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Delsite, Inc. – ‘10-K/A’ for 12/31/95

As of: Wednesday, 3/5/97 · For: 12/31/95 · Accession #: 718007-97-2 · File #: 0-11997

  As Of                Filer                Filing    For·On·As Docs:Size

 3/05/97  Delsite, Inc.                     10-K/A     12/31/95    1:109K

Amendment to Annual Report — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment to Annual Report                            45    186K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Business General Governmental Regulation Management's Discussion and Analysis of Financial Condition and Results of Operations Research and Development Summary Veterinary Medical Division
1	1st Page - Filing Submission
3	Item 1. Business
"	General
4	Veterinary Medical Division
5	Research and Development
9	Summary
12	Governmental Regulation
18	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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   UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
   Washington, D.C.  20549

 Form 10-K/A
 (Amendment No. 2)

 Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

 For the fiscal year ended December 31, 1995
Commission File Number 0-11997

 Carrington Laboratories, Inc.
(Exact name of Registrant as specified in its charter)    

Texas                                75-1435663 
(State of Incorporation)                (IRS Employer ID No.)     

2001 Walnut Hill Lane, Irving, Texas 75038
(Address of principal executive offices)

Registrant's telephone number, including area code:  (972) 518-1300       

Securities registered pursuant to Section 12(b) of the Act:         

Title of each class       Name of exchange on which registered            
None                                                          

Securities registered pursuant to Section 12(g) of the Act:         

   Common Stock ($.01 par value)
  (Title of class)
   Preferred Share Purchase Rights
  (Title of class)

Indicate by check mark whether the Registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the Securities     
Exchange Act of 1934 during the preceding 12 months (or for such          
shorter period that the Registrant was required to file such reports),    
and (2) has been subject to such filing requirements for the past 90      
days.  Yes [X]      No [ ]                                                

  Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be    
contained, to the best of the Registrant's knowledge, in definitive       
proxy or information statements incorporated by reference in Part III     
of this Form 10-K or any amendment to this Form 10-K.  [ ]                

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The aggregate market value of the voting stock held by non-     
affiliates of the Registrant on March 15, 1996, was $231,721,284.         
(This figure was computed on the basis of the closing price of such       
stock on the NASDAQ National Market on March 15, 1996 using the           
aggregate number of shares held on that date by, or in nominee name       
for, shareholders who are not officers, directors or record holders of    
10% or more of the Registrant's outstanding voting stock.  The            
characterization of such officers, directors and 10% shareholders as      
affiliates is for purposes of this computation only and should not be     
construed as an admission for any other purpose that any of such          
persons are, in fact, affiliates of the Registrant.)                      

Indicate the number of shares outstanding of each of the        
Registrant's classes of Common Stock, as of the latest practicable        
date:   8,657,421 shares of Common Stock, par value $.01 per share,       
were outstanding on March  15, 1996.                                      

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 DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's proxy statement for its annual     
meeting of shareholders to be held on May 23, 1996 are incorporated by    
reference into Part III hereof, to the extent indicated herein.           

  PART I

ITEM 1.  BUSINESS.                                                        

 General

  Carrington Laboratories, Inc. ("Carrington" or the "Company") is a
research-based pharmaceutical and medical device company engaged in the   
development, manufacturing and marketing of carbohydrate-based            
therapeutics for the treatment of major illnesses and the dressing and    
management of wounds.  The Company is comprised of three business         
divisions.  See Note 15 to the financial statements of this annual        
report for financial information about these business divisions.  The     
Company sells, using a network of distributors, nonprescription           
products through its Wound and Skin Care Division, veterinary medical     
devices and pharmaceutical through its Veterinary Medical Division and    
consumer products through its consumer products subsidiary, Caraloe,      
Inc.  The Company's research and product portfolio are based primarily    
on complex carbohydrate technology derived from the Aloe vera plant.      

The Company was incorporated in Texas in 1973, as Ava Cosmetics,
Inc.  In 1986, the Company sold the direct sales business it was then     
operating and changed its name to Carrington Laboratories, Inc.           

  Wound and Skin Care Division

 Carrington's Wound and Skin Care Division markets a comprehensive
line of wound management products to hospitals, alternative care          
facilities and the home health care market.  The Company's products are   
designed to maintain a moist wound environment which aids the healing     
process and to maintain the integrity of contiguous healthy skin.         
Carrington products are used in a wide range of acute and chronic wound   
and skin conditions and for incontinence and ostomy care.                 

The Company is committing significant resources to its wound and
skin care business.  Primary marketing emphasis is directed toward        
hospitals, managed care organizations, alternate care facilities and      
home health care providers, with wound and skin care products being       
promoted primarily to physicians and specialty nurses, e.g.               
enterostomal therapists.  Opportunities in the alternate care and home    
health care markets are also addressed through a telemarketing sales      
team and a National Accounts Department.                                  

The Company's hospital field sales force currently employs 43   
sales representatives, each assigned to a specific geographic area in     
the United States, five regional sales managers, a representative in      
Puerto Rico and a managing director of  the Wound and Skin Care           
Division.  The Company also uses an independent sales company employing   
four sales representatives to sell its products on a commission basis     
and an independent sales representative in Canada.  In addition to this   

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field sales force, the Wound and Skin Care Division employs seven         
telemarketers who focus on alternative care facilities and the home       
health care market, and three persons in its National Accounts            
Department.                                                               

The Company's products are primarily sold through a network of  
distributors.  Two of the Company's largest distributors in the           
hospital market for the last several years have been Baxter Healthcare    
Corporation ("Baxter") and Owens & Minor.  During fiscal 1993, 1994 and   
1995, sales of wound and skin care products to Baxter represented 10%,    
11% and 10%, respectively, of the Company's total net sales.  Sales to    
Owens & Minor represented 8%, 7%, and 14%, respectively, of total net     
sales over the same period.                                               

 Consumer Health

Caraloe, Inc., a separate subsidiary of the Company, markets or 
licenses consumer products and bulk ingredients utilizing the Company's   
patented complex carbohydrate technology.  Attention has been focused     
on three goals, the first of which is to sell Caraloe's Aloe              
Nutritional  brand products through the health food store market.  The    
second goal has been to develop private label aloe products for           
entrepreneurs seeking a high quality line of aloe products.  The third    
goal has been to become a supplier of bulk AVMP(TM) (Aloe vera            
mucilaginous polysaccharide) to commercial companies incorporating aloe   
vera mucilaginous polysaccharides into their established product lines.   
In May 1994, an agreement was signed with Mannatech, Inc., formerly       
Emprise International, Inc., to supply it bulk Manapol(R).  In February   
1996, an agreement was signed with Mannatech granting it an exclusive     
license in the United States for Manapol(R).  During fiscal 1994 and      
1995, sales of Manapol(R) to Mannatech represented 4% and 10%,            
respectively, of the Company's total net sales.                           

   Veterinary Medical Division

The Carrington Veterinary Medical Division ("CVMD") markets     
Acemannan Immunostimulant, a vaccine adjuvant, and several wound and      
skin care products to the veterinary market.  Acemannan Immunostimulant   
was conditionally approved by the United States Department of             
Agriculture ("USDA") in November 1991, for use as an aid in the           
treatment of canine and feline fibrosarcoma, a form of soft tissue        
cancer that affects dogs and cats.  A conditional approval means that     
efficacy and potency tests are required, and the product's label must     
specify that these studies are in progress.  The "conditional" aspect     
of the approval will be removed upon completion of additional potency     
testing which is in the final stages of development.  The Company         
expects to complete these tests in 1996.  There can be no assurance       
that these tests will result in he removal of the conditional             
restriction on the USDA s approval of Acemannan Immunostimulant.          

 In September 1990, the Company granted Solvay Animal Health, Inc.
("Solvay") an exclusive, worldwide license to use and sell a bulk         
pharmaceutical mannan adjuvant for poultry disease.  In January 1992,     
Solvay received approval from the USDA to market the bulk                 
pharmaceutical mannan as an adjuvant to a vaccine for Marek's disease,    
a virus infection that kills chickens or renders them unfit for human     
consumption.  Solvay sells the product under the trademark ACM I.         

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In March 1996, the Company signed an agreement with Farnam      
Companies, Inc., a leading veterinary marketing company, to promote and   
sell the CarraVet(TM) product line, including Acemannan Immunostimulant.  

    Research and Development

 General

In 1984, the Company isolated and identified a polymeric compound 
with a molecular weight between one and two million Daltons from the      
Aloe vera plant.  This compound has been given the generic name           
"acemannan" by the United States Adopted Names Council.  The Company      
intends to seek approval of the Food and Drug Administration (the         
"FDA") and other regulatory agencies to sell products based on complex    
carbohydrates in the United States and in foreign countries:  (i) to      
treat inflammatory bowel diseases, including ulcerative colitis, a        
widespread, chronic, inflammatory disease of the colon; (ii) to treat     
various forms of cancer; (iii) for use as an adjuvant to various          
vaccines; and (iv) to treat non-healing and other wounds.  For a more     
comprehensive listing of the type, indication and status of products      
currently under development by the Company, see "Research and             
Development--Summary" below.  The regulatory approval process, both       
domestically and internationally, can be protracted and expensive, and    
there is no assurance that the Company will obtain approval to sell its   
products for any treatment or use (see "Governmental Regulation"          
below).                                                                   

The Company is marketing or developing several products which in  
the past were given the general name of acemannan, suggesting the         
products were identical.  This is not correct because there are ten       
products in development or being marketed that are derived from 3 basic   
extracts of the Aloe vera plant.  The basic freeze-dried aloe vera        
extract is reconstituted to produce Manapol(R) and AVMP(TM) for both food 
grade and cosmetic grade products.  Further refinement produces Bulk      
Pharmaceutical Mannans that are used to produce hydrogels; the            
  Carrington(TM) Patch, an oral care product; Carra Sorb(TM) M, a freeze-dried
wound dressing; adjuvants, ACM I marketed by Solvay, and CARN 500 which   
is being developed as an adjuvant for various vaccines; and Aliminase(TM) 
(formerly CARN 1000) capsules which are being developed for ulcerative    
colitis.  Finally, Bulk Injectable Mannans are marketed as Acemannan      
Immunostimulant (CARN 700), and a product has been developed for the      
treatment of cancer, Alovex(TM) (formerly CARN 750).                      

The Company expended approximately $5,397,000, $5,334,000, and  
$5,370,000 on research and development in fiscal, 1993, 1994, and 1995,   
respectively.  The Company estimates that in fiscal 1996 it will spend    
more on research and development than in 1995.  Currently, the            
Company's research staff  comprises 13 full-time employees as compared    
to 21 full-time employees at the end of 1994.                             

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Preclinical Research

The Company identified the characteristics of its complex       
carbohydrates by a series of studies in the Company's laboratories and    
in several contract laboratories.  Based on toxicology tests sponsored    
by the Company on different animal species with dosages up to 40 times    
the proposed intravenous human dosage, in vitro and in vivo tests for     
mutagenicity, dermal sensitization tests, results of a Phase I safety     
study of an oral product in humans and a Phase I safety study of an       
intravenously administered preparation in humans, no clinically           
significant toxicity of the Company's products has been noted.  Further   
safety studies may be required by the FDA prior to the approval of any    
applications of complex carbohydrates.                                    

Other preclinical studies conducted in the Company's laboratories 
and in outside laboratories have shown that certain of the Company's      
complex carbohydrates stimulate macrophage and other white blood cells    
to produce lymphokines, including interleukin-1 and tumor necrosis        
factor alpha, that regulate other cells.  Interleukin-1 stimulates        
fibroblasts, which are essential to wound healing.  Tumor necrosis        
factor alpha acts against tumors in the body.  In addition, laboratory    
experiments conducted by the Company have shown that some complex         
carbohydrates have both pro- and anti-inflammatory actions.               

The Company believes that its products' pharmacological actions 
and lack of toxicity make them excellent candidates for further           
development as therapeutic agents for the treatments and uses for which   
the Company intends to seek regulatory approvals (see "Research and       
Development -- General" above).  There is no assurance, however, that     
the Company will be successful in its efforts.                            

 The Company operates a research and development laboratory at the
Texas A&M University Research Park to expand preclinical research in      
various wound healing applications and mechanisms of action.  Pursuant    
to this arrangement, the Company has access to leading authorities in     
immunology, as well as facilities and equipment to engage in              
experimentation and analysis at the basic research level.                 

