SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549
                                   
                               FORM 10-KSB
                                   
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT of 1934 


For the Fiscal Year Ended May 31, 1997       Commission File Number 0-16664

                                                                      

                  GENETIC LABORATORIES WOUND CARE, INC.


           (Exact Name of Company as specified in its charter)


               Minnesota                        41-1604048
          ____________________        _______________________________
        (State of Incorporation)     (IRS Employer Identification No.)

               2726 PATTON ROAD, ST. PAUL, MINNESOTA 55113
                                (Address)
                    TELEPHONE NUMBER:  (612) 633-0805
                                   
    Securities Registered Pursuant to Section 12(b) OF THE ACT: None
      Securities Registered Pursuant to Section 12(g) OF THE ACT:
                                   
                       COMMON STOCK $.01 par value
                       ___________________________
                                   
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of
the Exchange Act during the past 12
months (or for such shorter period that the Company was required to file such
reports), and (2)
has been subject to such filing
requirements for the past 90 days.  Yes  X     No_____

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B
contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy
or information
statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB.  [     ]

The issuer's revenues for its most recent fiscal year were $2,906,215.

Aggregate market value of voting stock held by nonaffiliates of Company as of
June 30, 1997
was approximately $1,200,000.  

The number of shares of each class of common stock outstanding on June 30, 1997
was:

                 Common Stock $.01 par value    2,401,850 Shares

                   DOCUMENTS INCORPORATED BY REFERENCE

     Incorporated Document                          Location on Form 10-KSB

1.                                                                  Genetic
Laboratories Wound Care, Inc.        Part III
  Proxy statement for 1997 Annual
  meeting of Shareholders
                                  PART I

ITEM 1.  BUSINESS

                      General Development of Business

Genetic Laboratories Wound Care, Inc. (herein referred to as "the Company")
manufactures and
markets proprietary wound care
products; primarily wound closure strips, specialty fasteners, and net
dressings. 

The Company contracts out the manufacture of its products having complete
control over all
manufacturing specifications involved.
The Company sells the completed products to its  independent distribution
network who resells
the products to the end users;
principally physicians, hospitals, nursing homes, and clinics.

The Company was incorporated on January 19, 1988, in the state of Minnesota as
a dividend to
the shareholders of Bioplasty, Inc.
(referred to herein as Bioplasty).  Pursuant to an Agreement between Bioplasty
and the Company
dated as of February 29, 1988
(referred to herein as the "Purchase Agreement"), the Company acquired the
wound care business
and certain assets of Bioplasty.  The
wound care business and assets of Bioplasty include the right to develop and
market proprietary
wound care products.  

               Financial Information about Industry Segments

The Company has only one industry segment, namely, the manufacture and
marketing of wound
care products.  Financial information
about the Company's business is contained in Items 6 and 7 hereof.

                                 Products

The Company markets the wound care products through its independent dealer
organization
worldwide utilizing independent sales
representatives.  These products include:

  WOUND CLOSURE STRIPS:

  SUTURE STRIP  is a sterile pressure sensitive adhesive wound closure strip. 
The wound
closure strip was designed with
  flexibility characteristics which provides maximum adherence  to maintain
wound integrity,
while allowing the proper amount of
  flex to minimize problems with skin shear and blistering.   Suture Strip is
available in a wide
variety of sizes and packages, and is
  used in various surgical and wound care procedures.

  NET DRESSINGS:

  FLEXINET/SYSTENET  is a specially woven versatile elastic net dressing for
wounds which
reduces dressing time, allowing for
  proper ventilation without restrictions and holds the dressings in place
firmly and comfortably.
Flexinet/Systenet is available in
  various sizes and packages and is used to hold dressings firmly in place.

  SPECIALTY FASTENERS:

  NG STRIP  is a nasogastric tube fastener.   It is made of a flexible material
designed to
maximize adhesion and minimize
  irritation, blistering, and skin shear.   NG Strip is available in various
packages and is used to
secure nasal or feeding tubes to the
  nose.

  UC STRIP /CATH-STRIP  is a catheter tubing fastener.  UC Strip/Cath-Strip
allows you to
secure urinary and gastrostomy
  catheter tubing to the patients skin.   UC Strip/Cath-Strip is made of a
flexible material designed
to maximize adhesion and
  minimize irritation, blistering, and skin shear.   UC Strip/Cath-Strip is
available in various
packages and is used to secure catheter
  tubing.

  PERCU-STAY is a sterile, self adhesive catheter fastener for percutaneous
drainage catheters.
Percu-Stay is made of a
  combination of a moisture-absorbent hydrocolloid surrounded by a pressure
sensitive adhesive
on a non-woven backing. Percu-
  Stay is available in two sizes and two packages and is used to secure
percutaneous drainage
catheters.



