FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1997

                                       OR

(  )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

For the transition period                             to

Commission file number  1-11394

                             MEDTOX SCIENTIFIC, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                              95-3863205
 (State or other jurisdiction of                               (I.R.S. Employer
incorporated or organization)                              Identification No.)

  1238 Anthony Road, Burlington, North Carolina                         27215
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number including area code:              (910) 226-6311

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

The number of shares of Common Stock,  $.15 par value,  outstanding as of August
1, 1997 was 55,516,742.

<PAGE>


                             MEDTOX SCIENTIFIC, INC.

                                      INDEX

                                                                           Page

Part I     Financial Information:

           Item 1:

               Consolidated Balance Sheets - June 30, 1997 (Unaudited)
               and December 31, 1996 ........................................ 3

               Consolidated Statements of Operations - Three Months
               Ended June 30, 1997 and 1996 and Six
               Months Ended June 30, 1997 and 1996 (Unaudited)............... 5

               Consolidated Statements of Cash Flows - Six Months
               Ended June 30, 1997 and 1996 (Unaudited) ..................... 6

               Notes to Consolidated Financial Statements.................... 7

           Item 2:

               Management's Discussion and Analysis of
               Financial Condition and Results of Operations ................11

Part II   Other Information .................................................17
               Signatures ...................................................18

<PAGE>

PART I. FINANCIAL INFORMATION

<TABLE>
                             MEDTOX SCIENTIFIC, Inc.
                           CONSOLIDATED BALANCE SHEETS
                   (In thousands, except for number of shares)


<CAPTION>
                                                     June 30          December 31
                                                      1997               1996
                                                  ---------------------------------
                                                   (Unaudited)
<S>                                               <C>                   <C>    
Assets
Current assets
   Cash and cash equivalents                       $         19         $       82
   Accounts receivable:
         Trade, less allowance for doubtful
           accounts ($362-1997; $358-1996)                5,328              4,476
         Other                                               69                 77
                                                  ---------------------------------
                                                          5,397              4,553
   Inventories:
         Raw materials                                      531                488
         Work in process                                    170                146
         Finished goods                                     672                656
                                                  ---------------------------------
                                                          1,373              1,290

   Prepaid expenses and other                               404                140
                                                  ---------------------------------


         Total current assets                             7,193              6,065



Equipment and improvements:
    Furniture and equipment                               9,877              9,200
    Leasehold improvements                                1,100                929
                                                  ---------------------------------
                                                         10,977             10,129
    Less accumulated depreciation
         and amortization                                (8,441)            (7,951)
                                                  ---------------------------------

                                                          2,536              2,178
Goodwill, net of accumulated amortization of
    $1,658 in 1997 and $1,184 in 1996                    15,362             15,836

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


Total assets                                       $     25,091     $       24,079
                                                  =================================



See notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>


                              MEDTOX SCIENTIFIC, Inc.
                      CONSOLIDATED BALANCE SHEETS (Continued)
                    (In thousands, except for number of shares)
<CAPTION>


                                                     June 30           December 31
                                                       1997               1996
                                                  ----------------------------------
                                                   (Unaudited)
<S>                                                <C>             <C>    
Liabilities and stockholders' equity
Current liabilities
   Line of credit                                  $     3,315     $         1,437
   Accounts payable                                      2,681               2,387
   Accrued expenses                                      1,547               2,074
   Current portion of restructuring accrual                782                 899
   Current portion of long-term debt                     2,121               2,790
   Current portion of capital lease obligations             71                  26
   Other current liabilities                                 -                  14
                                                  ----------------------------------

         Total current liabilities                      10,517               9,627


Long-term portion of restructuring accrual                 604                 904
Capital lease obligations                                  257                   -

Stockholders' equity 
         Preferred Stock, $1.00 par value:
         Authorized - 1,000,000 shares;
         Issued and outstanding -
         4 shares in 1997 and 238 in 1996                    -                   -
   Common Stock, $ .15 par value:
         Authorized - 60,000,000 shares;
         Issued and outstanding -
         55,512,158 shares in 1997 and
         25,555,796 shares in 1996                        8,327               3,834
   Additional paid-in capital                            51,905              56,366
   Accumulated deficit                                  (46,343)            (46,476)
                                                  ----------------------------------

