<PAGE>

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549
                                    FORM 10-KSB

[ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
          SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1997 Commission File Number: 0-22247

[   ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

                              NUTRITION MEDICAL, INC.
         (Exact name of Small Business Issuer as specified in its charter)

     MINNESOTA                                          41-1756256
(State or other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                   Identification Number)

             9850 51ST AVENUE NORTH, SUITE 110, MINNEAPOLIS, MN  55442
                  (Address of principal executive offices)    (Zip Code)

                                   (612) 551-9595
                            (Issuer's telephone number)

Securities registered under Section 12 (b) of the Exchange Act:  NONE
Securities registered under Section 12 (g) of the Exchange Act:

                            COMMON STOCK, $.01 PAR VALUE
                                  (title of class)

Check whether the issuer (1) 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 registrant 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 in response to Item 405
of Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of the registrant's knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. Yes ___     No  _X_

State issuer's revenues for its most recent fiscal year:    $4,104,601

On March 24, 1998, and based on the average bid and asked prices as of that
date, the aggregate market value of the voting stock held by non-affiliates
of the Issuer was $2,864,115.

The number of shares outstanding of the registrant's common stock, $.01 par
value, as of March 19, 1998 was 5,456,024 shares.

                        DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the 1998 Annual
Meeting of Shareholders (which will be filed with the Commission before April
30, 1998) (the "Proxy Statement") are incorporated by reference in Part III.

Transitional Small Business Disclosure Format:  Yes __  No  _X_

<PAGE>

                                        PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

     Nutrition Medical, Inc., a Minnesota corporation formed in July 1993
(the "Company" or "Registrant"), develops and sells generic critical care and
disease specific nutrition formulas, as well as related enteral feeding
pumps, delivery sets and feeding tubes for the hospital, nursing home and
home health care markets. The Company's critical care and disease specific
nutrition products are generally manufactured using ingredients, formulas and
processes comparable to those of national brand products. As of December 31,
1997, the Company marketed eight critical care and disease specific nutrition
products, four intact protein formulas and more than thirty related delivery
devices. The Company intends to expand these product lines through internal
development activities.

     On January 13, 1997, the Company acquired certain assets from Elan
Pharma, Inc. ("Elan"), a U.S. subsidiary of Ireland-based Elan Corporation,
plc.  The products acquired included inventory and fixed assets relating to
the production of the enteral (tube feeding) products (the "Elan Acquired
Products") of Elan, as well as exclusive rights to manufacture and market the
Elan Acquired Products.  In exchange for the Elan Acquired Products and
related assets, the Company issued Elan a note in the amount of $3,000,000
(due in seven years along with interest accruing at three percent per annum)
and 855,000 shares of the Company's common stock.  Total value of the
transaction, after taking into consideration market interest rates on the
note payable, was approximately $3,428,936.

     In September 1997, the Company announced the signing of a distribution
agreement with Nellson Nutraceutical, an Irwindale, California-based
manufacturer of nutritional products.  Under the terms of the agreement, the
Company is the exclusive distributor of Nellson's Suppla-Cal-TM- and Hi-Cal
VM-TM- supplemental nutrition bars.  The Company intends to continue to
market these products through existing channels.

RECENT DEVELOPMENTS.

     During 1996 and 1997, the Company incurred significant expenses related
to the development of a generic infant formula. In January 1998, the Company
announced its decision to suspend further independent development efforts
associated with this project.  The Company stated that it plans to seek a
corporate partner or buyer to complete its infant formula development
project. In the absence of such a partner, the Company will suspend further
investment on the project.

     Also in January 1998, the Company announced its intention to discontinue
its private label adult nutrition supplement business, which was introduced
in late 1995. Accordingly, the private label adult nutrition business has
been classified as discontinued operation in the Financial Statements
included in this Report.  In March 1998, the Company entered into an
agreement with Agrilink Foods, Inc., a New York corporation, pursuant to
which the Company will transfer its private label adult nutrition supplement
business to Agrilink effective May 1, 1998.  As part of the agreement, the
Company will receive cash for various marketing and supply-related items and
royalty payments for two years on the sale of these products.

     The Company has taken these actions to allow it to focus on its core
clinical nutrition business.

PRODUCTS

     Critical care nutrition formulas are used by hospitals and other health
care providers to feed critically ill patients who cannot consume adequate
nutrients orally and consequently require specialized feeding via tubes into
the intestinal tract. The use of critical care nutrition formulas often
continues at home or in a nursing home after a patient is discharged from the
hospital.

     The Company's strategy has been to focus on the development and sale of
a core line of generic critical care formulas for patients who are being
treated in intensive care units. Certain of these products contain unique
ingredients or proportions of ingredients to meet the metabolic requirements
of specific patient populations. The Company markets its critical care and
disease specific nutrition products to hospitals and other health care
providers as less expensive, generic alternatives to the established products
offered by major manufacturers. The Company intends to continue developing an
expanded line of critical care nutrition products and to establish itself as
a major supplier of such products in generic form.

                                       1

<PAGE>

     The Elan Acquired Products combined with the Company's existing critical
care and disease specific nutrition formulas provide the capability to market
a full line of formulas and the pumps and disposable administration hardware
used in formula delivery.

BACKGROUND

     Critically ill or severely injured patients are often unlikely to
consume adequate nutrients, which can exacerbate a patient's condition, cause
complications and prolong hospital stays. Total enteral nutrition ("TEN")
delivers, often via specialized pumps, formulations of protein,
carbohydrates, fat and vitamins via feeding tubes directly into the patient's
intestinal tract. Unless nearly all of the intestinal tract is missing or
nonfunctional, most patients can be fed via this enteral route.  One
application of TEN is in the treatment of critical care patients. The largest
single category of TEN nutrition products used in critical care are products
that contain unique protein sources referred to as "elemental". Unlike
long-term care formulas that contain "whole protein", which must be digested
before it can be absorbed and utilized by the patient, elemental formulas
contain predigested protein that offers immediately available nutrition
because little or no digestion is required. With one exception, all of the
Company's critical care nutrition products are elemental formulas.

     The critical care nutrition formula market is currently dominated by a
small number of established manufacturers of national brands, each of which
focuses on particular segments of the market. These manufacturers include
Ross Laboratories, a division of Abbott Laboratories ("Ross Laboratories"),
Novartis, formerly known as Sandoz Corp. ("Novartis"), Nestle Clinical
Nutrition, formerly known as Clintec Nutrition Co. ("Nestle") and McGaw, Inc.
("McGaw"). The Company believes these manufacturers sell their formulas at
substantial profit margins. Meanwhile, the United States health care system
has been under pressure to control costs. As a result, the medical community
and consumers have come to accept lower priced generic drugs and private
label over-the-counter products, and the market for these products has grown
rapidly. The Company believes it is the only company that has addressed the
critical care medical nutrition market with lower cost, generic alternatives
to established brands. The Company generally sells its generic critical care
nutrition formulas under its own label.

     The Elan Acquired Products provide the Company with whole-protein
formulas, as well as the pumps and disposable hardware (e.g. feeding tubes
and containers) used to administer formulas.  The Elan Acquired Products are
marketed under the Company's label and are generally priced below
competitor's brands.

PRODUCTS

     The Company currently has nine critical care and disease specific
nutrition products. With the exception of Gluco-Pro-TM-, each contains
elemental protein sources, which contain predigested protein that offers
immediately available nutrition. In February 1998, the Company launched its
first proprietary critical care formula, Glutasorb-TM-.  This formula is the
first high glutamine, ready-to-use elemental diet available in the United
States and, as such, has no specific competing branded product.  The
following chart provides information regarding each of the Company's critical
care nutrition products.

