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 from _________ to _________

                           Commission File No. 1-13690

                           PolyMedica Industries, Inc.
             (Exact name of registrant as specified in its charter)

        Massachusetts                                           04-3033368
 State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization                               Identification No.)

  11 State Street, Woburn, Massachusetts                          01801
 (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code            (617) 933-2020
                                                              --------------

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 per share
                                (Title of class)

                        Preferred Stock Purchase Rights
                                (Title of class)

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

         The number of shares  outstanding of the  registrant's  class of Common
Stock as of July 25, 1997 was 8,495,641  which  includes  158,661 shares held in
treasury.



                                        1

<PAGE>




                           POLYMEDICA INDUSTRIES, INC.
                                TABLE OF CONTENTS

                                                                           Page

PART I  -         FINANCIAL INFORMATION

Item 1  -         Unaudited Financial Statements

                  Consolidated balance sheets at
                           June 30, 1997 and March 31, 1997                 2

                  Consolidated statements of operations
                           for the three months ended June 30, 1997
                           and June 30, 1996                                4

                  Consolidated statements of cash flows
                           for the three months ended June 30, 1997
                           and June 30, 1996                                5

                  Notes to consolidated financial statements                6

Item 2  -         Management's discussion and analysis of financial 
                  condition and results of operations                       8

PART II -         OTHER INFORMATION

Item 6  -         Exhibits and Reports on Form 8-K                         16

Signatures                                                                 17

Exhibit Index                                                              18


                                        2

<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.           Unaudited Financial Statements


                           POLYMEDICA INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)


                                                    June 30,          March 31,
                                                      1997              1997
                                                  (unaudited)

ASSETS


Current assets:
    Cash and cash equivalents                     $  8,155             $11,028
    Accounts receivable -- trade (net of
      allowance for doubtful accounts of
      $756 and $538 as of June 30 and March 31,
      1997, respectively)                           11,246               6,202
    Inventories                                      5,262               5,481
    Prepaid expenses and other
      current assets                                 2,669               1,478
                                                  --------            --------

             Total current assets                   27,332              24,189

Property, plant, and equipment, net                  6,586               6,271
Intangible assets, net                              41,587              42,024
Deferred tax asset                                     629               1,133
Other assets, net                                    2,623               1,616
                                                  --------            --------

             Total assets                          $78,757             $75,233
                                                    ======              ======






















   The accompanying notes are an integral part of these unaudited consolidated
                              financial statements.

                                        2

<PAGE>



                           POLYMEDICA INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)



                                                   June 30,           March 31,
                                                     1997               1997
                                                 (unaudited)


LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
    Accounts payable -- trade                     $  3,250             $ 2,982
    Accrued expenses                                 5,632               3,403
    Senior debt and notes payable                    2,658               2,658
                                                   -------             -------

         Total current liabilities                  11,540               9,043

Senior debt and notes payable, net                  22,840              22,818
                                                   -------              ------

         Total liabilities                          34,380              31,861

Shareholders' equity:
    Preferred stock $.01 par value; 2,000,000 shares
       authorized, none issued or outstanding           --                  --
    Common stock, $.01 par value; 20,000,000
       shares authorized, 8,606,778 and 8,583,001
       issued as of June 30 and March 31, 1997,
       respectively                                     86                  86
    Treasury stock, at cost, (158,661 and 172,559
       shares as of June 30 and March 31, 1997,
       respectively)                                  (990)             (1,115)
    Additional paid-in capital                      53,371              53,338
    Accumulated deficit                             (6,952)             (7,783)
    Notes receivable from officers                    (898)               (929)
    Currency translation adjustment                   (240)               (225)
                                                   -------             -------

         Total shareholders' equity                 44,377              43,372
                                                    ------              ------

         Total liabilities and
            shareholders' equity                   $78,757             $75,233
                                                    ======              ======
















  The accompanying notes are an integral part of these unaudited consolidated
                              financial statements.

