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                                                                                                                March
15, 2005

Mr. Rufus Decker

Branch Chief

United States Securities and Exchange Commission

Washington, DC 20549-0510

RE:         Form 10-KSB for the Fiscal Year ended
September 30, 2004

                File No. 1-7335

Dear Mr. Decker:

                We have received the letter dated February 9, 2005
containing the comments of the Staff of the Securities and Exchange Commission
(“the Commission”).  Here are the
responses of Lee Pharmaceuticals (the “Company”) to the Staff’s comments.  The number of the response corresponds to the
number of the Staff’s comment.

1.                                       The Staff’s comment is noted.  As appropriate, in response to the Staff’s
comments below, the Company has described the proposed changes contemplated in
future filings.  In many cases, the
specific language will depend on the circumstances at the time of filing.

2.                                       The following disclosure will be added in
future filings:

“Upon review, there are
only two patents that currently offer the Company protection.  The following table sets forth information
regarding the two patents:

  Name

  Patent
  Number

  Duration

  Dental
  Restoration System & Method

  US. 5,695,340

  17 years from 1997

  Sculptured Nails

  US. 5,127,414

  17 years from 1992

The Company’s marketing efforts have, in
more recent years, been primarily directed at health and beauty aids, which
depend more on manufacturing capabilities and marketing skills than patent
protection.  Hence, the Company has not
filed applications in recent years.”

In addition, the
following disclosure will be added in future filings regarding the agreement
with Monticello Drug Company (“MDC”):

“The Company has a
service agreement with MDC.  Under this
agreement, the Company provides the warehousing, shipping, billing and
collection for several MDC owned and supplied products.  Weekly, the net sales of these products minus
certain agreed upon fees are calculated, and the proceeds are remitted to MDC
six weeks later.  MDC is responsible for
all sales, returns, advertising and possible liability claims for these
products.”

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3.                                       Gross
profit for fiscal 2004 was $3,034,000, or 35.6% of net sales.  This was a decrease of $472,000, or 13.5%,
from the gross profit of $3,506,000, or 40.0% of net sales, for fiscal 2003.  Net sales decreased $225,000, or 2.6%, for
fiscal 2004 from fiscal 2003.

One of the major reasons for the gross profit decline
in fiscal 2004 was a provision of $456,000 to cost of sales for “Loss Due to
Reduction of Inventory Value” (obsolete inventory).  This compares to a provision of only $150,000
in fiscal 2003.

Another reason for the decline was that total net
sales declined $225,000 in fiscal 2004.
Two major product lines with accompanying cost of sales percentages of
over 50% remained constant.  The net
sales reduction occurred in products with higher gross profit margins.

Freight expense was lower, in part, because of lower
sales.  In addition, in accordance with
the service agreement with MDC, an agreed upon percentage of its gross sales is
applied to the Company’s total freight charges.
Depending upon the product mix and combination with the Company’s
products, the percentage applied could be somewhat higher or lower than the
actual cost.

Product liability
insurance did not decline in fiscal 2004, but actually increased $119,000
because of increased coverage and higher premium rates.

We will make similar
disclosures in future filings, to the extent relevant in those filings.

4.                                       The
following will be included in Management’s Discussion and Analysis in future
filings:

CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

Our discussion and analysis of our
financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America.  The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
liabilities, expenses and related disclosures of contingent assets and
liabilities.  We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions; however, we believe that
our estimates are responsible.

REVENUE AND EXPENSE
RECOGNITION

Income and expenses are recorded on the
accrual basis of accounting.  The Company
recognizes revenues from sales when goods have been shipped, there are no
material uncertainties regarding customer acceptance, collection of the
resulting receivable is deemed probable and no other significant vendor
obligations exist.  Expenses are
recognized when services have been performed or inventory items have been used.  Chemical items are recognized as inventory
once Quality Control testing is in compliance with the Company specifications.

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DEFERRED INCOME

Deferred income relates to certain
consulting agreements arising from the sale of several product lines.  The deferred income is recognized over the
terms of the contracts.