<TABLE>
<CAPTION>
PRODUCT NAME             DATE INTRODUCED         TREATMENT CATEGORY        COMPETING BRANDED PRODUCT          MANUFACTURER
------------             ---------------         ------------------        -------------------------          ------------
<S>                      <C>                     <C>                       <C>                                  <C>
L-Emental-TM-            May 1994                ICU nutrition             Vivonex-Registered Trademark-        Novartis
L-Emental-TM- Plus       January 1995            ICU nutrition             Vivonex Plus-Registered Trademark-   Novartis
L-Emental-TM- Hepatic    June 1996               Liver Failure             Hepatic Aid II-Registered Trademark- McGaw
L-Emental-TM- Pediatric  June 1996               Children                  Vivonex Pediatric-Registered         Novartis
                                                                           Trademark-
Pro-Peptide-TM-          November 1994           ICU nutrition             Peptamen-Registered Trademark-       Nestle
Pro-Peptide-TM- VHN      November 1995           Trauma                    Peptamen VHP-Registered Trademark-   Nestle
Pro-Peptide-TM- For Kids May 1997                Children                  Peptamen Jr.-TM-                     Nestle
Gluco-Pro-TM-            June 1997               Diabetes                  Choice dm -TM-                       Mead Johnson
Glutasorb-TM-            February 1998           Trauma/ICU nutrition      Proprietary                          N/A
</TABLE>

            The Company generally establishes target prices for its critical
care and disease specific nutrition products that are approximately twenty
percent to thirty percent less than the selling prices of competing
established brand name products. At least one competitor in the critical care
nutrition products market has lowered prices to various customers of its
branded products to levels that offset all or part of the price advantage of
the Company's three competitive products.

                                       2

<PAGE>

     The Elan Acquired Products provide the Company with approximately forty
additional products consisting of special intact protein formulas, disposable
administration hardware and the related delivery pumps.  The Company has
plans to discontinue approximately twenty of these products, based on market
conditions and product acceptance.  In 1997 these products represented an
insignificant portion of the net sales.  In addition to the delivery of
critical care formulas, the Elan Acquired products appeal to the larger
long-term care segment of the clinical nutrition market. The pricing strategy
involves special contractual pricing with distributors and package pricing
for large end users. In addition, the enteral feeding delivery pump is
offered as an OEM product to several medical supply companies which directly
compete with the Company.

RESEARCH AND DEVELOPMENT

     The product development process begins with a determination by the
Company's management that a market opportunity exists with respect to a
particular product. The Company then contracts with an outside laboratory to
analyze the ingredients of the competitor's product and to formulate the
Company's version of the product. Certain members of the Company's scientific
advisory board consult with the contractors during the development process.
Research and development costs for continuing operations for 1996 and 1997
were $627,000 and $245,000,  respectively.

     To date, the Company has only developed products for which the Company
believes that no patent has been issued, and expects to continue this
development strategy. The Company has selectively engaged legal counsel to
conduct formal searches for intellectual property rights with respect to its
products in development, in addition to relying on the industry knowledge of
its employees and consultants.

     The Company's critical care, disease specific and intact protein
nutrition formulas are not required to undergo clinical testing or obtain FDA
approval.

MANUFACTURING AND DISTRIBUTION

     All of the Company's products are manufactured on a contract basis by
third parties. These contract manufacturers are subject to Food and Drug
Administration ("FDA") regulatory requirements for food and medical food
production, and the Company's products undergo quality control testing during
and after the production process. By using third party manufacturers, the
Company is better able to introduce new products that require differing
manufacturing processes. Nevertheless, reliance on contract manufacturers
involves various risks, including those set forth under the heading
"Dependence on Contract Manufacturers" in Exhibit 99.1 hereto.

     Critical care nutrition products are shipped from the manufacturer to
the Company's distribution warehouse in Minneapolis, Minnesota. Home
consumers of critical care and nutrition products typically acquire the
Company's products through health care providers.

     The Elan Acquired Products  are distributed through several distributors
or shipped from the Company's Minneapolis warehouse. The Company expects to
add additional distributors and direct customers as it integrates these
products into its existing customer base and expands marketing efforts.

MARKETING

     The Company employs its own inside sales personnel to market its
critical care nutrition products. These sales personnel target, via
telephone, the dietary and pharmaceutical departments of hospitals and
nursing homes. This approach reduces the Company's selling costs by
eliminating travel expenses and allowing its sales personnel to contact and
service a larger number of potential and actual customers. The Company also
uses direct mail and trade shows to further promote its products. In
addition, the Veteran's Administration and state and county hospitals have
annual bids for clinical nutrition products, and the Company actively
participates in these bids.

     The Company markets the Elan Acquired Products through distributors and
through independent outside salespeople who visit customer sites to promote
awareness and provide training and support as required.  In addition, the
Company utilizes its existing inside sales force to target customers of these
products, as well as potential purchasers of the Suppla-Cal-TM- and Hi-Cal
VM-TM- bars.

                                       3

<PAGE>

     Pump manufacturers frequently supply enteral feeding pumps to customers
at no charge in return for the opportunity to supply, on an exclusive basis,
the related formulas and administration hardware.  This strategy was employed
by Elan in the marketing of the Elan Acquired Products. The Company employed
this strategy in 1997 and expects to continue this strategy in the future to
attract new customers.

COMPETITION

     Competition in the critical care nutrition products market primarily
consists of three companies that have established brands in the specialty
markets in which the Company has chosen to compete. These companies,
Novartis, Nestle and McGaw, each market their specialty products through
sales personnel who generally use traditional in-person sales calls rather
than the telemarketing approach historically employed by the Company.
Although Ross Laboratories is the dominant manufacturer in the United States
adult TEN market (which includes the critical care nutrition market), Ross
Laboratories has focused on whole protein products that do not compete
directly with the Company's critical care elemental protein formulas, but
rather with several formulas acquired from Elan.  Although the Company
believes it is the only company currently offering low cost, generic
alternatives to the established brands, other companies may enter this
market.

     Competitors in the enteral pump and delivery device market include
Nestle and Novartis. However, the market leaders are Ross Laboratories and
Sherwood Medical, which together control approximately 75 percent of the pump
and disposables market.

GOVERNMENT REGULATION

     The Company's products and potential products are or will be subject to
government regulation. The Company's current products are regulated as food
and medical food by the FDA and are subject to labeling requirements, current
good manufacturing practice ("CGMP") regulations and certain other
regulations designed to ensure the safety of the products. Claims made by the
Company in labeling and advertising its products are subject to regulation by
the FDA, the Federal Trade Commission and various state agencies under their
general authority to prevent false, misleading and deceptive trade practices.

     In its pump and delivery device product categories, the Company is also
subject to FDA regulations regarding Class II medical devices.  These
regulations involve more stringent tracking, testing and documentation
standards. Failure to comply with FDA requirements can result in adverse
regulatory action, including injunctions, civil or criminal penalties,
product recalls or the relabeling, reformulation or possible termination of
certain products. The Company's current and potential products may become
subject to further regulation in the future.

EMPLOYEES

     The Company currently has 22 full-time employees, engaged in sales,
marketing, quality control and general corporate and administrative
functions. The Company does not have an agreement with any labor union and
the Company believes its relations with its employees are good.

ITEM 2.  DESCRIPTION OF PROPERTY.

     The Company's corporate headquarters are located at 9850 51st Avenue
North, Minneapolis, Minnesota, 55442, in an office/warehouse complex
consisting of approximately 9,500 square feet. The Company's current lease
expires on November 30, 2001.  Monthly rent, which includes the Company's pro
rata share of taxes, utilities and common area charges, is $6,900. In
addition, the Company rents, on an as-needed basis, public warehouse space to
store inventory.  The Company considers the facilities adequate and suitable
for the purposes they currently serve.  Future growth, however, may
necessitate additional office space.

TEM 3.  LEGAL PROCEEDINGS.

     In August 1995, the Company was named as a defendant in a patent
infringement lawsuit brought by Novartis, formerly Sandoz, in the United
States District Court for the District of Minnesota. The complaint asserts
that one of the Company's products, L-Emental-TM- Plus, infringes on two
patents held by Novartis and asks for relief in the form of an injunction
that would prevent the Company from selling the product as well as damages of
an unspecified amount. Both

                                       4

<PAGE>

patents were issued subsequent to the Company's introduction of L-Emental
Plus. The Company responded with a counterclaim seeking a declaration of
invalidity, unenforceability, non-infringement and inventorship of the
subject patents. A court order stayed the litigation pending a reexamination
by the United States Patent and Trademark Office of both patents. On August
13, 1997, the Company received notification that the United States Patent
Office will issue the two patents under review.  Although the scope of  the
patents was narrowed, the Company expects that the litigation, which was
stayed pending this determination, will resume, and the Company intends to
continue to vigorously defend against the claim. Sales of L-Emental Plus
constituted $298,000, or 40 percent, $497,000, or 41 percent, and $431,000,
or 10.5 percent of the Company's net sales in 1995, 1996 and 1997,
respectively. It is not possible at this time to predict the outcome of the
lawsuit, including whether the Company will have to cease selling L-Emental
Plus, or to estimate the amount or range of potential loss, if any. To date,
no injunction has been issued.