                                        3

<PAGE>




 
                           POLYMEDICA INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                  (Dollars in thousands, except per share data)

                                                  Three Months Ended June 30,
                                                    1997                1996
                                                 ---------           ---------

Revenues:

    Net product sales                             $13,958             $  4,825
    Royalties, exclusivity, development
       and license fees                                --                  168
                                                   ------               ------
                                                   13,958                4,993

Cost of product sales                               6,728                1,827
                                                   ------               ------

Total revenues, less cost of product sales          7,230                3,166

Operating expenses:
    Selling, general, and administrative            5,288                2,147
    Research and development                          123                  120
                                                   ------               ------
                                                    5,411                2,267
                                                   ------               ------

Income from operations                              1,819                  899

Other income and expense:
    Investment income                                 139                  283
    Interest expense                                 (698)                (681)
                                                   ------               ------
                                                     (559)                (398)

Income before income taxes                          1,260                  501
Income tax provision                                  429                   15
                                                   ------               ------

Net income                                       $    831              $   486
                                                   ======               ======


Net income per common share                      $    .09              $   .06
                                                   ======               ======

Weighted average number of
    common shares outstanding (thousands)           9,021                8,480
















  The accompanying notes are an integral part of these unaudited consolidated
                              financial statements.

                                        4

<PAGE>



                           POLYMEDICA INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In Thousands)


                                                   Three Months Ended June 30,

                                                    1997                 1996
                                                  --------             -------
Operating activities
    Net income                                    $   831              $   486
    Adjustments to reconcile net income to 
      net cash flows
       from operating activities:
         Depreciation and amortization              1,111                  667
         Deferred income taxes                        504                   --
         Provision for bad debts                      216                   --
         Provision for sales allowances               334                  214
         Changes in assets and liabilities:
             Accounts receivable--trade            (5,695)                (267)
             Inventories                              220                  (95)
             Prepaid expenses and other assets       (142)                (518)
             Accounts payable--trade                  266                 (363)
             Accrued expenses                       2,184                 (672)
                                                   ------               ------

               Total adjustments                   (1,002)              (1,034)
                                                   ------               ------

               Net cash flows from operating
                 activities                          (171)                (548)
                                                   ------               ------


Investing activities
    Spinoff of CardioTech International, Inc.          --               (3,830)
    Direct-response advertising                    (2,305)                  --
    Purchase of property, plant, and equipment       (588)                (198)
                                                   ------               ------

                Net cash flows from investing
                  activities                       (2,893)              (4,028)
                                                   ------               ------

Financing activities
    Proceeds from issuance of common stock            159                  810
    Repayment of officer loan                          30                   --
                                                   ------               ------

                Net cashs flow from financing 
                  activities                          189                  810
                                                   ------               ------

Net decrease in cash and cash equivalents          (2,875)              (3,766)
                                                   ------               ------

Effect of exchange rate changes on cash                 2                   10

Cash and cash equivalents at
    beginning of period                            11,028               23,302

Cash and cash equivalents at end of period        $ 8,155              $19,546
                                                  =======               ======







  The accompanying notes are an integral part of these unaudited consolidated
                              financial statements.

                                        5

<PAGE>



                           POLYMEDICA INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. The unaudited  consolidated  financial  statements  included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the  Securities  and  Exchange   Commission  and  include,  in  the  opinion  of
management,  all  adjustments,  consisting  of  normal,  recurring  adjustments,
necessary for a fair presentation of interim period results. Certain information
and footnote  disclosures  normally included in financial statements prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted pursuant to such rules and regulations.  The Company believes,  however,
that  its  disclosures  are  adequate  to make  the  information  presented  not
misleading.  The results for the interim  periods  presented are not necessarily
indicative of results to be expected for the full fiscal year.

   The preparation of financial statements in conformity with generally accepted
accounting  principles  requires   management  to  make  certain  estimates  and
assumptions  that  effect 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 revenue and expenses during the reported
period.  Actual results could differ from those estimates.