INVENTORY OBSOLESCENCE
ALLOWANCE

Inventory allowances for obsolescence are
recorded based upon a periodic review by the Company’s management of its
inventory.  The Company’s management will
evaluate obsolete and slow moving inventory and determine their overall future
salability and use in manufactured products.
If the future salability and use in manufactured products of slow moving
inventory are questionable, then an allowance is recorded based upon the lower
of cost or market.  If such inventory is
determined to have no future salability or use, then such inventory will be
written off.  Changes in customer demand
for certain products could impact the allowance for obsolete inventory.

INTANGIBLE ASSETS

Intangible assets consist of product
lines (Goodwill) and covenants not to compete.
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,”
we evaluate intangible assets and other long-lived assets for impairment, at
least on an annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its estimated
future cash flows.  Recoverability of
intangible assets and other long-lived assets is measured by comparing their
net book value to the related projected undiscounted cash flows from these
assets, considering a number of factors including past operating results and
economic projections.  Any change in the
projected undiscounted cash flows from these assets as a result of changes in
the Company’s operations or prospects could alter this analysis.  If the net book value of the asset exceeds
the related undiscounted cash flows, the asset is considered impaired, and a
second test is performed to measure the amount of impairment loss.  Amortization is computed using the
straight-line method over the estimated useful life of the covenants not to
compete.

5.                                       The
Company’s last audit committee meeting was prior to the date (February 9, 2005)
of your letter.  In the past, the audit
committee has discussed critical accounting estimates, as appropriate.

Please see the response to Comment 4.

6.                                       The
Board of Directors has not yet adopted a charter for the Audit Committee but
will consider doing so.

7.                                       As
more fully outlined in our reply to Comment
9, the Company expects to increase its source of cash by a combination
of increased sales, lower costs and perhaps additional financing from outside
lenders.  Insufficient cash flow to meet
the Company’s interest and capital payments over the next twelve months will be
addressed by a possible modification of the maturity date of the Company’s
notes payable.  Any increase in cash will
be used to pay accrued interest and notes payable.  Projected interest payments and capital expenditures
will have an impact on the Company’s liquidity.

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The bank overdraft
shown in the financial statements is a book overdraft only.  The Company writes checks weekly, resulting
in a negative balance in the ledger.
However, the checks are mailed on an “as needed” basis.  The bank balance, per the bank, is generally
positive on a daily basis.

The solvency provision
has been waived by our primary lender.

In future filings,
disclosure of the above will be added.

8.                                       Although there was an overall decrease in
net revenues in fiscal 2004 from fiscal 2003, net billings in the last two
months of fiscal 2004 and 2003 were as follows:

  Net billing —
  August and September 2004

  $

  2,105,758

  Net billing — August
  and September 2003

  1,544,428

  Increase

  $

  561,330

This increase in
net billings in the last two months of fiscal 2004 accounted for most of the
increase in accounts receivable at September 30, 2004.  The increase in sales was primarily to large,
long time, financially sound companies such as: McKesson Corporation,
Walgreens, AmerisourceBergen Services Corporation, etc., with minimal potential
collection problems.  Thus, management
did not believe there was a need to increase the bad debt reserve.

Set forth below is
information regarding the method by which the number of days’ sales in average
receivables was established:

  FY 2004

  FY 2003

  Net revenues

  $

  8,533,000

  $

   8,758,000

  Net receivables:

  Beginning of
  year

  $

   580,000

  $

   1,086,000

  End of year

  $

   1,012,000

  $

  580,000

  Average
  receivables

  $

   796,000

  $

   833,000

  Average daily
  sales on account

          (net
  sales on account divided by 300)

  $

   28,400

  $

   29,200

  Number of days’
  sales in average receivables

  28.03

  28.53

  Rounded (days)

  28

  29

To the extent any of
these trends appear in future filings, additional explanation will be added to
explain the trends.

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9.                                       The
Company plans to increase sales with the introduction of additional flavors in
the lip balm product line.  In addition,
the Company is attempting to sell to new customer accounts and increase sales
to existing customers.