Sales of the Company's products are not seen as being affected by seasonal
influences. Product
sales for the years ended May 31 are
as follows:
                          1997                            1996                 
   1995
                      $                   %   $                    %          $
           %

  Wound Closure Strips   $1,617,728          55.7       $1,634,252             
 66.9        $1,428,560      
64.5
  Specialty Fasteners   980,874              33.8          516,980             
 21.2           437,038        19.7
  Net Dressings         273,782               9.4          263,392             
 10.8           256,329        11.6

                        Materials and Manufacturing

The Company does not manufacture its products.  Independent contractors
manufacture the
products for the Company utilizing
specifications provided by the Company.  The Company's intention will be to add
manufacturing
when and where appropriate. The
Company has utilized one supplier to manufacture a majority of its products.
The Company has
had a good working relationship with
this supplier and plans to continue to do business with this supplier because
of its ability to
manufacture high quality products
required by the Company. The manufacturer also has strong regulatory and
quality departments
that allow them to comply with all
regulatory issues.

                           Government Regulation

The Company's products are subject to government regulation by the FDA under
the Federal
Food, Drug and Cosmetic Act (the
"FDCA") and accordingly, unless determined to be exempt, are subject to
preclearance
procedures of the FDA before marketing.

Under the FDCA, a medical device is classified as either a Class I device,
which is subject only
to the general control provisions of
the FDCA; a Class II device which, in addition to applicable general controls,
is subject to
performance standards (if such standards
have been developed) and may be subject to premarket approval; or a Class III
device which, in
addition to applicable general
controls is subject to the FDA premarket approval.  A premarket approval
application (PMAA),
if granted, permits full marketing in
the United States.  A PMAA is only granted  after experimental data has been
obtained under an
investigational device exemption
("IDE"), which permits clinical use of products for experimental purposes.  All
of the Companies
products have been classified as
Class I devices.  The Company has 510(k) approval from the FDA to market all of
its Class I
devices.

The governmental regulatory policies of countries outside the United States
vary considerably.
This results in some countries
allowing the use of medical products through a registration only process, while
other countries
require a lengthy approval process.
Inability to receive governmental approval from a country outside the United
States has not
hindered the Company through a loss of
sales in countries outside the United States. The European Community has issued
various
directives for the sale of foreign products.
These directives have certain requirements to be met before products can be
sold in the European
Community.  Sales to the European
Community were approximately 13% and 17% of net revenues for the years ended
May 31, 1997
and 1996, respectively. On July 21,
1997 the Company was granted CE certification for its products allowing it to
sell to the
European Community countries.

         Patents, Trademarks, Licenses, Franchises and Concessions

The Company has patents on its Suture Strip, NG Strip, Cath-Strip, and UC Strip
products in the
United States and the United
Kingdom.  The patents begin to expire in the year 2005.  The Company also has
trade names for
Suture Strip, Flexinet, NG Strip,
Cath-Strip, and UC Strip.

The Company believes that its success as a business will depend primarily upon
the quality and
economic value of its products, rather
than its ability to obtain and defend patents.  There can be no assurance that
the Company's
patents will afford protection against
competitors with similar technology; nor can there be any assurance that any
patents issued to the
Company will not be infringed upon
or designed around by others or that others will not obtain patents that the
Company would need
to license or design around.

                       Dependence on Single Customer

One distributor accounted for more than 10% of the Company's sales for the year
ended May 31,
1997.  The Company believes its
relationship with this distributor is strong.  During the year ended May 31,
1997 the Company's
customer base remained relatively
constant from the prior year.  

The Company has developed relationships with large distributors of medical
products in the
hospital, clinic and long-term care
markets and continues to work on strengthening these relationships. Many of the
Company's
distributors have merged or been
acquired by other distributors.


                         Marketing and Competition

The Company's products are sold through an international network of independent
distributors
servicing the hospital, clinic, and long-
term care facilities.  This network, which presently has over 200 distributors,
is managed by two
Regional Sales Managers.  Each
Regional Sales Manager has independent manufacturers representatives working
with the
distributors, hospitals, clinic, and long-term
care facilities.

Competition in the sale of medical devices and products such as the wound care
products is
intense.  The principal factors of
competition are product performance, customer service, and price.  There are
other suppliers of
competing products who are
considerably larger than the Company, or are a division or subsidiary of
corporations which have
much greater resources than the
Company. These competitors also have a variety of products available to them
and can offer the
end user more choices than the
Company can offer giving the competitors a selling advantage. The Company
believes it has a
competitive edge in the quality and
performance of its product allowing it to compete with the larger companies. 
The Company also
feels it is able to provide more
personal service to its customers giving it an advantage over larger more
rigidly structured
companies.  The Company does not have
enough information to date to estimate its market position in the wound care
field nor its
competitors position, however, management
does not believe the Company currently controls a significant share of the
market.  The
Company's main competition in the wound
closure strip market is 3M with their Steri-Strip products that control a large
share of the wound
closure strip market. There are
products that compete with the specialty fasteners, including white hospital
tape. The Company's
task is to demonstrate to the end
user that white hospital tape does have a cost and risk associated with its
use. When the end user
accepts the cost and risks associated
with white hospital tape, the specialty fasteners provide better performance
with lower risks
involved.

The net dressings market is very price competitive. The Company provides its
customers with
the highest quality net dressing and
does not compete on price. The Company believes it has a loyal base of net
dressing customers
that will continue to buy because of
the product quality and the customer service they receive.