  Animal Studies

The Company has pursued a strategy of developing products for   
certain animal indications, clinical testing of which may have            
application to studies for treatment of human diseases.  Animal           
clinical testing necessary to obtain eventual approval of a product for   
treatment of human diseases may also provide data sufficient to obtain    
approval for the related veterinary indication.  This approach enables    
the Company to obtain revenues from its research efforts at an earlier    
date and also expands data available from actual use of the product in    
animals.  The Company's clinical research efforts to date have focused    
on the indications described below.                                       

Vaccine Adjuvants.  An adjuvant is a substance that enhances the
antibody response to an antigen.  The ability to generate a vigorous      
immune response to an antigen is critical to the effectiveness of a       
vaccine.  The Company's studies indicate that acetylated mannans, when    
used as a vaccine adjuvant, produce marked stimulation of the immune      
system.                                                                   

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In 1990, the Company received approval from the USDA to sell an 
adjuvant to licensed manufacturers for use in combination with animal     
vaccines.  This use as a vaccine adjuvant for certain poultry diseases    
was licensed to Solvay pursuant to an agreement between Solvay and the    
Company entered into in September 1990.  In January 1992, Solvay          
received approval from the USDA to market an adjuvant to its vaccine      
for Marek's disease (see "Veterinary Medical Division" above).            

The Company has conducted or sponsored studies of CARN 500      
adjuvants with other vaccines for animals.  Based on these studies, the   
Company, either directly or through third party licensees, intends to     
pursue development of adjuvants for other animal vaccines.  In 1993,      
initiation of a program was begun to develop adjuvants for mammalian      
vaccines and for vaccines for marine animals under licenses with one      
European company.  There can be no assurance however, that such           
development will be successful or that the Company will be able to        
develop, or to enter into any licensing agreements for the development    
of, any additional adjuvants.                                             

 Evaluation of Anti-Tumor Activity.  Acetylated mannans (CARN 750)
are immunomodulating agents that increase circulating levels of           
interleukin-1 and tumor necrosis factor alpha.  A series of studies       
conducted at Texas A&M University in 1988 and 1989 on mice with highly    
malignant tumors indicated that a single intraperitoneal dose caused      
significant tumor reduction in a statistically significant percentage     
of mice.  This effect in many instances was dramatic, with complete       
regression of the tumor and with continuing immunity.  Recovered          
animals were resistant to syngeneic tumor reimplantation for up to six    
months after initial tumor regression.                                    

In 1991, the USDA granted the Company conditional approval to   
market an injectable form of a complex carbohydrate as an aid in the      
treatment of canine and feline fibrosarcoma, a form of soft tissue        
cancer, under the name Acemannan Immunostimulant.  The Company believes   
that the USDA's remaining requirements to remove the conditional          
restriction can be completed in 1996 (see "Veterinary Medical Division"   
above).  Of course, there can be no assurance as to whether or when the   
USDA will remove the conditional restriction on its approval of this      
product.                                                                  

   Human Studies

  Evaluation of Aliminase(R)(formerly CARN 1000) in the Treatment of
Inflammatory Bowel Diseases.  In October 1991, the Company filed an       
investigational new drug ("IND") application requesting approval to       
conduct human clinical trials on the efficacy of Aliminase(R) in the      
treatment of ulcerative colitis.  In November 1991, the Company           
received notice that the FDA was withholding approval of the study,       
pending submission of additional information.  Additional studies         
requested by the FDA were completed, and the results were submitted in    

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October 1992.  In December 1992, the Company received authorization       
from the FDA to commence human clinical trials under the IND              
application.  In early 1993, the Company began a pilot safety and         
efficacy study with oral Aliminase(R) in the treatment of ulcerative      
colitis patients who are experiencing an acute flare-up of the disease.   
This study was conducted by treating 54 patients with 400 or 800          
milligram doses twice daily for two or four weeks.  After four weeks,     
the disease activity index and the signs and symptoms of the disease      
were significantly improved, and the safety of the oral product           
continued to be confirmed.  A large controlled trial of Aliminase(R) in   
patients with ulcerative colitis began in September 1995.  A total of     
288 patients will be enrolled in four groups comparing a placebo with     
three doses of Aliminase(R) (150, 300 and 600 mg dosage levels,           
administered twice daily for six weeks).  Results are expected in 1996.   

Evaluation of Alovex(TM) (formerly CARN 750) in the Treatment of
Solid Tumors in Humans.  The Company believes that this intravenous       
product may be broadly useful in cancer therapy, with potential           
application in the treatment of major solid tumors, including melanoma,   
breast carcinoma, prostate carcinoma, colon carcinoma, hypernephroma      
and soft tissue sarcoma.  The Company initiated a Phase I human           
clinical trial of injectable Alovex(TM) in certain solid tumor            
indications.  The trial began in the United States in late 1995.  As a    
result of the success of Acemannan Immunostimulant in dogs and cats,      
the Company has reason to believe that injectable Alovex(TM) may play a   
significant role in the treatment of cancer in humans.                    

Evaluation of Carrington  Patch in the Treatment of Aphthous    
Ulcers. Carrington's efforts to broaden the claims for wound care         
products containing Carrasyn(R) Hydrogel were expanded to include an      
application within the oral health care field.  Two studies were          
conducted at Baylor College of Dentistry to examine the efficacy and      
safety of two formulations of Carrasyn(R) Hydrogel wound dressing in the  
treatment of oral aphthous ulcers (canker sores).  The first study        
involved Carrasyn(R) Hydrogel wound dressing modified for intraoral use   
versus a leading product.  The second trial involved the modified oral    
formulation of Carrasyn(R) Hydrogel that had been freeze-dried.  This     
product, Carrington(TM) Patch, reduced the pain of these ulcers.  A 510(k)
was submitted to the FDA for permission to market the freeze-dried        
formulation for the management of oral aphthous ulcers.  This was         
granted by the FDA, and the product will be marketed as Carrington(TM)    
Patch for the reduction of pain due to aphthous ulcers.                   

Evaluation of Carrasyn  in Wound Healing.  In 1993, a study was 
conducted at M.D. Anderson Cancer Center to determine if Carrasyn(R)      
Hydrogel was of benefit in treating radiation-induced skin reactions of   
mice.  These studies clearly showed that, when compared to controls,      
Carrasyn(R) Hydrogel could significantly reduce radiation-induced         
inflammation and tissue damage in animals.  As a result of this work, a   
small clinical trial was performed in 1994, studying the radiation-       
sparing effects of Carrasyn(R) Hydrogel wound dressing in four oncology   
patients.  Further trials will continue in 1996.  Four new indications    
(post-surgical incisions, sunburn, diabetic ulcers and radiation          
dermatitis) for Carrasyn(R) were added in 1995.                           

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    Evaluation of Carrasyn  Freeze-Dried Gel (Carra Sorb(TM) M) in Wound
Healing.  Following the submission of a 510(k) for a preservative-free    
freeze-dried gel for wound care, the FDA allowed Carrington to market     
this product, and it was launched in early 1996.                          

 Summary.  The following table outlines the status of the products
and potential indications of the Company's complex carbohydrates          
developed, planned or under development.  There is no assurance of        
successful development, completion or regulatory approval of any          
product not yet on the market.                                            

PRODUCTS AND POTENTIAL INDICATIONS DEVELOPED, PLANNED OR UNDER          
DEVELOPMENT PRODUCT OR POTENTIAL INDICATION POTENTIAL MARKET APPLICATIONS 
STATUS                                                                    

Topical                                                                   
  Dressings              Pressure and Vascular Ulcers         Marketed
  Cleansers                       Wounds                      Marketed
  Antifungal                     Candida                      Marketed

Oral                                                                      
Human                                                                 
   Anti-inflammatory         Ulcerative Colitis                Phase III
                                                              Clinical Trial

Injectable                                                                
Human                                                                 
  Anticancer          Melanoma, Breast, Prostate, Colon,       Phase I

                         Hypernephroma, and Soft Tissue       Clinical Trial
Sarcoma             

Veterinary                                                            
Anticancer                Fibrosarcoma                            
Marketed                                                                  

Dental                                                                    
Pain reduction             Aphthous Ulcers                Marketed

Vaccine Adjuvant                                                          
Veterinary                                                            
  Poultry Vaccines           Marek's Disease                  Marketed
Livestock                  Cattle, Sheep                          
Clinical Trials                                                           
    Marine (water treatment)   Trout, Shrimp               Clinical Trials

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  Licensing Strategy

The Company expects that prescription pharmaceutical products       
containing certain defined mannans will require a substantial degree of   
development effort and expense.  Before governmental approval to market   
any such product is obtained, the Company may license these mannans for   
certain indications to other pharmaceutical companies in the United       
States or foreign countries and require such licensees to undertake the   
steps necessary to obtain marketing approval for specific indications     
or in a particular country.                                               

Similarly, the Company intends to license third parties to market   
products containing defined mannans for certain human indications when    
it lacks the expertise or financial resources to market effectively.      
If the Company is unable to enter into such agreements, it may            
undertake to market the products itself for such indications.  The        
Company's ability to market these mannans for specific indications will   
depend largely on its financial condition at the time and the results     
of related clinical trials.  There is no assurance that the Company       
will be able to enter into any license agreements with third parties or   
that, if such license agreements are concluded, they will contribute to   
the Company's overall profits.                                            

In November 1995, the Company signed a licensing agreement with a   
supplier of calcium alginates and other wound care products.  Under the   
agreement, the Company has exclusive marketing rights to advanced         
calcium alginates products for North and South America and the People s   
Republic of China.  The Company will continue to seek opportunities to    
license products from third parties that will enhance its product         
portfolio.                                                                

  Raw Materials and Processing

The principal raw material used by the Company in its operations is 
the leaf of the plant Aloe barbadensis Miller, popularly known as aloe    
vera.  Through a patented process, the Company produces bulk              
pharmaceutical and injectable mannans and freeze-dried aloe vera          
extract from the central portion of the aloe vera leaf known as the       
gel.  Bulk pharmaceutical mannan, in the form of a hydrogel, is used as   
an ingredient in certain of the Company's wound and skin care products.   
Through additional processing, bulk mannans may be produced in oral and   
injectable dosage forms.                                                  

In May 1990, the Company purchased a 405-acre farm in the Guanacaste
province of northwest Costa Rica which currently has approximately 125    
acres planted with aloe vera. The Company plans to plant additional       
acreage as demand for aloe vera leaves increases.  The Company believes   
that the Costa Rica farm will be capable of providing substantially all   
of the aloe vera leaves required to meet the Company's presently          
anticipated needs (see "Properties--Costa Rica Facility" below).          

Manufacturing       

Prior to the second quarter of 1995, the Company produced           
substantially all its wound and skin care products in a leased facility   
in Dallas, Texas.  During the first quarter of 1994, the Company          
completed an evaluation of the production requirements that would be      
needed to meet all federal regulatory requirements as a fully             

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integrated pharmaceutical manufacturer, as well as the production         
capacity that would be required to meet continued growth in the           
Company's wound and skin care business.  It was decided to move its       
wound and skin care manufacturing operation from its present location     
to an unused portion of the Company's headquarters facility in Irving,    
Texas, and expand the facility through higher capacity equipment.  The    
moving, upgrading and expansion of the manufacturing operation began in   
the fourth quarter of 1994, and the project was completed and             
production began during the third quarter of 1995.  At the same           
location, the Company has upgraded its capabilities to produce            
injectable grade pharmaceutical products.  The Company believes that      
the new plant's capacity will provide sufficient capacity for the         
present line of products, and accommodate new products and sales          
growth.  Final packaging of certain of the Company's wound care           
products is completed by outside vendors.  The Company's calcium          
alginates, films and freeze-dried products are being provided by third    
parties.                                                                  

All of the Company's bulk pharmaceutical mannans, bulk injectable   
mannans and freeze-dried aloe vera extracts are produced in its aloe      
vera processing plant in Costa Rica.  This facility has the ability to    
supply the bulk aloe vera raw materials requirements of the Company's     
current product lines for the foreseeable future.  During the first       
quarter of 1994, the Company initiated a project in Costa Rica to         
upgrade the production plant to meet regulatory requirements for the      
production of bulk pharmaceutical oral and injectable mannans as          
required for IND's.  This project was completed in the fourth quarter     
of 1994.  Finished oral and injectable dosage forms will be produced by   
outside vendors until in-house production becomes economically            
justified.                                                                

The production capacity of the Costa Rica plant is larger than the  
Company's current usage level.  Management believes, however, that the    
cost of the Costa Rica facility will eventually be recovered through      
operations.  The larger production capacity will be required to conduct   
large scale clinical trials with bulk pharmaceutical and injectable       
mannans.                                                                  

 Competition

Research and Development.  The biopharmaceutical field is expected  
to continue to undergo rapid and significant technological change.        
Potential competitors in the United States are numerous and include       
pharmaceutical, chemical and biotechnology companies.  Many of these      
companies have substantially greater capital resources, research and      
development staffs, facilities and expertise (including in research and   
development, manufacturing, testing, obtaining regulatory approvals and   
marketing) than the Company.  This competition can be expected to         
become more intense as commercial applications for biotechnology and      
pharmaceutical products increase.  Some of these companies may be         
better able than the Company to develop, refine, manufacture and market   
products which have application to the same indications as bulk           
pharmaceutical mannans and bulk injectable mannans.  The Company          
understands that certain of these competitors are in the process of       
conducting human clinical trials of, or have filed applications with      
government agencies for approval to market, certain products that will    
compete with the Company's products.                                      

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Wound and Skin Care Division, Caraloe, Inc., and CVMD.  The Company 
competes against many companies that sell products which are              
competitive with the Company's products, with many of its competitors     
using very aggressive marketing efforts.  Many of the Company's           
competitors are substantially larger than the Company in terms of sales   
and distribution networks and have substantially greater financial and    
other resources.  The Company's ability to compete against these          
companies will depend in part on the continued expansion of the           
marketing network for its products.  The Company believes that the        
principal competitive factors in the marketing of its products is their   
quality, and that they are naturally based and competitively priced.      

