boston Biostatistics, Inc., and Dr. Chopra served as the Chief Investigator. The
drug dosing was twice that of the rheumatoid arthritis trial. Patients in this
trial were also matched with respect to demographic characteristics at study
entry. At the end of the study, patients receiving RA-11 performed better with
respect to almost all of the parameters used in this trial. Statistical
significance, as determined by the ACR and FDA, was achieved in several
important efficacy variables including scientific standards or criteria for
stiffness, pain and difficulty and scores for pain. Low incidence of minor side
effects was equal in the treatment and placebo groups.

IM-10

IM-10 is an oral phyto-pharmaceutical candidate derived from a single plant.
Extracts of this plant have demonstrated both immunosuppressive and
immunostimulatory properties. IM-10 is comprised of the immunostimulatory
compounds found in the plant extract and is currently undergoing preclinical
animal pharmacology testing for the stimulation and restoration of bone marrow
and the immune system in cancer patients being treated with chemotherapy. Due to
the high toxicity of chemotherapeutic agents, patients undergoing chemotherapy
often suffer compromised immune systems and significant drops in blood cell
counts. The Company has an exclusive worldwide license to IM-10. See "--Patents,
Licenses and Proprietary Rights."

In preliminary animal studies conducted by the Company in India, IM-10
showed an ability to restore to normal levels the immune system of animals
exposed to anti-cancer agents. Animals were given known anti-cancer agents which
severely depress the immune system and cause a significant drop in blood cell
counts (red blood cells, white blood cells and platelets). When IM-10 was
administered in the presence of the known anti-cancer agents, it restored the
immune system back to normal or baseline levels and increased blood cell counts.
The Company is currently conducting a much larger animal study with IM-10 in
India and similar pharmacological studies for efficacy are scheduled to start in
the third quarter of 1998, at the Veteran's Administration Hospital in Palo
Alto, California. Subject to satisfactory animal pharmacology testing, the
Company plans to determine human dosing and develop a large-scale, dose-ranging,
tolerance and efficacy trial for IM-10 in human patients undergoing cancer
chemotherapy. This study would be a placebo controlled, double-blind clinical
trial at Tata Memorial Cancer Research Center and Hospital, a cancer treatment
and research facility in Mumbai (previously known as Bombay), India. Using
protocols consistent with FDA guidelines, the Company anticipates beginning this
trial during the third or fourth quarter of 1998.

The competition in this area consists of cell stimulating drugs such as
Leukine, Neupogen and Alpha Interferon. Besides being very expensive, all of
these are currently available only in injectable forms and can potentially have
serious side effects. IM-10 is formulated in an oral capsule form, and in prior
testing by other investigators, the plant extract from which IM-10 is derived
has been shown to be safe in multiples of IM-10's intended therapeutic range.

HP-11

HP-11, an oral phyto-pharmaceutical candidate derived from a single plant
species, has demonstrated an ability to protect and regenerate destroyed liver
cells in preliminary testing. Other species of the same plant have been
evaluated and found to have hepato-protective (protection of liver tissue) and
hepato-regenerative (regeneration and repair of liver tissue) properties.
However, the Company believes that these other species have significant toxic
effects at relatively low therapeutic doses. The Company believes that the plant
species used in HP-11 has a much broader therapeutic index, with very high
safety margins. HP-11 was identified through the research efforts of the
Company's scientific team in India.

The goal of the Company's research and development activities with respect
to HP-11 is to demonstrate hepato-protective as well as hepato-regenerative
activity in the prevention and treatment of all forms of hepatitis, especially
hepatitis A, hepatitis B, hepatitis C and chemically induced (such as with
toxins, alcohol or drugs) hepatitis. Hepatitis is a disease of the liver
characterized by inflammation and damage of liver cells and loss of all
important liver functions. Viral hepatitis is of major medical importance
worldwide today. Very little treatment exists today for hepatitis. The only
treatment is usually symptomatic, for general management of the patient's
clinical condition and improving general nutrition. In very advanced cases,
interferon offers a general palliative therapy. Recently, the FDA approved a new
bioengineered interferon, Infergen, in the treatment of hepatitis C. Both forms
of therapy are injectables with side effects and are costly. The Company's
immediate plans for HP-11 include fractionation to isolate the most active
compounds and in-vitro activity evaluation on human liver cells. Fractionation
would be followed by trials to determine bioavailability (the rate and extent to
which the active compounds enter the general circulation).

BV-6

BV-6 is a naturally-occurring, biological, single molecule. BV-6, which is
derived from an animal cell component, is undergoing testing for the treatment
of degenerative diseases of the central nervous system, including seizure
disorders, strokes, multiple sclerosis and Alzheimer's disease. BV-6 has been
tested in cultured central nervous system neurons and in animals. BV-6 appears
to act by bypassing certain receptors in the brain that cause degeneration of
the brain tissue and, to date, has exhibited no toxicity over the entire
physiologically effective concentration range.

The NIH awarded an SBIR grant in the amount of $100,000 to the Company in
September 1996. Those studies have been successfully completed, confirming the
previous findings and a report has been submitted. An additional SBIR grant
application for $750,000 was submitted in April 1997 for further animal studies.
The application was amended in December 1997 to provide additional information,
and no response has been received to date. In 1995, the Company was assigned a
pending United States patent application related to BV-6. See "Patents, Licenses
and Proprietary Rights."

SA-12

SA-12, a non-plant based, proprietary antibacterial surgical scrub and
general disinfectant (not a pharmaceutical) for use on the hands or other skin
surfaces, was acquired by the Company from the product's inventor in 1995.

SA-12 is a scented, fast drying liquid, requiring no wipe-off, and it leaves
no oily feel after evaporation. SA-12 does not appear to irritate the skin. The
Company has tested the skin of SA-12 treated subjects for the presence of common
pathogens (streptococcus, staphylococcus, etc.) and has found no measurable

concentrations of microbial content for over two hours on the treated skin
(hands). Similar results were also obtained for highly virulent but less common
organisms such as Pseudomonas, E. coli and Candida Albicans. In a comparative
study, SA-12 was superior in terms of spectrum, speed and duration of activity
to the most widely used and known antibacterial agents currently available such
as Betadine, PhisoHex, Hibiclens and Sterillium.

SA-12 is comprised of ingredients listed in the United States Pharmacopeia
and can be produced at a cost which the Company believes will enable it to
compete effectively in developing countries, in very price sensitive healthcare
sectors, such as hospitals, and the food industry.

The product was launched in India in the second quarter of 1997 under the
brand name Multicidal-Registered Trademark- and will be introduced in Pacific
Rim countries and elsewhere under the brand name Periban-Registered Trademark-.
The initial introduction has been targeted at hospitals, clinics and physician
offices. After an initial period, the Company may consider promoting the product
directly to consumers in the over-the-counter market. The Company has no present
intention of marketing SA-12 in the United States. See "--Manufacturing and
Supply", "--Marketing" and "--Patents, Licenses and Proprietary Rights."

Currently, the Company is marketing 500 ml and 200 ml plastic dispenser
bottles, as well as pump dispensers. Additional consumer line extensions which
the Company may explore include small towel wipes in unit packages, soaps, body
lotions and other convenient applications.

RESEARCH AND DEVELOPMENT

The goal of the Company's research and development activities is to conduct
research at a level that is acceptable to the FDA and other regulatory bodies,
as well as global markets. With the exception of BV-6, substantially all of the
Company's research and development activities are presently conducted through
Bio-Ved in India. The Company funds most of Bio-Ved's research activities and
all ownership rights automatically vest in the Company. Bio-Ved currently has
three operational laboratories integrated at one site in India. These
laboratories are staffed with Bio-Ved's research and development scientists and
are also utilized by scientific consultants in connection with the Company's
activities. The Plant Screening Laboratory has the responsibility for analyzing
potential plant candidates and for the fractionation/ standardization of new and
existing products. The Formulations Laboratory has the primary mission of
developing the appropriate dosage forms for phyto-pharmaceuticals and quality
control and analytical procedures. The Animal Pharmacology Laboratory has the
responsibility for the study of pharmacological activity and mechanisms of
actions and for monitoring biochemical reactions in animal models. The Company
will seek to expand these laboratories to include other chemistry and
pharmacology activities. The Company, either directly or through Bio-Ved, also
has relationships with scientific institutions in India and elsewhere with whom
the Company has engaged and expects to continue to engage in joint research
activities.

Research and development activities with respect to BV-6 are currently
conducted at Emory University in the United States.

During the years ended December 31, 1997 and 1996, the Company expended
$272,000 and $401,000, respectively, in connection with its research and
development activities. In September 1996, the Company received a SBIR grant in
the amount of $100,000 from the NIH in connection with its BV-6 research
activities. In April 1997, the Company applied for an additional SBIR grant
relating to its BV-6 research in the amount of $750,000. The application was
amended in December 1997 in response to NIH comments.

MANUFACTURING AND SUPPLY

The Company currently relies on Kancor Flavours & Extracts Pvt. Ltd.
("Kancor") located in Southern India to provide all of the plant extracts used
in the production of RA-11. Kancor's production facility is ISO-9000 certified.
Kancor and the Company have entered into a five-year renewable agreement
covering the supply of these plant extracts. Plant extracts used in the
production of IM-10 and HP-11 for

testing purposes are purchased on an order-by-order basis. The Company has been
and expects to continue to be able to obtain plant extracts in quantities
sufficient for its testing and commercial production purposes for at least the
next 12 months without any significant interruption or sudden price increase,
although there can be no assurance thereof. Even though all plants used in the
production of the Company's phyto-pharmaceuticals are commercially cultivated,
no assurance can be given of continual sources of supply of required materials
or that reasonable arrangements can be made for their supply. Supply risks
include unexpected changes in regulatory requirements, exchange rates, tariffs
and barriers, difficulties in coordinating and managing foreign operations,
potentially adverse tax consequences and disruptions in the political and
economic stability of India and the other regions in which the Company's source
plants are grown as well as seasonality and weather factors. Interruptions in
supply or material increases in the cost of the supply could have a material
adverse effect on the Company's financial condition and results of operations.
Kancor has indicated that it intends to build a stand alone facility which would
be designed to meet the FDA's GMP requirements for bulk active pharmaceutical
ingredients. The Company is in preliminary discussions with Kancor regarding
utilization of such facility to produce bulk ingredients for the Company's
phyto-pharmaceuticals.

In October 1997, the Company entered into an agreement with Eisen
Pharmaceutical Co. (Pvt.) Ltd. of Pune, India ("Eisen"), for the manufacture of
RA-11. The agreement has a five-year term and is terminable by either party upon
three months' notice. Pursuant to the terms of the agreement, the Company
supplies the manufacturer with the raw materials used in, and retains a
supervisory role over, the manufacturing process. The Company operates under a
similar agreement with S.P.B. (Inc.) of Pune, India for the manufacture of
SA-12, except that the agreement commits the Company to purchase minimum monthly
quantities. Each of S.P.B. (Inc.) and Eisen has applied for a GMP approval
rating for finished formulations from the World Health Organization. In 1997,
the Company became dissatisfied with the performance of a former SA-12
manufacturer and began the process of changing to the present manufacturer. Due
to unanticipated delays, which have been resolved, related to transferring the
right to use the trade name associated with SA-12, the Company was forced to
suspend sales of SA-12 during the first quarter of 1998. The loss of the
manufacturing capacitates of either S.P.B. (Inc.) or Eisen would cause an
interruption in the supply of products produced by the respective manufacturer.
This could, in turn, have a material adverse effect on the Company's financial
condition and results of operations.

To provide the Company's requirements of RA-11 for United States clinical
trials, the Company intends to import active ingredients in bulk into the United
States. The United States has fewer requirements for import of active
ingredients and formulations than for finished formulations. The Company would
seek to enter into arrangements with third-party manufacturers which are United
States GMP-certified to supply finished product. The Company's long-term goal is
to build or acquire a United States GMP-certified manufacturing base in India to
produce the products sold by the Company in India and other countries.

MARKETING

The Company has no marketing or sales staff and currently intends to rely on
third-party distributors for the sale and marketing of all products it may
develop.

In April 1996, the Company entered into a memorandum of understanding with
Blue Cross Laboratories Ltd, of Mumbai (previously known as Bombay), India
("Blue Cross"), in connection with the distribution in India of SA-12 (the "BCL
Agreement"). Pursuant to the BCL Agreement, the Company is obligated to cause
S.P.B. (Inc.) to manufacture and deliver SA-12 to Blue Cross for distribution on
an exclusive basis. In addition to a negotiated sales price, Blue Cross will pay
the Company a percentage of all sales of SA-12 made by Blue Cross through March
31, 2001, the expiration date of the BCL Agreement. The Company is required to
maintain one month's supply of SA-12, and the Company is liable for damages for
nondelivery. The Company is also responsible for product liability claims. The
BCL Agreement is subject to termination by either party on six months' prior
notice.

Effective September 1997, the Company entered into a distribution agreement
(the "MD Agreement") with MD Pharmaceuticals Laboratories Ltd. for the marketing
of RA-11 and SA-12 in Singapore, Thailand and other Pacific Rim countries. The
MD Agreement is a three-year renewable direct marketing supply and distribution
agreement pursuant to which the Company sells finished product at an agreed upon
price. In May 1998, the Company commenced sales of RA-11 in Singapore under the
MD Agreement.

In September 1997, the Company entered into a memorandum of understanding
with Alembic Chemical Works Co. Limited ("Alembic") of Baroda, India for the
distribution in India of RA-11 (the "Alembic Agreement"). Pursuant to the
Alembic Agreement, the Company will manufacture and package RA-11 and sell it to
Alembic at an agreed upon price. Initially, Alembic is only required to test
market RA-11 in the State of Maharashtra, during which time an assessment
regarding the acceptance and effectiveness of RA-11 will be made. The Company
agreed to provide Alembic with 350,000 physician sample capsules without charge
through March 31, 1998. The test-marketing program was successfully completed in
March 1998. Although the Alembic Agreement provides that neither party will have
any obligation to the other if a definitive agreement is not reached by March
31, 1998, the parties are in discussions regarding a definitive agreement and
the Company contemplates a national launch of RA-11 in India in June 1998,
although there can be no assurance thereof. RA-11 will be marketed in India
under the trade name ARTREX-TM-.

The Company will continue to seek distribution arrangements with national
pharmaceutical distributors in countries other than the United States, Europe
and Japan. For products that may be sold in the United States and other large
markets, the Company will seek alliances or collaborative arrangements with
pharmaceutical companies that have established sales forces as well as the
ability and expertise to conduct clinical trials and finished product
manufacturing. The Company may license the products to such an entity or
entities in exchange for licensing and/or royalty payments. In any such
relationship, the Company's goal would be to supply the active raw material in
bulk to such entities who would then be responsible for finished product
manufacture and marketing. The Company cannot assure that it will be able to
enter into any such arrangements on terms acceptable to the Company, or at all.

COMPETITION

Competition in the pharmaceutical industry is extremely intense. The
principal factors upon which such competition is based include the following:
marketing, distribution, price, therapeutic efficacy, side effect profile, ease
of use, safety, physician acceptance and patient compliance. Many pharmaceutical
companies have significantly greater research and development capabilities, as
well as substantially greater marketing, financial and human resources than the
Company. In addition, many of these competitors have significantly greater
experience than the Company in undertaking preclinical testing and human
clinical trials of new pharmaceutical products and obtaining regulatory
approvals of such products. These companies may represent significant long-term
competition for the Company.

There can be no assurance that developments by other pharmaceutical
companies will not render the Company's products or technologies obsolete or
noncompetitive or that the Company will be able to keep pace with technological
developments of its competitors. Many of the Company's competitors have
developed or are in the process of developing technologies that are, or in the
future may be, the basis for competitive products. Some of these products may
have an entirely different approach or means of accomplishing the desired
therapeutic effect than products being developed by the Company. These competing
products may be more effective and less costly than the products developed by
the Company.

The Company is aware of a number of companies engaged in research and
development of pharmaceuticals based on plants. The Company is also aware of a
number of local companies in India which sell traditional ayurvedic products,
some of which products are used to treat diseases targeted by the Company, such
as arthritis. Many of the ayurvedic products sold by other companies in India
are not standardized to ensure consistent potency. Moreover, to the Company's
knowledge, none of the other

companies conduct clinical trials as well as other scientific confirmations
consistent with United States standards.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

TECHNOLOGY AGREEMENTS

The Company has entered into license agreements with Dr. Bhushan Patwardhan
pursuant to which the Company acquired exclusive worldwide rights to RA-11. One
agreement relates to the rights to commercialize RA-11 in India and the other
agreement relates to similar rights throughout the rest of the world. To
maintain its rights under the RA-11 agreements, in addition to paying royalties
on sales, the Company must commence marketing in India by January 1998 and
commence marketing outside India by 2003. The Company is currently in compliance
with its obligations under the agreements. The Company has also entered into a
license agreement with Dr. Patwardhan pursuant to which the Company acquired
exclusive worldwide rights to IM-10. To maintain its rights under the agreement,
in addition to paying royalties on sales, the Company must commence marketing in
India within one year of clinical confirmation and approval by the Drug
Controller of India (India's FDA equivalent) and commence marketing in at least
one country outside India within seven years of its initial marketing in India.
See "--Consultants."