2. Inventories consist of the following:
   (In thousands)
                                            June 30,              March 31,
                                              1997                  1997
                                           ---------             ----------

              Raw materials                 $1,923                 $2,168
              Work in process                  885                    845
              Finished goods                 2,454                  2,468
                                            ------                  -----
                                            $5,262                 $5,481
                                             =====                  =====

3. Advertising,  promotional,  and other marketing costs are charged to earnings
in the period in which they are  incurred.  Promotional  and sample  costs whose
benefit is expected to assist future sales are expensed as the related materials
are used.  Direct-response  advertising  and related costs are  capitalized  and
amortized  on a  declining  basis over a seven year  period,  which  matches the
expected  future stream of revenues  generated from new customers as a result of
this advertising. As of June 30, 1997, capitalized direct-response  advertising,
net of accumulated amortization, totaled $3.68 million. This balance consists of
$1.18 million in Prepaid  Expenses and Other Current Assets and $2.50 million in
Other  Assets,  Net. A total of  $243,000  in  direct-response  advertising  was
amortized and expensed in the three months ended June 30, 1997.

4. Certain  amounts  in  the  prior  period   financial  statements  have   been
reclassified to conform with the current year presentation.

                                        6

<PAGE>



5. In  February 1997, the  Financial Accounting Standards Board issued Statement
of  Financial Accounting  Standards ("SFAS") No. 128 "Earnings per Share."  SFAS
No. 128 establishes a different method of computing net income per share than is
currently  required  under  the  provisions  of the  Accounting Principles Board
Opinion No. 15 ("APB 15").  Under  SFAS No. 128, PolyMedica  will be required to
present  both  basic  net income per share and diluted net income per share (the
principal difference being that common stock equivalents would not be considered
in the computation of basic EPS).  PolyMedica plans to adopt SFAS No. 128 in its
fiscal quarter ending  December 31, 1997 and  at  that  time  all historical net
income per share data presented will be restated to conform to the provisions of
SFAS No. 128.  The Company  has  not calculated  the impact  of SFAS No. 128 and
does not expect the effect to be material.

6. In July 1997, the Company completed the sale of certain assets related to its
institutional  wound care  operations in the United States and United Kingdom to
Innovative  Technologies  Group  Plc.  Under the  terms of the sale,  Innovative
Technologies paid PolyMedica $9 million in cash and $4 million in the form of an
unsecured  promissory note. The Company could realize an additional $4.5 million
if  Innovative  Technologies  achieves  certain  milestones,  bringing the total
potential  value  of the sale to  $17.5  million.  The  Company  will  recognize
additional  proceeds  when  realized in excess of the $9 million cash  received.
This transaction will be recorded in the quarter ending September 30, 1997.




                                        7

<PAGE>



Item 2.   Management's  Discussion  and  Analysis  of  Financial  Condition  and
Results of Operations

         PolyMedica  is a leading  provider of  targeted  medical  products  and
services  with  primary  focus on diabetes  supplies,  consumer  healthcare  and
professional products.

Targeted Markets

Entrance into Diabetes  Supplies Business  through Purchase  of  Liberty Medical
Supply, Inc.  

The  Company  entered   the  Diabetes  Supplies  market  with  its  August  1996
acquisition  of  Liberty   Medical  Supply,  Inc. ("Liberty  Medical").  Liberty
Medical is among the largest, patient-focused, direct-mail providers of diabetes
supplies to senior citizens covered by Medicare.

         Liberty Medical is headquartered in Palm City,  Florida and was founded
in 1989.  Liberty  Medical is a  participating  Medicare  provider which accepts
payments directly from Medicare,  typically 80% of a product's price, before any
amounts are billed to the patient  and/or the patient's  medi-gap  insurer.  The
benefits  to a  patient  range  from  automatic  shipment  of  supplies  to  the
elimination of preparing paperwork or using personal resources while waiting for
reimbursement.  Liberty Medical ships to more than 40,000 customers in the U.S.,
making it one of the  largest  suppliers  to  senior  diabetes  patients  in the
country.  Its  products  address  a market  estimated  to  include  1.2  million
insulin-using  patients over 65 years old, of which it is estimated that 150,000
- 175,000  patients  currently  receive supplies  through  mail-order  companies
similar to and including  Liberty Medical.  Since March 1997,  Liberty Medical's
customer base has grown from 30,000 to 40,000.