                                                         13,889              13,724

   Less: Treasury stock                                    (176)               (176)
                                                  ----------------------------------

        Total stockholders' equity                        13,713              13,548

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

Total liabilities and stockholders' equity         $      25,091    $         24,079
                                                  ==================================


See notes to consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>

                             MEDTOX SCIENTIFIC, Inc.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except share and per share data)

<CAPTION>

                                                        Three Months Ended                  Six Months Ended
                                               June 30            June 30          June 30            June 30
                                                 1997               1996            1997               1996
                                            ----------------------------------  ---------------------------------
<S>                                          <C>            <C>                 <C>            <C>    
                                             (Unaudited)        (Unaudited)      (Unaudited)        (Unaudited)
Revenues
   Laboratory services                       $       6,779   $       6,735       $   12,922    $         11,483
   Product sales                                       707             892            1,367               1,688

                                            ----------------------------------  ---------------------------------
                                                     7,486           7,627           14,289              13,171
Cost of sales
   Laboratory services                               4,153           4,228            8,005               7,217
   Product sales                                       445             571              884               1,227
                                            ----------------------------------  ---------------------------------
                                                     4,598           4,799            8,889               8,444

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

          Gross profit                               2,888           2,828            5,400               4,727

Operating expenses
   Selling, general and administrative               2,421           2,623            4,580               5,030
   Research and development                            205             365              411                 710
   Restructuring costs                                   -               -                -                 858
                                            ----------------------------------  ---------------------------------
                                                     2,626           2,988            4,991               6,598
Other income (expenses)
   Interest and financing costs, net                  (160)           (126)            (276)               (203)
   Royalties and fees                                    -              22                -                  85
                                            ----------------------------------  ---------------------------------
                                                      (160)           (104)            (276)               (118)


                                            ----------------------------------  ---------------------------------
Net income (loss)                             $        102      $     (264)       $     133        $      (1,989)
                                            =====================================================================


Net income (loss) per share
                                             $        0.00       $   (0.01)       $    0.00        $       (0.09)
                                            ==================================  =================================



Weighted average number of
  common shares outstanding                     44,814,659         22,006,646      50,207,371         21,282,842
                                            ==================================  =================================



See notes to consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>

                             MEDTOX SCIENTIFIC, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<CAPTION>

                                                                Six Months Ended
                                                              June 30          June 30
                                                                1997            1996
                                                        ----------------------------------
                                                            (Unaudited)       (Unaudited)
<S>                                                           <C>              <C>
Operating activities
Net income (loss)                                              $    133         $   (1,989)
   Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
      Depreciation and amortization                                 964              1,054
      Provision for losses on accounts receivable                     4                 68
      Provision for obsolete inventory                              (97)                 -
      Restructuring costs                                             -                858
      Changes in operating assets and liabilities, 
      net of acquisition:
         Accounts receivable                                       (848)            (1,591)
         Inventories                                                 14                (34)
         Prepaid expenses and other                                (264)               161
         Accounts payable, accrued expenses and other              (247)              (342)
         Restructuring accruals                                    (417)              (506)
                                                        ----------------------------------
Net cash used in operating activities                              (758)            (2,321)

Investing activities
    Purchases of equipment and improvements                        (528)            (1,047)
    Cash used for MEDTOX acquisition                                  -            (19,287)
                                                        ----------------------------------
Net cash used in investing activities                              (528)           (20,334)

Financing activities
    Net proceeds from sale of preferred stock                         -             19,093
    Net proceeds (costs)  from sale of common stock                  32                629
    Net proceeds from line of credit, term loans
       and notes payable                                           1,878             4,392
    Principal payments on capital lease obligations                  (18)                -
    Principal payments on term loans and notes payable              (669)           (1,571)
                                                        ----------------------------------
Net cash provided by financing activities                          1,223            22,543
                                                        ----------------------------------

Decrease in cash and cash equivalents                               (63)             (112)
Cash and cash equivalents at beginning of period                     82               258
                                                        ----------------------------------

Cash and cash equivalents at end of period               $           19        $      146
                                                        ==================================

Supplemental noncash activities
    During 1997, the Company entered into capital lease obligations of $320,000 to purchase equipment.
    In January 1996, the Company acquired Medtox Laboratories, Inc.  The purchase price was $24 million,
       which  included $19 million cash and the issuance of $5 million in common stock (2,517,306  shares).  
    During 1997, the Company converted 234 shares of preferred stock into 22,001,232 shares of common stock.