In December 1995, the Company entered into an agreement with Dr. Abraham
Rosenberg pursuant to which the Company was assigned a United States patent
application related to BV-6, in exchange for royalties. See "--Consultants."

In June 1995, the Company entered into an agreement with S.V. Karnataki
pursuant to which the Company purchased SA-12 and related technology for an
initial signing fee and limited manufacturing and marketing milestone payments.

PATENTS AND PROPRIETARY RIGHTS

The Company's policy is to protect its technology by filing patent
applications. In addition to intending to file patent applications in the United
States, the Company has filed, and intends to file, patent applications in
foreign countries on a selective basis. The Company also relies on trade
secrets, unpatented know-how and technological innovation to develop and
maintain its competitive position.

The Company is the exclusive licensee under an issued United States patent,
which expires in 2014, relating to RA-11 and its use in treating degenerative
musculoskeletal disorders, including rheumatoid arthritis and osteoarthritis.
The Company also holds an exclusive license on two Indian patents, one of which
relates to the Company's proprietary plant extraction process and the other to
the Company's proprietary process for formulating RA-11, which expire in 2001.
However, the Company's licensor does not have any patent rights relating to
RA-11 outside of the United States and India. In addition, the Company has a
United States patent application pending for the use of BV-6 in the treatment of
degenerative diseases of the central nervous system.

Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as to
the enforceable scope of the claims of the patent. There can be no assurance
that the Company's issued patent or any patents subsequently issued to or
licensed by the Company will not be successfully challenged in the future. The
validity or enforceability of a patent after its issuance by the patent office
can be challenged in litigation. If the outcome of the litigation is adverse to
the owner of the patent, third parties may then be able to use the invention
covered by the patent without payment. There can be no assurance that the
Company's patents will not be infringed or successfully avoided through design
innovation.

There can be no assurance that patent applications owned by or licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology. It is also
possible that third parties may obtain patent or other proprietary rights that
may be necessary or useful to the Company. In cases where third parties are
first to invent a particular product or

technology, it is possible that those parties will obtain patents that will be
sufficiently broad so as to prevent the Company from using certain technology or
from further developing or commercializing certain product candidates. If
licenses from third parties are necessary but cannot be obtained,
commercialization of the product candidates would be delayed or prevented.

There may be patent applications and issued patents belonging to competitors
that may require the Company to alter its product candidates, pay licensing fees
or cease certain activities. If the Company's products or product candidates
conflict with patents that have been or may be granted to competitors,
universities or others, such other persons could bring legal actions against the
Company claiming damages and seeking to enjoin manufacturing and marketing of
the affected products. If any such actions are successful, in addition to any
potential liability for damages, the Company could be required to obtain a
license in order to continue to manufacture or market the affected products.
There can be no assurance that the Company would prevail in any such action or
that any license required under any such patent would be made available on
acceptable terms or at all. The Company believes that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If the Company becomes involved in such litigation, it could consume
substantial resources.

The enactment of the legislation implementing the General Agreement on Trade
and Tariffs has resulted in certain changes to United States patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period of
seventeen years from the date of grant. The new term of United States patents
will commence on the date of issuance and terminate twenty years from the
earliest effective filing date of the application. Because the time from filing
to issuance of patent applications is often more than three years, a twenty-year
term from the effective date of filing may result in a substantially shortened
term of patent protection, which may adversely impact the Company's patent
position. If this change results in a shorter period of patent coverage, the
Company's business could be adversely affected in the future, to the extent that
the duration and level of the royalties it is entitled to receive from its
potential collaborators is based on the existence of a valid patent. None of the
issued patents currently owned or licensed by the Company are adversely affected
by these changes in the term of patent protection.

The Company also relies on unpatented technology, trade secrets and
information and no assurance can be given that others will not independently
develop substantially equivalent information and techniques or otherwise gain
access to the Company's technology or disclose such technology, or that the
Company can meaningfully protect its rights in such unpatented technology, trade
secrets and information. The Company requires each of its employees, consultants
and advisors to execute a confidentiality agreement at the commencement of an
employment or consulting relationship with the Company. The agreements generally
provide that all inventions conceived by the individual in the course of
employment or in providing services to the Company and all confidential
information developed by, or made known to,

the individual during the term of the relationship shall be the exclusive
property of the Company and shall be kept confidential and not disclosed to
third parties except in limited specified circumstances. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's information in the event of unauthorized use or disclosure of such
confidential information.

TRADEMARKS

The Company seeks to file trademark applications on major products before
the products are publicly available. The following table reviews the Company's
current trademark filings:

PRODUCT UNITED STATES INDIA
- -------------------------- ----------------------------------- --------------------------------------

MENDAR-Registered Trademark-
RA-11 RADICURE-Registered Trademark- ARTREX-TM-
SA-12 PERIBAN-Registered Trademark- MULTICIDAL-Registered Trademark-MICROCIDAL-TM-
HP-11 MODALEX-Registered Trademark- MODALEX-TM-

OTHER GOVERNMENT REGULATION

COVERAGE AND REIMBURSEMENT BY THIRD PARTY PAYERS

The ability of the Company to successfully commercialize any products that
receive FDA approval will depend, in part, on coverage and reimbursement of such
products by third-party payers, such as government health care programs,
indemnity insurers, and managed care organizations. Significant uncertainty
exists as to the coverage and reimbursement status of pharmaceuticals and other
products following approval by the FDA. Government and other third-party payers
are increasingly attempting to contain costs by limiting both coverage and
reimbursement for pharmaceuticals and products approved for marketing by the FDA
and by refusing, in some cases, to provide coverage of approved pharmaceuticals
and products for disease indications for which the FDA has not granted marketing
approval. Payers are also increasingly applying cost effectiveness criteria to
new therapies for which alternatives exist. There can be no assurance that the
Company's products will be deemed cost effective compared to other alternative
therapies, or that adequate third-party coverage and reimbursement will be
available for the Company to realize an appropriate return on its investment. If
adequate coverage and reimbursement is not provided by government and other
third-party payers for uses of the Company's products, the market acceptance of
these products could be adversely affected.

HEALTH CARE "FRAUD AND ABUSE"

Once the Company's products are marketed in the United States, the Company
(and other entities marketing, purchasing, or seeking reimbursement for the
Company's products), will be subject to various federal and state laws
pertaining to health care "fraud and abuse," including anti-kickback laws and
false claims laws. Anti-kickback laws make it illegal to solicit, offer,
receive, or pay any remuneration in exchange for, or to induce, the referral of
business, including the purchase or prescription of a particular drug. False
claims laws prohibit anyone from knowingly and willfully presenting, or causing
to be presented, claims for payment to third party payers (including Medicare
and Medicaid) that are false or fraudulent, for items or services not provided
as claimed, or for medically unnecessary items or services. Thus, the Company's
activities relating to sale and marketing of its products, including any advice
that might be given concerning billing or reimbursement, would be subject to
scrutiny under these laws. Violations of fraud and abuse laws are punishable by
criminal and/or civil sanctions, including in some instances imprisonment and
exclusion from participation in federal health care programs, such as Medicare
and Medicaid. The Company intends to structure its sales, marketing and other
activities to comply with these and other laws. However, given the broad reach
of these laws, there can be no assurance that the Company's future activities
would not be subject to scrutiny and/or challenge at some time in the future.

ENVIRONMENTAL REGULATION

In connection with its research and development activities and its
manufacturing of clinical trial materials, the Company is subject to laws and
standards prescribed by the Indian government, and will be subject to United
States federal, state and local laws, rules, regulations and policies governing
the use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials and wastes. There can be no assurance
that the Company will not be required to incur significant costs to comply with
environmental and health and safety regulations in the future. The Company's
research and development involves the controlled use of hazardous materials,
chemicals, viruses and animal tissues. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company.

OTHER REGULATION

The Company is also subject to laws of more general applicability dealing
with issues such as occupational safety, employment, medical leave, and civil
rights and discrimination. In the United States, federal, state and local
governments in many instances are expanding the regulatory requirements on
businesses, and the imposition of these regulatory requirements may have the
effect of increasing operating costs and reducing the profitability of the
Company's operations.

HEALTH CARE REFORM

In the past several years there have been numerous initiatives in the United
States on the federal and state government levels for comprehensive or
incremental reforms affecting the payment for health care services and products,
including a number of proposals that would significantly limit reimbursement
under the Medicare and Medicaid programs. The Company anticipates that federal
and state governments will continue to review and assess alternative health care
delivery systems and payment methodologies. It is not clear at this time what
existing or future proposals, if any, will be adopted or, if adopted, what
effect such proposals would have on the Company's business. Aspects of certain
of these health care proposals, such as cutbacks in Medicare and Medicaid
coverage and reimbursement for pharmaceuticals, could adversely affect the
Company. There can be no assurance that past, present or future proposals for
health care reform, or other changes in the administration or interpretation of
governmental health care programs, will not have an adverse effect on the
Company.

PRODUCT LIABILITY

The testing and marketing of pharmaceuticals entail an inherent risk of
product liability attributable to unwanted and potentially serious health
effects. The Company intends to obtain clinical trial liability insurance
coverage in an amount consistent with industry practice. However, there can be
no assurance that such insurance coverage is or will continue to be adequate. In
addition, the Company has product liability insurance in India, the country in
which most of the Company's sales are generated. The Company is seeking to
obtain product liability insurance to cover sales in other foreign countries, in
amounts consistent with industry practice in those countries in which its
products are to be marketed. There can be no assurance, however, that insurance
will be available at all or in sufficient amounts to protect the Company at a
reasonable cost.

FACILITIES

The Company currently leases approximately 2,000 square feet of office space
in San Jose, California. The lease has a three-year term, which commenced in
October 1995, and provides for a monthly rental payment of approximately $3,200.
The lease may be renewed, at the Company's option, for one additional

three-year term at a rental based on the then fair market value. Bio-Ved leases
approximately 1,550 square feet of office space in Pune, India under a
three-year lease expiring in May 1999. The annual rental payment is
approximately $15,000. In addition, Bio-Ved currently utilizes approximately
4,000 square feet of laboratory space provided by the Bharati Vidyapeeth's Pune
College of Pharmacy. The laboratory space is provided pursuant to a five-year
agreement which expires in 1999 under which the Company has agreed to pay an
aggregate of approximately $7,000 annually to fund research fellowships and as a
grant to the College. The Company intends to use proceeds from the Offering to
establish and equip additional laboratory facilities for its research and
development activities in India and believes that there is an adequate supply of
suitable space in the Pune region for its expansion needs.

EMPLOYEES

As of March 31, 1998, the Company had 26 employees, 17 of whom were engaged
in research and development activities and nine are in executive management and
marketing. The Company's employees are not governed by any collective bargaining
agreement and the Company believes that its relationship with its employees is
good.

MEDICAL/SCIENTIFIC ADVISORY BOARD

The Company intends to form an Advisory Board from a multidisciplinary group
of distinguished scientists representing different fields closely associated
with the Company's business. Most of the prospective members will come from the
existing consultants to the Company and will be supplemented by one or more
representatives yet to be recruited.

CONSULTANTS

The Company utilizes various consultants in India and in the United States
for research and development of drug candidates, as well as for discovering
potential new drug candidates. The Company confers with such consultants as
necessary to discuss details of specific projects. Certain of the listed
consultants have entered into agreements specifying the terms and scope of their
individual consulting relationship with the Company. The Company does not
believe that termination of any individual agreement would materially adversely
affect its business. Although all these consultants have entered into
confidentiality agreements, none of these individuals is employed by the Company
and, therefore, they may have commitments to, or consulting contracts with,
other entities which may compete with their obligations to the Company. The
Company's consultants are:

NARENDRA BHATT, M.D. (Ayurveda), a fourth generation Ayurvedic physician,
received his M.D. degree from the University of Bombay in 1974. He has more than
23 years of experience in teaching, Ayurvedic clinical and pre-clinical research
and pharmaceuticals. His career includes academic teaching and research in
Ayurveda at the Government Podar Ayurvedic Institutes (1974-1987) and later as
R&D/Medical Director for two well known Ayurvedic pharmaceutical companies. He
has been R&D Advisor to Proctor & Gamble and Hoechst, India. He has authored
numerous papers and publications (both in India and internationally) and has
been awarded the highest honor by the International Academy of Ayurveda. He is
an expert advisor to several international bodies in the area of plant
pharmaceuticals. Among these is the Medical Control Authority (US FDA
equivalent) of the United Kingdom.

ARVIND CHOPRA, M.D. (Rheumatologist) received his M.D. degree from the Armed
Forces Medical College at Pune, India, in 1977. He is a fellow of the American
College of Rheumatology and a lifetime member in the Association of Physicians
in India, Cardiological Society of India, Indian Rheumatology Association and
the Interdisciplinary School of Health Sciences at the University of Pune. Dr.
Chopra has numerous papers and publications to his credit and has organized many
professional conferences in India.

GEORGE EHRLICH, M.D. (Medical Affairs) is the Founding Master of the
American College of Rheumatology and the Arthritis Foundation of North America.
He currently is a professor of medicine at New York University and the
University of Pennsylvania. In addition, Dr. Ehrlich is the Chairman of the
Expert

Advisory Panel on Chronic Degenerative Diseases of the World Health
Organization. He has held teaching and academic positions at various
institutions, including Tufts University, Cornell University, Temple University
and Hahnemann University School of Medicine. He retired as Vice President of
Medical Affairs for Ciba Geigy Ltd. Worldwide. He was Chairman of the Arthritis
Advisory Committee, FDA council 1993-1996, among other noted positions. Dr.
Ehrlich is considered a world expert in inflammatory, arthritic and rheumatic
diseases. He has written more than 200 publications, 55 abstracts, 60 book
chapters and 11 books.

PHILIP LAVIN, PH.D (Biostatistics) founded Boston Biostatistics, Inc. in
1983. He has been a statistical consultant for industry since 1976, member of
the Harvard Medical School faculty since 1977, and has served on FDA advisory
panels since 1983. He has co-authored over 150 publications in biostatistics and
medicine. He is a recognized authority in clinical, regulatory, and
biostatistical issues relating to drugs, devices, biologics, and cosmetics.
Under his direction, Boston Biostatistics has grown into a mid-size contract
research organization offering expert services in study and case report file
design, site recruitment and monitoring, medical affairs, regulatory affairs,
database development, data management and biostatistics, report writing, and
regulatory submissions.

KALINDI PHADKE, PH.D. (BioChemistry) has a Ph.D. degree in BioChemistry from
the University of Bombay. She has held research positions in large
multi-national pharmaceutical companies in the United States. Recently, she was
Senior Research Scientist at Eli Lilly and Company, in Indianapolis. A United
States citizen, she moved to India for family reasons where she was Deputy
Director of the National Cell Sciences Center at the University of Pune. She has
a special research fellowship from the National Institutes of Health. She has
more than 50 publications, including original work in arthritis pharmacology
models which are the standard of research in this area worldwide today.

BHUSHAN PATWARDHAN, PH.D (Interdisciplinary Health Sciences) received his
Ph.D. degree from the University of Pune, India. He is currently Dean of the
Interdisciplinary School of Health Sciences University of Pune. In 1993, Dr.
Patwardhan was selected as Co-Chairman of the 5th Annual INWIN and World Health
Organization Interscience World Congress in Geneva, Switzerland. Dr. Patwardhan
is a lifetime member of the Indian Medical Association, Indian Drug Research
Association and the Indian Society for Cancer Research. He is the founding
member of Ayurvedic International Diffusing Association, Science and Technology
Park Society and Indian Society for Clinical Pharmacology and Therapeutics.

RICHARD P. POLISSON, M.D., M.H.S. (Rheumatologist) was the Clinical
Associate Professor, Immunology Branch, National Cancer Institute, National
Institutes of Health in Bethesda, Maryland from 1978 through 1980. Later, he has
held a number of academic appointments at Massachusetts General Hospital,
Harvard Medical School and Duke University. He has been the principal
investigator on a number of research projects and co-investigator on several
others. The National Institutes of Health and many foundations and
pharmaceutical companies have funded his projects. Since 1994, Dr. Polisson has
held the position of Clinical Director, Arthritis Unit, and Director of all
Clinical Research at Massachusetts General Hospital. Very recently, he has been
named the Medical Director of Genzyme Tissue Repair (Genzyme, Corp.).