                         Research and Development

The Company's ability to greatly increase sales will depend upon, among other
things, the
expansion of its current product lines or the
introduction of new products.  The Company is actively pursuing new product
ideas that match
the interests of the current
international distribution network already in place.  Arthur A. Beisang, the
C.E.O., is in charge of
evaluating the development and
acquisition of new products. A portion of Arthur A. Beisang, C.E.O., and Robert
A. Ersek,
Medical Director, time is devoted to the
evaluation of new product development. The Company incurred $19,290 and $19,474
of research
and development costs for the years
ended May 31, 1997 and 1996, respectively.

                         Environmental Compliance

Compliance by the Company with applicable environmental requirements is not
expected to have
a material effect upon the capital
expenditures, earnings or competitive position of the Company.

                                 Employees

As of May 31, 1997, the Company employed eighteen employees of which sixteen
are full time.
None of such employees has a
collective bargaining agreement with the Company.  The Company's size allows it
to foster a
close relationship with its employees
which management feels increases productivity.

Financial Information about Foreign and Domestic Operations and Export Sales

The Company sold approximately $427,000 and $462,000 to foreign distributors
during the year
ended May 31, 1997 and 1996,
respectively.  All sales require payment to be made in U.S. Funds.   The
Company intends to
expand its exporting in the future.  The
Company has experienced no losses from any foreign receivables in the years
ended May 31,
1997 and 1996.

ITEM 2. PROPERTIES

The Company does not own any real estate.  The Company leases 9,500 square feet
of office and
warehouse space at 2726 Patton
Road, St. Paul, Minnesota 55113, pursuant to a five-year lease that expires
March 2002.  The
Company considers such space to be
adequate for its current needs.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to nor is any of its property subject to any
material pending or
threatened legal, governmental,
administrative or other judicial proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


                                 PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

Of the 12,000,000 shares authorized on May 31, 1997, there were 2,401,850
shares issued and
outstanding.  The Company's common
stock is traded in the "Local Over the Counter Market" on the "Pink Sheets" and
on the NASD
Electronic Bulletin board under the
symbol GELW.  At May 31, 1997, there were approximately 900 shareholders of
record.  The
bid and ask prices were as follows:

          Quarter Ending:     Bid       Ask

          Fiscal 1996
            August 31, 1995      1/2      15/16
            November 30, 1995    7/8      1 1/8
            February 29, 1996    3/4      1 1/8
            May 31, 1996         1/2        7/8
          Fiscal 1997
            August 31, 1996     7/16      13/16
            November 30, 1996    3/8        5/8
            February 28, 1997    1/2        3/4
            May 31, 1997        7/16      11/16

These prices represent quotations between dealers without adjustments for
retail mark-up,
mark-down or commissions, and do not
necessarily represent actual transactions.  The Company has not paid cash
dividends on its
common stock and does not anticipate cash
dividends in the foreseeable future. The Company's current debt agreement
prohibits the payment
of dividends.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth the net revenues, gross profit, and operating
income of the
Company for the years ended May 31, 1997,
1996, and 1995.

                                         1997      1996      1995
Net Revenues                                  
     Domestic Sales                 $ 2,479,392         $ 1,980,699  $ 1,794,729
     International Sales                426,823   462,179   363,127
     Royalties                                -                   -       56,237
Total                                         $ 2,906,215$2,442,878   $2,214,093


Gross Profit                        $ 1,834,564$1,440,122$1,367,690

Operating Income                    $   147,147         $    27,618   $  195,604


COMPARISON OF THE YEAR ENDED MAY 31, 1997 WITH THE YEAR ENDED MAY 31,
1996

                                 Revenues

Net revenues increased 19.0% to $2,906,215 for fiscal 1997 from $2,442,878 for
fiscal 1996.
Domestic sales increased by 25.2% to
$2,479,392 for fiscal 1997 from $1,980,699 for fiscal 1996. International sales
decreased 7.6% to
$426,823 for fiscal 1997 from
$462,179 for fiscal 1996. The growth in domestic sales is attributable to unit
sales growth of the
Company's specialty fasteners.

Net revenues from wound closure strips decreased by 1.0% to $1,617,728 for
fiscal 1997 from
$1,634,252 for fiscal 1996. The
decrease was the result of fewer units sold, primarily to international
customers. Unit sales
decreased by 2.8%.

Net revenues from specialty fasteners increased by 89.7% to $980,874 for fiscal
1997 from
$516,980 for fiscal 1996. The increase
was in units sold for all of the specialty fasteners; NG Strip, UC Strip,
Cath-Strip, and
Percu-Stay. Percu-Stay, a new product for the
Company in fiscal 1996, revenues were $353,673 in fiscal 1997 compared to
$15,439 in fiscal
1996, accounting for a majority of the
increase in revenues of specialty fasteners.

Net revenues from net dressings increased by 3.9% to $273,782 for fiscal 1997
from $263,392
for fiscal 1996. The increase was due
to a 3.8% increase in units sold.

                               Gross Profit

The gross profit percentage increased to 63.1% for fiscal 1997 from 59.0% for
fiscal 1996. The
increase is primarily due to the
increased proportion of  sales of specialty fasteners which have a higher gross
margin percentage
than the wound closure strips.