         In addition to the above  market,  the Company  believes  that there is
significant  growth  potential for Liberty  Medical's  products by expanding the
market to include  people with  diabetes  who are  non-insulin-using.  There are
current  proposals in Congress  (H.R.  58) to include this group under  Medicare
following a Congressional Budget Office study indicating that expanding diabetes
coverage in this manner would reduce Medicare expenditures. The Company believes
that passage of H.R. 58 could approximately double the size of Liberty Medical's
potential market.

         In  addition,  the  American  Diabetes  Association,  backed by various
medical  authorities,  has recently  suggested a lower  threshold for diagnosing
people with  diabetes.  Federal  health  officials  have also endorsed these new
guidelines  which include greater self monitoring and,  therefore,  the need for
more frequent testing and testing supplies.

Consumer Healthcare

         The Consumer  Healthcare  division  includes  OTC  Medical  Devices and
Urinary Discomfort Products.  These  products  are  sold  through  an  extensive
network  to  major  retailers.  OTC  Medical  Devices  include  the  number  one
private-label  market  position  and  the number  two overall market position in
digital  thermometers.   Digital thermometry  continues to be a growth category.


                                        8

<PAGE>



Urinary  Discomfort  Products   for  women  include  AZO-STANDARD(R),  which  is
currently the number one selling product in a growing market segment.

         The Company plans to ship a new and patented  Flexible-Tip  Thermometer
with Fever Alarm(TM) to drug stores nationwide in time for this year's cough and
cold season. The Company believes that several new consumer  healthcare products
will be introduced broadening its AZO feminine urinary discomfort line.

Professional Products

         Professional  Products include Prescription  Urologicals and Dressings.
Prescription  Urologicals  include a stable  line of  branded  products  such as
URISED(R), CYSTOSPAZ(R), ANESTACON(R) and a line of suppositories.

         In July 1997, the Company  completed the sale of certain assets related
to its  institutional  wound care  operations  in the  United  States and United
Kingdom  to  Innovative  Technologies  Group  Plc.  Under the terms of the sale,
Innovative Technologies paid PolyMedica $9 million in cash and $4 million in the
form of an unsecured  promissory  note.  The Company could realize an additional
$4.5 million if Innovative  Technologies  achieves certain milestones,  bringing
the  total  potential  value of the  sale to $17.5  million.  The  Company  will
recognize  additional  proceeds  when  realized in excess of the $9 million cash
received.  This  transaction will be recorded in the quarter ended September 30,
1997.

Overview

         In determining net product sales,  the Company records an allowance for
future returns of certain products as an adjustment to gross sales.

         The Company sells its products through a combination of  telemarketing,
national distributors,  wholesalers, mail-order catalogs, and retail chains. The
Company  continues  to seek  opportunities  to deliver new products to a broader
customer base by leveraging Liberty Medical's efficient, mail-order distribution
system and sophisticated software for billing and customer monitoring.

         Consumer  healthcare  products  are sold through a network of more than
100 independent sales  representatives and national wholesalers such as McKesson
Drug Company and Bergen  Brunswig  Corporation,  and to retailers  including CVS
Corp.,  Jack Eckerd Co., OSCO (American Drug Stores Inc.) and Rite-Aid Corp. The
Company promotes sales of its products through national  advertising in consumer
and professional publications, at professional and trade group meetings, as well
as through retail advertising.

         Although  the use of certain of the  Company's  products  are  somewhat
seasonal in nature,  the Company does not believe its net product sales,  in the
aggregate, are generally subject to material seasonal fluctuations.


                                        9

<PAGE>



         The Company operates from manufacturing, distribution, and research and
development   facilities  located  in  Massachusetts,   Florida,  and  Colorado.
Virtually all of the Company's  product sales are  denominated in U.S.  dollars.
The  Company's  research  and  development  activities  are funded from  ongoing
operations and consist of pilot production of pharmaceutical products.