     In November 1997, the Company was named as a defendant in a patent
infringement lawsuit brought by Nestle in the United States District Court
for the Northern District of Illinois.  The suit asserts that one of the
Company's products, Pro-Peptide-TM- For Kids, infringes on a patent held by
Nestle and asks for relief in the form of an injunction that would prevent
the Company from selling the product as well as damages of an unspecified
amount.  The Company intends to vigorously defend against the claim.  Sales
of Pro-Peptide For Kids, introduced in May 1997, constituted $134,000, or
three percent, of the Company's net sales in 1997. It is not possible at this
time to predict the outcome of the lawsuit, including whether the Company
will have to cease selling Pro-Peptide For Kids, or to estimate the amount or
range of potential loss, if any. To date, no injunction has been issued.

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

     During the quarter ended December 31, 1997, no matter was submitted to a
vote of security holders.

                                      PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's common stock has traded on the Nasdaq Small Cap Market
System under the symbol NMED since September 26, 1996.  As of March 25, 1998,
there were approximately 69 holders of record of the Company's common stock.
The quotations shown below represent inter-dealer sale prices as reported by
the Nasdaq Small Cap Market System, without retail mark-up, mark-down or
commission and may not represent actual transactions.

<TABLE>
<CAPTION>
                                1997               High     Low
                    ----------------------------   -----   -----
                    <S>                            <C>     <C>
                    First Quarter                  4 1/4   3 3/8
                    Second Quarter                 3 3/4     2
                    Third Quarter                  3 3/8     2
                    Fourth Quarter                 2 5/8     1

<CAPTION>
                                1996               High     Low
                    ----------------------------   -----   -----
                    <S>                            <C>     <C>
                    Third Quarter (since the
                    September 26, 1996 initial     4 1/4   3 1/2
                    public offering)
                    Fourth Quarter                 4 5/8   3 5/8
</TABLE>

     The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to declare any dividends on its Common Stock in the
foreseeable future.  The Company currently intends to retain any earnings for
use in the operation and expansion of its business.

     In Exchange for the Elan Acquired Products and related assets acquired
from Elan on January 13, 1997, the Company issued Elan a note in the amount
of $3,000,000 (due in seven years along with interest accruing at three
percent per annum) and 855,000 shares of the Company's common stock.  The
issuance of shares of common stock did not involve a public offering and
therefore was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended, (the "Securities Act").  Elan
subsequently transferred such shares to Elan International Services, Ltd., a
corporation owned and controlled by Elan's parent Elan Corporation, PLC.

                                       5

<PAGE>

REPORT OF SALES OF SECURITIES AND USE OF PROCEEDS THEREFROM

     The Company had an initial public offering that commenced September 26,
1996 and terminated with the sale of 1,437,500 shares of its common stock,
par value $.01, at a price of $3.50 per share.  All shares registered with
the Securities and Exchange Commission in connection with the Company's
initial public offering were sold.  The managing underwriter for the public
offering was Miller, Johnson & Kuehn, Incorporated. Total net proceeds from
the offering were as follows:

<TABLE>
          <S>                                              <C>
          Gross Proceeds                                   $ 5,031,250
          Less:
          Underwriting discounts & commissions                 503,125
          Expenses paid to or for underwriters                  93,591
          Other expenses                                       197,534
                                                           -----------
               Total Expenses*                                 794,250
                                                           -----------
          Net proceeds from offering                       $ 4,237,000
                                                           -----------
                                  USE OF PROCEEDS*

          Purchase and installation of equipment          $    303,000
          Research and Development                             479,000
          Sales and Marketing                                1,319,000
          Temporary Investments (U.S. Treasury Bills)        1,500,000
          Working Capital                                      636,000
                                                          ------------
               Total                                      $  4,237,000
                                                          ------------
</TABLE>

*None of such payments were made to the Company's directors and officers or
their respective associates, beneficial owners of ten percent or more of the
Company's common stock or affiliates of the Company.

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

CAUTIONARY STATEMENT

     This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended.  When used in this Form
10-KSB and in future filings by the Company with the Securities and Exchange
Commission, in the Company's  press releases and in oral statements made with
the approval of an authorized executive officer, the words or phrases
"believes", "anticipates", "intends", "will likely result", "estimates",
"projects" or similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying
such statements.  These forward-looking statements involve risks and
uncertainties that may cause the Company's actual results to differ
materially from the results discussed in the forward-looking statements.  The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances after the date of such statements. Readers
are urged to carefully review and consider the various disclosures made by
the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties
of the risks and factors that may affect the Company's business.  Such
forward-looking statements are qualified in their entirety by the cautions
and risk factors set forth under the "Cautionary Statement" filed as Exhibit
99.1 to this Form 10-KSB.

GENERAL

     The Company develops and sells nutrition products marketed as
cost-effective, generic alternatives to equivalent national brand products.
Initial development focused on branded generic formulas for the critical care
nutrition market. These products are sold to hospitals and other health care
facilities to feed critically ill patients who cannot consume adequate
nutrients orally and consequently require specialized feeding via tubes into
the intestinal tract. As of December 31, 1997, the Company had developed
eight such products. Critical care nutrition products are generally purchased
by a relatively large customer base, which typically places orders in
relatively small quantities.

                                       6

<PAGE>

     On January 13, 1997, the Company purchased a line of products from Elan
Pharma, Inc. consisting of intact protein formulas, enteral pumps and the
related disposable delivery hardware.  These products appeal to the larger
long-term care segment of the clinical nutrition market, while providing a
wider range of products that may be offered to hospitals and home health care
facilities.  A significant portion of the Company's growth in 1997 was
attributable to revenues provided from the addition of these products.

     In the fourth quarter of 1997, the Company completed a review of cash
flows expected to be derived from the Elan Acquired Products.  Based upon
this review and analysis, the Company concluded that the intangible asset
received in the acquisition was impaired and, as a result, took a charge of
$1.5 million to operations in 1997, thereby reducing goodwill from the
acquisition to zero.

     As discussed in Note 1 to the financial statements included in this
Report, the Company has discontinued its private label adult nutrition
supplement business, which had been introduced in late 1995. In 1997, this
product line represented 35 percent of gross sales but only approximately 6.8
percent of gross profit. The results of operations of this product line are
shown as discontinued operations, separated from continuing operations in all
periods for which a statement of operations is presented.

     The Company also announced in January 1998 that it was discontinuing its
efforts to develop and market a generic national brand equivalent infant
formula.  In 1997, the Company incurred an estimated $300,000 in sales and
marketing related costs and an equivalent amount in research and development
costs related to this project.  These costs represent a significant portion
of the increased operating costs incurred in 1997, as compared to 1996.  The
Company has taken these actions to allow it to focus on its core clinical
nutrition business.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996

     NET SALES.  Net sales from continuing operations for the year ended
December 31, 1997 totaled $4,104,601 compared to $1,224,871 for the same
period of 1996, an increase of 235 percent. The growth in sales is the result
of increases in sales of products offered in both periods, as well as new
products introduced in January 1997 as a result of the acquisition from Elan.
 This growth is attributable to the addition of new customers and growth in
orders from existing customers, combined with a greater number of products
available for sale in the 1997 period.

     GROSS PROFIT.  Gross profit from continuing operations for the year
ended December 31, 1997 increased to $1,293,158, compared to $685,431 in the
same period of 1996.  As a percentage of sales, however, gross profit
decreased from 56 percent in 1996 to 31.5 percent in 1997.  The decrease in
gross profit as a percentage of sales is primarily the result of change
within the product mix due to the Elan Acquired Products, which have a lower
profit margin than the critical care formulas.  In addition, profit margins
were depressed in early 1997 due to costs related to the integration of the
Elan Acquired Products into the Company's existing operations.  Gross profit
margins are expected to improve slightly in 1998 as integration-related costs
are less likely to occur.