SUSAN A. RICE, PH.D., D.A.B.T. (Toxicologist and Pharmacologist) received
her Ph.D. degree in Comparative Pharmacology and Toxicology from the University
of California at Davis. She has held numerous appointments, most recently as
Senior Managing Scientist at Failure Analysis Associates, Inc. in California,
and in the Department of Anesthesia at Stanford University School of Medicine
from 1976 to the present. Dr. Rice is a member of the American Society of
Anesthesia, American Society for Pharmacology and Experimental Therapeutics, the
California Society of Anesthesiologists and the Northern California Chapter,
Society of Toxicology. Her experience includes review and analysis studies for
IND and pre-marketing approval applications.

ABRAHAM ROSENBERG, PH.D. (Biochemistry and Neurochemistry) has a Ph.D.
degree in Biochemistry from Columbia University College of Physicians and
Surgeons. He was both a Fullbright Scholar and a Fullbright Senior Lecturer
early in his career. He has been in academics and research most of his life. His

positions include Professor, Biochemistry, Pennsylvania State University; Chief,
Division of Molecular Biology, New York University and Professor, Brain Research
and Neuropsychiatric Institutes, UCLA. Currently he is Professor, Psychiatry and
Behavioral Sciences at Emory University. He has published more than 80 papers
and served on the Editorial Boards of several reputed journals. He received the
National Institutes of Health James A. Shannon Director's Award in 1996 for his
work in neurochemistry.

SUBRAMANIAM S. SHASTRI, PH.D., M.B.A. (Pharmaceutical Sciences) received a
Ph.D. degree in Pharmacy and M.B.A. degree from the University of Iowa. He has
28 years of experience in the broad spectrum of pharmaceutical product
development, including multidisciplinary project team management practices and
is well-versed with the relevant regulatory requirements. Dr. Shastri has held
several positions with Syntex Corporation since 1969, including management of
the Research Pharmaceutical Operations from 1979 to 1993, during which sales
nearly quadrupled. Dr. Shastri has received two patents from the United States.

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL OF THE COMPANY

The Company's directors, executive officers and key personnel are as
follows:

NAME AGE POSITION WITH THE COMPANY
- ----------------------------------------------------- --- -----------------------------------------------------

Sanjeev Chitre(1)(2)................................. 44 Chairman of the Board of Directors
Deepa Chitre, M.D.(1)(2)............................. 40 President, Chief Executive Officer and Director
Barry Wald........................................... 60 President, International Operations
Nina Renaud.......................................... 47 Chief Financial Officer and Treasurer
Cynthia R. May....................................... 45 Director
Suzanne Rosenthal.................................... 62 Director
Michael Splinter..................................... 47 Director
Ajit Chitre.......................................... 54 Managing Director--Bio-Ved

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

(1) Sanjeev Chitre and Deepa Chitre are married.

(2) May be considered a founder of the Company as that term is defined under the
Securities Act.

SANJEEV R. CHITRE has served as Chairman of the Board of Directors of the
Company since inception. In 1989, Mr. Chitre founded Integrated Process
Equipment Corp., a publicly traded semiconductor equipment manufacturer, and has
served as its chairman since its inception in 1989 and as its chief executive
officer from inception until August 1997. Mr. Chitre was a vice president of
marketing and sales of Superwave Technology, Inc., a manufacturer of automated
in-line systems for the semiconductor industry, from 1984 through 1989.

DEEPA CHITRE, M.D. has served as a director of the Company since inception,
as its Chief Executive Officer since October 1996 and as its President since
October 1997. From 1993 to 1996, Dr. Chitre practiced pediatric medicine in
private practice. From November 1990 to August 1996, Dr. Chitre served on the
academic teaching faculty of Santa Clara Valley Medical Center, Stanford
University Medical Center and Lucille Packard Children's Hospital. During this
time, she was active in and chaired a number of committees involved in health
care, scientific research, clinical management, hospital administration and
medical teaching standards.

BARRY WALD has served as President, International Operations of the Company
since October 1997. From April 1994 until October 1997, Mr. Wald served as
President and a Director of the Company. From 1991 to March 1994, he served as a
consultant to the pharmaceutical drug delivery and biotechnology industry in
marketing, business development and strategic planning. From 1976 to 1990, he
was employed in various capacities, including Vice President, Marketing from
1981 until 1990, by Syntex Corporation, a pharmaceutical company. Mr. Wald
played a significant role in the launches of several major products by Syntex
Corporation, including a leading analgesic with worldwide sales reported to
exceed $400 million. From 1968 to 1975, Mr. Wald was employed in various
capacities by Merck Sharpe & Dohme.

NINA RENAUD has served as Chief Financial Officer of the Company since
September 1997. Since July 1995, Ms. Renaud has been a Managing Director of
Corporate Golf, a San Francisco-based marketing company of which she is a
principal and co-founder. Ms. Renaud currently devotes approximately 60% of her
business time to the Company and the balance to Corporate Golf. From October
1992 until December 1994, Ms. Renaud was Vice President, Finance and Chief
Financial Officer of Harris Moran Seed Company, a joint venture of Rhone-Poulenc
and Lefarge-Coppee. Ms. Renaud has also served as a divisional chief financial
officer, and as a director responsible for international licensing and export
operations, for Pioneer Hi-Bred International and CBS, Inc.

CYNTHIA R. MAY has served as a director of the Company since July 1995.
Since 1981, Ms. May has been employed by Saginaw Controls & Engineering Corp., a
private manufacturing company, most recently as vice president. Since July 1997,
Ms. May has been a director and chief operating officer of Graminex USA L.L.C.,
a manufacturer and processor of agricultural products including herbs for the
food and pharmaceutical industry. Since 1994, Ms. May has been treasurer of
Marathon Investments L.L.C. and vice president and treasurer of GRQ, L.L.C., two
private investment and financing entities.

SUZANNE ROSENTHAL has served as a director of the Company since October
1997. Ms. Rosenthal is currently Chairman of the Board Emeritus of the Crohn's &
Colitis Foundation of America, Inc. ("CCFA"), a position she has held since
1987. She served as CCFA's National President and its Executive Vice President
for over 30 years since its founding in 1967. Ms. Rosenthal has served as a
member of a number of National Institutes of Health advisory boards, councils
and committees, and since 1993 has served on the Advisor Council of the National
Institute of Diabetes, Digestive and Kidney Diseases. Ms. Rosenthal is the
Founder and past President of the Digestive Disease National Coalition, a
consortium of lay and medical professional organizations that educates the
public regarding the need for increased research and improved health care for
patients with digestive diseases.

MICHAEL SPLINTER has served as a director of the Company since October 7,
1997. Mr. Splinter has been employed in various capacities with Intel
Corporation ("Intel"), semiconductor chip manufacturer, since approximately
1984. He is currently a corporate Vice President and co-manages Intel's
Technology and Manufacturing group, which is responsible for Intel's process
development and worldwide manufacturing network. Mr. Splinter has authored
numerous technical and management papers and holds two patents.

AJIT CHITRE has served as Managing Director of Bio-Ved since September 1996
and as a consultant to the Company from April 1994 to August 1996. From May 1993
to August 1996 he was a consultant in marketing and new business development in
the biotechnology and pharmaceutical industry including AyurCore. From 1988 to
May 1993 he was Managing Director of Atija Corporation, a company involved in
direct sales and marketing of equipment in the semiconductor and biotechnology
industries. Mr. Ajit Chitre is a brother-in-law of Mr. Sanjeev and Dr. Deepa
Chitre.

All directors of the Company are elected by the stockholders, or in the case
of a vacancy, by the directors then in office, to hold office until the next
annual meeting of stockholders of the Company and until their successors are
elected and qualified or until their earlier resignation or removal.

In connection with the Offering, the Company has agreed, subject to certain
exceptions, that it will, for a period of five years from the date of this
Prospectus, upon the written request of the Representative, nominate and use its
best efforts to elect a designee of the Representative (which designee may
change from time to time) to serve as a director of the Company, or at the
Representative's option, appoint such designee as a non-voting advisor to the
Company's Board of Directors. The Representative has not yet exercised its right
to designate such a person. See "Underwriting."

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has established an Executive Committee, a Compensation and Stock
Option Committee, and an Audit Committee. The Executive Committee, consisting of
Messrs. Sanjeev Chitre and Michael Splinter and Dr. Deepa Chitre, exercises all
the power and authority of the Board of Directors in the management and affairs
of the Company between meetings of the Board of Directors, to the extent
permitted by law.

The Compensation and Stock Option Committee, consisting of Ms. Cynthia May
and Mr. Michael Splinter, makes recommendations to the Board of Directors
concerning compensation, including incentive arrangements, of the Company's
officers and key employees and others and administers the Company's Option Plan
and determines the officers, key employees and others to be granted options
under the Option Plan and the number of shares subject to such options.

The Audit Committee, consisting of Ms. Suzanne Rosenthal and Mr. Michael
Splinter, reviews the engagement of the Company's independent auditors and the
independence of the accounting firm, the audit and non-audit fees of the
independent accountants and the adequacy of the Company's internal control
procedures.

DIRECTOR COMPENSATION

Directors who are employees of the Company receive no compensation, as such,
for service as members of the Board. All directors are reimbursed for expenses
incurred in connection with attendance of Board and committee meetings. On
November 18, 1997, the Company granted options under the Option Plan to purchase
15,000 shares of Common stock at the initial public offering price per share to
each of Cynthia May, Suzanne Rosenthal and Michael Splinter. See "--Stock
Options--1997 Option Plan."

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the aggregate compensation paid or accrued by
the Company for services rendered in all capacities to the Company during the
fiscal years ended December 31, 1997, 1996 and 1995 by Dr. Deepa Chitre, its
President and Chief Executive Officer, and by Mr. Barry Wald, the only other
executive officer whose compensation exceeded $100,000 during the fiscal year
ended December 31, 1997 (together, the "Named Executive Officers").

ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS
- ----------------------------------------------------------------------------- ------------- ---------- ---------

Deepa Chitre, Chief Executive Officer and President.......................... 1997 $ 140,000(1) --
1996 $ 42,000(2) --
1995 $ 35,000 --

Barry Wald, President, International Operations.............................. 1997 $ 130,000(3) --
1996 $ 125,000(4) --
1995 $ 123,077 $ 23,595

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

(1) All of which has been deferred.

(2) Of such amount, $28,000 has been deferred.

(3) Of such amount, $104,932 has been deferred.

(4) Of such amount, $48,753 has been deferred.

No stock options were granted to the executive officers named in the Summary
Compensation Table during the fiscal years ended December 31, 1997, 1996 and
1995. See "--Stock Options."

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth certain information for the Named Executive
Officers with respect to the exercise of options to purchase Common Stock during
the fiscal year ended December 31, 1997 and the number and value of securities
underlying unexercised options held by the Named Executive Officers as of
December 31, 1997.

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1997 AT DECEMBER 31, 1997(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ----------- ----------- ------------- ----------- -------------

Deepa Chitre....................... -0- -0- -0- -0- -0- -0-
Barry Wald......................... 10,000 36,000 93,034 34,467 $ 526,572 $ 195,083

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

(1) Calculated on the basis of $6.00 per share, minus the per share exercise
price multiplied by the number of shares underlying the option.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with each of Dr. Deepa
Chitre and Mr. Barry Wald, effective as of the date of this Prospectus, pursuant
to which such individuals are employed as (i) President and Chief Executive
Officer, and (ii) President, International Operations, respectively, of the
Company. Each agreement expires three years following the date of this
Prospectus. Under the agreements (i) each executive has agreed to devote full
time to the business of the Company, (ii) Dr. Chitre and Mr. Wald are to be paid
annual salaries of $140,000 and $130,000, respectively, and each executive may
be entitled to annual bonuses, at the sole discretion of the Company, of $35,000
and $30,000, respectfully and (iii) each executive is entitled to fringe
benefits (such as paid vacation, disability insurance and participation in
medical insurance and employee benefit plans) as are generally available to
employees of the Company as well as such other benefits as may from time to time
be authorized by the Company. Each agreement includes provisions restricting
competitive activities and disclosure of confidential information, as well as
provisions relating to ownership of inventions. Prior to entering into the
present agreement, Mr. Wald had been employed pursuant to an agreement dated
April 1994 under which Mr. Wald was initially entitled to an annual salary of
$110,000, increasing to $130,000 (with a discretionary bonus) when the agreement
expired on December 31, 1996, at which time Mr. Wald's employment was continued
under the same terms pending finalization of the present agreement.

The Company has obtained key-person life insurance coverage in the face
amount of $2,000,000 on the life of Dr. Deepa Chitre naming the Company as
beneficiary under such policy. The Company has agreed with the Representative to
maintain such a policy in force for a minimum period of three years from the
date of this Prospectus or the respective term of the employment agreement
between the Company and such officer, whichever period is longer.

STOCK OPTIONS

1997 STOCK OPTION PLAN

In November 1997, the Board of Directors adopted and the stockholders
approved the 1997 Stock Option Plan (the "Option Plan"). The Option Plan
provides for the grant of incentive stock options ("ISOs") (within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"))
and non-qualified stock options ("NQSOs") to certain directors, officers,
employees and consultants of the Company. The purpose of the Option Plan is to
attract and retain exemplary employees, agents, consultants and directors.
Options granted under the Option Plan may not be exercisable for terms in excess
of 10 years from the date of grant. In addition, no options may be granted under
the Option Plan later than 10 years after the Option Plan's effective date.
Pursuant to the terms of the Option Plan, 227,986 shares of Common Stock have
been reserved for issuance upon the exercise of options granted or available for
grant under the Option Plan. Any shares subject to an option that terminates,
expires or lapses for any reason, and any shares purchased pursuant to an option
and subsequently repurchased by the Company pursuant to the terms of the option,
shall again be available for grant under the Option Plan. As of the date of this
Prospectus, a total of 45,000 options under the Option Plan have been granted to
three of the Company's non-employee directors (15,000 options each), which
options are exercisable at a price equal to the Offering price for a period of
five years (vesting at the rate of one-third per year), commencing as of
November 25, 1997. In addition, the Company granted an aggregate of 25,000
options under the Option Plan to three employees and consultants, which options
are exercisable at $6.00 per share in various vesting schedules commencing May
13, 1999. No other options have yet been granted under the Option Plan.

The Option Plan will be administered by the Board of Directors of the
Company which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NQSOs, or a
combination thereof, and the number of shares of Common Stock to be subject to
such options. The Board of Directors of the Company may, in its discretion,
delegate its power, duties and responsibilities under the Option Plan to a
committee consisting of two or more directors who are "disinterested persons"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation and Stock Option Committee is responsible for administering the
Option Plan. Options

may not be granted under the Option Plan with an exercise price which is less
than the market price per share on the date of grant.

The Option Plan contains certain limitations applicable only to ISOs granted
thereunder. To the extent that the aggregate fair market value, as of the date
of grant, of the shares to which ISOs become exercisable for the first time by
an optionee during the calendar year exceeds $100,000, the ISO will be treated
as a NQSO. In addition, if an optionee owns more than 10% of the Company's stock
at the time the individual is granted an ISO, the option price per share cannot
be less than 110% of the fair market value per share and the term of the option
cannot exceed five years.

OPTION GRANTS OUTSIDE OF THE OPTION PLAN

As of the date of this Prospectus, the Company has granted options outside
of the Option Plan for the purchase of an aggregate of 310,970 shares of Common
Stock, including options to purchase 137,501 shares at $.34 per share (all of
which are currently vested and 10,000 of which were exercised in December 1997
by forgiveness of $3,400 in accrued and unpaid salary), 60,000 shares at $3.00
per share (vesting in three equal annual installments commencing September 15,
1998), and 10,000 shares at $3.00 per share (vesting in three equal annual
installments commencing January 1, 1998), granted to Barry Wald, Nina Renaud and
Ajit Chitre, respectively, each an executive officer or significant employee of
the Company. The other 103,469 options granted are exercisable at various per
share prices ranging from $3.00 to the initial public offering price per share,
commencing at various times beginning immediately.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company has included in its Certificate of Incorporation provisions to
indemnify its directors and officers to the extent permitted by Delaware law.
The Company's Certificate of Incorporation also includes provisions to eliminate
the personal liability of its directors and officers to the Company and its
stockholders to the fullest extent permitted by Delaware law. Under current law,
such exculpation would extend to an officer's or director's breaches of
fiduciary duty, except for (i) breaches of such person's duty of loyalty, (ii)
those instances where such person is found not to have acted in good faith and
(iii) those instances where such person received an improper personal benefit as
the result of such breach.