                            Operating Expenses

Operating expenses increased to $1,687,417, 58.1% of net revenues, for fiscal
1997 from
$1,412,504, 57.8% of net revenues, for
fiscal 1996. Increases were due in a large part to increased marketing
activities intended to more
rapidly increase the sales of the
specialty fasteners and an increase in wages and benefits.

                               Other Income

Other income includes interest income of $6,024 and interest expense of $884
for fiscal 1997.
For fiscal 1996 other income consisted
of $164,213 for the sale of the Company's right, title, and interest in a
royalty agreement and
$10,550 of interest income.

COMPARISON OF THE YEAR ENDED MAY 31, 1996 WITH THE YEAR ENDED MAY 31,
1995

                                 Revenues

Net revenues increased 10.3% to $2,442,878 for fiscal 1996 from $2,214,093 for
fiscal 1995.
Domestic sales increased by 10.4% to
$1,980,699 for fiscal 1996 from $1,794,729 for fiscal 1995, while international
sales inceased
27.3% to $462,179 for fiscal 1996 from
$363,127 for fiscal 1995.

Net revenues from sales of wound closure strips increased by 15% due to an
increase in units
sold. Net revenues from sales of
specialty fasteners increased by 15% due mainly to an increase in the unit
sales price of one of
the new fasteners sold by the
Company. Net revenues from the sales of net dressings increased by 3% on a
minor increase in
units sold.

The Company received no royalties in fiscal 1996. On June 26, 1995, the Company
sold its
rights, title, and interest in the royalty
agreement for $164,213 (see Note 7 to the Financial Statement).

                               Gross Profit

The gross profit percentage decreased to 59.0% of net revenues for fiscal 1996
from 61.8% for
fiscal 1995. The decrease in gross
profit percentage was the result of slight increases in product costs, an
increase in international
sales which have a lower profit
percentage, and the discontinuance of the royalties.

                            Operating Expenses

Operating expenses increased to $1,412,504, 57.8% of net revenues, for fiscal
1996 from
$1,172,086, 52.9% of net revenues, for
fiscal 1995. The majority of the increase resulted from increased marketing
activities intended to
more rapidly increase sales of the
specialty fasteners and wound closure strips.

                               Other Income

The Company sold its right, title, and interest in a royalty agreement with Bio
Vascular for
$164,213 in fiscal 1996. The royalty
agreement was due to terminate in July 1995. Other income includes interest
income of $10,550
for fiscal 1996 and $3,759 for fiscal
1995.


LIQUIDITY AND CAPITAL RESOURCES

The Company had working capital of $1,067,892 on May 31, 1997 and a working
capital ratio of
5.9 to 1 compared to working
capital of $998,872 and a working capital ratio of 4.5 to 1 on May 31, 1996.

The Company's cash and cash equivalents increased to $351,201 on May 31, 1997
compared to
$252,188 on May 31, 1996.
Operating activities provided $155,712, while $71,851 was spent for equipment.
The Company
obtained an $18,000 loan for the
purchase of a new phone system and made principal payments of $3,130 on the
loan.

The Company believes it will be able to fund its operations and any capital
expenditure
requirements through internally generated
funds during the next 12 months. The Company has a $200,000 line of credit with
a local bank to
provide additional liquidity if
needed. (See Note 4 to the financial statements.) The agreement expires in
October 1997, the
Company intends to renew the line for
another year.

INFLATION AND CHANGING PRICES

The Company believes inflation and changing prices have not had a significant
impact upon the
operations or growth of the Company
during the past three years. Increases in prices of the components used to
produce the Company's
products during the next twelve
months are not expected to significantly affect the Company's operations.


FOREIGN CURRENCY TRANSACTIONS

All of the Company's foreign transactions are negotiated, invoiced and paid in
U.S. dollars.
Fluctuations in currency exchange rates in
other countries may therefore reduce the demand for the Company's products by
increasing the
price of the Company's products in
the currency of the countries in which the products are sold.

FORWARD LOOKING STATEMENTS

In addition to historical information this report may contain forward-looking
statements that are
subject to risks and uncertainties that
may cause actual results to differ materially from those reflected in the
forward-looking
statements. The Company believes it has
made fair and accurate forward-looking statements by relying on past events and
current
information available. The Company
undertakes no obligations to revise these forward-looking statements to reflect
events that may
arise.

ITEM 7. FINANCIAL STATEMENTS
                                                              Page Reference
                                                              Form 10-KSB
Independent auditor's report                                      12
Balance sheets at May 31, 1997 and 1996                          13,14
Statements of operations for the years ended May 31, 1997 and 1996          15
Statements of stockholders' equity for the years ended May 31, 1997 and 1996   
  16
Statements of cash flows for years ended May 31, 1997 and 1996    17
Notes to Financial Statements                                    18-22


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE

None

                                 PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS, COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT

The section entitled "Directors and Executive Officers" in the Registrant's
definitive proxy
statement for its 1997 annual meeting of
shareholders is incorporated by reference herein.