The Company implemented
cost reduction programs since September 2004.
They include personnel layoffs, salary cuts, wage freezes, lower
products liability premium, lower interest rate paid to a lender and the
vacating of a building.  In
addition, on March 8, 2005, a royalty expense will be expiring.  The expiration of the royalty expense will save the
Company approximately $5,000 per month.
Vacating one of the facilities will save the Company approximately
$7,500 per month in rent and utilities combined.

In future filings,
disclosure similar to that above will be included.

10.                                 In NOTE 1 Segment reporting, page
20, of the Company’s Form 10-KSB for the year ended September 30, 2004, the
Company reported two segments of business; namely, consumer personal care
products and professional dental products.
The consumer personal care products consists of approximately fifty (50)
different brand names and many more private label items.  Management feels that it is impracticable to
report revenues from each of the products in the Company’s two segments.  In future filings, as required by SFAS 131
(paragraph 37), disclosure will be added that management believes it is
impracticable to report revenues for each product within the Company’s
segments.

11.                                 In
future filings, the increase or decrease in bank overdraft will be shown as a
financing activity on the statements of cash flows.

12.                                 Sales
revenue is recognized after products are picked up, usually by a common
carrier, and signed for.  Shipping and
handling expenses are recorded in a separate department and included in selling
expenses.  The shipping expenses for the
year ended September 30, 2004 and 2003 are as follows and were included as part
of the “Selling and advertising” expenses in the Statement of Operations:

  9/30/04

  9/30/03

  Labor and fringe
  benefits

  $

  80,200

  $

   64,100

  Freight

  389,600

  563,400

  Building rental

  120,400

  56,800

  Utilities and
  supplies

  19,500

  20,000

  $

   609,700

  $

   704,300

In future filings, we
will include a similar disclosure regarding shipping and handling costs.

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13.                                 The
cost of goods sold line item consists of material (including a provision for
obsolete inventory if required), direct and indirect labor (and related fringe
benefits) and related manufacturing overhead expenses.  It also includes purchasing, receiving,
inspection (quality control functions), warehousing costs and inbound freight.

Selling and advertising expenses include salesmen’s and clerical
salaries (and related fringe benefits) and commissions, commissions to outside
representatives, travel, entertainment and expenses for various trade shows
attended.  Also included are royalty
expense on sale of certain products, coop advertising expenses, amortization of
several covenants not to compete agreements and impairment of certain product
lines (goodwill) if applicable.  As
stated in the reply to Comment 12, distribution costs are also included in this
category.

Administrative expenses include executive and clerical salaries (and
related fringe benefits), auditing and legal expenses, MIS expenses and
shareholder costs.

In future filings, we will include similar disclosure
regarding the components of these items.

14.                                 The
cooperative advertising expenses are included in selling and advertising.  The Company’s customers accrue 5% of gross
sales as a cooperative advertising allowance.
This allowance can only be collected by running the ad or performing the
promotional event and by providing proof of performance.  The Company’s credit terms are 1% 20 days,
net 30 days.

The Company does not participate in
coupons or buydowns and does not use rebates.

Slotting fees are paid
very infrequently.  Slotting expenditures
in recent years have been less than $25,000 per year.

In future filings,
disclosure similar to that above will be included.

15.                                 The
shipments and returns of MDC are compiled on a weekly basis.  From that net figure, a set percentage of
gross sales for cash discounts, freight and the Company’s fees are deducted,
and the balance due MDC is recorded as a payable.  It is paid six weeks later.  At the end of a quarter, or year end, a work
sheet entry is made, removing MDC’s net invoicing for that month from the
Company’s accounts receivable balance, and 85% of that figure is removed from
the Company’s payable balance to MDC.
The remaining 15%, which is the approximate amount of the above
mentioned deductions, is set up as a current asset.

We will make similar disclosures in future filings.

16.                                 All
of MDC’s returns and any bad debts are charged back directly to MDC; therefore,
these transactions have no effect on the Company’s allowance estimates.

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17.                                 The policy
for sales return allowances is the same for all of the Company’s products,
including private label.  Each month the
amount of actual returns is deducted from the allowances.  At the same time a provision for approximately
the same amount is added to the allowances.
If, from time to time, a customer indicates a desire to return a large
amount, such as a discontinuance of a product line, an additional provision is
recorded.  As the