The Company's bylaws provide that the Company may indemnify any person,
including officers and directors, with regard to any action or proceeding to the
fullest extent permitted under Delaware law.

The Company will enter into an Indemnification Agreement ("Indemnification
Agreement") with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his or her performance of his or her duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification is available if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful. Each
Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
director or officer that is party thereto to bring suit to seek recovery of
amounts due under such Indemnification Agreement and will require that the
Company indemnify the director or other party thereto in all cases to the
fullest extent permitted by applicable law. Although the Company intends to seek
to obtain directors' and officers' liability insurance, such insurance is
generally very expensive. If the Company is not able or willing to obtain
director' and officers' liability insurance to cover amounts, if any, required
to be indemnified by the Company, any payments made by the Company under an
Indemnification Agreement will have an adverse impact on its earnings.

It is the position of the Commission that insofar as the foregoing
provisions may be invoked to disclaim liability for damages arising under the
Securities Act, that provision is against public policy as expressed in the
Securities Act and is therefore unenforceable.

PRINCIPAL STOCKHOLDERS

The following table sets forth as of the date of this Prospectus and as
adjusted to reflect the sale of the 1,350,000 shares of Common Stock offered
hereby, certain information concerning the beneficial ownership of the Common
Stock by: (i) each person known by the Company to own more than 5% of the
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the Company's Named Executive Officers, and (iv) all executive officers and
directors of the Company as a group:

PERCENTAGE
OF OUTSTANDING
SHARES BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ------------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ------------------------------------------------------------------------------ ----------- ----------- -----------

Avantika Sanjeev Chitre Irrevocable Trust, dated July 8, 1991,
Bruce W. Mcroy, Trustee..................................................... 690,072 31.09% 19.33%
c/o Bruce W. McRoy, Esq.
Reicker, Clough, Pfau & Pyle LLP
15 West Carillo Street, Suite 100
Santa Barbara, CA 93102

Sanjeev and Deepa Chitre (2).................................................. 690,072 31.09% 19.33%

Fred Kassner.................................................................. 386,017(3) 16.15% 10.32
c/o Liberty Travel
69 Spring Street
Ramsey, NJ 07446

Cynthia R. May (2)............................................................ 226,651(4) 9.94% 6.24%

Marathon Investments, L.L.C................................................... 221,651(5) 9.74% 6.12%
13260 Spencer Road
Hemlock, MI 48626

Irwin M. Rosenthal............................................................ 172,518(6) 7.77% 4.83
c/o Rubin Baum Levin Constant & Friedman
30 Rockefeller Center
New York, NY 10012

Michael R. Splinter (2)....................................................... 159,741(7) 6.87% 4.35%

Barry Wald (2)................................................................ 137,501(8) 5.86% 3.72

Suzanne Rosenthal (2)......................................................... 5,000(9) * *

All executive officers and directors as a group (6 persons)................... 1,218,965(10) 48.43% 31.52%

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

* Denotes less than 1%

(1) Except as indicated in the footnotes to this table, the Company believes
that all the persons named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them,
subject to community property laws where applicable. In accordance with the
rules of the Commission, a person or entity is deemed to be the beneficial
owner of securities that can be acquired by such person or entity within 60
days from the date of this Prospectus upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options and warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days of
the date of this Prospectus have been exercised. The inclusion herein of
such shares listed as beneficially owned does not constitute an admission of
beneficial ownership.

Percentages herein assume a base of 2,219,702 shares of Common Stock
outstanding as of the date of this Prospectus and a base of 3,569,702 shares
of Common Stock outstanding immediately after the consummation of the
Offering.

(2) The address of the beneficial owner is c/o AyurCore, Inc., 1737 N. First
Street, Suite 290, San Jose, California 97112.

(3) Includes 170,000 shares of Common Stock underlying warrants. See
"Description of Securities."

(4) Includes 5,000 shares of Common Stock underlying options granted under the
Option Plan. Does not include an additional 10,000 shares underlying options
granted under the Option Plan which are not exercisable within the next 60
days. Also includes 221,651 shares beneficially owned (including 55,000
shares underlying October 1997 Warrants) by Marathon Investments, L.L.C.
("Marathon"), of which Ms. May is a principal. Ms. May disclaims beneficial
ownership of the shares owned by Marathon to the extent such shares exceed
her proportionate interest therein. Does not include shares held by Ms.
May's father, as to which Ms. May disclaims beneficial ownership.

(5) Includes 55,000 shares of Common stock underlying October 1997 Warrants. See
"Description of Securities."

(6) Mr. Rosenthal is a partner in the law firm of Rubin Baum Levin Constant &
Friedman, which firm shares beneficial ownership of shares held of record by
Mr. Rosenthal. Mr. Rosenthal disclaims beneficial ownership of such shares
to the extent such shares exceed his proportionate interest therein. Does
not include 15,000 shares underlying an option granted under the Option Plan
to Mr. Rosenthal's wife, Suzanne Rosenthal, a director of the Company.

(7) Includes (i) 54,741 shares of Common Stock held by the Splinter Roboostoff
Family Partnership, of which Mr. Michael Splinter and his wife, Ms. Patricia
Roboostoff, are general partners and (ii)100,000 shares of Common Stock
underlying warrants and 5,000 shares of Common Stock underlying options
granted under the Option Plan. Mr. Splinter disclaims beneficial ownership
of the shares owned by the Splinter Roboostoff Family Partnership to the
extent such shares exceed his proportionate interest therein. Does not
include an additional 10,000 shares of Common Stock underlying options
granted under the Option Plan which are not exercisable within the next 60
days. See "Description of Securities."

(8) Includes 127,501 shares of Common Stock underlying non-Option Plan options.

(9) Represents shares of Common stock underlying stock options granted under the
Option Plan. Does not include an additional 10,000 shares underlying options
granted under the Option Plan which are not exercisable within the next 60
days.

(10) Includes 155,000 shares of Common Stock underlying warrants, 15,000 shares
underlying options granted under the Option Plan and 127,501 shares
underlying non-Option Plan options.

CERTAIN TRANSACTIONS

In October 1994, the Company borrowed $250,000 from Fred Kassner, a
principal stockholder of the Company, under a two-year convertible promissory
note bearing interest at prime plus 2% per annum, which was convertible into
61,050 shares of Common Stock. In April 1996, the Company borrowed an additional
$250,000 from Mr. Kassner under a 90-day promissory note bearing interest at
prime plus 2% per annum. In connection with the April 1996 loan, Mr. Kassner was
granted two-year warrants to purchase up to 125,000 shares of Common Stock at
130% of the initial public offering price per share, which warrants expired in
April 1998. In May 1998, the expiration date of these warrants was extended to
May 2000. Effective October 31, 1997, pursuant to the Note Conversion, the
outstanding principal and accrued interest under such notes, totaling $619,868,
was converted into 154,967 shares of Common Stock.

In connection with this transaction Mr. Kassner was also granted October 1997
Warrants to purchase up to 45,000 shares of Common Stock at $4.00 per share.

In February 1995, Marathon, a principal stockholder of the Company,
purchased 166,651 shares of Common Stock from the Company for an aggregate
purchase price of $1,000,000, or $6.00 per share. Under the subscription
agreement, Marathon was granted certain anti-dilution rights. In consideration
for the waiver by Marathon of the anti-dilution rights, Marathon was granted
October 1997 Warrants to purchase up to 55,000 shares of Common Stock at $4.00
per share. Cynthia R. May, a director of the Company, is also a principal of
Marathon.

At various times from January 1996 through March 1998, the Company borrowed
an aggregate principal amount of approximately $280,000 from Sanjeev Chitre, the
Chairman of the Board of Directors and a principal stockholder of the Company.
The loan is evidenced by a promissory note bearing interest at prime plus 2% per
annum payable semi-annually. Originally, the note was to become due on demand,
in stages. The terms of the note have been revised to provide that no amounts
will become due and payable thereunder until one year following the consummation
of the Offering, provided the Offering is consummated by August 1, 1998. The
Company has allocated no proceeds of the Offering to repayment of the loan.

In January 1996, Mr. Irwin Rosenthal, Secretary of the Company and husband
of Ms. Suzanne Rosenthal, a director of the Company, loaned the Company $25,000,
as evidenced by a promissory note bearing an annual interest rate of prime plus
2%. Originally, the note was to become due and payable on demand commencing
January 1997. Mr. Rosenthal was a director of the Company at the time of the
loan. The terms of the loan have been revised to provide that no amounts will
become due and payable thereunder until one year following the consummation of
the Offering, provided the Offering is consummated by August 1, 1998. The
Company has allocated no proceeds of the Offering to the repayment of this loan.

Mr. Rosenthal is also a partner of Rubin Baum Levin Constant & Friedman
("RBLC&F"), counsel to the Company. During the years ended December 31, 1997 and
1996, RBLC&F rendered legal services for the Company in the amount of
approximately $250,000 (including deferred registration costs of approximately
$210,000) and $68,000, respectively. The Company paid to RBLC&F a total of
$50,000 and $0 during the years ended December 31, 1997 and 1996, respectively,
and an additional $10,000 in February 1998. In addition, RBLC&F contributed
services to the Company valued at approximately $118,000 in the aggregate over
such periods. At March 31, 1998, approximately $358,000 was owed by the Company
to RBLC&F for legal services rendered through that date. See "Legal Matters."

In each of March 1996 and August 1997, Michael R. Splinter, a director of
the Company, and his wife, Patricia Roboostoff, loaned the Company $100,000, as
evidenced by promissory notes each bearing an annual interest rate of prime plus
2%. In connection with the loans, these individuals were granted two-year
warrants to purchase up to an aggregate of 100,000 shares of Common Stock at
130% of the initial public offering price per share. In May 1998, the expiration
date of the warrants granted in March 1996 (which warrants expired in March
1998) was extended to May 2000. Effective October 31, 1997, the outstanding
principal and accrued interest under such notes, totaling $218,964, was
converted into 54,741 shares of Common Stock in connection with the Note
Conversion. In December 1997, the Company borrowed an additional $50,000 from
these individuals under a promissory note bearing interest at prime plus 2% per
annum. The promissory note is payable on demand commencing December 23, 1998 or,
if the Offering is consummated by August 1, 1998, one year from consummation of
the Offering.

At various times from November 1996 through January 1998, the Company
borrowed an aggregate principal amount of $625,000 from Atlantic Bank under
three-month term notes bearing interest at Atlantic Bank's prime rate plus 2%
per annum, payable monthly. In January and May 1998, the Company repaid a total
of $50,000 in principal, and the notes representing the $575,000 principal
balance have been consolidated and are presently due on August 4, 1998. The
Atlantic Bank loan is guaranteed by Sanjeev

and Deepa Chitre and secured by a pledge of common stock of another company,
which stock is owned by the Avantika Sanjeev Chitre Irrevocable Trust, dated
July 8, 1991, Bruce W. McRoy, trustee (the "Avantika Trust"), a trust for the
benefit of Sanjeev and Deepa Chitre's minor daughter. The Company intends to use
proceeds from the Offering to repay this loan.

Effective upon the inception of Bio-Ved in November 1995, all of the
outstanding stock of Bio-Ved was registered in the names of Mr. Sanjeev Chitre's
sister, Anita Chitre, and her husband, Ajit Chitre, Managing Director of
Bio-Ved, both of whom are resident Indians. The stock was registered in the
names of these individuals pending compliance with Indian regulatory
requirements applicable to AyurCore, Inc.'s investment in Bio-Ved. Currently,
and as a result of such investment, Bio-Ved is owned more than 99% by AyurCore,
Inc. with the balance being owned by Mr. and Mrs. Ajit Chitre. Since January
1995, Mr. Ajit Chitre has been compensated for services rendered in connection
with the Company's India operations at the rate of approximately $9,000 per
year.

DESCRIPTION OF SECURITIES

GENERAL

The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $.001 par value per share, and 5,000,000 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"). As of the date of this
Prospectus, there were outstanding 2,219,702 shares of Common Stock (held by 12
holders) and no shares of Preferred Stock.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, holders of
Common Stock are entitled to receive dividends ratably, when, as, and if
declared by the Board of Directors' out of funds legally available therefor and,
upon the liquidation, dissolution, or winding up of the Company, are entitled to
share ratably in all assets remaining after payment of liabilities and payment
of accrued dividends and liquidation preferences on any Preferred Stock. Holders
of Common Stock have no preemptive rights and have no rights to convert their
Common Stock into any other securities. All of the outstanding shares of Common
Stock are validly authorized and issued, fully paid, and nonassessable.

PREFERRED STOCK

The Preferred Stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by the Board of Directors, without
further action by stockholders, and may include voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and liquidation, conversion rights, redemption rights, and sinking fund
provisions. The issuance of any such Preferred Stock could adversely affect the
rights of the holders of Common Stock and, therefore, reduce the value of the
Common Stock. The ability of the Board of Directors to issue Preferred Stock
could discourage, delay, or prevent a takeover of the Company.

OUTSTANDING WARRANTS

The Company has outstanding warrants to purchase up to an aggregate of
375,000 shares of Common Stock at a purchase price of 130% of the initial public
offering price per share. These warrants expire at various times from August
1999 to May 2000. In addition, the Company has outstanding October 1997 Warrants
to purchase up to an aggregate of 100,000 shares of Common Stock at $4.00 per
share. These warrants expire in October 2002. Subject to certain limitations and
exclusions, holders of these warrants

are entitled to certain piggyback registration rights with respect to the
underlying shares. See "Underwriting" for a description of the material terms of
the Representative's Warrants to be issued by the Company to the Representative
upon completion of the Offering.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock. The
Company anticipates that in the future, earnings, if any, will be retained for
use in the business of the Company or for other corporate purposes, and it is
not anticipated that cash dividends in respect of the Common Stock will be paid.

DELAWARE ANTI-TAKEOVER LAW

Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law") generally prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an interested stockholder for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) the corporation has elected in its
original certificate of incorporation not be governed by the Delaware
anti-takeover law (the Company has not made such an election), (ii) prior to
such date the Board of Directors of the corporation approved either the business
combination or the transaction in which the person became an interested
stockholder, (iii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the outstanding voting stock of the corporation excluding shares
owned by directors who are also officers of the corporation and by certain
employee stock plans, (iv) on or after such date the business combination is
approved by the Board of Directors of the corporation and by the affirmative
vote of at least 66 3/4% of the outstanding voting stock of the corporation that
is not owned by the interest stockholder, or (v) the majority of the
corporation's stockholders adopt an amendment to the corporation's certificate
of incorporation electing not to be governed by the Delaware anti-takeover law,
such amendment not being effective for 12 months following its adoption and not
applicable to any business combination between the corporation and a stockholder
who became an interested stockholder after its adoption. A "business
combination" generally includes mergers, asset sales and similar transactions
between the corporation and the interested stockholder, and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns 15% or more of
the corporation's voting stock or who is an affiliate or associate of the
corporation and, together with his affiliates and associates, has owned 15% or
more of the corporation's voting stock within three years.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company, at 40 Wall Street, 46th Floor, New
York, New York, 10005, will serve as the Company's Transfer Agent and Registrar
for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have outstanding
3,569,702 shares of Common Stock. Of such shares, the 1,350,000 shares of Common
Stock offered hereby will be freely tradable without restriction or further
registration under the Securities Act except for any shares purchased by a
person who is or thereby becomes an affiliate of the Company, which shares will
be subject to the resale limitations contained in Rule 144 promulgated under the
Securities Act. The remaining 2,219,702 shares of Common Stock are restricted
securities within the meaning of Rule 144 under the Securities Act and, in
general, if held for at least one year, will be eligible for sale in the public
market in reliance upon and subject to the limitations of Rule 144.