         The Company has completed all of the steps to validate, manufacture and
sell pharmaceutical products made in the Company's Woburn facility. With receipt
of  an  FDA  Establishment  Registration  Number,  in-house  manufacturing  with
state-of-the-art,  automated  equipment is now underway for several  established
products including AQUACHLORAL(R), B&O(R), and URISED.

         Integral to the Company's  growth  strategy is the  acquisition  of new
products and businesses and the disposition of products and businesses no longer
central to the Company's  long-term  growth plans.  The Company has successfully
integrated six acquisitions since 1990, spun off one business and sold another.

         Period to period  comparisons  of changes in net product  sales are not
necessarily indicative of results to be expected for any future period.

Results of Operations

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

         The Company  generated  $13.96  million of revenues in the three months
ended June 30, 1997,  the highest in the Company's  history,  which  compares to
$5.0  million in the three  months  ended June 30, 1996 when the Company did not
own Liberty Medical.

         The Company's net income was $831,000,  or $.09 per share, in the three
months ended June 30, 1997. This performance compares to net income of $486,000,
or $.06 per share, in the three months ended June 30, 1996.

         Pretax  income  was $1.26  million in the three  months  ended June 30,
1997, which compares to $501,000 in the three months ended June 30, 1996.

         Net product sales of diabetes  supplies were $8.31 million in the three
months ended June 30, 1997. This performance compares with $4.58 million for the
three  months  ended  March 31, 1997 and $8.65  million of net product  sales of
diabetes  supplies for the seven  months  ended March 31,  1997.  As the Company
purchased  Liberty  Medical  in August  1996,  there  were no sales of  diabetes
supplies  in the three  months  ended June 30,  1996.  Since  acquiring  Liberty
Medical  and its  home  testing  business  for  Medicare-eligible  seniors  with
diabetes,  the  Company has  invested  in  improving  marketing  and  television
advertising to reach more people with its message.

         Net product sales of consumer  healthcare products decreased by 2.1% to
$1.94  million in the three  months  ended June 30, 1997 as compared  with $1.98
million in the three months ended June 30, 1996.  Sales of advanced  thermometry

                                       10

<PAGE>



products  increased  during  the  three  months  ended June 30, 1997 offset by a
decline in sales of AZO-STANDARD. The Company believes that the decline of sales
of  AZO-STANDARD  is  due to a short-term inventory  oversupply  at  distributor
warehouses. Recent retail takeaway data indicate that shipments of AZO-STANDARD,
which is the category leader, increased  during  the three months ended June 30,
1997 during a  period in  which the entire OTC urinary discomfort category grew.
The Company has increased its  advertising  and  promotional  campaign  to  take
advantage of growing  consumer awareness of this expanding category.

         Net product sales of the Company's  professional  products increased by
23.1% to $3.71  million in the three months ended June 30, 1997 as compared with
$3.01  million  in the three  months  ended  June 30,  1996.  This  increase  is
primarily due to  additional  shipments of URISED in the three months ended June
30, 1997,  which the Company believes is the result of a reduction in the supply
of generic products in the marketplace.

         As a percentage of net product sales,  overall gross margins were 51.7%
in the three months ended June 30, 1997 and 62.1% in the three months ended June
30,  1996.  Gross  margins in the three  months  ended June 30,  1997  decreased
primarily  due to  the  inclusion  of  significant  sales  of  diabetes  related
products,  whose  gross  margins  are lower than the  Company  average for other
products in the three months ended June 30, 1996.

         Selling,   general,  and  administration   expenses  ("SG&A  expenses")
increased by 146.4% in the three months ended June 30, 1997 to $5.29  million as
compared with $2.15 million in the three months ended June 30, 1996. Included in
SG&A expenses were  depreciation  and  amortization,  wages,  benefit costs, and
outside professional  services totalling $3.13 million in the three months ended
June 30, 1997,  or 59.2% of SG&A  expenses,  as compared  with $1.01  million or
46.9% of SG&A expenses in the three months ended June 30, 1996. SG&A expenses in
the three months ended June 30, 1997 include  costs  related to Liberty  Medical
operations,  which the  Company did not own in the three  months  ended June 30,
1996.  In addition,  during the three  months  ended June 30, 1997,  the Company
increased  marketing and  advertising  costs related to its consumer  healthcare
products.