ITEM 10.   EXECUTIVE COMPENSATION

The sections entitled "Executive Compensation" and "Election of Directors" in
the Registrant's
definitive proxy statement for its 1997
annual meeting of shareholders is incorporated by reference herein.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The sections entitled "Beneficial Ownership of Principal Shareholders and
Management" and
"Election of Directors" in the
Registrant's definitive proxy statement for its 1997 annual meeting of
shareholders is
incorporated by reference herein.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None
                                  PART IV


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report in Item 7:

1.   Financial Statements:

     Independent auditor's report

     Balance sheets at May 31, 1997 and 1996

     Statement of operations for the years ended May 31, 1997 and 1996

     Statements of stockholders' equity for the years ended May 31, 1997 and
1996

     Statements of cash flows for the years ended May 31, 1997 and 1996

     Notes to financial statements


(b) Reports on Form 8-K

     The company filed no reports on Form 8-K during the quarter ended May 31,
1997.


(c) Exhibits:

                                   Incorporated by Reference
                                   In This Report From

     (3)                           Articles of Incorporation     Exhibit (3.1)
and (3.2) to Company's Form 10
(File No. 000-16664)
                                   dated March 25, 1988.

     (4)                           Instruments Defining Rights   Exhibit (3.1)
and (3.2) above
                                   Security Holder

     (10)                          Material Contracts            Exhibit (2.1)

     10.1                          Genetic Laboratories Wound    Form 10-K
Annual Report for the year
ended May 31, 1989
        Care, Inc. Incentive Stock Option Plan                   (File No.
0-16664) dated August 25,
1989

     10.2                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1993
        Arthur A. Beisang          (File No. 0-16664) dated August 25, 1993

     10.3                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1993
        Dr. Robert Ersek           (File No. 0-16664) dated August 25, 1993

     10.4                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1993
        H. James Thompson          (File No. 0-16664) dated August 25, 1993

     10.5                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1996
        Arthur A. Beisang          (File No. 0-16664) dated August 23, 1996

     10.6                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1996
        Dr. Robert Ersek           (File No. 0-16664) dated August 23, 1996

     10.7                          Executive Agreement with      Form 10-KSB
Annual Report for the year
ended May 31, 1996
        H. James Thompson          (File No. 0-16664) dated August 23, 1996

     10.8                          Genetic Laboratories Wound Care, Inc.   Form
14-A Proxy Statement
        1996 Incentive Stock Option Plan                         (File No.
0-16664) dated September 20,
1996.

                                        27 Financial Data Schedule    Filed
herewith electronically.










                           FINANCIAL STATEMENTS
                      INDEPENDENT AUDITOR'S REPORT
                                   
                                    


To the Board of Directors
Genetic Laboratories Wound Care, Inc.
St. Paul, Minnesota


     We have audited the accompanying balance sheets of GENETIC LABORATORIES
WOUND
CARE, INC. as of May 31,
1997 and 1996 and the related statements of operations, stockholders' equity
and cash flows for
the years than ended.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express
an opinion on these financial
statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material
respects, the financial position of
Genetic Laboratories Wound Care, Inc. as of May 31, 1997 and 1996, the results
of its operations
and its cash flows for the years then
ended in conformity with generally accepted accounting principles.


                                   McGLADREY & PULLEN, LLP

Minneapolis, Minnesota
June 26, 1997


                  GENETIC LABORATORIES WOUND CARE, INC.
                                                                
                             BALANCE SHEETS
                          MAY 31, 1997 and 1996


                                  ASSETS
                                                                               
            1997                               1996

CURRENT ASSETS                                                                 
    
     Cash and cash equivalents                 $351,201       $252,188
     Receivables
         Trade less allowance for doubtful accounts                  
         $7,000 and $5,500 respectively (Notes 4 and 5)        412,919   
330,779
          Income taxes                            5,930              -
     Inventories (Note 4)                       478,711        631,734
     Prepaid expenses                            35,128         69,454

     Total current assets                     1,283,889      1,284,155


PROPERTY AND EQUIPMENT (Notes 3 and 4)
     Production equipment and tooling            60,140         59,093
     Office equipment                           194,552        148,021
                                                254,692        207,114

     Less accumulated depreciation              166,363        174,993
          88,329                                 32,121

         
OTHER ASSETS, net                                 5,087          8,136

                                             $1,377,305     $1,324,412

                  GENETIC LABORATORIES WOUND CARE, INC
                                   
                       BALANCE SHEETS (continued)
                          May 31, 1997 and 1996
                                   
                                   
                  LIABILITIES AND STOCKHOLDERS' EQUITY
                                   
                                   
           1997                               1996                          


CURRENT LIABILITIES                                  
       Current maturities of long term debt     $5,760$         -
       Accounts payable                        122,443    215,764
       Accrued expenses                         87,794     69,519
                                                                
          Total current liabilities            215,997    285,283

      
LONG TERM DEBT, less current maturities (Note 4)            9,110              
-


COMMITMENTS (Note 3)


STOCKHOLDERS' EQUITY (Note 2)
       Common stock, $.01 par value; 12,000,000 shares authorized,
            issued 2,401,850 and 2,401,100                      
            shares, respectively                24,018     24,011
       Additional paid-in capital              646,880    646,605
       Retained earnings                       481,300    368,513

                                             1,152,198  1,039,129

                                            $1,377,305 $1,324,412
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                                   
                    See Notes to Financial Statements

                  GENETIC LABORATORIES WOUND CARE, INC.
                                   