     SELLING GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses from continuing operations for the year ended December 31, 1997
increased 126 percent to $2.5 million, from $1.1 million in the same period
of 1996. The expense increase relates to the overall staffing and related
expenditures required to support the growth in sales by the Company and the
addition of new products. As noted above, the Company incurred charges of
$300,000 in 1997 for sales and marketing efforts related to the Company's
private label infant formula development project.  Selling, general and
administrative expenses, expressed as a percentage of net sales, were 62
percent and 92 percent for the years ended December 31, 1997 and 1996,
respectively. The percentage decrease is the result of economies of scale
arising from the relatively fixed nature of certain of the Company's selling,
general and administrative expenses, which have increased slowly in
comparison to the increase in overall sales.

     RESEARCH AND DEVELOPMENT.  Research and development costs from
continuing operations for the year ended December 31, 1997 increased 156
percent to $627,000 from $245,000 incurred in same period of 1996.  The
increase is attributable to higher costs associated with new products under
development in 1997, particularly costs related to the development of a
generic, national brand equivalent infant formula product, which has been

                                       7

<PAGE>

discontinued.  Research and development costs in 1998 are expected to drop to
1996 levels as a result of this change.

     GOODWILL.  Goodwill amortization of $1.8 million, of which $1.6 million
was written off in the fourth quarter of 1997, based upon the Company's
assessment of impaired value, represents all of the goodwill recorded at the
time of the acquisition of the Elan Acquired Products.

     OTHER EXPENSES.  Interest income for the year ended December 31, 1997
increased to $125,969  from $83,932 in the same period of 1996, as remaining
funds from the Company's initial public offering were invested for a full
year, compared with three months in 1996.  Interest expense in 1997
represents interest on a note payable to Elan Pharma, Inc. issued as partial
consideration for the Elan Acquired Products.

TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995

     NET SALES.  Net sales from continuing operations for the year ended
December 31, 1996 totaled $1,224,871 compared to $745,245 for the same period
of 1995, an increase of 64 percent. The growth in sales is the result of
increases in orders to existing customers and the addition of new customers,
as well as a larger number of products available for sale in the 1996 period.

     GROSS PROFIT.  Gross profit from continuing operations for the year
ended December 31, 1996 increased to $685,431, compared to $423,401 in the
same period of 1995.  As a percentage of sales, gross profit remained
relatively stable at 56 percent in 1996, compared with 56.8 percent in 1995.

     SELLING GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses from continuing operations for the year ended December 31, 1996
remained flat at $1.1 million.  As a percentage of sales, these expenses
decreased from 148 percent in 1995 to 92 percent in 1996. The percentage
decrease is primarily the result of economies of scale arising from the
relatively fixed nature of certain of the Company's selling, general and
administrative expenses, which have increased slowly in comparison to the
increase in overall sales.

     RESEARCH AND DEVELOPMENT.  Research and development costs from
continuing operations increased 61 percent to $245,000 for the year ended
December 31, 1996 when compared with the $152,157 incurred in the comparable
1995 period.  The increase is attributable to higher costs associated with
new products under development, particularly costs related to development of
a generic, national brand equivalent infant formula product.

DISCONTINUED OPERATIONS

     As discussed above, the Company announced in January 1998 its intention
to discontinue its private label adult nutrition supplement business and has
signed an agreement to transfer the business to Agrilink Foods, Inc.  This
segment of the Company's business, active since late 1995, generated revenues
of $2.2 million, $1.2 million and $96,000 in 1997, 1996 and 1995,
respectively.  Gross profits from this business were $95,000, $166,000 and
$11,000 in 1997, 1996 and 1995, respectively, while operating losses for the
same periods were $(365,000), $(158,000) and $(144,000), respectfully.  The
Company expects that any gain/loss on disposal of operation will be
insignificant and, accordingly, no amount was recorded in 1997 as a part of
discontinued operations.

YEAR 2000 ISSUE

     The Company has initiated an internal review to determine if any
computer programs used by the Company have time-sensitive software that
recognize a date using "00" as the year 1900 rather than the year 2000 ("Year
2000 issue").  If the review determines that some computer programs have such
time-sensitive program exposures, the Company will take steps to modify its
programs to address these potential problems.  Since the Company utilizes
third party contract manufacturers and current generation off-the-shelf
software for its contact management and accounting systems, the Company
expects its exposure risk to be minimal.

     The Company will initiate formal communications with all of its
significant suppliers by mid-1998 to determine the extent to which these
suppliers are vulnerable to Year 2000 issues.  There is no guarantee that the
systems of other companies on which the Company relies for manufacturing and
distributing its products will be

                                       8

<PAGE>

converted in a timely manner.  Delays in necessary conversions by these
suppliers could have an adverse effect on the operations of the Company and
its ability to continue to service the needs of its customers.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company has incurred net losses and negative cash
flows from operations. On September 26, 1996, the Company's initial public
offering was declared effective by the Securities and Exchange Commission.
The Company sold pursuant to this registration statement, in a transaction
that closed on October 1, 1996, 1,437,500 shares of the Company's common
stock at $3.50 per share, including an overallotment of 197,500 shares.  Net
proceeds to the Company, after deducting all offering costs, totaled $4.24
million. Unused funds are invested in U.S. Treasury backed funds with
maturities ranging under three months.

     Prior to the initial public offering, the Company's principal source of
cash and working capital had been from the private placement of its common
stock, through which the Company received approximately $2,800,000 in net
proceeds.

     In connection with the above described activities and results of
operations, the Company's net cash used by operations in the year ended
December 31, 1997, excluding the Elan Acquired Products, totaled $2.2
million, compared with $1.1 million in 1996.  Cash and cash equivalents as of
December 31, 1997 totaled $1,647,482.  Accounts receivables increased  during
1997 by approximately $785,000 due to sales increases and some extended sales
terms. Inventories, not including those received in the Elan acquisition,
have increased by approximately $655,000, offset by an increase of
approximately $557,000 in accounts payable.  The increased inventory reflects
increased levels of sales activities.  Inventories are expected to decline as
the transfer of the adult nutrition supplement business to Agrilink,
scheduled for May 1998, concludes.

     The Company made additions to equipment in 1997, primarily for the
packaging of infant formula products.  These assets are expected to be sold
because the Company is no longer pursuing the development of infant formula
products.  No additional significant capital expenditures are expected over
the next few quarters.

     As discussed in Part II, Item 1, the Company was named as a defendant in
two patent infringement lawsuits.  It is not possible at this time to predict
the outcome of these lawsuits, including whether the Company will have to
cease selling the products in question, or to estimate the amount or range of
potential loss, if any.

     The Company expects that the existing cash balances will be sufficient
to fund operations of the Company through 1998.  However, the Company's
future liquidity and capital requirements will depend on numerous factors
including competition, the extent to which the Company's products gain market
acceptance and the costs and timing of expansion of sales, marketing and
product development activities. There can be no assurance that the Company
will not be required to raise additional capital before the end of 1998, or
any time thereafter, or that such capital will be available on acceptable
terms, or at all.

ITEM 7.   FINANCIAL STATEMENTS.

     The following financial statements are included as a separate section
following the signature page to this Form 10-KSB:

     Report of Independent Auditors
     Balance Sheets as of December 31, 1997 and 1996
     Statements of Operations for the years ended December 31, 1997 and 1996
     Statement of Changes in Shareholders' Equity for the years ended December
       31, 1997 and 1996
     Statements of Cash Flows for the years ended December 31, 1997 and 1996
     Notes to Financial Statements

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

     No changes in accountants or disagreements between the Company and its
accountants regarding accounting principles or financial statement
disclosures have occurred within the twenty-four months prior to date of the
Issuer's most recent financial statements.

                                       9

<PAGE>

                                      PART III

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

     The information required by Item 9 is incorporated by reference to the
sections entitled "Election of Directors",  "Executive Officers" and "Section
16(a) Beneficial Ownership Reporting Compliance in the Company's Definitive
Proxy Statement for its 1998 Annual Meeting of Shareholders (the "Proxy
Statement"), which will be filed with the Securities Exchange Commission
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, within 120 days of the end of the Company's fiscal year ended
December 31, 1997.

ITEM 10.   EXECUTIVE COMPENSATION.

     The information required by Item 10 is incorporated by reference to the
section entitled "Executive Compensation" in the Proxy Statement.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by Item 11 is incorporated by reference to the
section entitled "Voting Securities and Principal Holders Thereof" in the
Proxy Statement.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by Item 12 is incorporated by reference to the
section entitled "Certain Transactions" in the Proxy Statement.