         Research and  development  expenses  were  $123,000 in the three months
ended June 30, 1997,  as compared  with  $120,000 in the three months ended June
30, 1996.

         Investment  income  decreased  by 50.9% to $139,000 in the three months
ended June 30, 1997,  as compared  with  $283,000 in the three months ended June
30, 1996, as the Company earned  interest on lower average cash balances in part
due to the June 1996 cash  distribution  to CardioTech  International,  Inc. and
cash paid for the purchase of Liberty Medical in August 1996.  Interest  expense
was $698,000 in the three months  ended June 30, 1997,  as compared  $681,000 in
the three months ended June 30, 1996, as the Company accrued interest expense in
both periods on $25 million of Guaranteed  Senior  Secured Notes due January 31,
2003 (the "Hancock  Notes") to the John Hancock  Mutual Life  Insurance  Company
("Hancock").


                                       11

<PAGE>



Liquidity and Capital Resources

         Since its  inception,  the Company has raised  $53.46  million in gross
equity  capital,  of which $7.16  million was from  venture  capital  financings
before the Company's initial public offering, $39.00 million from its March 1992
initial public  offering,  $4.55 million from a November 1996 public offering of
700,000  shares of common  stock,  and $2.75  million  from the sale of  431,937
shares of its common  stock,  pursuant to  Regulation  S  promulgated  under the
Securities Act of 1933. In January 1993, the Company sold to Hancock $25 million
of 10.65%  Guaranteed  Senior  Secured  Notes due January 31, 2003 (the "Hancock
Notes").  In January 1996, the Company executed an amendment which increased the
interest rate on the Hancock Notes to 10.9%.

         As of June 30, 1997, working capital was $15.79 million, including cash
and cash  equivalents of $8.16 million,  which compares with working  capital of
$23.77  million as of June 30, 1996.  In July 1997,  the Company  received  $8.6
million  in cash  proceeds  from  the  sale of  certain  assets  related  to its
institutional  wound  dressing  operations.  A total of $400,000 was  previously
received when a nonbinding letter of intent was signed to sell these assets.

         There were several major factors which affected  working  capital as of
June 30, 1997 as compared  with June 30,  1996.  In June 1996,  the Company paid
$3.83 million in cash to CardioTech in connection with its spinoff to PolyMedica
shareholders.  In August 1996 and March 1997,  the Company paid a total of $7.84
million in cash in connection with the Liberty Medical acquisition. In the three
months ended June 30, 1997,  the Company's use of working  capital was primarily
related to financing growth in Liberty Medical's expanding customer base.

         At March 31, 1997, the Company had  approximately  $10.1 million of net
operating loss carryforwards for income tax purposes. Pursuant to the Tax Reform
Act of 1986,  the  Company  believes  that the use of these net  operating  loss
carryforwards  in any particular  year will be limited as a result of changes in
ownership which occurred in prior periods.

         The  Company  expects  that  its  current  working  capital  and  funds
generated  from future  operations  will be adequate to meet its  liquidity  and
capital  requirements  for  current  operations.  In the event that the  Company
undertakes to make  acquisitions of  complementary  businesses or products,  the
Company may require  substantial  additional funding beyond currently  available
working capital and funds generated from operations.  Currently,  the Company is
conducting  an active  search for the  strategic  acquisition  of  complementary
businesses  or products.  The Company has no present  commitments  or agreements
with respect to any such acquisition.

Inflation

         To date,  inflation  has not had a  material  effect  on the  Company's
financial results.