                        STATEMENTS OF OPERATIONS
                    Years Ended May 31, 1997 and 1996


                                                          
                                           1997          1996
                                                     
Net revenues (Note 5)                    $2,906,215   $2,442,878
Cost of revenues                          1,071,651    1,002,756

Gross profit                                           1,834,564               
 1,440,122

Selling, general and administrative expenses           1,687,417               
 1,412,504          

Operating income                            147,147       27,618

Other income (Note 7)                         5,140      174,763

Income before income taxes                  152,287      202,381

Provision for income taxes (Note 6)          39,500       63,400

Net income                                 $112,787     $138,981

Net income per common share                    $.05         $.06

Weighted average number of common and common
equivalent shares outstanding             2,444,780    2,461,989
















                  See Notes to Financial Statements

                  GENETIC LABORATORIES WOUND CARE, INC.
                                   
                   STATEMENTS OF STOCKHOLDERS' EQUITY
                    Years Ended May 31, 1997 and 1996

                         

                               Common Stock  Additional
                                                          Paid in Retained
                             Shares    Amount   Capital  Earnings    Total


Balance, May 31, 1995     2,326,100$   23,261$  625,186$  229,532$  877,979


Stock issued (Note 2)        75,000       750    21,419         -   22,169

Net income                        -                   -                  -     
   138,981   138,981               

                                                      
Balance, May 31, 1996     2,401,100    24,011   646,605   368,5131,039,129


Stock issued (Note 2)           750         7       275         -      282


Net income                        -                   -                  -     
   112,787        112,787


Balance, May 31, 1997     2,401,850$   24,018$  646,880$  481,300$ 1,152,198















                     See Notes to Financial Statements

                  GENETIC LABORATORIES WOUND CARE, INC.
                                   
                        STATEMENTS OF CASH FLOWS
                   Years Ended May  31, 1997 and 1996



                                                1997           1996

CASH FLOWS FROM OPERATING ACTIVITIES                
          Net income                         $112,787        $138,981
          Adjustments to reconcile net income to net
          cash provided by (used in) operating activities:
          Depreciation and amortization        18,692          18,819
          Changes in current assets and liabilities:
            Receivables                      (88,070)        (42,451)
            Inventories                       153,023       (202,629)
            Prepaid expenses                   34,326        (40,313)
            Accounts payable                 (93,321)          83,396
            Accrued expenses                   18,275           3,715
            Income taxes payable                    -         (9,800)

          Net cash provided by (used in) operating activities                  
   155,712  (50,282)

CASH FLOWS FROM INVESTING ACTIVITIES

          Purchases of property and equipment                (71,851)          
  (15,529)

CASH FLOWS FROM FINANCING ACTIVITIES
          Principal payments on long-term debt                (3,130)          
         -
          Proceeds from note payable           18,000               -
          Proceeds from stock issuance            282          22,169

          Net cash provided by financing activities            15,152          
    22,169

          Net increase (decrease) in cash and cash equivalents 99,013          
  (43,642)


CASH AND CASH EQUIVALENTS
          Beginning                           252,188         295,830
          Ending                           $  351,201      $  252,188






                     See Notes to Financial Statements

                          NOTES TO FINANCIAL STATEMENTS

Note 1.   Nature of Business and Significant Accounting Policies

          Nature of Business

          The Company markets proprietary wound care products; primarily wound
closure strips,
specialty fasteners, and net
          dressings. Sales are made primarily to medical supply distributors
throughout the United
States and in foreign countries,
          mainly Europe, utilizing independent sales representatives. The
manufacturing of the
products is contracted out utilizing
          specifications provided by the Company. See Note 5 for major
customers and supplier.      

          Significant Accounting Policies

          Cash Flows and Cash Equivalents:

          For purposes of reporting its cash flows, the Company considers all
highly liquid debt
instruments with an original maturity
          of three months or less to be cash equivalents.  The Company
maintains its cash in bank
checking and savings accounts,
          which, at times, may exceed insured limits.  The Company has not
experienced any losses
in such accounts.

          Cash payments for income taxes totaled $44,076 and $74,554 for the
years ended May 31,
1997 and 1996, respectively.
          Cash payments for interest totaled $884 for the year ended May 31,
1997.

          Inventories:

          Inventories are stated at the lower of cost (first-in, first-out
method) or market.  Inventories
are comprised primarily of goods
          held for resale.

          Property and Equipment:

          Additions to property and equipment are stated at cost.  Depreciation
is computed using
accelerated and straight line methods
          over the estimated useful lives of five to seven years.

          Fair Value of Financial Instruments:

          The financial statements include the following financial instruments:
cash and cash
equivalents, trade accounts receivable,
          note payable, and accounts payable. The fair value of notes payable
is estimated based
upon interest rates for arrangements
          with similar terms. No separate comparison of fair values versus
carrying values is
presented  for the aforementioned
          financial instruments since their fair values are not significantly
different than their balance
sheet carrying amounts at May
          31, 1997 or May 31, 1996.