                                       10

<PAGE>

ITEM 13.  EXHIBITS LIST AND REPORTS ON FORM 8-K.

A)   EXHIBITS

     The following exhibits are included with this Annual Report on Form
10-KSB (or incorporated by reference) as required by Item 601 of Regulation
S-B:

<TABLE>
<CAPTION>
   <C>              <S>
   Exhibit No.      Description
   -----------      -----------
     1.1(a)         Form of Underwriting Agreement and Warrant
     2.1(c)         Asset Purchase Agreement dated January 13, 1997 by and
                    between the Company and Elan Pharma, Inc.
     2.2            Asset Purchase Agreement with an effective date of May 1,
                    1998, executed by and between the Company and Agrilink
                    Foods, Inc.*
     3.1            Second Restated Articles of Incorporation of the Company,
                    as amended
     3.2(b)         Second Restated Bylaws of Nutrition Medical, Inc.
     4.1(a)         Specimen Form of the Company's Common Stock Certificate
     4.2            Promissory Note Dated January 13, 1997 by the Company in
                    favor of Elan Pharma, Inc.
    10.1(d)         1995 Long-Term Incentive and Stock Option Plan, as amended
    10.2(a)         1996 Non-Employee Director Stock Option Plan
    10.3(a)         Purchasing Agreement, dated October 15, 1995, by and between
                    the Company and VHA, Inc.; Trademark License Agreement,
                    dated October 15, 1995, by and between the Company and VHA,
                    Inc.; Memorandum of Understanding, dated April 17, 1995,
                    between the Company and VHA, Inc.
    10.4(d)         Executive Employment Agreement, dated October 1, 1996, by
                    and between the Company and William L. Rush
    10.6(a)         Employment Agreement, dated September 1, 1994, by and
                    between the Company and Joseph F. Coffey
    10.8(a)         Office Lease, dated October 15, 1993, by and between the
                    Company and the 308 Corporation
    10.9(a)         Lease Agreement, dated February 22, 1996, by and between the
                    Company and Caliber Development Corporation
    23              Consent of independent auditors
    24              Powers of Attorney (set forth on the Signature Page hereof)
    27              Financial Data Schedule  (EDGAR only)
    99.1            Cautionary Statement
    99.2            Press Release dated January 28, 1998 announcing the
                    discontinuation of certain operations
    99.3            Press Release dated March 19, 1998 announcing the agreement
                    with Agrilink Foods, Inc.
</TABLE>
________________

(a) Incorporated by reference to the exhibit of the same number to the
    Registrant's previously filed Form SB-2 Registration Statement
    effective September 26, 1996 (Reg. No. 333-9999).
(b) Incorporated by reference to the exhibit of the same number to the
    Registrant's Quarterly Report on Form 10-QSB filed on November 13, 1996
    (File No. 333-9999).
(c) Incorporated by reference to the exhibit of the same number to the
    Registrant's Form 8-K filed on January 23, 1997 (File number 333-9999).
(d) Incorporated by reference to the exhibit of the same number to the
    Registrants Annual Report on Form 10-KSB filed on March 31, 1997.

*   Confidential information has been omitted from such Exhibit and filed
    separately with the Commission pursuant to a confidential treatment request
    under Rule 24b-2.

B)   REPORTS ON FORM 8-K.

     The Company did not file any reports on Form 8-K for the quarter ended
December 31, 1997.

                                       11

<PAGE>

                                     SIGNATURES

     In accordance with Section 13 or 15 (d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                   Nutrition Medical, Inc.

                                   By:   /s/    William L. Rush
                                      ----------------------------------------
                                      William L. Rush, Chief Executive Officer

                                   Date:  March 26, 1998

     In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.  Each person whose signature to this report on
Form 10-KSB appears below hereby constitutes and appoints William L. Rush and
Anwar H. Bhimani, and each of them, as his true and lawful attorney-in-fact
and agent, with full power of substitution, to sign on his behalf
individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments to this report on Form
10-KSB, and any and all instruments or documents filed as part of or in
connection with this report on Form 10-KSB or the amendments thereto and each
of the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitutes, shall do or cause to be done
by virtue hereof.

<TABLE>
<S>                                <C>                                <C>
By:   /s/  William L. Rush         Chairman of the Board,             Date: March 26, 1998
   ----------------------------    Chief Executive Officer,
     William L. Rush               President and Director
                                   (Principal Executive Officer)


By:   /s/  Anwar H. Bhimani        Chief Financial Officer and        Date: March 26, 1998
   ----------------------------    Secretary
     Anwar H. Bhimani              (Principal Financial Officer)


By:   /s/  Kenneth L. Evenstad     Director                           Date: March 26, 1998
   ----------------------------
     Kenneth L. Evenstad


By:   /s/  George E. Kline         Director                           Date: March 26, 1998
   ----------------------------
     George E. Kline

By:   /s/  Lawrence A. Lehmkuhl    Director                           Date: March 26, 1998
   ----------------------------
     Lawrence A. Lehmkuhl
</TABLE>

                                       12


<PAGE>


                               FINANCIAL STATEMENTS

                              NUTRITION MEDICAL, INC.


                       YEARS ENDED DECEMBER 31, 1997 AND 1996


<PAGE>


                               Nutrition Medical, Inc.

                                Financial Statements

                       Years ended December 31, 1997 and 1996





                                      CONTENTS

<TABLE>
<CAPTION>

<S>                                                                       <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1

Financial Statements

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 6

</TABLE>

<PAGE>
                           Report of Independent Auditors

Board of Directors and Shareholders
Nutrition Medical, Inc.

We have audited the accompanying balance sheets of Nutrition Medical, Inc. as
of December 31, 1997 and 1996 and the related statements of operations,
shareholders' equity and cash flows for each of the years then 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 Nutrition Medical, Inc. at
December 31, 1997 and 1996 and the results of its operations and its cash
flows for each of the years then ended in conformity with generally accepted
accounting principles.

                                                  /s/ Ernst & Young LLP

February 20, 1998

<PAGE>

                              Nutrition Medical, Inc.

                                  Balance Sheets

<TABLE>
<CAPTION>

                                                            DECEMBER 31,
                                                          1997         1996
                                                       ------------------------
<S>                                                    <C>          <C>
ASSETS
Current assets:
 Cash and cash equivalents                             $1,647,482   $2,553,955
 Short-term investments                                         -    1,671,596
 Accounts receivable, less allowance of $31,500
  in 1997 and $81,000 in 1996                           1,140,020      356,240
 Inventories                                            1,615,165      460,115
 Prepaid expenses                                          51,401       34,039
                                                       ------------------------
Total current assets                                    4,454,068    5,075,945

Equipment and office furniture, net                     1,179,200      132,369
                                                       ------------------------
Total assets                                           $5,633,268   $5,208,314
                                                       ------------------------
                                                       ------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                        $827,007     $269,037
 Accrued lease costs                                       66,600       75,000
 Accrued payroll                                          158,298       80,554
 Accrued expenses                                         482,044       84,487
                                                       ------------------------
Total current liabilities                               1,533,949      509,078

Subordinated note payable, including accrued interest   1,788,934            -

Shareholders' equity:
 Undesignated Preferred Stock, $.01 par value:
  Authorized shares - 5,000,000
  Issued and outstanding shares - none                          -            -
 Common Stock, $.01 par value:
  Authorized shares - 20,000,000 shares
  Issued and outstanding shares - 5,456,024--1997;
    4,593,024--1996                                        54,560       45,930
 Paid-in capital                                        8,706,444    6,943,287
 Accumulated deficit                                   (6,450,619)  (2,289,981)
                                                       ------------------------
Total shareholders' equity                              2,310,385    4,699,236
                                                       ------------------------
Total liabilities and shareholders' equity             $5,633,268   $5,208,314
                                                       ------------------------
                                                       ------------------------
</TABLE>

SEE ACCOMPANYING NOTES.

                                                                              2
<PAGE>

                              Nutrition Medical, Inc.