 Governmental Regulation

The production and marketing of the Company's products, and the     
Company's research and development activities, are subject to             
regulation for safety, efficacy and quality by numerous governmental      
authorities in the United States and other countries.  In the United      
States, drugs for human use are subject to rigorous FDA regulation.       
The Federal Food, Drug and Cosmetic Act, as amended, the regulations      
promulgated thereunder, and other federal and state statutes and          
regulations govern, among other things, the testing, manufacture,         
safety, effectiveness, labeling, storage, record keeping, approval,       
advertising and promotion of the Company's products.  For marketing       
outside the United States, the Company is subject to foreign regulatory   
requirements governing human clinical trials and marketing approval for   
drugs and devices.  The requirements governing the conduct of clinical    
trials, product licensing, pricing and reimbursement may vary widely      
from country to country.                                                  

Food and Drug Administration.  The contents, labeling and           
advertising of many of the Company's products are regulated by the FDA.   
The Company is required to obtain FDA approval before it can study or     
market any proposed prescription drugs and may be required to obtain      
such approval for proposed nonprescription products.  This procedure      
involves extensive clinical research, and separate FDA approvals are      
required at various stages of product development.  The approval          
process requires, among other things, presentation of substantial         
evidence to the FDA, based on clinical studies, as to the safety and      
efficacy of the proposed product.                                         

In order to initiate human clinical trials on a product, extensive  
basic research and development information must be submitted to the FDA   
in an investigational new drug ("IND") application.  The IND              
application contains a general investigational plan, a copy of the        
investigator's brochure (a comprehensive document provided by the drug    
manufacturer), copies of the initial protocol for the first study, a      
review of the chemistry, manufacturing and controls information for the   
drug, pharmacology and toxicology information, any previous human         
experience with the drug, results of preclinical studies and any other    
information requested by the FDA.                                         
If permission is obtained to proceed to clinical trials based on the
IND application, initial trials, usually categorized as Phase I, are      
instituted.  The initial or Phase I trials typically involve the          
administration of small, increasing doses of the investigational drug     
to healthy volunteers, and sometimes patients, in order to determine      
the general overall safety profile of the drug and how it is              
metabolized.  Once the safety of the drug has been established, Phase     

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II efficacy trials are conducted in which the expected therapeutic        
doses of the drug are administered to patients having the disease for     
which the drug is indicated, and a therapeutic response is sought as      
compared to the expected progression of the underlying disease or         
compared to a competitive product or placebo.  Information also is        
sought on any possible short-term side effects of the drug.  If           
efficacy and safety are observed in the Phase II trials, Phase III        
trials are undertaken on an expanded group in which the patients          
receiving the drug are compared to a different group receiving either a   
placebo or some form of accepted therapy in order to establish the        
relative safety and efficacy of the new drug compared with the control    
group.  Data are also collected to provide an adequate basis for future   
physician prescribing information.                                        

If Phases I through III are successfully completed, the data from   
these trials are compiled into a new drug application ("NDA"), which is   
filed with the FDA in an effort to obtain marketing approval.  In         
general, an NDA will include a summary of the components of the IND       
application, a clinical data section reviewing in detail the studies      
from Phases I through III and the proposed description of the benefits,   
risks and uses, or labeling, of the drug.                                 

In general, a more comprehensive NDA and a more prolonged review    
process are required for drugs not previously approved for marketing by   
the FDA.  If a second indication for an already approved product is       
sought, since many of the components of the review process are the        
same, a shortened review process generally can be anticipated.            
However, the FDA gives high priority to novel drugs providing unique      
therapeutic benefits and a correspondingly lower priority to drugs        
similar to or providing comparable benefits to others already on the      
market.                                                                   

In addition to submitting safety and efficacy data derived from     
clinical trials for FDA approval, NDA approval requires the               
manufacturer of the drug to demonstrate the identity, potency, quality    
and purity of the active ingredients of the product involved, the         
stability of these ingredients and compliance of the manufacturing        
facilities, processes and quality control with the FDA's current Good     
Manufacturing Practices regulations.  After approval, manufacturers       
must continue to expend time, money and effort in production and          
quality control to assure continual compliance with the current Good      
Manufacturing Practices regulations.                                      

Certain of the Company's wound and skin care products are registered
with the FDA as "devices" pursuant to the regulations under Section       
510(k) of the Federal Food, Drug and Cosmetic Act, as amended.  A         
device is a product used for a particular medical purpose, such as to     
cover a wound, with respect to which no pharmacological claim can be      
made.  A device which is "substantially equivalent" to another device     
existing in the market prior to May 1976 can be registered with the FDA   
under Section 510(k) and marketed without further testing.  A device      
which is not "substantially equivalent" is subject to an FDA approval     
process similar to that required for a new drug, beginning with an        
Investigational Device Exemption and culminating in a Premarket           
Approval.  The Company has sought and obtained all its device approvals   
under Section 510(k).  With respect to certain of its wound and skin      
care products, the Company intends to develop claims for which IND and    
NDA submissions will be required.                                         

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Department of Agriculture.  Certain products being developed by the 
Company for  animal health indications must be approved by the USDA.      
The procedure involves extensive clinical research, and USDA approvals    
are required at various stages of product development.  The approval      
process requires, among other things, presentation of substantial         
evidence to the USDA as to the safety and efficacy of the proposed        
product.  Furthermore, even if approval to test a product is obtained,    
there is no assurance that ultimate approval for marketing the product    
will be granted.  USDA approval procedures can be protracted.             

Other Regulatory Authorities.  The Company's advertising and sales  
practices are subject to regulation by the Federal Trade Commission,      
the FDA and state agencies.  The Company's processing and manufacturing   
plants are subject to federal, state and foreign laws and to regulation   
by the Bureau of Alcohol, Tobacco and Firearms of the Department of the   
Treasury and by the Environmental Protection Agency as well as the FDA.   

The Company believes that it is in substantial compliance with all  
applicable laws and regulations relating to its operations, but there     
is no assurance that such laws and regulations will not be changed.       
Any such change may have a material adverse effect on the Company's       
operations.                                                               

  Patents and Proprietary Rights

As is industry practice, the Company has a policy of using patent,  
trademark and trade secret protection with a view to preserving its       
right to exploit the results of its research and development activities   
and, to the extent it may be necessary or advisable, to exclude others    
from appropriating the Company's proprietary technology.  The Company's   
policy is to protect aggressively its proprietary technology by seeking   
and enforcing patents in a worldwide program.                             

The Company has obtained patents or filed patent applications in the
United States and approximately 24 other countries in three series        
regarding the compositions of acetylated manna derivatives, the           
processes by which they are produced and the methods of their use.  The   
first series of patent applications, relating to the compositions of      
acetylated manna derivatives and certain basic processes of their         
production, was filed in a chain of United States patent applications     
and its counterparts in the other 24 countries.  The first United         
States patent application in this first series, covering the              
composition claims of acetylated manna derivatives, matured into United   
States Patent No. 4,735,935 (the "935 Patent"), which was issued on       
April 5, 1988.  United States Patent No. 4,917,890 (the "890 Patent")     
issued on April 17, 1990 from a divisional application to the 935         
Patent.  This divisional application pertains to most of the remaining    
claims in the original application not covered by the 935 Patent.  The    
890 Patent generally relates to the basic processes of producing          
acetylated manna derivatives, to certain specific examples of such        
processes and to certain formulations of acetylated manna derivatives.    
Two other divisional applications covering the remaining claims not       
covered by the 890 Patent matured into patents, the first on September    
25, 1990, as United States Patent No. 4,959,214, and the second on        

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October 30, 1990, as United States Patent No. 4,966,892.  Foreign         
patents that are counterparts to the foregoing United States patents      
have been granted in some of the member states of the European Economic   
Community and several other countries.                                    

The second series of patent applications related to preferred       
processes for the production of acetylated manna derivatives.  One of     
them matured into United States Patent No. 4,851,224, which was issued    
on July 25, 1989.  This patent is the subject of a Patent Cooperation     
Treaty application and national foreign applications in several           
countries.  An additional United States patent based on the second        
series was issued on September 18, 1990, as United States Patent          
No. 4,957,907.                                                            

The third series of patent applications, relating to the uses of    
acetylated manna derivatives, was filed subsequent to the second          
series.  Three of them matured into United States Patent                  
Nos. 5,106,616, issued on April 21, 1992, 5,118,673, issued on June 2,    
1992, and 5,308,838, issued on May 3, 1994.  The Company intends to       
file a number of divisional applications to these patents, each dealing   
with specific uses of acetylated manna derivatives.  A Patent             
Cooperation Treaty application based on the parent United States          
application has been filed designating a number of foreign countries in   
which the Company has the option to file specific applications.           

In addition, the Company has also obtained a patent in the United   
States relating to a wound cleanser, U.S. Patent No. 5,284,833, issued    
on February 8, 1994.  This patent application is the subject of a         
Patent Cooperation Treaty application designating a number of foreign     
countries in which the Company has the option to file specific            
applications in the designated foreign countries.                         

The Company has obtained a patent in the United States relating to a
therapeutic device made from freeze-dried complex carbohydrate hydrogel   
(U.S. Patent No. 5,409,703 issued on April 25, 1995).                     

The Company intends to file patent applications with respect to     
subsequent developments and improvements when it believes such            
protection is in the best interest of the Company.  Although the scope    
of protection which ultimately may be afforded by the patents and         
patent applications of the Company is difficult to quantify, the          
Company believes its patents will afford adequate protection to conduct   
the business operations of the Company.  However, there can be no         
assurance that (i) any additional patents will be issued to the Company   
in any or all appropriate jurisdictions, (ii) litigation will not be      
commenced seeking to challenge the Company's patent protection or such    
challenges will not be successful, (iii) processes or products of the     
Company do not or will not infringe upon the patents of third parties     
or (iv) the scope of patents issued to the Company will successfully      
prevent third parties from developing similar and competitive products.   
It is not possible to predict how any patent litigation will affect the   
Company's efforts to develop, manufacture or market its products.         

The Company also relies upon, and intends to continue to rely upon, 
trade secrets, unpatented proprietary know-how and continuing             
technological innovation to develop and maintain its competitive          
position.  The Company typically enters into confidentiality agreements   

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with its scientific consultants, and the Company's key employees have     
entered into agreements with the Company requiring that they forbear      
from disclosing confidential information of the Company and assign to     
the Company all rights in any inventions made while in the Company's      
employ relating to the Company's activities.  Accordingly, the Company    
believes that its valuable trade secrets and unpatented proprietary       
know-how are adequately protected.                                        

The technology applicable to the Company's products is developing   
rapidly.  A substantial number of patents have been issued to other       
biopharmaceutical companies.  In addition, competitors have filed         
applications for, or have been issued, patents and may obtain             
additional patents and proprietary rights relating to products or         
processes competitive with those of the Company.                          

To the Company's knowledge, acetylated manna derivatives do not     
infringe any valid, enforceable, United States patents.  A number of      
patents have been issued to others with respect to various extracts of    
the Aloe vera plant and their uses and formulations, particularly in      
respect of skin care and cosmetic uses.  While the Company is not aware   
of any existing patents which conflict with its current and planned       
business activities, there can be no assurance that holders of such       
other aloe vera based patents will not claim that particular              
formulations and uses of acetylated manna derivatives in combination      
with other ingredients or compounds infringe, in some respect, these      
other patents.  In addition, others may have filed patent applications    
and may have been issued patents relating to products and technologies    
potentially useful to the Company or necessary to commercialize its       
products or achieve their business goals.  There is no assurance that     
the Company will be able to obtain licenses of such patents on terms      
acceptable to it.                                                         

The Company has given the trade name Carrasyn(R) to certain of its  
products containing acetylated manna derivatives.  A selected series of   
domestic and foreign trademark applications exists for the marks          
Carrisyn(R), Manapol(R) and Carrasyn(R) which are registered in the United
States and several foreign countries.  Further, the Company has filed     
applications for the registration of a number of other trademarks,        
including AVMP , both in the United States and in certain foreign         
countries.  The Company believes that its trademarks and trade names      
are valuable assets.                                                      

Employees     

As of March 1, 1996, the Company employed 276 persons, of whom 26   
were engaged in the operation and maintenance of its Irving processing    
plant, 131 were employed at the Company's facility in Costa Rica and      
the remainder were executive, research, quality assurance,                
manufacturing, administrative, sales, and clerical personnel.  Of the     
total number of employees, 102 were located in Texas, 131 in Costa Rica   
and one in Puerto Rico.  In addition, 42 sales personnel were located     
in 26 other states.  The Company considers relations with its employees   
to be good.  The employees are not represented by a labor union.          