                                       12

<PAGE>



Factors Affecting Future Operating Results

         The statements  contained in this Report that are not purely historical
are  forward-looking  statements  within  the  meaning  of  Section  27A  of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934,
including statements regarding the Company's expectations,  hopes, intentions or
strategies  regarding  the future.  Forward-looking  statements  include,  among
others:  statements  regarding  possible future  expansion of diabetes  coverage
under  Medicare;   statements  regarding  future  benefits  from  the  Company's
advertising and promotional  expenditures;  statements  regarding future product
revenue levels;  statements  regarding  product  development,  introduction  and
marketing;  and statements  regarding future  acquisitions.  All forward-looking
statements  included in this Report are based on  information  available  to the
Company on the date hereof,  and the Company assumes no obligation to update any
such  forward-looking  statements.  It is important  to note that the  Company's
actual  results  could  differ  materially  from  those in such  forward-looking
statements.

         The  future  operating  results  of the  Company  remain  difficult  to
predict.  The Company continues to face many risks and uncertainties which could
affect its operating  results,  including  without  limitation,  those described
below.

         Healthcare Reimbursement. Political, economic and regulatory influences
are resulting in fundamental  changes in the  healthcare  industry in the United
States.  The Company  anticipates  that  Congress  and state  legislatures  will
continue  to review and  assess  alternative  healthcare  delivery  systems  and
payment  methods and that public debate of these issues will likely  continue in
the future.  Sales of the  Company's  products will depend to some extent on the
availability  of  reimbursement  to certain of the Company's  customers by third
party payors such as government and private insurance plans. No assurance can be
given that such reimbursement will be available.

         Product  Liability.  The  testing,  marketing  and sale of medical  and
consumer  products entail an inherent risk that product liability claims will be
asserted  against  the  Company  or its  third  party  distributors.  A  product
liability claim or a product recall could have a material  adverse effect on the
business  or  financial  condition  of the  Company.  Certain  manufacturers  of
materials and/or  implantable  devices have been subjected to significant claims
for damages  allegedly  resulting  from their  products.  The Company  currently
maintains product liability  insurance coverage which it believes to be adequate
for its present  purposes,  but there can be no assurance that in the future the
Company  will be able to  maintain  such  coverage on  acceptable  terms or that
current  insurance  or insurance  subsequently  obtained  will provide  adequate
coverage against any or all potential claims.

         Competition and Technological Change. The Company is engaged in rapidly
evolving  and  highly  competitive  fields.   Competition  from  medical  device
manufacturers,  pharmaceutical  companies and other  competitors  is intense and
expected to increase. Many of these companies have substantially greater capital
resources,   research  and  development  staffs  and  facilities,   and  greater
experience in obtaining  regulatory  approvals and in marketing and distribution
of products, than the Company.  Academic institutions,  hospitals,  governmental
agencies and other public and private

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research   organizations  are  also  conducting   research  and  seeking  patent
protection  and may develop  competing  products  on their own or through  joint
ventures.  There can be no assurance  that the  Company's  competitors  will not
succeed in developing technologies and products that are more effective than any
that are being developed or sold by the Company.

         Reliance on  Distributors;  Limited Direct  Marketing  Experience.  The
Company has a limited direct marketing and sales  organization and relies on its
current distributors for certain product sales. The Company has a limited direct
sales force which it may need to broaden for certain of its products.  There can
be no  assurance  that the Company will  establish  such a direct sales force or
that any such  sales  force that may be  established  will be able to market and
distribute the Company's products successfully or to offset any decline in sales
to its existing  distributors.  The  Company's  ability to sell its new products
will  depend in part on its  ability to enter into  marketing  and  distribution
agreements  with  pharmaceutical,   medical  device,  personal  care  and  other
distributors  in the United States and other  countries.  If the Company  enters
into any such  agreements,  there can be no assurance  that the Company's  third
party distributors will be able to market the products effectively.

         Government  Regulation.  The  production and marketing of the Company's
products and its ongoing  research  and  development  activities  are subject to
regulation by numerous  governmental  authorities in the United States and other
countries,  and may become subject to the  regulations of additional  countries.
The Company cannot predict the extent to which government regulations or changes
thereto  might have an adverse  effect on the  production  and  marketing of the
Company's existing or future products.  A number of the Company's products under
development will require clearance by the Food and Drug  Administration  ("FDA")
in the United States.  Although the Company believes each of these products,  if
successfully developed, will obtain FDA clearance, no assurance can be made that
each will  obtain  such  clearance,  or that the  process of  clearance  will be
without undue delay or expense.