                             Statements of Operations


<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                          1997         1996
                                                       ------------------------
<S>                                                    <C>          <C>
Net sales                                              $4,104,601   $1,224,871
Cost of goods sold                                      2,811,443      539,440
                                                       ------------------------
Gross profit                                            1,293,158      685,431

Operating expenses:
 Selling, general and administrative                    2,538,184    1,120,787
 Research and development                                 627,438      245,280
 Goodwill amortization (and write-off)                  1,853,936            -
                                                       ------------------------
                                                        5,019,558    1,366,067
                                                       ------------------------
Operating loss                                         (3,726,400)    (680,636)

Other income (expense):
 Interest expense                                        (195,184)      (4,075)
 Interest income                                          125,969       83,932
                                                       ------------------------
                                                          (69,215)      79,857
                                                       ------------------------
Loss from continuing operations                        (3,795,615)    (600,779)

Discontinued operations:
 Loss from discontinued operations                       (365,023)    (158,233)
                                                       ------------------------
Net loss                                              $(4,160,638)   $(759,012)
                                                       ------------------------
                                                       ------------------------

Loss per share data (basic and diluted):
 Loss from continuing operations                            $(.70)       $(.14)
 Loss from discontinued operations                           (.07)        (.04)
                                                       ------------------------
Net loss per share                                          $(.77)       $(.18)
                                                       ------------------------
                                                       ------------------------

Weighted average number of shares outstanding           5,422,525    4,325,384
                                                       ------------------------
                                                       ------------------------
</TABLE>

SEE ACCOMPANYING NOTES.
                                                                              3
<PAGE>
                              Nutrition Medical, Inc.

                         Statement of Shareholders' Equity


<TABLE>
<CAPTION>                                                       COMMON STOCK
                                                            ----------------------       PAID-IN      ACCUMULATED
                                                             SHARES        AMOUNT        CAPITAL        DEFICIT        TOTAL
                                                            -------------------------------------------------------------------
<S>                                                         <C>        <C>              <C>           <C>            <C>

Balance at December 31, 1995                                3,105,524  $   31,055       $2,581,612    $(1,530,969)   $1,081,698
 Issuance of Common Stock at $2.50 per share in
  June 1996                                                    50,000         500          124,500              -       125,000
 Issuance of Common Stock at $3.50 per share in
  September 1996, net of offering costs                     1,437,500      14,375        4,222,675              -     4,237,050
 Value of warrants granted for services performed                   -           -           14,500              -        14,500
 Net loss                                                           -           -                -       (759,012)     (759,012)
                                                            -------------------------------------------------------------------
Balance at December 31, 1996                                4,593,024      45,930        6,943,287     (2,289,981)    4,699,236
 Issuance of Common Stock to purchase
  Elan product line                                           855,000       8,550        1,754,887              -     1,763,437
 Stock options exercised                                        8,000          80            8,270              -         8,350
 Net loss                                                           -           -                -     (4,160,638)   (4,160,638)
                                                            -------------------------------------------------------------------
Balance at December 31, 1997                                5,456,024  $   54,560       $8,706,444    $(6,450,619)   $2,310,385
                                                            -------------------------------------------------------------------
                                                            -------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES.
                                                                              4
<PAGE>

                              Nutrition Medical, Inc.

                              Statements of Cash Flows

<TABLE>
<CAPTION>

                                                       YEAR ENDED DECEMBER 31,
                                                          1997          1996
                                                      --------------------------
<S>                                                   <C>           <C>
OPERATING ACTIVITIES
Net loss                                              $(4,160,638)  $  (759,012)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Amortization (and goodwill write-off)                 1,853,936             -
  Depreciation                                            331,854        25,600
  Reserve for bad debts                                   (49,500)       81,000
  Value of options and warrants granted for
   services performed                                           -        14,500
  Changes in operating assets and liabilities:
   Accounts receivable                                   (734,280)     (315,895)
   Inventories                                           (655,050)     (102,011)
   Prepaid expenses                                       (17,362)      (28,310)
   Accounts payable                                       557,970       (44,773)
   Accrued interest                                       195,184             -
   Accrued liabilities                                    466,901        41,529
                                                      --------------------------
Net cash used in operating activities                  (2,210,985)   (1,087,372)

INVESTING ACTIVITIES
Sale (purchase) of short-term investments               1,671,596    (1,671,596)
Purchase of a business                                    (71,749)            -
Purchase of equipment and office furniture               (303,685)      (76,374)
                                                      --------------------------
Net cash provided by (used in) investing activities     1,296,162    (1,747,970)


FINANCING ACTIVITIES
Proceeds from issuance of Common Stock                       8,350    4,362,050
Payments on notes payable                                        -     (100,000)
                                                      --------------------------
Net cash provided by financing activities                    8,350    4,262,050
                                                      --------------------------

(Decrease) increase in cash                               (906,473)   1,426,708
Cash at beginning of year                                2,553,955    1,127,247
                                                      --------------------------
Cash at end of year                                   $  1,647,482   $2,553,955
                                                      --------------------------
                                                      --------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
Purchase of a business:
  Issuance of subordinated debt                       $  1,593,750   $        -
  Issuance of stock                                      1,763,437            -

</TABLE>

SEE ACCOMPANYING NOTES.
                                                                              5
<PAGE>

                              Nutrition Medical, Inc.

                           Notes to Financial Statements

                                 December 31, 1997


1. NATURE OF OPERATIONS

Nutrition Medical, Inc. (the "Company") develops and sells branded generic
critical care nutrition products for the hospital/nursing home market, as
well as private label nutrition products for sale through retail chains. The
Company's products are manufactured using ingredients, formulas and processes
comparable to those of national brand products. The Company currently has nine
critical care nutrition products and intends to continue to expand its
existing product lines. In early 1998, the Company announced its intention to
discontinue its private label nutrition products. Accordingly, the results of
operations of the segment have been classified as discontinued operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents. Cash
equivalents are available-for-sale, are carried at cost which approximates
market and consist of money market funds.

SHORT-TERM INVESTMENTS

Short-term investments are comprised of U.S. Treasury debt securities and are
classified as available-for-sale. At December 31, 1996, the Company's cost of
short-term investments approximated market value, with no resulting
unrealized gains and losses recognized. Realized gains and losses and
declines in value judged to be other than temporary are included in
investment income along with interest and dividends.

INVENTORIES

Inventories are valued at the lower of cost or market by the first-in,
first-out (FIFO) method.

EQUIPMENT AND OFFICE FURNITURE

                                                                              6
<PAGE>


                              Nutrition Medical, Inc.

                           Notes to Financial Statements

                                 December 31, 1997



Equipment and office furniture are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets
ranging from three to seven years.

                                                                             7
<PAGE>

                              Nutrition Medical, Inc.

                     Notes to Financial Statements (continued)



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

Income taxes are accounted for under the liability method. Deferred income
taxes are provided for temporary differences between the financial reporting
and tax bases of assets and liabilities.

REVENUE RECOGNITION

The Company recognizes revenue at the time of shipment of the product.
Provisions for estimated returns and allowances are accrued for at the time
of sale.

RESEARCH AND DEVELOPMENT COSTS

All research and development costs are charged to operations as incurred.

RECLASSIFICATIONS

Certain 1996 amounts have been reclassified to conform with the 1997
presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

STOCK-BASED COMPENSATION

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," but applies Accounting Principles Board Opinion No. 25 ("APB
25") and related interpretations in accounting for its plans. Under APB 25,
when the exercise price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.

                                                                             8
<PAGE>


                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)







                                                                             9
<PAGE>
                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)




2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount.

NET LOSS PER SHARE

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, EARNINGS PER SHARE. Statement 128 replaced the previously
reported primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to
the Statement 128 requirements.

3. ACQUISITION

On January 13, 1997, (the "Closing Date"), the Company executed an Asset
Purchase Agreement (the "Agreement") whereby the Company acquired certain
assets from Elan Pharma, Inc. ("Elan"), a U.S. subsidiary of Ireland-based
Elan Corporation, plc. The assets purchased include inventory and fixed
assets relating to the production of the enteral (tubal feeding) products
(the "Acquired Products") of Elan as well as exclusive rights to manufacture
and market the Acquired Products. In exchange for the Acquired Products and
related assets, the Company issued Elan a subordinated promissory note in the
amount of $3,000,000 (due in seven years along with interest accruing at
three percent per annum) and 855,000 shares of the Company's common stock.
The Agreement contains provisions which restrict Elan's ability to vote or
sell the shares of common stock. Total value of the transaction was
$3,428,936 after taking into consideration market interest rates on the note
payable, a discounted valuation for the common stock due to restrictions, and
$71,749 in acquisition expenses associated with the purchase.