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Financing   

In January 1995, the Company entered into a financing arrangement   
with NationsBank of Texas, N.A.  The agreement is composed of a           
$2,000,000 line of credit which expired one year from the date of the     
agreement and a $6,300,000 term loan that matures five years from the     
date of the agreement.  The interest rate on both credit facilities is    
prime plus one-half percent or the London Interbank Offering Rate plus    
200 basis points set for a period of thirty, sixty, ninety or one         
hundred eighty days.  The loans are collateralized by the Company's       
assets and contain certain covenants.  As of December 31, 1995, the       
Company was not in compliance with the term loan's fixed charge ration    
covenant.  The Company is in discussions with the Bank and is currently   
working toward a long-term resolution to the non-compliance.  As no       
binding amendments to the term-loan have been agreed upon as of March     
31, 1996, all outstanding debt under the term-loan has been presented     
as current for reporting purposes.  Given the current cash position,      
the Company's short- and long-term liquidity will not be significantly    
affected.  As of March 15, 1995, borrowings outstanding under the line    
of credit and term loan were $0 and $2,977,073, respectively.             

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ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION     
AND RESULTS OF OPERATIONS.                            

Background                                                                

The Company is a research-based pharmaceutical and medical device         
company engaged in the development, manufacturing and marketing of        
carbohydrate-based therapeutics for the treatment of major illnesses      
and the dressing and management of wounds and other skin conditions.      
The Company sells nonprescription products through its wound and skin     
care division; veterinary medical devices and pharmaceutical products     
through its veterinary medical division; and consumer products through    
its consumer products subsidiary, Caraloe, Inc.  The Company's research   
and product portfolio is primarily based on complex carbohydrate          
technology derived naturally from the Aloe vera plant.                    

In February 1995, the Company changed its fiscal year ending from         
November 30 to December 31. Comparative financial statements reflect      
the single month of December 1994, the fiscal year ended December 31,     
1995, and the preceding fiscal years ended November 30.                   

Liquidity and Capital Resources                                           

At December 31, 1995 and November 30, 1994, the Company held cash and     
cash equivalents of $6,222,000 and $1,805,000, respectively.  The         
increase in cash of $4,417,000 from November 30, 1994 to December 31,     
1995 was attributable to the issuance of common stock through a private   
placement and the exercise of options and warrants (see Note 8 to the     
consolidated financial statements) that resulted in an additional         
$11,602,000 cash.  The cash raised through the sale of common stock has   
been used for capital expenditures of $4,492,000, to increase inventory   
by $468,000, to reduce debt by a net amount of $570,000, to reduce        
trade accounts payable and accrued liabilities by $1,183,000 and to       
increase prepaid expenses and other assets by $666,000. Prior to the      
private placement, these expenditures were funded using the Company's     
line of credit. Subsequent to the private placement, the line of credit   
was paid off and no additional borrowings under the line have occurred.   
The capital expenditures related to construction at the Company's         
headquarters in Irving, Texas and the relocation of its manufacturing     
facility at a leased site to an unused portion of its headquarters (see   
Note 3 to the Consolidated Financial Statements).                         

During the first quarter of 1994, the Company completed an evaluation     
of the production requirements necessary to meet all federal regulatory   
requirements as a fully-integrated pharmaceutical manufacturer and to     
provide the production capacity needed to meet long-term sales growth.    
The Company has moved its wound and skin care manufacturing operation     
from a leased location to an unused portion of the Company's              
headquarters facility in Irving, Texas, and expanded its production       
capability through the addition of higher capacity equipment. At the      
same location, the Company has upgraded its capability to enable it to    
produce injectable products that meet FDA standards.                      

An increase in inventory was planned during the first half of the year    
to meet sales requirements during the period the manufacturing            
operations were relocating.  However, less than forecasted sales of the   

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Company's bulk Aloe vera products and less than projected sales in the    
Company's wound and skin care products during the year has resulted in    
higher than expected inventory levels.  The Company regularly evaluates   
its inventory levels and adjusts production levels at both its Costa      
Rica plant, where the bulk freeze-dried aloe vera extract is              
manufactured, and at its U.S. plant to meet anticipated demand.  As a     
result of these evaluations, inventory levels were reduced by $910,000.   

In January 1995, the Company entered into an agreement with NationsBank   
of Texas, N.A. for a $2,000,000 line of credit and a $6,300,000 term      
loan (see Note 6 to the consolidated financial statements).  This         
agreement increased the Company's available borrowing capacity by over    
$3,000,000.  As of December 31, 1995, the Company had available           
$2,000,000 under the line of credit and $823,000 under the term loan.     
In addition to increasing the Company's credit capacity, the agreement    
lowered the interest rate that the Company has to pay on its              
outstanding debt by over one percent.  Proceeds from the term loan were   
used to fund planned capital expenditures, a letter of credit required    
by a supplier, as discussed below, and planned research projects.  The    
line of credit will be used for operating needs, as required.  As of      
December 31, 1995, the Company was not in compliance with the term        
loan s fixed charge ratio covenant.  The Company is in discussions with   
the Bank and is currently working toward a long-term resolution to the    
non-compliance.  As no binding amendments to the term-loan have been      
agreed upon as of March 31, 1996, all outstanding debt under the term     
loan has been presented as current for reporting purposes.  Given the     
current cash position, the Company's short- and long-term liquidity       
will not be significantly affected.                                       

In February 1995, the Company entered into a supply agreement with its    
supplier of freeze-dried products.  The agreement required that the       
Company establish a $1,500,000 letter of credit.  The term loan with      
NationsBank was used to fund this letter of credit.  The funding of the   
letter of credit reduces the amount that the Company can borrow under     
the term loan but does not increase the Company's debt unless the         
letter of credit is utilized by the supplier.  As of March 31, 1996 and   
January 16, 1997, the supplier had not made a presentation for payment    
under the letter of credit.  On April 29, 1996, the Company's             
management elected to pay off the entire term loan balance of             
$2,977,000 plus $18,000 in accrued interest with available cash to        
eliminate the interest expense on the term loan.  The Company pledged a   
$1,500,000 certificate of deposit (CD) to secure the letter of credit.    
The supply agreement also requires the Company to accept minimum          
monthly shipments of $30,000 and to purchase a minimum of $2,500,000      
worth of product over a period of five years.  At the request of the      
supplier, the minimum buy quantities were waived for the three month      
period ending December 31, 1996.  The supplier currently produces the     
CarraSorb(TM)M  Freeze Dried Gel and the Aphthous Ulcer Patch for the     
Company.  Both of these products represent new technology and are still   
in the product launch phase.  The Company had approximately $49,000 and   
$232,000 of CarraSorb(TM)M  and Aphthous Ulcer Patch inventory on hand as 
of March 31, 1996 and January 16, 1997, respectively.  Current sales      
are lower than the minimum purchase requirement but the Company           
believes that as demand for the new technology increases, demand will     
exceed the minimum purchase requirement.  The Company is in full          
compliance with the agreement and has the available resources to meet     
all future minimum purchase requirements as of January 16, 1997.          

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On April 5, 1995, the Company completed a self-directed private           
placement of 300,000 shares of common stock at a price of $10 per share   
(see Note 8 to the consolidated financial statements).  The net           
proceeds from this offering were $2,956,000.  Of these proceeds,          
$1,919,000 was used to pay off the outstanding balance and related        
interest on the Company's line of credit with NationsBank.                
Additionally, $150,000 was used to pay off debt related to the            
Company's Costa Rica operations that bore an interest rate of 10.875%.    
Remaining proceeds are being used to fund capital expenditures,           
research projects and other operating needs.                              

From February 1995 through December 1995, 71 employees and 6 directors    
exercised options for 580,951 shares of common stock.  The option         
prices ranged from $6.25 to $29.00.  A total of $7,349,000 was raised     
by the Company through the exercise of these options.  As part of         
registering for resale the shares issued in the April 1995 private        
placement, the Company allowed certain warrant holders to include the     
shares of common stock underlying their warrants in the registration if   
they would exercise the warrants within 30 days of the effective date     
of the registration statement.  Warrants covering a total of 92,000       
shares were exercised at prices of $6.25 to $16.25 per share, resulting   
in the Company's receipt of a total of $1,084,000.                        

The Company began a large scale clinical trial during the third quarter   
of 1995 for the testing of its Aliminase(R) (formerly CARN 1000) oral     
capsules for the treatment of acute flare-ups of ulcerative colitis.      
The Company estimates that the cost of this clinical trial will be        
approximately $2,000,000, of which 20% was required as an up-front        
payment.  Payments made in advance to the clinical research               
organization resulted in prepaid expenses increasing.  In late 1995,      
the Company began an initial Phase I study using an injectable Alovex(TM) 
(formerly CARN 750) in cancer patients involving six cancer types.  The   
estimated cost of this study is $475,000.  In the middle of 1996, the     
Company may begin a second large scale clinical trial for the testing     
of Aliminase(R) oral capsules for the treatment of ulcerative colitis.    
The cost of this trial is expected to be approximately the same as the    
one that began in the third quarter of 1995.                              

In November 1995, the Company signed a licensing agreement with a         
supplier of calcium alginates and other wound care products.  Under the   
agreement, the Company has exclusive marketing rights for ten years to    
advanced calcium alginate products for North and South America and in     
the People s Republic of China.  Per the agreement, the Company made an   
up-front payment to the supplier of $500,000.  This payment resulted in   
increasing the prepaid assets of the Company.  Additional payments        
totaling $500,000 will be made to the supplier as new products are        
delivered.                                                                

The Company believes that its cash resources, including available cash,   
bank line of credit and term loan agreement (see Note 6 to the            
consolidated financial statements) and expected revenues from sales of    
wound and skin care, veterinary and consumer products will provide the    
funds necessary to finance its current operations.  The Company does      
not expect that these cash resources will be sufficient to finance the    
major clinical studies necessary to develop its products to their full    
commercial potential.  Additional funds, therefore, may have to be        
raised through equity offerings, borrowings, licensing arrangements, or   
other means.                                                              

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The Company is subject to regulation by numerous governmental             
authorities in the United States and other countries.  Certain of the     
Company s proposed products will require governmental approval prior to   
commercial use. The approval process applicable to prescription           
pharmaceutical products usually takes several years and typically         
requires substantial expenditures. The Company and any licensees may      
encounter significant delays or excessive costs in their respective       
efforts to secure necessary approvals. Future United States or foreign    
legislative or administrative acts could also prevent or delay            
regulatory approval of the Company's or any licensees  products.          
Failure to obtain requisite governmental approvals or failure to obtain   
approvals of the scope requested could delay or preclude the Company or   
any licensees from marketing their products, or could limit the           
commercial use of the products, and thereby have a material adverse       
effect on the Company's liquidity and financial condition.                

The production capacity of the Costa Rica plant is larger than the        
Company's current usage level. Management believes, however, that the     
cost of the Costa Rica facility will be recovered through operations.     
The upgraded facility will provide for the production of products         
needed for large scale clinical trials.  At March 11, 1996, the Company   
had no material capital commitments other than its promissory notes,      
leases, agreement with suppliers and clinical trials described above.     

Fiscal 1994 Compared to Fiscal 1995                                       

Net sales decreased from $25,430,000 to $24,374,000, or 4%.  The          
decrease of $1,056,000 resulted from a $2,557,000, or 11%, decrease in    
the Company's wound and skin care products.  Sales of these products      
decreased from $23,703,000 to $21,146,000.  Fourth quarter sales of the   
wound and skin care products decreased from $5,900,000 to $4,348,000,     
or 26%.  The Company's wound and skin care products have been marketed    
primarily to hospitals and select acute care providers.  This market      
has become increasing competitive as a result of pressures to control     
health care costs.  Hospital and distributors have reduced their          
inventory levels and the number of suppliers used.  Also, health care     
providers have formed group purchasing consortia to leverage their        
buying power.  This environment has required the Company to offer         
greater discounts and allowances throughout the year to maintain          
customer accounts. Discounts and allowances increased from $1,267,000     
to $3,063,000.  They averaged 6.2% of gross wound care sales in the       
fiscal fourth quarter of 1994, compared with a 18.3% average during the   
fourth quarter of 1995.  In February 1996, the Company revised its        
price list to more accurately reflect current market conditions.          
Overall wound care prices were lowered by an average of 19%.  In          
addition to these cost pressures, over the last several years the         
average hospital stay has decreased over 50% resulting in more patients   
being treated at alternative care facilities and at home by home health   
care providers.  This also had a negative impact on sales since the       
Company's sales force had been primarily focused on the hospital          
market.  To counter the market changes, the sales force is now also       
aggressively pursuing the alternative care markets.                       