See notes to consolidated financial statements.
</TABLE>

<PAGE>


                             MEDTOX SCIENTIFIC, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 1997

NOTE A -- BASIS OF PRESENTATION

The  accompanying   unaudited   consolidated   financial  statements  of  MEDTOX
Scientific, Inc. (the "Company") have been prepared in accordance with generally
accepted  accounting  principles for interim financial  information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the  information  and notes  required by  generally  accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring  accruals)  considered  necessary for a fair presentation of
financial  condition and results of  operations  have been  included.  Operating
results  for the six  month  period  ended  June 30,  1997  are not  necessarily
indicative of the results that may be attained for the entire year.  For further
information, refer to the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K, (as amended),  for the year ended December
31, 1996.

Loss Per Share:  Loss per share amounts are based on the weighted average number
of shares of common stock outstanding.

Reclassifications:   Certain  reclassifications  have  been  made  to  the  1996
financial statements to conform with the 1997 presentation.

NOTE B -- ACQUISITION OF MEDTOX LABORATORIES, INC. ("MEDTOX")

On January 30,  1996,  the Company  acquired  MEDTOX,  a  toxicology  laboratory
located in St.  Paul,  Minnesota.  The  purchase  price was $24  million,  which
included $19 million cash and the issuance of 2,517,306  shares of common stock.
The  acquisition  was  accounted  for under the  purchase  method of  accounting
wherein the  Company  recognized  approximately  $22  million in  goodwill.  The
goodwill is being amortized over a period of 20 years. Utilizing an undiscounted
cash  flow  analysis,  the  Company  concluded  that the  carrying  value of the
remaining goodwill associated with the MEDTOX acquisition exceeded the estimated
future cash flows.  Accordingly,  the Company recorded a write-off of $6,016,000
at December 31, 1996.

The Company  financed  the  acquisition  by issuing  $20 million of  convertible
preferred  stock and borrowing $4 million  under two $2 million term loans.  The
Company  also  entered  into a revolving  line of credit of up to $7 million for
working capital purposes.

The  consolidated  results of operations  for the six months ended June 30, 1996
include the results of the MEDTOX  operations  from January 26, 1996 to June 30,
1996.

<PAGE>

NOTE C -- ACQUISITION OF BIOMAN PRODUCTS, INC. ("BIOMAN")

On June 1, 1995,  the Company  acquired  Bioman,  an  environmental  diagnostics
company.  The purchase price was $140,000,  which included cash and the issuance
of 21,489 shares of common stock.  The  acquisition  was accounted for under the
purchase  method of  accounting  wherein  the  Company  recognized  $117,000  of
goodwill,  which was being amortized over a period of 20 years. The consolidated
results of  operations  for the six  months  ended June 30,  1996  included  the
results of the Bioman operations. In September 1996, the Company sold the former
Bioman  operations to a company headed by certain of the former employees of the
Company and Bioman.

NOTE D -- DEBT

To help finance the  acquisition of MEDTOX,  the Company  entered into revolving
and term loan  facilities  with  Heller  Financial,  Inc.  ("Heller").  The debt
financing  was for a total  of  $11,000,000  and  consisted  of two  term  loans
totaling  $4,000,000  and up to  $7,000,000  in the form of a revolving  line of
credit based primarily on the  receivables of the Company.  The amount of credit
available to the Company  varies with the accounts  receivable and the inventory
of the Company.  Effective May 1, 1997,  the Company and Heller entered into the
First  Amendment  to  Loan  and  Security  Agreement  and  Limited  Waiver  (the
"Amendment  Agreement")  whereby  Heller  agreed to waive the then  existing non
compliance  with certain  covenants.  As part of the  Amendment  Agreement,  the
Company and Heller agreed to revise the loan  covenants and loan interest  rates
commencing  May 1, 1997.  The interest rates on the two term loans of $2,000,000
are 3.0% and 2.5%  above the prime  rate  respectively.  The  revolving  line of
credit carries an interest rate equal to 2.0% above the prime rate.