                                                                             10
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



3. ACQUISITION (CONTINUED)

The Agreement contains a provision for the forgiveness of up to 100% of the
promissory note based on the Company's future stock performance. The
principal amount of the promissory note may be reduced on the fourth through
seventh anniversaries of the closing date. The amount of the reduction will
be determined by multiplying the number of shares sold by Elan during the
respective year by one-half of the difference between the average sales price
less $5 (year four), $6 (year five), $7 (year six) and $8 (year seven). A
similar reduction, using an eight dollar threshold will be applied to shares
remaining unsold at the end of the seventh anniversary of the closing date.

Based upon management's estimates of asset values, taking into consideration
market values and condition of the assets, as well as the estimated future
cash flows from the Acquired Products, the following represents the
allocation of the purchase price to the acquired assets, with the excess of
the purchase price over the assets allocated to goodwill:

<TABLE>
<CAPTION>

         <S>                                 <C>
         Inventory                            $  500,000
         Manufacturing equipment                 600,000
         Leased pumps                            475,000
         Goodwill                              1,853,936
                                              ----------
                                              $3,428,936
                                              ----------
                                              ----------
</TABLE>

Pro forma results of operations, as if the acquisition had taken place on
January 1, 1996, for the twelve month period ended December 31, 1996 are shown
below. Pro forma results are not necessarily indicative of the results to be
expected for the full year or the results that would have been achieved if the
acquisition had actually taken place on that date.

                                                                            11
<PAGE>
                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



3. ACQUISITION (CONTINUED)


                          Pro Forma Statement of Operations
                   (UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)

<TABLE>
<CAPTION>

                                                         TWELVE-MONTH
                                                         PERIOD ENDED
                                                         DECEMBER 31,
                                                             1996
                                                         ------------
          <S>                                            <C>
          Net sales                                          $7,285
          Gross profit                                        2,324
          Loss from continuing operations                    (1,134)
          Discontinued operations                              (158)
          Net loss                                           (1,292)
          Loss per share data:                                (0.25)
           Loss from continuing operations                    (0.22)
           Loss from discontinued operations                  (0.03)
           Net loss per share                                 (0.25)
</TABLE>

Pro forma results for the twelve-month period ended December 31, 1997 are not
shown since the impact would not have been materially different from report
results.

Sales from Elan products dropped significantly in 1997 due to a number of
factors. A number of Elan products were discontinued during 1997 and sales
expectations through distributors did not meet Company expectations. As a
result, the Company's market share of such products declined significantly
during 1997. The Company took steps to stop the decline in its sales and
market share in this product line, but management does not expect sales to
recover to pre-1997 levels in the foreseeable future. Management reviewed an
analysis of the undiscounted cash flows from the acquired business and
concluded that the carrying value of goodwill had been impaired. As a result,
the carrying value of goodwill on December 31, 1997 of approximately $1.5
million was written down to zero and the expense charged to continuing
operations.

                                                                            12
<PAGE>
                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



3. ACQUISITION (CONTINUED)

In addition, the Company also wrote down the value of equipment for packaging
infant formula $60,000. This amount was determined by comparing the carrying
value of the equipment with the price the equipment would demand if sold as
used equipment in the secondary market.

4. DISCONTINUED OPERATIONS

In January 1998, the Company announced its intention to discontinue its
private label adult nutrition supplement business, which was introduced in
late 1995.

The decision to discontinue the private label adult nutrition supplement
business was primarily due to low margins generated in this business and the
high level of working capital needed to support this business. In 1997, this
product line represented 35% of gross sales but only approximately 6.8% of
gross profit, while at the same time requiring approximately $1.0 million in
working capital to support its operations.

This segment of the Company's business generated revenues of $2,213,000 and
$1,777,000 in 1997 and 1996, respectively. Gross margins in this business
were $95,000 and $166,000 in 1997 and 1996, respectively, while operating
losses for the same periods were $365,023 and $158,000. At December 31, 1997,
the Company had approximately $840,000 of accounts receivable and inventory
on hand associated with the private label adult nutrition supplement
business. The Company expects any gain (loss) on disposal of operations to be
insignificant given current sales orders.

In March 1998, the Company entered into an agreement with Agrilink Foods,
Inc., under which the Company will transfer its private label adult nutrition
supplement business to Agrilink effective May 1, 1998. As a part of this
agreement, the Company will be receiving cash for various marketing and
supply related items and royalty payments for two years on the sale of these
products.

                                                                            13
<PAGE>

5. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       1997           1996
                                                     -----------------------
<S>                                                  <C>           <C>

Raw materials                                         $  292,032    $ 72,403
Work in progress                                          63,313           -
Finished goods                                         1,259,820     387,712
                                                     -----------------------
                                                      $1,615,165    $460,115
                                                     -----------------------
                                                     -----------------------
</TABLE>

6. EQUIPMENT AND OFFICE FURNITURE

Equipment and office furniture consist of the following:

<TABLE>
<CAPTION>

                                                           DECEMBER 31,
                                                       1997           1996
                                                     -----------------------
<S>                                                  <C>           <C>

Equipment and office furniture:
 Computer equipment                                   $  153,855    $106,925
 Office furniture                                        104,443      64,564
 Equipment, including pumps at customer sites          1,303,268      11,392
                                                     -----------------------
                                                       1,561,566     182,881
Less accumulated depreciation                            382,366      50,512
                                                     -----------------------
                                                      $1,179,200    $132,369
                                                     -----------------------
                                                     -----------------------
</TABLE>
                                                                            14
<PAGE>
                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)

7. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>

                                                                      DECEMBER 31,
                                                                    1997        1996
                                                                 ----------------------
<S>                                                              <C>           <C>
Subordinated note payable, with a stated interest rate of
  3% and interest imputed at 12%, due January 2004                $1,593,750    $   -
Accrued interest at the imputed 12% rate                             195,184        -
                                                                 ----------------------
                                                                  $1,788,934    $   -
                                                                 ----------------------
                                                                 ----------------------
</TABLE>

In January 1997, the Company entered into a subordinated promissory note with
Elan as a result of the acquisition of certain assets of Elan. Principal and
interest associated with this note are due January 2004. This note is secured
by the assets of the Company. For further discussion of the acquisition see
Note 3.

8. LEASES

The Company entered into an agreement, commencing October 6, 1996, to lease
an office and warehouse facility in Minneapolis, Minnesota. The lease
terminates on November 30, 2001, and requires the Company to pay its
proportionate share of real estate taxes and operating expenses. The
agreement allows for a five year renewal and a termination option after three
years in the event the landlord is unable to provide additional space for the
Company.

Future minimum lease rental payments required under leases in excess of one
year as of December 31, 1997 are as follows:

<TABLE>

<S>                                         <C>
1998                                        $103,065
1999                                          69,545
2000                                          69,360
2001                                          65,664
                                            --------
                                            $307,634
                                            --------
                                            --------
</TABLE>

                                                                           15
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



Total rent expense under operating leases for the years ended December 31,
1997 and 1996 was $90,383 and $48,989, respectively.


                                                                           16
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)


9. INCOME TAXES

At December 31, 1997 and 1996, the Company had net operating loss
carryforwards for tax purposes of approximately $3,601,000 and $2,040,000,
respectively. These net operating loss carryforwards are available to offset
future taxable income through 2012 subject to limitations under Section 382
of the Internal Revenue Code due to changes in the equity ownership of the
Company.

Significant components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>

                                                              DECEMBER 31,
                                                          1997           1996
                                                     ---------------------------
<S>                                                   <C>            <C>
Deferred tax assets:
 Net operating loss carryforwards                    $  1,440,000     $ 816,000
 Goodwill write-off                                       692,000             -
 Depreciation                                              32,000             -
 Inventory reserve                                        258,000        14,000
 Accounts receivable allowance                             13,000        32,000
 Accrued professional fees                                 80,000             -
 Other accrued expenses                                    22,000        11,000
                                                     ---------------------------
                                                        2,537,000       873,000
Deferred tax liabilities:
 Depreciation                                                   -       (12,000)
                                                     ---------------------------
                                                                -       (12,000)
                                                     ---------------------------
Net deferred income tax assets                          2,537,000       861,000
Valuation allowance                                    (2,537,000)     (861,000)
                                                     ---------------------------
Net deferred income taxes                            $         -      $       -
                                                     ---------------------------
                                                     ---------------------------
</TABLE>

10. CAPITAL STOCK

STOCK AUTHORIZATION

In July 1996, the Company increased the authorized shares of capital stock to
25,000,000, including 20,000,000 shares of common stock and 5,000,000 shares
of undesignated preferred stock.