In general under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including a person who may be deemed to be an affiliate
of the Company as that term is defined under the Securities Act, is entitled to
sell, within any three-month period, a number of shares beneficially owned for
at least one year that does not exceed the greater of (i) one percent of the
number of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and the availability of current public information about
the Company. Furthermore, a person who is not deemed to have been an affiliate
of the Company during the ninety days preceding a sale by such person and who
has beneficially owned such shares for at least two years is entitled to sell
such shares without regard to the volume, manner of sale or notice requirements.
Under Rule 144 (and subject to the conditions thereof), of the 2,219,702 shares
of Common Stock outstanding as of the date of this Prospectus, 619,850 are
eligible for sale immediately, 1,380,144 are held by affiliates of the Company
and will become eligible for sale beginning 90 days after the date of this
Prospectus; and substantially all of the remaining 219,708 shares will become
eligible for sale as of October 31, 1998. Notwithstanding the foregoing, the
holders of all of such shares have agreed, subject to certain limited
exceptions, not to offer, sell, assign, pledge or transfer any of such shares
for a period of 12 months from the date of this Prospectus without the
Representative's prior written consent. In addition, the Company has granted
certain registration rights with respect to the 135,000 shares of Common Stock
underlying the Representative's Warrants and the 100,000 shares of Common Stock
underlying the October 1997 Warrants, commencing one year following the date of
this Prospectus. See "Underwriting."

Under Rule 701 of the Securities Act, persons who purchase shares upon the
exercise of options granted prior to the effective date of the Offering are
entitled to sell such shares 90 days after the effective date of the Offering
and in reliance on Rule 144 without having to comply with the holding period
requirements of Rule 144 and, in the case of nonaffiliates, without having to
comply with the public information, volume limitation, or notice provisions of
Rule 144.

Prior to the Offering, there has been no public market for the Company's
securities. Following the Offering, the Company cannot predict the effect, if
any, that market sales of the Common Stock, or the availability of such shares
for sale, will have on the market price prevailing from time to time.
Nevertheless, sales by the existing stockholders of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices for the Company's securities. In addition, the availability for sale of
substantial amounts of Common Stock acquired through the exercise of options or
warrants could adversely affect prevailing market prices for the Common Stock.

UNDERWRITING

The underwriters named below (collectively, the "Underwriters") for which
Network 1 Financial Securities, Inc. (the "Representative") is acting as
representative, have agreed severally, not jointly, subject to the terms and
conditions contained in the underwriting agreement between the Company and the
Underwriters (the "Underwriting Agreement"), to purchase from the Company, and
the Company has agreed to sell to the several Underwriters, the 1,350,000 shares
of Common Stock offered hereby. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below:

NUMBER
UNDERWRITER OF SHARES
- --------------------------------------------------------------------------------- ----------

Network 1 Financial Securities, Inc..............................................

----------
Total............................................................................ 1,350,000
----------
----------

The Underwriters are committed to purchase and pay for all of the shares of
Common Stock offered hereby (other than shares offered pursuant to the
over-allotment option) if any shares are purchased. The shares of Common Stock
are being offered by the Underwriters, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to approval of certain
legal matters by counsel and to certain other conditions.

Through the Representative, the several Underwriters have advised the
Company that they propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") concessions, not in excess of
$.36 per share, of which not in excess of $.18 per share may be reallowed to
other dealers who are members of the NASD. After the commencement of the
Offering, the public offering price, concessions and reallowance may be changed.

The Company has granted the Representative an option, exercisable for 45
days following the date of this Prospectus, to purchase up to 202,500 additional
shares of Common Stock at the public offering price set forth on the cover page
of this Prospectus, less the underwriting discounts and commissions. The
Representative may exercise this option in whole or, from time to time, in part,
solely for the purpose of covering over-allotments, if any, made in connection
with the sale of the shares of Common Stock offered hereby.

The Company has agreed to pay to the Representative individually, and not as
a representative of the Underwriters, a 3% nonaccountable expense allowance,
$10,000 of which has been paid to the Representative as of the date of this
Prospectus. In September 1997, the Company paid $25,000 to be applied against a
nonaccountable expense allowance of a former underwriter whose relationship with
the Company has been terminated. The Company has also agreed to pay all expenses
in connection with qualifying the shares of Common Stock offered hereby for sale
under the laws of such states as the Representative may designate, including
expenses of counsel retained for such purpose by the Representative.

The Company has agreed to issue to the Representative and its designees, for
nominal considerations warrants (this "Representative's Warrants") to purchase
from the Company for four years, commencing one year from the date of this
Prospectus, up to 135,000 shares of Common Stock, at an exercise price of
$ per share (125% of the initial public offering price per share). The
Representative's Warrants may not be transferred for one year following the date
of this Prospectus, except to the officers and partners of the Representative or
the Underwriters or members of the selling group, and are exercisable at any
time, and from time to time, during the four-year period commencing one year
following the date of this Prospectus (the "Warrant Exercise Term"). During the
Warrant Exercise Term, the holders of the Representative's Warrants are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock. To the extent that the Representative's Warrants are exercised
or exchanged, dilution to the interests of the Company's then stockholders will
occur. Further, the terms upon which the Company will be able to obtain
additional equity capital may be adversely affected since the holders of the
Representative's Warrants can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the Representative's
Warrants. Any profit realized by the Representative on the sale of the
Representative's Warrants or the underlying shares of Common Stock may be deemed
additional underwriting compensation. Subject to certain limitations and
exclusions, the Company has agreed to register, at the request of the holders of
a majority of the Representative's Warrants and at the Company's expense, the
Representative's Warrants and the shares of Common Stock underlying the
Representative's Warrants under the Securities Act on one occasion during the
Warrant Exercise Term and to include such Representative's Warrants and such
underlying shares in any appropriate registration statement that is filed by the
Company during the seven years following the date of this Prospectus.

In addition, the Company has agreed to enter into a consulting agreement to
retain the Representative as a financial consultant for a period of two years
from the consummation of this Offering at a fee

equal to $5,000 per month, the entire $120,000 payable in full, in advance. The
consulting agreement will not require the consultant to devote a specific amount
of time to the performance of its duties thereunder.

The Company has also agreed, for a period of three years following
consummation of the Offering, if so requested by the Representative, to nominate
and use its best efforts to elect a designee of the Representative as a director
of the Company, or, at the Representative's option, as a non-voting adviser to
the Company's Board of Directors.

All of the Company's officers, directors and stockholders have agreed that,
for the 12-month period following the date of this Prospectus, they will not,
subject to certain limited exceptions, directly or indirectly sell, offer for
sale, transfer, pledge or otherwise dispose of any securities of the Company,
without the prior written consent of the Representative.

The Representative has informed the Company that the Underwriters do not
intend to sell any of the shares of Common Stock offered hereby to discretionary
accounts.

The Company has agreed to indemnify the Underwriters against certain civil
liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act.

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price of the shares of Common Stock
will be determined by negotiation between the Company and the Representative and
may not necessarily relate to the Company's asset value, net worth or other
established criteria of value. Among the factors that will be considered in
determining the offering price are the Company's financial condition and
prospects, management, market prices of similar securities of comparable
publicly-traded companies, certain financial and operating information of
companies engaged in activities similar to those of the Company and the general
condition of the securities market. In connection with this Offering, certain
underwriters and selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such persons may bid for or purchase Common Stock for the purpose of
stabilizing their respective market prices. The underwriters also may create a
short position for the account of the underwriters by selling more shares of
Common Stock in connection with the Offering than they are committed to purchase
from the Company, and in such case may purchase shares of Common Stock in the
open market following completion of the Offering to cover all or a portion of
such short position. The underwriters may also cover all or a portion of such
short position by exercising the Over-Allotment Option. In addition, the
underwriter may impose "penalty bids" under contractual arrangements with other
underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the Offering) for the account of other underwriters, the selling concession
with respect to shares of Common Stock that are distributed in the Offering but
subsequently purchased for the account of the Underwriter in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken they may be discontinued at
any time.

LEGAL MATTERS

Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for the Company by Rubin Baum Levin Constant
& Friedman, New York, New York. Irwin M. Rosenthal, a partner of Rubin Baum
Levin Constant & Friedman, is Secretary of the Company, is married to Ms.
Suzanne Rosenthal, a director of the Company, and owns 172,518 shares of Common
Stock. Mr. Rosenthal rendered legal services to the Company in connection with
the Offering. Nishith Desai Associates has served as special counsel to the
Company in connection with matters related to the laws of

India. Virginia K. Sourlis, Esq., Long Branch, New Jersey, will pass upon
certain legal matters for the Underwriter.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31,
1997, for the years ended December 31, 1997 and 1996 and for the period from
January 11, 1993 (inception) through December 31, 1997, included herein and
elsewhere in the Registration Statement, of which this Prospectus forms a part,
have been audited by Richard A. Eisner & Company, LLP, independent auditors, as
set forth in their report (which contains an explanatory paragraph relating to
the existence of substantial doubt about the Company's ability to continue as a
going concern) thereon appearing elsewhere in the Registration Statement, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
SB-2 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement. Statements made in the Prospectus as to the contents
of any contract, agreement or other document are not necessarily complete; with
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
and the exhibits thereto may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Room 1400,
Chicago, IL 60661, and 7 World Trade Center, Suite 1300, New York, NY 10048.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a website that contains
reports, proxy statements, and other information filed with the Commission. The
address of such site is http://www.sec.gov.

AYURCORE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONTENTS

PAGE
-----

Independent Auditors' Report............................................................................... F-2

Consolidated Financial Statements

Consolidated balance sheet as of December 31, 1997 and March 31, 1998 (unaudited)........................ F-3

Consolidated statements of operations and consolidated statements of comprehensive loss for each of the
years in the two-year period ended December 31, 1997 and for the period from January 11, 1993
(inception) through December 31, 1997, for the three-month periods ended March 31, 1998 and 1997
(unaudited) and for the period January 11, 1993 (inception) through March 31, 1998 (unaudited)......... F-4

Consolidated statements of changes in capital deficiency for the period from January 11, 1993 (inception)
through December 31, 1993 and for each of the years in the four-year period ended December 31, 1997 and
for the three months ended March 31, 1998 (unaudited).................................................. F-5

Consolidated statements of cash flows for each of the years in the two-year period ended December 31,
1997 and for the period from January 11, 1993 (inception) through December 31, 1997, for the
three-month periods ended March 31, 1998 and 1997 (unaudited) and for the period January 11, 1993
(inception) through March 31, 1998 (unaudited)......................................................... F-6

Notes to consolidated financial statements............................................................... F-7

F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
AyurCore, Inc.

We have audited the accompanying consolidated balance sheet of AyurCore,
Inc. and subsidiary (collectively, the "Company"), a development stage company,
as of December 31, 1997, and the related consolidated statements of operations,
comprehensive loss and cash flows for each of the years in the two-year period
ended December 31, 1997 and for the period January 11, 1993 (inception) through
December 31, 1997 and changes in capital deficiency for each of the years ended
December 31 in the period January 11, 1993 (inception) through December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements enumerated above present fairly, in
all material respects, the consolidated financial position of AyurCore, Inc. and
subsidiary as of December 31, 1997 and the consolidated results of their
operations and their consolidated cash flows for each of the years in the two-
year period ended December 31, 1997 and for the period January 11, 1993
(inception) through December 31, 1997 in conformity with generally accepted
accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
A to the financial statements, the Company has sustained recurring losses, a
working capital deficiency, negative cash flows from operating activities and
shareholders' capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Richard A. Eisner & Company, LLP

New York, New York

February 18, 1998

F-2

AYURCORE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET (NOTE A)

MARCH 31,
1998
DECEMBER 31, -------------
1997
------------- (UNAUDITED)

ASSETS
Current assets:
Cash.............................................................................. $ 23,000 $ 7,000
Accounts receivable............................................................... 9,000 21,000
Inventory (Notes B[2] and C)...................................................... 8,000 18,000
Prepaid expenses and other current assets......................................... 8,000 11,000
------------- -------------

Total current assets............................................................ 48,000 57,000

Equipment, net (Notes B[3] and D)................................................... 45,000 40,000
Investments to be held to maturity (Note E)......................................... 12,000 11,000
Deferred offering costs (Note K[5])................................................. 379,000 433,000
Other assets........................................................................ 24,000 24,000
------------- -------------
$ 508,000 $ 565,000
------------- -------------
------------- -------------

LIABILITIES
Current liabilities:
Due to bank (Note E).............................................................. $ 4,000 $ 10,000
Bank debt (Note H)................................................................ 500,000 600,000
Accounts payable and accrued expenses (Note I).................................... 1,085,000 1,231,000
Notes payable (including $355,000 and $405,000 to stockholders) (Note J).......... 455,000 505,000
Accrued interest (including $38,000 and 48,000 to stockholders) (Note J).......... 54,000 66,000
------------- -------------

Total current liabilities....................................................... 2,098,000 2,412,000
------------- -------------

Commitments and other matters (Notes A, M and N)

CAPITAL DEFICIENCY (NOTE K)
Preferred stock--$.001 par value, 5,000,000 shares authorized, none issued
Common stock--$.001 par value, 25,000,000 shares authorized, 2,219,702
issued and outstanding............................................................ 2,000 2,000
Additional paid-in capital.......................................................... 3,565,000 3,564,000
Unearned compensatory stock options................................................. (186,000) (166,000)
Foreign currency translation adjustment............................................. (8,000) (3,000)
Deficit accumulated during the development stage.................................... (4,963,000) (5,244,000)
------------- -------------

Total capital deficiency........................................................ (1,590,000) (1,847,000)
------------- -------------

$ 508,000 $ 565,000
------------- -------------
------------- -------------

See notes to financial statements.

F-3

AYURCORE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE A)

JANUARY
JANUARY 11, 11,
1993 THREE MONTHS 1993
YEAR ENDED (INCEPTION) ENDED (INCEPTION)
DECEMBER 31, THROUGH MARCH 31, THROUGH
---------------------- DECEMBER 31, ---------------------- MARCH 31,
1997 1996 1997 1998 1997 1998
---------- ---------- ------------ ---------- ---------- ----------

UNAUDITED (UNAUDITED)

Revenue:
Net product sales (Note L)........ $ 91,000 $ 91,000 $ 10,000 $ 101,000
Royalty income (Note N[3])........ 12,000 12,000 12,000
Government grant.................. 100,000 100,000 $ 56,000 100,000
---------- ------------ ---------- ---------- ----------
203,000 203,000 10,000 56,000 213,000
---------- ------------ ---------- ---------- ----------

Costs and expenses:
Cost of sales..................... 100,000 100,000 6,000 106,000
Research and development.......... 272,000 $ 401,000 1,312,000 34,000 89,000 1,346,000
General and administrative........ 735,000 844,000 3,012,000 225,000 183,000 3,237,000
---------- ---------- ------------ ---------- ---------- ----------
1,107,000 1,245,000 4,424,000 265,000 272,000 4,689,000
---------- ---------- ------------ ---------- ---------- ----------
Operating (loss) before other income
(expense)......................... (904,000) (1,245,000) (4,221,000) (255,000) (216,000) (4,476,000)

Other income (expense):
Interest income................... 1,000 12,000 1,000 13,000
Interest expense.................. (528,000) (83,000) (644,000) (27,000) (27,000) (671,000)
---------- ---------- ------------ ---------- ---------- ----------
NET LOSS............................ $(1,432,000) $(1,327,000) $(4,853,000) $ (281,000) $ (243,000) $(5,134,000)
---------- ---------- ------------ ---------- ---------- ----------
---------- ---------- ------------ ---------- ---------- ----------
BASIC AND DILUTED LOSS PER SHARE.... $ (.70) $ (.66) $ (.13) $ (.12)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING--BASIC AND
DILUTED........................... 2,034,945 1,999,994 2,219,702 1,999,994
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (NOTE B[11])

Net Loss.......................... $(1,432,000) $(1,327,000) $(4,853,000) $ (281,000) $ (243,000) $(5,134,000)
Currency Translation Adjustment... (8,000) (8,000) 5,000 (9,000) (3,000)
---------- ---------- ------------ ---------- ---------- ----------
Comprehensive loss................ $(1,440,000) $(1,327,000) $(4,861,000) $ (276,000) $ (252,000) $(5,137,000)
---------- ---------- ------------ ---------- ---------- ----------
---------- ---------- ------------ ---------- ---------- ----------

See notes to financial statements

F-4

AYURCORE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY (NOTES A AND K)

FOREIGN
COMMON STOCK ADDITIONAL UNEARNED CURRENCY
---------------------- PAID-IN COMPENSATORY TRANSLATION
SHARES AMOUNT CAPITAL STOCK OPTIONS ADJUSTMENT
--------- ----------- ----------- ------------- -----------