          Revenue Recognition:

          The Company recognizes revenue upon shipment of its product to its
customers. Orders
are generally shipped the same day
          they are received or the next business day.

          Use of Estimates:

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

          Net Income per Common Share:

          Net income per common and common equivalent share is computed on the
basis of the
weighted average number of common
          and common equivalent shares outstanding during the respective years.
 Common
equivalent shares consist of the dilutive
          effect, when material, of outstanding stock options.

          Income Taxes:

          Deferred taxes are provided on an asset and liability method whereby
deferred tax assets
are recognized for the deductible
          temporary differences and operating loss or tax credit carry forwards
and deferred tax
liabilities are recognized for taxable
          temporary differences.  Temporary differences are the differences
between the amounts of
assets and liabilities recorded for
          income tax and financial reporting purposes. Deferred tax assets are
reduced by a valuation
allowance when management
          determines that it is more likely than not that some portion or all
of the deferred tax assets
will not be realized.  Deferred tax
          assets and liabilities are adjusted for the effect of changes in tax
laws and rates on the date
of enactment.  Income tax expense
          is the tax payable or refundable for the year plus or minus the
change in deferred tax assets
and liabilities during the year.  At
          May 31, 1997 and 1996 the Company has no significant temporary
differences on which to
recognize deferred tax assets or
          liabilities. Tax credits are accounted for by the flow-through method
thereby reducing
taxes payable and the provision for
          income taxes in the period utilized.

          Issued But Not Yet Adopted Standard:

          The FASB has issued Statement No. 128, Earnings per Share, which
supersedes APB
Opinion No. 15. Statement No. 128
          requires the presentation of earnings per share by all entities that
have common stock or
potential common stock., such as
          options, warrants and convertible securities, outstanding that trade
in a public market.
Those entities that have only common
          stock outstanding are required to present basic earnings per share
amounts. All other
entities are required to present basic and
          diluted per share amounts. Diluted per share amounts assume the
conversion, exercise or
issuance of all potential common
          stock instruments unless the effect is to reduce a loss or increase
the income per common
share from continuing operations.
          All entities required to present earnings per share amounts must
initially apply Statement
No. 128 for annual and interim
          periods ending after December 15, 1997. Earlier applications is not
permitted.

          The adoption of Statement No. 128 would have no material effect on
reported earnings per
share for the years ended May 31,
          1997 and 1996.


Note 2.   Stock Option Plans

          The Company has two qualified incentive option plans which authorize
the granting of
options to officers and employees to
          purchase shares of common stock.  575,000 shares have been reserved
for issuance under
the plans.  These options are
          granted at the discretion of the Board of Directors.  All options
must be granted at no less
than 100% of the market value of
          the stock on the date of the grant(110% for employees owning more
than 10% of the
Company's common stock).  The
          options expire at varying dates not to exceed ten years from the
grant date and are not
transferable.  When exercising options,
          an employee's payment  may be either cash, shares of the Company
stock valued at the
market value, or a combination of the
          two.  All options outstanding at May 31, 1997 are exercisable. 


          The Company has adopted the disclosure-only provisions of Statement
of Financial
Accounting Standards No. 123
          "Accounting for Stock-Based Compensation."  Accordingly, no
compensation cost has
been recognized for the stock option
          plans. Had compensation cost for the Company's stock option plan been
determined based
on the fair value at the grant date
          for awards in 1997 and 1996 consistent with the provisions of
Statement of Financial
Accounting Standards No. 123, there
          would have been no material effect on the Company's reported net
earnings and net
earnings per share.

          Additional information relating to all outstanding options as of May
31, 1997 and 1996 is
as follows:

                                                                     1997      
                                    1996               
                                                      Weighted Avg.            
            Weighted Ave.
                                    Shares           Exercise Price     Shares 
           Exercise Price
          Options outstanding, beginning of year       145,750         $  0.32 
   223,950         $       .30
          Options granted           31,600                0.46         -       
         -
          Options canceled               -                   -   (3,200)       
       .36
          Options exercised          (750)                0.38  (75,000)       
      0.30
          Options outstanding, end of year   176,600               $      0.35 
   145,750              $      0.32
         
          Weighted average fair value of options
             granted during the year                  $   0.39                $
         -    
,
          The following table summarizes information about stock options
outstanding at May 31,
1997:


                                                         Options Outstanding   
                         Options Exercisable     

 Range of Exercise Prices  NumberWeighted Avg.      Weighted Avg.        
Number  Weighted
Avg.         
       Outstanding at   RemainingExercise Price     Exercisable at   Exercise
Price
        May 31, 1997    Contractual                  May 31,1997
                                 Life (Years)             

     $ .25 to .49           154,150      6.0        .32           154,150      
 .32
     $ .50 to .625           22,450      6.6        .53            22,450      
 .53
                            176,600      6.1        .35           176,600      
 .35



Note 3.   Commitments

          Operating Leases:

          The Company leases office and production facilities  under a lease
expiring March 2002.
Total rental
          expenses of $66,635 and $57,298 were charged to operations for the
years ended May 31,
1997 and 1996
          respectively.