                                                                            17
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



10. CAPITAL STOCK (CONTINUED)

INITIAL PUBLIC OFFERING

In September 1996, the Company sold 1,437,500 shares of common stock in an
initial public offering from which the Company received net proceeds of
$4,237,000. In connection with the initial public offering, the Company sold
to the underwriter, for a nominal price, a five-year warrant to purchase up
to 125,000 shares of common stock exercisable at $4.20 per share.

11. STOCK OPTIONS AND WARRANTS

The Company has two stock option plans that include both incentive stock
options and non-qualified stock options to be granted (the "Plans") to
directors, officers, employees, consultants and others. As of December 31,
1997, the maximum number of shares of common stock reserved under the Plans
is 900,000 shares. The Board of Directors establishes the terms and
conditions of all stock option grants, subject to the Plans and applicable
provisions of the Internal Revenue Code.

The following table summarizes activity under the Plans:

<TABLE>
<CAPTION>

                                                                                   WEIGHTED
                                    SHARES        PLAN OPTIONS OUTSTANDING         AVERAGE
                                   AVAILABLE  --------------------------------  EXERCISE PRICE
                                   FOR GRANT     INCENTIVE     NON-QUALIFIED      PER SHARE
                                  -------------------------------------------------------------
<S>                               <C>           <C>             <C>               <C>
Balance at December 31, 1995        122,500       109,000         268,500           $1.18
 Additional shares reserved         400,000             -               -               -
 Granted                           (295,750)      166,000         129,750            2.99
 Canceled                            19,500       (14,500)         (5,000)           1.40
                                   ----------------------------------------
Balance at December 31, 1996        246,250       260,500         393,250            1.97
 Exercised                                -        (1,000)         (7,000)           1.04
 Granted                           (139,000)      116,500          22,500            2.97
 Canceled                           120,500      (115,500)         (5,000)           2.34
                                   ----------------------------------------
Balance at December 31, 1997        227,750       260,500         403,750            2.13
                                   ----------------------------------------
                                   ----------------------------------------
</TABLE>
                                                                           18
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



11. STOCK OPTIONS AND WARRANTS (CONTINUED)

The following table summarizes information about the stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                         OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
              -----------------------------------------  ----------------------
                               WEIGHTED       WEIGHTED                 WEIGHTED
  RANGE OF                      AVERAGE       AVERAGE                  AVERAGE
  EXERCISE       NUMBER        REMAINING      EXERCISE      NUMBER     EXERCISE
   PRICES      OUTSTANDING  CONTRACTUAL LIFE   PRICE      EXERCISABLE   PRICE
--------------------------------------------------------------------------------
<S>            <C>          <C>               <C>        <C>           <C>
$1.00 - $1.50    327,250        3 years        $1.15        313,500      $1.10
 2.00 - 4.25     337,000        9 years         2.30        105,549       3.36
                --------                                   --------
                 664,250        6 years         1.73        419,049       1.64
                --------                                   --------
                --------                                   --------
</TABLE>

Options outstanding under the Plans expire at various dates during the period
from November 1998 through December 2006. The number of options exercisable
as of December 31, 1997 and 1996 were 419,049 and 301,200, respectively, and
are exercisable at a weighted average price of $1.64 and $1.22 per share,
respectively. The weighted average fair value of options granted during the
years ended December 31, 1997 and 1996 was $1.93 and $1.14 per share,
respectively.

In connection with the issuance of common stock at $1.35 per share from
February through September 1995, the Company granted warrants to purchase a
total of 152,107 shares of common stock. The warrants are exercisable at
$1.35 per share and expire at various dates through September 2000.

The Company has elected to following Accounting Principles Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("Statement
123"), requires use of option valuation models that were not developed for
use in valuing employee stock options.

Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of Statement 123. The
fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for 1997 and 1996: risk-free interest rate of
                                                                           19
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



6.0% for both years; and dividend yield of 0% for both years; volatility
factor of the



                                                                           20
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



11. STOCK OPTIONS AND WARRANTS (CONTINUED)

expected market price of the Company's common stock of .71 and .33,
respectively, and a weighted average expected life of the option of 7 and 4
years, respectively.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions. Because the Company's employee stock options
have characteristics significantly different from those of traded options,
and because change in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                          1997          1996
                                                      --------------------------
<S>                                                   <C>             <C>
Pro forma net loss                                    $(4,248,128)    $(825,404)
Pro forma net loss per common share - basic                 $(.78)        $(.19)
 and diluted
</TABLE>

The pro forma effect on net loss of 1997 and 1996 is not representative of
the pro forma effect on net loss in future years because it does not take
into consideration pro forma compensation expense related to grants made
prior to 1995.

12. CONTINGENCY

In August 1995, the Company was named as a defendant in a patent infringement
lawsuit brought by Novartis, formerly Sandoz Nutrition. The complaint asserts
that one of the Company's products, L-Emental-TM- Plus, infringes on two
patents held by Novartis and asks for relief in the form of an injunction
preventing the Company from selling the product, as well as damages of an
unspecified amount. The Company responded with a counterclaim seeking a
declaration of invalidity, unenforceability, non-infringement and
inventorship of the subject patents. On August 13, 1997, the Company received

                                                                           21
<PAGE>


                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



notification that the United States Patent and Trademark Office will issue
the two patents




                                                                           22
<PAGE>

                              Nutrition Medical, Inc.

                      Notes to Financial Statements (continued)



12. CONTINGENCY (CONTINUED)

under review. Though the patents were narrowed, the Company expects that the
litigation which was stayed pending this determination will resume, and the
Company intends to continue to vigorously defend against the claim. Sales of
L-Emental Plus constituted $497,000, or 40.5% and $431,000, or 10.5% of the
Company's net sales in 1996 and 1997, respectively. It is not possible at
this time to predict the outcome of the lawsuit, including whether the
Company will have to cease selling L-Emental Plus, or to estimate the amount
or range of potential loss if any.

In November 1997, the Company was named as a defendant in a patent
infringement lawsuit brought by a division of Nestle Clinical Nutrition. The
complaint asserts that one of the Company's products, Pro-Peptide for kids,
infringes on a patent held by Nestle and asks for relief in the form of an
injunction, that would prevent the Company from selling the product, as well
as damages of an unspecified amount. Sales of Pro-Peptide for Kids
constituted $134,000 or 3% of the Company's net sales in 1997. It is not
possible at this time to predict the outcome of the lawsuit, including
whether the Company will have to cease selling Pro-Peptide for Kids, or to
estimate the amount or range of potential loss, if any.

The Company has accrued in the fourth quarter for the expected litigation
costs associated with the two lawsuits based on management's estimate of
costs to defend against these lawsuits.

13. MAJOR CUSTOMERS

Two customers account for net aggregated revenues, expressed as percentages
of total sales from continuing operations as follows:

<TABLE>
<CAPTION>

                                         SALES                   % OF SALES
                                      ---------------------------------------
<S>                                   <C>                        <C>
Customer A                              $504,500                    12.3%
Customer B                              $452,500                    11.0%

</TABLE>

                                                                           23

<PAGE>

                                 INDEX TO EXHIBITS
<TABLE>
<CAPTION>
  Exhibit No.  Description
  -----------  -----------
       <C>     <S>
        2.2    Asset Purchase Agreement with an effective date of May 1, 1998, executed by and between the Company and Agrilink
               Foods, Inc.*
        3.1    Second Restated Articles of Incorporation of the Company, as amended
        4.2    Promissory Note Dated January 13, 1997 by the Company in favor of Elan Pharma, Inc.
       23      Consent of independent auditors
       24      Powers of Attorney (set forth on the Signature Page hereof)
       27      Financial Data Schedule  (EDGAR only)
       99.1    Cautionary Statement
       99.2    Press Release dated January 28, 1998 announcing the discontinuation of certain operations
       99.3    Press Release dated March 19, 1998 announcing an agreement with Agrilink Foods, Inc.
</TABLE>
---------------

*    Confidential information has been omitted from such Exhibit and filed
     separately with the Commission pursuant to a confidential treatment
     request under Rule 24b-2.

                                       13