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To continue to grow its wound care business, the Company realized that    
it had to expand from the $38 million hydrogel market in which it         
currently competes to a much larger segment of the billion dollar plus    
wound care market.  To achieve this objective, an aggressive program of   
new product development and licensing was undertaken in 1995 with the     
goal to create a complete line of wound care products to address all      
stages of wound management.  As a result of this program, the Company     
launched three new wound care product lines in late January 1996.  The    
Company expects to launch additional products in 1996.  However, the      
Company expects the first quarter of 1996 wound care sales to be over     
$1.5 million less than the first quarter of 1995 as a result of the       
reduced prices and other competitive market factors.  The Company         
expects the new products to improve sales during the second quarter.      

The decrease in the Company's wound and skin care products was            
partially offset by an increase in sales of Caraloe, Inc., the            
Company's consumer products subsidiary.  Caraloe's sales increased from   
$1,361,000 to $2,907,000, or 114%.  Of this, $1,513,000 is related to     
the sale of bulk Manapol(R) to one customer, Mannatech.  Sales of bulk    
Manapol(R) to Mannatech increased from $934,000 to $2,447,000.  Sales of  
the Company's veterinary products decreased from $366,000 to $321,000.    
In March 1996, the Company entered into an agreement with Farnam,         
Companies, Inc., a leading marketer of veterinary products, to promote    
and sell its veterinary line on a broader scale.                          

Cost of sales increased from $6,415,000 to $7,944,000, or 23.8%.  As a    
percentage of sales, cost of sales increased from 25.2% to 32.6%.  This   
increase is attributable to the increased sales of bulk Manapol(R), which 
has a substantially lower profit margin, 33%, as compared to the          
Company's wound and skin care products.  In January 1996, the profit      
margin on Manapol(R) was reduced to 8% as a result of current production  
levels and costs at the Company's Costa Rica facility.   Also, the        
increasing discounts, as discussed earlier, resulted in the Company's     
wound and skin care product costs increasing by approximately 4% as a     
percentage of sales.                                                      

To accelerate new product development and reduce overhead, the Company    
was restructured in 1995.  The restructuring included the lay-off of      
seventeen high level and under-utilized positions in administration,      
marketing, and research and development for a net reduction in salaries   
and benefits of approximately $120,000 per month.  Also, the Company      
relocated its manufacturing operations to its current facility on         
Walnut Hill in Irving, Texas and immediately realized a reduction in      
overhead and production costs as the new facility is more efficient       
than the prior location.  As the Walnut Hill facility is owned by the     
Company, rent and other facility expenses related to the former           
production facility of approximately $25,000 per month were eliminated.   
Each of these items is expected to reduce future expenses and improve     
cash flow results.  As a result of the restructuring, approximately       
$1.4 million of one-time charges were taken during 1995.  Of these        
charges, only $275,000 remained unpaid as of December 31, 1995.           

Of these charges, approximately $700,000 were selling, general and        
administrative expenses, $500,000 related to severance agreements,        
$130,000 was due to increased legal fees and a $70,000 write off of       
unamortized legal and banking costs that resulted when the Company        
refinanced its long term debt in 1993.  Approximately, $90,000 of cost    

10-K/A 23rd Page of 45 TOC 1st Previous Next ↓Bottom Just 23rd
were incurred in 1995 to complete the refinancing.  These costs are       
included in other long term assets and will be amortized over the term    
of the loan.  As a result, selling, general and administrative expenses   
increased from $11,968,000 to $12,442,000, or 4%.                         

Research and development expenses increased from $5,334,000 to            
$5,370,000, or 1%.  During the first half of 1995, $564,000 of cost       
associated with severance agreements resulting from the above described   
restructuring was charged to research and development.  These charges     
will reduce internal salaries on an ongoing basis.  However, this         
reduction was offset in 1995 by beginning the large scale clinical        
trial for the testing of Aliminase(R) (formerly CARN 1000) oral capsules  
for the treatment of acute flare-ups of ulcerative colitis during the     
third quarter of 1995.  The Company expects its research and              
development costs to increase by over $2,000,000 in 1996 due to the       
ulcerative colitis and cancer studies.                                    

Interest expense increased from $171,000 to $251,000, or 47%, due to      
increased borrowings during the first four months of 1995.  Interest      
income increased from $38,000 to $136,000, or 258%, due to having more    
excess cash to invest.                                                    

Net income for 1994 was $1,421,000, compared with a net loss of           
$1,628,000 for 1995.  This change is a result a changing product mix,     
increased discounts and one-time charges related to restructuring.        
Earnings per share were $.18 in 1994, compared to a loss per share of     
$.22 in 1995.                                                             

Fiscal 1993 Compared to Fiscal 1994                                       

Net sales increased from $21,184,000 to $25,430,000, or 20%.  The         
increase of $4,246,000 resulted from a $3,220,000, or 16%, increase in    
sales of the Company's wound and skin products due to a price increase    
that went into effect in January 1994.  Actual unit sales of the wound    
and skin care products were unchanged from 1993 to 1994.  Also            
attributing to this increase is a $1,084,000, or 393%, increase in        
sales of Caraloe, Inc., products, including bulk Manapol(R).  These       
increases were partially offset by a $58,000, or 13%, decline in sales    
of veterinary products.  Cost of sales increased from $5,288,000 to       
$6,415,000, or 21%, due to increase in net sales.  As a percentage of     
net sales, cost of sales was 25% in 1993 and 1994.                        

Selling, general and administrative expenses increased from $9,371,000    
to $11,968,000, or 28%, representing a $1,904,000 volume-related          
increase in sales and marketing expenses and a $693,000 increase in       
general and administrative expenses attributable to increases in          
personnel-related costs and legal expenses.                               

Research and development expenses decreased from $5,397,000 to            
$5,334,000, or 1%.  Significant research and development expenditures     
were postponed in 1994 principally due to deferred clinical studies       
while the Company was upgrading its manufacturing facilities to meet      
specification requirements for new products and while it was obtaining    
the necessary FDA clearances to conduct the clinical studies.             

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Interest expense decreased from $259,000 to $171,000.  Interest income    
decreased slightly from $40,000 to $38,000.  Net income increased from    
$805,000 to $1,421,000, or 77%, with earnings per share increasing from   
$.09 to $.18.                                                             

10-K/A 25th Page of 45 TOC 1st Previous Next ↓Bottom Just 25th
                                                                   [Download Table]
                                                                              
                                                                              
Consolidated Balance Sheets                 As of                             
                                  November 30,    December 31,    December 31,
                                    1994            1994              1995    
                                 -------------   -------------    ------------
                                                                              
Assets                                                                        
Current Assets:                                                               
  Cash and cash equivalents     $ 1,804,638     $   464,367       $6,222,008  
  Accounts receivable, net of                                                 
    allowance for doubtful                                                    
    accounts of $197,586,                                                     
    $204,905 and $226,884 at                                                  
    November 30, 1994, Decem-                                                 
    ber 31, 1994 and December                                                 
    31, 1995, respectively         2,891,375       2,884,911       2,226,651  
  Inventories                      4,635,769       5,047,149       5,103,988  
  Prepaid expenses and other         641,184         538,650         858,506  
      Total current assets         9,972,966       8,935,077      14,411,153  
Property, Plant & Equipment,                                                  
  at cost                         14,441,430      14,726,840      18,932,959  
  Less   Accumulated depreciation (4,981,041)     (5,070,401)     (6,222,309) 
                                  ----------      -----------     ----------- 
                                   9,460,389       9,656,439      12,710,650  
Other Assets                         363,391         307,460         812,294  
                                  ----------      -----------     ----------- 
                                 $19,796,746     $18,898,977     $27,934,097  
Liabilities and Shareholders'  Investment                                     
Current Liabilities:                                                          
  Current portion of                                                          
    long-term debt               $   649,993     $   450,395     $ 3,026,287  
  Accounts payable                 1,217,511       1,557,946         589,607  
  Accrued liabilities              2,385,842       1,408,075       1,830,573  
  Short-term borrowings            1,000,000       1,046,532                  
      Total current liabilities    5,253,346       4,462,948       5,446,467  
Long-term Debt, net of                                                        
    current portion                2,034,563       1,997,261          88,506  
Shareholders  Investment:                                                     
  Preferred stock, $100 par value,                                            
    1,000,000 shares authorized,                                              
    10,572, 10,572 and 11,840                                                 
    Series C shares issued at                                                 
    November 30, 1994, December 31,                                           
    1994 and December 31, 1995,                                               
    respectively                  1,040,634       1,040,634        1,167,434  
  Common stock, $.01 par value,                                               
    30,000,000 shares authorized,                                             
    7,344,390, 7,344,390 and                                                  
    8,378,999 shares issued and                                               
    outstanding at November 30,                                               
    1994, December 31, 1994 and                                               
    1995, respectively               73,444         73,444            83,790  
  Capital in excess of par value 33,074,508     33,074,508        44,666,112  
  Deficit                       (21,505,938)   (21,576,007)      (23,344,401) 
  Foreign currency                                                            
     translation adjustment        (173,811)      (173,811)         (173,811) 
Total shareholders  investment   12,508,837     12,438,768        22,399,124  
                                ------------   ------------      ------------ 
                                $19,796,746    $18,898,977       $27,934,097  

                                                                [Download Table]
The accompanying notes are an integral part of these balance sheets.

10-K/A 26th Page of 45 TOC 1st Previous Next ↓Bottom Just 26th
                                                                [Download Table]

Consolidated Statements of Operations                                          

For the Years Ended November 30, 1993 and 1994                                 
  and the Month Ended December 31, 1994 and the                                
  Year Ended December 31, 1995     November 30,             December 31,       
                               1993         1994          1994        1995     
                            -----------  -----------  -----------  ----------- 
                                                                               
Net Sales                   $21,183,774  $25,429,654  $ 1,781,017  $24,374,090 
Cost and Expenses:                                                             
   Cost of sales             5,288,450    6,414,757      516,247     7,944,271 
   Selling, general and                                                        
     administrative          9,370,946   11,968,200      984,535    12,441,972 
   Research and development  5,397,000    5,333,780      326,916     5,370,109 
   Interest expense            258,606      170,755       23,413       250,751 
   Interest income             (39,860)     (38,411)         (25)     (136,096)
Income before Income Taxes     908,632    1,580,573      (70,069)   (1,496,917)
   Provision for income taxes  104,000      159,335                    131,350 
Net Income                  $  804,632  $ 1,421,238   $  (70,069)  $(1,628,267)

Net Income per Common and                                                      
   Common Equivalent Share: $      .09  $       .18   $     (.01)  $     (.22) 

                                                                [Download Table]
The accompanying notes are an integral part of these statements.

10-K/A 27th Page of 45 TOC 1st Previous Next ↓Bottom Just 27th
                                                        [Enlarge/Download Table]
                                                                                            
Consolidated Statements of Shareholders' Investment                                         

For the Years Ended November 30, 1993 and 1994, and the Month Ended                         
December 31, 1994, and the Year Ended December 31, 1995,                         Foreign    
                                                     Capital in                  Currency   
       Preferred   Stock       Common     Stock      Excess of                   Translation
       Shares      Amount      Shares     Amount     Par Value      Deficit      Adjustment 
--------------------------------------------------------------------------------------------
                                                                                            
Balance, November 30, 1992                                                                  
        8,429    $ 826,334   7,296,202   $72,962   $32,761,703   $(23,495,021)  $(103,923)  
  Issuance of common stock upon exercise                                                    
    of stock options and warrants                                                           
                                40,377       404       253,933                              
  Dividends on preferred stock                                                              
        1,011      101,100                                  -       (111,674)               
  Net income for the year                                                                   
                                    -                                804,632                
  Translation adjustment                                                         (69,888)   
-----------------------------------------------------------------------------------------   
Balance, November 30, 1993                                                                  
       9,440     $ 927,434  7,336,579    $73,366   $33,015,636  $(22,802,063)  $(173,811)   
-----------------------------------------------------------------------------------------   
  Issuance of common stock upon exercise                                                    
    of stock options and warrants                                                           
                                7,811         78        58,872                              
  Dividends on preferred stock                                                              
       1,132       113,200                                         (125,113)                
  Net income for the year                                                                   
                                                                  1,421,238                 
----------------------------------------------------------------------------------------    
Balance, November 30, 1994                                                                  
     10,572     $1,040,634  7,344,390    $73,444   $33,074,508  $(21,505,938) $(173,811)    
----------------------------------------------------------------------------------------    
   Net loss for the month                                                                   
                                                                    (70,069)                
----------------------------------------------------------------------------------------    
Balance, December 31, 1994                                                                  
     10,572     $1,040,634  7,344,390    $73,444   $33,074,508  $(21,576,007) $(173,811)    
---------------------------------------------------------------------------------------     

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Sale of common stock at $10 per share,                                                      
    net of issuance costs of $40,732                                                        
                              300,000      3,000     2,956,268                              
  Issuance of common stock upon exercise                                                    
    of stock options and warrants                                                           
                              710,536      7,105     8,426,340                              
  Issuance of common stock for                                                              
    management and directors  compensation                                                  
                               24,073        241       208,996                              
  Dividends on preferred stock                                                              
      1,268        126,800                                          (140,127)               
  Net loss for the year                                                                     
                                                                  (1,628,267)               
----------------------------------------------------------------------------------------    
Balance, December 31, 1995                                                                  
     11,840     $1,167,434  8,378,999    $83,790   $44,666,112  $(23,344,401) $(173,811)    
----------------------------------------------------------------------------------------    

                                                                [Download Table]
                                                                The accompanying notes are an integral part of these statements.