As of June 30, 1997, the Company was not in compliance with certain covenants in
its  Amendment  Agreement  with Heller.  Heller has notified the Company that it
does not  currently  intend to exercise any of its rights or remedies  regarding
non compliance available to Heller under the Loan Agreement with Heller.

NOTE E -- CONTINGENCIES

The Company is a defendant to claims of patent  infringement  asserted on August
20, 1996. It is alleged the Company infringes two patents allegedly owned by the
plaintiff  relating to  forensically  acceptable  determinations  of gestational
fetal exposure to drugs and other chemical agents.  The Company has answered the
compliant  denying  any  infringement  and has  counterclaimed  for a  declatory
judgment that the patents are invalid, unenforceable, and not infringed. It also
has   counterclaimed  for  unfair  competition  under  federal  and  state  law,
requesting  money damages as well as injunctive  relief.  The Company intends to
vigorously  pursue its  defense of the claims and to  vigorously  prosecute  its
counterclaims.

<PAGE>

On March 18, 1997,  a lawsuit was  commenced in New York State Court by a former
holder of the Series A Preferred Stock claiming entitlement to additional shares
of Common  Stock as a result of the  Company's  previous  inability to issue the
conversion shares. The conversion shares have been issued to the former Series A
Preferred  Shareholder.  The  Company  has denied any  liability  and intends to
contest the lawsuit unless a reasonable settlement can be reached.

The Company  believes that the probable  resolution  of the above  contingencies
will not  materially  affect the financial  position or results of operations of
the Company.

On January  31,  1997,  the  Company  filed suit in  Federal  District  Court in
Minnesota  against a  majority  shareholder  and two  outside  directors  of the
Company alleging violation of Section 16b of the Securities Exchange Act of 1934
and seeking recovery of more than $500,000 in short-swing  profits. On August 4,
1997,  the U.S.  District  Court  granted  Defendants'  motion  to  dismiss  the
Company's  complaint,  ruling that the Defendants'  conduct did not constitute a
violation of Section 16(b).  The Company is  considering  whether to appeal that
decision.

<PAGE>


               CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS
             THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER
               FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS

         In  connection  with  the  "safe  harbor"  provisions  of  the  Private
Securities  Litigation  Reform  Act of 1995,  readers of this  document  and any
document  incorporated by reference  herein,  are advised that this document and
documents  incorporated by reference into this document  contain both statements
of historical facts and forward looking  statements.  Forward looking statements
are subject to certain risks and uncertainties, which could cause actual results
to differ  materially from those  indicated by the forward  looking  statements.
Examples  of forward  looking  statements  include,  but are not  limited to (i)
projections  of revenues,  income or loss,  earnings or loss per share,  capital
expenditures,  dividends,  capital  structure and other  financial  items,  (ii)
statements of the plans and objectives of the Company or its management or Board
of  Directors,  including  the  introduction  of new  products,  or estimates or
predictions  of actions  by  customers,  suppliers,  competitors  or  regulatory
authorities,   (iii)  statements  of  future  economic  performance,   and  (iv)
statements of assumptions  underlying  other statements and statements about the
Company or its business.

         This document and any documents  incorporated by reference  herein also
identify important factors which could cause actual results to differ materially
from  those  indicated  by the  forward  looking  statements.  These  risks  and
uncertainties include price competition, the decisions of customers, the actions
of  competitors,  the effects of government  regulation,  possible delays in the
introduction of new products,  customer acceptance of products and services, the
possible effects of the MEDTOX  acquisition and its related financings and other
factors which are described herein and/or in documents incorporated by reference
herein.

         The  cautionary  statements  made  pursuant to the  Private  Litigation
Securities  Reform Act of 1995 above and elsewhere by the Company  should not be
construed  as  exhaustive  or  as  any  admission   regarding  the  adequacy  of
disclosures made by the Company prior to the effective date of such Act. Forward
looking  statements are beyond the ability of the Company to control and in many
cases the Company  cannot  predict  what factors  would cause  results to differ
materially from those indicated by the forward looking statements.