Issuance of shares to founders.................................. 1,587,128 $ 2,000 $ (2,000)
Sale of common stock ($0.55 per share).......................... 45,833 25,000
Sale of common stock ($1.36 per share).......................... 139,332 190,000
Contribution of services (Note F)............................... 28,000
Value of options granted (Note K[4])............................ 22,000 $ (22,000)
Compensatory stock options earned............................... 3,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--DECEMBER 31, 1993...................................... 1,772,293 2,000 263,000 (19,000) $ 0
Sale of common stock ($4.09 per share).......................... 61,050 250,000
Proceeds from payment of subscription receivables...............
Contribution of services (Note F)............................... 15,000
Value of options granted (Note K[4])............................ 398,000 (398,000)
Compensatory stock options earned............................... 73,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--DECEMBER 31, 1994...................................... 1,833,343 2,000 926,000 (344,000) 0
Sale of common stock ($6.00 per share) (Note K[2]).............. 166,651 1,000,000
Contribution of services (Note F)............................... 42,000
Compensatory stock options earned............................... 142,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--DECEMBER 31, 1995...................................... 1,999,994 2,000 1,968,000 (202,000) 0
Contribution of services (Note F)............................... 33,000
Valuation of warrants (Note J).................................. 15,000
Value of options granted (Note K[4])............................ 39,000 (39,000)
Compensatory stock options earned (net of $4,000 for
forfeitures).................................................. (4,000) 167,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--DECEMBER 31, 1996...................................... 1,999,994 2,000 2,051,000 (74,000) 0
Valuation of warrants (Notes and K[3]))......................... 103,000
Value of options granted (Note K[4])............................ 200,000 (200,000)
Compensatory stock options earned (net of $35,000 for
forfeitures).................................................. (35,000) 88,000
Proceeds from exercise of stock options......................... 10,000 3,000
Conversion of debt to common stock (Note J)..................... 209,708 1,133,000
Foreign currency translation adjustment......................... (8,000)
Value of warrants issued in consideration of waiver (Note
K[3])......................................................... 110,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--DECEMBER 31, 1997...................................... 2,219,702 $ 2,000 $3,565,000 $(186,000) $ (8,000)
Compensatory stock earned (net of $1,000 forfeitures)........... (1,000) 20,000
Foreign currecy translation adjustment.......................... 5,000
Net loss..................................................
--------- ----------- ----------- ------------- -----------
BALANCE--MARCH 31, 1998 (UNAUDITED)............................. 2,219,702 $ 2,000 $3,564,000 $(166,000) $ (3,000)
--------- ----------- ----------- ------------- -----------
--------- ----------- ----------- ------------- -----------

DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT SUBSCRIPTION CAPITAL
STAGE RECEIVABLE DEFICIENCY
------------ ------------ ----------

Issuance of shares to founders.................................. $ 0
Sale of common stock ($0.55 per share).......................... 25,000
Sale of common stock ($1.36 per share).......................... $ (90,000) 100,000
Contribution of services (Note F)............................... 28,000
Value of options granted (Note K[4])............................ 0
Compensatory stock options earned............................... 3,000
Net loss.................................................. $ (163,000) (163,000)
------------ ------------ ----------
BALANCE--DECEMBER 31, 1993...................................... (163,000) (90,000) (7,000)
Sale of common stock ($4.09 per share).......................... 250,000
Proceeds from payment of subscription receivables............... 90,000 90,000
Contribution of services (Note F)............................... 15,000
Value of options granted (Note K[4])............................ 0
Compensatory stock options earned............................... 73,000
Net loss.................................................. (768,000) (768,000)
------------ ------------ ----------
BALANCE--DECEMBER 31, 1994...................................... (931,000) 0 (347,000)
Sale of common stock ($6.00 per share) (Note K[2]).............. 1,000,000
Contribution of services (Note F)............................... 42,000
Compensatory stock options earned............................... 142,000
Net loss.................................................. (1,163,000) (1,163,000)
------------ ------------ ----------
BALANCE--DECEMBER 31, 1995...................................... (2,094,000) 0 (326,000)
Contribution of services (Note F)............................... 33,000
Valuation of warrants (Note J).................................. 15,000
Value of options granted (Note K[4])............................ 0
Compensatory stock options earned (net of $4,000 for
forfeitures).................................................. 163,000
Net loss.................................................. (1,327,000) (1,327,000)
------------ ------------ ----------
BALANCE--DECEMBER 31, 1996...................................... (3,421,000) 0 (1,442,000)
Valuation of warrants (Notes and K[3]))......................... 103,000
Value of options granted (Note K[4])............................ 0
Compensatory stock options earned (net of $35,000 for
forfeitures).................................................. 53,000
Proceeds from exercise of stock options......................... 3,000
Conversion of debt to common stock (Note J)..................... 1,133,000
Foreign currency translation adjustment......................... (8,000)
Value of warrants issued in consideration of waiver (Note
K[3])......................................................... (110,000) 0
Net loss.................................................. (1,432,000) (1,432,000)
------------ ------------ ----------
BALANCE--DECEMBER 31, 1997...................................... $(4,963,000) $ 0 $(1,590,000)
Compensatory stock earned (net of $1,000 forfeitures)........... 19,000
Foreign currecy translation adjustment.......................... 5,000
Net loss.................................................. (281,000) (281,000)
------------ ------------ ----------
BALANCE--MARCH 31, 1998 (UNAUDITED)............................. $(5,244,000) $ 0 $(1,847,000)
------------ ------------ ----------
------------ ------------ ----------

See notes to financial statements

F-5

AYURCORE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

JANUARY 11, JANUARY 11,
1993 1993
YEAR ENDED (INCEPTION) THREE MONTHS (INCEPTION)
DECEMBER 31, THROUGH ENDED MARCH 31 THROUGH
---------------------- DECEMBER 31, -------------------- MARCH 31,
1997 1996 1997 1998 1997 1998
---------- ---------- ------------ --------- --------- -----------

(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................ $(1,432,000) $(1,327,000) $(4,853,000) $(281,000) $(243,000) ($5,134,000)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization..... 19,000 12,000 40,000 5,000 6,000 45,000
Contribution of services.......... 33,000 118,000 118,000
Compensation expense attributable
to options...................... 53,000 163,000 434,000 19,000 18,000 453,000
Interest expense attributable to
warrants........................ 90,000 90,000 90,000
Interest expense attributable to
conversion of debt to stock..... 294,000 294,000 294,000
Amortization of debt discount..... 13,000 15,000 28,000 28,000
Accrued interest.................. 94,000 68,000 193,000 12,000 20,000 205,000
Changes in:
Inventory....................... 4,000 (12,000) (8,000) (10,000) (5,000) (18,000)
Accounts receivable............. (9,000) (9,000) (10,000) (19,000)
Other assets.................... 35,000 (39,000) (32,000) (3,000) (15,000) (35,000)
Accounts payable and accrued
expenses...................... 318,000 295,000 785,000 96,000 87,000 881,000
---------- ---------- ------------ --------- --------- -----------
Net cash used in operating
activities.................. (521,000) (792,000) (2,920,000) (172,000) (132,000) (3,092,000)
---------- ---------- ------------ --------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments............. (12,000) (12,000) (12,000)
Purchase of equipment............... (12,000) (42,000) (87,000) (6,000) (87,000)
---------- ---------- ------------ --------- --------- -----------
Net cash used in investing
activities.................. (24,000) (42,000) (99,000) 0 (6,000) (99,000)
---------- ---------- ------------ --------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sales of common
stock............................. 1,465,000 1,465,000
Proceeds from bank borrowings....... 303,000 200,000 503,000 106,000 100,000 609,000
Proceeds from notes payable......... 200,000 200,000 200,000
Proceeds from stockholder loans and
advances.......................... 263,000 442,000 965,000 50,000 50,000 1,015,000
Repayment of stockholder advances... (10,000) (10,000)
Deferred offering costs............. (76,000) (76,000) (4,000) (80,000)
---------- ---------- ------------ --------- --------- -----------
Net cash provided by financing
activities.................. 490,000 842,000 3,047,000 152,000 150,000 3,199,000
---------- ---------- ------------ --------- --------- -----------
Effect of exchange rates on cash...... (5,000) (5,000) 4,000 9,000 (1,000)
---------- ---------- ------------ --------- --------- -----------
NET (DECREASE) INCREASE IN CASH....... (60,000) 8,000 23,000 (16,000) 21,000 7,000
Cash at beginning of period........... 83,000 75,000 23,000 83,000
---------- ---------- ------------ --------- --------- -----------
CASH AT END OF PERIOD................. $ 23,000 $ 83,000 $ 23,000 $ 7,000 $ 104,000 $ 7,000
---------- ---------- ------------ --------- --------- -----------
---------- ---------- ------------ --------- --------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest.......................... $ 37,000 $ 37,000 $ 12,000 $ 7,000 $ 49,000
Noncash activities:
Conversion of notes payable and
accrued interest into shares of
common stock.................... $ 839,000 $ 839,000 $ 839,000
Offering costs accrued............ $ 303,000 $ 303,000 $ 50,000 $ 353,000

See notes to financial statements

F-6

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE A--THE COMPANY

AyurCore, Inc. was incorporated in Delaware on January 11, 1993. On October
10, 1997 the Board of Directors of Bio-Ved Pharmaceuticals Private Limited
("Bio-Ved") (a company organized in India in November 1995), authorized the
issuance of 27,165 shares of its common stock for $7,500 to AyurCore, Inc.,
representing substantially all of its outstanding common stock. Effective
November 1995, Bio-Ved was wholly owned by relatives of the majority
stockholders of AyurCore, Inc. and was solely funded by AyurCore, Inc. The
acquisition of Bio-Ved has been accounted for in a manner similar to a
pooling-of-interests and accordingly the accompanying financial statements
include the accounts of Bio-Ved from inception.

AyurCore, Inc. and Bio-Ved (collectively, the "Company") are engaged in the
discovery, development, clinical testing and marketing of proprietary
plant-based pharmaceuticals (phyto-pharmaceuticals) for the treatment of
chronic, difficult-to-treat human diseases, applying the principles of Ayurveda
(an ancient science native to India which uses plants as medicinal therapies).
Substantially all the Company's operations relating to Ayurvedic drugs are being
conducted in India and certain of the Company's products require raw materials
which are cultivated in India. The Company is in the development stage and, to
date, has not generated any significant sales, has incurred expenses and has
sustained losses. Consequently, its operations are subject to all the risks
inherent in the establishment of a new business enterprise.

For the period from inception through December 31, 1997, the Company has
accumulated a deficit of $4,963,000, and has been dependent upon equity
financing and advances and loans from stockholders and others. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. In order to continue its operations, the Company is seeking additional
financing, which it is endeavoring to do by means of a public offering of
securities (see Note K[5]). However, there is no assurance that the Company can
complete its proposed securities offering or that it can obtain adequate
additional financing from other sources or that profitable operations can be
attained. The financial statements do not include any adjustments relating to
the recoverability of recorded asset amounts or the amount and classification of
liabilities that might be necessary as a result of the above uncertainty.

Foreign investments in Indian companies are subject to currency exchange
control laws. Such laws may restrict the repatriation of income earned by, and
capital invested in, such subsidiaries. Under current regulations, dividends up
to the amount of net income are freely repatriatable. On December 8, 1997, the
Company received approval for status which permits repatriation of invested
capital as well. The Company's investments prior to that date, aggregating
approximately $703,000, cannot be repatriated. Dividends from Bio-Ved to the
Company are subject to an Indian distribution tax.

In addition, the Indian government prohibits the export of certain plants,
plant portions and their derivatives and extracts. This prohibition does not
affect current operations.

F-7

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] BASIS OF PRESENTATION:

The accompanying consolidated financial statements include the accounts of
AyurCore, Inc. (including its Indian liaison office) and its substantially
wholly owned subsidiary, Bio-Ved. All material intercompany transactions and
account balances have been eliminated in consolidation.

[2] INVENTORY:

Inventory is stated at the lower of cost (first-in, first-out method) or
market.

[3] EQUIPMENT:

Equipment is carried at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets which range
from three to five years. Leasehold improvements are amortized over the lesser
of the economic useful life of the improvement or term of the lease.

[4] RESEARCH AND DEVELOPMENT AND PATENTS:

Research and development costs and patent expenses are charged to operations
as incurred.

[5] USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

[6] LOSS PER SHARE OF COMMON STOCK:

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," in the year ended December 31, 1997 and has
retroactively applied the effects thereof for all periods presented.
Accordingly, the presentation of per share information includes calculations of
basic and dilutive loss per share. The impact on the per share amounts
previously reported was not significant.

Additionally, pursuant to the Securities and Exchange Commission's Staff
Accounting Bulletin No. 98, issuances of common shares and potential common
shares issued for nominal consideration during the periods covered by statements
of operations that are included in the registration statement and in subsequent
filings with the SEC are reflected in computations of loss per share in a manner
similar to a stock split or stock dividend.

[7] FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying value of cash, notes payable, trade payables and accrued
expenses approximates their fair value because of the short maturity of those
instruments.

F-8

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] FOREIGN CURRENCY:

The financial statements for the operations in India are translated into
U.S. dollars from the Company's functional currency (Indian Rupee) at year end
exchange rates for assets and liabilities and weighted average exchange rate for
revenue and expenses. The effect of foreign currency translation adjustments are
included as a component of capital deficiency.

The Company's activities in India expose it to the risk associated with
currency exchange fluctuations. These currency exchange fluctuations have not
had a significant impact on reported results.

[9] STOCK-BASED COMPENSATION:

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has elected to account for its employee
stock-based compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). Under the provisions of APB No. 25, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's common stock at the date of the grant over the amount an
employee must pay to acquire the stock. Stock options granted to nonemployees
for goods or services are measured using the fair value of these options and
such costs are included in operating results as an expense.

[10] REVENUE RECOGNITION:

Sales revenue is recognized when product is shipped. Grant revenues are
recognized as the expenses for research and development activities performed
under the terms of the grant award are incurred.

[11] COMPREHENSIVE INCOME:

As of December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income"
issued in June 1997. SFAS 130 requires the reporting and display of
comprehensive income items in a full set of general purpose financial
statements. Other comprehensive income items are revenues, expenses, gains and
losses that under generally accepted accounting principles are excluded from net
loss and reflected as a component of equity, such as currency translation.

[12] INTERIM FINANCIAL INFORMATION:

The financial statements at March 31, 1998 and for the three months ended
March 31, 1998 and 1997 are unaudited, but include all adjustments (consisting
only of normal recurring adjustments) which management considers necessary for a
fair presentation of financial position, results of operations and cash flows
for those periods. Results of interim periods are not necessarily indicative of
results for the entire year or any future periods.

F-9

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[13] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" and No. 131, "Disclosures about Segments of an Enterprise and Related
Information". The Company has not yet determined whether the above
pronouncements will have a significant effect on the information presented in
the financial statements.

NOTE C--INVENTORY

Inventory consists of the following:

DECEMBER 31, MARCH 31,
1997 1998
------------- -----------

Raw materials....................................................... $ 6,000 $ 9,000
Finished goods...................................................... 2,000 9,000
------ -----------
$ 8,000 $ 18,000
------ -----------
------ -----------

NOTE D--EQUIPMENT

Equipment consists of the following:

DECEMBER 31, MARCH 31,
1997 1998
------------ -----------

Office furniture and equipment....................................... $ 30,000 $ 30,000
Computer equipment................................................... 21,000 21,000
Laboratory equipment................................................. 25,000 25,000
Leasehold improvements............................................... 9,000 9,000
------------ -----------
85,000 85,000
Less accumulated depreciation and amortization....................... 40,000 45,000
------------ -----------
$ 45,000 $ 40,000
------------ -----------
------------ -----------

NOTE E--INVESTMENTS

The Company accounts for its investments based on the following categories:
(1) held-to-maturity; (2) available for sale and (3) trading investments.
Held-to-maturity investments at December 31, 1997 consist of interest bearing
deposits in Indian banks (see Note A). The carrying amount approximates fair
value and the deposits mature between January 1999 and August 2000. At December
31, 1997 and March 31, 1998 approximately $5,000 and $8,000, respectively of the
deposits are collateral for loans due to bank.

F-10

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE F--RELATED PARTY TRANSACTIONS

The Company's operations in India are being directed by a relative of the
principal stockholders. Such individual's compensation, based on an agreement,
amounts to $9,000 per annum.

For the years ended December 31, 1997 and 1996 approximately $40,000 and
$101,000, respectively (including services contributed), were charged to
operations for services provided by a law firm, of which a partner is also a
stockholder of the Company. At December 31, 1997 and March 31, 1998 amounts owed
to this related party aggregated approximately $328,000 and $358,000,
respectively, and are included in accounts payable.