10-K/A 29th Page of 45 TOC 1st Previous Next ↓Bottom Just 29th
                                                                [Download Table]
                                                                                
For the Years Ended November 30, 1993 and 1994                                  
  and the Month Ended December 31, 1994 and the                                 
  Year Ended December 31, 1995       November 30,            December 31,       
                                  1993        1994        1994        1995      
                              -----------  -----------  ----------  ---------   
                                                                                
Cash Flows from Operating Activities:                                           
 Net income (loss)             $  804,632  $1,421,238   $(70,069)  $(1,628,267) 
  Adjustments to reconcile income (loss)                                        
  to net cash provided (used)                                                   
     by operating activities:                                                   
   Depreciation and amortization  964,380   1,206,323     109,648    1,277,466  
   Changes in assets and liabilities:                                           
    Decrease (increase) in                                                      
      accounts receivable, net    483,691    (603,534)      6,464      658,260  
   (Increase) in inventories     (230,018) (2,072,239)   (411,380)     (56,839) 
    Decrease (increase) in                                                      
      prepaid expenses and other  227,782    (427,752)    102,534     (319,856) 
   (Increase) decrease in                                                       
      other assets               (90,290)      7,535      35,642       (630,391)
   Increase (decrease) in                                                       
      accounts payable and                                                      
      accrued liabilities        773,838     838,264    (637,332)      (559,168)
                              -----------  -----------  ----------  ------------
   Net cash provided (used) by                                                  
     operating activities      2,934,015     369,835    (864,493)    (1,258,795)

Cash Flows from Investing Activities:                                           
 Purchases of property,                                                         
   plant and equipment         (1,575,426)  (3,014,053)   (285,410)  (4,206,119)
                              -----------  -----------  ----------  ------------
   Net cash used by                                                             
     investing activities      (1,575,426)  (3,014,053)   (285,410)  (4,206,119)

Cash Flows from Financing Activities:                                           
 Issuances of common stock        254,337       58,951               11,392,713 
 Proceeds from short and                                                        
   long-term borrowings                      1,500,000                5,741,569 
 Payments of short and                                                          
   long-term debt                (590,730)    (385,224)   (187,111)  (5,847,644)
 Principal payments of                                                          
   capital lease obligations      (69,819)     (48,266)     (3,257)     (64,083)
                              ------------    ----------  ---------- -----------
   Net cash (used) provided by                                                  
     financing activities        (406,212)   1,125,461    (190,368)   11,222,555

Effect of Exchange Rate                                                         
   Changes on Cash                (4,034)                                       
                              -----------    ----------   ----------  ----------
Net Increase (Decrease) in                                                      
   Cash and Cash Equivalents      948,343   (1,518,757) (1,340,271)    5,757,641

Cash and Cash Equivalents                                                       
   at Beginning of Year         2,375,053    3,323,396   1,804,638       464,367
                              -----------  -----------  ----------   -----------
Cash and Cash Equivalents                                                       
    at End of Year             $3,323,396   $1,804,639  $  464,367    $6,222,008
                              -----------  -----------  ----------    ----------

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Supplemental Disclosure of                                                      
 Cash Flow Information:                                                         
   Cash paid during the                                                         
     year for interest         $  283,938   $  206,129  $   20,386   $  281,476 
    Cash paid during the                                                        
     year for income taxes        166,210      124,120                   99,157 

Supplemental Disclosure of                                                      
 Non-Cash Financing Activities:                                                 
   Equipment acquired through                                                   
    capital leases                            114,203                           
   Issuances of common stock                                                    
    and warrants                                                       209,237  

                                                                [Download Table]
                                                                          The accompanying notes are an integral part of these statements.          

10-K/A 31st Page of 45 TOC 1st Previous Next ↓Bottom Just 31st
Notes to the Consolidated Financial Statements                            

Note One. Summary of Significant Accounting Policies:                     

In February 1995, the Company changed its fiscal year ending from         
November 30 to December 31. Comparative financial statements reflect the  
single month of December 1994, the fiscal year ended December 31, 1995,   
and the preceding fiscal years ended November 30.                         

PRINCIPLES OF CONSOLIDATION   The consolidated financial statements       
include the accounts of Carrington Laboratories, Inc. (the  Company )     
and its subsidiaries, all of which are wholly owned. All intercompany     
accounts and transactions have been eliminated in consolidation. Certain  
prior year amounts have been reclassified to conform with 1995            
presentation.                                                             

CASH EQUIVALENTS    The Company's policy is that all highly liquid        
investments purchased with a maturity of three months or less are         
considered to be cash equivalents.                                        

DEPRECIATION AND AMORTIZATION     Land improvements, buildings and        
improvements, furniture and fixtures and machinery and equipment are      
depreciated on the straight-line method over their estimated useful       
lives (3 - 40 years). Leasehold improvements and equipment under capital  
leases are depreciated over the terms of the respective leases (2 - 5     
years).                                                                   

TRANSLATION OF FOREIGN CURRENCIES     Based on an evaluation of the       
activities of its Costa Rica subsidiaries, as of September 1, 1993, the   
Company concluded that the functional currency for these operations was   
the U.S. dollar. Accordingly, such foreign entities translate monetary    
assets and liabilities at year-end exchange rates while non-monetary      
items are translated at historical rates. Revenue and expense accounts    
are translated at the average rates in effect during the year, except     
for depreciation and cost of sales which are translated at historical     
rates. Translation adjustments and transaction gains or losses are        
recognized in consolidated income in the year of occurrence.              

Prior to September 1, 1993, all assets and liabilities of foreign         
subsidiaries were translated into U.S. dollars at the exchange rates in   
effect at the balance sheet date. Revenue and expense accounts were       
translated at weighted average exchange rates. Translation gains and      
losses were reflected as a separate component of shareholders             
investment.                                                               

FEDERAL INCOME TAXES     Statement of Financial Accounting Standards      
( SFAS ) No. 109,  Accounting for Income Taxes,  was issued in February   
1992. As permitted under SFAS No. 109, the Company elected to adopt the   
new standard retroactively to December 1, 1989. The adoption of SFAS No.  
109 had no significant impact on the financial condition and results of   
operations for any of the years presented.                                

Deferred income taxes reflect the tax effect of temporary differences     
between the amount of assets and liabilities recognized for financial     
reporting and tax purposes. These deferred taxes are measured by          
applying currently enacted tax laws. The effect on deferred income tax    
assets and liabilities of a change in tax rates is recognized in income   
in the period that includes the enactment date.                           

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Certain of the Company's research and development expenditures qualify    
for tax credits and such credits are accounted for as a reduction of the  
current provision for income taxes in the year they are realized.         

RESEARCH AND DEVELOPMENT    Research and development costs are expensed   
as incurred. Certain laboratory and test equipment determined to have     
alternative future uses in other research and development activities      
have been capitalized and are depreciated as research and development     
expense over the life of the equipment.                                   

POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS  The Financial Accounting    
Standards Board has issued SFAS No. 106,  Employers  Accounting for       
Post-Retirement Benefits Other Than Pensions  and SFAS   No. 112,         
Employers  Accounting for Post-Employment Benefits.  The Company does     
not offer any post-retirement or post-employment benefits; therefore,     
these statements have no impact on the Company.                           

EARNINGS PER SHARE    Earnings per share are based on the weighted        
average number of common and common equivalent shares outstanding during  
each period. Stock options and warrants  are included as common stock     
equivalents if the dilutive effect on net earnings per share is greater   
than 3%. The common stock equivalents were either antidilutive, or        
represented dilution of less than 3%, in 1993, 1994 and 1995. The         
weighted average number of common shares used in computing earnings per   
share was 7,323,521, 7,340,982 and 7,932,675 for the years ended          
November 30, 1993, 1994 and December 31, 1995.                            

REVENUE RECOGNITION    The Company recognizes revenue when title to the   
goods transfers.  For the majority of the Company's sales, this occurs    
at the time of shipping.  Certain customers do not take title until the   
goods are delivered to their location or agent.                           

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 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.       

Note Two. Inventories:                                                    

Inventories are recorded at the lower of first-in, first-out cost or      
market. The following summarizes the components of inventory at November  
30, 1994 and December 31, 1995:                                           

                               1994                1995                   
Raw materials and supplies   $  577,475          $  583,408               
Work-in-process               2,615,090           2,725,399               
Finished goods                1,443,204           1,795,181               
                            ----------           ----------               
                            $4,635,769           $5,103,988               

Included in work-in-process is $2,495,021 and $2,537,546 of freeze-dried  
aloe vera inventory as of November 30, 1994 and December 31, 1995,        
respectively. Finished goods consist of materials, labor and              
manufacturing overhead.                                                   

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Note Three. Property, Plant and Equipment:                                

The Company has a 6.6 acre tract of land and a 35,000 square foot office  
and manufacturing building situated thereon. This facility is located in  
Irving, Texas, a suburb of Dallas, and is used as the Company's           
headquarters.                                                             

During July 1995, the Company completed the manufacturing and             
distribution project started during the first quarter of 1994. The        
project involved the physical relocation of its manufacturing operation   
from a leased facility in Dallas to an unused portion at the Company's    
corporate headquarters facility in Irving, Texas. The new facility is     
intended to meet all federal regulatory requirements applicable to        
provide the production capacity needed to meet long-term sales growth.    
At the same location, the Company has upgraded its capability to enable   
it to produce  injectable products that meet FDA standards. The total     
cost expended on the project was $4,469,000.                              

During the first quarter of 1994, the Company initiated a project in      
Costa Rica to upgrade its production plant to meet regulatory             
requirements for the production of bulk acetylated oral and injectable    
mannans as required for investigational new drugs (INDs). This project    
was completed in the fourth quarter of 1994 and cost approximately        
$1,200,000. Funding was provided by existing cash on hand and cash flow   
from operations. The Company's net investment in property, plant,         
equipment and other assets in Costa Rica at November 30, 1994 and         
December 31, 1995 were $4,545,000 and $4,280,000, respectively.           