<PAGE>


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

Introduction

         The  Company  commenced  operations  in June 1983 and until  1986 was a
development  stage company.  The Company became engaged in the  manufacture  and
sale of  Conventional  Biodiagnostic  Products as a result of its acquisition of
Granite  Technological  Enterprises,   Inc.  in  1986.  The  Company  began  the
manufacture and sale of its EZ-SCREEN(R) diagnostic tests in 1985 and introduced
its patented  one-step assays,  VERDICT(R) and RECON(R),  in 1993. Also in 1993,
the  Company  formed  DIAGNOSTIX,  Inc.  to market its  agricultural  diagnostic
products.  The Company  entered the laboratory  testing market when it completed
the acquisition of Princeton Diagnostic Laboratories of America, Inc., (PDLA) in
1994. In 1995, the Company acquired the former  operations of Bioman through its
DIAGNOSTIX,  Inc.  subsidiary.  On January 30, 1996 the  Company  completed  the
acquisition  of MEDTOX.  The results of operations for the six months ended June
30, 1996 include the  operations of MEDTOX from January 26, 1996 through the end
of the period.  Since  inception,  the Company has financed its working  capital
requirements primarily from the sale of equity securities.

Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996

         Total revenues for the three months ended June 30, 1997 were $7,486,000
as compared to $7,627,000 for the three months ended June 30, 1996. The decrease
was  attributable  to a decrease  in revenues  from  product  sales.  Laboratory
service  revenues  were  $6,779,000  for the three  months  ended June 30, 1997,
compared to $6,735,000  for the three months ended June 30, 1996.  This increase
was the  result of  increased  sample  volume  partially  offset by a  decreased
average selling price per sample.

         Product sales include the sales  generated from substance abuse testing
products,  which  incorporates  the  EZ-SCREEN and VERDICT on site test kits and
other  ancillary  products for the  detection of abused  substances.  Sales from
these  products  were $397,000 for the three months ended June 30, 1997 compared
to sales of $441,000  recorded for the same period in 1996. This decrease of 10%
was primarily due to the absence of certain sales  generated  through the former
operations of Bioman.

         Product sales also include sales of agricultural  diagnostic  products.
Sales of these  products  were $185,000 for the three months ended June 30, 1997
compared to sales of $372,000 for the three months ended June 30, 1996.  For the
three  months  ended June 30, 1996 the Company had sales of $133,000  which were
generated  through the former  operations of Bioman,.  Excluding these revenues,
sales of  agricultural  diagnostic  products  were $239,000 for the three months
ended June 30, 1996. As such,  the sales of these  products for the three months
ended June 30, 1997 were, on a pro forma basis, 23% lower  than  the  comparable
period  in 1996.  The  primary  reason  for the  decrease  was due to  decreased

<PAGE>

purchases by the USDA for the Company's products. The Company believes that this
is the result of  decreased  testing by the USDA for the tests that  utilize the
Company's products.

     Sales of contract  manufacturing  services,  microbiological and associated
product sales were $125,000 for the three months ended June 30, 1997 compared to
$79,000 for the same period in 1996.  This  increase is the result of  increased
revenues  from  contract  manufacturing  services.  In July,  1997,  the Company
entered into a three year Supply Agreement with Boehringer Mannheim  Corporation
("BMC"), whereby the Company will supply to BMC controls for certain products of
BMC.

           The gross  margin from the  revenues  generated  from the  laboratory
services was 39% for the three  months ended June 30, 1997 an increase  compared
to the same period in 1996,  when the gross margin was 37%. The  improvement  in
the  gross  margin  was  primarily  due to  the  increased  efficiencies  in the
laboratory  combined  with an increase in the number of tests  performed  in the
laboratory.

         Gross margins from the sales of both manufactured products and products
purchased  for resale for the three months ended June 30, 1997 were 37% compared
to 36% of sales of these  products  during the three months ended June 30, 1996.
This  increase in gross  margin from product  sales is  primarily  the result of
increased sales of contract manufacturing services.