NOTE G--INCOME TAXES

The Company recognizes deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

The Company has available for tax purposes the following net operating loss
carryforwards utilizable against the taxable income generated in each of the
respective jurisdictions:

DECEMBER 31, MARCH 31
1997 1998
------------ ------------

United States (expiring through 2012)............................ $3,557,000 $ 3,736,000
India (expiring through 2005).................................... $ 230,000 $ 253,000

At December 31, 1997 and March 31, 1998, the Company has provided a
valuation reserve against the full amount of its net operating loss benefit of
approximately $1,500,000 and $1,580,000, respectively, (including $81,000 and
$89,000, respectively, net operating loss benefit arising from the Indian
subsidiary which may only be utilized against future Indian taxable income) and
the benefit of $310,000 and $340,000, respectively from other temporary
differences, principally compensation expense not currently deductible, since
the likelihood of realization cannot be determined.

A reconciliation between the actual income tax benefit and income taxes
computed by applying the United States Federal income tax rate of 34% to the net
loss is as follows:

THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------ ------------------------
1997 1996 1998 1997
----------- ----------- ----------- -----------

Computed federal income tax (benefit) at 34% rate.................. $ (487,000) $ (451,000) $ (96,000) $ (82,000)
Impact of difference between foreign jurisdictions effective tax
rate
and U.S. tax rate................................................ (1,000) (6,000) (1,000)
State taxes, net of federal tax benefit............................ (77,000) (73,000) (15,000) (11,000)
Nondeductible interest charge...................................... 117,000
Increase in valuation reserve...................................... 448,000 530,000 111,000 94,000
----------- ----------- ----------- -----------
Effective rate..................................................... $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

F-11

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE G--INCOME TAXES (CONTINUED)

Dividends paid by the Company's subsidiary are subject to a ten percent tax.

The Internal Revenue Code contains provisions which may limit the
utilization of the net operating loss carryforward available in any given year
if significant changes occur in shareholder ownership interests. If the proposed
public offering discussed in Note K[5] to the financial statements is
consummated, it is probable that the amount of carryforward available in any
given year will be limited.

NOTE H--BANK DEBT

In October 1996 the Company borrowed $200,000 from a bank, payable on demand
evidenced by a note bearing interest at 2% above the bank's "Benchmark Rate"
(8.50% at December 31, 1997). Additionally, the Company borrowed $100,000 in May
1997 and $200,000 in September 1997. In September 1997 the three notes were
combined into one note for $500,000 which was due February 2, 1998. On February
2, 1998 the Company borrowed an additional $100,000 and all the notes were
combined into one note for $600,000 due May 4, 1998. On that date, the Company
repaid $25,000 and the remaining balance of $575,000 was extended to August 4,
1998. The debt is collateralized by certain securities of a public company held
by a principal stockholder and guaranteed by two principal stockholders who are
also executive officers and directors.

NOTE I--ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

DECEMBER 31, MARCH 31,
1997 1998
------------ ------------

Professional fees (Note F)....................................... $ 495,000 $ 573,000
Payroll and related expenses..................................... 342,000 402,000
Consulting....................................................... 132,000 129,000
Other............................................................ 116,000 127,000
------------ ------------
$1,085,000 $ 1,231,000
------------ ------------
------------ ------------

F-12

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE J--NOTES PAYABLE

Notes payable are as follows:

DECEMBER 31, MARCH 31,
1997 1998
------------ ----------

Note payable to stockholder (1).................................... $ 50,000 $ 50,000
Notes payable (2).................................................. 100,000 100,000
Notes payable to stockholders (3).................................. 305,000 355,000
------------ ----------
$ 455,000 $ 505,000
------------ ----------
------------ ----------

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

(1) Note bears interest at 2% above prime (8.50% at December 31, 1997 and March
31, 1998) and are payable on demand.

(2) Note bears interest at 10% and is payable on demand.

(3) Notes bearing interest at 2% above prime (8.50% at December 31, 1997 and
March 31, 1998), of which $230,000 is payable on August 1, 1998, $75,000 is
payable in December, 1998 and $50,000 as of March 31, 1998 is payable in the
first quarter of 1999, unless a public offering is consummated prior to
August 1, 1998, in which case the notes shall be payable one year from
consummation of the Offering.

From January 1, through March 31, 1998, a stockholder made advances
aggregating approximately $50,000 to the Company. The amounts have been combined
with the stockholders' existing note with the same terms as shown in (3) above.

In conjunction with certain notes issued, the Company granted warrants to
purchase common stock (see Note K[3]). During the years ended December 31, 1997
and 1996, the Company valued these warrants, using the Black-Scholes pricing
model, at $13,000 and $15,000, respectively which are being treated as debt
discount and amortized over the period of each loan.

Effective October 31, 1997, certain noteholders exchanged approximately
$700,000 of principal (including $250,000 of convertible debt) plus accrued
interest of $139,000 into shares of common stock at $4.00 per share. Except for
the portion of the principal attributable to the convertible debt, the
difference between the estimated fair value of the common stock and the $4.00
per share conversion price has been recorded as interest expense. If shares were
issued at $4.00 per share in lieu of debt at the respective issuance date of
debt, supplementary basic and diluted net loss per share for the years ended
December 31, 1997 and 1996 and for the three months ended March 31, 1997 would
have been $(.49), $(.60) and $(.11), respectively.

On April 1, 1998, an individual loaned $250,000 to the Company. Principal
and interest (calculated at 2% above prime) are payable on April 1, 1999;
provided, however, if a public offering or a private placement is consummated by
October 1, 1998, then principal and interest are payable one year thereafter. In
connection with the note, the Company issued 125,000 warrants (see Note K[3]).

F-13

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE K--CAPITAL DEFICIENCY

[1] STOCK SPLIT AND CHANGE IN CAPITAL:

On November 18, 1997, the Board of Directors of the Company approved a
18,333.486-for-1 stock split of its common stock. In addition, the Board of
Directors increased the authorized shares to 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock. All per share and share amounts in the
accompanying financial statements have been retroactively adjusted to reflect
the stock split.

[2] COMMON STOCK:

On November 18, 1997 the Board of Directors of the Company approved the
reclassification of its Class A and Class B common stock into one class of
common stock. The accompanying financial statements present common stock on the
one class basis.

In 1995 an agreement was entered into for the purchase of 166,651 shares of
common stock for $1,000,000 which contained an antidilution provision on the
next subscription for the same class of stock which is at a per share price less
than $6.00 (see Note K[3]).

[3] WARRANTS:

In connection with certain notes payable issued during the year ended
December 31, 1996 (see Note J) the Company issued warrants for the purchase of
200,000 shares of common stock at an exercise price of 130% of the anticipated
initial public offering price. In May 1998, the Company authorized the extension
of the expiration date of these then expired warrants, which will result in a
non-cash charge to operations of $201,000 in the second quarter of 1998,
representing the fair value of these warrants.

In connection with a note payable issued during the year ended December 31,
1997 (see Note J), the Company issued warrants for the purchase of 50,000 of
common stock at an exercise price of 130% of the anticipated initial public
offering price, expiring August 1999.

On December 8, 1997, the Board of Directors of the Company approved the
grant of warrants to purchase 45,000 shares of common stock in connection with a
debt conversion. The Company valued these warrants at $90,000. In addition,
warrants to purchase 55,000 shares of common stock were granted in consideration
for the waiver of certain antidilution rights (see Note K[2]). The difference
between the estimated fair value of the underlying shares of common stock and
the $4.00 per share exercise price of the warrants has been recorded either as
interest expense or in the case of the antidilution waiver warrants as a
dividend. The 100,000 warrants expire on October 30, 2002.

On April 1, 1998, in connection with the note payable issued (see Note J),
the Company issued warrants for the purchase of 125,000 shares of common stock
at an exercise price of 130% of the anticipated initial public offering price,
expiring on April 1, 2000.

[4] STOCK OPTIONS:

Pro forma information regarding net loss and loss per share basic and
assuming dilution is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options

F-14

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE K--CAPITAL DEFICIENCY (CONTINUED)

under the fair value method of that statement. The effect of applying SFAS No.
123 on 1997 and 1996 proforma net loss and recognizing compensation expense for
consultants as stated below are not necessarily representative of the effects on
reported net loss for future years due to, among other things, (1) the vesting
period of the stock options, (2) fair value of additional stock options in
future years and (3) reflect employee options granted subsequent to December 31,
1994. Had compensation cost for the Company's stock option grants to employees
and directors been determined based upon the fair value at the grant date
consistent with the methodology prescribed under SFAS No. 123, the Company's net
loss in 1997 and 1996 would have been approximately $(1,483,000) and
$(1,327,000) or $(.73) and $(.66), respectively, for basic and diluted loss per
share. The fair value of options granted to employees during the years ended
December 31, 1997 and 1996 is estimated to be $2.14 and $1.37 per share,
respectively. The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions for the year ended December 31, 1997: risk free interest rate of
5.55%--5.79%; dividend yield 0%; volatility 40% and expected life for options
granted of 5 years and for the year ended December 31, 1996: risk free interest
rate of 6.64%--6.73%; dividend yield of 0%; volatility of 40% and expected life
for options granted of 5 years.

During the years ended December 31, 1997, 1996 and 1994, the Company issued
options for 5,000, 29,000 and 30,000 shares of common stock to consultants which
were valued at $20,000, $39,000 and $46,000, respectively, and are being
amortized over the period of the related agreements.

Through December 31, 1994 the Company has granted 261,252 options to
employees at exercise prices less than the fair value of the underlying common
stock at the dates of grant. The Company recorded the difference as unearned
compensation, which is being amortized over the vesting period.

During the year ended December 31, 1997 the Company granted 60,000 options
to an employee at an exercise price which is $3.00 below the estimated fair
value of the underlying common stock. The Company recorded the difference as
unearned compensation, which is being amortized over the vesting period.

No options were granted during the three month periods ended March 31, 1998
and March 31, 1997.

F-15

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE K--CAPITAL DEFICIENCY (CONTINUED)

Stock option activity with respect to non-plan options is summarized as
follows:

WEIGHTED
AVERAGE NUMBER OF
EXERCISE SHARES
OPTIONS PRICE EXERCISABLE
--------- ----------- -----------

Outstanding at December 31, 1995........................... 291,252 .99 80,317
-----------
-----------
Granted.................................................... 40,500 3.00
Forfeited.................................................. (55,000) .14
---------
Outstanding at December 31, 1996........................... 276,752 1.46 117,184
-----------
-----------
Granted.................................................... 65,000 3.00
Forfeited.................................................. (25,782) 1.02
Exercised.................................................. (10,000) .34
---------
Outstanding at December 31, 1997........................... 305,970 1.86 165,336
Forfeited.................................................. (5,000) 3.00
--------- -----------
--------- -----------
Outstanding at March 31, 1998.............................. 300,970 $ 1.84 174,503
--------- -----------
--------- -----------

On November 18, 1997, the Board of Directors of the Company approved the
Company's 1997 stock option plan (the "Plan"). Pursuant to the Plan a total of
227,986 shares of common stock have been reserved for issuance as incentive
stock options to be granted to employees (including officer and directors) and
nonqualified stock options to be granted to employees (including officers),
directors, agents and consultants. Options granted under the Plan are
exercisable for a period of up to 10 years from date of grant at an exercise
price which is not less than the fair value on date of grant, except that the
exercise period of options granted to a stockholder owning more than 10% of the
outstanding capital stock may not exceed five years and their exercise price may
not be less than 110% of the fair value of the common stock at date of grant.
Options generally vest one-third immediately and thereafter one-third annually
on the anniversary date of the grant.

On November 18, 1997 the Board of Directors authorized the grant of an
aggregate of 45,000 nonqualified stock options under the Plan to three
nonemployee directors. The options are exercisable at $6.00 per share, vest
one-third immediately and balance in two equal annual installments and are
exercisable through November 18, 2002. At December 31, 1997 and March 31, 1998
the Company had 182,986 options available to issue under the Plan.

F-16

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE K--CAPITAL DEFICIENCY (CONTINUED)

The following table summarizes information about stock options outstanding
at December 31, 1997:

OUTSTANDING
------------------------------------------- EXERCISABLE
WEIGHTED- ----------------------
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICE NUMBER LIFE (IN YEARS) PRICE NUMBER PRICE
- --------------------- ----------- ----------------- ----------- --------- -----------

.34 $- 1.02....... 170,470 5.86 $ .51 136,003 $ .55
3.00$- 6.00...... 180,500 3.94 $ 4.16 44,333 $ 4.01
----------- ---------
350,970 180,336
----------- ---------
----------- ---------

The following table summarizes information about stock options outstanding
at March 31, 1998:

$ .34 - $1.02 170,470 5.61 $ .51 136,003 $ .55
$ 3.00 - 6.00 175,500 3.70 $ 4.20 53,500 $ 3.84
----------- ---------
345,970 189,503
----------- ---------
----------- ---------

[5] PROPOSED PUBLIC OFFERING:

The Company has signed a letter of intent with an underwriter with respect
to a proposed public offering of the Company's securities. There is no assurance
that such offering will be consummated. In connection therewith the Company
anticipates incurring substantial expenses which, if the offering is not
consummated, will be charged to expense.

NOTE L--SIGNIFICANT CUSTOMERS

Two Indian customers accounted for all of the product sales for the year
ended December 31, 1997. One of these customers accounted for all of the product
sales during the three months ended March 31, 1998.

NOTE M--ROYALTIES

In September 1994, April 1995 and June 1995, the Company acquired certain
exclusive intellectual property rights from two inventors for payments
aggregating $38,000, including certain milestone payments ($22,000 paid as of
December 31, 1997). The Company has ongoing royalty commitments for sales of
certain products covered by the rights acquired. The agreements provide for the
payment of royalties on gross revenue earned on these product sales and
sublicensing incorporating the technology.

F-17

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE M--ROYALTIES (CONTINUED)

In December 1995, the Company was assigned certain exclusive intellectual
property rights from an inventor for royalty payments on net receipts and on net
royalties received from sublicenses.

As of December 31, 1997 and March 31, 1998, royalties due under these
agreements were DE MINIMIS.

NOTE N--COMMITMENTS

[1] LEASES:

The Company is obligated for annual minimum rentals under operating leases
for office, equipment and laboratory facilities as follows:

YEAR ENDING
DECEMBER 31,
- ---------------------------------------------------------------------------------------

1998................................................................................... $ 44,000
1999................................................................................... 6,000
---------
$ 50,000
---------
---------

Rent expense was approximately $52,000, $49,000, $16,000 and $11,000, for
the years ended December 31, 1997 and 1996 and for the three months ended March
31, 1998 and 1997, respectively.

[2] EMPLOYMENT AND CONSULTING AGREEMENTS:

The Company has employment agreements with two officers which provide for
annual base salaries of $140,000 and $130,000 (subject to annual increases of
not more than 10% per year and bonuses of $35,000 and $30,000, respectively, at
the discretion of the Board of Directors), for a period of three years,
commencing on the effective date of the initial public offering.

At December 31, 1997, the Company has a consulting agreement which provides
for payments aggregating $11,000 through May 1998.

In November 1997, the Company entered into an agreement with the National
Institute of Immunology ("NII") in New Dehli, whereby NII will conduct certain
animal studies for a period of one year. The total amount payable to NII under
this agreement is approximately $20,000, of which approximately $4,000 has been
paid as of December 31, 1997.

[3] DISTRIBUTION AND MARKETING AGREEMENTS:

In April 1996, the Company entered into a five-year exclusive agreement to
provide Blue Cross Laboratories Ltd. of Mumbai, India ("Blue Cross") with an
antiseptic formulation at a mutually agreed upon price. The agreement provides
for the Company to have available one month's supply of the product and is
subject to penalties for nondelivery. The Company is to receive a royalty based
on a percentage of the net sales value realized by Blue Cross. During the year
ended December 31, 1997, the Company earned $12,000 of royalties under this
agreement.

F-18

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE N--COMMITMENTS (CONTINUED)

In September 1997, the Company entered into an exclusive three-year
agreement with MD Pharmaceuticals Laboratories Ltd. ("MD") to distribute two of
the Company's products to certain countries in southeast Asia. MD will provide
the Company with sales orders on a quarterly basis (subject to minimum quantity
orders). The Company reserves the right to discontinue manufacturing any of its
products with six month notice to MD and agrees to refund the purchase price of
discontinued inventory held by MD or replace it with ongoing product. The
Agreement may be cancelled by either party after August 31, 2000 with six month
notice or for cause.

In September 1997, the Company also entered into a memorandum of
understanding with Alembic Chemical Works Co. Limited ("Alembic"). Under the
agreement, Alembic test marketed a product in the Indian State of Maharashtra
for a period of six months. The Company provided 350,000 free capsules through
March 1998 and all other marketing costs were borne by Alembic. At March 31,
1998, neither party has any continuing obligation to the other.