The production capacity of the Costa Rica plant is larger than the        
Company's current usage level. Management believes, however, that the     
cost of the Costa Rica facility will be recovered through operations.     
The upgraded facility will provide for the production of products needed  
for large scale clinical trials. Management will continue to assess the   
realizability of the Costa Rica plant assets and will use the             
methodology described in SFAS No. 121,  Accounting for the Impairment of  
Long-Lived Assets and for Long-Lived Assets to be Disposed of  when it    
adopts the statement in 1996.                                             

The following summarizes the components of property, plant and equipment  
at November 30, 1994 and December 31, 1995:                               

                                  1994             1995                   
                              -----------      -----------                
Land and improvements         $ 1,389,433      $ 1,389,334                
Buildings and improvements      4,166,115        8,072,992                
Furniture and fixtures            822,666          867,571                
Machinery and equipment         7,314,440        7,825,667                
Leasehold improvements            301,846          330,465                
Equipment under capital leases    446,930          446,930                
                             -----------      ------------                
                             $14,441,430       $18,932,959                

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Note Four. Accrued Liabilities:                                           

The following summarizes significant components of accrued liabilities    
at November 30, 1994 and December 31, 1995:                               

                               1994              1995                     
                           ----------       ----------                    
Accrued payroll            $  587,038       $  210,185                    
Accrued management                                                        
    incentive compensation    386,533                                     
Accrued sales commissions     199,622          251,511                    
Accrued taxes                 133,055          165,249                    
Preferred dividends           111,168          124,495                    
Accrued severance liability   126,554          266,735                    
Other                         841,872          812,398                    
                           ----------        ----------                   
                           $2,385,842       $1,830,573                    

Note Five. Short-term Borrowings:                                         

Short-term debt activity for each of the years ended November 30, 1994    
and December 31, 1995 was as follows:                                     

                              1994               1995                     
                         -----------          -----------                 
Average amount                                                            
   of short-term                                                          
   debt outstanding                                                       
   during the year        $    3,000           $  467,667                 
Maximum amount                                                            
   of short-term                                                          
   debt outstanding                                                       
   during the year         1,000,000            1,905,259                 
Average interest rate                                                     
   at year end                9.25%                                       
Average interest rate                                                     
   for the year                                    8.9%                   

Note Six. Debt:                                                           

On January 30, 1995, the Company entered into an agreement with           
NationsBank of Texas, N.A. (the  Bank ). The agreement is composed of a   
$2,000,000 line of credit that expires one year from the date of the      
agreement and a $6,300,000 term loan that matures four years from the     
date of the agreement. The term loan is payable in equal quarterly        
installments of $250,000 principal, plus accrued interest beginning       
March 31, 1995 and ending January 30, 1999, when the unpaid balance is    
due. The interest rate on both credit facilities is the Company's option  
of prime plus .5% or 30, 60, 90, 180 day reserve adjusted LIBOR (London   
Interbank Offering Rate) plus 2%. The Company paid a commitment fee of    
$31,500 on the closing date. In February, the Bank waived the             
requirement that the Costa Rica assets be pledged to secure the term      
loan. The Company agreed to pay an additional commitment fee of $31,500   
at that time. $1,900,000 of the borrowings from the Bank were used to     
pay off all of the outstanding balances on notes due to Texas Commerce    

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Bank Dallas, N.A. and $1,827,000 was used to pay off the outstanding      
balance on the mortgage on the Company's headquarters building in         
Irving, Texas.  Of the term loan, $1,500,000 was carved out to provide a  
letter of credit to a supplier. The letter of credit did not increase     
long-term debt but reduced the amount available to borrow under the term  
loan. The remaining proceeds will be used to fund planned capital         
expenditures, planned research projects, and other operating needs. As    
of December 31, 1995, no amounts were outstanding under the line of       
credit and $2,977,000 was outstanding under the term loan. The interest   
rate on the borrowing ranged from 7.70% to 8.125% between January 30,     
1995 and December 31, 1995.                                               

The borrowings under the agreement are secured by the Company's assets    
in the United States. The Company is required to maintain a consolidated  
tangible net worth of $12,000,000 through November 29, 1995; $13,750,000  
thereafter through November 29, 1996; $15,250, 000 thereafter through     
November 29, 1997; and $16,750,000 thereafter. Also, the Company cannot   
permit the ratio of its consolidated total liabilities to consolidated    
tangible net worth to exceed 1.0 to 1.0 at any time; the ratio of the     
sum of pretax net income plus unusual charges (severance, extraordinary   
legal fees and debt refinancing costs related to terminated debt          
agreements) plus interest expense plus lease expense to fixed charges     
(interest expense and lease expense) to be less than 1.75 to 1.0; or      
capital expenditures to exceed $6,500,000 from the date of the agreement  
to December 31, 1995 or $2,000,000 per year for the calendar years        
thereafter. In addition, the Company may not pay cash dividends. As of    
December 31, 1995, the Company was not in compliance with the term        
loan s fixed charge ratio covenant.  The Company is in discussions with   
the Bank and is currently working toward a long-term resolution to the    
non-compliance.  As no binding amendments to the term-loan have been      
agreed upon as of March 31, 1996, all outstanding debt under the term     
loan has been presented as current for reporting purposes.  Given the     
current cash position, the Company's short- and long-term liquidity will  
not be significantly affected.                                            

In order to help finance the development of the Company's Costa Rica      
facilities, the Company arranged a five-year U.S. dollar-denominated      
loan in the amount of $600,000 from Corporacion Privada de Inversiones    
de CentroAmerica, S.A. In May 1995, the note was paid off using proceeds  
of the Company's private placement (see Note 8.)                          

Long-term debt of the Company for the years ended November 30, 1994 and   
December 31, 1995 is summarized as follows:                               

                                     1994             1995                
                                 -----------       -----------            
Note payable on land                                                      
   and building                  $ 1,829,199        $       -             
Note payable on Costa Rica                                                
  development costs                  233,318                -             
Term Loan                            416,667         2,977,071            
Obligations under capital leases     205,372           137,722            
                                   2,684,556         3,114,793            
                                 ----------         -----------           
Less   Current portion               649,993         3,026,287            
                                 ----------         -----------           
                                  $2,034,563        $   88,506            
                                  ==========        ===========           

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The Company leases certain computer and other equipment under capital     
leases expiring at various dates through 1998. The following is a         
schedule of future minimum lease payments under the capital lease         
agreements together with the present value of these payments as of        
December 31, 1995:                                                        

Fiscal Years Ending December 31,                                          
                            1996        $ 58,910                          
                            1997          51,164                          
                            1998          45,425                          
Aggregate minimum lease payments         155,499                          
Less - Imputed interest included in                                       
  aggregate minimum lease payments        17,777                          
Present value of aggregate minimum                                        
   lease payments                       $137,722                          

Note Seven. Preferred Stock:                                              

Series C Shares     In June 1991, the Company completed a transaction     
whereby the Company issued 7,909 shares of Series C 12% cumulative        
convertible preferred stock (the  Series C Shares ) in exchange for       
convertible debentures plus interest accrued to the date of exchange to   
a private investor (the  Investor ). The Series C Shares have a par       
value of $100 per share, are convertible at par into common stock of the  
Company at a price of $7.58 per share (subject to certain adjustments),   
are callable by the Company after January 14, 1996 and provide for        
dividend payments to be made only through the issuance of additional      
Series C Shares.                                                          

Subsequent to year end, all cumulative convertible preferred stock was    
converted to 174,935 shares of the Company's common stock.                
The Company had previously issued to the Investor a warrant to purchase   
25,000 shares of common stock of the Company at $15 per share through     
February 1, 1996. The Company also extended by three years, to February   
1, 1996, the life of certain warrants that had previously been issued to  
this Investor for the purchase of 50,000 shares of common stock of the    
Company (20,000 of which are now owned 10,000 shares each by two          
executives of the Investor, one of whom is a director of the Company),    
and reduced the exercise price of such warrants from $25 to $15 per       
share, which was above the market price of the common stock at the date   
of adjustment.                                                            

In addition to issuing the Series C Shares to the Investor, the Company   
also reduced the exercise price of warrants held by the Investor and one  
of its executive officers to purchase 65,000 shares of the Company's      
common stock from $15 per share to $12.75 per share, which was above the  
market price of the common stock at the date of adjustment.               

Subsequent to year end, the Investor exercised 25,000 warrants and the    
remaining 30,000 warrants at $12.75 per share.                            

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Note Eight. Common Stock:                                                 

Private Placement of Common Stock    In April 1995, the Company           
completed a self-directed private placement of 300,000 shares of          
unregistered common stock at a price of $10.00 per share. The average of  
the high and low sale price of the Company's common stock on the NASDAQ   
National Market on the day of the placement was $10.69 per share. Total   
proceeds net of issuance cost was $2,956,268. The Company agreed to use   
its best efforts to file a registration statement with the Securities     
and Exchange Commission within 90 days after the placement. Effective     
July 11, 1995, shares related to the private placement were registered    
for resale with the Securities and Exchange Commission. Proceeds from     
the placement were used for planned capital expenditures, payment of      
bank debt, research and development expenditures and other operating      
needs.                                                                    
Stock Options     The following summarizes stock option activity for      
each of the three years ended November 30, 1993, 1994 and December 31,    
1995:                                                                     

                                    Options Outstanding                   
                                Shares                Price Per Share     
Balance, November 30, 1992      644,855            $ 6.25    to  $29.00   
    Granted                     240,205            $ 8.62    to  $13.50   
    Lapsed or canceled         (114,320)           $ 6.25    to  $29.00   
    Exercised                   (17,025)           $ 6.25    to  $10.25   
------------------------------------------------------------------------  
Balance, November 30, 1993      753,715             $ 6.25    to  $29.00  
    Granted                     268,350             $ 8.25    to  $12.75  
    Lapsed or canceled         (118,275)            $ 6.25    to  $21.72  
    Exercised                    (7,100)            $ 6.25    to  $10.25  
------------------------------------------------------------------------  
Balance, November 30, 1994      896,690             $ 6.25    to  $29.00  
    Granted                     575,475             $11.125   to  $35.25  
    Lapsed or canceled          (72,036)            $ 8.625   to  $20.12  
    Exercised                  (580,951)            $ 6.25    to  $29.00  
------------------------------------------------------------------------  
Balance, December 31, 1995       819,178             $ 6.25   to  $35.25  
------------------------------------------------------------------------  
Options exercisable at                                                    
  December 31, 1995              175,424             $ 6.25   to $29.00   

The Company has an incentive stock option plan (the"Option Plan") under   
which incentive stock options and nonqualified stock options may be       
granted to certain employees. Options are granted at a price no less      
than the market value of the shares on the date of the grant, except for  
incentive options to employees who own more than 10% of the total voting  
power of the Company's common stock, to whom incentive options are        
granted at a price no less than 110% of the market value. Options         
granted expire four to ten years from the dates of grant.                 
The Company has reserved 1,500,000 shares of common stock for issuance    
under the Option Plan. As of December 31, 1995 options to purchase        
369,725 shares have been granted under the Option Plan, of which no       
options for shares have been exercised. The Company's 1985 Option Plan    
expired February 1995. The Company has reserved 1,400,000 shares of       
common stock for issuance under this plan. At the time the plan expired,  
options to purchase 1,150,440 had been granted, of which options for      
678,951 shares have been exercised.                                       

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In October 1995, SFAS No. 123,  Accounting for Stock-Based                
Compensation,  was issued. The disclosure requirements of this statement  
are effective for financial statements for fiscal years beginning after   
December 15, 1995. The Company intends to elect the option allowing it    
to continue to apply the accounting provisions of APB Opinion 25,         
 Accounting for Stock Issued to Employees.  With the Company's plan of    
adoption, the impact will be limited to additional footnote disclosure.   

Stock Warrants    From time to time, the Company has granted warrants to  
purchase common stock to the Company's research consultants and certain   
other persons rendering services to the Company. The exercise price of    
such warrants was the market price or in excess of the market price of    
the common stock at date of issuance. The following summarizes warrant    
activity for each of the years ended November 30, 1993, 1994 and          
December 31, 1995:                                                        

                                      Warrants Outstanding                
                                 Shares               Price Per Share     
                                ---------           -------------------   
Balance, November 30, 1992        330,376            $ 5.25   to  $30.50  
   Granted                         10,000                         $13.00  
   Lapsed or canceled            (41,126)            $19.75   to  $30.50  
   Exercised                     (20,750)            $ 5.25   to  $ 6.25  
------------------------------------------------------------------------  
Balance, November 30, 1993        278,500            $ 6.25   to  $26.00  
   Lapsed or canceled             (42,500)           $18.00   to  $26.00  
------------------------------------------------------------------------  
Balance, November 30, 1994        236,000            $ 6.25   to  $20.12  
   Lapsed or canceled            (130,000)           $11.25   to  $26.00  
   Exercised                     (92,000)            $ 6.25   to  $16.25  
------------------------------------------------------------------------  
Balance, December 31, 1995        99,000             $12.125  to  $20.12  
------------------------------------------------------------------------  
Warrants exercisable at                                                   
  December 31, 1995               99,000             $12.125  to  $20.12  

Warrants for 78,000 shares expire in 1996. The remaining warrants for     
21,000 shares expire between 2000 and 2002.                               

Employee Stock Purchase Plan    On October 29, 1992, the Company adopted  
an Employee Stock Purchase Plan (the  Stock Purchase Plan ). Under the    
Stock Purchase Plan, employees may purchase common stock at a price       
equal to the lesser of 85% of the market price of the Company's common    
stock on the last business day preceding the enrollment date as defined   
as January 1, April 1, July 1 or October 1 or any plan year or 85% of     
the market price on the last business day of the month. If any employee   
elects to terminate participation in the Stock Purchase Plan, the         
employee is not eligible to re-enroll until the first enrollment date     
following six months from such election. The Stock Purchase Plan          
provides for the grant of rights to employees to purchase a maximum of    
500,000 shares of common stock of the Company commencing on January 1,    
1993. As of December 31, 1995, 48,731 shares had been purchased by        
employees at prices ranging from $7.23 to $29.54 per share.               