          Future Minimum rental payments are:
         
     Year Ending May 31,                     Amount

           1998                              $59,100
           1999                              $59,100
           2000                              $59,535
           2001                              $61,305
           2002                              $47,025
                                             


     Savings and Retirement Plan:

     The Company has a savings and retirement plan for eligible employees.  The
plan was
adopted pursuant to Section 401(k) of
     the Internal Revenue Code.  Contributions to the plan are discretionary
for both the Company
and the employees.  The
     Company may make contributions to the plan which may match employee
contributions
subject to certain limitations.  The
     Company contributed $18,256 and $24,460 to the plan in the years ended May
31, 1997 and
1996, respectively.

     Compensation Agreements:

     The Company has Employment Agreements with three individuals for total
aggregate annual
base
     compensation of $193,300.  Two of the individuals are directors with total
aggregate annual
base
     compensation of $98,700.  The third individual is an officer with total
aggregate annual base
     compensation of $94,600.

     The agreements with the two directors provide that in the event of a
change of control of the
Company
     the two directors, if terminated, would be paid cash as severance equal to
all future amounts
owed under
     those agreements for the remainder of the terms.  All three agreements
expire June 30, 1998.

     The Company has deferred compensation agreements with an officer and an
employee which
provide benefits payable at age
     65. The estimated liability under the agreements will be accrued starting
in fiscal 1998 over
the years of employment. The
     Company has purchased single premium life insurance policies which are
expected to fully
fund the Company's future
     obligations under these agreements.

Note 4.   Financing Agreements

     Revolving Credit Agreement:

     The Company has a revolving credit agreement with a bank which allows the
Company to
borrow up to $200,000.
     Borrowings bear interest at the bank's prime interest rate plus 1.5%,
(10.0% at May 31, 1997).
Under the terms of the
     agreement, substantially all assets of  the Company are pledged as
collateral.  The loan
agreement also contains provisions
     requiring compliance with certain financial covenants and prohibits the
payment of dividends.
The agreement terminates on
     October 31, 1997.  No amounts were outstanding under the agreement at May
31, 1997 or
1996.

     Note Payable:

     The Company borrowed $18,000 from a local bank for the purchase of a new
phone system in
October of 1996.  The loan is
     for three years at 9% interest with monthly payments of $573. At May
31,1997 the
outstanding balance was $14,870.  

     Scheduled Annual Maturities Are as Follows:

     Year Ending May 31                      Amount

               1998                                         $5,760
               1999                                          6,308
               2000                                          2,802
                                                          $ 14,870

Note 5.   Customers and Supplier

     Major Customers:

     During the years ended May 31, 1997 and 1996 one customer accounted for
more than ten
percent of the Company's net
     revenues.  This customer accounted for approximately $355,722, 12.2% and
$378,272, 15.5%
of net revenues for the years
     ended May 31, 1997 and 1996, respectively. Accounts receivable from the
customer totaled
$41,265 and $30,870 as of May
     31, 1997 and 1996, respectively.


     Exports:

     The Company sells directly to foreign distributors located mainly in
Europe.  Total export
sales accounted for approximately
     15% and 19% of net revenues for the years ended May 31, 1997 and 1996,
respectively.
Accounts receivable at May 31,
     1997 and 1996 included amounts due from foreign customers of approximately
$80,000 and
$73,000, respectively..  All
     foreign sales require payment in U.S. funds.

     Supplier:

     The Company has utilized one supplier to manufacture a majority of its
products, which
represented approximately 70% and
     84% of net revenues for the years ended May 31, 1997 and 1996,
respectively.  The Company
has a good working
     relationship with this supplier and plans to continue to do business with
this supplier. 


Note 6.   Income Taxes

     The Company's effective tax rate varies from the statutory Federal Income
Tax rate for the
following reasons:


                                             1997       1996


          Statutory income tax rate                   35.0%      35.0%
          State income taxes, net of federal tax benefits         3.2          
          .7
          Non-deductible expenses                                 -            
         1.6
          Benefit of income taxed at lower rates      (9.9)      (4.5)
          Tax credits                                 (2.4)      (1.5)

          Effective tax rate                          25.9%      31.3%



Note 7.   Royalty Agreement

          On June 26, 1995, the Company sold its rights, title and interest in
a royalty agreement
with BioVascular, Inc., for $164,213.
          The royalty agreement was due to terminate in July 1995.


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




                                   GENETIC LABORATORIES WOUND CARE, INC.


          August 25, 1997          By:    /s/ Arthur A. Beisang        
                                             Arthur A. Beisang
                                             Chief Executive Officer




          Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has
been signed
          below by the following persons on behalf of the Registrant and in the
capacities on the
dates indicated.




             /s/ Arther A. Beisang                         Chief Executive
Officer   August 25, 1997
          Arthur A. Beisang        Director




             /s/ H. James Thompson                         President,          
     August 25, 1997
          H. James Thompson        Chief Financial Officer




             /s/ Robert A. Ersek                           Director, Secretary 
     August 25,1997
          Robert A. Ersek



               /s/ John H. Olson                           Director            
     August 25, 1997
          John H. Olson