[4] MANUFACTURING AND SUPPLY AGREEMENTS WITH INDIAN COMPANIES:

In October 1997, the Company entered into a five year manufacturing
agreement with Eisen Pharmaceutical Co. Pvt. Ltd. ("Eisen") whereby Eisen will
manufacture one of the Company's products at an agreed upon price. The agreement
may be terminated by either party with three months notice without any further
consideration.

In October 1997, the Company also entered into a five-year agreement with
Kancor Flavours & Extracts Pvt. Ltd. ("Kancor") whereby Kancor will provide
plant extracts for use in the manufacture of one of the Company's products at an
agreed upon price. Upon termination of the agreement due to breach by one of the
parties it may be subject to damages incurred by the other party.

The Company is not subject to any minimum purchase orders under the above
agreements.

In December 1997, the Company entered into a five year manufacturing
agreement with S.P.B. Inc. ("SPB") whereby SPB will manufacture one of the
Company's products at a price to be mutually agreed upon. The Company has a
commitment to purchase 30,000 units per month. The agreement may be terminated
by either party with three months notice without further consideration.

NOTE O--INFORMATION ON BUSINESS SEGMENT

The Company operates in a single industry, the discovery, development,
clinical testing and marketing of proprietary plant-based pharmaceuticals
(phyto-pharmaceuticals) for the treatment of chronic, difficult-

F-19

AYURCORE, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND MARCH 31, 1997 IS UNAUDITED)

NOTE O--INFORMATION ON BUSINESS SEGMENT (CONTINUED)

to-treat human diseases, applying the principles of Ayurveda. The Company's
activities consist of operations in India and the United States. Information
related to domestic and foreign operations is as follows:

YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------ ------------------------
1997 1996 1998 1997
---------- ------------ ---------- ------------

Revenues:
United States.............................................. $ 100,000 $ 56,000
India...................................................... 103,000 $ 10,000
---------- ---------- ------------
$ 203,000 $ 10,000 $ 56,000
---------- ---------- ------------
---------- ---------- ------------
Operating loss:
United States.............................................. $ 745,000 $ 809,000 $ 258,000 $ 183,000
India...................................................... 159,000 436,000 23,000 60,000
---------- ------------ ---------- ------------
$ 904,000 $ 1,245,000 $ 281,000 $ 243,000
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
Identifiable assets:
United States.............................................. $ 413,000 $ 93,000 $ 456,000 $ 108,000
India...................................................... 95,000 123,000 109,000 149,000
---------- ------------ ---------- ------------
$ 508,000 $ 216,000 $ 565,000 $ 257,000
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------

Capital expenditures for the years ended December 31, 1997 and 1996 were $0
and $4,000, respectively, in the United States and $12,000 and $38,000,
respectively, in India. Depreciation and amortization expense for the years
ended December 31, 1997 and 1996 and the three months ended March 31, 1998 and
1997 was $3,000, $2,000, $1,000 and $1,000, respectively, in the United States
and $16,000, $10,000, $4,000 and $5,000, respectively, in India.

F-20

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS.

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

TABLE OF CONTENTS

PAGE
---------

Prospectus Summary.............................. 3
Risk Factors.................................... 8
Use of Proceeds................................. 19
Dilution........................................ 20
Capitalization.................................. 22
Selected Consolidated Financial Data............ 23
Managements' Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 24
Business........................................ 29
Management...................................... 49
Principal Stockholders.......................... 54
Certain Transactions............................ 55
Description of Securities....................... 57
Shares Eligible for Future Sale................. 58
Underwriting.................................... 59
Legal Matters................................... 61
Experts......................................... 62
Additional Information.......................... 62
Index to Consolidated Financial Statements...... F-1

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

UNTIL , 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

AYURCORE, INC.
1,350,000 SHARES

COMMON STOCK

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

PROSPECTUS

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

NETWORK 1 FINANCIAL SECURITIES, INC.

, 1998

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

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article Eight of the Certificate of Incorporation of AyurCore, Inc. (the
"Registrant") eliminates the personal liability of directors to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such elimination of the personal liability of directors
of the Registrant does not apply to (a) any breach of the director's duty of
loyalty to the Registrant or its stockholders, (b) act or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (c)
action prohibited under section 174 of the Delaware General Corporation Law, and
(d) any transaction from which the director derived an improper personal
benefit.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are the estimated expenses of the issuance and distribution of
the securities being registered, all of which will be paid by the "Registrant".

SEC Registration fee............................................. $3,267.13
NASD filing fee.................................................. 1,607.50
Nasdaq listing fee............................................... 10,000
Printing expenses................................................ 70,000
Fees and expenses of counsels.................................... 360,000
Fees and expenses of accountants................................. 110,000
Transfer agent and registrar fees................................ 5,000
Blue sky fees and expenses....................................... 50,000
Representative's nonaccountable expense allowance................ 243,000
Director and officer insurance premium........................... 45,000
Miscellaneous.................................................... 2,125.37
---------
Total............................................................ $ 900,000
---------
---------

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

Set forth below is information as to securities of the Registrant sold
within the past three years which were not registered under the Securities Act
of 1933, as amended (the "Act"). In connection with such sales, the Registrant
relied upon the exemption from registration provided by Section 4(2) of the Act.
All purchasers have represented that they are accredited investors. The
information below gives effect to (i) the reclassification of the Registrant's
Class A Common Stock and Class B Common Stock as a single class of Common stock
and (ii) a stock split effected November 26, 1997, pursuant to which each
outstanding share of common stock was reclassified and converted into 18,333.486
shares of Common Stock.

On February 3, 1995, Marathon Investments L.L.C. purchased 166,651 shares of
Common Stock of the Registrant at a purchase price of $1,000,000.

From March 1996 to August 1997, the Company issued warrants to purchase
250,000 shares of Common Stock to three lenders in connection with their loans
to the Company in the aggregate amount of $500,000. Each warrant entitles the
holder to purchase one share of Common Stock at a price equal to 130% of the
initial public offering price per share for a period of two years.

Effective October 31, 1997, two holders of debt aggregating $838,830 in
principal and accrued interest (the "Debt") converted the Debt into an aggregate
of 209,708 shares of Common Stock of the Registrant. In addition, effective
December 8, 1997, the Company approved the issuance of 45,000 warrants to one of
such holders in connection with the Debt conversion, as well as 55,000 warrants
to another stockholder of the Company in consideration for the release of
certain antidilution rights. Each warrant entitles the holder to purchase one
share of common stock at $4.00 per share for a period of five years.

II-1

On December 31, 1997, Mr. Barry Wald exercised an option with respect to
10,000 shares of Common Stock at $.34 per share. The purchase price was paid by
forgiveness of $3,400 in accrued and unpaid salary.

ITEM 27. EXHIBITS.

(a) Exhibits:

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant (including amendments thereto).(1)
3.2 By-Laws of the Registrant, as amended.
4.1 Form of Representative's Warrant Agreement.
4.2 Form of Common Stock Certificate.
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality.
10.1 Form of Employment Agreement entered into between the Registrant and Barry Wald.(1)
10.2 Form of Employment Agreement entered into between the Registrant and Deepa Chitre.(1)
10.3 1997 Stock Option Plan (including forms of option agreements).(1)
10.4 Form of Indemnification Agreement to be entered into between the Registrant and its directors and
executive officers.
10.5 Lease Deed, dated as of April 19, 1996, by and between BAIF Development Research Foundation and Bio-Ved
Pharmaceuticals Private Limited ("Bio-Ved") (including agreement for furniture, fixtures and
fittings).(1)
10.6 Office Building Lease, dated as of September 8, 1995, by and between Northwestern Mutual Life Insurance
Company by its Agent Gibson Speno Management Company and Bio-Ved.(1)
10.7 Agreement, dated as of July 26, 1994, by and between Poona College Pharmacy and Bio-Ved.(1)
10.8 Memorandum of Understanding, dated as of October 9, 1997, by and between Bio-Ved and Alembic Chemicals
Works Co. Limited.(1)
10.9 Memorandum of Understanding, dated as of October 23, 1997, by and between Kancor Flavours & Extracts
Pvt. Ltd. and Bio-Ved.(1)(2)
10.10 Agreement, dated as of October 10, 1997, by and between Bio-Ved and Eisen Pharmaceutical Co. (Pvt.)
Ltd.(1)(2)
10.11 Agreement, dated as of September 28, 1994, by and between Bio-Ved and Dr. Bhushan Patwardhan
("Patwardhan") regarding RA-11.(1)(2)
10.12 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(1)(2)
10.13 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(1)(2)
10.14 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
IM-10.(1)(2)
10.15 Agreement, dated as of June 26, 1995, by and between the Registrant and S.V. Karnataki.(1)(2)
10.16 Patent Agreement, dated as of December 15, 1995, by and between Dr. Abraham Rosenberg and the
Registrant.(1)(2)

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

(1) Previously filed.

(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.

II-2

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

10.17 Distribution Agreement, dated as of September 1, 1997, by and between the Registrant and MD
Pharmaceuticals Laboratories Ltd.(1)(2)
10.18 Memorandum of Understanding, dated as of April 1, 1996, by and between Bio-Ved and Blue Cross
Laboratories Ltd. (including supplement thereto).(1)(2)
10.19 Promissory Note, dated January 29, 1996, made by the Registrant in favor of Irwin Rosenthal, as amended
by letter dated May 26, 1998.
10.20 Promissory Note, dated as of March 24, 1998, made by the Registrant in favor of Sanjeev Chitre, as
amended by letter dated May 26, 1998.
10.21 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Fred Kassner.(1)
10.22 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Michael Splinter and
Patricia Roboostoff.(1)
10.23 Form of Financial Advisory and Investment Banking Agreement between the Registrant and Network 1
Financial Securities, Inc.
10.24 Form of Warrant, dated as of December 8, 1997, in favor of each of Fred Kassner and Marathon
Investments, LLC.(1)
10.25 Form of Registration Rights Agreement, dated as of December 8, 1997, in favor of each of Fred Kassner
and Marathon Investments, LLC.(1)
10.26 Promissory Note, dated December 23, 1997, made by Registrant in favor of Michael Splinter and Patricia
Roboostoff, as amended by letter dated May 26, 1998.
10.27 Memorandum of Understanding, dated as of December 10, 1997, by and between Bio-Ved and S.P.B. (Inc.)
10.28 Promissory Note, dated April 1, 1998, made by Registrant in favor of Raj Rajartaman.
10.29 Warrant, dated as of April 1, 1998, issued to Raj Rajartaman.
10.30 Warrants, dated May 13, 1998, issued to each of Fred Kassner, Michael Splinter and Patricia Roboostoff
and Paul Gupta in connection with prior loans.
21.1 Subsidiaries of Registrant.(1)
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Rubin Baum Levin Constant & Friedman (included in Exhibit 5).
24.1 Power of Attorney (included with the signature page to the registration statement).(1)
27.1 Financial Data Schedule.

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

(1) Previously filed.

(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.

ITEM 28. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that it will:

(1) File during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) include any prospectus required by section 10(a)(3) of the Securities
Act;

(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the

II-3

Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fida offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

(b) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closings specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser of the Common Stock
offered hereby.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(d) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for the filing on Form SB-2 and authorized this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, there unto
duly authorized, in the City of San Jose, California, on May 26, 1998.

AYURCORE, INC.

By: /s/ DEEPA CHITRE
-----------------------------------------
Deepa Chitre,
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities and on the dates
indicated:

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ DEEPA CHITRE Officer and Director
- ------------------------------ (Principal Executive May 26, 1998
Deepa Chitre, M.D. Officer)

/s/ SANJEEV CHITRE
- ------------------------------ Chairman of the Board of May 26, 1998
Sanjeev Chitre Directors

Chief Financial Officer
/s/ NINA RENAUD and Treasurer (Principal
- ------------------------------ Financial and Accounting May 26, 1998
Nina Renaud Officer)

/s/ MICHAEL SPLINTER
- ------------------------------ Director May 26, 1998
Michael Splinter

/s/ CYNTHIA R. MAY
- ------------------------------ Director May 26, 1998
Cynthia R. May

/s/ SUZANNE ROSENTHAL
- ------------------------------ Director May 26, 1998
Suzanne Rosenthal

II-5

INDEX TO EXHIBITS

EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- ---------

1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant (including amendments thereto).(1)
3.2 By-Laws of the Registrant, as amended.
4.1 Form of Representative's Warrant Agreement.
4.2 Form of Common Stock Certificate.
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality.
10.1 Form of Employment Agreement entered into between the Registrant and Barry Wald.(1)
10.2 Form of Employment Agreement entered into between the Registrant and Deepa Chitre.(1)
10.3 1997 Stock Option Plan (including forms of option agreements).(1)
10.4 Form of Indemnification Agreement to be entered into between the Registrant and its directors
and executive officers.
10.5 Lease Deed, dated as of April 19, 1996, by and between BAIF Development Research Foundation
and Bio-Ved Pharmaceuticals Private Limited ("Bio-Ved") (including agreement for furniture,
fixtures and fittings).(1)
10.6 Office Building Lease, dated as of September 8, 1995, by and between Northwestern Mutual Life
Insurance Company by its Agent Gibson Speno Management Company and Bio-Ved.(1)
10.7 Agreement, dated as of July 26, 1994, by and between Poona College Pharmacy and Bio-Ved.(1)
10.8 Memorandum of Understanding, dated as of October 9, 1997, by and between Bio-Ved and Alembic
Chemicals Works Co. Limited.(1)
10.9 Memorandum of Understanding, dated as of October 23, 1997, by and between Kancor Flavours &
Extracts Pvt. Ltd. and Bio-Ved.(1)(2)
10.10 Agreement, dated as of October 10, 1997, by and between Bio-Ved and Eisen Pharmaceutical Co.
(Pvt.) Ltd.(1)(2)
10.11 Agreement, dated as of September 28, 1994, by and between Bio-Ved and Dr. Bhushan Patwardhan
("Patwardhan") regarding RA-11.(1)(2)
10.12 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(1)(2)
10.13 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
RA-11.(1)(2)
10.14 Agreement, dated as of April 7, 1995, by and between Patwardhan and the Registrant regarding
IM-10.(1)(2)
10.15 Agreement, dated as of June 26, 1995, by and between the Registrant and S.V. Karnataki.(1)(2)
10.16 Patent Agreement, dated as of December 15, 1995, by and between Dr. Abraham Rosenberg and the
Registrant.(1)(2)
10.17 Distribution Agreement, dated as of September 1, 1997, by and between the Registrant and MD
Pharmaceuticals Laboratories Ltd.(1)(2)
10.18 Memorandum of Understanding, dated as of April 1, 1996, by and between Bio-Ved and Blue Cross
Laboratories Ltd. (including supplement thereto).(1)(2)
10.19 Promissory Note, dated January 29, 1996, made by the Registrant in favor of Irwin
Rosenthal,as amended by letter dated May 26, 1998.
10.20 Promissory Note, dated as of March 24, 1998, made by the Registrant in favor of Sanjeev
Chitre, as amended by letter dated May 26, 1998.
10.21 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Fred
Kassner.(1)

EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ----------- --------------------------------------------------------------------------------------------- ---------

10.22 Stock Purchase Agreement, dated as of October 31, 1997, between the Registrant and Michael
Splinter and Patricia Roboostoff.(1)
10.23 Form of Financial Advisory and Investment Banking Agreement between the Registrant and
Network 1 Financial Securities, Inc.
10.24 Form of Warrant, dated as of December 8, 1997, in favor of each of Fred Kassner and Marathon
Investments, LLC.(1)
10.25 Form of Registration Rights Agreement, dated as of December 8, 1997, in favor of each of Fred
Kassner and Marathon Investments, LLC.(1)
10.26 Promissory Note, dated December 23, 1997, made by Registrant in favor of Michael Splinter and
Patricia Roboostoff, as amended by letter dated May 26, 1998.
10.27 Memorandum of Understanding, dated as of December 10, 1997, by and between Bio-Ved and S.P.B.
(Inc.)
10.28 Promissory Note, dated April 1, 1998, made by Registrant in favor of Raj Rajartaman.
10.29 Warrant, dated as of April 1, 1998, issued to Raj Rajartaman.
10.30 Warrants, dated May 13, 1998, issued to each of Fred Kassner, Michael Splinter and Patricia
Roboostoff and Paul Gupta in connection with prior loans.
21.1 Subsidiaries of Registrant.(1)
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Rubin Baum Levin Constant & Friedman (included in Exhibit 5).
24.1 Power of Attorney (included with the signature page to the registration statement).(1)
27.1 Financial Data Schedule.

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

(1) Previously filed.

(2) Confidential treatment is being requested for portions of this exhibit
pursuant to Rule 406 under the Securities Act.