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Note Nine. Share Purchase Rights Plan:                                    

The Company's Board of Directors adopted a share purchase rights plan by  
declaring a dividend distribution of one preferred share purchase right   
(a  Right ) on each outstanding share of the Company's common stock (the  
 Common Shares ). The dividend distribution was made October 15, 1991,    
payable to shareholders of record on that date. The Rights are subject    
to an agreement (the  Rights Agreement ) between the Company and the      
Company's stock transfer agent, and will expire October 15, 2001, unless  
redeemed at an earlier date.                                              

Pursuant to the Rights Agreement, each Right will entitle the holder      
thereof to buy one one-hundredth of a share of the Company's Series D     
Preferred Stock (the  Preferred Shares ), at an exercise price of $80,    
subject to certain antidilution adjustments. The Rights will not be       
exercisable or transferable apart from the Common Shares, until (i) the   
tenth day after a person or group acquires 20% or more of the Common      
Shares or (ii) the tenth business day following the commencement of, or   
the announcement of an intention to make, a tender or exchange offer for  
20% or more of the Common Shares. The Rights will not have any voting     
rights or be entitled to dividends. If the Company is acquired in a       
merger or other business combination, each Right will entitle its holder  
to purchase, at the exercise price of the Right, a number of the          
acquiring company's common shares having a current market value of twice  
such price. Alternately, if a person or group acquires 20% or more of     
the Common Shares, then each Right not owned by such acquiring person or  
group will entitle the holder to purchase, for the exercise price, a      
number of Common Shares having a market value of twice such price. The    
Rights are redeemable at the Company's option for $.01 per Right at any   
time prior to the close of business on the seventh day after the first    
date of public announcement that a person or group has acquired           
beneficial ownership of 20% or more of the Common Shares. At any time     
after a person or group acquires 20% or more of the Common Shares, but    
prior to the time such acquiring person acquires 50% or more of the       
Common Shares, the Company's Board of Directors may redeem the Rights     
(other than those owned by the acquiring person or group), in whole or    
in part, by exchanging one Common Share for each Right.                   

Note Ten. Operating Leases:                                               

The Company conducts a significant portion of its operations from an      
office/warehouse/distribution facility and an office/laboratory facility  
under operating leases that expire over the next seven years. In          
addition, the Company leases certain office equipment under operating     
leases that expire over the next four years.                              

The Company is committed under noncancellable operating leases, with      
minimum lease payments as of December 31, 1995 as follows:                
Fiscal Years Ending December 31,                                          
              1996                $  403,425                              
              1997                   410,130                              
              1998                   419,733                              
              1999                   394,128                              
              2000                   134,055                              
              Thereafter              82,809                              
                                  ----------                              
Total minimum lease payments       $1,844,280                             

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Total rental expense under operating leases was $422,337, $446,935 and    
$363,973 for the years ended November 30, 1993, 1994 and December 31,     
1995, respectively.                                                       

Note Eleven. Income Taxes:                                                

The tax effects of temporary differences that give rise to deferred tax   
assets and deferred tax liabilities at November 30, 1994 and December     
31, 1995 are as follows:                                                  

                                            1994               1995       
                                         ----------         ----------    
Net operating loss carryforward          $6,744,072         $9,834,875    
Research and development                                                  
   and other credits                        860,509            839,189    
Patent fees                                 287,450            308,110    
Other, net                                  526,930            794,948    
Less   Valuation allowance               (8,418,961)       (11,777,122)   
                                         -----------       ------------   
Deferred income tax asset                 $   -              $    -       
                                         ===========       ============   

Pursuant to the requirements to SFAS No. 109, a valuation allowance is    
provided when it is more likely than not the deferred income tax asset    
will not be realized. The Company has provided a valuation allowance      
against the entire deferred tax asset at November 30, 1994 and December   
31, 1995.                                                                 

The provision for income taxes for the years ended November 30, 1993,     
1994 and December 31, 1995 consisted of the following:                    

                                 1993              1994             1995  
                              ---------          --------         --------
Current provision              $104,000          $159,335         $131,350
Deferred provision, net                                                   
                              --------          --------          --------
Total provision                $104,000          $159,335         $131,350
                              ========          ========          ========

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The differences (expressed as a percentage of pre-tax income) between     
the statutory and effective federal income tax rates are as follows:      

                                1993              1994             1995   
                              --------          --------          ------  
Statutory tax rate              34.0%             34.0%           (34.0%) 
State income taxes               6.2               5.4               2.8  
Recognition of previously                                                 
   unrecognized deferred                                                  
   tax benefits                (36.6)            (35.3)               -   
Unrecognized deferred tax                                                 
   benefit                        -                -                34.6  
Expenses related to foreign                                               
   operations                    6.2               4.7               4.1  
Research and development                                                  
   tax credit adjustment          .7                .5                 -  
Other                             .9                .8               1.3  
                              --------          --------         -------- 
Effective tax rate              11.4%             10.1%              8.8% 
                              ========          ========         ======== 

At December 31, 1995, the Company had net operating loss carryforwards    
of approximately $28,926,000 for federal income tax purposes, which       
expire during the period from 2000 to 2010, and investment and research   
and development tax credit carryforwards of approximately $839,000,       
which expire during the period from 1999 to 2008, all of which are        
available to offset federal income taxes due in future periods.           

Note Twelve. Concentrations of Credit Risk:                               

Financial instruments that potentially expose the Company to              
concentrations of credit risk, as defined by SFAS No. 105, consist        
primarily of trade accounts receivable. The Company's customers are not   
concentrated in any specific geographic region but are concentrated in    
the health care industry. Significant sales were made to two              
unaffiliated customers, Baxter Healthcare Corporation accounted for       
$2,146,000, $2,775,000 and $2,492,000 and Owens &Minor accounted for      
$1,456,000, $1,795,000 and $3,348,000 of the Company's net sales in       
1993, 1994 and 1995, respectively. Sales by Caraloe, Inc. to an           
unaffiliated customer, Mannatech, Inc., formerly Emprise, Inc.,           
accounted for $0, $934,000 and $2,488,000 of the Company's net sales in   
1993, 1994 and 1995, respectively. The Company performs ongoing credit    
evaluations of its customers  financial condition and establishes an      
allowance for doubtful accounts based on factors surrounding the credit   
risk of specific customers and historical trends and other information.   

Note Thirteen. Fair Values of Financial Instruments:                      

SFAS No. 107,  Disclosures About Fair Value of Financial Instruments,     
requires disclosure of the fair value of financial instruments. The       
following methods and assumptions were used by the Company in estimating  
the fair value disclosures for its financial instruments.                 

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For cash, trade receivables and payables, the carrying amounts reported   
in the Consolidated Balance Sheets approximate fair value. The carrying   
amounts for revolving notes and notes payable approximate fair value      
based upon the borrowing rates currently available to the Company for     
similar bank loans.                                                       

Note Fourteen. Unaudited Selected Quarterly Financial Data:               

The unaudited selected quarterly financial data below reflect the fiscal  
years ended November 30, 1994 and December 31, 1995, respectively.        

1994         1st Quarter     2nd Quarter     3rd Quarter     4th Quarter  
             -----------     -----------     -----------     -----------  
Net sales    $6,414,153      $5,969,416      $6,303,426      $6,742,659   
Gross profit  5,092,901       4,508,094       4,682,973       4,730,929   
Net income      402,795         403,752         391,750         222,941   
Income per                                                                
    share           .05             .05             .05             .03   
Weighted average                                                          
    shares    7,337,458       7,339,148       7,342,932       7,344,390   

1995          1st Quarter     2nd Quarter     3rd Quarter     4th Quarter 
              -----------     -----------     -----------     ----------- 
Net sales     $6,275,759      $6,407,881      $6,621,396      $5,069,054  
Gross profit   4,636,540       4,331,661       4,351,009       3,110,609  
Net income      (496,782)       (286,555)        162,522                  
(1,007,452)                                                               
Income                                                                    
   per share       (.07)            (.04)           .02            (.12)  
Weighted average                                                          
   shares      7,359,387       7,812,878       8,213,508       8,344,929  

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(15)     Sales by Division                                                

The following summarizes the Company's sales by division and              
consolidated sales for the years ending December 31, 1995, November 30,   
1994 and 1993                                                             
(Dollar amounts in 000's)                                                 
                         Carrington Laboratories         Consolidated     
                     -------------------------------   ----------------   

 Year Ended            Wound                Carrington  Caraloe   Total   
  December 31, 1995    Care     Veterinary    Sales      Inc.     Sales   
 ------------------  --------   ----------  ----------  -------  -------  

 Sales, net           $21,147      $320      $21,467    $2,907   $24,374  
 Cost of Goods Sold     5,971       163        6,134     1,810     7,944  
                      --------    ------     --------   -------  -------  
 Gross Margin         $15,176      $157     $ 15,333    $1,097   $16,430  
                      ========    ======     ========   =======  =======  

 Year Ended                                                               
  November 30, 1994                                                       

 Sales, net           $23,665      $404      $24,069    $1,361   $25,430  
 Cost of Goods Sold     5,392       190        5,582       833     6,415  
                      --------    ------     --------   -------  -------  
 Gross Margin         $18,273      $214      $18,487    $  528   $19,015  
                     ========    ======     ========   =======  =======   
 Year Ended                                                               
  November 30, 1993                                                       

 Sales, net           $20,684      $463      $21,147    $   37   $21,184  
 Cost of Goods Sold     4,822       445        5,267        22     5,289  
                      --------    ------     --------   -------  -------  
 Gross Margin         $15,862      $ 18      $15,880    $   15   $15,895  
                      ========    ======     ========   =======  =======  

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Report of Independent Public Accountants                                  

To the Shareholders and Board of Directors of Carrington Laboratories,    
Inc., and Subsidiaries:                                                   

We have audited the accompanying consolidated balance sheets of           
Carrington Laboratories, Inc. (a Texas corporation), and subsidiaries as  
of November 30, 1994, December 31, 1994, and December 31, 1995, and the   
related consolidated statements of operations, shareholders  investment,  
and cash flows for each of the two years in the period ended November     
30, 1994, the month ended December 31, 1994, and the year ended December  
31, 1995. 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 consolidated financial statements referred to above   
present fairly, in all material respects, the financial position of       
Carrington Laboratories, Inc., and subsidiaries as of November 30, 1994,  
December 31, 1994 and December 31, 1995, and the consolidated results of  
their operations and their cash flows for the two years ended November    
30, 1994, the month ended December 31, 1994 and the year ended December   
31, 1995, in conformity with generally accepted accounting principles.    

Arthur Andersen LLP                                                       
Dallas, Texas                                                             
February 9, 1996                                                          

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                                 SIGNATURES                               

     Pursuant to the requirements of Section 13 or 15 (d) of the          
Securities Exchange Act of 1934, the Registrant has duly caused this      
Report to be signed on its behalf by the undersigned, thereunto duly      
authorized.                                                               

                                   CARRINGTON LABORATORIES, INC.          

Date: January __, 1997              By:  /s/ Sheri L. Pantermuehl         
                                      ---------------------------         
                                       Sheri L. Pantermuehl, CFO

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K/A’ Filing	Date	First	Last	Other Filings

	10/15/01	39		8-A12G/A, 8-K
	1/30/99	34
	11/29/97	35
Filed on:	3/5/97			10-Q/A
	1/16/97	19
	12/31/96	19	39	10-K, 10-K/A
	11/29/96	35
	5/23/96	3		DEF 14A
	4/29/96	19
	3/31/96	17	35	10-Q, 10-Q/A
	3/15/96	2
	3/11/96	21
	3/1/96	16
	2/9/96	44
	2/1/96	36
	1/14/96	36
For Period End:	12/31/95	1	44	10-K, 10-K/A
	12/15/95	38
	11/29/95	35
	7/11/95	37
	4/25/95	15
	4/5/95	20
	3/31/95	34		10-Q
	3/15/95	17
	1/30/95	34	35
	12/31/94	25	44
	11/30/94	18	44
	5/3/94	15
	2/8/94	15
	11/30/93	26	43
	9/1/93	31
	1/1/93	38
	11/30/92	27
	10/29/92	38
	6/2/92	15
	4/21/92	15
				List all Filings

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Filing Submission 0000718007-97-000002 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Delsite, Inc. – ‘10-K/A’ for 12/31/95

As of: Wednesday, 3/5/97 · For: 12/31/95 · Accession #: 718007-97-2 · File #: 0-11997

Previous ‘10-K’: ‘10-K/A’ on 10/4/96 for 12/31/95 · Next: ‘10-K’ on 3/26/97 for 12/31/96 · Latest: ‘10-K’ on 3/31/08 for 12/31/07

Amendment to Annual Report — Form 10-KFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Amendment to Annual Report — Form 10-K
Filing Table of Contents