         Selling, general and administration expenses for the three months ended
June 30, 1997 were $2,421,000, compared to $2,623,000 for the three months ended
June 30, 1996.  The $202,000  reduction in these  expenses in 1997 was primarily
the result of the  consolidation  of certain  administrative  functions into the
MEDTOX facility as well as decreased amortization expense.

         Research  and  development  expenses  incurred  during the three months
ended June 30, 1997 were $205,000 as compared to $365,000 for the same period in
1996.  The  reduction  of  $160,000  in  research  and  development  expenses is
primarily the result of a reduction of personnel and a refocus of efforts in the
research  and  development   function  associated  with  the  Company's  on-site
products.

         For the three  months  ended June 30,  1997,  the Company  incurred net
interest and financing costs of $160,000, compared to costs of $126,000 incurred
during the three  months ended June 30,  1996.  This  increase was the result of
increased  borrowings  against the line of credit  during the three months ended
June 30, 1997 as compared to June 30, 1996.

     For the three months ended June 30, 1997,  the Company had no revenues from
royalties  and fees,  compared  to $22,000 for the three  months  ended June 30,
1996.

<PAGE>
     As a result of the above,  the net income for the three  months  ended June
30, 1997 was $102,000, compared to the net loss of $264,000 for the three months
ended June 30, 1996.

Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996

         Total revenues for the six months ended June 30, 1997 were  $14,289,000
as compared to $13,171,000  for the six months ended June 30, 1996. The increase
was  attributable  to  the  increase  in  revenues  from  laboratory   services.
Laboratory  service  revenues were $12,922,000 for the six months ended June 30,
1997 as compared to  $11,483,000  for the six months ended June 30,  1996.  This
increase of 13% was  primarily  the result of the timing of the  acquisition  of
MEDTOX whereby the Company realized revenues from MEDTOX for approximately  five
months  during the six months ended June 30,  1996,  as compared to the complete
six month  period  ended  June 30,  1997.  Had the  acquisition  of MEDTOX  been
effective  January 1, 1996,  the Company would have had revenues of  $12,683,000
from laboratory  services during the six months ended June 30, 1996, as compared
to the $12,922,000  realized from the sale of laboratory services during the six
months  ended  June 30,  1997,  this would  represent  a pro forma  increase  of
$239,000 or 2%.

         Product sales include the sales  generated from substance abuse testing
products,  which  incorporates  the  EZ-SCREEN and VERDICT on site test kits and
other  ancillary  products for the  detection of abused  substances.  Sales from
these  products were $834,000 for the six months ended June 30, 1997 compared to
sales of $765,000  recorded for the same period in 1996. This increase of 9% was
primarily the result of sales of the EZ-SCREEN  PROFILE(TM) test kits which were
introduced in May, 1996.

         Product sales also include sales of agricultural  diagnostic  products.
Sales of these  products  were  $328,000  for the six months ended June 30 1997,
compared to sales of $687,000 for the six months  ended June 30,  1996.  For the
six months  ended June 30,  1996,  the Company had sales of $279,000  which were
generated  through the former  operations of Bioman.  Excluding  these revenues,
sales of agricultural diagnostic products were $408,000 for the six months ended
June 30,  1996.  As such,  the sales of these  products for the six months ended
June 30, 1997 were, on a pro forma basis,  20% lower than during the  comparable
period  in 1996.  The  primary  reason  for the  decrease  was due to  decreased
purchases by the USDA for the Company's products. The Company believes that this
is the result of  decreased  testing by the USDA for the tests that  utilize the
Company's products.

         Sales  of  contract   manufacturing   services,   microbiological   and
associated  product  sales were  $205,000 for the six months ended June 30, 1997
compared to $161,000 for the same period in 1996.  This  increase was  primarily
due to increased revenues from contract  manufacturing  services. 

<PAGE>

         Revenues generated from the shipment of products to the U.S. Department
of Defense were $75,000 for the six months ended June 30, 1996.  The Company had
no such sales  during  the six months  ended June 30,  1997.  The  contract  the
Company  had with the  Department  of Defense  has  expired.  At this time,  the
Company does not know if the U.S.  Department of Defense intends to purchase any
more of the kits the Company has developed.