         Patents and Trade Secrets.  The Company's success will depend, in part,
on its ability to obtain patents,  maintain trade secrets protection and operate
without  infringing on the proprietary  rights of third parties.  The Company is
the owner of two, and the co-owner of one,  issued  patents in the United States
and has filed  applications  for  additional  patents in the  United  States and
abroad.  There can be no assurance  that any pending  patent  applications  will
result in issued patents. In addition, there can be no assurance that any issued
patents   will  provide  the  Company  with   significant   protection   against
competitors.  Moreover,  there can be no assurance that any patents issued to or
licensed by the Company will not be infringed upon or designed around by others.

         The Company also relies on unpatented  proprietary  technology,  and no
assurance can be given that others will not independently  develop substantially
equivalent  proprietary   information,   techniques  or  processes,   that  such
technology  will not be disclosed or that the Company can  meaningfully  protect
its rights to such unpatented proprietary technology.  There can be no assurance
that the Company's non-disclosure  agreements will provide meaningful protection
for the Company's trade secrets or other proprietary know-how. In the absence of
patent protection, the Company's

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business  may  be  adversely  affected by  competitors who independently develop
substantially equivalent technology.

         Moreover,  there can be no  assurance  that the patents  held by others
might not have an adverse  effect on some of the  Company's  products or require
that the Company obtain licenses to continue to test,  manufacture or market the
affected product,  and, if so, there can be no assurance that such licenses will
be available on acceptable terms, if at all.

         Acquisitions of Other Businesses.  As part of its growth strategy,  the
Company currently intends to expand through the acquisition of other businesses,
as  well  as  internal  growth  and  strategic  business  alliances  with  other
companies.  The Company regularly  reviews  potential  acquisitions and business
alliances, some of which may be material. The acquisition of other businesses is
integral to the Company's business strategy;  however, there can be no assurance
that the Company will successfully acquire any businesses, or that such acquired
businesses, if any, will be profitable.  The Company does not currently have any
commitments or agreements  with respect to the  acquisition of any businesses or
products.



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                           PART II - OTHER INFORMATION

                           PolyMedica Industries, Inc.



Item 6.          Exhibits and Reports on Form 8-K

         (a)     See Exhibit Index
         (b)     The Company  filed a report on Form 8-K,  dated June 23,  1997,
                 under Item 5 - Other  Events,  relating to the  execution  of a
                 definitive agreement with respect to the sale of certain assets
                 relating to its institutional wound care operations.


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                                   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.


                                                 PolyMedica Industries, Inc.
                                                        (registrant)



                                           /s/ Steven J. Lee
                                           Steven J. Lee
                                           Chairman and Chief Executive Officer
                                           (Principal Executive Officer)



                                           /s/ Eric G. Walters
                                           Eric G. Walters
                                           Chief Financial Officer, Treasurer,
                                           and Clerk (Principal Financial and
                                           Accounting Officer)





Dated:  July 31, 1997

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                                  Exhibit Index

                           PolyMedica Industries, Inc.


Exhibit                            Description


10.75    -       Letter Agreement  amendment by  and  between the Registrant and
                 Steven J. Lee dated July 1, 1997.

10.76    -       Letter Agreement  amendment  by and  between the Registrant and
                 Dr. Arthur A. Siciliano dated July 1, 1997.

10.77    -       Letter Agreement  amendment  by  and between the Registrant and
                 Eric G. Walters dated July 1, 1997.

10.78    -       Letter Agreement  amendment by  and between  the Registrant and
                 Randy M. Sloan dated July 1, 1997.

10.79    -       Letter Agreement  amendment  by and  between the Registrant and
                 Robert J. Zappa dated July 1, 1997.

27       -       Financial Data Schedule

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