           The gross  margin from the  revenues  generated  from the  laboratory
services  was 38% for the six months  ended June 30, 1997 as compared to a gross
margin of 37% for the same period in 1996.  During the six months ended June 30,
1997,  the  Company  was able to  offset  declining  average  selling  prices by
reducing  costs through the  consolidation  of laboratory  operations in 1996 as
well as continued improvements in efficiency of laboratory operations.

         Gross margins from the sales of both manufactured products and products
purchased for resale for the six months ended June 30, 1997 were 35% compared to
27% of sales of these products  during the six months ended June 30, 1996.  This
increase  in gross  margin from  product  sales is  primarily  the result of the
increased  sales of the  EZ-SCREEN  PROFILE  product and contract  manufacturing
services,  as well as reduced costs as a result of certain  restructuring  steps
taken in 1996.

         Selling,  general and administration  expenses for the six months ended
June 30, 1997 were  $4,580,000,  compared to $5,030,000 for the six months ended
June 30, 1996.  The $450,000  reduction in these  expenses in 1997 was primarily
the result of the  consolidation  of certain  administrative  functions into the
MEDTOX facility as well as decreased amortization expense.

         Research and development  expenses incurred during the six months ended
June 30, 1997 were $411,000 as compared to $710,000 for the same period in 1996.
The reduction of $299,000 in research and development  expenses is primarily the
result of a reduction of personnel  and a refocus of efforts in the research and
development function associated with the Company's on-site products.

         During the six months ended June 30, 1996, the Company  determined that
it would be beneficial to consolidate the laboratory operations of PDLA into the
laboratory  operations at MEDTOX.  In addition the Company  decided to down size
certain  administrative  positions at both PDLA and MEDTOX in order to eliminate
duplicative  functions.  As a result of this  restructuring  plan,  the  Company
recorded a charge of $858,000 during the six months ended June 30, 1996 to cover
certain  costs of the  restructuring,  including  $100,000  related  to  certain
severance  payments.  The Company had no such charge during the six months ended
June 30, 1997.

         For the six months  ended  June 30,  1997,  the  Company  incurred  net
interest and financing costs of $276,000, compared to costs of $203,000 incurred

<PAGE>

during the six months ended June 30, 1996.  This  increase was the result of the
funds  borrowed by the Company to complete the financing for the  acquisition of
MEDTOX.

         For the six months  ended June 30,  1997,  the  Company had no revenues
from  royalties and fees,  compared to $85,000 for the six months ended June 30,
1996.  This decrease was  primarily due to the absence of royalties  from AML as
the agreement with AML has expired.

     As a result of the above,  the net income for the six months ended June 30,
1997 was  $133,000,  compared to the net loss of  $1,989,000  for the six months
ended June 30, 1996.

         Management  believes the acquisition of MEDTOX and the restructuring of
the laboratory  operations will continue to improve the operating results of the
Company.  Management  expects net sales to grow through both the addition of new
accounts,  as well as the  introduction of new laboratory  testing  services and
on-site products.

Material Changes in Financial Condition

         As of June 30, 1997,  accounts  receivable were $5,397,000  compared to
$4,553,000  at December  31, 1996.  The  increase of $844,000 is  primarily  the
result of higher  sales in the  quarter  ended June 30,  1997 as compared to the
quarter ended December 31, 1996.

         Prepaid  expenses  and other  assets were  $404,000 at June 30, 1997 as
compared to $140,000 at December 31, 1996. The increase of $264,000 is primarily
the result of the renewal of annual maintenance  contracts,  annual licenses and
fees and an increase in prepaid supplies.

         The  balance  of  equipment  and  improvements  at June  30,  1997  was
$10,977,000  as compared to a balance of  $10,129,000  at December 31, 1996. The
increase  of  $848,000  was the result of  purchases  of  equipment  and capital
improvements  for the laboratory  operation to improve  efficiencies  and reduce
operating costs.

         As of June 30, 1997,  accounts payable totaled  $2,681,000  compared to
$2,387,000 at December 31, 1996. The increase of $294,000,  or 12%, is primarily
the result of increased  purchases of kits, forms and other supplies as a result
of increased  business for the laboratory  testing services  consistent with the
seasonality of the business.

         Accrued  expenses  were  $1,547,000  at June 30,  1997,  as compared to
$2,074,000  at December  31, 1996.  The  decrease of  $527,000,  or 34%, was the
result of payments made during the first six months of 1997 for expenses accrued
at December 31, 1996.

         At June 30, 1997,  the Company had a total balance of leases payable of
$328,000  compared to a balance of $26,000 at December 31, 1996. The increase in

<PAGE>

the  balance of the leases  payable  was the result of the  purchase  of certain
equipment to improve operating efficiencies in the laboratory.

          June 30,  1997,  the  Company  had a total  balance  of  restructuring
accruals of $1,386,000 compared to a balance of $1,803,000 at December 31, 1996.
The decrease in the balance of the restructuring  accruals of $417,000,  or 23%,
was the result of payments made during the six months ended June 30, 1997.

         At June 30,  1997,  the  Company had a total loan  balance  owed to its
financial  lender of $5,436,000,  compared to a total balance of $4,227,000 owed
at December 31, 1996. The net increase of $1,209,000,  or 29%, was the result of
increased  borrowings  by the  Company  from its line of credit  to pay  certain
accrued  expenses  and  restructuring  accruals as well as  purchases of certain
assets to improve operating efficiencies.

Liquidity and Capital Resources

         Since its inception,  the working  capital  requirements of the Company
have been funded  primarily  by cash  received  from equity  investments  in the
Company and more recently debt financing. At June 30, 1997, the Company had cash
and cash equivalents of $19,000. The Company is currently marginally  profitable
and, as such, is relying on a continued  positive cash flow from  operations and
its line of credit to fund its working capital and asset  purchases.  The amount
of credit on the revolving line of credit is based  primarily on the receivables
of the Company  and,  as such,  varies with the  accounts  receivable,  and to a
lesser degree the inventory of the Company. The revolving line of credit carries
an interest  rate equal to 2.0% above the prime rate.  As of June 30, 1997,  the
Company  had total  availability  of  $3,512,000  on the line of credit of which
$3,315,000 was borrowed,  leaving a net  availability of $197,000 as of June 30,
1997. In the short term, the Company  believes that the  aforementioned  capital
will be  sufficient  to fund the  Company's  planned  operations  through  1997,
although there can be no assurance that the available capital will be sufficient
to fund the future  operations of the Company beyond 1997. The Company  believes
that consistent  profitable earnings,  as well as access to capital, will be the
primary basis for funding the operations of the Company for the long term.

         The Company  believes that the  acquisition  of MEDTOX,  the subsequent
consolidation  of the  laboratory  operations  from PDLA into MEDTOX,  and other
synergy  that will be realized  from the  acquisition  of MEDTOX will enable the
Company to generate  positive cash flow. The Company  continues to follow a plan
which includes (i) continuing to  aggressively  monitor and control costs,  (ii)
increasing revenue from sales of the Company's products,  services, and research
and  development  contracts,  as well as (iii)  continue to  selectively  pursue
synergistic  acquisitions to increase the Company's  critical mass. There can be
no assurance that costs can be controlled,  revenues can be increased, financing
may be obtained, acquisitions successfully consummated, or that the Company will
be profitable.

<PAGE>


ITEM 2   CHANGES IN SECURITIES.  Inapplicable

ITEM 3   DEFAULTS ON SENIOR SECURITIES.  Inapplicable

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.  None

ITEM 5   OTHER INFORMATION


ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibit  10.41,   Amendment  to  the  Loan  and  Security
              Agreement  and Limited  Waiver  Between the Company and Heller
              dated May 1, 1997.

              There was no Report on Form 8-K during the three  months ended
              June 30, 1997.

<PAGE>



                                   SIGNATURES


         Pursuant to the  requirements  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.


Date:    August 12, 1997


                                 MEDTOX SCIENTIFIC, INC.

                                By:   /s/  Richard J. Braun
                                      Richard J. Braun, Chief Executive Officer

                                By:   /s/    Peter J. Heath
                                      Peter J. Heath, Vice President of Finance
                                      and Chief Financial Officer